Economists may be loath to admit it but industrial policies have been used successfully by more than a few countries, writes American political scientist Francis Fukuyama.
“East Asian fast developers like Japan, South Korea, Taiwan, and China used different versions of industrial policy to produce historically unprecedented rates of economic growth. There has been a long failure of American economists to recognize this record”, writes Fukuyama for American Purpose.
And it’s not just East Asian companies that have managed to utilize industrial policy to great success. America has too, but it just doesn’t call it industrial policy, argues Fukuyama. Rather, he says, it’s called the defense department, where, due to cutting-edge technology investments, “many of the foundational technologies of our era, including computers, radar, semiconductors, integrated circuits, and, most famously, the internet all started out as government-funded military projects.”
The U.S. government has proven in this instance that it can act as a successful venture capitalist when the agency involved (DARPA) was run by technocrats as opposed to politicians.
Given that America and other Western countries will continue to be threatened by crucial supply chain vulnerabilities through dependence on China, and, additionally, that the US is on a path of transition towards clean technologies that can be easily foreseen, applying industrial policy in these areas is justified, Fukuyama argues.
