The Political Economy of Industrial Policy Legitimacy: Reconciling State Intervention with Dynamic Competition
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South Korea Sangmyung University
Abstract
In recent years, both the EU and the US have revived industrial policy amid challenges like digital dominance, the green transition, and shifting geopolitical dynamics. This paper uses a comparative historical approach to examine the legitimacy of industrial policy across post-WWII development, Cold War tech strategies, globalization, and current initiatives like the CHIPS Act, the EU Green Deal, and the Inflation Reduction Act.
The study finds a move from static to Schumpeterian competition models, reframing legitimacy debates. While concerns about rent-seeking persist, proponents emphasize innovation, externalities, and security. “Hybrid regimes”—industrial alliances and public–private missions—now blend industrial strategy and competition policy.
In the EU, “open strategic autonomy” and new state-aid rules aim to align market logic with strategic needs. In the US, bipartisan support has driven federal reinvestment in critical sectors. The paper argues that legitimacy depends on clear goals, R&D targeting, and institutional reforms that blend expertise with democratic oversight.
Ultimately, it proposes a new framework: industrial policy as “dynamic competition strategy” tied to ecological and security objectives and embedded in multi-level governance.
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