Why it is Difficult to Implement Industrial Policies: Lessons from the Synfuels Experience

Alfred A. Marcus, Allen M. Kaufman

Research output: Contribution to journalArticlepeer-review

16 Scopus citations


An example of a recent effort to initiate and sustain a strongly interventionists, long-term industrial policy is the U.S. Government's synfuels program. In this case, increased opportunities for business gain were offset by government-erected barriers to business development. The complexities of political coalition building and inter-business rivalry also hindered the progress of the program. General lessons to be learned are that changes in market forces, the tendency of both government and business toward fragmentation, and design problems can make this type of industrial policy hard to establish and implement. In the absence of a lasting crisis which mobilizes a large segment of the population or a profound change in market forces which has the effect of realigning business-government relations, the systematic pursuit of such long-term industrial policies is not likely.

Original languageEnglish (US)
Pages (from-to)98-114
Number of pages17
JournalCalifornia Management Review
Issue number4
StatePublished - 1986

Bibliographical note

Funding Information:
Until the 1973 oil "crisis," the U.S. had a series of unrelated energy policies. 12 The oil crisis began the quest fora comprehensiveen ergyp olicy, but harmonizing various interests,r e-evaluatingp reviousp olicies,and overcoming old habitso f thinking were not easy. 13 The synfuelpsr ogram was part oft helarger andf lawede ffortto c reatea national energyp olicyFor . a short period in 1979, itw as thec ornerstonoef t hispolicy. Interesti n synthetic fuelsi s very old. During WorldW arII, theG ermans made advancesi ns ynfueldse velopmentF.r om1 945t o 1958, whent heU .S. shiftedf romp rimaryde pendenceon coal to dependence on natural gas and oil, plans fora coal-based synthetic fuel industr"ys taggeredand collapsed" because of the cheap flowo fforeign oil. 14 This shifto ccurreddespite the poor economicc onditiono f the coal industry and the country'gs rowing dependence on foreign oil. From1 959t o 1968, the government was ablet o maintain only a "feeble" pilot-planpt rogramfor coal-derived,s ynthetic fuels. 15 As long as therew as amplef oreignoi l,s ynfuelws eren ote conomi-cally attractive. However, in 1973, in response to theA rabboycott, interest pickedu p. On theo ne hand, new sourceso fenergy became desirable; ont heother, the companies had large cashr eservest hatc ouldb e usedf ordeveloping alternative energy sources. The private interestin synthetic fuelsw as supported by increasedf ederalf undsf orr esearch,d evelopmentand , demonstration. These were first suppliedb y the Energy Researcha nd Development Ad-ministratioann d then by the Department of EnergyT. hus,w hent hepublic policy debate on synthetic fuels reemerged ine arnesti n 1979a s a resulto f the "second" energy crisisi nducedby the Iranian revolution, therew ere now numerous public and private actorso n thes cene whoh adlong favored legislation to commercialize synfuels. 16


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