The Industrial Policy that Dare Not Speak Its Name



Accomplished real journalist and aspiring pajama-clad blogger (I know own two pairs of pajama pants) Steve Coll makes the provocative argument that we already have large-scale industrial policy in the United States and it’s called “defense procurement”:

Why does the United States have one of the most robust aircraft-manufacturing industries in the world? The answer is not that pure free markets have, through the workings of a natural law, granted us such a bounty. Yes, Boeing has been disciplined and strengthened by global-market competition, particularly with Airbus, but large-scale federal spending on defense contracts has crucially strengthened Boeing’s position as a locus of human capital, design experience, and innovation. In 2006, the federal government spent more than sixty billion dollars on aircraft manufacturers. Boeing received $20.8 billion, according to Government Executive magazine. (Lockheed-Martin received $27.3 billion, and Northrup-Grumman $16.7 billion.)

Why does the United States have one of the most sophisticated, innovative electronics industries in the world? Raytheon’s take from the Pentagon in 2006: $10.4 billion; Computer Sciences, $2.7 billion. And so on. General Motors received $806 million dollars that year, mostly from the Army, enough to make it the fortieth largest defense contractor on the list, just ahead, startlingly, of Johns Hopkins University, which received more than seven hundred million dollars, most of it from the U.S. Navy. (Note to self: Why?)

So we have an outsized industrial policy, centered on our national-defense strategy. General Motors receives a lot less than Boeing because our current strategy favors aviation over ground transportation. This strategy has shaped our patterns of employment and innovation—the subsidies do not remain only within the military, but spill across the civilian economy as well. Our industrial policy has also given us less inspirational national capabilities such as world-beating personal-security and mercenary services (Blackwater).

Viewed through this lens, ambitious proposals for government-assisted efforts to build a green collar economy look less revolutionary and more like transformations of the long-existing American approach to policy and the market.