chapter  4
Industrial Policy
WithA. NOWAK AND V. H. MANEK KIRPALANI
Pages 10

New Eastern European EU members have recently joined. Therefore, their fi rms must develop in order to compete successfully with Western and global companies. The answer goes beyond admonitions to privatize state-owned industries. This was the old answer for economies in transition when the problem was to move economies from centrally planned ones to the market system. The chapter addresses the future need to be competitive. It points out how Eastern Europe has focused on a policy for foreign trade based on a model of “short business distance.” The chapter proceeds with a combination of description and analysis of the Polish and Slovenian economies in transition. These two countries have been selected because they are, in a signifi cant sense, the two ‘gateway’ countries for the rest of Eastern Europe. The former by way of size and the latter by way of per capita income. Furthermore, both are ‘impact’ countries by their history of intellectual leadership, current development toward market economies, and sustainable global enterprise. How they advance will serve as an example for the rest of the Eastern European countries that have recently joined the EU. Together they can bring a range of benefi ts to the EU. Finally, it is shown that the situational logic calls for a “modern” industrial policy in both these ‘gateway’ countries. A novel but satisfi cing method of selecting industries to build is advocated. The industries should then be ones that have sustainable competitive advantage.