Will Europe?s industry survive the crisis? Competitiveness, employment and the need for an industrial policy

This paper examines the state of Europe?s industry and competitiveness in the current crisis and provides the rationale for a new industrial policy at the European level. Section 1 documents the decline of EU industry and the losses in outpud resulting from the crisis started in 2008. Section 2 investigates the issue of competitiveness, an issue at the top of the EU Commission policy agenda. Competitiveness is seen at the heart of economic growth and in the current crisis much of the policy advice from Brussels has focused on ways to restore the competitiveness of weaker countries. Mainstream notions of wage-driven price competitiveness as a determinant of export success of EU countries are not convincing. Rather it is technology, product quality, immaterial capabilities and the characteristics of goods and sectors that are crucial factors explaining the dynamics of productivity and competitiveness in Europe. Section 3 is devoted to the employment dimension. During the recession the job creating potential of product innovation has been lost leaving space to process innovations and job losses that have hit hardest craft and manual workers. A process of skill, job and wage polarisation has characterised the European employment structure leading to increasing inequality and poverty. Not all European countries have been affected in the same way, leading to a cntre-periphery polarisation in terms of unemployment and productivity. Section 4 concludes with a specific proposal for a new European industrial policy that could orient structural change towards enironmental sustainability, ICT applications and health and welfare systems. In these fields the employment impact is likely to be significant also in terms of skills and wages of the workforce.