Written by Zsolt Trembeczki & Péter Goreczky
After decades of primarily adhering to free market ideas, in recent years industrial policies have returned to the toolkit of U.S. policy making. This is primarily the combined result of China’s economic rise, widely perceived deindustrialization in the U.S., the rise of climate change as a credible threat to the current way of life, and Covid-19’s recent demonstration of the value of reliable domestic supply chains in certain crucial industries. The 2024 U.S. presidential campaign indicates that this shifting towards greater government activism in the economy is set to continue regardless of who wins. In such an environment, European countries and the European Union will face increased pressure to tailor their own industrial policies, but it is crucial to keep in mind not only the benefits, but also the dangers of such policies, and carefully tailor them to mitigate possible pitfalls such as market distortions, the inefficient allocation of resources, or wasteful use of taxpayer funds.