Industrial Policy: The Road Not Taken

American Prospect (Faux) - In the 1970s, Wall Street and its economists defeated manufacturing.

By the mid-1970s, cracks in the American industrial base were already visible. For the first time in the 20th century, the United States began running trade deficits. Factory closings that had earlier been limited to apparel, shoes, and plastic toys spread to steel, small appliances, and auto parts. And the decision by the Arab states to control oil prices signaled that the era of cheap energy that had fueled American manufacturing was coming to an end.

These early signs of trouble set off this country's last serious debate over the question of whether the government should have a policy for supporting a healthy manufacturing industry -- that is, an "industrial policy."

For its advocates, industrial policy seemed a no-brainer. The manufacturing sector was the generator of productivity and innovation. It had been the engine of America's rising prosperity and the bedrock of its political as well as economic power. Without America's capacity to become the "arsenal of democracy" -- churning out the tanks, ships, planes, and ordnance that overwhelmed its enemies across two oceans -- World War II might well have ended differently.