In the UK, attempts have been made over a very long period to change the way specific industries or regions operate.
The rationale for these policies has varied over time, from the overtly political (ie. the need to preserve jobs in sensitive parliamentary constituencies) to economic considerations such as helping sectors adjust to changes in market conditions, to encourage rationalisation or to improve international competitiveness.
The methods that have been tried in the past include such instruments as public ownership, soft loans, grants, tax breaks and subsidies. The ‘credit crunch’ has brought these policies into sharper focus.
A number of ailing financial institutions have been given public support, but not in the form of subsidies. The government has in effect become the largest shareholder in several banks, a measure that stops short of nationalisation. The hope is that once they have been restored to financial health, they can be returned to the private sector by selling the shares and making a ‘profit’ for the taxpayer.
In many ways, separating macro and micro policies is to make an artificial distinction. The obvious long-term intention of any intervention at industry or regional level is to raise economic performance (in terms of growth or employment) which, in turn, will help the economy at a macro level.
In addition, there are the short-term opportunity costs associated with spending taxpayers’ money in areas that are under-performing (in market terms) when a better national return might have been earned if the money had been spent differently or not at all.