Thoth distribution@thoth.pub 20260403T074608

urn:uuid:b1df6ee0-ce4f-4a40-843c-d065d2e63f32 03 01 01 thoth-work-id urn:uuid:d02a2d34-5c2d-40ca-b5cc-5b29f6f1fb91 01 thoth-publication-id urn:uuid:b1df6ee0-ce4f-4a40-843c-d065d2e63f32 06 10.11647/obp.0434.07 00 EB E107 10 Creative Commons Attribution-NonCommercial 4.0 International license (CC BY-NC 4.0). 02 https://creativecommons.org/licenses/by-nc/4.0/ 01 01 6. A New Industrial Policy as the Key to the Green Transition 1 A01 Karl Aiginger Karl Aiginger Professor Vienna University of Economics and Business Honorary Professor Johannes Kepler University of Linz Karl Aiginger was born in Vienna on October 23, 1948. He is director of the Policy Crossover Center: Vienna—Europe (www.euiopaplattform.at). He is Professor at the Vienna University of Economics and Business and is an Honorary Professor at the University of Linz. He is Editor-in-Chief of the Journal of Industry, Competition and Trade (JICT). He has been the Director of the Austrian Institute of Economic Research (WIFO) from 2005 to 2016 and Coordinator of the research project “New Dynamics for Europe: Reaping the Benefits of Socio-ecological Transition”—WWWforEurope (http://Synthesis-Report-Part-I.foreurope.eu). He had temporary commitments at Stanford University, MIT, UCLA, and at the University of Changsha (Hunan, China). His research foci are industrial economics, competitiveness, and strategies of firms, regions and countries. The Policy Crossover Center published studies on “More or Less Europe”, Europe taking the lead in responsible globalization, and a European partnership policy with the South and the East. 01 eng 00 10 03 01 06 03 00 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. 30 00 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. 20 00 Open Access 01 URL https://www.openbookpublishers.com/ Open Book Publishers 01 Open Book Publishers 01 Publisher's website: home page https://www.openbookpublishers.com/ 02 Publisher's website: webpage for this title https://www.openbookpublishers.com/books/10.11647/obp.0434/chapters/10.11647/obp.0434.07 Cambridge, UK 04 01 20241211 Karl Aiginger 02 WORLD 34 01 Unstructured citation Acemoglu D. (2023) “Letter from America: When Industry Means Hard Work”, Royal Economic Society, https://res.org.uk/newsletter/letter-from-america-when-industry-means-hard-work/ 34 06 10.1007/s10842-024-00415-8 34 06 10.1007/s10842-019-00322-3 34 06 10.1080/02692170601005507 34 01 Unstructured citation Austin, B., E. Glaeser, and L. Summers (2018) “Saving the Heartland: Place-based Policies in 21st Century America. Brookings Papers of Economic Activity”, Brookings, https://www.brookings.edu/articles/saving-the-heartland-place-based-policies-in-21st-century-america/ 34 06 10.1353/eca.2022.0005 34 01 Unstructured citation Aiyar, S., and A. Ilyna (2023) “Geoeconomic Fragmentation and the Future of Multilateralism”, IMF Staff Discussion Notes 2023(001), https://www.imf.org/en/Publications/Staff-Discussion-Notes/Issues/2023/01/11/Geo-Economic-Fragmentation-and-the-Future-of-Multilateralism-527266 34 01 Unstructured citation Birdsall, N. M., J. E. L. Campos, C. S. Kim, W. M. Corden, L. MacDonald, H. Pack, J. Page, R. Sabor, and J. E. Stiglitz (1993) The East Asian Miracle: Economic Growth and Public Policy: Main Report (English). A World Bank Policy Research Report. Washington, DC: World Bank Group, http://documents.worldbank.org/curated/en/975081468244550798/Main-report 34 01 Unstructured citation Chang, H. J. (2002) Kicking Away the Ladder: Development Strategy in Historical Perspective. London: Anthem Press. 34 06 10.3386/w17842 34 01 Unstructured citation Draghi, M. (2024) The Future of European Competitiveness. Brussels: European Commission, https://commission.europa.eu/document/download/97e481fd-2dc3-412d-be4c-f152a8232961_en 34 01 Unstructured citation Economist, The (2024) “Can India, Indonesia, and Saudi Arabia be the Next Great Economies”, The Economist, 4 January, https://www.economist.com/leaders/2024/01/04/can-india-indonesia-and-saudi-arabia-be-the-next-great-economies 34 01 Unstructured citation Gil, I. S., and M. Raiser (2012) Golden Growth: Restoring the Lustre of the European Economic Model. Washington, DC: World Bank Group. 34 01 Unstructured citation Irwin, D. A. (2020) “The Washington Consensus Stands Test of Time Better than Populist Policies”, 4 December, Peterson Institute for International Economics, https://www.piie.com/blogs/realtime-economics/washington-consensus-stands-test-time-better-populist-policies 34 06 10.1051/shsconf/202317602009 34 01 Unstructured citation Javorcik, B. S., L. Kitzmueller, H. Schweiger, and M. A. Yildirim (2023) “Economic Costs of Friend-shoring”, CID Faculty Working Paper 422, https://growthlab.hks.harvard.edu/publications/economic-costs-friend-shoring 34 06 10.1146/annurev-economics-081023-024638 34 01 Unstructured citation Kelsey, T. (2023) “When Missions Fail: Lessons in ‘High Technology’ from Post-War Britain”, Blavatnik School of Government Working Paper 2023–056, https://www.bsg.ox.ac.uk/sites/default/files/2023-12/BSG-WP%E2%80%932023-056-When-Missions-Fail.pdf 34 01 Unstructured citation Ketels, C., and E. Duch (2022) “Industrial Policy in a New Global Reality: Towards a More Location- and Sector-Driven Approach”, Private Sector Development Blog, 11 July, https://blogs.worldbank.org/psd/industrial-policy-new-global-reality-towards-more-location-and-sector-driven-approach 34 01 Unstructured citation Ketels. C., M. E. Porter, and A. Kapoor (2022) Competitiveness Roadmap for India @ 100. Delhi: Economic Advisory Council of the Prime Minister, https://www.hbs.edu/ris/Publication%20Files/Report_Competitiveness_Roadmap-25_August_2022_Web_Version_690d1fab-dce8-48a0-8cd5-6d6a63a6d5eb.pdf 34 01 Unstructured citation Kose, M. A, and F. Ohnsorge (2023) Falling Long Term Growth Prospects: Trends, Expectations, and Policies. Washington, DC: World Bank, https://openknowledge.worldbank.org/handle/10986/39497 34 06 10.2307/j.ctvc776tv 34 01 Unstructured citation Mazzucato, M. (2021) Mission Economy: A Moonshot Guide to Changing Capitalism. London: Allen Lane. 34 01 Unstructured citation Nayyar, D., and G. Nayyar (2024) “Made in India: Industrial Policy in a Changing World”, Journal of Industry, Competition and Trade 24(1): 13. 34 06 10.1007/s10842-024-00420-x 34 01 Unstructured citation Rodrik, D. (2015) “Premature Deindustrialization”, NBER Working Paper 20935, https://www.nber.org/system/files/working_papers/w20935/w20935.pdf 34 01 Unstructured citation Rodrik, D., and J. Stiglitz (2024) “A New Growth Strategy for Developing Nations”, Harvard, https://drodrik.scholar.harvard.edu/sites/scholar.harvard.edu/files/dani-rodrik/files/a_new_growth_strategy_for_developing_nations.pdf 34 06 10.1007/s10842-024-00418-5 34 01 Unstructured citation Yellen, J. (2022) “Remarks at Microsoft in New Delhi”, US Department of the Treasury, 11 November, https://home.treasury.gov/news/press-releases/jy1096 WORLD 11 Unknown 36 Unspecified hosting platform: webpage for this product https://www.openbookpublishers.com/books/10.11647/obp.0434/chapters/10.11647/obp.0434.07 29 Unspecified hosting platform: download the title https://books.openbookpublishers.com/10.11647/obp.0434.07.pdf 20 08 20241211 01 urn:uuid:b0b6e55d-2f6d-4c74-b138-5fe46725f739 03 01 01 thoth-work-id urn:uuid:d02a2d34-5c2d-40ca-b5cc-5b29f6f1fb91 01 thoth-publication-id urn:uuid:b0b6e55d-2f6d-4c74-b138-5fe46725f739 06 10.11647/obp.0434.07 00 EB E105 10 Creative Commons Attribution-NonCommercial 4.0 International license (CC BY-NC 4.0). 02 https://creativecommons.org/licenses/by-nc/4.0/ 01 01 6. A New Industrial Policy as the Key to the Green Transition 1 A01 Karl Aiginger Karl Aiginger Professor Vienna University of Economics and Business Honorary Professor Johannes Kepler University of Linz Karl Aiginger was born in Vienna on October 23, 1948. He is director of the Policy Crossover Center: Vienna—Europe (www.euiopaplattform.at). He is Professor at the Vienna University of Economics and Business and is an Honorary Professor at the University of Linz. He is Editor-in-Chief of the Journal of Industry, Competition and Trade (JICT). He has been the Director of the Austrian Institute of Economic Research (WIFO) from 2005 to 2016 and Coordinator of the research project “New Dynamics for Europe: Reaping the Benefits of Socio-ecological Transition”—WWWforEurope (http://Synthesis-Report-Part-I.foreurope.eu). He had temporary commitments at Stanford University, MIT, UCLA, and at the University of Changsha (Hunan, China). His research foci are industrial economics, competitiveness, and strategies of firms, regions and countries. The Policy Crossover Center published studies on “More or Less Europe”, Europe taking the lead in responsible globalization, and a European partnership policy with the South and the East. 01 eng 00 10 03 01 06 03 00 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. 30 00 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. 20 00 Open Access 01 URL https://www.openbookpublishers.com/ Open Book Publishers 01 Open Book Publishers 01 Publisher's website: home page https://www.openbookpublishers.com/ 02 Publisher's website: webpage for this title https://www.openbookpublishers.com/books/10.11647/obp.0434/chapters/10.11647/obp.0434.07 Cambridge, UK 04 01 20241211 Karl Aiginger 02 WORLD 34 01 Unstructured citation Acemoglu D. (2023) “Letter from America: When Industry Means Hard Work”, Royal Economic Society, https://res.org.uk/newsletter/letter-from-america-when-industry-means-hard-work/ 34 06 10.1007/s10842-024-00415-8 34 06 10.1007/s10842-019-00322-3 34 06 10.1080/02692170601005507 34 01 Unstructured citation Austin, B., E. Glaeser, and L. Summers (2018) “Saving the Heartland: Place-based Policies in 21st Century America. Brookings Papers of Economic Activity”, Brookings, https://www.brookings.edu/articles/saving-the-heartland-place-based-policies-in-21st-century-america/ 34 06 10.1353/eca.2022.0005 34 01 Unstructured citation Aiyar, S., and A. Ilyna (2023) “Geoeconomic Fragmentation and the Future of Multilateralism”, IMF Staff Discussion Notes 2023(001), https://www.imf.org/en/Publications/Staff-Discussion-Notes/Issues/2023/01/11/Geo-Economic-Fragmentation-and-the-Future-of-Multilateralism-527266 34 01 Unstructured citation Birdsall, N. M., J. E. L. Campos, C. S. Kim, W. M. Corden, L. MacDonald, H. Pack, J. Page, R. Sabor, and J. E. Stiglitz (1993) The East Asian Miracle: Economic Growth and Public Policy: Main Report (English). A World Bank Policy Research Report. Washington, DC: World Bank Group, http://documents.worldbank.org/curated/en/975081468244550798/Main-report 34 01 Unstructured citation Chang, H. J. (2002) Kicking Away the Ladder: Development Strategy in Historical Perspective. London: Anthem Press. 34 06 10.3386/w17842 34 01 Unstructured citation Draghi, M. (2024) The Future of European Competitiveness. Brussels: European Commission, https://commission.europa.eu/document/download/97e481fd-2dc3-412d-be4c-f152a8232961_en 34 01 Unstructured citation Economist, The (2024) “Can India, Indonesia, and Saudi Arabia be the Next Great Economies”, The Economist, 4 January, https://www.economist.com/leaders/2024/01/04/can-india-indonesia-and-saudi-arabia-be-the-next-great-economies 34 01 Unstructured citation Gil, I. S., and M. Raiser (2012) Golden Growth: Restoring the Lustre of the European Economic Model. Washington, DC: World Bank Group. 34 01 Unstructured citation Irwin, D. A. (2020) “The Washington Consensus Stands Test of Time Better than Populist Policies”, 4 December, Peterson Institute for International Economics, https://www.piie.com/blogs/realtime-economics/washington-consensus-stands-test-time-better-populist-policies 34 06 10.1051/shsconf/202317602009 34 01 Unstructured citation Javorcik, B. S., L. Kitzmueller, H. Schweiger, and M. A. Yildirim (2023) “Economic Costs of Friend-shoring”, CID Faculty Working Paper 422, https://growthlab.hks.harvard.edu/publications/economic-costs-friend-shoring 34 06 10.1146/annurev-economics-081023-024638 34 01 Unstructured citation Kelsey, T. (2023) “When Missions Fail: Lessons in ‘High Technology’ from Post-War Britain”, Blavatnik School of Government Working Paper 2023–056, https://www.bsg.ox.ac.uk/sites/default/files/2023-12/BSG-WP%E2%80%932023-056-When-Missions-Fail.pdf 34 01 Unstructured citation Ketels, C., and E. Duch (2022) “Industrial Policy in a New Global Reality: Towards a More Location- and Sector-Driven Approach”, Private Sector Development Blog, 11 July, https://blogs.worldbank.org/psd/industrial-policy-new-global-reality-towards-more-location-and-sector-driven-approach 34 01 Unstructured citation Ketels. C., M. E. Porter, and A. Kapoor (2022) Competitiveness Roadmap for India @ 100. Delhi: Economic Advisory Council of the Prime Minister, https://www.hbs.edu/ris/Publication%20Files/Report_Competitiveness_Roadmap-25_August_2022_Web_Version_690d1fab-dce8-48a0-8cd5-6d6a63a6d5eb.pdf 34 01 Unstructured citation Kose, M. A, and F. Ohnsorge (2023) Falling Long Term Growth Prospects: Trends, Expectations, and Policies. Washington, DC: World Bank, https://openknowledge.worldbank.org/handle/10986/39497 34 06 10.2307/j.ctvc776tv 34 01 Unstructured citation Mazzucato, M. (2021) Mission Economy: A Moonshot Guide to Changing Capitalism. London: Allen Lane. 34 01 Unstructured citation Nayyar, D., and G. Nayyar (2024) “Made in India: Industrial Policy in a Changing World”, Journal of Industry, Competition and Trade 24(1): 13. 34 06 10.1007/s10842-024-00420-x 34 01 Unstructured citation Rodrik, D. (2015) “Premature Deindustrialization”, NBER Working Paper 20935, https://www.nber.org/system/files/working_papers/w20935/w20935.pdf 34 01 Unstructured citation Rodrik, D., and J. Stiglitz (2024) “A New Growth Strategy for Developing Nations”, Harvard, https://drodrik.scholar.harvard.edu/sites/scholar.harvard.edu/files/dani-rodrik/files/a_new_growth_strategy_for_developing_nations.pdf 34 06 10.1007/s10842-024-00418-5 34 01 Unstructured citation Yellen, J. (2022) “Remarks at Microsoft in New Delhi”, US Department of the Treasury, 11 November, https://home.treasury.gov/news/press-releases/jy1096 WORLD 09 Open Book Publishers 02 Publisher's website: webpage for this product https://www.openbookpublishers.com/books/10.11647/obp.0434/chapters/10.11647/obp.0434.07 29 Publisher's website: download the title https://books.openbookpublishers.com/10.11647/obp.0434/ch6.xhtml 20 08 20241211 01