A US Industrial Policy

A 40-ACRE tank factory in Slovakia put out of work by the end of communism gives most people in the West a good feeling. They want to help convert that industry into something more useful than a pro forma socialist tractor factory.

Helping the fledgling East European democracies reshape their industries to reflect changing times is a good idea.

But what about in the West? What about in Hartford, Conn., where United Technologies cut 14,000 workers due to fewer defense contracts? Will we help US defense industry convert?

During the cold war the Japanese and Germans pulled ahead in many industries. Can Washington now help US firms compete?

More bluntly: Should the US have an industrial policy?

Certainly, some help can be given the defense industry. Many defense engineers and their firms are the best and the brightest the US has. The US did not spend the bulk of its postwar money and talent developing VCRs, appliances, and high-tech consumer goods, like Japan. It developed ICBMs, submarine technology, lunar landing modules, space shuttles, and high-tech weaponry. For Washington to now tell this sector, "Goodbye, we don't need you," is shortsighted.

There are ways to help. One is through the Defense Advanced Research Project Agency, which originally was founded to identify spinoff technology for defense and commercial use, but for the last decade has confined itself mainly to defense. DARPA may now need fresh priorities.

Germany and Japan use industrial policy devastatingly well. Who articulates a US policy? The presidential campaign may answer that. Democratic hopefuls (notably Paul Tsongas) have broached the subject. Even President Bush, who spent a decade wedded to a laissez-faire policy, is taking it up. The White House has identified some 22 "generic pre-competitive technologies," hot new areas of innovation.

A sprawling, dynamic nation can't have the tight industrial policy small homogeneous states do. US innovative spark comes from rich free-market interplay. You can't socialize ingenuity.

But US energies have at times been intelligently focused by government. RCA was formed by the Navy in 1914; US aeronautics owes much to NASA. It's not un-American to strategically fund federal labs, offer low-interest loans to new technology firms, toughen trade talks, and target science education. Barriers to developing new technologies - such as capital and research costs - are high. US firms can use a boost.