Rather than advocate for a specific conclusion, I'd like to propose a way of looking at this problem:

What matters is a society's capacity to produce. Not whether something is "fair", not whether an industry deserves this or that. Not whether some cherished economic theory is being honored.

Specifically, what matters is the creation and support of productive ecosystems, which are networks of credit, knowledge acquisition and transfer, skilled workers, skilled product managers, and supplier/vendor/retailer relationships.

A key part of these productive ecosystems is jobs. If you want to learn how to build bridges, you do not set up schools to teach engineering, you fund the building of bridges, and people will figure out how to build them on the job, and the demand for civil engineers will pull students to study this and then universities will open up programs to cater to that demand. The jobs come first. Only 5% of China's population attends university, yet they are able to build all the infrastructure they need because they have a laser like attention to creating jobs. They will even build bridges for America, as long as Chinese workers get to make them. They will build a port for anyone who wants it, as long as Chinese workers are the ones building the port. The entire Belt and Road initiative is an attempt to import infrastructure jobs by sending workers all over the world to build infrastructure, as long as China gets to build it. They know that half these projects will default and not make any money, but what they get out of that is a skilled workforce, and with a skilled workforce they can do anything. They will let American companies set up factories in China as long as there is a knowledge transfer as part of the deal. That all their state owned enterprises are losing money is not important, the acquisition of skills and the creation of productive ecosystems is what matters. I wonder when the US will realize this.

Western economic thinking is focused on P&L, rule of law, etc, and assumes as an article of faith that in such an environment, productive ecosystems will just arise all on their own, like rats being created from piles of trash. It will just happen, because in the past it just happened. So we are focused on abstract principles, but what the last 30 years has shown us is productive ecosystems being destroyed right and left as production migrates over to Asia.

Apparently these abstract principles don't work in all cases, so people are going to need to abandon their faith in free markets just as much as they need to abandon their concerns over some fat cat getting a subsidy -- unless they want their nation to completely deindustrialize.

However abandoning our faith in what worked before still leaves as muddied the concerns of what will work now, because it's not so clear that Asia's economic model can be successfully copied. Latin America tried to adopt this model in the 1970s -- a policy of import substitution, production subsidies and taxes on consumption. But it didn't work. Similar policies were tried in Africa in the 1980s and they also didn't work. So apparently you need more than just a policy of subsidizing production. What is that X-factor?

One proposal is that the X-Factor is human capital. Whether cultural or genetic or literary, for some reason China has human capital for which these policies work well but in Latin America/Africa they don't. Another proposal is that the X-Factor is exports - it's not enough to just subsidize production you need to subsidize exports as well. A third proposal is that the X-Factor is state organizational capacity (a kind way of saying "less democracy, more centralization"). A fourth is nationalism -- being willing to sacrifice some of your own wealth for the benefit of the nation, rather than say boosting your bonus by outsourcing. And last, there is the notion of practicality. The West is often quite fanatical in holding to beliefs that no longer work, because our wealth has made us take for granted so much that we have the luxury of rigid moral views when other nations are just focused on acquiring skilled jobs.

Whatever that X-factor really is, Latin America and Africa didn't have it but the East Asian nations do, even though all of these tried to subsidize investment.

What I think is worthwhile is to start adopting explicit policies to nurture productive ecosystems rather than insisting that more of whatever we believed before is needed now. Because we are rapidly deindustrializing, the foreign sector already owns 40% of the nation's productive capacity and very little is still produced in the West at all. Clearly the old beliefs need to change.