Ah Yes The Economist Magazine Says You Need A National Industrial Policy
With a picture of Bill Clinton as the lead off speaker.
I could've picked another one of Mr Clinton's ideas, one less likely to raise any hackles, like his call for shortening review periods for government infrastructure projects. I agree with that too. But I'm picking this one because it's difficult. This one is about having a national industrial policy. A lot of readers here are going to reject that idea out of hand. I don't. Judging by the fact that this Rana Foroohar article in Time is on the website's top-ten most-read list, there are a lot of other folks out there who are at least receptive to the idea as well. (Read that article too, by the way. It's really interesting.) And the concentration on Michigan and the car industry here reminds us of the largest recent instance of American industrial policy: the decision to bail out the car industry. That intervention probably saved a couple of million jobs, and left Ford and GM as solid companies. The experience of Germany in the financial crisis and post-crisis recovery (6% unemployment, at the moment) suggests that having an industrial policy and paying companies to keep jobs may be a strategy that has its advantages.
I am tempted to resubscribe, just so I can relive the pleasure of cancelling.
Idiots.
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Dec '10
Re: Ah Yes The Economist Magazine Says You Need A National Industrial Policy
From "Free Trade Doesn't Work" by Ian Fletcher.
"Because of the myriad impacts that government decisions have upon industries, there is no option of "not having" an industrial policy. There is only good and bad industrial policy. In the words of James C. Miller, III, chairman of the Federal Trade Commission under Reagan, "Any discussion of industrial policy should begin with the recognition that we have one. The issue is what type." A nation that refuses to have a conscious industrial policy will still have a de facto industrial policy because the sum of its short-term tactical choices will amount to a long-term strategic choice whether intended or not."
Why does this matter?
Well, reflect on this: In high-value scaled industries, it is impossible for a nation's economy to ever enter a vertical with any sort of comparative advantage as volume leads to lower aggregate inputs per unit. So with completely non-protectionist industrial policy (ideological free trade) a nation like South Korea would never have gotten into, say, the business of making and selling cars. Or microwaves.
Would such a policy have been good for the South Koreans?
May '10
Re: Ah Yes The Economist Magazine Says You Need A National Industrial Policy
Well, Matt Steinglass, who is one of the Atlantic bloggers on that particular blog, is a total lefty, writes for The Nation, etc. He is of the mindset that would love to resurrect the NIRA if they could. Other bloggers at Democracy in America are actually more level-headed. Will Wilkinson, formerly of CATO, would never promote an "industrial policy".
Dec '10
Re: Ah Yes The Economist Magazine Says You Need A National Industrial Policy
From what little I know about Wilkinson-- and it is very little-- he does advocate an industrial policy: The lack of concentrated government support for high-margin industries because market forces will allocate investment most efficiently to create these industries.
Well, let's take a look at three industries in America that were hugely responsible for growth and prosperity throughout their verticals throughout the 70s, 80s, and 90s: Semiconductors, aviation, and pharmaceuticals.
What do all these have in common? They were bearing the fruit of intentional industrial policy in the 50s and 60s. And how do things look now, in the age of Wilkenson's preferred industrial policy? Well, American companies had 90% of the semiconductor market in 1980. Now they have 10%.
This ain't cheap plastic crap from China we're talking about, here...
Mar '11
Re: Ah Yes The Economist Magazine Says You Need A National Industrial Policy
The only industrial policy we require is one that takes the EPA, OSHA, NLRB and their brethren out to the woodshed. We certainly do have an industrial policy, its' goal unfortunately is to insure industry has every incentive in the world to locate their business elsewhere.
Edited on Jun 22, 2011 at 8:35pmAug '10
Re: Ah Yes The Economist Magazine Says You Need A National Industrial Policy
KarlUB:
So with completely non-protectionist industrial policy (ideological free trade) a nation like South Korea would never have gotten into, say, the business of making and selling cars. Or microwaves.
Would such a policy have been good for the South Koreans?
Well, doesn't that rather depend on what the South Koreans would have done otherwise?
Since an economy is much more than cars and microwaves, it isn't obviously true that an economy that makes these things is better off than an economy that doesn't. However, it isn't obviously false either. Rather, a case must be made that takes into account the opportunities foreclosed by making cars and microwaves. If you can do this, then your question makes sense.
Aug '10
Re: Ah Yes The Economist Magazine Says You Need A National Industrial Policy
Yeah, that's basically how I feel.
So yeah, I guess we have an industrial policy whether we like it or not. But why not minimize the damage our government does to domestic industry before we go discouraging trade with foreign industry?
Feb '11
Re: Ah Yes The Economist Magazine Says You Need A National Industrial Policy
The United States does have an industrial policy.
It is to let merchantilist foreign governments bankrupt American businesses who won't move out of the United States.
This is because the US government is run by globalists who are at best embarrassed at the idea of favoring American business, and at worst regard Americans as thieving scum of the Earth who have prospered at the expense of everyone else.
For example, I've often heard about how US tax policy favors investment elsewhere. Yet despite continual complaints about this from just about everyone in public life somehow that never changes.
Hence I conclude that the US tax policy to favor investment elsewhere is a deliberate policy of the political class - both democrat and republican - and the complaints those folks make to the public about it are mere theater intended to fool people.
This line of thought fails to warm my heart towards them, somehow.
Feb '11
Re: Ah Yes The Economist Magazine Says You Need A National Industrial Policy
Midget Faded Rattlesnake
Well, doesn't that rather depend on what the South Koreans would have done otherwise?
Since an economy is much more than cars and microwaves, it isn't obviously true that an economy that makes these things is better off than an economy that doesn't. However, it isn't obviously false either. Rather, a case must be made that takes into account the opportunities foreclosed by making cars and microwaves. If you can do this, then your question makes sense. · Jun 22 at 4:05pm
Instead of assigning people the task of arguing in favor of the policy South Korea in fact successfully adopted why don't you make the case to us that they should have adopted a different policy. Tell us the wonders South Korea would have experienced if they had adopted your favored policy, and how it would have resulted in more success for them.
Dec '10
Re: Ah Yes The Economist Magazine Says You Need A National Industrial Policy
Xennady
Tell us the wonders South Korea would have experienced if they had adopted your favored policy, and how it would have resulted in more success for them. · Jun 22 at 4:48pm
From the Wiki entry on the economy of South Korea regarding their rapid growth that started in the sixties. Right after, mind you, a nation-destroying civil war:
"The most significant factor in rapid industrialization was the adoption of an outward-looking strategy in the early 1960s. This strategy was particularly well suited to that time because of South Korea's poor natural resource endowment, low savings rate, and tiny domestic market. The strategy promoted economic growth through labor-intensive manufactured exports, in which South Korea could develop a competitive advantage. Government initiatives played an important role in this process. The inflow of foreign capital was greatly encouraged to supplement the shortage of domestic savings. These efforts enabled South Korea to achieve rapid growth in exports and subsequent increases in income."
That there is an industrial policy that 1) Defers short-term gain for more significant long-term strategic advantage, and 2) Actually cares about South Korean citizens. Call me a xenophobe, but wish we did that.
Dec '10
Re: Ah Yes The Economist Magazine Says You Need A National Industrial Policy
To put a finer point on it: Letting the market dictate what south Korea should have done in 1965 without a strategic industrial policy would have been leveraging their cheap labor to concentrate on low-margin transactional industries where it would have been easier for them to realize an immediate competitive advantage. That would have gotten them marginally more money in any particular year in the sixties.
Instead they concentrated on developing capacity higher on the value-chain where they did NOT have a Ricardian competitive advantage. Free traders call this stupid and inefficient. Seems to me like it worked out pretty well for them.
Mar '11
Re: Ah Yes The Economist Magazine Says You Need A National Industrial Policy
Indeed it did, but the United States is not in a comparable situation in any way whatsoever. It is misleading to draw such an analogy. Our principal foreign policy objective during the Cold War, sans Carter, was defeat of the Soviet block. To further that goal trade was very much one of our tools in the struggle. Given that, it made sense to construct preferential trade policies for allies such as Germany, Japan, South Korea, etc. such that they would be able to rebuild their economies and be useful allies against the Soviets. There is no comparable benefactor who will do the same for us now. The only hope for improvement in our economy is to remove factors which hinder it, not some vain hope to craft an export lead miracle.
Edited on Jun 22, 2011 at 8:53pmFeb '11
Re: Ah Yes The Economist Magazine Says You Need A National Industrial Policy
Roberto
Our principal foreign policy objective during the Cold War, sans Carter, was defeat of the Soviet block. To further that goal trade was very much one of our tools in the struggle. Given that, it made sense to construct preferential trade policies for allies such as Germany, Japan, South Korea, etc. such that they would be able to rebuild their economies and be useful allies against the Soviets.
True. Interesting admission here. That is, that our trade policies granted our cold war allies preferential treatment as part of that struggle. I take that to mean that you agree with me that US trade policy was deliberately arranged to disadvantage our allies American competitors. In other words, we let Japanese and other allied firms bankrupt American companies as part of a strategy to win the Cold War.
Well, the Cold War is long over. So why do we still retain that same trade policy, and why have we extended it to just about everyone- including communist China?
Roberto
The only hope for improvement in our economy is to remove factors which hinder it
True again. But one the worst factors hindering it is a trade policy inherited from another era.
Dec '10
Re: Ah Yes The Economist Magazine Says You Need A National Industrial Policy
I'm just happy that we established it just might be possible that totally free trade is-- sometimes-- a bad idea for a particular nation.
Now that we've gotten that ideological shibboleth out of the way perhaps we can talk about what trade-- and industrial-- policy would be good for the bulk of the citizens that live in THIS nation.
Dec '10
Re: Ah Yes The Economist Magazine Says You Need A National Industrial Policy
Oh, and I couldn't agree more that our regulatory regime is totally part of the problem. I just don't think it's all of the problem. I suggest it is different regulations we need. Not none.
Mar '11
Re: Ah Yes The Economist Magazine Says You Need A National Industrial Policy
Xennady
True. Interesting admission here. That is, that our trade policies granted our cold war allies preferential treatment as part of that struggle. I take that to mean that you agree with me that US trade policy was deliberately arranged to disadvantage our allies American competitors · Jun 23 at 1:05am
No. The explicit advantage gained from trade policy was against other nations whose industry did not have access to the enormous US consumer base. Neutrals such as India and enemies such as Warsaw Pact nations did not have an equal opportunity to grow their economies by trade with the US.
The implicit advantage they gained was against American competitors and that consisted of being able to do business here without being subjected to our regulatory regime.
Mar '11
Re: Ah Yes The Economist Magazine Says You Need A National Industrial Policy
KarlUB: I'm just happy that we established it just might be possible that totally free trade is-- sometimes-- a bad idea for a particular nation.
Now that we've gotten that ideological shibboleth out of the way perhaps we can talk about what trade-- and industrial-- policy would be good for the bulk of the citizens that live in THIS nation. · Jun 23 at 4:50am
A pure free trade policy may very well have disadvantages, I will certainly concede that. Such decisions should be made on a nation by nation basis. I still maintain that an industrial policy is a horrible idea; it is a recipe for corruption and crony capitalism. We need look no further than the Obama administration's incestuous dealings with Jeffrey Immelt and GE in his quest for "green jobs" to see where that road takes us.
Mar '11
Re: Ah Yes The Economist Magazine Says You Need A National Industrial Policy
The effect is so large that other issues recede into insignificance in comparison. Consider one illuminating case: since the creation of the NRC in 1975 there has not been a single nuclear reactor approved for construction, the last was in 1973. What is true there is equally true for these other regulatory bodies, these organizations are run in a manner that is explicitly hostile to industrial development.
Sep '10
Re: Ah Yes The Economist Magazine Says You Need A National Industrial Policy
Main Feed! Main Feed! Main Feed!
May '10
Re: Ah Yes The Economist Magazine Says You Need A National Industrial Policy
Karl, how do you square this urge for government support of selected "winner" industries with your Ron Paul enthusiasms? This sounds to me more like Pat Buchanan.
Re: Ah Yes The Economist Magazine Says You Need A National Industrial Policy
Oh goody! With the right industrial policy, we can turn out . . . like France.