Employee involvement is key to the public interest in industrial policies

The involvement of workers and others in society is essential to ensure that Brazilian industrial policy serves the country’s development goals and the public interest, according to a new study.

Researchers found that limited public involvement in the design and implementation of industrial policies in sectors such as animal protein skewed practices towards corporate welfare, benefiting companies but not society.

An analysis of industrial policy plans developed since the mid-1990s shows that those that were more effective had greater involvement of trade unions and civil society. In return for support, the government demanded more from the private sector.

The industrial policies with the weakest conditions included agreements with the meat industry, where unions were weak and government funding helped Brazilian companies become global forces with limited benefits to the public interest.

The study, conducted by Renato H. de Gaspi of the Central European University and Pedro Perfeito da Silva of the University of Exeter, was published in the journal Development and Change.

Researchers examined industrial policy for different sectors and found that it was influenced by the power of trade unions and social pressure. They have destroyed significant differences between different sectors such as automotive, animal protein and pharmaceuticals.

Dr Perfeito da Silva said: “There is always a risk that risk policy plans can backfire on corporations when money is given to companies that give nothing back to society. If trade unions and civil society are included in discussions, industrial policy is more likely to be aligned with national goals.

“The rise of China means all nations must better plan their industrial policies. They must maintain relationships that do not involve companies taking resources from the state. If countries impose fewer conditions, industrial policy will have less impact on development.”

More stringent conditions prevailed in the automotive industry, where trade unions have greater power. Private companies have been given specific targets for technological innovation and employment guarantees.

Dr de Gaspi said: “Rather than focusing solely on persuading business groups to invest, governments committed to an economic transformation agenda should activate other groups that can bring with them the necessary motivation to direct industrial policy outcomes towards goals that can improve society.”

The presidency of Luis Inácio Lula da Silva, himself a metalworker, in 2002 meant that trade union leaders now had greater influence on government policy. This balanced the relative power of business in negotiations, enabling unions to call for better working conditions and greater nationalization of the production chain.

This greater influence of non-business groups in shaping industrial policy appears to be returning in Lula’s new government. The new mission-based industrial policy plan identifies conditions and specific indicators, although these are still undefined. One can only hope that lessons from the past will make a difference in current development efforts.