The New EU Industrial Policy: Smart Specialisation Fortifying Capitalist Unevenness
By Angela Wigger
The Treaty of Rome in 1957 did not mention industrial policy as a designated Community competence but its preambles declared a high degree of competitiveness an overarching goal, which indirectly laid the basis for a supranational intervention. Industrial policy has been a key pillar in the gradual reconfiguration of several national markets into one giant single market at the outset but it vanished in name during the decades of neoliberal restructuring.
Only with the attempts to end sluggish economic growth after the 2008 crisis, industrial policy has been on a major comeback, rising like a Phoenix from its ashes. Alongside a worldwide revival of industrial policy, including ‘America First’, Made in China 2025 or Make in India, the European Commission launched various initiatives and programmes to induce a European Industrial Renaissance. Bolstered by a rhetoric of competitiveness and the need to create an attractive business climate, industrial policy had to reverse the process of deindustrialization, backshore manufacturing capacity from emerging markets to the EU and foster European value chains, so that manufacturing products could be exported with the label Made in Europe.
Smart Specialisation: a new industrial policy?
One of the flagship industrial policies is Smart Specialisation, a place-based, differentiated regional development policy adopted in 2014 that aims at upscaling regional manufacturing clusters to Industry 4.0-type technologies, such as robotics, artificial intelligence, cloud computing, big data and data analytics, 3D printing and the internet of things. Importantly, Smart Specialisation has been blended into the EU cohesion policy and subordinated to the goal of ‘economic, social and territorial cohesion, balanced economic growth and upward economic convergence’, as enshrined in the Single European Act of 1987.
As balancing out intra-EU manufacturing growth patterns is particularly pertinent in a context of the longstanding asymmetries in economic structures revolving around a north-south and west-east axis, the Journal of Common Market Studies article The New EU Industrial Policy and Deepening Structural Asymmetries: Smart Specialisation Not So Smart interrogates whether Smart Specialisation is indeed an appropriate strategy for alleviating structural disparities. Drawing on a critical political economy perspective rooted in historical materialism, Smart Specialisation is understood in dialectical interplay with the inherent contradictions of the broader capitalist dynamics of uneven and combined development – a structural and recurring feature of capitalism, which in theory, can temporarily be mitigated by state regulation. The article demonstrates that Smart Specialisation is neither smart nor does it induce upward economic convergence.
Smart Specialisation has been designed as a neoliberal supply-side strategy that builds on new public management, private-public governance structures, or what has been referred to as the entrepreneurial discovery process: rather than national and regional governments picking winners or breeding champions, a collective intelligentsia of regional businesses, national and regional governments, universities, research institutes and knowledge centres, and the wider civil society, should jointly identify comparative advantages of regional industries, set R&D investment priorities and formulate research and innovation proposals that compete for public and private funding. The European Commission aims at complementing the bottom-up process with a top-down strategic drive through facilitating cross-regional synergies, spill-overs and production complementarities, and thereby induce a value chain industrialisation so that manufacturers pull components from various regional industrial clusters and close the gap in economic development within the EU.
A competitive logic undermining cohesion policy
Climbing the stairway to excellence, moving ahead in transnational value chains and exploiting new cross-regional synergies is not confined to lagging regions. Smart Specialisation has been declared a policy for all regions – with no region left behind. While it is questionable whether ‘specialising smart’ in a competitive niche rather than diffusing investments into multiple domains is a viable and also sustainable catching up strategy for all regions, Smart Specialisation is not a voluntary or non-committal policy.
Smart Specialisation cross-cuts multiple EU funding streams, all of which subjugate the access to funding to a competitive selection process. Developing Smart Specialisation strategies has become an ex-ante conditionality to access funding from the European Regional Development Fund (ERDF) – funding that increasingly relies on debt instruments meant to trigger a multiplier effect and leverage ever more private (venture) capital in the selected manufacturing agglomerations. In addition, an ex-post conditionality was added: access to funding was made conditional upon compliance with the new EU public deficit and debt rules, and the macroeconomic adjustment measures of the European semester.
The competitive race for research and innovation funding dilutes the original raison d’être of cohesion policy and its transfer of payment logic. Not everyone who plays can win, and competition within the regions does not take place on an equal footing. Clusters in lagging regions that exhibit low growth, or that are confronted with rapid deindustrialization or low value-added, low knowledge- and low technology-intensive industries face multiple obstacles that put them at a comparative disadvantage.
Notably clusters from regions in Europe’s south tend to identify the expansion of tourism services with spin-offs to the local agri-food production, gastronomy or the cultural and creative industries as trailblazing areas for industrial upscaling and investment (see also this recent article in JCMS). Smart agri-food-tourism strategies certainly may succeed in incremental technological upgrades and integrating various regional sectors, which renders them more competitive and improves the visitor’s tourism experience; however, these are also low technology intensive, low skill and low value-added sectors that render the possibility of catching up with the advanced regions unlikely. Smart Specialization strategies adopted in medium and high technology-intensive export-led EU economies of the EU’s North host corporations that are innovation leaders or frontrunners with higher R&D activities and a higher readiness to make the transition to Industry 4.0 production. Not only are Smart Specialization projects larger and better funded, they are more likely to crowd in private equity.
Industrial clusters in less developed and poorer regions also face greater difficulties coping with the administrative workload that comes with the sheer complexity of submitting competitive funding applications, co-operating with the European Commission and complying with progress reports and evaluations. Furthermore, due to the far-reaching austerity programmes, regional budgets have shrunk in crisis-hit countries. Notably, regions in member states under excessive deficit and macroeconomic imbalance procedures are structurally disadvantaged in ‘specialising smart’: not only are similar stimulus programmes, such as those found in wealthier member states, out of reach, but borrowing money on financial markets or the European Investment Bank is also not a viable option as such borrowings count as public debt subject to EU deficit rules.
The European Commission is well aware that not every region can become the next Silicon Valley; however, with advanced regions simultaneously upgrading regional industrial structures, Smart Specialisation, as an industrial policy within cohesion policy corroborates the status quo of structural asymmetries.
Smart Specialisation: favouring capital
Smart Specialisation does not amount to the creation of common goods accessible to society at large but entails an in-built hierarchy in favour of industrial and financial capital. Regional or national government representatives act as facilitators and universities and research institutes are subordinated to private proﬁt motives, while civil society, the so-called fourth helix in the multiple stakeholder engagement, is not only vaguely deﬁned, or depicted in terms of innovation users and consumers, but also marginally involved. Most importantly, ‘labour’ is not even considered a separate collaborative agent, neither in the formulation, implementation or evaluation of Smart Specialisation strategies. The success of the project of an ever-closer union depends not only on economic convergence but also on citizens, including labour, having ownership of policies that affect their lives.
Angela Wigger is Associate Professor Global Political Economy at the Radboud University. She researches capitalist crises and crises responses from a historical materialist perspective. Focal points are the geopolitics of industrial and antitrust policy, industrial reshoring attempts, the “competitiveness” fetish, internal devaluation and debt-led accumulation in the age of rentier capitalism.
Twitter: @AngelaWigger @ RadboudPol @RadboudNSM @Radboud_Uni