Four years ago, I shared a video that explained that 19th century cronyism and industrial policy in America was just as wasteful, corrupt, and ineffective as the 20th century version (think Japan) or the 21st century version (think China).
Unfortunately, some people don’t know (or don’t care) about economic history.
Senator Marco Rubio of Florida, for instance, tweeted yesterday that “strong industrial policy turned America into a world power.” And he included a timeline ostensibly showing that politicians steered the economy in the right direction.
Fortunately, Phil Magness of the Independent Institute responded with a tweet that added some very necessary corrections. Here’s the new and improved version.
Looking at the historical track record, Magness easily has the stronger argument.
I’ll add a couple of my observations.
- First, Alexander Hamilton definitely was imperfect, but not as bad as his reputation.
- Second, there were (good) capitalists and (bad) cronyists in the 18th century.
- Third, Smoot-Hawley was terrible, but other policies also helped cause the Great Depression.
By the way, Magness mostly focused on the trade restrictions that accompany industrial policy (you can find modern-day versions in Biden’s semiconductor subsidies and his misnamed Inflation Reduction Act), but I think the discussion of the graft-riddled transcontinental railroad was the most instructive part of his reply.
After all, does anyone doubt that today’s sleazy politicians would be just as likely to use industrial policy as a way of funneling cash to campaign contributors?
P.S. Jack Mintz is right.
