Economy & Business

Rubio’s Industrial Policy Is Far from Radical

(Illustration: Thom Reis)
It is a common feature of political planning, and one well within the American tradition.

One of the important subtexts of Marco Rubio’s industrial-policy speech earlier this week is the intersection of economic structures and geopolitical strategy. In current debates on the right, proponents of neoliberal economics (especially on trade) have often joined forces with those who want to defend the “liberal international order” (or who wish, in any case, to maintain a proactive American foreign policy). In some ways, this alliance makes sense. Many view President Trump as the central question in American politics, and he has trumpeted his criticism of the post-1989 consensus on both foreign and economic policy. Moreover, American policymakers pivoted to international “free trade” agreements as a key element of geopolitical strategy in the aftermath of the Second World War.

However, in some other ways, there might be some tensions in this alliance. In many respects, the economic trends of 2001 to 2016 undermined the ability of the United States to continue as a ballast of the post-1945 geopolitical order. The extended slowdown in economic growth since Y2K has shrunk the size of the American economy relative to the rest of the world, and the social turmoil accelerated by the disruptions of the neoliberal economy makes it harder for the United States to realize long-term geopolitical goals.

Increased trade with the People’s Republic of China, which is not a conventional market economy, is clearly a major part of this story. It has delivered a shock to the industrial core of the United States. It has made many sectors of the American economy more dependent upon the Communist Party of China. In the postwar era, the United States championed trade agreements with its market-economy allies. Post-2000, we’ve seen a reversal of this, with China absorbing a growing portion of the U.S.’s foreign commerce to eventually become its top trading partner. (The current administration’s efforts to renegotiate our trading arrangements with China — often called a “trade war” — have somewhat reversed this trend; China is now only America’s third-largest trading partner, behind Canada and Mexico.)

Senator Rubio’s speech highlighted the way that the economic trends of the past two decades have had major impacts on the textures of American life and on the ability of the United States to project its power abroad. A United States that is dependent upon the People’s Republic of China for the production of many important manufacturing products is one that will be increasingly vulnerable to economic interference. As a particular example of this vulnerability, he cites the fact that the United States imports 80 percent of its rare-earth minerals from China.

Other recent analyses of industrial policy have emphasized similar themes. In an essay for American Affairs, the Hudson Institute’s Arthur Herman documented the implications that industrial policy (or its lack) could have for great-power politics. For instance, a lack of American investment in setting the terms for 5G infrastructure might create an opportunity for Chinese behemoths (allied to the government) to establish the rules for the next generation of telecommunications. Industrial policy has a bearing on the raw production of military materials, too: “Today the Navy currently has only one firm manufacturing and refurbishing shafts used by both surface ships and submarines. Only one production line produces all the large-caliber gun barrels, howitzer barrels, and mortar tubes used by our armed forces.”

Industrial policy does not have to mean a war of all against all. It is a common feature of political planning, and one well within the American tradition. Under Ronald Reagan, the U.S. government was able both to invest in next-generation technologies and to maintain alliances across the world. More broadly, efforts to buttress the middle class in industrialized nations may help make many of the real achievements of globalization more sustainable. A strategy to secure important American manufacturing and infrastructure interests need not lead to retreat from the world but instead can give the United States the resources (economic and social) to be a responsible player on the world stage.

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