In The Conservative Futurist: How To Create the Sci-Fi World We Were Promised, I discuss how regulation since the 1970s has notably slowed US productivity growth, though it’s not the sole factor. Citing economists John Dawson and John Seater, I highlight that post-World War II federal regulations may have significantly hindered American economic growth. Without these regulations, they argue, annual growth could’ve been more like five percent, instead of just over three percent. This suggests a far smaller economy than otherwise—although the economists caution against ignoring the benefits of some rules— along with less of the good stuff that goes along with economic growth. Ryan Murphy and Colin O’Reilly further critique “anti-growth safetyism” in America’s regulatory approach, which has stifled innovation in key sectors like nuclear power and supersonic transport. They suggest deregulation could enhance economic growth by an extra percentage point annually, underscoring the economic drawbacks of overly cautious regulation.
Given the scholarly evidence in favor of this thesis, it’s interesting to see the phenomenon play out in real time in the world around us. An enlightening new piece in The Economist contrasts semiconductor contract manufacturer TSMC’s expansion efforts in Japan and the United States, highlighting the challenges and successes in both regions. TSMC is opening its first fabrication plant on Kyushu Island on February 24th, with plans for a second. This contrasts with its expansion in America, where it delayed production start dates for two Arizona plants, pushing the first from 2024 to 2025 and the second from 2026 to possibly 2027 or 2028. The second plant, intended for advanced three-nanometer chips, may now focus on less-advanced production.
The difference in outcomes so far can be attributed, in part, to labor relations, local partnerships, and government subsidies. In Japan, union activism is rare, and TSMC has benefited from investments and cooperation from major Japanese companies like Denso, Sony, and Toyota, which are also the plants’ primary customers. In contrast, TSMC has navigated the US expansion alone, facing labor disputes—TSMC has now promised to hire and train locals— and slow government subsidy disbursements under the 2022 CHIPS and Science Act.
Then there’s this:
The delays could drag on. In October Gina Raimondo, America’s Commerce Secretary, warned that projects like TSMC’s could be held up for years by the environmental reviews required for federal funding unless they are exempted on national-security grounds. In a survey of around 200 semiconductor firms by the Bureau for Industry and Security, an American government agency, 64% named environmental rules as among their biggest regulatory problems, compared with 21% who included export controls and 18% who cited local permit and zoning laws.
TSMC’s experience operating here in America should, at minimum, temper US policymaker enthusiasm for industrial policy. Spending taxpayer money is only part of the equation. That dough then needs to make things actually happen within a political economy that in too many places is built to hinder rather than encourage progress. Reality again wins over ideology.
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