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Published by EH.NET (May 2000)
James Foreman-Peck and Giovanni Federico, _European Industrial Policy: The
Twentieth-Century Experience_. Oxford: Oxford University Press, 1999. xvi +
466 pp. $105 (cloth), ISBN: 0-19828998-7.
Reviewed for EH.NET by Francesca Fauri, Professor of Istituzioni Economiche
Europee, Faculty of Political Sciences, University of Bologna in Forlė.
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The aim of this multi-authored volume is to contribute to an understanding
of European industrial policy, broadly interpreted, by introducing an
historical perspective. The collection of case studies allows the reader to
become familiar with the differences among countries, and the remarkable
continuity within countries, of European national industrial policies.
The book analyses the industrial policies of four broad groups of
countries: the largest Western European states - Britain, France, Germany
and Italy - a group of small, but highly productive nations - Sweden, the
Netherlands, Belgium and Ireland - three states with a long tradition of
state industrial regulation: Spain, Portugal and Greece, and finally the
case of Russia, a huge economy with a deep-rooted tradition of centralized
decision making and state intervention.
British industrial policy from the nineteenth century was characterized by
economic liberalism, and despite the greater industrial role of the
government after the First World War, it clung to the liberal precepts of
minimum state expenditure and 'self-regulation' during the inter-war
period. It was only after 1945 that the Labour government took a much more
interventionist stance-nationalizing industries such as the coal industry,
gas, electricity and railways and adopting a variety of measures including
import controls and industrial subsidies at levels unknown in the past. In
the 1980s, the state reversed to more market-oriented industrial policies:
it abandoned state ownership and direction of industry, radically improving
the performance of British economy (even though the author claims that the
redirection of economic activity was not necessarily ideal and skill and
learning deficiencies began to emerge).
The French claim to have invented the concept of industrial policy and, as
a matter of fact, since Colbert, the idea that productive capacity can be
increased by state aid has never been abandoned by French governments.
Curiously enough, the chapter on Germany is titled "The Invention of
Interventionism," contending with the French for the primacy. The first and
most important industrial policy instruments used by the German government
since the 1880s have been tariffs and subsidies. In this case economic
performance has shown that state interventionism and a positive economic
trend are not incompatible at all. Also the Italian state has a
long-standing tradition of intervention, progressively shifting its range
of interest from railways, tariffs and public procurements to bailouts,
planning regulation, subsidization and the use of state-owned enterprises.
Albeit, not with German results, being in the words of the authors "much
less effective than it may have been given the large resources allocated to
industrial promotion."
Small states such as Sweden, the Netherlands, Belgium and Ireland, all
experienced, though in different historical periods, state attempts to
influence industrial growth, usually ranging from rare selective
interventions (protection, subsidies, nationalization) in the past, to
general efforts to facilitate and stimulate industrial growth in more
recent times. The Netherlands is a case in point: arguably the most liberal
country in Europe since its creation in the sixteenth century, between 1948
and 1963 the government actually intervened in support of declining
industries as had never done before (or has done since).
Spain, Portugal and Greece, three latecomers in the industrialization
process, all present, with different degrees of intensity, a key state role
in the promotion of industrial development. Spain, as the other two, was
characterized by a long-term presence of an authoritarian government, but
it was the only one to combine authoritarianism with a political ideology
of intense and large-scale industrialization. Yet, results were meager: the
state interventionist approach proved not very efficient, supporting the
implementation of a rigid system of import substitution that soon became
not only superfluous, but harmful to overall economic growth.
Russia is the utmost example of industrial policies with maximal state
intervention, at least until the 1990s. During the Tsarist peacetime
economy (1890-1913) the state promoted the development of heavy and defense
industry in order to remedy the technological backwardness of the country.
The main beneficiaries of Tsarist industrial policies were the railway,
engineering, iron, steel and defense industries, with much of the burden
falling on the agricultural sector as a result of tax policies. After the
New Economy Policy interval (1921-27) in which the Bolshevik policy-makers
tried to reverse the policy of nationalization by privatizing small
industrial enterprises, industrial policy in the Stalinist era became
highly centralized, the state owned all productive assets and
quantity-oriented plans were utilized as the main coordination mechanism.
State planning was retained as the key industrial policy instrument until
1992 when economic decision-making started being decentralized to banks,
firms and regions and Russia started its difficult transition to a market
economy. Yet, historical traditions are likely to influence the pattern of
industrial organization and policies that Russia will develop in the
future.
The introduction of a cultural theory of industrial policy in the last
chapter helps explaining why European industrial policies show different
degrees of state intervention. Inter-country differences in the propensity
to intervene also depend on the dimension of trust: industrial policy
requires an adequate degree of trust to succeed.
Surely this volume has two great merits: it provides a collection of case
studies constructed along the same line of discussion themes, thus
facilitating comparative analysis, and it offers a synthesis of a great
deal of literature unavailable in English. Undoubtedly, the book has
fulfilled its task of rendering the future writing on the history of
European industrial policy more manageable.
Francesca Fauri is author of "A Comparative Analysis of Italian and British
Management before World War II" in Vera Zamagni and Lars Engwall, editors,
_Management Education in Historical Perspective_ (Manchester University
Press, 1999) and "Economic Miracle and Italy's Chemical Industry: A Missed
Opportunity" in _Enterprise and Society_ (forthcoming, summer 2000). She is
currently working on a book on "L'Italia e l'integrazione economica europea
(1947-2000)."
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Published by EH.NET (May 2000).
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