Draghi’s love letter to industrial strategy risks heartbreak

MARIO Draghi wants Europe to follow the United States and China down the road marked “industrial strategy”. As Europe’s most influential economist – a former head of the European Central Bank, former prime minister of Italy and technocrat supreme – Draghi had enormous leeway in preparing his report on European competitiveness. He could have focused on unleashing Europe’s entrepreneurs or lightening its burden of entitlements. But instead, he produced a 400-page love letter to industrial strategy.

Draghi advocates an increase of 800 billion euros (S$1.15 trillion) in the European Union’s collective investment, both public and private, to drive growth in the economy’s critical sectors. That massive sum is the equivalent of 4.4 to 4.7 per cent of Europe’s gross domestic product (for comparison, investment under the Marshall Plan in 1948-51 was 1 to 2 per cent of GDP). He carefully eschews the “old industrial strategy” of producing national champions and conquering global markets, but only does so to embrace the “new industrial strategy” even more enthusiastically.

Draghi’s world is one of forging common objectives, agreeing on joint plans and delivering coordinated responses, rather than creative destruction, animal spirits and neutral government. He wants to create a new “competitiveness coordination framework”, align trade policy with industrial policy, consolidate Europe’s fragmented telecoms industry, “engineer a coherent strategy for all aspects of decarbonisation, from energy to industry”, and secure critical supply chains. With this report, the world’s last remaining neoliberal great power – the EU – surrenders to the fashion for industrial strategy.