growth would have been as fast or faster without industrial policy cannot be directly refuted, nor can the impact of industrial policy on growth be directly quantified.

The debate about industrial policy has been intensified not only by these methodological problems but also by the ideological implications of the issue. Industrial policy involves a high degree of government intervention in the economy, and such intervention is anathema to many economists and politicians, particularly in the US. The emotional content of the debate has in many instances led to a lack of focus, particularly in regard to the issue of time. Industrial policy advocates and critics rarely differentiate between industrial policy in Japan's early stages of development and industrial policy after Japan had achieved advanced nation status. This is clearly incorrect, since changes in the functioning of markets and institutions that occur as development progresses will have an impact on how industrial policy can work. Equally important, this lack of differentiation fails to acknowledge the differing degrees of intervention that have characterized Japanese industrial policy over time.

Despite these methodological and ideological difficulties, few topics have more relevance than ascertaining the efficacy of industrial policy in promoting growth. This topic is arguably more important for developing countries. With over two-thirds of the world's population living in nations with per capita GNP of less than 1,800 US dollars and one-third subsisting on less than 300 dollars, the majority of people will greatly benefit from any means to accelerate the process of economic development. Should industrial policy prove to be a key factor behind Japan's economic success, then industrial policy could serve as a prescription for many of the world's economic woes. Developed countries too could benefit should Japan's recent experience with policy have contributed to economic out-performance.

At the same time, the dangers associated with industrial policy are equally profound. Even if industrial policy has contributed to success, the question remains as to how fair such policy measures are in an international context. Countries which deliberately attempt to affect the allocation of resources to select industries must also consider whether they may face retaliation for doing so. The dangers are obviously greater if industrial policy is ineffective, since its use would slow development and undermine growth. If this ineffectiveness is not perceived, then industrial policy holds a threat even to countries not explicitly practising industrial policy. In such countries, advocates of industrial policy may blame poor economic performance on the absence of policy. To the extent that such performance arises because of mistakes in macroeconomic management, these mistakes might not be addressed.

The importance of the topic, and related difficulties, have stimulated

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