Richard McKenzie, a member of the economics department of Clemson University, here assesses the probable impact of new government regulation of the economy under what politicians like to call “National Industrial Policy” (NIP). He sets forth the major legislative policy proposals promoted under this rubric, and he examines their probable effect upon international trade, capital taxation, and central planning. Citing hard empirical data, McKenzie explodes the hoax of deindustrialization, the mythology of the displaced worker, and the ideology of employee “rights.” Though advocated as a fresh new idea, McKenzie finds that the basic NIP doctrines are “at least as old as the eighteenth century’s mercantilism and as familiar as this century’s disastrous experiments with central planning, the corporate state, and five-year plans.” He warns that more government involvement in the economy would mean more politically arbitrary decisions made in Washington, more wasted resources, and ultimately a poorer society.

The noble concerns voiced by NIP champions do nothing to redeem their implausible arguments with Professor McKenzie, who finds them replete with internal contradictions that “draw into question the movement’s intellectual foundation.” Further, NIP’s backers either fail to realize or choose to ignore the fact that government control of workers, businessmen, and consumers “ultimately translates into the control of people, whether the control is instituted by democratic or by authoritarian means.”

The author maintains that centralized planning “is bound to fail to produce what people want because it cannot obtain the information needed to make those calculations without the market it seeks to supplant.” Further, plant-closing laws and trade restrictions would not protect American jobs, nor would National Industrial Policy make U.S. companies more competitive internationally. McKenzie illustrates how protectionism invariably becomes corporate welfare by pointing out how auto executives received enormous bonuses (ranging into the millions of dollars) in 1984 at a time when the Federal government was forcing the Japanese to withhold, “voluntarily,” its cars from American markets.

The overriding objective of McKenzie’s analysis is to redirect policy discussion toward ways to free the market from political control and interference. In his “Alternative Vision of Our Economic Future,” McKenzie makes a strong case against government-managed capitalism. Too few Americans understand that many of our current economic problems have been caused by the breakdown of constitutional constraints on government. If our national economic future is to be prosperous and free, we must heed McKenzie’s warning as we retrace the steps we have already taken toward managed markets and the interventionist state.


[Competing Visions: The Political Conflict Over America’s Economic Future, by Richard McKenzie (Washington, DC: CATC Institute) $8.95]