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industrial location policy

  The manner in which the state seeks to influence the location of industrial activity, generally justified by the pursuit of welfare objectives. Industrial location policy under capitalism is usually directed towards the economic regeneration of declining industrial districts, such as parts of northern England and certain inner-city areas. In the underdeveloped world industrial location policy may be directed towards the initiation of economic development, or modernization.

Industrial location policy normally comprises goals, instruments and strategy. The goals represent the policy objectives, such as the creation of new jobs or raising local income. The instruments are the specific measures adopted to induce industry to become established in the areas in question, which can comprise grants towards the cost of plant and machinery, favourable rates for writing off capital investment, a financial premium for each job created, and tax concessions as well as state-provided industrial premises, industrial estates laid out with the necessary utilities, and general investment in local or regional infrastructure. The strategy is the way in which the various measures adopted are related to one another.

An important element in any industrial location policy is the spatial strategy. Financial inducements to new industry may be dispersed or concentrated in geographical space. In the latter case, some kind of growth-pole policy is often adopted, with certain places selected for special consideration by virtue of their apparent growth potential. A further step in the direction of concentration is the creation of a planned industrial complex. Another kind of spatial strategy, favoured by governments committed to the encouragement of market forces, involves local relaxation of constraints on development, for example in an enterprise zone or free trade area.

Under capitalism, the extent to which industrial location policy can succeed is constrained by the profit-seeking objectives of private industry. The inducements that the state is able to offer may be insufficient to offset the disadvantages of a relatively high cost location. Under socialism, industrial location policy is an integral part of national economic and social planning. But there are limits to the freedom of the state to locate industry in pursuit of welfare objectives, for dispersal to high-cost locations can impair overall efficiency — as some eastern European countries discovered.

With the demise of socialist state planning, and the emergence of a neo-liberal economic orthodoxy emphasizing market solutions to local or regional economic problems, interest in industrial location policy has declined in recent years. This is exemplified by the with-drawl of regional policy in England in the 1980s, while continuing in Scotland and Wales. States are now more likely to place their hopes for stimulating industrial development in broader policies of deregulation and flexible labour markets, with the location of new investment less subject to government influence or control. However, some expectations are still vested in industrial development planning, including the designation of free trade zones in the former Soviet Union. (DMS)

Suggested Reading Chapman, K. and Walker, D. 1991: Industrial location: principles and policies. Oxford: Basil Blackwell. Smith, D.M. 1981: Industrial location: an economic geograpghical analysis, 2nd edn. New York: John Wiley.



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