📈 Chartpack: Industrial policy [Part 2]

Can the US steer its economy towards long-term goals?

In Part 1 of this Chartpack, I introduced some reasons for the renewed interest in industrial policy. We analysed the effects of offshoring, the decline in public research funding, and how governments can accelerate market development.

Now, we turn our focus to how the United States is addressing these issues with industrial policy. Specifically with laws most of our readers will be familiar with — such as the Inflation Reduction Act (IRA), which, contrary to its title, concentrates on the energy transition, and the CHIPS and Science Act (CHIPS), dedicated to advancing US research and reviving semiconductor manufacturing domestically.

In Part 2, I will cover:

• The aims of the CHIPS and IRA Acts.

• Assessing the effectiveness of the CHIPS and IRA Acts one year post-enactment.

• The unintended consequences and obstacles in the way of their success.

I’ll spend some time walking through the focus and early outcomes of these Acts. If you are already familiar with them, skip to the “All is not calm” section. Otherwise, let’s get started!

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Critical technologies are in focus

Instead of just protecting industries, like the industrial policies of yore, these new laws steer investments towards strategic sectors, with an eye to foster growth and innovation, a concept

Azeem Azhar

calls “Catalytic Governance”. This approach is gaining traction globally, as evidenced by the increasing number of industrial policies worldwide.

Source: Rodrik et al.