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quietus [soylentnews.org] writes:

Our last meeting of the state visit, in the Great Hall of the People, was with Li Keqiang, the premier of the State Council and the titular head of China’s government. If anyone in the American group had any doubts about China’s view of its relationship with the United States, Li’s monologue would have removed them. He began with the observation that China, having already developed its industrial and technological base, no longer needed the United States. He dismissed U.S. concerns over unfair trade and economic practices, indicating that the U.S. role in the future global economy would merely be to provide China with raw materials, agricultural products, and energy to fuel its production of the world’s cutting-edge industrial and consumer products.

H.R. McMaster: How China Sees The World. [theatlantic.com] The Atlantic Monthly, May 2020.

China has the world's largest manufacturing sector, accounting for about 31% of total global manufacturing output. The EU's manufacturing sector has a global production share of 20%, while the United States accounts for about 17%.

In the United States, around 12.3 million people work in manufacturing; for the EU this number is 29.7 million. China's manufacturing sector employs over 120 million people.

Some of the hallmarks of the Biden Administration are its Inflation Reduction Act (IRA), the Bipartisan Infrastructure Law (BIL), and the CHIPS and Science Act. Both IRA and CHIPS act combined aim to inject close to a trillion dollars into specific sections of the manufacturing sector, while the INVEST in America Act (BIL) adds another 1.2 trillion dollar investment into transportation and road projects and electric grid renewal.

On June 12 of this year, the Joint Economic Committee of the US Senate held a hearing, titled "Made in America: The Boom in U.S. Manufacturing Investment" [senate.gov]. For that hearing, 4 witnesses were called.

For two of the witnesses, the future for US manufacturing looks bright, with the help of the acts mentioned above. If we want to remain a rich country, we need to invest in advanced manufacturing, they claim.

Rich countries are countries which have accumulated superior knowledge for producing highly-complex leading edge technologies. With that go successful enterprises and high pay, high quality jobs, and a more diversified economy. Diverting money into manufacturing does not need to harm other sectors of the economy: look at Silicon Valley. Now the global software powerhouse, it started with manufacturing transistors.

The Acts passed during this Administration do help: the private sector invested approximately $80bn into manufacturing construction in 2019; in 2024 that has increased to an annualized $220bn.

The other two witnesses -- both connected to the Cato Institute -- have a different outlook though. Policies where you target specific sectors of the economy rarely work, they claim. They are bound to stimulate waste and corruption, and direct funds away from companies who really could use them: and that's without even talking about fiscal deficits and such. Better turn those funds towards generalized tax reductions, which will ultimately stimulate more investment into the broader economy.

Also, one should take into account the reaction of the outside world here: the EU is already working on its own industrial policies, largely in response to the Biden Administration's Acts. We might very well end-up in a zero-sum game, where the only benefactors are a range of companies which are artificially kept alive with grant money.

Now, dear reader, it may come as a surprise to you, but you have just been urgently asked -- by a prominent US Presidential Candidate -- to give your advice on a New Industrial Policy for America.

What will you say? How will you argue?

Original Submission