From Mercantilism to Neoliberalism and Back Again? Shifting Policy Paradigms in EU Industrial Policy Lars Niklasson, Associate Professor in Political Science, Linköping University

Contradictory policies?  A ”neoliberal” side: ”Creative destruction”, competition Deregulation/common regulation A common currency, restricted gov’t  A ”mercantilist” side: Competitiveness, collaboration Support for firms, regions, individuals Eurochampions?

Good or bad?  Interesting to a political scientist! Why this mix? Where are the political conflicts? What are the motives and ideas? Will this mix produce growth? Is diversity a problem or a strength? Will Europe survive globalization?  This overview is a first step

A clash of national traditions? National policies to support firms? YES/MORE National policies to support firms? NO/LESS European policies to support firms? YES/MORE France(CEE) European policies to support firms? NO/LESS GermanyUK

A triangular drama? LiberalsMercantilistsSocialdemocrats Pro-marketxx(x) Pro-SMEx Pro-MNCx(x) Nationalistx(x) Social agenda(x)x Collectivistxx Individualistx(x) COALITIONS: Center-Rightxx Center-Leftxx Northernxx

Oscillating compromises TimeKey issueDominant perspectives 50s-70sBuilding up industrial policies Mercantilism 80sThe Single market Competition Liberalism 90sEMU, SGP ”No industrial policy” ”No innovation policy” (?) Liberalism with some mercantilism Ca Employment Strategy Lisbon Strategy Mercantilism with some liberalism Ca 2008-Crisis EU 2020 Liberalism with some mercantilism

Explanations?  External events and crises  High level compromises (Thatcher, Mitterand, Kohl)  Shifting majorities  Business lobbying? (ERT?)  DG’s with different perspectives  Growing importance of the Parliament  Competing paradigms in Economics

The underlying conflict: Should diversity be maintained? Policy areaUKGermanyFrance Ownership and finance A market of shareholders Coordinated by the banks A dominant role of the state LaborA market for labour, little regulation Regulation and coordination by the social partners Regulated by the state. Unions not so strong R&DFinanced by firms and the state Coordinated through business associations etc By the state and the firms MODELLiberal market economy, LME Coordinated market economy, CME State- dominated CME Mediterranean?

A new European compromise? A more social market economy? Model 1Model 2 Proposed European Social Model The Social Investment State (In use by the EU) The Liberal Investment State FocusPublic spending Top-down By agencies Public spending Empowerment Personal accounts Possible coalitionsCenter-Left: Social democrats + Mercantilists Northern: Social democrats + Liberals Swedish role modelThe Myrdals on the welfare state 1930s Social partners: ”The comfort of the wings” 1960s

Summary and conclusions  An interesting contradiction of policies  Europe needs SMEs and MNCs  A risk that politics is short-sighted and supports existing firms too much  Europe needs instruments for skills development and flexibility  Better to support individuals than to support firms