Industrial policy and vulnerable capitalism

This paper emphasises the linkages between corporate strategy, the macroeconomy and the role of industrial policy in this macropolicy context. While this is an aspect of industrial policy that is rarely addressed, we suggest that there is, in fact, a real and highly significant complementarity, especially in the context of modern capitalism, with its distinctive features. The underlying premise is that problems cannot be resolved easily directly at the macro level: appropriate industrial policy may be a necessary ingredient in securing better economic performance. Current discussions of exchange rate policies and the major adjustments required for eliminating external imbalances between the USA, China, Japan and Europe would seem to point to this conclusion. This paper emphasises the linkage between corporate strategy, the macroeconomy and the role of industrial policy in this macropolicy context, and points to appropriate policies that aim to rebalance the economy by shifting towards a more diffuse governance structure that deconcentrates strategic decision making and opens up the potential for new forces of dynamism.