The failures of tariffs and industrial policies in the United States, Japan, and China underscore the broader limitations of anti-market economic strategies. These policies often stem from the belief that governments can outmaneuver markets in allocating resources and driving innovation. Yet, as history repeatedly demonstrates, markets are better suited to these tasks.
Markets excel at aggregating dispersed information, aligning incentives, and fostering competition. When governments intervene through tariffs or industrial policies, they disrupt these mechanisms, leading to inefficiencies and unintended consequences. For instance, while tariffs may provide short-term relief to struggling industries, they ultimately impose costs on consumers and other sectors of the economy, undermining overall prosperity.
The author’s conclusions are spectacularly on-target. I was living in Japan during the real estate crash of the late ‘80s due to all of the government involvement in the economy. Here again, the incentives are totally misaligned between the bureaucrats and the entrepreneurs. One cannot seem to quite make things work in the other’s domain. Bureaucrats work to rules and don’t care for results and entrepreneurs work to make profits through efficiency, so you can see that the results will be different. Japan has still lost its economic dynamism and cannot find it. China looks to be having economic troubles and the US is entering dangerous waters, like the 1930s, due to the tariffs and noise about tariffs. Good luck to us all. If you think none of this is true, please change my mind!