On this week’s episode of Free Lunch by The Peak, we sat down with Dr. Réka Juhász to talk about industrial policy and how Canada has turned to these policies in recent years.
How do you rationalize government intervention through industrial policy?
“The most common rationale is the classic market failure, an instance where the market doesn't function well enough to provide socially desirable outcomes. A good example is the climate crisis and carbon emissions: In a free market system, we end up producing far more CO2 than what is socially desirable. So there is rationale for government to step in.”
What are some of the strongest arguments against industrial policy?
“People accept that these market failures exist. But some people think the cure will be worse than the disease. So they're talking about a kind of government failure: Will the government just make a bigger mess of things? The concerns are that the decisions may not be in the best interests of the public or that the government doesn’t have the expertise to make them.”
What is the value proposition of funding, say, an international company in Canada?
“The way I understand this trade-off, with respect to EV subsidies, is that multinationals have expertise in EV and battery production. So at this point, if Canada wants to get a foothold in this industry, it seems much more realistic to use the capabilities of multinationals to harness some of the spillovers that might accrue from the capabilities that multinationals bring.”
This interview has been edited for clarity and length. Listen to the full conversation here.