Bruce Bartlett has an interesting column at The Fiscal Times posing the question, can Obama’s manufacturing initiative really work? Some of the conclusions will be controversial at best, but it’s worth a read if only for some important history lessons. One of the key items takes a look back at a time when Japan was still the envy of the world – manufacturingwise at least – and the United States government was poking around in the then emerging technology of HDTV.
Even among Republicans there was admiration for the Japanese model. During the George H.W. Bush administration, where I worked in the Treasury Department, it had strong supporters at the Commerce and Defense departments. One of the key battlegrounds was high-definition television (HDTV), which was just in its infancy. Commerce was very keen to support American manufacturers of HD televisions and DOD agreed in order to support the American semiconductor industry. (Semiconductors are a major component of HDTV.)
The author notes that there was internal strife in the administration, with Treasury and the Council of Economic Advisers advising a hands off, free market policy. In the end they were shouted down and Washington chose to place a bet on American semiconductors. How did that work out?
Years later, one of the people at Commerce who supported subsidies for HDTV admitted to me that the technology that it wanted to support turned out to be inferior to that which ended up being the standard. It also turned out that the real money was not to be made manufacturing HDTV’s, but in producing the programming, an area where the U.S. remains dominant.
The Obama administration should, in some sense, be supported for taking an interest in seeing American manufacturing restored. But whether it’s Barack Obama or his eventual GOP challenger in office next year, we need to be wary of what kind of support is offered.
On the one hand, we could see more Solyndra style, federal nose under the tent activity trying to apply some ham handed “help” to manufacturing under Obama. One of the alternatives, offered by Rick Santorum, would see a bizarrely deformed tax code offering special preferences to manufacturing. Unfortunately, both of these ignore the lessons of the G.H.W.B administration and their experience in meddling with the free market. As the author found, a group of elected bureaucrats with little to no knowledge or experience in technology and industry are almost perfectly unsuitable to pick winners and losers. Offer a level playing field with the fewest impediments possible and the clearest path to success and prosperity, and innovation (along with the associated jobs and GDP) will follow.
Those who fail to to learn from history are doomed to repeat it. I’m sure I read that somewhere…