The defeat of Walter Mondale on Tuesday leaves the Democratic Party -- at least for now -- without an economic program to offer in Congress next year or a philosophy around which to build a political majority.
A year ago, liberal academics, labor economists and some Democratic members of Congress were pushing proposals for an industrial policy creating a strong governmental role in aiding declining industries and helping developing ones. They hoped to make this the keystone of a Democratic economic program for 1984.
But the sharp attack on that concept by prominent Democratic economists early this year stopped the industrial-policy movement in its tracks. It was barely mentioned in Mondale's campaign -- but the Democratic nominee found no other economic rallying point to replace it.
The divisions over industrial policy that will confront Democrats again next year were debated by four prominent economists shortly before the election at the Kennedy Institute of Politics in Cambridge, Mass.
Arguing for an industrial policy were economists Barry Bluestone of Boston College and Bennett Harrison of the Massachusetts Institute of Technology.
Arguing against industrial policy were Charles L. Schultze, former chairman of the Council of Economic Advisers in the Carter administration, and Robert Z. Lawrence, a senior fellow with the Brookings Institution.
Quotations from that debate excerpted by staff writer Peter Behr follow.
* Bluestone: We now have a 7 1/2 percent unemployment rate compared with 5 percent rates in the 1960s, and it seems we're going to be holding steady at 7 1/2 percent. But more important than that is some of the occupational skidding we're seeing in the economy. A large number of workers, many of them in basic industries, are being dislocated from those industries and moving down the occupational hierarchy.
Our institute at Boston College recently completed a survey of unemployed auto workers [for] the Department of Commerce. We've looked at those workers who are employed full time in new [jobs]. On average they have suffered a 30 percent loss in real earnings, 41 percent of the workers no longer have any employer-paid health insurance, 56 percent of the new jobs do not offer employer-paid pensions, 40 percent offer no paid life insurance. . . .
The growth in new jobs is often in very different industries requiring very different skills, and the new jobs are often located in very different parts of the country. But much more important . . . is the fact that the new jobs that have been created have been disproportionately in industries that pay lower wages and usually offer less adequate benefits.
* Lawrence: While our opponents have spoken about the problem of general standards of living, in fact, I think their concerns have been misstated. What they're really worried about is that certain individuals in this economy are moving from high points on the economic distribution to somewhat lower points. When a steelworker loses his job or an automobile worker loses his job, it's very likely that he or she will suffer a 30 percent decline in their living standard. . . . The crucial question that we really have to ask ourselves as a nation, is . . . should the state be guaranteeing individuals what their current income levels are?
It seems to be that the answer ought to be no. What we have to concern ourselves with as a society is the bottom 20 percent of the income distribution. . . . To ask people who earn average incomes on the order of $13,000 or $15,000 a year to subsidize employment of individuals who earn $26,000 or $28,000 because of the concern that they will lose their positions seems to me to be inequitable.
* Harrison: Structural change within manufacturing . . . has profound implications for public policy. But you don't see it if you don't look below the surface. The fact is that employment of production workers has fallen by 7 percent in manufacturing since July 1973. All of the growth of manufacturing in the 1970s has been managers, salaried professionals, technicians and their secretaries.
. . . Displaced blue-collar factory workers are not about to be retrained for the service jobs inside their companies; they're not going to become managers, accountants, lawyers, engineers or clerical workers. The dislocation problem is much greater than one would believe. . . .
In the recovery period of December 1982 to July 1984, the job growth in just one part of the nonmanufacturing sector, wholesale and retail trade, was greater than the job growth in all of manufacturing, including high tech. . . .
In July of this year, the average manufacturing weekly wage for production workers was $370 a week. For nonsupervisory service-sector workers, the average in July was $248. In other words, it takes 150 service jobs to make up in earnings from the loss of 100 typical manufacturing jobs. . . .
This isn't a young, underdeveloped country just starting out, having to put up with generations of miserably hard, dirty low-paid work as the price for building an industrial base. Many of our grandparents and parents already paid that price so that we in our generation could enjoy a high standard of living. That standard of living is now being threatened . . . by structural changes in the world economy and by the particular ways in which American corporations have chosen to respond to those pressures.
Even as we sit here, new local-content laws are being negotiated with different countries; General Motors, General Electric and IBM -- the leading-edge companies in society -- are negotiating new, nonmarket, non-price-based contracts with foreign firms, foreign governments and with each other in different parts of the world.
The point of all this, whether you like it or not . . . is they all reflect industrial policies by private companies, by foreign governments and by our government.
. . . An open public debate about structural change is absolutely essential if we are to find the path to economic growth with distributive justice and with an improved quality of life. Not growth for its own sake. Not competitiveness for its own sake. Growth with equity. That's what we think the industrial policy debate is really about.
* Schultze: There is one common thread to the recommendations about industrial policy . . . that government ought to have a specific industrial strategy which would correct the allocation of investment among industries, localities and firms in a desirable direction and different from what the market would provide. . . .
Neither Bluestone or Harrison or, in fact, any industrial-policy proponent has come up with specific objective criteria which government might use to substitute for the forces of the market in determining where private investment and other resources ought to go and how long they ought to stay there. And that's not surprising. You can't invest such criteria.
If the whole industrial-policy operation is not to be one vast pork barrel, government must have objective criteria for making such decisions. You can't stop all plant closings. You can't protect all declining industries. Which ones and how much? You can't support all new ventures. Which ones? Government must pick and choose. . . .
One set of problems we don't need is a governmental industrial policy trying to substitute its allocation decisions for those of the market.
Finally, the whole thrust of the industrial policy recommendations is terribly dangerous to democratic government. The more political power is turned over to producer goods -- and that's inherent in all this -- organized by industry, the more we invite the domination of politics by economic power and the triumph of the economic interests over the common good.