# Industrial Policy **Industrial policy** is government action that deliberately favors particular sectors or firms, through subsidies, tax credits, procurement preferences, tariffs, export controls or equity stakes, on the theory that markets alone will under-supply capacity the country needs. For forty years American economists treated it as a polite name for "picking winners." It is now the bipartisan default, and the second Trump administration has pushed it further than any predecessor, into the government owning pieces of companies. ## An old American idea The intellectual root is [[Alexander Hamilton]]'s 1791 *Report on Manufactures*, which argued that an infant industrial economy needed protective tariffs and bounties to survive British competition. The German economist Friedrich List carried the argument abroad in the 19th century, and the postwar "developmental states" ([[Japan]], [[South Korea]], [[Taiwan]]) used credit allocation, export targets and protection to industrialize. The United States practiced its own version through defense spending (DARPA, the space program, the semiconductor industry's early government customers) while denying it had an industrial policy at all. ## Rejection and return From the 1980s the [[Neoliberalism]] consensus held that governments allocate capital worse than markets and that [[Free Trade]] maximizes welfare. Three shocks broke that consensus: the [[China Shock]] to American manufacturing employment, China's own state-led industrial strategy, and the supply-chain failures of the pandemic. The response came from both parties: | Phase | Instruments | Character | |---|---|---| | Biden (2021–2024) | [[CHIPS and Science Act]] grants, [[Inflation Reduction Act]] tax credits, chip export controls | Subsidy-led, rule-based, open to any qualifying firm | | Trump II (2025– ) | Tariffs ([[Section 232]]; the IEEPA tariffs until the Supreme Court struck them down in *Learning Resources v. Trump*, February 20, 2026), the [[Defense Production Act]], direct equity stakes, golden shares | Deal-led and discretionary, negotiated firm by firm | ## The equity turn The distinctive feature of the Trump version is ownership. The government converted unpaid CHIPS grants into a roughly 10% stake in Intel ([[Intel Government Equity Stake]]), took preferred stock and a price floor in [[MP Materials DoD Rare Earth Partnership]], and accepted a perpetual veto instead of cash in the [[US Steel Nippon Golden Share]]. The [[Government Equity Stakes Roster]] lists the deals; [[American State Capitalism]] treats the concept. The right's case for it runs through [[Oren Cass]] and [[American Compass]]: national security and working-class jobs justify steering capital. The objection, from free-market conservatives and from the left alike, is that discretionary deals invite cronyism, since a firm's fortunes now depend on its relationship with the White House rather than on a published rule. That critique is the reason this site tracks the deals one by one. ## See also - [[American State Capitalism]] · [[Government Equity Stakes Roster]] · [[Golden Share]] - [[CHIPS and Science Act]] · [[Inflation Reduction Act]] · [[Defense Production Act]] · [[Tariffs]] - [[Free Trade]] · [[Neoliberalism]] · [[China Shock]] · [[Robert Lighthizer]]