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The evolution of industrial policy since the postwar period
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The Great Recession renewed calls for a return of state activism in support of the European
economy. The widespread nationalization of ailing companies and the growing activism
of national development banks led many to celebrate the reappearance of industrial policy.
By reviewing the evolution of the goals, protagonists, and policy instruments of i...
Context in source publication
Context 1
... demise of postwar industrial policy did not mean that state intervention ceased to be an important engine of growth altogether. Rather than relegating industrial policy to the dustbin of history, the wave of liberalization, market integration, and privatization of the 1980s and 1990s triggered a reorientation of state intervention with the emergence of new protagonists and the deployment of new policy instruments (Table 1). The goal of state intervention shifted from sheltering domestic markets from foreign competition to strengthening the international competitiveness of domestic firms, industries, sectors, and regions. ...Citations
... However, among these actions we can observe extreme, strongly politically motivated behaviour, which brings the market-oriented economies alarmingly close to the forms known from the former authoritarian socialist states, i.e. to solutions based on central planning (Berend, 2016). In the formally and ideologically oriented market economy of the European Union, such tendencies can be seen above all in Poland and Hungary, where under almost authoritarian governments an intensively progressive renationalisation of the economy (Bulfone, 2020) and an evident reduction in the role of local government can be observed. The public perception of these measures is mitigated by the governments in question with rhetoric exposing the immediate need and temporary nature of various anti-market and centralist decisions. ...
... This is particularly the case for industrial policymaking in Europe. Since the 1970s, the strengthening of EU competition policy and state aid regulations have increasingly curtailed governments' capacity to intervene discretionally in the economy (Jabko 2006;Clift & Woll 2012;Bulfone 2020b). Thus, national or subnational governments have incentives to deploy forbearance because they have only limited or no direct power over higher-level regulations, which they cannot readily change. ...
Political economy scholarship generally assumes that governments are interested in enforcing economic regulations. Cases of non-enforcement are predominantly studied in the context of developing countries and are chiefly associated with states' deficient institutional capacity. This article casts doubts on these assumptions by showing how governments in advanced democracies manipulate the regulatory regime and generate selective non-enforcement of economic regulations to shape markets at their discretion. We argue that regulatory forbearance becomes an attractive form of industrial policy when governments are prevented from intervening discretionally in markets due to legal obstacles, which they cannot overcome; or when the productive structure of the country makes alternative forms of intervention unviable. Drawing on the study of tax non-enforcement in two most-different cases of strong and weak state capacity such as Germany and Italy, the article theorizes three techniques through which governments manipulate regulatory regimes: legal and organizational sabotage and shirking. By shedding light on the economic logic of forbearance, the article points at non-enforcement as an overlooked mode of regulatory governance and suggests the need to inquire further into governments' strategic agency behind regulatory regimes.
The resurgence of industrial policies in the European Union has led to the introduction of policies to support regions in industrial transition within the framework of territorial cohesion policies. There is an initial interest in introducing a social component in these policies. This brief investigation reviews the actions carried out to date and reflects on their implementation. The European Commission has launched several regional policy pilots, which could help in the definition of new industrial transition policies, but these policies require to progress in their practical implementation, in order to obtain the expected results, thus mitigating the social impacts that the transition may cause in the regions of Europe. From the analysis of the pilots and the state of the art, we propose some recommendations to operationalize these policies, based mainly in an appropriate policy mix, consideration of the spatial components, involvement of the stakeholders and the use of bottom-up and neo-endogenous approaches.
The Global Financial Crisis (GFC) and the subsequent Covid-19 economic shock fed expectations of a radical overhaul of the set of economic ideas that have ruled (macro)economic policymaking since the 1970’s. Monetary policy especially saw a spectacular shift in new policies that were adopted. When nominal interest rates hit the zero lower bound, central banks of the Advanced Market Economies (AME) were forced to explore a broad range of new and rather unconventional policies. In terms of monetary policymaking the past decade and a half is marked by experimentation and innovation. Central banks’ role in the economy has massively expanded and new problems and responsibilities were entrusted upon them. This has come with new challenges. Since the start of the GFC and up until the Covid-19 economic shock, inflation has been persistently below target despite monetary policy being extremely accommodative. Seemingly signaling a chronical inability to control the level of inflation, this undermined the credibility of central banks. The coming climate crisis, in addition, has confronted AME central bankers with a ‘green policy dilemma’: should they engage with climate change and risk jeopardizing the consensus approach to monetary policy (focused solely on price stability) or should they refuse to do so and risk jeopardizing financial stability? These challenges have put the dominant paradigm of modern central banking under increasing stress. An unsettled issue is whether these multiple crises and new challenges have also led to a genuine ‘policy revolution’ or a true ‘paradigmatic shift’ in monetary policy-making. This dissertation will answer this question by analyzing AME central banks’ policy reactions to both the financial and Covid-crisis and the new challenges of lowflation and climate change. It will examine what these reactions have meant for the survival of the current macro-economic regime and will develop a more general theory on the potential drivers and barriers of radical policy change in monetary pol-icy. This is done by developing an idiosyncratic analytical framework that departs from Peter Hall’s classic framework on policy paradigms. By relying too heavily on the work of Thomas Kuhn, it is argued, Hall’s framework restricts the possible types of policy change by allowing only for slow incremental change (as part of ‘normal policymaking’) or a radical rupture or full-blown paradigm shift. Our alternative frame-work, in contrast, starts from the work of Imre Lakatos’ conception of paradigms or research programs as basically consisting of a set of tenacious ‘hard core beliefs’ that cannot be challenged and a set of ‘ancillary beliefs’ or ‘protective belt assumptions’ that are more malleable and subject to change. Based on this insight, the alter-native framework proposes three dimensions of change that mutually interact and together determine the degree of possible policy change: I) cognitive, II) normative-institutional, and III) socio-political change. Corresponding with Lakatos’ hard core beliefs, it is the normative-institutionalist ideas that central bankers hold that will eventually determine which new ideas and policies will be considered, deemed acceptable and put into practice. Based on this analytical framework the dissertation reaches the conclusion that the continued attachment by AME central bankers to certain core principles of the old paradigm (i.e. price stability, strict central bank independence, monetary dominance and the long-term neutrality of money) has prevented a full-blown paradigm shift taking place both in the aftermath of the GFC and Covid19-crisis. Because the normative-institutionalist ideas of the current monetary policy consensus were not questioned more fundamentally, practical alternatives legitimizing radically different policy solutions were never allowed to blossom.
The article develops a framework to explain an empirical observation that runs counter received wisdom in comparative political economy, namely the co-existence of large higher education systems and thriving manufacturing sectors in advanced capitalist countries. Introducing the concept of skill breadth, the article hypothesizes that: (i) advanced manufacturing firms have narrow skill needs concentrated around STEM skills; (ii) these skills are likely to be under-supplied by the higher education system unless dedicated public policies are put in place: and (iii) governments intervene in higher education policy to ensure the availability of those skills that are crucial for firms located in key sectors of national knowledge economies. Cross-country survey data of employer preferences for higher education graduates and case studies of recent higher education policy change in Germany and South Korea provide strong support for the argument. The article advances our overall understanding of skill formation systems in the knowledge economy and testifies to the persistent presence of policy levers that governments can employ to manage the economy and to support domestic firms.
