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01 Apr 2016

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How did the industrial specialisation of European countries change in the long run? Given the different patterns followed by each EU member state, is it possible to design continental industrial policies, aiming at harmonising the different models of development? 

In research to be presented at the Economic History Society’s 2016 annual conference in Cambridge, Fabio Lavista, starts from the observation that the European development process after the Second World War, in terms of industrial structure, was a sequence of convergence and divergence, determined by the interaction of the progressive economic integration and national structural policies. 

At the beginning of the period, following the resurgence of protectionism in the inter-war years, the level of specialisation was obviously low. After the Second World War, the mechanism of the international aid coming from the United States, as well as the first continental coordination institutions established by European countries, still favoured this ‘de-specialisation’. 

But it was not only a matter of external pressure: towards the same direction led the national development policies adopted by many European countries in the post-war decades. After the Second World War, the relative emphasis placed on alternative objectives of economic planning varied between countries, but in most cases the latter were strictly linked with national or regional development: to give rapid economic growth a higher priority, to redirect growth by encouraging the industrialisation of underdeveloped areas, to modernise national industries, to preserve full employment or to increase productive investments. 

In this environment de-specialisation was preserved for some years, but there were forces that pulled in the opposite direction: the progressive integration of the European market and the new European legislation, both oriented to reduce transaction costs, started to favour a redistribution of the European industry. 

An important role in this shift towards specialisation was also played by the natural selection derived from the 1970s international crisis and by the national policies pursued since the second half of that decade in order to reduce the effects of the economic slowdown, by decreasing the size of public intervention and internationalising national economies. 

Empirical analysis has registered an increase in the degree of industrial specialisation of the main European countries since the half of the 1970s. This apparent paradox – countries increase their convergence in institutional terms by becoming more differentiated in structural terms – was the prelude to a more generalised divergence process. 

This evolution raises interesting problems not only in historical perspective. The sectoral composition of countries – as far as sectors respond in different ways to monetary shocks – explains, in fact, the different attitudes towards centralised monetary policies, suggesting that a process of convergence or, at least, of harmonisation would be desirable. Understanding how market and institutional incentives acted in the past could help to design a future strategy. 

Given this framework, the study presents the Italian case. In particular, it analyses the effects of the policies established by the Italian government after the Second World War in order to industrialise the underdeveloped southern regions. 

These policies were characterised by: the lack of connection and coordination with the ordinary central and peripheral administration; the increasing commitment of extraordinary developmental agencies to direct industrialisation; a growing role of state owned enterprises as provider of employment; finally, the centrality of broad investment incentives, with important distorting effects, due to their implicit lack of orientation capability. 

The absence of a long-term planning of interventions and the preference for top-down actions, even in recent years, when – at least formally – it seemed to prevail a new vision of development, more aimed at improving the socio-economic context rather than at distributing subsidies to households and enterprises, led to the failure of these policies, testified by the growing divergence in term of per capita GDP between northern and southern regions. 

But there is also another important consequence, directly linked with the two opening questions: during the 1970s and the 1980s, the need to preserve employment levels in an increasingly unstable macroeconomic environment, along with growing financial constraints, negatively influenced the attempts to modernise the Italian industry, with long-term consequences on its structure, that is still today characterised by a specialisation in medium-low technology intensive sectors. 


Structural policies, regional development and industrial specialisation: the Italian case (1952-2002)

Fabio Lavista, Insubria University (Varese) +39.333.2930874

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