The antidote to a state guided economy

At National Review Online, Reihan Salam worries that with the proliferation of government intervention into business we are veering into the territory of a "state-guided" economy. The problem isn't just that the government is spending taxpayer cash indiscriminately, it's that all this cash comes with strings attached, and the fact that those in power will have influence over where and how this money will be spent.

Once such a system becomes dominant, industry will shift from innovation to rent-seeking. That is, influencing those in power to steer money and business their way. This isn't because our business leaders are evil, or see backroom deals as the preferred business model. This is because once we establish a system of resource allocation that is based on political influence, then the natural tendency of those seeking profit will be to first seek influence. If you think pursuing political influence rather than the encouragement of creativity is the basis of a sound economy, you are sadly mistaken.

Salam looks at the case of Vice-President Biden and a closed GM plant in Delaware as an example. He doesn't fault Biden for his efforts to lure new business to Delaware, that's perfectly natural, but it has negative consequences:

I don't actually think that the vice president did anything untoward. He used his influence on behalf of a community he has represented for decades, and that is perfectly understandable if not admirable in some sense. But it's worth keeping in mind where the push for industrial policy is really taking us. The largess that the DOE and Biden are dispensing isn't really theirs to give away.

For Biden, the reopening of Delaware's Boxwood Road plant is "a metaphor for the rebirth of the country." There ought to be a second half to that sentence: "a metaphor for the rebirth of the country as a haven for crony capitalism." That's a little harsh. But this is really bad, guys.

This critique seems utterly sensible and I think it would appeal to anyone with even the slightest tendency toward free markets.

Of course, if I lived in Delaware, I might see this whole issue differently. I don't, but I do live in Wisconsin.

Here's My Two Cents blog bemoaning the inability of the Wisconsin legislative delegation to use their position to help Oshkosh Corporation secure government contracts:

While we would all like to think that things like major military contracts are awarded strictly on lowest bid and highest quality of work--anyone who knows anything about Washington knows that politics plays a major role in that process as well.

Instead of calling for an end to this influence, he proceeds to detail just how inadequate our legislators are at playing the game when it comes to the military contracts sought by Oshkosh. He ends on this note:

So, as Oshkosh and the Fox Valley enter the biggest game of Hardball ever, Wisconsin is fielding a team of Punch-and-Judy hitters--when we all know that chicks dig the long ball.

Nice touch there at the end, but the whole thing misses the point entirely. Do we send our legislators to Washington to insure we get a big slice of an enormous tax-dollar pie? I'd like to think that those on the right would prefer that legislators in Washington shrink the size of what is undoubtedly a wasteful government bureaucracy, even if this means fewer dollars return home. Better that they never left, I would say.

In closing, Salam offers a real recipe for improvement and hints at why it doesn't get the attention it deserves:

Imagine what we might accomplish if we abandoned targeted giveaways in favor of, say, a lower corporate income tax, better schools, and better roads. That, alas, sounds rather mundane.

When it comes to government I'll take mundane any day of the week.