Todd Tucker has a new paper in which he argues in favor of "industrial policy and planning." I was planning to follow a policy of industriously ignoring it, because I didn't want to call attention to it. Better just not to talk about it, I thought. But Todd is clever and cited me in his paper, which he knew would induce me to respond. Excellent trolling, Todd!
His cite is to this blog post I did. In particular, he cites one passage, which he describes as follows:
A final objection is more rooted in an observation about the nature of democratic regimes. Simon Lester at the Cato Institute writes that advocates of industrial policy “need to take into account that they are not always going to be in power…You can’t just say, we want economic statecraft but only the good kind. Once the principle has been established, it can be used for anything, and you know that in advance.” Even if one wants the tool for only progressive ends, “that also means President Trump has the power for some non-progressive thing. Given the way such power will actually be used, it’s worth considering whether it would be better if the US government simply didn’t exercise this power, or exercised it a lot less” (Lester 2019).
To clarify, I was talking about "economic statecraft" here, not industrial policy generally. My point was that once you start messing around in other countries' affairs, it inevitably goes in a bad direction at some point. Your intentions might be good (albeit misguided and probably ineffective), but those of your successors might not be good.
Todd offers this reaction:
But to some extent, these critiques could be successfully levied about any activist government policy. Why legislate at all if one’s program could be repealed or co-opted in the future? ...
My response, of course, is: Exactly! This critique CAN be made about any government policy, including industrial policy. Even assuming there is a way to make industrial policy and other activist government policies work in the hands of clever and unbiased administrators, how can you ensure that they won't be ruined later by whomever is in charge next?
Now, I don't mean to suggest that, on the basis of this concern, the government should never do anything. I just mean that people should be a bit circumspect about what governments can do effectively, and "industrial policy" is a great example. How can the government take actions that help specific companies without getting stuck in a cycle of lobbying influence? I'd like to see Todd grapple with that question a bit more. I know he puts "nationalization" out there as a possibility, but it is very unlikely this would play much of a role. In practice, industrial policy is going to involve helping particular industries. Picking the right ones (and cutting them off from aid at some point) and making the whole thing work is really difficult.
To illustrate this point, let me put one of Todd's examples out there for your consideration:
policymakers now are frustrated that China appears to be dominating so many different industrial sectors. The Washington, DC Metro system, for instance, needs new railcars—but there are no American companies left that can supply them. The system also has been stymied by poor rail infrastructure, which has led more and more commuters to switch to driving Chinese-made electric scooters. An inclusive industrial policy might ban scooter imports and fund railcar and bus construction in West Virginia (ground zero of the opioid crisis) and impoverished-majority areas like Black Southeast DC and Prince George’s County, Maryland.
If this is the model, any experiment with some sort of new and expanded industrial policy might not last long. (The flaws seem obvious to me, but we can talk about this proposal if others see things differently).
(I should also note that Todd is not limiting himself to "industrial policy" in the way that most people think of it. He includes "and planning" in the paper's title, which perhaps was a clue that he had something bigger in mind, but when I first read that I took it to mean the planning of industrial policy. In fact, he seems to have in mind economic planning and governance reform more generally. There are many elements of traditional industrial policy in the paper, but he goes much further.)
