Joe Biden teaches the EU a lesson or two on big state ‘dirigisme’
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
In case you hadn’t noticed, an incredibly bold experiment in social dirigisme is unfolding not in France, where linguistically and spiritually it belongs, but in the land of the free.
The Frenchwoman writing these lines confesses she has been flabbergasted by the conditions, unveiled this week, attached to $39bn in grants and loans in the US Chips act, which is designed to encourage the development of an entire semiconductor manufacturing ecosystem in America.
What US commerce secretary Gina Raimondo has outlined is a far-reaching attempt to bend employer behaviour, not only in the field of industrial and financial strategy — chipmakers must agree not to expand in China for a decade and refrain from stock buybacks — but also in how they treat their staff.
Among some of the most striking features — and after the administration had to scale back its legislative plans on childcare — companies applying for the funds will have to demonstrate that they will provide “affordable, accessible, reliable and high-quality child care”.
Child care should be within reach for low- and medium-income households,” states the documentation, “be located at a convenient location with hours that meet workers’ needs, grant workers confidence that they will not need to miss work for unexpected childcare issues, and provide a safe and healthy environment that families can trust.”
Applicants must also “describe any wraparound services — such as adult care, transportation assistance, or housing assistance”. They are “strongly encouraged” to sign collective bargaining deals with unions ahead of building new plants. This is language that France’s pre-eminent Socialist president François Mitterrand would have been proud of.
In the US, companies have so far refrained from complaining publicly about these provisions but they have not gone unnoticed.
“Affordable childcare is an admirable goal but it has nothing to do with semiconductors,” tweeted Steven Rattner, former auto industry adviser to Barack Obama. “If we want the CHIPS act to work, it can’t be used as a pack mule for unrelated policy priorities.”
Economist Joseph Stiglitz expressed a more positive view. “Worker scarcity is a significant challenge in our economy, especially in high-tech industries. The provision that companies receiving CHIPS money provide childcare for workers is an important component,” he said. “We need a market economy that not only reflects values but encourages and develops these values from the outset.”
In Europe, the initiative will be closely watched. “They are using industrial policy to push social policies,” said Shahin Vallée, former EU adviser to Emmanuel Macron and now senior fellow at DGAP, the German Council on Foreign Relations. “There has been a profound ideological shift in the US, and in Europe, we still haven’t adjusted to it.”
The statist Charles de Gaulle would also have been envious of Joe Biden’s industrial volontarisme: broadly that where there’s a will, there’s a way. The Chips act, combined with the Inflation Reduction Act and its $369bn in grants, loans and tax credits for the rollout of renewable energy and clean technologies, are the most significant attempts to revive industrial policy in the western capitalist world since the aftermath of the second world war.
This sea change has deeply unsettled European companies and policymakers, triggering a rethink of industrial policy at EU and national level, and spurring attempts by Brussels to loosen state aid and national subsidy rules.
European business leaders, who complain that the EU is about sticks and not enough carrots, have called for similar incentives in the form of direct funding and tax credits. But they would surely be less keen on the significant strings that the US has also attached.
As one French government official pointedly said: “If we were doing this in France, we would be described as communists.”
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