bout de papier, Vol. 9, No. 1 (1992) — Winter 1992 // Hiver 1992, pp. 45–47
The State, Business and Industrial Change
in Canada by Michael M. Atkinson and
William D. Coleman, University of Toronto
Press, 1989, 236 pp., $35.00 hard cover;
$16.95 paperback.
Except for the discussion a year or two ago about a Federal Business Development Bank loan program for strip clubs, we have not heard much about industrial policy lately. It was different back in the 1970s, when a great deal of political and bureaucratic energy was expended in the search for one. Some of the early Trudeau-era movers and shakers took it as an article of faith that Canada would be a winner in the international race for competitiveness and growth if only we could find a way to deploy our national assets according to some well-conceived industrial strategy. If less endowed countries like Sweden and Japan could do it successfully, why not Canada? Surely it was just a matter of getting it all together.
The effort was not notably successful. By the early 1980s, we had learned the hard way that although the will to get it all together might be strong, the analytical and institutional challenges were formidable. Industrial policy-making is an inherently messy business in which everything is related to everything else — and to some things more than to others! Nonetheless, it is a subject that is unlikely ever to go away, and it deserves more sophisticated treatment than the usual argument about planning and intervention on the one hand, and markets and competition on the other.
Professors Atkinson and Coleman teach political science at McMaster University in Hamilton, Ontario. Although obviously no strangers to economics, their book is primarily about the politics of industrial policymaking, defined as all the public and private sector interactions which have a bearing on the ability of the Canadian state to intervene decisively in industrial development. Their analysis draws heavily on institutional theory: the central idea is, indeed, that industrial policy can only be as good as the institutions available to participate in it. It is not an easy book, but on careful reading, it emerges as a diligent and coherent effort to bring analytical order to the Canadian record on industrial policy-making. It also goes a fair way toward explaining why we have not been very good at it.
The authors explain that in industrial policy theory there are two main types: anticipatory policy where the objective is planned positive adjustment to change; and reactive policy which is defensively oriented and typically targetted on the needs of particular firms. The anticipatory type proceeds from an assessment of what the appropriate industrial structure ought to be and often involves intrusive measures of “structural intervention”. The reactive kind embodies a strategy of “environmental intervention” in which the measures are aimed at creating an appropriate investment climate, with the decision as to whether to take advantage of them left to individual firms; for example, reactive policy is often associated with political pressure to bail out weak firms. Without ascribing all virtue to one type or the other, Atkinson and Coleman obviously consider anticipatory policy to be the nobler of the two options.
There is, of course, nothing especially singular or surprising about all that. But the plot thickens when the authors introduce a series of historical and institutional factors which they believe have an important bearing.
These include the modus operandi of capital markets in Canada, which leaves the financial and industrial sectors relatively autonomous from the state. European-style industrial banking systems never developed in Canada, with the result that individual firms have traditionally looked to the securities market instead of to the chartered banks for their long-term capital. This independence from the banks and the state has fostered what the authors call a “firm-centred” business culture which is resistant to state influence on investment decisions and hence to an anticipatory approach to industrial policy. Moreover, although business has easily dominated the interest intermediation (read “pressure group”) and political party systems, its own organizations are not impressively strong viewed from the standpoint of their ability to participate in industrial policymaking. For instance, business organization in Canada is notable for the lack of “peak” associations whose members are other associations: the most important among them being the Business Council on National Issues, the Canadian Chamber of Commerce and the Canadian Manufacturers’ Association which consist of individual firms directly enrolled. This particular manifestation of “firm-centred” culture means that while Canadian business associations — there are about 500 of them — are able to represent the interests of their members well, they are not, in general, able to aggregate those interests in such a way as to facilitate the making of industrial policy.
Nor do the authors find the Canadian state itself to be well equipped for this. By contrast with a country like France, where much of the executive power is wielded via the administrative apparatus rather than by the representative institutions, Canada has only a weak state tradition. The Westminster parliamentary model and the Federal system tend to reinforce this weakness. Because “no grand theoretical argument has been made that the state in Canada embodies an authority that is separate from, or in some manner superior to, the authority exercised by the duly constituted government of the day” “, the authority of the Canadian bureaucracy remains unsettled and there is minimal encouragement for the development of the autonomy necessary for anticipatory policy-making. The freedom from partisan political interference enjoyed by most Canadian public officials has been achieved at the expense of other kinds of autonomy, for example, European-style training systems aimed at developing core bureaucracies able to exercise both technical and political judgment on their own. By contrast, the prevalent view among Canadian officials is that they are merely the servants of their political masters and have no business pushing industrial policy.
The centre of gravity of this book is a chapter in which the authors elaborate a concept of “policy networks” to illustrate how policy-making has been conducted in Canada at the level of industrial sectors. A “policy network” is essentially an analytical tool to describe the relations which exist between (and among) the business and government sides when they come together to make industrial policy. The quality of each such network — the authors identify six types — is a function of how much autonomy the bureaucrats enjoy: whether they generate their own information or depend on industry for it; how highly their authority is concentrated, for example, whether one group of officials can take the lead in formulating policy or must share authority with other groups in a “turf” situation; and on the industry side, how well its interests are mobilized into “policy-capable” associations. The general thrust of the analysis is that the quality of the policy directly depends on the quality of the network which produced it.
The authors review the Canadian policymaking record in seven industrial sectors, grouped according to whether they are in an expansionist phase (space, telecommunications equipment and pharmaceuticals), a mature phase (petrochemicals and meat processing), or in a process of retrenchment (textiles, clothing and dairy products). These down-to-earth and lucidly descriptive chapters are a welcome relief from the heavy theory of much of the rest of the book, and are worth the price of admission in themselves. Although I did not think that the attempt to ascribe all “policy outcomes” in each sector to the “policy network” prevalent in that sector quite came off, the book did make some persuasive points about the real nature of the industrial policy-making process.
The use of trade policy as a means to the same ends as industrial policy is a politically attractive option, especially because it can be presented as non-interventionist. In the present Canadian context, the critical question is whether free trade with the United States and maybe Mexico can be a “stand alone” policy which relieves the government of a responsibility for pursuing complementary industrial policies. Atkinson and Coleman are emphatically of the view that the process of adjustment to free trade, if left exclusively to the marketplace, is unlikely to yield equitable results and that industrial policies therefore will continue to be required. This, incidentally, is where the Macdonald Commission also came out, although on the somewhat different ground that industrial policies would be vitally important in enabling Canada to capture the benefits of free trade. In the context of a North American Free Trade Area (NAFTA) it is indeed difficult to see how Canada could expect to share equitably in the trading opportunities arising from a revitalized Mexico if everything is simply left to the magic of the market: the advantages which the United States will enjoy — not least geographically and lingustically — will be formidable. So perhaps we should be hearing more about industrial policy.
View the original scanned pages →
Originally published in bout de papier, Vol. 9, No. 1 (1992) — Winter 1992 // Hiver 1992, pp. 45–47. Read the rest of this issue →
