TheAltWorld The Revival of Industrial Policy
In the 1970s a few economists attempted to create interest in “industrial policy,” which implied some sort of picking of winners and losers by a government bureaucracy. The topic did not gain traction. Soviet central planning was on the ropes. The influence of the free market Chicago School was rising, and Japanese industrial policy had given the concept two black eyes by trying to prevent Honda from entering automobile production and Sony from producing sound equipment.
The topic died, but not for Ian Fletcher who has spent years with Marc Fasteau producing a 831 page tome titled Industrial Policy for the United States.
My opinion is that as the authors define industrial policy, the most likely result would be that award approval and accompanying subsidies would go to lobby groups that pay the most in campaign contributions. Industrial policy would be a way to reward political friends and for others to purchase their way into the system in the same way that affirmative action has been exploited. The authors’ view of government is, of course, more optimistic, but it is disconnected from the way government works.
Nevertheless, there is an important point that a renewal of interest in industrial policy could successfully address. In the decades during which industrial policy has been off the agenda, American manufacturing and industry have been offshored, depriving US workers and state and local budgets of the income and taxes associated with the production of goods and services that Americans consume; the economy has been financialized at the expense of productive investment; monopolies have been encouraged “in order to compete,” thus hindering new startups.
An industrial policy properly understood could have prevented these destructive developments in the US Economy.
Therefore, I recommend the book as possibly it could result in putting content into Trump’s renewal of America, a renewal that most certainly is not compatible with H-1B and L-1 work visas. It is pointless to deport aliens and them import them with work visas.
The book’s 180 pages on the history of American protectionism should be read by every academic economist. It is indisputable that the US developed under protectionism and not under free trade. Indeed, the US fought a “Civil War” in order to impose a high tariff regime on the South. The study of economics no longer includes economic history or the history of economic thought. Few economists today have ever read Adam Smith or Alfred Marshall or even Keynes and Paul Samuelson. They know nothing about the Enclosures, the appearance of a labor market, and the industrialization of England.
Today’s academic economists entertain themselves with models that have no bearing on reality. Essentially, they play games and are useless.
In my opinion, advocates of industrial policy have more faith in government bureaucrats than in entrepreneurs. This is their mistake. An entrepreneur is personally involved–it is his money, his career — a bureaucrat has nothing at risk.
For me the question is not whether industrial policy can produce winners but whether it can block policies whose only purpose is to reward a favored interest group.
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