How Industrial Policy Gets Done: Frontline Lessons from Three Federal Officials
October 8, 2024
By Todd N. Tucker, Kate Gordon, Satyam Khanna, and Ronnie Chatterji
Introduction
The Biden administration has advanced the most active industrial policy for the civilian economy since Franklin D. Roosevelt’s presidency.1 This includes grant and loan subsidies for industries the US strategically wants to promote, such as clean energy and semiconductors. In particular, new programs were launched at three different agencies: a $6 billion Office of Clean Energy Demonstrations (OCED) and an Office of Manufacturing & Energy Supply Chains (MESC) at the Department of Energy (DOE); a $27 billion Greenhouse Gas Reduction Fund (GGRF) at the Environmental Protection Agency (EPA); and a $39 billion CHIPS Program Office at the Department of Commerce (DOC). DOE benefited from funds under the 2022 Inflation Reduction Act (IRA) and the 2021 Infrastructure Investment and Jobs Act (IIJA), the EPA’s efforts were funded under the IRA, and DOC’s work was financed in the 2022 CHIPS and Science Act.
To get a better understanding of how these new programs work, what problems they’re trying to solve, and what hurdles they’ve encountered, we caught up with three of the architects of Biden’s new industrial strategy: Kate Gordon, who served as senior advisor to Energy Secretary Jennifer Granholm from 2021 to 2023; Satyam Khanna, who served as senior advisor for the GGRF at the EPA from 2023 to 2024; and Aaron “Ronnie” Chatterji, the “CHIPS czar” at the National Economic Council and Department of Commerce from 2021 to 2023. What follows is our conversation from the summer of 2024. It provides valuable insights into what it means in practice to build state capacity—i.e., to ensure government is able to achieve the objectives the people set for it, in a manner that is democratic, equitable, and informed.
“Climate change is the big market failure. Unlike local pollutants, when you emit a ton of carbon, you're emitting it into the global atmosphere, and the impacts are all over the place.”
— Kate Gordon
Top Takeaways
#1
The turn toward industrial policy resulted from trial and error by organizers, policymakers, and academics in the years following the 1990s and 2000s wave of globalization.
#2
Federal agencies are plugging gaps in private markets, because the latter can’t or won’t coordinate economy-wide transitions in energy systems, invest in needy communities at the necessary scale and speed, or account for national security concerns.
#3
A major factor slowing down implementation of the new industrial policy programs was the need to translate the general language of statutes passed by Congress into precise definitions and strategies that agencies could defend internally and externally.
#4
Workforce development and economic development programs—far from distracting from core industrial policy goals—are core to helping investments overcome supply-side constraints.
#5
The programs have been successful, leading to major US investments by all five of the top global chips companies, creation of new state green banks, and the launch of major battery manufacturing hubs.
#6
There are reasons to believe that these investments will be resilient to changes in the makeup of government.
#7
To continue to make progress, investments in state capacity must be made on an ongoing basis.
Footnotes and Suggested Citation
Read the footnotes
1The Roosevelt administration’s most paradigm-shifting effort in this vein was the National Industrial Recovery Act’s National Recovery Administration, which attempted to build industry-specific codes to promote fair competition and labor rights. These codes included production targets. NIRA—part of what scholars call “the First New Deal”—was overturned by a conservative Supreme Court in the mid 1930s. Roosevelt’s Second New Deal would shift to more “arms-length” regulation of business, an approach Biden generally followed by running most of his initiatives through the tax code—a fiscal strategy that courts have generally allowed. See Tugwell, Rexford G. The Democratic Roosevelt: A Biography of Franklin D. Roosevelt. Doubleday, 1957.
Suggested Citation
Tucker, Todd, Kate Gordon, Satyam Khanna, and Ronnie Chatterji. 2024. “How Industrial Policy Gets Done: Frontline Lessons from Three Federal Officials.” Roosevelt Institute, October 8, 2024.
Related Resources
Authors
Kate Gordon
Guest AuthorKate Gordon is the CEO of California Forward, a statewide nonprofit focusing on enabling the shift to a more sustainable, resilient, and inclusive economy across every region of the state.
Satyam Khanna
Guest AuthorSatyam Khanna is the president of Khanna Economic Strategies, a sustainable finance advisory firm. He most recently served in the Biden administration as senior advisor in the Office of the EPA Administrator, where he was a lead architect of the Greenhouse Gas Reduction Fund.
Aaron “Ronnie” Chatterji
Guest AuthorAaron “Ronnie” Chatterji, PhD, is the Mark Burgess & Lisa Benson-Burgess Distinguished Professor of Business and Public Policy at Duke University. Chatterji has published over 30 peer-reviewed articles and two books, Can Business Save the Earth? (Stanford University Press) and The Role of Innovation and Entrepreneurship in Economic Growth (University of Chicago Press).