Should-Read: Dani Rodrik: Trump’s Defective Industrial Policy: “Sociologists Fred Block and Matthew Keller have provided perhaps the best analysis of the US “developmental state”…
…a reality that they say the reigning market-fundamentalist ideology has obscured…. A “decentralized network of publicly funded laboratories” and an “alphabet soup” of financing initiatives, such as the Small Business Innovation Research (SBIR) program, work with private firms and help them commercialize their products… the extensive role of both federal and state governments in supporting the collaborative networks on which innovation rests…. Such industrial policies, based on close collaboration and coordination between the public and private sectors, have of course been the hallmark of East Asian economic policymaking….
Unlike China, of course, the US purports to be a democracy. And industrial policy in a democracy requires transparency, accountability, and institutionalization…. Government agencies need to be close enough to private enterprises to elicit the requisite information about the technological and market realities on the ground…. But they cannot get so close to private firms that they end up in companies’ pocket, or, at the other extreme, simply order them around. And that is where industrial policy à la Trump fails to pass the test….
We can expect the Trump administration’s industrial policy to vacillate between cronyism and bullying. That may benefit some; but it will do little good for the overwhelming majority of American workers or the economy as a whole.