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State Capacity in Short Supply: Assessing the Biden Administration’s Industrial Strategy

After decades of witnessing factories shutter and production move overseas, the political class in Washington seems finally to have woken up to the consequences. A once-in-a-century pandemic laid bare the costs of industrial weakness, and a generation-defining geopolitical contest with China has further raised the stakes. The importance of supply chains and domestic production to the nation’s economic well­being and national security can no longer be dismissed as fanciful or fringe analysis. The neoliberal economic consensus that underlays the policies of deindustrialization and globalization has come under scruti­ny, and while it may continue to hold serious sway in the halls of power, it no longer enjoys an intellectual monopoly there. Politicians are, after all, responsive to the public mood—and many of them, including both the current and prior president, seem to have understood that the public wants something new.

The public policy implications of that fracturing consensus for the nation’s present economic challenges are as yet unknown. For all the posturing about changing economic course and reinvesting in America, the American government has yet to offer a coherent, unified economic strategy and corresponding policy program. In many respects, that is the domestic policy challenge—and opportunity—of our time: to chart a course out of the neoliberal quagmire and toward an economy that genuinely supports national power, economic resilience, dignified work, and shared prosperity.

But it is near impossible to navigate a new course without first getting one’s bearings. Navigators must be clear about where they are, and how they got there. A long-term strategy can only be so helpful without the essential, preliminary exercise of diagnosis. That is why we were encouraged, in February 2021, when the Biden administration directed seven cabinet-level departments to conduct yearlong supply chain assessments across six sectors: defense, public health, information and communications technology (ICT), energy, transportation, and agri­culture. At first blush, this was just the sort of exercise that the federal government should undertake to inform a national economic strategy suited to the nation’s challenges.

Much of the analysis and recommendations in each assessment is accurate and useful; some is not. The assessments rightly acknowledge that American industrial decline is indeed a problem. Taken together, however, they are instructive in revealing the challenges of offering a cohesive diagnosis of why industrial degradation occurred. However ambitious the effort’s intent and scale, in its inability to fully diagnose American economic weakness—to answer the question of why we lost our way—it represents an oddly unambitious product.

While aiming to comprehensively survey American supply chain vulnerabilities, the assessments struggle to articulate a clear economic story into which their analyses and policy proposals coherently fit. In the absence of such a metanarrative, politics—that is, self-justification—fills the void, and an exercise that should ideally lay the groundwork for a policy strategy instead merely “reinforce[s] the strategy [the Biden administration] laid out in June [2021]”—that is, eight months before the assessment reports’ publication.

The reports reveal plenty about the state of the nation’s critical supply chains. In this respect, they are a commendable achievement that should yield near-term policy reforms to address several discrete chal­lenges. But the overall exercise reveals even more about the federal gov­ernment’s incapacity to convey a coherent national economic story—much less design and implement a corresponding national economic strategy. For however much the administration has rightly prioritized economic resilience and sought to address it comprehensively, it could not overcome the limitations of established policy approaches: an execu­tive branch that is not yet fully equipped to govern strategically in economic policy, and a political environment that demands an all-or-nothing approach where narrow bipartisanship is most needed.

On Definition and Direction

It is helpful to begin at the beginning: definitions. Without a sufficiently bright guiding north star, the assessments fall prey to definitional uncertainty throughout. Different reports define “supply chain resili­ency” differently, and the overall exercise’s problems stem, in part, from regularly invoking the term without consistently defining it. This lack of consistency understandably jeopardizes the coherence the assessments might have offered in their diagnoses. But more fundamentally, the overreliance on the term “supply chain resilience” betrays the myriad purposes of industrial policy and the very need for a national economic strategy, rather than a set of near-term policy fixes.

On the one hand, the term is often defined far too broadly. The exercise frequently describes supply chains as a means to varied ends. As the February 2021 Executive Order ordering the reports promises:

Resilient American supply chains will revitalize and rebuild domestic manufacturing capacity, maintain America’s competitive edge in research and development, and create well-paying jobs. They will also support small businesses, promote prosperity, advance the fight against climate change, and encourage economic growth in communities of color and economically distressed areas. More resilient supply chains are secure and diverse—facil­itating greater domestic production, a range of supply, built-in redundancies, adequate stockpiles, safe and secure digital net­works, and a world-class American manufacturing base and work­force. Moreover, close cooperation on resilient supply chains with allies and partners who share our values will foster collective economic and national security and strengthen the capacity to respond to international disasters and emergencies.

Deployed in this way, “supply chain resiliency” seems to mean “getting all the economic goals we like.” Worthy though many of these goals may be, none of them reflects the reason why the federal government should prioritize supply chain resiliency as a matter of public policy. Rather, they are second-order effects of a policy that should be pursued to ensure that the nation can provide for its own security and the prosperity of its people, despite shocks and challenges. Domestic manufacturing capacity, a strong workforce, and broad-based growth are, in fact, worthy goals of economic and industrial policy that each require a particular approach. But strengthening supply chains is neither the primary reason, nor primary means, for achieving those goals.

The pursuit of myriad, tangentially related ends under the banner of “supply chain resilience” in turn opens the door for a host of unrelated political priorities to skew the exercise. On the level of discrete analysis, the reports shoehorn existing progressive coalitional priorities into the analysis that are extraneous to the task at hand. Subsidized childcare, for instance, is singled out as a lever to achieve supply chain resilience in the capstone report. The agriculture supply chain assessment aims to “im­prove equity agri-food supply chains and markets.” On the level of guiding principles, the absence of a coherent diagnostic story opens the door for other ideological commitments and narratives to commandeer the effort.

Nowhere is this clearer than in the Department of Energy’s report, the organizing principle of which is the need to transition to clean energy to “combat the climate crisis” and attain “energy justice.” The long-term challenge posed by climate change merits a policy response, but this misuse of preexisting policy goals as an interpretive filter results in skewed analysis. Vulnerabilities in the global fossil fuel supply chain, now a topic of immense interest amid rising gas prices, receive only a brief aside—a striking flaw. It also results in definitional confusion. In some places, “supply chain resilience” simply indicates the practical means by which renewable energy transition is achieved; in other instances, the chance to strengthen supply chains is simply a happy by­-product of the green revolution.

The assessments’ scattershot approach, in which supply chain resiliency can mean all things to all people and encompass all policy priorities, might be excused as a by-product of commissioning separate agencies to author separate reports. But as the executive order quoted above reveals, the sweeping usage comes from the White House itself. Much as “infrastructure” became a byword for the whole menu of progressive policy in public discourse during the Biden administration’s first year—public childcare as central to the nation’s “care infrastructure,” for example—“supply chain resilience” risks losing its meaning so long as it is invoked to justify extraneous policy goals.

In another sense, however, the supply chain resiliency frame is not too broad, but too narrow. However politically salient the term may be in the wake of the Covid-19 pandemic, using “supply chain resilience” as a euphemism for “national industrial policy” unduly narrows the scope and purpose of actual industrial policy to security against exoge­nous shocks and geopolitical risks. The name given to the Biden administration’s “Supply Chain Disruptions Task Force” reflects this shortsighted limit on an otherwise worthwhile initiative, focusing on “disruption” by exogenous forces rather than atrophy from endogenous weaknesses.

Even the reports’ purported ideological ambition on this score be­trays a narrowness of thinking. The capstone report claims that “supply chain resilience is now an enduring national priority” with a corresponding change in the consensus understanding of the role of public policy. It notes that supply chains are no longer considered the exclusive domain of the private sector and that considerations beyond near-term efficiency must be included as well. The market’s preferred “just-in-time” philosophy has been displaced by a public-private emphasis on “just-in-case.” Yet the government’s role in this account is articulated as the public sector needing to clean up the market’s mess, caused by private sector mismanagement.

In this way, the singular focus on supply chain resilience reflects a misunderstanding of the federal government’s role in economic policy—as merely redressing system failures rather than directing national economic development. National governments must—and historically have—assumed a more active role in economic development beyond merely redressing market failures. Designing and pursuing a national economic strategy that restores the foundations of American prosperity, including resilient supply chains, will require a different attitude from policymakers and an administration with a clearer sense of its responsibilities. As economist Mariana Mazzucato has observed, “[a]ddressing today’s societal challenges . . . require[s] a vision, a mission, and, most of all, confidence about what the State’s role in the economy is.”

Supply Chain Review: A Review

Building on some of the work of the Trump administration, President Biden worked aggressively to address supply chain vulnerabilities upon entering office. He strengthened Buy America provisions, formed the interagency Supply Chain Disruptions Task Force, and shepherded a bipartisan infrastructure package through Congress. Alongside tactical policy measures, the president also began to lay the groundwork for a national economic strategy focused on supply chain resilience. That was the purpose of the February 2021 “Executive Order on America’s Supply Chains” commissioning a series of sectoral supply chain assessments from cabinet-level agencies.

Published in February alongside a capstone report, these assessments purport to mark “a crucial milestone in [a] long-term institutionalization effort” to promote “supply chain resili­ence.” The reports are the first of their kind—the first time that the federal government has sought to assess its major supply chain vulnerabilities in anything approximating comprehensiveness. In many respects, they signify the rubber of high-brow rhetoric about “industrial policy” meeting the actual road of economic analysis and policymaking. Their cumulative pages contain reams of industry analysis and policy recom­mendations.

What they lack is a common structure and unifying approach. That may have been an unavoidable feature of the exercise commissioning different reports from different cabinet-level agencies. Perhaps it is even something to be encouraged—different agencies should have distinct cultures, priorities, and methodologies suited to their particular jurisdic­tions. But in this case, the result is needless incoherence.

The assessments’ quality varies markedly. Each of the six department‑level reports sketches an introductory-level summary of the supply chain(s) in question and a gloss on the issues therein. Some of these summaries are insightful and do gesture to the larger issues at play; others, less so.

The Department of Defense’s report comes the closest to a real diagnostic effort. The report highlights the larger economic trends that have hollowed out the American defense industrial base and made defense supply chains fragile. Regarding vulnerabilities in the kinetic capabilities supply chain, the report notes the decline in private sector capital investment and acknowledges the effects of international com­petition:

Over time, many domestic suppliers have lost business and/or exited the market due to unstable DoD procurement practices and competitive pressure from foreign nations, particularly China. For example, China’s lower production costs make importing materi­als more profitable than producing the same material domestically. It also reduces the likelihood of U.S. private capital investment, leading to erosion of the profitability and competitiveness of U.S. manufactured materials and resources.

With respect to critical energy storage capabilities, the Department notes that the largest challenge “by far . . . is the power of China’s industrial base. China dominates the global advanced battery supply chain. . . . Even materials and components manufactured domestically often have reliance on China-produced precursors.” With respect to castings and forgings, the Department understands that its productive capacity challenges “can be attributed in part to the impacts of offshoring and waves of industry consolidation since the mid 20th century. For example, the United States has only one foundry that can produce the large titanium castings required for some key systems.”

The Pentagon’s worthy effort understands its own limits, however. Its report clearly acknowledges the insufficiency of its own industrial policies to address larger trends. With respect to semiconductors, for example:

The migration of semiconductor manufacturing to the Asia-Pacific region, and the subsequent decline in domestic manufacturing, represents a substantive security and economic threat for the United States and many allied nations. Any strategy adopted to increase domestic microelectronics manufacturing capacity must be cognizant of the influence of commercial drivers. Unless the commercial microelectronics market is willing to support domestic manufacturing by steering demand to U.S. producers, any DoD investment in this area will be unsuccessful.

The Pentagon cannot address systemic economic malinvestment. For that, action from the civilian government and private sector is required. Only Congress, for example, could make good on the report’s sensible recommendation to fund the chips Act. Likewise, while it can high­light the larger trends responsible for our degraded defense base, the Department cannot speak to the policy choices that caused those trends. It is not, after all, the Pentagon’s job to set national economic policy. Thus far can the report go, and no further.

Other reports make little effort to diagnose root causes. The public health supply chain assessment, authored by the Department of Health and Human Services, targets immediate vulnerabilities and current policy actions to the neglect of a long-term perspective or analysis of overarching trends. While it reflects an earnest approach and acknowledges that Covid-19 exposed preexisting supply chain vulnerabilities, its fixation on present challenges, rather than root causes and future policy solutions, undermines the reports’ effectiveness as a diagnostic tool for renewed policy reform.

Where it does attempt to identify root causes of supply chain vulner­ability, the report focuses everywhere but past policy choices. Its readout of the “Economic Pressures” that have contributed to the offshoring of production includes an accurate but incomplete list of actors: foreign governments with their more attractive regulatory envi­ronments and anticompetitive practices, consumers and their desire for cheap goods, industry obsessed with cost-cutting and thus tempted by just-in-time inventory management, and unpredictable demand fluctua­tions attributed to no one in particular—everyone, in other words, but policymakers. As to who permitted and incented such industry behavior in the first place, or failed to appreciate the risks posed by international competition, or decided that cheap goods serve the national interest, little is said. On the whole, the public health report reads like an exercise in pandemic-related self-justification, seeking to save face and address immediate political concerns when a deeper reckoning—and self-reflection—is needed.

At times, the reports read as if a fuller, more cohesive story is strain­ing, just beneath the surface of the text, desperate to say why the trends that caused American industrial decline occurred. The information and communications technology (ICT) supply chain assessment, issued jointly by the Departments of Commerce and Homeland Security, contains such moments. For example:

One of the primary economic risks posed by the current structure of the global ICT supply chain is that it incentivizes companies to allocate capital outside of the United States, particularly for manufacturing. When the majority of manufacturing capacity for a particular industry is moved to another country, domestic innovation is affected.

A reader could be forgiven for speculating that the report authors have a fuller diagnosis in mind, but are unable or unwilling to say it fully. The original hundred-day supply chain review, which preceded the departmental reports, shares similar moments of narrative clarity when it connects industrial decline and supply chain fragility to the malinvestment of financial capital:

A focus on maximizing short-term capital returns has led to the private sector’s underinvestment in long-term resilience. For example, firms in the S&P 500 Index distributed 91 percent of net income to shareholders in either stock buybacks or dividends between 2009 and 2018. This has meant a declining share of corporate income going into R&D, new facilities or resilient production processes.

But even here, the implication that policy decisions may have shaped such market behavior are overlooked. On the whole, while clearly understanding the dangers of industrial decline, the Biden administration’s sketches describe trends and outcomes (mostly accurately), but fail to explain or identify their causes.

A more compelling, and ultimately more constructive, diagnosis would have not only identified underlying causes of industrial decline, but highlighted the policy measures that enabled them. It would note that the weakness of America’s supply chains has been long in the making and is symptomatic of decades-long economic trends shaped by policy. Here, for example, is what it might have said:

Over the last forty years, the United States has suffered from declining domestic investment and a pattern of offshoring produc­tion. Without domestic productive capacity or capital investment, the United States came to depend on foreign nations—even adver­saries, namely China—for critical goods and inputs.

While driven by the private sector, such market trends were permit­ted and encouraged by policy programs of economic liberalization across two spheres—foreign trade and domestic regulation. On the one hand, the United States embraced an active program of trade liberalization that eased the movement of goods and capital across borders—culminating with China’s entry to the WTO. This pattern of asymmetric trade liberalization was a continuation of Cold War–era policy when U.S. foreign policy interests in developing a non-Soviet bloc trumped consideration of domestic economic strength. But it enabled the mer­cantilist policies of developing and competitor nations—including state subsidization, forced technology transfer, and more—to distort market signals and incentives at home and jeopardize the attractiveness of the nation’s economy as a site of production and investment. Believing falsely that all sectors equally served the national interest—“Potato chips, computer chips, what’s the difference?” as George H. W. Bush’s economic adviser, Michael Boskin, famously quipped—policymakers looked on, or even cheered, as production was offshored and the nation evolved into a services-oriented economy.

Within the domestic sphere, the federal government adopted a series of tax and regulatory reforms meant to spur market forces by clawing back state “interference.” While such reforms arguably promoted eco­nomic dynamism for a time, they ultimately dis­couraged long-term investment and growth. Guided by a philo­sophy of shareholder primacy and enabled by these regulatory changes, firms optimized around short-term financial returns rather than long-term planning and strategy. Businesses strove to cut costs and adopt marginally more efficient “just-in-time” inventory practices; meanwhile, firms pursued short-term syn­ergies through mergers, enabled by lax antitrust enforcement. The results were consolidated markets with reduced competition, weak industry with low productivity growth, and vulnerable supply chains dependent on foreign suppliers.

Congress and past presidents of both parties embraced policies that enabled these trends. It is time for policymakers, including those who were there and are still in positions of power, to correct their mistakes and adopt a different economic consensus with a different explanation of, and response to, America’s economic challenges.

A Mixed Bag of Policy Proposals

Lacking a complete diagnosis and directive, the assessments do not live up to their potential. The Biden administration has worked hard to convey confidence in the state’s economic role in any number of discrete action areas; in some areas it has succeeded, in others not so much. It has pointed out private sector behaviors that have proven not to be in the national interest. But it has not confidently surveyed the policy environ­ment so as to explain how, or offer a shared narrative as to why, the state’s own choices have contributed to industrial decline in the first place.

The reports’ underdeveloped diagnosis leads to a mixed bag of policy proposals. Some are relevant, necessary, and gesture at the need for sys­temic reform. Many are mere continuations of existing policy, toothless suggestions or platitudes (“we will convene stakeholders”), or else technocratic measures that may improve outcomes at the margin but will not change fundamentals. For instance, the Department of Transportation’s suggestion that we “encourage greater standardization and foster interoperability of data among States and between the multimodal transportation networks and the private sector” is probably a good idea. But it will not reverse decades of deindustrialization.

The most ambitious and promising proposals are reserved, perhaps unsurprisingly, for the White House’s own “Plan to Revitalize American Manufacturing and Secure Critical Supply Chains in 2022,” which accompanied the publication of the individual departmental reports and the White House’s capstone report. Of these proposals, a number mirror earlier proposals from other elected leaders—many from across the aisle—wise enough to have been concerned about the nation’s supply chains before Covid-19 exposed their weakness.

The plan’s top proposals, for example, bear remarkable resemblance to ideas contained in the reauthorization of the Small Business Administration (SBA) proposed in 2019 by then committee chairman Marco Rubio. The Biden-Harris Plan’s most prominent (and now adopted) proposal is for new export support for domestic manufacturers, espe­cially small and medium-sized manufacturers. While housed in the Export-Import Bank rather than the SBA, the program shares the spirit of that reauthorization’s proposed Innovation Growth Loan and other export-support measures. The Biden plan’s call to increase access to capital for small domestic manufacturers likewise mirrors prior Republi­can proposals to do the same, for example the American Innovation and Manufacturing Act.

The Biden-Harris Plan’s proposals to increase domestic extraction and processing of critical minerals, improve the Small Busi­ness­ Innovation Research (SBIR) program, strengthen Buy America provisions, and pass comprehensive competition legislation like the United States Inno­vation and Competition Act (usica) all have—and have had—Republi­can champions.

A Democratic administration’s first-of-its-kind supply chain analysis has produced overarching policy recommendations that were largely already in circulation with bipartisan support. That should provide ample ground for bipartisan reform. Yet, for the most part, Congress has not taken the necessary steps, nor has the administration been able to convince it to.

More confidence in the appropriate role of policy—and more politi­cal courage from the administration and both parties in Congress—is required. For its part, the Biden administration can and should take a stronger line on policy ideas that can help reshape fundamental incentive structures.

Offshoring and outsourcing, repeatedly cited throughout the assess­ments, are in large part a function of failed trade policy. Cheap, foreign-made goods can only displace American-made ones, and thereby under­mine domestic industries over time, because they have been permitted to be imported. Critical industries can relocate their productive capacities to distant shores because American policy allows, and even encourages, them to do so. Such realities recommend forceful corrective responses. A global tariff pegged to the U.S. trade deficit, for example—a measure strongly supported by former U.S. Trade Representative Robert Light­hizer and descended from John Maynard Keynes’s proposal at Bretton Woods—would do more than target specific weak supply chains. It would reconfigure the broad rules of trade such that American industry is strengthened, and American dependency reduced, across the board. An import certificate program, like the one long supported by Warren Buffett, has similar potential.

Instead of such measures, the administration is succumbing to short-term political and economic pressures and contem­plating China tariff “relief” that will do little to ease inflation. Whether those in the admin­istration who know better, like U.S. Trade Representative Katherine Tai, can dissuade those who do not—or who do, but nevertheless prioritize political exigencies over sound trade policy—remains to be seen as of this writing.

More discrete, less sweeping reforms are even closer to hand. Both Republicans like Senator John Cornyn and House Foreign Affairs Committee ranking member Michael McCaul, and Democrats like Senator Bob Casey and House Ways and Means Trade Subcommittee chairman Earl Blumenauer, have supported an outbound investment review mechanism. Acting like a reverse Committee on Foreign Invest­ment in the United States (cfius), which screens foreign investments to protect against foreign control of sensitive or critical enterprises, such a mechanism would allow an interagency committee to review and pre­vent the offshoring of critical industrial activity to hostile countries. This commonsense measure was recommended by the bipartisan U.S.-China Economic and Security Review Commission and would reduce supply chain vulnerability, but it has fallen prey to internal dissension within the White House, which raises an obvious question: if offshoring of critical supply chains, especially to adversaries, undermines economic resilience in the ways the assessments describe, why not review such activity and prevent its most detrimental instances? Perhaps a stronger account of how the nation went wrong would yield stronger measures to make things right.

No Future without Repentance

The federal government has not yet sufficiently recovered the clarity and confidence necessary to address industrial decline. Widely sup­ported measures to fund the chips Act and invest in R&D have been passed, but represent only initial steps—and were achieved with great difficulty and after serious delay. To achieve the clarity and confidence the moment requires, there must be a reckoning with past policy deci­sions as well as a reorganization of the executive branch to craft an effective industrial policy.

The assessments’ focus on exogenous shocks to supply chains is, while on one level understandable, revealing. Blaming outside or exoge­nous factors conveniently obscures established policymakers’ complicity in the nation’s economic challenges. As noted above, conspicuously lacking in the exercise’s analysis and recommendations are robust exami­nations of long-term economic trends that jeopardize the nation’s economic health and resilience. There is no serious exploration of the manner in which financialized capitalism has spurred mal- and dis-invest­ment in the nation—much less how trade, tax, and other policy decisions have driven those trends.

The elision proves consequential for the assessment’s analysis and the exercise’s ultimate effectiveness. Financialization and deindustrialization were not naturally occurring phenomena; they reflected policy choices, many of which the political and business elite have been (and are) party to. Without addressing those choices, the Biden administration cannot fully diagnose our national industrial weakness—much less offer a poli­cy reform agenda that addresses root causes. No amount of federal spending or policy action will restore resiliency to the nation’s supply chains so long as domestic investment remains in decline and private industry has the incentive and ability to move offshore.

Exactly why the administration overlooked this critical dimension of the supply chain story is an open question. Perhaps it is plausible to consider whether a generational dynamic is at play. The president and senior Democratic congressional leadership were all born prior to the 1960s and have been in Washington for nearly half a century. To critique the past forty years of neoliberal policy failure would require a serious grappling with their own decisions—what we might call policy repent­ance. It is hard not to wonder whether younger administration voices are not eager to tell a bigger, more cohesive story, but are constrained by the realities of political propriety. One thinks of National Economic Council director Brian Deese, who has been outspoken on the need for a new industrial policy—but whose public remarks can leave the question of what exactly happened between our postwar height of public invest­ment and our present crisis conspicuously unexplored.

Beyond the limitations posed by gerontocracy, the supply chain assessment exercise was also compromised by the technocratic tools and agency structures it was obliged to use. Six reports authored by seven different organizations were unlikely to cohere, much less offer a broader accounting. As Timothy Meyer and Ganesh Sitaraman have noted in this journal, the federal government, and the executive branch in particular, is poorly equipped and struc­tured to develop and implement national economic strategy. The vagar­ies of agency structure privilege technocratic issue-area fluency over big-picture thinking and silo policymakers within narrow jurisdictions. From the standpoint of regulating industry, such a structure might be suitable (one thinks again of the Department of Transportation’s earnest list of discrete fixes and improvements we could make to relieve trans­portation-related supply chain problems). But it poses a barrier to the strategic perspective necessary to think across industries and sectors, or identify and support new or emerging sectors. It is reasonable to com­mission a department to assess a sectoral supply chain within its jurisdiction. But to expect a comprehensive diagnosis and rethinking of national policy might be unfair.

At least in theory, the White House should serve this role. But beyond convening and coordinating, its capstone report largely provides an overarching gloss on an otherwise discordant set of reports. A federal government that is capable of crafting and implementing a national economic strategy will require reform to the executive branch. A better agency structure more suited to developing and implementing a national industrial strategy might help policymakers better define the proper role of government and deploy appropriate policy tools to execute an effective industrial policy.

Developing and implementing an effective industrial strategy is certainly not beyond the power of the federal government to execute. The federal government has marshalled and coordinated the private sector to build domestic industry in the past—from the War Production Board during the Second World War to Operation Warp Speed during the Covid-19 pandemic. Even as it struggles to fight an ascendant China, the United States government has combated similarly mercantilist powers in the past—for example, Japan, whose automobile, electronics, and semiconductor industries threatened American economic dominance through the 1980s. While the specific challenges are different today, the worthy effort to rebuild American supply chains and restore domestic industrial capacity will require a similar level of ambition and will demand policy reforms that extend to the nation’s tax, trade, and investment regimes—a different approach not just to the discrete issues in particular sectors, but to political economy in general.

Toward a New Economic Consensus

National policy must be more than technocratic. It requires a clear and comprehensive account of the facts, a theory of the case—a story about what went wrong, and why, and how we can make it right. The nation needs a new economic consensus, grounded in a common diagnosis about the nature of capitalism and its relationship to policy, and the choices that have delivered us financialization, deindustrialization, and yes, our current supply chain fragility.

We do have the makings of such a consensus from the Right and the Left, at least on policy. The chips Act presented low-hanging fruit—that it passed is an encouraging sign, but no sure signal that a new consensus may be emerging. Other fights remain uncertain—for exam­ple the ongoing infighting within the White House and Congress over whether to weaken China tariffs for short-term political gain.

Even on the level of grand diagnosis, figures as politically divergent as Elizabeth Warren, Marco Rubio, Josh Hawley, Ro Khanna, and Rob­ert Lighthizer have articulated views that contain elements of a similar story: the ship of American economics has lost its way under the malign influence of neoliberal free market fundamentalism, and we will not find our way home again until we acknowledge it and consult a better compass. The fact that those figures may prefer not to be named in the same breath speaks to the challenge ahead. Politics—in the partisan sense, not the philosophical sense—threatens to limit our ability to diagnose and govern, as extra-economic concerns and cultural debates forestall cooperation.

This is as true within the Right and the Left as between them. The Trump administration, too, struggled to effect meaningful policy shifts, in part because there was little consensus among its senior officials. In the absence of a new center of gravity, the policy changes it did achieve (like the Tax Cuts and Jobs Act) were obliged to run on the fumes of Reagan-era ideology. Governing in the midst of ideological uncertainty and transition, in which political parties strain to define what they believe and thus to offer a governing agenda, is a tall order no matter which party is in charge.

In the final analysis, the Biden administration’s supply chain review highlights both the opportunity and difficulty of the moment. The very fact that it was undertaken is a positive sign of how economic thinking has begun to shift, and some of its recommendations are commendable. One hopes that Congress and the administration will see fit to overcome their mutual dysfunction and partisan hostility and take action. But ultimately, what was meant to be an ambitious, agenda-defining exercise has also demonstrated just how much more ambition is truly needed.

To confront the nation’s economic challenges requires an accounting for and a reckoning with past policy decisions. That is, it will require enough ambition to summon a greater level of political courage—or, one might say, political resilience.

This article originally appeared in American Affairs Volume VI, Number 3 (Fall 2022): 23–37.

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