Marco Rubio Is Wrong About Industrial Policy

In an op-ed published this week by The Washington Post, Sen. Marco Rubio (R–Fla.) makes the case for why conservatives ought to support top-down industrial policy set by the federal government—and, inadvertently, also provides a concise illustration of just how incoherent and illogical that idea actually is.

The article's headline—which was likely applied by the Post's editors and not Rubio himself, but nonetheless captures the spirit of the piece—promises to explain why the senator believes in industrial policy "done right." At its heart, Rubio's argument is no more complex than that: Industrial policy is good when he gets to be in charge and bad when someone else is running it.

Certainly, there's no way that could go wrong!

It might be slightly easier to believe that we ought to give Rubio and his friends more control over the economy if the rest of the op-ed wasn't littered with factual errors and worrying gaps in logic. In fact, Rubio doesn't even get through the first paragraph of the piece before making a significant error. "Today," he writes, Congress no longer views industrial policy with the same skepticism that it once did, but "what replaces unfettered free trade remains hotly debated."

Unfettered free trade? That's hardly an accurate description of the current status quo in the United States—a fact that Rubio surely knows, since Florida's sugar and fruit industries are the beneficiaries of some of the most aggressive protectionist policies on the books. Even before former President Donald Trump ramped up the use of tariffs, America had more protectionist policies than other large, developed economies: A 2015 report from Credit Suisse called the United States the world's most protectionist developed nation.

Rubio's inability to describe the current status quo matters. It's a failure of the ideological Turing Test, and it reveals that he misunderstands the economic policies he's trying to shift—or that he is deliberately misinforming readers about them. Either way, this ought to call the rest of his claims into question.

Unfortunately, that's far from the only mistake in the piece. A more blatant factual error occurs when Rubio riffs on some of what he sees as the more successful examples of industrial policy in American history—including NASA, which he credits with inventing baby formula, among other things. That's just wrong. Baby formula was invented in the 1860s, and one of the most popular brands available today dates back to 1925, decades before NASA was founded. (Seriously, did no one at the Post fact-check this?)

Rubio also errs when he claims that America's manufacturing sector "has suffered decades of neglect and unfair competition." In fact, American manufacturing is stronger than ever—even though manufacturing employment has declined in recent decades, largely because of increased automation. The supposed decline of American industry is the lynchpin to pro-industrial policy arguments on both the right and the left, but it is an imagined problem. As the Cato Institute's Colin Grabow put it in a recent article published by the American Institute for Economic Research: "A sector that accounts for a greater share of global output than any country save China, exported nearly $1.6 trillion in 2022, and has over 600,000 job openings is a poor poster child for globalization's alleged ills."

After getting those basic facts wrong, Rubio's op-ed pivots toward logical incoherence. The senator condemns the Biden administration's efforts at implementing industrial policy via the CHIPs Act, which poured subsidies into domestic manufacturing of semiconductors, and the poorly named Inflation Reduction Act, which ramped up incentives for production and purchasing of electric vehicles. Rubio correctly diagnoses why those initiatives seem to have failed, pointing out that "absurd diversity, equity and inclusion requirements and environmental regulations" have undermined the goals of both bills, as has the influence of lobbyists.

But rather than learning a lesson from those failures, the senator encourages conservatives to double down. Rubio would do well to take to heart F.A. Hayek's observation that "it is an illusion when the more conservative interventionists believe that they will be able to confine these government controls to the particular kinds of which they approve."

The concrete steps Rubio says he'd like to see the government take only confirm the problems with this line of thinking. He proposes "tying generous subsidies to performance requirements such as export quotas" and "getting serious about deregulation and permitting reform to create a competitive business environment where industrial policy can actually work."

There's a nugget of a good idea in there—yes, the government should get serious about deregulation and permitting reform.

But hold on. If the government is going to be doling out support to favored companies, isn't that likely to harm rather than promote a competitive business environment? Industrial policy that props up established, politically connected firms will make it more difficult for new competitors to gain a foothold in the market—or might prevent investors and entrepreneurs from even trying, since they know the deck is stacked in advance.

Indeed, protectionism is by definition about protecting companies from competition. Arguing for more protectionism and a more dynamic economy is nonsensical.

Given all the flaws with industrial policy, one might believe that it's a fool's errand to give government officials more power over the economy. But that's a debate that Rubio says we can't even have. "We simply don't have the option of doing nothing," he writes. "Decisions about how we run our economy are always being made—the only question is by whom."

This is a nod to the "everything is industrial policy" argument recently made by Oren Cass, the former Mitt Romney adviser who now runs the American Compass think tank and a prominent advocate for industrial policy among conservatives. In short, Cass believes that everything the government does necessarily involves picking winners and losers, and therefore policy makers should eschew neutrality and actively wield their power to shower favoritism on the right winners.

As Reason's Stephanie Slade has already explained at length, this is a nonsensical claim. Indeed, if everything is industrial policy, then Rubio's attempt to draw a distinction between "unfettered free trade" and his aim to "chart a new course" via industrial policy is meaningless because we've been doing industrial policy all along.

Obviously, there are two competing visions here: one that favors less governmental intrusion into the marketplace and one that calls for the government to take on a more active role in directing sectors of the economy that officials view as important. Trying to wipe away that distinction is nothing more than a rhetorical ploy.

Or, to put it in Rubio's own terms: Yes, the government absolutely has the option of doing nothing—and given its track record when it comes to picking winners and losers, that's exactly what it should do.

The post Marco Rubio Is Wrong About Industrial Policy appeared first on Reason.com.