Back to the seventies?
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“Industrial policy” was one of the many economic failures of the 1970s. President Reagan, rightly, dispensed with it. President Clinton acclimatized the Democrats to the world by coaxing them to accept its failure. But leaders in both parties are now determined to march back to the 1970s.
Industrial policy failed for a reason. None of us is smarter than all of us. Nobody knows everything. Government will almost invariably latch on to the “one right way” of doing things, just as someone discovers how to do it better and cheaper. And government, political prestige on the line, will seek to suppress the innovative new in favor of the failing old.
Even with developing technologies – ideas that seem almost certain to win out – it is hard to pick out in advance which version will win. We need decentralized systems to test these things. We need to let people try different ways. Most will fail, and a few will change everything.
The Obama administration backed a solar power company called Solyndra with around half a billion dollars of “loans”. The company went bankrupt having failed to live up to ?expectations. It fell far short of its targets for the efficient conversion of solar rays into usable energy. Yet a few years later these same targets were exceeded by other businesses, with no need for any government handouts.
It was Donald Trump, of course, who led Republicans down the path to “protecting” American industry from competition. That’s a sure route to economic failure and, of course, Joe Biden jumped on Trump’s bandwagon and is taking the Democrats down the same path. It is the same failed consensus of LBJ, Nixon, Ford, and Carter. It failed last time. It will fail again. It’s based on a complete misunderstanding of human nature.
When businesses are competing to serve customers, the economy will do well, and everyone will benefit. When businesses are competing for government handouts you lead the country down a path to failure, cronyism, and corruption. The only people who do well are the politicians.
Trump, laughably, describes himself as a conservative. Biden pretends to be a moderate. But both are leading their parties towards the centralized economic policies of the far left. Previously sensible Republicans, such as Senator Marco Rubio of Florida, are joining Biden on the Trump-Sanders bandwagon to economic catastrophe.
The federal government is more than $30 trillion in debt. It has nothing to teach American families and businesses about how to invest wisely. Let innovation be tested in the market, by consumers, not by bureaucrats. Let America succeed again. Weighing down the economy with extra tariffs, regulations, handouts, and all the corrupt baggage of industrial policy will fail. Again.
Industrial policy is all about stroking the ego of politicians, empowering central government, and paying off political donors. It has nothing to add to sane economic management, and will only do tremendous harm.
Let’s not go back to the 1970s. Let’s go forward to a new century of American innovation. Government does not need to plan this. It just needs to get out of the way.
Spending money the government doesn’t have on businesses it doesn’t understand will lead to disaster. ?
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Quentin Langley lives in New York and teaches at Fordham University and Manhattan College. His book, Business and the Culture of Ethics was published in September 2020
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