December 3, 2009

Conservatives for Industrial Policy

John Quiggin has a good commentary on Australia's embattled Liberal Party. They have gone all out in opposition to Prime Minister Kevin Rudd's proposed cap-and-trade system -- even to the point of ousting their leader, Malcolm Turnbull, for his accommodationist stance -- but also seem to recognize that denialism on climate change will make them even more unpopular than they are already. Thus, they seem to be embracing policies that, whatever their merits, have little to do with free market ideology:
Rather, [Liberal MP Wilson Tuckey] suggests 'To respond to these problems the Government should take an up front role investing in and developing Australia's only significant and predictable renewable energy resource which is to be found in the tides of the Kimberley.'

Tuckey also proposes extensive public investment in High Voltage Direct Current transmission lines, noting that 'China will not have an ETS. It will invest in Hydro, Nuclear and other renewable energy. Its Government is already building an extensive HVDC network.'


Having denounced the government's emissions trading scheme as a massive new tax, [Tony Abbott, the new Liberal leader] can scarcely embrace the main alternative, a carbon tax. On the other hand, he has committed himself to achieving the emissions reductions promised by Labor.

In these circumstances, the Chinese approach endorsed by Wilson Tuckey is probably the only feasible option. It is, perhaps, surprising that, having elected its most conservative leader ever, the Liberal Party may have to turn to the Communist Party of China for policy guidance. But politics makes strange bedfellows.
The dynamic reminds me of American conservatives who denounce cap-and-trade as being overly intrusive, but think nothing of calling for massive government investment in clean energy, with the money coming from... well, it's never specified, but it's presumably not as awful as taxing pollution, which any economist will tell you is the most cost-effective and least intrusive (in terms of regulations) way to reduce emissions. Some Democrats, too, seem to have adopted this attitude.

In any case, I think a green industrial policy isn't such a bad idea -- not my first choice, but acceptable -- but it's odd to see right-leaning folks embrace this type of government intervention as the more market-friendly alternative.

UPDATE: TPM has a good primer for Americans on the Australian climate change debate.

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