Joe Biden Uses Chip Subsidies to Turn Social Policy Around

Joe Biden

In terms of industrial policy, the US President has exceeded many expectations, but he has failed in his goal of a social revolution for the time being.

(Photo: dpa)

Washington US President Joe Biden has ushered in a new era of industrial policy and is promoting promising industries with state aid. Some predecessors tried something similar, such as Donald Trump, who had Covid vaccines developed with billions in funding. But Biden is doing something that no president before him has tried or even dared to do: He uses the subsidies as a lever to change the behavior of private companies, especially in the social and ecological areas.

The US government launched a gigantic chip offensive this week. Semiconductor manufacturers can apply for $39 billion in grants, but in return they must meet stringent conditions: provide childcare, pay union wages, refrain from share buybacks, and use low-emission energy sources.

That means the president doesn’t just want to strengthen the chip industry in order to become independent of China. He also uses the opportunity to create incentives for better conditions for the workforce. In the country of super corporations, where entrepreneurial freedom is paramount and where a strong state is often equated with the deprivation of liberty, this is remarkable: it is a paradigm shift.

Even the hurdles in the infrastructure package and the “Inflation Reduction Act” pointed in a similar direction. State money is only available for “made in America”, which should benefit the middle class in the long term. Biden has yet to prove whether his protectionism is paying off. Although the American manufacturing industry is booming, it may be decades before entire supply chains relocate to the United States.

The chip offensive could have an effect more quickly, after all, the first new semiconductor plants are already under construction. Biden’s requirements for operators can be a role model for Asia and Europe, where there is also increased investment in critical industries.

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Because only if skilled workers also benefit from subsidies, only if subsidies flow into sustainable production, can the hoped-for boom in future technologies function in the long term. This includes a certain degree of state control. Remember the euphoria about the “share economy”, which has hardly been regulated to this day. In reality, very few Uber drivers and food delivery people can make a living from their jobs.

Social policy will decide the 2024 elections

It must be in a company’s commercial interest to be attractive to professionals, both men and women. In particular, the lack of access to child care in the USA is an economic obstacle. Almost half of all employees who retire give the reason that they cannot afford childcare. At the same time, share buybacks are reaching record highs in the USA, which is mainly used for short-term price maintenance instead of the workforce.

If a state-of-the-art sector that the whole world is watching sets a good example, it could send out a signal. But of course the desired changes in the semiconductor industry will not solve the social problems of the USA – its share of the entire corporate world is far too small for that.

Biden originally wanted to push through higher taxes for corporations and the wealthy during his tenure, as well as trillions in investments in education, social programs, childcare and minimum wages. But that failed, also because his party colleagues in Congress voted against it.

In terms of industrial policy, Biden has exceeded many expectations, but he has failed in his goal of a social revolution for the time being. In the 2024 presidential election campaign, the Democrats will have to position themselves clearly here. The billions in subsidies with socio-political incentives are a start.

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