CAMBRIDGE – A quarter-century ago, in the wake of the Thatcher and Reagan revolutions and the collapse of communism in Europe, the concept of “industrial policy” appeared to have been discredited in most of the developed world. Lately, however, it has been making a comeback. Indeed, the question of how government should bolster domestic industry has resurfaced in what ordinarily would be considered the most unlikely of places – the United States, where President Donald Trump has promised to back high-paying manufacturing jobs and routinely targets individual companies and business leaders for flattery or condemnation.
In the nationalist form favored by populists like Trump, but also by less mercurial leaders, like British Prime Minister Theresa May, industrial policy is seen as a means to reclaim control over the forces of globalization, which supposedly favor “globalist” elites and no one else. But industrial policy also “returned” in the immediate wake of the 2008 global financial crisis. With markets having clearly failed, governments across the West took far-reaching measures to save various industries and firms from bankruptcy, boost economic activity and create jobs.
In reality, debates about industrial policy, like industrial policy itself, never really went away. Governments have always tried to foster conditions for industrial success at home. And a dispassionate, technocratic industrial policy is increasingly considered crucial for guiding technological innovation and diffusion, and for confronting problems such as climate change.
Still, even those who view industrial policy as a panacea concede that it has a mixed history, with notable successes punctuated by spectacular failures. Many Project Syndicate commentators have been participating in – and often leading – these debates for years. As policymakers around the world increasingly consider whether and how to intervene on behalf of the “home team,” they would do well to consider the most important arguments about the proper role of, and best practices for, industrial policy in the twenty-first century.