Innovation vs. Industrial Policy

By Veronique de Rugy

Wednesday, July 10, 2024

 

Former defense secretary Leon Panetta and former congressman Mike Gallagher (R., Wis.) have a piece in the Wall Street Journal worth highlighting. They argue that the best way to make the country stronger and better able to face potential geopolitical threats is not government-driven industrial policy but, instead, greater reliance on our nation’s capacity for commercial innovation:

 

The U.S. is unlikely to adopt industrial policy or match our enemies in sheer production volume. That’s OK; our path forward instead lies in America’s capacity to innovate.

 

Our enemies prioritize personal power and ambition over their citizens’ interests. Such authoritarians are also willing to steal to overcome a dearth of homegrown innovation. The well-documented theft of intellectual property and cyberattacks conducted by state-sponsored actors in China, Russia, Iran and North Korea reveals that our enemies have contempt for the rules-based international order. Yet we needn’t stoop to their level to compete. By embracing American innovation and ingenuity as cornerstones of our national-defense strategy, we can uphold and strengthen our fundamental values.

 

The Defense Department must make the rapid adoption of new technologies a priority, particularly in the commercial sector.

 

Innovation is fundamentally incompatible with industrial policy, which involves government promotion — using subsidies and tariffs — of particular industries or technologies. It is planning based on what already exists, what is already known, and what government officials can conceive. By necessity, it excludes genuine innovation because innovation is creative. Innovation creates possibilities that didn’t previously exist. Future innovations, therefore, can’t possibly be part of today’s industrial-policy plan.

 

There is also the problem of bureaucracy itself, which too often imposes counterproductive requirements. Bureaucrats’ permission-slip mentality and risk aversion slow the innovative process. And a less innovative America will be a weaker America — economically and militarily.