Rebirth of Industrial Policy and an Agenda for the Twenty-First Century

Abstract

After a period of decline in interest and premature predictions of demise, industrial policy is back on the scene. A variety of trends have contributed to the renewed interest. In the developing world, there has been a pushback against the market-fundamentalist approach, typically associated with the Washington Consensus. Even when growth rates have been high, economies in Sub-Saharan Africa and Latin America have experienced unsatisfactory rates of productive transformation and shortfalls in generating quality jobs in manufacturing or modern services. This has created a demand for proactive government policies to diversify and upgrade economies beyond simply freeing up markets. In the advanced economies, generalized labor market malaise and the lingering effects of the financial crisis have produced similar effects. Low growth dynamics occurred especially in the euro zone, as countries with trade and budget double deficits with a common currency struggled to come out of the crisis. The continuing decline in the employment shares of manufacturing in the USA and Western European countries and the increasing competitive threat posed by China on world markets have pushed in the same direction. 1 Interest in 2 Warren (2019) and Rubio (2019). 3 Bofinger (2019), Altmaier (2019). 4 See the Alstrom-Siemens case, in which the firms argued to need a merger for remaining competitive with Chinese rail equipment. The merger was rejected by the EU Commission in spring 2019. A Franco-German Manifesto for a European Industry Policy for the twenty-first century see BMWI (2019). 5 Rodrik (2016).

The Covid-19 crisis and manufacturing: How should national and local industrial strategies respond?

“…Successive UK governments have, of course, steered away from 'picking winners' and supporting key firms since the 1970s. However, new rationales have been developed for industrial policy, outlining and encouraging changed roles for government in relation to key and strategic firms and industries (Aiginger and Rodrik, 2020). Such thinking will be especially important and more feasible for the UK after the end of the Brexit transition (Coman, 2020).…”

The New European Industrial Strategy and the Company’s Organization Models

“…The aim of a "New European Industrial Strategy" is broader than the sectoral goals of the traditional industrial policies (Aiginger & Rodrik, 2020, Bianchi et al, 2019, Cresti et al, 2020, Rodrik, 2004, Wade, 2012, Warwick, 2013, Wigger, 2018. In fact, the "New European Industrial Strategy" consider the manufacturing sectors in a strategic perspective for the economic growth, and respond to the new needs for a better wellbeing of the European citizens, for a sustainable environment in the various regions and countries in Europe.…”

Europe Dwarfed by Media and Low Self-confidence

“…China has a large trade surplus and Europe a smaller but still significant one, while the US has a large and persistent deficit. Taking product sophistication into account, the EU has the largest share in high-end quality products (Aiginger & Rodrik, 2020).…”