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 saw this blog article too and I think it's a convincing case why we need tariffs with China.
Noah even undersells the benefits of tariffs when he says something like "with peaceful partners (i.e. not China) the best economic policy is free trade plus redistribution to the losers of free trade". While that may be true when it comes to maximizing GDP, it is not true on a more holistic level.
People who live in a burned out city in the Midwest probably don't reflect warmly on the destruction of their community just because they now qualify for food stamps, Section 8 housing, and other forms of welfare. They would much rather have a good paying job and a thriving hometown.
But going back to Noah's argument, he's spot on. There has been a lot of cope in the Western world about the rise of China.
Cope exhibit 1) Look at Germany, they are still making stuff!
Cope exhibit 2) The U.S. still has a massive manufacturing sector!
Cope exhibit 3) The U.S. and Europe will continue to make high value products while China takes only lower end items
These arguments have all been brutally shattered in the last decade, as China continues to take more and more of the pie, and is moving into higher end items. Germany and Japan in particular are being hollowed out by Chinese competition. China will soon produce as much as the rest of the world combined.
Moving into industrial policy, Noah accurately points out that we need something like it. And he rightfully acknowledges that government spending isn't enough. California has spent $100 billion on high speed rail, has created 13,000 jobs, and has almost nothing to show for it. But he seems to be too sanguine on the Chip Act, which is itself a massive boondoggle, and not a great success for Biden as he frames it.
Tariffs and the free market will solve a lack of domestic manufacturing in a way that bloated government programs cannot.
I'd like to think so, but I'm also pretty bullish on the ability of bloated government regulations to get in the way. We really could just strangle ourselves here.
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