Industrial Policy, Right and Wrong
One of the things that struck me when I first arrived in Washington, fresh off of winning an insurgent Senate campaign in 2010, was how D.C. lawmakers, academics, and reporters all thought they had the world figured out. Every development, every data point, somehow justified their worldview.
It wasn't just a matter of partisan confirmation bias — though that was, and remains, rampant. Rather, it was most evident where people on the right and left agreed. The most prominent example might well have been the bipartisan consensus that took hold after the Cold War, according to which free trade — characterized by indiscriminately removing policies that hinder the international flow of goods — was considered an unqualified good, while proactively using government to strengthen domestic industry represented a path to inevitable inefficiency and decline.
In some ways, this consensus was understandable. We had won the Cold War on the strength of American capitalism, which buried the Soviet Union's communism. The only challengers to the resulting world order were terrorist groups that were impossible to take seriously on an intellectual level. In such an environment, one could be forgiven for assuming laissez-faire policies were always and everywhere beneficial — I was very much formed by this view myself.
But even back in 2010, there were signs that all was not well with the post-Cold War order. The Great Recession had taken jobs and even homes from many families. Deindustrialization and deaths from drug overdoses had taken their toll on towns across the heartland. And the wars in Iraq and Afghanistan continued to grind on.
Some of these crises were hotly debated in Washington, but others — like deindustrialization and the opioid crisis — barely registered until it was too late for tens of thousands of Americans. When policymakers finally acknowledged these problems, the next question was what to do about them — and that was where stale consensus thinking became dangerous.
Far too often, the answers from think tanks, consultants, and committee chairs felt like under-contextualized Reagan-era talking points in a modern font. They simply did not reflect the world we lived in — a world in which China was rising, corporate patriotism was declining, and communities were fracturing.
If living is learning, lessons are all around. Just look at our defense industrial base: The Pentagon reports that its number of aerospace and prime contractors has fallen from 51 to five since the end of the Cold War. Headlines remind us that our submarine fleet is shrinking by one boat every two years, and that manufacturing can't keep up with need. Our advanced weapons systems often depend on China — our most significant rival — for crucial components. And according to dozens of war games, we have barely enough missiles to defeat the People's Liberation Army in a conflict over Taiwan.
Meanwhile, America is involved in an increasing number of international conflicts, from Russia's war on Ukraine to Israel's campaign against Hamas to skirmishes with Iran-backed militias across the Middle East, not to mention the rising tensions in the South China Sea. Our involvement in any and all of these conflicts threatens to spread our resources ever more thinly across the globe. In short, we are underprepared to defend Americans and our national interests from those that would do them harm.
Our adversaries are implementing ambitious industrial strategies to take advantage of this moment. The phrases "Made in China 2025" and "Military-Civil Fusion" denote Beijing's plan to use industrial dominance to displace and degrade the United States. Even if we dismiss Beijing propagandists' exaggerated claims about this strategy's success and account for the waste and corruption endemic to China's communist system, it's hard to argue with the results: While our industrial base has shrunk, China's has grown many times over.
Indeed, our greatest adversary is now the world's largest ship- and steel-making power by several orders of magnitude. It's the world's largest producer and exporter of cars. It seeks to become the number-one producer of microchips and aerospace technology as well, though it has been denied the top spot for now. As its debt rises and birthrates plunge, communist China may yet collapse under the weight of its own contradictions. But hope is not a viable strategy. China poses a manifest danger to our country, and we will need a robust industrial base to counter it.
Unfortunately, national security is only one component of the problem: The collapse of American manufacturing has also done incalculable harm to our nation's social fabric. Many towns once characterized by strong, stable employment and vibrant community life became hotbeds of discontent, drug addiction, and suicide when the factories supporting them shut down or moved overseas. Even phenomena like falling rates of marriage, childbearing, and male labor-force participation are linked to deindustrialization, as recent research by my Senate office details.
That's the bad news. The good news is that there is a way out of this predicament. Throughout our history, our leaders have enacted targeted industrial policy to foster productive growth, supply-chain resilience, well-paying jobs, and military strength. When designed properly, these policies have succeeded. There's no reason we can't follow in their footsteps today.
Unfortunately, the Biden administration's attempts at industrial policy have done little to inspire confidence.
To be sure, there was plenty of buzz surrounding these initiatives when they began. In 2022, when President Biden stood before a fresh groundbreaking at an Intel factory site and proclaimed that "the future of the chip industry is going to be made in America," he was met with rapturous applause. Yet although domestic spending on microchips, electric-vehicle (EV) batteries, and other advanced technology has increased since the president took office, our national independence and strength are arguably less secure now than they were under President Trump.
Part of the reason is that Beijing is restricting key parts of the supply chain: Its export controls on gallium, germanium, graphite, and other minerals threaten our ability to make everything from cars to missiles.
Additionally, the Biden administration's response to these threats reeks of special-interest favoritism and progressive ideological capture. The administration tends to focus on faddish causes — many of which, like renewable energy, are already dominated by China — while ceding more essential industries to our adversaries. Officials have also done little to prevent American technology and tax dollars from flowing to China. Finally, the administration has undermined its own attempts to build more factories in America with burdensome regulations, red tape, and activist mandates.
Conservatives may be tempted to see these failures as the inevitable result of government intervention. As American Compass executive director Oren Cass observes, "[c]ritics warn that even if a public boost for manufacturing is worthwhile in theory, it will become a political boondoggle in practice. The president appears determined to prove the critics right."
The libertarian conclusion — best represented by Milton Friedman's call to "move unilaterally toward free trade" — is nevertheless incorrect. Like calls for unilateral disarmament, it ignores the basic reality that other nations have agency. China regularly abuses our economic openness to its relative benefit — and our relative detriment. Moreover, to argue that we should abandon industrial policy because we are executing it poorly is to ignore the many examples in America's past proving that such policy, properly conceived and bounded, can work.
The commonsense path forward is to identify the Biden administration's particular failures, which are not endemic to industrial policy broadly, and to correct them with conservative insights. These insights include a greater willingness to prioritize the national interest, a more pragmatic approach to regulation, and increased support for entire supply chains, from the mine to the factory.
This is a tall order. But as difficult as it may be to get industrial policy right, conservatives can and must take ownership of this space to keep the American economy strong and free — and to prevent our nation from becoming the vassal of an overseas dictatorship.
INDUSTRIAL POLICY DONE RIGHT
Using government to support industry and defend our economic and national security is nothing new for America, nor is it a departure from American conservative principles. And despite assertions from critics that free markets alone are responsible for America's success, plenty of evidence indicates that industrial policy played a vital role in building our nation into a world power.
Such evidence can be found in the earliest days of the republic. The first secretary of the Treasury, Alexander Hamilton, famously favored using subsidies to foster domestic manufacturing and "render the United States, independent on foreign nations, for...essential supplies."
One early example of this policy is the national arsenal, built on a site personally selected by George Washington near Springfield, Massachusetts. The arsenal began as a store for arms manufactured abroad, but within a few years of America's independence from Britain, it was producing small arms that made our nation less reliant on foreign powers for defense. The benefits of the arsenal spilled over into the commercial economy, with skilled labor and workshops concentrated in a small geographic area transforming the Connecticut River Valley into the nation's first major manufacturing hub. "It would not be hyperbole," notes historian Robert Forrant, "to call [this] collection of firms...the 'Silicon Valley' of its day."
After the founding era, Whig statesman Henry Clay proposed an "American System" of tariffs and infrastructure development to harness the resources of the West and transform our young republic into an engine of prosperity. He encountered resistance from President Andrew Jackson, who lowered tariffs and abolished the national bank that Hamilton had built. But the first Republican in the White House, Abraham Lincoln, resuscitated Clay's ideas and brought many of them to fruition. Even if they pale in comparison to the Emancipation Proclamation and the Union's victory in the Civil War, it's nonetheless clear that the transcontinental railroad, the first federal financial system, and effective tariffs rank among Lincoln's most prominent and longest-lasting achievements.
The 20th century saw the United States come into its own as a world power while taking industrial policy to new heights. During both world wars, external threats to economic and national security became so intense that they pushed Washington to venture beyond the reasonable confines of industrial policy. But insofar as these efforts enabled the arsenal of democracy to overcome the central and axis powers, they were profoundly successful.
The Cold War required a more sustainable and durable approach, and Americans enacted one, launching what was in many ways the golden age of federally funded research and development (R&D). In his 2017 article "The Digital Age Produces Binary Outcomes," David Goldman described how American efforts to push the boundaries of applied science rendered the Soviet Union's conventional military obsolete and gave the United States a decades-long commercial manufacturing advantage that shaped the contours of the modern world.
Goldman uses the microchip as a prime example. This globe-altering technology did not emerge on its own from the free-market ether; it came from a Defense Advanced Research Projects Agency commission for fast and light weather analysis, later applied to fighter-jet radar systems.
According to Goldman, Israel's use of microchips against Lebanon in 1982 was so impressive that it helped "[persuade] Russia's leaders that America would win a conventional war, which set in motion the collapse of Communism." Meanwhile, microchips opened the door — and gave America early access — to "[f]ast and cheap computing, optical data transmission, sensing, imaging, CAD/CAM manufacturing — all the technologies that have defined the economy of the past thirty years."
The Apollo program's advancements had an impact similar in scale and scope. From 1961 to 1973, NASA spent the equivalent of $26 billion on contracts with thousands of companies. Apollo was one of the largest public-private partnerships in history — and its results were spectacular. Not only did it build the entire industry of human spaceflight from scratch and send a man to the moon, it generated more than 2,000 spinoff technologies with innumerable commercial and military applications, including integrated circuits, telemedicine systems, heat-resistant clothing, and baby formula.
Cold War history also demonstrates how protecting American industry through tariffs and other trade measures can succeed. As Wells King and Dan Vaughn, Jr., explain, industrial policy transformed the dynamic between the United States' and Japan's auto sectors in the 1980s. Throughout that decade, the American auto industry's productivity — and the quality of its products — improved dramatically, while Japanese car companies reduced their exports to the United States and began building "transplant" factories in America. By the 1990s, these factories had brought billions of dollars to our nation and employed more than 100,000 workers. Even now, they continue to serve a productive role in our economy.
None of this happened by accident: It occurred in large part because President Reagan (who is often mischaracterized as the embodiment of libertarian free-trade dogma) threatened Japanese car companies with trade restrictions.
Reagan did not do so because he had lost faith in free-market competition. To the contrary, he did so because he saw that the competition between American car companies and their Japanese counterparts was no longer "free." As King and Vaughn observe: "On top of the aggressive government support [Japan] provided to its own producers, high tariffs kept imports uncompetitive, while onerous standards made it virtually impossible for foreign firms to build operations in Japan." Was industrial policy the right response? The results speak for themselves.
None of this is to say that industrial policy has not also produced pork, boondoggles, and outright failures: For every Apollo, critics can point to a Solyndra. But to suggest that government "interventions" in the economy are doomed to fail is to ignore the lessons of America's past. Industrial policy has done much good in America — and it can do so once again.
THE BIDEN ADMINISTRATION'S FAILURES
Because industrial policy can yield such enormous benefits, it's crucial to criticize it when it is deployed poorly. And the Biden administration has deployed it poorly.
The administration's failure has been threefold. First, it has often prioritized the wrong industries and technologies, allowing ideology to trump a cool-headed assessment of the national interest. Second, when it has identified the right sectors, the administration has failed to prevent taxpayer funds from flowing to adversaries like China. And third, the administration has diluted the potency of industrial-policy efforts by attaching strings to federal incentives that conflict with its goal of building factories in the United States.
Microchip manufacturing is a case in point for the latter two failures. This is a critical industry if there ever were one: Its products are necessary for basic weapons, our most impressive military platforms, and the commercial economy alike. Moreover, as noted above, smart government policy has fueled the industry's advancement and maturity. Indeed, federal support, paired with private ingenuity and incentives, helped America become the world leader in chip production for decades.
That changed when competitors in East Asia adopted aggressive strategies to promote their electronics industries. The governments of Japan, Taiwan, and South Korea moved mountains to support local champions and transform them into world-dominating companies. Their efforts paid off: Time and again, electronics that had been invented in America — including flat-screen displays, smartphones, personal computers, and the chips that powered them — ended up being made in Asia. Some of this technology was stolen, but the vast majority was given away in the ordinary course of business.
Asian governments promoted their firms' interests, prioritized manufacturing, and created an attractive business environment for companies in targeted sectors. The United States did not. As a result, America's chip sector fragmented. Our country remains a leader in chip design and research, but it lags in manufacturing: We build just 12% of the world's chips, down from 37% in the 1990s. The lost production volume has been gobbled up by those same Asian countries — worst among them China.
For many years, China had few chip-production capabilities and tended to perform low-value, labor-intensive work like chip packaging. Beijing is committed to changing that. In the last decade, the Chinese government has committed tens of billions of dollars to native producers through industrial guidance funds while encouraging established players like TSMC and Samsung to make chips in China. As a result, China's share of global chip production has surpassed that of the United States. We are still ahead on chip technology by many metrics, but Chinese firms like Huawei and SMIC are closing the gap — and few would dispute that they have the momentum.
Thanks to these developments, support for a bill to revive American chip manufacturing was strong and bipartisan just a few years ago. In 2020, I co-sponsored the American Foundries Act, which pledged $15 billion in grants for chip-manufacturing facilities. I also sponsored successor legislation, the CHIPS for America Act, that included an even larger program to build chip factories in the United States.
But Congress had to fund that program, and disturbing signs soon emerged that Democrats' approach to the issue differed from my own. The Democrats proposed a $280 billion package called the CHIPS and Science Act, to which industry lobbyists added a provision granting the U.S. Department of Commerce the power to waive restrictions on chipmakers' expanding production in China. The entire point of the CHIPS for America Act was to encourage production in America while preventing it in China; this provision gave the Biden administration a free hand to give taxpayer funds to chipmakers that produce many of their products in the latter.
Next, Democratic leaders removed from the bill language I had developed with senators Rob Portman and Tom Carper to protect federally funded R&D from espionage. Our measure would have restricted educational and cultural exchange programs that China uses to penetrate our university research centers in two ways: by enhancing disclosure requirements for scholars who receive gifts and academic appointments from foreign governments, and by stiffening the penalties for failing to report such ties. Left-wing groups pressured Democrats to strip these protections from the bill with outlandish accusations of anti-Asian racism.
Thus, a once-worthy effort to rebuild our industrial base turned into an unacceptable giveaway to our adversaries. The CHIPS and Science Act passed the Senate and later became law, but it did so without my vote.
Unfortunately for America, the Biden administration's efforts to implement the law show my concerns were well founded. The statute tasks the Department of Commerce, led by Secretary Gina Raimondo, with distributing tens of billions of dollars in CHIPS grants and writing many of the rules that govern those grants. The department's national-security guardrails, finalized in September 2023, do not require grant recipients to leave China, nor do they incentivize them to do so; they simply state that chipmakers cannot expand their capacity to produce the most advanced microchips in China by more than 5% over a 10-year period. Bizarrely, the rules calculate expansion by factory floor space rather than output, which gives companies a loophole to avoid the guardrails entirely. And they impose even fewer restrictions on the production of less-advanced legacy chips.
This is part and parcel of the Biden administration's strategy of gradually cutting off China from leading-edge technologies while placing relatively few restrictions on mature technologies. National security advisor Jake Sullivan calls this the "small yard, high fence" approach to technology competition. The administration appears to hope this strategy will widen the technological gap between China and the United States by forcing Beijing to waste time reinventing technologies that we already have.
The problem is that this strategy treats our most advanced technologies as the only ones worth protecting when mature technologies are just as important — if not more so — to our national security. Most mass-produced weapons and automobiles, for instance, rely on microchips that the Biden administration deems "legacy" technology. The Commerce Department's decision to ignore these chips means it is allowing companies to continue producing the most commercially and militarily significant chips in China while receiving U.S. tax dollars.
A second problem with the Biden administration's implementation of the CHIPS and Science Act is that it imposes burdensome regulations on chipmakers that directly contradict the law's stated goal of building more factories in America. One of the CHIPS program office's first actions was to identify the hoops companies must jump through to qualify for grant funding — many of which sound like parodies of left-wing identity politics.
For example, the rules state that companies must "develop an equity strategy" so that groups the left believes deserve special treatment — "people of color," "LGBTQ+ individuals," and "justice-involved individuals" (i.e., convicted criminals) — do not face "systemic barriers" to employment. Companies also must establish inclusive hiring practices to ensure that enough of their contractors are owned by minorities, women, and veterans. And they must submit a "construction workforce plan" with a "detailed description" of how they will recruit female construction workers.
The CHIPS program office also threw a few bones to the environmental lobby, urging grant applicants to "use 100% renewable energy for facility operations" and "demonstrate that they have sufficiently accounted for current and future weather- and climate-related risks." Secretary Raimondo is now backtracking from some of these requirements by lobbying Congress to prevent federally mandated environmental-impact statements from delaying CHIPS projects for months. (Of course, Democrats regularly defend such requirements when they apply to other endeavors, such as bringing broadband internet to rural communities.)
For all its flaws, the CHIPS and Science Act targeted the right sector: Microchips are indispensable to modern life, and their production is concentrated in one dangerous point on the map. The Inflation Reduction Act (IRA) — the Biden administration's other major industrial-policy initiative — doesn't even have that to its credit.
Brazenly sold as an inflation-fighting measure, the IRA is actually the left's attempt to force green energy and EVs on an unwilling public. It represents an effort to boost supply for a new industry in the hopes that demand will follow. In short, the IRA embodies industrial policy at its most idealistic — and most contradictory. Instead of playing to America's strengths as a world leader in oil, natural gas, and internal-combustion vehicles, the Democrats have chosen to play catch-up in industries already dominated by China. It's not hard to guess how that's going.
The bulk of the IRA's $1.2 trillion in incentives goes to tax credits for producing wind turbines, solar panels, EVs, and other infrastructure to support a green economy. These credits have inspired a wave of new factory announcements, but at least six have been from Chinese solar companies looking to cash in. These are the same companies that spent years dumping subsidized solar panels into our market to undercut American companies. Now they're poised to reap more subsidies — this time from the American taxpayer.
Even where American companies are leading IRA projects, connections to China are not hard to find. One of the highest-profile deals the IRA encouraged is a joint venture between Ford Motor Company and CATL, the Chinese battery giant, on a $3.5 billion EV-battery plant in Michigan. Ford chose a Chinese partner for a simple and predictable reason: China is the undisputed leader in battery production, building more than half the global supply.
Deals like this have put Democrats in a bind. Do they want green energy enough to pay China for the privilege? So far, the Biden administration's answer is yes: Late last year, it released guidelines permitting IRA tax credits to go to companies producing cars with technology licensed from China. This effectively greenlights the Ford-CATL deal and others like it.
Meanwhile, the Biden administration excludes American miners from the IRA's flagship production tax credit, ruling that "extraction" does not qualify for federal subsidies. This decision makes no sense if the goal is building end-to-end supply chains for products like batteries and solar panels in the United States — but it makes plenty of sense if the goal is appeasing the environmental lobby, which is hostile to American mining. Paradoxically, this decision will only boost demand for minerals extracted from places with abysmal environmental, human-rights, and labor records, like the war-torn Congo. This is industrial policy of a sort — but not the kind that builds American economic resilience.
Of course, it's too early to write an obituary for the IRA. But early signs of its impact are not promising. EV sales are not meeting the lofty targets that activists demanded, and companies like Ford are pulling back on investment — including by shrinking the plans for the battery factory with CATL. The IRA thus exposes the limits of propping up industries favored in Washington when demand for those industries' products does not exist elsewhere in the country.
If this sounds like a standard criticism of industrial policy, it is. Politics can distort the flow of funds to influential sectors and incumbent companies. Planners are fallible. Poor program design can have unintended consequences. These are all fair points.
But the naysayers go too far by arguing that industrial policy can never work, no matter how carefully designed and executed. As Lincoln told skeptics of internal improvements in his day, Americans should not succumb to the temptation to "do nothing at all, lest you do something wrong." If conservatives do nothing, we will only cede the future of the American economy to the left, or to people whose profit motives frequently conflict with our national interest and public responsibility. Neither outcome would be good for America.
If progressives have their way, we'll end up with more wasteful schemes for windmills and other left-wing pet projects. If the globalized private sector is left to its own devices, we'll end up with more outsourcing, offshoring, and collaboration with China. Someone will have to make decisions about the composition of the American economy: It is our responsibility to ensure that those decisions are made with America's well-being in mind.
If conservatives truly care about helping workers and rebuilding domestic industry, we need to put our stamp on manufacturing policy by using the unique strengths of markets and government to create a competitive business environment and support internationally competitive manufacturing firms in America.
HOW TO RESPOND
A serious effort to rebuild American industry will learn from the successes of our nation's past and the extravagant failures of the present. Such an effort must start with a realistic assessment of our goals.
As we have seen, progressive measures like the IRA are frequently driven by ideological commitments to fighting climate change and boosting renewable energy — priorities that much of the country does not share. Progressives also tend to undermine their own policies with excessive regulations on frivolous matters like inclusion and equity while focusing too little on making our domestic manufacturers more competitive internationally. Such an approach may increase EV and solar-panel adoption at the margins, but it has failed to rally Americans behind its vision for the future, much less improve our defense industrial base.
Conservatives can provide a more compelling and realistic vision for American industry. Our goal should be to support American manufacturers so that our nation has an industrial base capable of ending our reliance on foreign markets for goods that are essential to maintaining a free and prosperous republic. This is a national project, set apart from schemes motivated by global priorities like combating climate change that have vague and diffuse benefits but concrete and concentrated costs for the American people. This goal is also tightly tied to national security — a realm where our federal government has substantial power under the Constitution.
Restoring America's defense industrial base is also the goal that can win the broadest buy-in among Republicans and Democrats who are serious about national security. Regional conflicts in Ukraine and Gaza — in which the United States is not even a direct participant — have exposed the inadequacy of our industrial base. This problem is not easily amenable to market-based solutions (aside from purchasing more weapons and ammunition from countries with successful industrial policies, like South Korea). Just as there are no atheists in foxholes, when it comes to self-preservation, even hardened libertarians can concede that some amount of industrial policy is warranted. This is common ground that conservatives can use to make real progress.
Restoring the defense industrial base may well require higher levels of defense spending, but the conversation cannot end at topline defense numbers: Sluicing dollars through the same leaky pipes will not solve our problems. Conservatives need to accept the reality of scarcity and consider reforming the defense acquisition process more substantially.
While shoring up our defense industrial base is our most urgent priority, it should not be the only one. Conservatives must also take steps to support and rebuild our commercial industrial base, with an emphasis on sectors — mining, oil and gas, metallurgy, agriculture, chemistry, medicine, etc. — essential to maintaining our nation's independence in a dangerous world. Many of these industries are inextricably linked to national security: In a time of crisis, they could be called upon to meet our nation's most basic needs.
The pandemic reminded us what happens when we depend on foreign countries to provide us with vital products during an emergency — products like active pharmaceutical ingredients, many of which come from China. Policymakers simply cannot afford to ignore the fortunes of critical industries outside the strict confines of the defense industrial base.
Some of these industries have fallen out of fashion, particularly "old" and "dirty" sectors like mining and heavy industry. They rarely grab the spotlight in Washington, where policymakers prefer to focus on cutting-edge (and frequently speculative) technologies like artificial intelligence. Conservatives can correct this imbalance by championing industries that serve as the backbone of a free nation, regardless of whether they are fashionable. And we can focus on securing supply chains from end to end — from the mine to the assembly line — rather than focusing on one stage of the process. A bill that Democratic representative Ro Khanna and I have sponsored — the National Development Strategy and Coordination Act — would direct the federal government to identify critical industries every four years and invest $2 billion per year in supporting those industries.
Perhaps the most important insight conservatives can bring to the task of rebuilding industry is a pragmatic understanding of the strengths and weaknesses of markets and government. Time and again, progressives err by assuming that any problem can be fixed with new programs and sufficient taxpayer funding. They lavish subsidies on companies and causes that may not prove successful even in the domestic market, much less the fiercely competitive arena of international trade. The bulk of this funding ends up wasted. The eye-watering price tags of bills like the IRA and the Green New Deal make this clear.
Many on the right err in the other direction — by allowing a healthy skepticism of government to morph into a hostility toward all government action. A more balanced and, I would argue, more conservative view recognizes that government is often essential to identifying, organizing, and funding national projects beyond the scope of private initiative. It also recognizes that how best to carry out these projects is a prudential question, and that the answer will often involve market incentives as well as buy-in from the private sector. To return to an example from our history, NASA put men on the moon, but it could not have done so without support from thousands of companies that were themselves motivated by a combination of patriotism, a desire for government contracts, and the lure of commercializing the technologies created through public-private partnerships.
We need to think about policy in similarly pragmatic terms today. Our aim should not be to cut checks to every company with a heartwarming story to tell: That's a recipe for wasting money on firms that know how to lobby but not how to hack it in the marketplace. We should instead be more disciplined with public funds, offering support to companies with the expectation that they will use the opportunity to experiment, innovate, and become world champions. Companies that fail to do so according to clear metrics, such as export numbers, should be denied additional support, and funds that have been extended to them should be clawed back where possible.
Countries with successful industrial policies impose this kind of export discipline on their companies — often ruthlessly. The key is thinking clearly about the incentives that public funding creates and establishing enforceable metrics to avoid waste and abuse by corporate welfare clients to the greatest extent possible.
We can do this without dictating to companies how to invest and compete in minute detail. Instead, our standards should focus on what companies must accomplish (i.e., meeting meaningful production benchmarks) and whom those accomplishments must benefit (i.e., the American people). Establishing clear expectations and rewards and then getting out of the way is the right tack here.
We should be under no illusion that this approach will always work, or that it will always avoid waste or abuse. Those outcomes should be fought at every turn, of course, but they cannot be averted entirely. The important question is whether, on net, such an approach would strengthen our country. The answer to that question is plainly yes.
We can complement this approach by eliminating wasteful and burdensome regulations. For example, any successful effort to rebuild domestic industry must make permitting reform a top priority: We will never be competitive with East Asia if we cannot streamline the endless process of reviews that every green-field project must go through before breaking ground.
Deregulation is a generally applicable solution, and is therefore less subject to political favoritism and corporate gamesmanship. It's also a priority that can unite most Republicans and bring along enough moderate Democrats to become reality. After all, deregulation is industrial policy — one that uses means long championed by conservatives (including those allergic to the term) to carry out its goal.
Another promising government initiative of recent years is the Pentagon's Office of Strategic Capital, which acts as a government-backed venture fund to provide debt and equity to projects of strategic significance. This innovative model recreates some of the strengths of our capitalist financial system while stretching taxpayer funds further than would be possible through a traditional grant-making process.
The bottom line is that no single reform or model will work in every case: We must be pragmatic about the means we use to rebuild industry while remaining steadfast in our commitment to securing America's strength and freedom.
SERVING THE NATIONAL INTEREST
The industrial policy outlined above would represent a vast improvement over the Biden administration's approach. Hamstrung by industries and activists whose interests conflict with those of the United States, the administration's initiatives — CHIPS and the IRA — promise many of the downsides of industrial policy (massive spending, market inefficiencies, and top-down social engineering) with too few benefits for national security or the broader public. The corrections recommended here, by contrast, would strengthen our defense industrial base and revive declining job sectors, all while capturing federal spending in domestic economic gains.
Conservatives should champion these corrections, and not just because they will assure the American people that we're serious about reversing our nation's decline. They should do so because such reforms are necessary for maintaining the one thing most sacred to our national project: our freedom.
One can define freedom in many ways. In recent decades, the right has tended to define it exclusively as freedom from big government. There are ample reasons to do so. But in our zeal for individual liberty, we should not forget that the United States was also founded in pursuit of an additional type of freedom: freedom from foreign domination.
The desire for this sort of freedom fueled our revolution against the British Crown and stirred the generation of leaders who served in its wake. "Against the insidious wiles of foreign influence," warned George Washington in his famed farewell address, "the jealousy of a free people ought to be constantly awake, since history and experience prove that foreign influence is one of the most baneful foes of republican government."
Washington and the founders generally equated national independence with economic independence. We should do the same, and follow in their footsteps to strengthen and secure domestic industry. In the 1790s, that would have meant passing tariffs and enacting subsidies to protect American industries from British export dumping. In the more technologically advanced (and dependent) 2020s, it means using the federal government to ensure that a whole host of sectors can counter and overcome those of communist China.
There is another type of freedom that conservatives should champion as well. It is one I highlighted in a 2018 article for National Review: "the freedom to live a virtuous and meaningful life supported by family, community, faith, and the dignity of work."
That last piece is key, because as conservatives have taught for decades, without a stable, rewarding career, it's almost impossible to achieve the American Dream. And while well-paying jobs are not unattainable in today's economy, they are out of reach for many of our most vulnerable citizens — particularly those living in the hollowed-out communities of the Rust Belt and the predominately black neighborhoods of our cities. Both of these populations saw wages decline and opportunities flee throughout the post-war period.
The collapse of American manufacturing correlates with falling employment and societal decay in rural Appalachia and downtown Baltimore alike. But conservative industrial policy could correlate with the inverse, breathing new life — and freedom — into a divided and downcast nation.
Using the federal government to attempt this change makes small-government conservatives nervous, and understandably so. But we have seen the consequences of three decades of neglect: emboldened enemies, a weak military, and even weaker communities. Further neglect will only lead to worse outcomes. Ceding policy leadership to progressives, who have little regard for federalism, subsidiarity, or God-given rights, is an equally unappealing option.
Fortunately, we have the vision and the political capital to rebuild American industry in light of fundamental conservative insights. The time for unified action is now. The national interest demands it — and history will commend us for following through.
