Two of the nation's leading antagonists in the emerging political debate over the need for an industrial policy today failed to agree on even the meaning of the term.
Industrial policy--which, like a chameleon, changes complexion depending on where it is discussed--has become a buzz phrase in the political lexicon. But both Democrats and Republicans are trying to determine what it means as the jockeying begins for issues in the 1984 presidential campaign.
George Gilder, a conservative and author of the best-selling "Wealth and Poverty," and Harvard University professor Robert B. Reich, author of the recent "The Next American Frontier" and a champion of the industrial-policy concept, debated the issue today at the Semiconductors Forum, a high-technology conference cosponsored by Rosen Research and L.F. Rothschild.
"We do have a fairly elaborate industrial policy, but for reasons of ideology, we pretend not to have one," Reich contended. "Our primary industrial policy is protectionism. Notwithstanding their rhetoric and the Adam Smith ties, the Reagan administration has been even more protectionist than its predecessors."
While preserving basic industry on one end of the spectrum, the government foments a high-technology policy on the other through such agencies as the National Aeronautics and Space Administration, the Defense Department and the National Institutes of Health, Reich argued.
Gilder responded to the very sympathetic crowd, "The crux of industrial policy is that government has somehow had a central role in the development of technological innovation." In fact, he said, it does not.
Gilder contended that Reich "believes in the 'cock-a-doodle-doo' theory of economic development"--that when government crows, somehow the so-called "sunrise" industries are brought forth.
"The real conflict in society isn't between rich and poor, government and industry or male and female, but between established companies and the newcomer companies that will rise to replace them," Gilder said. "The problem with government is that it tends to favor established companies."
He cited several examples of how early government grants to established electronic companies in the fledgling semiconductor industry proved to be a waste.
The widely touted model for a U.S. industrial policy is Japan. Reich said that the high-tech agenda of the U.S. Defense Department and Japan's Ministry of International Trade and Industry, the architect of Japan's industrial policy--are very similar on a superficial level. But in a critical way, they are "strikingly different," he observed.
"The Japanese are primarily concerned with international commercial competitiveness, while the Defense Department mainly wants reliability," Reich said.
These twin de facto industrial policies of protectionism and national security are arguably not propelling the economy forward," Reich said. "In fact, they are crippling us."
"The secret of Japanese success isn't MITI," said Gilder. "It's that they have three times the rate of savings we do." He said that gives Japanese companies greater access to capital investment.