Three Reasons to Make the Industrial Policy Conversation Better
August 21, 2023
By Felicia Wong
A few short years ago, a mention of industrial policy would have generated, at best, a puzzled “what’s that?” in response. Today, the topic is everywhere, at the top of our national policy agenda and even fueling op-ed wars.
The new industrial policy literature is fascinating and important. We’re at the very beginning of the biggest economic transition in at least a generation, and there’s a lot to learn from academic articles and think tank white papers, from Substacks and tweets. Do municipal housing successes and failures provide good, bad, or irrelevant lessons as we seek to build domestic semiconductor fabs? What were the factors that led to increased unionization in certain sectors in the 1930s and 1940s, and can those factors be replicated today? Is private equity a follower, leader, or hindrance to public investment? All of these are good questions, and all deserve serious debate. It’s a brave new world, where we’re all learning how to build.
How we learn matters. Our discourse will be most useful if those of us engaged in it resist the intramural food fights, and make sure we don’t create a monocultural echo chamber. Fighting is so tempting. It drives clicks and subscriptions. But it also usually generates more heat than light. And it pushes all but the loudest voices out of the conversation.
This is a problem. The enormity of the task ahead—driving reorganization of the global economy so that it prioritizes the health of the climate, workers, and communities over short-term profits—requires the willingness to listen to one another, and a good dose of humility.
Here are three reasons it’s important that we keep the debate open rather than narrow, with respect to both content and participants.
The first is about race and power. In an age of building lots of big new things, one key question is how those building decisions affect communities that have long lacked power, especially Black and Indigenous communities, and other communities of color. The United States, as we know all too well, has a weak track record here. Even during the Roosevelt administration, at the height of the industrial mobilization that many now look to as a model for the green transition, the pro-union laws of the 1930s and the economic security laws of the 1940s systematically excluded Black and brown workers and veterans. FDR created the Federal Housing Authority, which, as a policy matter, refused to insure homes in Black neighborhoods.
While it is true that a “rising Rooseveltian tide” did lift all boats relative to past performance, and the New Deal did well by middle-class America in the aggregate, our nation’s racialized economic rules have lasting effects, as my colleagues and I have documented. The disproportionate legislative power of white Southern Democrats in the 1930s is certainly one reason that FDR agreed to a bad deal for Americans of color. But the fact that virtually all of his top advisors were white men is also relevant. To some of them, even committed progressives, the racially disparate impact of the New Deal might have seemed a price worth paying. After all, they weren’t the ones paying it.
We are at real risk of replicating this dynamic in today’s industrial policy moment. Robinson Meyer made this point well in a recent interview with Ezra Klein, noting we’d be having a significantly different conversation about keeping petroleum refineries and outfitting them with carbon capture if those facilities were in elite neighborhoods.
The Green New Deal of 2019 was certainly about decarbonization, but one of its primary mechanisms for change was collective power-building, and the deliberate and clear inclusion of ideas and voices from all affected communities. The Inflation Reduction Act, a tremendous achievement given the legislative constraints of the moment, is not the Green New Deal. Even given the directives of Justice40, the IRA has far weaker mechanisms for including the historically disempowered.
Some of the tax credit guidance coming out of the Treasury Department is designed to include a range of communities. But most of these tools are indirect bank shots. And in the bigger public conversation, we are starting to see a narrow band of mostly white experts—overwhelmingly liberals and progressives, mind you—in conversation with each other. Their discussions are so often about speed that they often minimize, or even ignore, other important interests.
This is normatively troubling. And, as my colleague Rhiana Gunn-Wright regularly points out, this risks creating serious knowledge gaps that can worsen project outcomes. Arguments that essentially boil down to “the environmental community is wrong and out of step when it uses old-school litigation to stop things it doesn’t like” paint with too broad a brush. This is a pervasive blind spot from most go-to commentators these days.
They miss the big picture, because the environmental community today is definitely not monolithic. Not everyone using litigation is a wealthy, home-owning NIMBY. But pretending they are could very well lead to a massive gap in our policy design. Our leading politicians must prioritize finding better ways for poor communities to have a say in their own lives and get legitimate compensation for any damages. Otherwise, history will repeat itself. And we’ll risk leaving local, case-by-case grand bargains on the table, leading to less building at requisite speeds.
My second point is about our overall approach to learning in this moment. One current of much of the recent industrial policy conversation is a yearning for a single narrative, with a short list of relevant variables, for this new era. I suspect, from the tone of the popular conversation, that we’re looking to replace the elegance of supply-side economics or neoliberalism with something similarly parsimonious. As a political scientist running a paradigm-focused think tank, I get it. Grand strategy—an overarching approach to making complex, and often tough, decisions about building—would make it far easier to design policy for the coming economic transition.
But I just don’t think a grand theory is really in the cards, near-term. Not because we aren’t smart enough or aren’t working hard enough—but because building is place-specific, sector-specific, and coalition-specific. We are entering an era of inductive reasoning. If we aim for too much elegance or parsimony in our approaches, we will miss a lot of important trees in our search for the forest. Ezra Klein—perhaps the most influential of all the writers seeking answers to the question of how to build tomorrow’s green economy—has shown us both sides of this conundrum. In a 2021 column, Klein cites a wide range of factors as potentially hindering a fast clean-energy build-out, from inadequate government capacity and investment to permitting processes that never seem to end. This vision of a new “supply-side liberalism” encourages a diverse range of thinkers and strategists to imagine their political projects under it. Klein has also long understood the importance of power, and power-building, in economic transformation. Power, he notes, is plural, and fractious.
More recently, Klein has focused on the need to build quickly and efficiently as a dominant value. He is understandably frustrated with the bad uses of environmental and other laws in deep blue states and cities. But I worry that many of our building problems can’t be solved narrowly. Achieving necessary speed might not run only, or even primarily, through NEPA reform. Lowering unit costs for producing semiconductors so that we can rival Asian manufacturers is only one variable for our overall success in building a reliable and sustainable chips industry.
There is no map for our new reality that is as simple and scalable as Milton Friedman’s shareholder primacy. I believe instead that our new era would benefit from an ethic of policy experimentalism, where technological solutions are developed by those with close-in knowledge of given industrial or sociopolitical challenges, and we figure out ways to diffuse lessons rapidly and organically. I am not arguing for long, sequential arms-length regulatory processes that can be at the mercy of activist judges. It will be important for all of us—and for government implementers of the new industrial policy—to shift when things aren’t working, which is easier said than done; and to establish long-term ways of learning from cases that can seem disparate.
Industrial strategy requires learning inductively, learning by doing. Sector-by-sector, town-by-town—the politics and the economics are different. What it will take to build fiber optics in Hickory, North Carolina, is very different from what it will take to build affordable housing in San Francisco, California. We have stories of success, like the record-fast build-out of public pre-K in New York (which is definitely a story of industrial policy and definitely a story of cutting through tremendous amounts of bureaucratic red tape). And we have cautionary tales, like using nonunion labor to build semiconductors in Phoenix, Arizona.
If you’re a reader of The American Prospect, these cases will sound familiar. The Prospect has made granular reporting on the new industrial policy a core part of its mission. They are telling stories of success and stories of struggle. In so doing, they and others, like Rana Foroohar, are providing important fodder for our new era of empiricism. The openness of today’s public investment (with adequate guardrails, as Roosevelt’s Lenore Palladino and Isabel Estevez have called for) will, I hope, be good for long-term project outcomes. And a learning focus, rather than a gotcha orientation, is one way to try to prevent news, good or bad, from devolving into the anxiety of a Twitter hot take or, worse, been-there, tried-that defeatism.
Third, let’s state it clearly: We understand that our new project will have trade-offs. The question is whose interests get priority, and how we’ll structure decision-making and programmatic input. The same people who lack historical and contemporary power should not and need not continue to get the short end of the stick. Any economic transformation is a fundamentally distributive and redistributive process. This makes industrial policy decisions inherently political. But rather than pretending this isn’t so, and wishing the kludgeocracy away, we should make the political institutions in which such decisions are made better, in accordance with our values. This means inclusion and longevity in addition to speed and efficiency. The Biden administration has taken a strong step in this direction, by reducing the time tax that falls disproportionately on poor Americans. Now we need more.
Progressives, including my Roosevelt colleagues, are putting forward serious proposals to expand permitting bureaucracies, making them more responsive. How much of the building problem this will solve is not yet clear to me. But it is better, prima facie, to start by improving public agencies rather than by watering down regulation and thereby handing decision-making power on key matters of public interest—like siting or pollution—to private firms after they have received generous public subsidies. We have run that playbook before, during the globalization era. It led to the exporting of good jobs that markets did not replace. It’s important to learn from that history, and acknowledge that a socially sustainable transition will require better government but also, in some cases, more government, not less. Indeed, some of the speediest development the US has ever done was with big government as the driver, not the passenger, as Roosevelt’s 2021-22 Distinctly American Industrial Policy series documented. The same is true internationally, as Estevez’s work has shown.
So yes, industrial strategy will entail trade-offs. Speed and scale, jobs and inclusion, national security and supply chains, and decentralization and federal planning will likely come into conflict, in certain places and times. But for progressives to negotiate down their level of ambition—precisely at the moment of unprecedented government leverage over market-shaping activities—seems at best premature and at worst counterproductive. Instead of trying to win the internet by calling on each other to walk ideological planks, let’s put more energy into amassing evidence, building power, and identifying blind spots in our analysis. After all, building bridges, rather than walking planks, is what supply-side liberalism is supposed to be all about.