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Industrial Policies Pave Paths to Economic Decay

In my latest column for the Pittsburgh Tribune-Review I argue that Americans have nothing to fear from Chinese industrial policy. A slice:

History is filled with dire warnings of this or that powerful government using extensive controls to propel its economy to a new level of wow. What history is not filled with are actual examples of economies being so propelled. Quite the opposite.

Whenever genuine and sustained economic growth has occurred in reality, that growth was rooted in free, competitive markets combined with respect for private property and a toleration for innovation and change.

Government economic planning undermines these vital institutions and attitudes. Industries that receive subsidies and protection are those that are politically prominent or fashionable. They’re seldom the industries that have a promising future absent the favors bestowed on them by the state.

Making matters worse is the fact that these favors weaken rather than fortify these industries. Born from privileges and protected from competition, firms in these industries have little incentive to become efficient at any task other than begging the government for additional privileges and protection. Such firms do not become awesome global competitors.