Dubnick, Mel and Lynne Holt, “Industrial policy and the states,” PUBLIUS 15 (1) 1985:113-29.
Abstract:
The emergence of industrial policy proposals on the national scene raises the prospect of a greater role for the states in American economic policy. Four types of industrial policy proposals are described, each representing a distinctive strategic orientation. After describing the implied role of states in each type, we argue that state involvement is politically necessary if any proposal is to succeed in the national policymaking arena. We assess the four strategic proposals in light of that contention and conclude that two of the approaches-infrastructure investment and subnational jurisdiction proposals-have an advantage over the better-known trade policy and sectoral targeting strategies.
AI-Generated Summary:
This document discusses the role of state governments in the development and implementation of industrial policy in the United States.
Definitions and Ambiguities of Industrial Policy
- Industrial policy involves microeconomic tools like tax rules, grants, and restrictions, whether active or passive.
- There is no consensus on whether policymakers must explicitly intend or actively pursue industrial policy for it to exist.
Major Industrial Policy Strategies
- Four types are identified: trade policy, sectoral targeting, infrastructure investment, and subnational jurisdiction.
- Each strategy differs in focus, implementation, and the role of government and states.
Trade Policy and State Roles
- Emphasizes national efforts to improve U.S. competitiveness internationally.
- Advocates favor centralized policymaking, limiting state independence and involvement in trade-related activities.
Sectoral Targeting and State Involvement
- Focuses on supporting specific industries or regions to promote growth or offset decline.
- Advocates prefer national coordination, with limited direct roles for states, relying on business and industry groups.
Infrastructure Investment Approach
- Aims to strengthen basic conditions like transportation, power, and human capital.
- Promotes government facilitation through microeconomic tools, emphasizing active investment and institutional support.
Subnational Jurisdiction and Federal Coordination
- States and localities compete for industries via development programs.
- Federal policies can influence state efforts, but the approach relies on indirect, coordinated actions rather than direct control.
Political and Strategic Necessity of State Involvement
- State involvement is politically necessary for the success of any industrial policy.
- Strategies like infrastructure investment and subnational jurisdiction have advantages due to their feasibility and alignment with existing state roles.
Role of State and Local Governments in Industrial Policy
- Current trust in state governments is low, leading to minimal roles in sectoral targeting.
- Federal institutions would primarily make investment decisions, potentially marginalizing states.
Infrastructure Investment Strategies and Decentralization
- These strategies favor facilitative, non-direct government intervention, relying on loosely related decision units.
- States could play a significant role by managing infrastructure projects or influencing policies through grants and mandates.
Subnational Jurisdiction Strategies and Hierarchical Relationships
- These approaches depend on active state involvement, building on existing state programs and autonomy.
- They imply a hierarchical relationship where federal policies guide state actions, challenging traditional federalism norms.
Importance of State Involvement in Future Industrial Policy
- Political realities favor significant state roles due to existing state activities and influence in Congress.
- States use tools like financial aid, tax incentives, and development programs, making their involvement unavoidable.
Challenges of Federal Preemption and Political Dynamics
- Legal preemption is difficult, and political solutions risk counteracting national goals.
- State and local interests are likely to push for programs favoring regional economic goals, influencing policy outcomes.