industrial policy


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industrial policy

a policy concerned with promoting industrial efficiency and competitiveness, industrial regeneration and expansion and the creation of employment opportunities. Industrial policy can be broadly based, encompassing, for example, measures to increase competition (see COMPETITION POLICY) and promote regional development (see REGIONAL POLICY), as well as specific across-the-board measures to stimulate efficiency and the adoption of new technology; or it can be more narrowly focused involving selective intervention in particular industries or support for particular projects and firms. Industrial policy in most countries is both reactive (responding, for example, to cases of market failure by acting to restructure and rationalize declining industries or support failing, ‘lame duck’ firms) and proactive (acting as a catalyst for change by encouraging, for example, the establishment of new businesses and the development of new technologies). Between 1962 and 1992 the National Economic Development Council (NEDC) and its satellites, the Economic Development Committees were responsible for the formulation of strategic programmes for improving efficiency and international competitiveness.

Currently in the UK, the thrust of industrial policy is directed towards strengthening the industrial base of the economy in a number of ways, including:

  1. the promotion of greater domestic competition by attacking in particular, CARTELS, anti-competitive practices and MERGERS and TAKEOVERS (see COMPETITION POLICY (UK)), together with the privatization and DEREGULATION of state-owned industries (see NATIONALIZATION VERSUS PRIVATIZATION);
  2. the stimulation of overseas trade by the provision of back-up export support services by the DEPARTMENT OF TRADE AND INDUSTRY (DTI) and its arms, the Export Market Information Centre, EXPORT CREDIT GUARANTEE DEPARTMENT, etc. (see EXPORTING);
  3. the regeneration of regions in industrial decline by the provision of financial support programmes for firms prepared to locate in the assisted areas. (see REGIONAL POLICY);
  4. the encouragement of innovation and the adoption of new technologies through DTI-sponsored ‘collaborative research’ between industry and government/university research departments and TECHNOLOGY TRANSFER programmes, the SMART scheme, Regional Technology Centres and the activities of the BRITISH TECHNOLOGY GROUP;
  5. the promotion of vocational training, again partly funded by the DTI, together with more general initiatives to create employment opportunities. See TRAINING.

Finally, in recent years particular emphasis has been placed on the small- and medium-sized enterprise sectors (SMEs – see BUSINESS entry) of the economy. To encourage business start-ups and assist with initial development problems, the DTI offers a LOAN GUARANTEE SCHEME, which together with the ENTERPRISE INVESTMENT SCHEME, provides financial backing to small firms. Recently, financial support has been provided for various measures aimed at encouraging SMEs to adopt information technology and E-COMMERCE. These measures are dispensed through the SMALL BUSINESS SERVICE and the BUSINESS LINK network. Grants are available for small firms undertaking new investment in areas designated as ‘assisted areas’ under UK REGIONAL POLICY. (See ENTERPRISE GRANT SCHEME.) See MARKET STRUCTURE, MARKET PERFORMANCE, SCIENCE PARK, SUBSIDY, INVESTMENT INCENTIVE.

industrial policy

a policy concerned with promoting industrial efficiency and competitiveness, industrial regeneration and expansion, and the creation of employment opportunities. Industrial policy can be broadly based, encompassing, for example, measures to increase competition (see COMPETITION POLICY) and promote regional development (see REGIONAL POLICY) as well as specific across-the-board measures to stimulate efficiency and the adoption of new technology; or it can be more narrowly focused, involving selective intervention in particular industries or support for particular projects and firms. Industrial policy in most countries is both reactive (responding, for example, to cases of market failure by acting to restructure and rationalize declining industries or support failing ‘lame-duck’ firms) and proactive (acting as a catalyst for change by encouraging, for example, the establishment of new businesses and the development of new technologies).

In the UK, industrial policy in its broadest sense was formerly implemented through the NATIONAL ECONOMIC DEVELOPMENT COUNCIL (NEDC) and its satellites, the Economic Development Committees. The main work of NEDC had been to formulate programmes for improving efficiency and international competitiveness and to identify the threats and opportunities facing particular industrial sectors. NEDC was abolished in 1992.

Examples of general programmes to assist industry include support for small business start-ups and development (ENTERPRISE INVESTMENT SCHEME); the adoption of advanced technologies (Micro-Processor Applications Scheme); and vocational TRAINING.

Examples of selective intervention in British industry include the RATIONALIZATION of declining industries; support for high-technology growth industries; support for firms in temporary financial difficulties; support for INVENTIONS and INNOVATIONS; support for strategic MERGERS.

In the past, a number of bodies were established to sponsor and provide financial assistance in this area, including the National Research and Development Corporation (established 1948), the Industrial Reorganization Corporation (1966–71), the National Enter-prise Board (1975), and the British Technology Group, formed through the merger of the National Research and Development Corporation and the National Enterprise Board in 1981.

In some countries (most notably the UK), industrial policy has developed on a piecemeal basis and has varied in the degree of enthusiasm accorded to it by the government of the day In others, for example Japan and France, industrial policy has been seen as an arm of INDICATIVE PLANNING and has been applied on a more continuous and coordinated basis.

In recent years, UK industrial policy has favoured a more competitive, market-driven stance that has involved the PRIVATIZATION of sectors such as gas, water, electricity, telecommunications and bus services, and, at the ‘grassroots’ level, the encouragement of an ‘enterprise culture’ by aiding new small business start-ups:

ENTERPRISE INVESTMENT SCHEME, ENTERPRISE GRANT SCHEME, DEPARTMENT OF TRADE AND INDUSTRY, SMALL BUSINESS SCHEME, BUSINESS LINK.

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