SOME HITS, SOME MISSES IN INDUSTRIAL POLICY
Your article "Industrial policy" (Cover Story, Apr. 6) on America's competitive position in the global economy hit the nail on the head. We are lagging behind our international competitors in technology. But to me, a statistic just as alarming as those you cite is something we recently discovered: U.S. manufacturers are losing faith in America's ability to lead as product innovators.
A study we recently conducted among U.S. manufacturers with annual sales of $10 million to $500 million revealed a distressing loss of confidence:
-- Half of all midsize manufacturers believe the U.S. is no longer the worldwide leader in product innovation;
-- Another third say that we are No. 1 in this critical area, but that others are catching up; and
-- Only 8% say we're No. 1 to stay.
Robert E. Nason
You missed our last (and perhaps only) national experiment with an industrial extension service. As recently as 20 years ago, this country had a state-based service, established under the State Technical Services Act of 1965. Several of the existing state programs were created under this program.
There is no question that the U.S. could gain economic benefits from an industrial extension service modeled on the Japanese technology centers. However, the real experience base might be here, with our own experiment and the successful state programs it spawned.
Martin D. Robbins
The sharp decline in productivity growth over the past two decades stems not from a lower rate of public investment but from this country's tax code's failure to distinguish between nominal and real returns on investment. This oversight, combined with the quadrupling of inflation since 1965 (from 1% to over 4%), has added almost two percentage points to the real costs of capital. This dramatic, though hidden, tax hike has slowed the growth of private capital formation per employee from 2.6% per year to 0.6%, leading to similar drops in output and real hourly earnings. Congress could devise no better industrial policy than indexing interest income and capital gains for inflation.
W.N. Cordell II
Palo Alto, Calif.