The Limits of Government

We live, sadly, in an age when big government is back, given a lot of help by the supposed imperatives of the climate “emergency,” and the alleged failures of “free market fundamentalism,” a fundamentalism I have yet to see in the wild, but there we are. . . .

So, I was (on the whole) pleasantly surprised to see a note (no, more than a note) of skepticism about this shift to the activist state in an article by Janan Ganesh in the center-left Financial Times.

Ganesh writes:

The west is going through a phase of almost messianic belief in the power of government. America’s protectionist turn against China is the largest example. You needn’t go all the way with the Economist, which regards this commercial estrangement as “phoney”, to see that it is already beset with perverse consequences. Yes, the US is importing less of certain goods directly from China. But the “friends” to which it is turning as alternative suppliers are themselves reliant on China for inputs. The US is not isolating its existential rival. It is cutting in the middle man.

To say that the adoption of a less naive approach toward trading with China is the largest example of a revived belief in the power of government is a stretch. That dubious honor belongs to the West’s climate policy, an exercise in central planning on a gigantic scale. And (surprise, surprise) it will be a disaster for everybody other than the central planners, the rent-seekers who feed off them, and the West’s geopolitical adversaries. But that’s a discussion for another time.

As for China, there is no doubt that the current efforts by the U.S. to better police its trade with that country can be subverted by the “middlemen” that Ganesh refers to. But the reality is that the necessary (and belated) “conscious uncoupling” between the U.S. and China will have to be incremental due to the complexity of the trading relationship between the two that currently exists, and it will inevitably be flawed. That’s, however, no reason not to accelerate this separation, and, in the process, come closer to getting it right. The Biden administration’s latest round of restrictions on tech investment in China was a (small) step forward, even if it did not go nearly far enough. For a well-argued, rather different view so far as the latter is concerned, please check out Jonathan Nicastro’s recent article on Capital Matters. That will be a disagreement for another time.

Ganesh:

The sudden faith in tariffs, subsidies and bureaucratic checks on investments is startling. But it isn’t the only case of Utopian government around.

I wouldn’t regard that faith as “Utopian” or, even, as a faith: It is instead a recognition that the foolish liberal historical determinism (now, there’s a faith) that, in essence, came with the belief that trade would bring us altogether, was nonsense. Throwing sand in the gears of the China trade is crude, but so long as it is recognized that it is only a start, it is rather less “Utopian” than ignoring the dangers into which that trade has taken us.

Ganesh is on more secure ground when he points to some other follies:

Rishi Sunak is the sixth or seventh UK premier in my lifetime to try to “level-up”, or “rebalance”, his London-centric nation. Emmanuel Macron is almost as far down the line of French presidents who have sought to influence west and central Africa from Paris.

As a measure of that project’s success, the counter-insurgency in the Sahel was abandoned last year and Niger, a rare western foothold there, is in chaos. The lesson — that some things are beyond any state — might be clearer now.

Think of what these politicians are taking on…Sunak versus a city whose freakish preponderance within Britain predates the Industrial Revolution, France versus the Sahel’s religiosity and inhospitable topography. What is government decree against such ingrained and impersonal forces?

Indeed.

Ganesh continues:

The state can do spectacular things. Europe cut its reliance on Russian fossil fuels at speed. Governmental leadership, not just biomedical genius, produced the Covid-19 vaccine. But these feats tend to happen under extreme duress. In normal times, the business of government is to make things a bit better, knowing that it will make other things a bit worse. This is because: resources are finite, different goals conflict, advanced countries plucked most of the low-hanging fruit long ago, unintended consequences obtain, and social outcomes are determined as much by deep historical patterns or geographic constraints as by diktat.

I’m not as optimistic as Ganesh appears to be about Europe having successfully managed the consequences of reducing its reliance on Russian fossil fuels. With (perhaps overwrought) talk, in part due to high energy costs, of the deindustrialization of Germany, and with another winter coming, let’s see.

However, there’s a lot to what Ganesh writes in his last paragraph:

The [British] Treasury was always accused of hiring humanities-trained generalists over technical economists. Is that all bad? With some Shakespeare or Conrad, it is easier to see that one’s schemes to better the world have to reckon with the permanence of human nature, among other external forces. It is a public service, not a mental defect, to understand how little we can do against the tempest.

Wise words.