Tuesday, January 18, 2011

What's Industrial Policy?

Is it just me or is it slightly ironic to look at the economic directions of China vs. the US and suggest that the US's problem is that there's TOO MUCH Federal involvement in the US economy?

On one hand we have a booming economy that's aggressively luring industry, discouraging offshoring, and investing in the next generation of power generation.

And on the other hand we have a stalled economy with no Industrial policy at all and in fact rewards businesses for shipping jobs overseas.

This is what we call "cognitive dissonance"

An article in the Huffington post asks and answers an important fundamental question after suggesting the US needs an industrial policy, and that's simply...

What is an industrial policy?

What is an industrial policy, exactly? In the United States, it would entail a sustained program to encourage homegrown industry. It would include a more assertive trade policy (you block our goods, we'll block yours), but also such things as chartering a national development bank, ending the favorable treatment of foreign investments, creating new tax credits for research and development, and actively discouraging offshoring, for starters.

Basically, what overarching strategy does the US have as a way to encourage manufacturing and business?

Right now?

None. The US has no strategy. Right now the strategy is to do just the opposite and hope purchasing power parity, or goods that can be made elsewhere and then bought cheaper here, makes up for lost jobs and declining wages.

But alas...most US companies now shipping jobs to China no longer even seek to sell here. The market here is saturated. Instead they're looking to other markets and other nations. That means our jobs are leaving to china, but our good aren't getting cheaper anymore.

China has a great strategy for promoting and luring manufacturing and industry. The US has NO strategy.

Time to change that.

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