Industrial Policy Round-Up #1

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Last week, I created a twitter for the purposes of scrapping our fave zone of cyberspace for mentions of industrial policy—follow Lil’ Industrial Policy Guy!—partly for the novelty of it, but also for keeping up with the ongoing conversations around the topic. It’s certainly been more active than I initially anticipated, and one of the things I have found deeply fascinating (and deeply disconcerting) is the the continuation of a trend that I noticed when I first wrote about this topic back in July: there’s a more dynamic conversation happening right now on the right, as opposed to the left.

Perhaps the item that gained any sort of widespread circulation was a piece that ran in the American Prospect, titled “Industrial Policy and the Climate Challenge”. It’s written by Mariana Mazzucato, who, for those who don’t know, is the author of The Entrepreneurial State: Debunking Public Vs. Private Sector Myths. Her work is quite interesting, focusing on the ways in which state-financing and research and development has led to a multitude of innovations that we tend to take for granted as being the byproducts of a kinetic, technologically-oriented laissez-faire system. Mazzucato’s preferred example is the iPhone: behind the GPS technology, the touch screen, voice commands, etc, is the looming—yet largely invisible—hand of government sponsorship of technological development. The crux of the matter that Mazzucato identifies is a certain squeamishness on the part of private ventures to embark on high-cost, high-rest ventures, which leads to hold their investment capital close to the chest. In an inversion of common economic thinking, the state here emerges as the entity that comes to bear the costs and risks of the “technological mission”.

There’s a continuity between these arguments and those in her article about the possibility of a green industrial policy or Green New Deal. Because businesses have become—or maybe always were—risk-averse, it’s foolish to look to them in setting off the great waves of investment and innovation that are necessary in confronting (and hopefully averting) impending climate catastrophes. Instead, the state should take charge in generating the vital infrastructures and research programs and mobilizing the appropriate flows of capital and labor that is needed. This, in turn, means harnessing the power of the market to a strong, centralized imperative, with the two locking together into a reciprocally-determining ‘co-design’. She writes:

Policies aimed at big societal challenges require confronting the direction of growth—to become more inclusive and sustainable. But this is very hard to do within the traditional framework that sees policy as simply fixing market failures or simply de-risking and facilitating value creation. Challenge-led growth requires a new tool kit—one that is more based on market shaping and market co-creating. Industrial policies have always been composed of both a “horizontal” and a “vertical” element. Horizontal policies have historically been focused on skills, infrastructure, and education; while vertical policies have focused on sectors like transport, health or energy, or technologies. These two traditional approaches roughly embody differing schools of economics: neoclassical economics–inspired horizontal policies focusing on supply-side factors and inputs; and evolutionary economics–inspired policies putting emphasis on demand-side factors and systemic interactions.

There’s a curious echo here of Nick Srnicek and Alex Williams’ commentsin the 2013 Manifesto for Accelerationist Politics, that “[w]e need to posit a collectively controlled legitimate vertical authority in addition to distributed horizontal forms of sociality… The command of The Plan must be married to the improvised order of The Network”. And just as the MAP shimmered with a kind of steely retrofuturism, so too does Mazzucato look back. The end of her piece features a black and white photograph, dated to 1963 of President Kennedy looking up at a rocket on the launch pad at Cape Canaveral, and the final section bears the telling title of “We need a climate moon shot”.

Meanwhile, in Brussels, the conversation is already rolling. Financial Times reports that the Eurozone is in a mad rush to “retool” its industrial policy programs in the face of the bloc’s automakers failure to embrace the “electric car revolution”. Automotive manufacturing is a vital component of the European industrial base, and as it stands now is in the unenviable position of having to import batteries for the new breed of cars—batteries that, importantly, take up some 40% of manufacturing costs. In 2017 the European Battery Alliance, a coalition of policymakers and businesses, was formed to work towards remedying this situation, and within two years it helped funnel 100 billion euros in private and public funds into battery manufacturing. With an expected boom in battery manufacturing on its way—a “tenfold” growth by 2023—this number, along with a deeper and broader industrial policy infrastructure, is expected to climb.

Concerns about the climate and sustainable development are only a part of the European’s shift. It’s also deeply political:

Fearing European industry could be crushed by US technological supremacy, Washington’s growing protectionism and Chinese state capitalism, German, French and EU leaders have embraced a reinvigorated industrial policy as a tool to assert the continent’s technological independence and ensure its economic survival… “I really think of this issue in terms of sovereignty,” says Bruno Le Maire, French finance minister.

The drive to maintain a top position in the global system is also at the heart of what got by far the most circulation on twitter: Marco Rubio’s December 10th speech given to the National Defense University. It follows in the wake of the senator’s February 2019 report “Made in China 2025 and the Future of American Industry”, and his talk last month at Catholic University on “Catholic Social Doctrine and the Dignity of Work”. In the former, Rubio took aim at the ten-year China drafted by the Chinese government in 2015, which outlined a strategic bid to become the world leader in a host of key industries. These include information technology, robotics, green energy, railway equipment and agricultural technology—an ambition program that slots the ongoing US-China trade war into its real context. In the words of a Council on Foreign Relations article published last year, “[i]n the saga of the U.S.-China economic rivalry, Made in China 2025 is shaping up to be the central villain, the real existential threat to U.S. technological leadership”.

Rubio, chairman of the Committee on Small Business and Entrepreneurship and a member of the Committee on Commerce, Science, and Transportation, concurs. The February Report addresses a growing imbalance between American and Chinese industrial power and global competitiveness, and suggests that the US’s common stance in regards to the economy—neutrality—is sadly mistaken. “‘Not choosing’ is a choice, however it is made”. As such, “the US cannot escape or avoid decisions about industrial policy”. For Rubio, the choice is clear: affirm industrial policy.

The talk given to Catholic University was somewhat different, focusing instead on the question of whether or not a commitment to a strictly market-based order is compatible with notions of the common good: “does our country exist to serve the interest of the market, or does our market exist to serve the interests of our nation and of our people?” Contemporary American Catholicism has had a curious affinity with laissez-faire attitudes, emerging in part from the broad “fusionist” strategy pursued by the right since the 1950s, which sought to marry social conservatism to libertarian-leaning economic ideology. In its most recent manifestations, there has been an erroneous conflation between the Catholic social teaching of subsidiarity (matters must be handled by scale approach to their magnitude) and its economic corollary, distributism, and laissez-faire economics. Properly rendered, subsidiarity lends itself to a more corporatist position, from which the regulation of the common good is supposed to unfold—in contrast to the liberal ideal of the common good emerging from the foam of individual actors pursuing what they perceive as their individual goods. But I digress—

Rubio tries to resolve these issues by offering up an awkward synthesis that he dubs “common good capitalism” (one can’t help but wonder if this shares any genetic material with Andrew Yang’s “human-centered capitalism”). “Common good capitalism”, he argues, “is about a vibrant and growing free market, but it is also about harnessing and channeling that growth for the benefit of our country, our people, and our society at large”. A truly utopian form of capitalism!

In the recent talk at the National Defense University, the geopolitical struggle with China, common good capitalism, and industrial policy all intersect. A few choice bits:

Almost overnight, we have awakened to the reality that “while America slept,” the Chinese Communist Party has emerged as an immediate and growing threat to prosperity, our freedoms, and our security.

[…]

Experts were intoxicated with post-Cold War fantasies about “the end of history.” A bipartisan consensus formed that an American-helmed international system would forever be the new normal, and the arc of all nations was toward democracy and respect for the rule of law.

We have made great progress toward advancing our values and interests. But it is now clear that our consensus on China was dangerously flawed.

[…]

This century will be defined by the relationship between the United States and China.

And it will either be the story of an unfair and unbalanced relationship that led to the decline of a once great beacon of liberty and prosperity.

Or it will be the story of a stable, balanced, and sustainable relationship that allowed us to further and protect our national interest and the common good of our people.

[…]

For public policy makers, the common good can’t just be about corporate profits. When dignified work, particularly for men, goes away, so goes the backbone of our culture. Our communities become blighted and wither away. Families collapse, and fewer people get married. Our nation’s soul ruptures.

[…]

I am not advocating for a government takeover of our means of production.

What I am calling for us to do is remember that from World War II to the Space Race and beyond, a capitalist America has always relied on public-private collaboration to further our national security.

And from the internet to GPS, many of the innovations that have made America a technological superpower originated from national defense-oriented, public-private partnerships.

[…]

It is a call for a 21st-century pro-American industrial policy.

There is every reason to take seriously the gravity of this moment. What Rubio is posing is a break with the prevailing orthodoxy that it has cemented itself as an unwavering dogma around both the Republicans the Democrats. Usually such calls come from the fringes of a given party—but here, it is being issued from within the mainstream itself. It’s a rupture, even, with the shift in the party that has taken place under Trump: for all the bluster and nostalgia-mongering of the MAGA moment, Trump’s policies have failed in virtually every respect to break with orthodoxy. Even his primary hammer of choice, the tariff, was a feature of both Reagan and Bush Jr.’s economic toolbox, and its all-pervasive use has more to do with the contingencies of structural geopolitical-economic imbalance that it does with any sort of sea-change. And as the tariff war continues to fall short of delivering the goods, and the economy continues to stagnate (how long before people realize how truly lackluster the recent jobs report really was?), the support for these ideas in the mainstream will only grow.

Meanwhile, the liberal centrists continue to dig their heels in. Industrial policy was featured at this year’s Charles River Associates Brussels Conference, dedicated to the issue of “Anti-Trust in Times of Upheaval”. Jason Furman, a veteran of the Obama administration’s economic team (first as deputy director of the National Economic Council, then as chairman of the Council of Economic Advisors), seemed to suggest that while industrial policy may be something of inevitability, restraint and caution should condition any embrace of such programs:

A little background on Mr. Furman here: prior to entering the Obama administration, he was involved with the incredibly misnamed Hamilton Project, a program that was run out of the liberal counterpart to the American Enterprise Institute, the Brookings Institution. If “neoliberal” actually means anything at all, the Hamilton Project personifies it. It was founded in 2006, with the aid of start-up funding provided by Goldman Sachs, by Robert Rubin, himself a veteran of the firm and the former head of Bill Clinton’s Treasury Department. Rubin wasn’t the only former Clintonite who was associated with the Hamilton Project, with his protege Lawrence Summers—Clinton’s deputy Treasury secretary—taking a position there as well. Obama spoke at the Hamilton Project’s opening ceremony, and when it came time to staff his economic team, he drew heavily on the group’s ranks, tapping not only Furman but Summers, Peter Orszag, and Austan Goolsbe as well. When it came time to organizing the bailouts in the wake of the Recession, it was these people who set the agenda—and who, against dissenting voices in the administration who were sidelined, blocked more radical solutions and structural changes from going forward. So take Furman’s comments with a grain of salt.

One last item, brought to my attention by Thom:

Oren Cass was a participant at the National Conservatism Conference, where he debated libertaran Richard Reinsch on the merits of the an American industrial policy—taking, as one might guess, a pro-policy stance. To see Cass announcing his departure from the Manhattan Institute (which, historically, has been a hotbed of neoliberal orthodoxy) is interesting enough, but that he’s doing so to “start a new organization whose mission is to redefine economic orthodoxy” is extremely telling.

Until next time!

9 thoughts on “Industrial Policy Round-Up #1

  1. Ed, at some point can we have a conversation about “industrialism”, extractvism, and finite materials on a finite planet. I’m not accusing you of any sins, but how on earth are we to continue with industrialization as the biosphere continues to collapse. Do you subscribe to the machiinc ascendancy prophecy where absolutely everything is remade via industrial-capital logics into a non-biotic planet?

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    1. Sure, Michael! As you know I have some background in activism, especially related to ecological questions, so these are things I’m very sensitive to. I think, however, it’s important to parse apart industrialization, industry, and industrial policy, and the way that I think these terms work together not as ideal objects detached from material conditions, but real forces in the pathways of historico-material development. Industry, simply put, refers to particular arrangement of production — it evolves out of manufacturing, which saw the development of a division of labor alongside the rise of workshops dedicated to manufacturing machines. The birth of industry is marked by the point in which machine ceases to be powered by the human body, but draws on an external source of power, usually through the capture of a natural process. So yeah, there’s a fundamental connection between the spread of industry — industrialization — and extractivism, as the widening gyre of industrial integration drives a need for deepening resource cannibalization.

      But it’s not obvious to me that it must remain so. Even if we take the sort of locally-oriented micro-manufacture of, say, Kevin Carson as an example, it seems to me that this would remain within the parameters of ‘industry’ more than it would be a return to an age of the traditional craftsmen. In places where these forms of production have prevailed (I’m thinking pre-consolidated Shenzhen, or Italy’s Emilia-Romagna), the complex division of labor persists, only that it is released from the singular vertically-integrated firm and replaced by the chains of the network (in this sense, post-Fordism production exists halfway between the vertically-integrated firm and this form), specialized knowledge exists not in relation to the tool, but machine parts, and an external, non-human motive source continues to be tapped!

      That’s only one half of my interest in the industrial policy debate. The other has to do with my interest (going back to the early days of DIU blog) in the “long waves” of capitalist development, first proposed by Soviet economist Kondratiev, elaborated upon by Schumpeter, and enhanced by neo-Schumpeterians like Freemen and Perez. The great merit of Freemen and Perez (especially the latter), is how they emphasize that each ‘wave’ of development is punctuated by a crisis, which constitutes a ‘turning point’. This is close to the Regulation School theories: the ‘roll-out’ of paradigm-shifting transformations in the circuits of production is characterized by breaks and contradictions, the conflicts between the old mode and the new mode, the chaos of non-simultaneous development/uneven development, technological lags and invest bubbles. The crisis-turning point necessitates an evening-out that calls forth an ‘institutional adaptation’ (or in the frame of the Regulation School, a mode of regulation — regulation here understood in the broadest sense possible, including but also beyond the narrow meaning of governmental regulation). In my estimation, the 2007-2008 crisis was such a turning point, much like how the Great Depression was for the Fordist long wave — but no institutional adaptation has yet to occur, and the contradictions have only deepened. But as conservation begins to build, on both the left and right, about industrial policy, the outlines of just such a thing begin to come into view. It would be a world-shift, on par with the rejection of Keynesianism for neoliberalism in the late 70s and 80s.

      The state, in the last instance is the bourgeois state. It’s not the transcendent figure, standing outside and simply harming capitalism, and Land suggests it is (Deleuze and Guattari: the state is the ‘unit of anti-production’ that is immanent to capitalist productionism). But it’s form is also determined by struggle. Since industrial policy opens the floodgates for a state-led reorganization of the economy–with obvious limits, ofc–I assume that it too will be a terrain of struggle, and maybe good things will fall out of that. After all, the dynamic production model of Emilia-Romagna (ecologically-inclined with a high standard of living, both of which I think are fundamental and necessary) is governed through industrial policy — and Carson himself ended up conceding the necessity of a ‘partner state’. Going broader, I can’t see the pursuit of degrowth, if it isn’t to be done in a way that is utterly catastrophic (imo we should avoid catastrophism, in thought and practice), will require feats that, quite frankly, will be promethean.

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  2. MJ: I like this notion of “the widening gyre of industrial integration”, which seems to be a very tidy way to describe what others have termed ‘globalization’: the increasing capture of social, regulative and existential variation by capitalist systems geared towards the production of particular values and technics that establish and maintain the very real material and cultural status of controlling private interests.

    And, as you suggested, these grind-machines tear asunder or “cannibalize” vast quantities of non-human materials and energy, devastating ecosystems everywhere. The question remains, which you only touched on in a cursory way, HOW is industrialism – even at smaller regional scales, not beholden to vertically integrated orgs – going to remain growth-oriented and ostensibly industrial as climate-induced ecological and social chaos ensues and disrupts the very transnational flows of materials, data, and agreements that machine dependent industries rely on? If is doesn’t seem obvious to you that industrialism must remain reliant on untenable extractivism then how are we to overcome these reliances?

    These is a question I don’t think we can easily side-step with appeals to some desire to avoid catastrophism. Catastrophe is already well under way (and has been for many peoples for far longer that we post-moderns), and some might argue that industrialization as such IS the catastrophe.

    Industrial processes, and the institutional and legal networks that afford them, are highly vulnerable not only to ‘internal’ crises and contraindications, but also ecological instabilities wrought by changes in food and water supplies, crises in agricultural production and in social cohesion. At this point in history even small scale industry is reliant on expertise, minerals, information technology, and hydrocarbons only supplied via a stable international logistical network defended by “state” national armies. So as ecosystems, particularly aquifers, are collapsing which and generating crises that, as you say, require “institutional adaptations” the prospect for the pathological growth trajectory (as based in a cultural denial of physical and human limits on a finite planet) seems destined to fail. Massive outbreaks of war to relieve the coming scarcities and tensions seems inevitable (and predictable given history).

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    1. Hey Michael, thanks for the great response and the challenges that come along with along with them! I think what you’re posing here cuts right to the heart of the matter, and some of these things I don’t have any straightforward answer for. But maybe we can start picking a few things apart.

      I’d like to start from what you say in the middle here:

      >These is a question I don’t think we can easily side-step with appeals to some desire to avoid catastrophism. Catastrophe is already well under way (and has been for many peoples for far longer that we post-moderns), and some might argue that industrialization as such IS the catastrophe.

      I certainly don’t want to come off a side-stepping already-existent climate catastrophes (and the argument that industrialization itself is catastrophic appealrs tome, ala Marx, Benjamin or Adorno – or even Schumpeter’s indirect borrowing from Nietzsche in his description of capitalist ‘creative destruction’). Nor do I think that appealing to avoidance of catastrophe is something left hanging in the realm of abstract desire. While catastrophe is underway, we can’t neglect the still-persistant cause of mitigation. In this sense I’m not one who sees the worst case scenarios as inevitable, already cemented-in-place realities. And even if these *were* to a particularly degree inescapable, the timetables are still fairly wide. Given that the idea of a smooth and harmonic balance between human culture and natural processes has never existed, and that social organization itself develops in the context of a harsh world, the ‘operational parameters’ still seems to me to be considerable.

      On a more immediate level is the issue of the determination engendered by the present-day infrastructures that constitute our world and condition our relationship with the natural forces that we are in fact continuous with, which are in turn molded in accordance with the operative abstraction that is capital. If there was to be a world beyond capital, it wouldn’t unfold through one swift apocalyptic negation, where the infrastructures and systems are swept aside a new one is posed in its place; they too will emerge stamped with the mark of these things. Likewise, climate catastrophe shouldn’t be viewed, I think, as an exterminating angel (not that I’m accusing you of this position, but it is one that has at least some pull on divisions of the left). One can easily imagine a capitalist system that, despite the amplifying magnitudes of material constraints being placed on it, continues to lumbers on, shedding more and more the egalitarian mask that it wears – a real barbarism beyond whatever dreams NRx could offer it. Likewise, we know that catastrophe itself does little to wound capitalism, and in fact serves to open the possibilities for its continued reproduction. Economic catastrophes allow capitalism to boost the rate of profit, and we know from the high profitability that occured in the wake of both world wars that the annihilation of entire societies is the stuff of boom-times. We’ve also already seen how climate chaos has both posed problems for capital (we’ll see how the poor crop-planting conditions in the US, for example, play out in the longer runs) and made possible all sorts of investment opportunities and privatization programs in disaster zones.

      Industrial policy isn’t an alternative to capitalism or it also isn’t a long term solutions. The ‘institutional adaptations’ that I mentioned above are largely endogenous to capitalist development, and are expressions of what emerges in the intersection of the ‘smoothing out’ of spatial unevenness and the macro-scale transformation of institutional frameworks and civil life in introduction of immense structural shifts. As capitalism is a constantly evolving meta-system, these adaptations have a finite life-span. This is something its most fierce proponents don’t wish to acknowledge, as they repeat the mantra that the state is in something of a transcendent position relative to the capitalist system — which blocks, in turn, the recognition of value (and capital as the self-movement of value) as the structuralizing force of society. Mazzucato, for instance, goes as far as to suggestion that it is the public sector that is the real source of economic value, and argues that the proper recognition of this will make possible the much-sought economic golden age. The Marxist response that I would take-up would be much like the one that Mattick used to confront Marcuse when the latter came to view the state (in the context of institutional adaptation of the New Deal) as something that had ‘beaten’ the law of value: that state fiscal policy, the ground for industrial policy, is dependent on the consistent capture of profits from the private sector, and because profitability in fact declines as the result of increasing productivity, there will be a point in which a real limit is reached. This is exactly what happened at the end of Fordism, which voided out this regime of the ‘rational state’: declining profitability led the state to run short on financing for its social (and military) obligations, to which it responded with money printing, culminating in the dollar crisis and the stagflation of the 70s.

      I know your comment wasn’t geared towards industrial policy, but industrialism in general, but I think it’s worth acknowledging the way that industrial policy remains locked into the contradictions present in the capitalist system, and isn’t something detached from it. While industrial policy broadens the role of planning and rationalization, this remains subjected to the anarchy of capitalist production — the topsy-turvy world of the market, and behind it, the relentless drive of production for production’s sake. I stick to Marx’s imperative for a society beyond capitalism: the bringing of this anarchy and maddening propulsion under common control. That entails, too, the bringing under control of irrational growth, and thus the stripping away from ‘industry’ its unity with abstract capitalist imperatives. Marx understood that there was an ecological element to this as well, as evidenced by his comments in Capital Volume 3 on “associated producers rationally regulating their interchange with Nature, bringing it under their common control” — not the fantasy of bringing capital-N Nature under common control, but the metabolic interaction between human culture and natural proceses (from here it makes sense why, towards the end, Marx saw the possibility of communism being realized not in the developed core, but on the basis of the encounter between the Russian peasant commune, advanced machinery — the objectification of human knowledge — and the interconnectivity called forth by the world market).

      The importance of industrial policy emerges right in this zone. The rate of profit has been stagnant for a significant period, and despite a boost in the 90s we can say that there has been a “long downturn” since the 1970s. Profitability is scarce, but money-capital isn’t, which is locked into forms of fictitious capital, as financial instruments and the like. For this reason I strongly suspect that large-scale state intervention and planning is extremely likely, and while the left meagerly looks at it from the ecological perspective, in the guise of Green New Deals, the conversation on the right is much stronger and outpacing the left. If institutional adaptation is on the table, the left should want to be there, not seeing the industrial policy as an end in itself (since, as I pointed out above, it is, in the final moment, always going to be a mechanism for assisting capitalism to carry out its expanded reproduction), but as a terrain of struggle. This holds especially true for those interested in things like ‘degrowth’; I have a hard time seeing, for instance, how the pathway to such a things, if robbed of it either the nostalgia for an unbroken world or the Ricardian economics so often underpin it — both falling victim to the fabulation of harmony and balance — wouldn’t in actuality look like something closer to a de-neoliberalized version of eco-modernism.

      In this sense, it seems to me that the left doesn’t need to hide from things like verticality, planning, integration, centralization or that thing that is most maligned (being in our world of perpetual hangover from the 1960s quests for authenticity): bureaucracy. All these things already exist, but remain subordinate to capital, why not try to reverse this as part of an unfolding process, instead of looking for the swift, apocalyptic break? This isn’t to say that grasping industry and bureaucracy by the horns should be the total of the left’s actions; without a movement outside the political arena, this would short-circuit into simple reformism, swapping one blackmail or history for another. It’s on this side that the most decisive battle-lines are drawn — for instance, when it comes to global logistics chains and cross-cultural flows, we shouldn’t give in to autarkic impulses (the withdrawal from the world that is explicit and implicit in a host of positions taken up by the right and the left), but defend the international character of the globally oppressed, in all of their fundamental interdependencies

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