As we anticipate the selection of presidential candidates by the two major parties, an unexpected revelation emerges. It used to be Republicans who said they were for small government and market solutions, while Democrats deemed an expanding government should provide desired results. 

Regardless of their eventual nominee, Democrats will likely stick to a top-down system, using industrial policy, taxes, rules, and transfer payments to shape outcomes. The cost is considered incidental under their economic framework, Modern Monetary Theory (MMT). In simple terms, you borrow what you want. This approach is not unique to the Democrats. Trump’s Republican party appears to be following a similar path, leading to a surprising convergence in economic policies that makes the two parties more alike than different.

It’s intriguing to note the significant shift in the Republican party’s historical stance as the advocate for small government. Under Trump’s leadership, the party has surprisingly adopted a similar approach to the Democrats, favoring a larger government and increased intervention. This shift is evident in President Trump’s tenure, which saw record Debt, an unprecedented shutdown of the economy during COVID-19, and a lack of effort to curtail government rules at all levels. The party’s reluctance to reform entitlements, a stance it shares with the Democrats, almost guarantees either higher taxes or massive borrowing or both. Imposing the 20% social security dictated by lack of funds is a political non-starter.

The concept of Industrial Policy is a crucial pillar of both parties’ economic strategies. Subsidizing winners they choose is an essential feature of Biden’s legislation. Trump’s winners, on the other hand, are favored by tariffs. Interestingly, Biden has maintained most of the Trump tariffs, and Trump Republicans haven’t shied away from subsidies like the Chips Bill. This shared approach to economic policy further underscores Trump and Biden’s nostalgia for the 1950s and 60s, when supposedly good-paying union jobs were abundant and the middle class was thriving.

Of course, this was a unique time when so much of the world was recovering from World War II. Companies and unions could pass on high costs and mediocre products with little competition. Even this era could have been better for the many who paid for these goods. In any case, it ended in the 70s with inflation and recession. Do we want to repeat it? 

The belief that we need a tariff wall and subsidies to revive manufacturing is at odds with the reality. The U.S. is already a manufacturing powerhouse, second only to China in production. This fact should instill a sense of reassurance that our manufacturing sector is robust and does not require drastic measures to sustain it. Japan, Germany, and South Korea combined don’t equal our output. The fact we don’t need as many people to produce more is a good thing. 

David B. McGarry, in an article for the American Institute of Economic Research, tells us how favorable this situation is, “With respect to worker productivity, American manufacturing ranks first globally, boasting $141,000 value-added per worker. Second-place South Korea falls short of $100,000 per worker, and China (languishing in ninth place) manages only $18,783.12 per worker. ” We succeed by focusing on high-value products and farming out the less lucrative.

How modern societies organize determines whether they advance or fall behind. In the “More” series, I showed how the breakdown of top-down economies gave way to the bottom-up market-based societies that enjoyed ever-expanding wealth for everybody. Isn’t it better to trade with like-minded nations rather than attempt to make everything here? Where will we get the workers for those assembly lines at nearly full employment? Increase immigration? Yet both our significant parties seem hellbent on returning to some fairytale past.

We are witnessing industrial Policy failure in real time. Even with tariff protections, subsidies, and favorable rules, the government mandates to transition to windmills, solar panels, and electric vehicles (E.V.s)are floundering on the rocks of reality.

Windmills are destroying wildlife and communities, solar panel companies are near bankruptcy, and EVS are piling up on car lots. Is this how we want to spend trillions of our grandchildren’s money? 

This result happens when leaders rely on “the best and the brightest” elites rather than the vast number of participants engaging in markets to render verdicts on what works and what doesn’t. Remember the curse of cronyism in top-down societies that distort and drain resources.

The markets will signal whether Nuclear, fission or fusion, Hydrogen, or something else will power the future, but it must be practical and cost-effective. The billion or so people without electricity, like the rest of us, need something they can afford.

What is at stake is whether the U.S. will continue to rely on the capitalistic markets that have built a “Super Abundance” or revert to the top-down caste societies of the past. Yet, both major parties feature Government direction. Where is the choice with proven success? We pay more attention to the candidate’s personalities while overlooking their philosophy of organizing society. Reagan was a classical liberal favoring capitalism and deference to markets, while Wilson was a progressive. Reagan had great success, while Wilson failed.