An economic examination of industrial policy

Abstract

In this dissertation, Industrial Policy proposals are critically analyzed and a theoretical methodology developed which may be used to structure the policy debate. The methodology draws heavily from existing international trade models and argues that to support declining (senile) industries, automatic adjustments to a competitive equilibrium must be mitigated. An evaluation of comparative economic performance in the textile, shipping, steel, and automobile industries during the period in which Industrial Policy has become an issue yields the conclusion that the United States' economic performance is not appreciably different than the economic performance in Japan, West Germany and Great Britain. This is in direct contrast to claims of secular decline, relative to countries having a proactive, systematic Industrial Policy, made by Lester Thurow, Robert Reich and Felix Rohatyn.