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!