Dubnick, Mel. “Industrial Policy in American States: The Invisible Side of the Debate.” Prepared for presentation at the 1983 Annual Meeting of the Southern Political Science Association, November 3–5, Birmingham.
AI-Generated Summary:
The document explores the scope, strategies, and limitations of state-level industrial policies in the United States, emphasizing their strategic leverage points and implications.
The Role of State Industrial Policies
- All fifty states have some form of industrial policy aimed at attracting, retaining, and expanding industries.
- The debate centers on whether the U.S. needs a national industrial policy rather than focusing solely on state efforts.
- State policies are often overlooked in national discussions but are crucial in regional economic development.
Framework of Industrial Policy Leverage Points
- Governments can influence industrial development through six key leverage points: market climate, size, structure, resources, risks, and behavior.
- These leverage points represent vulnerabilities that policies can target to shape business decisions.
- Policy tools include moral suasion, regulation, public ownership, and indirect measures like tax credits.
Market Climate and Its Influence
- Business climate is subjective and depends on attitudes of populations and officials toward industry.
- States promote their business climates through media campaigns and incentives to attract firms.
- The effectiveness of such campaigns is debated, but many states believe a favorable climate influences location decisions.
Market Size and State Capabilities
- Market size is a critical factor for firms seeking growth or stability.
- States have limited control over market size due to federal preemptions and interstate commerce restrictions.
- States can support industries in expanding markets through lobbying and trade promotion efforts.
Market Resources and Incentive Programs
- Land, labor, and capital are essential resources that states can manipulate via subsidies, tax exemptions, and financial assistance.
- Programs like low-interest loans, tax credits, and resource-based incentives have expanded significantly since 1966.
- Resource-based strategies are the most commonly used form of industrial policy at the state level.
Market Structure and Competition
- The level of competition within markets influences business decisions.
- States can influence market structure through regulation, antitrust exemptions, and support for monopolies or industry associations.
- Limitations exist due to federal laws and the nature of interstate commerce.
Regulatory Tools and Behavioral Norms
- Deregulation and lax enforcement are used to attract industries, especially in less regulated sectors.
- States may deregulate or relax enforcement to create a more favorable business environment.
- Regulatory strategies are limited by political and social conditions and may be temporary.
Market Risks and Liabilities
- States can reduce business risks through loan guarantees and liability protections.
- Federal policies like patent laws and indemnity acts also influence business risk management.
- State efforts in risk mitigation are less common but can be effective in specific industries.
Influence of Business Behavior and Norms
- Direct regulation of business behavior has declined, but deregulation can be a strategic tool.
- States often participate in regulatory “race to the bottom” to attract industries.
- The effectiveness of behavioral regulation depends on political, economic, and social contexts.
Conclusions and Future Directions
- State policies primarily rely on resource-based strategies, with potential for diversification.
- The effectiveness of these policies varies and is influenced by federal constraints and regional factors.
- The debate on national versus state industrial policies must consider the existing state-level activities and their implications.
Author’s Note: This conference paper preceded the published article: Dubnick, Mel, and Lynne Holt. “Industrial Policy and the States.” Publius 15 (1), 1985: 113–29.