… is from pages 152-153 of economist Lionel Robbins’s insightful and still-relevant 1937 book, Economic Planning and International Order:
If groups of producers are allowed to organize themselves and to restrict new entrants and new investment “in order to maintain the stability of the industry”, the capital and labour which is excluded has to work elsewhere for prospects which presumably it finds less attractive. Thus gradually, on the one hand, there is built up a series of entrenched industrial interests, labour being combined with capital in the fight against interlopers, and on the other hand there develop residues of, as it were, pariah labour and pariah capital, either working at margins less productive than the margins of “organized industry”, or unemployed through unwillingness to accept the lower remuneration necessarily associated with the inferior margins. This is not an imaginary picture. It is a picture of what does happen and what must happen whenever, by the erection of industrial castes, capital and labour are prevented from serving society in those lines of production in which they are willing to offer their services.
DBx: Indeed so.
Industrial-policy proponents – whether on the right (such as those at American Compass) or on the left – are proponents of pariah labor and pariah capital. Refusing to see the full consequences of protectionism and subsidies, industrial-policy proponents focus their gazes exclusively on protected and subsidized workers and industries. “Look!” these proponents proclaim triumphantly, “Industrial policy works!” These proponents do not see the firms that are not created; the firms that do not expand; the workers who are shuttled off into less-productive employments and, hence, paid lower wages; the outputs that are not produced and the lower quality of many of the outputs that are produced.
Industrial-policy proponents perform a move that’s intellectually equivalent to that of someone who observes a successful armed robber and, impressed by all that he or she sees, proclaims that armed robbery is an effective means of enriching the populace.