Is it past time for the United States to have an industrial policy?

Correction:  Apparently it is an urban legend that data centers use a lot of water. The water used for cooling is recycled in the cooling process. Therefore, water usage by data centers is moderate.

Is it past time for the United States to have an industrial policy?

Paul Craig Roberts

Mark Fasteau and Ian Fletcher have given us a well researched and thoroughly documented study of the important role that an industrial policy could play. In 692 pages of text, 107 pages of footnotes, 18 pages of bibliography, and 12 pages of index, the authors come close to exhausting the subject in their book, Industrial Policy for the United States.

Industrial policy was last heard of in the United States back in the 1970s and 1980s when a few on the liberal-left believed that the US economy required more government regulation than it had. At that time industrial policy had a bad reputation. It had been utilized in Japan.  Sony had been told not to manufacture and market quality sound, and Honda had been told not to enter automobile production. Both companies ignored the industrial policy, and their successes are well known stories.

Previously, I had no use for industrial policy, seeing it as just another opportunity for government to misdirect the economy.  In the passing years, events have made me see, in principal, the usefulness of an industrial policy. However, I doubt that industrial policy would be any more likely to escape being captured by interest groups than any other regulatory policy.

Nevertheless, the absence of an industrial policy also has costs. What brought industrial policy back to mind is the construction of large numbers of massive data centers in locations without sufficient electricity to power them and water to cool them. The implications for nearby communities are serious because of the impact on their power bills and water usage. Before communities are overwhelmed, sufficient studies should be done to discover if sufficient power and water exist for their operation and, if not, to evaluate the cost and time frame involved in preparing the area for the data centers and assigning the cost to the data centers.

Another example is government pressure to replace the combustion engine with electric vehicles. California, and if not California another blue state, passed or attempted to pass a law requiring all vehicles licensed in the state to be electric by a near term date. The legislation came naked of any study if it was possible to provide sufficient electricity to convert the vehicle fleet from combustion engines to electric. Already states such as California and Texas suffer brownouts during hot summer periods. 

Another example is the Democrats’ policy of open borders that in recent years has brought into the United States, according to estimates, 30 million illegal immigrants. This massive tax and environmental burden was imposed on communities already in budget difficulties from the offshoring of manufacturing jobs and the shrinkage of the middle class tax base. The burden was imposed on communities that are already facing water supply difficulties. Alabama, Georgia and Florida are in legal conflict over the water originating in North Georgia that flows into the Gulf of Mexico via the Apalachicola river. Atlanta, a city that the absence of forethought permitted to outgrow its sustainable borders, refuses to release the water. There are many other examples in the southwest of cities grown too large sitting on top of depleting aquifers. In fracking areas wells and underground water have been polluted. The resource base of the activities undertaken was never considered.

In principal, a well functioning industrial policy would have first explored the capability of the affected regions to support the heavy energy and environmental needs of the activities undertaken.

Studies of the decline of civilizations point to the over-exploitation of resources available to the civilization. Thus, it can be argued that the absence of industrial policy can lead to civilizational collapse. Perhaps realization of this would protect industrial policy from being captured and exploited to serve the self-interest of organized lobby groups.

Regardless, the issues raised in Industrial Policy for the United States should become part of public policy discussions and economists’ concerns.