Paul Otellini on Industrial Policy

Intel CEO Paul Otellini:

Other countries have focused on investing in innovation, creating national policies to build digital infrastructure, and have moved quickly to embrace sustainable energy. We are seeing this not just in India and China, but in Finland, Korea, Japan, the Netherlands, and many other places...

[A]s a nation we must have a clear, enduring strategy to promote innovation, investment, and startup companies … a set of policies that let American business confidently invest in the future, raise capital, take risks, and feel assured that we are training the talent to lead the next generation of industries. That, after all, is what the rest of the world is doing...

[Education] is an area in which the U.S. must succeed. Growth in math-intensive science and engineering jobs outpace overall job growth by three to one. Think about this: according to one source, America's GDP would grow by more than a third if U.S. students became globally competitive in math and science. Any real strategy for future competitiveness has to address this issue. President Obama has made this issue a top focus of his administration. We see it as the responsibility of not just government, but of every business that depends on highly skilled employees...

When the CEO of one of America's biggest, most profitable companies gets up in front of a room full of CEOs and says that A) Government needs to do more in the way of industrial policy, and B) Obama's ideas are a step in the right direction, it makes you wonder how Republicans can still claim to be the party of business. What's more accurate is that Republicans are the party of specific businesses that survive thanks mainly to favorable government treatment (insurance, finance, and natural resource companies).

Possible Republican/conservative responses to Otellini's remarks, arranged in order of respectability, might include:

1. Industrial policy always fails, because the free market will always outperform any market with government interference.

2. Government spending is always money down the toilet.

3. Maybe better education and infrastructure would help our nation, but I'll be damned if some black person somewhere is getting one dollar of my money.

Regarding Response 1, whether industrial policy works or not is still an open question, but few serious economists would dispute that education, infrastructure, and R&D are public goods that government must provide if the economy is to thrive. There is no record of a successful civilization whose roads and schools were not paid for by the government. Maybe conservatives think we should turn our society into a massive Randian utopian experiment, but most of us realize that that would be national suicide.

Regarding Responses 2 and 3...well, I rest my case.

It's worth it to note, by the way, that one big obstacle to better education in this country comes not from the Right, but from a branch of the Old Left: the anti-reform efforts of America's teachers' unions, who have so far stymied most efforts to fire bad teachers and pay good teachers more. Fortunately, many younger liberals, like Matt Yglesias, recognize this. We can bash conservatives all we want for trying to destroy the public education system - and we'd be perfectly right to do so - but our misguided impulse to protect union power has contributed heavily to the system's stagnation.

At any rate, the upshot is that we need to start seriously start thinking about ramping up industrial policy once again.