America’s Greatest Asset Has Been Our Industrial Capacity; It’s Time to Rebuild It.
For over seventy-five years, American leadership has brought an unprecedented era of peace, prosperity, and stability across the globe. When looking back on these decades, many point to our military strength, our great economic dynamism, and our technological innovations as the sources of America’s national power. These observations are true, but they miss what underpins these pillars.
Military, economic, and technological prowess are not generated out of nothing. They come from something deeper, something that we are at risk of losing: our industrial capacity. U.S. industrialization in the twentieth century is what enabled such a colossal rise in the military, economic, and technological spheres. Just after World War II, the United States made up half of the global GDP, and over a quarter of the U.S. GDP was from the manufacturing sector at the time.
Much has changed since our post-war industrial boom. China has surpassed the United States as the world’s manufacturing superpower, accounting for almost 29 percent of global manufacturing output, while the United States lags at just under 17 percent. America’s manufacturing decline is a consequence of decades of outsourcing our capacity. We naively believed that if we ceded our industrial capabilities to China, that nation would democratize and become more like us. American politicians from both parties were wrong to assume this outcome.
China’s manufacturing rise is not just about cheap toys and clothing and clothing to fill our big-box stores. It includes critical technologies that impact our economic, national, and personal security, like electric vehicles (EVs), robotics, artificial intelligence, solar technology, pharmaceuticals, drones, batteries, and ships.
In some of these industries, such as EVs and shipbuilding, China has not only surpassed America’s industrial capacity but has also left us behind.
China is the largest producer of EVs, making up 57 percent of the world’s production. China is the world’s largest shipbuilder, with a capacity that exceeds that of the United States by over 230 times. Allowing these situations to occur was a strategic blunder that will degrade America’s national power over time.
A robust manufacturing industry fit for the twenty-first century requires more than forging and engineering. Our industries need critical components, like engines, computers, microchips, complex alloys, and countless other critical technologies with fragile supply chains. China has, in fact, managed to insert itself into dominant positions in many of these supply chains. For example, in the steel sector, China now produces about half the world’s output, with a commanding position in the global market. China’s supply chain dominance renders our economic security more vulnerable in the event of a conflict between our nations.
A U.S. manufacturing revival requires an environment that supports thousands of small and medium enterprises as the backbone of the industry. This is critical to prevent over-consolidation of smaller businesses—which are important drivers of innovation and employment. We need a strategy that integrates all of our capacity from big factories to small machine shops into a rebuilt industrial base.
Overregulation is stifling our manufacturing companies. Government mandates must be utilized surgically to foster economic growth, not hamstring the economy unnecessarily. High corporate taxes are closely connected to overregulation and will, with certainty, drive our best entrepreneurs to seek less burdensome taxation abroad.
Public-private partnerships that combine the resources and capital of the government and private sector can also, in targeted settings, help facilitate our industrial transition and let us catch up in industries essential to our future. The CHIPS Act needs some retooling but may prove to be a useful precedent in this area.
New factories will need skilled blue-collar workers to weld, install HVAC systems, fit pipes, and fulfill scores of high-paying jobs in the trades. The federal government has been far too silent on the importance of strengthening the industrial manufacturing workforce as well as expanding vocational schools and apprentice programs. We need young people who want to work on factory floors. Young foreign scientists and engineers who graduate from our universities and who share our values should be allowed to stay rather than be pushed out to apply their U.S. education to the benefit of our competitors.
We must also harden America’s industrial infrastructure and our power grids to make them more resilient in the face of increased cyberattacks. The thousands of daily cyber intrusions, hacks, and probes we see now are but a mere foreshadowing of what we can expect from thousands of Chinese hackers if war ever comes.
Private sector R&D investment ensures that America remains at the cutting edge of technological advancements. It is our companies that will keep us ahead in the tech race with China in the key areas of AI and Quantum computing. The government must stop beating up our tech companies with outdated anti-trust lawsuits and consumer investigations and allowing our allies, especially the EU, to do the same.
The United States holds a key position in the manufacturing sector, which no other industrial country, especially China, has—abundant North American energy. Factories require energy, and the high-tech plants of the future will require lots of it. The United States already produces over 12 million barrels of oil a day. That number could go millions of barrels a day higher with more energy-friendly policies. Finishing the last few miles of the Keystone XL pipeline would bring an additional 900,000 barrels of Canadian crude to our refineries in Texas. Oil and gas are just the start.
An “all of the above” energy policy that would entice manufacturers to make long-term bets on America will also focus on alternative sources. Wind, solar, tidal, geothermal, and hydropower all have their places in diverse regions of this country. America should regain its leadership in these green energy fields from China. The energy sources of the future—nuclear (ready today) and fusion—will also play significant roles in powering industry.
America’s strength has always come from our ability to outproduce the world. Our industrial might is what sustains our military superiority, economic might, and technological prowess. This country has all the ingredients, from its people to its bountiful natural resources, to get back on top of manufacturing. To do so, the United States must reindustrialize decisively and with dispatch. Maintaining our peace and prosperity depends on such action.
About the Authors:
Robert C. O’Brien (ret.) is Chairman of American Global Strategies. He served as the twenty-seventh United States National Security Advisor from 2019–2021.
Henrietta Fore is Chairman of Holsman International. She served as the fifteenth Administrator of USAID from 2007–2009. O’Brien and Fore are Carnegie Distinguished Fellows at Columbia University’s Institute of Global Politics.
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