Why Industrial Policy Fails as an Economic Solution

The quest for a robust industrial policy has long been a bipartisan ambition, yet it consistently fumbles as a viable economic strategy. Many rhetoric-laden promises, like those witnessed in past administrations, fail to address the fundamental flaws inherent within, leading to inevitable disappointments. But why exactly does industrial policy continuously underdeliver?

A Misguided Faith in Government Direction

The allure of a mission-oriented state, promising economic rejuvenation through targeted interventions, has captivated minds across the political spectrum. Both the left and the right often settle into the belief that smarter, more capable governance can steer industries to new heights — a faith critiqued heavily by economists such as Veronique de Rugy.

Mariana Mazzucato, an influential economist, speaks vehemently for a deft government hand in economic management. Nonetheless, whether through Trump’s tariffs or Biden’s subsidies, these interventions regularly not only fall short but also manifest as costly, economically draining endeavors. As stated in Lawrence Journal-World, they transform into more political IOUs than pathways to growth.

Economics Ignored: Efficiency Versus Protectionism

Unfortunately, industrial policy often confuses support with stifling protectionism. The classic approach of shielding domestic industries through tariffs hikes prices and culminates in weaker competitiveness. The dream of reviving 20th-century manufacturing jobs disregards today’s reality — modern factories thrive on automation and efficient machinery, not human labor.

Politics Over Economics

One cannot separate economic intention from political reality. The problem lies in the naïve hope for a politics-free technocracy — a fantasy disrupted by the persistent political messiness that infiltrates policy-making processes.

Every subsidy or tariff is politically motivated, discouraging the economic adjustments necessary for real growth. Without politically-induced protection, open and competitive research might flourish, reminiscent of successful initiatives like DARPA.

The Illusion of Progress

Countries have mirrored attempts to engineer economic growth, but visible strides often mask innovation stagnation. France’s Minitel, heralded as a precursor to the Internet, offers a once-celebrated yet cautionary tale. Industrial policy successes superficially impress but transpire into hurdles blocking technological evolution.

In conclusion, industrial policy’s repeated demise illustrates one harsh truth: the government’s attempts to master economic forces seem inept compared to the market’s unseen efficiencies. In a world driven by constant innovation and competition, shielding outdated practices offers little more than the illusion of success, deterring nations from genuine progress.