Yves here. A look at how China used and improved on the old US and Japanese developmental state models. Authors Bill Lazonick and Yin Li stress the importance of China adopting sound corporate governance models, versus the US falling prey to financialization.
By William Lazonick, Professor of Economics, University of Massachusetts Lowell and Yin Li, Assistant Professor, School of International Relations and Public Affairs, Fudan University. Originally published at the Institute for New Economic Thinking website
In our INET working paper, “China’s Development Path,” we employ the “social conditions of innovative enterprise” framework to analyze the key determinants of China’s development path from the economic reforms of 1978 to the present. First, we focus on how government investments in human capabilities and physical infrastructure provided foundational support for the emergence of Chinese enterprises capable of technological learning. Second, we delve into the main modes by which Chinese firms engaged in technological learning from abroad—joint ventures with foreign multinationals, global value chains, and experienced high-tech returnees—that have contributed to industrial development in China. Third, we provide evidence on achievements in indigenous innovation[1]—by which we mean improvements in national productive capabilities that build on learning from abroad and enable the innovating firms to engage in global competition—in the computer, automobile, communication-technology, and semiconductor-fabrication industries. Finally, we sketch out the implications of our approach for the role of innovation in China’s development path as it continues to unfold.
Like any national economy that has achieved sustained economic growth, the Chinese state has invested in human capabilities and physical infrastructure that provide goods and services to the business sector. The Chinese developmental state has not, however, been a passive investor in these productive resources. It has implemented proactive policies to support the expansion of advanced manufacturing capacity by attracting, negotiating, and coordinating foreign investment, and by fostering the inflows of talent and knowledge to China. Such investments have formed the foundation of the nation’s technological learning. Furthermore, to foster innovative business enterprises, the Chinese government often has provided sustained funding, described as “patient capital”, which otherwise would not have been available through nonstate financial channels.
The case of China also demonstrates that the success of the developmental state in fostering a dynamic of growth eventually depends on the emergence of innovative enterprises. From the perspective of the theory of innovative enterprise, the importance of indigenous innovation derives from the concept of the locus of strategic control. Companies that seek to become global competitors in technology industries must go beyond technology learning from abroad to develop superior productive capabilities at home. Key to indigenous innovation are, first, the devolution of strategic control to autonomous business enterprises that can engage in domestic and global competition by investing in learning processes, and second, the exercise of strategic control within these business enterprises by senior executives who have both the abilities and incentives to allocate corporate resources to investment in innovation.
As indicated in our essay, a distinctive feature of China’s development path has been the wide range of governance structures, from minying to employee ownership to joint ventures to state-owned enterprises to venture-backed startups, under which innovative firms have emerged since the 1980s. The key issue is not the form of enterprise ownership but rather the abilities and incentives of those who exercise strategic control, given an ownership structure. Not all Chinese firms possess these strategic capabilities, but, from our study of China’s development path, it is our contention that the most successful Chinese companies have been those in which, given the supportive national ecosystem, senior executives have had the autonomy, ability, and incentive to invest in innovation.
Strategic control over corporate resource allocation gives top executives the power to invest in the productive capabilities of the workforce and, through organizational integration, transform those productive capabilities into the organizational-learning processes that are the essence of innovation, enabling the generation of higher-quality, lower-cost products. Building these organizational capabilities inevitably entails the high fixed cost of attracting, training, motivating, and retaining the labor force engaged in organizational learning. For innovation to be successful, this fixed-cost investment in productive capabilities must result in a higher-quality product than would otherwise have been available for the firm’s market segment. Then, by virtue of possessing a higher-quality product, the innovating firm can transform the high fixed cost of developing that higher-quality product into low unit cost by accessing a large extent of that market segment, thus achieving economies of scale. Over the last four decades, those Chinese companies which have been able to generate higher-quality products have had the advantage of access to both a rapidly growing domestic market, resulting from national economic growth, and a massive export market enabled by China’s participation in the global economy.
In addition to strategic control and organizational integration, innovative enterprise requires financial commitment. To accumulate technological capability, Chinese companies have reinvested profits in productive capabilities, often complemented by loans from the state-run banking system. This financial commitment has combined with strategic control and organizational integration as social conditions of innovative enterprise for Chinese firms. Underpinning the success of enterprise growth in China has been the dynamic interaction of innovative business strategy and developmental government policy.
As principles of economic transformation, the social conditions of innovative enterprise that have enabled China’s development path are not unique to China. Following the publication of Chalmers Johnson, MITI and the Japanese Miracle in 1982, it became common to credit the “developmental state” for Japan’s rise to global leadership in a range of mass-production industries. Yet, from the late nineteenth century, it was the United States that possessed the most formidable developmental state in history. From the perspective of the accumulation of knowledge that provided a foundation for Japan’s indigenous innovation, the United States, first and foremost among the advanced economies, functioned as Japan’s developmental state. Central to Japan’s success was the growth of innovative enterprises, supported by national institutions—specifically, stable shareholding, permanent employment, and main-bank lending—that provided Japanese corporations with the social conditions that enabled indigenous innovation and, in many cases, the subsequent transition to global technology leadership.
By transferring this knowledge from abroad and then improving upon it, by the last decades of the century Japanese corporations were outcompeting their US rivals in industries such as automobiles, consumer electronics, machine tools, and steel, in which US companies had been world leaders. The organizational foundation of US leadership in mass-production industries had been the combination of secure employment under the norm of career with one company for both blue-collar operatives, typically organized in unions with first-hired, last-fired seniority provisions, and white-collar engineers, whose attachment to the company was cemented by promotion up the corporate hierarchy and the availability of company-funded nonportable defined-benefit pensions, based on years of service with the company. These employment relations characterized what Lazonick has called the “Old Economy business model” (OEBM).
Under Japan’s system of permanent (aka “lifetime”) employment, which evolved in the post-World War II decades, blue-collar operatives and white-collar engineers also had, as in the United States, employment security over the course of their careers. In the United States, however, there was an organizational segmentation of the routine work of “semi-skilled” operatives from the organizational learning among engineers who were deemed to be part of the management structure. In sharp contrast, the key source of Japanese competitive advantage in the mass-production industries was organizational integration of the skills and efforts of shop-floor operatives with those of professional engineers to enable the collective and cumulative learning required to generate higher-quality, lower-cost products. In effect, the Japanese surpassed the United States in mass-production manufacturing by perfecting the OEBM.
In the 1970s and 1980s, as an outcome of indigenous innovation commenced in Japan in the 1950s, Japanese electronics corporations also used their integrated skill bases to become global leaders in memory chips, a segment of the semiconductor industry in which value is added by reducing defects and increasing yields. This development forced major US semiconductor companies to retreat from this segment of the market, with Intel facing the possibility of bankruptcy in the process. Led by Intel with its microprocessor for the IBM PC and its clones, US companies became world leaders in logic chips, in which value is added through design and functionality. Indeed, the IBM PC, with its open-systems “Wintel” architecture, formed the basis for the rise to dominance of a “New Economy business model” (NEBM), characterized by offshoring and outsourcing of manufacturing, mainly to Asia; insecure employment, marked by interfirm labor mobility; stock-based pay and defined-contribution pensions; and the emergence of a global technology labor force, with India and China playing leading roles in the supply of highly educated people, particularly to the tech industry of the United States.
With ten times the population of Japan and the world’s second-largest economy, China has become a formidable global competitor, engaging in indigenous innovation through its global participation in the US-led NEBM. Despite their accumulated technological capabilities in information and communication technology, Japanese firms failed to prevail as major global competitors in the mobility revolution because they remained ensconced in the OEBM. In contrast, China’s emergence as a global competitor in ICT, with companies such as Lenovo, Huawei, and Alibaba, has been based on taking a development path that has become integral to NEBM on a global scale, with a pervasive presence in global value chains.
While through the process of indigenous innovation, Chinese companies have become major global competitors, many US technology companies have fallen victim to corporate financialization. The starkest contrast is between the success of Huawei Technologies in communication infrastructure, in which the company is the world leader (followed by Sweden’s Ericsson and Finland’s Nokia), and the failure of US-based Cisco Systems to become a significant competitor in this segment. In a forthcoming paper, “The Pursuit of Shareholder Value: Cisco’s Transformation from Innovation to Financialization,” Marie Carpenter and William Lazonick document how, at the turn of this century, Cisco was positioned technologically to build on its global leadership in enterprise networking equipment to become a major competitor in the more sophisticated service-provider infrastructure segment. To do so, Cisco would have had to make large-scale investments in manufacturing and marketing as well as R&D. Instead, from 2002-2021, Cisco distributed USD144 billion (98 percent of net income) to shareholders in the form of stock buybacks as well as USD48 billion (another 33 percent of net income) as dividends. More generally, corporate financialization has robbed the United States of the possibility of attaining a leadership position in 5G and IoT.
In smartphone competition with Huawei, Apple has benefited immensely from US trade policy that, from the fourth quarter of 2020, eviscerated the Chinese company’s high-end smartphone output by coercing TSMC to stop shipping advanced nanometer chips to HiSilicon, Huawei’s chip-design subsidiary. Yet TSMC’s rise to global dominance of advanced chip fabrication was enabled by the fact that Apple itself chose to outsource semiconductor fabrication while, between October 2012 and June 2022, wasting USD529 billion on stock buybacks (92 percent of net income) to give manipulative boosts to its stock price. Apple could have deployed just a fraction of this cash to fund on a sustained basis its own state-of-the-art fab—as indeed an industrial journalist suggested to Apple CEO Steve Jobs in 2010. To put the extent of this corporate financialization in perspective, the combined USD27 billion that TSMC and Samsung Electronics committed to spending over several years from 2021 to launch state-of-the-art fabs in the United States was less than one-third of the USD86 billion that Apple spent on buybacks in 2021 alone.
Meanwhile, as has explicitly been recognized by Pat Gelsinger, Intel’s CEO, who took office in February 2021, corporate financialization has been a prime cause of that company’s loss of world leadership in chip fabrication to TSMC and Samsung. China’s SMIC may be struggling to catch up with the Taiwanese and Korean companies in advanced nanometer platforms, but Intel’s financialization has helped create an opening for SMIC’s development path. The same argument can be made about how Boeing’s corporate financialization, manifested by USD43 billion in buybacks from January 2013 to the first week of March 2019, just before the second of the two Boeing 737 MAX crashes, crippled a US-based technology leader, enhancing the possibility that China’s Comac, with its C919, might break into the Boeing-Airbus duopoly in the global manufacture of large aircraft.
More generally, a book could be written about how US-based companies have supported China’s development path to the mutual benefit of both nations, but how the US-based companies have squandered these gains in the name of “maximizing shareholder value”. Indeed, such a book could focus solely on the story of China’s rise to global leadership in green technology, with corporate financialization causing the United States to fall further and further behind. For the past decade or so, as the success of China’s development path has become clear in global competition, US interests have complained about China’s currency manipulation, intellectual property theft, unfair government subsidies, violation of WTO rules, and attacks on US national security. While, depending on the facts of the matter, there may be cause for US concern on any or all of these issues of US-China relations, a policy agenda that limits itself to litigating these questions will fail to comprehend the technological learning that since the 1980s has been driving China’s development path. At the same time, this US penchant for blaming China will ignore, or at best underestimate, the damage to the development path of the United States that corporate financialization has wrought.
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[1] The pioneering academic work on indigenous innovation in China was done by Qiwen Lu, on a project led by William Lazonick at the UMass Center for Industrial Competitiveness from 1993 to 1998 and the Euro-Asia Centre, INSEAD, from 1998 until Professor Lu’s untimely death in August 1999, just after his submission of the final book manuscript China’s Leap into the Information Age: Innovation and Organization in the Computer Industry to Oxford University Press (published in 2000). During the late 1990s, Qiwen Lu was in contact with Feng Lu, who was completing his Columbia University PhD dissertation on the reform of Chinese state-owned enterprises. Feng Lu subsequently became a faculty member at Tsinghua University, where, with his student Kaidong Feng, he ran a project on the limits imposed on indigenous innovation of the Chinese policy of “trading market for technology” in the automobile industry. In the spring of 2004, Feng Lu, by that time professor of political economy at Peking University, met with officials at the Chinese Ministry of Science and Technology (MOST) to discuss his report carried out with Kaidong Feng, The Policy Choice to Develop Our State’s Automobile industry with Indigenous Intellectual Property Rights. This report was influential in making “indigenous innovation” central to MOST’s Medium and Long Term Plan. For the last decade, William Lazonick and Yin Li have been collaborating with Kaidong Feng on a project on indigenous innovation and economic development in China.
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While the article touches on it, it doesn’t quite focus enough on what I think is the key distinguishing factor in Chinese development models, which is regional competition. China has one big advantage over the other Asian and European developing states – its sheer size means it can try out several models simultaneously, and simply pick the winner. So it hasn’t had to maintain the sort of laser focus on a small number of sectors that Japan, ROK, and Taiwan have had to do, which has been both successful for them but also a source of weakness in their economy. Finland for example, is a cautionary tale of what can happen when a country becomes very technologically advanced in a very narrow area (i.e. Nokia).
But while the Chinese model has strengths, it has also clear weaknesses. Put simply, if you compare China’s development to the similar gradient of Japan, ROK, and Taiwan, it is lagging when it comes to creating world leading companies. Its getting there, but, to take one example, its only now producing half decent cars – Japan and ROK were producing world leading cars at a similar level of development. And ROK and Taiwan lead on microchip technology – ROK, it shouldn’t be forgotten, was far poorer and less developed than China less than 50 years ago. So while China has advanced rapidly, its model is not demonstrably superior to the other Tiger nations, or similar nations in Europe for that matter. Its China’s scale that makes it impressive. But China will only really have definitively made it when its companies are genuine world leaders, rather than having ‘caught up’ with its competitors. There are surprisingly few examples of this so far.
China’s corporate structures are notoriously conservative and hierarchical, which is a very good model for catch up development, but probably less good when it comes to actually becoming world leaders. China has its own financialization problems, not least its addiction to low productivity infrastructure investment and often shocking levels of construction. One Chinese family I know recently had to raise the equivalent of $25,000 to ensure their engineer son had his job in a major company ‘guaranteed’ following his successful interview. This is pretty much the norm in many sectors in China and is hardly a reassuring sign that the best people are being put in the most appropriate jobs.
I think it’s important to acknowledge that a lot of our operating hypotheses, yours, mine, and perhaps others here as well, on the inner workings of the Chinese innovation landscape often rest on a foundation, solid at the best of times, but other times not so, of apriori assumptions. Even when genuine attempts are made to lead with empirical data, China is so often viewed through a skeptical lens in the west that this bias finds a way to seep into research output and contaminate it, making it genuinely hard to locate the true contours of Chinese innovation in a way that maps to the actual reality on the ground. We saw this with the assumptions in the West about Russian military tech pre-Ukraine war, it was taken for granted that western weaponry was far superior to anything the backward Russians could conceivably produce. Raising one’s head above the parapet to point to the folly of underestimating an adversary’s true capabilities would have been a career limiting move, such was the certainty borne of living in a propaganda bubble.
What we do know is that the chinese have managed to rouse themselves to become a top 3 global player in some key industries like mobile telephony, networking gear etc, and while many may scoff at this, Tiktok is rearranging the established order in social media (capturing attention at such scale is no easy feat, whatever one may think of Tiktok). The argument can be put forward that without e.g. foreign components a company like Huawei wouldn’t be able to make phones, but equally credible is the argument that Chinese manufacturing capacity was the wind beneath Apple’s wings on its ascend to the top of the mobile food chain. The point is, China has made a genuinely impressive push to catch up in key technology sectors that define the present, but perhaps even more importantly, are contesting for outright leadership positions in areas that are going to shape the future, AI, quantum computing, biomedicine etc.
I’m not altogether sure that its true that China has always been seen through a sceptical lens – its possibly the bias in my own reading, but over the past 30 years I’ve read far more ‘China will lead/take over the world’ books and articles in mainstream sources than the opposite. In the 1990’s I worked for a major US engineering company that had a lot of its engineering know-how openly taken by a Chinese client and the company moved out of the sector on the assumption that it was inevitable that China would dominate the particular sector within 10-20 years. They didn’t, the Koreans, Germans and Japanese still lead. If anything, the particular area (railway rolling stock and electrics) the Chinese have fallen behind internationally. In recent major tenders I’ve been following they didn’t even make the cut for final bids. Given the vast size of the Chinese railway industry I find it really strange that they find it very hard to compete internationally either on quality or price (there may well be specific reasons for this I don’t know about).
There are certain key areas where recent Chinese advances have been astonishing to me – in particular in the unglamorous ‘nuts and bolts’ side of electronics. They have displaced the Japanese in particular in a lot of key standard componentery, often at a remarkable speed. But they are still way behind in many key areas, not just in terms of technology, but in simply being able to make products the customers want. Its anecdotal, but I know quite a few people involved in the interface of design and manufacturers who now say HCM/Saigon is the new hotspot for innovation and manufacturing and has superseded cities like Shenzen. Again, its anecdotal, but product engineers I know rate their Vietnamese counterparts very highly and often speak of relief of not dealing with Chinese contractors anymore. I think this is ominous for China as this process usually takes place well after a leading city region has matured.
Chinas big advantage is also its disadvantage. It can’t just lead one or two sectors. Taiwan and ROK are minuscule by comparison to China and lead major industrial sectors, but their economies are inevitably vulnerable because of this narrow focus. China needs broad spectrum leading companies right across the board in high tech, mid-tech, and basic consumer products – and thats just for domestic need. But its still struggling to get there – in my opinion, its at least a decade behind where it ‘should’ be when you benchmark it against the major developed Asian nations. That to me indicates fundamental weaknesses within its model. There is no particular mystery as to where those weaknesses are – they are discussed openly in China’s media and by Party leaders – and even Xi himself. Whether these will prove fatal to its growth in the longer term, I’ve really no idea, but my suspicion is that its close to peaking at a point under the dread middle income trap.
I am struck by the parallels between your analysis of the Chinese economic strategies and some of the analyses of Russian battlefield strategies. Some u.s. analysts criticize the Russian offense for the ways it violates u.s. doctrine for executing an offensive. The Russians appear to have real concern about limiting the damage they do to the territory they absorb and apparently intend to keep — as opposed to u.s. strategy of moving quickly as if in a Blitzkrieg with worry about damage — after the fact. There seems a fundamental difference in the intent behind Russian and u.s. offensive strategies. I believe your analysis of Chinese strategy might contain a similar misapprehension of the Chinese intent, its time domain, and constraints. My impression — admittedly based on far less knowledge and experience of China and the economies of the Tigers than you or Thuto can claim — is that the Chinese elite rides precariously on the back of a hungry Tiger — its vast population. Promises have been made and history suggests they must be catered to, that they might quiet that Tiger. This impression makes it difficult for me to assess China’s progress, relative rate of progress, and probability of success in terms of the economic competition supposed in this post.
As a member of the u.s. Populace, I am concerned about the future of the u.s. contrasted with that of China. I am disturbed by how quickly discussion of relative economic competitiveness, appeared to me, to pass to considerations of the Chinese economy compared with that of Japan, the ROK, Viet Nam, and Taiwan. Discussion of regions in China’s sphere of influence recalls to me the Korean proverb: “Eat Chinese mustard and cry.” Also the discussion seems to me, to assume the u.s. is completely out of the running in the global economic competition … an I assumption I believe is all too true.
Rather than debate the relative progress and future of the Chinese economy versus that of other nations, I would far rather discuss the relative positions now and in the future, of the u.s. and China as global hegemons — assuming the future oceans support weather and waves that continue to enable the existing notions of a global economy. [I remain impressed by the paleoclimate’s ocean waves and conditions described in Hansen et al. 2016.] I am very pessimistic about how well the u.s. dependence on a ‘global’ economy might adapt to some of the futures I can easily foresee. I believe the Chinese broad breadth economy of goods and services will serve the Chinese peoples and their satellites far better than the ruin the u.s. economy promises for our future. I suppose many of China’s presumed competitors in the ‘race’ [what race?] to economic development and dominance will become economic vassals of China in what I believe will be the much smaller world of the future.
There are problems in the Chinese economy, economic strategy, and economic vision of the future. I also believe that without virtually unimaginable changes in the u.s. economy … the u.s. will be a far less important player in the future than our present discussions have anticipated, so far.
I am surprised that there is no mention of the godfather of “maximizing shareholder value” – Milton Friedman – and his wonky Friedman Doctrine-
https://en.wikipedia.org/wiki/Friedman_doctrine
That sob has caused such massive damage to societies around the world and now he is no longer here to see the payoff of his doctrine. He never even lived long enough to see the 2008 crash. And as far as I recall, there is actually no legal requirement for companies to concentrate on maximizing shareholder value but is actually a Wall Street construct that.
I’ve been thinking about Uncle Wonky lately. His quote that “inflation is always a monetary phenomenon” has been puzzling me because just the phrase makes me think he was either a total moron or a truly enlightened person. I can’t decide which. If by “monetary phenomenon” he meant inflation is always about money and money is the only thing that has value – then yes Milty was a nitwit. But if he meant that monetary phenomena are always a nothing burger then maybe he did have two brain cells. He was pretty casual about the importance of equality – did he have any pithy quotes on inequality? – so I’m thinking he was not worried that inflation caused hardship for the poorest, now most of us, as long as corporations kept making more and more profit. I’m leaning toward Milty being a one-trick pony without a care in the world. So naturally when we handed China a super-primed consumer market for all their products it was such a windfall for the corporations no one including Milton Friedman had the integrity to question it. The money was just toooo good. And now we are blaming China?
Not everyone is blaming China. Some people are willing to ascribe some blame to the Free Traderists and their Free Trade, and to Clinton, etc.
I believe it is wrong to give Milton Friedman more credit than he deserves. His ideas met the needs of the Big Money Elite running the u.s. economy but he did not work the wondrous dismantling of the u.s. economy. Legion COEs and billionaire potentates deserve credit for applying Friedman’s ideas. Those ideas happened to nicely fit into propaganda that served the COEs and billionaire potentates in their long range efforts to more efficiently plunder the rich wealth so many generations of the u.s Populace had amassed through policies remarkably similar to the way this post described Chinese economic policies. Also, remember that Milton Friedman was just a member of the thought collective working through many decades to effect changes in the u.s. and World economy. Let us not forget contributions of the vast stables of wholly owned politicians, judges, and u.s. regulatory agencies that did so much to help so few. And do not forget the clueless way that the u.s. Populace and wholly owned economics profession swallowed the Friedman KoolAid making it all too easy to implement the plunder, dismantling, and transfer of so much Public Wealth. And thank you to all the little people who helped.
I’ve seen quite a bit of the “China is going to take over the world” commentary you reference, and my sense after reading such articles was always that they were “boy cries wolf” scare mongering designed to give local audiences, especially the policy making elites in the legislative halls and the investors who write the cheques, a kick up the back side to “do something now otherwise the Chinese will take over”. It was always whichever sector created the most panic and urgency to elicit a response from said elites that had the spotlight shone on it. This is perhaps a meandering way of saying that while I don’t doubt that some people believed it, I don’t think the people espousing this “China taking over” narrative were resigned to that fate, it was more like they were issuing a rallying cry. That said, I still saw many more “the Chinese are nothing more than low cost manufacturers who pose no threat to western tech supremacy” type articles than the opposite, but that’s just my experience.
As regards the Chinese not making the cut in the latest big tenders you mention, I would ask who is issuing the RFPs, and whether technical merit alone (or lack thereof) is enough to explain these outcomes? We are still in the middle of a trade war between America and China and it’s not inconceivable that geopolitical forces are being brought to bear behind the scenes to dissuade countries from choosing the Chinese as the preferred bidder (the ensuing trade war propaganda that labels anything Chinese a national security threat has been quite successful, and coupled with the threat of sanctions can send a chill down the spine of many a potential Chinese client). This goes back to my earlier point that China analysis is a murkier affair than most people are willing to admit, and not an insignificant part of it is done to confirm people’s priors about China.
On the issue Saigon surpassing Shenzhen, I follow the tech industry to the point of near-total immersion and it’s the first i’m hearing of it so until more data comes in, I will suspend judgement on this. Finally, my own sense is that the future isn’t going to look like the past, and delineations between sectors will be far less defined than we are used to seeing today. Technologies like AI are going to diffuse across industries (e.g. medicine, precision manufacturing, defense etc) in a manner that will redefine what we call “broad-spectrum technological dominance” and on this front, the Chinese are very much in the race.
This comment is meant to respond to PK’s above.
The economic competition this post discusses is a very unfair competition! The u.s. Does NOT allow for economic planning. IT IS NOT ALLOWED!!!!!
The Chinese seem to believe it is alright to do economic planning, even promote a government sponsored and backed Industrial and economic Policy. This is anathema!!!!! Planning cannot be done. Humankind and all the inventions of Humankind … EXCEPT the Market … are completely unable plan an economy or economic development. The manifold Chinese apostasies must be rooted out and burned at the stake — for their souls sake! Amen.
We absolutely have industrial policy. But it’s done to facilitate looting. You can see it from who gets the big Federal spending and subsidies: the military-intel state, higher ed, real estate, health care (the tax treatment of employer provided insurance is a massive subsidy, even before getting to the US letting its intellectual property developed on the Federal dime go into drugs where the US says bupiks about pricing and doesn’t get royalties either).
The DoD tried to have LCD flat panels made in the US. They’d funded the technology. But Silicon Valley turned up its nose at the economics of making things, so LCDs went to SKorea and Japan.