Last January, the European Commission authorized aid from the German government of 902 million euros to a Swedish company, Northvolt, for a battery factory for electric vehicles with the aim of allowing the production of between 800,000 and one million vehicles of this type. . The news summarizes many of the aspects that define the industrial policy of the EU and its member states today. The first of them is that said authorization is part of the Temporary Framework for Crisis and Transition which, if at first it tried to alleviate the negative effects on the economy of the Russian invasion of Ukraine, has later been expanded to include all those measures. to support key sectors for the transition to a net zero greenhouse gas emissions economy. The authorization is justified because the EC must ensure that these subsidies do not alter the principle of equal conditions within the single market.
The second relevant aspect is that the measures developed by the EU are not unrelated to those carried out by other countries and, in this case, singularly, the United States. The subsidy is still a response to the Biden administration’s Inflation Reduction Act to the extent that its objective is for the company to carry out its investment in the US taking advantage of the incentives of the aforementioned law. A third aspect is that these decisions are based on the fiscal capacity of the EU member states. A subsidy of 700 million euros and a guarantee of 202 for a single operation is not available to everyone and, consequently, the application of such measures can accentuate inequality between member states. The debate, then, is between those who think that the enormous investment effort that represents the challenges facing the European economy must be supported by national public budgets or, on the contrary, a new issuance of Eurobonds. Alternative, the latter, which, on the other hand, would limit the coordination problems that may exist between European policies and their execution by the member states.
A fourth aspect derives from the fact that these investments are carried out where there is an environment that is capable of providing externalities, whatever they may be, to the investment. Where there is a qualified workforce and high levels of innovation, investment opportunities are higher. The complexity of public policies and, in particular, industrial policy should not be elements that question its development. As Dani Rodrik says, in a recent interview in the Financial Times, industrial policy is not a particularly inefficient policy nor is it more vulnerable than others to both rent capture and regulatory capture such as, for example, education, health or the macroeconomic. Minimizing failures and extending success stories is the challenge of industrial policy.