Here's the 100-year-old policy conservatives are trying to revive — and why it won't work
More than 100 years ago, the United States embraced what economists call “industrial policy” — which was also embraced in Japan during the 1980s. Washington Post columnist Megan McArdle, in a July 23 piece, notes that industrial policy has been seeing a rebirth under the Trump Administration. And she explains why she believes it is unlikely to work in the U.S. of the 21st Century.
McArdle notes that industrial policy “was last hot in the 1980s, as an ascendant Japan seemed about to displace us at the apex of the global economy” — adding that “center-left policy wonks spent a decade urging us to copy them.” But Japan, McArdle stresses, ended up being “mired in its 20-year ‘lost decade,’ and the United States was entering an unplanned economic boom courtesy of Silicon Valley. Industrial policy abruptly vanished from the national conversation. Then came President Trump, whose campaign contained a lot of folk industrial policy.”
The problem with Trump’s version of industrial policy, according to McArdle, is that “even brilliant planners can’t actually predict the future, and if they guess wrong, they can squander a great deal of taxpayer money while actually making the economy less competitive.”
McArdle acknowledges that in some countries, industrial policy has worked. And the U.S., she writes, “practically invented it more than 100 years ago.” But in 2019, she emphasizes, the U.S. is ill-equipped to handle it.
The U.S., according to McArdle, is “short some of the prerequisites to successful industrial policy, such as a highly trusted and effective civil service. If Republicans really want to pursue industrial policy, they’re going to have to agitate for bigger, better-paid government bureaucracies.”
McArdle wraps up her piece by stressing that while the U.S. embraced industrial policy more than 100 years, that ship has long since sailed for the United States. Industrial policy, she says, is “a one-time trick that no country ever gets to repeat, no matter how carefully it plans.”