BRAVE NEW CORPORATE WORLD: AN ASSESSMENT OF INDUSTRIAL POLICY
Public concern with the dangers of corporate power reached a feverish pitch in the early 1970s. Bills designed to control perceived abuses were passed by Congress, establishing the Environmental Protection Agency (EPA) and the Occupational Safety and Health Agency (OSHA) and curbing the widespread practice of overseas bribery. This antimonopoly fervor peaked with the attempt to nationalize the oil industry, and with Congressional consideration of the Hart Deconcentration Act. Though these efforts failed, they placed the monopoly problem at the center of the liberal agenda.
Ten years later, worrying about monopoly seems quaint. The political ascendance of corporate reaction, combined with corporate "hired guns' from the University of Chicago and the American Enterprise Institute, have all but extinguished the antitrust movement. Nevertheless the basic tenet of twentieth-century liberalism--that capitalism can be reformed by wise state intervention--survives in the current school of industrial policy advocates. These neoliberals, an eclectic mix of lawyers, political scientists, labor and international trade economists, and a handful of politically active bankers and industrial capitalists, are providing the ideological bridge between academics and politicians for a new round of state intervention, much as an earlier group of intellectuals legitimized the macroeconomic finetuning advocated by American Keynesianism in the 1960s.
Conceding the debate on monopoly power to the right, industrial policy advocates tend to focus on the international economy. They emphasize the need to reorganize corporate management in the United States, with a view to enabling U.S.-based corporations to accommodate rationally to the changing structure of international trade. They argue that macroeconomic demand management is insufficient unless accompanied by mechanisms for dealing with change in industries, firms, and regions. The disturbing employment, profit, and growth statistics of the past fifteen years are seen as the consequence of corporate management's emphasis on short-run profits rather than long-run growth. For a variety of cultural and historical reasons, U.S. capitalism is said to be stuck with tax experts and "go-go' finance wizards at the economy's helm. Only prudent state intervention into the detailed functioning of the economy will prevent collapse under the weight of Japanese and third world imports.
Industrial policy appeals to many on the left as a sophisticated, activist response to reaction and economic crisis. At the end of the 1970s economists such as MIT's Lester Thurow and businessmen such as investment banker Felix Rohatyn began calling for state-led economic restructuring. While the views of these earlier advocates were criticized as being antidemocratic, more recent proponents of industrial policy--in particular Ira Magaziner and Robert Reich--have adopted a more democratic orientation.
After Reagan's anti-"big government' election swept many major Democratic politicans out of office and reduced the power of those who remained, the Democrats became a party "in search of ideas.' One of those ideas has been industrial policy. Robert Reich, Lester Thurow, and others were admitted to the inner circles of the Hart and Mondale campaigns. Indeed, the New York Times reported that, after reading Reich's The Next American Frontier, Mondale proclaimed: "This should do it for the Democrats in 1984.'
If the Democrats should succeed in deposing Reagan this year, a change in economic policy as sweeping as supply-side economics or the "New Economics' of the Kennedy-Johnson years may follow. Should the left applaud this? Should it "jump on the bandwagon'? Are there important criticisms to be mounted against this new version of liberalism?
Thurow's popular 1980 book, The Zero Sum Society, was the first coherent statement of the industrial-policy position. …