An industrial strategy for Europe

“INDUSTRIAL policy” has moved to the centre of economic and even national-security debates, from the United States to the European Union (EU). But the term can be misleading, not only because its meaning is rather vague, but also because it fails to capture the true imperative facing policymakers.

Industrial policy refers to the use of a wide range of tools, from regulations to subsidies and tax incentives, to support overall economic growth or foster dynamism in specific sectors. It is as old as the state. Go back 2,000 years to China’s Han dynasty, and you will find that iron-making was a state monopoly.

Europe has its own long history of pursuing industrial policy. European governments spent centuries supporting vital industries and technologies – especially those most relevant to war – in order to stay ahead of their enemies, who were often also their neighbours. More recently, they have pursued joint industrial policies to integrate, not fight, with one another.