How to Survive the Revival of Industrial Policy
The return of dirigisme will bring back old problems in new and scary forms. Here’s what businesspeople need to know.
Will the new industrial policy work better than the old one?
Photographer: Mark Ralston/AFP via Getty Images
Over the past decade industrial policy has gone from passe to fashionable. Governments that once scoffed at “picking winners” now compete to influence what companies produce and where they produce it. Harvard economist Dani Rodrik argues that a new wave of research demonstrates that, in aggregate, industrial policy was more successful than once thought. The economic debate has evolved from the question of “why” to the question of “how,” he says. Even some Republicans are changing their minds: Marco Rubio, a US senator from Florida, wants to use industrial policy to revive US manufacturing and create “dignified” work, and American Compass, a right-of-center think tank, has plenty of ideas about how he should do it.
The revival is already beginning to reshape the global economy. A Bloomberg Economics analysis of UN foreign direct investment data shows that all the government cajoling of companies to take geopolitical considerations into account is having an effect: Of the $1.2 trillion in greenfield FDI invested in 2022, close to $180 billion shifted across geopolitical blocs from countries that declined to condemn Russia’s invasion of Ukraine to those that did.