Although that reasoning is seductive, the Chinese political economy is too flawed for it to work. China’s earlier approach to solar panels is instructive. In the previous decade, Chinese entities with the support of the government and lending institutions bought international solar companies and invited leading foreign firms to establish operations in China. At great expense, and even before Mr. Xi’s era, the Chinese strategy to bolster a given sector has been to acquire, develop or steal world-class technology and capabilities, support the creation of entire supply chains inside the country, eliminate overseas competition, and subsequently dominate domestic and global markets.
Mr. Xi seeks to apply this approach to technologically important and advanced sectors as part of his high-quality-growth mantra. The problem is that there is no escaping the iron laws of economics. The massive assistance that the government provided to Chinese firms on solar led to a predictable oversupply of panels domestically and in global markets. Even as global demand fell, Chinese companies ramped up production of panels to remain in business, and this was possible only due to even more subsidies worth billions of dollars. China did achieve its objective of dominating the global solar-panel industry. But applying this state-led approach to an ever-expanding list of advanced and green sectors will only worsen the problems of overcapacity, indebtedness and inefficiency that Mr. Xi is seeking to alleviate.
Instead, expect more counterproductive “pro-worker” policies like raising the corporate income tax. Taxes are paid only by flesh-and-blood people, and corporations, well, are not people.
In other words, corporations don’t really pay taxes. For instance, they pass the corporate income tax on to workers in the form of lower wages, to consumers in the form of higher prices, and to shareholders in the form of lower dividends and share valuations (which can mean reduced values of workers’ pensions). It’s like a game of hot potato, except the potato is on fire and always lands in the laps of those at the end of the line—the very people faux populists claim to be helping.
Imagine workers’ surprise when they find wages stagnating faster than a politician’s principles during election season. “At least we stuck it to the corporations!” the politicians will say as workers tighten their belts another notch.
Calls for industrial policy suffer from the same flaws. On the right, these arguments are usually about propping up industries said to be crucial for national security and a desire to bring manufacturing jobs back to the U.S., particularly regions hit hard by deindustrialization.
Even ignoring the fact that America’s industrial base is doing well—capacity is at an all-time high—industrial policy inevitably involves the government providing subsidies, tax credits, tariffs, and other special privileges to a few large, well-connected corporations. This cronyism is of no benefit to most ordinary workers; it’s a boondoggle for the politically powerful. It will hurt working class taxpayers.
Arnold Kling reflects wisely on GMU Econ alum Emily Chamlee-Wright’s thoughts on liberalism.
Jeff Jacoby rightly describes the comparisons of Joe Biden to George Washington as “ridiculous.” A slice:
In almost every important way, Washington’s decision was the opposite of Biden’s. Most Americans did not want Biden to run again and did not think he could handle the job. For almost the entirety of his presidency, Biden’s approval rating has been underwater. In 1796, many Americans could not imagine any president ever coming up to the standard Washington had set. Who in 2024 believes that with the end of Biden’s presidency America will lose — to quote King George III’s description of Washington — “the greatest character of the age”?
Give Biden credit for bowing to the inevitable. But the man is no George Washington, and it is silly to claim otherwise.
Joseph Epstein isn’t fooled by the amoral and shallow creature who is, and who has always been, Joe Biden. Two slices:
After more than 50 years in government, Mr. Biden has become the emblematic politician, which is no compliment. He came into office promising to heal the rifts dividing the country, and instead widened them by his own leftward political turn. He continues to call himself Catholic yet is blithely pro-choice on abortion. Everything about him—his ideas, his language, his very smile—seems fake.
Mr. Biden doesn’t lie as often as Donald Trump, but his lies are grander. He claims to have inherited high inflation and worked sedulously to lower it. He claims to have enlarged and held the North Atlantic Treaty Organization together. He claims to have created millions of new jobs. None of these claims hold up under even cursory investigation.
…..
Democrats hold that Mr. Biden has forgone a second presidential term out of selflessness, on behalf of the American people, for the greater good of the country. Of late I have heard him referred to as “lovable.” Not a word about how he became rich while in political office, owning several costly homes, a Corvette and who knows how many other cars, nor of a son and brother, not to speak of grandchildren, who have also grown rich as his star ascended.
David Simon takes friendly issue with a claim made by Glenn Loury. A slice:
In 1989, The Economic Consequences of Immigration by my late father, the economist Julian Simon, reported that immigrants’ children have a higher labor-force participation rate and a “higher propensity to start new businesses” – and that economist Barry Chiswick had found that 1970 Census data show that “men with a foreign-born parent have 15 percent higher earnings.”
The evidence about immigrants’ children, moreover, is consistent with earlier work by economics Nobel Prize winner Gary Becker and Simon’s theory expounded in his 1987 book, Effort, Opportunity, and Wealth”: Effort both increases with the size of the potential gain and is inversely proportional to wealth. In other words, a person with less wealth will exert more effort to achieve the same gain than a person with more wealth – and will exert yet more effort for a greater gain.
Here’s the abstract of a new paper by Jeffrey Clemens, Julia Payson, and Stan Veuger:
The COVID-19 pandemic led to unprecedented levels of federal aid transfers to state governments. Did this funding increase benefit state incumbents electorally? Identifying the effect of revenue windfalls on economic voting is challenging because whatever conditions led to the influx of cash might also benefit or harm incumbent politicians for a variety of other reasons. We develop an instrument that allows us to predict allocations to states based on variation in congressional representation. We find that incumbents in state-wide races in 2020, 2021, and 2022 performed significantly better in states that received more relief funding due to their over-representation in Congress. These results are robust across specifications and after adjusting for a variety of economic and political controls. We consistently find that the pandemic-period electoral advantage of incumbent politicians in states receiving more aid substantially exceeds the more modest advantage these politicians enjoyed during pre-pandemic elections. This paper contributes to our understanding of economic voting and the incumbency advantage during times of crisis as well as the downstream electoral consequences of both the COVID-19 pandemic and of unequal political representation at the federal level.
