Rethinking the American Industrial Policy Debate: The Political Significance of a Losing Idea

In the early 1980s “industrial policy” seemed to be emerging as the American left’s answer to supply-side economics. Yet soon after, supply-side economics was triumphant and industrial policy back in the political wilderness. This article investigates why the American left rejected industrial policy in the 1980s but appears to be reembracing it under the Biden administration. Via reviewing the history of the industrial policy debate, I argue that the American left rejected industrial policy proposals for several reasons including disunity within the Democratic party coalition, the growing strength of the venture capital industry, and the perceived incompatibility of industrial policy with American political institutions. Despite the defeat of industrial policy movement in the 1980s, however, I argue that a process of adaptation and reworking during the Clinton administration allowed industrial policy ideas to survive in “hibernation,” ultimately reemerging in the changed policy environment which followed the 2008 financial crisis.