This assumes A) that the state is better at picking winners than the private sector and B) that competitiveness can be raised simply by throwing money at the problem. I am not saying that the state should never provide subsidies to young industries with potential (although the whole Solyndra debacle clearly illustrates the danger in that), but the key word is temporary.
That depends entirely on your tax system.
That assumes that 100% will remain unemployed. Even allowing for that, how long do you continue to subsidize an uncompetitive business before the cost of subsidies becomes greater than the cost of paying temporary unemployment benefits? How does the state address the underlying cause of the uncompetitiveness?
Modern economics most certainly does consider second order effects, which is why the auto industry was bailed out in the US. The overall losses to the economy from the loss of the auto industry would have been catastrophic but the bailouts were temporary and the industry was required to repay the cost as soon as it was back on its feet. It is not that modern economics prefers a Darwinian approach, it is simply that Darwin is inevitable. Industries that fail to innovate and remain competitive will eventually fail.
In which old industries do the markets not determine success or failure?
Bookmarks