A review of the latest book by CPA board members Marc Fasteau and Ian Fletcher.
On October 24, 2024, during the Multilateral Industrial Policy Forum held in Riyadh, Saudi Arabia, the United Nations released a soberingreport on America’s declining position in the global manufacturing landscape. In many ways, Xi Jinping is right: China is rising, and the U.S. is in decline. By 2030, China is expected to account for 45 percent of global industrial production – up from 6 percent in 2000. By that year, the U.S. will account for only 11 percent, a more than 50 percent decline from its 25 percent share 30 years prior.
Thus, in less than one generation China has gone from making Happy Meal toys and Christmas ornaments to creating rival AI and social media platforms. Most EV car makers cannot build a car without partnering with a Chinese battery company. Solar is almost totally dominated by Chinese brands. And at a time when the U.S. is trying to transition to renewable energy, most offshore wind equipment ismade in Europe or China.
The European Union is in even worse shape than we are. Germany’s percentage of global manufacturing production will go from eight percent to three by 2030, if the UN’s forecast is correct. And most other EU nations will fall off the map, lucky to account for even one percent.
Global trade today is contentious. But it used to at least seem rather easy, before a new bipartisan consensus on trade emerged to challenge the old laissez-faire, free trade model. One could argue that this began at the grassroots level, perhaps when independent presidential candidate Ross Perot famously warned in 1992, during a debate with Bill Clinton and George H.W. Bush, of a “giant sucking sound” of American manufacturing jobs going to Mexico if the North American Free Trade Agreement was passed. And today, members of Congress, and of course President Trump, are at least starting to implement policies designed to protect American industry from low-cost, low-tax, weak-environmental-regulation, high subsidy nations around the world.
Why? In large part because the U.S. has been falling behind in the international competition for high-value industries and good jobs because it bought into several myths: that government intervention should be limited, that trade should be duty-free, and that currency exchange rates should be left to the market. But this status quo version of globalization has gutted American manufacturing, leaving huge sectors dependent on imports, many of which come from our country’s most dangerous geopolitical rival.
To reverse this ongoing crisis, ignoring the usual suspects on these matters is therefore a good starting point. In their new book, Marc Fasteau and Ian Fletcher describe the gist of the problem this way:
“Nations already hosting advantageous industries must defend themselves against efforts to take them away. So effective industrial policy for the U.S. will require protectionist measures. But because a group of interrelated mainstream theories opposes almost all protectionism, choosing sound policies requires understanding these theories and why they are misleading half-truths.”
So, what would the alternative be? Something like what’s sketched out in Industrial Policy for the United States: Winning the Competition for Good Jobs and High-Value Industries, where Fasteau and Fletcher make the case for a strategic, long-term industrial policy. They argue that this is the only way for the U.S. to retain its leading edge, especially when its main rival – China — is a long-term, strategic thinker with over a billion mouths to feed.
This book is long, comprehensive, and intellectually sophisticated enough for professional economists. But it’s written in a lively, accessible style, so that those with a business or policy interest in the new tariff debate and why laws like the CHIPS Act are warranted can pick a chapter and learn something. Industrial Policy for the United States seeks to list all of the tools a country can use to improve its industrial base and entice businesses to invest in manufacturing. If these tools are deployed, the authors argue, the results will be good for local economies and labor, who will be employed in higher-paying jobs in advanced manufacturing, rather than in low-wage service jobs.
The standard argument against this kind of industrial policy is that it involves “picking winners,” which is supposedly both economically inefficient and an invitation to political corruption. The authors respond to that argument in their chapter “The Industrial Policy Toolkit”:
“In a developed nation like the U.S., picking winners will very rarely be appropriate, as the sophistication of our private sector, unlike in developing nations, makes it quite capable of picking most winners on its own. Most of the industrial policies America will need will not involve favoring the profitability of any one enterprise. Picking technologies and favoring advantageous sectors is not picking winners, because these policies do not direct profit to any particular company. Nor is it picking winners to level the playing field with tariffs.”
Fasteau and Fletcher argue that with this kind of policy there will always be a “market layer” between governmental actions and private-sector bottom lines. This doesn’t mean the government won’t sometimes need to single out individual sectors, or companies, it deems strategic. “It would not be rational for America to neglect Boeing or Intel, its de facto national champions in large commercial aircraft and semiconductors,” they say, arguing that it was correct for the CHIPS Act of 2022 to subsidize Intel’s efforts to manufacture the most advanced computer chips here at home instead of building a new factory in China, or outsourcing manufacturing to someone else in Asia. The appropriate quid pro quo for such support is that the recipient firms have to develop and manufacture advantageous, risky, difficult technologies, with long time horizons before they are profitable, in the U.S.
The authors highlight four countries as case studies of successful industrial policy, including manufacturing powers like Japan, and three cautionary tales (Britain, India, and Argentina). They also zero in on specific industries, such as cars, chips, and robotics.
From the book:
“For decades, Washington’s policies toward the auto industry swung between neglect and outright hostility, punctuated by assistance in recurring crises. The federal government failed to respond appropriately to foreign incursions into the American market. It distorted corporate strategies with antitrust enforcement. It imposed poorly designed environmental policies. And it failed to manage exchange rates. The net result was that government did not do its part to preserve a distinct American-owned, -managed, and -located industry. As a result, car and parts production in this country is increasingly foreign-owned and run, complicating future efforts to support the sector with industrial policy.”
Since NAFTA, the U.S. auto industry has become the North American auto industry. The U.S. recorded a $156 billion tradedeficit in passenger cars in 2024 and an $86.79 billion deficit in car parts. (The overall goods deficit was a record $1.22 trillion.)
Industrial Policy for the United States tackles one of the hardest problems of global, organized society: getting trade right. Readers will understand that this may be harder than getting to the moon – but without a coordinated effort, and domestic manufacturing, the moon landing does not happen.
For Fasteau and Fletcher, effective industrial policy will require coordination of many executive-branch agencies and the congressional committees that oversee them. And the only government official with the electoral mandate, legal authority, and broad purview to lead this effort is the president, so a strong, consistent presidential commitment will be essential.
The authors’ final caution is that a nation that loses its industrial prowess, as the UN report suggests will happen to the U.S. by 2030, does not easily get it back. They note that, “Specialized expertise—especially learning-by-doing, which requires actual production—can be difficult to acquire.” This book serves as much of a warning as it does a how-to guide for keeping industry alive.
Neither author is a professional, PhD-trained economist, which helped them think outside the box of the failed orthodoxy of the profession. Fasteau, a vice-chairman of the Coalition for a Prosperous America (CPA), was an investment banker in New York for 14 years, including as a Managing Director and partner at Dillon Read. Fletcher, a member of the CPA’s advisory board, is a former IT consultant and consulting economist who wrote the prescient 2010 bookFree Trade Doesn’t Work and co-wroteThe Conservative Case Against Free Trade
The book has garnered numerous praise, including an endorsement from new Secretary of State Marco Rubio.
And as Jeff Ferry, chief economist emeritus at CPA and a pathbreaking dissident economist in his own right, said: “Industrial Policy for the United States is essential reading for anyone who wants to understand the important role industrial policy and the technology industry have played in the economic history of the U.S. and every other major nation. It is authoritative, comprehensive, and insightful.”
Whatever the ultimate answers to America’s current economic problems, some are likely to be drawn from the ideas Fasteau and Fletcher lay out in their latest work.
GET YOUR COPY TODAY!
INDUSTRIAL POLICY FOR THE UNITED STATES
A work of rigor and ambition, Industrial Policy for the United States by Marc Fasteau and Ian Fletcher is essential reading that provides a new theoretical model for how economies develop, challenging the free-market orthodoxy on economic growth and trade policy.
CPA is the leading national, bipartisan organization exclusively representing domestic producers and workers across many industries and sectors of the U.S. economy.
CPA Book Club: Can the U.S. Win the Competition for High Value Industries?
A review of the latest book by CPA board members Marc Fasteau and Ian Fletcher.
On October 24, 2024, during the Multilateral Industrial Policy Forum held in Riyadh, Saudi Arabia, the United Nations released a sobering report on America’s declining position in the global manufacturing landscape. In many ways, Xi Jinping is right: China is rising, and the U.S. is in decline. By 2030, China is expected to account for 45 percent of global industrial production – up from 6 percent in 2000. By that year, the U.S. will account for only 11 percent, a more than 50 percent decline from its 25 percent share 30 years prior.
Thus, in less than one generation China has gone from making Happy Meal toys and Christmas ornaments to creating rival AI and social media platforms. Most EV car makers cannot build a car without partnering with a Chinese battery company. Solar is almost totally dominated by Chinese brands. And at a time when the U.S. is trying to transition to renewable energy, most offshore wind equipment is made in Europe or China.
The European Union is in even worse shape than we are. Germany’s percentage of global manufacturing production will go from eight percent to three by 2030, if the UN’s forecast is correct. And most other EU nations will fall off the map, lucky to account for even one percent.
Global trade today is contentious. But it used to at least seem rather easy, before a new bipartisan consensus on trade emerged to challenge the old laissez-faire, free trade model. One could argue that this began at the grassroots level, perhaps when independent presidential candidate Ross Perot famously warned in 1992, during a debate with Bill Clinton and George H.W. Bush, of a “giant sucking sound” of American manufacturing jobs going to Mexico if the North American Free Trade Agreement was passed. And today, members of Congress, and of course President Trump, are at least starting to implement policies designed to protect American industry from low-cost, low-tax, weak-environmental-regulation, high subsidy nations around the world.
Why? In large part because the U.S. has been falling behind in the international competition for high-value industries and good jobs because it bought into several myths: that government intervention should be limited, that trade should be duty-free, and that currency exchange rates should be left to the market. But this status quo version of globalization has gutted American manufacturing, leaving huge sectors dependent on imports, many of which come from our country’s most dangerous geopolitical rival.
To reverse this ongoing crisis, ignoring the usual suspects on these matters is therefore a good starting point. In their new book, Marc Fasteau and Ian Fletcher describe the gist of the problem this way:
So, what would the alternative be? Something like what’s sketched out in Industrial Policy for the United States: Winning the Competition for Good Jobs and High-Value Industries, where Fasteau and Fletcher make the case for a strategic, long-term industrial policy. They argue that this is the only way for the U.S. to retain its leading edge, especially when its main rival – China — is a long-term, strategic thinker with over a billion mouths to feed.
This book is long, comprehensive, and intellectually sophisticated enough for professional economists. But it’s written in a lively, accessible style, so that those with a business or policy interest in the new tariff debate and why laws like the CHIPS Act are warranted can pick a chapter and learn something. Industrial Policy for the United States seeks to list all of the tools a country can use to improve its industrial base and entice businesses to invest in manufacturing. If these tools are deployed, the authors argue, the results will be good for local economies and labor, who will be employed in higher-paying jobs in advanced manufacturing, rather than in low-wage service jobs.
The standard argument against this kind of industrial policy is that it involves “picking winners,” which is supposedly both economically inefficient and an invitation to political corruption. The authors respond to that argument in their chapter “The Industrial Policy Toolkit”:
Fasteau and Fletcher argue that with this kind of policy there will always be a “market layer” between governmental actions and private-sector bottom lines. This doesn’t mean the government won’t sometimes need to single out individual sectors, or companies, it deems strategic. “It would not be rational for America to neglect Boeing or Intel, its de facto national champions in large commercial aircraft and semiconductors,” they say, arguing that it was correct for the CHIPS Act of 2022 to subsidize Intel’s efforts to manufacture the most advanced computer chips here at home instead of building a new factory in China, or outsourcing manufacturing to someone else in Asia. The appropriate quid pro quo for such support is that the recipient firms have to develop and manufacture advantageous, risky, difficult technologies, with long time horizons before they are profitable, in the U.S.
The authors highlight four countries as case studies of successful industrial policy, including manufacturing powers like Japan, and three cautionary tales (Britain, India, and Argentina). They also zero in on specific industries, such as cars, chips, and robotics.
From the book:
Since NAFTA, the U.S. auto industry has become the North American auto industry. The U.S. recorded a $156 billion trade deficit in passenger cars in 2024 and an $86.79 billion deficit in car parts. (The overall goods deficit was a record $1.22 trillion.)
Industrial Policy for the United States tackles one of the hardest problems of global, organized society: getting trade right. Readers will understand that this may be harder than getting to the moon – but without a coordinated effort, and domestic manufacturing, the moon landing does not happen.
For Fasteau and Fletcher, effective industrial policy will require coordination of many executive-branch agencies and the congressional committees that oversee them. And the only government official with the electoral mandate, legal authority, and broad purview to lead this effort is the president, so a strong, consistent presidential commitment will be essential.
The authors’ final caution is that a nation that loses its industrial prowess, as the UN report suggests will happen to the U.S. by 2030, does not easily get it back. They note that, “Specialized expertise—especially learning-by-doing, which requires actual production—can be difficult to acquire.” This book serves as much of a warning as it does a how-to guide for keeping industry alive.
Neither author is a professional, PhD-trained economist, which helped them think outside the box of the failed orthodoxy of the profession. Fasteau, a vice-chairman of the Coalition for a Prosperous America (CPA), was an investment banker in New York for 14 years, including as a Managing Director and partner at Dillon Read. Fletcher, a member of the CPA’s advisory board, is a former IT consultant and consulting economist who wrote the prescient 2010 book Free Trade Doesn’t Work and co-wrote The Conservative Case Against Free Trade
The book has garnered numerous praise, including an endorsement from new Secretary of State Marco Rubio.
And as Jeff Ferry, chief economist emeritus at CPA and a pathbreaking dissident economist in his own right, said: “Industrial Policy for the United States is essential reading for anyone who wants to understand the important role industrial policy and the technology industry have played in the economic history of the U.S. and every other major nation. It is authoritative, comprehensive, and insightful.”
Whatever the ultimate answers to America’s current economic problems, some are likely to be drawn from the ideas Fasteau and Fletcher lay out in their latest work.
GET YOUR COPY TODAY!
INDUSTRIAL POLICY
FOR THE UNITED STATES
A work of rigor and ambition, Industrial Policy for the United States by Marc Fasteau and Ian Fletcher is essential reading that provides a new theoretical model for how economies develop, challenging the free-market orthodoxy on economic growth and trade policy.
MADE IN AMERICA.
CPA is the leading national, bipartisan organization exclusively representing domestic producers and workers across many industries and sectors of the U.S. economy.
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