THE ROLE OF STATE ECONOMIC DEVELOPMENT PROGRAMS IN NATIONAL INDUSTRY POLICY

A decade of economic stagnation has produced a plethora of calls for government action to stimulate economic growth in employment. Arguing that activists federal industry policy is likely not to emerge in the United States, Rasmussen and Ledebur examine the potential role of states in a "federalist industry policy." States presently administer effective programs of financial assistance to business enterprises. These efforts are "rationally parochial" in that their purpose is served equally well by cresting a new job or pirating from other jurisdictions. This paper considers how state programs can be reoriented to serve national growth and development objectives as well as those of specific jurisdictions. It concludes that a subnational industry policy offers a unique opportunity to reallocate existing state resources to achieve a much higher social return.