… is from page 181 of the 2016 Mercatus Center re-issue of my late colleague Don Lavoie’s superb and still-relevant 1985 volume National Economic Planning: What Is Left? :
Frequent references in this literature [in support of industrial policy] to the idea that an RFC [Reconstruction Finance Corporation] agency would supply or raise capital are simply false. All this sort of agency can do is to transfer capital, not create it. It can only channel investment away from the avenues market signals would have attracted it into and toward those it prefers.
DBx: Americans who today fret that the interventions into the Chinese economy of state officials in Beijing are destined to increase the Chinese economy’s growth at the expense of America and other countries forget that industrial policies have a terrible track record. Such policies fail. And why would they not fail, given not only that such policies substitute government-officials’ necessary ignorance of relevant economic details for the market’s marshaling of, and reliance on, the dispersed knowledge of these details, but also because government officials are driven by political motives that often conflict with the long-run economic interests of members of society?
For Americans today to fret about Beijing’s attempt to pick industrial ‘winners,’ and then for these Americans to plead with Uncle Sam to do the same thing in America, is yet another instance of pleading for Uncle Sam to inflict economic damage on Americans in order to keep up with the economic damage that Beijing inflicts on the Chinese.