For roughly four decades, the dominant consensus in American economic policy held that the government should not pick winners and losers — that industrial policy was a category error, a relic of postwar statism that market competition had rendered obsolete. That consensus collapsed between 2021 and 2022 with the passage of the CHIPS and Science Act and the Inflation Reduction Act, two pieces of legislation that together represent the largest peacetime industrial policy intervention in American history. Combined, they authorize approximately $1 trillion in public investment, tax credits, and loan guarantees targeted at semiconductor manufacturing, clean energy deployment, electric vehicle production, and advanced battery technology. The intellectual scaffolding for this reversal had been under construction for years in academic economics and policy circles; the political moment arrived when supply chain fragility, geopolitical competition with China, and climate urgency converged in a single legislative window.
The return of industrial policy is not a return to the New Deal or the Great Society. It is a different animal: market-shaping rather than market-replacing, operating primarily through tax credits and subsidies that leverage private investment rather than through state-owned enterprises or nationalization. The IRA's signature mechanism — the 30% investment tax credit for clean energy — is designed to alter the economics of private investment decisions rather than to direct investment bureaucratically. The CHIPS Act's semiconductor subsidies follow a similar logic: the government is not building fabs, it is inducing Intel, TSMC, Samsung, and Micron to build them in the United States by making the economics more favorable than they would otherwise be.
From a Law 4 perspective, this is stewardship with an explicit industrial geography: the Biden administration's implementing agencies worked to ensure that subsidized facilities were built in states and regions that had experienced deindustrialization — not exclusively, but as a stated preference. The Treasury Department's guidance on IRA bonus credits created enhanced incentives for investment in "energy communities" — counties dependent on coal mining or coal-fired power plants. CHIPS Act implementing rules included provisions favoring facilities that created union-wage manufacturing jobs. These geographic and labor provisions are the stewardship layer on top of the market-shaping mechanism: they attempt to direct the benefits of reindustrialization toward the communities most harmed by the deindustrialization it partially reverses.
The intellectual case for this intervention rests on three separate but reinforcing arguments. The first is national security: semiconductor manufacturing concentrated in Taiwan and South Korea constitutes a strategic vulnerability that market logic will not correct because the risk is systemic rather than firm-specific — no individual company internalizes the full national security cost of geographic concentration. The second is climate: the clean energy transition requires investment at a scale and speed that market rates of return will not produce without price correction for the externalities of carbon emissions. The third is economic geography: deindustrialized regions suffer persistent unemployment, fiscal distress, and social breakdown that market forces have shown no tendency to self-correct over four decades, suggesting that structural intervention is necessary to break the path dependence.
The skeptical case is also serious. Critics from the left argue that the IRA's tax credit mechanism delivers massive benefits to large corporations that would have made many of these investments eventually anyway, at public cost that could have been deployed more directly. Critics from the right argue that government selection of winning technologies and industries is inherently less efficient than competitive markets, and that the political process corrupts industrial policy by directing subsidies toward politically favored rather than economically optimal uses. The experience of the Loan Programs Office under Obama — which funded Solyndra's failure as well as Tesla's success — is the cautionary tale most frequently deployed against the optimistic reading.
The labor dimension is central to the policy's justification and its contested reception. The IRA's prevailing wage and apprenticeship requirements — which condition the full 30% credit on paying union-scale wages and using registered apprentices — represent a direct attempt to ensure that the jobs created by the clean energy transition are good jobs by historical manufacturing standards. If enforced rigorously, these provisions could meaningfully slow the decades-long compression of manufacturing wages. If enforced laxly, or if firms simply accept a reduced credit tier, they become a symbolic gesture. Early implementation evidence is mixed: some clean energy facilities are paying prevailing wages and building apprenticeship pipelines; others are accepting the reduced credit rather than meeting labor standards.
The geopolitical dimension is equally significant. The CHIPS Act was explicitly framed as a response to Chinese industrial policy — specifically, to China's Made in 2025 strategy and its dominant position in advanced manufacturing of solar panels, batteries, and telecommunications equipment. This framing does something interesting ideologically: it justifies industrial policy not as domestic social engineering but as competitive response to a rival state that never abandoned industrial policy. The logic is that unilateral free market adherence in a world where major competitors actively direct investment is not neutral — it is a concession. Whether or not this framing is accurate as a description of global competition, it has proven politically powerful across partisan lines.
The long-run effectiveness of this intervention will depend on institutional design questions that remain unresolved: whether the Commerce Department can manage CHIPS implementation without the corruption and capture that have historically afflicted industrial policy programs; whether the IRA's labor standards survive legal challenge and political revision; whether the geographic targeting mechanisms produce real convergence in regional economic outcomes or merely shift where new investment would have landed anyway. These are genuine stewardship questions. The policy exists; the design is being tested in real time.