European industrial policy for the green and digital revolution

Abstract

The urgent need to accelerate on, and make a national success of, the green and digital transition is leading to widespread calls for greater government involvement in the economy, including by means of an active industrial policy. After reviewing several case studies, it becomes evident that, against conventional wisdom, nearly all countries have systematically engaged in some form of industrial policy, especially large economies like the USA and China, notwithstanding their very different economic models. The same is true for Europe, both at the national level and through European Union policies. After analysing these experiences, we draw six key policy lessons to inform future debates on how to shape a successful industrial policy in the years to come and mitigate its risks, while acting in a context of souring geopolitical tensions.