Economic Policy

Conditionality was a central concern in the development literature of the 1990s. With the significant expansion of targeted public support to private firms since the Great Financial Crisis, the issue of conditionality has once again become a focal point in industrial policy debates. Despite the growing interest in the concept, the existing literature lacks a systematic conceptualization of conditionality within the context of industrial policy and does not outline the political factors that enable state actors to introduce it. This article addresses this gap by critically reviewing the existing literature and providing a systematic political economy of conditionality. We offer an overview of the literature on conditionality, examining different industries, historical periods, and national contexts. In doing so, we make three key contributions to the debate on industrial policy and regulatory instruments more broadly. First, we distinguish between two broad approaches to encoding conditionality in industrial policy: hard-coding and soft-coding. Next, we map the coalitional, institutional, ideational, and global contextual factors that facilitate conditionality. Finally, we present two vignettes of recent industrial policy initiatives in the European Union and the United States as illustrative cases. This conceptual exercise, intended to lay the foundation for future causal research on conditionality, demonstrates that the presence of conditionality is not merely a technical matter of political design but is instead shaped by configurations of political economy factors.

Decarbonization forces societies to cope with the restructuring and outright unwinding of assets, firms, workers, industries, and regions. We argue that this problem has created legitimacy for industrial policies managing the reallocation of resources. We illustrate this dynamic by documenting incremental state-building in the European Union, an administration institutionally tilted toward regulatory statehood and the making of the Single Market in energy since the 1990s. European greening policies, we argue, have incrementally lessened the primacy of regulatory tools and have introduced a plethora of instruments to accelerate green restructuring and carbon unwinding. Best understood as a process of multi-sited institutional layering, the European Union increasingly appears to complement financial and regulatory instruments to effect green energy transitions with the management of decline in targeted regions and sectors, based on targeted funds and targeted transition planning.

This paper contributes to Comparative Political Economy (CPE) by developing an analytical concept of corporate welfare. Corporate welfare—the transfer of public funds and benefits to corporate actors with weak or no conditionality—is a prominent form of state-business relations that CPE scholarship regularly overlooks and misinterprets. Such transfers should be understood as a structural privilege of business in a globalized post-Fordist capitalism, and an increasingly common strategy through which states attempt to steward national economic dynamism within a highly constrained range of policy options. However, without a well-developed concept of corporate welfare—premised upon the key criterion of conditionality—studies that identify a ‘return’ of the state in industrial planning misrepresent these transfers to business as a reassertion of state influence and control, rather than a reflection of state weakness and subordination. The paper provides the analytical building blocks to properly conceptualize transfers to business, works out the core challenges for empirical research, and provides empirical illustrations of this burgeoning phenomenon from the fields of unconventional monetary policy, privatization, and urban political economy.

How do policy paradigms change? This article demonstrates that changing social imaginaries about economic growth enabled paradigmatic changes in USA corporate tax policy in the 1980s. Based on archival sources, it reconstructs how policy makers switched from focused support for capital-intensive smoke-stack industries towards support for emerging high tech-sectors between two major tax-bills in 1981 and 1986. This switch was made possible by the emergence of what we call the Silicon Valley imaginary—the idea that sound economic policies stimulate the reallocation of society’s resources towards new economic fields. The emergence of this social imaginary resulted from political realignments and changing notions of economic growth and justice. The search for sources of future economic growth and societal coalitions led policy-makers to appropriate ideas about the promises of new industries.

Corporate concentration is currently being discussed as a core reason for the crisis of democratic capitalism. It is seen as a prime mover for wage stagnation and alienation, economic inequalities and discontent with democracy. A tacit coalition of progressive anti-monopoly critiques and small business promoters considers more deconcentrated corporate structures to be a panacea for the crisis of democratic capitalism, arguing that small firms in competition are better for employment, equality and democracy. This paper offers a brief outline of ideas of the anti-monopoly and small business ideal and critically evaluates whether a more deconcentrated economy may live up to these promises. While we agree that the plea for strengthened antitrust enforcement contains relevant and promising prospects for reform, our analysis concludes on a decidedly critical note. In particular, we caution against romanticized notions of the small capitalist firm.