According to the Detroit Free Press, US Car Czar Ron Bloom (the sidekick and then successor to Steve Rattner), is set to shift to become the manufacturing czar. His task will be to oversee the rebirth of American manufacturing, a sector that’s decline in significance over the decades, but which potentially could be a great source of new, post-real estate economy jobs.
Manufacturing is the Mick Jagger of economic sectors — sexy for being decidedly unsexy. Almost everyone wants to see more manufacturing, especially if the products being manufactured are either “green” or “high tech.”
Noam Scheiber recently wrote in The New Republic that it’s time for the government to take a more active role in industrial policy — directly promoting key sectors that we want to see grow:
So far as I can tell, the only solution to the underlying economic problem is something that’s been a dirty word in Washington the last generation or two: industrial policy (that is, an active government role in the development of certain industries.) In his LSE lectures, Krugman quipped that “if someone could invent the 21-st century moral equivalent of the railroad, or actually even the moral equivalent of IT in the ’90s, that would help a lot.” I agree–that would help a lot. But waiting around for this to happen seems risky when the alternative is a decade of stagnation.
If, on the other hand, the government were to place some massive bets on R&D, we might substantially increase our chances of stumbling onto a major technological breakthrough–or at least accelerate the process. True, industrial policy is a lousy idea under normal circumstances: Any invention with lucrative commercial applications should have a high enough expected return to attract private capital Using government money to fund progressively longer shots is likely to be wasteful. (The exception is technology that would be socially useful but whose commercial applications aren’t immediately obvious.) But, in a deep recession like this one, the case for industrial policy gets much stronger. At worst, the additional government spending would inject some needed stimulus into the economy. At best, it might yield a technological breakthrough that could attract a subsequent wave of investment and make growth self-sustaining.
This is not necessarily a horrendous idea, and as Scheiber goes onto note, investments in things like green cars show that Obama is already thinking along these lines.
But here’s a different idea: Rather than the government trying to pick winners, and guess what industries will prove to be self-sustaining, Ron Bloom should first address policies that are particularly anti-industrial. For example, what kind of red tape, labour laws, legal liabilities, and counterproductive environmental laws do we already have on the books that make manufacturing harder than it ought to be.
Why is it that we have scads of unemployed Americans in our cities, yet it’s still more economical to buy sneakers made in China and then ship them over here? After a thorough examination of what current policies are holding manufacturing back, then we can talk about what future policies might foster more growth.
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