Rana Foroohar is absolutely correct to insist that the cheerleading for industrial policy in the US is premature (Opinion, March 18). Her argument carries at least two implications. First, industrial policy requires goals for outputs, not goals for mobilising investment. The US has not articulated a clear set of medium-term goals for what it hopes to achieve beyond broad principles: reaching net zero carbon emissions a few decades hence and general growth (or even stability) in manufacturing employment.
Second, Foroohar underscores the siloed nature of critical agencies within government and highlights how the public sector is rife with corporate capture. The case of Boeing, one of the most storied champions of American industrial policy, illustrates the uncompetitive and dangerous outcomes of the state-business relationship.
Late industrialising East Asian countries (Japan, South Korea, Taiwan and, more recently, China) provide two key lessons that could be adapted in the US for anything worthy of being called “industrial policy”. First, there needs to be a key coordinating centre within US government to shape relationships with business and civil society on terms determined by the state. The sociologist Peter Evans has described such a relationship as “embedded autonomy”.
Second, government should be willing to discipline corporate actors by withdrawing fiscal incentives for targeted sectors or even by taking ownership stakes. The late political economist Alice Amsden called such tools “reciprocal control mechanisms”.
We need look no further than the unfolding failure of the US auto sector to compete with new Chinese companies on electric vehicle technology and price, to see the absurdity of describing recent policies like the Inflation Reduction Act as effective industrial policy.
Benjamin H Bradlow
Assistant Professor of Sociology and International Affairs, Princeton University
Princeton, NJ, US
This post was originally published on Financial Times
