Thursday, December 08, 2016

Two Ways of Looking at U.S. Industrial Policy

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U.S. industrial policy, as practiced (click to enlarge; source)

by Gaius Publius

I was of two minds,
Like a tree
In which there are two blackbirds.

    (with apologies to Wallace Stevens)

Much of the debate around U.S. trade policy — or "trade" policy, since so much of it really concerns capital flow and "investor rights" than it does actual trade — is really an attempt to define and direct U.S. industrial policy.

Here's one definition of "industrial policy":
The industrial policy of a country, sometimes denoted IP, is its official strategic effort to encourage the development and growth of part or all of the manufacturing sector as well as other sectors of the economy.[1][2][3] The government takes measures "aimed at improving the competitiveness and capabilities of domestic firms and promoting structural transformation."[4] A country's infrastructure (transportation, telecommunications and energy industry) is a major part of the manufacturing sector that often has a key role in IP.
Ignore the part about "aimed at improving the competitiveness of domestic firms," since industrial policy can have other, more pernicious goals, as you'll see shortly. Industrial policy certainly promotes "structural transformation" when it acts. In the same way, by inaction industrial policy leaves in place structures it prefers not to disturb.

In short, "industrial policy" is what a nation does or does not do to structure its manufacturing capability — its ability to produce good domestically, with domestic labor — as it wishes. In other words, the goal of a nation's industrial policy is to enable the wishes of the nation's leaders, whatever they are, even when those wishes are other than "improving the competitiveness of domestic firms."

Let's look at two definitions of current U.S. industrial policy, in particular, mine and Marcy Wheeler's. While quite different, these definitions are not mutually exclusive, since, as the piece quoted above points out, "Industrial policies are sector-specific." One (mine) deals largely with manufacturing for the privately financed consumer-based economy. Wheeler's deals largely with the publicly financed and supposedly military-based economy.

First my own definition, then Wheeler's.

U.S. Industrial Policy — Beggar the Nation to Enrich the Wealthy

If you consider the effect (i.e., the goal as practiced) of U.S. industrial policy, you can't in good conscience say it's "aimed at improving the competitiveness of domestic firms," since what would improve that competitiveness (that is, bolster the competitiveness of goods manufactured domestically) is the kind of protectionism practiced during the first 200 years of the nation's history, explicitly argued by Alexander Hamilton and adopted under the George Washington administration.

The Washington administration, and every administration until Reagan's, had as a goal to increase the competitive success of the domestic manufacturing sector, the sector powered by U.S. labor, relative to both domestic (U.S.) markets and world markets. Under Reagan, and under every president since — Bush I, Clinton, Bush II, Obama — the U.S. manufacturing sector, or that part of it that services the consumer economy, has been systematically dismantled. (The arguments that this is true are legion, but for the short version, think NAFTA.)

Thus my definition of U.S. industrial policy as practiced:
Current U.S. industrial policy is to move our consumer manufacturing capability out of the country at the fastest possible rate and to hand the (untaxed) savings to billionaires, using corporations as a pass-through.
That is, the people who control U.S. government policy vis-à-vis the manufacture of consumer products make sure that the nation's manufacturing worker class is made poorer so that the savings in labor cost can go into the pockets of the corporate ownership and financier classes. They do this to the greatest extent possible, and at the fastest rate allowable under current conditions.

They do this by action — through treaties like NAFTA, for example, as well as numerous bilateral agreements — and by inaction, through tax policies that don't interrupt, or in many cases accelerate, the wealth drain out of the worker class (including white collar workers) into the pockets of the international wealthy.

Regarding U.S. industrial policy for the consumer manufacturing sector, a person would be hard put, I think, to disagree. Which is why I wrote at the start of this piece that the "wishes" or goals of a nation's policy don't necessarily have to be beneficial to its manufacturing sector. In this case, the U.S. beggars (dismantles) its manufacturing sector for another goal — the enrichment of those who control the political and political-messaging processes.

The F-35 As U.S. Industrial Policy

Marcy Wheeler takes another approach to determining what U.S. industrial policy is, and hits the nail on the head, at least as regards the military-industrial-congressional sector. Wheeler discusses that here (my emphasis):
Our Industrial Policy Is the F-35

...I actually think the [Carrier] deal ought to elicit a more interesting discussion of industrial policy — the kind of systematic intervention that [economist Jared] Bernstein talks about that might actually do something about the hollowing out of America’s manufacturing base.

Such a discussion has long been forbidden in American political discourse, in part because the same economists pretending such whack-a-mole bribes haven’t become the norm in American political life also pretend that an unfettered “free” market (always defined to include mobile capital and goods, but not labor) will benefit everyone.

Yet even during the period when any discussion of industrial policy has been forbidden, we’ve had one.

Our industrial policy consists of massive US [taxpayer-financed] investments in manufacturing war and intelligence toys that we then sell to foreign governments. When done with Middle Eastern petro-states like Saudi Arabia, that trade goes a long way to equalize our foreign trade deficit, but it contributes directly to instability that then requires us to intervene and build more war toys. That investment in war leads, in turn, to a disinvestment in publicly funded infrastructure that could also provide jobs in the heartland.

The most obvious symbol of our unacknowledged industrial policy is the F-35...
Wheeler goes on to add:
Our current industrial policy, you see, feeds so few prime contractors that they are virtually immune from the competition that might pressure them to deliver quality goods. Which leads, in turn, to rework, contract overruns, and contractors walking out of the building with our government’s most closely guarded secrets, all with no consequences.

Let’s stop pretending (as this piece does) that America’s manufacturing, increasingly dominated by the production of war toys, exists in a a real market, shall we?
Which is where our views converge:
Once we do that, we might begin to address the diseases of our defense contracting and — more importantly — rediscover the value of investing in other kinds of manufacturing that our country needs to have. Justify these investments by some future defense need, I don’t give a damn (though there are military officials who will soberly explain the risks of the hollowing out of our manufacturing base). But invest in the technologies the US needs to stay competitive and retain a manufacturing base.
And there it is, two definitions of "U.S. industrial policy," one for manufacturers in the privately financed consumer sector and one for manufacturers in the tax-payer financed military-industrial-congressional sector.

Interesting how the source of the money used — whether it comes from the public pocket (yours and mine) or the pocket of those who own the business — determines where the manufacturing occurs. It probably helps a lot that publicly financed manufacturing includes a very generous profit guarantee (which Wheeler also discusses), a guarantee not available to private corporations.

These must guarantee their profit — and their mahogany suite compensation and "golden parachutes" packages — by taking from tax-payers in another way. They take from them directly, in other words, in the form of lost wages, since they can't use the IRS as an extraction tool.

GP
 

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5 Comments:

At 10:38 AM, Blogger Gadfly said...

Let's not forget that Bernie loves him some F-35s and has for years: https://socraticgadfly.blogspot.com/2015/02/hypocrisy-alert-bernie-sanders-wanting.html

 
At 12:00 PM, Anonymous Anonymous said...

The CMIC aside, the usa has had as its sole IP: whatever benefits the money, do; whatever benefits WORKERS (as opposed to consumers), fuck them all.

That's even been true in the CMIC sector as defense corporations move domestic factories around to find the cheapest non-union, non-benefitted labor, least onerous ecological requirements and dumbest electorates it can find. And the gravy from defense contracts *ALL* goes to the board and stockholders... a fraction of which is to be recycled in the form of lobbying, campaign bribes and promises of cushy 8-figure incomes for those suffering electoral demise.

 
At 12:20 AM, Anonymous Anonymous said...

I quote Michael Parenti for an analysis of not only the complete US economy but also that of the entire global capitalist system:

"There are a lot of people who still don’t get it. They don’t get it that these guys are playing for keeps, that they are going after you, that they are not going to leave any little bit left for you. There’s only one thing that the ruling circles throughout history have ever wanted, and that’s everything. There’s only one thing they want: all the wealth, the treasures, and the profitable returns, all the choice lands and forest and game and herds and harvests and mineral deposits and precious metals of the earth, all the productive facilities and gainful inventiveness and technologies, all the control positions of the state and other major institutions, all public supports and subsidies, privileges and immunities, all the protections of the law and none of its constraints, all the services and comforts and luxuries and advantages of civil society with none of the taxes and none of the costs. Every ruling class in history has wanted only this: all the rewards and none of the burdens. Their operational code is, We have a lot. We can get more. We want it all. And if you don’t know that, you’re in a sad place. If you know that and you don’t know anything else, you know more than if you know everything else and you don’t know that."

From: "Fascism, the False Revolution"
http://tinyurl.com/4x7synt
-----------------------------------

John Puma

 
At 4:08 AM, Anonymous Anonymous said...

I present a quote from Michael Parenti that is a succinct analysis of both the complete US economy and the global capitalist system:
"There are a lot of people who still don’t get it. They don’t get it that these guys are playing for keeps, that they are going after you, that they are not going to leave any little bit left for you. There’s only one thing that the ruling circles throughout history have ever wanted, and that’s everything. There’s only one thing they want: all the wealth, the treasures, and the profitable returns, all the choice lands and forest and game and herds and harvests and mineral deposits and precious metals of the earth, all the productive facilities and gainful inventiveness and technologies, all the control positions of the state and other major institutions, all public supports and subsidies, privileges and immunities, all the protections of the law and none of its constraints, all the services and comforts and luxuries and advantages of civil society with none of the taxes and none of the costs. Every ruling class in history has wanted only this: all the rewards and none of the burdens. Their operational code is, We have a lot. We can get more. We want it all. And if you don’t know that, you’re in a sad place. If you know that and you don’t know anything else, you know more than if you know everything else and you don’t know that."

From: "Fascism, the False Revolution" 1996
http://tinyurl.com/4x7synt
--------------

John Puma

 
At 9:01 AM, Anonymous Anonymous said...

John:
Now you know why I keep mentioning the intellectual pygmies in the electorate -- they have been affirming this since 1980 without exception.
It's to the point now that neither "party" really has to pretend any more. $hillbillary only barely lost, and $he was the "left" personification of your quoted meme. Everyone on the right has been unabashed in their pursuit of that since ... well forever.

 

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