Other Countries ’ Industrial Policies Don’t Justify Our Own

Scott LincicomeCato today published my newWhite Paper on the perils of American industrial policy, and the timing couldn ’t be better. The Senate, for example, has passed theInfrastructure Investment and Jobs Act (the Bipartisan Infrastructure Bill) and theU.S. Innovation and Competition Act, each of which contain numerous subsidies and other measures intended to boost American manufacturing and compete with China. Those bills now sit with the House, which is also considering a  bunch of industrial policy proposals, such asspecial tax credits for union ‐​made electric vehicles, in President Biden ’s $3.5 trillion “reconciliation package.”As explained in my new paper, U.S. industrial policies have a  long history of high costs (for the federal budget and U.S. economy), failed objectives, political dysfunction, and empty justifications. Prominent among those justifications, especially today, is that industrial policies have worked well in countries like South Korea, which has a long history of economic interventionism. I cite oodles of research showing why such claims are misguided (for Korea and others), but a brand new National Bureau of Economic Research (NBER)working paper provides some excellent additional support – and some broader lessons along the way.The paper, from economists Minho Kim, Munseob Lee, and Yongseok Shin, uses a  novel and detailed dataset to examine the effects of Korea’s “heavy and chemical industry” (HCI) drive in the 1970s ...
Source: Cato-at-liberty - Category: American Health Authors: Source Type: blogs