Jeff Shear: The Wrong Word for Bailout
[Jeff Shear is the author of Keys to the Kingdom, an investigation into a weapons deal with Japan, published by Doubleday in 1994. His writing and reporting have appeared in The New York Times Magazine, The Washington Post, Rolling Stone. He was staff correspondent for the National Journal, regularly reporting from the White House and Congress, and co-authored The Buying of the Congress, by Avon Books.]
One of the crankier words we hear echoing from Republican ranks describing the financial bailout is…"socialism." David Sanger in the Times preferred “nationalization.” Not too many years ago, government’s scratching around in the business of business was known more academically as Industrial Policy. Ironically, at the time, industrial policy was a Republican notion. Championed by Robert A. Mosbacher, the 28th Secretary of Commerce, it called for government direction as an antidote to the trading might of the so-called Asian Tigers (Japan, Thailand, etc.), which exercised industrial policy. Introducing the term into the current debate might clarify matters and mark the way to a more rational argument. What is more, the term offers a bit of historical direction.
Industrial policy, government's picking economic “winners and losers," led to my book, The Keys to the Kingdom: The FS-X Deal and the Selling of America's Future to Japan. The book viewed the question of industrial policy against the backdrop of a contentious weapons deal developed by then-Secretary of Defense Caspar Weinberger. While largely a trade issue, the FS-X deal was cleverly trotted out as a symbol for a host of sins, among them the danger of America's defense industry offering up high technology goods with rich civilian market potential in the name of national alliances, which somehow boiled down to industrial policy. In reality, industrial policy was not an especially significant factor in the weapons deal, but when billions of dollars are at stake, any argument will do, and the debate over industrial policy loomed large for me as I sorted through "the selling of America's future.”
The more telling and ultimately decisive battle over industrial policy during those years took place over High Definition Television. At the time, America’s electronics industry was moribund. A nation that had invented the microchip, had suddenly lost the production battle to commoditize it. The very technology that promised to be the ubiquitous hum of all things electronic, the DRAM, had been stolen out from under us by overseas market forces driven by planned economies. At stake was the future of the American hearth and home, the TV. And, more than that, its emerging successor, the promised savior of America’s electronics industry, HDTV.
Commerce Secretary Mosbacher foresaw the problem, as well as the opportunity. He suggested hundreds of millions of tax payer dollars be used to build a domestic enterprise roughly on the order of the Navy’s national radio system. In the post World War One era, the Navy used its wireless communications network to both entice and to muscle the General Electric Company into creating what would become the Radio Corporation of America (RCA). For decades, RCA and the electronics industry it helped spawn represented the cornerstone of this nation’s comparative advantage over lesser nations: Yankee ingenuity. For a time, industrial policy worked. Then it didn’t. RCA is now, of course, owned by Thomson SA, a transnational headquartered in France.
At the time, 1989 -- the nation’s trade deficit with Japan was approaching an unprecedented $88 billion (in current dollars) -- Mosbacher seemed positioned to defend an industry crucial to the economy and the national defense.
Then along came the conservative polymath George Gilder. In articles in Forbes, The National Review, and books, Life After Television, he declared that “Apple and Intel…[will] overthrow the establishments of consumer electronics, telephony and television.” (emphasis mine.) His argument made sense: the U.S. already led the world in computers, and computers were the future of television. Gilder slammed Mosbacher’s plan to pour national treasure, on principle; and then buried it under the notion of pumping public wealth into a dying consumer electronics industry. Private investors would take care of business, and flow investment capital into companies where America held dominance over the Asian Tigers: computers. Soon after, Gilder and those who supported him found traction in Washington, and Mosbacher’s vision of industrial policy politely disappeared from the national conversation.
So what do we learn by changing the terms of today’s Congressional debate over the auto industry from “socialism” or “nationalization” to “industrial policy”? Was the Navy right in driving private industry to create RCA? Or was Gilder right in sinking the idea of government picking winners and losers through industrial policy? As I sit re-thinking the history of the first Bush era on my MacBook Pro (American), my iPod Touch (American) plays through a Onkyo AV receiver (Japanese) connected to a Samsung HDTV (Korean) taking signals through a Scientific Atlanta cable box (American) and a Sony Blue-ray disc player (Japanese). What can this mean for the U.S. auto industry? It’s not good news for either. Certainly, many of the electronic components sold by American companies like Apple and Scientific Atlanta have been manufactured overseas. The greater part of the circuitry comes from Asia. Doubtless, parts were assembled in Mexico. It’s a global economy.
And that makes all the difference in the world.
The autos parked in my driveway are made in Germany and Japan. I’ve never owned an American car. My father did, but I’m not sure I’d rush to buy one. The issues for me are quality, styling, and mileage standards. I want a Green Machine that starts every morning, to head out on the road to energy independence, the intersection where environment meets national security. But there’s little certainty that the Congress can force the automakers to find the right direction. George Gilder was right about HDTV; still, too much depends on Detroit to cavil over words like socialism or nationalization. The simple fact is that it may be necessary to turn the corner on industrial policy, not forever, but for now.
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