Last week’s cover story of The Economist, "Picking winners, saving losers", assails nations’ industrial policies, arguing that they almost always fail and constitute inappropriate government intervention in markets. Our blog post picks this argument apart, noting that The Economist’s article fails to adequately distinguish between innovation policy and industrial policy, glosses over a litany of successful contributions U.S. innovation policies have made to spurring economic growth, and fails to explain how the private sector alone could have created the Internet or mapped the human genome. It notes that, though neoclassical economists may not like it, governments play a legitimate and crucial role in shaping the innovation capabilities of national economies. As between corporations, it’s a competition; and, as with companies, the countries that develop the best strategies and skills at fostering, developing, and delivering innovation are the ones most likely to win.
