Industrial Policies in the European Community

Is international economic cooperation a fair-weather phenomenon? Are sovereign nations only prepared to entertain open and cooperative economic relationships with each other from a comfortable position of security? Do they not, at the first sight of trouble, run for shelter?

In Chapter 1 has been briefly sketched the global context in which the debate over industrial policies in developed countries has been getting under way. Industrial policies in Western Europe, especially in the countries of the European Community, have been drawing most of the fire, particularly from the United States and, increasingly, the more advanced of the developing countries against whose exports of manufactures the corresponding industries in developed countries are finding it hard to compete.

This chapter and the next will attempt to present in a factual manner the principal features of industrial policy in various countries of the European Community and those being pursued at Community level. It will permit the discussion to move from the abstract issues discussed in Chapter 2 to practical problems of public policy.

In recent years, since the early 1970s, several industries in Western Europe have experienced poor demand conditions which cannot be entirely attributed to the slowdown in growth in the world economy. They are the victims of structural change, part of the normal process of growth, whereby some sectors expand as others contract. During the ‘recession’, their problems have grown so much that their very future is in doubt. Public attention is focussed on their plight to such an extent that the counterpart existence of growing industries is ignored or forgotten.

There is much to criticise in the way in which industrial policy is conducted in the European Community. Governments continue to fly to the help of sick firms without apparently considering the broader implications of such aid for other sectors of the world economy. It is necessary to think in terms of the world economy because of the degree of integration which has taken place among national economies, especially among the more industrialised ones, as a result not only of the liberalisation of international trade and capital flows that has been effected since World War II but also of the technological advances that have been made since then in transport and communications; and it is still necessary to labour the point because, in spite of all the political talk of ‘economic interdependence’, it is not yet obvious that politicians and media of public opinion have much idea of what it means. Restructuring an industry has in practice become synonymous, in the European Community, with protection and cartelisation and there is a deep reluctance to let large firms, however inefficient, go to the wall.¹