Caution: Central 'Planning' Ahead

Over at Reason, Veronique de Rugy notes that both parties ran on economic platforms that differed in detail, but were essentially the same:

The Next Boeing? (Image by Coolcaesar, via Wikimedia Commons, license.)

Supporters of Vice President Kamala Harris are surely experiencing disappointment, but one of the Biden-Harris administration's pillars -- "industrial policy" -- won big on Tuesday. That's because it's already been embraced by both parties. President-elect Donald Trump loves expensive tariffs, and Harris loves big subsidies to big businesses, and to some degree vice versa.

...

... What makes industrial policy distinct is that it picks certain economic activities to promote in attempts to reorder our economic landscape -- sometimes even for cultural reasons.

Democrats use it to force a transition away from energy sources they dislike. They use mandates, subsidies, and tax incentives to permanently change the way we consume energy at the national level, whether we want it or not. Meanwhile, lots of Republicans want to impose tariffs that push more people into manufacturing jobs and incentivize women to stay home so that America looks more like it did in the 1950s.

Both sides want to coerce some people into activities that are not in their best interests. So, to achieve a national order that intellectuals and politicians prefer over the current one, the economy must suffer.

This is a good overview of what industrial policy is, for anyone who may be unfamiliar with the latest trendy repackaging of central planning.

The piece also notes that Boeing, long favored by industrial policy, is a cautionary tale and may well be a preview of the fate of Intel, the government's latest darling.

The piece indicates in several ways that central planning fails in large part due to the perverse incentives it sets up, often purposely. This is true, but it is always worth noting further that, on top of it being a misuse of government, central planning is a fool's dream.

My favorite quotation on that last score comes from the economist George Reisman, who puts it this way:

The overwhelming majority of people have not realized that all the thinking and planning about their economic activities that they perform in their capacity as individuals actually is economic planning. By the same token, the term "planning" has been reserved for the feeble efforts of a comparative handful of government officials, who, having prohibited the planning of everyone else, presume to substitute their knowledge and intelligence for the knowledge and intelligence of tens of millions, and to call that planning. (as quoted in Andrew Bernstein's Capitalist Manifesto, p. 345) [bold added]

Anyone who thinks that Donald Trump's embrace of industrial policy will improve our economy has another thought coming.

-- CAV