The Post-Gazette is continuing its push for the establishment of “a new industrial policy” in this country. Talk about a mistake of the uninformed.
In its latest embrace of industrial policy, the P-G, in a Thursday editorial, lauded President Biden’s signing of the CHIPS and Science Act. That’s the measure that doles out more than a quarter-trillion dollars of corporate wealthfare – the P-G mimics the measure’s pimps in calling it “investments” and “incentives” — to the U.S. semiconductor industry.
In noting that the latest spate of government interventionism “has been called Washington’s most substantial piece of industrial policy in 50 years,” it justifies such government direction, if not conscription, of part of the economy, thusly (broken into paragraphs for ease of reading):
“(T)he United States has sacrificed our security and independence to a self-destructive idea of globalism and free trade.
“America’s once robust chip manufacturing industry is one of the worst victims. Three-quarters of all chip manufacturing capacity, and 100% of the capacity to make the most high-tech chips, is located in Asia. Most of that comes from the enormous Taiwanese foundries that the Chinese Communist Party is openly salivating over.
“These chips aren’t just for laptops and smartphones: They’re essential for everything from children’s toys to cars to medical equipment. America (and our allies) would be in grave trouble if the CCP gains control of these factories.”
To its credit, the P-G recognizes, as does Sen. Pat Toomey, the Pennsylvania Republican, “that choosing winners among semiconductor manufacturers will distort the market.”
“But the alternative is a global marketplace that cares nothing for American workers or national interests, and one in many cases dominated by an adversarial power.
Concludes the editorial:
“The question isn’t whether the United States should embrace industrial policy in this new era of great power competition. It’s how it should embrace industrial policy. The CHIPS and Science Act is a promising start.”
But while this might sound like a reasonable and even measured argument for such interventionism, it is not. It is, however, sophistry. (Though we cannot gauge whether it is intentional or born out of ignorance).
For as Cato Institute scholar Scott Lincicome reminds (again, broken into more paragraphs for ease of reading):
“In sum, industrial policy — properly defined — has an extensive and underwhelming history in the United States, featuring high costs (both seen and unseen), failed objectives and political manipulation.
“Not every U.S. industrial policy effort has ended in disaster, but facts here and abroad demand that we rigorously question any new government efforts to boost ‘critical’ industries and workers and thereby fix alleged market failures.
“Unfortunately, such skepticism is rarely applied.”
Continues Lincicome:
“The United States undoubtedly faces real economic and geopolitical challenges, but the solution lies not in copying China’s top-down economic planning on the grounds that the U.S. system is failing and that China is an inevitable economic power.
“Instead, American policymakers should lean into the things that made the United States a global leader to begin with: openness to foreign trade, workers and investment; tax policies that avoid excessive burdens; flexible labor markets; stable monetary policy and most notably, a lack of any grand industrial policy.”
Or as Brookings Institution scholar Charles L. Schultze succinctly characterizes this newly burgeoning, rationalized embrace of industrial policy:
“(O)ne set of government measures that we do not need is an industrial policy under which the federal government tries to play an important role in determining the allocation of resources to individual firms and industries.
“We have enough real problems without creating new ones.”
In other words, ‘round and ‘round and ‘round it goes, and where the interventionist basis for industrial policy ends, more astute analyses knows – ineffectual nationalized industries that only embolden the creeping crud of socialism to pick up its pace.
Truth be told, China’s state-directed chip-making industry is a corrupt mess. And as a Wall Street Journal editorial recently noted:
“China’s assets are formidable, but its politically directed economic policy isn’t one of them. The U.S. doesn’t need politicians and bureaucrats picking winners and losers. It needs economic policies that unleash the creativity and investment of people and private firms.”
We should not be emulating such Chinese policies. We should be eschewing them.
Colin McNickle is communications and marketing director at the Allegheny Institute for Public Policy (cmcnickle@alleghenyinstitute.org).
