Industrial policy, once considered a negative term, is now at the heart of global economic strategies, particularly in the United States. Historically, the idea that governments could identify and invest in strategic industries was criticised as ineffective. However, the changing geopolitical context and the possibility of a disconnected global economy have led to a reassessment of what constitutes success and failure in industrial policy.
China, now the world's second largest economy, has largely adopted industrial subsidies, influencing global dynamics. Its dominance in key sectors such as green technologies and electric vehicles (EVs) has prompted other nations to rethink their economic strategies. The European Union, for example, has launched initiatives to strengthen its domestic green energy industry so as not to be dependent on China.
European competitiveness is being called into question, with calls for significant investment to stimulate the economy and embrace digital technologies. However, there are doubts about Europe's ability to compete effectively with the US or overcome its structural challenges without closer cooperation and greater political will.
In summary, the global race for subsidies reflects a shift in the perception of industrial policy, driven by contemporary geopolitical and economic challenges. Nations are re-evaluating strategies to secure their economic future, although this can involve significant expense and uncertain outcomes.
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