By: James Si Zeng
According to the conventional wisdom of law and development, the role of law in economic development is primarily passive, focusing on property protection and contract enforcement. However, East Asian economies have defied this conventional approach by achieving remarkable growth through the strategic implementation of industrial policies. In recent years, even traditionally liberal states like the United States have shown a growing interest in adopting industrial policies. Building on the experiences of East Asian economies, particularly China, this Article argues that law can serve as an instrument for implementing industrial policy objectives. Consequently, industrial policy introduces a hierarchical dimension to the law. By comprehending the interplay between industrial policy and law, we can gain fresh perspectives on how the law impacts economic development. Moreover, if industrial policies contribute to sustained long-term growth, incorporating their considerations into the economic analysis of the law can yield valuable insights in prescribing normative implications. For example, in the realm of eminent domain law, when determining whether and how much to compensate private firms for losses caused by new regulations, a primary concern is preventing under-investment and protecting investment-backed expectations. However, industrial policies may intentionally deter investment in certain sectors. In such cases, compensation may be reduced or even withheld. Additionally, in corporate law, when designing laws on anti-takeover policies, the state can also differentitate cases based on their potential impacts on research and development.