Last month, the Congressional Progressive Caucus unveiled a “New Affordability Agenda,” a package of policy reforms aimed at addressing voters’ cost-of-living concerns. The agenda includes efforts to reduce the costs of childcare, housing, and electricity, among other household expenses. But one plank stood out as surprisingly bold: A proposal for the federal government to engage in the public production of prescription drugs. The Affordable Drug Manufacturing Act, introduced by Senator Elizabeth Warren and Representative Jan Schakowsky, would allow the federal government to manufacture certain generic drugs and sell them at a discount. Under the bill, a vial of insulin, for example, would drop from $300 to $50.
“We make your prescription drugs cheaper by saying if companies won’t make prescription drugs affordable, we’ll just make them ourselves,” posted Representative Greg Casar, the Texas Democrat and caucus chair. This DIY progressivism builds on action by states from California to New York exploring public production of insulin to ensure access for their residents.
For years, the liberal response to concentrated corporate power has been to regulate it, sue it, or subsidize consumers trapped by it. All those tools have their place. But each approach has limits. Lawsuits take years. Regulation can be fought, weakened, or rolled back by lobbyists. Subsidies can be captured by the very firms whose pricing power made them necessary.
But the Progressive Caucus proposal suggests another way is possible by reviving a forgotten policy tool used to counter concentrated production of critical goods, as my colleague Ganesh Sitaraman and I explain in a new paper: public factories.
Public factories are government-owned production facilities that provide or expand the supply of important goods. Some public factories are government-owned and government-operated (GOGO) facilities; others are owned by the government but operated by a private contractor (GOCO). Like other public options, public factories can provide an alternative to private firms that get away with selling subpar goods at inflated prices. Because they operate as nonprofit enterprises, public factories act as a “yardstick,” as President Franklin D. Roosevelt put it, to both measure private performance and pressure private producers to improve their output and pricing.
As Sitaraman and I explain, there is a long history of policymakers creating public factories. After the Revolutionary War, President George Washington and Treasury Secretary Alexander Hamilton fretted that private arms manufacturers were overcharging the new government for low-quality weapons. They convinced Congress to create armories—public factories for military arms—to secure dependable, affordable supplies. The Springfield armory in particular would go on to develop pioneering advanced manufacturing techniques like interchangeable parts and assembly-line style mass production that helped seed the Second Industrial Revolution. During the Civil War, public factories in the North produced everything from arms to uniforms to drugs like morphine, partly to avoid unscrupulous contractors bilking the government for a wartime windfall. During the Progressive Era, the Navy ran factories producing smokeless powder for artillery and firearms, and armor plates for its then-new steel ships to secure better deals and higher-quality goods than those offered by the private sector.
Public factories were once routinely used to combat monopolies. In the early 1900s, North Dakota established a public flour mill to protect wheat farmers from monopolized out-of-state mills. That public enterprise remains the country’s largest flour mill to this day. Several cities, including New York, San Francisco, and Detroit, created public asphalt plants to counter local “asphalt trusts.” Other cities created municipal ice plants to provide affordable ice to their residents during hot summers without acceding to the “extortionate prices” charged by private ice dealers. After World War II, President Harry S. Truman and Congressional Democrats explored creating public steel mills to counter the steel industry’s self-imposed capacity limitations that constrained postwar consumer abundance.
Public factories could be useful today. Like the price-gouging by military contractors from earlier American history, there is no shortage of industries fleecing the public sector. Pharmaceutical industry concentration and anti-competitive practices, such as patent abuses, have led to high prescription drug prices charged to government healthcare programs, not to mention private insurers and underinsured Americans paying out of pocket. When President Joe Biden’s administration offered incentives for environmentally friendly electric heat pumps, the private equity industry drove increased consolidation across the heat pump supply chain to raise prices and capture more government subsidies. Private equity has also snapped up manufacturers of fire trucks and ambulances, forcing municipalities to pay higher prices or reduce emergency response services.
In other sectors, monopolized production causes economy-wide bottlenecks. Consider electrical transformers. For years, the U.S. has faced severe shortages of critical grid. Years-long wait times for transformers delayed new housing developments, infrastructure projects, and even disaster relief efforts. These shortages are caused, in part, by limited domestic production of a type of steel critical to transformer production. Only one American company—the steelmaker Cleveland-Cliffs—produces the steel needed for transformer production, but not enough to meet demand, leaving transformer manufacturers dependent on imported steel and beset by Trump tariffs. All this has led to increased costs for construction projects requiring grid upgrades.
Ultimately, each concentrated sector produces higher costs for consumers. Monopolized drug pricing leads to higher insurance premiums and out-of-pocket costs. Rolled-up heat pump markets lead to higher costs for consumers seeking more efficient energy units. Private equity companies that deliberately cultivate strategic backlogs to charge high prices for emergency response vehicles force households to pay higher property taxes and higher medical bills. Monopoly-induced transformer shortages lead to high-priced supply-constrained housing markets, along with increased household and business energy costs.
Public factories could reduce scarcity and lower prices. As I have proposed elsewhere, a public factory to produce electric steel for transformers can ease bottlenecks across the economy while promoting competition within a concentrated domestic industry.
Public factories could also support fertilizer production disrupted by the Iran War. Since its inception, the Tennessee Valley Authority has had the authority to publicly manufacture agricultural fertilizer—a prerogative it used to develop better fertilizers, which could be reactivated to increase supply and bring competition to an industry with significant consolidation.
Like the public factories of old, the reality—or even just the threat—of the public sector entering an industry could weaken the strategic and economic value of monopoly or roll-up tactics. Once the public factory bazooka is used a few times, it might have an even greater deterrent effect, discouraging corporations from engaging in that kind of anti-competitive conduct in the first place.
Factories can take years to build and come online; using public factories to improve affordability will require moving much faster. To yield near-term supply increases, public factories may need expedited permitting, as Congress did to expedite semiconductor plant construction. The Defense Production Act could also help public factories get faster, priority access to essential equipment and materials.
Americans are frustrated that they have lost control of their own economic destinies. Rising prices and profits consume more of the fruits of their labor, padding someone else’s pockets. That frustration can be addressed by antimonopoly principles, which seek to wrest control of economic power from a few private stakeholders for the public’s benefit. As FDR explained in the context of electricity markets in 1932, the option of direct public production meant that “any community” could “engage in the supplying of” important goods if they “believe that they are unable to obtain adequately low rates or adequately good service from [a] private company.” As the Congressional Progressive Caucus has reminded us, the public can take matters into its own hands to directly produce essential goods at the prices and quality it needs.
