The Research Paper provides an analysis of two different economic policies and attempts to answer the question whether the US is better off with industrial policy or free trade. The analysis reviews Japan's industrial policy of the 20. century in order to answer this question.
Table of Contents
I. Introduction
II. Industrial Policy
III. Economic Freedom
IV. Conclusion
Research Objectives and Key Topics
This research paper examines the effectiveness of federal industrial policy in contrast to free trade principles, specifically aiming to determine whether government intervention in industrial structure can generate sustainable economic benefits for the United States.
- The theoretical and practical implications of national industrial policy.
- Comparative analysis of industrial strategies, focusing on historical examples like Japan.
- The role of economic freedom and market forces in fostering global competitiveness.
- The risks associated with government "picking winners and losers" in the economy.
Excerpt from the Publication
II. Industrial Policy
National Industrial policy is a set of economic reforms to change the industrial structure of a nation's economy. Proponents of National Industrial policy are opponents of an unfettered market and think that the government has to foster economic growth by more than just fiscal and monetary policies. One of the most famous proponents of industrial policy was Harvard Professor Robert Reich. He claimed in the 1980s that the U.S. Economy “had been unraveling since the sixties.” (McKenzie, n.d.). He argued that it was in a phase of deindustrialization. The core industries steel, textiles, rubber, shoes, and automobiles were declining and becoming increasingly uncompetitive in the global market. Reich believed that foreign nations that used industrial policy like Europe or Japan were more successful because their policies provide for economic adaptation, the U.S. did not. Therefore he argues the government should be directly involved in establishing national industrial goals and assuring that the goals are achieved.
Federal industrial policy involves letting the federal government decide the industrial structure, redistribute resources and output, and reallocate income from one region of the country to another and from one income class to another (McKenzie, n.d.). The government's task is to identify the industries that are perceived to be competitive in the future and give specific aid to them. The aid consists of government subsidies and a variety of protectionist policies such as trade barriers and tariffs on foreign competitor products. Industrial Policy also supports federal and state expenditures for basic education and worker training to improve competitiveness, plant-closing restrictions to slow down the outflow of capital, and federal expenditures on day care facilities to get more human capital into the labor market. By focusing on specific industries, the government hopes to create internationally competitive industries that have a competitive advantage over all foreign competitors. Proponents of this theory argue that the government has superior information on which industries in their country are the most competitive. By targeting and using resources to aid these specific industries, the whole nation will be better off because the country is specializing in industries for which it has a competitive advantage.
Summary of Chapters
I. Introduction: This chapter contextualizes the research within the era of globalization and presents the debate between free trade and government-led industrial policy.
II. Industrial Policy: This section defines industrial policy as a mechanism for government-steered economic development, utilizing the post-war Japanese model as a central case study.
III. Economic Freedom: This chapter explores the theoretical necessity of market liberty, protection of property rights, and the reduction of government interference for sustained economic health.
IV. Conclusion: The author concludes that industrial policy and economic freedom are fundamentally contradictory, arguing that free trade is the more effective long-term path for the U.S. economy.
Keywords
Industrial Policy, Free Trade, Economic Freedom, Globalization, Market Forces, U.S. Economy, Competitive Advantage, Government Intervention, Protectionism, Economic Growth, Deindustrialization, Subsidies, International Business, Market Regulation
Frequently Asked Questions
What is the fundamental focus of this research paper?
The paper examines the debate between implementing a federal industrial policy and adhering to free trade principles to assess their impact on the U.S. economy.
What are the primary themes discussed in the paper?
The main themes include government intervention, industrial restructuring, global competitiveness, economic liberty, and the risks of protectionist measures.
What is the central research question?
The research seeks to determine whether federal industrial policy—defined as government fostering growth in specific sectors—actually makes the U.S. economy better off.
Which scientific approach or method does the author employ?
The author employs a comparative analysis of economic theories and historical case studies, specifically examining the Japanese "miracle" and the post-Soviet economic transitions.
What does the main body of the paper cover?
It provides definitions of industrial policy, discusses the concept of economic freedom, and contrasts these approaches to evaluate their outcomes on national competitiveness.
Which keywords best characterize this work?
Key terms include Industrial Policy, Free Trade, Economic Freedom, Market Forces, and Competitive Advantage.
How does the author characterize the role of the government in industrial policy?
The author describes the government's role as attempting to "pick winners and losers," which involves redirecting resources and providing subsidies to industries perceived as future-competitive.
What is the author's final conclusion regarding U.S. economic policy?
The author concludes that federal industrial policy is incompatible with economic freedom and that a market-driven approach is superior to government intervention for long-term prosperity.
- Quote paper
- Bachelor of Business Administration Alexander Hardt (Author), 2014, Industrial Policy vs. Free Trade: Does Federal Industrial Policy Make the US Economy better off, Munich, GRIN Verlag, https://www.hausarbeiten.de/document/276592
