People take it as an assumption that cronyism will always happen if the government invests too strongly/consistently in a certain thing. But cronyism is a policy and structural failure, it's usually because the incentives for the different parties involved encourage it to happen. Institutions can be designed carefully if policymakers actually want to do it.

USPS is a great example of an organization that's managed to largely avoid this. Whenever you mention that people crawl out of the woodwork to complain about the 7 different times they lost their package, but their logistics at scale is still unmatched by the private sector, while also not completely negating the value of private sector alternatives (which so often is argued would happen if the government actively started doing anything new).

>People take it as an assumption that cronyism will always happen if the government invests too strongly/consistently in a certain thing.

No, it's the opposite. It's a conclusion taken from empirical evidence looking at success rates in the real world. As the US has engaged on its most recent bout of industrial policy, industrial activity has declined, not gone up. Again, this is expected. If you through protectionism make chips and steel in the US inefficiently, everyone in the US using those products as inputs suffers.

There's some limited cases like developing countries engaging in catch up growth , but there's virtually no evidence for effectiveness of these policies in cutting edge technologies, which isn't surprising because they by definition tend to rely on supply chains and knowledge sourced from all across the globe, and to this protectionism is particularly disruptive. And even in developing nations most of the time practices like ISI (import substitution industrialization) fail, it's devastated Latin America in the 1950s to 1980s.

I don't know what USPS proves in this case because it's sustained by a government monopoly. Obviously you could if you wanted privatize mail delivery.

It is established economic theory not just some opinion . Constraints in form of regulations, subsidies, tariffs by government intervention will produce inefficiencies.

This is the core economic philosophy behind both the modern centre right[2] i.e. neoliberal democrats (80s-today) and the right wing republican conservatives (pre MAGA -2016).[1]

Even communists would agree this is correct, it is understood in different levels since Adam Smith invisible hand, from far left to centre left just posit that different polices that benefit the people not the economy are worth the cost .

That is actually true for all other groups except anarchists and libertarians all agree government intervention is needed in some form, they just disagree on how .

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Postal services anywhere in the world are inefficient by design. They are governed by universal service obligation principles not efficiency same with telecom providers and other utilities.

The question then becomes how much inefficiency is acceptable given the objectives . There are no right answers, you could have competing private couriers who dump unprofitable low density routes to USPS while serving profitable ones themselves (UPS, fedEX, Amazon ) or you could have gigantic postal service which is sole delivery provider socialist style, there are going to be some problems either way.

It is just matter of preference which set of trade offs we are okay with .

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[1] Post MAGA it is a populist party economically there is no fixed ideology to be characterized

[2] the centre right label is economic and technical to contrast say the socialist left party of FDR/New Deal 1930-70s, not meant to offend.