Michael Lind: Who’s Afraid of Industrial Policy?





Michael Lind’s new book, "Land of Promise: An Economic History of the United States", will be published in April and can be pre-ordered at Amazon.com.

President Obama’s emphasis in his State of the Union message on revitalizing American manufacturing has led to predictable attacks by critics that he is practicing “industrial policy.”  This criticism is largely limited to the libertarian right, which has watched in dismay as Mitt Romney denounces unfair Chinese practices and Newt Gingrich promises to revive the government-backed American space-flight industry.

In debates in the 1980s and 1990s, the term was often associated with proposals to emulate one or another aspect of the export-oriented Japanese model. Today, however, critics use “industrial policy” in blanket condemnations of any government support of particular technologies as well as particular industries and particular companies.  Industrial policy, they allege, is both un-American and doomed to failure.

In fact industrial policy is as American as domestically produced apple pie.  George Washington supported Alexander Hamilton’s plan for promoting American manufacturing by means of subsidies and tariffs, and Hamilton’s opponents Thomas Jefferson and James Madison eventually reconciled themselves to federal support for American manufacturing.  Henry Clay proposed a similar “American system” of infant-industry protection and federal support for infrastructure.  During the Civil War, Clay’s disciple Abraham Lincoln presided over the enactment of a version of the American System, based on high tariffs to protect strategic industries and federal land grants and financial subsidies for transcontinental railroads.

Industrial policy was even more successful in the 20th century U.S.  After the Wright brothers invented the airplane, the federal government used airmail to subsidize the infant American civil aviation industry.  The U.S. Navy worked with American companies to create the Radio Corporation of America (RCA), which spun off the NBC and ABC radio and TV networks.  During World War II the government built vast numbers of factories, which were turned over at low prices to private companies after 1945....



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