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January 3, 2011

America Needs An Industrial Policy

-- by Dave Johnson

This post originally appeared at Campaign for America's Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.

Over the weekend Daily Kos ran a front-page story, America needs an industrial policy, making the point that Germany is doing well because their government understands that a national policy of promoting manufacturing drives the economy and jobs.

There is a simple reason why Germany manufactures so many high-end goods, from the best watches to the finest grand pianos, all the way up to Porsches and highly complicated precision instruments: it is the policy of the German government.

Well, it isn't exactly a policy. It is more of a framework. Germany's method of creating wealth is straightforward: 1. Produce a highly educated workforce. 2. Have that workforce create and make advanced, precision things for high wages. 3. Export the things at a high price and then re-invest that money back into item 1. This is why Germany is the Number 2 exporter in the world despite having only 27 percent of America's population and only 6 percent of Number 1 exporter China. The Germans realize they cannot beat either China or India based on cost. Advanced nations can't compete on cost. America could bust all the unions, get rid of the minimum wage, eliminate all social benefits and taxation and we would still lose jobs to low-wage nations. Germany decided to avoid going down the same path of downward spiral among its middle class that we are in. Instead, they invest in their people and in research.

Investing In People And Research Pays Off

As the Daily Kos story points out, Germany invests in their people and research. "America could bust all the unions, get rid of the minimum wage, eliminate all social benefits and taxation and we would still lose jobs to low-wage nations." And the results are there for all to see. Germany is recovering faster from the economic downturn with jobs returning. Manufacturing and exports lead the way.

Over the last 30 years, and the last 10 years in particular, America has conducted an experiment in letting "the markets" decide. Markets are a one-dollar-one-vote system, and of course those with the most dollars to begin with ended up deciding that they should be the primary beneficiaries from this experiment. Namely, them. Wall Street's share of profits jumped from around 16% to around 40% of all profits in the economy.

The "markets" experiment has failed for the rest of us. It is time for We, the People to realize that our government is us, and we need it to make decisions for us. Markets mean one-dollar-one-vote. When dollars decide those with the most dollars will decide to do things that benefit them. Democracy means one-person-one-vote, and that means making decisions that benefit We, the People. Our government - We, the People - must start deciding things that work for We, the People and not those who already have the most of everything. That means developing an industrial policy that invests in We, the People to pull us out of the mess that one-dollar-one-vote has put us in.

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Posted by Dave Johnson at January 3, 2011 4:59 PM


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