Industrial change, financial system and coherent industrial policy

?The debate on the relationship between the financial and the non-financial sectors of the economy is an old one. Schumpeter (1911) argued that an efficient and effective financial system has a positive impact on economic growth. Recently this debate has experienced renewed interest after the financial crisis, which revealed the extraordinary growth of the financial sector over recent decades, the increasing gap between the financial and the real sectors of the economy, and the so-called financialization of enterprises. In fact, the financial sector grew so big and has made such high profits that it is legitimate to ask whether it impeded non-financial structural change as a result, by drawing away not only money, but also human capital from the real sector, since many engineers preferred working in the financial sector to get higher wages than in industry. Meanwhile industries have experienced substantial structural changes that have induced new calls for industrial policies at the beginning of the 2000s, and led to a ?return? of industrial policy. The aim of this paper is to discuss both the effects of financialization on the industrial sector and the implications for the design of sustainable industrial policies. The conclusions are that industrial policy should include actions aimed at inducing the financial sector to focus on providing resources to investments in productive sectors and reduce speculative activities. Financial and macroeconomic policies must indeed be coherent with industrial policy so that all parts of the economic system combine to contribute to a move toward sustainable development paths.?