While President Clinton studiously avoids the term, advocates of “industrial policy,” such as Robert Reich, Ira Magaziner, and Laura Tyson, [...]
May 1 1994 by Edwin J. Feulner
While President Clinton studiously avoids the term, advocates of “industrial policy,” such as Robert Reich, Ira Magaziner, and Laura Tyson, now dominate his administration. These and other cheerleaders for government intervention in the economy speak in grandiose terms of “targeting” key industries and “rebuilding
Unfortunately, many corporate operatives and business organizations think they or their members will benefit from policies that put bureaucrats in charge of many of
Instead of waiting for a government check, perhaps these executives need a reality check.
Government intervention may provide some businesses with a bigger slice of the pie in the short term, but the inevitable market inefficiencies of a planned economy-and that’s what it is, folks-will prevent that pie from growing. If bureaucrats knew better than entrepreneurs and venture capitalists how to invest, they wouldn’t be bureaucrats; they’d be making real money in the private sector.
Bureaucrats have no localized, specific information on which to base their decisions. They have no “bottom line” to discourage them from sacrificing accuracy to appease political interests. And, since such huge sums of money are at stake, both in government subsidies and “profits” that depend on government intervention, industrial policy goes hand-in-hand with heavy lobbying and even political corruption. As Kazuo Nukazawa, a managing director of the Keidanren,
Bill Clinton seems anxious to stumble around in the dark. For example, he wants to boost NASA funding to develop “an environmentally friendly, fuel-efficient, lightweight passenger aircraft” that could be commercially manufactured by the year 2005. NASA hopes such an aircraft would breathe new life into domestic aircraft manufacturing and create 140,000 jobs.
Along the same lines, the administration announced last October that it is teaming with the Big Three automakers to help
Another element of the grand plan is a commitment to support-even protect-certain “strategic” industries on which
Of course, all these actions are based on the idea that inherent shortcomings in the current
Nevertheless, the argument oft-repeated by industrial planners is that many business opportunities are too difficult (if not impossible) for the private sector to exploit. They say only the government can shoulder the financial risks involved in moving many ideas off the drawing board and into production.
It’s ironic that
Another example: The idea behind the
If Congress really wants to strengthen
- Passing product-liability reform and other tort-reform legislation.
‘s lawsuit-crazy tort system drains the economy of tens of billions of dollars annually and hinders product innovation. America
- Enacting regulatory reform. Many regulations directly increase the cost of employing workers and act like a hidden tax on job creation. Congress should establish a federal regulatory budget and place a limit on the total estimated cost imposed each year on the economy-and on employment-by all regulations.
- Overhauling antiquated US. antitrust laws. Outdated trade laws left over from the turn of the century make it difficult for firms to enter into joint-production alliances (to finance research programs or to develop and market new products) generally permitted in other countries.
- Negotiating other free-trade agreements. After implementing NAFTA, the administration should negotiate similar agreements with any country desiring bilateral open markets.
financial and banking laws. Restrictions on interstate banking force many banks to remain small, uncompetitive, and unable to provide both commercial and investment services. U.S.
- Permitting the ‘Baby Bells” to enter the long-distance market. Congress also should allow regional
operating companies to manufacture telephone equipment and to own video programming and other businesses. This will promote competition, create jobs, and help build the “data highways” the Bell administration is so excited about. Clinton
At best, industrial policy would leave in place unwieldy barriers to private enterprise. At worst, it would add to them, instituting a checkerboard of special subsidies and privileges.
Edwin J. Feulner, Ph.D., is president of The Heritage Foundation, a Washington, DC-based public policy research institution. He also serves on the boards of several other foundations and research institutes. Dr. Feulner is the author of “Conservatives Stalk the House.”