How Can America Restore Its Industrial Self-sufficiency?

The wealth that the U.S. achieved in the early 20th century has been eroded by encouraging other countries to build their industrial base while not taking care to ensure a domestic industrial future in this country.

This has been extensively documented and is evidenced by 30 years of trade deficits and a most recent deficit of $817 billion last year – the U.S. simply does not produce what it needs to sustain itself.

What can we do to correct this?

Coming to terms with reality

U.S. consumers of many products including capital equipment now find that foreign imports or foreign-owned domestic producers provide a better value or quality than domestic counterparts, if they even exist. Without some incentive, current policies are simply failing to stimulate competitive domestic industry.

Limitations of the free market

Capitalism is motivated by profit, which can be affected by government tax or other policies and foreign competition. If the policy of the government & foreign competition does not allow for profitable returns on investment in critical domestic industries then it seems that there are two options.

1) Protectionism

By closing the trading borders, domestic demand may be met with increased industrial domestic investment. However, in limiting foreign goods, U.S. consumers will not be able to afford much needed goods until domestic industry catches up. There is also the risk of encouraging domestic monopolies.

2) Government direct investment

For industries that do not provide sufficient return for risking private capital, there should be a way to employ public money to benefit the entire country. This is what happens with government health care programs, military, public transportation, and countless other examples. There should be some mechanism to ensure that core commodity (like steel and transportation) industries that form the basic platform for a self-sufficient industrial country should be maintained even if these commodity industries themselves are not profitable to private investors.

Examples from other countries

Japan through its Ministry of International Trade and Industry (MITI) has helped provide leadership and assistance for development of industrial productivity and employment.

According to the Federation of American Scientists (FAS), “MITI facilitated the early development of nearly all major industries by providing protection from import competition, technological intelligence, help in licensing foreign technology, access to foreign exchange, and assistance in mergers.”

MITI is a successful case study in how the government can work with industry to stimulate core sectors that serve the entire country without attempting to establish a centrally planned economy.

The FAS continues: “MITI served as an architect of industrial policy, an arbiter on industrial problems and disputes, and a regulator. A major objective of the ministry was to strengthen the country’s industrial base [by encouraging investment through incentives and selection of most needed products and development procedures to be developed that would benefit their most important industries like steel and robotics]. It did not manage Japanese trade and industry along the lines of a centrally planned economy, but it did provide industries with administrative guidance and other direction, both formal and informal, on modernization, technology, investments in new plants and equipment, and domestic and foreign competition.”

We should take the best that other countries have to offer and refine it with our own experience and objectives. By doing nothing we are bound to be buffeted by those other countries that have a strong plan to continue to dismantle our industry and economy.

Japan has used intelligent planning as opposed to our unplanned industrial regression (witness the auto industry). Japan is accomplishing this from a zero base of ashes from end of the war in 1945 and having only 4% of our land area, only 40% of our population & with absolutely no natural resources. It is very obvious from their example that there are better ways than our ways, that major changes should take place immediately or we will be relegated to become a 2nd class power & eventually a 2nd class country.