Over the last few years, the United Kingdom (2017), Saudi Arabia (2018), and Germany (2019) have formally announced a “national industrial strategy.” According to World Bank data, Germany, the United Kingdom, and Saudi Arabia have the fourth ($3.861 trillion), sixth ($2.829 trillion), and 18th ($793.0 billion) largest economies in the world, respectively, as measured by gross domestic product in 2019. The development of national innovation strategies is a partial response to the global commercial ascendancy of the People’s Republic of China’s (PRC) over the last four decades. More specifically, many Western and non-Western economies are addressing, or preparing to address, the PRC’s “Made in China 2025” five-year economic plan (announced in 2015) to become a global leader in 10 advanced technology manufacturing sectors.

In general, “industrial policy” has a national government playing an active, participatory role in guiding the direction of various business (usually manufacturing) sectors and their respective firms within the national economy. National industrial strategy is an evolution of 20th-century industrial policy. Unlike traditional 20th century efforts at industrial policy (which focused on public policy efforts to maintain domestic primacy of declining, older industries), national industrial strategy recognizes (and generally accepts) the international global economy as a foundation of competition. Another aspect of national industrial strategy involves the recognition of themes or challenges that will drive the implementation of the strategy for a period of years into the future. Lastly, and most importantly, national industrial strategy focuses on technologically emerging industries, as well as the national government working collaboratively in a partnership with these emerging industries to meet future growth challenges and opportunities.

China’s “Made in China 2025” national industrial strategy has attracted the attention of the U.S. Congress. In February 2019, the U.S. Senate Committee on Small Business & Entrepreneurship released a report that evaluated the “Made in China 2025” strategy. The committee recommended a U.S. economic policy framework responding to the political economy challenges of the “Made in China 2025” industrial plan. This policy framework includes enacting strategic U.S.-China capital flow restrictions and corresponding defensive measures for domestic industries targeted by the PRC industrial strategy.

The committee report also recommends prioritizing new economic development, including encouraging physical investment and discouraging unproductive arbitrage through the federal tax code and utilizing development assistance from the Small Business Investment Company and Small Business Investment Research programs. Moreover, the report recommends considering labor market stabilization policies to support ongoing American employee attachment to the labor force and accumulation of valuable skills. In this report, the “central conclusion is that the U.S. cannot escape or avoid decisions about industrial policy.”

In fact, the U.S. has implicitly pursued an industrial strategy focused on developing the financial services, IT/software development, and biopharmaceuticals industries, with public policy support examples coming in the form of tax code benefits and IP rights protection. The Biden administration is a strong proponent of what it terms a “comprehensive manufacturing and innovation strategy.” This proposed national industrial strategy includes both $400 billion in federal spending on “Buy America” purchases of domestic products, materials, and services, and $300 billion in federal spending on basic research and breakthrough technologies, including federal “seed funding” for commercialization of emerging technologies such as electric vehicles, lightweight materials, 5G, and artificial intelligence.

Does such an administration plan for a formal American industrial strategy have enough political support in the 117th Congress? There is bipartisan support to assist the manufacturing sector in a post-COVID-19 environment. The U.S. manufacturing sector has successfully adapted to meeting the needs of Americans in manufacturing PPE equipment, respirators and ventilators, and developing vaccines and treatments during the pandemic. While direct employment from an expanded U.S. manufacturing base will be limited (due to the manufacturing’s ongoing capital substitution of robotics and automation for employees), the manufacturing sectoral multiplier effect that stimulates economic activity across the American economy is higher than in any other sector of the U.S. economy, with the Bureau of Economic Analysis calculating $1.48 in services and production for every manufacturing dollar of investment (and other experts believe this economic impact is significantly underestimated).

What are the prospects of a Biden national industrial strategy being implemented? With the U.S. unemployment rate at 6.3% for January 2021 (down 0.4% primarily due to 406,000 Americans leaving the U.S. labor force), 10 million Americans remaining unemployed, and approximately 10,000 fewer manufacturing employees in the labor force as of last month, a manufacturing-focused, fiscal stimulus package could make it through both houses of a Democratic-controlled Congress (with some Republican support) and to President Biden’s desk for his signature this year.