As governments reshape the rules of competitiveness, understanding the new landscape is essential
393293 01: A view of the World Bank building October 5, 2000 in Washington, DC. The World Bank bank lends money to developing countries around the world. (Photo by Per-Anders Pettersson/ Getty Images)
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A Reversal Decades in the Making
Earlier this year, the World Bank made a U-turn on industrial policy. Following a long history of discouraging countries from using policy tools to advance economic winners, its new report Industrial Policy for Development acknowledges that industrial policy is “back with a vengeance.” The Chief Economist’s foreword admits the bank’s earlier advice “has not aged well—it has the practical value of a floppy disk today.”
This reversal isn’t isolated. The report found that 183 of the world’s 195 countries already target at least one industry. Governments across the ideological spectrum are actively organizing to compete in the next industrial era. However, approaches vary by country and region.
For businesses and investors, understanding this evolving policy environment is key to seeing where and how secular trends will unfold as specific technologies and opportunities receive the tailwinds of state support, in a global environment characterized by both fragmentation and realignment.
The Forces That Changed the Calculus
How did we get here? For decades, the dominant formula was straightforward. Governments maintained macroeconomic stability, invested in education and infrastructure, and opened markets. Private capital did the rest. That model thrived when global trade was expanding, supply chains were deepening, and the rules of the game — set largely by a U.S.-led multilateral order — were stable enough to plan around.
What cracked it was not a single shock but a convergence: slowing global growth, supply chain exposure laid bare by a pandemic, the scale of the energy transition, a multilateral order fragmenting under geopolitical pressure, security competition around semiconductors, and the emergence of AI. Some governments are also drawing lessons from watching China’s centralized model produce industrial outcomes in electric vehicles, solar manufacturing, and advanced materials that market-led economies struggle to match at comparable speed or scale. Each force alone might have been manageable within the old framework. But together, they’ve created a coordination challenge too complex for policymakers to trust to markets alone.
This environment is also increasingly interconnected, calling for a more coordinated response. Data center electricity demand is on track to double by 2030, reaching the equivalent of Japan’s grid, which powers an industrialized nation of over 120 million people. That power depends on supply chains. For example, the U.S. imports 12 of the most essential inputs for energy-related critical minerals entirely from abroad, which are now under simultaneous pressure from rare earth export controls, near-collapse of shipping through the Strait of Hormuz, and a tariff environment that’s made the cost and reliability of global inputs structurally uncertain. Decisions in one system now determine outcomes in the others.
Across Administrations, Across Continents
When industrial policy works, it can deliver broad-based growth, innovation with wide access, and international partnerships that reduce conflict through mutual economic dependence. The current wave carries positive potential at unusual scale, spanning an ideological range that should give pause to anyone reading this as a partisan phenomenon.
A prominent American illustration is the CHIPS and Science Act of 2022. The federal government committed $52.7 billion to rebuild domestic semiconductor manufacturing. Over $540 billion in private investment was announced in its wake, spanning more than 100 projects across 28 states. The public commitment changed the investment calculus for markets, and private capital followed. This should be a clear goal of industrial policy done right: not replacing markets but activating them.
Intel logo displayed on a phone screen and microchip and are seen in this illustration photo taken in Krakow, Poland on July 19, 2023. (Photo by Jakub Porzycki/NurPhoto via Getty Images)
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The same strategic logic has continued under a very different administration, through an even more direct instrument. In August 2025, the Trump administration converted $8.9 billion in unspent CHIPS grants into direct equity ownership of Intel, making the U.S. government the company’s largest single shareholder in the name of national security. The approach — not a subsidy, not a loan, but direct equity in a strategic industrial asset — represents a meaningful evolution along the state-coordination spectrum.
This same logic runs through a different political architecture across the Atlantic. Europe’s proposed Industrial Accelerator Act, put forward by the European Commission in March 2026, embeds “Made in EU” and low-carbon requirements directly into public procurement and conditions foreign investment on employment commitments, IP transfer, and EU content requirements. It is simultaneously an industrial policy, a clean energy strategy, and a geopolitical positioning instrument, reflecting a broader recognition that industrial competitiveness in this era now requires coordinating multiple levers at once.
China pursues industrial policy at much greater scale and with more direct state authority. Over the past decade, China moved from negligible market share to global leadership in sectors it identified as strategic priorities, including solar manufacturing, electric vehicles, and battery technology, achieving a scale that market-led economies now find it difficult to match. The model has also generated its own contradictions — overcapacity in some sectors, capital misallocation in others — that the rest of the world is still absorbing. China’s outcomes have significantly altered how competitive industrial policy is perceived elsewhere, a recalibration already visible from the CHIPS Act to the EU’s Industrial Accelerator Act, and in the strategies of dozens of economies that have concluded that leaving advanced industry entirely to markets is no longer viable.
The Stakes: Trillions in the Balance
The decisions being made in this decade will shape the competitive and security architecture of the next half-century. $151 trillion in infrastructure investment is needed through 2050. Energy and digital systems, the backbone of both AI-driven growth and industrial capacity, will make up a substantial share of that need. It was precisely this gap that former European Central Bank governor Mario Draghi identified in his 2024 report to the European Commission, concluding that Europe alone faced an additional €800 billion annual investment requirement on a scale not seen since the Marshall Plan.
An aerial view shows a solar power plant in a field outside the village of Sietzing, north eastern Germany on November 3, 2025. (Photo by Odd ANDERSEN / AFP) (Photo by ODD ANDERSEN/AFP via Getty Images)
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For businesses and investors, the implications are material. Industrial policy is now a primary input into where infrastructure gets built, which technologies receive sustained capital support, and which supply chains get managed against disruption. Companies and capital allocators who map this landscape accurately — understanding not just that industrial policy is back, but how each jurisdiction’s coordination model works and where it is likely to hold — will find structural tailwinds where others see only complexity.
The Risks: From Framework to Execution
There are good reasons why industrial policy has been less popular in prior periods and remains contested in certain circles today. The common concerns are well-founded. Governments may be ill-equipped to pick winners, directing capital toward politically favored projects rather than productive ones. Efficient market mechanisms risk displacement, and private investment, rather than being crowded in by public commitment, can be crowded out by it, leaving less total capital in the system, not more. Government intervention also risks inviting corruption and regulatory capture.
Policy competition between major powers has, in some industries, tipped from productive to zero sum, subsidies that distort capital allocation by entrenching incumbents, and others creating punishing overcapacity. The same mechanisms that accelerate investment can also reduce innovation, mobilizing capital but narrowing future options.
A deeper risk in the current wave isn’t fully captured by standard critiques. Industrial policy fails not only when badly designed at the top. It fails when people living nearest its physical footprint don’t see benefits in their daily lives. When that gap opens, social legitimacy erodes, and without it, long-term commitments can’t find the consumers, permits, or votes to survive the political cycles required to deliver on their promise.
SALT LAKE CITY, UTAH – MAY 23: Demonstrators take part in a protest at the Utah State Capitol to oppose the construction of the Stratos data center in Box Elder County on May 23, 2026 in Salt Lake City, Utah. The proposed data center would be about 40,000 acres and is speculated to use 9 gigawatts of power. (Photo by Natalie Behring/Getty Images)
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The long tail of this policy-legitimacy gap is already visible in populist movements responding to the unequal distribution of benefits from globalization. Resistance is mounting today, too, in response to AI and data center buildout, even as industrial policy everywhere strives to stimulate its growth.
A proposed $1 billion data center near Howell, Michigan withdrew its rezoning application after months of sustained community opposition over water use, grid strain, and environmental impacts. The developer had offered residents little transparency about what was being built in their community, and the township responded by instituting a moratorium on new data center proposals, pausing not just one project but an entire category of local development while it rewrote its zoning rules from the ground up.
Curren’s analysis of 140 large data center projects has found that between 30% and 50% of projects scheduled to come online in 2026 now face delays, with community resistance identified as a primary driver of attrition across the pipeline. The infrastructure that national industrial strategies depend on is running into the lived experience of the people asked to host it, and that friction carries real economic consequences.
Navigating the New Landscape
This is not a return to the industrial policy of the 20th century. What’s emerging is something more complex — a multi-polar landscape where different coordination models compete simultaneously, where supply chain collaboration and strategic resource competition coexist uneasily, and where the line between economic policy and national security has blurred. Understanding this landscape is no longer optional for anyone allocating capital, designing strategy, or making policy across any major sector.
Navigating it requires more than awareness that industrial policy is back. For decision makers, the first imperative is mapping not just the markets you operate in directly, but the indirect exposures created by supply chains, capital flows, and regulatory spillovers across borders. The second is policy awareness: understanding not only the specific frameworks in each jurisdiction, but the national objectives those frameworks are designed to serve and the governing philosophy of the policymakers shaping them. Industrial policy in the U.S., the EU, and China reflects not just different instruments but different theories of what the state is for. The third is diversification, hedging, and risk adjustment.
In an environment this uncertain, balance is the best positioning in a landscape still being formed. The World Bank’s U-turn, including its Chief Economist’s statement that the institution’s prior aversions had aged about as well as a floppy disk, was not the first signal that the rules are changing, and it will not be the last.
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