Industrial policy. [Definition:  “a government policy that encourages resources to shift from one industry or sector to another; this can be done  by changing input costs, output prices, or other regulatory treatment.”   It is an attempt by the government to address critical national security concerns or economic competition.)

This is not something that the US government has consistently promoted over the decades.  Unless,  of course, it’s related to the needs of the Pentagon, where we worry incessantly that our country remains strong and strategically capable to deflect all challenges.  Industrial policy fell out of favor during the Reagan Years (during which the Washington Consensus [economists who advocated the promotion of free trade and the dissolution of state enterprises], Iand it ceased being  a cornerstone of our budgeting processes.

But, President Biden recognized the challenges that were rampant as the 2020 calendar rolled in. From COVID-19, to supply chain malfunctions, to climate change, and the definite roar of China, things had to change.  Which is why President Biden definitely wants to promote advanced manufacturing and climate change so we are seeing the beginnings of industrial policy thinking at the higher levels of our government.

Others (which date back to Reagan) believe that this is a distortion and interruption of or Free Market system, whereby firms may be rewarded for their lobbying skills (hmm- that seems to be the way things have been since the 1980s anyway) and not for the quality and depths of their product and service offerings. All of which were designed to make and keep the USA financially stable and growing.

But, as a general rule, the US avoids policies- unless it is times of war or other external threat. (Think of FDR and our attempts to escape the Depression. Which was followed by the Cold War and Space Race.)

You might note that Biden’s Infrastructure Bill for climate change harkens back to FDR’s new deal, for example. Or “Build Back Better” to promote US competitiveness and the middle class and requiring the federal government to purchase goods and services produced here in the US (by American firms).

But, even some of the GOP members have recognized the need for a cogent industrial policy.  For example, Marco Rubio (R-Sen, FL) that this is useful to deter China from controlling the world chip markets, promoting certain vital industrial enterprises, etc.

As such, we are now implementing the new Chips and Science Act, an industrial policy aiming to restore US competitiveness to the semiconductor industry. The administration considers this akin to our “moonshot” concept that President Kennedy initialized in the 1960s.

The catalyst for the “moonshot” was the Soviet Union.  This time, it’s China. And, it’s China as the antagonist that is binding both the Democrats and the Republicans together, because the strategic threat to the US Future is clear.  And, the subsidies in the Act are arranged to counter the impulse of these firms to build plants outside the US, where costs may be somewhat lower. Moreover, we are spreading the incentives all over the USA, so that all of America (and the middle and lower class) can benefit from this policy.

Who knows?  Maybe we will adopt policies to promote other vital components of our economy.  And, tomorrow, we’ll see how this policy is being broadened to cover and entangle three critical components of our economy.