Industrial policy is gaining momentum in many countries, and some economists see it as a successful model. China. In a world facing many challenges, there is a resurgence of interest in his role. industrial policy And her governmental support To enterprises and industries considered to be of strategic importance. People are wondering if we can trust the free market, and there are fears that countries are losing their innovation edge. National security hawks also worry about relying on competitors for critical resources such as semiconductors and pharmaceuticals. IN USAIndustrial policy has ceased to be a taboo topic. Both parties support the Semiconductor Incentive Act. The industrial policy of the US presidential administration Joe Biden is extensive, with at least two semiconductor manufacturing clusters planned by 2030. Those who receive government funding must comply with a series of requirements, including a ten-year ban on the expansion of advanced semiconductor manufacturing facilities in China, as well as a commitment to affordable childcare for employees. The policy is part of Washington’s broader approach, which also includes $370 billion in clean energy subsidies under the Inflation Reduction Act.

Japan, meanwhile, is providing more than $500 million in subsidies to 57 companies to encourage them to invest within its borders as part of a broader effort to reduce dependence on China. Similarly, the European Union is strengthening its industrial policy, including allocating 160 billion euros from the coronavirus recovery fund to digital innovations such as chips, batteries and climate change adaptation technologies. In implementing industrial policy as part of their development strategy, countries often face competing goals such as sustaining economic growth, maintaining financial and fiscal stability, and creating “national champions”.

There are governments with the following options: a) Those that prioritize financial and fiscal stability along with supporting safe national champions. This strategy often emphasizes national security, prudence and resilience rather than the potential benefits of a more aggressive development strategy. b) Those that emphasize economic development and the selection of national champions who take risks. c) Finally, those who, following fair market capitalism, prioritize stability along with economic growth without focusing on national champions. Fair market capitalism also offers a different path to achieving national security goals than the industrial policy approach.

There are fears that countries are losing their edge in innovation.

Instead of each country promoting national champions, this approach encourages a diversified global supply chain based on open and fair trade, thus avoiding an economic arms race. This approach can lead to greater efficiency and innovation in the long term, while reducing the risks of supply chain disruptions through diversification and international cooperation.

* Economist at the International Monetary Fund. The article was published on the IMF blog.