Industrial policy, once a taboo in mainstream economics, is being mainstreamed by the very institutions that spent four decades stigmatising it. In March 2026, the World Bank published Industrial Policy for Development: Approaches in the 21st Century, co-authored by Ana Margarida Fernandes and Tristan Reed. The IMF, has done a similar volte face, first in its 2019 working paper ‘The Return of the Policy That Shall Not Be Named’ and again in the October 2025 World Economic Outlook, which has a chapter titled ‘Industrial Policy: Managing Trade-Offs to Promote Growth and Resilience’. That the IMF and World Bank have now openly readmitted industrial policy into their vocabulary is no small thing. Does it mean the tide has turned on austerity and market fundamentalism?

The argument of this article is that this rhetorical turn arrives bound by two structural constraints that the new Bretton Woods literature largely refuses to confront: the ongoing rentierisation of Global South economies through IMF-World Bank conditionality, and the imperial retaliation that meets serious attempts at sovereign industrialisation. Industrial policy on the terms set by Washington and Wall Street will not free up the policy space the Global South needs; it risks becoming another financial product or technocratic buzzword layered onto an already extractive architecture.

The Evolution of Industrial Policy

In the foreword to Industrial Policy for Development, World Bank Chief Economist Indermit Gill admits that the Bank ‘helped stigmatize’ state intervention in its 1993 East Asian Miracle report, and that this advice ‘has the practical value of a floppy disk today’. Strong words, and late ones.

It is noteworthy that the 1993 report was published a decade after Chalmers Johnson’s MITI and the Japanese Miracle (1982) and four years after Alice Amsden’s Asia’s Next Giant (1989). The report also arrived at the nadir of the Third World project, after the failure to actualise the demands of the New International Economic Order. In retrospect, that report could be read both as a nail in the coffin of the NIEO and as an attempt to mystify and bury the reality of the East Asian developmental state.

Much of the classical industrial policy literature reads as economic history or borrows from the case-study method popular in business schools. While this can produce more useful policy advice than the abstractions of neoclassical economics, it has invited the accusation that the field is anecdotal. Industrial policy scholarship has adapted by becoming more empirical: studies now measure the size and scale of interventions, their impact on supply chains and international markets, and the correlations between industrial indicators and development outcomes. What the field has gained in quantitative rigour, however, it has lost in historical and conjunctural analysis.

The new World Bank report exemplifies this shift, offering a typology of industrial policies cross-tabulated against a typology of economies to produce a matrix of ‘most appropriate’ interventions. To their credit, Fernandes and Reed synthesise a substantial empirical literature showing that well-targeted, time-limited interventions with export discipline can produce measurable productivity effects. But the report’s empiricism comes at the price of a vanishing historical horizon: cases are flattened into estimable treatment effects, severed from the geopolitical conditions and class settlements that made them possible.

Countries in the Global South do not face a menu of policy options arrayed against a neutral backdrop. Any attempt at industrial policy today must contend with two structural realities: the ongoing rentierisation of southern economies by the policies of the IMF and the World Bank themselves, and the retaliation, by domestic and international forces, against governments that pursue sovereign industrialisation in earnest.

The Policy of Rentierisation

There has always been a considerable gap between the research, the rhetoric and the operations of the Bretton Woods institutions. Before getting too excited about a change in tone, the actual contemporary policy agenda should be taken into account.

There is no evidence that the IMF has given up on austerity, deregulation, and privatisation. Balancing the government budget remains the centre of gravity of its approach to imbalances that are fundamentally global in character. A 2023 Oxfam report found that 87% of IMF programmes in 2020–22 contained austerity conditions, even as the IMF publicly emphasised social spending floors. The IMF’s recent mission creep into ‘good governance’ and ‘anti-corruption’, advances privatisation under a moralised banner that echoes a racist perception of the peoples of the Global South.

Central to this agenda is the promotion of central bank independence (CBI), which removes monetary policy from elected governments and constrains peripheral central banks to inflation targeting alone, neglecting development and employment. IMF conditionality has increasingly included CBI clauses. CBI is anathema from an industrial policy perspective: central bank financing of state investment and the capitalisation of development banks have been crucial in almost every story of late industrialisation – the Bank of Japan’s ‘window guidance’ of credit to strategic sectors being a foundational case. In practice, the IMF’s CBI agenda forces governments to rely on high-interest commercial debt to finance investment, channelling capital into short-term speculative assets rather than long-term industrial development.

The World Bank, meanwhile, has moved away from its nominal mandate as a multilateral development bank towards becoming a facilitator for private capital mobilisation. Its Maximizing Finance for Development framework envisions private investors leading the investment process, with states confined to creating a ‘conducive environment’ and ‘derisking’ investments – what Daniela Gabor has called the ‘Wall Street Consensus’. The Bank thus plays a complementary role to the Fund: the IMF constrains fiscal and monetary policy, and the World Bank steps in to facilitate private capital under the banner of public-private partnerships.

The practice of the IMF and the World Bank in the Global South is not really industrial policy at all but a kind of rentier policy – enabling private capital to extract rents from currency speculation, sovereign debt, and infrastructure. The obvious risk is that the new-found rhetoric of industrial policy becomes another financial product – like ‘green finance’ or ‘blended finance’ before it – locking developing countries deeper into a debt-austerity cycle. Freeing up the resources and policy space needed for genuine industrial policy requires a reversal of the rentierisation imposed by the Bretton Woods institutions.

The Policy of Retaliation

Even where rentierisation can be loosened, a second constraint binds: the geopolitical reaction that meets serious attempts at sovereign industrialisation.

South Korea, the example par excellence of successful late industrialisation, struck a specific bargain with the prevailing hegemon. South Korea’s land reform (1949–50) weakened the landlord class, while the nationalisation of the commercial banks (1961) freed up resources for industrial investment. In the Cold War context, this was not merely tolerated but actively underwritten. South Korea not only received $12.6 billion in US aid between 1946 and 1978, but benefitted from war procurement during the US war on Vietnam – which peaked at 2.9% of South Korean GDP, rivalling the Marshall Plan in scale. Industrial policy in Seoul was not merely permitted; it was, in significant part, commissioned.

Where similar attempts at anti-rentier and pro-industrialisation policies have run against the strategic goals of imperialism, the response has been markedly different. Iran’s 1951 nationalisation of the Anglo-Iranian Oil Company under Mohammad Mossadegh was met with a CIA- and MI6-organised coup d’état; the Islamic Republic, which renationalised the oil after the rule of the Shah, now faces a comprehensive sanctions regime.

Ghana under the leadership of Kwame Nkrumah (1957–1966) pursued one of the most ambitious post-independence industrialisation programmes on the African continent, tied to a pan-African vision of economic integration. Nkrumah was overthrown by a CIA-backed coup d’état in February 1966, dismantling an industrial trajectory that has not been reassembled since.

Salvador Allende’s Unidad Popular government in Chile (1970–1973) nationalised the copper mines and commissioned Project Cybersyn: a real-time, telex-linked information system intended to coordinate production and build the technical infrastructure for economic planning. Allende, like Nkrumah before him, was overthrown by a CIA-backed coup d’état led by General Augusto Pinochet. Chile today remains in the thrall of market fundamentalism – expect no industrial policy from current right-wing President José Antonio Kast.

These cases demonstrate what happens when a country’s industrial strategy collides with the architecture of US hegemony. Imperial retaliation forecloses not only particular industrial policies but the very ‘state capacity’ whose absence is now lamented by the Bretton Woods institutions that helped destroy it.

From Policy to Programme

It is misleading, then, to present industrial policy as a politically neutral toolkit. For many governments on the centre-left, the problem is not only a lack of belief in industrial policy but a combination of fear of imperial retaliation and the policy constraints already imposed by the rentierisation agenda.

What would happen if a country like Sri Lanka or Sengeal were to renegotiate or repudiate its debts, conduct land reforms, and bring the central bank back under public authority? They would face an immediate downgrade by the Big Three rating agencies, the suspension of bilateral lending under the Paris Club and the OECD Common Framework, and, in a worst-case scenario, sanctions. The technical question of ‘what industrial policy?’ is in practice subordinate to the political question of ‘who will allow it?’

Proponents of industrial policy, both from the heterodox perspective and of the new Bretton Woods vintage, may therefore be constructing an unrealistic standard by holding up cases like South Korea while ignoring the geopolitical conditions that enabled them. The World Bank’s matrix of ‘appropriate’ interventions implicitly assumes a country that can choose. For the majority of the Global South, choices are objectively constrained.

For the vast majority of countries in the Global South, industrial policy will have to be preceded, not followed, by a prolonged struggle to oust entrenched landed and mercantile interests that work in tandem with US imperialism to stymie industrialisation. The very process of taking on those interests can push countries into a siege economy that permanently postpones the industrial project it was meant to enable.

What ‘siege economy’ means in practice is best read off the cases of countries that survived imperial retaliation without succumbing to it. Iran’s ‘Resistance Economy’ (Eqtesad-e Moqavemati) – a doctrine formalised by Ayatollah Ali Hosseini Khamenei in 2014, in the wake of the 2010–12 sanctions tightening – is the most explicit recent attempt to articulate sovereign industrialisation as a defensive posture, emphasising domestic production, knowledge-based industries and reduced oil dependence. Cuba’s ‘Option Zero’ (Opción Cero), a contingency plan drawn up after the collapse of the Soviet Union to survive with the barest minimum of resources, is another example.

None of these are the preferred policies, they are policies that have been imposed by the pressures of imperialism. Decades of adaptation under imperial pressure produce survival, not industrial development. National-scale resistance hits limits that only a reformation of the international economic order can transcend.

We live in a conjuncture where the spheres of economics and politics are more overtly entangled than at any time since the early Cold War. The contradictions of an international order that preaches industrial policy and enforces rentierisation, that praises ‘derisking’ and refuses debt restructuring, are no longer plausibly deniable. For the Global South, there is no such thing as an industrial policy that does not confront the entrenched power of rentiers, foreign and domestic. Confrontation, in turn, requires political strategy and contingencies for the inevitable retaliation. The World Bank’s new report is a useful symptom, but it is not a programme. The programme will have to be written elsewhere.

Shiran Illanperuma is a researcher at the Tricontinental: Institute for Social Research.