Industrial policy for economic security(Bruegel)
Maria Demertzis
APRIL 17, 2024
For the next five years, economic security will undoubtedly be one of the top priorities for the leadership of the European Commission. To ensure its economic security, the European Union will need to use the until recently discredited concept of industrial policy, in other words, interfering with market forces to promote sectors and firms it deems strategic. But it will have to use it wisely if such policies are to make a difference to the EU’s economic growth.
Ensuring economic security implies that two objectives will need to be achieved. The first is ‘de-risking’. As the world economy becomes increasingly fragmented, optimising one’s production based only on growth and profit maximisation is not rational. To ensure business continuity, firms must also optimise the lengths of their supply chains, while diversifying and increasing their resilience. In fact, one wonders why the EU had to go through such a vast energy shock to realise the importance of diversification, particularly when it concerns such an important factor of production as energy.
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