A Four-Step Plan for Re-Industrialization
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Over the long-term, the debate on “industrial policy” has focused on picking specific industries and companies as winners or losers, typically driven by incentives. A correct, affordable and successful industrial policy would, instead, create the conditions in which the U.S. and foreign companies will invest in U.S. re-industrialization in their own self-interest. We need to pick “industry” not “industries.” We need to recreate conditions in which the free market will, once again, allow the U.S. to be largely self-sufficient.
In the decades since World War II, the United States has sacrificed its manufacturing economy based on assumptions about globalization. Some actions were generous: The U.S. did so in part to help the world recover from the war and later to help low-income nations achieve democracy and middle-class status through preferred terms on exports to the U.S. Some were more self-serving: U.S. multi-national corporations found lower cost sources for a broad range of consumer goods. The focus on lower purchase price promised greater apparent immediate profit, even if it also entailed unrecognized costs and longer-term risks.
A correct, affordable and successful industrial policy would create the conditions in which U.S. and foreign companies will invest in U.S. re-industrialization in their own self-interest.
Many of those assumptions are proving false. The economic and security costs of the U.S. losing much of its industrial base – costs both for the U.S. and for the international system – are becoming evident. But too often this is framed as an irreversible trend.
It doesn’t have to be.