Biden’s Industrial Policy is the Key to His Economic Restructuring
America is about to revive an idea that was left for dead decades ago. It’s called industrial policy, and it’s at the heart of Joe Biden’s plans to restructure the U.S. economy.
When industrial policy was last debated in the 1980s, critics recoiled from government “picking winners.” But times have changed. Devastating climate change, a deadly pandemic and the rise of China as a technological powerhouse require an active government pushing the private sector to achieve public purposes.
The dirty little secret is that America already has an industrial policy, but one that’s focused on pumping up profits with industry-specific subsidies, tax loopholes, tax credits, bailouts and tariffs. The practical choice isn’t whether to have an industrial policy but whether it meets society’s needs or those of politically powerful industries.
Consider energy. The fossil fuel industry has accumulated “billions of dollars in subsidies, loopholes and special foreign tax credits,” in Biden’s words. He intends to eliminate these and shift to non-carbon energy by strengthening the nation’s electrical grid, creating a new “clean electricity standard” that will force utilities to end carbon emissions by 2035 and providing research support and tax credits for clean energy.
It’s a sensible 180-degree shift of industrial policy.
The old industrial policy for the automobile industry consisted largely of bailouts — of Chrysler in 1979 and General Motors and Chrysler in 2008.
Biden intends to shift away from gas-powered cars entirely and invest $174 billion in companies making electric vehicles. He’ll also create 500,000 new charging stations.
This also makes sense. Notwithstanding the success of Tesla, which received $2.44 billion in government subsidies before becoming profitable, the switch to electric vehicles still needs pump priming.
Internet service providers have been subsidized by the states and the federal government, and federal regulators have allowed them to consolidate into a few telecom giants. But they’ve dragged their feet on upgrading copper networks with fiber, some 30 million Americans still lack access to high-speed broadband, and America has among the world’s highest prices for internet service.
Biden intends to invest $100 billion to extend high-speed broadband coverage. He also threatens to “hold providers accountable,” for their sky-high prices — suggesting either price controls or antitrust enforcement.