BusinessWeek’s latest cover story by Andy Grove (Intel co-founder and former CEO), “How America Can Create Jobs,” makes a strong case against traditional free market economics and in favor of targeted industrial policy to secure American jobs, adding to the growing consensus in favor of a public investment approach to economic growth.

Several of Grove’s arguments align with those in our latest report, “The Power to Compete,” which outlines a comprehensive federal strategy to secure U.S. leadership in the global clean energy industry, including a manufacturing development agenda.  This contrasts to commentators like Thomas Friedman, who consistently argue that modest market incentives like a carbon price are enough to secure U.S. competitiveness.

According to Grove, high-tech domestic job creation depends on supportive public policy mechanisms, including targeted public investment, to achieve scaling and economic cluster formation.  It’s not enough to simply create a friendly environment for start-ups.  Unfortunately, the U.S. has lost large numbers of jobs in the computer and clean-tech industries because it has failed to implement a broader industrial development strategy, including investment in manufacturing capacity.  Grove points to the state economic development policies of Asian countries as a potential model, which we examined as related to the clean energy industry in “Rising Tigers, Sleeping Giant“:

Our fundamental economic beliefs, which we have elevated from a conviction based on observation to an unquestioned truism, is that the free market is the best of all economic systems—the freer the better. Our generation has seen the decisive victory of free-market principles over planned economies. So we stick with this belief, largely oblivious to emerging evidence that while free markets beat planned economies, there may be room for a modification that is even better.

Such evidence stares at us from the performance of several Asian countries in the past few decades. These countries seem to understand that job creation must be the No. 1 objective of state economic policy. The government plays a strategic role in setting the priorities and arraying the forces and organization necessary to achieve this goal. The rapid development of the Asian economies provides numerous illustrations. In a thorough study of the industrial development of East Asia, Robert Wade of the London School of Economics found that these economies turned in precedent-shattering economic performances over the ’70s and ’80s in large part because of the effective involvement of the government in targeting the growth of manufacturing industries.

Consider the “Golden Projects,” a series of digital initiatives driven by the Chinese government in the late 1980s and 1990s. Beijing was convinced of the importance of electronic networks—used for transactions, communications, and coordination—in enabling job creation, particularly in the less developed parts of the country. Consequently, the Golden Projects enjoyed priority funding. In time they contributed to the rapid development of China’s information infrastructure and the country’s economic growth.

Grove recommends at least one policy to improve U.S. high-tech job creation:

The first task is to rebuild our industrial commons. We should develop a system of financial incentives: Levy an extra tax on the product of offshored labor. (If the result is a trade war, treat it like other wars—fight to win.) Keep that money separate. Deposit it in the coffers of what we might call the Scaling Bank of the U.S. and make these sums available to companies that will scale their American operations. Such a system would be a daily reminder that while pursuing our company goals, all of us in business have a responsibility to maintain the industrial base on which we depend and the society whose adaptability—and stability—we may have taken for granted.

The full article can be read here.