Trump wants to boost industries that were once dominant, in many cases, when he was a child. The share of manufacturing employment in the American economy reached its peak of 39 percent during World War II, and its total workforce peaked in 1979. Because of increases in productivity in automated manufacturing, the value of real industrial output continued to increase and was, before Trump’s current tariff damage, still close to its peak before the Great Recession.

Despite his efforts, Trump is criticized by others for not doing enough. For instance, Financial Times columnist Rana Foroohar recently argued that Trump needs to move beyond haphazard tariffs to an industrial policy with “a 360-degree view” that incorporates government subsidies, tax breaks, and “work force training commitments” (Foroohar 2025).

Bolstering “truly strategic industries” requires a coherent effort, she claims, pointing to President Joe Biden’s 2022 CHIPS and Science Act, not a Trumpian “policy made in dribs and drabs” that is “incoherent at best.” Manufacturing resilience, for example, requires “more regional nodes of critical goods manufacturing around the world. It’s not about ideology. It’s just about not keeping all your eggs in one basket.” The certainty of industrial policy is necessary for investors to know “what the US cares about in terms of manufacturing, and why.” Like many others, she dreams of a rational and coherent industrial policy.

But considering government as it is, instead of what the interventionists dream it could be, reveals that coherent industrial policy is impossible. It is merely part of a race for politics and power. The calls for industrial policy are essentially ideological.

What is industrial policy? / One definition of industrial policy is ambitious and encompassing: “government policies that explicitly target the transformation of the structure of economic activity in pursuit of some public goal” (Juhász et al. 2023). In this grand vision, close to Foroohar’s, industrial policy is different than the mere addition of miscellaneous government interventions. It targets a great collective goal and pretends it can be rationally pursued by something akin to economic planning.

Industrial policy can be seen as the offspring of what Jean-Baptiste Colbert (1619–1683), a minister to King Louis XIV, tried to achieve. As described by economic historian Donald Coleman, Colbertism was “a systematic treatment of economic activities.” Colbert “used a variety of tools: subsidies, special tax, reductions or exemptions, protection against foreign imports,” etc. He encouraged exports and domestic manufacturing. He was a dirigiste mercantilist who believed his policies enriched the country and thus the king—even though they likely explain why France lagged far behind England when the Industrial Revolution got underway.

After World War II, the French government pursued a high-tech industrial policy that was often described as Neo-Colbertism. Examples include the Plan calcul (Computation Plan) launched by French President Charles de Gaulle in 1966. The project aimed at turning the country into a computing giant, but it mainly succeeded in diverting resources to unsuccessful national champions. Other European states adopted some form of neo-Colbertism. So did most states in the underdeveloped world, which focused on a sort of Trumpian promotion of manufacturing.

One can argue that neo-Colbertism was often not as encompassing as industrial policy is supposed to be. At any rate, the comprehensive vision of industrial policy has never taken root in the United States. Foroohar thinks that Biden tried to bring it to America (again, the CHIPS and Science Act and the misnomered Inflation Reduction Act), but she believes he did not do enough.

An ideal state / Advocates of industrial policy are victims of a romantic view of government. Public choice economics has shown that it is an error to imagine ideal public policies and expect that politicians and bureaucrats will realize them. Government officials and agents have their own personal interests. Even if they did not, they cannot know all the required information about supply and demand, which can only be conveyed by the free-market prices that their interventions would disrupt. Individuals have different preferences that are better reconciled by economic freedom and voluntary cooperation than by political coercion and polarization. Industrial policy is necessarily industrial politics.

Coherent policies / A rational industrial policy is impossible if by “rational” we mean logically coherent or simply consistent with what the different individuals in society want given the limited resources available to satisfy those demands. This is why most forays into industrial policy turn out to be disappointing. It is not by happenstance that the countries with more economic freedom—that is, with less industrial policy—are typically the ones with more prosperity and economic growth, as shown by the Freedom of the World Index. The governments of more regimented societies try to overcome free (or more free than unfree) economies but are always behind the curve.

Industrial policies often promote declining industries simply because special interests want to maintain their market position against changes in consumer demand, technological progress, and other market factors. But sometimes they promote other industrial sectors because those special interests are more politically powerful and closer to the government. Rent-seeking guides industrial policy. For obvious reasons of incentives, free competition and financial markets are generally better at resource allocation than politicians and bureaucrats. Public choice analysis shows that government failures are generally worse than market failures.

An ideology / Foroohar imagines that her view of industrial policy is not grounded in ideology but in common sense—for example, “about not keeping all your eggs in one basket.” What she and other industrial policy supporters mean is that the state should keep your eggs in its basket. She does not seem to understand that producers (and speculators and inventory hoarders) are more efficient than politicians and at ensuring the consumers’ security of supply at prices the latter are willing to pay. And if she is speaking of government stuff—warplanes, tanks, military fuel, combat boots—why can’t the government manage its inventories and sign contracts with several producers in friendly countries?

Contrary to her claims, industrial policy is “about ideology.” It is about the ideology that a coercive allocation of resources will produce the goods that politicians and bureaucrats think consumers should want. At best, it is a belief that political and bureaucratic processes will, by some magic, adapt to what consumers want better than market competition will.

Supporters of industrial policy should emphasize not only the latest industrial fad, but also include a bread component. Otherwise, who will direct production toward resilient production of bread, the machines to produce it, and the labor necessary in those and related industries? Recall the Russian official who, after the breakup of the Soviet Union, asked British economist Paul Seabright: “Who is in charge of the supply of bread to the population of London?”

What industrial policy cares about / Businesses, Foroohar writes, should be told “what the US cares about in terms of manufacturing, and why.” This is a highly ideological if not mystical statement. Since the United States is composed of about 260 million adults, speaking of what the country cares about in manufacturing is nonsensical except if all individuals are unanimous. Each individual or private group expresses through markets what it wants and is willing to give up to get it. Foroohar probably means what the US government cares about, either identifying it with all individuals or glorifying political authority. In a 2024 Financial Times column, she blames “America” for its “very little sense of collectivism.” Hers is properly a collectivist ideology.

Industrial policy, she writes in that 2024 column, includes

rebalancing consumption and production within an economy, reducing inequality and promoting better and more sustainable kinds of growth, building a more globally competitive workforce, finding a middle ground between innovation and regulation and so on.

For good measure, she adds “educational reform” and “inclusion.” She obviously likes all these things, including those in the “and so on.” Industrial policy would involve changing “the entire nature of the American economy.” Whether this is according to Trump’s or Foroohar’s preferences, everybody else should be very worried.

Readings

• Foroohar, Rana, 2024, “America (Still) Has No Industrial Policy,” Financial Times, March 18.
• Foroohar, Rana, 2025, “Tariffs Without Industrial Policy Won’t Work,” Financial Times, April 20.
• Juhász, Réka, et al., 2023, “The New Economics of Industrial Policy,” CEPR/​VoxEU, December 4.
• Lincicome, Scott, and Huan Zhu, 2021, “Questioning Industrial Policy: Why Government Manufacturing Plans Are Ineffective and Unnecessary,” Cato Institute, September 28.