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Quotation of the Day…

… is from pages 221-222 of the 2016 re-issue of my late colleague Don Lavoie’s indispensable and devastatingly effective 1985 refutation of the case for industrial policies of whatever particular stripe, National Economic Planning: What Is Left?:

[T]he unprecedented productivity of the Market organizing principle relative to Tradition was due to the rapid profit and loss selection process by which new habits could be tried, old ones revised, and either, where profitable, preserved. The essence of planning as it is practiced is to sabotage this very feature of markets, to slow down or prevent the revision of established routines. These rigidification policies are implemented by using traditional mercantilist tools for government interference into the competitive process: licensing restrictions, wage and price controls, credit allocation, and the dispensing of subsidies to special interest groups….

DBx: Beautifully put.

Compared to Progressives who endorse industrial policy, conservatives who do the same at least have the advantage of being truer to their name: industrial policy is aimed at conserving existing firms, existing jobs, and existing patterns of specialization and trade. Progressives, in contrast, bizarrely imagine that such conservation is progressive, while leaving people free in competitive markets to innovate and to replace exiting firms, jobs, and patterns of specialization and trade with new and better ones is a conservative stance.

(Progressives will protest that they wish not to conserve existing producers and jobs but to use state power to create firms and jobs “of the future.” But pay close attention to the schemes actually proposed by Progressive politicians: these all are aimed at artificially protecting, or even enlarging, markets for existing producers. Owners of firms “of the future” and holders of jobs “of the future” vote only in the future; they do not vote in the present. Votes in the present are cast by owners of firms of the present and by holders of jobs of the present. And so it is to these present voters that politicians pander.)

But what both conservative and Progressive proponents of industrial policy miss is the reality that industrial policy inevitably obstructs economic growth. Such policy is not only not progressive, it destroys the very process that created the firms and jobs that industrial policy is intended to preserve.