Hello and welcome. You are listening to Patrick Boyle on Finance, a podcast exploring ideas from quantitative finance, examining events occurring in markets right now and financial history to see what lessons can be taken away, including interviews with some of the most interesting people in the world of finance. To learn more about the podcast, visit onfinance.org.

After decades of using its influence at institutions like the World Bank and the IMF to influence

governments around the world to cut back on tariffs and subsidies

and to embrace free trade, the United States has in recent years launched the most sweeping

industrial policy in generations. This is a big change.

We've gotten in the habit over the last 40 years of thinking that government has the answers.

There's very little that government

can do as efficiently and as economically as the people can do themselves. And if government would

shut the doors and sneak away for about three weeks, we'd never miss them. 40 years after Ronald

Reagan rejected large-scale government intervention in the economy, and 30 years after Bill Clinton signed the NAFTA

free trade agreement, US politicians have been pushing through tariffs on foreign goods

and subsidies for domestic producers in strategic sectors, with the hope of boosting the

US economy, reinvigorating the manufacturing sector and creating new jobs.

Obviously, a big reason for this change in direction has been competition from countries

like China, whose planned economies have seen great success over the last 20 years. But does

that really mean that heavy-handed government intervention

is the right direction for Western economies to move in? Industrial policy is a term for

a set of policies that governments use to bolster national industries or companies deemed

strategically important for either economic competitiveness, social outcomes,

or national security.

Washington's new embrace of industrial policy has made other advanced economies nervous.

They worry about the competitive threat of subsidised American companies and the risk of seeing

...