For decades, many U.S policymakers have talked like Thomas Jefferson while acting like Alexander Hamilton. Jefferson, the United States’ first secretary of state and third president, championed limited government; Hamilton, its first treasury secretary, argued for active state support of emerging industries. The political rhetoric in Washington, extolling free markets and minimal state intervention, has been Jefferson’s. The reality has been Hamilton’s: the government invested in projects that drove U.S. competitiveness and innovation. Examples abound. Beginning in 1958, the Department of Defense funded the research that led to the Internet, and other public agencies were the source of all the technology now found in smartphones, including GPS, touchscreens, and Apple’s Siri. Investments by the National Institutes of Health (NIH), totaling hundreds of billions of dollars over many years, created entire pharmaceutical industries.

This dynamic is what I documented in my 2013 book, The Entrepreneurial State, and later in a 2015 Foreign Affairs article, “The Innovative State.” The federal government was willing to take risks that private capital would not and was patient enough to fund decades-long research. It was far-sighted enough to build markets at the forefront of innovation. The government understood that only patient, long-term public capital could absorb the uncertainty of transformational research; private investors, beholden to quarterly returns, systematically underinvest in precisely the breakthroughs that drive sustained growth.

For much of the last four decades, mainstream economic commentary largely ignored the key stabilizing role the state played. Successive administrations and policymakers in both parties dismissed the tools of industrial policy as economically inefficient or politically suspect, even as government-led innovation never went away. The result was an economy in which the state remained central to value creation, but the gains were too easily privatized. The institutions that were meant to set direction, design public-private contracts, and monitor performance were allowed to weaken. No mutual bargain materialized that compelled firms receiving public support to reinvest share returns and deliver affordable access. The public funded the risks but secured neither equity returns nor affordable access to the innovations their taxes created. Instead, private investors captured the rewards.

Now, industrial policy has returned to center stage. President Joe Biden first broke the industrial policy taboo with a series of legislative measures designed to catalyze private investment in semiconductors, clean energy, and advanced manufacturing. But his administration expanded productive capacity without ensuring that the gains reached working people more broadly, and this failure to translate government investment into shared prosperity contributed to President Donald Trump’s victory in 2024.

The Trump administration, too, has embraced industrial policy, but is pursuing it in all the wrong ways. Instead of organizing policy around missions—explicit public goals that define the problem to be solved and the outcomes to be delivered—and then aligning the state’s tools to get there, it has treated industrial policy as a set of sector deals to be cut and announced. It has stripped away conditions on government support for private industry that could ensure the socialization of rewards. The government has taken a ten percent stake in the semiconductor manufacturer Intel for $5.7 billion in CHIPS Act funding; a 15 percent stake in the rare-earth mining and processing company MP Materials for a $400 million investment; a five percent stake in Lithium Americas, the company developing the Thacker Pass lithium project in Nevada, through loan restructuring; and a “golden share” in U.S. Steel, granting the government permanent veto power over headquarters relocation and production offshoring. But it is using these unprecedented equity stakes not to steer strategy or secure public value but to extract value retroactively.

Industrial policy will fail, economically and politically, unless it is organized around clear missions to create public value. Direction and discipline are necessary to guide investment, innovation, regulation, and procurement toward outcomes that people can see in their lives. And delivering on a mission requires capable institutions with the expertise to design contracts, coordinate across departments, and learn from results. It requires enforceable conditions on government support to ensure that the firms receiving that support reinvest rather than extract, offer better wages and training rather than race to the bottom, and produce affordable goods and services rather than engage in monopoly pricing. When the state socializes risks through public funding, the public must share in the rewards.

It took 400,000 people to get the United States to the moon in 1969, most of them working in the private........

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