Introduction

The use of industrial subsidies was little known in the eighteenth and nineteenth centuries, so that the rise and subsequent waning of this policy instrument has been an extraordinary phenomenon of the twentieth-century economy. Direct subsidy payments to private firms amounted to more than five per cent of national output at their peak in the late 1960s, and at different times have been an important means by which the government has sought to fine-tune and stabilize the economy; to correct for balance of payments difficulties; to redistribute activity between areas; to encourage enterprise, innovation and technology transfer; and to deal with the most serious of modern economic problems, that of unemployment. More recently, following sustained efforts by national and supranational bodies to eliminate these payments, industrial subsidies have found a more modest role as policymakers have come to understand the limits of these measures, and the pattern of spending has returned to that of an earlier period.