 |
 |
|
|
|
|
|
|
|
The number of people who seek a closer bond between the affairs of private business and government seems never-ending. Businessmen who fear the rough and tumble of open competition have habitually run to hide behind the skirts of their bureaucratic protectors. Tariffs, import quotas, government sponsored cartels limiting the domestic production of goods, subsidies to encourage domestic production of goods, professional licensing, government created monopolies, anti-monopoly legislation, zoning laws, building codes, business-sponsored regulation...the creativity exhibited by some individuals in their quest to gain coercive advantage over others by appealing to our nation's top "hired gun" is truly astounding. They continually devise new ways to prevent the consummation of voluntary transactions and/or to gain special favors which put them at a competitive advantage.
This long tradition of seeking to advance by pull rather than production continues in today's society in the form of "industrial policy." Touted by many business and political leaders as the key to the future, this modern day example of governmental intervention garners its supporters from a variety of fields. Automakers hail a collaboration between them and the government in developing smaller, more fuel efficient cars...of a type which the public may not even desire. The president seeks to insert the clumsy hand of government into the web of the Internet...which appears to be working fine so far, thank you, without such "assistance."
Even though the longer term problems inherent in the tight linkage between government and industry have become evident in Japan, policy pundits still point with pride to our neighbor across the Pacific as a perfect model the United States should emulate. That blueprint is so attractive to the proponents of government/business intertwining that they ridicule out-of-hand anyone who might dare to question their assumptions, facts, and conclusions.
One incarnation of business-government "partnerships" takes the form of CRADAs -- cooperative research and development agreements -- in which each side contributes to the costs of R & D and shares in any benefits that accrue. This time, however, a fresh twist was added to an old formula. Given the recent diminishment in defense spending and the specter of more cuts -- not only in spending levels but of whole departments -- many government labs are encouraging mutual projects with industry to protect their own existences.
Los Alamos (New Mexico) National Laboratory, Sandia National Laboratory in Albuquerque, Lawrence Berkeley (CA) National Laboratory, the USDA's Agricultural Research Service in Byron, GA, Brookhaven National Laboratory in Upton, NY, and others associated with the Departments of Energy and Defense are all eager to "lend a helping hand" to industries in need of assistance. Given that some Republicans in Congress were determined to end what they viewed as a species of "corporate welfare," it is perhaps not surprising that these labs and their corporate partners loudly beat the drums as they touted the benefits of their symbiosis.
What the government takes away with one hand, it often tries to replace with the other. After hampering business with excessive taxes and regulations, Congress created CRADAs as a way of enhancing the competitiveness of American business in the international marketplace. Both the government labs and the industries which turned to them sought similar goals: to tap into the money, equipment, and knowledge possessed by the other.
In non-governmental settings, such cooperation and division of labor is to be applauded. What one group of individuals is unable to accomplish alone -- or at least without great difficulty and hardship -- becomes not only possible but feasible when it unites with another willing organization. By focusing on those aspects of some project in which they enjoy a comparative or absolute advantage, the partners can together create a synergy that may lead to increased benefits for all involved. If, however, their linkage creates more problems than it solves, the cost of that mistake is born by the willing participants, not innocent third parties.
There, of course, lies the crux of the problem with CRADAs or any other such example of national industrial policy. A lab doing non-military work is stepping beyond the bounds of proper governmental concern, i.e., protecting our rights from violations by others. Developing weapons to defend us against external enemies is one thing. Utilizing publicly supplied funds to aid the Walt Disney Company in developing a better way to set off its fireworks is quite another.
As director of the Industrial Research Institute in Washington, D.C., Charles F. Larson sees nothing inherently or fundamentally wrong with government/industry partnerships. For him, "The main problem is the bureaucracy." Even House members who would like to reduce the budgets of such government labs use as their rationale a desire to increase the labs' competitiveness with other labs and to encourage closer adherence to departmental goals.
While 20% of CRADAs focus on basic research, other agreements are designed to hone technology that has already been developed. The money involved has nearly doubled from FY 1994 to a projected FY 1996 total of $5.8 billion. The total of such CRADAs has risen 36% over the same period to nearly 7000.
In addition to the improved fireworks ignition system for Disney, other successful projects mentioned include: progress towards a test for Parkinson's disease; a device for spraying a combination of lacewing eggs and glue onto plants for natural pest control; interpreting oil company search data; and genetic analysis of cotton plants.
Motorola board member, Robert Galvin, headed an independent task force to investigate CRADAs. The panel's criticisms included charges that CRADAs often stray too far from their authorized missions; may compete against private companies offering the same services; often lack good standards for determining which CRADAs to fund; and do not have adequate documentation to determine the degree of success achieved by these partnerships.
Despite such concerns, Nuno Vaz of General Motors' government-partnership program is highly enthusiastic of CRADAs. While he believes that government and business used to have an adversarial orientation, they now "sit on the same side" of the table and enjoy a much improved atmosphere of cooperation.
Such glowing commentary comes as little surprise from someone directly benefiting from privileges obtained at taxpayer expense. However, as with any such governmental subsidy of business activity, CRADAs misdirect resources from where they are best utilized into areas that are more marginal. Such distortions in investment create problems that may be less visible than such concretes as new fireworks controls, but they are none the less real. While proponents of a national industrial policy point to the "bridge that was built" (to use an example from Hazlitt), their ideas are ultimately detrimental to the very industrial base they purport to help.
That pattern of unintentional negative consequences is hardly a new phenomenon. It happens whenever government steps beyond the proper bounds of its mission. When taxpayers must pick up the tab for losses, not only are creativity and accountability blunted, private solutions which might better address the concerns of business never come to fruition.
A project that is not economically justified for private business to implement should not be done until such time as conditions are conducive to its fulfillment. Whether constructing a transcontinental railroad, spreading rural electrification, or racing to the moon, diverting wealth through coercion is never ethically or economically permissible.
It's just as true now as it has ever been that when someone knocks on your door and says, "Hi. I'm from the government, and I'm here to help," the best course to follow is to slam shut that door and run for your life.
That's a lesson far too many businesses and individuals have yet to learn.
Quotes are from: "Tapping Government Know-How," Tina Adler, Science News, 7-29-95, pp. 72-74.
