Note: the views herein are solely those of the author and not of PolicySphere.
Earlier this week, Florida Senator Marco Rubio wrote an op-ed for the Washington Post provocatively titled “I believe in industrial policy — done right.” It is always worth paying attention to Senator Rubio as he is one of the most innovative policy thinkers in the U.S. Senate.
In 2024, the debate about what–if anything–should replace the post-Reagan consensus on economic policy on the right-of-center is an important one, and the Senator’s contribution is a helpful one.
MORE: Read our exclusive interview with Senator Rubio here.
After pointing out that industrial policy has benefited the United States in the past, Sen. Rubio spends a lot of time on judicious attacks on the Biden Administration’s version of industrial policy, which he believes to be underwhelming. However, he adds, Republicans should not give in to the “temptation […] to respond by reverting to the old consensus — to resume a pre-2017 economic mind-set because the Biden administration has botched its economic efforts.”
The piece concludes with sketches of constructive policy proposals: “focusing on the domestic industrial base and the working class, not fantasies such as the ‘green transition.’ […] supporting critical industries such as mining, oil and gas, and metallurgy […] tying generous subsidies to performance requirements such as export quotas [and] getting serious about deregulation and permitting reform to create a competitive business environment.”
What was disappointing to this writer was the response from contradictors, which was mostly a wave of sarcasm and snickering. Free-marketers on the right are convinced that industrial policy is always and everywhere a failure–fine. If the case is so airtight, then, they should actually make it.
This writer’s perspective on industrial policy is shaped by his French background. France is, in many ways, ground zero for industrial policy. And the history of France shows that industrial policy can be successful, as endeavors such as Airbus (noteworthy now that Boeing seems to be collapsing due to overfinancialization), the TGV, and nuclear reactors show. At the same time, French industrial policy has led to a fair share of disastrous white elephants to vindicate free marketers’ criticisms.
Therefore, the answer to “industrial policy” cannot be a simple yes or no. There needs to be more specifics, more details, more thought. And the observer who wishes to be neutral and rational will have sympathy for both sides at different times and places.
In this spirit, let us offer some early points as a starting discussion, to challenge both sides:
Industrial Policy You Shall Always Have With You. If nothing else, in any plausible future, the United States of America will have a significant defense-industrial complex to provide for its national security needs, and government intervention and funding into areas considered strategic to national security will be politically viable. Furthermore, in the era of so-called “fourth generation warfare”, what counts as strategic goes well beyond tanks and missiles: 5G equipment, social media apps & algorithms, AI, computer chips, space rockets and satellites… Maybe not all of these are strategic but you can certainly make an honest case that they are. Furthermore, in a mass democracy, the majority of the voting public will never be composed of doctrinaire libertarians. The public will always have preferences for certain industries and policymakers will be responsive to the public’s preferences. The point is this: every government will always have something like an “industrial policy.” The question should not be whether having an industrial policy is a good idea or not, but what that policy should be.
It Is Obviously Not The Case That Industrial Policy Always Fails. It is worth reiterating the point, to the free market snickerers, who seem to be so convinced that it is self-evident, to the point of mirth, that industrial policy must fail. Apart from France, we can point to other examples of successful industrial policy, such as, er, all of East Asia, as well as the internet and Silicon Valley. These are all pretty impressive accomplishments. It would help the debate if free marketers, instead of dismissing all industrial policy, tried to come up with an account of why these exceptions (if they are exceptions) occur, and how that should guide public policy.
Getting Industrial Policy Right Is Tricky. This is the same point as above, from the other side. Senator Rubio is surely right that we should have industrial policy “done right.” But if even the French, who in some sense invented industrial policy in the modern sense and have arguably had the most success with him, only get it right some of the time, the “done right” is a big deal. This is especially true in the current United States political environment, which has been described as a “kludgeocracy” where, for various arcane reasons, government objectives are more often achieved through mandates and tax incentives than direct provision; also an environment where it is exceedingly difficult to attract talented people into government service. Advocates for industrial policy need an account for why so much industrial policy has failed and why it will be different this time.
If everyone could stop with the posturing and snickering and start to engage productively on these questions, the policy debate would move forward much more quickly.
Pascal-Emmanuel Gobry is the Publisher of PolicySphere.
