The American paradox: ideology of free markets and the hidden practice of directional thrust

Robert H. Wade

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: The USA presents a paradox. The US state has practised production-focused industrial policy from the early years of the republic, with benefits that by any plausible measure far exceed costs. But since the 1980s, the exchange-focused idea that ‘the free market is what works, and having the state help it is usually a contradiction in terms’ has been at the normative centre of gravity in public policy discourse. With ‘industrial policy’ rendered toxic, the state has disguised its production-focused practice, to the point where even non-ideological academic researchers claim that the USA does industrial policy not at all, or badly. This essay reviews the history of US industrial policy, with an emphasis on ‘network-building industrial policy’ over the past two decades. At the end, it draws a lesson for policy communities in other countries and interstate development organisations such as the World Bank and IMF.

Keywords: industrial policy; US developmental state; networks; varieties of capitalism; leading the market; following the market (search for similar items in EconPapers)
JEL-codes: H54 L5 N62 O52 (search for similar items in EconPapers)
Date: 2017-05-01
New Economics Papers: this item is included in nep-hme, nep-hpe and nep-pke
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Citations: View citations in EconPapers (11)

Published in Cambridge Journal of Economics, 1, May, 2017, 41(3), pp. 859 - 880. ISSN: 0309-166X

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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:69765

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