America Has a National Security Strategy. Where Is Its National Competitiveness Strategy

It is taken for granted in Washington that each new administration comes up with its own National Security Strategy. Indeed, Section 603 of the Goldwater-Nichols Department of Defense Reorganization Act of 1986 mandated that such a strategy must be generated and transmitted to Congress annually, although recently they have come more sporadically than that. President Reagan complied, unveiling one for each of his last two years in office; President George H.W. Bush had three during his term; and President Clinton had seven in his two terms. But Presidents George W. Bush and Barack Obama produced just two each during their respective eight years in office, while Presidents Trump and Biden each had one during their terms.

But even one is better than none, which is how many national competitiveness strategies the country has had in its entire history, even though it is becoming increasingly clear that America's weakened industrial base is a major weakness should it have to fight a prolonged war.

Review of National Security Strategies

In reviewing the NSS through the lens of U.S. competitiveness and dual-use industrial capabilities several things come through. First, the documents have gotten more and more vacuous, vague, and self-promoting over the years. What started as actual strategies-albeit at a high level-has largely turned into glorified press releases of the amazing things the administration is doing.

Second, there has been a gradual evolution toward including a focus on U.S. international competitiveness, but even in the last decade, the focus has been quite limited. In its 1988 NSS, the Reagan administration mentioned industrial capabilities, but largely in passing, writing "in discussing the economic elements of power, we rely on the size and strength of the U.S. economy as our ultimate line of defense."

The first Bush administration mentioned making America more competitive, but the 1993 NSS concluded that doing nothing was the key: "we must, however, remain committed to the fundamental principle that a robust free market, and not government intervention and regulation [no one advocating for competitiveness at the time was advocating for more regulation], is the key to an effective defense industrial base." This statement overlooks that it was government spending and not the market that funded the lion's share of the defense industrial base, but Republicans at the time felt compelled to spout such free-market bromides.

Clinton's NSS, in part to reflect his campaign's theme of "it's the economy stupid," was the first to really focus on the economy, but its focus was broad and vague. The 1998 NSS discussed enhancing American competitiveness, but with the administration in the thrall of Rubinism (the economic philosophy of then-Treasury Secretary Bob Rubin, former CEO of Goldman Sachs) it saw reducing the federal deficit as key to boosting U.S. industrial competitiveness. The report did, however, mention the importance of a good business environment, and of course more education and training, and more foreign markets open to U.S. goods and services, all long-held bromides.

The 2002 NSS of George W. Bush's administration virtually ignored the issue, other than to promote platitudes about igniting "a new era of global economic growth through free markets and free trade." (How did that work out vis-à-vis China?)

To the extent any NSS has talked about the nexus between the civilian economy and national security capabilities, including the ability to field advanced weapons systems at scale, it has been vague at best. Obama's 2010 NSS simply made reference to the idea that "the foundation of American leadership must be a prosperous American economy." Presumably the strategy would be indifferent to whether the economy was producing a lot of potato chips or computer chips. And the strategy's answers were reducing fossil fuel use, making health care more affordable, and enacting more education and other social policy measures, none of which would affect the industrial base.

To its credit, the Trump administration was the first to identify China as the key pacing threat, as opposed to a trading partner that could be seduced to the side of democracy and fair play with just a bit more Western investment and access to U.S. markets. But when it came to the America's dual-use industrial base, the report was quite light. It promised to "evaluate the strengths and weaknesses of our defense industrial base," but that appears not to have been done. It promised to encourage homeland investment, including working "with industry partners to strengthen U.S. competitiveness in key technologies and manufacturing capabilities," but again, in the face of a Trump administration OMB that wanted to cut almost all spending, little to nothing was done, other than imposing tariffs on China. So, while the strategy asserted that "economic security is national security," at the end of the day implementation on the economic front was severely lacking.

In contrast, the Biden administration has not seen national security competition with China as the driving focus of its national security strategy. Rather, "the climate crisis is the existential challenge of our time." That may or may not be true, but climate is a global challenge, not something the United States can solve on its own. Moreover, if climate is determined to be the major crisis, then policy will focus on that, and not on rebuilding the U.S. industrial system, which is what we have seen from the Biden administration, especially in pressing for the clean energy incentives that were included in the IRA.

However, unlike earlier national security strategies, the Biden administration's did note that "there is no bright line between foreign and domestic policy." But it then defaulted to talk about ensuring the strength of America's middle class, something that is at best tangentially related to national security strength. And it talked about "implementing a modern industrial and innovation strategy," but then focused on areas such as investing in water and other physical infrastructure as advancing this goal.

What's Wrong?

What has been singularly lacking in all of these reports has been any analysis of the competitive position of America's dual-use industrial base and what is needed in the way of policy to strengthen it. It's as if administration after administration has assumed that the market will take care of it. But just to be clear: No, the market will not. Investors are indifferent to whether they invest in potato chips or computer chips.

The sad reality is that it's as if the Washington national security establishment is living in another era. An era when our main military competitor was a communist country run by a stifling Gosplan bureaucracy. An era when defense spending drove commercial innovation and there was more spin-off than spin-on. An era when the United States was the dominant industrial nation on the planet.

None of that is true today. The overwhelming national security threat facing the nation is not poverty in Africa, droughts, narco trafficking, climate change, or another such issue: It is China. And China is not the Soviet Union. China is the world's leading manufacturer and is close to becoming the world's leading innovator. And yet our national security strategies are strangely silent about this threat and what to do about it.

Some of this unwillingness to focus on the new challenge comes from the national security establishment's stubborn reluctance to reject marketist economics in favor of more pragmatic producerist economics, as the former doctrine can only council "markets work, markets work, markets work." Fund your planes and tanks, and leave the rest to the magic of the market.

But some of this also reflects a resistance to accepting the new reality. It took the Soviet-backed invasion of South Korea for the U.S. national security and foreign policy establishments to awaken from their stupor and realize that, yes, George Kennan was right, the Soviets were bent on global domination and we better respond. Probably not a good idea to strip down our armed forces to pre-WWII levels. Probably not a good idea to dramatically reduce investment in defense technologies. So, the United States did respond, and pretty well for the most part. By the early 1960s, the U.S. government was funding more R&D than every other country-business and government combined.

But four things were different then:

1. The US government had massive fiscal headroom due to a fast-growing economy and relatively few retirees sucking up most federal spending.
2. The "marketist" takeover of the economics profession was not even in its infancy. That would not emerge until the late 1970s. It fully blossomed in the 1980s, and it remains dominant until today. It was much easier for administrations to toe the prevailing ideological line than to actually engage in industrial policy without being vilified as economic idiots.
3. The U.S. lead in manufacturing and technology was massive. So even if the country's policy was not optimal, we still led. Russia was far behind, and in China bicycles counted as advanced technology. But now U.S. output in advanced industries is below the global average, while China is far ahead.
4. Unlike when communists invaded Korea, the threat now is only potential, not realized. So, without an action-forcing mechanism, incrementalism and the status quo prevail.

What to Do

So, what to do? Many people involved in this debate look intensively for policies, programs and actions that are needed. This is looking in the wrong place. For anyone who is a serious student of U.S. industrial competitiveness, the solutions are right there for the asking: What is needed is the political will to challenge the multiple forces of the status quo and make a radical shift from the "marketist" approach to a "producerist" approach by focusing first and foremost on how to restore America's advanced-industry dominance. Hopefully, the Trump administration will cross this intellectual Rubicon and reject its fellow traveling free-market ideologues. A good start would be to formulate a National Security Strategy that lays out a vision for making America the largest and most dominant advanced-industry economy in the world.

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