What’s in a polity? Political institutions and varieties of economic interventionism in the United States and the European Union

Di Carlo, Donato ORCID: 0000-0002-4406-7739, Moretti, Lorenzo and Moschella, Manuela (2025) What’s in a polity? Political institutions and varieties of economic interventionism in the United States and the European Union. Governance, 38 (4). ISSN 0952-1895

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Abstract

This article examines the political foundations of industrial policy amid the return of state economic interventionism. Comparing the United States' Inflation Reduction Act (IRA) and the European Union's Green Deal Industrial Plan (GDIP), it shows that contrasting industrial policy strategies were ultimately shaped by differences in the two polities' legislative rules. In both cases, geopolitical pressures sparked renewed interest in green industrial policymaking. However, procedural mechanisms for majoritarian decision‐making in the U.S. Senate enabled the government to overcome partisan veto players and compelled the design of the IRA as a budgetary instrument centered on fiscal subsidies. By contrast, unanimity requirements in the EU's joint decision‐making system prevented the Commission from overcoming Member State veto players in the Council, precluding supranational fiscal instruments and resulting in a regulation‐based, decentralized approach via national state aid. The findings contribute to the burgeoning debates on the return of industrial policy and state activism by showing how political institutions contribute to shaping not only the scope but also the form of economic interventionism within different polities.

Item Type:	Article
Additional Information:	© 2025 The Author(s)
Divisions:	European Institute
Subjects:	J Political Science H Social Sciences > HB Economic Theory
JEL classification:	H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H25 - Business Taxes and Subsidies P - Economic Systems > P1 - Capitalist Systems > P16 - Political Economy O - Economic Development, Technological Change, and Growth > O2 - Development Planning and Policy > O20 - General
Date Deposited:	19 Sep 2025 08:39
Last Modified:	29 Oct 2025 08:36
URI:	http://eprints.lse.ac.uk/id/eprint/129545

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