The Political Economy of National Industrial Policy

This paper evaluates the current NIP proposals by first explaining the general economic consequences of the 'protective state' that facilitates market exchange and economic efficiency, and the 'redistributive state' that arbitrarily directs the organization of individual activity according to political criteria. It is shown how government promotes economic cooperation and prosperity when it is restricted to protecting private property rights and the freedom of exchange, and how the redistributive or 'planning' role of government leads to economic conflict, stagnation, and a loss of' individual liberty. The adverse effects of governnient planning are illustrated by examining the consequences of the NIP proposal to extend greater governmental control over the allocation of credit. It is explained how NIP proponents are deluded by the fallacious assumption that politics is inherently 'cooperative' whereas market behavioris conflictual, and is therefore the source of economic instability. This is followed by a discussion of how the cun'ent debate over industrial policy is part of an ongoing struggle by political threes to supersede the market economy.

  • Authors: Thomas J. Dilorenzo
  • Year: 1984
  • Organisation: Cato Institute
  • Publisher: Cato Institute
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