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When picking winners is the urgent thing to do

Should nations single out select big products to manufacture, and put millions to work on them in the confidence of a big economic upside? China has done so — solar panels come to mind, in addition to wind turbines, high-end batteries and bullet trains. Japan has done similarly with cars since the 1980s, and South ...

By Steve LeVine

September 12, 2011, 2:26 PM

Should nations single out select big products to manufacture, and put millions to work on them in the confidence of a big economic upside? China has done so -- solar panels come to mind, in addition to wind turbines, high-end batteries and bullet trains. Japan has done similarly with cars since the 1980s, and South Korea more recently. But in the United States, this approach to industrialization is highly controversial -- swaths of the economic and political edifice scorn it in highly unflattering terms, such as that it is "chasing fads," and puts "the chosen few at a competitive advantage over all other job creators." (Above President Obama visits a Smith Electric Vehicles plant.) On the ExxonMobil website, Ken Cohen says parts of the Obama Administration's industrial policy amounts to "telling oil workers that their jobs are less valuable to the economy than those in other manufacturing industries."

Should nations single out select big products to manufacture, and put millions to work on them in the confidence of a big economic upside? China has done so — solar panels come to mind, in addition to wind turbines, high-end batteries and bullet trains. Japan has done similarly with cars since the 1980s, and South Korea more recently. But in the United States, this approach to industrialization is highly controversial — swaths of the economic and political edifice scorn it in highly unflattering terms, such as that it is "chasing fads," and puts "the chosen few at a competitive advantage over all other job creators." (Above President Obama visits a Smith Electric Vehicles plant.) On the ExxonMobil website, Ken Cohen says parts of the Obama Administration’s industrial policy amounts to "telling oil workers that their jobs are less valuable to the economy than those in other manufacturing industries."

Such detractors have gained fuel in recent weeks with the implosion of one of those winners — the solar company Solyndra, which has filed for bankruptcy after receiving $535 million in stimulus funding. Yet the Administration is pushing ahead. Just last Friday, it announced a $90 million loan for a Colorado solar power project.

Over the last couple of weeks, the New York Times has been exploring industrialization in an interesting way. Here is what the issue adds up to: Manufacturing produces a lot of jobs — five indirect jobs for each one in the actual plant, writes Louis Uchitelle in a piece yesterday. Therefore, if the U.S. wishes to drive down its long-term unemployment rate, factories must get up and running.

Uchitelle’s piece features the thinking of Andrew Liveris, the CEO of Dow Chemical, who has made himself a spokesman for U.S. re-industrialization even as he has relocated much manufacturing to China. Dow is benefitting from $141 million in public funding for a Michigan solar pilot plant, and $161 million for a nearby advanced battery factory for electric cars. In both cases, the grants amount to half or more of the cost, but Liveris says that is what is required to revive the U.S. as a manufacturing country. He says the federal government must pick winners. "I would not let free markets rule without also addressing what I want manufacturing to be 20 or 30 years from now," Liveris says.

Companies such as Dow locate factories abroad not just because labor is cheap, but because that’s where demand is growing, he says. When new factories go up in the U.S., they may serve export markets, but they must mainly be based on local demand.

At Fast Company, Jigar Shah suggests that choosing winners is a subtle concept: Government can and ought to set and fund general goals such as the creation of an alternative-energy industry — it should "articulate infrastructure visions and plans that support new sources of energy, solve the world’s growing water and food scarcity issues, and create new markets and industries," Shah says. But subtlety is the key — don’t overstep by identifying specific companies.

What Liveris is saying is that it’s too late for subtlety.

<p> Steve LeVine is a contributing editor at Foreign Policy, a Schwartz Fellow at the New America Foundation, and author of The Oil and the Glory. </p>