A business that has sustained a sustainable business has to cover its costs with enough extra. If, however, the profits are not large enough to cover the costs, I can't make payroll after a while or I can't pay for my raw inputs and I go out of business. And so workers who work in some industry may find themselves out of a job through no fault of their own because the business they were employed by started making losses. We call it trade adjustment assistance unemployment. That's actually part of an industrial policy also in the sense that people who lose their jobs get assistance from the government precisely because it wasn't really their fault. But it reduces the cost of participating in a capitalist system
Economist and political scientist Michael Munger of Duke University talks about industrial policy with EconTalk host Russ Roberts. Munger argues that in a democracy, the default outcome for industrial policy is crony capitalism--attempts to improve on that outcome either by appointing experts or eliminating cronyism are going to fail for political reasons. The conversation concludes with a discussion of the reliability of Munger's claim and what options are left for dissatisfied reformers.