To Halt America’s Decline, We Need Industrial Policy

Since it is more blessed to give than to receive, modern America must be counted among the most sanctified nations of the world.

In a conversion equal to Ebenezer Scrooge’s, we have embraced the spirit of Christmas giving in a fervor of benevolence that belies our earlier reputation as the stronghold of selfish materialism. With staggering generosity we are transferring our resources, our productive power and our proud pre-eminence as the provider of opportunity to the once-benighted lands of Western Europe and the Far East. Nor should it be thought to detract from our magnanimity that this immense shift is not purposeful but rather the result of a myopic, greed-crippled incapacity to adapt to the changes of the post-postwar world.

Since the public guardians of the general welfare, with becoming modesty, obscure this quiet generosity with a confusing cacophony of public debate about deficits, tax revisions, imaginative science-fiction missile defenses and the ominous peril of a hostile Nicaragua, it is necessary to review a few facts that might help illuminate the American decline.

Sometime in the early 1970s the growth of our country’s economic supremacy came to a halt. By then we had come to think of ourselves as an already “affluent society” whose principal task was the use of our ordained abundance to wipe out remaining pockets of social injustice, and to enhance the public conditions of individual existence. Not only a rich society and a powerful society, but also a “Great Society”: a tree on every street, and a teacher for every mind.

And then it was over.

One could assemble a multitude of facts, but it takes only a few to tell the story--principally those illustrating the tragic stagnation and relative decline in American productivity.

“Productivity” can be neither defined nor measured with precision. But we can come close enough. If it costs $75 in materials and labor to make $100 worth of Christmas ornaments, then you have created wealth. The rate at which a business or a nation creates wealth is its true productivity.

As early as 1900, European delegations came to the United States to learn the secret of American productivity. But in the 1980s our productivity growth has fallen behind almost every non-communist industrial nation (except for moribund old England). It is, for example, about one-third that of West Germany’s and one-sixth that of Japan’s.

This means that other countries, our competitors in the world economy, are beginning to surpass our ability to create wealth--that is, to produce, innovate, sell and profit.

The consequences of this decline are already manifest. Our boasted standard of living is currently lower than that of eight or ten other countries. By the end of this year about 6 million manufacturing jobs will have been lost to overseas competitors.

It is easy to blame others for this ominous deterioration. Some countries exclude our goods while selling freely in the American market. These tactics are not competition, but economic aggression.

But the primal source of the difficulty is not them--it is us. We can manufacture video recorders and automobiles and semiconductor chips. And we can match our competitors. Why don’t we? Is it perhaps because we have lost our edge--the desire and the energy to strive, to compete and to win? I prefer not to believe that. I think that our failure flows from our inability to break out of old ideological straitjackets symbolized by the obsolete terms liberal and conservative . Neither of these labels expresses the necessity of a national industrial policy--a government that is equipped with new laws and economic instruments to fulfill its historic function in a free-enterprise society: first, to do for enterprise what enterprise cannot do for itself, and, second, to eliminate obstacles to an open, competitive market.

The first will require the education of a work force that is able to meet the need for technical skills--government-financed research in civilian technology (better cars, and dishwashers that work) whose innovations will be available to any who will use them, along with strong measures to limit credit and compel savings for investment.

The second goal--preservation of the American market--means rewarding those who manufacture their goods in this country, and imposing penalties on companies that move their production overseas. If you build in America, you create jobs and income for Americans. If you go abroad, you are transferring American wealth to others, diminishing the nation from which your freedom to organize, flourish and profit is derived.

We last tried to formulate a national industrial policy during the days of the New Deal. Today’s dangers to our economy are totally different, in dimension and time. And we have not even begun to address the problem. While water flows into the hold, the captain of our leaking ship of state are still debating the comparative navigational merits of the sextant and the compass. The victims of this failure--the first victims--are middle-class Americans who are watching their well-being and opportunity being diminished to the point where many are threatened by actual poverty.

In 1892 the National Peoples Party (the “Populists”) included in its platform the assertion that “from the same prolific womb of governmental injustice we breed the two great classes--tramps and millionaires.” We have come down a long road since then. But, like many highways of history, it still runs both ways.