Industrial Policy’s Comeback
Market fundamentalism has failed to improve economic and social conditions. Now, we need a mission-oriented approach to the economy that embraces an active role for government in spurring growth and innovation.
Today it is precisely those “market mechanisms” that appear not to have delivered on their promise. An equally exhaustive review of the experience of several advanced economies during the last few decades—from the 2008 financial crisis, populist challenges to globalization, and vast increases in economic inequality to decaying infrastructure, climate change, and the broader pursuit of short-term profit at the expense of long-term investment—has badly tarnished the reputation of neoliberal market fundamentalism. Under this regime, modern capitalist markets have proven themselves unable to create an even distribution of wealth and income, ecological sustainability, affordable shelter and health care, and a sufficient number of high-quality middle-class jobs. Amidst this policy crisis, industrial policy is making a comeback, shaping high-level discussions at the intersection of trade policy and economic growth on subjects from artificial intelligence to climate change.
Boston Review
Nonsensical article.
ReplyDeleteThe authors say in connection with “neoliberal market fundamentalism” that “Under this regime, modern capitalist markets have proven themselves unable to create an even distribution of wealth and income, ecological sustainability, affordable shelter and health care..”.
Well no one ever said Regan / Thatcher style “fundamentalism” WOULD DEAL with inequality or “ecological sustainability”!!!! Economics text books have always made it clear that there are some things the market does not deal well with, if at all: e.g. “externalities” like pollution and inequality. Certainly in the UK, spending on social security did not plummet when Thatcher came to power.
Ergo what is needed to deal with the latter two problems is a social security system and anti pollution laws, subsidies for wind & solar power etc: i.e. stuff we're ALREADY DOING, and no thanks to Mazzucato.
While one COULD CLASSIFY subsidies for wind and solar power as a FORM OF industrial policy, that on it's own is not what is normally meant by “industrial policy”. The phrase “industrial policy” (and this is the way in which the authors use the phrase in he second half of the article) means something like “a move towards a Soviet style central planning system”.
The above points which have long been made in economics text books are not an argument more the latter sort of move.
There's plenty more nonsense in that article. I'd tear more strips off it on my blog....:-)