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So It’s Industrial Policy |
| Mon April 6th, 2009 |
Don Rose
Chicago Daily Observer
Sen. Bob Corker of Tennessee, the rising Republican spokesman for big business, almost got it right the other day when he called the firing of G.M.’s Rick Wagoner a move toward a national “industrial policy.”
Corker, who ran a racially inflammatory commercial against Harold Ford Jr., rambled on that we had crossed a new line—never before have we had an industrial policy, which he defines as “deciding what vehicles and plants will survive.” Others say it’s determining industrial winners and losers.
Well, Senator, the answer is both “yes” and “no.” We’ve been practicing various forms of industrial policy for generations—but not comprehensively enough and sometimes making wrong decisions, as when the Henry Paulson decided Lehman Brothers should be a loser and banking collapsed.
Industrial policy—hotly debated in the 1980s when deindustrialization set us on the road to economic decline—is essentially governmental intervention into the economy that directs the way factors of production are distributed throughout a nation’s industries.
Walter Mondale and Gary Hart were both strong advocates of a comprehensive industrial policy, calling for full federal involvement in restructuring the economy. They recognized the seeds of the economic problems that helped put us where we are today. Their opponents, naturally, cried “socialism” or worse, insisting, as conservatives still do, that the free market will correct itself and eventually make everything all better.
The fact is an industrial policy could turn out to be capitalism’s best friend. Franklin D. Roosevelt utilized industrial policy to pull us out of the depression—despite the nonsense of the revisionists who tell us he made it worse. He preserved American capitalism.
We’ve been subsidizing agriculture—including the carcinogenic tobacco industry—for decades, keeping it a “winner.” In 1980 we nationalized Chicago’s Continental Bank because we thought—this sounds familiar—it was too big to fail. It stayed alive long enough to get healthy and enjoy a successful merger.
Later the government gave a big (for the times) bailout loan to Chrysler, which made a comeback under the aegis of showman CEO Lee Iacocca.
More significantly, back in the 1950s the Eisenhower Administration generated a massive stimulus plan by investing in the national highway system, which turned out to be the greatest social and industrial policy action of the century. It stimulated the growth and proliferation of suburban America, boosted the auto industry, the steel industry, the homebuilding industry and, of course, big oil.
All winners—just as Obama hopes to create with green industries.
Small wonder that a mid-century president of GM, Charles E. Wilson, could boast “What’s good for General Motors is good for the country and vice versa.” He became Secretary of Defense.
Speaking of big oil, the complex, highly beneficial tax codes created for the industry are yet another example of government intervention to help promote a winner.
The losers were the passenger railroads and public transportation—which we’re trying to upgrade now during our current economic crisis.
Most of this was done was done without massive, direct government investment in the industries—and with little or no regulation. The bigtime CEOs in effect were running the country—the tail wagging the dog.
Now that the situation is partly reversed and we are making significant investments through lending, it is clearly the government’s right—yes, responsibility—to take a hand in management. Mininally having a voice in hiring and firing the executives who helped bring down the industrial and financial pillars of our economy.
There’s always the argument that government can’t run businesses well—though Social Security and Medicare are damned fine insurance companies. A damned site better than AIG.
However, government isn’t really trying to run the businesses or planning to. Just supervising to be sure it’s done right—which obviously it was not under the current crop of managers.
A good case can be made that Obama should have fired a lot more bank and automotive CEOs. There is plenty of talent around to replace them.
Do we really want the bums who broke the banks and auto companies to continue to do same with all the money we’re spending to bail them out?
As the Tribune’s David Greising wrote recently:
“People are saying the U.S. has embarked on a new industrial policy with its investment in Detroit, Wall Street and other businesses. With the ouster of Wagoner and the redirection of GM’s strategy, it seems possible that industrial policy might yield good corporate strategy too.”
Okay Sen. Corker, call it what you want—call it socialism—but let’s not the rest of us get scared off by scary names. Remember, they called Medicare “socialized medicine” and that’s some of the best medicine ever prescribed.
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Don Rose is a regular columnist for the Chicago Daily Observer
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