The Institutional Framework for Industrial Development: New Direction for a European Industrial Policy

The capacity of industry to innovate is a basic element in economic performance. As the various outbreaks of 'Eurosclerosis' perhaps indicate, there is considerable concern about technological progress in firms in Europe. As a response to falling growth figures, rising unemployment and lagging productivity growth, the European Community initiated the Internal Market Programme ('1992'). The implicit assumption underlying this policy is that competition is the basic driving force behind economic progress.

The theme of this publication is that competition is a necessary but not sufficient condition for economic growth. Networks of symbiotic relations between firms, between employers and employees and between the public and the private sector are indispensable for gathering and creating information, developing new technologies and implementing innovations.

The argument is developed as follows. After the introductory section, the relevance of 'Eurosclerosis' and its policy implications are questioned by comparing the economic performance of various European countries, the USA and Japan. Subsequently the industrial policy of the EC is discussed and the emphasis of the EC on competition as the driving force behind economic growth is highlighted. The remainder of the publication is devoted to alternative views on economic development that rely on interest intermediation between economic actors in the public and the private sector in addition to the competition model. As the model of interest intermediation has not been left uncriticized the dangers of such a model are also presented.