Industrial policy has been a frequent subject on Smith's blog, for those who don't follow it. (He's for it, and thinks that Biden's industrial policy was mostly good - it's worth following the links in this post.) This post focuses on defense-related geopolitical industrial policy goals and pros and cons of anticipated changes under the incoming Trump administration and Chinese responses. Particularly, he highlights two major things China can do: Restrict exports of raw materials (recently announced) and use their own industrial policy to hamper the West's peacetime industrial policy (de facto policy of the last 30 years). These are not extraordinary insights, but it's a good primer on the current state of affairs and policies to pay attention to in the near-future.
Noah Smith: Manufacturing is a war now
noahpinion.blog
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I like the end of your post the most.
Noah Smith can admire the problem all he wants, but his solutions have a big problem; they're Government operated or implemented solutions.
Philosophical questions about the role of the Government aside, pretty much all the literature I can find clearly demonstrates that state capacity and ability are utter dogshit, and have been trending that way since the 1970s. It's largely a regulation problem, but, more deeply, a matter of difficulty in managing complexity. Market systems manage complexity much better because there is "skin the game" and cost-benefit is more well informed. Market participants crash towards an equilibrium in a way that a central planning authority simply cannot.
I am not only suspicious, but highly doubtful that any sort of Federal level industrial policy will bear fruit. The CHIPS act is a great case in point.
So let's tag in free markets and de-regulate, right? Well, first, absolutely yes! But there's also the unfortunate reality that one of the byproducts of this is unpopular at the moment; a very small number of people will get incredibly rich.
We can set Wall Street and the Tech Bros loose on re-building American industrial capability and they will do it faster, better, and cheaper than the government. Jobs with good salaries will be created (though I am suspicious enough of those jobs will be created). And something like 100 new billionaries could be minted, with even more money being chopped up between VC/PE investors, banks, etc. I think this creates a cultural problem where people will want the good jobs, but hate the New Elons that emerge from the new companies.
This is the cultural tradeoff for economic growth; for the median to do better (much better) you have to allow for the fact that a tiny minority will do astronomically better.
Right now, there are major parts of both American political parties that look at wealth as inherently unearned at the best or morally wrong at the worst. If that attitude doesnt' change, a return to growth ethos is inherently limited.
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