The arsenal of democracy may not be dead, but it is definitely dying. That’s the message I got from perusing the Pentagon’s 2020 assessment of U.S. industrial capabilities, which was released on Tuesday.
I am indebted to InsideDefense.com for making the full report available, since almost nobody else wrote about the report’s release and it is nearly impossible to find on the Defense Department website.
That’s a shame, because it is probably the most complete assessment of how America’s industrial decline is impacting national defense ever produced. Although mandated by Congress, it is, in effect, the capstone product of a four-year effort by the Trump administration to reverse the nation’s deindustrialization.
The report makes clear that four years are not enough to fix a problem that has been unfolding for half a century. Despite nearly continuous growth in GDP during that time, the United States has become increasingly dependent on offshore sources, especially Asian nations, for industrial goods critical to its economic and military security.
A U.S. Army M1A2 main battle tank. The Pentagon says production of combat vehicles is at risk from ... [+]
The report, which runs to 180 pages, offers a sector-by-sector glimpse of just how severe the nation’s industrial decline has been. For instance:
· The domestic shipbuilding industry has become a captive of federal demand as production of large oceangoing commercial vessels has waned and supply chains have withered.
· The U.S. suffers the worst trade balance of any industrial nation in machine tools, with only two U.S. companies making it into the rankings of the world’s top 21 producers.
· Although the U.S. is a big consumer of semiconductors, domestic output has plummeted to 12% of the global total because companies have moved production offshore.
Everywhere you look in this report, the news is bad. And while China is cited as a key factor in U.S. industrial decline, the report makes clear that the core problem is a structure of incentives in the domestic economy that rewards quick returns and is indifferent to the long-term consequences of under-investment.
You don’t need a Pentagon analysis to see the fallout from such behavior. Take a stroll through Best Buy and see if you can find anything made in America. Or check out where your antibiotics are made the next time you need a prescription. It turns out most antibiotics consumed in the U.S. come from China, and even when they come from elsewhere they often require Chinese-produced chemical precursors.
The report offers a mixed picture of where the U.S. stands on research of next-generation technologies vital to defense, such as 5G and biotechnology. But the persistent message is that while America still does well at cutting-edge research, when it comes to turning the fruits of our inquiries into manufactured goods, the overwhelming trend is to shift offshore.
How else can you explain that 75% of all the lithium-ion batteries produced in the world are made in China versus 12% in the U.S.? You can’t make electric vehicles without such batteries. You probably also can’t make the kind of ground vehicles our military will need in the future without such batteries.
The bottom line here is that the United States is not competing effectively in industries that will largely define the future of the global economy. Whatever President Trump’s failings may have been, and they were many, he saw where this was headed and put industrial policy back on the national agenda.
The Pentagon’s latest industrial capabilities report makes clear that President Biden will need to do the same, rethinking much of U.S. economic and trade policy. As his national security advisor, Jake Sullivan, argued with co-author Jennifer Harris in Foreign Policy a year ago, “a new grand strategy for today’s world will only be as good as the economic philosophy behind it.”
