A PROPOSAL FOR THE REINDUSTRIALISATION OF SPAIN
The experience of the 1980s and 1990s suggests that public policy should anticipate any economic restructuring, to avoid making it more costly and difficult than necessary. It should also take a proactive stance in order to ensure the success of the objectives pursued. There are successful proactive experiences in the recent past, such as the switch to natural gas or the development of broadband infrastructures to facilitate digitalisation. But the transitions that are already on the horizon are on a larger scale.
On this basis, the Chair in Industrial Policy proposes the definition of an industrial strategy to implement a Reindustrialisation Plan based on the following principles:
Stability
Economic and regulatory stability to encourage industrial and business investment
Ideas
Support for innovation and idea generation
Human capital
Commitment to human capital and its training in the main skills demanded by the industry today.
Infrastructure
Improving public infrastructure necessary for the development of economic activity.
The appropriate development of these principles should lead to an improvement in industrial productivity and, consequently, in the country's economic growth. To this end, it must be borne in mind that improving the conditions for developing the best industrial strategy does not depend exclusively on the ministry that holds these competencies, as there are other factors such as infrastructure, technology and innovation and the development of people's skills, which are currently the responsibility of other ministries, or even other administrations due to the decentralisation of competencies. It is therefore necessary to draw up a government framework plan aimed at the reindustrialisation of the business fabric, addressing all the necessary aspects for this purpose, and not only the Ministry of Industry, although the latter has the leading role and a coordinating role for those critical elements.
Several ministries should be coordinated and contribute to the Plan: Economy (enabling digital transformation and SME financing); Science and Innovation (supporting the development of new products and processes); Labour (facilitating issues such as dual training); and Universities (for the necessary orientation towards market needs and fundamentally STEM programmes).
A first draft of the Plan would have to come from the Spanish Government, led by the Ministry of Industry, with a significant degree of concreteness, and should be the basis for the discussions and consensus proposed later on. Otherwise, the process of designing the Plan could be long and tedious. For its preparation, a prior "benchmark" should be made with other countries, for which the comparison with countries such as Germany, South Korea or the USA, the latter in recent years, is significant.
A first draft of the Plan would have to come from the Spanish Government, led by the Ministry of Industry, with a significant degree of concreteness, and should be the basis for the discussions and consensus proposed later on. Otherwise, the process of designing the Plan could be long and tedious. For its preparation, a prior "benchmark" should be made with other countries, for which the comparison with countries such as Germany, South Korea or the USA, the latter in recent years, is significant.
The Plan should be agreed with the Autonomous Communities, which have broad powers in matters of industrial policy. Part of the success of this Plan will depend on the degree of coordination between the different administrations. There are good examples of this type of coordination in Europe, as is the case in Germany between the federal government and the Lander, or even in Spain in the management of European funds.
The Plan must also be agreed with the social partners (employers and trade unions), as they will be the main actors alongside the central government and the Autonomous Communities. Without a broad consensus with these agents, it will be difficult to implement it effectively.
The Plan must also be agreed with the social partners (employers and trade unions), as they will be the main actors alongside the central government and the Autonomous Communities. Without a broad consensus with these agents, it will be difficult to implement it effectively.
Lastly, and also very important, an educational effort must be made to explain to society, and especially to Spanish businessmen, the importance of manufacturing industry for the development of any country. There are examples close to home, such as Germany, and further afield, such as South Korea, a country similar in size to Spain, which has successfully developed its industry.
In this context, Spain should design its Reindustrialisation Plan based on current growth vectors, and reinforced with intangible assets such as talent, R&D and innovation, which would allow defining "who" and "how" the protagonists of such a plan will be.
- If we think of "who", horizontal or cross-cutting policies have to be aware of their different effects depending on the sector of activity of the economy.
- If we think about "how" we should design instruments or institutions that facilitate the industrial sectors and companies to make the best use or mix of industrial inputs to achieve the most optimal and competitive product in the markets.
- In addition, the "where" should also be considered, as it is well known that productive efficiency is also conditioned by the location of production plants, which tend to be installed where they can benefit from the best mix of productive factors.
Therefore, and following the proper design of an industrial strategy:
Discrimination should be made between sectors, technologies and skills where significant differentiation and competitive advantage can be achieved.
The public sector should share an acceptable level of risk with the private industrial sector in order to achieve the necessary investments to achieve increasing returns and productivity improvements.
Cross-cutting policies should be coordinated with other ministerial departments or administrations to align them with the objectives of this strategy.
A long-term approach should be taken, accepting that industrial policy interventions need to be implemented consistently over a long period of time before they bear fruit.
The strategic sectoral approach should aim at economic growth and productivity improvement, and in this line of work the following is proposed:
Prioritise industrial sectors with recovery potential, where Spain is already present. These are typically medium productivity but labour-intensive sectors, important for aggregate productivity and growth because of their wages and living standards.
There are also opportunities in sectors with higher productivity. It is logical for manufacturing industry to try to grow in sectors it already knows or which are close to those it knows, for the obvious reason that it needs to have prior know-how to tackle them. This is an analysis that should be carried out with the support of those responsible for the industries identified as developable, which could include the aeronautical and automotive components, food, energy, chemicals, pharmaceuticals, as well as certain types of capital goods and machinery.
Addressing frontier and future industrial sectors in which the Spanish manufacturing sector is furthest away in terms of know-how, but which for strategic reasons should be there due to their high productivity and innovation. These are relevant sectors for driving the technological frontier in an advanced economy. Among these sectors could be explored: advanced electronic equipment, which would be an evolution of those already manufactured in Spain; mechatronics and robotics, as an evolution of the capital goods industry; biotechnology, as an evolution of the pharmaceutical and chemical sectors; digital equipment and networks, basic for the future development of almost any sector.
But there is a common element to all of them: important simultaneous industrial investments by different actors are required to adapt and modernise sectors, to favour those that have competitive advantages today in order to maintain them in the future (e.g. the automotive industry and its components) and to focus on sectors of the future based on innovation and technology (e.g. semiconductors, as they have important spill-over effects for many other economic activities). The government can play an active and co-ordinating role in this. And the volume of investment in new production equipment and technology must be sufficiently large to improve productivity, achieve increasing returns at the micro and macro levels, and consequently increase competitiveness.