The Future of US Industrial Policy

We Americans don’t do industrial policy.  In reality, that’s something of a smokescreen.  Because the term industrial policy is considered taboo, we do innovation policy or technology policy instead.   Whether we like it or not, Obama’s support for cleantech sectors is industrial policy.  Ditto for George W. Bush’s promotion of homeland security technologies or Ronald Reagan’s support for the Sematech semiconductor manufacturing consortium.

As the economy moves (hopefully) toward recovery, industrial or innovation policies will be an important part of the needed policy mix in the US and overseas.   The latest issue (December 2010) of Local Economy, a British economic development journal, takes a look at the industrial policy debate in several economies.  My attached article, “Obama’s Innovation Policy:  Can the New Directions Hold,” looks at recent US experience with innovation and technology policies.   The basic argument is that Obama’s current policy directions mimic those of his predecessors.  Instead of embracing new innovation policies, he has opted to proceed with pilot projects and demonstration grants.  In the process, no real institutional base of support is constructed.   And, when political leadership changes and budget pressures arise (as they are presently doing), these pilot efforts are quickly cut back or eliminated.  In the process, US innovation policies continue to move forward via “two steps forward, one step back” process.   A more serious long-term commitment is needed.   In addition to this case study, the Local Economy special volume also includes articles examining industrial policy debates in the UK, Germany, and France.

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