The Lesson Not to Learn From Solyndra

National economic strategy is tricky, but necessary.


David Frum is certainly right that the bankruptcy of Washington-backed solar energy firm Solyndra makes the federal government's support for an individual firm look laughably inept.

"If the U.S. government wants to discourage the use of oil, there is one powerful mechanism at hand: tax the stuff," Frum concludes. "Private actors will respond to the incentive. They will conserve and substitute and innovate all on their own. But when it comes time for investments in individual firms? Back off and let Mr. Market do the job that he does best."

[Read about how Obama abandoned clean energy in his recent jobs speech.]

I agree.

Yet I think the episode gives the concept of a national economic strategy—one hesitates to utter the verboten phrase "industrial policy"—an unnecessarily bad name.

Frum's policy preference, to my mind, still constitutes such an economic strategy. It is more macro than micro, to be sure, but it's strategic all the same. We shouldn't shrink from this. Our competitors abroad certainly don't.

Former Reagan administration trade official Clyde Prestowitz cites several successful examples of government-nurtured development in the telecommunications, energy, semiconductor, and aviation industries in countries like China, South Korea, and Finland.

Government support of a specific industry need not entail the picking of winners at the micro level; often, it can take the form of policies that American conservatives favor: that is, tax breaks and deregulation.

[See a collection of political cartoons on energy policy.]

Prestowitz's broader—and I would argue unassailable—point is that, in the increasingly complex web of interdependent economies, countries can't avoid at least some notion of economic strategy.

Indeed, he writes, America has had one for the last 30 years. And it looks something like this:

It is to overconsume, and to promote weapons production, financial services, construction, medical research and services, agriculture, and oil and gas consumption and production. Further, it is both to offshore production and provision of all tradable manufacturing and services as well as, increasingly, high-technology R&D, and to expand the domestic retail, food service, and personal medical services industries. At the macro level, the strategy is to run up massive debt and borrow as much and as long as possible.

Again: We've had an economic strategy for quite a while. The problem is, it stinks.