Whatever happened to good old-fashioned capitalism? Take a look at the Presidentís proposed budget unveiled this week and you find more government planning of the private sector than anyone has seen since the fall of the Soviet Union.
For example, buried in the hefty boost for the Energy Departmentís office of science is an increase in government-supported research on nuclear power, totaling $250 million. Why does the nuclear power industry need $250 million next year? I thought capitalism was about companies investing money on their own if they think something is likely to be profitable.
Nuclear power doesnít suffer from a lack of research. The industryís problem is itís not profitable. Why not? Blame Homer Simpson. Homer, in case you didnít know, has a job at a nuclear power plant. He and his colleagues are not exactly careful with the plutonium they use. The reason Americans find Homer Simpson funny is because Americans donít trust the nuclear power industry. $250 million of tax-supported research isnít going to change that any time soon.
Meanwhile, the President wants to cut research on alternative energies like geothermal and hydro-power. But he also wants to put $150 million into making ethanol from switch grass and wood chips. Whatís the logic here? The federal government has no more expertise picking industrial winners and losers than I do. I donít have much, but I wouldnít bet $150 million on switch grass and wood chips.
The proposed budget also includes a record $6 billion for basic research in the physical sciences. The President says we need this in order to ďkeep America competitive.Ē But why are the physical sciences more important to the nationís competitiveness than, say, the biological sciences? The biological sciences wonít get a penny more in the Presidentís budget. Yet last time I looked, bio-technology seemed quite promising.
Besides, if the physical sciences are so crucial to our competitiveness, why canít we rely on American companies to make these investments?
Government has an important role subsidizing research that no individual company will do because the fruits of it are so basic itís instantly available to every company. But that kind of research wonít help ďAmerican competitivenessĒ because in this age of instant communications, the whole world has access to it.
Most big American companies these days are global anyway. Theyíre developing products all over the planet. Microsoft and dozens of other American high-tech firms have research facilities in places like Bangalore, India. Meanwhile, foreign-based firms have research labs in places like Cambridge, Massachusetts, and Palo Alto, California. Itís simply wrong to claim that by subsidizing basic research in America weíre somehow improving ďAmerican competitiveness.Ē
The competitiveness of this nation depends on the education and skills of our people. In this global economy, the only asset thatís unique to America is whatís in the heads of Americans. Yet the Presidentís budget contains the largest cuts in federal spending on education in more than a decade. If this is national planning, itís the dumbest plan Iíve ever come across.
Robert B. Reich is Professor of Public Policy at the Goldman School of Public Policy at the University of California at Berkeley. He has served in three national administrations, most recently as secretary of labor under President Bill Clinton. He has written ten books, including The Work of Nations, which has been translated into 22 languages; the best-sellers The Future of Success and Locked in the Cabinet, and his most recent book, Reason. His articles have appeared in the New Yorker, Atlantic Monthly, New York Times, Washington Post, and Wall Street Journal. Mr. Reich is co-founding editor of The American Prospect magazine.