Then there’s the former Sears auto mechanic who lost his job after a private equity firm purchased the struggling retail giant and ran it into bankruptcy. Ahmari says the man’s story epitomizes the carnage wrought by a financial sector that enriches itself by buying, “looting,” and then discarding the husks of once-great American companies.
That characterization is more than a bit rich. As Avik Roy, president of the Foundation for Research on Equal Opportunity, puts it, “You don’t make money by stripping a company of its assets and selling them to the ground.” While not every attempt will be successful, the goal of private equity is to create value by finding mismanaged businesses and turning them around.
At the same time, Ahmari’s story overlooks the ways public policy introduces distortions in this space. Money printing, artificially low interest rates, and the implicit guarantee of government bailouts if things go sideways have all pumped up the financial industry, pushing people to invest in the stock market, increasing demand for ever more exotic financial instruments, and generally leading to riskier behavior than we would otherwise see. These are knock-on effects of government’s attempts to manage the economy—to subject it to political control.
Examples are everywhere. Price controls meant to protect customers lead to shortages of critical goods. Minimum wages price the lowest-skilled workers out of the labor market. Subsidies meant to bolster domestic competitiveness flow to well-established corporations at the expense of startups. And regulations, which Ahmari wants more of, put a damper on economic growth.
“The regulatory compliance burdens of the last 20 years have made it almost impossible to have small nimble firms be an alternative to these large hidebound bureaucratic companies,” with their armies of lobbyists and compliance officers, explains Duke University economist Michael Munger. “There are far fewer business opportunities than there should be, and as a result, the very least well-off are subject to coercion. But the answer is not new regulatory burdens that will make it even harder for new businesses to come online but to get rid of the existing regulatory burdens, which will allow me to say, ‘You know what, I’m tired of your bullshit, and I’m going to get a job somewhere else.'”
Also reviewing Sohrab Ahmari’s new book is Mark Pulliam. Here’s his conclusion:
Pundits have coined a term for conservatives preoccupied with class conflict: right-wing Marxism. I hesitate to apply that epithet here only because I did not detect even a scintilla of true conservatism in Tyranny, Inc., which struck me as a shrill, superficial rehash of Marxist concepts. Despite Ahmari’s extensive reliance on leftist sources and arguments, Tyranny, Inc. has been panned by the Left, and, for the reasons outlined above, it is doubtful that it will earn many converts on the Right.
Current US policies raise all the same old questions that have been asked before about industrial policy. Why should we expect the government to do a good job of picking winners and losers, or to allocate scarce resources better than the market? If the government intervenes in markets, how will it avoid mission creep, cronyism, and corruption?
In the real world, government planners simply lack the control to make an industrial policy succeed over the long term. Biden can subsidize semiconductor manufacturing with the stroke of a pen, but he cannot wave a magic wand to create workers who are qualified to staff chip-fabrication plants. Deloitte estimates that the US semiconductor industry will face a shortfall of 90,000 workers over the next few years. Just this month, Taiwan Semiconductor Manufacturing Company announced that it must delay production at an Arizona fab, owing to a lack of workers with the right experience and training.
Moreover, companies that adhere most closely to the administration’s broader social-policy views could become politically favored and entrenched, reducing market competition, discouraging new entrants, and sapping economic dynamism. All too often, social-policy goals conflict with industrial goals. The Biden administration wants to support organized labor, but it also wants to hasten the green transition. Yet the United Auto Workers are making aggressive demands in negotiations with automakers just as those companies are facing increased costs to shift to EV production. If workers follow through with a strike next month, that will further derail US industry.
Populists are often cast as deniers of rationality, creators of a climate of “post-truth,” and valuing tribe over truth and the rigors of science. Their critics claim the authority of rationality and empirical facts. Yet the critics no less than populists enable an environment of spurious claims and defective argumentation. This is especially true in the realm of science. An important case study is the account of scientific trust offered by a leading public intellectual and historian of science, Naomi Oreskes, and the misapplication of that theory during the coronavirus pandemic.
Public health people and pediatricians told the world that letting kids go to school was an irresponsible act of letting the virus rip, which it was not. They sowed the idea that school is dangerous, and now kids — especially poor and minority kids — are reaping the harms.