Institutional conditions for effective and legitimate industrial policies: the case of Portugal

Abstract

State intervention in support of specific productive activities aiming to foster structural change (i.e., industrial policy) has been a controversial topic in both academic and political debates. In spite of many years of theoretical and empirical research, such debate has not reached definite conclusions. Recently, the debate on industrial policy has been experiencing a change of focus, falling away from the rationale of such public interventions to focus on the institutional conditions that promote the success of the policies pursued. In this paper we analyse the conditions for effective and legitimate industrial policies, examining four cases of such type of interventions in Portugal. Our analysis emphasises the differences between the various interventions according to two dimensions: the number of (potential) beneficiaries targeted by the policy and the diversity of public agencies in possession of relevant skills for its implementation. These factors help to determine the level of scrutiny to which public policies are subjected, either by private actors or within the State apparatus. Both sources of scrutiny help to minimise the risks of capture of public resources by private interests, and to foster institutional learning processes that promote the effectiveness of policies.