Dreaming Big to Keep America Rolling
Economist Philip Verleger was traveling in Asia last month when the news broke that General Motors was slashing 30,000 jobs to try to reverse its death spiral. A Japanese economist he had known for many years asked him a stark question: "What great nation will allow its major manufacturing company to fail?"
The convulsions wracking GM are scary, but they're getting surprisingly little attention amid America's sea of other troubles. Certainly, we've heard barely a peep out of the Bush administration, which evidently worries more about keeping energy companies happy than Rust Belt manufacturers. Commentators have blamed GM management for being too shortsighted and its workers for being too greedy. But few people seem to appreciate that the nation as a whole has a stake in maintaining a dynamic industrial base, or that government policies could help reverse our industrial decline.
GM's crackup is a snapshot of where we're all heading unless people take the country's economic problems more seriously. America's role in the global economy increasingly is that of the freeloading consumer, gobbling up what's produced overseas by more frugal and industrious people. We take out another mortgage on the house, buy another Toyota and think, what the heck? But then, who can expect individuals to act responsibly when we have an administration that asserts, in apparent sincerity, that the proper response to our massive deficits is more tax cuts that plunge us even deeper into debt? We've become so inured to public-sector mismanagement that the idea of government solving problems is almost laughable.
But suppose we took GM's near-death experience as a national wake-up call and decided to get serious about reviving the long-term health of the U.S. manufacturing sector. What if political leaders treated this as a fundamental national mission, equivalent to President John F. Kennedy's call to put a man on the moon? Could government make any difference?
Try this thought exercise: Suppose a government plan could revitalize the automobile industry and the rest of the transportation sector, encouraging it to leapfrog several generations of technology; suppose this same plan could cut U.S. dependence on foreign oil to zero; and suppose, finally, that the plan could develop new technologies that would bump our economy to a higher growth path and foster U.S. economic leadership in the 21st century. Would that idea be worth exploring?
This strategy for revitalization was proposed last year in a study by Amory Lovins called "Winning the Oil Endgame: Innovation for Profits, Jobs and Security." It got too little attention at the time, but I found myself rereading it this week as I pondered the mess at GM and tried to answer the question posed by Verleger's Japanese friend.
Lovins's plan is precisely the sort of thing a great nation should explore as its biggest manufacturer is skidding off the road. The details are complicated, but the essence is pretty simple: Lovins argues that by radically transforming the materials used in cars, trucks, airplanes, office buildings and factories -- substituting carbon-fiber composites and other lightweight products -- the United States could cut its oil use by 29 percent in 2025 and an additional 23 percent soon thereafter.
These ultra-light vehicles would be nearly twice as efficient as today's hybrid-electric cars, with better performance and safety, Lovins argues. Fuel savings would pay for the extra cost of the vehicles in about three years. Meanwhile, Lovins proposes using biotechnology and other new techniques to replace hydrocarbons with biofuels -- cutting 25 percent more from U.S. oil consumption.
To stimulate the transition to this new industrial paradigm, Lovins proposes revenue-neutral "feebates" that would apply fees for inefficient vehicles and rebates for lightweight ones; he suggests a subsidized government program to lease or sell efficient cars to low-income Americans. To foster the new technologies, he proposes government measures that have worked well in the past: Pentagon procurement policies that drive innovation; federal loan guarantees to encourage retooling by automakers and others, and similar loan guarantees for the purchasers of new fleets of airplanes and trucks; and a $1 billion government prize (the "Platinum Carrot") to reward the most important innovations.
The bottom line, Lovins says, is that by investing a total of $180 billion over the next decade to end foreign oil dependence and stimulate strategic industries, the United States could save $70 billion every year starting in 2025. That's a pretty good payback.
I'm no technologist, so I can't evaluate the technical details of Lovins's proposal. What I like is that it's big, bold and visionary. It would shake an America that is sitting on its duff as foreign competitors clobber our industrial giants, and it would send a new message: Get moving, start innovating, turn this ship around before it really hits the rocks.