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Development of western European states through a common industrial policy.

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 modern 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).

Until the Bangemann Memorandum (1990), the practiced industrial policies were the selective or sectorial ones, directed toward strategic and energy intensive branches. The coal and steel industry was firstly aimed at, as these were strategic branches in the 1950s, representing the subject of the Treaty of the European Coal and Steel Community (ECSC).

The objectives, the actors involved and the instruments of the common industrial policy are illustrated in Figure 2.

As part of the Europe 2020 Strategy, the objectives of the stipulated industrial policy refer to structural changes, to the introduction of innovations in industry, to the provision of sustainability and of resource effectiveness, to the provision of an attractive business environment, to rendering effective the unique market, to paying special attention to small and middle enterprises.

The Europe 2020 strategy introduced a new industrial policy. In the EU, from the standpoint of industrial policy, there is a distinction between four groups of countries.

In the first group there are states whose industrial structure is dominated by sectors that are technologically advanced. Being specialized in technologically developed industrial branches, these countries have an innovation capacity and an effective educational system (Austria, Belgium, Denmark, Finland, France, Germany, Ireland, the Netherlands, Sweden, Great Britain). The GDP per capita is beyond the EU average. The value added by industry varies between 10.6% in France and 24.2% in Ireland (European Commission, 2011).

The second group includes countries specialized in branches that are less developed technologically, without excluding activities with high competitiveness (Cyprus, Greece, Italy, Luxembourg, Portugal and Spain). The supremacy of labour intensive branches, the relatively reduced innovations and the relatively reduced intensity of knowledge, lead to an actually small number of companies working in these economies, with high performances compared to the states from the first group. The GDP per capita is beyond the EU average. The value added by industry varies between 6.5% in Luxembourg and 16.1% in Italy (European Commission, 2011).

The third group is made of countries whose GDP per capita is reduced (the Czech Republic, Hungary, Malta, Poland, Slovakia and Slovenia). These are specialized in sectors where there is high innovation intensity and in technology-based branches. They passed through a process of structural and transition changes, from the labour intensive branches to the technology-based ones. The GDP per capita is under the EU average. The value added by industry is between 13.3% and 23.3% from the total (European Commission, 2011).

The fourth group is made of countries that still progress, but are specialized in sectors less advanced technologically (Bulgaria, Estonia, Latvia, Lithuania and Romania). These states, like those in the second group, focus on the effectiveness of the educational system, but the advanced technology equipment remains precarious. The GDP per capita is under the EU average. The value added by industry oscillates between 9.9% and 22.4% (European Commission, 2011).

Getting back to the Europe 2020 strategy, industry is analyzed in an ambitious action plan, with over 70 propositions, entitled Integrated Industrial Policy for a Globalized Era, with an emphasis on:

--ensuring the competitive character of industry;

--The Small Business Act for Europe was reassessed in 2011 and adapted to the future requirements, especially to those related to the new strategy in support of the SMEs' internationalization (small and mediums enterprises);

--conceiving a Plan of Action for the SMEs ' Access to Funding, a priority objective in order to raise industrial competitiveness;

--including SMEs (small and mediums enterprises) in the Multiannual Financial Framework 2014-2020;

--relaunching market and industry, an objective included in The Single Market Act, adopted in 2011;

--industrial technological development--High Level Group on Key Enabling Technologies made concrete recommendations regarding technological development, especially with a view to raising investments, mentioned in the Horizon 2020 as well, and to modernizing the European Standardization System.

An analysis of the evolution of the industrial policy in six EU member states (Germany, France, Great Britain, Italy, Sweden and Ireland), over 25 years, identified a series of general features as follows (Sharp, 2003):

--from interventionism to laissez-faire (the 1970s);

--from the support of great corporations to sustaining SMEs (Small and Mediums Enterprises--SMEs);

--from national policy to regional policy;

--from the focalized orientation to diffuse orientation;

--from physical capital to human capital.

The economic policy of the EU puts emphasis (like that of USA and Japan) on research-development in the industrial field. From the point of view of the private investments, whose results are expected to be obtained in the short run, destined to this activity, EU occupied the third place, after USA and Japan. The leaders of the European research are Denmark, Germany, Finland and Sweden.

European states like France, Portugal, Denmark, Italy, Austria, Belgium, Ireland, Finland, the Czech Republic, the Netherlands, the Great Britain, support the industrial research and development by financial stimuli and crediting facilities (France, Portugal), facilities for crediting research activities within universities (Italy), deductions for expenses in research and SMEs (small and medium enterprises) development (Denmark), generic tax deductions (the Netherlands), revised system of fiscal credits (Great Britain), etc.

In the industrial field, the emphasis is particularly put on technology, micro- and nano-electronics, nanotechnology, industrial biotechnology, photonics and advanced manufactured systems. Some of the European countries promote explicitly these branches, and others conceive special programs. Germany, for instance, adopted a new strategy for technological development, valid by 2020; Estonia elaborated a system of loans; France made substantial investments in the digital infrastructure; Sweden, Italy, Portugal and Slovenia promote projects in the high-tech field; Lithuania stimulate investments in technology by tax exemptions, and Great Britain revised its strategy in the technological field.

At the EU level, there is a problem of energetic effectiveness, under the form of the reduction of energy consumption and of carbon dioxide and other greenhouse gas emissions, as well as a problem of raise of energetic security, resource provision, reduction of dependency upon import. The industrial consumption of energy in EU 27 was reduced with over 18% in the period 1995-2009, with raises of about 22%, 23% and 5% in the fields of transport (especially the road and air ones), services and real estates (European Commission, 2011).

3. Conclusions

The EU industrial policy is based on a stable environment for the achievement of industrial production, on innovation, on knowledge, on entrepreneurship, on a high degree of social cohesion, on performance labor, on the stimulation of investments and on durable development.

The Western European member states are those who enjoy a competitive advantage as far as industry is concerned (Haller, 2011). Let us not forget that the European technological development centers have financial power and implicitly afford supporting research and innovation activities. These states have the capacity to successfully implement measures of industrial policy, unlike the EU members that are clearly disadvantaged in terms of technological-industrial and adaptation capabilities.


Haller, A. P. (2011), "Informational and Technological Progress in the Knowledge Based Society," International Journal of Economic Practices and Theories 1(1): 7-12.

Pelkmans, J. (2006), "European Industrial Policy", Bruges European Economic Policy Briefings, Beep Briefing no. 15, Bianchi, Patrizio, and Labory, Sandrine (eds.), International Handbook of Industrial Policy, Edwin Elgar, URL:

Prisecaru, P. (ed.) (2004), Common Policies of the European Union, Bucharest: Economica.

Rodrik, D. (2007), "Industrial Development: Some Stylized Facts and Policy Directions," Industrial Development for 21st Century, New York: United Nations, Department of Economic and Social Affairs: 7-29, URL:

Sharp, M. (2003), Industrial Policy and European Integration: Lessons from Experience in Western Europe over the Last 25 Years, Working Paper no. 30, Centre for the Study of Economic & Social Change in Europe, School of Slavonic & East European Studies, London.

*** European Commission (2011), Member States Competitiveness Performance and Policies: Reinforcing Competitiveness 2011 edition, URL: Communication from Commission--Industrial Policy: Reinforcing Competitiveness, COM 0642. Final Commission Staff Working Document Member States Competitiveness Performance and Policies 2011, SEC (2011) 1187 European Commission, Enterprise and Industry.


Romanian Academy, Iasi Branch; Gheorghe Zane Institute of Economic and Social Research, Romania
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Author:Haller, Alina-petronela
Publication:Economics, Management, and Financial Markets
Article Type:Report
Geographic Code:4E
Date:Dec 1, 2014
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