(Adapted from a Tweetthread.)
Just delving into @SJRickard new book “Spending to Win.” Stephanie is interested in the interaction between economic geography and political systems, and their joint impact on patterns of industry subsidization. Thread. (amazon.com/Spending-Win-P…)
She looks at subsidies because other tools — e.g. tariffs — have been more comprehensively restricted by international trade agreements. But she argues the point is a more general one about government supports.
She finds a wide array of national practices. Austria subsidized the purchase of microwaves for restaurants across the country! Similar to FDR’s TVA, which directly and indirectly incentivized appliance purchases, as I recount here:
The 2nd episode was the panoply of early New Deal programs, which democratized (for whites) access. FHA and TVA promoted appliance ownership as a human right and key to dignity. The mechanisms were primarily through the feds nationalizing (by insuring) private lending.
There was also private public partnerships, whereby approved TVA appliance salesmen would go door to door in the South, selling standardized models that would conform to federal electrical code standards. (Before, electrical wiring was often unsafe.)
As to geography, countries and regions vary a lot in the level of spatial concentration of their industrial activity. For instance, the average U.S. industry is 29 percent more geographically concentrated than the OECD average. She argues that plurality systems like the US and Canada are more likely than proportional representation systems to have specific rather than general subsidy schemes. The argument focuses on the difference between “surplus votes” and “effective votes.” In the US, it isn’t rational for parties to focus on boosting turnout in safe districts, whereas in parliamentary/nationwide district systems, this would add towards the national seat share. Because government resources are scarce, in the US, it thus makes sense for politicians to campaign on directing funds towards the most competitive districts. In parliamentary systems, more geographically diffuse industries receive subsidies. I had a quick look at the OECD stats for the US, which confirm Stephanie’s story. Agriculture is an extreme outlier in its degree of concentration
And sure enough, ag gets a lot of subsidies (not to mention other supports) and long has. (amazon.com/State-Party-Am…) The book has loads of specific examples. Stephanie writes: “US sugar cane farmers receive an extra $369 million dollars a year from government-funded subsidies and nearly 60 percent of this money goes to just 17 growers in a single state: Florida.”
Fanjul brothers, anyone?
It’s not just ag. U.S. industry as a whole is more geographically concentrated than the norm. That, coupled with the electoral system, means that the U.S. is more likely to target industrial policy towards geographically concentrated industries. The reverse is true for PR.
Because international rule restraints tend to target particularistic policies, one implication of Rickard’s argument is that countries with plurality systems will be more likely to violate international agreements. Tidily, thus, Stephanie predicted the rise of Trump. Prediction = blame? I’ll leave it to you to decide. ;)