Development of Western European States through a Common Industrial Policy

By Haller, Alina-Petronela | Economics, Management and Financial Markets, December 2014 | Go to article overview

Development of Western European States through a Common Industrial Policy


Haller, Alina-Petronela, Economics, Management and Financial Markets


1. Introduction

Development supposes structural changes: the production of goods with new technologies and the transfer of resources from the traditional to the newer activities. This is, according to Dani Rodrik (Rodrik, 2007), based upon:

-diversification rather than specialization;

-industrial activities;

-structural changes in the industrial sector;

-models of specialization whose foundation is not the factor endowment;

-exportation of complex industrial products, with high added value;

-unconventional convergence of innovative industrial producers.

According to Dani Rodrik, development is based upon industrialization. If the macroeconomic foundations are ensured (economic stability and operational markets), the structural transformations occur involuntarily, and the resources are directed towards the place where their contribution to the national product is maximal (Rodrik, 2007). The interest for the industrial policy comes from the following factors:

-the industrial sector, in some of the countries, plays the role of an engine of economic growth, thus needing measures to stimulate the demand, to improve infrastructure, to provide technological equipment, to support companies, especially the small and medium enterprises;

-the necessity to reorient the natural and financial resources towards priority fields;

-the correction of structural disequilibrium in economy, by shifting emphasis from the financial to the production sector, among other means;

-the promotion of activities with high added value;

-the raise of the demographic pressure, etc.

Although the importance of the industrial sector stays high, its percentage in the GDP decreased, in favor of the tertiary one, but industry re-became a priority with the beginning of the current economic crisis, being seen as a solution for the latter, especially in the Western European developed countries. There is no economy that would have reached high sustainable levels of income per capita without structural transformations, without having shifted emphasis from traditional activities with small productivity, like the agricultural ones, to the modem activities, with high productivity, specific to the secondary and the tertiary sectors.

2. Industrial Policy of Western European States

In the EU, the measures of industrial policy are followed and applied at least at two governing levels: the EU's and the member states' one.

The nature and intensity of the European industrial policy was modified after the Treaty of Paris had been enforced (1951), which established the bases of the European Coal and Steel Community (ECSC). The article 130 of the Treaty of Maastricht refers to the industrial competitiveness in a system of open markets.

The vast concept of industrial policy is made of three components: framework issues, horizontal industrial policies, and specific industrial policies. The weight of horizontal, specific and sectorial industrial policies respectively cannot be established in general terms. They depend upon specific aspects in the EU framework.

The framework issues are directly correlated with what the EU internal market represents, a vast, solid and legal concept, with a strong institutional support, and accompanied by cohesion policies. The latter are oriented towards the poor regions of the EU and towards the less developed members. Cohesion also implies redistribution from the EU rich areas to the poor ones, and this supposes a long-run strategy meant to reduce the gap of development. Once the objective is reached, the measures that are specific to the policy of cohesion are not applied any more.

The measures and instruments of European industrial policy are presented in Figure 1.

Industry is a priority in the European economic policy, rendering it effective and raising its competitiveness; it is the proper way to prevent the social changes within the EU (European Commission, 2011). …

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