State-business relations and the automotive industry: a comparison of state aid politics in Italy and Britain

Résumé:

How do sectoral state-business relations affect state intervention? This paper explores the automotive
industry in Italy and Britain since the 1960s to understand how the different configurations of state-business relations affect the choice of government to intervene in the sector. The two countries have historically been understood to have two deeply different political economies: liberal in Britain and mixed-interventionist in Italy. Thus, the British liberal-market economy has been described as being characterised by minimal state intervention, with firms solving their disputes using market solutions, rather than involving the state. Italy, instead, has been called a “dysfunctional state capitalism” that resembles neither the liberal market economy of Anglo-Saxon countries, nor the Rhenish model of coordinated capitalism, where the state acts as a mediator. As a result, state intervention follows clientelist pressures rather than clear policy patterns.

Yet, in the automotive industry they display similar patterns of state intervention both temporally and in terms of types of state involvement. Temporally, a marked increase in state aid until the 1980s (in Britain) or early 1990s (in Italy) was followed by a steep decline in the role of the state in subsidising carmakers. Although this decline can certainly be attributed to the more stringent rules on state aid control instituted by the European Commission, a closer examination paints a more complicated picture. In both countries, intervention was usually reactive rather than proactive and failed to produce a systematic approach to industrial policy. However, the underlying approach to state intervention of Italian and British policy-makers differed starkly even after the institutionalisation of European state aid rules.

This paper draws on the literature on policy networks to take a sectoral approach to state-business relations in the automotive industry. It shows how in both countries there existed particular sectoral configurations that, though acting through different mechanisms, steered state interventionism towards reactive policy-making and prevented any kind of industrial planning from being feasible. In particular, Italy presented multiple state-business relations with its main carmakers, Alfa Romeo and Fiat, which resembled either parentela or clientele relationships. In Britain, instead, the presence of multiple manufacturers, including important foreign ones, forced the British government to take a balanced approach that could not favour one single carmaker. Yet, the heterogeneity in interests between local and foreign manufacturers prevented the government from being able to address the sector as a whole.

The paper provides one of the first attempts to join the state aid politics literature with the sectoral policy network approach to state-business relations in a comparative perspective. It offers an important political-historical insight on distributive politics and industrial policy. In particular, it has three main implications. Firstly, it provides evidence that not only can different sectoral state-business relations be found in the same country over time, but also that overlapping simultaneous relations can be found within the same sector. Secondly, from a methodological standpoint, it offers support for the importance of controlled comparisons in the analysis of causal mechanisms. Finally, the evolution of the automotive industry is strongly in line with the literature’s analysis of the large firm as a multinational actor. Thus, the paper also has important implications for other sectors where large firms are dominant, such as airlines, energy or telecommunications.