We’ve been hearing about the end of globalization for the better part of the last decade, and yet rumors of its demise appear to have been greatly exaggerated. The latest calls for American energy independence and re-shoring manufacturing are part of this broader trend, which seeks to insulate the domestic economy from turmoil in faraway regions. COVID-19 also brought the idea of “industrial policy” back to the forefront. While it’s hard to pin down an exact definition, Scott Lincicome of the Cato Institute relates some key features behind the misguided notion that the government must steer critical industries for reasons of national importance.
Whether we’re talking about steel, oil, or semi-conductors, the proponents of a robust industrial policy argue that we’ve become too reliant on our potential foes for strategic resources, and must set national production goals through legislation rather than impartial market forces. This can range from Soviet-style central planning (which led to the ultimate collapse of the USSR), to the use of trade barriers, tax incentives and subsidies - i.e., “picking winners and losers.”
Even with the latter approach, Lincicome points out many flaws in modern American industrial policy. In a recent Cato white paper, Questioning Industrial Policy, he highlights the inefficiencies brought about by injecting politics into the market’s discovery process, and notes how most recent attempts to “improve” the outcomes of global competition have tended to hinder even our vital domestic industries.
Scott joined me to break down the report, and make the case for embracing globalization and free trade in the 21st century rather than hunkering down in our domestic silo.
Questioning Industrial Policy
Why Government Manufacturing Plans Are Ineffective and Unnecessary The United States undoubtedly faces economic and geopolitical challenges, including ones related to China, but the solution does not lie in copying China's top‐down economic planning. In the wake of the COVID-19 pandemic and rising U.S.-China tensions, American policymakers are again embracing industrial policy.
It's the End of Globalization as We Know It (and That's Probably Fine), Part 1
The stubbornly persistent pandemic, events in Ukraine, and simmering U.S.-China tensions have led numerous commentators-and not just the usual skeptics-to boldly proclaim that we're entering a new era of "deglobalization." Factories are reshoring, economies are decoupling, and everyone has given up on "free trade."
Actually, America Isn't 'Energy Independent.' (And That's a Good Thing.)
After last week's deep dive into supply chains, recent events give us a great real‐world example of the benefits of economic openness and the costs of isolationism. (So pardon me in advance for covering some of the same stuff two weeks in a row.)