From Mercantilism to Neoliberalism and
Back Again?
Shifting Policy Paradigms in EU Industrial
Policy
Lars Niklasson, Associate Professor in
Political Science, Linköping University
Contradictory policies?
 A ”neoliberal” side:
 ”Creative destruction”, competition
 Deregulation/common regulation
 A common currency, restricted gov’t
 A ”mercantilist” side:
 Competitiveness, collaboration
 Support for firms, regions, individuals
 Eurochampions?
Good or bad?
 Interesting to a political scientist!
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Why this mix?
Where are the political conflicts?
What are the motives and ideas?
Will this mix produce growth?
Is diversity a problem or a strength?
Will Europe survive globalization?
 This overview is a first step
A clash of national traditions?
National policies to National policies to
support firms?
support firms?
YES/MORE
NO/LESS
European policies to
support firms?
YES/MORE
France
(CEE)
European policies to
support firms?
NO/LESS
Germany
UK
A triangular drama?
Liberals
Mercantilists
Socialdemocrats
Pro-market
x
x
(x)
Pro-SME
x
Pro-MNC
x
(x)
Nationalist
x
(x)
Social agenda
(x)
x
Collectivist
x
x
Individualist
x
(x)
COALITIONS:
Center-Right
x
Center-Left
Northern
x
x
x
x
x
Oscillating compromises
Time
Key issue
Dominant perspectives
50s-70s
Building up industrial
policies
Mercantilism
80s
The Single market
Competition
Liberalism
90s
EMU, SGP
”No industrial policy”
”No innovation
policy” (?)
Liberalism with some
mercantilism
Ca 1997-2007
Employment Strategy Mercantilism with some
Lisbon Strategy
liberalism
Ca 2008-
Crisis
EU 2020
Liberalism with some
mercantilism
Explanations?
 External events and crises
 High level compromises (Thatcher,
Mitterand, Kohl)
 Shifting majorities
 Business lobbying? (ERT?)
 DG’s with different perspectives
 Growing importance of the Parliament
 Competing paradigms in Economics
The underlying conflict:
Should diversity be maintained?
Policy area
UK
Germany
France
Ownership and
finance
A market of
shareholders
Coordinated by
the banks
A dominant
role of the
state
Labor
A market for
labour, little
regulation
Regulation and
coordination by
the social
partners
Regulated by
the state.
Unions not so
strong
R&D
Financed by
firms and the
state
Coordinated
By the state
through
and the firms
business
associations etc
MODEL
Liberal market
economy, LME
Coordinated
market
economy, CME
Statedominated CME
Mediterranean?
A new European compromise?
A more social market economy?
Model 1
Model 2
Proposed European
Social Model
The Social
Investment State
(In use by the EU)
The Liberal Investment
State
Focus
Public spending
Top-down
By agencies
Public spending
Empowerment
Personal accounts
Possible coalitions
Center-Left:
Social democrats +
Mercantilists
Northern:
Social democrats +
Liberals
Swedish role model
The Myrdals on the
welfare state
1930s
Social partners: ”The
comfort of the wings”
1960s
Summary and conclusions
 An interesting contradiction of policies
 Europe needs SMEs and MNCs
 A risk that politics is short-sighted
and supports existing firms too much
 Europe needs instruments for skills
development and flexibility
 Better to support individuals than to
support firms