Industrial policy in Italy and Germany: yet another look

Italy, like most European countries, has experienced stagnant GDP growth in the past years. In a recent paper, Lucchese and Nascia (Industrial Policy and technology in Italy, 2016) argue that the decline in the Italian industry could be traced back to the financial and the Euro crises in 2007/08, and is mainly caused by a fall of domestic demand, which itself is rooted in an austerity policy. The authors argue for a paradigm shift in innovation and industry policy away from the horizontal European approach to a more vertically oriented approach led at the national level. In this paper we try to contribute to this discussion by providing another look at the data which reveals a different cause of the loss of competitiveness. In contrast to Lucchese et al., we argue for a more disaggregated level of industrial and innovation policies to foster and improve sunrise sectors and regions. We underpin our arguments with examples from Germany, which recovered from the “Sick man of Europe” a decade ago and has emerged as one of the most competitive countries.