Laissez Faire Industrial Policy

The United States has arterial bleeding of the trade deficit. The "invisible hand" of the market is supposed to solve all our problems. If we can just get the dollar to go lower, foreign buyers will flock to buy our commodities. Above all we can not have an 'industrial policy.' The Secretary of Commerce, Robert A. Mosbacher, agreed to help fund a consortium of manufacturers and universities to get cracking on HDTV. He pledged $1.3 billion in government loan guarantees — not money, just guarantees of money.

The Plan was Nixed

The laissez faire minions of the White House nixed the plan. If economics is a system, subject to system properties with an underlying ecology as I think it has, then no policy is a policy. A laissez faire industrial policy is a policy characterized by permitting your competitors to organize on their behalf, while you steadfastly plan not to respond except in the market place of your competitor's choosing. It is as if we were back in the 17th or 18th centuries when the vast majority of capital enterprize was private (except for war) and operated without restraint. The present White House policy seems to be premised on the fact that we do not have much of a public sector to our economy and we should reduce that as much as possible. Public policy in the economy of the Reagan/Bush administrations seems to be restricted to war production and fooling around with the money supply and interest rates.

Partnerships

The government seeks partnerships in all aspects of its activities. The National Park Service has a specific initiative called Partners in Parks. The Justice Department recently sent a letter to all its employees asking them to adopt babies as one answer to the abortion problem. We as a government bailed out the Chrysler Corporation. The money was paid back ahead of schedule with a fat profit for the tax payer. We have corporate entities called National Defense Corporations in which the government owns the land, the buildings and the equipment, and hires a management corporation like Rockwell International to operate the facility as "government furnished equipment" to manufacture a war implement. The President called for a "thousand points of light." Was he asking for these volunteers to give something of value toward the running of the nation in order to excuse the Federal Government from exercising its responsibilities toward the citizen/sovereign or was he asking the volunteers to help him—cooperate with him to get the job done. The President would put something in the pot—the volunteer would put something in the pot.

The Other Viewpoint

Public policy on the economy has had such a remarkable effect in general that Lord Keynes based an entire theory of economy on it. J.K Galbraith wrote a book called "Economics and the Public Purpose," New American Library, New York, NY. (1973). Many people violently disagree with Keynes and Galbraith but they are the 'other' viewpoint and there aren't that many more view points.

A Blind Man In Elephant Country

There is good cause to maximize the effect of free enterprise but to fail to see it just as one of two parts of the economic equation along with the public sector is to be a blind man in elephant country. Should the public sector predominate? No. Can the private sector operate without the level laying field provided by government? No. Should the public sector compete with the private sector? In general no, but the public sector should be in those businesses that tend to be unfairly monopolistic because a means of obtaining pricing information is not otherwise available to insure competitiveness in the free market.

It's the Presidents's Call

We have laws to insure against cartelist and monopolistic practice. Why shouldn't we have laws that insure fair competition, domestically and internationally. The role of the President in domestic trade is problematical. The Congress has the express authority to regulate commerce among the several states. The role of the President in international trade is unequivocal. The President is the chief-administrator of our foreign affairs. If he and his agents fail to represent our interests in international trade, that interest can not be represented by anyone else. So when we see former President Reagan accepting honoraria in the neighborhood of $2 million for ten days of speech making in Japan we have to wonder if it was the interests of the citizen/sovereign that he represented during his administration.

The Government's Role

There is good reason for government participation in all aspects of industrial development. It is the simple reason of insuring competitiveness. When the government sponsors research, the government receives the patents. The inventor, if the patent is important economically, is handsomely rewarded, but the government retains the basic patent and the right to license it. Patents and trade secrets. Patents are a constitutional right. But the development of basic ideas never come in one fell swoop. Even well thought out patents need additional development to get all the benefits out of them. That is best achieved by making the patents available to as many individuals that want them and can afford the licensing fee. The more widely a good patent is disseminated the faster benefits will flow from them. I repeat, individual patents are wonderful, they are constitutional, they reward innovation and creative thought. Shared patents simply speed up the process.

Buying Technology

The Japanese—when they need new ideas—are prone to just go out an buy the company that has the technology since when they buy the company they also get the patents. If the patents are proprietary they go from being U.S. owned patents to Japanese owned patents. If they are licensed, that's another matter. Japan recently has demonstrated that it is quite capable of generating its own basic discoveries.

And speaking of Japanese cooperation, (which we were not), the Japanese recently granted a patent to Texas Instruments for a basic chip design TI filed for in Japan 50 years ago.

National Interest Industries

The President should think through his position on foreign trade. He does not need a domestic industrial policy, that's not his sphere of influence anyway; he needs an international trade policy based upon national interest industries — industries that are as vital to our economic national interests (economic hegemony) as the defense industries are to our political national interests (political hegemony).

The New Industrial Revolution

Information technologies will give birth to the new industrial revolution. They are vital to our economic and political well-being and it is just as important to be independent in the field of in formation technologies as it is to be independent in energy technologies. (We can do the latter with solar technology. We will die in our own waste matter if we try to do it with nuclear technology, cold fusion excepted.) Chip technology, computers, HDTV are all part of the picture. The deal the White House nixed would have plunged us headlong into the new HDTV technology. HDTV or some variation of it will be the way we see the future.

A laissez faire international industrial policy is one where you let the international competition clean your clock.

. . . Ted Sudia . . .

© Copyright 1989
Institute for domestic Tranquility