Noah Smith at Noahpinion:
The other day I gave a talk at a conference in Canada about industrial policy. When we came to the inevitable question of which specific industries Canada should target, I had an answer ready: “the Electric Tech Stack”.
The fact that I had an answer ready surprised some people in the audience. The traditional criticism of industrial policy is that it’s all about “picking winners”, and that winners are very hard for even the smartest person to pick. But in some cases it’s actually very easy to pick winners. In the 19th century, every country knew they needed railroads, both for national defense and for transporting goods. In the 20th century, many countries knew they needed an auto industry, because those same assembly lines and supply chains could be quickly repurposed to make tanks and other military vehicles in case of a war. In the early 20th century, countries knew that having a steel industry was crucial for creating most of the important military equipment, while in the later century, the U.S. correctly guessed that having a powerful semiconductor industry was crucial for dominance in precision weaponry.
In all four of these cases, there were arguments about the economic benefits of promoting the industries in question, but in the end it was military necessity that tipped the balance decisively in favor of industrial policy. As I told the folks in Canada, a similar thing is true in the 2020s.
More here.
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