Public aids to industry: elements of assessment,
by Jean Le Foll.
Financial aids from the State to industrial firms constitute an important means of public intervention in the production system But what do we mean by aid to industry? What are the objectives, and who are the actual beneficiaries ? The answers are often ambiguous or partial. The ever more clearly expressed objective to modernize manufacturing industries and the high growth of financial aids over the past four years, incite us to take this analysis further.
A presentation of annual flows in large categories summarizes the detailed description, appearing in annex, of the various forms of financial aids studied and their evolution during the past fifteen years. It already enables pinpointing a few interesting characteristics: very high growth of export aids over all the period and of nearly all types of aid since 1981, high concentration in four industrial sectors, iron and steel industry, shipbuilding, aeronautics, data processing, as well as in a limited number of large groups, influence of social factors and national independence considerations in the assignment of these public funds.
In order to go beyond this first level of observations, it is then necessary to develop the appreciation criteria and elements of comparison. The diversity of the objectives of public intervention in the production system and the diversity of the means used —financial aid generally not being the most important— then lead to a first answer: it is nearly impossible to make a single and complete assessment of whether financial aid alone can achieve all these objectives.
At the level of the subsidized firm, it appears first of all that public aid allows taking action, which would not have been made or only to a lesser extent without it, since such action was deemed to be scarcely profitable or too risky by entrepreneurs. It also appears that the permanence and the complexity of the main aid procedures in the French system create changes in behaviour and specific interdependences between entreprises and the administrative depaitments concerned.
Finally if the more general effects of aids to industry are considered, we are led to studying their impact on regional development, development of the subsidized industries, the balance of payments, public funds and employment. It can then be noticed that over and beyond the expected results, it is really important to take into account the indirect shifting or crowding out effects which, although difficult to measure, significantly lower the efficiency which may have been assessed beforehand at the mi- croeconomic level. Greater transparency and more systematic posterior assessments would help increase the efficiency of these aids and their suitability for the mam objective of industrial modernization.
Public aids to industry: elements of assessment, by Jean Le Foll. Financial aids from the State to industrial firms constitute an important means of public intervention in the production system But what do we mean by aid to industry? What are the objectives, and who are the actual beneficiaries ? The answers are often ambiguous or partial. The ever more clearly expressed objective to modernize manufacturing industries and the high growth of financial aids over the past four years, incite us to take this analysis further. A presentation of annual flows in large categories summarizes the detailed description, appearing in annex, of the various forms of financial aids studied and their evolution during the past fifteen years. It already enables pinpointing a few interesting characteristics: very high growth of export aids over all the period and of nearly all types of aid since 1981, high concentration in four industrial sectors, iron and steel industry, shipbuilding, aeronautics, data processing, as well as in a limited number of large groups, influence of social factors and national independence considerations in the assignment of these public funds. In order to go beyond this first level of observations, it is then necessary to develop the appreciation criteria and elements of comparison. The diversity of the objectives of public intervention in the production system and the diversity of the means used —financial aid generally not being the most important— then lead to a first answer: it is nearly impossible to make a single and complete assessment of whether financial aid alone can achieve all these objectives. At the level of the subsidized firm, it appears first of all that public aid allows taking action, which would not have been made or only to a lesser extent without it, since such action was deemed to be scarcely profitable or too risky by entrepreneurs. It also appears that the permanence and the complexity of the main aid procedures in the French system create changes in behaviour and specific interdependences between entreprises and the administrative depaitments concerned. Finally if the more general effects of aids to industry are considered, we are led to studying their impact on regional development, development of the subsidized industries, the balance of payments, public funds and employment. It can then be noticed that over and beyond the expected results, it is really important to take into account the indirect shifting or crowding out effects which, although difficult to measure, significantly lower the efficiency which may have been assessed beforehand at the mi- croeconomic level. Greater transparency and more systematic posterior assessments would help increase the efficiency of these aids and their suitability for the mam objective of industrial modernization.