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Post-election thoughts, 1: the return of “industrial policy”….

Some thoughts as we (my coauthors, Gitelson and Dudley), make our final revisions on the 9th edition of our American Government text….

Although I can’t do too much to my chapter on the economy, I’m now happy I decided to leave in the discussion of “industrial policy“. Along with “supply side economics,” it is a legacy of earlier editions that I just refused to let go of as those concepts faded from the political scene during the late Clinton and GWB years. But recent events seem to augur well for these ideas — or at least industrial policy — emerging from the ashes.

Anticipating how I will deal with the emerging situation in the tenth edition (or a revision of the 9th in 2010 if all goes well), the debate over TARP — the Troubled Assets Relief Program (a.k.a. the “$700 billion bailout”) — is heading in the direction of a major industrial policy. The purchase of toxic assets has now given way to equity buys in the financial sector, with critics calling it “nationalization” or “socialism for the wealthy” (“state capitalism” is another term being thrown about).

But the way this is playing out (in policy scholar jargon, “being implemented”), we have a process of government picking winners and losers — and investing in the winners accordingly while letting the losers suffer the whims of a government-shaped marketplace.

Many regard the reconfiguration of the AIG deal that was announced today as the first step into the non-financial sector (although insurance is not quite industrial), and the voices are loud and clear that something has to be done for GM, Ford and Chrysler beyond merely lending them money to develop small, fuel efficient cars (although that pre-crisis move certainly qualifies as industrial policy).

If and when the dust settles, we might actually here the phrase “industrial policy” again become part of the debate again….

November 10th, 2008 Posted by | accountabilitybloke | no comments