By Kevin L. Kearns. Kevin L. Kearns is a fellow Economic Strategy Institute future of American high-tech companies.
The Christian Science Monitor
AS the United States economy remains mired in slow growth, hallmark of the Bush presidency, the question of whether America needs an industrial policy has become a prominent Washington economic debate. "Industrial policy" had been a postwar taboo - linked to the disastrous economic record of communism. But now the subject may play an important role in the presidential campaign if Bill Clinton, whose platform contains many industrial policy-like components, uses the issue to challenge George Bush's hands-off, laissez-faire philosophy.
Japan has employed industrial development strategies to build an advanced economy. The Germans and French have used industry and technology policies to foster growth in key industries like aircraft and aerospace. Now some US economists are grudgingly giving industrial policy a second look. So are politicians. The reason is simple: Our free-trade economics isn't working to America's advantage in the post-cold-war global competition.
The situation somewhat resembles the final years of the USSR, when the ruling elite knew Marxist economics was bankrupt - but clung to it out of ideological rigidity and fear that privileges would vanish. In the more pragmatic and flexible US, at least some Republican members of Congress, and a few executive branch officials, wonder if a rethinking of the administration's hands-off approach is needed.
In the brave new economic world, foreign "national champion" industries, with the full backing of their governments, are skewing marketplaces to give themselves comparative advantage and win market share from US rivals. US corporations, operating without government support or sympathy, must fend for themselves. The results are proving catastrophic.
Almost weekly, layoffs are announced by premier corporations. Tens of thousands have lost jobs at GM, IBM, Hughes, United Technologies, McDonnell Douglas, and Boeing. Along with Zenith and Smith-Corona, many companies will move to Mexico to stay competitive. Key European and Asian competitors, however, are following high-wage, value-added, differentiated product approaches to achieve good work and a rising standard of living.
President Bush's most telling failure is the 0.4 percent annual rate of GDP growth - the lowest of any modern president. At the 1988 Republican convention, Bush promised growth that would create 30 million jobs. Now, as he admits, he is 29 million jobs short. And jobs that have been created are in services and government. Almost every other sector has employment drop, especially the crucial manufacturing sector, which lost 1.3 million jobs.
The difference between manufacturing jobs and others is crucial. Not only does manufacturing pay an average weekly wage of $455, higher than the national average of $355, or the $331 a week of service industries, it is also the sector most amenable to more productivity, which raises salaries and living standards. As more of our manufacturing base is des-troyed by predatory practices of foreign rivals or moved offshore in an attempt to compete, the country will be trapped in a downward wage spiral.
Meanwhile, foreign industrial policies have tried to manipulate market forces for better work and living standards. Hence, our new discussion of industrial policy. Where do the candidates stand?
The Bush campaign is mainly opposed to industrial policy. The concept clashes with its free-trade ideology. But its officials claim success for industrial policy-like programs. The president's science adviser, Allan Bromley, speaks glowingly of the National Technology Initiative, procedures intended to foster cooperation between the 726 federal labs and private enterprise. Though not a White House creation, Sematech, a semiconductor consortium partly supported with government funds, gets credit for gains in worldwide market share for US firms.
Yet the White House won't emerge a champion of industrial policy. …