May 27, 2021 –
The concept of industrial policy has been neuralgic in the UnitedStates for quite some time. In recent years economic orthodoxy—along with many Americans and a substantial majority of members of Congress—has argued that” the market” is the best mechanism to spur innovation. Our strategic competitors—China in particular—uses state subsidies, restrictive and unfair trade practices, intellectual property theft, and abundant state research resources to catalyze technological innovation, and are threatening American security and economic interests. America has not always been adverse to industrial policy, and some are arguing for a new approach to industrial and innovation policy.
Summary
On May 27, 2021, the U.S. Department of Defense (DoD) Strategic Multilayer Assessment (SMA) program hosted its first debate between Dr. Robert Atkinson (President, Information Technology and Innovation Foundation) and Mr. John Thornhill (Innovation Editor, The Financial Times) as a part of its SMA INSS/PRISM Speaker Series.
Dr. Atkinson argued that the US needs an industrial policy because it is already deep in economic and technological competition with countries around the world, including China. Because the USG is aware of this economic and technological competition, it already has an industrial policy, even if not explicit. Industrial policies can fit along a spectrum from a true laissez-faire approach to an economy that is strictly controlled by a central government. Dr. Atkinson argued that the industrial policy he supports is not an economy run directly by the central government, which picks winners and losers. Instead, he advocated in favor of supporting strategic industries with increased federal funding to better compete with US rivals abroad for the global market share. This funding will also help companies in the private sector maximize their societal returns, which are 40 percent of what they should be, according to Dr. Atkinson.
Mr. Thornhill argued against US adoption of a robust industrial policy. He first provided an antidote of two USSR textile factories: one of which was constructed to produce tiles and the other of which was created to destroy subpar textiles. The need to create faulty textiles to keep the second factory running is an example of a non-market incentive that a government-run economic policy can create. He argued that a robust US industrial policy may focus on the wrong incentives. As a result, the United States’ free market could become less free, and kill zones surrounding the US’s largest companies could expand, which would in turn lead to less competition. Mr. Thornhill argued that instead of an industrial policy, the US needs a robust anti-trust policy that keeps its markets competitive and keeps its educational institutions minimally influenced by the USG. By maintaining its educational system, the US will continue to attract top talent from other countries as well.
Both Dr. Atkinson and Mr. Thornhill mentioned in their rebuttals and closing statements that they agreed on several points, including that an industrial policy that gives the USG a large amount of power would not benefit the nation.Dr. Atkinson emphasized that the type of industrial policy he is an advocate for would support strategic industries in the US and not determine winners or losers. However, Mr. Thornhill emphasized that implementing a true industrial policy at the state level may stifle innovation, which he believes is a process of natural selection.
Speaker Bios
- Dr. Robert Atkinson, President, Information, Technology and Innovation Foundation
- John Thornhill, Innovation Editor at the Financial Times