Industrial policy is basically an attempt to intervene in the economy through government investment to create growth. Classically looked down upon by neoliberals, it was a part of the New Deal and part of the economic policies of the East Asian miracle economies. That said, it also has a history of failure and waste, one of the biggest problem is kill mechanisms, once you’ve got a bad subsidy or the like going it has a vehement constituency looking to protect their rents.
Anyhow Dani Rodrik has looked at a WSJ article on Obama’s economic policy and thinks it may be back. Specifically Obama is putting $15 [billion[ a year towards energy tech, funding an "infrastructure reinvestment bank to promote high speed rail, doubling research spending, supporting high speed networks, etc.
Rodrik is cautiously optimistic about what he sees:
Although it is difficult to be sure, Obama’s comments in the interview suggest that he has thought these issues through more carefully than we are accustomed to with politicians and presidential aspirants. I sense the outlines of a coherent and economically sensible strategy here.
My personal take is that if there was any reliable connection between industrial policy and growth, someone would likely have found it by now. So it’s probably a gamble in terms of growth. However, most of these initiatives sound worthwhile in their own right. Also, absent these sort of things, we might have a repeat of the 90s where the economy grew but the median wage stagnated as inequality continued to rise.
Also, I’ve got the perhaps naive hope that this might take some of the pressure off the one part of the U.S. government that does have an official industrial policy, namely the Department of Defense. I’d rather have members of Congress trying to funnel clean energy investment dollars to their district rather than building some Cold War weapon system not relevant to current or likely U.S. conflicts. Some level of pork is inevitable and perhaps even advantageous, but it needs to be channeled in productive ways.
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