Central Planning Achieved Significant Victories on Election Night

Supporters of Vice President Kamala Harris may be feeling disheartened by recent political developments, however, one of the fundamental tenets of the Biden-Harris administration, known as “industrial policy,” has garnered substantial support from both major political parties. This crossover appeal can be linked to overlapping interests: President Donald Trump champions high tariffs, while Harris advocates for substantial subsidies directed at large corporations. This bipartisan endorsement of industrial policy raises concerns, as it reflects a trend toward economic strategies that many argue are fundamentally flawed. Often framed as populist initiatives, industrial policies frequently resemble the crony-capitalism systems that detractors warn against. Sam Gregg, an expert from the American Institute for Economic Research, characterizes industrial policy as an attempt to manipulate resource allocation in specific sectors, ultimately echoing the principles of central planning.

The mechanisms employed in industrial policy encompass a range of tools, including subsidies, tax breaks, tariffs, and regulatory exemptions. Although many of these practices are already prevalent in the U.S. economy, the distinguishing feature of industrial policy is its explicit selection of favored economic activities in pursuit of an orchestrated vision for the economy—sometimes with cultural motives in mind. The Democrats may leverage industrial policy to accelerate a transition toward renewable energy sources, enforcing mandates, subsidies, and tax incentives to shape national consumption patterns regardless of public opinion. Conversely, certain Republicans advocate for tariffs to boost manufacturing employment while also attempting to mold societal norms to resemble mid-20th century America. The underlying implication is that both major parties are striving to compel populations into particular economic and social roles that do not necessarily align with individual interests or preferences.

The pitfalls of imposing industrial policy are notable in its failure to effect sustainable societal or cultural improvements. Historical precedents suggest that government intervention, through the mechanism of subsidies and preferential treatments, distorts essential market signals that typically guide resource allocation effectively. A prime example can be observed in Boeing, where decades of government support have failed to cultivate real innovation or enhance competitiveness; the company has instead fostered a dependency on political connections over true customer satisfaction. This pattern resonates across multiple sectors, from the green energy initiative to semiconductor manufacturing, demonstrating that state intervention often engenders dependencies rather than fostering innovative capacities.

Political wrangling over industrial policy can lead to chronic reliance on government subsidies, with established companies becoming adept in lobbying efforts instead of focusing on authentic growth strategies. This cycle of dependency can become particularly precarious when companies encounter operational troubles, as seen with Intel, a notable beneficiary of the Biden administration’s semiconductor strategy through the CHIPS and Science Act. Reports indicate that Intel’s current financial strife might prompt calls for additional government bailouts because of its perceived strategic importance. In scenarios like this, insulating a company from market discipline typically exacerbates, rather than alleviates, its challenges, raising the risk of further inefficiency and stagnation.

Industrial policy further complicates the economic landscape by allocating funds to corporations that may not warrant such financial support. An illustrative case concerns the Taiwan Semiconductor Manufacturing Company (TSMC), which had already earmarked $12 billion for a new facility in Arizona prior to the enactment of the CHIPS Act. This scenario highlights the redundancy of government intervention in facilitating investment that would likely have occurred independently. The reliance on subsidies not only misallocates resources but also stifles competitive dynamics within the market.

In conclusion, unless there is a significant policy shift—especially among influential actors like Trump and Congress—toward a model that restricts central planning, the implications of ongoing industrial policy could be detrimental to the overall economic health. The intertwining of subsidies, tariffs, and other forms of government intervention creates a landscape riddled with inefficiencies, dependency, and an erosion of true market-driven competition, potentially leading to profound economic repercussions.