Competition policy vs. industrial policy as a growth strategy

ABSTRACT

This paper shows that competition policy, rather than industrial policy, generated the rapid economic growth in post-war Japan. It also reveals that Japan’s growth rate was lowered from the mid-1970s due to newly introduced industrial policies and paucity of further competition policy. The current Abe government recognises the need for competition policies in Japan to recover from the low-growth period. The paper describes the types of competition policy carried out under Abenomics, especially in National Strategic Special Zones.Abbreviations: METI: Ministry of Economy, Trade, and Industry NSSZ: National Strategic Special Zones     

Industrial Policy—An Institutional Economic Framework for Assessment

Abstract:

In this article we suggest an institutional economic approach to classifying government policies, thus offering suggestions to improve the expected outcomes of government policy as well. We elaborate the argument for industrial policy-government policy to directly influence investment and resource allocation decisions by private companies. By adopting dimensions for industries that are stable over time, we can suggest which policies are suitable for which industries.     

Producing Airpower: The Rise and Fall of Neo-Liberalism’s Defence Agenda

ABSTRACT

Few policy issues are more challenging than complex weaponry’s procurement and employment. Technology drives weapon costs upwards faster than economies are growing and militaries struggle to maintain increasingly sophisticated arms. Certain governments have adopted a reform agenda rooted in neo-liberal economic theory to address these challenges. Two broad policies – enhancing inter-firm competition for contracts and outsourcing activities to the private sector – emerged as central to this reform agenda. Although rarely presented as such, these reforms present a significant intellectual challenge to the hitherto predominant statist model for military power’s provision. Surprisingly, in light of neo-liberal policies’ adoption by militarily active states, no study has systematically examined these reforms’ content and impact. My article fills this lacuna by examining the state – the United Kingdom – that most consistently enacted neo-liberal defence reforms. To preview the conclusion, neo-liberal reforms initially generated small initial efficiencies, but then produced significant adverse consequences when pursued beyond a certain minimal level. Britain’s competition policy, for example, ultimately incentivized firms to consolidate into monopolies, which narrowed the scope for future competition and prevented the state from upholding fixed price contracts. Outsourcing, likewise, proved detrimental once policymakers sought to extend its scope beyond a limited range of simple services.     

The Political Economy of Policy Vacuums: The European Commission on Demographic Change

ABSTRACT

Supranational organisations can only confront politico-economic issues that are recognised as important. Typically, issues gain recognition either when they provide an external shock to the system, shaking political actors into action, or when they are framed as important in policy networks concerned with developing the appropriate scientific approach. Ideally political and scientific actors align in creating pressures to recognise the issue as salient and to mobilise organisational responses. Issues differ in their capacity to be driven by both political and scientific pressures, creating crisis management, technocratic, and reform agenda outcomes. Here we explore a further variation, where pressures around an issue are insufficient, creating a policy vacuum. We examine one such policy vacuum in Europe: demographic change. This issue belongs to no particular Directorate-General in the European Commission, but is subject to policy frames from DG EMPL and DG ECFIN. Without sufficient political and scientific pressures, no particular policy position is occupied and advocated despite recognition of the issue’s importance. We discuss the role of policy vacuums and the need for their identification in political economy research.     

Transnational Depoliticisation and Industrial Policy: The European Commission and French Steel (1980–1984)

ABSTRACT

Following the 2008 financial crash, voices have called governments to re-embrace industrial policy and promote industrial development. Such calls presuppose that the past decades witnessed a relative retreat of activist industrial policies. Within international political economy the latter is explained by the limits posed by the structure of global economic governance and globalisation on the state’s interventionist capacities. This article argues that these constraints have enabled states to pursue the transnational depoliticisation of industrial policy and transfer decision-making responsibilities to spheres lying beyond the governmental arena such as transnational institutions. By appealing to supranational economic rules, governments can disclose their own preferences for certain industrial policies and resist pressures to assist declining activities. To substantiate these claims the article proposes an archival investigation of the French government’s management of the steel industry between 1980 and 1984 and its support for a European Commission-led management of restructuring. The findings suggest that the pressures of the Commission played a crucial role in strengthening the government’s effort to implement socially unpopular but economically vital industrial choices.     

Policy Dimensions of Progressive Institutional Change: Lessons from China’s Construction of a Socialist Market Economy

Abstract:

Through a comprehensive review of the progressive institutional change (PIC) literature, I first discuss four possible trajectories of PIC by considering the forces of societal reaction that might frame the path, as well as the scale and scope of the changes. Thus, I pose four questions that need to be asked when related policies are formulated for PIC. To illustrate this method, I scrutinize the evidence from the construction of a socialist market economy by the Chinese government since the 1980s and argue that related policies have successfully promoted PIC from three dimensions: (1) curbing potential conflicts with power groups; (2) promoting a sense of awareness among stakeholders; and (3) minimizing disturbances to the community. Actually, the related changes demonstrate a dynamic “displacement process” for PICs. Despite the success of this sociosystem, it is found that the sustaining of PIC which requires policy factors that enhance instrumental efficiency in the Chinese context will serve as a challenge to the Chinese government ahead.     

The Role of Fiscal and Monetary Policies in Sustaining Growth With Stability in India*

The performance of the Indian economy in recent years has attracted increasing international interest. This paper focuses on the role of fiscal and monetary policies in the evolution of the Indian economy over the years, with particular attention being given to the reforms undertaken in these policies since the early 1990s. The coordination of fiscal and monetary policies has been crucial in the sequencing of the economic reform process carried out since the early 1990s. Monetary policy aims to maintain a judicious balance between price stability and economic growth. With the opening up of the Indian economy and the spread of financial sector reforms aimed at functional autonomy, prudential strengthening, operational efficiency, and competitiveness of banks, considerations of financial stability have assumed greater importance in recent years alongside the increasing openness of the Indian economy. The biggest challenge facing the conduct of fiscal and monetary policy in India is to continue the accelerated growth process while maintaining price and financial stability. Therefore, the self‐imposed rule‐based fiscal correction at both the national and subnational levels has to be consolidated and carried forward. The existence of a high level of fiscal deficit also contributes to the persistence of an interest rate differential with the rest of the world, which then also constrains progress toward full capital account convertibility. The success achieved in revenue buoyancy through tax rationalization and compliance has to be strengthened further.     

Funding Pain: Bedouin Women and Political Economy in the Naqab/Negev

ABSTRACT

This contribution focuses on the experiences and voices of Palestinian Bedouin women surviving and challenging Israeli colonial policies while residing in their own land and, in particular, the Bedouin women of the Naqab living in unrecognized villages. Through interviews and focus groups, this study learns from and engages with the voices of Palestinian Bedouin women because colonized women's criticisms of the political economic apparatus are seldom invoked to influence policy. Exploring these women's voices offers an opportunity to examine the political economy of their unrecognized, officially nonexistent villages and homes and to rectify the gap in bottom-up knowledge of political economy by investigating the institutional structures that define and circumscribe women's lives. Privileging Bedouin women's production of knowledge carries the analytical value of studying political economy based on women's own experiences and struggles against hegemony.     

The Impact of Foreign Direct Investment on Poland's Trade with the European Union

Over 75% of FDI in Poland originates from the EU. The EU also predominates in the exports and imports of FDI companies. The objective of this article is to examine whether FDI is likely to replace trade or to create new trade flows. In particular, the article shows the influence of FDI on Poland's trade with the EU. The FDI impact on Polish trade can be seen as its contribution to export creation. Moreover, externalities caused by trade and FDI inflow are influencing Polish specialisation patterns, which is important in the process of integrating the economy into the world market.     

Interpreting the Crisis,Envisioning the Future

ABSTRACT

What role do the historic identity tropes associated with being an island play in the foreign policy of contemporary Britain? To answer this underexplored question, this article utilises theories of critical geopolitics and ontological security to analyse a series of recent parliamentary debates and reveals the continuing importance of geopolitics to British foreign policy. This entails a conceptualisation of the role that discourses of island geopolitics played in the British Empire, giving rise to a set of tropes that I call island identity. Many studies emphasise the enduring pragmatism of British foreign policy; by contrast, my framework allows a foregrounding of how foreign policy-makers seek ontological security through the use of the established discursive tropes of island identity which establish Britain in subject positions of geopolitical relevance relative to novel contexts. The case studies focus in particular on globalisation and the EU –two issues of particular relevance, especially since the Brexit vote. This article allows a deeper understanding of both by contextualising them within British traditions of geopolitical discourse.     

Choosing sides in the trilemma: international financial cycles and structural change in developing economies

ABSTRACT

This paper analyzes the impact of international financial cycles on structural change in developing economies. It is argued that the impact of these cycles depends on the specific combination of macroeconomic and industrial policies adopted by the developing economy. The cases of Brazil and Argentina are contrasted with those of Korea and China. In the Asian economies, macroeconomic policy has been a complementary tool along with industrial policy to foster the diversification of production and capabilities. Inversely, in the case of the Latin American countries, long periods of real exchange rate (RER) appreciation, combined with the weaknesses (or absence) of industrial policies, contributed to the loss of capabilities and lagging behind.     

Does market competition promote innovation efficiency in China’s high-tech industries?

ABSTRACT

Despite extensive discussion about the relationship between market competition and innovation performance, the impact of market competition on the innovation efficiency of high-technology industries in a transitional economy is still unclear. The article is based on panel data of 17 subsectors of China’s high-tech industry spanning the 2001–2016 period. Using stochastic the frontier analysis model, we empirically test the impact of market competition on two-stage innovation efficiency from the perspective of the industry. The results indicate that market competition and firm scale have positive and significant effects on the efficiency of two-stage innovation, the effects of industry export intensity and government intervention on R&D efficiency are negative, but the effects are different for the efficiency of the commercialisation of technology. Based on the results of the empirical analysis, this paper compares the trends and the differences between R&D efficiency and commercialisation efficiency, and then uses cluster analysis to reclassify China’s high-tech industries into three categories, thus revealing the disconnect and imbalance within China’s high-tech industries. At the end of the article, we present some possible policy recommendations.     

Will America create a Cold War with China

ABSTRACT

American policy towards China is now up for grabs, with hardliners and soft-liners battling for the upper hand. The hardliners view China as an existential threat to American security and interests. The soft-liners regard China as a powerful counterpart, on occasion friend, competitor, or adversary, but not an existential threat. In my view, the hardline approach – to be pursued through protectionist trade policies and aggressive technology policies — would prove disastrous, weakening the world economy and creating a self-fulfilling grave risk of future conflict.     

Automation,Financialization, and Institutional Change: Challenges for Progressive Policy

Abstract:

This article argues that the issue of “technological unemployment” resulting from automation is the result of ceremonial encapsulation within the process of progressive institutional adjustment. While institutions of production have adjusted to account for new technological developments, institutions of distribution have not. As discussed here, the main cause of this lack of adjustment is a financialized economy, in which shareholder returns motivate and dominate economic decision making and activity. As a result, gains and benefits from technological advances exacerbate existing income inequality and reduces the power of labor. I discuss this issue in detail before explaining how progressive policies that divorce private wage-labor from access to the system of social provisioning may serve to smooth this process of institutional adjustment caused by the introduction of automated processes.     

Free software on the market-side: the failure-story of free software services companies in France

ABSTRACT

This article investigates two research funding policies in a cooperative and a non-cooperative R&;D setting: subsidising private research (Spr) and subsidising public research (Spu). We show that R&;D cooperation with subsidies (either Spr or Spu) always performs better than R&;D cooperation with no subsidy. Furthermore, the Spr policy leads to better performance than the Spu approach does in terms of overall net surplus whether the firms cooperate or not in R&;D. Nevertheless, comparing the two research funding policies for the same level of public spending shows that the Spu policy with R&;D cooperation is in some cases more effective than the Spr policy, the latter becoming too costly for the government when spillovers are high.     

Helicopter Ben,Monetarism, The New Keynesian Credit View and Loanable Funds

Abstract:

The purpose of this article is to examine the intellectual roots of monetary dominance over fiscal policy. A first step was Milton Friedman’s reinterpretation of the Great Depression based on the money-multiplier story associated with the fractional-reserve system. In the 1990s New Keynesian authors and Ben Bernanke in particular never got away from Friedman’s interpretation and remained faithful to the loanable funds theory despite their new focus on bank credit and their apparent abandonment of monetarism. New Consensus Macroeconomics kept arguing that expansionary fiscal policy could only lead to higher inflation rates and real interest rates that lowered potential output. The New Keynesian literature on the zero lower bound of the early 2000s thus mostly overlooked the benefits of expansionary fiscal policy; instead, the optimism on unconventional monetary policies failed to prepare policymakers for the Global Financial Crisis. The crisis demands far-reaching changes to monetary and macro theory not least of which is a recognition that the theory of loanable funds is incapable of providing any insight into how the financial system works in practice.     

Governance–Based Analysis Of Regulation

This article surveys current literature on the developing nature of regulatory systems and regulatory reforms, attempts to place such arrangements in the pervasive context provided by public policy processes and institutions, and argues that an explanation of the 'governance of regulation' is crucial to an understanding of the strengths and weaknesses of regulatory practice. The article begins by defining the range of meanings of regulation, then goes on to emphasize the importance of the framework of governance within which regulatory policy and practice proceed. The location of regulatory reform in contemporary debates on state–market relations and related managerial reforms is examined. Reference to this framework highlights the significance of the public policy process through which regulatory policies must be delivered, and the key role within that framework of political categories of analysis. The article ends by considering the issue of 'policy transfer' between developed and developing economies, and the need for policy–relevant research into regulatory systems and policies in developing countries.     

On the economics of R&D and technological collaborations: Insights and results from the project colline

Research collaborations involve co-production and exchange of knowledge across organisational boundaries. They involve governance of intellectual property rights and partners' use of collectively produced knowledge. The principal findings arise from case studies of consortia governance in biotechnology and software and substantial variety in arrangements is identified. This variety may be explained by the appropriability of knowledge in particular research domains as well as by the nature of the knowledge generated. Consequences of governance rules are explored for European research consortia and for collective standards making activities. The analysis indicates several policy conclusions: government policy has an important role in overcoming market failures in consortia formation; adoption of any uniform intellectual property rights model for consortia would be likely to reduce research productivity; policies aimed at stimulating consortia formation must take account of the nature of knowledge that is to be exchanged.     

A Macro-Level Account of Money and Credit to Explain Gendered Financialization

ABSTRACT

The paper intervenes in the debate on macroeconomics, money, gender, and financialization. Generally, there is an omission in gender studies on gender-specific effects of monetary policy. Not only is there a blind-spot about the role of monetary policy in feminist political economy, there is equally a blind-spot in meso-level analysis which focus on the social construction of institutional mechanisms and the predatory market power of oligopolistic banks. Yet, monetary policy is neither neutral in the short-term nor long-term. Such policies have gender-differentiated effects on employment, income, consumption, savings which in turn have feed-back effects on economic growth. My intent is to focus on the changing role of monetary policy and highlight the omission in gender studies on financialization, as well as argue that the shift of the credit cycle to fictitious capital (future revenue) is one of the central explanatory variables in the predatory banking model of subprime lending. Yet, the financial crisis of 2007 did not usher in a normalisation of the credit and finance system. Exactly the opposite happened. Unconventional monetary policy continues to facilitate a credit system based on future claims which has gendered distributional effects, in the process increasing the wealth inequality on a global scale.     

Industrial innovation and governmental policy: A review and proposal based on observation of the U.S. electronic sector

The U.S. electronics sector has been particularly successful at technological innovation since the 1940s. This paper addresses governmental policies that influence the process of technological innovation, drawing on aspects of the history of the electronics sector. Three topics receive particular attention—(1) uncertainties, ideas, and imperfect appropriability, (2) returns to R&D and associated investments, and (3) competition and selection environments. As a foundation for this discussion, several conceptual frameworks are briefly described and some classifications for innovation are explored, i.e., by importance (basic/improvement), by locus of change (process/product), by area of application (peaceful/dangerous), by locus of choice (private/public), and by value (worthwhile/not worthwhile). The discussion is underscored by the observation that better links between conceptual understanding and policy formulation are needed in order to derive practical insights into useful actions. One specific policy recommendation is tendered: an income tax credit on earnings of all employees (including salaried staff and managers) of R&D intensive firms. Such a policy would be appropriate from the standpoint of the topics outlined above (i.e., uncertainties, returns to R&D, and competition); the policy would also delegate responsibility for effective use of the subsidy to the employees and firms affected and would directly acknowledge and reward the contributions of individuals—whether in R&D, production, marketing, or support areas—to the innovative capabilities of their firms and the society at large.