Lincicome on Industrial Policy
Scott Lincicome and Huan Zhu have a new Cato working paper on industrial policy. The paper is very good and reviews—and builds on—the recent literature on the subject. It also makes a point of clarifying what industrial policy is and what is not, and what successes it can and what it cannot claim.
Here’s an enlightening bit on industrial policy and Covid-19 mRNA vaccines:
the COVID-19 vaccines developed under “Operation Warp Speed” have been heralded as a triumph of American industrial policy, but the first vaccine to market (Pfizer/BioNTech) disproves the assertion. BioNTech was a German company that had been working on mRNA vaccines for years and began its collaboration with Pfizer (based on an earlier working relationship) months before the U.S. government began OWS in May 2020 or contracted with the companies for a vaccine in July of that same year. (Management actually predicted in April 2020 that distribution of finished doses would occur in late 2020.) The companies famously refused government funds for R&D, testing and production–efforts that instead leveraged Pfizer’s substantial pre-existing U.S. manufacturing capacity, as well as multinational research teams, global capital markets and supply chains, and a logistics and transportation infrastructure that had developed over decades. In fact, the Trump administration’s contract with Pfizer was for finished, FDA-approved vaccine doses only and expressly excluded from government reach essentially all stages of vaccine development (i.e., “activities that Pfizer and BioNTech have been performing and will continue to perform without use of Government funding”). There is even some evidence that OWS’ allocation of vaccine materials to participating companies (some of which still have not produced an approved vaccine) may have impeded non-participant Pfizer’s ability to meet its initial production targets and expand production after the vaccine was approved. Surely, some state support (e.g., support form RNA research and a large vaccine purchase commitment) was involved both before and during the pandemic, but it all lacked the necessary commercial, strategic, or nationalist elements of “industrial policy.” In fact, mRNA visionary Katalin Karikó actually left her government-supported position at the University of Pennsylvania “because she was failing in the competition to win research grants” and thus “moved to the BioNTech company, where she not only created the Pfizer vaccine but also spurred Moderna to competitive imitation.” The NIH grant supporting her early work actually came through her colleague, Drew Weissman, and “had no direct connection to mRNA research.” Other efforts, such as Moderna’s mRNA vaccine, had more state support, but the BioNTech/Pfizer vaccine shows that it was not a necessary condition for producing a wildly successful COVID-19 vaccine