Productive Development Policies

In recent years, a new consensus has emerged to suggest that states must adopt productive development policies (PDPs) to transform their economies. As well as improving the functioning of existing markets, these policies aim to create new markets and productive activities and promote technological innovation while also tackling major social challenges. The consensus around them stems from several years of experimentation and learning in the implementation of PDPs in developed and middle-income countries. As a consequence, there is now more information available than ever, along with more appropriate instruments for guiding the implementation of such policies.

This working paper analyzes why PDPs need to be adopted, how to design and implement them, and what combination of instruments produces the best results in the process of doing so. It also sets out to make use of the available knowledge to present Argentina’s situation from a comparative perspective and make the often chaotic world of PDPs more intelligible.

One initial caveat to this study is that the success of any given policy can never be guaranteed. Indeed, the choice of strategy and the instruments to implement it must be sensitive to each country’s development priorities, objectives, and institutional and structural conditions. At the same time, the best practices surveyed in recent years recommend a systemic take on PDPs, understanding them as packages of interactive measures that are strategically coordinated at the highest level of government and are articulated with the private sector, with the aim of ramping up the overall competitiveness of the production system. This approach necessarily implies strengthening state capacities, particularly to achieve what is referred to in this paper as “methodical flexibility”—in other words, the state learns from PDPs as it implements them and has specific mechanisms for monitoring and modifying them.

To develop these recommendations further, this paper includes a matrix for classifying the different instruments used around the world by area and level of intervention. It also analyzes the PDPs that have been implemented in Argentina: although the country has policies at the sector, cross-sector, and macroeconomic levels in almost all the major areas of the economy, the paper shows that there is a lack of strategic vision and overall coordination that has long undermined the developmental potential of these strategies. Finally, an analysis of PDPs seeking to boost Argentina’s software industry illustrates how important a systemic approach was in this specific case, in which PDPs played a key role in increasing exports and innovation. Failing to use PDPs would put the country’s companies—and thus the economy as a whole—at a disadvantage compared to countries that are doing so. Going forward, a key challenge is identifying other sectors with innovative and export potential in order to implement recommendations like those discussed in this study and move toward the agendas for productive transformation that Argentina needs to implement to escape the spiral of recurrent crises and economic stagnation.

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