With the help of a new government program, Romania is preparing for the implementation of a new industrial policy. In this way, Romania joins the global trend of recent years with little delay, even if the latest measures in the energy sector can be considered a prelude. However, unlike the situation in Western Europe and America, declining economic power and political and administrative incapacity will seriously limit its chances of success (assuming that interventionist policies could theoretically have positive effects).

First of all, what do we mean by industrial policy and why can we talk about the global trend of recent years? In a narrow sense, the phrase means a set of government policies aimed at the development of the industry as a whole or a certain industrial sector by supporting, in most cases, some national champions. Broadly speaking, the phrase covers government policies aimed at the development of one or more economic sectors, whether they are industrial or not, and regardless of the reasons behind them. I use the term in this broader sense because it allows us to cover a wider set of public policies introduced by the government to accelerate the development of certain sectors, regardless of the reasons behind them.

As for the reasons that led to the revival of interest in the interventionist policy of the state, including industrial policy, they are numerous, and, of course, the purpose of this article is not to consider them in detail, but, briefly, they can be highlighted. four main reasons: i) the great economic crisis of 2008 and the policies adopted to deal with it, which highlighted the problems of the neoliberal model; (ii) climate change; (iii) the COVID pandemic; and (iv) major geopolitical changes in recent years, namely the cooling of Sino-American relations and the war in Ukraine.

A basic understanding of root causes is important because each of the major public policies proposed by global actors in recent years is a response to one of them. More precisely, if we talk about the success of Trump in 2016 and one of its consequences, namely the implementation of the first resettlement measures (but without real success), they were possible against the background of social division caused by the neoliberal model in the United States, which was exacerbated by the great economic crisis of 2008. Although neoliberal prescriptions have reduced inequality at the global level, they have not been as effective at the national level (i.e. displacement and occupational readjustment have not intervened as easily, the concept market consolidation advanced by Polanyi, showing its usefulness). On the other hand, if considered green proposals on both sides of the Atlantic, they are apparently determined by the effects of climate change. Last but not least, the COVID pandemic and the aforementioned geopolitical changes have re-focused governments on the importance of economic and energy security, so that the focus has shifted to sustainability (despite the price impact). In this vein, the facilities provided Chip Works (both at the European and American level), even if a secondary role is also played by the resolution of social divisions caused by the deindustrialization of recent decades.

Returning to the new government programme, even if the phrase is not used directly, the industrial policy directed by the new government is reflected in the three proposed “big public policies of the government”. This is, first of all, the “Made in Romania” program, which aims to stimulate production in the country. Thus, grants of up to 200,000 euros will be given to companies involved in intermediate production, and guarantees of up to 1 million euros, targeting in particular the Romanian food industry. The second measure is the re-industrialization of the country through the provision of state aid schemes, and last but not least, the desired transition to an innovation economy through aid given to the startup ecosystem (also in the form of state aid).

What problems will be solved by these measures? The reason for the “Made in Romania” program is, the prime minister himself tells us, the fight against inflation. It is clear that none of the main issues discussed above are targeted, even if, at first glance, we could imagine that the program is also aimed at accelerating the development of less developed areas in order to reduce regional inequality. Regarding the other two measures, the focus seems to be on the implementation of the European agenda in Romania (e.g. green deal Europe and the European Digital Agenda), but also mentions, for example, the reduction of the trade deficit from the import of construction materials. Of course, in this case we are trying to solve the problem of climate change, on the one hand, and on the other hand, to reduce external dependence from the point of view of security (at the Union level in the first two cases, at the national level in the last case). As with the first measure, the expectation that these measures will also attempt to address regional imbalances is misleading, as the government’s program does not contain any direction in this regard.

As for their effectiveness, serious questions arise here. As for the “Made in Romania” program, in the conditions of an excessive budget deficit, the granting of grants will unfortunately not have the expected effect, since the effective levers for reducing inflation are quite well known (both monetary and fiscal). Even assuming that it could have such an effect, it is clear that it will be delayed for a long time, given on the one hand the bureaucratic process required for granting grants, and on the other hand the investment period itself. The method of implementation is also not optimal. In a society still struggling with corruption, the choice of providing benefits in the form of grants directly administered by public institutions is not the happiest. They significantly increase the risk of conflicts of interest and incorrect selection of beneficiaries (even assuming the good faith of the officials responsible for providing them).

Regarding the second measure, are we talking, first of all, about reindustrialization in the literal sense of the word? This is more political rhetoric, given that Romania is quite good in terms of the contribution of the industrial sector to GDP, ahead of, for example, countries such as France or the Netherlands, where there has really been an important shift in recent decades to production processes (similar to the US process). In fact, they are trying to attract foreign direct investment, activities that produce results are also well known in this area. Thus, the government should use European money as much as possible through the private sector and avoid its simplistic distribution through bureaucratic grants or, even worse, by giving it to state-owned companies. The government has a significant number of state-owned companies in its portfolio, through which reindustrialization has been attempted so far (notably under previous PSD governments). Their failure, with a few exceptions, shows us a political and administrative inability to implement an active industrial policy, much more desirable is the allocation of resources through general fiscal measures or through politically independent bodies (such as the FEI or a new development bank, assuming it actually will free from excessive politicization). – Read the entire article and comment on Contributors.ro