President Obama is not a closet socialist or cunningly patient radical. What he is—or what he fancies himself—is a neo-Whig. The Henry Clay of the 21st century. He never tires of pointing out that the federal government in the 19th century midwifed the transcontinental railroad and land-grant colleges. In the 20th century, it developed a proto-internet and the global positioning system. In the 21st century? Obama dreams of a green-energy revolution. High-speed rail. A smart electrical grid. And more.
Like TAC contributing editor James Pinkerton, I’m partial to the American System way of thinking. I find it frustrating when conservatives don’t admit that government goods and services can make economic as well as moral sense. I’m excited, for example, by the administration’s plan to undertake the brain science equivalent of the Human Genome Project. But this is the kind of basic research that even private sector R&D executives concede is necessary to make new treatments possible.
Micro-level government investment is often a trickier proposition. As New Jersey Chris Christie is finding out the hard way: Less than a year after opening, the Revel casino in Atlantic City is preparing for bankruptcy. The misbegotten casino and hotel complex was the beneficiary of $261 million in tax incentives—a large chunk of more than $1.5 billion in subsidies the Christie administration has showered on private companies in the hopes of making a dent in the state’s high unemployment rate.
“Bruce, if he is true to his lyrics, would love the fact that the state used taxpayer funds to invest in this place to create jobs for men and women,” Christie said (sounding not at all unlike Obama) in a public appeal to singer Bruce Springsteen to perform at the casino’s grand opening. “Those are middle-class, working people.”
Josh Barro saw where Christie’s state-level industrial policy was headed: “The private markets knew that Revel was a bad investment, which is why the project stalled,” he wrote last August. “Unfortunately, New Jersey lawmakers couldn’t bring themselves to admit as much, and they ended up throwing taxpayers’ good money after bad.”
The spectacle of the Revel, and New Jersey’s fiscal entanglement with it, is a cautionary tale of the pitfalls of short-term, state-sponsored enterprise. Could the Revel prove to be a sort of Solyndra of the 2016 presidential campaign? I doubt it. The open secret is that other Republican governors—Bobby Jindal, Rick Perry, Scott Walker—have done much the same thing. (Ohio’s John Kasich, to his credit, has begun to try to wean the private sector off its tax-credit milk.)
Call it what you will: Cronyism. State capitalism. Public-private partnership. In the case of the Revel, it’s a “French kiss” Chris Christie probably wishes he didn’t plant.
William Dalton 
grumpy realist 
Dan Phillips 
Paul Emmons 
cely 
cka2nd 
Good post, but there is, on the whole (and I really mean that as a general statement) a difference between the way left-ish governments and more ‘conservative’ governments approach private-public partnerships. It is because they start from different premises – as you note – and measure success in different ways.
For a left-ish policy-maker, “industrial policy” is not code for a socialist communit fascist Nazi Kenyan anti-colonial take over and destruction of the Free Market Capitalist System That Nourishes Our Liberties. It is, rather, a simple recognition of the fact since at least he Emperor Claudius, the State can and does shape industrial development, sometimes for the better, sometimes for the worse. As the German economist Friedrich List observed, England did not get its pre-eminence in the wool trade and the merchant marine out of this air: by the time Adam Smith was writing about comparative advantage, England had invested, in laws and trade measures over three hundred years, in both industries. A simple thing like patent protection – a “government” policy – can make the difference between innovation and stagnation. As against this background, in general (there are exceptions) left-ish investment in the private sector represents a more outward, future-oriented approach. Green energy is the best example.
Conservative – or self-described conservative – policy-makers reject talk of industrial policy. But, as you rightly note, it is not because they reject helping industry. Even when the impulse is right, however, (job creation, rather than mere transfer of wealth to corporate interests), because the starting point is a sort of psychological defeatism (“what’s the use, we can’t actually change industrial development patterns by government measures”), the benefits of the state end up being spent on shorter-term projects, or on local favourites. Because it is haphazard, it will not, as a rule, yield long-term benefits. Because it relies on transfer of benefits rather than state direction, it will not always benefit the local population. With the added disadvantage that this approach is no better at predicting success than the left-ish one.