European Industrial Policy: The Twentieth-Century Experience

European Industrial Policy: The Twentieth-Century Experience

European Industrial Policy: The Twentieth-Century Experience

European Industrial Policy: The Twentieth-Century Experience


At the end of the 20th century with stagnating industrial output, unemployment in many European countries has climbed to levels not seen since the 1930s. Interventionist industrial policies thus find new popularity after the gentle flirtation with liberalization in the early 1990s. Under the Maastricht Treaty, the European Union was granted industrial policy powers for the first time. The present study aims to contribute to an understanding of European industrial policy by introducing an historical perspective. National policy continuities and the considerable time over which industrial performance responds to changed environments emerge with greater clarity in the long run. The chapters in this book take a broad view of industrial policy, including those policies that establish the `framework', such as competition law, as well as sector for firm specific policies. The overall conclusion is that improved framework policies, such as liberalization and re-regulation, are still essential. Monetary union in the `core' will increase tensions arising from economic inflexibility. Although there are often strong political barriers blocking implementation of appropriate industrial policies, they will be even more necessary under monetary union.


A big plant is going to close. Thousands will lose their jobs. A government minister steps in with a massive subsidy. Thousands breathe sighs of relief. So perhaps does the minister, facing re-election in the next few months. Financing details can be left until later.

The government miraculously reduces borrowing without raising taxes or cutting expenditure. At the same time it boasts of an economy rejuvenated by sales of state enterprises. Former government ministers find themselves advising banks on the next wave of privatizations.

If we accept that both these examples should be covered by the broad definition of 'industrial policy', there is no surprise that the subject provokes strong reactions. During the great economic boom after 1945, European governments were widely believed to be benevolent, powerful, and informed helmsmen of national industries. More commonly today industrial policy is irrevocably linked with wasteful state intervention. Despite these polarized positions, what is contentious is often unclear. The definition and scope of 'industrial policy' differs not only between European countries (with Germany taking the broadest option) but also within their boundaries. Some regard competition policy as an element of industrial policy, others consider it to be separate and distinct.

The present study takes the wider view. The aim is to contribute to an understanding of European industrial policy, broadly interpreted, by introducing a historical perspective. We show the remarkable continuity in European national institutions, cultures, and societies, despite the traumas of world wars, revolutions, and foreign occupations. 'Liberal' France at the end of the nineteenth century was far more interventionist than liberal Britain. Later in the twentieth century, British expenditure on industry as a proportion of national income tended to converge with France's. But in the 1980s 'economic liberalism' resurfaced in Britain earlier and more prominently than elsewhere in Western Europe. Continuity offers some explanations for the instruments and objectives of national policies and for comparative industrial performance. Differences in the competitiveness of national industries often take a considerable time to emerge. They also persist for lengthy periods. In such cases a long-term perspective on the effectiveness of policy intervention is helpful. The quite extraordinary growth of Italian industrial productivity in the decades after 1945, radically narrowing the productivity gap with the United States, contrasts with the considerable but less spectacular performance of the more interventionist Spanish economy over the same period.

Conventional European historiography distinguishes 'the long nineteenth century' ending in the slaughter of the First World War. Here instead we are concerned with 'the long twentieth century', beginning with (fairly) liberal late nineteenth-century Europe, including the two world wars, the world economic . . .

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