• An Alternative European Industrial Policy?

  • By Gabriel Colletis | 17 Nov 14 | Posted under: European Alternatives , Transformative Strategies
  • The need for an ‘industrial renaissance’ seems now to be the object of a fairly broad consensus. Although for a long time industry was considered part of an outdated heritage, industrial jobs are now seen as a crucial factor conditioning the number of jobs, skilled and less skilled, in the service sector.


    The usefulness and meaning of a European industrial policy

    We see such a policy as having two possible general directions. The first would aim at taking advantage of the potentials and complementarities of national and regional productive structures in Europe, avoiding, in particular, the imbalances connected to terms of trade and the effects of polarisation.

    The second direction of a European industrial policy would consist of framing it in a way consistent with both a macro-economic policy directed towards support for activity (through investment but not only) and a policy of promoting efforts in education, training, and research.

    Besides the very unequal development of industry in the different European countries, there are also some profound differences in the composition of productive structures. In certain countries or territories industry essentially produces consumer goods ultimately intended for households, whereas other places primarily produce machines for equipping industrial plants. Still other countries produce energy or intermediary goods that are part of the composition of finished products. These differences in composition constitute a potential for complementarity that could serve as an essential base for the gradual establishment of a European productive system and as a general orientation for European industrial policy. This potential of complementarity has, in the past, been used in certain sectors like aeronautics (e.g. Airbus) or space (e.g. Ariane).

    However, several obstacles make this perspective hard to translate into practice. The first is that the most powerful European country, Germany, while known for its production in the capital goods industry is just as much a producer of durable consumer goods and end consumer goods aimed at households. Germany’s capacity to produce energy as well as the intermediate products its industry needs is also very strong. While other countries often need things produced by Germany, the converse is not true. With a balance of trade surplus in its strong areas (machinery, cars, chemicals, etc.), Germany has managed to reduce its deficits in areas that, historically, are not its strong points (agro-industry, textile, clothing, etc.). The differences in the level of valorisation of different activities and products, reflected by relative prices, is a second obstacle. A specialised machine tool for cutting gears or a topof-the-line car do not have the same added value as mass-produced clothing or a ton of coal. Thus a country whose productive composition is focused on activities with a high added value at high prices and where demand is inelastic with regard to price would inevitably dominate at the expense of others. It would sell the others expensive products and buy from them products whose low prices show they contain less added value. Encouraging European complementarity of national or regional productive systems that ignores such an imbalance is equivalent to encouraging the complementarity of a powerful man and his vassals.

    The third obstacle comes from the powerful momentums that make activities agglomerate in certain areas called ‘focus’ zones. Such momentums produce areas of inequality whose cumulative character is hard to overcome. While certain regions in Europe pursue and increase their development by maintaining and attracting specific essential resources, that is, capacities, while deepening the mechanisms of collective learning, others are sinking under the weight of the crisis and under-development, driving into exile the younger and best educated generations. This disorganises the networks of social and productive solidarity where they exist.

    Among the weak points of European industrial policy identified by the European Commission itself is internal demand which ‘remains weak, undermining European companies’ home markets and keeping intra-EU trade subdued after the crisis’ (European Commission, IP/14/42 22/01/2014 <http://ec.europa.eu/enterprise/initiatives/mission-growth/index_en.htm)>. It is very hard for all European countries to have a positive balance of external trade and export-led growth. Thus, in all European countries domestic demand, in different degrees and in different ways, plays a central role. Industrial policies, whether European or national, cannot be dynamic and proactive if they are conceived in a depressed macro-economic environment. It is thus necessary to connect industrial and macro-economic policies by injecting the means that are required for them. The strong risk today (especially in France) is that a policy of support for big corporations (in lieu of an industrial policy) associated with a recessive macro-economic policy will only accentuate the outward orientation of these companies although this is one of the prime causes of de-industrialisation.

    Rather than devoting disproportionate means to big or very big corporate groups, it would be more sensible for European governments to support economic activity by undertaking massive public investment. Promoting a kind of public investment that is not opposed to the growth of workers’ income would indeed combine the advantages of short and middle term measures (the support of activity in the sectors concerned) with preparation for the future. Public investment must cover both plant and infrastructure and must also be oriented towards education, training, research, and innovation. There is no doubt that the fortress of productivity, which has so long protected industry and jobs in Europe, can no longer play this role in the face of the emerging countries. Until conditions emerge for harmonious co-development in the world, it is indispensable that European industry become the crucible of another model of development, placing democracy and labour at its centre through training and the recognition of the abilities of all those who work in the service of human needs today. It is both necessary and possible.


    The principles of any industrial policy

    Seven principles can guide choices that promote industry:

    The first principle: viewing industry as a system.The basic unit of any industrial policy is inter-relation, since industry is a system and not the sum of its actors. It is the density of relations between the actors of the ‘productive system’ that conditions the efficiency of the whole, which is clearly much more than the sum of the individual performances of each.

    The second principle: basing the performance of industry on the recognition and strengthening of the skills of its workers.We think that, more than the saving in time or optimisation of the production process, the potential significance of the new technologies of production that have been announced (e.g. 3D printers and robotics) lies in the capacity to work differently rather than faster. The logic of cost reduction should give way to practices that emphasise innovation.

    The new notion expressed by the neologism ‘cobotic’, which invokes a cooperative kind of robotics, focuses on the needs of the user. Cobotics can be understood as robotics that aims at using or having recourse to mechanical systems of substitution developed to work with people, accompanying them and helping them in particular situations and for particular tasks. As was the case during the computerisation of work stations, cobotics will only really be able to fulfil its promise of a different kind of work if a major effort is made to train people. This effort lies at the heart of industrial policies and must be applied to both technical and organisational skills. The mission of robots is not necessarily to replace people; instead it can assist them. ‘Big data‘ will constitute large stores of structured information, but they cannot replace the human mind. Far from denying the role of skill and experience, the new production and management technologies could accentuate it. The individual and collective capacity to carry out complex tasks, to recombine existing know-how in new configurations, constitutes the essence of technology, defined as the whole of the mechanisms and practices available in a given culture.

    From now on, the questions of efficiency and of coordination will assume a growing importance, for two reasons. First, because the individual actors decreasingly have at their command the whole range of skills needed to resolve a problem. Second, because the regulatory mechanisms that ensured the relatively stable and predictable working of economic and social systems have been largely dismantled by the increased opening up of these economies through the deregulation that is causing or intensifying the general instability. The engineering mechanisms and practices available in a culture, which is what essentially constitute technology, can thrive in a democracy. We therefore believe that democracy in civil society as well as within companies is Europe’s only comparative advantage and must be preserved and made fruitful rather than be seen as an obstacle to efficiency.

    The third principle: giving life to democracy within the enterprise whose institutional existence is recognised as such. The dominant image of a firm is that of an organisation whose sole aim is to make a profit. Everything happens as if those who own the corporation’s capital were the only parties present, being able freely to dispose of the firm as if it were a mere liquid asset. The process of financialisation, which broadly speaking dates from the 1990s, intensifies all these features and their effects. Not only is profit confirmed as the firm’s sole purpose but it in turn is oriented to the shareholders’ interests as a matter of priority. Profits and dividends are no longer what are left over from the firm’s operations but are considered guaranteed preconditions. Since dividends are announced to shareholders in advance, the sharing of profits and of added value are overdetermined. The effect of this is to restrict both the self-financing of investments and the wage level – these are treated as adjustment variables. Wage earners are expected neither to mobilise their skills nor be associated in the designing of strategy – nor be fairly paid.

    The extreme pressure exerted on the firm’s costs (especially its wage costs) is not aimed at improving the firm’s competitiveness but only its profitability – out of which the guaranteed incomes of the shareholders are paid. Investments are now chosen for their ability to reach a standard of profitability set by the financial markets and the holders of capital. This form of capitalism is far worse than a rentier capitalism that is limited to taking advantage of the condition of past accumulation – it destroys what has been accumulated, eating it up or squandering it.

    Recognising the firm as a complete institution in itself, not just a mere capital-owning company, giving it its own managing organ, in which the wage earners would be recognised not in relation to their cost savings but their work contribution, is a central issue for democracy, social peace, and economic efficiency. With the help of available new production techniques, only those wage earners recognised for their competence and ability to directly take part in strategic decisions could be involved at this level, considering the immensity of human needs and the need to preserve nature from the great danger it faces.

    Recognised as a common good once it pursues objectives that go beyond those of a mere firm, the enterprise emerges from the classical alternative of the private appropriation of profits and the socialisation of costs and losses. Its governance can be broadened to include, beyond its wage earners and capital providers, representatives of the general interest – those of the territories in which it is active – who could be integrated into the firm’s management.

    The law must establish this new alternative kind of representation, and EU law could make a positive contribution to this, beyond the present provisions for a ‘European company’. The social section of this statute already requires that companies put a mechanism in place for the participation of European wage earners. This mechanism can consist of establishing mechanisms for information and the consultation of wage earners and even for their participation in organs of governance. The first is a move in the right direction, but it is insufficient since the fate of major firms, being strongly marked by their financialisation, has already been radically separated from the future of the national, and even European, fabric.

    The fourth principle: promoting long term de-financialising strategies (time).De-financialising must answer to the general principle of re-articulating the economic and the social spheres. This is essential to getting out of the crisis and evolving towards a new kind of social organisation. It is a precondition for all financial regulation with any significant operational scope. The present financialisation follows a general principle that opposes the economic and social to one another, making income depend on the ‘factors’ of mobility.

    The most mobile factor, the financial factor, has established its right of remuneration before that of all the others (industrial capital, and both skilled and unskilled labour), thanks to its extreme mobility and its volatility. The remuneration of labour, whether semi-skilled or unskilled, appears as a ‘residue’. The social tensions (e.g. the growth of inequality) that arise from the principle connecting speed of mobility to level of remuneration, but also the economic instability associated with this principle, result, in the current situation, in the impossibility of drawing up compromises and creating the institutions required for a new mode of development. Dealing with time, the speed of mobility of the ‘factors’, is today the indispensable precondition for putting finance back in its place (in the service of economic and social development) and reducing inequalities.

    It is a process that will involve stages, both to put a brake on the liquidity of financial capital and to increase the mobility of labour. Challenging the volatility of financial capital – making it concede that it has to invest rather than just bet money on something – means instituting retardants: taxes on financial transactions, differential taxing of profits according to whether they are re-invested or distributed as dividends, the different taxing of short- and long-term capital gains, the proportional granting of voting rights to shares based on how long they have been held, etc. The ‘compartementalisation’ of financial activities (one example of which is the separation between the activities of merchant banks and deposit banks) reflects the same logic of favouring relative liquidity at the expense of the absolute volatility of financial capital.

    All these reforms could be initiated at the national level, but the most coherent relevance of these reforms lies at the European level. This level will only live up to its potential when there is determined political action by the peoples of different European countries.

    The perspective of increasing the mobility of labour must, for its part, not be understood in the spatial sense, as it customarily is, but as a matter of making labour more skilled, of making it specific, developing experience and capacities. Mobility is thus that of workers who change their assignments in accordance with the specific tasks or projects to be carried out. Industry can again become a place of stable and well paid work. This stability, far from meaning the carrying out of a job whose content never changes, should become synonymous with a mobility that is guaranteed by the re-deployable character of its capacities.

    The fifth principle: promoting the anchoring of activities (space). Beyond the short term or localised projects that could be developed everywhere to reduce the ecological footprint and protect nature, the durable anchoring of activities in territories or regions is an important aspect of industrial renovation. While the choice of localisation is now mainly based on cost comparisons, those based on an offer of the specific advantages of territories are more lasting. Territories that know how to propose the complementary capacities which enterprises need, by identifying them and organising them in networks, will be able to preserve the local anchoring of the companies in question, and much more effectively than by throwing themselves into a general cost competition.

    With this perspective we clearly distinguish between localisation and regionalisation. Rather than proposing generic advantages, always liable to be competed with (offers of real estate, infrastructures, various exemptions), the territories would do well to identify and develop the availability of skills corresponding to the needs of the firms that have gone too far in the practice of outsourcing. A firm would have difficulty in finding specific skills in the areas of competence that it has outsourced. Rather than multiplying a variety of subsidies and exemptions to firms taken in isolation or supporting a number of infrastructure projects through Structural Funds, which show little evidence of being economically effective, this new industrial policy would strengthen the inter-relations between firms (by benefiting from the advantages of proximity to anchor their activities) and could then be called a real policy of a productive system, integrating the actors of the world of research and training.

    Rather than only seeking to accumulate and concentrate the protagonists in an area regarded as limited by borders, the public protagonists should in the future seek to encourage productive combinations based on confidence, shared outlooks, and potentially complementary skills. The settling of a firm in a region and its participation in the regional dynamics constitute a wager on the future.

    The main role that the public protagonists should play is that of examining these developments and anticipating needs in terms of the complementary capacities of firms. This will require a great improvement in the level of coordination between the public protagonists as well as the strengthening of relations of trust between the public and private protagonists.

    The sixth principle: producing for other needs while protecting nature.What to produce and for whom? Production for export or production as a synonym for a more sustained growth cannot be sufficient or even satisfying answers. The degrowth thesis has some solid argument to put forward, which condemn the malaise at work but also the harm productivism does to people and nature. At the same time, it does not always clearly distinguish between growth and development. This approach, while it rightly adopts a critical attitude to the damage done by productivism, ignores the immensity of social needs in poor countries as well as, increasingly, in the developed countries (e.g. in education, health, food, housing, and transport). This question, with the rise in inequality everywhere, has become a central issue for millions of people who are no longer able to feed or house themselves adequately. In this context, while ‘growth’ does not, by itself, resolve any problem, the converse is also true: Without developing productive activities no progress in covering social needs is conceivable. The difference between growth and development lies precisely in the fact that development implies satisfaction of essential needs such as food, housing, clothing, as well as education and health.

    Without subscribing to the degrowth thesis, we nevertheless largely agree with those who advocate an ‘ecological transition’ and transformations in the structure of employment and the organisation of work. We agree with those who think that a reconversion to more labour-intensive forms of activity is both desirable and possible once the emphasis is placed on the quality of the goods and services provided, the recombining instead of the division of tasks, and the re-localisation of economies.

    Rather than a ‘green growth’ implying that new activities and new kinds of work could arise in Europe on a mass scale in activities involving the management of the environment, we think that one should look at development in another way, a kind of development that no longer considers nature as offering resources (water, air, land …) that can only have value if they are brought on the market. The development of socially useful production that preserves nature sometimes demands higher capital expenditure but especially requires labour, more skilled than those marshalled by a mass production based on increases in productivity. Providing quality goods and services to consumers and doing so without destroying the environment implies a more complex configuration of work based on a variety of objectives going beyond immediate production.

    The seventh principle: establishing protective standards of a new model of development. The change of paradigm that we are proposing will need protective measures and norms – protection against finance, but also against the whole range of deregulatory choices that has pitted workers in general competition with one another through offshoring and dumping of all kinds; protection against the choices that make austerity and decline preferable to the development of productive activities, the only effective remedy to unemployment and deficits; and norms for reconciling the economic with the social, developing useful activities that answer to social needs while protecting nature.

    The issue of protectionism is extremely important in the perspective of a new development project. If protectionism is needed, it cannot alone replace an overall project. The approach that we are advocating views protectionism as a means of project development whose intention is political. Most partisans of a policy of protectionism opt for an EU-level protectionism. Theoretically, the EU could be an area where protectionism could be made to work, but on three conditions:

    The first condition of an EU-level protectionism would be that the European project and institutions be oriented towards development of the economies and productive systems of different European countries. The second condition would be that the economic and social situation of the European countries should be more or less similar in order to favour the adoption of common measures that do not provoke significant asymmetries between the countries concerned. The third condition, finally, would be that the bulk of the balance of trade deficits contracted by the different countries be with other countries outside the EU. Indeed, what would be the use of measures to protect from countries outside the European Union if the deficits were mainly between the countries? Examining the three ‘theoretical’ conditions leads to seriously questioning the effective possibility, today, of any protectionism on a European scale. For a long time now EU institutions have not sought to strengthen the development of European countries, particularly not that of their industries. The needed reorientation in constructing Europe is opposed in principle to the content of the present trans-Atlantic so-called ‘free trade’ negotiations, covering both trade in goods and investments (TTIP: Transatlantic Trade, and Investment Partnership) and services (TSA: Trade and Services Agreement). These negotiations are disarming Europe and the European nations, giving multinational firms the exorbitant power to sue countries if they think a change of legislation harms their interests (see, for example, the Investor-State Dispute Settlement) – not before the national courts but before the International Centre for Settlement of Investment Disputes dependent on the Washington-based World Bank.

    A second observation is that the economic and social situation of different European countries, far from converging has never stopped diverging – except that they all share the typical features resulting from the crisis of financialised capitalism. How, for example, can we imagine certain European countries supporting protection measures for certain industries when they totally lack these and they import goods at the lowest possible prices from these very industries?

    Finally, as to countries whose trade deficits have contracted – with countries outside Europe or with other European countries – the situation varies. In France’s case, apart from trade with China, the principal imbalances are with other developed countries, with Germany in particular. The latter, for its part, has a very positive balance of trade (within and outside the euro area).

    It thus appears risky to expect from the present European Union any easy implementation of protectionist measures. This confirms that it is necessary to engage in a reorientation of the EU’s construction since the European area is, indeed, the one that seems most favourable for protectionist measures. Because of the size of intra-eurozone trade, it would enable the reconciliation of two figures that globalised capitalism tends to pit against each other – the consumer and the wage-earner. Everything happens as if the consumers had no other choice in maintaining their purchasing power (at least in the short and middle term), that is, being able to buy the products they want, but to ‘prefer’ imported products at the expense of employment in France and in Europe.

    The re-articulation of the interests of consumers, more generally the users of goods produced (whether households which consume or entrepreneurs who buy semi-finished products), with the interests of those who conceive and make them is one of the major reasons for protective measures. The nation seems to be the solidest rampart, likely to be opposed to financialised capitalism and a relevant area for the democratic shaping of an industrial strategy. Open but not offered for sale, the national areas must become the place for initiatives of a new educational protectionism.

    Nevertheless, protectionism at the European level, despite difficulties in establishing it, seems the only protectionism conceivable, except by challenging the whole process of economic integration undertaken since the signing of the Treaty of Rome (1957). An eventual protectionism within the community area would destroy the current EU immediately. Within the European area a renewed EU is the institution that would give meaning to the necessary protective measures. It is also the one institution able to provide greater coherence to the connection between increased wages, growth of outlets, and increase of production. The EU, due to the size of its intra-zone trade remains the principal outlet for firms producing in Europe. A gradual increase in the purchasing power of European wage earners would thus privilege the European firms, which could strengthen their production in Europe and re-localise production that has been transferred outside Europe because of the pressure up to now exerted on purchasing power.

    Finally, the changes that need to be carried out in the perspective of a new model of development should be made in each of the three spaces – local, national, and EU. These three spaces are intermingled, and the new standards will, most often, be drawn up simultaneously at all three levels. By way of illustration, the present and future wages and working conditions of aeronautic workers are, and will increasingly be, set simultaneously in Toulouse, Hamburg, Munich, Paris, Brussels, and Frankfurt.


    Conclusion: for a general change of conceptual framework and an alternative industrial policy

    To think that it is possible to establish protections without changing paradigm will only result in failure. It is this paradigm shift that we see as central. A new industrial policy and protective measures are a privileged means or vector. The social forces in Europe must actively campaign for a gradual reorientation but one still supported by the political project of European and national institutions.

    No system whatever its area (national or European) – and the EU is indeed vast and complex – can be reformed if it is too open (that is, unprotected). A new development project for Europe presupposes protective standards. The object of these standards would be to prevent externally manufactured products from entering the European Union without restriction if they do not respect the values it intends to promote: the values of labour and the skills incorporated in the products, the value of social relations within the firm, the societal value linked to the great principles based on human rights and protection from a variety of dangers (to health, especially), the values of cooperation and mutually advantageous agreements – and finally, the value of nature. All these values are opposed to the bargaining carried out in secret to impose standards on the peoples that lower the level of protection (TTIP, TISA).

    The new industrial development project answers a political aim. This aim cannot exist if it is not carried forward by social forces, if it is not thought out and implemented by the people as citizens. 

Related articles