In Marvel's X-Men comic series, young mutants with nascent powers often find themselves in the Xavier Institute, a special school where these talented youngsters can hone their skills and learn to control their unique powers, becoming fully and truly super-human in the process.
Based on the seemingly endless support for state industrial policy, I can only conclude that proponents of such interventions know of a similar school for aspiring bureaucrats and politicians. How else to explain their belief in the preternatural abilities of policymakers to foresee the future?
In today's Korea Times, former prime minister Han Seung-soo - who now heads the Global Green Growth Institute in Seoul - implies that he is a graduate of this Mutant School for Prescient Policymakers when he insists that the Korean government must lead the nation's economy into its "green" future:
Green growth cannot be achieved if the national and global economy is left to the free market. So the government needs to play a role in providing economic incentives and disincentives, subsidies, regulations and other macroeconomic planning tools, especially in developing countries.
While Han does not explicitly invoke the term, the Korean government's "green growth" policies can only be seen as the latest trend in industrial policy. The notion of industrial policy has different meanings to different people, but in essence, it refers to any type of selective intervention or state policy that attempts to alter the structure of production toward sectors that are expected to yield better prospects for economic growth than would occur in the unmolested market.
Trouble is, there is no Mutant School for Prescient Policymakers, nor do bureaucrats undergo a magical intellectual transformation upon entering office. In placing our faith in state industrial policies, then, we are assuming that these bureaucrats have superior knowledge of the future compared to investors in private capital markets. This being an unrealistic assumption, we can only hope that policymakers will get lucky in their bets and not simply turn their powers into a form of cronyism. Alas, history is not a source of optimism on this front.
If Han is as certain as he seems about the spectacular prospects for green growth, he would do well to leave his current post, set up his own investment fund, and start raking in the profits from the green growth he predicts. As it stands, however, he seems only willing to risk other people's money on such ventures. This alone should be enough to discredit his claims about the need for such government puppeteering of the economy.
Further Reading: "On the Myths of Industrial Policy"