Industrial Policy and the New Economy: The Political Economy of High-Tech Development in the United States (1970-2015)

In the 1970s, a group of United States policymakers attempted to apply a new and protean economic idea, industrial policy, to solve the dual crises of stagflation and deindustrialization. It is well documented that these individuals failed because they attempted to impose the coordinated market economy model of Japanese industrial policy onto the liberal market economy of the United States. Many have argued that the push for an American industrial policy died in the 1980s. I argue, however, that without federal intervention to establish a comprehensive national industrial policy, a group of pragmatic state-level policymakers generated their own set of industrial policies focused on the commercialization of innovative technologies. These programs relied on non-market strategic cooperation and the public provision of patient capital to small, innovative firms, signaling a significant deviation from the traditional understanding of the American liberal market economy model of capitalism. Over time, this industrial policy model pioneered by states "trickled-up" to the national level to form a decentralized substrate of federal and state-level programs that fit the nation's political-institutional context. Today, these programs constitute a comprehensive and unacknowledged national industrial policy regime, and this regime has proven particularly effective at leveraging networks to facilitate technology development in the decentralized "post-Fordist" new economy. These programs, however, were not sufficient to dislodge the United States from its "low-road" economic model that has resulted in inequitable growth and wage stagnation since the 1970s, and new industrial policy solutions are required to address these issues.