In a recent talk at the Brookings Institution, National Security Advisor Jake Sullivan discussed the concept of a “modern American industrial strategy” as part of President Biden’s economic approach. This new industrial policy is touted by the Left as a fresh take on an old idea, but it still suffers from the same level of government inefficiency and vanity that plagues traditional industrial policies.
While government-private sector partnerships have been successful in the past, government direction of the economy is often less effective than market forces in driving innovation and efficient allocation of resources. The U.S. has seen both successes and failures in industrial policies, with examples such as NASA and SpaceX and Operation Warp Speed demonstrating effective government support in emergency situations, but also experiencing stagnation in industries due to government intervention.
While setting overall conditions for the economy is necessary, there is a limit to how much government can effectively guide economic development. Companies and investors take risks every day and subject themselves to market discipline, while governments often lack the knowledge to effectively plan for the future of technology and industry. President Biden’s spending on infrastructure and the environment may be hindered by growing environmental regulations and bureaucratic complications.
Overall, the concept of a new industrial policy may seem like a shiny new approach, but it still suffers from the same limitations as traditional industrial policies, and may hinder rather than help economic growth in the long run.