Industrial Policy, Again

In the official Republican response to tonight's State of the Union address, Representative Paul Ryan stated, "Depending on bureaucracy to foster innovation, competitiveness, and wise consumer choices has never worked – and it won't work now."

Actually, the microprocessor and the internet are two technologies that developed specifically because of government sponsorship. In the early 1960s, the US military bought large numbers of nascent microprocessors at prices designed to stimulate further development of the technology, in effect creating an artificial market to prop up the technology until it got a foothold in the broader commercial market. Without that assistance, the US wouldn't have become the center of microprocessor manufacturing that we became: no Intel, AMD, Texas Instruments, Microsoft, Apple... and the personal computer revolution would have come later and, probably, somewhere else. The PC revolution created countless jobs and became a new infrastructure-level productivity enhancer that increased US competitiveness and, I think, pulled us out of the early '80s recession.

The Defense Advanced Research Projects Agency is famously responsible for the development of the internet in the 1970s, which blossomed 20 years later and created another infrastructure-level increase in productivity and competitiveness. Again, I think that technology pulled us out of the recession in the early 1990s.

Today, there's no similar technology emerging from the labs, ready to conquer the world and make us all more productive, create millions of new jobs, etc. If Ronald Reagan hadn't pulled the plug on government-sponsored technology programs, particularly in environmental technologies, we might have such a new technology ready to create jobs and maintain our competitiveness. Lacking such a technology, we're left to compete with few advantages in a world full of lower cost producers, some of whom also have more natural resources. Republican demonizing of industrial policy has basically disarmed us economically.