As we close out 2023, it’s time to turn to prognostication. I guess it would be more logical if I did a comprehensive analysis of 2023 and major industrial policy trends throughout the year – however, to do that justice, it will take some time, so I will try to do that shortly.

So your guess is as good as mine, but here goes:

• It seems quite evident that we are living in a post-Inflation Reduction Act and CHIPS and Science Act world. Looks for advanced economies to continue to play catch up to the U.S. and introduce a mixture of policies to enlarge their domestic economic bases/prevent capital flight.
• The pressure to engage in robust industrial policies will be opposed by fiscal hawks across the political spectrum (not just the Right!), who will instinctively oppose these inflationary policies. Well, be more creative folks. You can re-balance your existing suite of policies to maintain their current fiscal outlays, while still encouraging thoughtful industrial policies.
• Looking backward for a second, it seems like 2023 was the year where the myth of the Chinese economic development model was finally burst. Even if China does return to a brisker pace of growth, it does not seem like its version of authoritarian industrial policy will be the guiding star for developing countries (or even some developed countries). Again, going back to point 1, this leaves the U.S. as once-again (?) the most influential industrial policy jurisdiction in the world, even with all the inherent contradictions in its political and economic philosophy.
• A long-running trend that will continue to play out in 2024 is the continued convergence of climate change adaption/mitigation and industrial policy. This is most notable in Saudi Arabia, as the eventual sun-setting of their petroleum industry has led them headlong into myriad ventures (e.g., sports, entertainment, urban development). While the example of Saudi Arabia is most associated with “diversification,” I think this is climate change hedging manifesting as diversification. This can also be seen in (what is to me – please correct if I’m wrong) a resurgence in nuclear reactor construction/development. In the country in which I’m located (Canada), there has been a noticeable shift in public sentiment and actual announcements related to nuclear reactors.
• If 2023 was the year of AI, 2024 might be where industrial policy grapples with the economic implications of AI. Already the familiar battle lines are being drawn between laissez-faire approaches and a more measured response. Given the disaster of social media proliferation in the 2000s/2010s culminating in the cluster-f of the 2016 US election, it seems like the mood has shifted. The number of countries studying AI or pondering legislation or introducing legislation seems like lessons have been learned from the hands-off mistake from the social media era. Whether these policies will be any good remains to be seen. But the point is pretty clear – in the absence of sensible policies, there is a non-zero probability that unfettered AI proliferation could further destabilize an already shaky global economy that has never really recovered from the 2008 financial crisis. Sensible taxation policies that lead to universal basic income or improved social programs that compensate displaced workers are needed IN ADVANCE of the diffusion of AI. We cannot wait for this tsunami to devastate labour markets, and then use band aids and patchworks to fill the wholes in the ship. We tried this in the WTO/free trade disaster of the 1990s – it led to Donald Trump, Orban, Erdogan, Cameron, etc. Let us not repeat this mistake.

Again, these are just educated guesses. Let’s see how many turn out to be correct.

Happy New Year!