1/10
I don't think industrial policy can only be "successful" if its policies are implemented precisely to maximize certain well-defined economic goals, or even (and this will be controversial) that it needs to be free of politics and corruption.
wsj.com
I don't think industrial policy can only be "successful" if its policies are implemented precisely to maximize certain well-defined economic goals, or even (and this will be controversial) that it needs to be free of politics and corruption.
wsj.com
2/10
That certainly wasn't the case with the history of industrial policy in the US. Anyone well-versed in the history knows that US industrial policy was always driven by political interests, horribly corrupt, and often badly thought out.
That certainly wasn't the case with the history of industrial policy in the US. Anyone well-versed in the history knows that US industrial policy was always driven by political interests, horribly corrupt, and often badly thought out.
3/10
And yet the combination of highly politicized trade protection and even more politicized industrial policy was on the whole immensely successful in helping propel the US economy to its astonishing achievements.
And yet the combination of highly politicized trade protection and even more politicized industrial policy was on the whole immensely successful in helping propel the US economy to its astonishing achievements.
4/10
Similarly, government support of manufacturing and investment was extremely important to China's also astonishing rise between 1978 and 2006, but only the most credulous will see this as an example of careful, politically neutral, uncorrupt and efficient planning.
Similarly, government support of manufacturing and investment was extremely important to China's also astonishing rise between 1978 and 2006, but only the most credulous will see this as an example of careful, politically neutral, uncorrupt and efficient planning.
5/10
In fact one thing that Chinese industrial policy has in common with American industrial policy is how messy, unfair, and even sloppy it was.
So why did it seem to succeed in both cases?
In fact one thing that Chinese industrial policy has in common with American industrial policy is how messy, unfair, and even sloppy it was.
So why did it seem to succeed in both cases?
6/10
I can only hypothesize, but I think the process may matter more than the specifics, or the ability to "pick winners". In any economy in which large transfers are systematically and broadly delivered to the manufacturing sector, manufacturing competitiveness will increase.
I can only hypothesize, but I think the process may matter more than the specifics, or the ability to "pick winners". In any economy in which large transfers are systematically and broadly delivered to the manufacturing sector, manufacturing competitiveness will increase.
7/10
At some point these inefficient transfers can become excessive, as happened in China roughly after 2006-07, but until then, they generate major increases in the country's manufacturing capacity and in the productivity of Chinese workers.
At some point these inefficient transfers can become excessive, as happened in China roughly after 2006-07, but until then, they generate major increases in the country's manufacturing capacity and in the productivity of Chinese workers.
8/10
Of course the US and China would have been better off if industrial policy had been more intelligent, less corrupt and less driven by local politics, but as long as the economic benefits exceeded the economic costs of these transfers, the economy overall came out ahead.
Of course the US and China would have been better off if industrial policy had been more intelligent, less corrupt and less driven by local politics, but as long as the economic benefits exceeded the economic costs of these transfers, the economy overall came out ahead.
9/10
I am not apologizing for clumsy, corrupt or incompetent policymakers, but I will argue that if these were the the qualities that prevented industrial policy from being "successful", there will not have been a single case of successful industrial policy in history.
I am not apologizing for clumsy, corrupt or incompetent policymakers, but I will argue that if these were the the qualities that prevented industrial policy from being "successful", there will not have been a single case of successful industrial policy in history.
10/10
What matters is the broad direction of fiscal support. If the US favors domestic manufacturers to nearly the extent that China does, then, like in China, the US share of global manufacturing will rise. We know this from our own history.
What matters is the broad direction of fiscal support. If the US favors domestic manufacturers to nearly the extent that China does, then, like in China, the US share of global manufacturing will rise. We know this from our own history.
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