This book advocates a coherent and comprehensive industrial policy for the United States. So it must deal with the dominant view of most US economists, policymakers, journalists, and citizens that industrial policy has not worked and cannot work. It does this step by step:
PART I: THE UNDERLYING ECONOMICS
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Chapter 1, Why the Free Market Can’t Do Everything, explains why free markets, although absolutely crucial, cannot deliver prosperity on their own, and why purely free-market thinking cannot design the industrial policies that can.
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Chapter 2, The Dynamics of Advantageous Industries, spells out the nature of the “advantageous” industries that industrial policy should target, and the economics that derives from this.
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Chapter 3, The Industrial Policy Tool Kit, describes the tools governments worldwide, including the US, have used to implement industrial policy to grow and retain the most valuable industries in their countries.
Chapter 4, Trade, Currencies, and Industrial Policy, explains how international trade, including comparative advantage, foreign exchange rates, and tariffs, presents the US with both threats and opportunities.
PART II: COUNTRY CASE STUDIES
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These studies:
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Explain the principles, practices, successes, and pitfalls of industrial policy worldwide over many decades.
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Document how industrial policy has driven rapid, high-quality economic development using the same basic principles in countries with widely differing cultures and governments
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Illustrate the many ways industrial policy must address a nation’s stage of economic development, its political structure, the sophistication of its industries, and the trade and exchange-rate policies of other countries
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Show that industrial policy failures are not due to unknowable causes, but to readily comprehensible errors that the US can choose to avoid.
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Rebut critics who argue that industrial policy has never truly succeeded or, where its success is undeniable, that it is due to a culture or political structure so different from ours that Americans should not even bother to try
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Each country chapter conveys the above ideas in a different way:
Chapter 5, Japan, describes an outstanding case of successful, proactive industrial policy, the first that attracted American attention. This chapter introduces the all-important Asian economic model and how industrial policy plays out over time at national scale.
Chapter 6, Korea, discusses that country’s industrial policy, derived from Japan’s, showing how industrial policy has been transmitted around the world as a practitioners’ tradition, rather than a theoretical doctrine. This chapter is more historical, concrete, and industry-specific than Japan’s.
Chapter 7, China, explores how that country’s extremely proactive, systematic, and aggressive industrial policy ups the ante to a full-blown economic challenge to the US. Geopolitics and national security enter the narrative here.
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Chapter 8, Germany, extends the book's model beyond East Asia and introduces the idea of indirect, multilevel industrial policies, in sharp contrast to the explicit, centralized East Asian approach.
Chapter 9, France, because that country’s record of both success and failure, despite having all the ingredients for success, is very revealing.
Chapter 10, Britain, is the book's first example of a systematically unsuccessful industrial policy, chosen because Britain's familiarity to Americans makes its travails easy to grasp.
Chapter 11, India, is another failure case and a Third World example to show that the book's theory applies to radically different societies and levels of development.
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Chapter 12, Argentina, is discussed because its decades of catastrophic industrial policy failures give a sharp, readily understood picture of what not to do.
PART III: THE FORGOTTEN HISTORY
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Chapter 13, The Renaissance Origins of Industrial Policy, explains how the centuries-long, multi-continental record of industrial policy success bolsters its credibility today.
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Chapter 14, America 1750–1865, shows how, contrary to prevailing myth, the US was founded as protectionist nation and used industrial policies to develop economically.
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Chapter 15, America 1866–1939, describes the forgotten hand of industrial policy in well-known events from the Civil War to the Great Depression.
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Chapter 16, America 1940–1973, explains how the US abandoned its successful heritage of protectionism and, due to the Cold War, undertook massive governmental support for technology development.
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Chapter 17, America 1974–2007, describes how the US largely misdiagnosed its growing economic problems and, instead of returning to sound trade and industrial policies, chose increasingly extreme free-market strategies.
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Chapter 18, America 2008–Present, tells how Obama tried, but failed, to fix these problems by doubling down on free-market policies, and how Trump challenged this consensus, breaking new ground that Biden built on.
PART IV: INNOVATION AS A SYSTEM
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These chapters show that the US already has quite a lot of effective industrial policy, even if not recognized as such, supporting the book's argument that the US can design and execute coherent industrial policy. And they highlight deficiencies of America’s current innovation system that need fixing.
The detail in these chapters makes clear the scope, diversity, and mechanisms of existing programs. These chapters show how innovation is not a one-size-fits-all process, but requires institutions tailored to the needs of specific industries and contexts.
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Chapter 19, Governmentally Supported Innovations, provides striking counterexamples against the widely held belief that almost all innovation comes from the private sector.
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Chapter 20, Federal Science and Technology Programs, describes the most established, least controversial, most widely understood federal programs supporting innovation.
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Chapter 21, Federal Proactive Innovation Programs, turns to lesser known, more controversial institutions that exemplify what the authors would like to see happen, as opposed to what already exists.
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Chapter 22, Industrial Policy for Advanced Manufacturing, looks at advanced manufacturing to elucidate the key battlefield where innovation rivalry will play out in American manufacturing.
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Chapter 23, Micro-governance of Industrial Policy, examines the organization and management of day-to-day operations of industrial policy agencies for innovation and its commercialization.
Chapter 24, The Crisis of the American Patent System, describes the decline of our patent system that will be a major negative for US industrial policy unless reversed.
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PART V: INDUSTRY CASE STUDIES
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Chapter 25, Automobiles, introduces the reader to what failed US industrial policy looks like on a multi-decade, industry-specific level.
Chapter 26, Semiconductors, Aviation, and Space, covers military industrial policies in the three industries in which the post–World War II US has had the most success at industrial policy.
Chapter 27, Robotics, describes the superior scale and sophistication of foreign industrial policy in an industry that is already important and will only become more so.
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Chapter 28, Nanotechnology, shows how much technological “wide open space” there is for new industries and industrial policy.
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PART VI: CLUSTER CASE STUDIES
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Chapter 29, The Massachusetts Life Sciences Cluster, features a state-level industrial policy success story and a good illustration of how to tailor policies to the characteristics and needs of the industry being supported.
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Chapter 30, The Upstate New York Semiconductor Cluster, shows how state-level policies require many different players and, ultimately, support from Washington.
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RECOMMENDATIONS
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Here are dozens of specific policy implications, covering everything from the tax code to geopolitics. Some are large and some are small. Some are within easy political reach, while others will be very controversial. All are intricately connected, forming a complete whole.
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