The world is changing quickly. The former Soviet Union is gone and its successor, Russia, is seeking to reclaim parts of Soviet territory using military force. The United States (US) as a sole remaining superpower cannot take the lead, due to populism, failed democracy, and a lack of resilience. China is on the rise, but autocratic, longing for resources and facing a declining population. Europe is less dynamic and innovative, not yet seen as unified with common goals. New middle powers are gaining shares in production, but are themselves very different. The problems the world faces are changing: peace is no longer guaranteed, global warming is accelerating, poverty is on the decline but re emerging in other ways, and migration policy is becoming more and more important. The green transition may be an engine of change and new dynamics, but there are also many backlashes. In this situation, a new industrial policy is needed—one very different from that of the past. We begin by describing the past policy as an isolated policy, along with the questions of whether such a policy is needed in a capitalistic economy and whether it should focus on “important sectors” (the sectoral or French approach) or “important activities” (the horizonal or German approach). We then turn to the increasing importance of international exports/ investments and the necessity for a green transition, but also new forms of protectionism and backlashes. This chapter builds on Aiginger and Rodrik (2020) with respect to “industrial policy for the 21st century”, as well as on Aiginger and Ketels (2024) for its “reloading” after the most recent changes in the policy environment.
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", "localeCode": "EN", "abstractType": "SHORT", "canonical": true }, { "abstractId": "5b101b2b-956b-4457-b812-f274ef85417d", "workId": "a5a08fcc-4060-4738-abe7-c93ec292e390", "content": "The fifth volume in the European Public Investment Outlook series explores how Europe can drive structural transformation through strategic public investment. Reflecting on the lessons from the 2008–2020 polycrisis and recent economic challenges, this timely book examines fiscal policy's role in both stabilization and long-term economic development.
Part I, ‘State of the Art’, reviews current public investment and industrial policies in major European economies, including France, Germany, Italy, and Spain. It provides detailed analyses of each country's approach to fostering structural transformation through public investment.
Part II, ‘Challenges’, addresses the diverse obstacles and opportunities facing Europe’s industrial policy. It emphasizes a multidimensional strategy to overcome bottlenecks in key sectors and drive transformation. Topics include the role of industrial policy in the green transition, creating a cohesive strategy for Europe, enhancing economic security, trends in European Union defence spending, sustainable mobility, and financing structural investment beyond 2027.
This volume is essential reading for researchers, economists, and policymakers focused on understanding and implementing effective public policy in Europe, and will further appeal to anyone interested in EU governance and public investment strategies more broadly.
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