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National Industrial Policy and the Local Planner

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    National Industrial Policy and the Local Planner

    Jeanne H. ArmstrongJohn R. Mullin

    This article analyzes the debate concerning the problems, approaches, and intent of industrialpolicy as it relates to the working planner. t begins with a search for a definition. !rom there theauthors set forth a rationale for such a policy and lay out the key characteristics typically proposed

    by its ad"ocates. The critical dimensions in the debate are then re"iewed. !inally, the potentialimpacts of "arious policy options upon local planners are discussed.

    #"er the past decade there has been an e"er increasing recognition that theindustrial base of the $nited %tates is undergoing a dramatic transformation thatsignificantly affects e"ery region of the country. &hile planners ha"e long had someknowledge of this shift, due largely to the works of such scholars as 'irch ()*+*,Harrison ()*-, and 'luestone and Harrison ()*-, the popular press through suchwriters as Halberstam ()*-/, Thurow ()*-/, and Reich ()*-0 now recognizes thischange. 1lanners are reacting to this de"elopment by increasingly undertaking ma2orefforts to insure that communities maintain a healthy industrial climate (Hodges )*-345oldsmith and Jacobs )*-4 6otson )*-0. $sing ta7 abatements, low interest bonds,2ob training incenti"es, and infrastructural assistance programs, among other approaches,planners ha"e become acti"e participants in "irtually all phases of the industrialde"elopment process (nternational 8ity Management Association )*-94 Mier )*-0.&hether or not these approaches are in the public interest remains to be analyzed(5oodman )*+*. Howe"er, the fact remains that local planners are participatingsignificantly in maintaining, enhancing, and e7panding the industrial base of theircommunities.

    Their efforts ha"e been aided e7tensi"ely by federal programs that constitute a defacto, informal, and dis2ointed national industrial policy (Thurow )*-3. 'oth thesuccesses and the failures of the federal go"ernment in inter"ening at the local le"el ha"efueled e7tensi"e discussion and debate concerning its role in fostering positi"e change.!or e7ample, 'endick and :edebur ()*- outline four approaches; () the ndustrialnhancement Approach, (0 thendustrial 'ailout Approach, and (9 the 'acking &inners Approach. #thers ha"erecommended options that range from a formally adopted policy complete withincenti"es and sanctions to a noninter"entionist position in which go"ernment does littlebeyond promoting industry on international markets. As Robert ?aus ()*-0 has

    humorously noted;

    !eli7 Rohatyn, the

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    made an ndustrial !edB C 5ary Hart C &alter Mondale C e"en John 8onnally wants anindustrial policy.B All 5odDs chillDun want industrial policy.B

    &hate"er approach emerges in the coming years will most likely affect theindustrial base of "irtually e"ery city and town in the nation. Thus, planners shouldunderstand the state of the discussion and debate and how the options could affect their

    efforts (&indsor )*-/4 !isher )*-. This article is intended to contribute to thatunderstanding.

    This article analyzes the current debate concerning the problems, approaches, andintent of industrial policy. t begins with a search for a definition and then sets forth therationale for a national policy and lays out the characteristics of national policy typicallyproposed by key policy ad"ocates. The critical dimensions in the debate concerningindustrial policy are then re"iewed. !inally, the potential impacts of "arious policyoptions upon the local planner are discussed.

    IN SEARCH OF A DEFINITION

    ndustrial policy in its myriad forms raises many Euestions. These include how todefine it, who would o"ersee it, what it would control, and what its end results would be.

    There is no commonly accepted definition of national industrial policy (ndustrial1olicy; s t the AnswerF )*-04 'eauregard )*-0. As 8halmers Johnson ()*-9 noted insumming up his own book on industrial policy; 6ichotomies, distinctions, definitionalproblems and deflations of Euick fi7es e7ist on almost e"ery page.B

    n its simplest form, national industrial policy can be defined as public initiati"esthat influence and guide the de"elopment *f targeted industrial sectors in society (:e"itanand Johnson )*-0=-9. This definition closely fits industrial policy as it now works in the

    $nited %tates G an often shotgunB approach consisting of short=term programs andpro2ects without an o"erall framework. 5oldstein and 'ergman ()*-/ label this assimply 1luralistic 1olicy Making.B n fact, the approaches taken are often sodisconnected or conflicting that the federal go"ernment is unable to take concrete actionsdesigned to maintain and enhance the national industrial base. !or e7ample, for the pastyear the federal go"ernment decided to allow increased importation of Japaneseautomobiles, to further restrict the sale of high technology items to the 8ommunist 'lock,and to increase free trade in the shoe industry. The rationale for these decisions wasdifferent in each case. The decision in"ol"ing importation of Japanese autos wasintended to send a message to the Japanese go"ernment that, as a Euid pro Euo, it shouldfollow suit and increase its imports of American goods4 the decision concerning the sale

    of computers was based largely on defense considerations4 and the decision concerningthe shoe industry was based largely on the need to keep the debt=ridden economy of'razil from becoming worse. n each case there was a strong basis for the decision. @etdespite the rationale, local American industry was affected negati"ely. 6etroit sufferedfrom the decisions to allow increased importation of Japanese automobiles 2ust as the%ilicon alley and 'rockton, Massachusetts, suffered from the decisions regarding hightechnology and free trade in the shoe industry. 8learly, current de facto industrial policypermits political considerations to supercede industrial needs (:eone and 'radley )*-).

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    Thus, industrial policy emerges partly as an indirect by=product of a range of politicaldecisions G many of which are not intended to directly affect local industries. :ocalplanning in such situations is e7tremely difficult.

    Reich ()*- offers a more comprehensi"e definition;

    ndustrial policy focuses upon the most producti"e patterns of in"estment, and thus it fa"orsbusiness segments that promise to be strong international competitors while helping to de"elop theindustrial infrastructure (highways, ports, sewers and skilled workforce needed to support theseelements. At the same time, by balancing regional growth and by assisting workers to retrain orrelocate, it seeks to reduce the resistance to economic change likely to come from those whowould be the hardest hit.

    ReichDs definition includes almost all of the elements of industrial policy that arebeing discussed at the national le"el. These are public initiati"es, industrial targeting,political in"ol"ement, international competition, infrastructure impro"ements, work forcede"elopment, worker training, balanced regional growth, and help for the displacedworker.

    Approaches suggested to meet the goals of industrial policy are Euite "aried.%ome supply=siders argue for the creation of new capital to fuel the economy. The newclassB ad"ocates see the need to create better capital allocation methods. ndustrialeconomists often argue for increased production incenti"es. :abor leaders push forincreased worker protection and retraining. 8ongressional leaders argue for industrialtargeting. 8ommerce officials want to fight Japan nc.

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    inter"ention can o"ercome these problems. Although there is no common agreement asto the scope of the problems, ad"ocates generally focus on the following needs;

    mpro"ed systems of capital allocations. The current system pro"ides few incenti"es for eithercompanies needing assistance for retooling or those most likely to grow and prosper in the worldmarketplace ('lume, 8rockett, and !riend )*-)4 >ckstein and Tannenwald )*-).

    mpro"ed infrastructure. 'oth at a national le"el and among the industrialized states, there is anincreasing reluctance to in"est in the long=term pro2ects necessary to support the industrial base(

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    The elements can be found in many different go"ernment programs. !ore7ample, the $nited %tates has issued o"er KII billion in go"ernment loans to industrialfirms. These loans, as Thurow has noted, in roundtable discussion with ?antrow ()*-0,really constitute a back=door Reconstruction !inance 8orporation (R!8.B Moreo"er,the go"ernment funds more than thirty=three percent of all industrial research and

    de"elopment acti"ity, and directly or indirectly, thirty percent of the nationDs scientistsand engineers (

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    these and suggests the need for others. %till other studies and information point to thedifficulties in"ol"ed in formulating and implementing an industrial policy thatincorporates some of these components.

    A Platform for Building Public Consensus

    The importance of building public consensus is almost unanimously recognized.The only argument is how best to gain it. %ome insist on the need to de"elop a tripartiteboard of business, labor, and go"ernment leaders consisting of people of the caliber of6a"id RockefellerDs Trilateral 8ommission (Rohatyn )*-0. %ome argue for the creationof a high=Euality professional network of ci"il ser"ants who ha"e the reEuired skills andinterests to work with the pri"ate sector (A 8autious

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    go"ernment subsidies for retraining workers and bringing potential and dropped=outworkers into the workplace. This would be e7tremely costly and would reEuire adramatic policy shift by the present conser"ati"e go"ernment.

    1erhaps most important, corporatists call for targeted in"estment planning.

    &orking with labor, industry, and the financial community, along a pattern similar to awartime agency, the go"ernment would directly allocate capital to fast=track companiesthat are capable of rapid 2ob e7pansion, ha"e inno"ati"e products, and ha"e the means tocompete internationally ('owles, 5ordon, and &eisskopf )*-9.

    %ome elements of the corporatist approach ha"e been employed by the !rench

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    t would also reEuire the agreement of labor (a highly pluralist and splintered set oforganizations, industry (many of whose members stand to lose, the banking community(already hea"ily in"ol"ed in industries that could suffer, and 8ongress (with its parochial"iewpoints. The task appears o"erwhelming.

    Effective Job Retraining>ffecti"e 2ob retraining does not mean a return to the 8omprehensi"e>mployment Training Act with its hea"y emphasis on make=work and public ser"ice2obs.

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    March 0, )*-+, p. 9+. This fact should become known to local public officials who, inturn, could begin to take actions to either help their own manufacturing firms oranticipate plant closings.

    n brief, there is no reason why the smokestack cities of @oungstown, Allentown,

    &eirton, and Homewood, for e7ample, had to face the closing of ma2or industrial plantswithout a long lead time to ad2ust. n most cases, the e"idence of disin"estment in thesecities was readily a"ailable. 'etter information and Euicker dissemination of findings arerelati"ely easy steps to take in forging a workable policy (

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    decline G when bakers and in"estors would rather flee than rein"estF This Euestionrecalls the need for accurate information. 8learly, an early warning system must be acrucial part of the administration of an industrial policy.

    "aintenance of the Infrastructure

    n"estment in street, water, sewer, port, and rail systems in the $nited %tates hasdeclined steadily o"er the past two decades (8hoate and &alter )*-). 'etween )*/3and )*++ alone there was a drop of twenty=one percent in public in"estment in constantdollars (Massachusetts Ta7payers !oundation )*-9. Thus, the countryDs infrastructure isfalling behind that reEuired to ser"e both industry and the general public. f the $nited%tates is to be competiti"e in the international arena, its national industrial policy shouldfa"or a strong infrastructure support system ('arker )*-94 8hoate and &alter )*-).

    Emphasis on Innovation

    AmericaDs firms compete both domestically and internationally. >"ery indicationis that the international forum will be the real test of a companyDs ability to sur"i"e

    (:odge and 5lass )*-9. Most industrial policy ad"ocates recognize the need to protect,enhance, and stimulate e7pansion of these firms as they grow (Allen and :e"ine )*-94'irch )*+*.

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    $ho Can Predict "ar'et Place Changes&

    Twenty years ago could any e7pert ha"e predicted the rise of a 6igital, 1rime,&ang, or AppleF &ho can understand the success of the 'ath ron &orks %hipyard, onone hand, while the !ore Ri"er %hipyard, less than one hundred miles distant and backedby the giant 5eneral 6ynamics 8orporation, failedF The point is that there are many

    firms that ha"e all the earmarks of failure (i.e., Rockport %hoes and 8on"erse Rubber inngland but which for some reason sur"i"e and prosper. %imilarly, there are firmsthat ha"e all the earmarks of success (i.e., #sborne, R8A computers that for some reasonor another fail. 1lanners can predict general trends such as the slow collapse of the$nited %tates shoe, ship, and te7tile manufacturing base, but they cannot predict whichfirms within these industries will decline, when, and to what degree. The marketplace, inshort, is often a mystery ('hide )*-0.

    $ho $ould Bac' the Ris' (a'ers&

    'ureaucracies deal best with known people and companies. ndeed, anyone whohas worked with the federal go"ernment knows how difficult it is to break into federal

    contracting. t is no wonder that so many of the companies doing business with thefederal go"ernment ha"e former bureaucrats as their points of contact (i.e., 5reater&ashingtonDs Route 9*3 'eltway 'anditsB. t often appears that one must be part ofthe system in order to partake of its largess.

    5i"en the nature of bureaucracies, critics maintain that any industrial policywould constantly fa"or the safe, secure, steady, industrial approach o"er the "enturesomerisk taker. They also note that it is far easier to work with one large firm than twentysmaller companies, and it is no surprise that the eight=hundred largest conglomeratescontrol se"enty percent of all economic acti"ity while the remaining fourteen millioncontrol thirty percent ('ergman and 5oldstein )*-0. The Tennecos and the 5eneral6ynamics of the nation ha"e a clear ad"antage.

    !inally, as the economist Joseph %chumpeter ()*// has noted, the nationaleconomy is regularly buffeted by wa"es of inno"ation and gales of creati"e destruction.B&ith recessions, stagflation, inflation, protectionism, and other ma2or market fluctuationsseemingly occurring at an increasingly rapid rate and with technological ad"ancesinfluencing the industrial marketplace at an e"er faster pace, the wa"es and gales will behigher and more forceful.

    >"en if we had the means to predict when ma2or industrial changes would occur,it is Euestionable whether efforts should be taken to influence them. The creation of newfirms designed to compete with mature firms ser"es to sort out weak, noncompetiti"efirms. n theory, as the older firms collapse, they are replaced by more efficientorganizations. Thus, the creation of new firms helps to insure competiti"eness. n thefinal analysis, it may not be simply a Euestion of predicting change, but a Euestion of howwe should handle change and whether we ha"e the ner"e to let the wa"es and galesBwork as they will. >conomist James Howell ()*-3 goes one step further, suggesting thathurrying history alongB may be a positi"e approach. n effect, success will come when

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    we allow decaying industries to lea"e or close while stimulating new growth. This willbe no easy task.

    $ho $ould )andle Congress&

    &hich public agency is going to announce that te7tiles in %outh 8arolina, paper

    pulp in #regon, or tool making in ngland will no loner be supported as targetedindustriesF How long would it be before deals, howe"er honest, are struck ('adaraccoand @affie )*-0F n late )*-3 there were more than two hundred bills in the $nited%tates 8ongress asking for Euotas, trade agreements, and tariffs on products ranging frompetrochemicals to waterbed liners (6ropping the #ther %hoe )*-3. mergency and >7port1romotion Act which calls for Japan and such emerging countries as 'razil, Taiwan, and%ingapore to cut their trade surpluses by fi"e percent within one year or risk a twenty=fi"epercent duty on their e7ports.

    The reality is that each congressional representati"e is at least partially obliged to

    work for the short=term economic stability of his or her district. !or e7ample, in )*-0,Adams 1rint, a ma2or employer in the 'erkshire Hills of western Massachusetts, was onthe brink of bankruptcy. The firm had all the characteristics of companies that had beenfleeingB ngland for the past two decades. @et the local congressman immediatelypetitioned for an emergency loan from the %mall 'usiness Administration to keep thecompany afloat. The loan was granted. %i7 months later the company went intorecei"ership and the loan was ne"er repaid. &ho gainedF The local congressman gainedbecause the electorate saw him as responding to their need. %imilarly, the company andits employees gained si7 more months of producti"e work. 'ut the federal go"ernmentlost its money and other companies with less political clout but a greater likelihood ofreco"ery lost the opportunityB to reco"er. Thus, the Euestion remains as to who is goingto o"ersee 8ongress to ensure that federal monies are directed to those companies withthe greatest chance of becoming or remaining competiti"e.

    $ho $ould )andle the Pressure !roups&

    There is no logical reason for the $nited %tates to protect and finance its merchantfleet. Although the reason regularly gi"en is that this fleet will be needed in time of war,the

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    &hat will be the 8riteria for Aiding an ndustryFf such decisions are made purely upon economic grounds, who will handle the

    eEuity issuesF f eEuity issues are considered, will we not be at least partially subsidizingplants that should die a natural deathF

    This dilemma is especially e"ident in the 'lackstone alley of Massachusetts andRhode sland, the birthplace of the American ndustrial Re"olution. n community aftercommunity the remnant firms of the once robust te7tile industry ha"e continued tomanufacture cloth through a steady cycle of economic decline (8entral MassachusettsRegional 1lanning 8ommission )*-. n the )*3Is and )*/Is, these companies whereoften purchased by multinationals and holding companies Euick to realize that Americante7tiles could not sur"i"e in an international market and who stripped the purchasedcompany of all tangible assets and typically sold the business at a paper lossB to localowners. These owners, in turn, turned to go"ernment for financial assistance (e.g., ta7write=downs, industrial bonds and asked employees to take pay cuts. They wouldprosper for a short period until, faced with an economic downturn, they would slide into

    recei"ership while the bank found a new owner. #nce such a person or group was found,the cycle would continue again. n short, while these firms and communities wereattempting to remain stable, they were being increasingly "ictimized by national andinternational trends (1hillips )*-94 1hillips and idal )*-0.

    >fficiency considerations dictate that these plants should not be supported. @et, ifeEuity becomes a dri"ing force in an industrial policy, then such firms would continue togain support. n such cases death is only prolonged. n other words, one personDs fairshare is often another personDs rip=off.B !or e7ample, the decision by the 1resident todeny a tariff on shoes will mean that thousands of American 2obs will be lost. n onesense, the people who hold these 2obs are sacrificed to national needs. To them, thedecision is highly ineEuitable, and their lobbying groups and their congressionalrepresentati"es will make this point clear again and again in &ashington. f theselobbyists and congressional representati"es are successful in o"erturning the 1residentDsdecision then a multifaceted Euestion of eEuity is triggered. f these 2obs are protected,then American consumers will pay fifteen percent more for shoes. Moreo"er, it has beenestimated that the net result of shielding shoe manufacturing will cost the consumerK3I,III per protected 2ob (!eldstein and !eldstein )*-3. !inally, as another e7ample,the !ederal Reser"e 'ank of

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    TH> :#8A: 1:AThe traditional American 1lanning Association description of what planners

    typically do suggests that local planners will be little more than passi"e obser"ers ofnational industrial policy (5oldsmith and Jacobs )*-4 6otson )*-0. n fact, manyplanners state emphatically that industrial de"elopment is not one of their ma2or

    concerns. Howe"er, our e"idence based upon working studies of more than forty ngland cities and towns suggests that the planner is now, and will be, playing anincreasing role in industrial de"elopment. #ur e"idence, based upon a re"iew of theinfluence of current national industrial policies on small cities, also suggests that thecreation of a formal policy or the e7tension of e7isting policies will directly affect theEuality of life and future well=being of American communities G clearly two area soma2or concern to the practicing local planner. The important Euestions are how canplanners become in"ol"ed in national industrial policy and what can they contribute to itsformulation and de"elopmentF

    8learly, it is in the best interest of local communities for planners to assemble

    data on the state of local industry G well beyond that which is typically collected for anindustrial base study. This data would be an important ingredient in an early warninganalysis, in ascertaining the relati"e health of local industry, and in preparing applicationsfor go"ernment grants designed to assist communities in meeting local industrial needs.

    1art of this data collection effort would include collecting information on laborskills, needs, and changes. Most communities currently rely on state labor market areadata. This would most likely not be sufficient G particularly since meaningful local le"ellabor training and retraining are critical components in "irtually all industrial policyoptions. The collected data would become the critical information base for thede"elopment of a skilled labor force.

    #ne could also e7pect the planner to become increasingly in"ol"ed in efforts toassist in restructuring of industry. This might mean helping firms obtain temporary localconcessions on ta7es and en"ironmental controls, or relief from other regulations. tmight also mean preparing applications for grants to impro"e local industrial facilities orto obtain low=interest loans. Many of these tasks are already undertaken by localplanners (e.g., ndustrial Re"enue 'onds, $rban 6e"elopment Action 5rants. Howe"er,if a comprehensi"e policy is e"er adopted, then one could e7pect that the workload wouldincrease and that programs would be more carefully integrated.

    :ocal planners would not likely play a direct role in the research and de"elopmentaspect of national industrial policy. Howe"er, communities would benefit frompromoting close ties between local industry and nearby colleges and uni"ersities. #urresearch in ngland regularly points out that uni"ersities attract industry and thatindustry, in turn, is attracted to the laboratories, research facilities, and knowledge basefound on campuses. Thus, a close tie between academia and industry ser"es as a meansof stimulating research and meeting local needs.

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    1lanners could also play an acti"e and important role in infrastructure planning.1art of their 2ob would be to help pro"ide a climate that encourages a potentially fugiti"eindustry to stay at home. nfrastructure that meets present and pro2ected demand and ismodern, efficient, and en"ironmentally safe will stimulate industries to stay in place andalso attract new firms. n this instance, we would e7pect a rebirth of the long moribund

    local capital impro"ements planning program and a renewed public commitment toinfrastructural planning and de"elopment.

    1lanners would ha"e to become interested participants in how their communitiespromote replacement economic acti"ity. f America is no longer attracting 2obs fromo"erseas and if plant shifts to other regions of the country are occurring less freEuently, itfollows that the homegrown industrial base will become increasingly significant. Howand where the homegrown starter industries are nurtured or incubated should be a ma2orconcern for planners.

    1lanners can also take steps to assure that the Euality of life in their communities

    is of such a positi"e nature as to attract and keep competiti"e industries. n matureindustrial towns with their aged mill=housing, sooted appearance, high social costs, andpro=union patina this will be Euite difficult. !or e7ample, despite the working classcommunity roots of 6igital, 6ata 5eneral, and &ang, there is a much stronger pull inthese firms toward communities with a high Euality of life. They are far more likely to belocated in suburban towns than in traditional industrial communities.

    &hat would happen if a policy of picking winners and losers was de"elopedFMost likely it would mean that go"ernment assistance would be made a"ailable to thosefirms considered critical to the nationDs well=being. t would also mean that thecommunities where these firms are located would ine"itably benefit from increased 2obs,a greater ta7 base, a sense of security, and an impro"ed psychological feeling of well=being. 1lanners in such communities would likely focus more on growth managementissues than on trying to stop decline.

    %ince most industries likely to be so considered are on the fringes of cities (and inmany cases the most healthy cities, such a policy would clearly aid those communitiesthat are already prosperous. The classic e7ample would be the 'M town; with thee7ception of its noble e7periment in 'edford=%tuy"esant, 'M picks locations for itsplants that are considered to meet the Euality=of=life goals of its workers. ne"itably thishas meant areas that are prosperous, clean, middle=class, well=managed, that ha"e goodschools, and that are near cultural or recreation attractions. n short, backing winnerswould mean backing winning communities (:ugar )*-9. The %ilicon alleys, Route)-s, Austins, and 5olden Triangles would win while the 5arys, @oungstowns, andAllentowns would lose.

    n a community laced with mature industries that ha"e not been picked for specialhelp (losersB the potential for further disruption would be Euite high. The loss of 2obs,security, and image, as well as the decline of the communityDs economic base, paints aportrait of a community in need of ma2or transformation. Here the planner can also play

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    a critical role. :ikely tasks include reducing performance standards, preparing earlywarning system planning, de"eloping starter industryB programs, and obtaining 2obretraining assistance.

    1lanners ha"e a strong role to play in responding to national industrial policy.

    8ollecting more pertinent data on local industry, insuring suitable land for e7pansion,helping to organize retraining efforts, writing grant applications in support of localindustry, creating early warning systems, promoting local spin=offs, and guiding efforts toinsure the attracti"eness of the community are all likely tasks. &hat is most remarkableis that planners are already performing many of these tasks to a large degree. &hat iseEually remarkable is that they are neither coordinated nor integrated. n the finalanalysis, howe"er, if a national industrial policy is de"eloped, planners will ha"e animportant role in maintaining, protecting, and enhancing the industrial well=being of theircommunities.

    &H>R> 6# &> 5# !R#M H>R>F

    &hat would we ha"e after all is said and doneF &e would ha"e a go"ernmentthat has a popular mandate and a clear direction concerning retraining, that has better dataand analytical techniEues, that has helped the worker to mo"e to meaningful 2obs, thatstimulates research and de"elopment, that helps growing companies, that coordinatesinteragency policies, and that pro"ides first=rate infrastructural support for industry.&hat we would ha"e, in brief, is a means by which to be competiti"e in the worldmarketplace. 'ut the price would indeed be high.

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