During the glory days of Japanese industrial growth (1960’s,
70’s, 80.s, MITI almost seemed to be running Japanese industry, and Japanese industry was becoming very
powerful indeed. In fact, it was
eating what we believed to be our lunch. Many people in the U.S. felt that the link between
Japanese Industries and this powerful government agency was cheating. After all, we believed the private sector
should be separate from the public sector. Many people thought we had too much
government meddling in business, and businesses should be freer to operate independently
with the goal of making money that would trickle down through society. If we did not have a national
industrial/ manufacturing policy, those who did must not be playing fair. Somewhat comparable to U.S. feelings
about China — there is something wrong with a nationally run capitalistic
system. It must not be fair
competition.
But we have always had industrial/manufacturing policy, or perhaps I should say many government influences on industry and manufacturing. We just have not had as coherent and powerful an industrial/manufacturing policy as Japan had in the days of MITI, or perhaps as China now has.
A friend of mine was responsible for foreign operations of a large U.S. company before his retirement. He claims that the largest factor responsible for outsourcing is not wage level, but rather tax policy. In fact he goes so far to say that the tax advantages to building overseas factories and outsourcing are so large that companies would be crazy not to do it. Our tax policy certainly influences industry. And our government influences industry and manufacturing through its very large consumer footprint. The total amount of manufacturing in the U.S. these days is on the order of 2 trillion dollars. But our foreign arms sales in 2010 was some 65 billion dollars and the Department of Defense spent 140 billion on procurement, and 79.1 billion on research, development, test, and evaluation.
U S. government funded research and development, although representing only a fraction of overall research and development in the U.S., is highly influential in determining future directions of industry, since it is more basic in nature. After all, the development of the transistor the GPS system, and the boosters for our space efforts were funded by the government. In the Stanford Engineering School, the majority of research is funded by government agencies, with the Defense Department providing a large share. None of this D.O.D. funding goes toward developing actual weapons. In fact, the Defense Department is now extremely interested in alternate sources of energy, because of the expense and difficulty of transporting petroleum fuels over long distances in areas such as the Mid East. But the nature of government sponsored research and development cannot help but influence future directions of industry (nanotechnology?).
And then there are patent policies, rules and regulations having to do with everything from toxic materials to fairness of competition, tariffs, education, setting the minimum wage, immigration policies, legislation on such things as unionization, social security, and medical care, and a myriad of other factors that directly or indirectly affect industry and manufacturing. So it is fairly naïve to say that we do not have a national industry/manufacturing policy. The question is should it be more coherent, more transparent, and more consistent with national goals. For instance, if employment continues to be a problem due to changes in global business patterns and technology, should the government more actively encourage activities that either hire or train people whose knowledge and skills no longer match opportunities?
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