Romney wants a federal industrial policy?
I know I touched on this earlier , but Mitt Romney's comment in Michigan struck a major nerve in my conservative spinal column, and I'm still gobsmacked about the following words that came out of Mitt Romney's mouth
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What I'm critical of is the absence of a federal policy designed to strengthen the U.S. automotive sector and manufacturing general.
A comment like this should hurt conservative ears like fingernails to a chalkboard. To put it bluntly, such a proposal is raw, unfiltered liberalism. Folks born after 1975 won't remember this firsthand, but back in the 1970s and 1980s, liberal Democrats and liberal media and labor union leaders consistently lamented the lack of a federal industrial policy, citing the success story of Japan and its emerging economic powerhouse as Exhibit A.
Despite the real economic pains felt in the Rust Belt, Ronald Reagan and fellow conservatives resisted the clamor (with Chrysler being a Reagan exception), saying that the federal government should not be in the business of further insinuating itself into the private sector and should not be in the business of picking economic winners and losers. We said that such a move would not improve efficiency and productivity, and it would stifle creativity in our free market economy. We argued that the most creative sectors were the least regulated and least subsidized sectors, citing the brand new personal computer industry and software innovators such as Microsoft. We said that this form of corporate welfare would unfairly reward and prop up companies that should stand on their own and adapt to an ever-changing economic environment.
Thankfully, the argument went south when the Japanese economy went south, exposing the fundamentally flawed policy for what it was. The concept of a federal industrial policy was tossed in the dustbin of history (or at least I thought it was), lodged somewhere between communism and that stack of old Huey Lewis & The News records.
Yet here we are in the 21st century, 20 years after a pitiful argument died, hearing Mitt Romney--a Republican, no less--trying to resurrect this dinosaur of a idea in a pitched primary race. I may very well have a bias here, but I believe that I would be just as repulsed by this stupid idea no matter who I supported.
Comments :
Can't say I disagree
It's a shame this type of rhetoric is so common.
But when someone is in Michigan, it's a pretty predictable thing to say.
And how did that turn out?
In the 70s and 80s the American car companies got their behinds handed to them by Japanese manufacturers. So after you scuttled the idea of a federal industrial policy did they bounce back, or are they still anemic compared to the Toyotas and Hondas of the world?
I came. I saw. I posted.
Veni, Vidi, Bitchy.
Japan went through a decade-long recession,
in large part because of the tight-knit relationship between government, industry and finance. Doesn't mean they stopped making good cars.
On the other hand
we never developed a federal industrial policy and we continue to make bad cars.
Sounds like a toss up...
I came. I saw. I posted.
Veni, Vidi, Bitchy.
Maybe if we could get rid of the UAW
...our car companies would be more competitive. It is borderline-impossible for a unionized company to win against nonunion competition.
As is, the car industry jobs are gradually moving to right-to-work states and from union companies/plants to nonunion companies/plants.
Ultimately the UAW will kill itself, even if takes the bankruptcy of the Big 3 for it to happen.
In the end, this is all healthy. We should all celebrate when uncompetitive companies go out of business, freeing up capital and labor for more productive uses.
Uh...
The UAW is certainly a large Union with just over half a million members.
Hey, did you know how many members the Japanese Auto Worker's Union has? 724,000. Also the UAW isn't just the US but also Canada, and Japan has half our population which means their auto union represents a much larger percentage of the population as a whole.
So the issue is not the presence or absence of unions.
I came. I saw. I posted.
Veni, Vidi, Bitchy.
Where are Japanese companies building their US plants?
Many of those supposedly "Japanese" cars are built in the US, not Japan.
The auto industry jobs aren't so much going away as moving from Michigan to the South.
SPC
By the way, one of the big reasons the Japanese did kick our butts up down and sideways in the 70 s and80s is because of Statistical Process Control (SPC) a means of assuring quality that was invented by an american. The Japanese took the idea and ran with it when American car companies had no interest, even though the work had been very useful to munitions manufacture in the US in WW2.
That strikes me as precisely the kind of thing where a federal industrial policy would have been very worthwhile. If Ford and GM had been running good SPC programs at the same time that we were teaching the methodology to the Japanese odds are the 80s would have been very very different.
I came. I saw. I posted.
Veni, Vidi, Bitchy.
Hindsight is 20/20
It's easy to say "if only we had done X" now with the benefit of hindsight.
A federal industrial policy would be a never-ending series of boondoggles. You're just replacing corporate bureaucrats with a combination of government bureaucrats and corporate lobbyists. This is unlikely to result in better decision-making.
More likely, it will just be a massive waste of taxpayer dollars on projects of minimal value, or a massive transfer of taxpayer dollars from "unfavored" to "favored" sectors of the economy -- much like our current energy policy is. Better to abolish all of the corporate welfare and let innovations be funded in the market by profit-seeking VC's instead.
Reagan did us all a big favor by dismantling most of the Carter-era energy boondoggles.
Hindsight?
SPC had already been used in this country successfully. That means it isn't really a matter of hindsight, but of the car company executives being purely idiots.
True, after all because Reagan opened it up to the market we now have far more fuel efficient cars... hrrrrm.
but we've dramatically reduced our use of foreign controlled fuels... wait.
Okay, at least we developed a strong industry of alternative energy supplies so that when we do need to drop oil we have a fall back.... oh.
So tell me again what a great idea Reagan's dream of keeping us utterly dependent upon the middle east was, cause to my eye it was a colossal cluster^%$#.
I think you realy want to avoid using that example in particular when trying to sell the idea that markets know best...
I came. I saw. I posted.
Veni, Vidi, Bitchy.
At the time...
...such esteemed individuals as JK Galbraith were telling us that we didn't have to worry, because large corporations like GM could simply create demand for their products through advertising. Cartels along the lines of the Big 3 plus the UAW were viewed as a model for other industries to follow.
Galbraith was dead wrong, and it's a good thing we didn't listen too carefully to his advice, but at the time, the guy was considered one of our top Big Economic Thinkers.
Other well-regarded proponents of US "industrial policy", like Lester Thurow, made equally ridiculous predictions and recommended equally ridiculous policies. Again, good thing we didn't listen.
You make it sound like I care about any of these things.
I consider "energy independence" to be a completely ridiculous idea. We shouldn't even *try* to be "energy independent", no more than we should try to be "food independent" or "steel independent" or "textiles independent" or any-other-product independent. These slogans are really nothing other than protectionism in disguise.
Economic progress comes not through independence from others, but through *interdependence* with others. We should not fear this interdependence -- we should embrace it wholeheartedly. Just as I gain from trading with other individuals within this country, I also gain from trading with other individuals outside this country.
As far as fuel-efficient cars go: to the extent that consumers demand them, and to the extent that they can be produced given current technology, they are already being produced. (Indeed, some research has suggested that consumers *overvalue* fuel efficiency -- they give it *more* weight in their buying decisions than it would rationally warrant.) The market is already solving this problem just fine, thank you very much, and government initiatives like PNGV have been, much as you would expect of such things, little more than corporate-welfare sinkholes for taxpayer dollars.
As far as alternative energy sources go: to the extent that these sources are price-competitive with fossil fuels, they are already being used. Unfortunately, the simple reality is that, most of the time, they are *not* price-competitive without government subsidies. So large numbers of taxpayer dollars are being thrown down a black hole subsidizing these inefficient technologies. Yes, these technologies will have their day; it just hasn't come yet. Government shouldn't attempt to speed up the process -- this will do more harm than good. VCs will invest in these technologies, and eventually they will become viable at their own natural pace.
Some protectionism is warranted, even for you free marketers
You certainly must understand the national security implications behind not having ready access to energy, preferably cheap. I won't go any further into it because I know you already understand the issue and don't wish to insult your intelligence or waste keystrokes.
I also enjoy interdependence with other countries, but it's hard to embrace it when the government is actively rattling its saber toward some of these countries. Granted, very little of our oil comes from Iran, but there is enough that if Iran decided to embargo us, we'd feel it where it hurts. Expensive energy prices are a drag on the economy and will increase government defense expenditures with no useful increase in "services" (paying more to fuel tanks, aircraft, and Humvees that do the same job isn't a good thing).
I never broke the law; I am the law! --
George W. BushJudge DreddI'm listening to...
I'm not worried
Interdependence goes both ways. We need their oil, but they need our dollars. And it's not like there aren't other countries buying and selling oil.
Iran would have to cut off not just us, but the entire world, if they wanted their embargo to be more than a PR move -- otherwise, they would discover that oil is a fungible commodity, and every barrel they didn't sell to us would be made up for by an extra barrel sold to us by Russia, Canada, Venezuela, etc., or re-sold to us by another buyer. And if they cut off the whole world, well... they'd be hurting themselves more than they'd be hurting us.
Yes, I'd sell off the Strategic Petroleum Reserve, or transfer it to being a military reserve only (we would keep enough to ensure that our tanks, ships, and planes can go to war).
Ultimately, I consider trade a better guarantor of peace than armies. Once two nations are sufficiently interdependent, one would have to be a complete moron to go to war with the other.
Price still goes up
Cutting off just us is what caused the oil shocks of the 70s. We bought more from other areas but it cost us.
Iran is rational enough to not do this anymore, but I'm not sure that Venezuela (Chavez) is, or Saudi Arabia, if the monarchy were overthrown by Wahabi fundamentalists, is either.
You've never played Civilization have you? :-)
I never broke the law; I am the law! --
George W. BushJudge DreddI'm listening to...
Oil shock or dollar shock?
The oil price increases in the 70s had a lot to do with inflation and the falling value of the dollar. (Sound eerily familiar? If you measure oil prices in euros rather than dollars, oil prices have only gone up modestly in recent years.) The embargo may not have been as important as people tend to think.
An embargo, by itself, would not have caused gas lines. The gas lines were caused by price controls.
Recall, one of Reagan's first acts as president was to issue an executive order abolishing those price controls.
Energy
Well I'd hope you;d care about some of them at least. particularly when you are advocating a policy that bought us nothing and has cost us so much.
Or to put it another way- if you don;t care about any of these things then you are operating from a value system that seems radically divorced from the typical american, in which case why should we listen to what you consider good vs. bad?
First of all energy isn;t like any of the other things you mention because energy is a necessity for all of the rest of it. No energy means you have no transportation, no communication, no industry, no services, nothing whatsoever.
The only thing on that list that is close to comparable is food. The difference there is that our food supplies are not vastly dominated by foreign powers relatively hostile to us. And we do have a substantial ability to produce our own food. Taken together that means our reliance on foreign food is neither as critical nor as concentrated as our reliance on foreign energy.
So back in the 80s you would been just fine with getting all of our communications security infrastructure from, say, the USSR? Or are there some things which a nation needs to have a good degree of control over? At a minimum are there not certain things so critical to the function of the nation that it is best not to rely upon enemies to provide it?
Please. The way the market "solved" this problem was by conducting more advertising of fuel inefficient SUVs. That isn't a solution, LZ. That's recklessness. The market refused to deal with the issue in an intelligent way, that means they forfeit any right to complain when government steps in.
And, gosh, it's just not possible that maybe they aren't price competitive because President Reagan killed the government backed research? Maybe?
You praise a policy that undercut alternative energy by using the resultant weakness of alternative energy as a justification after the fact.
I came. I saw. I posted.
Veni, Vidi, Bitchy.
Funny story there
It wasn't hard to predict that the benefits and health care costs of retired workers would eventually prove a drag on the big companies, and in fact it was predicted
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The unions hammered out good deals for themselves, of course, but they've also accepted pretty significant cuts to try to keep the companies competitive. They can't be blamed for the failure at the top of the company to read the market correctly. Rising gas prices sure don't help.
Same thing that's happening with the airline industry.
Companies can't cope with the broken US health care system that puts all the burden upon the employer, and with the short-sighted energy policy that does nothing to guard against inevitable increases in the price of oil that then reverberate throughout the economy.
Come, my friends. 'Tis not too late to seek a newer world -- Tennyson
Yes, they can
Other companies are able to deal with our health care system. They may not like it, but they deal. So when Detroit complains about this, I smell a rat. Specifically, a rat that wants to dump all of its unaffordable retiree health-care obligations onto me, the taxpayer...
Oil prices, just like all other prices, fluctuate. We don't need a government policy to "guard" against this, no more than we need a government policy to "guard" against increases or decreases in the price of steel, food, or any other commodity. Nor is there anything the government can really do in this respect. Virtually all of the proposed energy policies from both parties are useless or counterproductive.
Other companies like what?
I would guess the companies you had in mind are (a) relatively young and (b) relatively small and (c) mostly involve relatively skilled labor (all "relatively" compared to auto or airline industry).
Come, my friends. 'Tis not too late to seek a newer world -- Tennyson
As in, the nonunion sector of the economy
...which encompasses dozens of industries, ranging from financial to manufacturing to services to construction to [... the list could go on and on]. Remember, the vast majority of private-sector jobs in the US are nonunion.
Heck, here in Texas, only about 5% of the workforce is unionized! So the question is less "who am I talking about" than "who am I *not* talking about."
Regardless of the skill level of their employees, what these nonunion firms tend to have in common are:
- wages and benefits more in line with market rates
- defined-contribution, not defined-benefit, pensions (or in the process of phasing out defined-benefit pensions for new employees); thus, no giant balance sheet liabilities associated with former employees
- less job security for incompetent employees (certainly none of these ridiculous "job banks" for employees who should have been let go)