Reviving Industrial Policy and Economy-Wide Planning in the Time of Global Crises

The US faces numerous challenges—from climate change to trade competition—that make a more robust industrial policy and plan necessary for the continued success of our country. As Roosevelt Institute Fellow Todd Tucker argues in a new report, Industrial Policy and Planning: What It Is and How to Do It Better, only government can provide the long-term, strategic structural fixes to address these growing challenges. Defining industrial policy as any government policy that encourages resources to shift from one industry or sector into another, the paper offers an introduction to the concepts of industrial policy and planning, what it is, where it has worked, and how the US can do it better. [1]

Notably, the report argues that in order for industrial policy to be successful, policymakers will need to move beyond previous neoliberal, ad-hoc laws (e.g., President Trump’s ineffective Chinese tariffs) and reorient how the government allocates labor and capital between industries—encouraging some activities and discouraging others. This, as Tucker suggests, can be done using the following steps:

• Defining industrial policy and planning as a horizontal lever of state power that influences the distribution of income between industries;
• Using successful non-US industrial policy cases like South Korea to show why these policies can and do work;
• Examining how racism, the courts, and neoliberalism got in the way of a comprehensive industrial plan in the US;
• Outlining a series of design decisions that policymakers should consider when implementing a more thoughtful, democratic, and inclusive industrial policy—using the Green New Deal as an example; and
  Addressing key criticisms of industrial policy and planning and elevating how an alternative approach might address them.

“Industrial policy is back in the national conversation due, in large part, to legislation put forth by senators like Elizabeth Warren (D-MA) and Marco Rubio (R-FL) who understand that America has no choice but to develop policies that compete with the rest of the world. Nonetheless, there is little agreement on how to define industrial policy and how it might be implemented effectively, sustainably, and inclusively in the United States,” said Tucker. “The issues canvassed in the report are just the beginning of the hard work to come. Tough choices will need to be made about the purpose, specific tools, and evaluation criteria that will be employed to ensure that a new plan works in practice—and not just in theory.”

To further support the need for strong industrial policy, today Tucker released the working paper, The Green New Deal: A Ten-Year Window to Reshape International Economic Law, which proposes that a parallel global Green New Deal initiative is necessary to avoid a conflict between socially sustainable decarbonization of the planet and existing global trading rules.

[1] Tucker defines industrial policy as any government policy that encourages resources to shift from one industry or sector into another, by changing input costs, output prices, or other regulatory treatment. Additional detail can be found on page 4 of the report.

About the Roosevelt Institute

The Roosevelt Institute, a New York-based think tank, promotes bold policy reforms that would redefine the American economy and our democracy. With a focus on curbing corporate power and reclaiming public power, Roosevelt is helping people understand that the economy is shaped by choices—via institutions and the rules that structure markets—while also exploring the economics of race and gender and the changing 21st-century economy. Roosevelt is armed with a transformative vision for the future, working to move the country toward a new economic and political system: one built by many for the good of all.

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