In recent decades, in parallel with the reduction of organisational sociology to management theory, industrial policy has been encapsulated in two words: ‘shareholder value’. Based on neo-liberal assumptions about the inherent imperfectability of unregulated markets—for capital as well as labour—this US-dominated discourse has reduced the complexity of the industrial ecosystem to a single question, the ‘principal-agent’ problem of aligning the interests of executive directors with company shareholders.
In contrast with the earlier American sociology of the ‘managerial revolution’, which positively appraised the perceived disjunction between technical enterprise managers and mere profiteering, this way of thinking assumed that turning managers into automatons whose every action was determined by the prospect of enhanced share valuation would resolve America’s perceived relative long-term industrial decline, in the face of global competition, particularly from the BRICs.
It was a chimera which could only perversely encourage short-termism, rent-seeking and ‘creative’ accounting—bringing Enron and WorldCom in its wake—as well as the starving of industry, as compared with the burgeoning financial behemoths, of investment. Its nadir was the rescue of the rust-belt car industry of Detroit from extinction by President Obama. Mass unemployment , with only the frailest of welfare safety-nets, is its enduring legacy.
Just as a new macro-economic policy for Europe has to break decisively with neo-liberal orthodoxy, with its pre-Keynesian and self-flagellating ‘austerity’, a new industrial policy has to do likewise. After decades of framing the issue in the hands-off terms of ‘lame ducks’ and (dismissively) ‘picking winners’—as if ‘the markets’ had some invisible but always superior intelligence—we have to establish a new language of participation and collaboration which allows of human co-operation to produce better industrial outcomes.
The Gestalt shift is from thinking of the firm in isolation, linked only to other actors by the market, to thinking of the regional, national and European economies as fundamentally interconnected—and of the overall public interest taking precedence over selfish private interests. At every level, the whole can and should be made greater than the sum of its enterprise parts in two key ways.
First, as the Nordic economies show—grouping around the top of all the orthodox economic competitiveness leagues as they do—it is critical to develop the public realm on which all private-sector firms can equally draw. From research and development to training to the kind of cultural facilities which will attract internationally mobile specialists, there is an inherent co-ordination dilemma which will always lead to serious under-supply. Most obviously this is true in terms of finance, where firms across Europe are being starved of support from private banks which have looked to higher and more immediate casino margins, whereas the public Landesbanken in Germany have remained closer to their traditional role of taking stakes, and a long-term interest, in local companies.
Secondly, as strong European regions like Baden-Wuerttemberg, Catalonia, Rhone-Alpes and Emilia-Romagna demonstrate, facilitating inter-firm networks and collaboration between firms and research institutions is essential to lever up scale and performance and sustain competitiveness. The northern Italian clothing industry, for instance, would never have survived low-cost volume competition otherwise. This requires strong and well-integrated industrial development agencies, operating on a regional level and with close knowledge of the warp and weft of the economic structure.
Competition, which among high economic performers has already moved from price to quality, must now also move to eco-efficiency. US evidence shows that a blind choice to invest preferentially in firms with strong sustainability commitments would be a safe one because of their better than average business outturns. Investment agencies and banks should make that same pro-environment, pro-business judgment and governments should ensure that by tighter environmental regulation they ensure a green ‘race to the top’.
Last, but by no means least, a new industrial policy must have a quite different focus than ‘shareholder value’. It should major instead on the value of labour to employees and consumers—the 99 per cent, in other words. And it should do so by ensuring the interests of workers and consumers are aligned.
That can best be done by having firms that are employee and/or consumer-owned or, at least, by maximising the autonomy of work teams on the shopfloor and their discretion to respond to diverse and dynamic customer demands. Company law and public investment capital can here be used as the levers for change, as well as engaging the trade unions in a discussion about how to move beyond a sometimes defensive corporatism to a more expansive social role—for example through bargaining for share-ownership schemes. Again, we know this works: US union-sponsored research shows that enhanced employee ownership improves productivity as long as workers are released from oppressive supervision.
For a long period the ‘European social model’ has been a fading sepia image, as market fundamentalism, in measures such as the Bolkestein directive and European Court of Justice judgments, has taken hold. The underlying assumption has been that social and environmental interventions are a drag on the economy and should be minimised. On the contrary, social and environmental policies are an active factor in restoring the competitiveness of European industry and an activist industrial policy—as well as sensible macroeconomics—is just what Europe needs.