A local newspaper editorial goes all-out all-a-ga-ga over the federal government’s $80 billion “investment” in Westinghouse Energy Company’s nuclear energy program.
It “is a milestone in the U.S. government’s embrace of industrial policy to strengthen the nation’s domestic economy and international competitiveness,” the editorial gushes. “It represents an ambitious response to the reality that the global marketplace, by itself, does not always create outcomes that are in America’s best interests.”
Ignorance truly is bliss.
The editorial rationalizes its advocacy for such gross government interventionism thusly:
“The logic behind the … investments is that [artificial intelligence] infrastructure, including energy, should be considered at least in part a public good. Leaving the market to its own devices will ensure that corporations pursue strategies that are best for them, but not necessarily optimal for America’s national interests.
“Further, the costs and financial risks of nuclear energy, in particular, are difficult for private enterprise to swallow on its own: Only with a public boost can the country produce the amount of nuclear power it needs.”
But as the Brookings Institute (hardly a bastion of conservatism) reminded a few years back, “Every government, throughout history, has been practicing some form of industrial policy—public policies aimed at stimulating industrial growth and, ultimately, the transformation of the economy… . Unfortunately, the results have been disappointing,” it says.
Because, we would add, government attempts at commanding the economy, in developed and developing nations, are a preordained failure.
In a nutshell, Brookings reminded that the “analytical case for industrial policies is based on the idea that there is a market failure that is preventing industrialization and so some form of government intervention, such as a subsidy, is necessary to correct that failure.”
“The case is usually made in the form of elegant economic models that portray the market failure and show how intervention can lead the economy to higher growth. Most of these models assume that the relevant market failure is the only distortion in the economy,” Brookings notes.
“In the real world, however, these economies are full of distortions, such as labor market regulations, energy subsidies, and the like. In this setting, correcting the market failure associated with industrial policy may not promote industrialization; in fact, it may make matters worse.”
Think of the squandering of scarce taxpayer capital that most likely could be put to better, and truly public, purposes.
Then there’s the concept of “political capture.”
“(A) common issue is that industrial policies are too easily captured by politically powerful groups who then manipulate it for their own purposes rather than for structural transformation,” Brookings says.
And then there’s the old bugaboo of government attempting to “pick winners,” generally another preordained failure of government command economics.
As Hoover Institute scholar David Henderson puts it:
“There are two problems with industrial policy: information and incentives. Government officials don’t have, and can’t have, the information they need to carry out an industrial policy that creates benefits that exceed costs.”
And writing in Reason magazine last year, Jarrett Skorup says “industrial policy” might as well be synonymous with “empty promises.”
“Unfortunately, lessons aren’t being learned. Instead of looking at the national and state failures of industrial policy, current politicians are plowing ahead. Yesteryear’s grants to railroads and battery manufacturers are today’s semiconductor and data center subsidies.
“The lesson for politicians has not been how to do these programs more effectively or to stop doing them—but rather, that these economic development deals are handy ways to get in the headlines for creating jobs without having to actually create any jobs or any accountability for them.”
Nonetheless, and despite the massive cache of evidence to the contrary, the local newspaper editorial lauds the “historic shift away from laissez-faire and toward industrial policy in the national interest. … (I)t’s a bold risk worth taking.”
To those who don’t know history, perhaps, but not to those who can recognize that such old flimflams are nothing new and are doomed to failure.
Colin McNickle is communications and marketing director at the Allegheny Institute for Public Policy (cmcnickle@alleghenyinstitute.org).
