Dani Rodrik - Contribution to Workshop

FRANCE STRATÉGIE & OECD WORKSHOP ON NEW INDUSTRIAL POLICY TOOLS Paris, 17 October 2022

Session 1: Can new industrial policy tools help Europe resume convergence and innovation?

Dani Rodrik, Professor; Harvard University

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Diagnosing the disease We are experiencing both economic and political malfunction • • •

One important connection: o

Good jobs are becoming scarce

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Technology and globalization

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Social costs: broken families, drug abuse, crime

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Political polarization and rise of populist parties

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Authoritarian values

Underlying drivers: Broad costs: W.J. Wilson 1996, Autor, Dorn, and Hanson 2018 Autor et al. 2017, Dal Bò et al. 2018, Colantone and Stanig 2016, 2017, Guiso et al. 2017 Ballard-Rosa et al. 2018, Colantone and Stanig 2018

If climate change is a threat to our physical environment, scarcity of good jobs is a threat to our social and political environment.

Why industrial policy for good jobs When we talk about (how to create) good jobs, tendency to focus on training, minimum wages, collective bargaining, social policies •

But sine qua non of good jobs is high productivity for the lower-educated segments of the workforce

When we talk about (objectives of) industrial & innovation policy, tendency to focus on manufacturing, supply-chains, the green transition, digitalization, global competitiveness •

Jobs as incidental

An argument for IP that directly targets good jobs •

Why focus on good jobs?

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Why industrial policy?

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What kind of an industrial policy?

A new form of industrial policy Focus on services and SMEs rather than manufactures and national champions Instead of top-down subsidies, a different role of public sector: •

Gal-setting

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Discovery and provision of missing public inputs

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Coordination

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“Soft” conditionalities

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Monitoring and goal-revision

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Fostering local experimentation