Competition Policy Must be a Fundamental Component of Industrial Policy
If not, industrial policy just becomes a mechanism of corporate domination.
Last week, Competition Policy International published a new paper by my Open Markets colleague Audrey Stienon and me. We argue that competition policy must be a foundational element of industrial policy to ensure fairness, socially beneficial innovation, and broadly shared prosperity, ultimately safeguarding democratic governance.
We outline how the United States is undergoing four major economic transitions that will reshape our society, including the climate and demographic transitions. Successfully navigating these transitions will require ambitious industrial policy strategies — public investments, market coordination, and regulatory frameworks to guide change. But as industrial policy becomes more essential, so too does the need for strong safeguards. Without them, these strategies risk entrenching incumbent power, distorting markets, and undermining the very democratic institutions they are meant to support.
Our paper places this moment in historical context: from the American System and westward expansion to the New Deal and Cold War R&D, industrial policy has long played a central role in shaping the U.S. economy. The challenge is to ensure these tools serve democratic ends — not concentrated private power.
Competition policy plays a critical role in that process. It can prevent powerful incumbents and financial actors from capturing the benefits of industrial strategy, blocking new entrants, or distorting markets to serve narrow interests.
This competition policy strategy is particularly urgent in sectors like healthcare and childcare, where private equity firms increasingly use public money to generate profits while undermining wages, service quality, and community well-being.
The good news is that many of the tools to address these risks already exist. From merger scrutiny under the Clayton Act to Section 5 of the FTC Act, common carriage obligations, and even structural remedies like breakups and compulsory licensing, policymakers have a powerful legal toolkit — they just need the political will to vigorously use it.
Our central assertions are:
Navigating economic transitions successfully requires intentional, democratic policymaking.
Competition policy is not an afterthought — it is essential to ensuring that industrial policy leads to a fair, innovative, and democratic economy.
The paper can be downloaded here.
Thanks for Reading
Image credit: Pavlofox via Pixabay.
Well written paper!. In my opinion, building on your args, I think its important to note that a powerful but often overlooked historical example of such democratic economic governance already existed for much of US history, through intentional policy structures that essentially generated constant antitrust fields, even long before later federal antitrust enforcement came into being
From roughly the 1830s to some point after WW2, U.S. political and economic governance developed under a structurally decentralized regime combining localized capital formation, regionally chartered banks, and varied state-level industrial policies. While later, post war phase was more unified it remained economically and governmentally decentralized and pluralistic until centralizing actions taken during the advent of the so called Neoliberal Era; things National Bank Notes, state banking, localized industrial development, etc werent just things that existed alongside democratic economic governance, they enabled it and were parts of it, they were like its financial scaffolding.
The existence of thousands of individually chartered banks under both state and national regimes created a naturally fragmented credit system, preventing any single financial center from monopolizing capital flows while generating a geographic, sectoral, and societal diffusion of both access to capital and decision making related to its deployment. Alongside this, decentralized publicly accessible mass-member political parties served as democratic intermediaries, enabling economic and political voice at the local and regional levels, which constantly placed pressures against concentrations of private power. These structures intentionally generated economic redundancy by design: multiple overlapping banking, legal, and industrial frameworks meant that no single actor, public or private, could easily dominate capital allocation or productive industry.
Importantly, much of what you now describe as the need for federal antitrust law was also performed at lower levels of government through state corporate law restrictions, charter limitations, fair trade statutes, anti-monopoly, and more. The Old Republic saw these things it as the essential condition for democratic governance. Thus, the lowercase-d democratic aspects of "democratic economic governance" you seek were once generated not primarily by national administrators but by decentralized institutional design itself. As you ponder modern frameworks, one might ask whether proposals that rely heavily on federal technocratic administration can truly recreate the robust, self-sustaining democratization that broad regional capital autonomy once ensured. Your program may succeed technically, but without structural redundancy and participatory decentralization, theres a high risk that it simply creates a new set of centralized gatekeepers vulnerable to capture