Western industrial policy failure over the past three decades is not a partisan story. It is a bipartisan, trans-Atlantic consensus failure that crossed ideological lines, spanned administrations of every political stripe, and was celebrated at the time as evidence of sophisticated economic thinking. The cost of that failure is now being paid in supply chain vulnerabilities, strategic dependencies, and industrial atrophy that will take a generation to reverse.
The intellectual foundations were laid in the 1990s. The Washington Consensus — the package of free market, open trade, privatization, and deregulation prescriptions promoted by the IMF, World Bank, and US Treasury — explicitly rejected industrial policy as distortionary and inefficient. Comparative advantage theory said: specialize in what you do best, trade freely for everything else, and the invisible hand will produce optimal outcomes globally. The prescription was seductive in its elegance and catastrophic in its application to strategic materials and national security.
Craig Tindale’s analysis in his Financial Sense interview documents the outcomes across sector after sector. Rare earths, copper processing, gallium production, magnesium refining, transformer manufacturing, specialized chemicals — in each case, the market found the efficient solution, and the efficient solution was China. The invisible hand pointed East, and Western governments — committed to the doctrine that industrial policy was illegitimate — had no framework for responding.
The accumulated cost is now visible. America has 22 industrial lobbyists at Congress and the Federal Reserve to China’s 1,000-plus financial sector lobbyists. The FOMC’s models don’t include industrial capacity. The ESG framework closed the last magnesium plant. The permitting system has kept Resolution Copper in development purgatory for twenty years.
Western industrial policy failure is not irreversible. But reversing it requires first acknowledging that it happened, understanding why, and rebuilding the institutional frameworks — the Hamiltonian state capitalism — that the Washington Consensus told us to discard. That intellectual work is finally underway. The material work has barely started.
The Hedge 