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Warren's plan is a better form of economic nationalism

By Robert B. Reich, Tribune Content Agency on

Trumpian economic nationalism is a zero-sum game in which the industries of the future are dominated either by China or by the United States. We win or they win.

The loudest opposition so far has come from multinational American corporations and their Republican shills in Congress who don't want tariffs stopping them from making bundles of money around the world.

So is this really the choice -- Trump's zero-sum economic nationalism or unfettered free trade? No. In the 1980s, America debated a third alternative.

The phrase then was "industrial policy" -- putting national resources (government spending on research and development, along with tax subsidies and export incentives) behind emerging industries while making sure American workers got the resulting experience and jobs.

Industrial policy centered on a putative deal between the American public and American business: Corporations would get extra resources to grow bigger and more innovative. In return, those corporations would create high-paying jobs in America and focus on sectors promising the greatest social returns.

This wasn't laissez-faire economics, but nor was it zero-sum economic nationalism. America's investments in its workers and leading-edge industries wouldn't prevent other nations from making similar investments. Such competition would be positive-sum: If all nations' workers became more productive, and all socially beneficial industries grew, the Earth would be better for everyone.

 

Those of us who advocated such a policy argued that America already had an unintentional one: Our giant defense industry had turned America into the world's leading maker of bombs, airplanes, satellite communications, cargo ships and container ships, as well as the leader in computers, software and the internet. Our subsidies for pharmaceuticals under the National Institutes of Health were central to our dominance over new drugs.

But America's hidden industrial policy didn't necessarily benefit America. Military spending is bloated and wasteful. The NIH doesn't require drug companies using its research to invest in good jobs in America, or to hold down drug prices.

Moreover, special tax breaks for oil and gas have hastened climate change. The huge 2008 bailout of Wall Street with no strings attached allowed corporate executives to prosper even as millions of Americans lost their homes and savings because of the Street's gambling addiction.

State and local subsidies to lure companies (think of Amazon's recent auction for its new headquarters) have merely moved jobs from one state or city to another and are ignored when a company decides it can do even better by moving elsewhere.

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