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Scott Lincicome warns of the cronyism which is inherent in industrial policy. Two slices:

On one hand, it’s just common sense that cronyism and corruption concerns might arise at a giant company making a heavily regulated product and benefiting from massive amounts of government support (subsidies, contracts, etc.). Regardless of the merits of that regulation and support, the sheer amount of taxpayer and corporate money involved, as well as the political and bureaucratic processes required to obtain it, make some amount of cronyism all but inevitable. (Incentives matter!) And, as we’ve discussed with Big Steel, Big Ship, Big Sugar, and their corporatist friends, it’s often simply cheaper and easier to hire lobbyists and use the political process to pad your bottom line than it is to compete and innovate in a relatively free market.

But the corrupting effects of government on corporate behavior aren’t just common sense—they’re backed by decades of scholarship in the United States and abroad. In a 1997 paper, for example, economists Alberto Ades and Rafael Di Tella examined 32 countries and found that ones with “active industrial policies” (e.g., government procurement preferences and subsidies to Japanese and South Korean “national champions” during the latter half of the 20th century) were more likely to suffer from corruption, which in turn undermined the efficacy of the industrial policies at issue. More recent work found that EU development subsidies and procurement contracts substantially increased corruption risks in Eastern Europe in the 2000s, and that public procurement (and the sectors, such as transportation and construction, closely tied thereto) is disproportionately vulnerable to corporate corruption problems.

Similar findings hold for tariffs and other kinds of protectionism. In a 2009 paper, Pushan Dutt and colleagues examined numerous trade and industrial policies during the 1990s and found “strong evidence that corruption is significantly higher in countries with protectionist trade policies”—a problem amplified when bureaucrats are granted wide discretion in implementing the interventionist policy at issue. Elsewhere, Aneesh Raghunandan found that U.S. companies receiving state-level subsidies, especially tax breaks, are more likely to engage in financial fraud than are nonrecipient firms—a result likely driven by “lenient” enforcement in subsidy-providing states.

More broadly, The Economist found last year a statistically significant relationship between a country’s level of nationalism and both its perceived and actual level of corruption.


Examples abound outside the U.S. too. As the Mercatus Center’s Veronique de Rugy reported last year, the heavily subsidized European planemaker Airbus “got hit with a $3.9 billion fine in 2020 for using hundreds of intermediaries to bribe public officials in numerous countries—including Japan, Russia, China, Libya, and Nepal—to buy its planes and satellites,” and “also faced an American inquiry over possible violations of export controls.” Corruption at the company—which is Europe’s “national champion” and Boeing’s biggest rival, by the way—was in the words of a U.K. regulator, “endemic,” and the decades-long bribery scandal has since become a “case study” in corporate fraud. At the time of the announcement, the Guardian reported, the Airbus anti-corruption settlement had become the U.K.’s biggest ever, topping the previous No.1: British national champion Rolls-Royce, which enjoyed broad U.K. government support and then succumbed to its own government contracting scandal.

Ramesh Ponnuru makes the case for Haley over Trump. Two slices:

I share some of these conservatives’ concerns. I would prefer it if Haley’s foreign-policy rhetoric reflected any sense of chastening post-Iraq and post-Afghanistan.


Haley hasn’t tried to subvert the Constitution or called for terminating any part of it, toyed with destroying NATO, veered crazily between praise for and threats to Kim Jong Un, thrown away Republican Senate seats, attacked one appointee after another, supped with notorious anti-Semites. . . . I could go on. Trump will almost certainly be the Republican presidential nominee. That’s no reason to refrain from saying that she would be a better one.

My intrepid Mercatus Center colleague, Veronique de Rugy, details some of what Javier Milei can teach America’s Democrats and Republicans. A slice:

Both [U.S.] parties have recently become so populist that they could justly be described as modern Peronists who believe that politicians, better than people operating in a free market, can direct investment and determine which industries should succeed and which should fail. It’s no exaggeration to say that America has traveled a significant distance down the “road to serfdom” that Milei warns about.

Milei, an economist by training, doesn’t only criticize collectivism; he offers a compelling, positive case for capitalism. By tracing global economic history, he highlights a pivotal moment: the advent of capitalism and the Industrial Revolution. This period marked a departure from centuries of economic stagnation, ushering in unprecedented growth in global per capita gross domestic product (GDP) and a significant reduction in poverty.

Juliette Sellgren talks with SMU economist Robert Lawson about the late Jim Gwartney and economic freedom.

Dr. Peter Grinspoon’s letter in today’s Wall Street Journal is wise:

While reading Allysia Finley’s column “Marijuana Is More Dangerous Than Biden’s HHS Lets On” (Life Science, Jan. 22), I felt as if I were reading something out of the Nixon White House, at the dawn of the war on drugs, in the 1970s. It is true that cannabis has its harms. As a cannabis clinician, I avoid recommending cannabis for teen users, pregnant or breast-feeding patients and patients with a history of psychosis. I counsel patients to avoid smoking it in favor of edibles, topicals or tinctures, and to “start low and to go slow” with the dosage.

The results have been encouraging. Patients are finding relief from such difficult-to-treat conditions as chronic pain, anxiety, insomnia, nausea and pelvic pain. Often, the medicinal cannabis is less toxic than the conventional pharmaceuticals that the patient would have used otherwise. No wonder around 90% of Americans support legal access to medical marijuana. This support spans both political parties.

It is also important to note that the prohibition of cannabis has been an absolute disaster. There have been more than 20 million arrests for nonviolent cannabis possession over the past 50 years, disproportionately of Americans with dark skin. These arrests interfere with a person’s education, housing and employment. It is impossible to argue that the harms of using cannabis, especially among nonvulnerable individuals, has been more damaging than the criminalization of cannabis.

Peter Grinspoon, M.D.
Harvard Medical School
Auburndale, Mass.

J.D. Tuccille reports on the Canadian court ruling that Canadians’ rights were violated by the government’s crackdown on the Freedom Convoy. A slice:

The Canadian government’s use of emergency powers against the Freedom Convoy protest of restrictive COVID-19 policies was unreasonable and led to the infringement of individual rights, a federal judge ruled this week. The case was brought by two protesters whose bank accounts were frozen, with support from civil liberties groups. While the plaintiffs will receive some compensation for legal costs, the main result of the decision, which the government plans to appeal, is to limit the power of the state to treat political opposition as an “emergency.” It also further hobbles the prospects of Prime Minister Justin Trudeau, who is wildly unpopular among Canadians.