In somewhat simplified terms, the fundamental policy choice is between conventional or "Neoliberal" austerity, progressive-environmental austerity, and what might be called "Catch-up reindustrialisation" - a policy shift in favour of investment over consumption to rebuild the US industrial base and shore up America's long-term security and economic prospects, particularly vis-à-vis China.
"China built 21 submarines last year, while the United States struggled to build one." Simply throwing more money at the Pentagon and incumbent defence contractors will not solve these problems: serious procurement reforms and broader industrial policy measures are necessary.
Although Haley and others typically prefer to imagine that foreign policy and economic policy are distinct domains, their interventionist commitments nevertheless preclude any significant cuts to defence spending.
Cutting Social Security is so politically toxic that Trump has completely distanced himself from the proposals of George W. Bush and Paul Ryan, once hallmarks of conservative economic policy.
The absence of effective environmental policy is already imposing its own form of austerity, as seen in rising home insurance prices across the United States, to which climate change is almost certainly a contributor.
The more likely outcome is the continuation of the status quo, in which lavishly funded NGOs persist in their attempts to push badly designed policy on a reluctant populace.
Trade measures such as tariffs intentionally raise prices, at least in the immediate term, while funding for industrial policies may come at the expense of other budget priorities.
The need for a serious industrial policy programme has become more pressing for various reasons.
The fact is that, even without a self-conscious industrial policy, the US government has had to subsidise fallen national champions such as Boeing in recent decades.
What has been missing is a serious plan to maximise the effectiveness of these investments, in large part because the post-Cold War neoliberal consensus precluded any open consideration of industrial policy.
Suggested reading The Hollywood liberals who rule America By Frederick Kaufman According to this conventional economic theory, industrial policy will always be inefficient, value-destructive, and a drag on growth because it interferes with market-driven capital allocation.
The net result, from a national perspective, is chronic underinvestment, particularly in capital-intensive sectors where foreign industrial policies drive down returns.
These investments, in turn, can form the basis of new companies, technologies, and industries, as the many historical examples of successful industrial policies attest, from Korean autos to Taiwanese semiconductors to early Silicon Valley.
On the contrary, American industrial policy faces a number of obstacles and complications.
The US government itself is poorly structured for this end, with limited institutional capacity to integrate foreign policy and economic policy.
Suggested reading Why Kamala's gun is a powerful weapon By Lee Siegel Second, advocates of US industrial policy often have diverging goals in mind.
Such diffuse ambitions may impede both the passage and implementation of successful industrial strategy, as previous criticisms of "Everything bagel" industrial policy have shown.
Policies like the Chips Act passed in large part due to the support of incumbent industry lobbies, though policy design suffered in various ways as a result.
Namely, the "Asian Tigers" each used global export markets, particularly the US market, as a competition check: companies that increased export share received more industrial policy support; those that did not were cut off.
Without the export-market check, there is an increased temptation to subsidise "Zombies", rather than orient industrial policy investments toward improving productivity and competitiveness.
Such contracting models remain more the exception than the rule in US policy.
Thirty years after the end of the Cold War, it is clear that the United States squandered its unipolar moment, not only via quixotic foreign policy interventions but also through imprudent economic policy.
https://unherd.com/2024/11/american-industry-must-rise-again/
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