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We Need An Industrial And Innovation Policy For Europe

Pini, P. & Antonioli, D. (2015) “We Need An Industrial And Innovation Policy For Europe“, Social Europe Journal, 30 January.


The prolonged economic crisis since 2008 has drastically reduced incomes and employment levels and the promised recovery will not reabsorb unemployment, particularly in Europe. Nevertheless, economic policy in Europe is sticking to past recipes based on two mainstays: fiscal austerity and labour flexibility. This strategy does increase the short-run cost competitiveness of European firms overseas but this comes at the cost of decreasing the size of European internal markets reliant on domestic demand.

Europe needs clearly structural reforms, but of a kind very different from those asked by the European Commission during this crisis.

We here report on two closely connected and integrated lines of policy intervention related to the labour and the industrial system in Europe and its periphery countries. The two layers of intervention relate to industrial/innovation policy and labour policies mainly linked to wage setting.

Industrial And Innovation Policy

First of all, Europe needs a public industrial policy for strategic sectors, both traditional and mature, new and innovative. This policy must be complementary to government macro policies aimed at sustaining aggregate internal demand that private firms view as seriously deficient. Such demand can be increased only by stepping up public expenditure on investments – a strategy that requires major changes in the Eurozone’s Fiscal Compact.

Establishing an effective industrial policy means:

  • choosing how and where to place national manufacturing in the global market in terms of technology, production and demand, and
  • backing structural changes in the economic system, not only quantitative growth in demand but changes in its composition and direction.


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