The New Era of Industrial Policy Is Here

Industrial policies are not new. Countries have long practiced them: Japan used gyōsei shidō, or “administrative guidance,” coupled with loans, grants, subsidies, and other financial tools, after the Second World War to foster the growth of its manufacturing sector. In 1986 China launched its 863 program to modernize technology. South Korea, Singapore, and Taiwan all used programs to stimulate modernization and development. In the United States the Apollo space program and the work of the Defense Advanced Research Projects Agency (DARPA) are examples of mission-oriented industrial policies that successfully stimulated innovation. Yet over the last few decades, critics have questioned whether such interventions were the most efficient way to allocate public resources. Failures to achieve objectives, perceived anticompetitive effects, concerns about crowding out private investments, and the view that programs often ended up serving special interests all fueled the skepticism. As did high-profile failures such as the U.S. investment in solar panel maker Solyndra, the Synthetic Fuels Corporation (established in 1980 and closed six years later), and the commercial failure of the British and French Concorde supersonic passenger jetliner. Consequently, the pendulum swung the other way; many governments intervened less.