The New Industrial Politics | by Barry Eichengreen

The New Industrial Politics The economic landscape is constantly evolving, and with it, the role of the state in promoting specific industries. In a recent article, Barry Eichengreen explores the concept of "industrial politics" and its implications for economic development. Traditionally, the role of the state in the economy has been limited to providing essential public goods such as infrastructure, education, and healthcare. However, as Eichengreen points out, the nature of economic competition has changed. Globalization and technological advancements have made it increasingly difficult for countries to compete in traditional industries such as manufacturing. In response, many governments have turned to industrial politics as a means to promote growth and job creation. Industrial politics refers to government intervention to support specific industries in particular regions. This can take the form of monetary incentives, tax breaks, subsidies, or even protectionist policies. The goal is to create a favorable business environment that attracts investment and promotes the growth of targeted industries. One of the notable examples of industrial politics is Germany's "Industry 4.0" initiative. The German government has invested heavily in promoting advanced manufacturing technologies and has provided financial incentives for businesses to adopt them. The goal is to maintain Germany's competitive edge in manufacturing and create high-paying jobs in the sector. Similarly, China has pursued a policy of promoting strategic industries through state intervention. The "Made in China 2025" plan aims to transform China into a global leader in advanced manufacturing, robotics, and artificial intelligence. The government has provided substantial financial support and regulatory incentives to companies operating in these industries. These examples highlight the potential benefits of industrial politics. By supporting specific industries, governments can create clusters of expertise, attract private investment, and promote innovation. This can lead to job creation, higher wages, and increased competitiveness in the global market. However, industrial politics also has its critics. Some argue that it creates an unfair playing field and distorts market forces. By favoring certain industries, governments may inadvertently harm others. Additionally, industrial politics can be susceptible to corruption and favoritism, as the allocation of resources becomes politicized. Furthermore, it is not always easy to identify which industries to support and how to support them. Economic conditions and technological advancements are constantly changing, making it difficult to predict future trends. Governments risk investing in industries that may become obsolete or fail to deliver the desired economic outcomes. Despite these challenges, Eichengreen argues that industrial politics is here to stay. With the rising importance of technology and innovation, countries can no longer rely solely on the market to allocate resources efficiently. Governments have a role to play in fostering the development of industries that are crucial for long-term growth and competitiveness. However, Eichengreen also emphasizes the need for caution and strategic thinking in implementing industrial politics. Governments should carefully consider the costs and benefits of intervention, and ensure that it is targeted and transparent. They should also be willing to adapt their policies in light of changing circumstances and new information. In conclusion, industrial politics represents a new approach to economic development in an increasingly competitive global economy. By promoting specific industries, governments can create an environment that fosters innovation, attracts investment, and creates high-paying jobs. However, industrial politics also presents challenges and risks, and policymakers must carefully consider the costs and benefits. Ultimately, the success of industrial politics will depend on the ability of governments to strike the right balance between intervention and market forces.