3.3.7 Politically Targeted Economic Interventions
Politically targeted economic interventions, to help an industry or region, impose costs elsewhere and damage the economy overall.
Most political control of the economy is directed towards the whole of the domain being governed, but sometimes governments target a particular area for different treatment if it has a high political profile. The politicians are trying to achieve a specific political effect on the target area, with varying degrees of effectiveness, but all such interventions have adverse economic consequences elsewhere and unintended side-effects.
Four kinds of intervention are considered here:
● Governments can intervene to support a specific industry or region (126.96.36.199); this might be effective for a while, but it doesn’t address the underlying reason why the help was needed and it diverts resources from elsewhere in the economy.
● They can apply sanctions or tariffs, or give economic aid as inducements, to other countries (188.8.131.52). Such actions vary in their political effectiveness, but they all place a burden on the economy of the country that uses them.
● They can make politically targeted economic interventions to attract political donations from specific individuals or organisations (184.108.40.206). The donors are seeking to benefit by persuading the politicians to distort economic policy, which is undemocratic and is often suboptimal for the economy as a whole.
● A government can strike ad hoc deals with companies, using its power as a bully to get its way (220.127.116.11). This undermines the framework of rules that govern an economy, ultimately increasing the cost of doing business.