"Truly Impressive"
- Willy Shih,
Harvard Business School
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.
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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This is the first comprehensive book on industrial policy in English in 35 years.
Explicit, proactive industrial policy is back on the agenda in the US after decades when the concept was taboo and the reality was swept under the rug as "national security," "science," "public health" and other worthy but noneconomic objectives.
But what is industrial policy, anyway? What can it accomplish? What are the underlying economic mechanisms that make it possible for state intervention to outperform markets? Is this even true, given its many obvious failures and the many arguments in favor of the superiority of markets?
These are the questions this book was written to answer, at a high scholarly standard and based on a wide breadth of international and historical data.
It offers a unified underlying theory of the economics of industrial policy, one which lays out why markets, although crucial, will never be enough for national economic success.
It takes an unabashedly positive view of the potential of industrial policy, but is rigorously honest about the dangers of such measures, because only by understanding these failures can industrial policy hope to succeed.
It offers a new synthesis of economic history, one in which nations' struggles to achieve the best industrial policies have been a key determinant of their rise and fall for centuries.
Above all, contrary to mainstream academic economics, it matters
what industries a nation has. "Computer chips = potato chips" thinking ignores fundamental differences.
Ironically, the U.S. used to understand all the policies it has since lost touch with. For example, pre-WWII America was protectionist, and the U.S. only abandoned this policy, for political rather than economic reasons, during the Cold War.
The other nations examined in detail in this book are Britain, France, Germany, Korea, China, Japan, India, and Argentina.
This book contains many industry case studies. It discusses steel, ships, cars, aircraft, computers, oil, rockets, robots, and vaccines, among others.
Industrial policy is neither liberal nor conservative, and this book is scrupulously bipartisan, which is why it has won endorsements from leading elected officials of both parties.
It is written with American interests in mind, but its lessons are relevant to all nations.
Both Trump (with tariffs) and Biden (with the CHIPS Act) took steps in the direction of proactive industrial policy, and there is almost certainly more to come.
This book will be an excellent guide to understanding how much of the economic agenda of the next 30 years will unfold, what will work, 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. His personal website is here.
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. His personal website is here.
