_ Biden’s industrial policies represent a stunning ideological
reversal. The harder part will be making them work _
_This article appears in the February Issue of The American Prospect.
Since the late 1970s, as the U.S. lost productive capacity in industry
after industry, progressives have been calling for an industrial
policy. This was mostly disdained by orthodox economists and rejected
by the presidential wing of both parties in favor of global
The economy has paid dearly for this, with the loss of good jobs and
industries that anchored entire regional economies. Democrats in turn
have paid with the loss of working-class voters.
Now, under Joe Biden, we have a potentially transformational shift of
ideology and policy. Stimulated by the COVID recession, the supply
chain crisis, and the urgent need for renewable energy, Biden’s
administration has sponsored an industrial policy, actually several
industrial policies, intended to reclaim technological leadership and
Jubilant liberals, who have long called for this, are now a little
like the dog who caught the car. Coordinating these diffuse policies
into a coherent whole and enabling them to succeed is a staggeringly
One marquee piece of legislation, the CHIPS and Science Act, will
spend $13 billion to subsidize semiconductor research and another $39
billion to build more production facilities (known as fabs) in the
U.S., using grants, loans, and tax credits. Spending $52 billion (over
five years) sounds like a lot, but a single semiconductor fab can cost
$5 billion or more, and Intel says that their new Ohio research and
manufacturing complex will cost between $60 billion and $120 billion
over a decade
All told, chip manufacturers had planned to invest on the order of
in at least 23 new U.S. semiconductor factories, even before the new
legislation passed. Government needs detailed performance standards
for these subsidies for maximum public benefit.
The Inflation Reduction Act includes even more money for clean-energy
security and climate change mitigation, $369 billion over a decade.
Much of this is via tax credits to accelerate the shift from fossil
fuels for heating and cooling to heat pumps and electricity generated
by wind turbines and solar panels, as well some direct subsidies to
promote domestic manufacture. There are also tax credits for the
purchase of electric vehicles made in the USA.
And the bipartisan infrastructure law
[[link removed]], with
about $600 billion of new money beyond the usual appropriations for
highways and public works, includes major outlays for green projects,
including $73 billion to update the nation’s electricity grid
to carry more renewable energy, $7.5 billion for electric-vehicle
charging stations (on which accelerated EV sales depend), and $7.5
billion for clean buses and ferries. These outlays also promote
domestic production and jobs.
In addition, the National Defense Authorization Act passed in December
includes dozens of industrial-policy measures. This is on top of
continuing outlays for the Department of Energy, the National Science
Foundation, and the National Institutes of Health (NIH).
It’s hard enough to make industrial policy work in a single agency.
The new enhanced industrial policies involve coordination across
multiple federal agencies; several levels of government (federal,
state, county, municipal); multiple technologies; and the intense
involvement of the private sector.
There is no single industrial-policy czar. Among top officials, John
Podesta oversees outlays under the Inflation Reduction Act. Commerce
Secretary Gina Raimondo is in charge of CHIPS and Science. Mitch
Landrieu coordinates the bipartisan infrastructure law. Jake Sullivan
deals with the foreign-policy cross-pressures of America’s new
economic nationalism. Presumably, these people talk to each other, and
to the leaders of dozens of other agencies with jurisdiction in these
Among the challenges are:
* Making sure that different agencies and programs are not operating
at cross-purposes and that it all adds up to a coherent whole;
* Engaging the private sector without producing windfall profits,
gratuitous subsidies, or failed ventures that become grist for
Republican we-told-you-so investigations (viz. Solyndra);
* Putting tough performance standards into these grants and loans to
achieve other progressive goals, such as support for union labor and
* Connecting industrial policy to workforce policy, so that there is
a rendezvous between needed specialists at every level and newly
* Streamlining permitting and environmental reviews, so planned
facilities come to fruition without endless delays;
* Reconciling the bold climate goals in these several programs with
the practical disruption of the environment caused by, say, solar
farms and power lines; and
* Harmonizing our new industrial policy with foreign policy and
trade policy, notably with our European allies, who see U.S.
industrial subsidies as violating trade rules at their expense.
In principle, it all adds up to reclaiming industrial and tech
leadership, accelerating the post-carbon shift, and creating good
domestic jobs. In practice, it’s potential chaos.
THE OLD INDUSTRIAL POLICY, AND HOW WE LOST IT
Industrial policy in the U.S. dates to Alexander Hamilton’s 1791
Report on the Subject of Manufactures
Henry Clay’s American System of public improvements and high
tariffs, and Lincoln’s support for public investments to enhance
agriculture and manufacturing. In World War I, the government
organized several industries needed for the war effort, including
radio and aircraft research and production. World War II was one
massive industrial policy, creating new weapons systems, synthetic
substitutes for supplies that the war had cut off, and the
technologies to make them work.
After WWII, government continued to invest in science and technology,
via the National Science Foundation, the National Institutes of
Health, and the Cold War–era Defense Department. The Pentagon
created the Advanced Research Projects Agency (later renamed DARPA) to
fund “beyond the horizon” technologies, operating like a
government venture capitalist. Specialized military procurement
subsidized new processes and products, many with civilian spin-offs,
from aircraft to computers. The U.S. also had the national
laboratories and the great research universities, heavily underwritten
by government, which incubated new technologies and entire new
industries. It was taken for granted that production would stay at
This was America’s national innovation system, and it worked.
Despite protestations that we believed in free trade, it added up to a
tacit form of economic nationalism.
But by the 1970s, while government-sponsored R&D continued, there was
an increasing disconnect between U.S. technological leadership and
domestic production. This was the era when the U.S. began losing
industry, and good-paying unionized workforces.
The U.S. cemented the loyalty of Cold War allies by opening our
borders to their exports without demanding reciprocity. The extreme
disdain among economists for the survival of industry, much less
industrial policy, was captured in a famous remark by Michael Boskin,
chair of the Council of Economic Advisers under Bush I: “Potato
chips, computer chips—what’s the difference? They’re all
chips.” (Boskin has since denied saying this.)
By the early 1980s, for example, Japan was leading the U.S. in most
categories of semiconductors. Japan’s targeted industrial policy and
protectionism, its bank-industry interlocks and cartels, all
orchestrated by the Ministry of Trade and Industry (MITI), became the
model for the subsequent national innovation systems in China and
elsewhere in Asia. Today, the U.S. share of global semiconductor
production has fallen from 37 percent in 1990 to 12 percent, with
heavy dependency on Taiwan and South Korea.
In the ’80s, the U.S. also lost most of its machine tool industry to
Japan and Germany, autos and steel to multiple foreign competitors,
and the entire consumer electronics industry, which domestic
manufacturers had previously dominated. When the U.S. did regain some
innovative leadership in microelectronics, via Apple computers and
iPhones (using technologies partly developed thanks to DARPA),
production was outsourced to Asia. The rupture between technical
innovation and domestic manufacturing was complete.
Throughout this period, the U.S. did have several tacit
mini-industrial policies. The 1980 Bayh-Dole Act allowed industry to
exploit government-funded R&D. In 1984, Congress created a blanket
antitrust exemption for private companies to engage in collaborative
research. There were modest tech subsidy programs housed at NSF and
the Commerce Department. NIH sponsored the Human Genome Project, which
was a tacit industrial policy for biotech.
In 1987, the top 14 semiconductor makers persuaded Reagan’s
administration to back a home-based consortium known as Sematech, with
$100 million in DARPA funding matched by the industry. Robert Noyce,
who had co-invented the integrated circuit and co-founded Intel, was
the industry leader of Sematech. Noyce was charismatic, widely
admired, and well connected in both parties. “Semiconductors were
sexy, machine tools were old economy,” says Clyde Prestowitz, one of
the architects of Reagan’s trade policy with Japan.
But these policies lacked adequate scale, ideological approval, or an
explicit national commitment to connect them to domestic
manufacturing. The dominant ideological premise was that the location
of production is the proper business of the market, not the
INDUSTRIAL POLICY FOR CORPORATE AMERICA
There was a logic and a discipline to wartime industrial planning
_because government was the customer_. So government could dictate
specifications as well as target applied research to focused goals,
and build or requisition factories as necessary.
Today’s industrial policy is far more diffuse. It’s more about
developing new technologies and bringing production home, but without
the discipline of government as customer, except in the case of some
military hardware. It will require nothing less than a transformation
in the logic of our entire economic system, making government’s role
far more explicit and coherent.
The lead agency for CHIPS and Science is the Commerce Department,
which has neither the experience nor the personnel to manage a
government-wide industrial policy. The one part of Commerce with some
related expertise is the National Institute of Standards and
Technology (NIST), a billion-dollar agency that has sponsored small
industrial-policy initiatives in the past. But under previous
administrations when NIST tried to play a government-wide coordinating
role, “the big players, the Pentagon and the Department of Energy,
basically told NIST to get lost,” says one former Commerce official.
Commerce simply doesn’t have enough people to process the various
CHIPS subsidy proposals that will come flooding in from corporations,
universities, and other research centers after detailed criteria are
published by the department in February. The bigger challenge is
devising the terms of the Commerce Department’s contractual
agreements with the semiconductor companies that will get its
largesse. What kinds of chips will they commit to make, at what
volume, and with what public input and public benefits, including for
Commerce Secretary Gina Raimondo, who meets regularly with top
is among the most corporate of Biden’s appointees. And in many ways,
that’s the point. Progressive enthusiasts of industrial policy need
to reckon with the awkward fact that industrial policy, not
surprisingly, is mostly carried out by industry.
The long-sought arrival of industrial policy comes at a time when the
left is properly excoriating corporate America for everything from
hyperconcentration and stock buybacks to grotesque pay gaps and union
busting. Big Tech companies in particular are improbable partners
because of the serial abuses of tech platform monopolies and the
extreme outsourcing by the likes of Apple.
And yet, unless we are proposing industrial policy via socialized
public enterprises, private corporations must be the instruments. The
key question for progressives is: What does government (and the ideal
of a just society) get in return, beyond returning more production and
technical leadership to the U.S.?
Biden has done well in targeting new clean-energy outlays to poor and
underserved communities, as well as rural areas and tribal
reservations. His Justice40 Initiative commits to delivering 40
percent of the overall benefits of climate, clean-energy, and related
federal investments to diverse low-income communities that are
overburdened by pollution and underserved by infrastructure. He wins
praise from advocates of climate justice.
But for the most part, Biden has chosen not to use these extensive
industry subsidies and tax breaks as leverage to get corporate America
to clean up its act in other respects. The CHIPS and Science Act does
prohibit corporate beneficiaries from using government funds for stock
buybacks. But as Sen. Elizabeth Warren has pointed out
since money is fungible there is nothing to prevent corporations from
taking CHIPS money and using other money on buybacks.
That would be consistent with past practice. Five large U.S.
semiconductor firms (Intel, IBM, Qualcomm, Texas Instruments, and
Broadcom) spent $250 billion on buybacks from 2011 to 2020. That’s a
whopping 70 percent of their net profits, and also more than five
times the public funds spent in the CHIPS Act.
Raimondo has said she opposes buybacks. At a September 29 hearing,
Sen. Warren called on Raimondo to set up tougher rules, like requiring
companies to attest on the application form that they won’t engage
in buybacks, and clawing back funds from companies that go back on
their word. Raimondo took no further action.
DOMESTIC JOBS, OR UNION JOBS?
Pre-existing Buy America requirements and the 1931 Davis-Bacon Act in
effect require construction and transportation projects built with
federal funds to use union labor, though labor still has to fight to
make sure these commitments are honored, especially in right-to-work
states. These new industrial policies will still likely be bonanzas
for the building trades, and several tax-credit provisions in the IRA
do give extra credit to projects that pay prevailing wages. But the
Biden administration has not used its potential leverage to require
companies accepting federal subsidies to refrain from resisting union
organizing drives for production jobs.
A White House 182-page Guidebook, released in December, detailing all
the clean-energy subsidies and conditions of the Inflation Reduction
Act, declares that “the Inflation Reduction Act is designed to
ensure that these transformative investments create good-paying union
jobs.” But as the _Prospect has documented
that claim is grossly exaggerated. Neutrality requirements for
companies receiving benefits under both the IRA and the bipartisan
infrastructure law were stripped from the final legislation.
The tech industry is notoriously anti-union. It would be a huge
breakthrough if production workers at semiconductor fabs and other
tech companies were unionized. Generally speaking, these companies pay
decent wages but fiercely resist unions. Biden does have the power to
change that by directing the Commerce Department to make
union-friendliness an express criterion in the applications for
subsidy that Commerce reviews.
The CHIPS and Science Act allocates $10 billion to develop “regional
technology hubs.” The law mandates worker participation, but
Republicans who supported the bill expect their share of the regional
money, and several of these hubs will be in right-to-work states.
Government lawyers generally take the position that requiring
companies taking subsidies to explicitly commit to “neutrality” in
union organizing drives would invite lawsuits. The preferred language
would have federal performance requirements refer to job quality and
strategies such as community benefits agreements, which in turn
involve unions and pave the way for organizing with de facto
There is an inevitable tension between participatory democracy and
large-scale industrial policy.
The CHIPS and Science Act gave all the power and most of the money to
the Commerce Department. The National Science Foundation was given
$200 million to promote training of tech workers through regional
partnerships between educational institutes and employers. The Labor
Department, the agency closest to the labor movement and traditionally
its advocate, got nothing, not even money for apprenticeship. A $200
million grant for tech worker training through regional partnerships
was instead routed through the National Science Foundation.
_The New Republic_, in a scathing article
last September on Labor Secretary Marty Walsh’s policy
disengagement, quoted congressional sources describing Walsh as absent
from the legislative process when the CHIPS legislation was going
through Congress, and getting outplayed by Raimondo. Labor later had
to negotiate a memorandum of understanding with Commerce on its
Commerce has no experience in workforce development. The Big Tech
companies would like the government’s help in training production
workers without the complication of a registered tech apprentice
program on the model of the building trades, which might be
union-friendly. Mike Russo, a onetime leader of a Steelworkers
affiliate and a respected expert on workforce development, has
contracts with both the NSF and the Labor Department to develop
one-stop models of training and apprenticeship for tech workers.
Whether these are paths to union production jobs will depend on the
rules written by other agencies.
In November, in response to a request for comment, the AFL-CIO sent
Raimondo a 41-page memo on exactly how they would like to see the
CHIPS process structured, to carry out the administration’s general
commitment to good jobs, and ideally to unionized jobs. Among the key
demands: “The Commerce Department must require CHIPS incentives
applicants to submit a job quality and worker protection plan.” The
federation also called on the Commerce Department to prioritize CHIPS
incentives, grants, loans, and loan guarantees to applicants that
affirmatively allow workers to join a union “without fear of
intimidation or retaliation throughout the semiconductor industry and
Raimondo is extremely unlikely to agree to this de facto neutrality
condition unless personally directed to do so by President Biden. One
concern is that Commerce will be friendly to collective-bargaining
agreements in blue states where strong unions do the heavy lifting,
but do nothing to advance union successes in right-to-work states
where a lot of federal money will subsidize fab construction, such as
The Department of Energy has done somewhat better than Commerce.
DOE’s recent notice of funding availability for $3 billion in
battery subsidies provides a 20 percent credit for manufacturers who
commit to good jobs throughout the workforce (not just construction)
and community benefits agreements. DOE still needs to draft strong,
enforceable language for the actual contracts.
At the other extreme, the Environmental Protection Agency, which got
$5 billion under the bipartisan infrastructure law to subsidize school
districts to acquire electric buses, just shoveled out the first $1
billion to districts, with no labor standards of any kind. Of the four
electric-bus manufacturers in the U.S., two are organized by the UAW.
One other, Lion Electric, is currently the object of an intense
campaign by Jobs to Move America and its union and community allies to
accept a community benefits agreement, the precursor to unionization.
EPA labor standards could have helped, and still could.
WHEN THE COMMUNITY BENEFITS
More progress has been made at the state and local level. Since 2011,
Jobs to Move America and its union and community allies have extracted
community benefits agreements
(CBAs), which they call a U.S. Employment Plan, from bus and railcar
manufacturers in several states. The CBA commits employers to hire
union workers as well as more minority and disadvantaged workers,
using the leverage of local government procurement and pressure from
organized labor, especially in areas with a strong union presence.
In Los Angeles, the Metro transit agency agreed to require that its
new electric buses be manufactured with union labor
another strong union town, the local labor federation and JTMA, using
a community benefits strategy, got the city to insist that the
contractor, CSR, receiving a $1.3 billion contract for 846 railcars,
will not only produce in Chicago but have a union contract.
In its extended memo to the Commerce Department, paralleling that of
the AFL-CIO, JTMA called on Commerce to require all bidders to have a
U.S. Employment Plan that enumerates how many domestic jobs will be
created or supported, what the minimum wages will be, and how they
will hire disadvantaged or underrepresented workers.
The JTMA strategy—CBAs leading to good union jobs—is the template
for the leverage the labor movement wants the Biden administration to
exert on the corporate beneficiaries of its trillions of dollars in
industrial-policy spending. But even though the federal government is
the ultimate source of much state and local transportation money,
national Democratic administrations in Washington, despite friendly
general commitments, have seldom been willing to get into the trenches
on behalf of unions.
Until President Obama’s last year, when his Transportation
Department issued a statement cautiously supporting CBAs, his
administration was largely unhelpful to the JTMA strategy, raising
legal concerns that they might be anti-competitive, and failing to use
the leverage of federal funds to promote unionized production jobs
except on traditional construction contracts.
It remains to be seen whether Biden’s administration will do any
better. Biden does have the power to direct Cabinet secretaries to
include explicit pro-labor language in their detailed performance
standards. Biden could also direct his secretaries to convene meetings
between corporate CEOs seeking discretionary funding and leaders of
unions seeing to organize their production workers, to pursue areas of
common ground and report back before any government financing
commitments are made.
The senior trade union leaders I spoke with view Biden as the best
friend of the labor movement since FDR, but say he needs to play more
of a hands-on role when it comes to the details of policy.
Ribbon-cutting photo ops, like the recent one in Covington, Kentucky,
are great politics, but no substitute for presidential engagement in
the policy implementation process.
NIMBY ON STEROIDS
The U.S. requires large projects to run a more complex gauntlet of
permitting and environmental review requirements than any other large
industrial nation. In 2020, the White House Council on Environmental
Quality compiled data on timelines for 1,276 environmental impact
statements (EIS) filed between 2010 and 2018 and found that NEPA
reviews averaged 4.5 years.
A detailed study done for the Center for Security and Emerging
Technology, pointedly titled “No Permits, No Fabs,” looked at all
the world’s semiconductor fabs built between 1990 and 2020. Not only
did construction take longer in the U.S., but the delay increased over
time, rising from an average of 665 days from 1990 to 2000 to 918 days
between 2010 and 2020. The study contrasted the welcome mat rolled out
for tech companies by Taiwan and Singapore with the serial obstacles
facing them in the U.S.
In addition to legitimate environmental reviews, major new facilities
sometimes attract local opposition from citizens and local governments
that don’t want the additional traffic, noise, environmental risks,
toll on water and sewer systems, or newcomers. This was not the case
in the last mid-century, when environmental reviews didn’t exist and
Ford or GM plants were seen only as sources of badly needed new jobs.
An emblematic case is the story of the obstacles thrown in the path of
New York state’s ultimately successful efforts, under eight
governors (from Republican Nelson Rockefeller to Democrat Andrew
Cuomo), to turn the Capital Region around Albany into a world center
for nanotechnology. The motivation was the severe decline in
manufacturing jobs and the shrinkage of the region’s anchor tech
This process was a surprising success of regional industrial policy
for advanced tech. So far, it has created at least 10,000 direct
production jobs and 50,000 secondary jobs, with more to come. But
along the way, the effort was repeatedly stymied by small-town local
In 1996, after extensive investment in area universities, the regional
development authority began efforts to attract a major semiconductor
fab. This was blocked when the first-choice location in North
Greenbush (population at the time: around 10,000) was vetoed by the
town council. Saratoga County, working with Advanced Micro Devices
(AMD), then filed initial requests for approval of a new fab in the
nearby towns of Malta and Stillwater in 2002.
Production finally began ten years later, in 2012. If this is the pace
of approvals under Biden’s new industrial policies, we will all be
wards of the Chinese by the time new fabs are actually built.
Beyond opposition that is arguably legitimate due to concerns about
traffic and the toll on local public infrastructure, some county
governments controlled by Republicans either oppose federally funded
projects per se, or don’t want Biden-sponsored initiatives to
Semiconductor production is also cyclical, subject to periodic gluts;
we’re seeing that right now, as consumers pull back
after high pandemic-era spending. Yet it is part of a much broader
revived national innovation system that anchors other good jobs. In
upstate New York, GlobalFoundries and Micron are laying off hundreds
of workers this year. But both companies say these layoffs are
temporary, and both are doubling down on new plans for more long-term
investments. Forecasting a doubling of demand for semiconductors by
2030, Micron is investing up to $100 billion
in a new fab projected to create up to 9,000 jobs. The CHIPS and
Science Act reinforces this commitment.
There is also the tricky question of what is a domestic company. Until
its IPO in 2020, GlobalFoundries, though based in upstate New York,
was financed and 100 percent owned by Abu Dhabi’s sovereign wealth
fund. And while GlobalFoundries has two major factories in the U.S.,
it also manufactures in Dresden, Germany, and Singapore; and has
design centers in Beijing, Shanghai, Bangalore, and Sofia, Bulgaria,
as well as Austin, Texas, and Santa Clara, California.
Environmental activists are strong supporters of the shift to
renewables. But many don’t care whether the chips and EVs are made
in America as long as they are made using clean production processes
and government policy accelerates the shift away from carbon.
Local environmentalists often resist the intrusion of fabs, solar
farms, windmills, and power lines. Sometimes this is legitimate, as in
concerns for offshore wind disrupting fisheries. In other cases it is
aesthetic, as when solar farms or wind turbines are seen as spoiling
The irony is hard to miss. Much of the impetus for Biden’s
industrial policies was environmental. Increased investment in
renewable energy is needed to reduce carbon pollution and slow climate
change. But many of these projects are either delayed by laws that
were enacted in an earlier era to protect the environment, or because
they entail tricky environmental trade-offs. Environmentalists will
need to reconcile their desire to shift away from carbon as rapidly as
possible with their wish for a pristine environment.
Another irony involves the double-edged role of Joe Manchin.
Environmentalists have abhorred and blocked Manchin’s effort to use
federal legislation to rescue the Mountain Valley Pipeline, which
would carry natural gas from West Virginia to Virginia, by explicitly
directing federal agencies “to issue all approval and permits.”
However, the rest of Manchin’s bill is far from crazy. It would set
a two-year target for major projects that require environmental
reviews, have government set a lead agency to reduce the
fragmentation, require the president to identify and prioritize
reviews for at least 25 strategically important energy and mineral
projects, and allow federal overrides of state permitting requirements
in some circumstances, particularly on electricity transmission. If
the U.S. government is serious about targeted industrial policy, we
need something like this legislation, stripped of its sweetheart
provision for West Virginia.
In 2015, legislation called the FAST Act
[[link removed]] (for Fixing
America’s Surface Transportation) included a provision known as
FAST-41 for better coordination of environmental reviews at the
federal level. However, project participation is voluntary. In
principle, fast-track approvals could be accelerated without
compromising core environmental goals. It’s another way government
has to be retooled to make industrial goals a national priority.
Yet there is an inevitable tension between participatory democracy and
large-scale industrial policy. We need to expedite these projects, but
not to return to the days of New York’s Robert Moses and others in
the urban renewal era who created special redevelopment districts with
the power to bypass local democratically elected bodies.
And if we create super-approval powers for federally led industrial
policies, it helps to remember that progressives are not always the
government. The _Prospect_ has written about the tension between blue
cities and red states
which increasingly have written preemption laws to prevent the Austins
and the Charlottes from enacting progressive local policies.
A national Republican administration could perform the same gutting of
environmental (and labor) standards, if loopholes for fast-track
permitting were added to the hard-won statutory mandates of the
National Environmental Policy Act and the Clean Air Act. The dirty
part of the Manchin bill is a reminder of the perils of too-easy
overrides of environmental standards and reviews.
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