Last week I began posting The "Me Party" 10-point plan for American Renewal
. In Part 1, I talked about why it's important to shift from "consumer" to "producer" thinking. In this installment, I'll share more thoughts on what a producer economy should look like.
Part 2. Buy cradles, not graves.
Despite Joe Biden's rampant enthusiasm, I read that about one of every six dollars spent on the American Recovery and Reinvestment Act - the stimulus bill - actually went to industries where we hold a technical lead, or into nascent industries where funding might generate immediate jobs and huge long-term rewards. The rest, a vast sum, went toward redundancy, bureaucracy and bailouts. I'm impressed by GM's revival and impending IPO, but the money we spent bailing out inefficient smokestack industries and investment banks might just plug a few holes in sinking ship. Will slowing the decline of lagging industries create the long-term jobs we need, or could that money have made a bigger difference elsewhere?
I contend that the American economy needs vision and leadership to sustain innovation, and a national industrial policy to prioritize investments. Among the many countries with successful industrial policies are China, India, Brazil, Germany and Italy. In fact, the United States employed its own form of industrial policy through NASA, DARPA, and a host of federal agencies for over half a century until the Cold War ended. The result was global leadership in computers, aerospace, communications, materials sciences, e-commerce, electronics, data management, and a host of other industries. Our industrial policies created millions of high-paying jobs and defined the modern world.
So why didn't these successful programs continue? Because without an external enemy, such forward-looking government investment soon becomes unpopular with politicians. Laissez faire conservatives oppose any kind of intervention into free markets, and would rather see Boeing, HP and other companies go it alone against heavily subsidized Airbus than risk increased taxes and regulation. Meanwhile, left wingers range from merely skeptical to openly hostile toward for-profit ventures, and would use tax dollars to subsidize labor but not businesses that create jobs. Lacking some greater purpose -- the Cold War or the Great Recession -- neither side would spend tax money on business.
Lost in that reasoning is the realization that our nation's defense, diplomacy and prosperity all rely on a healthy domestic economy. In a capitalist society, business
is the greater purpose.
So does a workable policy look like?
First, the policy must eliminate international barriers to trade and level the playing field. To prevent countries from dumping products into the United States, we must establish fair and reciprocal trade relationships whereby we mirror the market access policies of our trading partners. If a foreign market is open to American products, then ours should be open to theirs. If a trading partner imposes tariffs and duties on our products, then we should do the same. Likewise, we must create a mechanism to penalize currency manipulations.
Secondly, our industrial policy must focus on long-term national goals like energy independence, a secure and efficient power grid, commercialization of space, sustainable food and water, improving public health and expanded communications infrastructure. We should funnel grants, loans and contracts into these industries and their supporting technologies, and encourage commercial applications of basic technologies. Investment in these and similar segments can create entire new industries while playing to our scientific and technological strengths.
For the most important and promising programs, we must create actual programs -- like Apollo and the Interstate Highway System -- using federal dollars to spur development. These programs will create jobs in key industries, accelerate commercial viability of emerging technologies and lead to private investment.
We must follow an up-or-out policy for mature industries. There is no such thing as "too big to fail" in a robust economy. Rather than subsidizing old, inefficient or broken business models, government should provide large tax incentives for private investment in productivity and adoption of key technologies. Likewise, we must allow the market to penalize failures to prevent artificial "bubble" economies.
Finally, we must create a healthy environment for businesses to grow and flourish throughout the United States. We must simplify and standardize business taxes and regulations. We must create consistent and enforceable zoning and licensing. Most importantly, we must improve the efficiency of the domestic labor market.
Industry has been the backbone of our society for almost one hundred and fifty years, but individual businesses can't go it alone. We must protect our golden goose, even if it farts sometimes.
Coming next: Part 3: Quit Subsidizing Big Labor.
