Governments across the world are increasingly recognising that the private sector alone cannot solve the most pressing challenges to economic and national security. In the U.S., both the current and previous administrations have pursued industrial policy to rebuild the industrial base, secure supply chains, sustain technological leadership, reboot the defence sector and safeguard energy security.

Industrial policy tools vary, but all aim to reshape economic output in alignment with national interests. However, ad hoc interventionism risks turning industrial policy into a political piggy bank. To avoid this, a principled framework is essential. Such a framework should include:

• Strategic Objective: Define the goal: resilience, security, innovation.
• Market Failure Diagnosis: Identify the capital constraint, demand and supply bottlenecks.
• Instrument Matching: Align policy tools with the specific failure.
• Competition Preservation: Avoid creating monopolies or permanent government dependencies.
• Success Metrics: Focus on strategic returns, not just financial gains.
• Exit Strategy: Plan for sunsetting support and divesting public stakes.
• Internationalisation: Ensure policies are positive-sum and scalable across borders.

The global economy is drifting toward a transactional form of autarky - a "law of the jungle" approach. This is a dangerous path. Hyper-globalisation created vulnerabilities, but isolationism reduces market size, stifles innovation, and lowers the economic cost of conflict.

As countries scale up industrial policy, the risk of a global subsidy war looms large. Yet there is a growing consensus among rule-abiding nations that strategic sectors, for example, semiconductors, EVs, batteries and solar panels, require coordinated investment.

The key question is whether countries can grant each other access to their productive capacity and purchasing power, while collectively raising barriers against those not playing by the same rules. No one is fully aligned yet, but progress looks promising.  The G7, for instance, has evolved from ignoring economic security to making it a central theme.

The challenge now is to rebuild a rules-based economic order that balances national interests with global cooperation. That requires technocratic, unsentimental work: shared playbooks, aligned incentives, and trusted trade corridors.

Between hyper-globalisation and rank isolationism lies a more sustainable model: Sectoral Economic Zones. These zones allow countries to collaborate on critical supply chains where domestic capacity is insufficient and import dependence is high.

By partnering with like-minded nations, countries can rebuild the connective tissue of the global economy. This approach balances resilience with openness, avoiding the pitfalls of both excessive dependence and isolation.