Managing Modern Capitalism: Industrial Renewal and Workplace Democracy in the United States and Western Europe

By M. Donald Hancock; John Logue et al. | Go to book overview

14.
Industrial Policy and Competitiveness in the United States

RAY MARSHALL

The question of whether the United States should adopt an industrial policy was raised by the presumed failures of macroeconomic policies to deal with the economic problems of the 1970s and 1980s. There is a consensus that demand management, or Keynesian, policies helped the United States and other industrialized countries achieve a period of sustained growth and prosperity and relatively low rates of inflation during the 1950s and 1960s, but that such policies could not cope with the declining growth in productivity and total output, inflation, and rising unemployment characterizing the internationalized information society of the last part of the 1960s and the 1970s. Consequently, the monetarist- supply-side alternative emerged to demand management, which culminated in the economic policies of the Reagan administration.

Supply-side policies promised to stimulate savings, investment, economic prosperity, and a balanced budget by the end of 1984, while monetarist policies would prevent inflation without generating high levels of unemployment. Industrial policy advocates consider Reaganomics not only to have clearly failed to achieve its promised objective, but also to be unfair, unworkable, and based on insufficient empirical and theoretical evidence. They therefore suggest industrial policy as a better alternative. This chapter outlines the pros and cons of the industrial policy debate and concludes with an outline of some policies to strengthen economic performance in the United States.

Industrial policy means different things to different people. To some, mainly its critics, industrial policy indicates planning credit allocation, picking winners and losers, and government efforts to stimulate growth industries and phase out declining, noncompetitive industries in order to enrich the economic mix. To most proponents, however, industrial policy means cooperative public- private efforts to improve the competitiveness of American industry and facilitate adjustment to change. Interest in industrial policy has been stimulated by the declining international competitiveness of much of American industry and poor economic performance relative to countries like Germany, Japan, and France that have adopted more or less formal industrial policies or strategies. Proponents of industrial policies argue that without an explicit industrial policy, the United States will be at a competitive disadvantage in a world where it competes with countries whose policies are more targeted, better coordinated, and have greater

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