NSCAI: Final Report
A year ago, before Joe Biden won the presidential election, and he was appointed National Security Advisor, Jake Sullivan, along with Jennifer Harris of the Roosevelt Institute, published an essay in Foreign Policy, 'Neoliberalism Is Finished. America Needs a New Economic Philosophy,' calling for the U.S. to adopt industrial policies to meet Chinese competition.
- Now that he is National Security Advisor and positioned to champion these views in the White House, this essay takes on an importance it didn't have when published. Here are some excerpts.
‘The U.S. national security community is rightly beginning to insist on the investments in infrastructure, technology, innovation, and education that will determine the United States’ long-term competitiveness vis-à-vis China.’
- ‘The growing competition with China and shifts in the international political and economic order call for more expansionary economics.’
‘Advocating industrial policy was once considered embarrassing—now it should be considered something close to obvious.’
- ‘Rather than focusing on picking winners in specific sectors, there is an emerging consensus that suggests governments should focus instead on investing in large-scale missions—like putting a man on the moon or achieving net-zero emissions—that require innovations across many different sectors.’
‘Another good reason [besides climate change] is that others are doing it, especially the United States’ competitors.’
- ‘President Xi Jinping’s Made in China 2025 strategy is a 10-year blueprint aimed at catapulting China into a technology and advanced manufacturing leader in both the commercial and military domains.’
‘Good estimates are elusive, but China’s subsidies alone reach into the hundreds of billions of dollars.’
- ‘And these investments have already paid off handsomely in several areas, like artificial intelligence, solar energy, and 5G, where many experts believe China is on par with or already outstripping the United States.’
‘U.S. firms will continue to lose ground in the competition with Chinese companies if Washington continues to rely so heavily on private-sector research and development, which is directed toward short-term profit-making applications rather than long-term, transformative breakthroughs.’
My Take. The Biden administration has a broad view of national security that embraces financial, economic, and technological threats.
- This is reflected in the composition of Mr. Sullivan's National Security Council staff, which, unlike previous staffs, includes experts in all these diverse fields.
Given Mr. Sullivan's views on industrial policies to meet the national security challenges posed by China in these areas, as well as what seem to be Mr. Biden's own inclinations, expect initiatives to be forthcoming.
The question, as I discussed in my Commentary a couple of weeks ago, isn’t whether or not we will have American-style industrial policies for AI, semiconductors, and other industries.
- The question is what each of these will look like given the range of proposals that will be coming, not just from the White House, but from Congress and indeed from all over the political spectrum.
But whatever these are, big changes are coming in how the U.S. organizes itself to compete with China. Industrial policy American-style will be back soon.
- Stay tuned.