Thursday, May 18, 2023

The New Washington Consensus - An Industrial Policy For a New American Century

On April 27th of this year, President Biden’s National Security Advisor, Jake Sullivan, gave a speech on “Renewing American Economic Leadership” at the Brookings Institute. In this speech, he outlined a new vision for how the USA could maintain its global predominance going forward by “integrating domestic and foreign policy”, focusing on economic policies in both realms.

This speech signalled a massive shift in prevailing economic orthodoxy in the USA, moving away from the emphasis on reduction of tariffs abroad and continuously lower rates of taxation at home, towards a new “Industrial Policy” that seeks “not to decouple from China”, but rather “de-risk and diversify” (words which Sullivan borrowed from EU Chief Ursula von der Leyen). Sullivan stood up and said that the old economic order was over and that a new one would have to be built. This was earthshaking stuff!

By now, we should not be surprised by the fact that this speech received very little attention from mainstream media outlets. Conservative media was too busy focusing on the Bud Light Boycott to even notice that the Biden regime is working to do away with the old Washington Consensus that was forged under its hero, Ronald Reagan. Sullivan went as far as calling for a ‘New Washington Consensus’ to replace the told one (a repudiation), adding that this wide-sweeping economic policy vision requires bipartisan congressional support.


Two problems with these industrial policy ideas: (1) For all the usual reasons, no one is smart enough to figure out what our industrial policy should be. It means walking onto the field with a lot of preconceived ideas and commitments that are unlikely to survive contact with reality. Markets do a much better job. But they don't send riches in predictable directions or typically toward DC, and so they don't much like them. (2) Even if the industrial policy is a good idea (meaning less destructive than it might be) it will quickly be colonized by swarms of rent-seekers who will turn it into the sort of rigid and inefficient economy we have now. And that's no good. I mean, with all due respect to Mr. Sullivan, isn't he exactly the sort of slimy toad you don't want proposing grand economic strategy? Do we even want grand economic strategy? This is the same Sullivan up to his ears in the Russia-gate scandal, correct? That was not very nice of him and was certain unfair play if not felonious, which it probably was. Industrial policy all comes down to a combination of protectionism and subsidies, and those will be determined by the usual rules of grift.

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That's about the size of it, Mr Smith. We've had "industrial policies" in Britain over the years and their characteristics have been just what you point to.

I went once to a drinks-and-chat meeting of the Conservative Party.
"What's your line?" asked a local MP.
"What should the government do for you?"
"Keep out of the way."
"Oh", he sneered, "a real conservative" and turned his back.

Posted by: dearieme | May 19, 2023 4:48:42 AM