A common argument against industrial policy is the idea that government will become
captive to vested interests. While there is broad consensus that innovation serves as an integral
catalyst in leading the trajectory of an economy and even society forward, the emphasis in
economic development policy remains on traditional attraction and retention incentives. This is
often directed at specific businesses, which is largely a zero-sum game with little or no broader
effects for economic development. In addition, local governments tend to support the same
policies over time, adding incremental changes to preexisting strategies, rather than a wholesale
reconsideration of investment strategy. The emphasis recently has shifted towards boutique,
targeted policies. Yet, as we consider that the greatest economic growth potential is expected
from the development of new industries, the difficulty of predicting what will be the next big
thing is a daunting task for venture capitalists, investment bankers and other experts. Our
argument is that government has a vital role in promoting capacities that enable the fullest
variety of human endeavors and potential, including a variety that cannot be foreseen.
Policy efforts aimed at fostering equity are commonly criticized as handouts that produce
perverse incentives to diminish effort. Despite intentions to “even the playing field”, the
American public has notable reservations in supporting redistributive programs (Pittau, et al.
2013)
. Up until the recent economic recession, many espoused anti-regulation and proprivatization practices. Nevertheless, as we reflect on economic practices over the past few
decades, many are questioning the tenets of the Chicago School of Economics: rent-seeking
behavior associated with widespread deregulation and retraction of government involvement in
the marketplace and society is widely considered to have contributed to the growing
socioeconomic rifts across the U.S. population as well as the dramatic economic downturn that
4 "In the News." Financial Times [London, England] 28 Apr. 2003: 3. Financial Times. Web. 30 Aug. 2013.
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began in 2008. In his book, The Price of Inequality, Nobel Prize winning economist Joseph
Stiglitz (2012) argues that equity and efficiency must be considered in tandem. The skewed
distribution of wealth in the U.S. has grave consequences for the economy and society. Those
occupying the middle and lower rungs of the income distribution are unable to follow the
American Dream because they lack the capabilities to fully participate in the economy. If this
cycle continues there is potential for subsequently even greater divergence in income and
opportunity, leaving those who are disadvantaged less able to gain access to education, finance
and opportunity. Moreover, as Brenner and Pastor (2013) emphasizes, the increasingly unequal
distribution of income inhibits entrepreneurship, slows economic growth, and destabilizes the
economy of American cities. Rather than viewing equity and efficiency at odds, they appear to
be complements. Reconsidering the role of government argues for a broader framework focused
on building capacities designed to benefit and advance the entire population.
