Industrial Policy is defined as government policy (direct investment, tax credits, etc.) adopted to encourage the development and growth in all or part of the economy. Important examples of the US approach to the Nation’s Infrastructure as Policy include the National Interstate Highway System, the Tennessee Valley Authority, the Works Projects Administration, and so forth.  This module will look at National Infrastructure as Policy—when has it worked, and when has it failed, and why.

Import and export controls are an effective tool of Industrial Policy. However, this tool’s use must be considered carefully, especially in the defense sector. Overly restrictive policies can harm US industrial competitiveness and the ability to sell goods overseas, while restrictions that are too loose can result in advanced capabilities falling into the hands of adversaries.  This module will examine such tools as the International Traffic in Arms Regulations (ITAR), the Buy American Act, and Buy America Laws, etc., and how they relate to the defense and other private sector industries.

Balancing government and industrial investments in areas like R&D and Capital Expansion is delicate.  For a long time, industry received a fairly large tax break to invest in R&D and Capital Expansion, but recent changes to the Federal Tax Code severely scaled back incentives for industry to “invest in themselves”, driving stagnation in long-term competitive growth.  This module examines the value and cost of Industrial taxation and credits.   

A key question when examining Industrial Policy, especially in the global economic context, is how to balance “make at home” with “have available at home”.  There are many important factors to consider, including scarcity and sourcing of materials. Necessarily, policy decisions will elicit regulatory framework quandaries, especially pertaining to questions about the environment and the criticality of components and or materials used. This module will explore the implications of product components to include critical minerals and rare-earth elements, and how they influence “make” or “store” decisions for derivative products.

While the levers of industrial policy vary (grants, loans, and tax credits, etc.), they tend to target four primary areas: Infrastructure, Workforce, R&D, and Production. While development of Infrastructure and Workforce industrial policies tend to be relatively independent of the others, R&D and Production frequently overlap. The balance of R&D and Production is typically driven by urgency (what do I need now?) and potential (quantum or AI may be big in the future, so investment is a necessity to keep up). This module looks at the tradeoffs involved with this decision.

The final investment component is workforce development.  The US used to have a reliable pipeline of technical expertise enabled by a robust flow of STEM-based Ph.D.’s. Today, STEM-focused trade schools have withered and, with rare exception, up to 75% of graduate students in STEM disciplines at US universities are not US citizens. Retaining that talent has only become more difficult. Ultimately, strengthening US industrial competitiveness hinges on a capable and enduring workforce which will require tenuous but necessary changes to policy.