Revitalized Tools for Economic Statecraft

Abstract

Abstract This chapter examines how vertical industrial policy (VIP) serves as a revitalized tool for geoeconomics in the context of global power competition. VIP refers to the selective and targeted government intervention that deliberately favors particular industries or firms, which have been widely used by both earlier and later developers in economic development. Yet, contemporary policy measures warrant new scholarly attention for their explicit links to national security that go far beyond commercial objectives. First, what this chapter calls offensive strategies nurture national and global champions in strategic sectors for national security purposes. This can be done either through explicit VIP at home or through mergers and acquisitions of foreign firms. Second, “defensive” strategies block foreign competition in the domestic market by limiting market access. While the competitive race for VIP secures ground for guarding key technologies and national security, it also raises the costs of economic interdependence.