A Tale of Two Market Failures: Why Childcare and Green Technology Require Different Public Approaches

May 30, 2024

After a decade in which the neoliberal consensus began to crumble, we’ve seen more policy experimentation in the last four years than we have in half a century. New and previously abandoned policy initiatives—from the use of the Defense Production Act to turbocharge the production of the COVID-19 vaccine to the creation of a national green bank through the Greenhouse Gas Reduction Fund—have used public power to address market failures in novel ways. So far, this experimentation has largely been confined to a policy agenda focused on the pandemic, the climate crisis, and China’s outsized role in certain supply chains. But it should inspire us to think more broadly about the policy tools available to government if we want to solve the wide range of problems markets alone cannot. 

We must root the development of this progressive, post-neoliberal policy menu in an understanding that the kind of challenges government might want to solve do not lend themselves to a one-size-fits-all approach. Solving the market failures involved in the childcare crisis, for example, requires different policy tools than getting a domestic solar industry or electric vehicle industry off the ground. 

In both of these cases, the public sector has to step in because these are industries Americans need to thrive and currently do not have reliable and stable access to. That’s a pretty good litmus test for when we might want more government involvement, but it is also just the beginning. 

Once we have established that government has a role to play, policymakers and advocates need to ask why Americans lack reliable and stable access to the resources in question. In the case of childcare, for example, the people who need it simply cannot afford to finance an adequate system on their own. Young parents are often at a low point in their earnings trajectory and are limited in what they can pay for the time, space, and labor-intensive services young children need. 

Ensuring stable and reliable access to some new green technologies—from solar panels to electric vehicles—presents strikingly different challenges, including the need to reduce costs through further technological development and boost demand over fossil fuel–based technologies, while increasing domestic manufacturing so that supply chains are not unduly controlled by China. 

Notably, the challenges of ensuring access to the childcare industry and these green technologies play out over very different time frames as well. There is no reason to believe that an initial influx of capital will lead to a more profitable childcare industry. Parents will remain at the low-earning point in their careers, and new technologies will not shift the fundamentally labor-intensive nature of the job. Only sustained investment will ensure stable access. Indeed, we have seen in recent years examples of what happens when new funds into childcare systems are not sustained: Access disappears as providers close. 

If this is the case, we might ask, why shouldn’t we be looking at more direct public provision of childcare? If a stable industry will always require public funding, what are the advantages of channeling it through private providers instead of building a true public option? 

In contrast, there is reason to believe that as some green technologies improve and companies begin to produce cheaper EVs or solar panels, for example, they will become self-sustaining. The public may need to play a role in encouraging initial technological innovation and production through R&D funding and demand- and supply-side subsidies, but it’s possible to imagine a stable market that exists after the initial funding goes away. We don’t need to nationalize the EV industry, but we do need better public financing options—like green banks—for essential industries we are trying to foster. And we should consider how public stakes in private companies can give the public a say in the companies we invest in. 

These examples show two ends of the spectrum of public marketcrafting; they illustrate that as we expand our policy imaginations, we should be thinking about how to deploy the government creatively to solve specific problems. Progressive, post-neoliberal governance will require the public sector to step in where neoliberals insisted markets would take care of it. To do that well, policymakers must understand which tools make sense for which market failures.