Everybody Is an Industrial Planner Now

For a generation, suggesting that the state should choose which industries a country builds was the economic equivalent of bad manners. The market knew best, capital would find its level, and ministers who fancied themselves entrepreneurs were politely reminded of their failures. That consensus has quietly collapsed. From Washington to New Delhi to Brussels, governments are once again drawing up lists of sectors they intend to grow, and writing cheques to match. Industrial policy, long treated as a relic, has become respectable, even fashionable. The harder question is whether the people now practising it remember why it fell out of favour in the first place.

Why the taboo broke

Several shocks converged. The pandemic exposed how thin and concentrated certain supply chains had become, with whole economies waiting on a single region for medicines, chips, or basic components. Geopolitical rivalry then turned commercial dependence into a security worry: a country that cannot make its own advanced semiconductors or refine its own critical minerals discovered that it had outsourced more than manufacturing. Add the scramble to build clean energy at scale, and the case for active state direction wrote itself.

What is striking is how bipartisan, and how international, the conversion has been. Politicians who spent careers extolling open markets now speak comfortably of resilience, strategic autonomy, and bringing production home. The vocabulary has shifted from efficiency to security, and once a goal is framed as national security, the usual objections to spending tend to fall quiet.

The seduction of picking winners

The appeal is obvious. A well-aimed subsidy can summon a factory, a cluster of suppliers, and a constituency of grateful workers, all conveniently visible before the next election. Unlike tax cuts or interest-rate decisions, an industrial strategy gives a government something to point at: ground broken, jobs announced, a flag planted in a coveted technology.

But picking winners assumes the picker can see the future more clearly than the thousands of firms competing in it. Governments are not famously good at this. They are subject to lobbying, to regional horse-trading, and to the temptation of propping up yesterday's champions rather than tomorrow's. The same political energy that builds a plant makes it almost impossible to close one that fails.

Old lessons, relearned slowly

The economies usually cited as industrial-policy successes shared an unglamorous discipline: they tied support to performance, exposed favoured firms to export competition, and withdrew help when results did not come. The failures, by contrast, dispensed money as patronage and called it strategy. The difference was rarely the ambition. It was the willingness to let recipients fail.

Today's planners face a subtler trap. When many countries subsidise the same sectors at once, the result can be a glut, with everyone overbuilding capacity in the hope of being the survivor. Public money then chases public money across borders, and the taxpayer underwrites a race that may end in shuttered plants and recrimination.

What separates strategy from spending

The distinction worth watching is whether governments build the boring institutional machinery that makes industrial policy work: independent evaluation, sunset clauses, and the courage to admit a bet has soured. A strategy that cannot be wound down is not a strategy but a habit. The countries that fare best will probably be the ones that treat their own enthusiasm with suspicion.

Industrial policy is neither the panacea its champions imply nor the folly its critics insist upon. It is a powerful and expensive tool that rewards patience, candour, and self-restraint, three qualities that political cycles rarely supply. Everybody is a planner now. The test of the coming years is which of them can also be a disciplined one, and which will simply rediscover, at considerable cost, the lessons their predecessors learned the hard way.