It Started with AT&T

I’m not as pleased as David Ignatius appears to be with the updated version of industrial policy he says in his latest Washington Post column that the Biden Administration is eager to embrace:

Sen. Marco Rubio (R-Fla.), one of the commission’s chief sponsors, put the new vision succinctly in a December 2019 speech. He said it was time to recognize “the perils of free-market fundamentalism” in dealing with China and instead embrace “a 21st-century pro-American industrial policy.” That revisionist thinking now animates the Biden administration, senior members of Congress and some leading technology executives.

Like some other big paradigm shifts, this one has become obvious only as it began to displace the old laissez-faire approach to China. Behind the scenes, there’s broad congressional support for the activist stance in both parties: Nineteen of the commission’s recommendations were quietly inserted in the defense authorization act passed in January, including what could be billions of dollars in spending for new semiconductor fabrication plants in the United States.

The changes that artificial intelligence will bring to everything that touches digital technology dazzle even the most buttoned-down experts in the field. That’s why members of the commission and others close to this issue are so agitated about the need for radically increased U.S. efforts: They literally think our future is at stake, militarily, economically and even politically.

What’s driving the move toward government-directed investment in technology is a fear that China’s so-called civil-military fusion will overwhelm American effort, unless it’s matched. Eric Schmidt, the former Google chief executive who chaired the commission, argued in congressional testimony last month that “the threat of Chinese leadership in key technology areas is a national crisis.” Instead of leaving solutions to private companies, he urged, “we will need a hybrid approach that more tightly aligns government and private-sector efforts to win.”

Abandoning “free-market fundamentalism” doesn’t bother me. I’ve been proposing that myself for decades. Mass engineering projects with highly specific objectives, e.g. “We choose to put a man on the moon”, don’t bother me. In the past the federal government has been pretty done pretty well by them. “Operation Warp Speed” may fit into that category. Reshoring industries vital to defense doesn’t bother me, either. I think it’s a scandal and an outrage that we’ve allowed things vital to our national defense to be sourced only from China.

But vague, potentially impossible objectives overseen by a committee consisting of elected officials, federal bureaucrats, and business executives make me very leery.

It goes back more than a century. I’ve written about it before. The chairman of AT&T wanted the entire economy to be run by a relative handful of business executives, meeting “in secret enclave” with the federal government, formulating their plans to rework the American economy. It reminds me too much of Adam Smith’s famous remark:

People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty or justice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary.

which in context is less a critique of the evil intentions of businessmen than it is of public-private cooperatives which somehow rarely turn out well. Some people end up getting very, very rich while the country as a whole gets poorer.

4 comments… add one
  • walt moffett Link

    Everything within the State?

  • Grey Shambler Link

    Sixty years ago when we were competing with another central planning juggernaut, the Russians had a saying concerning the US,
    “Fear has big eyes.”
    The Chinese have their own problems.

  • Precisely, walt moffett. It’s real fascism, Mussolini-style fascism.

  • walt moffett Link

    Really don’t like black shirts or red ones for that matter.

    Howsa about using the requiring all Federal contracts and purchases no matter how big or trivial require an All-American supply chain. Diodes from Hawaii, paper clips (made from recycled us metal) etc. Some things we will have to license, particular weapons and health care equipment. Or will this all lead to trade wars, endless WTO meetings and Jennings waxing Roth.

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