The Return of Industrial Policy Means Bad News for Emerging Technology Sectors

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Executive Summary

  • Bipartisan bills such as the United States Innovation and Competition Act (USICA) signal an interest among an array of policymakers in using industrial policy to bolster preferred sectors and counter the economic influence of China.
  • The past use of industrial policy has often translated into resources controlled by the politically connected and failed investments, rather than promoting the general welfare.
  • Even with good intentions, policymakers lack the incentives and knowledge to make the best decisions about the direction of markets, and as a result industrial policy has historically resulted in underperforming or failed investments, with taxpayers bearing the costs.
  • An alternative strategy for promoting strategic sectors is reducing barriers to entry and innovation, such as focusing on light-handed regulation and the removal of regulatory red tape.

Introduction

Policymakers on both sides of the aisle have expressed concern about…

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