In recent years, politicians and thought leaders of the left and right have surprisingly converged on an idea that was left for dead decades ago: industrial policy.

President Joe Biden has made it a centerpiece of his economic plan, and Republican senator Marco Rubio has positioned it as a signature initiative. Think tanks of the left, such as the Roosevelt Institute, and those on the right, such as American Compass, have issued bold proposals for a new American industrial policy. And while mainstream economists have sneered at the idea for years, some prominent voices such as Joseph Stiglitz and Dani Rodrik openly advocate it.

This report contends that industrial policy is both imperative and inevitable – so we should make sure to get it right. That requires at least three things:

  • Setting clear priorities;
  • Deploying the appropriate policy tools; and
  • Structuring government institutions to limit political capture and maximize policy effectiveness.

This report addresses the first two but will focus particularly on the third challenge. By examining one of the most successful cases of industrial policy, that of postwar Japan, we can identify general principles for successful industrial policy governance that apply to the United States today.

Steven K. Vogel is Chair of the Political Economy Program, the Il Han New Professor of Asian Studies, and a Professor of Political Science at the University of California, Berkeley.