Computer Chips vs. Potato Chips: The Case for a U.S. Strategic-Industry Policy

January 3, 2022

 

KEY TAKEAWAYS

  • In a fiercely competitive global economy, it is no longer assured that the United States will have needed domestic production and innovation capabilities, nor will it necessarily be able to securely buy them at will from other nations.
  • U.S. economic and national security now depend on bolstering capacity in strategically important industries and technologies. A generic competitiveness policy will not suffice.
  • Policymakers cannot ensure the “right boats” are lifted without a strategic-industry policy that identifies key industries and technologies, continually monitors U.S. and foreign capabilities, and implements policies to bolster targeted sectors.
  • Strategic-industry policy should not entail favoring U.S. firms over allied nations’ firms that produce or do research in America. Nor does it mean picking industries in which the U.S. lacks capabilities or picking specific firms as “winners.”
  • It does entail identifying industries in which the U.S. must have adequate capabilities to be secure. It means analyzing the strengths and weaknesses of each industry and implementing the correct policy interventions to spur competitive advantage.
  • It is time to end the stale argument about free markets versus industrial policy. We need both: market-based policy for most of the economy, and strategic industrial policy for select sectors.