“There is no question that OSHA under Obama is a vast improvement over the previous administration,” says Tom O’Connor, executive director of the National Council for Occupational Safety and Health. “This is not reflected in new regulations, but in the approach to enforcing existing [regulations] and using the authority that they have to make the agency more of a serious deterrent to unsafe conditions.”

Workplace health and safety advocates had expected more. They greeted Obama’s 2008 victory with relief. After eight years of ineffectual Republican control, the Department of Labor, and specifically the Occupational Health and Safety Administration, would be in friendly hands.

The administration staffed the agency well, nominating experts from the health and safety profession and the labor movement and shunning the industry insiders favored by George W. Bush. Obama’s choice for OSHA chief, David Michaels, had a public interest pedigree, including a 2008 expose of the questionable claims big business makes in defense of its products. While Senate Republicans stalled other Labor Department appointees, the administration’s OSHA nominees were quickly approved.

OSHA is primarily an inspection agency and it is in this capacity that Michaels and his staff are given the greatest latitude, although even here they operate within clearly delineated limits. For example, although Michaels hired 130 new OSHA inspectors, there are still only 2,200 inspectors (including state OSH officers) for 8 million work sites. The penalty amounts the agency can issue, which are set by Congress, have not been updated since 1990, with both serious and repeat violations set at a paltry $7,000 and a $70,000 maximum for willful violations.

Michaels’ OSHA maximizes its capabilities by playing with the percentages: increasing minimum penalties and reducing the size of the violation abatements OSHA offers for factors that include establishment size, employer good faith and past history. But as Michaels testified before Congress: “Any administrative changes we are able to make would still be inadequate to compel many employers to abate serious hazards. These steps are an effort to do the best with the outdated, antiquated tools we have.”

Even so, employers have taken notice. One business consultant’s new ad reads: “OSHA’s back in the enforcement business and issuing inspections and citations at a record pace. They’ve hired more inspectors, are pushing for higher penalties and even looking to put safety pros in jail.” Such scare tactics are clearly self-serving in this instance, but OSHA’s recalibration of its penalty system got serious coverage in trade journals and among industry associations. These actions could compel employers to think twice before taking chances with workers’ lives, even if the average OSHA penalty is still around $1,000.

Since Obama’s election OSHA has built stronger ties with community and workers’ centers, in an attempt to make the agency accessible to vulnerable immigrant workers. OSHA’s campaign to encourage employers to provide training materials to workers in a language they understand can also be understood as an attempt to extend the agency’s protection to sectors that have long gone unpoliced.

The Michaels regime strengthened OSHA’s enforcement mechanisms, but when it comes to new regulations they are stymied at every turn. In early 2010 OSHA attempted to issue a rule to allow employers to note when a workplace injury was caused by repetitive stress. The standard would have added an extra column to the survey employers are required to fill out when a worker is hurt. The Chamber of Commerce reacted fiercely, and a year later the regulation was dead. A similar fate befell a proposed rule that would have required basic engineering controls to protect workers from excessive and eardrum-damaging noise on the job.

OSHA’s most recent regulatory dust-up is over the proposed silica standard. The proposed rule would limit worker exposure to crystalline silica, a breathable dust found in many construction, manufacturing and mining operations, which causes silicosis, an incurable disease linked to lung cancer and other deadly respiratory illnesses.  Two hundred people die of it a year. OSHA’s silica rule is believed to require the halving of the current permissible exposure limit to silica, to be achieved through better ventilation and a requirement that brick and concrete be hosed with water before cutting, thus reducing dust.

But industry fears that any rule will engender higher costs of production and, consequently, kill jobs. “It could affect 2 million jobs, and the construction industry … is not back on its feet yet … it might cost $3 billion a year — it’s a very expensive process,” said Rob Crolius, president of the Refractories Institute, a trade association whose members would be affected by the standard. Other trade groups lobbying to prevent the standard include the American Chemical Alliance, Brick Industry Association, Associated General Contractors of America, and the National Association of Home builders, among many others.

And they’ve been quite successful: The silica standard is currently stuck in the limbo of the White House Office of Information and Regulatory Affairs (a historic “graveyard of regulations”). Well over a year has passed since OSHA submitted the rule but still it languishes with OIRA, which has spent a disproportionate amount of time with business stakeholder groups behind closed doors during the interminable review process. OIRA is technically only supposed to spend four months reviewing a rule. Spokespeople refuse to comment on the extraordinary delay.

The fate of the silica standard is a neat encapsulation of OSHA’s existential crisis. Even when lead by dedicated staffers the agency remains enmeshed within a larger political system that is dominated by reflexively anti-regulatory ideologies. Even Democratic politicians find satisfaction in inveighing against bureaucracy and regulations that “have had a chilling effect on growth and jobs,” as president Obama himself has written.

The targets of their ire are rather vague. Contrary to the mythology of the campaign trail, many regulations are reasonable, serve a public purpose and are rarely as expensive as industry fears they will be. When both parties use conservative rhetoric to undermine the regulatory responsibilities of the state it is little wonder that OSHA finds itself forced to operate within such a limited field.

It could be argued that the Obama administration is delaying OSHA’s regulatory decisions because of potential political controversy, especially during a hotly contested election year. But political scientists argue that relatively obscure policy compromises have little impact upon electoral politics. Few people pay attention to such issues, and those who do already have a fixed position. Delaying real policy that affects real people, for ethereal political gain, makes little sense.

“There were efforts during the Clinton administration to get major rules out. I worked in the agencies then, and at that moment it may seem that you are really sensitive [to political controversy],” says Celeste Monforton, professorial lecturer at George Washington University School of Public Health who worked for the Department of Labor for over 10 years. “But I learned you have to take opportunities when you have them. We didn’t get a Gore administration. You have to move fast when you have the opportunity, otherwise you may not have it next year.”

In fact industrial policy is as American as domestically produced apple pie.  George Washington supported Alexander Hamilton’s plan for promoting American manufacturing by means of subsidies and tariffs, and Hamilton’s opponents Thomas Jefferson and James Madison eventually reconciled themselves to federal support for American manufacturing.  Henry Clay proposed a similar “American system” of infant-industry protection and federal support for infrastructure.  During the Civil War, Clay’s disciple Abraham Lincoln presided over the enactment of a version of the American System, based on high tariffs to protect strategic industries and federal land grants and financial subsidies for transcontinental railroads.

Industrial policy was even more successful in the 20th century U.S.  After the Wright brothers invented the airplane, the federal government used airmail to subsidize the infant American civil aviation industry.  The U.S. Navy worked with American companies to create the Radio Corporation of America (RCA), which spun off the NBC and ABC radio and TV networks.  During World War II the government built vast numbers of factories, which were turned over at low prices to private companies after 1945.

The most innovative entrepreneur in the 20th century was the U.S. government.  The federal government invented or developed nuclear energy, computers, the Internet and the jet engine.  And it built the interstate highway system and completed the national electric grid, creating a continental market based on the technologies of the second industrial revolution.

To be sure, the government has sometimes backed failures, usually in the fad-driven energy field, like Solyndra or synfuels back during the Carter years.  But few private venture capitalists can match the remarkable record of success of Uncle Sam.  Indeed, venture capitalists in IT and social networking have exploited and commercialized technologies from the transistor to the Internet that were originally developed by America’s home-grown version of state capitalism.

Even a seemingly commonsensical rule like preventing the government from “picking winners” among particular corporations is unconvincing, in light of the historical record.  Congress gave Samuel F.B. Morse the money he needed to develop his telegraph.  Was that wrong?

It would be easy to get a thousand Ph.D. economists to sign a manifesto insisting that we should ignore history whenever it conflicts with theory. But those who know only about generic firms competing in abstract markets know nothing useful at all.  Nobody can understand real-world industrial capitalism without understanding the nature and history of the specific major industries that rival countries struggle to obtain, by fair means or foul.

Shipbuilding, for example. In the 17th century, in order to surpass the Dutch as the leading trading and naval power, the English passed the Navigation Acts, which mandated that all goods brought in and out of the island kingdom had to be borne in English ships with English crews. The modern equivalent would be a requirement that nobody could fly in or out of the U.S. except on an American airliner made in America by Boeing.

The Navigation Acts ensured that Britain would have an immense, state-of-the-art merchant marine (civilian) fleet with experienced sailors, so that both ships and men could be drafted in wartime.  For this reason, Adam Smith wrote in “The Wealth of Nations”:  “As defence, however, is of much more importance than opulence, the act of navigation is, perhaps, the wisest of all commercial regulations of England.” Elsewhere in the book Smith explained:  “The defence of Great Britain depends very much upon the number of its sailors and shipping.  The act of navigation, therefore, very properly endeavors to give the sailors and shipping of Great Britain the monopoly of the trade of their own country.”

When the United States won its independence from Britain, it followed the  example of the mother country and passed its own navigation laws.  While foreign ships were permitted to carry goods to and from U.S. ports, all “cabotage” — port-to-port shipping along the coasts or up and down rivers — was a monopoly of ships that had 75 percent American ownership and majority-American crews.  Until World War I, America’s merchant marine fleet was protected under the 1817 Act Concerning the Navigation of the United States.  This policy was reaffirmed by the 1920 Jones Act, which remains in place today.

The Jones Act and its predecessors, however, did nothing to help builders of ocean-going commercial ships.  During World War I, the federal government paid for a massive expansion of American shipbuilding.  But the war left a global glut and American shipbuilding contracted again.

President Franklin Roosevelt had served as assistant secretary of the Navy in Woodrow Wilson’s administration.  Under his leadership, Congress in 1936 passed the Merchant Marine Act and created the U.S. Maritime Commission to promote “an adequate and well-balanced American merchant marine, to promote the commerce of the United States, and to aid in the national defense.”

In World War II, as in the earlier global conflict, defense dollars paid for the expansion of American shipyards.  When overcapacity plagued the global industry after the war, the major shipbuilding nations responded by subsidizing their shipbuilders to preserve them and compete for shares of the global market.  The U.S. responded in kind, providing American shipbuilders with operating differential subsidies to compensate for foreign government subsidies and lower wages overseas.

Then Ronald Reagan was elected president.  In 1981 the market fundamentalists of the Reagan administration brought about the merger of the U.S. Maritime Commission with the U.S. Department of Transportation, not with the Pentagon, where according to Adam Smith’s logic it belonged.  The administration and Congress abolished all subsidies to American shipbuilders, leaving them unable to compete for global business against foreign rivals that benefited from government subsidies, government financing of sales, government R&D, government grants and tax benefits. The Reagan administration claimed that the planned 600-ship navy would compensate for the loss of commercial business by American shipyards, but that navy never materialized, and following the Cold War the U.S. Navy shrank.  A five-point national shipbuilding initiative by the Clinton administration, designed for military-to-commercial conversion, was too little and too late.

Shipbuilding is a highly capital-intensive, advanced technological industry, not an “old,” labor-intensive industry that is naturally suited to poor, developing nations with unskilled labor.  In addition to high-wage Japan and South Korea, leading shipbuilding nations include Germany, France, Finland, Italy, Poland and Spain, which unlike the U.S. have never ceased to protect and subsidize this critical strategic industry.  Unions cannot be blamed for the demise of American shipbuilding, because many successful shipbuilding work forces abroad are unionized.

In Reagan’s first year in office, 46 merchant ships were on order from American shipbuilders.  During his final year in office, the number was zero.  After Reagan, American shipyards that built civilian seagoing vessels collapsed from nearly two dozen to around half a dozen, which depended on dwindling Navy contracts and the Jones Act for most of their shrinking business.

In 1975, Japan, South Korea and China had 8 percent of world shipbuilding.  By 2010 the three East Asian nations had 86 percent of global shipbuilding. Even though U.S. exports and imports account for a fifth of all seaborne trade, the U.S. builds fewer than 1 percent of the commercial ships in the world.  No clearer proof exists that nations can use industrial policies to start from practically nothing and soon dominate a major global industry.  Having learned that lesson, India and Brazil have announced plans to promote their national shipbuilding industries, using methods like procurement from state-owned energy companies and national content laws. Meanwhile, the U.S. has no plans to rebuild the once-great American shipbuilding industry that Franklin Roosevelt expanded and Ronald Reagan allowed to collapse.

Government policy, not absolute or comparative advantage, explains why the U.S. and the European Union dominate the global aircraft construction industry, why Japan captured much of the global consumer electronics market, and why China has rapidly become a manufacturing power.  None of this means that the U.S. should go back to high 19th-century-style tariffs or emulate East Asian countries in suppressing wages and consumption to overinvest in manufacturing.  Nor does it justify corrupt crony capitalism that tries to clothe itself in the rhetoric of the national interest.  But it does mean that today, as in the past, a national industrial policy of some kind is as essential as the armed forces to American security and prosperity.

One way or another, America will have an industrial policy.  The only question is whether it will be made by us — or made for us, by foreign governments in the service of interests other than our own.