Opinion | A Recipe for a Striving America

I travel a lot. Just over the last several weeks, for example, I’ve been in some rural and redder parts of America (in Idaho, Kansas, Nebraska, Ohio, Texas) and some bluer parts (in California, Illinois, New York). My overall impression is that the social, economic and psychological chasms between these two zones are wider than ever.

Of course, we’ve always had vast inequalities in America, but it used to feel like inequality within a single society. Now it feels like separate societies with almost no social exchange between the two. In parts of the country with fewer college graduates, the towns often look shabbier, they’re poorer, the effects of the opioid crisis are evident, the young are leaving, obesity is more common, the zeitgeist is grimmer, civic life is hollowed out.

We can all list the forces that contribute to this widening divide, but a big one is this: Over the past 70 years or so, America, without much conscious deliberation, embraced its information-age future. In 1973, the sociologist Daniel Bell wrote a book called “The Coming of Post-Industrial Society.” Bell wrote that the leadership in the emerging social order would come from the “intellectual institutions.” He added, “the entire complex of prestige and status will be rooted in the intellectual and scientific communities.”

In the ensuing decades, finance, consulting and tech rose while manufacturing shrank. According to the St. Louis Federal Reserve, manufacturing made up 28 percent of America’s nominal gross domestic product in 1953. By 2015 it was 12 percent, and today it is lower still.

During these decades most of us in the news media, government, the academy and other sectors developed a distinct, educated-class way of seeing the world. We assumed, for example, that the best way to expand opportunity and boost growth was through better schooling. The Bushes, Bill Clinton and Barack Obama all produced important education reforms. The thinking was simple: If we invested enough in human capital — through preschool, community colleges, research universities and beyond — we could prepare the next generation for the high-tech and service-sector jobs of the future. This idea is certainly central to the way I’ve seen the world over the last few decades.

We were basically telling people in manufacturing regions to get out and shift to services. In a provocative 2023 essay in American Affairs, David Adler and William B. Bonvillian laid out the trends: The vocational education system withered. Financial markets rewarded outsourcing. There was a growing disconnect between the American innovation system and the American production system. That is to say that while America produces new ideas it has not made similar advances in producing breakthroughs in manufacturing processes. In the mid-20th century, America led the world in building cars and ships, but, Adler and Bonvillian write, “As the mass production era was succeeded by new waves of manufacturing advances, America would no longer be king of manufacturing.”

Economically, this shift from manufacturing to ideas made total sense. Let workers in low-wage countries work in factories. Americans will graduate to high-wage information-age jobs. American society will prosper as we do what we’re best at. And indeed, the American economy is the strongest big economy in the world. High-income manufacturing nations like Japan and Germany are stagnant, as American wealth just keeps growing.

But sociologically, politically and culturally, this shift from brawn to brains has contributed to the vast chasms we see today. Places where highly educated information-age denizens gather are gleaming, while many other places are desolate. The people who have the kinds of abilities that make for school success are thriving; people with other kinds of abilities are not.

This state of affairs has produced a seismic shift in how people in both parties think about public policy. The old bipartisan education-can-save-us mantra is falling into the background. A new bipartisan we-need-to-rebuild-manufacturing mantra is taking hold. Though his wife is a teacher, Joe Biden has not been an education president. He’s been an industrial policy president. He’s tried to use hundreds of billions of dollars to help America build things — through big infrastructure projects and in factories.

In the spring of 2023, Biden’s national security adviser, Jake Sullivan, gave a speech at the Brookings Institution laying out the economic mistakes the Biden administration has tried to correct. He argued that while pursuing economic efficiency, America had let entire supply chains of strategic goods, like microchips, move overseas. He argued that it was a mistake to believe that the type of growth a country achieved didn’t matter. It was a mistake to believe that if the financial and tech sectors drove wealth creation, then it didn’t matter if infrastructure atrophied. He argued that when a large nonmarket economy like China’s begins to dominate the world through brute force, then market economies need to change their policies in response.

He summarized the Biden approach: “A modern American industrial strategy identifies specific sectors that are foundational to economic growth, strategic from a national security perspective and where private industry on its own isn’t poised to make the investments needed to secure our national ambitions. It deploys targeted public investments in these areas that unlock the power and ingenuity of private markets, capitalism and competition to lay a foundation for long-term growth.”

In other words, industrial policy: The government chooses key sectors that will spur economic growth and enhance national security. The government supports those sectors with direct subsidies, tax credits, trade protections and other measures. The government isn’t just educating people; it’s shaping the economy in a much more aggressive way. As the economics writer Noah Smith has noted, if the 1930s brought us the New Deal and the 1980s brought us the free-market Reaganism, today we are entering an era of “New Industrialism.”

I think of it this way. The Clinton-to-Obama era was bottom up. We sought to give people the skills to rise. The Biden era is more top down. The effort is to create the industries that will suck workers up to middle-class status.

Last week, Kamala Harris signaled that she would continue the trend. “One of the recurring themes in American history is that when we make an intentional effort to invest in our industrial strength, it leads to extraordinary prosperity and security,” she said.

The 2024 election could be an occasion to debate this fundamental shift in policy. This election could be a moment to ask fundamental questions: Is it smart to focus our policy attention on manufacturing, which is only one-tenth of the American economy, and not the other 90 percent? Is it plausible to think America can ever be a manufacturing powerhouse again? Even if manufacturing recovers, does that mean manufacturing jobs will recover? The new plants employ robots, not humans. Does industrial policy even work?

We’re not having this debate. That’s in part because Harris and Donald Trump are not exactly conviction politicians with well-defined worldviews. It’s also in part because both parties agree on this shift to manufacturing. It’s just that to achieve this goal, Trump wants to primarily use tariffs and the Democrats propose using subsidies and other measures.

I think Trump’s tariff idea is insane, but I’ve also genuinely been uncertain about the prudence of Democrats’ new industrial policy focus. Will it contribute to social cohesion and an American economic renaissance, or just become a sinkhole of debt-funded spending that will drag us to stagnation?

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Personally, I have no philosophic objections to aggressive government efforts to reshape the American economy. I’m the kind of guy who first read Alexander Hamilton’s 1791 Report on Manufactures with a thrill in my heart. Hamilton sought to transform an agrarian society into a dynamic, industrial one. I’m the kind of guy who reveres Republican legislators like William Pitt Fessenden, who, during the Civil War, passed the gigantic pieces of legislation that fueled America’s transformation into an economic colossus. I strongly believe that any healthy society needs to find ways to reward a variety of abilities, not just the one our current meritocracy rewards: the ability to please teachers and take tests during adolescence.

But I wasn’t born yesterday. Industrial policy has been around for a while, and it’s often been a miserable failure. During the middle of the 20th century, governments around the world intervened aggressively to jump-start economic development. Most of those projects were counterproductive. For example, in the 20th century African nations and global development agencies spent tremendous amounts of money to industrialize Africa. But Africa failed to industrialize. Part of the problem was bad policy. As one Brookings Institution report put it, “Investments were often made with little regard to efficiency, and the managerial capacity of the state was badly overstretched.”

In 2021, the Peterson Institute for International Economics released a report called “Scoring 50 Years of US Industrial Policy, 1970-2020.” It found that the programs that worked best focused on basic research and development, like DARPA, which helped develop the internet. The programs that worked worse were the ones in which government tried to target and develop specific sectors or companies, like protections and subsidies for steel and semiconductors, and investments in the Solyndra Corporation (solar panels) and Foxconn (electronics). In other words, government is most effective when shaping the conditions in which private companies operate and worse at the kind of targeted interventions that today’s New Industrialists are talking about.

Japan was supposedly an early model of industrial policy success. But the Japanese economy has stagnated. Between 1990 and 2021, the U.S. economy grew by about 110 percent, while the Japanese economy grew by about 25 percent.

China seemed to show that you can build a booming economy through huge government interventions, reviving industrial policy’s prestige around the world. But China grew fastest when it was liberalizing its economy, not after 2010, when its government started intervening more aggressively. Today, China’s economy is slowing. Productivity growth has stalled. Public morale has collapsed. China’s factory activity has declined for five consecutive months.

Another downside of industrial policy is that it creates divisions and bitterness between nations. When you support your own national industries, you end up harming other countries’ industries, including those of your friends and allies. The International Monetary Fund and Global Trade Alert monitored over 2,500 industrial policies around the world last year and found that more than two-thirds distorted trade, discriminating against foreign concerns. Furthermore, this kind of protectionism backfires. More workers lose their jobs when other countries retaliate than gain jobs from the protections themselves.

The final downside I’ll mention is that industrial policy leads to more regulations. When government agencies hand out money, they inevitably attach strings intended to serve other social goals. Some of the Biden administration’s industrial policies have provisions to encourage better child care, more opportunities for women and the economically disadvantaged, and promotion of diversity, equity and inclusion.

I know it sounds like old-school Reaganism to say this, but regulations really do strangle growth. Why is the European tech sector so pathetic compared with the American one? It’s not for lack of smart people, great research centers and government support. In a report last month, the former European Central Bank president Mario Draghi blamed “inconsistent and restrictive regulations.”

Why is the Canadian economy doing so much worse than the American economy? Living standards for Canadians have barely budged since Justin Trudeau took office in 2015. Part of the problem is regulations, especially on energy and mining. Why has the vaunted German economy stagnated? Some experts believe the Germans allowed their economy to become overregulated. Why is it so hard to build housing in America? Regulations.

These are the industrial policy downsides. So does this mean Team Biden is wrong and we should reverse course? Well, not so fast. If you look at the early results of some of the industrial policies passed during the Biden administration, some are pretty fantastic.

The Inflation Reduction Act and the CHIPS and Science Act offered more than $400 billion in subsidies, tax credits and loans to boost industry. They have spurred a tidal wave of private investment spending. For example, chip companies and their suppliers have announced investments totaling $327 billion over the next 10 years. The clean energy sector is booming, too. The U.S. is now spending more than twice as much on factory construction than it did during the Obama and Trump years.

These investments are being made exactly where you’d want them — the formerly industrial Midwest. Along with all the grimness I see, I occasionally get to visit places — upstate New York, eastern Ohio — where people are excited about new chip plants and employers coming in. Their main worry is: Where are we going to find workers?

Not everything is perfect. Government is still government. A Financial Times report found that 40 percent of Biden’s big manufacturing investments have faced delays or been postponed indefinitely. There’s been a lot of spending to create electric vehicle chargers, but so far, not a lot of E.V. chargers have been created. Nor has manufacturing employment risen; it’s roughly the same as in 2019.

But after weighing the pluses and minuses, you’d have to say the Biden agenda is off to a very promising start. It will take a while for the factories under construction to come online and start employing people, but the investments are huge, reviving America’s industrial base.

If I were an economist I might be wary, given industrial policy’s mostly unsuccessful record. But I’m a journalist who mostly sees the world through a sociological and cultural lens. We just can’t continue as a society with the kind of economic, social and cultural chasms that I see in my travels. Something has to be done, and the New Industrialism is right now the best thing out there.

To create a just society we need to build a society that rewards a diversity of skills. I know how to process information, and our current society is built to reward people like me. I’m terrible at working with my hands. I have low spatial intelligence. I don’t have the wisdom and sensitivity to know how to diagnose and correct, say, engine trouble. We have to find more ways to reward the abilities that don’t involve information analysis on a laptop.

So, at the end of the day, I agree with those who say the question is not whether we do industrial policy, but how. And when I think about it, five basic principles come to mind that might guide a modern industrial policy:

Create pleasant surprises. The crucial question for industrial policy is when in the production cycle should the government intervene. Should it restrict itself to funding basic research or, further downstream, should we actively try to subsidize specific companies?

In my view, government should focus on setting the table, not trying to serve the meal. The primary focus should be basic research. Industrial policymakers face an epistemological problem. Government bureaucrats don’t have enough knowledge to plan the future. Basic research turns that disadvantage on its head. When expanding the frontiers of knowledge, you never know what is going to lead to what. DARPA researchers didn’t set out to create Silicon Valley, but that’s what happened. It was a pleasant surprise.

We could have a DARPA for manufacturing, doing research on materials discovery, machine tool innovation, maintenance innovation and execution. How can we most efficiently build stuff?

Pick the low-hanging fruit. I’m suspicious of plans to comprehensively revamp American economic policy. Our economy is pretty awesome. But we have blind spots and scarcities. My Times colleague Ezra Klein and Derek Thompson of The Atlantic have been asking the right question: How can we take areas where there is scarcity and turn them into abundance? I think we all agree we need additional housing, faster trains, cleaner energy, more health research centers and speedier shipbuilding. If we just worked on building in the areas where the need is obvious, we wouldn’t have to get bogged down in an ideological fight over the ideal form of political economy.

An economics-only approach fails. These left-behind places don’t lack only jobs. They also lack community organizations, intact families, religious institutions, cross-class friendships, fathers in the neighborhoods — all the sorts of things the economist Raj Chetty has shown lead to social mobility. You’re not going to grow a successful work force if the families and neighborhoods the people come from are in chaos. As Chetty noted in a recent Times essay, we need place-based programs built on the wisdom that the neighborhood is the unit of change. Economic policy, family policy, local community policy are all one thing, so industrial policy has to have a social capital component.

Push China to the edge. How did we defeat the Soviet Union? We showed Soviet leaders that their model couldn’t compete. The West has to pressure China until its leaders conclude that their policies before 2010 were better than their policies after. China is obviously not as dysfunctional as the U.S.S.R. was, but it has real weaknesses. Xi Jinping has a puritanical streak that leads him to see industrial production as honorable and consumer activity as hedonistic. That’s a self-destructive way to build a modern economy. Democratic nations can expose these weaknesses if they adopt a global posture toward one another and a relatively strict one toward China, denying it access to key markets and goods.

Support progressive deregulation. J. Hector St. John de Crevecoeur, who came to America in the 18th century, observed: “A European, when he first arrives, seems limited in his intentions, as well as in his views; but he very suddenly alters his scale; 200 miles formerly appeared a very great distance, it is now but a trifle; he no sooner breathes our air than he forms schemes and embarks in designs he never would have thought of in his own country.”

That’s the America I want all of us to live in, a nation that incites a hunger to learn and build, a social order that cultivates the vigorous virtues — aspiration, experimentation, creativity, entrepreneurship. Many of us in the educated class get to live in such an America. A humble form of industrial policy is a step toward creating a dynamic, striving America for all.

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