Picking winners is shorthand for a style of industrial policy in which the state actively selects particular firms, sectors, or technologies for preferential treatment rather than relying on horizontal policies (general R&D credits, education, infrastructure) that apply across the economy. Tools typically include direct subsidies, concessional loans, equity stakes, tax holidays, public procurement preferences, tariff protection, and targeted regulatory carve-outs.
The phrase is usually used pejoratively by critics, who argue that governments lack the information and incentives to outperform markets in allocating capital, and that targeted support invites rent-seeking, lobbying, and politically motivated misallocation. Classic skeptical references include Friedrich Hayek's The Use of Knowledge in Society (1945) and later public-choice critiques.
Defenders — including economists associated with the developmental state literature such as Ha-Joon Chang, Dani Rodrik, and Mariana Mazzucato — argue that successful late industrialisers (Japan under MITI, South Korea under the Park-era Economic Planning Board, Taiwan, and Singapore) explicitly targeted sectors like steel, shipbuilding, semiconductors, and electronics, and that markets systematically underinvest in capabilities with large spillovers. Mazzucato's The Entrepreneurial State (2013) emphasises that foundational technologies behind the iPhone, from GPS to touchscreens, drew on targeted state funding via DARPA and similar agencies.
Contemporary examples have revived the debate. The US CHIPS and Science Act (2022) authorised roughly $52 billion in semiconductor manufacturing and R&D subsidies, with awards announced to firms including Intel, TSMC, Micron, and Samsung. The EU's Chips Act (2023) and Green Deal Industrial Plan pursue similar logic, as does China's Made in China 2025 strategy. Critics point to high-profile failures — Solyndra's 2011 bankruptcy after a US loan guarantee, or the UK's mid-twentieth-century support for British Leyland — as cautionary cases.
In practice most modern industrial policy blends vertical (sectoral) and horizontal measures, and the analytical question is less whether to pick winners than how to design conditionality, sunset clauses, and accountability so that support is withdrawn when it fails.
Example
Under the 2022 CHIPS and Science Act, the US Commerce Department awarded multibillion-dollar grants to Intel, TSMC, and Micron to build domestic semiconductor fabs.
Frequently asked questions
Because critics, especially in the neoclassical and public-choice traditions, argue governments lack the information and discipline of markets and tend to channel support to politically connected firms rather than the most productive ones.
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