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Bush Just Might Buy This Plan If No One Calls It `Industrial Policy'


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BUSH JUST MIGHT BUY THIS PLAN--IF NO ONE CALLS IT `INDUSTRIAL POLICY'

Four years ago, retired Admiral Bobby R. Inman dropped in on Vice-President George Bush to chat with his old CIA colleague, and the issue of U. S. competitiveness came up. "How," Inman recalls Bush asking, "can politicians like me get it into terms that can be understood? How do we make it sound-bite-sized?" Inman took up the challenge. And on Mar. 20, the Council on Competitiveness, an industry-academia-labor group of which Inman is leader, published a report advocating a decidely un-Bushian linkage: A partnership of government and business to boost America's eroding industrial strength.

Sorry, Mr. President: The topic still won't fit on bumper stickers. And the report's recommendations raise the "industrial policy" red flag among some White House free-marketeers. Says one top Administration official, referring to the report's authors: "They have a stronger view of what government should do than we have."

'NOT ENCOURAGING.' Still, there's reason to believe the report may yet draw notice in the right places. The U. S. is riding a wave of euphoria over its high-tech victory in the gulf, which makes all things techie hot right now. At the same time, U. S. industry is increasingly worried about falling behind Japan and Europe in commercial innovation.

That concern is justified, according to Inman & Co. (table). America is stumbling worst in technological areas where large capital investments are required, such as flat-panel displays, and where foreign governments are supporting and protecting their own industries, such as memory chips. "The U. S. is deteriorating in many technologies, and future trends are not encouraging," warns Erich Bloch, former director of the National Science Foundation and one of the study's authors.

The report's technique may give it more credibility than past efforts. It incorporates research by Japan's Ministry of International Trade & Industry and by a European Community technology task force. It finds unanimous agreement that what drives economic growth is a handful of critical technologies: advanced structural materials, biotechnology, microelectronics, computers, and software.

What's more, the authors of the report wisely decided not to recommend simply throwing more federal dollars at the problem. They note that thegovernment's role is largely limitedto sponsoring research, educating its citizens, and creating investment in-centives. The study puts much of the onus on business to do the rest, "matching or surpassing the best commercialization practices of their competitors." Meanwhile, U. S. industry and universities are urged to forge closer ties to enhance the nation's industrial competitiveness, rather than just reveling in basic research for its own sake.

FOCUSED R&D. The Administration hasn't ignored research and development, particularly big-ticket items such as a high-speed national computer network, a Superconducting Supercollider, and the Human Genome project. But the report says the effort needs to be more focused on the sorts of generic, "precompetitive" R&D that small and medium-size companies can convert into salable products.

The U. S. government and industry combined still spend more than any other nation on R&D. The problem is, many of the projects are impractical. For example, the bulk of the $7 billion in Energy Dept. research is done in the department's labs, largely isolated from U. S. industry. What's needed is an approach more like Japan's. Tokyo invites industry to help design research for maximum market impact. Companies share in the discoveries, then compete in product development.

Despite industrial policy phobias, the Bush Administration is showing flexibility. It budgeted a 14% increase in its applied R&D budget last year and funded research in such fields as flat-panel displays and X-ray lithography. That's a signal that this report might not be tossed on a dusty shelf.

WHERE THE U.S.

TRAILS BADLY

-- Structural ceramics

-- Gallium arsenide chips

-- Memory chips

-- Flat-panel displays

-- Advanced metals

-- Scientific instruments

DATA: COUNCIL ON COMPETITIVENESSPaul Magnusson


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