Public Policies for Industry

The economic development is the result of the human initiative towards the production of goods and services, in order to meet the underlying demand, or the outcome of the production initiative itself. Seemingly, it all comes down to a decision by a social agent and the mobilisation of human, financial and physical resources that enable production. In fact, it is a much more complex process, subject to different layers of decision-making or causality, the understanding of which is paramount to grasp the differences in the distribution of economic activity within a country’s territory – the so-called regional asymmetries –, as well as the different economic development of countries, their paths and future potential. This process is neither deterministic nor fatalistic, as there are no predetermined tracks; however, it is crucial to analyse its depth and inertia, in order to enable virtuous processes of economic development and improvement of social well-being.

Therefore, and firstly, it is necessary to place the individual initiative towards the production of goods and services within the social and institutional frameworks, which encompass the values and social achievement principles that lead individual action. A value system that rewards merit and initiative, and makes each individual responsible for his or her social position, tends to favour entrepreneurship and risk tolerance. Likewise, an institutional framework that favours interpersonal and intergenerational trust tends to strengthen cooperation mechanisms inherent to the production process, and crucial to optimise the use of resources, namely savings and labour.

Secondly, the individual initiative relies on the mobilisation of specific and general knowledge provided by society, through the individual socialisation process, educational and professional training and the processes of dissemination and acquisition of tacit knowledge available in the different social and professional groups.

This means that economic development policy must be understood as consistent action at different layers enabling or influencing the maximisation of the economic and social trajectory of a given community, considering its existing heritage of values, institutions, knowledge and individual initiative. Thus, a development policy requires:

• a deep knowledge of anthropological, social, and institutional aspects, an assessment of the levels of education and formal and tacit knowledge, which led a given community to the point where it stands at the moment of political decision;

• a plan to change this combination of circumstances, acknowledging the different degrees of inertia - from the deepest, or structural, to the most circumstantial - and different response times. The plan ought to be realistic, i.e., feasible in terms of time and mechanisms necessary to implement the required changes;

• A consistent framework of incentives capable of inducing individual behaviours and initiatives, the elements that will ensure the adoption of said changes by the target community.

Hence, and considering the fact that development trajectories rely on the connection between overlapping levels of key-elements of economic and social dynamics, the social, institutional and economic policy must define, after careful analysis:

• transformation objectives that consider inertia, hurdles and response times of each of said levels;

• the supply of public goods (necessary to the desired transformation). – By nature, public goods must be provided by the community.

Some of the critical areas of the economic and social dynamics are associated with:

- the nature, intensity and dynamics of the national or regional innovation system, i.e., the coordination between education, production and dissemination of new knowledge and professional training;