Friday, January 7, 2011

Obama's New Chief of Staff Backs Industrial Policy

So what is the new "friendly to business" chief of staff, Bill Daley, really all about? Try crony capitalism. Try heavy duty industrial policy strength crony capitalism.

You will never confuse Daley with Adam Smith.

Science Magazine points out that he is a big supporter of "industrial policy," i.e. the failed policy of Japan, where the government attempts to pick economic winners.

Aside from the impossibility of picking winners across an economy when knowledge is dispersed, which means the best way to pave the way for innovation is to get out of the way and let different entrepreneurs try different projects, industrial policy leads to financing of projects to the politically connected. With a Chicago Daley doling out the cash, can we expect anything else?

Via Science Magazine, here's Daley "logic" on why free traders need to be in favor of industrial policy:

Other countries are much better organized to deal with all these issues, he said, and the decentralized structure puts the United States at a disadvantage.

He acknowledged that adopting a new strategy could reopen old political wounds. "Yes, we'll run into the issue of industrial policy," he said. "But most other countries, that doesn't seem to bother them." And he suggested that the fight is worth making.

"Those of us who are free traders and pure market believers seem to back up whenever the question of industrial policy comes up for discussion," he said. "But the hole we put ourselves in won't be solved simply by rearranging the boxes. ... The rest of the world is not waiting for us to get our act together."


  1. Daley and Sperling should make quite a team. Sperling will be in charge of centralizing lending and setting compensation limits of the very businesses Daley decides to support.