Elizabeth Warren wants an industrial policy. Here are the traps to avoid.
In a new campaign proposal for reviving American manufacturing, Sen. Elizabeth Warren (D-MA) argues that American companies have recklessly offshored industry, prioritizing shareholders at the expense of working- and middle-class jobs. To address this situation, she calls for aggressive interventions that include:
Weakening the U.S. dollar to spur export industries;
Expanding publicly funded R&D;
Requiring the government to purchase American-made products;
Investing in postsecondary apprenticeship programs;
and creating a “Department of Economic Development” to coordinate trade- and development-related agencies around a National Jobs Strategy.
Warren cites the experiences of Germany, Japan, and China as countries that have had success with industrial policies America is allegedly too timid and constrained to pursue. “If we want faster growth, stronger American industry, and more good American jobs,” she writes, “then our government should do what other leading nations do and act aggressively to achieve those goals instead of catering to the financial interests of companies with no particular allegiance to America.”
Sen. Warren’s proposal comes at a time when “industrial policy” — once a term of derision — is gaining plaudits among commentators and academics alike. But enthusiasm for what Warren calls “economic patriotism” must be tempered by careful analysis of the specific policies being proposed. In what follows, I take a closer look at the tools other rich countries have used to develop and sustain globally competitive manufacturing industries, and gauge their applicability in the U.S. context.