Industrial Policy: New Wine in Old Bottles
Posted by Brad Spangler on Jan 1, 2009 in Studies • 14 commentsIn this study, Kevin Carson asserts that the existing capitalist economic system is a result of State industrial policy suppressing libertarian alternatives. That status quo, however, is unsustainable according to Carson. Getting government out of the way would unleash market forces to birth a “neotechnic” economy of previously unmatched prosperity. Download: Industrial Policy: New Wine in Old Bottles
[...] will kick off with reading Kevin Carson’s first paper for The Centre for a Stateless Society: Industrial Policy: New Wine in Old Bottles and that will be followed up with finishing Benjamin Tucker’s Instead of a Book. What [...]
[...] book. Also, Carson’s first quarterly study for the Center has been published in PDF format – Industrial Policy: New Wine in Old Bottles. To complete the Carsonian trifecta, check out his latest commentary piece — Ecuador [...]
"According to a study in Vermont, substituting local production for only ten percent of imported food would create $376 million in new economic output, including $69 million in wages at over 3600 new jobs. A similar study in Britain found the multiplier effect of ten pounds spent at a local business benefited the local economy to the tune of 25 pounds, compared to only 14 for the same amount spent at a chain store." -p.18
This is just the broken window fallacy. Substituting local production for imports does not create any NEW economic output or any NEW jobs. Rather, jobs are being destroyed elsewhere in order to create "new" local jobs. If Vermont "creates" $376 million by switching to local production, that same amount must be lost elsewhere.
Economic growth is caused by savings and investment, not clever bookkeeping.
I don't believe it's an example of the broken window fallacy unless one considers buying from one vendor rather than another to be "damage" — which would be a very unorthodox interpretation, one that I doubt Bastiat would agree with, judging by his famous "Petition of the Candlestick Makers":
http://bastiat.org/en/petition.html
Yeah, it's not really the broken window fallacy. To be more precise, I guess it's just ignorance of the general lesson of Hazlitt's book, i.e. "tracing the consequences of that policy not merely for one group but for all groups."
In this case, looking at the local effects while ignoring the "foreign" effects.
I don’t see how you can call it ignorance, since I specifically identified the replacement of outside by local money as a feature. Here in NW Arkansas, we’ve got Wal-Mart and Tyson HQ spending money they sucked up out of communities all over the country. I fully understand that in a decentralized economy, with local production for local markets, most of that money would stay in its communities of origin instead of coming here. I didn’t cite other studies that compare the health of local civil society in communities where most economic activity involves locally-owned business, rather than a handful of corporate colonizers. Civil society thrives in the former. The “foreign” effects would be the same as local–substituting local for foreign business.
If you’ve read the entire essay, you should be aware of what I consider the specific advantages of a diversified local economy: in particular, its gearing of supply to demand and comparative security against shocks and dislocations. All “jobs” are not created equal. My ability to convert my labor directly to use value in the household economy, or to trade my labor for that of my neighbors within the community, is far less vulnerable to the business cycle or to the decision of a single large employer to close up shop and move. If that’s a bug rather than a feature in your value system, fine, but I don’t think it’s something you can “prove” from Hazlitt.
In fact, one of the central points I tried to make involved the growing irrelevance of “jobs” as something that one is given by an employer.
And to anticipate, yes, I’m familiar with the concepts of comparative advantage and division of labor. Division of labor is a good like any other, with a point of diminishing returns; and state-subsidized economic centralization promotes it beyond that point.
"I don’t see how you can call it ignorance, since I specifically identified the replacement of outside by local money as a feature."
Agreed. My point is just that McKibben is wrong to say that substituting local production for importing creates NEW economic output, when really it just shifts production from outside to inside the community.
But like you said, local production has other benefits, like better jobs, stronger communities, etc.
[...] to an Alternative Economy“, which essentially summarizes his recently published study “Industrial Policy: New Wine in Old Bottles” for U.S. President-Elect Barack [...]
[...] Industrial Policy: New Wine in Old Bottles: It’s extremely rare to find something that I’m in total agreement with. Extremely rare. This essay is one of the few instances. It’s a moderate, well informed, practical and optimistic view of future economies. Highly recommended reading for every citizen but especially those who have their own little business. [...]
This is nuts :
"The latter industries, created almost entirely through
government-funded R&D during and after WWII, and/or whose existence was possible
only through the action of government in guaranteeing a market for their product,
included civilian jumbo jets, microelectronics, cybernetics, and the use of automated
control systems for machine tools.3"
Carson sounds like a marxist *and* luddite who hardly knows what he's talking about. The idea that an industry as sophisticated as microelectronics has been created by government intervention is a joke and betrays a serious lack of knowledge about technology. The only sort of engineering that the state can manage is 'social' engineering.
@Brunnel — We know these things weren't a result of laissez faire because there was no laissez faire at the time.
Brunnel: According to a heavily documented history by David Noble (Forces of Production), the overwhelming majority of R&D in microelectronics, cybernetics, etc. was funded by the Air Force and carried out in USAAC/USAAF/USAF contractors.
Charles Nathanson claims that the overwhelming majority of electronics industry R&D was funded by the military from WWII through the 1960s.
I suggest you read those sources and get back to me with a point by point explanation of why you reject their historical claims, rather than making a simple statement of religious faith as you have here.
You really don't think the government's funding priorities have an effect on the direction of technological development?
Your casual tossing around of the term "Marxist," btw, indicates that YOU hardly know what you're talking about. A conventional Marxist would argue that any government intervention that promoted economic centralization and capital-intensiveness was objectively "progressive," and that the only thing left was to expropriate the shareholders and have the CEOs appointed by the state when the firm got big and Galbraithian enough. I would think that anyone of at least normal intelligence would be able to discern that this is not my argument, but I'm not holding out much hope for you.
"We know these things weren’t a result of laissez faire because there was no laissez faire at the time."
Non-sequitur. There never has been real laissez-faire. That doesn't mean all industry is an indirect (or direct) creation of the state.
"According to a heavily documented history by David Noble (Forces of Production), the overwhelming majority of R&D in microelectronics, cybernetics, etc. was funded by the Air Force and carried out in USAAC/USAAF/USAF contractors."
Well, I suggest you bother to learn the history of IC producers like Intel, AMD and the like. Or just look around you. PCs, cell phones and other gadgets exist because they are used by the civilian *mass market*, not the military.
"You really don’t think the government’s funding priorities have an effect on the direction of technological development?"
To a point yes. If it wasn't for the destruction gov't causes we would have even more amazing technology.
[...] Industrial Policy: New Wine in Old Bottles: It’s extremely rare to find something that I’m in total agreement with. Extremely rare. This essay is one of the few instances. It’s a moderate, well informed, practical and optimistic view of future economies. Highly recommended reading for every citizen but especially those who have their own little business. [...]