In the 1980s, the administration of President Ronald Reagan promoted free-market competition under the banner of “Reaganomics,” which emphasized spending cuts and deregulation. Industrial policy aimed at selectively supporting industries deemed potential winners was criticized for potentially creating economic inefficiencies, as was believed to have occurred in the Soviet Union.
However, interest in industrial policy revived in the United States following the 2008 global financial crisis. As an emergency measure, the U.S. government provided a bailout for General Motors and introduced measures to stimulate demand in selected sectors, including the market for environmentally friendly vehicles.
After President Joe Biden took office in 2021, the emphasis on using industrial policy to enhance the competitiveness of U.S. industry became even stronger. In an article published before he joined the Biden administration, Jake Sullivan, who later served as Assistant to the President for National Security Affairs, wrote, “Advocating industrial policy was once considered embarrassing—now it should be considered something close to obvious.”
The Biden administration pursued an investment-driven industrial policy through legislation including the Infrastructure Investment and Jobs Act and the CHIPS and Science Act, the latter of which promotes domestic semiconductor production. This policy shift was driven by technological competition with Chinese companies and concerns over supply chain risks.
Earlier, the first Trump administration had sought to encourage the reshoring of manufacturing to the United States through its “Buy American” policy, which prioritizes U.S.-made products in government procurement. It also imposed tariffs on imports, including steel and aluminum products. The second Trump administration has placed even greater emphasis on tariffs and the reshoring of manufacturing.
However, some argue that the U.S. government has long provided strong support for technological innovation and industrial development. One example of this support is the work of the Defense Advanced Research Projects Agency (DARPA), an agency within the Department of Defense. To promote long-term research and development, DARPA has supported technological innovation in fields such as information and communication technology (ICT) and electronics by fostering collaboration among universities, companies, and research institutions. The United States has also developed a government-backed venture capital model that links government technology needs with private-sector startups.
Professor Robert Wade of the London School of Economics and Political Science has characterized the United States as a “developmental state in disguise,” highlighting its continued support for industrial development under the banner of a free-market economy.
>> Original text in Japanese
* Translated by RIETI.
August 6, 2026 - Published in Nihon Keizai Shimbun's " Introduction to Economics—New Trend in Industrial Policy "
