Whither Industrial Policy? the Candidates Play It Cool

Article excerpt

DURING this presidential election year, the first in the post-cold-war era, sagging United States competitiveness dominates the debate.

To boost the US economy, Democratic challengers call for a reorientation of America's industrial policy.

Since World War II, the US government has invested trillions of dollars in US military preparedness; the Democrats seek a civilian substitute - a policy that encourages US development by offering incentives, ensuring financing, and enacting protective laws for certain industries.

Incumbent President Bush won't utter the phrase industrial policy; he is concerned that he'll incur the wrath of Pat Buchanan and the conservative right who oppose big government.

"Bush knows he's knee-deep in sectoral-specific policies, but he won't admit it, because he's afraid of the political heat," says Otis Graham, author of the recently released book, "Losing Time: The Industrial Policy Debate." This is not a new-found fear among Republicans, says the history professor at the University of California, Santa Barbara.

"Since Ronald Reagan denounced industrial policy in 1980, Republicans have denied that we've had such a policy," Mr. Graham says. "Fact is, we've always had one. Policies are sector specific, tax policies aren't uniform, and we're always picking winners and losers. For example, steel production doesn't get {government} research-and-development assistance, but electronics manufacturing does."

US policymakers have lost precious time during this 12-year denial, says Graham. "We're left with an enormously scattered industrial policy, instead of a strategically managed industrial portfolio." Like other economists and trade watchers, Graham looks toward Europe and Asia when he recommends better coordinated government intervention as a means of enhancing US economic competitiveness.

America's European and Asian competitors - with subsidies, aggressive marketing, and protective trade policies - have a far more strategic outlook for their economies, many analysts say. Graham points to Japan's Ministry of International Trade and Industry as the height of "government and business cooperating in a partnership." He says "the crucial question of industrial policy is 'Who is the senior partner?' Government has to be the senior partner, because corporations, which are often multinational, have themselves, not a nation, in mind first."

That senior partner must pick winners such as electronics over steel, says Graham. It must successfully work the interests of labor unions, corporations, and government into a cogent policy. Democrats favor planning

Jeff Faux, president of the liberal Economic Policy Institute points to several Democratic challengers who offer concrete proposals to advance industry through government intervention. These include Arkanas Gov. Bill Clinton, Sen. Tom Harkin (D) of Iowa, and Sen. Bob Kerrey (D) of Nebraska who all support "diffusing the latest developments in technology to small and medium-sized manufacturers," as Mr. Faux puts it.

This, says Faux, can best be achieved by setting up state agencies that, together with the federal government, finance and direct public-university research, which is then funneled down to the county and city levels so that business can use it. "This goes on in Europe and Asia. We can and should use this approach here," Faux says.

But US businesses fear more government control, including antitrust, labor, and environmental regulations. John Cregan, president of the conservative US Industrial and Business Council, a group of 1,500 companies, says the Democratic presidential candidates go too far. …