In the 20th century, national economic strategy remained central to the war policies of Franklin Delano Roosevelt and the technology investment strategies of the Cold War. The idea was that if America faced possible military weakness, the government would intervene to foster industries necessary for military defense. Silicon Valley grown up, thanks in part to investments by the National Security Agency and the CIA in military radio wave research at Stanford. Cisco and IBM got their start with federal funds and contracts. Even as he liberalized the economy, Ronald Reagan maintained an industrial policy aimed at burying what his administration considered “declining” industries like steel and cars focus on high-tech industries, such as fiber optics, which is particularly useful for military purposes.
Times have changed, but the Hamiltonian roots of American economic policy remain in place. Despite being one of the most technologically advanced countries in the world, America lags behind in key sectors. Market forces, along with Chinese subsidies, have made militarily essential U.S. domestic industries dependent on Chinese parts, expertise, and manufacturing. American companies may still have the capacity to meet strategic security needs without government intervention, but the development of the chip industry to date suggests that this is not the case. As in Hamilton’s time, the market seeks profits before security.
Few on the right recognize that the CHIPS and Science Act and Mr. Biden’s Inflation Reduction Act are also a response to the government subsidies they complain about and which have had success supporting industry Chinese company in the important areas of computers, mobile phones, solar energy and electric cars: the Chinese BYD has become the biggest global producer of electric vehicles, putting pressure on Tesla and other American companies. With recent technological breakthroughs in chips, China is quickly catching up with the United States in semiconductor capacity, precisely because of state strategy and support.
Government intervention and investment in semiconductor research might be considered a gamble, but it is by no means a radical change in U.S. policy. Mr. Biden’s economic plans seem even more Hamiltonian in contrast to those suggested by Donald Trump. 10 percent customs duties on all imports and 60 percent customs duties on all Chinese products. Republican leaders have yet to take a position on these disastrous proposals, although prominent economists on all sides predict dire consequences for the U.S. economy, not to mention security alliances, if they were adopted.
Hamilton’s main concern was that America succeed in building an industry capable of defending itself. He sought to protect the future prospects of a nascent nation in a hostile world of industrial and militarily powerful countries, and he did not hesitate to involve the state in the equation. With neo-Hamiltonian securonomy, Mr. Biden is doing the same.
