FRANCE STRATÉGIE & OECD WORKSHOP ON NEW INDUSTRIAL POLICY TOOLS Paris, 17 October 2022
Session 1: Can new industrial policy tools help Europe resume convergence and innovation? Josefina Monteagudo Senior Expert; European Commission
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Our industry and society are living through a series of continuous shocks and challenges that are putting our current economic model to a test We can say we live in the economy of discontent, with a growing income gap, growing divergences, the COVID pandemic, the Russian invasion of Ukraine. Or, as Commissioner Breton often calls it, an era of permacrisis. The consequences are before our eyes: massive spill overs on the population, on the economy. A specific one is the acceleration of de-industrialisation, hitting areas until now considered to be sheltered. While it can be argued that there is something normal about de-industrialisation, there is nothing normal nor good about losing high value-added manufacturing with high innovative capacity.
The challenges we face requires us to rethink our model, our business models, even rethinking the economic paradigm. The change applies to both private and public sector actors: We need to increase economic resilience. Even better, to build “antifragile” economies, to borrow the term from Nassim Taleb, able to surf on disruptions, to smartly dominate disorder. Markets can play a role in the solution but are not enough when the gaps between the social and private returns are too large, like during the pandemic or when facing strategic dependencies in relation to critical materials or technologies. Even traditional market mechanisms, like the Schumpeterian creative destruction seems not to be working properly. We need to change from “business as usual” to “unusual” business; to use more expensive inputs if that reduces dependencies and ensure sustainability; to think not only jobs but about quality-jobs; we need to shift to fair and purpose driven economic paradigms. We need mission-oriented industrial policies.
To achieve this, we need to retool our industrial policy. Traditional approaches may not be enough, e.g. soaring inflation needs high interests rates but also the right, smart investment: We need to build on our Single Market, which is a de-risking element for investment: via funding, but also regulation, standards, industrial alliances. We have also learnt our lesson when it comes to strategic dependencies, and to the fact that the market may not fix itself in the face of major shocks, including on chips and raw materials. The Commission is active and has announced initiatives on semiconductors, the EU Chips Act, a Critical Raw Material Act.