Recommended reading: Marc Levinson's "An Extraordinary Time - The End of the Postwar Boom and the Return of the Ordinary Economy" or my title: Why leaders try variations of the same thing and wonder why it fails every time. Link to Barnes and Nobel book store.

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Industrial Policy

by Richard the Engineer written from 2010 to today

The Current U.S. Industrial Policy

Those people saying we don’t have an industrial policy are too inside the forest to see any relationship between the forest and the world. Clearly exemplified by the “short-term managerial reward system” we have seen the transformation of American business from entrepreneurial capitalism to accounting centered capitalism. This industrial policy of allowing the financial people to play at business is obviously not suited for long-term prosperity.

Based on finance, not industry

 As soon as possible the accountants take over from the original entrepreneurs

Industry becomes a front for the financial guys. It doesn’t matter what is produced.

Unless specifically planned, the ownership of a company will pass to a bunch of accountants who have no idea what the business does except create spreadsheets to make the management important while they drive the business into dust.

Entrepreneurs and accounts (and salespeople) look at problems completely differently. Only the entrepreneur’s view is a building solution.

Only occasionally does a government program help small business. No one helps small business. There is no industrial policy concerning small business.

As long as natural resources could be easily exploited to increase wealth, creating new industries as new technologies came on line. These technologies include the steel industry which created the railroad industry which increased commerce. As these industries matured they passes to accountants. Without broadly increasing industries, like railroads, eventually all of the economy is controlled by people without any idea of how to make their companies work and grow.

The entrepreneurs find it hard to understand why they need to control government. It was several years and a crisis or two for Bill Gates to understand the need to spend money influencing government. Accountants feel it’s one of the most important parts of their business.

One of the most important current policy parameter is the cost of a product is more important than the needs of society. It’s often made into a “religious” issue.

Globalization is not an industrial policy

If both production and consumption are in the same taxing district no trade imbalance would exist. That’s due to taxes being used to recalculate wealth geographically.

Are we at a time where the old capitalism no longer works and the new capitalism is one with the engineers and entrepreneurs in charge? They have morals which salespeople and accounts lack.

Europe had problems with cheap American products in the 1800’s and even 1900’s. Europe actually invested a great deal of money in America. Things like railroads, mines, and cattle ranches.

Free markets are never free, only a variation of trading. Buying is not trading.

Greater than a 5% trade deficit dooms an economy.

The easiest way to maintain the unbridled “capitalism” is to reject any universal alternatives, especially if the alternative capitalism would produce more wealth in the same period of time.

Industrial policy actually is important. Nevertheless only limited industrial policies have ever been placed in real affect. Canals, railroads, and the Interstate Highways are examples. So is WWII.