A still agrarian Congress shelved his report, but his ideas shaped economic policy for the next century. Henry Clay’s “American System” carried his influence forward. The protective tariffs that helped industrialise the North and the federal land grants that built the transcontinental railroads did so as well. During the 20th century, the Cold War gave rise to the military-industrial complex. Darpa invented the internet, Nasa developed and spun off technologies that reshaped entire industries, and federal procurement sustained America’s aerospace and semiconductor sectors for decades. The Interstate Highway System was not only one of history’s largest infrastructure projects but also a major federal subsidy for the automobile industry. When the 2008 financial crisis hit, the government took equity stakes in banks and carmakers, once again flouting free-market orthodoxy.
Yet the myth of laissez-faire America has proved remarkably durable, almost a national religion even as practice has diverged from creed. The same orthodoxy, promoted through the US-dominated World Bank and USAid, has at times hindered economic development elsewhere.
In a recent research paper, The United States as an Active Industrial Policy Nation, Jiandong Ju, Yuankun Li, and I analysed 12,167 congressional acts and 6,030 presidential orders issued between 1973 and 2022, using large language models to identify policies that deliberately shifted the economy away from laissez-faire outcomes. The results are striking. We identified 267 congressional acts and 187 presidential orders containing significant new industrial policies. That is more than nine such directives per year over half a century, a pattern that holds regardless of which party controlled the White House or Congress. From Richard Nixon to Joe Biden, every president has advanced industrial policy. The difference between the two parties is one of degree, not kind. Our research also highlights notable features of US industrial policy. American policymakers have built guardrails into economic interventions. Some 59% of all industrial-policy laws and orders carry an explicit expiration date, with an average duration of about four years. Many are designed as pilot programmes that can be wound down if they fail. Others include conditional triggers: “Buy America” procurement preferences, for example, apply only if domestic prices are no more than 125% of international market prices. If the inefficiency becomes too large, the subsidy lapses.
As America turns 250, the pendulum has swung back towards explicit state capitalism. The Chips and Science Act, the Inflation Reduction Act and the aggressive tariffs deployed by Donald Trump and Joe Biden are not a departure from American tradition. But the current debate — between those who see creeping socialism and those calling for a more equitable distribution of gains — risks missing a longer continuity. The US has never been a pure laissez-faire economy. From its earliest days, it has used state power to correct what it sees as the failures of laissez-faire while relying on a competitive private sector as the engine of growth and innovation.
See also: Chip worker shortfall endangers US factory revival
The real secret of American economic success over the past 250 years is not ideology but pragmatism: a willingness to use both markets and the state. As the country looks to the future, that pragmatism may be one of its most important legacies. — © Project Syndicate, 2026
Shang-Jin Wei, a former chief economist at the Asian Development Bank, is Professor of Finance and Economics at Columbia Business School and Columbia University’s School of International and Public Affair
