Some on the right want conservatives to pursue more activist industrial policy. The think tank American Compass, founded by former Mitt Romney economic adviser Oren Cass, has been among the leading organizations calling for this change. In its recent publication, “Rebuilding American Capitalism: A Handbook for Conservative Policymakers,” the section on industry demonstrates poor economic reasoning and would be a recipe for failure.
Just because something is assembled somewhere, however, does not mean that it is produced there. The value-added chain is quite long, and many of its most important stages are immaterial. Taiwan and China do have significant market shares of some aspects of the global semiconductor value chain, but according to an October 2020 report, America dominates overall — no CHIPS act required. The U.S. controls over 60 percent of the “fabless” market, which designs but does not manufacture nor assemble chips, while China’s share is less than 20 percent. The American share of the integrated-device-manufacturers (IDM) market, which designs, manufactures, and assembles chips, is approximately 50 percent, compared with China’s near-zero. Intel chips are not assembled in the U.S., but they are ideated, innovated, and iterated upon here.
One industry allegedly in need of help from such a bank is “the commercial maritime industry,” which it would help “modernize.” But that industry is already the beneficiary (or victim) of more protectionism and government support than nearly any other. The Jones Act was passed to ensure “adequate domestic shipbuilding capacity” in the event of war by restricting “water transportation of cargo between U.S. ports to ships that are U.S.-owned, U.S.-crewed, U.S.-registered, and U.S.-built,” as the Cato Institute describes in a report. The Jones Act achieved the opposite of its stated purpose, but American Compass thinks it will get the protectionist formula right this time.
Lordstown is another example of the peril of politicians allocating capital. The lesson is worth keeping in mind as the press releases fly and the politicians show up for photo ops. Far too often, and despite taxpayer subsidies, the government picks losers.
These aren’t dead-end “McJobs,” as they are sometimes derisively called. They’re important opportunities to learn how to function in the labor market and, importantly, how to serve others. One of the most important things about working for pay in a service enterprise is that it takes you off the throne. It makes you contend with the fact that you are not the star of the cosmic narrative. Other people matter, other people have preferences and problems, and it is presumptuous to expect them to ignore those preferences and problems and do what you want for no other reason than because you want it done. It turns out that the best way to do what you want is to govern your selfish passions and help other people do what they want.
Unfortunately, I expect this argument to pass unnoticed before blind eyes. H.L. Mencken allegedly said that the definition of “fundamentalism” is the fear that someone, somewhere might be having a good time. 21st-century progressive fundamentalism is the fear that someone, somewhere might make money, and progressives look askance at fast food companies and retailers that make a great deal of money. This is not in itself vicious; if it is done via exchange – which, as it happens, is how fast food companies and retailers make their money – it is positively virtuous. In competitive labor markets, these firms’ profits do not come at the consumer’s or employees’ expenses. They do not take it. They earn it by making consumers and employees better off relative to their best alternatives.
“McJobs” aren’t just worth having. They’re vital. They make it easier for the people who have them to accumulate valuable skills and labor market experience, which research has shown leads to higher future earnings. The market process allows low-skill people to specialize in what they do best while freeing up high-skill people who can concentrate their efforts on things they do best. Everybody wins, and in some small way, you have a part in every achievement by every bleary-eyed customer for whom you dutifully pour coffee on their morning commute.
Writing in the Wall Street Journal, Richard McKenzie points out that one underappreciated cause of the increase in the concentration of wealth in the U.S. is that Americans are living longer. A slice:
Americans’ increasing life spans have disproportionately increased the elderly’s considerable wealth advantage. They’ve had more time to save and invest because of advances in medical science during their lifetimes.
From 1940 to 2019, Americans’ life expectancy rose by almost 16 years, while the share of the U.S. population 65 and older grew from 9.8% to 16.7%. The elderly have progressively more healthy years to work. Most important, increased life spans have meant that older Americans’ wealth portfolios have been able to compound for longer.
To illustrate, consider a 65-year-old today who has a portfolio of $1 million, fully invested in an S&P index fund, enabling him to hold off for years shifting assets into lower yielding bonds. Suppose he chooses to work an additional 10 years, expecting almost the same number of retirement years as a 65-year-old had in 1940, but all the while allowing the $1 million portfolio to compound for 10 years. If the S&P increases at its historical inflation-adjusted rate of 7.2%, his real wealth will grow to about $2 million—without any additional investments. The retiree will move from the top 12% of wealth holders to the top 6%. The person with $6 million at 65 will move from the top 3% to the top 1% at 75.
Mysteriously (or perhaps not), California’s most recent standardized test revealed declines in math and English language arts — yet rising grades. Larry Sand, writing in City Journal, reports that 73 percent of 11th-graders received A’s, B’s and C’s in math, while the test showed that only 19 percent met grade-level standards. Among eighth-graders, the disparity was 79 percent and 23 percent. Among sixth-graders’ English scores, it was 85 percent and 40 percent. Amazingly (or perhaps not), the high school graduation rate has risen as students’ proficiencies have fallen.
Grade inflation, sometimes called “equity grading,” and “social promotions,” which combat meritocracy as a residue of white supremacy, leave a wake of wreckage. “According to World Population Review,” Sand says, “California now leads the country in illiteracy. In fact, 23.1 percent of Californians over age 15 cannot read this sentence.”
Remote learning during the pandemic, say [Robert] Pondiscio and [Tracey] Schirra, “pried open the black box of America’s classrooms.” Progressives, anxious to slam it shut again, portray any public involvement in public education, other than paying for it, as an infringement of the hitherto unenunciated right of teachers to unabridged sovereignty over other peoples’ children. But as UCLA law professor Eugene Volokh has said, “Someone’s got to decide what is going to be taught in K-12 schools.” Teachers, principals, legislatures, school boards — the First Amendment does not say whom.
Progressives and their most muscular allies, the teachers unions, stand athwart parents shouting, “Mind your own business!” This is a political argument conservatives can link to the issues of school choice and charter schools, each of which polls well. As North Carolina’s Republican-controlled legislature has noticed.
That state’s Democratic governor, Roy Cooper, is following the example of the federal government, which currently is operating under 41 declared “emergencies.” And he is emulating the executive grandeur exuded by presidents of both parties who acquire special powers with such declarations. Cooper has declared a “state of emergency for public education.”
His cri de coeur, which enlarged his power not a whit, was occasioned by the state legislature moving to expand the state’s school choice program beyond low-income families. He says that expanding the ability of parents to choose between public and private schools will “choke the life out of public education.” From this prediction, we can infer Cooper’s bleak assessment of many public schools’ inability to compete when parents have choices.