The opinion pages of both the Financial Times and Wall Street Journal have featured calls for industrial policy in the past week, an encouraging trend toward realism about the necessary role for government in a free-market economy. In the Times, yesterday’s editorial warned against “the absence of a proactive industrial policy” and argued that “quick adoption or reiteration of a series of long-term industrial goals would … greatly benefit Britain’s post-coronavirus rebuild.” This expands notably on its observation at the pandemic’s start that “governments will have to accept a more active role in the economy” through public services and active labor-market policy. The Journal, for its part, took the confusing step of running an op-ed proposing industrial policy under the headline “America Doesn’t Need an Industrial Policy.” Continuing to haggle over the term even as the substance moves forward will generate some confusion, but it marks progress down the path toward better policy.
The excellent op-ed, by the Hudson Institute’s Thomas Duesterberg, proposed to make the American economy “more resilient and secure” through a series of government interventions. By all appearances, Duesterberg was among those confused by the attempt to couch his agenda as opposition to industrial policy. On one hand, he did write that, “an industrial policy remains a bad idea. … History records few examples of democracies in which political leaders have successfully steered their economies by targeting industries for support.” On the other hand, within a few sentences he was suggesting, “the U.S. would benefit from a government-led effort to identify industries that are vital to national security and products that are essential in national health emergencies”; a sentence after that, “the federal government must also consider how to protect the overall economic strength of important and capital-intensive sectors like semiconductors and telecommunications equipment.”
Duesterberg’s agenda plainly comprises an industrial policy: “premarket research consortia”; “a stronger research-and-development tax credit, and establishment of a similar credit for education and skills training”; “lists of critical materials and technologies … that must be locally sourced … to maintain U.S. technological superiority”; “cost-effective regulatory policy”; and “a strong infrastructure improvement program, funded in part by public-private partnerships.” Indeed, these were proposals number one, two, three, five, and eight in the symposium just published by American Compass on “Moving the Chains: 9 Strategies for Retaking Global Leadership in Industry and Innovation.” Duesterberg’s own contribution to that symposium, on resetting the terms of trade, was proposal number seven. The list likewise parallels the agenda I have presented in arguing the resolution, “That America Should Adopt an Industrial Policy.”
The name is not what matters—if the Journal, and Duesterberg, prefer “Schmind-schmustrial Schmolicy,” that’s fine. Conversely, the specifics matter a lot. Policies some see as critical to success, others might consider fatal. Those are vital debates. But we can’t have them while framing as opposition what is in fact support for the central insight that our market economy requires support from public policy to deliver the innovation and industrial strength that our nation needs. Conservatives committed to the free market should expand their playbook, just as Duesterberg suggests.
A fascinating test case will be the American Foundries Act, just introduced by Senators Cotton, Rubio, Hawley, Schumer, Gillibrand, and Jones, among others, to boost domestic semiconductor manufacturing. The bill “reflects a broader understanding of the investment needs and opportunities in an industry than typically comes out of Washington,” writes Harvard professor Willy Shih (also a participant in the Compass symposium). On The Commons, Marshall Auerback highlights how the bill “marks a significant ideological break from longstanding aversion to government involvement in anything remotely approximating national industrial policy.”
Rhetoric gives way to reality when actual legislation emerges. Whatever phrasing we prefer, the question remains: are we ready for public policy to take steps on behalf of domestic industry, and if so which should we take?