America’s Blind Spot: Industrial Policy

Abstract

The current debate between the supply-siders, or conservatives, and the demand-siders, or liberals, is highly misleading. The Reaganites, for their New Deal, have embraced a supply-side strategy of macroeconomic management, and they have won the political mandate to prove their curative powers for our ailing economy. The opposition, with their tried but not-altogether-true Keynesian arguments for demand-side management, have had little choice but to accept the electorate's decision. Their hopes for the future may well depend on the failure of the supply-side experiment. The debate unfortunately sidetracks the nation from dealing with the root of our chronic stagflation and diminished global competitiveness the underlying industrial system. Neither side offers us a basis for revitalizing the declining industrial system, nor does either recognize the links between domestic and international economic policies. Even after a decade of one of the worst deteriorations in this nation's rate of capital formation, neither the liberals nor the conservatives offer us serious reasons why accelerated depreciation allowances should stimulate industrial development. They both ignore the fact that a decade of stagflation has created a massive crisis in investor confidence, which makes such across-the-board allowances all but useless. In a business environment characterized by in-