Industrial Policy and Manufacturing: What's the Big Idea?

December 5, 2011

The Aspen Institute is known for asking what I like to call "killer questions."  Since Aspen is in the business of ideas, they know that questions have a way of focusing the mind on what we know and don't know, spurring on that tumbling, teaming process of idea creation.  This time, Aspen's manufacturing team (led by the esteemed Tom Duesterberg) asked in a recent event whether the U.S. needs a national manufacturing strategy.

To attempt a reply, they invited Douglas Holtz-Eakin, Ron Blackwell, and Clyde Prestowitz. Considering the backgrounds of the individuals on stage, we in the audience got vastly differing accounts of America's potential and what it takes to turn it into reality.  The one thing that all the panelists agreed on was that the real question was not whether America should have an industrial policy, but what form it should take.  Now, in saying this they were all taking liberties with the technical meaning of "industrial policy."  Their point though was that even choosing to not support industry at all through the public sector was itself a policy stance.  And regardless of the policy, the end goal is the same: a healthy manufacturing sector in America. For as differing as the panelists were, there was a lot to applaud.

In the eyes of Ron Blackwell of the AFL-CIO, competitiveness and growth are the key questions for our future. That means that America needs a pro-competition strategy rather than an explicit industrial policy.  Education and training programs are important for such an approach, as is rebuilding our national infrastructure.  This helps not just the manufacturing sector, but practically all other aspects of the economy as well.

Clyde Prestowitz, founder and president of the Economic Strategy Institute, saw a tremendous productive capacity in America that is being challenged by anti-competitive policies abroad and a domestic culture that sees manufacturing as passé.  How should a country, especially one as powerful as America, respond abroad?  As others in the Chamber here have pointed out, we "deserve the opportunity to compete—and succeed—on a level playing field."  And while turning back the cultural tide is not an easy task, there's much to be said for simply restoring the notion that we are a country that makes things and makes things happen.

Douglas Holtz-Eakin proved to be an insightful panelist who (in the nicest way) didn't mince words.  He said that America was a terrible place to invest in.  Our fiscal challenges and burdensome tax structure are proving to be tremendous obstacles to investing in the future of manufacturing.

The good thing is that we know quite clearly what these hurdles are and what can be done to clear them.  The real challenge, as he illustrated later in the program regarding the space industry, is figuring out the right relationship between the public and private sector.  The private sector has the capacity in every way to lead with its investments; in turn, the two sectors must focus on coordination, cooperation, and communication (rather than control). From here on, the panelists talked about America's tax system, the shale gas boom, national laboratories, and more.  Though there was more disagreement to be had on the right way to keep America competitive, in a strange way the event itself was a part of gaining a sense of our national priorities.

Public policy matters for the future of manufacturing, and whatever policy decisions are made one thing is clear: the private sector must take the lead.