Letter IEDI n. 783–Industrial policy experiences in the XXI century
There is great activity in the realm of industrial policy around the world in the present days. Today’s Letter IEDI presents a summary of the study "Varieties of industrial policy: models, packages and transformation cycles" by Professor Antonio Andreoni, University of London, which was published in late 2016 as a chapter of the book Efficiency, Finance, and Varieties of Industrial Policy, organized by Nobel laureate Joseph Stiglitz and Akbar Noman.
In this study, Professor Andreoni analyzes and contrasts the diversity of industrial policies that Germany, the United States and Japan designed and adopted in recent years to meet the challenges of structural changes in the global landscape. This group of countries was selected by the author because, historically, their policies constitute a learning benchmark for other countries in their respective regions. The author also examines the policies of three major industrial economies in phase of convergence (China, Brazil and South Africa), which he considers as key references, and places of experimentation and innovation in industrial policy.
According to the author, the variety in the experience of national industrial policies results from contextual (institutional and structural) and economic policy differences, as well as from different political spaces and different reasons and justifications for government action.
In the comparative analysis of the national industrial policies of the six selected countries, Andreoni examined different models of industrial policy governance and packages of measures adopted by the selected countries over time. Each policy measure was mapped in two main composite dimensions (governance and policy coordination model, and industrial policy package and alignment measures) and one temporal dimension. The temporal dimension aims to capture the cycle of action of industrial policy (transformation cycle) in which the author also includes institutions and active policy measures introduced by previous governments.
Despite the variety of packages, models and paths of national industrial policies in the selected countries, this taxonomy allowed the author to identify emerging patterns, trends in industrial policy practices, and common strategies. According to him:
• All selected countries adopt a combination of selective sectoral policies and systemic policies for the manufacturing industry. The latter aim at the symbiotic development (or restructuring) of complementary groups of industries.
• All countries significantly strengthened the financial and technological support for the manufacturing industry and the industrial system as a whole.
• In all selected countries financial support schemes are adopted, including loans, long-term financing, grant compensation.
• All these supply side measures have been increasingly combined with a renewed emphasis on demand industrial policy. Driven by increasing international competition, all countries are introducing more strategic government procurement policies.
Andreoni notes that the technological and financial infrastructure of the selected countries are, however, extremely different in terms of the scope of interventions, functions and institutional forms. Countries such as Germany, the United States and Japan, which have a technological infrastructure developed over the last century, have worked to build strong competitive advantages in high-tech activities.
Among the emerging industrial countries, only China and Brazil recently intensified support for the development of an intermediate system of dissemination of R&D activities. In South Africa, in contrast, little emphasis has been given to the intermediate institutions of industrial development and the development of public-private technology infrastructure.
Regarding the financial infrastructure, the author highlights the role of development banks which, in Germany and also in Brazil and China, are an important operational arm to implement public financing schemes as well as to guide, coordinate and support long-term strategies.
With regard to industrial policy governance models, the author points out the advantages of multilayer models that combine top-to-bottom and bottom-to-top policy interventions and are managed by different levels of government: federal, national, regional, local.
The multi-layered governance model provides greater flexibility in the composition of the industrial policy package and, in general, allows greater selectivity in policy design, better monitoring and better implementation of policy. However, it requires the construction of an articulated institutional infrastructure and the coordination of policy governance among all government actors.
In countries like the United States, Germany and Japan, sectoral policies tend to operate at the national, regional and municipal levels, while systemic policies are orchestrated at the central or federal level. In turn, developing countries, particularly China and Brazil, are increasingly adopting systemic policies oriented to the manufacturing industry and converging to a multi-layered governance model similar to that adopted by developed countries.
According to the author, the new industrial policy frontier seems extremely complex. Despite the existence of a number of key areas of industrial policy common to all countries, the variety persists and, to some extent, increases in response to different industrial trajectories and to distinct policy paths. New tensions are also emerging within and between regions. Although industrial policies continue to operate within national borders, industrial systems of manufacturing are so integrated that the impacts of national policies increasingly have consequences everywhere.
Andreoni concludes his article arguing that, although there is no "single model" of industrial policy strategy, understanding the varieties of industrial policy experiences of different countries expands the imagination of government policies and points to the opportunity to improve coordination, alignment and synchronization of industrial policy packages.
Further details about this interesting study are presented in portuguese.