Are National Champions Really Winners?

COLOGNE – Manufacturing is once again at the top of Europe's business agenda. The European Union's previous industry commissioner, Antonio Tajani – who was recently replaced by Elżbieta Bieńkowska – set a goal of increasing manufacturing's share of GDP from just over 15% in 2012 to 20% by 2020. But if member states are to achieve this goal, current policy approaches within the EU will need to be rethought. Any modern industrial policy must involve more than just picking winners.

EU governments have different, often contradictory, strategies for their respective manufacturing sectors. Germany is focusing on creating a competitive framework that enables “hidden champions" to emerge as global leaders. France, by contrast wants to create national champions by selecting specific sectors for special support; its government recently described plans to acquire a stake in carmaker Peugeot as an act of “industrial patriotism."

Past experience, however, suggests that the French approach won't end well. As a 2004 report from Germany's Monopolies Commission pointed out, “French enthusiasm for pronouncements on industrial policy and the media's admiration for the activism of the ministers responsible are out of all proportion to the success of this policy."

Still, EU governments, despite privatizing sizeable chunks of industry since the 1980s, continue to look fondly on their industrial policies – the production of the Airbus being a case in point. Industrial support is usually justified on the grounds that private-sector monopolies and duopolies distort markets – though, having driven McDonnell-Douglas out of the market, Airbus and Boeing left the global market structure unchanged.