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Originally Posted by PaulS
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An interesting article. I particularly like the last sentence in which it is admitted that government does pick winners. Also the previous mention that market forces are more powerful than (government)policy.
The article tries to connect successful progress to government tax and "investment" policy. It seems very persuasive, except that the connection is not expanded to include what were the causes, or connections, which made it seem necessary for government to intervene. Inside the small bubble of an immediate "problem" (x) and a possible quick fix, especially a government fix (g), one can be trapped in the perception that, indeed, fix "g" should solve problem "x." what is not seen or discussed is how similar fix "g" solutions helped create problem "x."
When government policies intervene in market forces causing the cost of production to rise above a competitive level, and, therefor, it becomes more economical to produce in other countries, it will then require government "investment" (mucho government bucks) to make up the difference in order to restore production here. An unnecessary inflationary distortion of the market created by government intrusion. Which also causes a rise in consumer costs either in higher prices or in higher taxes.
So then, government, in order to stimulate production, picks a winner. But that distorts the evolution of possible competing producers, especially those who would replace the "winning" product with something different. So, guess what. When an idea surfaces in the market place which would be better than what current "winners" are producing, the cost for bringing new technology to production has been so inflated by government investment and regulation that the government must now pick a new winner and "invest" big bucks again.
And, so, therefor, all costs--production, research, capitalization--are inflated, usually beyond internationally competitive costs. And government becomes even more pervasively involved in the economy. To the point where it seems that the economy cannot grow, or even survive, without the large hand of government assisting or even driving it.
When the automobile started to become feasible as a mass market commodity, it was done so without government "investment." Actually, the federal government at the time had not yet acquired the power to intervene in the market that it has now. If it had, it could have picked winners then--who would it have chosen? Would it have tried to bolster the horse and buggy as more eco-friendly. Or would it have invested in steam or electric power rather than petroleum? We might have had electric cars being mass produced long ago if it had. Interesting. However, the federal government then was more into choosing itself as the winner. So it constantly increased its power, and did so by waging an invested war against capital entrepreneurs under the pretext of helping the poor and the middle class. The government viewed its command and control of the economy as its primary "investment" in the marketplace.
So the economic war between private enterprise and government escalated, with the resulting inflation of costs, to the point where we are today. Entrepreneurship, without government assistance of some kind, either direct grants or tax breaks or preferential regulation, is still possible, but far less probable. The market is far less dynamic, evolutionary, for that, and so moves more slowly in more narrow dimensions and at greater costs.
So the article can say “If there is one key lesson from the shale revolution, it is that public investments in technology innovation can bring a huge benefit for both the economy and the environment,” but it doesn't say why it is so necessary to have such public investments. It doesn't say that before the federal government got so involved in "investing" in the private market, the market had already been investing in itself at far lower costs. And that market grew and evolved in unimaginable ways. And it created higher standards of living--even throughout the battle between private and public investment and production . . . until recent years.
There is a reverse relationship now developing wherein as government control and regulation grows toward some tipping point of private domain being converted to public domain, economic stagnation for so-called "middle" classes is more prevalent, even to the point where the middle class is said to be disappearing. And a point is increasingly being reached where government "investment" is not only necessary, but the sole driving force of economy. The point will eventually be tipped into the complete socialization of the economy.
This, of course, will reduce the "class structure" to "the people," the government, and the government cronies. The so-called fight for the middle class is really the fight against it. The middle class has traditionally been the class which fought government. The poor relied on government, the rich were in bed with the government, the middle class was the working and consuming class which the other classes depended on for a revenue base. By making the government the revenue base, the middle class is no longer needed. Population can be controlled by contraception and dependence on government largesse doled out in government prescribed quantity and quality. And the cronies will be left on an isolated float of shrinking ice.
This is not necessarily by accident. Many would say it is a good and necessary thing.