The big “how”: New ways to govern industrial policy

To achieve their goals in areas like energy transition, national security, and social restructuring, policymakers must prioritise the implementation of effective industrial policy. While there is a growing consensus on the importance of government intervention in the economy, there are complex dilemmas to navigate. Striking the right balance between strategic autonomy and economic efficiency while also ensuring a rapid transition to a low-carbon future poses significant challenges for policymakers.

These challenges require a strong emphasis on governance. Effective governance is crucial in the face of uncertainty, not only to resolve problems of coordination but to carve out long-term strategies that don’t risk other crucial societal objectives. There are also other obstacles that governments need to overcome, including geopolitical instability, limited administrative capacities, inflationary pressures, intricate supply chains, outdated systems, and a lack of feedback mechanisms, among others.

Demos Helsinki recognises these challenges and has been building holistic frameworks and analyses to address both the governance and capacity gaps associated with coordinating industrial policy in the 21st century. By leveraging these insights, decision-makers can find useful tools to overcome coordination and governance obstacles and successfully navigate the complexities of industrial policy to achieve historical societal objectives.

1 GOVERNANCE: ORCHESTRATING STATE ACTION

To implement effective industrial programs, governments must reform their structures, processes, and institutions that determine the capacity of the public sector. Reviewing capabilities to collect and analyse information while incentivising strategic investments becomes crucial. It’s not about relying solely on subsidies to overcome crises; it’s about building the capacity to orchestrate a coherent industrial strategy.

Read more: The changing role of the state in the economy | Missions for Governance | An operative model for implementing missions

2 POLICY: COORDINATED EXPERIMENTATION

Governments must reshape the tools that shape industrial policy design, implementation, and governance. Demos Helsinki has identified a transformative model that emphasises consensus building, devolved problem-solving, learning, and iteration. Policies aligned with this model provide both strategic direction and the necessary agility in leadership and action. So far, evidence of this model can be derived from the cases of the exemplary Finnish education system, the success of the Montreal Protocol, and the cutting of emissions from vehicles in California.

Read more: Experimentalist R&I funding | Humble Governance

3 CAPACITIES: RE-TRAINING AGENTS OF GOVERNANCE

Reforming the skills, resources, and capabilities of civil servants is essential for meaningful industrial policy leadership. Top-down change cannot happen without including and retraining the individuals responsible for implementation. To foster the right capacities, civil servants need skills in experimentation, co-creation, strategic foresight, and agility.

Read more: A new ethos for the civil service | More on civil service training

Connect with us here, or by emailing our industrial policy experts directly:

Juha Leppänen
Chief Executive
juha.leppanen@demoshelsinki.fi

Iacopo Gronchi
Governance Senior Expert
iacopo.gronchi@demoshelsinki.fi

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Feature Image: Fokkebok / iStock