Bidenomics is not only spending money anymore.
No, it’s a whole new economic paradigm, in response to a recent speech by National Security Adviser Jake Sullivan at the Brookings Institution.
He describes Biden’s approach as “modern American industrial strategy.”
In so doing, he shares the left’s penchant for putting the adjective “modern” in front of an old idea to make it sound shiny and modern.
“Modern monetary theory” is an expression for the persistent belief – or temptation – that you’ll be able to spend piles of cash you do not have without consequences.
“Modern” industrial policy is presumably better than “outdated” industrial policy, but each have the same conceit that government – with all its inefficiencies and the inevitable inconsistencies and compromises that include legislative sausage-making – can see the future better than the market players .
It is true that government-private sector partnerships – and in extreme cases, government management of the economy – may be useful.
During an existential struggle equivalent to World War II, economic freedom and efficiency understandably gave solution to the imperatives of production in the great military struggle.
There are several success stories of commercial policy; for example, Japan after the war, until its economic model crashed into a wall, causing a long time of stagnation.
In America, the collaboration between NASA and SpaceX has been fruitful, and Operation Warp Speed has been a good example of government creative support for private sector work to perform a crucial goal under emergency conditions.
But the counterexamples are extensive.
The commercial policy that (together with generous American aid) helped Western Europe recuperate quickly from the ruins of war eventually became a source of stagnation in lots of the countries that adopted it.
In the United States, the Seventies were a time of all varieties of trade restrictions, quotas, and other rules designed to support privileged industries and fine-tune the economy.
This era was truly the golden age of commercial policy, and the harvest has come.
Yes, government can and will set the general conditions for the economy and ensure adequate supplies of strategically sensitive goods, even when supply chains come under pressure, but there are limits to how much it could usefully steer economic development.
The government all the time operates with a deficit of information in comparison with business and investors who take risks day-after-day, pushing the boundaries of innovation and subjecting themselves to the discipline of the market, which can punish them severely in the event that they are flawed and reward them handsomely in the event that they are flawed. they’re right.
In the Nineties, when the Web was just getting began, few would have predicted that the future of technology can be firms like Google, Facebook, Apple and Amazon.
The U.S. Department of Commerce didn’t create these firms and will not have created them even when it had been specifically instructed by the president and Congress.
It is true that Sullivan presents a vision that runs counter to the old so-called Washington Consensus in favor of deregulation and free trade.
Nevertheless it rebels against a libertarian ideal that has never been realized in the United States and never can be.
Had the Washington Consensus been strictly followed, government spending wouldn’t have spiraled uncontrolled, so that the United States finds it difficult to defy the $31.4 trillion debt limit.
A new study has just found that regulation – mostly environmental – has increased significantly since the late Nineties, and the cost of complying with it has increased by about $1 trillion since 1970.
Essentially, President Joe Biden is spending huge amounts of cash on infrastructure and green initiatives in an economy where green regulation is making it increasingly difficult to construct anything, definitely not in a cost-effective or timely manner.
What the new industrial policy gives on the one hand, the old industrial policy – and the bureaucracy that accompanies it – takes away from the other.
The alleged climate crisis purports to justify any irrationality or cost imposed on taxpayers and the economy.
If this, as you’d expect, doesn’t work as planned, don’t fret.
There’ll all the time be a chance for a new, modern industrial policy to take the place of the old one.
Twitter: @RichLowry