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,
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