In the Summer issue of Regulation, I suggest that the growing popularity of industrial policy (also called “industrial strategy”) all over the world is a return to Jean-Baptiste Colbert, the Finance Minister of Louis XIV in the 17th century. Industrial policy is not just an assemblage of political meddling acts—otherwise it would be everywhere in the history of mankind—but, as some experts define it, “government policies that explicitly target the transformation of the structure of economic activity in pursuit of some public goal.” In my article, I write (“Of Tariffs and Industrial Policy,” 48-2 [Summer 2025], pp. 7-8):
Considering government as it is, instead of what the interventionists dream it could be, reveals that coherent industrial policy is impossible. … The calls for industrial policy are essentially ideological. …
Industrial policy can be seen as the offspring of what Jean-Baptiste Colbert (1619–1683), a minister to King Louis XIV, tried to achieve. As described by economic historian Donald Coleman, Colbertism was “a systematic treatment of economic activities.” Colbert “used a variety of tools: subsidies, special tax, reductions or exemptions, protection against foreign imports,” etc. He encouraged exports and domestic manufacturing. He was a dirigiste mercantilist who believed his policies enriched the country and thus the king—even though they likely explain why France lagged far behind England when the Industrial Revolution got underway. …
[Industrial policy] is about the ideology that a coercive allocation of resources will produce the goods that politicians and bureaucrats think consumers should want. At best, it is a belief that political and bureaucratic processes will, by some magic, adapt to what consumers want better than market competition will.
At about the time Regulation hit the newsstands, actual and virtual, British Prime Minister Sir Keir Starmer announced a new attempt at industrial policy. He was proud, he said, “to launch a new industrial strategy for the nation today.” Contrary to the past ones, this one will be “robust, strategic, and unapologetically long-term.” It “meets the challenges or our era,” notably with a “10-year plan.” (Keir Starmer, “The Industrial Strategy Will Provide Certainty for Business,” Financial Times, June 23, 2025.)
The Economist wisely expresses some doubts. Referring to the government’s policy document, the magazine writes (“Britain’s Industrial Strategy Is Unlikely to Boost Its Economy,” July 24, 2025):
The sprawling document spans wildly different sectors and is jammed with “transformative” funds, hubs and accelerators. … Experience suggests some scepticism is in order.
Industrial policy and even more industrial strategy are attractive labels for an age-old illusion that politicians and bureaucrats can boost economic growth by deciding where resources should be allocated. One hope of many supporters, if not their goal, is that tax revenues and the state will grow. In the 1930s and 1940s, economists Ludwig von Mises and Friedrich Hayek showed how central planners cannot have the dispersed knowledge on supply and demand, costs and preferences, that would be necessary to guide the economy toward real prosperity as diverse individuals want it.
