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University Microfilms International A Bell & Howell Information Company 300 North Zeeb Road, Ann Arbor, Ml 48106-1346 USA 313/761-4700 800/521-0600 Order Number 9011138 Industrial policy and economic performance in the developed West: An examination of four policy models, 1960-85 Celso, Anthony Nino, Ph.D. The Ohio State University, 1989 UMI 300 N. Zeeb Rd. Ann Arbor, MI 48106 INDUSTRIAL POLICY AND ECONOMIC PERFORMANCE IN THE DEVELOPED WEST AN EXAMINATION OF FOUR POLICY MODELS 1960-85 DISSERTATION Presented in Partial Fulfillment of the Requirements for the Degree Doctor of Philosophy -in the Grade School of the Ohio State University By Anthony N. Celso, B.A., M.A. ******* The Ohio State University 1989 Dissertation Committee: John Champlin Approved by William Childs Lawrence Herson Brian Pollins Department of Political Science ACKNOWLEDGMENTS While there are many people who have assisted me in completing this study, I would like to single out three in particular. First, my doctoral committee deserves special mention. My adviser, Lawrence Herson, provided me with invaluable advice and moral support during the three years that it took me to write this dissertation. Larry gave me the inspiration needed to complete this study. The junior members of my committee (especially William Childs) gave me additional insight into constructing the dissertation's prose, style and analysis. Secondly, my mother's generosity and patience needs to be / commended. She provided the material support that allowed me to finish this study after my graduate school funding was terminated. Without her assistance, I would not have had the time to devote to my doctoral research and subsequent completion of this study. Thirdly, the assistance and support of my girl friend, Alicia Man, gave me the necessary courage and self-confidence to finish this study. Alicia, moreover, provided me with proof reading and technical assistance that facilitated the data analysis part of this dissertation. Additional thanks must go to John Champlin who sat in at my dissertation's oral exam with onlyitwo weeks notice and whose spirited criticisms improved my understanding of the theoretical ii literature in the political economy area. Finally, my editor and typist, Sandy Wood, needs to be congratulated for removing numerous spelling errors and assisting me in constructing this document to meet Graduate School.guidelines. iii VITA March 1959 ...................... B o m - Columbus, Ohio June 1981........................ B.A. , The Ohio State University, Columbus, Ohio June 1987........................ M.A. , The Ohio State University, Columbus, Ohio August 1989...................... Ph.D., The Ohio State University, Columbus, Ohio August 1989...................... Assistant Professor, Mount Union College, Alliance, Ohio FIELDS OF STUDY Major Field: Political Science Political Economy and Industrial Policy Policy Analysis and Design Comparative Politics (Western Europe) iv TABLE OF CONTENTS ACKNOWLEDGEMENTS......................................... ii VITA..................................................... iv LIST OF TABLES...................................... v LIST OF FIGURES ix LIST OF CHARTS....................... x CHAPTER PAGE I. CREATIVE DESTRUCTION AND INDUSTRIAL POLICY. 1 Introduction.............................. 1 Creative Destruction in Market Societies; 1960-85 ........................................... 3 The Industrial Policy Debate: Liberalism, Corporatism, and Statism. .. 8 Methodology and Structure: An Overview . 18 II. COMPARATIVE POLITICAL ECONOMY AND INDUSTRIAL POLICY.......................... 21 Introduction........................ 21 The Political Economy Perspective ........ 21 Policy Regimes Style: Planning, Markets and Persuasion.................... 23 The Corporatist Challenge ................ 25 Liberal and Socialist Critiques of Corporatism....................... 28 The Welfare State ...................... 30 The Industry Policy Debate: Incomes, Nationalizations and Business Subsidies......................... 34 Political-Economy Literature: An Assessment......................... 42 Conclusion........................... 46 v PAGE III. FRAMEWORK FOR COMPARATIVE INDUSTRY POLICY ANALYSIS................................ 48 Introduction................................ 48 Structural Analysis: Growth Cycles, Industry Policy, Adjustment, and Competitiveness .......................... 49 Industrial Policy Styles.................... 53 Policy Style Evaluation .................... 66 Conclusion.................................. 71 IV. INDUSTRIAL STRUCTURE ADJUSTMENT ................. 75 Introduction. ............................ 75 Manufacturing Reconstruction and National Industry Structure .............. 76 Adjustment Perspectives .................... 87 Industrial Policy Adjustment: Methodology, Analysis and Results ........ 93 Prime Values and Policy Performance ........ 107 Policy Adjustment: An Assessment ........... 114 Conclusion.................................. 116 V. INDUSTRY STRUCTURE COMPETITIVENESS............ ' . 118 Introduction................................ 118 Economic Factors and Trade Performance. 119 Industrial Policy Styles and Trade Utilization.............................. 126 Data Evaluation: Competitive Behavior of Six Industrial Ecnonomis.............. 137 Competitiveness and Industrial Policy Performance.............................. 159 Conclusion.................................. 166 VI. ADJUSTMENT, COMPETITIVENESS AND INDUSTRY POLICY PERFORMANCE: SOMECONCLUSIONS ............. 169 i \ Introduction................................ 169 Industry Adjustment and Competitiveness 1960-85 .................................. 170 Industrial Policy Style Limitations ........ 173 Industrial Structure Performance: Economic and Political Explanations .... 182 LIST OF REFERENCES.................................... 189 vi LIST OF TABLES TABLE PAGE 1. Employment Total Economy, Annual Percent Change.......................................... 5 2. Industrial Production, Annual Percent Change (1960-85)....................................... 9 3. Evaluation Structure............................. 72 4. Rates of Growth in Employment in Manufacturing INdustries By Economic Grouping, 1970-77......... 80 5. Capacity Utilization in Manufacturing (%). 81 6. Degree of Capacity Utilization by Industrial Branches........................................ 82 7. Manufacturing Employment by Production Category . 85 8. Unemployment: Four Year Averages from 1960 to 8 3 .......................................... 96 9. Long Term Unemployment Rates: 1960-85.......... 98 10. Unemployment Rate Change......................... 99 11. Industrial Production, 1960-83................... 101 12. Industrial Production, 1960-85................... 102 13. Labor Disputes (Days Lost Per 1000 Workers), 1960-63 ........................................ 104 14. Days Lost Per 1000 Workers Recession/Non- Recession Periods.............................. 106 i 15. Adjustment Experience 1960-85 ................... 114 16. Share of World Exports by Economic Grouping (1960-80)...................................... 120 17. Structure of EC Exports (1958 and 1 9 8 6 ) ......... 122 18. Value Added to Production Across Industrial G r o u p .......................................... 125 vii TABLE PAGE 19. Gross Fixed Investment 1960-85 (Percent GDP)......................................... 139 20. GDP Gross Fixed Investment, 1972-75, 1980-83. 141 21. Exports Capacity (GDP Percents) 1960-85.... ...... 145 22. Exports Capacity, 1972-75, 1980-83........... 147 23. Import Dependence, 1960-85 (GDP Percent)..... 149 24. GDP Import Dependence, 1972-75, 1980-83 ...... 151 25. GDP Surplus/Deficit on Current Account, 1960-85 . 153 26. Real Compensation Per Employee, Deflator GDP. 158 27. Austrian and West German Performance......... 186 28. Performance of High and Low Value Added Industries Structure......................... 186 viii LIST OF FIGURES FIGURE PAGE 1. Structural