I read this article a few days ago and I think he brings up an interesting point that is worth debating.
"In theory, I am deeply skeptical of government industrial policy. Government doesn’t know how to pick winners and losers, it will make mistakes, and the process will get politicized. All this is true. And yet when I look at China and South Korea and also Germany and Japan, I see governments playing a crucial role. They do make mistakes— their versions of Solyndra— but they seem to view them the way venture capitalists would. Their role is to seed many companies, only a few of which will succeed. Once these companies are identified, government helps them compete against big U.S. multi nationals. There used to be a joke about Marxist economists who would say of a deviation from pure communist economics: “It might work in practice, comrade, but it doesn’t work in theory.” That’s what industrial policy looks like these days. The theory doesn’t make sense, but it’s hard to argue with the result."
Are we valuing theory over practice in our industrial policy at the cost of our global competitiveness?
The issue comes up when government has a vested interest in the maintenance of an industry - ie., when the banks collapsed, they did so knowing that the government would bail them out or risk a complete freeze of the money supply. Our government should intervene to try and aid the economy, not businesses. The GM and Ford bail outs and restructuring were grand successes in that vein.
Creating an environment for industry to grow is what's important, and revisions to the US tax code and some industrial regulations are needed. We should try to make ourselves competitive, but that doesn't mean we should go as far as what China has done to itself and its laborers.
It's worth noting that Adam Smith, when he wrote The Wealth of Nations, summarized capitalism as a system that "...with adept management, may turn private vice (greed) into public good." What exactly adept management means has been argued over, but I think it's clear that we do need to push for reform to stimulate industry, possibly through a major tax overhaul + review of our industrial policy to stimulate growth. These are the sorts of policy changes that could hopefully gain some bipartisan support and may be reviewed after election season.
"In theory, I am deeply skeptical of government industrial policy. Government doesn’t know how to pick winners and losers, it will make mistakes, and the process will get politicized. All this is true. And yet when I look at China and South Korea and also Germany and Japan, I see governments playing a crucial role. They do make mistakes— their versions of Solyndra— but they seem to view them the way venture capitalists would. Their role is to seed many companies, only a few of which will succeed. Once these companies are identified, government helps them compete against big U.S. multi nationals. There used to be a joke about Marxist economists who would say of a deviation from pure communist economics: “It might work in practice, comrade, but it doesn’t work in theory.” That’s what industrial policy looks like these days. The theory doesn’t make sense, but it’s hard to argue with the result."
Pure capitalism as a theory only came about long after capitalism was put into practice. I would comment to Mr. Zakaria that governments aren't the only incorporated agencies that don't know how to pick winners and losers, make mistakes, and become politicized. Our current policies should, in theory, help foment growth, in practice, they're not. We don't need to actually directly support a corporation insomuch as we need to foster a better environment for business.
The issue comes up when government has a vested interest in the maintenance of an industry - ie., when the banks collapsed, they did so knowing that the government would bail them out or risk a complete freeze of the money supply. Our government should intervene to try and aid the economy, not businesses. The GM and Ford bail outs and restructuring were grand successes in that vein.
Creating an environment for industry to grow is what's important, and revisions to the US tax code and some industrial regulations are needed. We should try to make ourselves competitive, but that doesn't mean we should go as far as what China has done to itself and its laborers.
It's worth noting that Adam Smith, when he wrote The Wealth of Nations, summarized capitalism as a system that "...with adept management, may turn private vice (greed) into public good." What exactly adept management means has been argued over, but I think it's clear that we do need to push for reform to stimulate industry, possibly through a major tax overhaul + review of our industrial policy to stimulate growth. These are the sorts of policy changes that could hopefully gain some bipartisan support and may be reviewed after election season.
Pure capitalism as a theory only came about long after capitalism was put into practice. I would comment to Mr. Zakaria that governments aren't the only incorporated agencies that don't know how to pick winners and losers, make mistakes, and become politicized. Our current policies should, in theory, help foment growth, in practice, they're not. We don't need to actually directly support a corporation insomuch as we need to foster a better environment for business.
First of all it was GM and Chrysler, and success is still up for grabs. Neither one of them makes a quality car I would want to buy.
I do agree that government should promote growth, and one of the easiest ways is to promote opportunity. I just had to do my taxes on a home office that I now "own" (as long as I pay my mortgage and taxes) compared to one that I rent. They need me to calculate depreciation on the office. 3 pages of paperwork for a $64 deduction. My tax software said I could skip it, but if I ever sold the house, I would have to recalculate it anyway, so mise do it now. That's rediculously complicated.
Why not just take my mortgage payment, taxes and insurance (most people have these escrowed into one) and % by the square footage just like a renter. That's 2 lines not 3 pages.
Making it harder to get the things people need to conduct business by making it overly complicated (like the guy and his fish, or the ice cream shop with the fresh strawberries) puts us at a disadvantage.
Private Mod Note
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Rollback Post to RevisionRollBack
Out of the blackness and stench of the engulfing swamp emerged a shimmering figure. Only the splattered armor and ichor-stained sword hinted at the unfathomable evil the knight had just laid waste.
The issue comes up when government has a vested interest in the maintenance of an industry - ie., when the banks collapsed, they did so knowing that the government would bail them out or risk a complete freeze of the money supply. Our government should intervene to try and aid the economy, not businesses. The GM and Ford bail outs and restructuring were grand successes in that vein.
Creating an environment for industry to grow is what's important, and revisions to the US tax code and some industrial regulations are needed. We should try to make ourselves competitive, but that doesn't mean we should go as far as what China has done to itself and its laborers.
It's worth noting that Adam Smith, when he wrote The Wealth of Nations, summarized capitalism as a system that "...with adept management, may turn private vice (greed) into public good." What exactly adept management means has been argued over, but I think it's clear that we do need to push for reform to stimulate industry, possibly through a major tax overhaul + review of our industrial policy to stimulate growth. These are the sorts of policy changes that could hopefully gain some bipartisan support and may be reviewed after election season.
Pure capitalism as a theory only came about long after capitalism was put into practice. I would comment to Mr. Zakaria that governments aren't the only incorporated agencies that don't know how to pick winners and losers, make mistakes, and become politicized. Our current policies should, in theory, help foment growth, in practice, they're not. We don't need to actually directly support a corporation insomuch as we need to foster a better environment for business.
Ford was not bailed out. GM and Chrysler were the ones that got the bailouts from the government. Ford actually had the forward thinking to recognize that something was wrong in the market and took steps to assure that they wouldnt need such a bailout, and sure enough, they got through it all just fine, and without a dime of taxpayer money. While I can understand the government feeling the need to step in to assure that those large companies didnt fail and the huge collatoral damage it would have caused to the job market, to me, Ford came out of that as the one company I can feel good about buying from.
Sorry if that wasnt 100% on topic, but I felt the need to correct a gross misstatement in regards to Ford being bailed out, which was not the case. Im sure you didnt mean anything by it, but I dont want others who may not be paying attention to be spreading misinformation unintentionally.
Private Mod Note
():
Rollback Post to RevisionRollBack
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http://www.fareedzakaria.com/home/Articles/Entries/2012/1/26_The_Case_for_Making_It_in_the_USA.html
I read this article a few days ago and I think he brings up an interesting point that is worth debating.
"In theory, I am deeply skeptical of government industrial policy. Government doesn’t know how to pick winners and losers, it will make mistakes, and the process will get politicized. All this is true. And yet when I look at China and South Korea and also Germany and Japan, I see governments playing a crucial role. They do make mistakes— their versions of Solyndra— but they seem to view them the way venture capitalists would. Their role is to seed many companies, only a few of which will succeed. Once these companies are identified, government helps them compete against big U.S. multi nationals. There used to be a joke about Marxist economists who would say of a deviation from pure communist economics: “It might work in practice, comrade, but it doesn’t work in theory.” That’s what industrial policy looks like these days. The theory doesn’t make sense, but it’s hard to argue with the result."
Are we valuing theory over practice in our industrial policy at the cost of our global competitiveness?
Creating an environment for industry to grow is what's important, and revisions to the US tax code and some industrial regulations are needed. We should try to make ourselves competitive, but that doesn't mean we should go as far as what China has done to itself and its laborers.
It's worth noting that Adam Smith, when he wrote The Wealth of Nations, summarized capitalism as a system that "...with adept management, may turn private vice (greed) into public good." What exactly adept management means has been argued over, but I think it's clear that we do need to push for reform to stimulate industry, possibly through a major tax overhaul + review of our industrial policy to stimulate growth. These are the sorts of policy changes that could hopefully gain some bipartisan support and may be reviewed after election season.
Pure capitalism as a theory only came about long after capitalism was put into practice. I would comment to Mr. Zakaria that governments aren't the only incorporated agencies that don't know how to pick winners and losers, make mistakes, and become politicized. Our current policies should, in theory, help foment growth, in practice, they're not. We don't need to actually directly support a corporation insomuch as we need to foster a better environment for business.
First of all it was GM and Chrysler, and success is still up for grabs. Neither one of them makes a quality car I would want to buy.
I do agree that government should promote growth, and one of the easiest ways is to promote opportunity. I just had to do my taxes on a home office that I now "own" (as long as I pay my mortgage and taxes) compared to one that I rent. They need me to calculate depreciation on the office. 3 pages of paperwork for a $64 deduction. My tax software said I could skip it, but if I ever sold the house, I would have to recalculate it anyway, so mise do it now. That's rediculously complicated.
Why not just take my mortgage payment, taxes and insurance (most people have these escrowed into one) and % by the square footage just like a renter. That's 2 lines not 3 pages.
Making it harder to get the things people need to conduct business by making it overly complicated (like the guy and his fish, or the ice cream shop with the fresh strawberries) puts us at a disadvantage.
Ford was not bailed out. GM and Chrysler were the ones that got the bailouts from the government. Ford actually had the forward thinking to recognize that something was wrong in the market and took steps to assure that they wouldnt need such a bailout, and sure enough, they got through it all just fine, and without a dime of taxpayer money. While I can understand the government feeling the need to step in to assure that those large companies didnt fail and the huge collatoral damage it would have caused to the job market, to me, Ford came out of that as the one company I can feel good about buying from.
Sorry if that wasnt 100% on topic, but I felt the need to correct a gross misstatement in regards to Ford being bailed out, which was not the case. Im sure you didnt mean anything by it, but I dont want others who may not be paying attention to be spreading misinformation unintentionally.