Social and climate justice movements have long demanded alternative development models and social relations that are different from neoliberalism, which merely promotes unfettered markets. There is much interest lately to ‘return to industrial policies’ where national governments play a greater role in the economy. Some progressive researchers started to imagine what industrial policy with Global South perspective would look like to address threats from the climate breakdown and ensure a liveable, just and sustainable planet where people could enjoy a better life and well-being.
It is urgent for Global South countries to pursue industrial policies to achieve a sustainable and inclusive industrialisation and realise a socially just and inclusive energy transition. However, unlike those in the core states or the Global North, they are undermined by the international rules on trade, investment and finance that favours the interests of the latter. The interest to keep the current global world (dis)order or the imperial arrangement is shaping the neo-colonial scramble for strategic resources, especially the minerals needed for energy transition.
Where is the finance?
Finance or the lack of it continues to be the main hindrance for Global South countries in pursuing industrial policies that could help them break away from their current economic dependency. Industrial policy and global finance are inextricably linked. Finance is a critical enabler for industrial policy. At the same time, it cannot be separated from broader structures of power in the global economic and monetary system as well as trade. Wealthier countries, due to their advantageous position in accessing finance, are implementing significantly more industrial policies and with less constraints than lower-income countries.
Industrial Policy needs the support of the state, especially a substantial capital that can be sourced domestically or internationally. Many countries in the Global South end up borrowing to finance their industrial policy and often get mired in unsustainable debt. To implement strategies to pursue transformative industrial policy, a state must have the capacity to fund and support the industries that will serve as the pillar of its industrial policy. Such support can be in the form of direct subsidies, loans and investment to its state-owned industries or companies where it has majority or partial stake. Global South countries have less capacity to provide support to priority industries.
Where could such substantial finance come from?
Resource nationalisation for industrialisation
Resource nationalism is defined as the assertion of state sovereignty over natural resources, often leading to the nationalisation of industries that were previously controlled by foreign companies. It is a strategy where a government takes greater control over various processes of its natural resources or assets to promote domestic processing and manufacturing, rather than exporting raw materials.
One of the earliest historical cases of achieving energy access and industrialisation was the example of nationalisation of Baku’s oil (then Russian Azerbaijan) in the early Soviet period. Baku is the first oil town in the world, and its oil fields fuelled the transition of Soviet economy from a feudal one to an industrial giant. Baku’s oil was the first nationalised oil asset. After the October Revolution, the Bolsheviks nationalised all of Baku’s oil assets and set up the state-owned Azneft (Azerbaydzhanskoye neftyanoye proizvodstvo) company.
Before nationalisation, Baku’s oilfields were largely owned by foreign investors, most notably the Swedish Nobel brothers (yes, of Nobel Peace Prize) through their company Branobel, which was the largest oil producer in the world by the late 19th and early 20th centuries. Another foreign stakeholder was the US company Standard Oil.
Resource nationalism is a widespread and normal policy of states, especially but not solely in the energy sector. Mexico and the Gulf states followed the same policy, which helped in their industrialisation. Many, including this author, are arguing that ownership over oil, gas, and coal assets is crucial, especially in the much-needed phase out and rapid increase of renewables in the energy mixed. It is common logic that states could not control what it doesn’t own for a planned transition. In the current overdrive to develop and extract oil and gas in Africa wherein our partners and allies are saying “no to oil and gas,” it could be useful to push for more government stake in the assets and use of generated revenues to fund renewable energy development. That way there would be a timeline for quick fossil fuel phase out and increase of renewable energy use.
Industrialisation and energy access
Pursuing industrial policies for industrial development also require a certain level of access to energy. Although ideal and based on modern broader economic and social development goals, achieving universal access to energy is not a historical prerequisite for industrialisation. Universal access is a principle for broader societal welfare and development, which can be provided after economic take off and industrialisation.
Countries that kicked-off Industrial revolutions in Europe and North America, achieved their industrial status before universal electrification and transition from steam engine. The reason for this is that it may not be feasible to have a centralised energy infrastructure to deploy to all populations as it would be very expensive. The countries that are now highly industrialised achieved industrialisation by expanding energy use for industries and urban centres where capital and industrial labour force are concentrated, while rural and remote areas remained without access for decades. One of WoMin’s argument against new oil and gas projects is that the assets are merely diverted to Western markets. Communities and movements are clamouring for those resources to generate energy for domestic use and address energy injustice suffered by African people.
Debt cancellation and prevention of debt crises
Unsustainable debt accumulation, especially involving odious debts, brough many of the Global South economies to their knees and led to widespread poverty. The concept of odious debt emerged from the idea that a people are not bound to repay debts contracted without their consent and for their detriment. The doctrine offers a legal justification for a successor government to repudiate debts incurred by a predecessor that was illegitimate or despotic. There was an argument for the Mandela-led government not to pay apartheid debt after the transition following this principle.
Debts are undermining the ability of governments to meet the needs of their people and fund essential public services like healthcare and education and meet the costs of the climate crisis. Freeing countries from unsustainable debts and constraining high automatic allocation to debt repayment or interest payment could help channel precious funds to finance industrial policy for industrialisation.
Some recent initiatives to resist the global financial architecture:
(1) The Bank of the South (Banco del Sur or Banco do Sul) (2009) was a proposed Latin American financial institution intended to be an alternative to existing international lenders like the IMF and World Bank. Aimed to support regional development and social programs.
It was never fully capitalised or operational until 2016, and its purpose of fostering regional integration and providing loans for infrastructure and social programmes was never realised. Member countries: Argentina, Bolivia, Brazil, Ecuador, Paraguay, Uruguay, and Venezuela.
(2) BRICS Bank/New Development Bank – presented itself as alternative to the World Bank and International Monetary Fund group and regional development banks. Its main attraction is that it focuses on infrastructure and sustainable development projects without traditional conditionalities. However, some scholars argue that it does have the same priorities in types of loans given (infrastructures) and that it could be seen as “sub-imperial” or continuation of existing global financial system rather than offering a real alternative.
(3) UN Framework Convention on Sovereign Debt is a proposed legally binding international treaty championed by civil society organisations, aiming to establish a fair, transparent and democratic global framework for sovereign debt restructuring and debt crisis prevention. It is an intergovernmental process to make recommendations for closing gaps in the debt architecture and explore options to address debt sustainability, dialogues between debtors and creditors.
There is no formal convention yet as it is not yet established or signed into law.
While the Fourth Financing for Development (FFD4) conference in Spain in 2025 discussed the issue and included the “Compromiso de Sevilla” document, attempts to include a specific intergovernmental process for a UN Convention were blocked by the US and caused the EU, Australia, Canada, and UK to weaken the final text.
(4) Bridgetown Initiative/Special Drawing Rights – is a call for urgent and decisive action to reform the international financial architecture. The Prime Minister of Barbados Mia Mottley’s popular proposal to tackle debt and climate change has component proposals for the International Monetary Fund to inject billions of US dollars’ worth of reserve assets into struggling economies annually through Special Drawing Rights. It was initially proposed at the COP27 climate conference.
It seeks to accelerate climate finance through measures like providing liquidity to distressed nations, increasing lending by multilateral development banks, and establishing a US$500 billion Global Climate Mitigation Trust funded by Special Drawing Rights (SDRs). It aims to create financial systems that support climate resilience and justice, preventing countries from being forced to prioritise debt service over essential development needs.
Finance for inclusive industrial policy
Capitalism has never functioned as promoted and the ruling class knows this very well. Afterall, at times of crisis and climate breakdown, we see bank bailouts but not relief to the environment and people. Governments use industrial policy to address market failures that private markets cannot fix, such as accelerating green transitions or securing supply chains for critical products. However, the character of the policy is also shaped by the kind of government pursuing it, whether it will be inclusive and responsive to community and women’s needs or will just focus on growth and development of the sector it wishes to focus on.
