International development institution, founded alongside the IMF at the Bretton Woods conference in 1944. It has 189 member countries.
Since 1980 the World Bank and the IMF have promoted a package of liberal reforms—free markets, sober fiscal policies and private enterprise—that came to be known as the "Washington Consensus". When countries on the brink of financial collapse sought assistance, the institutions extended fresh loans and coaxed creditors to take haircuts in return for these reforms.
In 1993 a Bank report titled "East Asian Miracle" grudgingly admitted that the growth of Japan and South Korea in preceding decades may have been aided by governments' illiberal picking of industrial winners. But that was largely a matter of luck, the report declared: "The promotion of specific industries holds little promise." It warned that import substitution was too risky, as cosseted domestic firms tend to fail when exposed to international competition, and that warping the economy to benefit handpicked industries risked starving the rest. Instead, countries could try to boost exports by attracting foreign investment and increasing infrastructure spending.
In March 2026 the Bank released "Industrial Policy for Development", a 275-page guide for governments determined to intervene in the economy. Ana Margarida Fernandes, who leads a group researching development, and Tristan Reed, one of her economists, cover whether, when and how poor countries might use tools from public spending to tariffs and exchange-rate management to boost industry.
The report distinguishes two main categories. "Market incentives"—subsidies for startups, import restrictions, local-content requirements, consumer subsidies and tariffs—are treated cautiously. Restricting imports excludes countries from global value chains. Tariffs promote some industries at the expense of others. "Public inputs"—spending on electricity, water, transport, industrial parks and worker training—receive a warmer endorsement. The report lauds Ethiopia for increasing the cargo capacity of its national airline to encourage horticulture exports, Morocco and Costa Rica for creating industrial parks, and Romania for a government training scheme that produced workers and eventually attracted firms.
The authors acknowledge that poor countries have changed since 1993 in ways that make them less vulnerable to industrial-policy disaster, notably by keeping inflation and budget deficits under control. Of the 183 countries assessed, each had at least one industrial policy in place. Of the Bank's economists covering 189 member countries, four in five had been asked by governments to advise on industrial policies.
Jake Sullivan, architect of Joe Biden's hands-on industrial policy, called the report's significance "hard to overstate". Yet many of its ideas look familiar: the implicit warning to policymakers remains that interventionism leads nowhere good.
I profoundly believe it takes a lot of practice to become a moral slob.