Politicized Resource Allocation Yields Lackluster U.S., Michigan Recoveries

In today's lead editorial, The Wall Street Journal attributes America's lackluster economic recovery in part to the politically orchestrated misallocation of scarce resources, including subsidies for alternative energy. Says The Journal, “. . . if wind turbines are a good business, they will find a market on their own. If wind power turns out to be an uncompetitive bust, then the government will have misallocated hundreds of billions more dollars that could have found more productive uses.”

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Government misallocation and central planning in the guise of “industrial policy” have also been significant contributors to Michigan’s lost decade and, until we were joined by the rest of the country in 2008, our chronic “single state recession.”

In scores of articles and studies, Mackinac Center analysts have chronicled this misallocation through political development programs misguidedly labeled “economic development.” The examples include:

  • Hundreds of millions of taxpayer dollars spent to subsidize a handful of electric car battery assembly plants employing at most a few hundred workers each.
  • An ongoing film subsidy program projected to suck $130 million from the state budget this year.
  • Massive “renewable energy” subsidies and mandates, potentially including wind turbines lining Great Lakes shorelines, that have already cost Michigan jobs by making electricity cost more here than in competing states.
  • A huge expansion in the size and scope of a state corporate welfare favor factory that repeated studies have shown either fails to create net new jobs or even costs jobs.
  • Other examples too numerous to list in a brief blog post.

As The Wall Street Journal put it, these “(g)overnment ‘investments’ ... are by definition made for political purposes, rather than for their highest potential return. They are allocated by politics rather than by prices."