From all appearances, the U. S. will be reviving the old concept, widely discredited, of “industrial policy” in an attempt to head off the growing domination of China and compete with them in various strategic components of economic growth. Clear evidence of this strategy is that the U. S. Senate last month approved a bill providing for $52 billion in subsidies for the construction of new semiconductor fabrication plants, a move that has very little precedent and a practice about which we have been extremely critical of China for years. One of the bill’s lead sponsors, Sen. Mark Warner of Virginia, says, “I’ve been impressed with the China model (of state capitalism)” and the other co-sponsor, Sen. John Cornyn of Texas, is also pretty up front about the change in attitude: “What we’re doing is industrial policy unlike anything people with my free market, conservative background would ordinarily be comfortable with. Our driving impetus is what China is doing and the security of the supply chain”. Really.
There has almost always been broad support in the U. S. for government funding of basic research and development, which has long been our competitive edge, but advocates of industrial policy, including many members of Congress and White House staff, are not satisfied with American leadership in innovation; they want to dominate the supply chain with the manufacturing piece as well. For others, not convinced, this is tantamount to the old phrase, “picking winners”, which is anathema to free-marketeers. As noted by Scott Kennedy of the Center for Strategic and International Studies, “it would be a huge mistake for the U. S. to try and match Chinese government spending….so much of it is thrown down bottomless pits, leading to over-investment, lower profits, slower innovation and more debt”. Other skeptics would remind us of the Japanese experience with industrial policy through their Ministry of International Trade and Industry (MITI), which dominated most of Japan’s industrial decisions for decades, but collapsed in the 1990s. Still others say that, despite the successes of China’s model, there remain serious questions about its overall effectiveness and sustainability, but no one questions China’s objective and commitment to a grand strategy, which is to build their model into a “Sino-centric” order based on socialist market economics. All of this should be of valid concern, but Sen. Warner says that we have no choice–that new semiconductor plants are going to be built and without federal intervention they will all be built in China. Then there is the politics of it all, and Sen. Warner has also assured us that U. S. semiconductor subsidies “must be allocated through a clear, rigorous process without political interference”. Now if you buy that, I have oceanfront property in Arizona to show you.
Vernon Edgar Wuensche says
This seems like a difficult problem no matter how you cut it. We need to have other sources than China with low production costs and having them dominate supply with their lower costs is a national security problem. How about we find other countries who are allies to produce them maybe with special tax considerations. And how about instead of the govt industrial policy giving low or no taxes on local chip production and reducing other regulations on the process.
Jim Windham says
You’re right, Vern, it’s very complicated, but as you suggest there are a lot of ideas that should be on the table before we get to the failed industrial policies of the past. China is a tough problem, but if we do what we do best, we’ll win the long game.
Dr. Tom says
We will NOT do what is best, long-term. I am regretfully cognizant of that. Not while there is a single, Chicomm-loving Democrat left in the USA.
We have already lost the battle, and China is victorious.
Tim Phillips says
As disappointing as it may be I must agree with Dr. Tom in his opinion, and only add it’s not just the Dems it’s all of Washington that has been eclipsed by the technology oligarchs in combination with the global corporate leaders that have allowed the Chinese to win. Greed and power were the 2 drugs of choice pushed by the Chines Communist Party aided by McKinsey, Bain, Booze Allen, et al. To outsource American industrial production to China in exchange for slave labor in the pursuit of qtr-over-qtr profits to meet analyst expectations.
You have to hand it to the Chinese. Masters of the long term strategic vision and discipline to execute.
Don’t forget to wear your mask as a reminder of the American funded first successful deployment of a global bio-weapon to bring global capitalism and American freedom to its knees in preparation for the beheading that approaches by the day.
Drew Scheberle says
I agree with Sen. Cornyn.
Danny Billingsley says
What business enterprise has the U.S. government ever undertaken, to make money and remain apolitical, ever done either?