The New Industrial Policy in Europe a Decade After (2002–2012)

“Les autores notent que la politique industrielle est la résultante d’un ‘triangle’ formé par la politique de la concurrence, la politique commercial (échange extrérieures) et la politique technologique.”

See, European Commission (1994, 1998).

And more in general the book I have edited, Le nuove politiche industriali nell’Europa allargata (Mosconi 2004).

See also, Visco (2004).

See, European Commission website http://​ec.​europa.​eu/​enterprise/​policies/​industrial-competitiveness/​industrial-policy/​index_​en.​htm.

“Kok Report” (European Commission 2004c); European Commission (2005a).

Sapir et al. (2003).

Padoa-Schioppa (1987).

In his opening statement in defence of his motion Ha-Joon Chang (“The Economist” 2011) writes: “There is truth in the argument that above a certain level of development, countries become ‘post-industrial’, or ‘deindustrialised’. But this is only in terms of employment—the falling proportion of the workforce is engaged in manufacturing. Even the richest economies have not really become post-industrial in terms of their production and consumption. From expenditure data in current (rather than constant) prices, it may appear that people in rich countries are consuming even more services, but this is mainly because services are becoming even more expensive in relative terms, thanks to structurally faster productivity growth in manufacturing”.

Prodi (2003).

In his report (A New Strategy for the Single Market) to the President of the European Commission, Monti (2010), in the same paragraph argues that: “In Europe, leaders are discussing the merits, and limits, of an active industrial policy. The return of interest for industrial policy goes parallel with a renewed attention to the importance of manufacturing for Europe’s economy and a wide concern for the profound transformation of the European industrial base triggered by the crisis”.

http://​www.​manufacturing.​gov/​welcome.​html.

http://​www.​bmbf.​de/​en/​6618.​php.

“Public authorities—the argument goes (Jacquemin 1997, Chap. 6)—could then favour organizational forms that internalize the external effect of important technological choices and promote the emergence of poles of competition; through financial aids and specific public programs they would be required to support research and development in high-technology industries (microcomputers, aerospace, biotechnology) affected by important fixed and sunk costs […]”.

Have “The Economist” readers suddenly become all nostalgic about some form of planned economy? This is unlikely and one hopes that no one will judge the result of the debate on industrial policy promoted by the British weekly magazine through the lenses of the past. There is no nostalgia in the minds of the 72 % of the readers who, on Saturday 17 July 2010, at the end of an engaging week of debate between two opposite theses, have defeated the motion of “The Economist”, which was the following: “This house believes that industrial policy always fails”. It is almost impossible to summarize how rich the debate was: the debate, as usual, was divided in three phases (“Opening remarks”, “Rebuttal statements”, “Closing statements”) which lasted a whole week (12–17 July) and was moderated by a journalist of “The Economist”, Tamzin Booth. The debate was also enriched by many online comments by the readers, as well as by two special guests. The Debate is available at: http://​www.​economist.​com/​debate/​overview/​177.

Almost three quarters of the voters (72 % against 28 %) agreed with Rodrik, as the moderator of the debate declared in the “Winner announcement”. However, Lerner did not agree—or at least not completely; in fact, in his final remarks there was a timid and partial opening to Rodrik’s thesis: with industrial policy there are both unresolved conceptual problems and some downright “failures in its implementation”, but something can be done. The counterevidence is Lerner’s book—cited and recommended by Rodrik himself—where the author spoke about the historically important role played by the US Department of Defense in the growth of the Silicon Valley (Lerner 2009). Following this debate from a European perspective, there is an additional argument that can be made: for my own contribution to this Debate, see: “Comments from the floor, 9/58” (http://​www.​economist.​com/​debate/​overview/​177).

The Theory was originally published in 1911.

Alexis Jacquemin (1987) was already talking about the need for this type of industrial policy at the end of the 1980s; more recently, many have returned to the topic, including Philippe Aghion et al. (2011).

Both of these rankings/studies, aside from being annual publications, are based not on market capitalization but on the total turnover of the relevant companies. In particular, Mediobanca’s definition of the terms of its study is given in the following: “Objective: a study of the aggregate accounts of the largest multinationals in the world. Object: companies with sales over 3 billion Euros, equal to at least 1 % of the total sales in its respective area or nation. Sectors: manufacturing and energy industry, telecommunications and utilities; businesses not involving manufacturing are not included: construction, finance, etc. Geographic Area: global, divided into three macro-areas: Triad (Europe-North America-Japan), Asia-Russia, and the Rest of the World.”

Considering, though, the North American continent (or, if we prefer, North American Free Trade Agreement; NAFTA), we must add 11 from Canada and 3 from Mexico to the big American players, for a total of 146 (a figure that surpasses the European companies by 9).

Think only of the importance held by start-ups in the high-tech sector, especially those that come out of academic settings. And there’s no need to mention the importance of the small and medium enterprises (SMEs), the backbone of all economies in the EU.

Then, the Commission (2012) adds a footnote which deserves attention: “Industrial activities also have important spillover effects on production and employment in other sectors. For every 100 jobs created in industry, it is estimated that between 60 and 200 new jobs are created in the rest of the economy, depending on the industrial sector”.

McKinsey [2012], like the European commission, points out the changing boundaries between the different sectors (manufacturing vs services): “Service inputs (everything from logistics to advertising) make up an increasing amount of manufacturing activity. In the United States, every dollar of manufacturing output requires 19 cents of services. And in some manufacturing industries, more than half of all employees work in service roles, such as R&D engineers and office-support staff”.

It is worth mentioning, among the most innovative and forward-looking proposals, the one called “EuroUnionBond” put forward by Romano Prodi and Alberto Quadrio Curzio (2011, 2012).

There would be much to be said about this, even just thinking about European antitrust events in recent years: on one hand the severe decisions taken by the Commission regarding the General Electric-Honeywell merger (not approved) and the Microsoft case (convicted of abusing a dominant position); on the other hand, three Commission decisions against three concentration operations (Airtours/First Choice, Schneider/Legrand, Tetra Laval/Sidel), then overturned by the Court of first instance. The stated aims of competition policy retain their complete validity, fully investigated by juridical doctrine and economic theory: the spreading of private economic power and protection of individual freedom and rights; protection of economic freedom of market competitors; assurance of consumer wellbeing through efficient allocation and production. On 1 May 2004 two new reforms became applicable, giving form and substance to new competition policy: (1) “Antitrust”: new Council Regulation No 1/2003 for application of Articles 81 and 82 of the Treaty prohibiting restrictive practices and abuse of dominant positions, replacing a regulation dated 1962; (2) “Merger control”: new Council Regulation No 139/2004 controlling concentrations of businesses, reforming the first regulation dated 1989. At that time, alongside these major legislative instruments, there was a further decision that is worth mentioning here. In fact, it is quite significant that the Commission’s third Communication on new industrial policy (European Commission 2004a), issued on 20 April 2004, was flanked with another, connected Communication, by the title: “A proactive competition policy for a competitive Europe” (European Commission 2004b). It underlines how “the existence of efficient competition in the EU’s internal market contributes in a decisive manner to the competitiveness of European industry since it promotes improvement of productivity and innovation”.

The relationship is the core of Giuliano Amato’s “Jean Monnet Lecture”, delivered at the University of Parma on 26 April 2004, and now published as Chap. 2 in Mosconi (2004).

When describing Europe as “Fragmented Power”, André Sapir (2007) mentioned “External monetary affairs”, like trade and competition policies, as “an exclusive competence of the Union”, even if with “two important qualifications”. More in general, in its Report, Bruegel’s research team dealt with “the fragmented character of the governance of Europe’s external economic policy”, coming to this conclusion: “A common external energy policy and a common migratory policy are ‘sine qua non’ conditions for the EU to develop solid and healthy relationships with neighbours who possess vast energy and/or human resources that are vital to its security and well-being”.