A wag with whom this scrivener regularly converses was prompted to put fingers to keyboard in response to recent At Large columns dealing with not only sports corporate weathfare but, more critically, a renewed push in some circles for a dedicated, and government-directed, national “industrial policy.”
The thoughts of my Whitehall correspondent, his name withheld by request, follow:
“Dear Mr. McNickle,
“I have read various posts from you about the corporate wealthfare that is modern sports. The CHIPS And Science Act is corporate wealthfare on steroids.
“The U.S. government is handing some of the world’s most profitable companies (based on gross margins) billions in bribes to erect chip production facilities here. This dwarfs the sports bribery racket by an order of magnitude.
“Right now, Taiwan Semiconductor leads the planet in chip technology. The company produces high-end chips for AMD, Apple, NVIDIA, in addition to numerous other companies at their facilities on Taiwan. South Korea’s Samsung is currently the No. 2 player in high-end chip technology.
“Both of these countries are under threat from Communist regimes that are not our friends. The reality is that China, despite its centralized industrial policy, is even more dependent than we are on other countries for cutting edge electronic technology and North Korea is one of the poorest nations on the planet. It has taken a while, but companies are finally waking up to the threat posed by them and were already in the process of building facilities here, before the CHIPS Act was written.
“The fact that Intel has fallen so far behind that AMD spun off Global Foundries, which has shown no interest in investing in high-end production, and that IBM has sold off its chip-making operations to Global Foundries also is reason for concern.
“Corporations are supposed to operate in the best interest [of] their shareholders. These companies have made decisions that may have looked good in the short term but their lack of investment has made them uncompetitive.
“U.S. tax policies are partially responsible for the current state of affairs but that doesn’t explain corporate myopia. Now we are going to hand corporations taxpayer money for something that they were already in the process of doing anyway.
“During the Cold War, we refused to trade with Communist countries, and it was effective. Their economies became basket cases. We need to return to that type of policy and get other nations to join us.
“The free world needs to shun trade with China, Russia and Iran, as well as the other countries that are aligned with them. We also need to encourage our friends by promoting free trade. Protectionist industrial policies are always backwards looking and ultimately leave nations less competitive on the world stage.”
Writing in The Wall Street Journal on Monday, columnist Andy Kessler added an even more spot-on assessment of the kind of malarkey for which too many pols and their “industrial policy” acolytes continue to shill.
He calls government types’ entreaty to move the question from why we should pursue an industrial policy to how such a policy can be pursed successfully – a point recently filched in a P-G editorial without attribution – “as wrong as Soviet or Chinese five-year plans.”
“Industrial policy eventually leads to disaster,” Kessler reminds. “Japan’s Ministry of International Trade and Industry micromanaged the country’s domestic semiconductor industry and ended up presiding over its decline. Today, no Japanese semiconductor company sits in the global top 10.”
And, he continues, because China doesn’t have access to state-of-the-art chip-making equipment, “it has made little progress in advanced chips.”
Continues Kessler:
“Yes, we need domestic supplies of advanced chips in case China invades Taiwan. But subsidies are the wrong approach. Handouts are almost always allocated based on what’s good for politicians rather than on sound economics. Money often ends up in swing states. …
“Don’t let lobbyists allocate capital, because Wall Street always views handouts as a huge negative, resulting in lower valuations and higher costs of private capital.”
Game. Set. Match.
But as long as pols are allowed to keep dishing out the corporate wealthfare to buff their images, and as long as corporate pigs are allowed to keep bellying up and feeding at the public trough, the facts of the matter don’t matter to them.
Colin McNickle is communications and marketing director at the Allegheny Institute for Public Policy (cmcnickle@alleghenyinstitute.org).
