One day maybe Americans will awaken to the subject of “industrial policy.” That would be a good subject for an educator-in-chief to tackle, but here is a glimpse about the topic and why it is so important.
First, while conservatives have often fought the notion of the U.S. government having an industrial policy, the Department of Defense has long had an office devoted to it. A recent example of industrial policy talk and action was when President Obama sought to push for renewable energy policy that pegged solar power as a preferred source of energy because it is in “endless” supply and does no harm to the environment.
He went foul by having the government (Department of Energy) provide financial loan incentives to solar power cell manufacturers. Industrial policy doesn’t mean that the government should become a venture capitalist or banker. That is wrong headed.
Because America was caught flat-footed at the start of World War II without adequate manufacturing capability and capacity in place, the DOD embarked on a policy to ensure that sufficient manufacturing resources are resident to produce weapons, ammunition, and systems for military purposes to ensure national security.
There has been much concern of late about diminishing manufacturing resources.
America’s manufacturing industry, both commercial and military, is greatly dependent on the global supply chain. That is one reason why American foreign policy extends our reach so broadly in the world. That is to protect raw material resources, and to protect suppliers as they and their nation states become allies.
If America were to pull back, the nation would become vulnerable until and unless capabilities are restored at home.
President Eisenhower coined the term, Military-Industrial Complex, that he used to caution Americans about it becoming too powerful an influence. This happens with the propensity for business in that sector tends to outstrip economic balance.
Here is the problem, aside from foreign weapon systems sales, defense manufacturers and associated contractors, don’t produce commercial products and therefore do not add to the Gross Domestic Product. Instead, they consume tax revenues akin to being on corporate welfare. The “welfare” dimension comes into play when businesses and capabilities are kept in operation with capacity that greatly exceeds immediate demand. It is a reserve capacity.
Regulating activity to keep the systems in place and meaningfully busy requires defense industrial policy.
One dimension that needs exploring is the idea that to become a qualified defense manufacturer and contractor, companies must demonstrate commercial viability and being superior performers in the commercial free enterprise marketplace. After all, how can a company have commercial best practices if it doesn’t produce commercial products for consumers?
If America wants to make the economy more sustainable, it needs to consider ideas such as this to ensure that the ratio of guns to butter is optimized for sustainability.
Sequestration is a flash in the pan, and policy should not be formed based on that artificial invention by a dysfunctional Congress.
Here are several sources devoted to "industrial policy":
- Manufacturing and Industrial Base Policy
- Office of Secretary of Defense OSD
- Library of Economics & Liberty
See annotated list.
“Sequestration Drives Firms To Push DoD Industry Policy
Sep. 21, 2013 - 03:45AM | By ZACHARY FRYER-BIGGS
The composite-structure deckhouse of the destroyer Zumwalt is set on the ship at Bath Iron Works in January. Contractors are seeking a US defense industrial base strategy that would protect critical industrial capabilities that supply the US military.
The composite-structure deckhouse of the destroyer Zumwalt is set on the ship at Bath Iron Works in January. Contractors are seeking a US defense industrial base strategy that would protect critical industrial capabilities that supply the US military. (General Dynamics Bath Iron Works)
WASHINGTON — Few in the US national security arena are supportive of the defense cuts tied to sequestration, but now that those cuts appear to be here to stay, industry is pushing the Defense Department to take the next step: Manage its vast network of contractors to protect critical industrial capabilities that give the US its technological edge.
In particular, contractors are looking for a defense industrial base strategy, a clearly articulated outline of what DoD’s priorities are and how it intends to direct its money. That guidance would in turn help companies make investment decisions so they have the capacity in the right areas when the government comes calling.
Making those kinds of decisions will inevitably lead to winners and losers, but industry is willing to accept those kinds of divisions for the sake of clarity, said Christian Marrone, the Aerospace Industries Association’s vice president for national security and acquisition policy.
“Invariably china will be broken,” he said. “It ultimately does come down to service vs. service, program vs. program. But you have to prioritize somewhere. If you make everything a priority, nothing is a priority.”
And despite the contractors’ continued concerns about sequestration cuts, planning how to manage limited resources is crucial, Marrone said.