One lesson of the Great Recession has been that countries with higher shares of industry in their GDP seemed to be less affected by the crisis. Consequently, the call for an industrial renaissance has become stronger. Industrial policy has now become a top priority in countries where it was not explicitly considered in the past. A strong EU-wide industrial policy is expected to foster growth and job creation. However, cultivating industrial development is a complex challenge. This Forum, featuring contributions by Mariana Mazzucato, Mario Cimoli, Giovanni Dosi, Joseph E. Stiglitz, Michael A. Landesmann, Mario Pianta, Rainer Walz, and Tim Page, addresses the steps that need to be taken to create a new European industrial policy. What are the structural challenges that need to be addressed? What are the instruments of the EU's industrial policy? And should the EU be engaged in picking winners, or is the market better at making such judgements?
This figure from Rainer Walz’s Forum article Green Industrial Policy in Europe shows average EU-level sectoral employment effects of increasing renewable energy demand to 30 or 35 per cent of total energy demand in Europe in 2030 under two energy policy scenarios. Click on the image for more information.
The Ukrainian government has committed to implement far-reaching reforms in exchange for the support it is getting from the international community, led by the International Monetary Fund. Understandably, given Ukraine's disappointing transition history, there is widespread scepticism on whether the country will live up to its commitments. Three failed IMF programmes later, Erik Berglof (London School of Economics) explains why this time is different for Ukraine.
Alan H. Meltzer (Carnegie Mellon University) asserts that the U.S. Federal Reserve’s initial round of quantitative easing in 2008 successfully provided enough reserves to prevent a major banking crisis. Thereafter, however, the Fed made some major errors, supplying a total of $4 trillion in additional reserves, most of which sit idle on bank balance sheets. The ECB is now several months into its own QE program. While it will have some positive near-term effects, QE cannot solve the problems of the eurozone. For the eurozone to survive, it must permit real wages within countries to adjust so as to make production costs compatible across countries.
In early 2010, as the risk of sovereign default in Greece first emerged, the Intereconomics Forum invited several experts to examine the options available to EU policymakers. Eight months later, six of the same authors returned to reassess the situation. Today, in light of the recent referendum in Greece that could lead to the country's removal from the eurozone, these experts' views from five years ago are enlightening to read. From the Irish bailout to the precarious status of Portugal, not to mention the potentially disastrous situation looming in Spain, our contributors were uncertain whether EU policymakers were up to the challenge of defending the euro. Nonetheless, most of these economists still saw ways for the EU to escape the crisis without being forced to abandon the common currency.
"The role of government is not to run commercial enterprises, but to spark innovation elsewhere."
- from Mariana Mazzucato's Forum article Innovation Systems: From Fixing Market Failures to Creating Markets
Should central banks intervene in currency markets? In theory, within a flexible system, central banks should leave the process of determining appropriate exchange rates to the currency markets. In practice, however, central banks have frequently intervened to "manage" the exchange rates according to their goals and priorities. Thomas Straubhaar (University of Hamburg and Transatlantic Academy) discusses whether central banks can effectively intervene in currency markets and describes some lessons other countries could learn from the Swiss experience.
by Sebastian Dullien
by Fabio Genoese, Christian Egenhofer, Michael Hogan, Christian Redl, Markus Steigenberger, Patrick Graichen, Graham Weale
by Basak Kus, Wen Fan
by Klaus-Jürgen Gern, Nils Jannsen, Stefan Kooths, Maik Wolters
by Silke Tober
by Ralf Boscheck
by Linde Götz, Gerrit B. Koester, Thomas Glauben, Rudolf Bulavin
by Mark Weisbrot
Vassilis Monastiriotis, Niamh Hardiman, Aidan Regan, Chiara Goretti, Lucio Landi, J. Ignacio Conde-Ruiz, Carmen Marín, Ricardo Cabral
Mariana Mazzucato, Mario Cimoli, Giovanni Dosi, Joseph E. Stiglitz, Michael A. Landesmann, Mario Pianta, Rainer Walz, Tim Page
Francis Jacobs, Yves Bertoncini, Valentin Kreilinger, Stijn van Kessel, Andrea L.P. Pirro, Simon Otjes, Sonia Piedrafita, Vilde Renman
Vanessa Rossi, Carmen M. Reinhart, Vincent Reinhart, Klaus Abberger, Dean Baker, Justin Yifu Lin