The Global Scrimmage Over Industrial Policy: Lessons from China and Japan

The Rise of Industrial Policy: A Global Scrimmage

China’s remarkable success in leveraging industrial policy to bolster its economy and promote green manufacturing has catalyzed a heated competition among nations striving to nurture and protect their local industries. This resurgence of government intervention in the economy echoes a time long past—40 years ago—when similar anxieties were triggered by the rise of an Asian power, Japan. At that time, fears surrounding Japan’s economic prowess were palpable, as it emerged as a formidable competitor on the global stage.

In the early 1990s, the narrative was dominated by Michael Crichton’s gripping thriller, Rising Sun, which painted a dark picture of Japan’s relentless economic warriors. This fictional portrayal was mirrored in numerous nonfiction works that warned of the financial and technological juggernaut propelled by Japan’s influential government trade ministry. A survey conducted in 1990 revealed that nearly two-thirds of Americans perceived Japanese investments in the United States as a threat to American economic autonomy.

However, this anxiety about Japan’s economic dominance peaked just as the nation was on the brink of a prolonged economic downturn, known as the “lost decades,” characterized by the collapse of both real estate and stock market bubbles. Fast forward to the present day, and Japan, after enduring a lengthy period of stagnation, is now implementing a multibillion-dollar industrial policy aimed at revitalizing its underwhelming economy and reclaiming its status as a leader in technological innovation.

As nations around the world observe China’s industrial strategies, they are prompted to reconsider their own approaches to economic policy, igniting a new wave of competitive spirit in the global market.