Why stop at industrial policy? Why not full socialism? Its no different.
The only thing keeping countries from becoming socialist is they believe in the same liberal propaganda that is used to discredit state capitalism. Its all just bluff and propaganda like religion. Some of the slaves actually believed that the plantation system was the best system for them simply because they believed their masters propaganda of no alternative.
Whenever people realize that Wall Street is the world's biggest bully and push back will there be any change.
This is a good reminder that development doctrine is rarely just about development.
It often functions as a coordination technology for maintaining a particular hierarchy in the world economy, then gets revised once that hierarchy starts shifting.
Jostein, your dissection of the World Bank's hypocrisy is surgically precise, but your deduction stops halfway up the mountain.
In 2026, the World Bank is simply repeating its 1993 mistake: Misattribution.
In 1993, its "East Asian Miracle" report deliberately erased the decisive role of "state intervention" in the early rise of South Korea, Taiwan, and even the US and UK, forcibly attributing their success to "free markets." In 2026, it declares that industrial policy should be included in all countries' toolkits. Is this U-turn an "admission and correction of error"? No, it is yet another misattribution.
System A (the US/West) cannot effectively replicate System B's industrial policy because the underlying evaluation codes of the two systems are mutually exclusive.
1. System A’s Fatal Straitjacket: ROI (Return on Investment)
"Free markets" work seamlessly in System A because the underlying driver is Wall Street's capital allocation efficiency and shareholder value maximization. But in the "hardcore industrial war" of the Great Bifurcation, this becomes a fatal flaw. When the US government distributes tens of billions in CHIPS Act subsidies, the funds flow to publicly traded companies (like Intel) tethered to the quarterly earnings cycle. Capital's inherent instinct is to resist long-cycle, high-friction, low-margin, asset-heavy investments. The inevitable result: industrial policy funds mutate into stock buybacks and executive bonuses, rather than physical semiconductor fabs.
2. System B’s Dimensional Strike: Physical Scale Over Financial Statements
The reason System B's industrial policy is so formidable is that, at the national strategic level, it essentially ignores ROI in the financial sense. To build UHV power grids, high-speed rail networks, and a complete lithium battery supply chain, System B is willing to endure unimaginable capital misallocation, overcapacity, and decades of financial losses. It treats "infrastructure and baseload manufacturing" as thermodynamic public goods necessary for national survival, not as profit-making tools. It pursues "absolute occupation of physical market share," not "pretty numbers on a balance sheet."
3. Systemic Rejection of Hardware by Software
You cannot forcefully insert a piece of "cost-blind industrial infrastructure" code into a financial ecosystem that worships "quarterly earnings." When System A attempts to copy System B's subsidy policies, exorbitant union costs, environmental permitting friction, and Wall Street's arbitrage-seeking will bleed the capital dry long before it can be converted into actual "physical capacity."
The World Bank's bible can be rewritten overnight, but the physical laws of financial capitalism cannot. System A's greatest helplessness lies here: when it finally decides to swallow its pride and copy System B's homework, it discovers it simply cannot afford the civilization-level bill of this "ROI-blind" state system.
[The Underlying Operating System of Chinese Manufacturing: The R.I.C.E. System]
Simple metrics of looking at real economies: oil use vs steel production and to compare the USA and China.
They use similar amounts of oil @19-20million bpd
China: 0.74 tonnes of steel per person per year
US: 0.23 tonnes pppy
Overall, the US produces 79 million metric tonnes, a mere 7.9% of China's billion tonnes a year.
This was achieved by investing into infrastructure, especially energy infrastructure, at huge expense for a better future organisation. Which they now have.
Optimum, your choice of metrics is exactly right — oil and steel are physical quantities, not financial ones. That's the only kind of ruler that reads a real economy.
But the sharpest cut in your comment is this: the two countries burn roughly the same amount of oil and produce two different civilizations. Same thermal input — one side turns it into steel, cement, batteries, hulls, and transmission towers; the other turns it into SUV commutes and last-mile packages. One is sedimenting energy into fixed assets; the other is dissipating energy into consumption flow. The second law of thermodynamics does not negotiate with quarterly earnings.
I have argued in [The Industrial Standard: The Real Backing of the RMB Is Not FX Reserves, It Is Factory Capacity] that the RMB's true anchor long ago stopped being the dollar or gold — it is this physical machine that swallows a billion tons of steel and two billion tons of cement every year. Those two per-capita tonnage numbers of yours are the body temperature of that machine.
Thank you ChinArb for your reply and the link to your article, I have read it.
Lately, I have become dubious about the stated figures of domestic oil consumption by the US.
Production is about 14% of global output. They claim to use 19-20%.
They are therefore a net importer by logical deduction.
However, the US claims to export 4 million barrels per day. This is 85 times more than in 2011.
The only explanation that a nation of 340m (US) uses as much diesel as 1.5b (China) could be that the extravagant military expenditure on fuel is added to domestic consumption, and that the 'trade' in oil comes from Iraqi/Libyan/Syrian oil fields acquired as spoils of war, which more or less add up to 4mbpd. Whether the 4mbpd is included in the 20mbpd total consumption figure I'm not sure.
This once again underlines the difference in the use of energy by China to uplift and invest in international infrastructure projects (as per your article) and the US doing the exact opposite - destroying infrastructure at high energy cost.
China does use an enormous amount of coal which offsets oil purchases.
It still leaves the US as an overall importer of energy, with a decaying infrastructure, overvalued stock market based on services, a severly shackled industrial base, an overstretched expensive military.
It comes as no surprise that the World Bank has made a u-turn.
A few data points worth checking together: the U.S. net position is actually on the export side — net exports of around 1.64 million b/d in 2023. The surge in exports traces back to the shale revolution combined with the lifting of the crude oil export ban in 2015, rather than war-sourced supply. The U.S.-China consumption gap is also somewhat wider than "roughly the same" — the U.S. at around 20.5 million b/d versus China's 15-16 million b/d.
But none of this touches the core of your argument — a deindustrialized, militarily overextended economy on one side, and an economy using energy to drive real industry on the other. The thermodynamic endpoint was written into the structure from the beginning. The World Bank's U-turn? Just the World Bank turning in circles.
You're right that World Bank economists are driven more by donor interests than by evidence—but I'd argue it's even worse than you suggest. The Bank doesn't just follow evidence selectively; it systematically perpetuates whatever intellectual fashion is currently in vogue in the West onto the developing world.
The pattern is clear. Post-WWII: big-push industrialization. The 1980s: neoliberal structural adjustment and anti-corruption crusades. The 2010s: childcare mandates, anti-nuclear stances, and renewable energy advocacy. Now the 2020s: industrial policy is suddenly back in fashion—though Justin Lin, as Chief Economist in the 2010s, was already calling himself a "neo-structuralist" and supporting selective interventions.
But your confidence in industrial policy's developmental benefits deserves serious scrutiny. Most celebrated cases—from American industrialization to East Asian miracles—were primarily driven by military competition, not development goals. The empirical literature is far more mixed than you acknowledge. Spectacular failures are common, and the most consistent finding across contexts is that industrial policy gets captured by political cronies and rent-seekers.
Mainstream economics textbooks devote chapters to market failures while barely mentioning government failures—despite the latter being more common and often more destructive in practice.
Here's a question: if you genuinely believe the IMF and World Bank are so destructive, why not advocate for their abolition? Developing countries can access commercial capital markets without these institutions—from lenders not owned by the supposedly malevolent Western powers you critique.
Frankly, these institutions primarily prop up dysfunctional states that would otherwise face market discipline. Perhaps we'd all be better off letting serial defaulters like Argentina, Pakistan, and Egypt finally face the consequences of their choices rather than perpetually bailing them out.
Over-industrialisation across industrial economies and short-term industrial strategy have made productivity decline within western hemisphere. Neoliberalism policy and incoherent bargain-power approach make advanced industrial economies to outsource their manufacturing toward East Asia countries, while these countries embraced state intervention on regulating the markets and mitigating the risks for local manufacturers with strong policies on industrial policy. This should have been the straightforward strategy advanced industrial economies but instead, they're more confidence on deregulation and free markets while embracing strong egalitarian state without productivity or diversification on economy.
I think one problem is a lack of enough specific meaning to terms and concepts (which there is reason to argue is on purpose). For example, two different people, who perhaps even share the same views, may find themselves mistakenly thinking they dont because of a conflict in definitions, take for example the first and closing sentences in your comment here, that last sentence refers to economic design and by extension economic policy and so it refers to "industrial policy"
From what I know, there is literally no such thing as a governance system, whatever form it may have, that is not doing industrial policy, that would mean that there is no economic policy, and sense the economy is the actual physical world all around us that would mean that there is no order, which then would be mean there is no governance system. So if there is a governance system then there is industrial policy
The only things that vary, and they can vary by quite a lot, is what that industrial policy is and who decides what it is and how it is executed.
The USA once had a widely and deeply federated system that rejected central planning, whether done by the central government OR by a relatively small grouping within the private sector (or some combination there of), it rejected central planning in all its forms. But there was an system and such there was a design, its structural biases were towards geographically diffused, highly diverse, and redundant-while-still-competitive mid sized firms and for the public sector it was biased towards local government
since its intensive de-democratizations decades ago, has been running an industrial policy that (to be fair its a big place and some places and sub-sectors have managed to hold onto some autonomy) has had at its center: Big Finance, Big Pharma/Med, Big Software Tech, Weapons Contractors, with Big University and a diverse array of assorted other sorts who are meshed into their worlds
It's because of AI. When AI drive the world now, and information widely available, the west must correct themselves before being corrected further. And AI will get high demand for countries that need industrialization therefore make their tech industry even richer.
Human capital - the wellbeing of humans for the purpose of being used as labor - has been in steady decline under WB policy - will this new grand awakening of theirs address the need for investment in human capital as well? Healthcare, education, transportation infrastructure, access to nutritious food and wages that allow them to buy the food. I’m not seeing that in the report.
Please forgive my free riding for the moment. Yes, I read high level anecdote, Paul Kingsnorth in South Africa talking to government in the immediate post-apartheid period. Note now the geopolitical postition of SA given the deadly wars and atrocities in what we might more rightly call W. Asia, let alone the propaganda that saturates 'the West', including EU/UK and wider Europe. Look for motives, look for policies? It may not be 'singularites' await us in short time, but tipping points, irreversible damage, who looks to secure a safer position given planetary boundaries and extractive economies?
Why stop at industrial policy? Why not full socialism? Its no different.
The only thing keeping countries from becoming socialist is they believe in the same liberal propaganda that is used to discredit state capitalism. Its all just bluff and propaganda like religion. Some of the slaves actually believed that the plantation system was the best system for them simply because they believed their masters propaganda of no alternative.
Whenever people realize that Wall Street is the world's biggest bully and push back will there be any change.
Quite right. You raise very pertinent points and like religion, it's all about control
This is a good reminder that development doctrine is rarely just about development.
It often functions as a coordination technology for maintaining a particular hierarchy in the world economy, then gets revised once that hierarchy starts shifting.
Jostein, your dissection of the World Bank's hypocrisy is surgically precise, but your deduction stops halfway up the mountain.
In 2026, the World Bank is simply repeating its 1993 mistake: Misattribution.
In 1993, its "East Asian Miracle" report deliberately erased the decisive role of "state intervention" in the early rise of South Korea, Taiwan, and even the US and UK, forcibly attributing their success to "free markets." In 2026, it declares that industrial policy should be included in all countries' toolkits. Is this U-turn an "admission and correction of error"? No, it is yet another misattribution.
System A (the US/West) cannot effectively replicate System B's industrial policy because the underlying evaluation codes of the two systems are mutually exclusive.
1. System A’s Fatal Straitjacket: ROI (Return on Investment)
"Free markets" work seamlessly in System A because the underlying driver is Wall Street's capital allocation efficiency and shareholder value maximization. But in the "hardcore industrial war" of the Great Bifurcation, this becomes a fatal flaw. When the US government distributes tens of billions in CHIPS Act subsidies, the funds flow to publicly traded companies (like Intel) tethered to the quarterly earnings cycle. Capital's inherent instinct is to resist long-cycle, high-friction, low-margin, asset-heavy investments. The inevitable result: industrial policy funds mutate into stock buybacks and executive bonuses, rather than physical semiconductor fabs.
2. System B’s Dimensional Strike: Physical Scale Over Financial Statements
The reason System B's industrial policy is so formidable is that, at the national strategic level, it essentially ignores ROI in the financial sense. To build UHV power grids, high-speed rail networks, and a complete lithium battery supply chain, System B is willing to endure unimaginable capital misallocation, overcapacity, and decades of financial losses. It treats "infrastructure and baseload manufacturing" as thermodynamic public goods necessary for national survival, not as profit-making tools. It pursues "absolute occupation of physical market share," not "pretty numbers on a balance sheet."
3. Systemic Rejection of Hardware by Software
You cannot forcefully insert a piece of "cost-blind industrial infrastructure" code into a financial ecosystem that worships "quarterly earnings." When System A attempts to copy System B's subsidy policies, exorbitant union costs, environmental permitting friction, and Wall Street's arbitrage-seeking will bleed the capital dry long before it can be converted into actual "physical capacity."
The World Bank's bible can be rewritten overnight, but the physical laws of financial capitalism cannot. System A's greatest helplessness lies here: when it finally decides to swallow its pride and copy System B's homework, it discovers it simply cannot afford the civilization-level bill of this "ROI-blind" state system.
[The Underlying Operating System of Chinese Manufacturing: The R.I.C.E. System]
https://chinarbitrageur.substack.com/p/the-underlying-operating-system-of?r=71ctq6
I really enjoyed reading your comment, thank you.
Simple metrics of looking at real economies: oil use vs steel production and to compare the USA and China.
They use similar amounts of oil @19-20million bpd
China: 0.74 tonnes of steel per person per year
US: 0.23 tonnes pppy
Overall, the US produces 79 million metric tonnes, a mere 7.9% of China's billion tonnes a year.
This was achieved by investing into infrastructure, especially energy infrastructure, at huge expense for a better future organisation. Which they now have.
Optimum, your choice of metrics is exactly right — oil and steel are physical quantities, not financial ones. That's the only kind of ruler that reads a real economy.
But the sharpest cut in your comment is this: the two countries burn roughly the same amount of oil and produce two different civilizations. Same thermal input — one side turns it into steel, cement, batteries, hulls, and transmission towers; the other turns it into SUV commutes and last-mile packages. One is sedimenting energy into fixed assets; the other is dissipating energy into consumption flow. The second law of thermodynamics does not negotiate with quarterly earnings.
I have argued in [The Industrial Standard: The Real Backing of the RMB Is Not FX Reserves, It Is Factory Capacity] that the RMB's true anchor long ago stopped being the dollar or gold — it is this physical machine that swallows a billion tons of steel and two billion tons of cement every year. Those two per-capita tonnage numbers of yours are the body temperature of that machine.
https://chinarbitrageur.substack.com/p/the-industrial-standard-why-the-rmb?r=71ctq6
Rebar and concrete breathe. Quarterly earnings don't.
Thank you ChinArb for your reply and the link to your article, I have read it.
Lately, I have become dubious about the stated figures of domestic oil consumption by the US.
Production is about 14% of global output. They claim to use 19-20%.
They are therefore a net importer by logical deduction.
However, the US claims to export 4 million barrels per day. This is 85 times more than in 2011.
The only explanation that a nation of 340m (US) uses as much diesel as 1.5b (China) could be that the extravagant military expenditure on fuel is added to domestic consumption, and that the 'trade' in oil comes from Iraqi/Libyan/Syrian oil fields acquired as spoils of war, which more or less add up to 4mbpd. Whether the 4mbpd is included in the 20mbpd total consumption figure I'm not sure.
This once again underlines the difference in the use of energy by China to uplift and invest in international infrastructure projects (as per your article) and the US doing the exact opposite - destroying infrastructure at high energy cost.
China does use an enormous amount of coal which offsets oil purchases.
It still leaves the US as an overall importer of energy, with a decaying infrastructure, overvalued stock market based on services, a severly shackled industrial base, an overstretched expensive military.
It comes as no surprise that the World Bank has made a u-turn.
A few data points worth checking together: the U.S. net position is actually on the export side — net exports of around 1.64 million b/d in 2023. The surge in exports traces back to the shale revolution combined with the lifting of the crude oil export ban in 2015, rather than war-sourced supply. The U.S.-China consumption gap is also somewhat wider than "roughly the same" — the U.S. at around 20.5 million b/d versus China's 15-16 million b/d.
But none of this touches the core of your argument — a deindustrialized, militarily overextended economy on one side, and an economy using energy to drive real industry on the other. The thermodynamic endpoint was written into the structure from the beginning. The World Bank's U-turn? Just the World Bank turning in circles.
True, the political context matters. But we can go further and call out the World Bank for being an instrument of Western (and capitalist) hegemony.
You're right that World Bank economists are driven more by donor interests than by evidence—but I'd argue it's even worse than you suggest. The Bank doesn't just follow evidence selectively; it systematically perpetuates whatever intellectual fashion is currently in vogue in the West onto the developing world.
The pattern is clear. Post-WWII: big-push industrialization. The 1980s: neoliberal structural adjustment and anti-corruption crusades. The 2010s: childcare mandates, anti-nuclear stances, and renewable energy advocacy. Now the 2020s: industrial policy is suddenly back in fashion—though Justin Lin, as Chief Economist in the 2010s, was already calling himself a "neo-structuralist" and supporting selective interventions.
But your confidence in industrial policy's developmental benefits deserves serious scrutiny. Most celebrated cases—from American industrialization to East Asian miracles—were primarily driven by military competition, not development goals. The empirical literature is far more mixed than you acknowledge. Spectacular failures are common, and the most consistent finding across contexts is that industrial policy gets captured by political cronies and rent-seekers.
Mainstream economics textbooks devote chapters to market failures while barely mentioning government failures—despite the latter being more common and often more destructive in practice.
Here's a question: if you genuinely believe the IMF and World Bank are so destructive, why not advocate for their abolition? Developing countries can access commercial capital markets without these institutions—from lenders not owned by the supposedly malevolent Western powers you critique.
Frankly, these institutions primarily prop up dysfunctional states that would otherwise face market discipline. Perhaps we'd all be better off letting serial defaulters like Argentina, Pakistan, and Egypt finally face the consequences of their choices rather than perpetually bailing them out.
Over-industrialisation across industrial economies and short-term industrial strategy have made productivity decline within western hemisphere. Neoliberalism policy and incoherent bargain-power approach make advanced industrial economies to outsource their manufacturing toward East Asia countries, while these countries embraced state intervention on regulating the markets and mitigating the risks for local manufacturers with strong policies on industrial policy. This should have been the straightforward strategy advanced industrial economies but instead, they're more confidence on deregulation and free markets while embracing strong egalitarian state without productivity or diversification on economy.
I think one problem is a lack of enough specific meaning to terms and concepts (which there is reason to argue is on purpose). For example, two different people, who perhaps even share the same views, may find themselves mistakenly thinking they dont because of a conflict in definitions, take for example the first and closing sentences in your comment here, that last sentence refers to economic design and by extension economic policy and so it refers to "industrial policy"
From what I know, there is literally no such thing as a governance system, whatever form it may have, that is not doing industrial policy, that would mean that there is no economic policy, and sense the economy is the actual physical world all around us that would mean that there is no order, which then would be mean there is no governance system. So if there is a governance system then there is industrial policy
The only things that vary, and they can vary by quite a lot, is what that industrial policy is and who decides what it is and how it is executed.
The USA once had a widely and deeply federated system that rejected central planning, whether done by the central government OR by a relatively small grouping within the private sector (or some combination there of), it rejected central planning in all its forms. But there was an system and such there was a design, its structural biases were towards geographically diffused, highly diverse, and redundant-while-still-competitive mid sized firms and for the public sector it was biased towards local government
since its intensive de-democratizations decades ago, has been running an industrial policy that (to be fair its a big place and some places and sub-sectors have managed to hold onto some autonomy) has had at its center: Big Finance, Big Pharma/Med, Big Software Tech, Weapons Contractors, with Big University and a diverse array of assorted other sorts who are meshed into their worlds
It's because of AI. When AI drive the world now, and information widely available, the west must correct themselves before being corrected further. And AI will get high demand for countries that need industrialization therefore make their tech industry even richer.
https://openknowledge.worldbank.org/server/api/core/bitstreams/661135c3-3a0c-44a5-afe3-5217dd58e0d8/content
Human capital - the wellbeing of humans for the purpose of being used as labor - has been in steady decline under WB policy - will this new grand awakening of theirs address the need for investment in human capital as well? Healthcare, education, transportation infrastructure, access to nutritious food and wages that allow them to buy the food. I’m not seeing that in the report.
Nice reflection
Thank you for sharing
Having just finished reading Helleiner's Forgotten Foundations of Bretton Woods, this is, a very interesting 'development'...
Please forgive my free riding for the moment. Yes, I read high level anecdote, Paul Kingsnorth in South Africa talking to government in the immediate post-apartheid period. Note now the geopolitical postition of SA given the deadly wars and atrocities in what we might more rightly call W. Asia, let alone the propaganda that saturates 'the West', including EU/UK and wider Europe. Look for motives, look for policies? It may not be 'singularites' await us in short time, but tipping points, irreversible damage, who looks to secure a safer position given planetary boundaries and extractive economies?