Europe 2020 strategy: An industrial policy for the globalisation era

Will it work?

Question:

An industrial policy for the globalization era is one of the flagship initiatives of the Europe 2020 Strategy. Do you think it was useful to add it in the flagship initiatives, and why?

Answers:

Helen Bicknell, Professor/in FB Wirtschaft & Medien, The Fresenius University of Applied Sciences

The Europe 2020 strategy presents its targets in a positive light, but the same targets presented in other words tell us that by 2020,Europeaims to achieve an unemployment level of 25% and 64 million people will probably still be living in poverty (a reduction of 20 million).  Although the Single Market project claims to benefit the 500 million consumers, 220 million workers and 20 million entrepreneurs inEurope, it is primarily the 20 million entrepreneurs who are identified as the main recipients of this industrial policy. The industrial policy flagship initiative focuses primarily on improving the competitiveness of European industry. It plans to do this by improvingEurope’s sustainable use of resources, by promoting innovative industries, increasing research and development, improving finance to SMEs, and improving education and training. These are all laudable aims. But in most industrial companies, improving competitiveness means reducing jobs, even though higher unemployment levels increase government spending, reduce taxation revenues and usually lead to anti-European sentiments.

The Commission recognises that “Management and workers’ representatives are the key players to agree on restructuring strategies at the company level” but the only way that workers could possibly benefit from this industrial policy is if they manage to obtain a position as a ‘highly-skilled worker’ in an innovative, sustainable and competitive industry. It is unlikely that there will ever be sufficient jobs of this calibre for all European workers.

Including industrial policy as a flagship initiative might be seen as a useful tool, but is unlikely to solve the problems currently facingEurope. The European Union certainly needs coherent economic and industrial policies, but the flagship initiative or the 2020 strategy by themselves will not solve Europe’s problems of how to keep its firms competitive and its citizens committed to the EU in the globalization era.

Paul Hare, Professor, School of Management and Languages, Heriot-Watt University

In my view, the industrial policy element in Europe’s strategy for 2020 is very important – it should be part of the strategy. However, the main point I would make is that that while the whole Europe 2020 strategy looks great on paper, much of it is quite simply not being backed up by effective action on the part of EU member states. Hence I am not very optimistic that the plans will be implemented effectively, unless European leaders really get their act together soon.

That said, there is a case for some sort of industrial policy, since it would be foolish for Europe just to rely on markets alone without carefully directed state support. However, it seems to me clear that neither the EU itself nor the member states should be in the business of picking winners or supporting old businesses that should rather be allowed to decline. Instead, we need to create conditions for easy start up and financing of new businesses (e.g. not too much regulation, sensible tax regimes, etc.), support diverse forms of innovation and research, support education and training programmes, and provide high quality public infrastructure (e.g. ports, road, other transport, IT networks, and so on).

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