Industrial policy’s strange bedfellows

by Richard Schulman

“National Conservatism” (NC) has sometimes been characterized as an attempt to fashion a coherent political theory and program out of President Trump’s unpredictable policy-making. Its spokesmen include Fox News commentator Tucker Carlson and the City Journal‘s Oren Cass. They are calling for a national industrial policy as a fulfillment of National Conservatism’s attack on free markets, individualism, and the Enlightenment.

Elizabeth Warren, now the leading presidential candidate of the Democratic Party far left, also wants an American industrial policy. She has come in for praise from Tucker Carlson in this regard. This has not escaped columnist George Will’s notice.

Although President Trump himself has not committed himself openly to an industrial policy, his extensive trade protectionism and closeness to Tucker Carlson suggest that he may move in that direction. Were he to do so, the electorate could face a 2020 ballot featuring two proponents of industrial policy — Warren vs. Trump. This would give an ironic twist to complaints of both candidates’ constituencies that every four years the voters are stuck with a Demopublican conspiracy, the Uniparty.

Oren Cass’s advocacy of industrial policy is more developed than Tucker Carlson’s. In his presentation on July 14th — Bastille Day — to the National Conservatism Conference in Washington, DC, Cass argued in favor of the following policies:

1. Fund basic research across the sciences,
2. Fund applied research, focusing in fields like advanced materials, robotics, and logistics,
3. Support private-sector R&D and commercialization with subsidies and specialized institutes,
4. Emphasize vocational education and target higher-education support at relevant disciplines,
5. Give engineering majors greater assistance than comparative literature majors,
6. Increase infrastructure investment and reduce regulatory burdens on it,
7. Give fast-track approvals of projects that expand industrial capacity,
8. Bias the tax code in favor of profits generated from the productive use of labor,
9. Retaliate aggressively against mercantilist countries that undermine market competition,
10. Reduce Chinese student visas toward zero until Chinese policies change,
11. Tax foreign acquisition of U.S. assets, making U.S. goods relatively more attractive, and
12. Impose local content requirements in key supply chains like communications.

Cass’s policy recommendations, to the extent that they have a principled basis, center on mercantilist policies favoring domestic goods manufacture. Most of them are bad economics and unconstitutional — that is, they have no enumerated basis in the Constitution. Our itemized critique which follows has both economics and the Constitution standing behind it — namely, the provisions in Articles 1 and 2 for the common defense.

• The funding of basic and applied research, including research in the private sector (Cass’s proposals 1, 2, and 3 above) should have an arguable national defense rationale. Perhaps controversially, we believe that both space travel and health research meet that criterion. Fortunately, the private sector is now more heavily involved in basic and applied research than hitherto, and this is to be encouraged.
• Vocational education should be left to the states; they have a better sense of local needs and capabilities. Federal vocational education programs have been a conspicuous failure and are also unconstitutional. (Cass 4).
• Federal support for degrees in select sciences, engineering, and area studies have a pedigree going back to the post-Sputnik period and have a defense rationale (Cass 4 and 5).
• The national highway system built during the Eisenhower years had a national defense rationale. Infrastructure proposals today should meet that criterion and not be projects more suitable to being handled by the states, e.g., by providing local rather than national benefits (Cass 6).
• There is no reason for the government to suppose that it knows better than markets by favoring some sectors over others. Cass items 7 and 8 are pure industrial policy. They constitute bad economics and, by reducing national wealth, are bad for national security.
• Practicing mercantilist policies while punishing other countries that do the same is a hypocritical disgrace and bad economics. (Cass 9)
• The risk of enabling espionage and training researchers who will return to China and aid their military and intelligence efforts has to be weighed against the value of Chinese students becoming familiar with the freedoms available in the US and possibly becoming US citizens. Thus, a selective policy is appropriate regarding visas, not the zero-visa policy advocated by Cass 10.
• Discouraging foreign investment in the US where no security issues are present will reduce US employment and total investment. Allies shouldn’t be kept out by local content restrictions. Protectionism raises costs to consumers and prevents productive investments elsewhere. (Cass 11 and 12)

The Democrats’ Green New Deal is industrial policy, and Elizabeth Warren and the rest of the Democratic candidates have all boarded that train. Cass and Carson would like to pull Trump aboard as well, minus the Green tilt. Republican magazines that were once solidly conservative, such as the Claremont Review, are chasing that train as well, as are Republican public intellectuals who were once limited-government conservatives, such as Roger Kimball and Victor Davis Hanson.

Climb down, mates. The Uniparty train is headed for a crash, just as Japan’s industrial policy locomotive did in the 1980s. By way of counterpoint, a spirited defense of the Founders’ conservatism / classical liberalism may be found in George Will’s new book, The Conservative Sensibility, reviewed here. National Conservatism’s hostility to the Founding and the Enlightenment is discussed here.