Industrial policy means viewing the economy not as one single thing, which is usual way to view it when people talk about inflation being X% or economic growth being Y%, but as an intricate network of specific industries.
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Key insight #1: Some industries are more valuable than others. They make the highest profits, pay the best wages, and drive the whole economy forward
The key is that nations are locked in a ruthless rivalry to possess the most valuable industries. These are not only those important for national security, like aircraft building, but those that generate the highest profits and the largest quantity of good jobs.
Americans are not going to be well-paid if most people are stuck flipping burgers at McDonalds. But if they are building electric cars or other sophisticated manufactured goods, they have a shot. But that means we need such industries to be thriving in the US right now.
​Most are not.
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Foreign countries like China, Japan, Germany, and others, use every trick in the book to grab and hold onto the best industries. They lock America out of their markets with trade barriers, often hidden, to keep the sales for themselves. They subsidize their exports, overtly and covertly, to build volume and destroy American competitors.
Our foreign rivals rig their banking systems to build up industry, not financial speculators. (Why don't we? See Chapter 18.) They fund not just pure science, but the development of new technologies right down to the factory floor. (Sometimes, they steal technology from us.) They don't try to send all their people to college, but teach them the skills for sophisticated, modern manufacturing industries.
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By such tactics, they have been outcompeting America in industry after industry.
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​Most American economists will tell you that this is impossible. They'll tell you no nations are "winners" or "losers" in international trade. They'll tell you it doesn't matter if nothing seems to get made in America anymore. They'll tell you science automatically turns into technology. They'll tell you that the rest of the world will lend us money forever. They'll tell you our enemies will sell us military hardware when war breaks out and we've lost our industrial base.
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​Above all, they'll tell you that the free market is always right, and that even if it isn't, no government can do anything about it, especially ours. It doesn't know how, and it can't learn. Washington is too corrupt, and doing nothing about these problems is the American Way. It's laissez faire. It's freedom.
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This book is about why they're wrong.
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It's a book about why free trade is a mistake and why America needs tariffs, a hardball attitude in ​
What if America has been going about economics all wrong for the past 50 years? What if this isn't a matter of Democrats being wrong or Republicans being wrong, but of neither side understanding basic economic realities that the rest of the world lives by? And that we Americans used to understand back when our economy was the fastest-growing in the world?
That's what industrial policy is about.
Industrial policy is based on viewing the economy not as one single thing, which is the usual way to view it when people talk about inflation being X% or economic growth being Y%, but as an intricate network of specific industries, some of which are more important than others.
The key here is that nations are locked in a ruthless rivalry to possess the most valuable industries. These are not only those important for national security, like aircraft building, but those that generate the highest profits and the most good jobs.
Americans cannot be well-paid if most people are flipping burgers at McDonalds. But if they are building electric cars or other sophisticated manufactured goods, they can be. But that means we need such industries to be thriving in the US right now.
​Most are not. Manufacturing productivity is falling and the percentage of goods bought in America that are made here has reached an all-time low.
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In significant part, this is because foreign nations like China, Japan, Germany, and others use a wide range of policies to grab and hold onto the best industries. For example, they lock America out of their markets with trade barriers, often hidden, to keep the sales for themselves. They subsidize their exports, overtly and covertly, to build volume and destroy American competitors. They fund not just pure science, but the development of new technologies right down to the factory floor. (Sometimes, they steal technology from us!) They rig their banking systems to build up industry, not financial speculators. (Why don't we? See Chapter 18.) They don't try to send all their people to college, but teach them the skills for sophisticated, modern manufacturing industries.
​
By such tactics, they have been outcompeting America in industry after industry.
​
​Most American economists will tell you that such policies can never work. They'll tell you no nations are "winners" or "losers" in international trade. They'll tell you it doesn't matter if nothing seems to get made in America anymore. They'll tell you science automatically turns into technology. They'll tell you that the rest of the world will lend us money forever. They'll tell you our enemies will sell us military hardware when war breaks out and we've lost our industrial base.
​
​Above all, they'll tell you that the free market is always right, and that even if it isn't, no government can do anything about it, especially ours. It doesn't know how, and it can't learn. Washington is too corrupt, and doing nothing about these problems is the American Way. It's laissez faire. It's freedom.
This book is about why they're wrong.
It's a book about why free trade is a mistake and why America needs tariffs, a hardball attitude in international trade negotiations, and to leave the WTO.
It's a book about how Wall Street's love of unconstrained international capital flows has driven the dollar to heights that make American industry uncompetitive. And about how to fix this.
It's about how America's greatest corporations, chasing short-term profits, covered up what foreign nations were doing to us and prevented our government from playing the international economic game for the benefit of ordinary Americans. (And eventually ended up getting burned themselves.)
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It's about how America's greatest technological triumphs, from jet planes to the internet, emerged from partnerships between government and the private sector to drive innovative technologies forward. Not from the private sector on its own.
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And it's a book about how America used to understand all these things. Right back to the Founding Fathers when the Industrial Revolution was just getting started. Hamilton, Lincoln, Teddy Roosevelt: They all knew. The U.S. only lost the plot due to the Cold War. (This book discusses why.)
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This book explains these realities with histories, case-studies, and narratives -- of nations, industries, technologies, and key people. The industries include steel, ships, cars, aircraft, computers, oil, rockets, robots, and vaccines, to name just a few. Did you know Herbert Hoover was an industrial policy hero? (See Chapter 15.)
This is a big book, because there are so many angles for getting at the underlying realities. It discusses everything from the economics of the Italian Renaissance to the quantum computers of the Defense Advanced Research Projects Agency. It gives new interpretations to many familiar events in American history, right down to the present day.
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Industrial policy is neither liberal nor conservative, and this book is forthrightly bipartisan. Both Trump (tariffs) and Biden (the CHIPS Act) took some small steps in the direction of industrial policy. These moves were a success, but America needs to go much further in this direction and probably will. ​Therefore, this book is the key to understanding how much of the economic agenda of the next 30 years will unfold, what will work and what won't, and why.
THE AUTHORS
Marc Fasteau
is a vice-chair of the Coalition for a Prosperous America. Before founding an insurance company acquired by Progressive, he was a partner at Dillon Read & Co., a New York investment bank, and previously a congressional economic staffer. He is a graduate of Harvard College and Harvard Law School, where he was on the Law Review. He lives in New York City.
Ian Fletcher
is on CPA’s Advisory Board. He is the author of Free Trade Doesn’t Work and coauthor of The Conservative Case against Free Trade. He has been senior economist at the Coalition, a research fellow at the US Business and Industry Council, an economist in private practice, and an IT consultant. He was educated at Columbia University and the University of Chicago. He lives in San Francisco.
