{"id":1918112,"date":"2023-04-22T12:11:00","date_gmt":"2023-04-22T16:11:00","guid":{"rendered":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/in-depth-reshoring-us-industry-from-china-requires-defense-driven-innovation-economist-says\/"},"modified":"2023-04-22T12:17:32","modified_gmt":"2023-04-22T16:17:32","slug":"in-depth-reshoring-us-industry-from-china-requires-defense-driven-innovation-economist-says","status":"publish","type":"post","link":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/in-depth-reshoring-us-industry-from-china-requires-defense-driven-innovation-economist-says\/","title":{"rendered":"IN-DEPTH: Reshoring US Industry from China Requires Defense-Driven Innovation, Economist Says"},"content":{"rendered":"<aside class=\"mashsb-container mashsb-main mashsb-stretched\"><div class=\"mashsb-box\"><div class=\"mashsb-count mash-medium\" style=\"&quot;\"><div class=\"counts mashsbcount\">22<\/div><span class=\"mashsb-sharetext\">SHARES<\/span><\/div><div class=\"mashsb-buttons\"><a class=\"mashicon-facebook mash-medium mash-nomargin mashsb-noshadow\" href=\"https:\/\/www.facebook.com\/sharer.php?u=https%3A%2F%2Fwww.conservativenewsdaily.net%2Fbreaking-news%2Fin-depth-reshoring-us-industry-from-china-requires-defense-driven-innovation-economist-says%2F\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Facebook<\/span><\/a><a class=\"mashicon-twitter mash-medium mash-nomargin mashsb-noshadow\" href=\"https:\/\/twitter.com\/intent\/tweet?text=&amp;url=https:\/\/www.conservativenewsdaily.net\/breaking-news\/?p=1918112&amp;via=ConservNewsDly\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Twitter<\/span><\/a><a class=\"mashicon-subscribe mash-medium mash-nomargin mashsb-noshadow\" href=\"#\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Subscribe<\/span><\/a><div class=\"onoffswitch2 mash-medium mashsb-noshadow\" style=\"display:none\"><\/div><\/div>\n            <\/div>\n                <div style=\"clear:both\"><\/div><\/aside>\n            <!-- Share buttons by mashshare.net - Version: 4.0.47--><div class=\"post_content\">\n<div class=\"aplayer_app\" data-source=\"https:\/\/vs1.youmaker.com\/assets\/2023\/0422\/6e693c20-eea8-419d-8eae-db89eb411f36\/audio.mp3?length=10050093&#038;duration=837\"><\/div>\n<\/p>\n<p>It\u2019s increasingly the received wisdom in Washington: China\u2019s military power and manufacturing capacity are twin challenges America must face.<\/p>\n<p>Economist David Goldman wants to address the two together through vigorous industrial policy driven by smart defense spending\u2013but his analysis has already met with skepticism in some quarters.<\/p>\n<p>\u201cThe United States is going to go bankrupt eventually,\u201d Goldman told The Epoch Times in an April 14 interview.<\/p>\n<p>He cited the country\u2019s long-standing trade deficit, which has been <a href=\"https:\/\/fred.stlouisfed.org\/series\/BOPGSTB\">widening for decades<\/a> as the United States continues importing more in combined goods and services than it exports.<\/p>\n<figure id=\"attachment_3065729\" style=\"width: 600px\" class=\"wp-caption aligncenter\"><a href=\"https:\/\/img.theepochtimes.com\/assets\/uploads\/2019\/09\/02\/Tariff-hikes.jpg\"><figcaption class=\"wp-caption-text\"><noscript><\/noscript><\/figcaption><\/a> A truck passes by shipping containers at the Port of Los Angeles after tariffs on Chinese imports were imposed by President Donald Trump in Long Beach, Calif., on Sept. 1, 2019. (Mark Ralston\/AFP\/Getty Images)<\/figure>\n<p>Goldman worries about the country\u2019s net foreign asset position. As of the fourth quarter of 2022, Americans were on the hook for more than $16 trillion in foreign liabilities.<\/p>\n<p>\u201cWe take people\u2019s goods and give them our paper in return. There\u2019s a natural limit to how long you can do that. At some point, people won\u2019t be able to take our paper,\u201d he said.<\/p>\n<p>The economist\u2019s <a href=\"https:\/\/dc.claremont.org\/content\/uploads\/2023\/03\/Provocations-5-Goldman.pdf?utm_campaign=Claremont%20Institute%20News%20Emails&#038;utm_medium=email&#038;_hsmi=253400600&#038;utm_content=253400600&#038;utm_source=hs_email\">new article on domestic manufacturing<\/a> is the latest in a series of \u201cProvocations\u201d from the Claremont Institute Center for the American Way of Life.<\/p>\n<p>Goldman is known for his long-running \u201cSpengler\u201d column in the Asia Times, a perch that has let him closely observe the rise of China.<\/p>\n<p>The economist pointed to recent indications of growing Chinese geopolitical strength despite American opposition, like Brazilian President Lula\u2019s <a href=\"https:\/\/www.reuters.com\/technology\/brazil-paves-way-semiconductor-cooperation-with-china-2023-04-14\/\">visit<\/a> to a Huawei site in Shanghai and Beijing\u2019s role in <a href=\"https:\/\/www.theepochtimes.com\/china-brokering-saudi-iran-deal-sees-biden-losing-the-middle-east_5134926.html\">brokering a deal<\/a> between Saudi Arabia and Iran.<\/p>\n<p>Huawei <a href=\"https:\/\/asiatimes.com\/2023\/04\/huawei-eyes-saudi-arabia-as-its-regional-hub\/\">is building<\/a> Neom City, a smart city in Saudi Arabia near the Red Sea.<\/p>\n<figure id=\"attachment_5056121\" style=\"width: 600px\" class=\"wp-caption aligncenter\"><a href=\"https:\/\/img.theepochtimes.com\/assets\/uploads\/2023\/02\/14\/Lee-1200x900.jpg\"><figcaption class=\"wp-caption-text\"><noscript><\/noscript><\/figcaption><\/a> John Lee Ka-chiu (second L), Hong Kong Chief Executive, visiting THE LINE Experience Exhibition of NEOM Future City in Riyadh, Saudi Arabia, on Feb. 5, 2023. (Hong Kong Information Services Department)<\/figure>\n<p>\u201cThe economic power that China wields through its export machine is giving it a whole string of diplomatic successes, and that diminishes American power,\u201d Goldman said.<\/p>\n<p>\u201cIf these trends continue, we\u2019ll end up looking like Britain, as a former imperial power against the United States, with China in the position of the United States,\u201d he added.<\/p>\n<h2>Spengler Against Decline<\/h2>\n<p>How would Goldman prevent, or at least stave off, the decline of the United States?<\/p>\n<p>Part of the solution would be to subsidize an American equivalent to Huawei.<\/p>\n<p>In some ways, that might be a return to form. Not so long ago, the United States brought the world Bell Labs, a powerful engine of innovation throughout the 20th century.<\/p>\n<p>Goldman claims a certain kind of economic inefficiency made that possible.<\/p>\n<p>\u201cThe government gave AT&#038;T a monopoly. AT&#038;T overcharged people for telephone services. And that enabled AT&#038;T to support Bell Labs,\u201d he told The Epoch Times.<\/p>\n<p>The government-led breakup of Ma Bell saved consumers money. Yet, according to <a href=\"https:\/\/quello.msu.edu\/wp-content\/uploads\/2015\/08\/Memories-Noll.pdf\">engineer Michael Noll<\/a> and other Bell veterans, the end of AT&#038;T\u2019s monopoly made it harder to justify the long-range, fundamental research programs that led to inventions like the transistor and the photovoltaic cell.<\/p>\n<p>Goldman advocates more government research and development spending, focused on basic science and not on picking winners and losers in the marketplace\u2014a job he considers best suited to the private sector.<\/p>\n<p>Unlike other industrial policy hawks, including former President Donald Trump, Goldman is not a big fan of tariffs.<\/p>\n<p>\u201cTariffs are a very broad subsidy, and I think they\u2019re a lousy one,\u201d he said, arguing that Trump\u2019s tariffs failed.<\/p>\n<p>American education is another one of Goldman\u2019s targets.<\/p>\n<figure id=\"attachment_3220407\" style=\"width: 600px\" class=\"wp-caption aligncenter\"><a href=\"https:\/\/img.theepochtimes.com\/assets\/uploads\/2020\/01\/29\/ceremony-1200x798.jpg\"><figcaption class=\"wp-caption-text\"><noscript><\/noscript><\/figcaption><\/a> Pasadena City College students at the graduation ceremony in Pasadena, Calif., on June 14, 2019. (Robyn Beck\/AFP via Getty Images)<\/figure>\n<p>\u201cOur engineering education is alarmingly poor,\u201d he said, noting that China produces many more engineering majors than the United States.<\/p>\n<p>Meanwhile, America\u2019s brightest young minds follow the money.<\/p>\n<p>In the <a href=\"https:\/\/twitter.com\/MJadrool\/status\/1484002977614606340\">words<\/a> of one anonymous Twitter user, \u201calmost all of the smartest guys I knew in college, guys who would have governed colonies in the 19th [century], are working email jobs or programming at a Tinder-for-dogs start up.\u201d<\/p>\n<p>\u201cThe smartest kids go to the big tech companies, where they hope to become millionaires by the time they\u2019re 26,\u201d Goldman said.<\/p>\n<p>He wants to incentivize science and engineering education by bringing back the National Defense Education Act of 1958, a law motivated by the Soviets\u2019 launch of the Sputnik satellite and attendant concerns about the nation\u2019s engineering workforce.<\/p>\n<p>Goldman would also boost the number of skilled factory workers through an apprenticeship system modeled on systems in Germany, Switzerland, and Scandinavia.<\/p>\n<p>In addition to bolstering America\u2019s labor pool, he would change the tax code to make life easier for capital-intensive businesses.<\/p>\n<p>Manufacturing is a particularly capital-intensive sector; it requires a lot of real, physical goods, things like machines and production plants.<\/p>\n<figure id=\"attachment_5081598\" style=\"width: 600px\" class=\"wp-caption aligncenter\"><a href=\"https:\/\/img.theepochtimes.com\/assets\/uploads\/2023\/02\/24\/aluminium-rolls-1200x800.jpg\"><figcaption class=\"wp-caption-text\"><noscript><\/noscript><\/figcaption><\/a> Employees work at the production line of aluminum rolls at a factory in Zouping, Shandong Province, China, on Nov. 23, 2019. (Stringer\/Reuters)<\/figure>\n<p>\u201cIt takes years to write off the investment in capital-intensive equipment, which is a big disincentive to companies trying to make investments in that area,\u201d Goldman told The Epoch Times.<\/p>\n<p>He also thinks the United States\u2019 stringent regulatory environment hinders domestic manufacturing.<\/p>\n<h2>\u2018War is the Father of All Things\u2019<\/h2>\n<p>Defense spending, perhaps the Provocation\u2019s sharpest thorn, is central to Goldman\u2019s plan for rebuilding U.S. manufacturing.<\/p>\n<p>\u201cAt the peak of the Cold War during the late 1970s and the 1980s, defense policy demanded a wide range of innovations in weapons systems that required the discovery of new technologies,\u201d he wrote.<\/p>\n<p>Many crucial digital technologies, not least the Internet, started with help from the Defense Advanced Research Projects Agency (DARPA).<\/p>\n<p>Goldman believes intelligent defense spending could help America innovate in manufacturing sectors at the far frontiers of science and engineering.<\/p>\n<p>He summarizes his call to defense-driven innovation with a line from the ancient Greek philosopher Heraclitus: \u201cWar is the father of all things.\u201d<\/p>\n<p>That doesn\u2019t sit right with economist Marshall Auerback.<\/p>\n<p>Auerback, a researcher at Bard College, has <a href=\"https:\/\/americancompass.org\/an-industrial-policy-by-any-another-name\/\">written<\/a> about industrial policy for <a href=\"https:\/\/www.theepochtimes.com\/think-tank-wants-to-set-new-direction-for-conservatives-after-midterms_4858232.html\">American Compass<\/a> and other outlets.<\/p>\n<p>In an April 18 email to The Epoch Times, he cited the <a href=\"https:\/\/www.jstor.org\/stable\/2538876\">work<\/a> of economist Seymour Melman, who warned of the dangers of the military economy.<\/p>\n<p>Notably, many analysts believe the COVID-19 response placed the U.S. economy on something like a <a href=\"https:\/\/foreignpolicy.com\/2020\/03\/26\/the-coronavirus-war-economy-will-change-the-world\/\">war footing<\/a>.<\/p>\n<figure id=\"attachment_4492600\" style=\"width: 600px\" class=\"wp-caption aligncenter\"><a href=\"https:\/\/img.theepochtimes.com\/assets\/uploads\/2022\/05\/26\/GettyImages-1290144647-Large-1200x800.jpeg\"><figcaption class=\"wp-caption-text\"><noscript><\/noscript><\/figcaption><\/a> President Donald Trump greets the crowd before he leaves at the Operation Warp Speed Vaccine Summit in Washington on Dec. 8, 2020. (Tasos Katopodis\/Getty Images)<\/figure>\n<p>Auerback questioned the efficiency and broader economic benefits of defense spending.<\/p>\n<p>\u201cMost weapons projects now require relatively little touch labor. Instead, a disproportionate share is siphoned into high-cost R&#038;D (from which the civilian economy benefits little), exorbitant management expenditures, high overhead, and out-and-out padding, including money that flows back into political campaigns,\u201d Auerback told The Epoch Times.<\/p>\n<p>He conceded that any successful push for an industrial policy would require a justification based partly on national security, \u201cespecially among Republicans.\u201d<\/p>\n<p>\u201cYou won\u2019t get bipartisan buy-in unless you bring the GOP onboard,\u201d he added.<\/p>\n<p>In an April 21 email to The Epoch Times, Goldman said Auerback \u201cis certainly correct that there are more efficient ways to allocate R&#038;D funding than military technology.\u201d<\/p>\n<p>Yet, \u201cas a practical matter, we\u2019ve never done anything else right. The digital age was the child of DARPA and the Cold War.\u201d<\/p>\n<p>\u201cWe\u2019ve never done anything of real grandeur without a defense [or] space driver,\u201d he added.<\/p>\n<h2>Taxes, Tariffs, and Woke Industrialism<\/h2>\n<p>Like Goldman, Auerback thinks basic federal R&#038;D spending could stand to increase.<\/p>\n<p>He, too, warned of the dangers of continuing to outsource manufacturing to China or Asia more generally, partly due to the risk of intellectual property theft.<\/p>\n<p>\u201cThis is especially true in the automobile sector where the mad rush to electrical vehicles will ultimately destroy Detroit,\u201d he said.<\/p>\n<figure id=\"attachment_5001034\" style=\"width: 600px\" class=\"wp-caption aligncenter\"><a href=\"https:\/\/img.theepochtimes.com\/assets\/uploads\/2023\/01\/21\/Electric-Vehicle-charging-GettyImages-1242853588.jpg\"><figcaption class=\"wp-caption-text\"><noscript><\/noscript><\/figcaption><\/a> A driver charges his electric vehicle at a charging station as the California Independent System Operator announced a statewide electricity Flex Alert urging conservation to avoid blackouts in Monterey Park, Calif., on Aug. 31, 2022. (Frederic J. Brown\/AFP via Getty Images)<\/figure>\n<p>Auerback diverges from Goldman when it comes to tariffs and taxes. He told The Epoch Times he would target the latter at U.S. companies that offshore their operations.<\/p>\n<p>As for tariffs, Auerback made the case that free trade orthodoxy in America is something of a historical accident.<\/p>\n<p>\u201cThe idea of eliminating everybody\u2019s tariffs instead of granting market access on a case-by-case basis seems to have come from the Wilsonian wing of the Democratic Party led by Cordell Hull, the Tennessee senator, who subsequently became FDR\u2019s Secretary of State for 11 years,\u201d Auerback said.<\/p>\n<p>\u201cHull and other Southerners had always been for free trade because they had no industries in need of infant industry protection and wanted to sell cotton, soybeans, beef, and any other farm products to the markets of the European empires,\u201d he added.<\/p>\n<figure id=\"attachment_5198560\" style=\"width: 600px\" class=\"wp-caption aligncenter\"><a href=\"https:\/\/img.theepochtimes.com\/assets\/uploads\/2023\/04\/16\/id5198560-4_18_woodrow-wilson-1200x754.jpg\"><figcaption class=\"wp-caption-text\"><noscript><\/noscript><\/figcaption><\/a> Woodrow Wilson, the 28th president of the United States, campaigning for office. (Hulton Archive\/Getty Images)<\/figure>\n<p>Indeed, sectional conflict over tariffs helped cause the U.S. Civil War.<\/p>\n<p>Free trade picked up more steam immediately after World War II when the U.S. economy was virtually alone among advanced nations in being undamaged enough to supply the world with manufactured goods.<\/p>\n<p>Auerback characterized the current period as a \u201c40-year Reagan-Thatcher experiment with unmanaged capitalism,\u201d one he believes must end.<\/p>\n<p>He didn\u2019t limit his criticism to Republicans and conservatives.<\/p>\n<p>\u201cDemocrats must be careful not to use the rubric of national industrial policy as an excuse to pin on a bunch of their own political hobby horses, such as child care, or \u2018equity\u2019 mandates (which are highly inimical to good industrial policy),\u201d he said.<\/p>\n<h2>Trade Divides Thinkers<\/h2>\n<p>A more fundamental challenge to both Goldman and Auerback comes from free trade advocates.<\/p>\n<p>One is Donald Boudreaux, an economist at the Mercatus Center at George Mason University.<\/p>\n<p>In a <a href=\"https:\/\/cafehayek.com\/2023\/04\/debunking-yet-another-false-tale-told-about-american-trade-deficits.html\">letter<\/a> to Claremont\u2019s Center for the American Way of Life, he characterized Goldman\u2019s piece as a \u201cstampede of economic misunderstanding and factual errors.\u201d<\/p>\n<p>Boudreaux pointed out that Americans\u2019 net wealth has increased significantly over many decades, even as the United States consistently ran trade deficits.<\/p>\n<p>The beginning of that period coincided with the rise of Japan as a manufacturing power\u2013one that, like China, was forecast to pose a major economic threat.<\/p>\n<figure id=\"attachment_4703883\" style=\"width: 600px\" class=\"wp-caption aligncenter\"><a href=\"https:\/\/img.theepochtimes.com\/assets\/uploads\/2022\/09\/1.tagreuters.com2022binary_LYNXMPEI8017K-FILEDIMAGE-1200x813.jpg\"><figcaption class=\"wp-caption-text\"><noscript><\/noscript><\/figcaption><\/a> A worker checks machinery at a factory in Higashiosaka, Japan, on June 23, 2022. (Sakura Murakami\/Reuters)<\/figure>\n<p>Bryan Riley, director of the National Taxpayers Union\u2019s Free Trade Initiative, told The Epoch Times that the United States\u2019 reliance on imports is a two-way street.<\/p>\n<p>\u201c[It] also means foreign suppliers are dependent on the U.S. market for their success. And there is a big difference between \u2018dependence\u2019 and simply choosing to import certain products because it\u2019s more affordable to do so,\u201d he said in an April 19 email to The Epoch Times.<\/p>\n<p>While Goldman claimed that America\u2019s industrial policy was causing real incomes to fall, Riley cited data from both the <a href=\"https:\/\/www.cbo.gov\/publication\/58353\">Congressional Budget Office<\/a> (CBO) and the <a href=\"https:\/\/fred.stlouisfed.org\/series\/A229RX0A048NBEA\">Federal Reserve<\/a> showing that incomes have trended upward over recent decades, even as free trade policies have come into effect.<\/p>\n<p>The CBO data ends in 2019. The Federal Reserve data, which ends in 2022, shows real disposable personal income declining from 2021 onward\u2013a period that coincided with much of the COVID-19 response, pandemic-era Congressional spending, and Joe <\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>It\u2019s increasingly the received wisdom in Washington: China\u2019s military power and manufacturing capacity are twin challenges America must face. Economist David Goldman wants to address the two together through vigorous industrial policy driven by smart defense spending\u2013but his analysis has already met with skepticism in some quarters. \u201cThe United States is going to go bankrupt<\/p>\n","protected":false},"author":152,"featured_media":1918113,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mo_disable_npp":"","fifu_image_url":"https:\/\/cndimages.nyc3.digitaloceanspaces.com\/breaking-news\/wp-content\/uploads\/2021\/01\/IMG_2758-scaled-1.jpg","fifu_image_alt":"","footnotes":""},"categories":[543],"tags":[4501,24919,13919,24405,6984,7297,8934,24918],"class_list":["post-1918112","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-the-epoch-times","tag-china","tag-defense-driven","tag-economist","tag-in-depth","tag-industry","tag-innovation","tag-requires","tag-reshoring"],"fifu_image_url":"https:\/\/cndimages.nyc3.digitaloceanspaces.com\/breaking-news\/wp-content\/uploads\/2021\/01\/IMG_2758-scaled-1.jpg","_links":{"self":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts\/1918112","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/users\/152"}],"replies":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/comments?post=1918112"}],"version-history":[{"count":0,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts\/1918112\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/media\/1918113"}],"wp:attachment":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/media?parent=1918112"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/categories?post=1918112"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/tags?post=1918112"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}