From Georgia’s Film Subsidies to Intel’s Collapse, Industrial Policy Keeps Failing

Industrial policy is failing, and not just in Washington. Across America, officials promise to engineer the right economic outcomes by intervening in the market in just the right ways. Most people know that under Presidents Joe Biden and Donald Trump, the idea has exploded. Less appreciated is how enthusiastically governors and state legislators are embracing their own versions.

They repeat the same claims: With the right mix of subsidies, protection, and political direction, one government or another can revive strategic industries and deliver durable economic strength. The results tell a different story.

Wherever it’s found, industrial policy is producing wasted resources, distorted incentives, and fragile outcomes that collapse the moment political support shifts or market realities intrude. Just look at the similarities between Georgia’s famous film-industry tax credits and a few of the federal government’s favorite projects.

A recent Wall Street Journal investigation into Georgia’s experience reads like a textbook example of how the model fails. Film–tax credit schemes are sold as investments in business “ecosystems” and middle-class jobs. In reality, they are either a subsidy to production companies to do what they would have done anyway, or they are bribes to highly visible, highly mobile capital that can leave as quickly as it arrives. Georgia was the latter.

For years, Georgia marketed itself as the “Hollywood of the South,” luring blockbuster franchises with lavish, refundable tax credits (about $5.2 billion between 2015 and 2022) that could be converted directly into cash. The result was a temporary, subsidy-fueled surge in production followed by a predictable collapse, which became visible in 2023.

Labor costs rose. The boom empowered unions to extract concessions. Georgia’s competitiveness eroded. Other states like New Jersey and countries like the United Kingdom countered with richer offers or lower labor costs.

Today, Georgia is left with millions of square feet of underused soundstages and other stranded infrastructure, relics of productions that have already moved on. The numbers are damning. Auditors estimate that the state lost 80 cents for every dollar in outlays. Rather than questioning the whole premise, legislators responded by doubling down and extending incentives to films shot elsewhere and merely edited in the state.

Georgia is not an outlier. This same pattern has played out repeatedly in states and cities that have tried to buy a film industry. This includes California, where ever-larger tax credits have been justified as “retention” policies rather than genuine development, at rising fiscal cost and with weak evidence of durable, net economic gains.

If film credits are the most transparently wasteful form of industrial policy, Intel is the most consequential. Under Biden and Trump, the already struggling semiconductor firm has been cast as a national champion meant to anchor semiconductor leadership. Billions in public support, preferential treatment, and public ownership were supposed to deliver a turnaround.

For a time, the narrative worked. Starting in August 2025, when the Trump administration took shares in the company, investor enthusiasm surged and demand exploded. Stocks went up by 120 percent in five months. But industrial policy cannot fix operational reality, and perception cannot fix performance. Intel struggled to adjust after cutting capacity on older production lines, lacked customers for key new products, and was unprepared to feed the AI data-center boom. So now Intel’s stock is crashing again.

Then there are Trump’s tariffs, framed as industrial policy to reindustrialize the country, protect workers, and lower prices. Instead, tariffs have quietly consumed much of the manufacturing sector’s profits. This is unsurprising. Most U.S. imports are inputs used to make American goods. Tariffs, therefore, are taxes on American manufacturing.

Empirical work by the Kiel Institute shows that foreign exporters absorb only a trivial share of the cost. Roughly 96 percent of the burden is passed to American buyers. U.S. households and businesses—not foreign firms—overwhelmingly covered the roughly $200 billion in customs revenue collected in 2025. Companies we import from responded not by cutting prices but by shipping fewer goods to the U.S. As Kiel economist Julian Hinz put it, the tariffs amounted to an “own goal” that raised costs, compressed profits, and weakened the very industries they were meant to protect.

This helps explain why a promised auto-manufacturing renaissance hasn’t materialized. Automakers and suppliers have so far absorbed much of the tariff shock through smaller profit margins, restrained pricing, and selective job cuts. This is not sustainable. Investment decisions are now being reconsidered, and some manufacturers, like Volkswagen, warn that new U.S. plants no longer make sense.

Tariffs did not restore competitiveness or pricing power. They jacked up costs and made American production less attractive at the margin.

These cases all differ in detail but share a common logic: Industrial policy tries to engineer outcomes while ignoring processes. It assumes that political favor can substitute for market incentives. That innovation and customer demand won’t suffer. That shielding firms from competition will make them stronger. Instead, we get fragile industries that are dependent on even more political support.

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