Industrial Policy for Competitiveness and Sustainable Development

The point of departure of this paper is the hypothesis that we are in the midst of a change in the techno-economic paradigm. What we perceive as new challenges in a globalized world economy are in fact symptoms of the search for a new paradigm. There is some probability that a key feature of a new paradigm will be ecological sustainability. Therefore, a policy that tries to shape the structures of the future paradigm will have to follow the lines of an industrial policy for sustainability. Industrial policy is a controversial issue; the pros and cons are discussed. The concept of systemic competitiveness and findings from innovation economics help understand why it is not sensible to leave structural change entirely to market forces. Industrial policy for sustainability has to be formulated and implemented at the local/regional, national, and supranational level. 1 What are the new challenges in world economy? Current discussion in Germany focuses on globalization as a central element of the new challenges in the world economy. A prevailing feature is the globalization of financial markets in which huge sums of money are transferred around the world in next to no time. But it is not only money which is considered to be flexible in every way. A prevalent thesis is that companies, too, are free to choose whatever location they like. In consequence, differences among nations are supposed to disappear—high-wage countries will have to adjust wages, taxes, employers' contributions, and ecological requirements towards the bottom. This argumentation seems plausible because it can be illustrated with a number of empirical examples: relocations of production to low-wage countries outside the European Union, the foundation of new car factories on green field sites, and the like. However, the argumentation is too simple, and wrong in essence, because it underestimates the requirements which companies have with regard to locations and the ability of locations to meet them (Esser et al. 1996). An alternative and more sensible approach is the question what the new framework conditions of world economy actually are. Innovation economists speak of a change in the technoeconomic paradigm (Freeman 1987). Since the industrial revolution the evolution of the industrial mode of production has seen breaks which gave rise to new organizational patterns at company, branch and societal levels. These breaks are interconnected with far-reaching technological changes (technology as the sum total of technical hardware, know-how, qualification and organization, Meyer-Stamer 1997). The last one of these paradigms that has determined the development of the post-war period is being discussed under the label of Fordism (Hirsch and Roth 1986, Marglin 1990): with the general application of industrial mass production productivity and distribution potentials grew dramatically. Trade unions were able to secure growing real wages in the course of protracted struggles, which led to an overall increase in material living standards. The welfare state with comprehensive social security, in several variants, became the typical form of society in the industrialized world. This growth model met its limits in the 1970s. The major factor that caused a persistent decline in economic growth was a considerable drop in productivity growth. The explanation is that the potentials for a further productivity increase in the framework of mass production had been exhausted. There were other factors, too, not least the enormous resource intensity of this model, which caused a high need in energy that was covered by import and provided the oil exporting countries with a strong negotiating position. The last twenty years have been marked by the crisis of Fordism and the search for a new paradigm. Search does not mean of course that a group of social scientists and economists sit down together and figure out a new model. Just as Fordism had never been planned, the new paradigm, too, will be the result of decentralized, uncoordinated activities of numerous actors in differing spheres. Nevertheless, there are tendencies which help to identify the trajectory of future development. Such tendencies can be observed in several areas—there where new organizational and policy pattern have gained the upper hand over the past few years. A parallel