We warned of this in March. And, sadly, and to the detriment of sound market principles, American taxpayers and the American economy, it is coming to pass:

The president and the Congress have, with their multitrillion-dollar “infrastructure” bill, firmly embraced the dangerous and market-perverting concept of “industrial policy.”

As The Wall Street Journal reports:

“The U.S. and its allies have long pressed China to stop helping favored industries with subsidies, government preferences and other interventions.

“Now they are beginning to copy it. Last month, the U.S. Senate voted for direct industry subsidies with little precedent: $52 billion for new semiconductor fabrication plants, called ‘fabs.’”

The “rationale” is clear, at least in the pols’ minds. To wit, and as The Journal details:

The European Union has committed to doubling to 20 percent its share of global semiconductor manufacturing capacity. South Korea has approved up to $65 billion in government support for semiconductors. The Japanese government has promised to match other countries’ semiconductor aid while planning to turn Japan into an Asian data center hub.

“Chip-manufacturing subsidies are the most prominent of a range of interventions Western governments are rushing out to promote industries they deem strategic, from electric-car batteries to pharmaceuticals,” reports The Journal. Global Trade Alert, a trade-monitoring group, says these interventions have increased sharply in both the United States and Europe over the past decade.

The nub of the rub?

“Collectively, this represents an embrace of ‘industrial policy,’ the idea that governments should direct resources to industries critical to the national interest rather than leaving things to the market,” reports The Journal.

But this is bad enough in theory, let alone in practice, as we noted four months ago, citing expert analyses, when the Biden administration visited Pittsburgh to start promoting his plan.

“Implicit in the argument for a U.S. industrial policy is the belief that market forces alone cannot or will not produce economic growth and rising living standards,” reminded Michelle Clark Neely, writing for the Federal Reserve Bank of St. Louis in ‘The Pitfalls of Industrial Policy.’

“And as Samuel Gregg, writing in The Journal of the Witherspoon Institute, reminds:

“The problems that characterize industrial policy are not the stuff of abstract speculation. They are real, and they should give any policymaker who cares about the common good significant pause before going down this path.”

Gregg’s bottom line:

“Industrial policy provides many short-term satisfactions: most notably, the sense that one is ‘doing something’ to fix real problems. In the long term, however, the economic and political dysfunction that industrial policy creates is, as countries from Japan to France and Argentina have discovered, difficult to eradicate.”

Yet here we are – again – and U.S. public policy makers are licking their chops.

As The Journal notes:

“The biggest hurdle with industrial policy is governments’ inability to predict technological trends, and the West’s new industrial-policy push might prove wasteful and ineffective, which some analysts say is already true of China’s.

It’s what happens when government attempts to command the economy.

And as Scott Kennedy of the Center for Strategic and International Studies reminds:

“It would be a huge mistake for the U.S. to try and match Chinese government spending. So much of it is thrown down bottomless pits, leading to over-investment, lower profits, slower innovation and more debt.”

And then there’s this salient fact:

For all the Chinese government’s economic interventions, Kennedy reminds the nation’s chip companies remain well behind leading Western competitors.

He also notes how China has injected between $49 billion and $72 billion into state-owned aircraft maker Commercial Aircraft Corporation of China (Comac) in a so-far-unsuccessful effort to make it a competitor to Airbus and Boeing, The Journal further reports.

The problem with “industrial policy” is the same as any government intervention. The more government intervenes – and, invariably, falls short – the more it seeks to intervene to cover up the lie of the last, failed, intervention.

Gee, what could go wrong?

Colin McNickle is communications and marketing director at the Allegheny Institute for Public Policy (cmcnickle@alleghenyinstitute.org).