Ugh, no. I always went LF, on principle alone.
I did that too, at first, but real life principles and in game mechanics just don’t jive all that well unfortunately.
Generally speaking IRL, LF/market economies tend to be far more efficient and rationalized compared to centrally planned economies since the decision making is dispersed among people at lower levels who have a better understanding of local conditions than some bureaucrat in a distant capital. But in Vicky 2, this means the “AI capitalists” are the ones making these decisions, and frankly they are bad at it.
They often elect to build factories for goods that are in low demand, that don’t benefit from resources present in a given state, or factories that require resource inputs you have absolutely zero access to.
Except there were such restrictions that governments often faced. Look at the US in this time period, when the federal government was often constrained in directly engaging in such projects.
Arguments about the historicity of governments directly deciding what sort of industries should be build are imo, secondary to the fact that the AI capitalists struggled to make the proper decisions real life capitalists would have.
The encourage certain industry types national focuses help I guess, but I never had great luck with those. As the government of a major military power, it shouldn’t be that difficult to encourage the development of domestic armaments industries so that my army/navy dosent languish for artillery, small arms, or ammunition the moment a war breaks out elsewhere in the world and exports of said goods dries up.