The traditional success stories for industrial policy are catch-up stories: the American colonies learning to make what they'd once bought from Britain, Japan and the Asian Tigers going from poor to rich.
Can industrial policy make a real difference in countries that are already rich and have high labor costs?
Do we really have to give up on free trade though?
My hope has been that we better articulate the distinction between "strategically important" things like semiconductors and "random crap" like sneakers and fidget-spinners...
I have a son who is a bit of a Bernie-type socialist, and he gets caught up on the healthcare issue a lot to say markets don't work. My counter is always that *most things* aren't like that - free market capitalism is doing just fine for getting you Doritos and donuts and most "normal" things you purchase. I feel the same argument applies to free trade.
Also, the health care industry in this country is hardly a free market given how involved government is in health insurance (including private via the employer mandate), and how using insurance to pay for everything obscures prices which are essential to a functioning market.
Not to mention the sharp restrictions on how many doctors can be graduated each year imposed by the AMA. There's a reason we're constantly importing doctors from other countries, and it's not because Americans are dumb.
AMA is just a lobbying group and they've changed course and been lobbying for more doctors for a while (the battle has shifted to scope of practice since 1990s concerns of a doctor glut turned out to be very wrong). The 1997 Balanced Budget Act is where the residency funding cap was set and was just revised upward by 1000 slots by the 2021 Consolidated Appropriations Act. Most of the AMA lobbying with the 2021 act was over funding and the No Surprises portion.
It's an interesting topic for sure but the "AMA is restricting spots" argument I see all the time doesn't really lead to any solution because it's extremely out of date.
I was not aware they’d changed course, though from this post it sounds like it’s a relatively recent change, taking place around 2019 (not all that long ago, given we’d only now be graduating larger classes), and that scope of practice issue appears to undermine the course change and continues to result in the need to import foreign doctors.
You have to always see the AMA as a lobbying group that is fighting with other lobbying groups (especially advanced practice nursing ones). The self-inflicted doctor shortage of the '90s allowed midlevels to increase their clout (especially getting more independent practice opt-outs in the mid aughts) and expand into the vacuum. AMA dropped opposition long before 2019 (I'd say mid-late aughts) because the previous strategy backfired significantly as various studies predicting shortages came out. Classic case of the market substituting a different good, shifting the debate to whether it's inferior or not. The recession kind put a pause on the issue because overall demand went down (before the ACA kicked in) and practices instituted hiring freezes. Once the market normalized and the issue regained salience, the AMA openly lobbied for more physicians, including the bill that ended up getting folded into the 2021 legislation.
I'm an anesthesiologist (and have been researching pretty in depth for a presentation on our labor shortage). We're basically THE cautionary tale all the disciplines have been following. When states adopted CRNA opt-outs (https://www.asahq.org/advocacy-and-asapac/advocacy-topics/opt-outs) pretty much outlines the "oh shit" moment.
Also keep in mind that TOTAL residency slots are capped while most scope of practice battles are fought on the state level between specialty lobbies (that answer to different national organizations, not the AMA). The market is also funny because people strongly prefer to practice in urban areas so physicians and midlevels will fight to the death before taking a rural job.
Like I frequently say, it resembles the housing crisis in many ways.
If you want to predict the future, we'll probably see a bad ER shortage in about a decade. It's a high demand service but Covid and various other things gave emergency medicine two consecutive bad matches (med students chose other specialties).
I admit I've come close to protesting the "hearing test" that is part of the annual visit to the pediatrician. Kid hears fine, and I have no idea why it's almost $100 that you're charging the insurance company.
But I didn't want trouble with the doc so I let it slide.
Health care is a red herring, obviously we could have a Canadian type system that functioned fine but Bernie and Warren refuse to provide leadership to implement the program at the state level which is actually how Canada runs their program at the provincial level…they are demagogues that want power which is why they insist on a federal program. Utilities work fine and state universities work fine and even public school systems that are failing overall often have very good individual schools.
Here is the problem with too much socialism—at some point schemers like Bernie and AOC get too much power and the productive have no incentive to work hard. So you never want a society where schemers get too much power and then consolidate power by printing dollars to hand out to voters to vote for them and then productivity is undermined and the managerial class is gutted. So the key to America is the managerial class and I personally know managers that are millionaires that attended HBS and some that were mowing lawns when their peers were getting MBAs.
I'm definitely not rooting for too much socialism. But I'm not afraid of Canadian or Scandinavian levels... If that should even be called Socialism, honestly.
I don’t even really consider universal health care as socialism. Instead of other countries I would use Massachusetts as benchmark for America. It would be very easy for Massachusetts to implement a Medicare for All program as 95% of the population are insured and Massachusetts already runs a big health insurance program as every state does. If Massachusetts made M4A work then many other states would implement the program. And remember the context is all things being equal % below poverty level was the biggest factor for a population’s Covid death rate in America. Universal health care and education and reducing poverty go hand in hand.
Health care parallels the housing issue more than anything. Supply is way less than demand and any system (including a fully socialized one) has to deal with that.
Healthcare requires direct care by multiple advanced degree holders (doctors, nurses, mid-levels, etc.) in addition to pharmaceuticals and devices. And "discount rate" healthcare just isn't considered socially acceptable or ethical. The public demands a VERY expensive product!
Industries that aren't strategically important to the US, sure. I want free trade in food, toys, games, etc. so I can import all that stuff from Japan without paying tariffs, because I like Japanese stuff. I want free trade in steel so public transport agencies can use it to build subway tracks cheaply and efficiently.
Yglesias suggests we won't have fiscal room to keep spending like this on industrial policy without either raising taxes or triggering inflation. Is he right?
If he is right, and we want to watch our budget and support these industries at the same time, what are the cost-effective options?
Is there a more efficient way to encourage semiconductor plants and electric cars than writing checks on an inflation-constrained national budget?
never too late to roll back those darn GWB tax cuts, right? that seems like the obvious path to fixing some budget problems. (At least to me, someone who does not have to win any elections...)
Republicans even appear to reject the Bush tax cuts because they only lowered the top rate to 37% and not 35%. Both major Republican tax cuts were followed by recessions—2008/09 and 2020…I think 39.6% is pretty innocuous if it’s starting at 37%. I will add that the issues are set for 2024 and I think both parties will have similar platforms.
An interesting question is whether all government spending is all equally inflationary? Is it best thought of just one simple inflation constraint? The countries best known for industrial policy are also well known for low inflation (despite debt or deficits). However, a corollary of that is that it won't lead to much of a boost in wages for workers.
Yes, all deficits are "equally inflationary," equal to zero. Inflation is a matter of how the Fed sets its policy instruments, short term interest rates, QE, interest on reserves or anything else it might invent.
As the former Chief Economist at PJM Interconnection (largest wholesale power market inn the world and 2nd or 3rd largest dispatched power system globally), I have seen this coming for years...industrial policy based on climate and environment. The changeover from coal to gas and now moving to renewables is staggering in its rapidity since 2008. To date much of this policy has been decentralized with the states, but EPA policy has also been a big driver during the Obama years and now with Biden. This all works had in glove with the industrial policy we see at work now.
What I fear is the lack of faith in market mechanisms and incentives that could lead us down the path where we found ourselves in the 1970s and 1980s with an overbuilt, costly (see nuclear), system which drive the reforms of the 1990s with EPAct 1992 that led to wholesale power markets we see today. The emerging command and control mentality is going to lead us back to high cost power (contrary to the concrete promise) due to the desire to over build transmission assets and the reliability need to overbuild renewable resources which ties directly into national security issues.
The problem I see in my part of the world is environmentalists do not understand the physics and reliability needs of power system operation and control. The right wants to dictate old technologies that should go away and have forced through the Cory’s leas flexibility in environmental policy (see the press reports on forthcoming GHG rules for power generation as a replacement for the Obama era Clean Power Plan).
I happen to agree with the main ideas of the Biden industrial policy, reducing market power and dominance, and onshoring industrial production. But the implementation details matter. If we botch the power system aspects, which are a necessary condition for the rest of industrial policy, we will have nothing to show for it. We need a complete rethinking of how the power system works, how to manage intermittency, and minimize costs to avoid going back to the 70s and 80s problems. This is far from insurmountable but does require thoughtfulness and thinking outside the traditional boxes and silos most operate in today.
Business man me, believes one of the paradigms seen in infrastructure that is a problem, is the decoupling of long term CAPEX capacity investment and subsequent maintenence from, the profitable low fixed cost Service side.
Competition amongst various Service providers who utilize the same independent capex infrastructure decouples their pricing. Infrastructure is long term and gets dealt a short hand in a Quarter over Quarter run Service provider approach.
Personally, I would put it all back together as a regulated monopolies which worked extremely well.
Targeting "job creation" is our ugly mirror of China's provincial GDP targets and should be viewed with similar skepticism. The PRC builds empty apartment towers, we build factories then shut them down. We're great at cutting ribbons, less up on sustainability or market fit. We celebrate the shiny new headquarters while ignoring that all those jobs were just moved across a state line.
We should acknowledge the failure modes of the former consensus, empowering Beijing. That doesn't mean we should develop amnesia for the failures of protectionism.
Must we prioritize 6,000 steel jobs over 6,000,000 factory jobs that rely on steel as an input because that's just the way the wind is blowing? Should we go ahead and spend $926,000 per job saved in a blue collar industry for the sake of the headlines? Should we go ahead and rip safe infant formula out of mothers' hands and then pat ourselves on the back for our ability to adapt to the new status quo?
When states play the market it often goes poorly, often undermining the very goals the state is pursuing. We're watching this play out in slow motion and nobody is willing to admit it yet on either side of the aisle. Here's how:
A bias for trade was too permissive, but the reactive bias against trade has led to Biden-admin skepticism for President Tsai's signature push, a trade deal with the US. Taiwan has chips and we have beef, among a million other temperate zone agricultural products that are absurdly expensive on the island. The trade compatibility couldn't be better, and would directly blunt the PRC's use of economic coercion. By flatly rejecting these overtures and preferring a "jobs-focused" trade policy, it weakens the DPP relative to the KMT, creating an opening for the historical party of Beijing accomodationists. The KMT cannot campaign on unification post Hong Kong, but it can now campaign on offers of resumed trade with Beijing for various political concessions. DPP's focus on a trade deal it could not deliver most notably brought an exit strategy for TSMC, a path to weaken the silicon shield.
We're gutting the WTO, even though it's the only international body that had actually compelled changes in PRC behavior. Rare earths took a couple tries, but the second case was decided far faster than the first, and it seems to have sunk in.
The TPP was loaded with handouts for aggressive IP protection for our content industries, and there were other deeply questionable provisions. Nonetheless, Hanoi wants trade, and unlike the PRC, is willing to normalize excesses in its political and economic system to get it. The provisions in these regional agreements constrain authoritarian governments, creating a safe haven for businesses, spreading rule of law through a subtle backdoor. Walking away from the TPP was not a pro-jobs move, for most jobs, it was not pro-democracy or rule of law, it was certainly not a move to contain the PRC. It had massive flaws, but the solution was to fix it, and funnel the domestic trade surplus into trade assistance, not abandon it.
Where economists develop a consensus and the public disagrees, your problem is branding. The solution is not to simply give up on everything. Tie tenure to fewer articles and more billboards, give nobels for communication and marketing as often as theory.
In the meantime, I long for the days where our industrial policy does not target GDP or job growth, and someone picks up a book and reads about Goodhart's Law. One day we might actually target just *improved human welfare,* whether that means working fewer hours or more, whether that means enjoying things, or services, or even just leisure. It's easy to forget that the goal isn't to make some number go up on paper, it's to ensure people can live full, happy, and valuable lives.
I wait for that day. In the meantime, long live the Jones Act I guess. This is our curse for finding sanctuary on econ blogs, then never going outside to talk to anybody else.
Steel can be recycled and so once steel is here it can be recycled if we need it for national security purposes and so anything that results in less steel in America is actually making us weaker. And the same thing applies to batteries as once batteries are here they can be recycled. Obviously we do need a steel industry and battery industry but let’s import as much as we can while we can
Fiscal stuff ("industrial policy" or whatnot) does not "create jobs or destroy jobs; the Fed does that. What fiscal policy can do (but not necessarily _will_ do) is move resources from consumption to investment and from lower return investments to higher return investments.
Nice, but one small contradiction. Not all economists are free trade enthusiasts. Perhaps my background as an industrial worker is the cause. However, I clutch my Ph.D diploma and argue for what is describe as reality about trade. On it's surface, the doctrine of comparative advantage is unassailable. Given their climatic endowments, Hawaii should grow pineapple and Idaho potatoes. They will then benefit from trading their respective surpluses. The catch is that this result only holds where endowments and technology are fixed. With constantly evolving technology, comparative advantage becomes a Red Queen's race. The value of endowments and lowest costs of production will constantly change driven by competition. The United States lost comparative advantage in manufacturing in part because corporate leadership no longer understood their own firm's production technology. Applying only financial metrics, outsourcing towards lower labor costs appeared more profitable than internal investment.
I should have mentioned Brad Delong's favored phrase, "communities of engineering practice". CFOs evaluating make or buy decisions do not have ready access to these communities. Nor do the communities have a seat at the table when these decisions are made. That's the problem.
The success of this new industrial policy really depends on quickly Getty some large successes. Right now it’s all promises, ground broken, but nothing actually completed.
For instance Microns proposed Fabs in Boise and New York. Shortly after Micron made these announcements for billions dollars of spending, the market went soft. In Boise, Micron laid off people and froze hiring even though the project is moving a long slowly.
Until one of these large infrastructure projects is completed and we can see concrete results, will people really support the project. It’s the same for rail and energy. We need to see results, where real people have jobs and their is real production.
"The new industrial policy is intended to strengthen the U.S.’ hand against China, and an attempt to at least partially reverse the rise in inequality that happened in the 80s, 90s, and 00s."
Sounds a lot like an agenda to make America great again. :-)
To be fair, as someone who essentially likes that economic agenda, I'm not picky whether its championed by the Left or the Right. But it is pretty funny that the entire establishment of this country (Left and Right -- universities, labor unions, big business, government bureaucracies, media) would spend 4 years telling us that this agenda was going to destroy America and democracy, that the American press would abandon any semblance of objectivity, declare that "making America great" was code for fascism, and set itself the job of destroying the man who articulated those words... only to embrace the same agenda immediately once their preferred candidate won.
Of course not. You and I might disagree somewhat about which other ideas we would hang onto, but that's fine, and the fact that we can do so civilly is a sign of a healthy republic.
I know lots of Trump voters (incl me) and not one of them thinks he's a nice guy or a moral person or would trust him alone with their children -- especially daughters. They voted for specific policies and to end the living-Constitution hegemony of SCOTUS. While many are thrilled with the judges, most are disappointed on other policies. Despite the media's characterization of him as some kind of Mussolini-in-waiting, Trump was relatively ineffective: poor staff choices, opposition of the bureaucracy, his attention span of a gnat, and a complete lack of interest in the legislative process. There's a reason that probably 30% of the Trump voters I know now support DeSantis. We're tired of the drama; we want a policy wonk.
Your democracy point is more complicated, as contempt for the American people is quite bipartisan. Recent revelations (via Congress and Musk) about the intelligence agencies choosing sides -- whether it's FISA warrants obtained under false pretenses in the Russia collusion case, wiretapping the Trump campaign, or suppression of Hunter Biden laptop story in 2020 by ex intel execs at the bidding of the Biden campaign -- is a far greater threat to democracy than a few hundreds rioters who broke into the capitol building for a few hours. IMHO. The former worries me much more, and not just because it's coming from my political opponents. I would be against it it was J Edgar Hoover and Joseph McCarthy doing the same things (and they did.)
That Cheeto Mussolini was essentially a bumbling incompetent Mussolini-wannabe (and Mussolini himself wasn’t exactly great at the execution part; the Italian navy’s battleships in WWII, I believe, never actually managed to hit a single enemy ship from the many shots they fired) doesn’t excuse him from being an authoritarian Mussolini-wannabe.
COVID was tailor made for an authoritarian to seize control. Lots of governors essentially made themselves kings of their states in March and April of 2020. (Not entirely unreasonably given the information at the time.) Perhaps Trump was just too incompetent to do the same on a national level, but honestly, I didn't see him even try. No martial law. No national stay-at-home orders. No social credit system. The man everyone claimed was a dictator in waiting essentially deferred to the longstanding American system of federalism and local control. Meanwhile many liberal governors (Whitmore, Cuomo, and Newsome most of all) turned authoritarian shockingly quickly.
As i said, I don't like the man personally, and he deserves some of the criticism he gets. But there's also a lot of blind rage directed at Trump that seems to make left-leaning folks see things that sometimes aren't there -- Trump Derangement Syndrome is a real thing. (The opposite is blind adoration -- ala Eric Metaxis and the my pillow guy -- which I find equally disturbing.) And unfortunately, 2024 looks like it will be a repeat of 2020 -- just what everyone was looking forward to.
Trump is the rare president that admits mistakes…and he admits to a lot of them! Bottom line—Trump wasn’t interested in being president and he just inherited the best situation since JFK and coasted for 3 years.
The root cause origins, from my personal observations working at one of top free trade globalization companies GE follows:
Around the mid 1980s, 5 yrs in, Jack Welch determined he didn't like a lot of manufacturing. He got rid of everything that was- high union, low margin, not 1 or 2 market share. Jack, as evidenced by his RCA acquisition, sold off Research and Innovation giant Sarnoff labs; manufacturing of TVs, RCA defense, space and aero businesses.
Jack kept NBC. It was "Japan proof". Japan held the place of threat back then that China took over as to buying everything and making everything. Before Rupert, foreign ownership of TV media was not allowed.
Jack's love became the "low people intensity" of service. He came to despise internal Innovation and capex. He bought up R&D and service companies instead of investing.
This was the the launch of the mindless short sighted "free traders" and globalization. In reality, just my guess and feel here, free trade did not increase at all US-EU. Instead, it was all a cover for making China the low cost manufacturing site for the US.
The Conservatives thought exporting US manufacturing jobs to China, and post Soviet Russia, would carry over to exporting western style democracy. Oops! Flawed to the infinite.
Finally, we are starting to get our senses back. The strongest nations Build!
Jack Welch also cooked the books and essentially sunk GE. It tells you something that he was worshiped in his prime when those who did research knew he was a charlatan (my first accounting prof in b-school said GE was cooking their numbers well before all the relevations came out).
Excellent analysis, the part about not having an industrial policy being an industrial policy favouring financial institutions is insightful and probably accounts for a good portion of America's industrial decline. If USA can execute well and I would not bet against the USA - for all its shortcomings it is THE place where great things can happen - it will define economics for the next few decades.
Free market capitalism doesn't apply to healthcare for numerous reasons. Fundamentally, consumers are at the mercy of the providers due to exigent nature of a medical incident, so the supply/demand balance is out of whack. Insurance to the rescue! In other circumstances (when the provider creates the exigent circumstance for the consumer) we call them a mugger (your money or your life!). Most people are happy to pay up when the cost (your wallet) is small compared to the asset at risk (you). That is probably why there isn't a market for mugging insurance. Since a heart attack can literaly cost you your house if you don't have insurance, most people are happy to pay protection money to stave off the medical muggers.
Another reason healthcare won't be reformed anytime soon is that it is a jobs program, much like bank branches, cellphone stores, tax preparers, etc. It keeps people of normal intelligence gainfully employed turning the gears of artificially complicated processes.
You are confusing trade policy towards China with trade policy generally and creating factory jobs with having munition factories to win a war. At a minimum the US should have a policy of free trade for free people, but what Biden is doing is forcing European countries to decide if they also want to provide lavish subsidies to compete. If you want to argue for the death of free trade, explain why you believe that a subsidy war with Europe is a good idea because that is the policy that’s actually being implemented. And clean energy production at home does not make bombs. Reshoring chips is closer to the mark, but the fact remains that Ukraine is easily firing more howitzer shells than we can make let alone something with a computer chip in it. This is our problem in a potential war with China, not where solar panels are manufactured. You’re right that free trade did not democratize China, but that’s no reason to throw out free trade in general, particularly for the free world.
2. Much more needs to be written; discussed and turned into policy on this
Key points for me/
- …” to restore an economic mentality that champions building. And that is the core of our economic approach. To build.”
- “ a foreign policy for the middle class”
- the type of growth DOES matter
- This feels very electable / voteable - “ American consumers and workers that they’re going to get cheap electricity, a nice new electric car, a better job, safety from climate change, and safety from domination by the Chinese Communist Party”
In a political world where everything is about "the other side is trying to kill us", it's a nice read that appears as "Man vs Nature" not "Man vs Man" plot. Even China is treated as "Nature" with "China's disruptive entry" into the world causing all those jobs to be offshored - as if it wasn't a thousand cold decisions by factory owners to ship jobs - first to Mexican maquiladoras, mostly, then the China when they were even cheaper.
Income inequality is a "Man vs Man" plot, still being played out, as the author notes, with Republican hostility to any alleviation. The challenge of "industrial policy" is to induce the owners of all the capital to shift their investments with carrots; there's still no sticks to be used - so that it can look like a "Man vs Nature" story, with the only "bad guys" being the lack of investment or research, or anything neutral.
In the Everything Bagel industrial policy and its potential impact on the US economy. The policy seeks to encourage innovation and investment in key sectors of the economy, including advanced manufacturing, clean energy, and digital infrastructure. One way to ensure that the policy leads to an effective outcome is through federally funded technology competitions. Such competitions can drive innovation, promote collaboration among industry players, stimulate grassroots inventors and identify the best technology solutions for a given problem.
The proposal we made to the Biden Administration regarding the 2nd Generation Superconducting Maglev transport system is a good example of how federally funded technology competitions can contribute to the success of the new industrial policy. This high-speed transport system, invented by the late Drs. James Powell and Gordon Danby, could complement the existing rail and highway infrastructure by showing investors, the public, and the media how well this zero-emissions, very low energy per ton mile transport would be in comparison to similar systems being developed and by foreign government investors.
Technology competitions can serve as a catalyst for innovation, bringing together researchers, engineers, and entrepreneurs to develop new technologies and products. The competition can be designed to identify the best solution to a particular problem, such as reducing greenhouse gas emissions or improving energy efficiency. In the case of the 2nd Generation Superconducting Maglev transport system, a competition could be designed to identify the best technology for high-speed transportation in the US.
By funding technology competitions, the federal government can also promote collaboration among industry players, including startups, established firms, and research institutions. Participants in the competition could be encouraged to form partnerships and collaborations to develop more effective solutions. Such collaborations can lead to the creation of new products, services, and technologies, which can boost economic growth and create jobs and accelerate the development of critical infrastructure that will help the world meet the zero emissions goals.
Finally, technology competitions can help identify the best technology solutions for a given problem. In the case of the 2nd Generation Superconducting Maglev transport system, a competition could be designed to identify the best technology for high-speed transportation in the US. The competition could evaluate the performance, efficiency, and safety of various transport systems, and identify the best solution for the US market. This information could then be used to inform policy decisions and guide investment in the transportation sector.
In conclusion, federally funded technology competitions can contribute to the success of the new industrial policy by driving innovation, promoting collaboration among industry players, and identifying the best technology solutions for a given problem. The proposal to showcase the 2nd Generation Superconducting Maglev transport system is a good example of how such competitions can be used to identify the best technology solutions for key sectors of the economy. By investing in technology competitions, the federal government can help ensure that the new industrial policy leads to a more effective outcome, boosting economic growth and creating jobs.
OK. I'm totally on board, but I do have to question one of the assumptions. There's no question that WW2 changed everything in the U.S. economy. Out of it, we had a stronger middle class with much less inequality. What could possibly go wrong?
Let's start with debt. Government debt to GDP ratio hit over 120% by the end of the war a level not achieved again until the COVID crisis in 2020. Interestingly, we saw many signs of decreasing inequality starting to show up in the years since 2020. One might be tempted to draw a conclusion that running huge debts itself is part of the answer, but there's more there than that. The proceeds of the debt do have to be invested wisely. Let's hope the Biden policies are wise.
The other caution I'd add is that the world was a very different place in 1946. The only parts of the world that weren't devastated by the war weren't serious economic competitors to the U.S. (Africa, S. America). The U.S. was the only country in the world with the ability to produce the goods the world needed to rebuild in the quantities required. For U.S. workers, this was a huge shot of steroids that lasted for a generation, but it's gone.
My point is not that the industrial policy is wrong, but no matter how you slice it, it isn't going to be as spectacularly successful as that of the end of WW2. If we use that as the test case, it's going to appear to be a failure.
The traditional success stories for industrial policy are catch-up stories: the American colonies learning to make what they'd once bought from Britain, Japan and the Asian Tigers going from poor to rich.
Can industrial policy make a real difference in countries that are already rich and have high labor costs?
I guess we'll find out!
Do we really have to give up on free trade though?
My hope has been that we better articulate the distinction between "strategically important" things like semiconductors and "random crap" like sneakers and fidget-spinners...
I have a son who is a bit of a Bernie-type socialist, and he gets caught up on the healthcare issue a lot to say markets don't work. My counter is always that *most things* aren't like that - free market capitalism is doing just fine for getting you Doritos and donuts and most "normal" things you purchase. I feel the same argument applies to free trade.
Also, the health care industry in this country is hardly a free market given how involved government is in health insurance (including private via the employer mandate), and how using insurance to pay for everything obscures prices which are essential to a functioning market.
Not to mention the sharp restrictions on how many doctors can be graduated each year imposed by the AMA. There's a reason we're constantly importing doctors from other countries, and it's not because Americans are dumb.
AMA is just a lobbying group and they've changed course and been lobbying for more doctors for a while (the battle has shifted to scope of practice since 1990s concerns of a doctor glut turned out to be very wrong). The 1997 Balanced Budget Act is where the residency funding cap was set and was just revised upward by 1000 slots by the 2021 Consolidated Appropriations Act. Most of the AMA lobbying with the 2021 act was over funding and the No Surprises portion.
It's an interesting topic for sure but the "AMA is restricting spots" argument I see all the time doesn't really lead to any solution because it's extremely out of date.
I was not aware they’d changed course, though from this post it sounds like it’s a relatively recent change, taking place around 2019 (not all that long ago, given we’d only now be graduating larger classes), and that scope of practice issue appears to undermine the course change and continues to result in the need to import foreign doctors.
https://blog.petrieflom.law.harvard.edu/2022/03/15/ama-scope-of-practice-lobbying/
You have to always see the AMA as a lobbying group that is fighting with other lobbying groups (especially advanced practice nursing ones). The self-inflicted doctor shortage of the '90s allowed midlevels to increase their clout (especially getting more independent practice opt-outs in the mid aughts) and expand into the vacuum. AMA dropped opposition long before 2019 (I'd say mid-late aughts) because the previous strategy backfired significantly as various studies predicting shortages came out. Classic case of the market substituting a different good, shifting the debate to whether it's inferior or not. The recession kind put a pause on the issue because overall demand went down (before the ACA kicked in) and practices instituted hiring freezes. Once the market normalized and the issue regained salience, the AMA openly lobbied for more physicians, including the bill that ended up getting folded into the 2021 legislation.
I'm an anesthesiologist (and have been researching pretty in depth for a presentation on our labor shortage). We're basically THE cautionary tale all the disciplines have been following. When states adopted CRNA opt-outs (https://www.asahq.org/advocacy-and-asapac/advocacy-topics/opt-outs) pretty much outlines the "oh shit" moment.
Also keep in mind that TOTAL residency slots are capped while most scope of practice battles are fought on the state level between specialty lobbies (that answer to different national organizations, not the AMA). The market is also funny because people strongly prefer to practice in urban areas so physicians and midlevels will fight to the death before taking a rural job.
Like I frequently say, it resembles the housing crisis in many ways.
If you want to predict the future, we'll probably see a bad ER shortage in about a decade. It's a high demand service but Covid and various other things gave emergency medicine two consecutive bad matches (med students chose other specialties).
Why are total residency slots capped? It seems like medical schools should be expanding.
I admit I've come close to protesting the "hearing test" that is part of the annual visit to the pediatrician. Kid hears fine, and I have no idea why it's almost $100 that you're charging the insurance company.
But I didn't want trouble with the doc so I let it slide.
Doritos and donuts and healthcare issues are a good fit ...
Health care is a red herring, obviously we could have a Canadian type system that functioned fine but Bernie and Warren refuse to provide leadership to implement the program at the state level which is actually how Canada runs their program at the provincial level…they are demagogues that want power which is why they insist on a federal program. Utilities work fine and state universities work fine and even public school systems that are failing overall often have very good individual schools.
Here is the problem with too much socialism—at some point schemers like Bernie and AOC get too much power and the productive have no incentive to work hard. So you never want a society where schemers get too much power and then consolidate power by printing dollars to hand out to voters to vote for them and then productivity is undermined and the managerial class is gutted. So the key to America is the managerial class and I personally know managers that are millionaires that attended HBS and some that were mowing lawns when their peers were getting MBAs.
I'm definitely not rooting for too much socialism. But I'm not afraid of Canadian or Scandinavian levels... If that should even be called Socialism, honestly.
I don’t even really consider universal health care as socialism. Instead of other countries I would use Massachusetts as benchmark for America. It would be very easy for Massachusetts to implement a Medicare for All program as 95% of the population are insured and Massachusetts already runs a big health insurance program as every state does. If Massachusetts made M4A work then many other states would implement the program. And remember the context is all things being equal % below poverty level was the biggest factor for a population’s Covid death rate in America. Universal health care and education and reducing poverty go hand in hand.
Health care parallels the housing issue more than anything. Supply is way less than demand and any system (including a fully socialized one) has to deal with that.
Healthcare requires direct care by multiple advanced degree holders (doctors, nurses, mid-levels, etc.) in addition to pharmaceuticals and devices. And "discount rate" healthcare just isn't considered socially acceptable or ethical. The public demands a VERY expensive product!
ah I see, do most people not realize they fill their lives with crap that doesn't matter?
I've been traumatized since learning there's a $5 BILLION market for pet costumes! OMG do people even know what to do with their money at this point?
Industries that aren't strategically important to the US, sure. I want free trade in food, toys, games, etc. so I can import all that stuff from Japan without paying tariffs, because I like Japanese stuff. I want free trade in steel so public transport agencies can use it to build subway tracks cheaply and efficiently.
Yglesias suggests we won't have fiscal room to keep spending like this on industrial policy without either raising taxes or triggering inflation. Is he right?
If he is right, and we want to watch our budget and support these industries at the same time, what are the cost-effective options?
Is there a more efficient way to encourage semiconductor plants and electric cars than writing checks on an inflation-constrained national budget?
never too late to roll back those darn GWB tax cuts, right? that seems like the obvious path to fixing some budget problems. (At least to me, someone who does not have to win any elections...)
Republicans even appear to reject the Bush tax cuts because they only lowered the top rate to 37% and not 35%. Both major Republican tax cuts were followed by recessions—2008/09 and 2020…I think 39.6% is pretty innocuous if it’s starting at 37%. I will add that the issues are set for 2024 and I think both parties will have similar platforms.
An interesting question is whether all government spending is all equally inflationary? Is it best thought of just one simple inflation constraint? The countries best known for industrial policy are also well known for low inflation (despite debt or deficits). However, a corollary of that is that it won't lead to much of a boost in wages for workers.
Yes, all deficits are "equally inflationary," equal to zero. Inflation is a matter of how the Fed sets its policy instruments, short term interest rates, QE, interest on reserves or anything else it might invent.
Higher taxes yes! Maybe even more than taxing net emissions of CO2.
Noah,
Another thoughtful piece as always.
As the former Chief Economist at PJM Interconnection (largest wholesale power market inn the world and 2nd or 3rd largest dispatched power system globally), I have seen this coming for years...industrial policy based on climate and environment. The changeover from coal to gas and now moving to renewables is staggering in its rapidity since 2008. To date much of this policy has been decentralized with the states, but EPA policy has also been a big driver during the Obama years and now with Biden. This all works had in glove with the industrial policy we see at work now.
What I fear is the lack of faith in market mechanisms and incentives that could lead us down the path where we found ourselves in the 1970s and 1980s with an overbuilt, costly (see nuclear), system which drive the reforms of the 1990s with EPAct 1992 that led to wholesale power markets we see today. The emerging command and control mentality is going to lead us back to high cost power (contrary to the concrete promise) due to the desire to over build transmission assets and the reliability need to overbuild renewable resources which ties directly into national security issues.
The problem I see in my part of the world is environmentalists do not understand the physics and reliability needs of power system operation and control. The right wants to dictate old technologies that should go away and have forced through the Cory’s leas flexibility in environmental policy (see the press reports on forthcoming GHG rules for power generation as a replacement for the Obama era Clean Power Plan).
I happen to agree with the main ideas of the Biden industrial policy, reducing market power and dominance, and onshoring industrial production. But the implementation details matter. If we botch the power system aspects, which are a necessary condition for the rest of industrial policy, we will have nothing to show for it. We need a complete rethinking of how the power system works, how to manage intermittency, and minimize costs to avoid going back to the 70s and 80s problems. This is far from insurmountable but does require thoughtfulness and thinking outside the traditional boxes and silos most operate in today.
Business man me, believes one of the paradigms seen in infrastructure that is a problem, is the decoupling of long term CAPEX capacity investment and subsequent maintenence from, the profitable low fixed cost Service side.
Competition amongst various Service providers who utilize the same independent capex infrastructure decouples their pricing. Infrastructure is long term and gets dealt a short hand in a Quarter over Quarter run Service provider approach.
Personally, I would put it all back together as a regulated monopolies which worked extremely well.
Targeting "job creation" is our ugly mirror of China's provincial GDP targets and should be viewed with similar skepticism. The PRC builds empty apartment towers, we build factories then shut them down. We're great at cutting ribbons, less up on sustainability or market fit. We celebrate the shiny new headquarters while ignoring that all those jobs were just moved across a state line.
We should acknowledge the failure modes of the former consensus, empowering Beijing. That doesn't mean we should develop amnesia for the failures of protectionism.
Must we prioritize 6,000 steel jobs over 6,000,000 factory jobs that rely on steel as an input because that's just the way the wind is blowing? Should we go ahead and spend $926,000 per job saved in a blue collar industry for the sake of the headlines? Should we go ahead and rip safe infant formula out of mothers' hands and then pat ourselves on the back for our ability to adapt to the new status quo?
When states play the market it often goes poorly, often undermining the very goals the state is pursuing. We're watching this play out in slow motion and nobody is willing to admit it yet on either side of the aisle. Here's how:
A bias for trade was too permissive, but the reactive bias against trade has led to Biden-admin skepticism for President Tsai's signature push, a trade deal with the US. Taiwan has chips and we have beef, among a million other temperate zone agricultural products that are absurdly expensive on the island. The trade compatibility couldn't be better, and would directly blunt the PRC's use of economic coercion. By flatly rejecting these overtures and preferring a "jobs-focused" trade policy, it weakens the DPP relative to the KMT, creating an opening for the historical party of Beijing accomodationists. The KMT cannot campaign on unification post Hong Kong, but it can now campaign on offers of resumed trade with Beijing for various political concessions. DPP's focus on a trade deal it could not deliver most notably brought an exit strategy for TSMC, a path to weaken the silicon shield.
We're gutting the WTO, even though it's the only international body that had actually compelled changes in PRC behavior. Rare earths took a couple tries, but the second case was decided far faster than the first, and it seems to have sunk in.
The TPP was loaded with handouts for aggressive IP protection for our content industries, and there were other deeply questionable provisions. Nonetheless, Hanoi wants trade, and unlike the PRC, is willing to normalize excesses in its political and economic system to get it. The provisions in these regional agreements constrain authoritarian governments, creating a safe haven for businesses, spreading rule of law through a subtle backdoor. Walking away from the TPP was not a pro-jobs move, for most jobs, it was not pro-democracy or rule of law, it was certainly not a move to contain the PRC. It had massive flaws, but the solution was to fix it, and funnel the domestic trade surplus into trade assistance, not abandon it.
Where economists develop a consensus and the public disagrees, your problem is branding. The solution is not to simply give up on everything. Tie tenure to fewer articles and more billboards, give nobels for communication and marketing as often as theory.
In the meantime, I long for the days where our industrial policy does not target GDP or job growth, and someone picks up a book and reads about Goodhart's Law. One day we might actually target just *improved human welfare,* whether that means working fewer hours or more, whether that means enjoying things, or services, or even just leisure. It's easy to forget that the goal isn't to make some number go up on paper, it's to ensure people can live full, happy, and valuable lives.
I wait for that day. In the meantime, long live the Jones Act I guess. This is our curse for finding sanctuary on econ blogs, then never going outside to talk to anybody else.
Steel can be recycled and so once steel is here it can be recycled if we need it for national security purposes and so anything that results in less steel in America is actually making us weaker. And the same thing applies to batteries as once batteries are here they can be recycled. Obviously we do need a steel industry and battery industry but let’s import as much as we can while we can
Fiscal stuff ("industrial policy" or whatnot) does not "create jobs or destroy jobs; the Fed does that. What fiscal policy can do (but not necessarily _will_ do) is move resources from consumption to investment and from lower return investments to higher return investments.
Nice, but one small contradiction. Not all economists are free trade enthusiasts. Perhaps my background as an industrial worker is the cause. However, I clutch my Ph.D diploma and argue for what is describe as reality about trade. On it's surface, the doctrine of comparative advantage is unassailable. Given their climatic endowments, Hawaii should grow pineapple and Idaho potatoes. They will then benefit from trading their respective surpluses. The catch is that this result only holds where endowments and technology are fixed. With constantly evolving technology, comparative advantage becomes a Red Queen's race. The value of endowments and lowest costs of production will constantly change driven by competition. The United States lost comparative advantage in manufacturing in part because corporate leadership no longer understood their own firm's production technology. Applying only financial metrics, outsourcing towards lower labor costs appeared more profitable than internal investment.
I should have mentioned Brad Delong's favored phrase, "communities of engineering practice". CFOs evaluating make or buy decisions do not have ready access to these communities. Nor do the communities have a seat at the table when these decisions are made. That's the problem.
I agree here, but this is not an issue of trade policy, but one of fiscal deficits and dollar "overvaluation."
I have disagreed with his view in an earlier comment.
I'll post a new post covering my thoughts and experiences at top.
The success of this new industrial policy really depends on quickly Getty some large successes. Right now it’s all promises, ground broken, but nothing actually completed.
For instance Microns proposed Fabs in Boise and New York. Shortly after Micron made these announcements for billions dollars of spending, the market went soft. In Boise, Micron laid off people and froze hiring even though the project is moving a long slowly.
Until one of these large infrastructure projects is completed and we can see concrete results, will people really support the project. It’s the same for rail and energy. We need to see results, where real people have jobs and their is real production.
"The new industrial policy is intended to strengthen the U.S.’ hand against China, and an attempt to at least partially reverse the rise in inequality that happened in the 80s, 90s, and 00s."
Sounds a lot like an agenda to make America great again. :-)
To be fair, as someone who essentially likes that economic agenda, I'm not picky whether its championed by the Left or the Right. But it is pretty funny that the entire establishment of this country (Left and Right -- universities, labor unions, big business, government bureaucracies, media) would spend 4 years telling us that this agenda was going to destroy America and democracy, that the American press would abandon any semblance of objectivity, declare that "making America great" was code for fascism, and set itself the job of destroying the man who articulated those words... only to embrace the same agenda immediately once their preferred candidate won.
I mean, that man also was willing to topple American democracy. And was way more corrupt than the “swamp”. And yes, boosted white nationalists.
Being against laissez-faire free trade doesn’t mean all his other ideas were fine.
Of course not. You and I might disagree somewhat about which other ideas we would hang onto, but that's fine, and the fact that we can do so civilly is a sign of a healthy republic.
I know lots of Trump voters (incl me) and not one of them thinks he's a nice guy or a moral person or would trust him alone with their children -- especially daughters. They voted for specific policies and to end the living-Constitution hegemony of SCOTUS. While many are thrilled with the judges, most are disappointed on other policies. Despite the media's characterization of him as some kind of Mussolini-in-waiting, Trump was relatively ineffective: poor staff choices, opposition of the bureaucracy, his attention span of a gnat, and a complete lack of interest in the legislative process. There's a reason that probably 30% of the Trump voters I know now support DeSantis. We're tired of the drama; we want a policy wonk.
Your democracy point is more complicated, as contempt for the American people is quite bipartisan. Recent revelations (via Congress and Musk) about the intelligence agencies choosing sides -- whether it's FISA warrants obtained under false pretenses in the Russia collusion case, wiretapping the Trump campaign, or suppression of Hunter Biden laptop story in 2020 by ex intel execs at the bidding of the Biden campaign -- is a far greater threat to democracy than a few hundreds rioters who broke into the capitol building for a few hours. IMHO. The former worries me much more, and not just because it's coming from my political opponents. I would be against it it was J Edgar Hoover and Joseph McCarthy doing the same things (and they did.)
That Cheeto Mussolini was essentially a bumbling incompetent Mussolini-wannabe (and Mussolini himself wasn’t exactly great at the execution part; the Italian navy’s battleships in WWII, I believe, never actually managed to hit a single enemy ship from the many shots they fired) doesn’t excuse him from being an authoritarian Mussolini-wannabe.
COVID was tailor made for an authoritarian to seize control. Lots of governors essentially made themselves kings of their states in March and April of 2020. (Not entirely unreasonably given the information at the time.) Perhaps Trump was just too incompetent to do the same on a national level, but honestly, I didn't see him even try. No martial law. No national stay-at-home orders. No social credit system. The man everyone claimed was a dictator in waiting essentially deferred to the longstanding American system of federalism and local control. Meanwhile many liberal governors (Whitmore, Cuomo, and Newsome most of all) turned authoritarian shockingly quickly.
As i said, I don't like the man personally, and he deserves some of the criticism he gets. But there's also a lot of blind rage directed at Trump that seems to make left-leaning folks see things that sometimes aren't there -- Trump Derangement Syndrome is a real thing. (The opposite is blind adoration -- ala Eric Metaxis and the my pillow guy -- which I find equally disturbing.) And unfortunately, 2024 looks like it will be a repeat of 2020 -- just what everyone was looking forward to.
Trump is the rare president that admits mistakes…and he admits to a lot of them! Bottom line—Trump wasn’t interested in being president and he just inherited the best situation since JFK and coasted for 3 years.
Not really. Trump's economic policy ended up being "neoliberalism in one country", than dirgiste.
The root cause origins, from my personal observations working at one of top free trade globalization companies GE follows:
Around the mid 1980s, 5 yrs in, Jack Welch determined he didn't like a lot of manufacturing. He got rid of everything that was- high union, low margin, not 1 or 2 market share. Jack, as evidenced by his RCA acquisition, sold off Research and Innovation giant Sarnoff labs; manufacturing of TVs, RCA defense, space and aero businesses.
Jack kept NBC. It was "Japan proof". Japan held the place of threat back then that China took over as to buying everything and making everything. Before Rupert, foreign ownership of TV media was not allowed.
Jack's love became the "low people intensity" of service. He came to despise internal Innovation and capex. He bought up R&D and service companies instead of investing.
This was the the launch of the mindless short sighted "free traders" and globalization. In reality, just my guess and feel here, free trade did not increase at all US-EU. Instead, it was all a cover for making China the low cost manufacturing site for the US.
The Conservatives thought exporting US manufacturing jobs to China, and post Soviet Russia, would carry over to exporting western style democracy. Oops! Flawed to the infinite.
Finally, we are starting to get our senses back. The strongest nations Build!
Jack Welch also cooked the books and essentially sunk GE. It tells you something that he was worshiped in his prime when those who did research knew he was a charlatan (my first accounting prof in b-school said GE was cooking their numbers well before all the relevations came out).
Is the strong pound policy similar to that?? I know Blair stated that losing manufacturing jobs was to be expected.
Excellent analysis, the part about not having an industrial policy being an industrial policy favouring financial institutions is insightful and probably accounts for a good portion of America's industrial decline. If USA can execute well and I would not bet against the USA - for all its shortcomings it is THE place where great things can happen - it will define economics for the next few decades.
Free market capitalism doesn't apply to healthcare for numerous reasons. Fundamentally, consumers are at the mercy of the providers due to exigent nature of a medical incident, so the supply/demand balance is out of whack. Insurance to the rescue! In other circumstances (when the provider creates the exigent circumstance for the consumer) we call them a mugger (your money or your life!). Most people are happy to pay up when the cost (your wallet) is small compared to the asset at risk (you). That is probably why there isn't a market for mugging insurance. Since a heart attack can literaly cost you your house if you don't have insurance, most people are happy to pay protection money to stave off the medical muggers.
Another reason healthcare won't be reformed anytime soon is that it is a jobs program, much like bank branches, cellphone stores, tax preparers, etc. It keeps people of normal intelligence gainfully employed turning the gears of artificially complicated processes.
You are confusing trade policy towards China with trade policy generally and creating factory jobs with having munition factories to win a war. At a minimum the US should have a policy of free trade for free people, but what Biden is doing is forcing European countries to decide if they also want to provide lavish subsidies to compete. If you want to argue for the death of free trade, explain why you believe that a subsidy war with Europe is a good idea because that is the policy that’s actually being implemented. And clean energy production at home does not make bombs. Reshoring chips is closer to the mark, but the fact remains that Ukraine is easily firing more howitzer shells than we can make let alone something with a computer chip in it. This is our problem in a potential war with China, not where solar panels are manufactured. You’re right that free trade did not democratize China, but that’s no reason to throw out free trade in general, particularly for the free world.
Subsidy war with Europe leads to American manufacturing (and manufacturing expertise and jobs) that would otherwise not be there.
1. It’s about time
2. Much more needs to be written; discussed and turned into policy on this
Key points for me/
- …” to restore an economic mentality that champions building. And that is the core of our economic approach. To build.”
- “ a foreign policy for the middle class”
- the type of growth DOES matter
- This feels very electable / voteable - “ American consumers and workers that they’re going to get cheap electricity, a nice new electric car, a better job, safety from climate change, and safety from domination by the Chinese Communist Party”
In a political world where everything is about "the other side is trying to kill us", it's a nice read that appears as "Man vs Nature" not "Man vs Man" plot. Even China is treated as "Nature" with "China's disruptive entry" into the world causing all those jobs to be offshored - as if it wasn't a thousand cold decisions by factory owners to ship jobs - first to Mexican maquiladoras, mostly, then the China when they were even cheaper.
Income inequality is a "Man vs Man" plot, still being played out, as the author notes, with Republican hostility to any alleviation. The challenge of "industrial policy" is to induce the owners of all the capital to shift their investments with carrots; there's still no sticks to be used - so that it can look like a "Man vs Nature" story, with the only "bad guys" being the lack of investment or research, or anything neutral.
Noah,
In the Everything Bagel industrial policy and its potential impact on the US economy. The policy seeks to encourage innovation and investment in key sectors of the economy, including advanced manufacturing, clean energy, and digital infrastructure. One way to ensure that the policy leads to an effective outcome is through federally funded technology competitions. Such competitions can drive innovation, promote collaboration among industry players, stimulate grassroots inventors and identify the best technology solutions for a given problem.
The proposal we made to the Biden Administration regarding the 2nd Generation Superconducting Maglev transport system is a good example of how federally funded technology competitions can contribute to the success of the new industrial policy. This high-speed transport system, invented by the late Drs. James Powell and Gordon Danby, could complement the existing rail and highway infrastructure by showing investors, the public, and the media how well this zero-emissions, very low energy per ton mile transport would be in comparison to similar systems being developed and by foreign government investors.
Technology competitions can serve as a catalyst for innovation, bringing together researchers, engineers, and entrepreneurs to develop new technologies and products. The competition can be designed to identify the best solution to a particular problem, such as reducing greenhouse gas emissions or improving energy efficiency. In the case of the 2nd Generation Superconducting Maglev transport system, a competition could be designed to identify the best technology for high-speed transportation in the US.
By funding technology competitions, the federal government can also promote collaboration among industry players, including startups, established firms, and research institutions. Participants in the competition could be encouraged to form partnerships and collaborations to develop more effective solutions. Such collaborations can lead to the creation of new products, services, and technologies, which can boost economic growth and create jobs and accelerate the development of critical infrastructure that will help the world meet the zero emissions goals.
Finally, technology competitions can help identify the best technology solutions for a given problem. In the case of the 2nd Generation Superconducting Maglev transport system, a competition could be designed to identify the best technology for high-speed transportation in the US. The competition could evaluate the performance, efficiency, and safety of various transport systems, and identify the best solution for the US market. This information could then be used to inform policy decisions and guide investment in the transportation sector.
In conclusion, federally funded technology competitions can contribute to the success of the new industrial policy by driving innovation, promoting collaboration among industry players, and identifying the best technology solutions for a given problem. The proposal to showcase the 2nd Generation Superconducting Maglev transport system is a good example of how such competitions can be used to identify the best technology solutions for key sectors of the economy. By investing in technology competitions, the federal government can help ensure that the new industrial policy leads to a more effective outcome, boosting economic growth and creating jobs.
OK. I'm totally on board, but I do have to question one of the assumptions. There's no question that WW2 changed everything in the U.S. economy. Out of it, we had a stronger middle class with much less inequality. What could possibly go wrong?
Let's start with debt. Government debt to GDP ratio hit over 120% by the end of the war a level not achieved again until the COVID crisis in 2020. Interestingly, we saw many signs of decreasing inequality starting to show up in the years since 2020. One might be tempted to draw a conclusion that running huge debts itself is part of the answer, but there's more there than that. The proceeds of the debt do have to be invested wisely. Let's hope the Biden policies are wise.
The other caution I'd add is that the world was a very different place in 1946. The only parts of the world that weren't devastated by the war weren't serious economic competitors to the U.S. (Africa, S. America). The U.S. was the only country in the world with the ability to produce the goods the world needed to rebuild in the quantities required. For U.S. workers, this was a huge shot of steroids that lasted for a generation, but it's gone.
My point is not that the industrial policy is wrong, but no matter how you slice it, it isn't going to be as spectacularly successful as that of the end of WW2. If we use that as the test case, it's going to appear to be a failure.