Neoliberal Industrial Policy and Structural Reforms Since the 1970s

4.4. Neoliberal Industrial Policy: From vertical policies to horizontal measures and Structural Reforms (labour market reform, services’ reform, etc) since the 1970s

We shall look first at what actually happened, and later we will talk about the alternative and possible Keynesian alternative. In the wake of a shrinking working class, there was an important change in industrial policy since the 1980s. It began in the late 1970s with Margaret Thatcher and Ronald Reagan in the UK and US. Curiously, it was social democrat parties in Europe who produced the change.

Then, in 1982 Latin American countries were facing the debt crisis, and they were forced to open their economies and apply neoliberal policies. It was the end of the Third World project (The Third World was not a place, it was a project!). Neoliberals didn’t understand well the developmental state’s success, and put down East Asia’s success to “market-friendly policies”. Export-oriented industrialization was promoted in these countries, and foreign transnational corporations (TNCs) were free to enter. A new term was coined to call these policies in 1990: The Washington Consensus.

In the European case, the Single Market was crucial, a project launched in 1986 aiming to achieve a common market for 1993. The European Round Table of Industrialists (ERT) as a multilateral “private planning network” facilitated class unity of Europe’s transnational capitalist groupings and exercised leadership over the direction and content of the single-market project. The socioeconomic content of the project was entirely in accordance with the neoliberal norms (Ryner & Cafruny, 2017: 78). Later, in 2005 the European Commission re-launched the Lisbon Agenda as the “Growth and Jobs Strategy” (The current plan is called Europe 2020) (Ambroziak, 2016).

In Spain, the social democrat party (PSOE) made the transition to the neoliberal industrial policy, a political party heavily helped by Germany since the mid-1970s (Muñoz, 2012). Besides, in Spain, like in all the world, subnational governments have become very important when it comes to industrial policy. The Basque Country (the Basque Government) has been especially active in this area, thanks to its competence in raising taxes.

As usual, there’s economic theory behind this new neoliberal industrial policy (for example the Endogenous Theory of Growth and the Natural Rate of Unemployment by New Keynesians).

→ Competition Policy: From vertical Policies to Horizontal Policies

● Nowadays some measures are considered dangerous: vertical policies. Those measures are sector or firm specific. Money given to specific sectors of companies is called state-aid, and is under control by Competition policy because it can damage other companies. The shift from vertical to horizontal policies came in Europe with the Single Market for 1993.

● European governments intervened strongly: 1970-1980.

● The European Coal and Steel Community (ECSC) guided and coordinated the many aids to be given by European governments to these branches with the

● Restructuring was very badly done→ Spanish government didn’t defend their manufacturing industry.

● SEAT the Spanish automaker was privatized and sold to the German enterprise Volkswagen. After 1986 Spain experienced an economic growth based on an invasion of European transnationals, which undermined the independence of the Spanish industry.