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EU funds, state capacity and the development of transnational industrial policies in Europe’s Eastern periphery

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  • Gergő Medve-Bálint
  • Vera Šćepanović

Abstract

Many have claimed that in the dependent market economies of Central and Eastern Europe industrial policy has been reduced to incentives to foreign investors – a feature accentuated by their loss of policy space through integration into the European single market. In this paper, we offer an alternative view by arguing that the European Union (EU) has in fact made it possible for its members to recover a degree of policy space lost to economic and regulatory integration. The EU does this through transnational industrial policy, which is the combination of its competition and cohesion policies. The former limits cross-country competition for capital; the latter provides additional resources to support a more inclusive industrial policy benefiting small and medium enterprises (SMEs). However, effective utilization of transnational industrial policy depends on domestic state capacities. We demonstrate this by comparing the distribution of EU funds to automotive firms in Poland and Romania. In Poland, efforts to create institutions that promote SMEs have resulted in a more balanced distribution of EU resources, while in Romania a weak and unstable institutional environment led to their greater concentration, thereby reducing European funds to another source of rents for the most powerful firms.

Suggested Citation

  • Gergő Medve-Bálint & Vera Šćepanović, 2020. "EU funds, state capacity and the development of transnational industrial policies in Europe’s Eastern periphery," Review of International Political Economy, Taylor & Francis Journals, vol. 27(5), pages 1063-1082, September.
  • Handle: RePEc:taf:rripxx:v:27:y:2020:i:5:p:1063-1082
    DOI: 10.1080/09692290.2019.1646669
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    Cited by:

    1. Tomic, Slobodan & Dragicevic, Ognjen, 2023. "An Unexpected Fate of a Regulatory State at the EU’s Gate: Internationalisation and Non-Consolidation of the Serbian Regulatory State," SocArXiv 7g9zx, Center for Open Science.
    2. Thomas SJ Smith, 2023. "Mapping complexity in deglobalisation: A typology of economic localisms from ‘hyper-localism’ to ‘strategic autonomy’," Local Economy, London South Bank University, vol. 38(3), pages 242-263, May.
    3. Imre G. Szabó, 2022. "The wages of reconstruction – the EU’s new budget and the public service staff shortage crisis on the EU’s eastern periphery1," Transfer: European Review of Labour and Research, , vol. 28(1), pages 141-145, February.

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