Picking Losers Isn't a Great Industrial Policy

Let us not begrudge President-elect Donald Trump his little triumph in Indianapolis, where he and Vice President-elect Mike Pence appear to have persuaded United Technologies Corp. subsidiary Carrier to keep about 1,000 furnace-plant jobs that were slated to be eliminated as production shifted to Mexico. Yes, we may learn as the details trickle out that we're really only talking about a few hundred jobs, or that the state of Indiana has given away too much in tax incentives. But this was a big issue for Trump (as well as for Democratic candidate Bernie Sanders) on the campaign trail, and he has found a way to at least partially deliver on his promises.

In general, it's probably not a bad thing to have a president jawboning corporations to keep and create manufacturing jobs in the U.S. For decades, companies have been under pressure from investors and competitors to cut costs by moving production to lower-cost overseas locales. Now, those cost differentials are a lot smaller than they used to be. Deloitte's global manufacturing competitiveness index ranks the U.S. as the second most competitive country for manufacturing in 2016, behind only China, and the executives polled for the index predicted that it would be No. 1 by 2020. This and other factors -- such as rising protectionist sentiment around the world and increased attention to the risks inherent in globe-spanning supply chains -- have led to talk of a "reshoring" wave that could bring manufacturing activity back to the U.S. in a big way. Nudges from political leaders might actually be helpful in making this happen.