The EU’s continuing financial and economic crisis, which began in 2008, has shifted the focus of political debates at the European Commission and the European Parliament (EP) towards the importance of industry.
This article outlines the European Commission’s and the European Parliament’s approaches to the current industrial policy debate. It looks at a number of recent policy documents and focuses on areas that deviate from the neoliberal economic policy the EU has practiced up to now. It closes with a critical assessment of these documents and an outline of the key challenges that they pose to the European left in constructing a new integrated EU industrial policy.
On 28 October 2010, the Commission initiated the debate on industrial policy with a presentation of its new industrial-policy concept: An Integrated Industrial Policy for the Globalisation Era: Putting Competitiveness and Sustainability at Centre Stage. It began by highlighting the importance of industry:
One out of four jobs in the private sector in the European Union is in manufacturing […] and at least another one out of four is in associated services that depend on industry as a supplier or as a client. 80 per cent of all private sector research and development efforts are undertaken in industry – it is a driver of innovation and a provider of solutions to the challenges our societies are confronted with.
The Commission also pointed out that the manufacturing sector accounts for 75% of all EU exports.
At least rhetorically, the Commission seems to have moved on from its former one-sided emphasis on (financial) services. It has finally admitted that a significant part of the service sector depends on industry and that it is therefore the precondition for a part of the services sector. According to the Commission, half of all jobs in the private sector depend directly or indirectly on industry. It is on this basis that the Commission has defined its industrial policy:
This communication sets out a strategic framework for a new integrated industrial policy that will stimulate economic recovery and jobs by ensuring a thriving world-class industrial base in the EU.
The Commission continues by arguing that its new policy approach will ‘provide growth and jobs and enable the transition to a low-carbon and resource-efficient economy’.
A central concept in the Commission’s document is an ‘integrated industrial policy’, which means a systematic linking of the policy areas important for an effective industrial policy. In the Commission’s view, this involves the following spheres: competitiveness, smart regulation, access to finance, infrastructure, research and development, employee training, industry modernisation, standardisation and intellectual property rights, strengthening the EU internal market and promoting exports; trade policy, ensuring access to raw materials; resource, energy and carbon efficiency, reducing structural overcapacities, and corporate social responsibility.
The intention is to align these fields with the aims of the Europe 2020 strategy. The Commission’s new industrial policy is to be coordinated at the EU, national, and regional levels by means of the European Semester and country-specific recommendations, both of which were first implemented in 2011.
However, the Commission’s primary aim – fully in line with previous EU policy – is to strengthen competition and make the EU the most competitive economy in the world. Nevertheless, the document also reveals some shifts of emphasis in terms of the EU’s internal market.
The Commission sees access to financing especially on the part of small and medium-sized enterprises (SMEs) as a central problem. It therefore argues that the financial markets need to become stabler and more efficient and be given incentives ‘to finance the real economy and investments, instead of being involved in speculation on the financial markets’. This would be accompanied by a shift away from traditional bank loans and towards corporate financing through capital markets, including venture capital or project bonds: in other words, measures that are also the focus of the European Fund for Strategic Investments (EFSI).
Furthermore, the Commission would like to see EU funding programmes better aligned with industrial policy. This includes enhancing the promotion of innovation in the field of environmentally-friendly production processes and products, and the generation of energy from low-carbon sources, as well as simplifying access to funding programmes (particularly for SMEs)
Another key aspect of the document is the call for smart regulation, which requires initial impact assessments and ex post assessments of the effect of legislation on EU economic competitiveness, with a special focus on SMEs.
Further elements of a stable legal framework for its new industrial policy include clear rules for the protection of intellectual property rights (including the regulation of EU-wide patents), the enforcement of clearly defined standards (particularly regarding new technologies), the fight against unfair competition, and the prevention of product piracy. In the interest of SMEs, the Commission is also pushing for the far-reaching harmonisation of laws governing these fields in the internal market, and appropriate tax legislation.
Greater use is to be made of the EU’s Cohesion Fund and European Regional Development Fund for expanding energy, transport and communication infrastructure services. The focus is to be the expansion of modern, high-speed networks throughout the internal market (as part of the Digital Agenda). This is to ensure that the rapidly increasing importance of information and communication technology for industrial production is properly taken into account.
The Commission also views enabling technologies such as industrial biotechnology, nanotechnology, new materials, photonics, microelectronics and nanoelectronics, advanced manufacturing systems, as well as a more efficient use of resources and environmentally-friendly energy production, as the core of ‘industrial innovation’ and industrial modernisation.
Due to technological and labour market issues, the Commission intends to focus more strongly on industrial value and supply chains and to ensure that any parts of these chains located outside of the EU are returned to the internal market. In this context, it is worth noting that the Commission no longer describes the internal market as a ‘highly competitive market economy’, and in at least one section of its communication it refers to it as ‘a highly competitive social market economy’.
Another factor worth noting is that the public sector is seen as playing an important role as consumer and investor, especially in innovative renewable technologies. Nevertheless, the Commission continues to express the decidedly neoliberal view that ‘competition-driven structural adaptation is quickest and most efficient’.
The Commission views education and training policies, and well-qualified employees, as an essential element of a successful strategy to combat unemployment and secure existing jobs. It therefore calls for closer coordination between the various political levels, the involvement of social partners, and the strengthening of the European Social Fund in order to deliver better results on these issues.
The document’s passages on corporate social responsibility are particularly striking. The Commission calls on companies ‘to take into account their contribution to sustainable growth and job creation, and consider the interests of the employees and citizens affected by business decisions’. For this purpose, the Commission has announced a policy initiative on corporate social responsibility, aimed at ‘addressing emerging issues such as business and human rights, and company disclosure of environmental, social, employment-related, and governance information’. In its 14 October 2011 communication entitled Industrial Policy: Reinforcing Competitiveness, the Commission asserts that supporting ‘social businesses and the social economy is another important tool for strengthening the competitiveness and the sustainability of the European industry’.
The Commission also focuses on the relatively few raw materials available in the EU. On the one hand, the Commission mentions secondary raw materials (in other words, recycled materials), which it would like to promote. On the other hand, one of the most serious issues the new industrial policy addresses is the securing of better access to primary raw materials. The Commission intends to push through legislation on the global level that will protect the EU’s continued access. If access to resources is threatened by market concentration, or anti-competitive agreements, the Commission considers as ‘essential’ the ‘vigorous application of the EU’s existing competition rules in cases of anti-competitive agreements or market concentration threatening to endanger access to raw materials’.
The Commission’s aggressive commodity policy is related to its commercial policy, and the title of this section of the document – ‘Capitalising on globalisation’ – clearly conveys the neoliberal nature of the EU’s external trade policy. Instead of looking towards cooperation and security partnerships, as well as fair trade, the Commission focuses on expanding and developing export markets. This is probably the most critical point in the document.
On 2 February 2011, the Commission issued a separate communication on this issue: Tackling the Challenges in Commodity Markets and on Raw Materials, which space does not permit us to discuss here.
In October 2012, the Commission published a communication entitled A Stronger European Industry for Growth and Economic Recovery. Importantly, this document no longer reflects the Commission’s previous line on supporting unconditional competition in the EU’s internal market. It sets new priorities, such as ‘the social market economy’ and ‘corporate social responsibility’, and calls for the involvement of social partners, consumers, and citizens; it also recognises the importance of public procurement.
In so doing, one of the goals of the Commission is to increase industry’s share from 16 per cent to 20 percent of GDP by 2020. At the time of publication, the Commission gave the level of production in the EU as 10 per cent of GDP, which has led to a loss of more than 3 million jobs.
In this document the Commission defines the four pillars of its industrial policy: the creation of an investment-friendly framework, improving the workings of the internal market, better access to capital and credit, and better trained employees; and it specifies the industrial sectors it wants to support and the measures that could improve the framework.
The Commission also notes that labour markets in countries characterised by stronger levels of social dialogue have proven to be more crisis-proof and, as such, recommends improving dialogue at the European and national levels.
Finally, the Commission urges the checking of labour market segmentation, an end to the rampant use of non-standard employment contracts, and to abuses of labour law through bogus self-employment; it calls for improvements in the quality of traineeships, including related working conditions.
During the 2009 to 2014 legislative period, the European Parliament (EP) set out its position on the Commission’s new approach in three initiative reports:
Although all three reports view the Commission’s approach as encouraging, they also expand on it and endorse a number of other elements.
The EP’s first report clearly emphasises certain socio-political and ecological concerns. From the outset, it views the social market economy as a foundation of integrated industrial policy. The most significant element in this report, however, is its treatment of competitiveness, sustainability, and decent work as equally important elements of a triad:
[…] to overcome the effect of the crisis and face those challenges, the EU needs an industry policy approach that combines competitiveness, sustainability and decent work that can at the same time stimulate the economy, boost employment, reduce environmental degradation and improve quality of life.
Consequently, the EP essentially rejects unconditional competition and instead uses the term ‘fair competition’ quite consistently in its report. For example, on the issue of external trade, the EP argues that future multilateral and bilateral trade agreements should ‘form part of an industrial strategy based on fair global competition and reciprocity by European trading partners’. Moreover, it reasons that as ‘social and environmental concerns and relevant standards should be incorporated in free trade agreements […] steps must be taken to ensure that European industries are not endangered by unfair practices’. On company takeovers, the document calls on the EU to make funds available to prevent them if they ‘prove to be detrimental – in industrial, economic and social terms – to social cohesion and the stability of the internal market’.
The EP continues by calling on the Commission ‘to reduce social inequalities, to promote the ILO’s Decent Work Agenda’, ‘to create a framework for cross-border collective bargaining’, and ‘to ensure that […] employment is placed on the same footing as combating inflation among the European Central Bank’s objectives’. Finally, the EP calls for fair pay for employees, a fair remuneration of internships, as well as action against social dumping. Finally, it also supports Eurobonds and emphasises the role of public procurement in creating demand, thus not shying away from contentious social issues.
In the EP’s second report – Small and Medium Size Enterprises (SMEs): competitiveness and business opportunities – it shows support for the Commission’s broad approach to integrated industrial policy. Its focus is on the economic significance of SMEs and their importance in employment policy in the context of EU industrial policy. Above all, this report calls for greater equality of opportunity for SMEs compared to large companies. The EP specifically calls for cutting red tape, easier access to credit and EU funds, the application of the special SME Test as part of smart regulation, and for improved access to public procurement through simple procedures that can be carried out by SMEs. Significantly, the EP’s report even calls on the Commission ‘to include special information on cooperatives in the financial instruments managed by the European Investment Fund’.
This report, too, emphasises that an integrated industrial policy needs to be built on ‘the principles of social market economy and in support of a transition to a sustainable, resources efficient and resilient economy’. Consequently, it refers to the potential of SMEs to create jobs and thereby reduce poverty and social exclusion. In this sense, the report ‘calls on the Commission and the Member States to support SMEs in establishing a working atmosphere that will encourage workers to comply with the standards of labour law, worker protection and health protection, thus also contributing to social prosperity and the fight against poverty’. Here, clearly, the self-regulatory powers of the market are no longer the focus of European industrial policy.
The EP’s third report –reindustrialising Europe to promote competitiveness and sustainability – also supports the Commission’s approach; however, it focuses on sustainability and ecological management, as well as on the ‘social dimension’ of integrated industrial policy, and it deserves to be treated in some detail here.
The report begins with the triad of competitiveness, sustainability and decent work described in the EP’s first report (Industrial Policy for the Globalised Era). It states throughout that industrial policy must create ‘new jobs and decent work’ and criticises the Commission, saying it ‘deplores the absence in the Commission proposal of any measures against wage dumping and social dumping’. It calls for an adequate remuneration of internships, equal pay for equal work, and gender equality in labour relations.
More than any other EP document, this one focuses on workers’ rights. It stresses ‘that workplace democratisation, including active participation by staff representatives and trade unions, needs to be expanded’ and points out that informing and consultation in the workplace is a right enshrined in the EU Charter of Fundamental Rights.
Furthermore, the report calls on the Commission to investigate whether it ‘is permissible under European competition law’ for ‘a group with worldwide operations to surrender a site that it has decided to close to another group which might take it over or to a public entity for temporary use’. It addition, the EP ‘calls on the Commission to study the US example of allowing trade unions to lodge trade complaints, given that trade distortions can negatively affect industry and therefore workers and to propose similar measures for the EU’.
In view of the Commission’s proposed cluster policy, the report calls on the Commission to make detailed proposals and to ensure that structurally weaker regions are involved in its policy. In general, the EP calls for a greater harmonisation of labour and social legislation, and of tax law (in order to prevent tax competition), and a clear definition and coordination of industrial policy between the various political levels in the EU.
Finally, this third report stands out from all the others in its insistence that industrial policy has to be shaped in accordance with the needs of society. It stresses that ‘RISE [Renaissance of Industry for a Sustainable Europe] needs an alliance of and partnership with stakeholders from industry from different sectors (including SMEs), trade unions, academia and civil society, such as consumer watchdogs and non-governmental organisations’. It continues by calling on the Commission ‘to link supply-side policy tools with demand-side tools by means of the creation of Innovation Partnerships (such as those on smart cities, active ageing or raw materials) and the development of “lead markets” which aim to promote the market uptake of new products and services living up to societal needs’.
The strong positions taken in the documents outlined here are a result the social pressure exerted by the crisis; in terms of the EU’s internal market, they diverge from the neoliberal path followed up to now by EU economic policy. On the other hand, these documents are merely communications and initiative reports prepared by the Commission and the European Parliament, and that is their weakness. They are only position papers, and not legal texts, and, as such, establish no legislative commitments.
Added to this is the problem that the current Commission, which took office in 2014, is reviewing all of its policy areas with the aim of increasing compliance from now on with the principle of subsidiarity. As a result, we can observe that the Commission’s industrial policy is largely bidding farewell to social and environmental concerns and instead being reduced to the achievement of global competitiveness. It is returning to its old neoliberal path, a course that reflects the interests of the Member States represented in the EU Council, which have increasingly focused on their own national interests and egotism since the crisis began.
The European crisis has, nevertheless, opened up cracks in the EU’s neoliberal edifice. Although these cracks are unlikely to lead to short-term shifts in the political power structure, it would make sense politically, given the developments in Greece and Spain, and in Portugal, to take these cracks seriously and open them further.
Political power relations normally only change over the medium to long term; that is why we have to develop long-term strategic policies. Industrial policy is the kind of political issue that lends itself well to this purpose.
It thus makes sense to seek out demands that are close to, or overlap with, left demands, to analyse them accurately, and, if appropriate, refine them and then actively support them. It is essential that strong political pressure be exerted on the Commission and the parliamentary majority to prevent them from completely falling back into their neoliberal rut; the social and environmental dimensions set out above need to become intrinsic parts of the new integrated EU industrial policy. And they must become part of relevant EU legislation, which requires changing the ECB’s objectives (as called for by the EP). After this, the left could focus on the shortcomings of the Commission’s and the EP’s texts and push to have them corrected.
All of the texts outlined above emphasise the importance of smart regulation within integrated industrial policy. Smart regulation can be a useful approach if its impact assessments have the proper social and environmental dimensions, that is, when it assesses the impact on employment, quality of work, social security, and sustainable development, and not only on competitiveness.
The defence industry is always a critical issue in industrial policy, and the Commission’s texts also reflect this. The defence industry should be pushed towards conversion and, in cooperation with the unions, moved away from weapons production and towards non-military production.
Although the documents outlined above address the issue of ‘industry 4.0’, they fail to recognise the significance of this development and its impact on employment, industrial relations, and on the structure and organisation of industrial production. This is no longer an issue for the distant future: Airbus intends to use 3D printers in the serial production of stainless steel, aluminium components, and spare parts starting in mid-2016. It is thus urgent that the left work together with trade unions and academia to address these developments and to develop policies and demands that ensure evolution is democratically organised and controlled.
In view of these technological developments, it is surprising that none of the reports mentions the issue of working time reduction as a means of combatting unemployment, and instead only speaks of more flexible working hours.
Moreover, all of the documents largely ignore the extremely different situations found in the various Member States. On the one hand, there are strong industrial societies in the EU, such as Germany, which generates about 30 per cent of total industrial and commercial output. (Germany is followed by Britain, France, Italy, and Spain, which together account for 40 per cent.) By contrast, the combined output of the remaining 23 Member States is equivalent to that of Germany alone. Some of these countries, such as Greece, Malta, Portugal, and Cyprus, no longer even have an industrial base and are now faced with the fundamental question of how to (re)build their industrial sector. On the other hand, some Central and Eastern European countries do still have an industrial base, and although these have shrunk considerably compared to the situation before 1989, they still account for far more than the EU target of 20 per cent of GDP. These countries need to work out how to maintain their industry. Above all, however, they need to find a way of raising their social, labour, and trade union rights to Western European standards, and of overcoming corruption and oligarchic corporate structures.
An industrial policy that only reflects the Brussels perspective cannot do justice to the differences between these countries. Successful industrial policy thus needs to be anchored at the regional level, and Brussels needs to consider regional problems. From a left perspective, this not only means taking into account the interests of regional enterprises, but also the interests of workers on the ground. It is not a matter of national egos but of regional realities that need to be taken into account. And here the left can develop its own independent approach to a new, integrated EU industrial policy – it is sorely needed because the left has as a rule neglected this issue.
All of these issues are tied to the question of how to fund the new industrial policy, especially for countries without an industrial base or with insufficient resources to develop their industrial production. Although the Commission’s and the EP’s documents do at least seek to address this problem, what they essentially do is to talk about new possibilities of access to private capital, and in view of the high debt ratio of public budgets, they are emphasising public-private partnerships (PPPs). And so the issue of strengthening public investment remains underdeveloped.
It is indeed reasonable to draw private capital into the real economy, as the Commission intends; however, the state only has limited influence over the behaviour of private investors. Therefore, adequate public funds are also necessary for implementing the new industrial policy. Otherwise, the structurally weak regions of the EU could gain nothing from this policy.
These documents say a good deal about value chains. The concern of the Commission and the EP is to draw more attention to value chains and, for reasons of technology policy and labour market policy, to integrate them more strongly into the internal market, where they reach into several countries. But the documents fail to address a key problem: the companies that dominate these value chains are located within a small number of EU Member States, and especially in Germany whose industry, as already mentioned, accounts for 30 per cent of the EU’s total commercial-industrial output.
During a workshop organised by transform! and the Rosa-Luxemburg-Stiftung and held in Brussels on 27 and 28 April 2015, Italian researcher Matteo Gaddi pointed out that businesses located within value chains are hardly able to make their own decisions and instead are controlled by the company at the top of the chain. The governments of the Member States in which dependent companies are located thus have very little freedom to effect industrial policy: the corporate headquarters at the top of the value chains are simply beyond their reach. It is unrealistic to expect that these very entangled industrial structures can be broken down within the EU internal market; the only chance for solutions is at the EU level.
Since 2013, transform! europe and the Rosa-Luxemburg-Stiftung (RLS) have contributed to the debate on industrial policy with a series of workshops, which saw the participation of representatives of left parties in EU countries, left members of the European Parliament and of national parliaments, trade unionists, and researchers.
The RLS commissioned country studies for a workshop held on 27 and 28 April 2015 in Brussels. The reports covered Bulgaria, Germany (Ruhr region), Greece, Italy, Croatia, Poland, Portugal, and Slovenia and provided a detailed picture of the conditions faced by these Member States.
The workshops provided a fundamental understanding of the question of industrial policy, which left parties, foundations, and think tanks need to keep on their agendas, bringing the discussion to a wider public.
In October 2014, to broaden the debate, transform! published an interim report entitled Project Left Industrial Policy/Productive Transformation for Europe. In February 2015, on the initiative of the Bundestag deputy, economist, and vice-chair of Die LINKE, Axel Troost, a discussion paper was published: Renewing Europe: For a common social and ecological industrial policy in Europe. It was signed by 41 left politicians, academics, and trade unionists from different EU Member States. Finally, in spring 2015, transform! published the discussion paper Towards Europe’s Productive Transformation – an Emergency. For an Alternative Industrial Policy.
The term ‘integrated industrial policy’ implies a complex system that, in order to function, is based on a deep social division of labour and a whole range of socially performed preliminary work. Accordingly, this system needs to be socially and democratically integrated, managed, and controlled, and the surplus value produced has to be socially appropriated, not just individually.
If this new integrated EU industrial policy is ever realised it would have to go hand in hand with rapid technological progress. This is an explicit goal of the EU Commission. But technological progress of course by no means automatically creates jobs; through rationalisation it is much more likely to lead to their loss.
If we define labour politically as the active participationin the shaping of human society, then the goal of a left industrial policy can only be to fight for a society in which the technological progress generated by a new European industrial policy is transformed into social and environmental progress, for the benefit of everyone.