Center for American Progress

Role of Federal Government in Creating a Competitive Economy

Role of Federal Government in Creating a Competitive Economy

Mark Levinson explains how the federal government can guide the private sector to be more competitive on the Center's new competitiveness blog.

This was a post on the Doing What Works project’s competitiveness blog.

The question is not whether the government should guide the private sector to become more competitive, but how.

As part of their response to the economic crisis, the Obama administration put in place a series of programs designed to increase productive investment in the economy.

There have been funds to encourage investments in green technologies—electric cars, solar energy, wind energy, biofuels—and funds to finance job-creating and energy-saving weatherization programs for older homes and buildings. The FCC’s National Broadband Plan would encourage investment to upgrade the national broadband network and make fast broadband service available to underserved parts of the country. The administration published a “Framework for Revitalizing American Manufacturing,” and the president spoke in support of a national infrastructure bank to fund new spending on roads, railways, water systems, and airports.

Political and ideological timidity has restrained the administration from adequately funding these programs. And now there is no funding. Even worse, the administration seems to have given up on jobs altogether and has embraced austerity even though unemployment languishes near double digits.

We do not need to start from scratch. The United States has long had an unacknowledged system of industrial planning and research and development. It is called the Pentagon. Though this hidden industrial policy has not been particularly coherent or strategic, U.S. industry has long enjoyed spillovers from technologies created by military agencies such as the Defense Advanced Research Project Agency. The National Science Foundation and the National Institutes of Health have also subsidized universities as incubators of industry.

The question today is can we build on the Pentagon’s success with industrial policy and have it apply to the broader economy?

To do so, we must overcome radically different visions of how industrial policy should be structured. The business community’s vision is one of U.S.-owned firms around the world that are subsidized and deregulated to make them more competitive with foreign counterparts. That stands in stark contrast to labor’s vision of an industrial policy that will result in high-paying jobs in the United States.

The federal government’s role in creating a competitive economy should not be restricted to manufacturing. Our national policy goal should be to convert every human service job to a good job that pays a living wage with good benefits. Good jobs include adequate training, professional status, and the prospect of advancement. Most human service jobs are wholly, or in part, publicly financed, so the federal government could set standards for pay, training, and career advancement.

Our technology policy, likewise, should be about more than merely subsidizing research and development, or else it might do more harm than good to the economy. We should not subsidize R&D activity that isn’t assured of taking place in America, by workers who have the right to form unions (a right they currently don’t enjoy).

The administration desperately needs to re-find its voice on the urgency to create jobs. When it does, it can then begin to address a series of longer-term structural challenges such as constructing an economy driven by something other than asset bubbles, reestablishing a healthy manufacturing sector, transforming an ever-important services sector, and developing new industries capable of employing millions of workers at good wages.

Mark Levinson is the chief economist at the Service Employees International Union.

This was a post on the Doing What Works project’s competitiveness blog.

Read other posts from the blog:


The positions of American Progress, and our policy experts, are independent, and the findings and conclusions presented are those of American Progress alone. A full list of supporters is available here. American Progress would like to acknowledge the many generous supporters who make our work possible.