It occurred to me that there is another point that needs to be made about that Noah Smith blog post on industrial policy. He raises the worry that the weakness of the bureaucratic state capacity could get in the way of the Biden administration’s industrial policy. He writes:
There’s also the danger that U.S. state capacity is so low that the government checks won’t even go out at all, because the government won’t know where to send them. . . .
The U.S. government simply doesn’t know how to approve companies to receive subsidies, and doesn’t have the personnel to do it. . . .
But when private construction is dependent on government subsidies, it’s a problem if the government can’t get those subsidies out the door. This appears to be happening with the CHIPS Act and its semiconductor subsidies. . . .
Perhaps bureaucratic state capacity is low, so the government can’t handle all the applications and allocations. CNBC reported last summer that 140 people had been hired to evaluate CHIPS Act subsidy applications; perhaps many more are needed, and perhaps they need time to gain experience.
Smith is right that the deployment of industrial policy requires a large number of bureaucrats. They are the ones controlling the allocation of resources and many other aspects of industrial policy. They decide who gets the money, where to send the checks, and what to spend it on.
Imagine the large bureaucratic apparatus that is needed to decide who gets the semiconductor subsidies, to make sure that these companies comply with labor-union and buy-American requirements and don’t run afoul of the inevitable environmental requirements. Imagine the level of power that must be given to bureaucrats to enable them to decide who, exactly, can export what, precisely, to which countries.
Smith has no issue with growing the administrative state. If anything, he fears that we are lacking bureaucrats to do the work. But conservatives, national conservatives or not, should have a problem with this, as it is in direct contradiction their complaints about the administrative state, or even “the deep state.” Do they realize that industrial policy inevitably empowers that deep state they dislike so much?
Let’s recap: Industrial policy is hard to implement because of political incentives and our heavily regulated environment. Industrial policy done through tariffs shrinks production. It also further empowers big corporations. Industrial policy enlarges the administrative state.
It’s as if industrial policy isn’t populist at all.