TechnoNationalism: An Industrial Policy For The TwentyFirst Century

Trade relations between China and the United States have soured significantly in recent years, with the Trump administration instigating a trade war in 2018. The tariffs and other measures are aimed at addressing the fact that China benefits disproportionately from the global trading system and challenges the United States as a global economic power. This economic success, combined with China's reluctance to integrate into the US-led system and embrace liberal institutions and values, has fueled growing geopolitical competition. Many popular theories, such as the idea that China's integration into world markets would inevitably lead to liberal reforms, were wrong. Instead, China pursued an industrial policy and gained political-economic power through free trade policies. America's response has been to reform and strengthen its own industrial policy to adapt to the new geopolitical environment China has created.

The opposite approach to industrial policy

In an article for Foreign Affairs, John M. Deutsch and Ernst J. Moniz describes how there has been a bipartisan shift in industrial policy in the United States since the 2015 Made in China 2025 report, which Beijing described as promoting its plans. Its domestic high-tech industries. Although it has a strong manufacturing industry for low-cost goods, China's high-tech industry is relatively underdeveloped and dominated (if at all) by Western companies. Through government-sponsored research and development projects, China hopes to become a world leader in advanced industries such as artificial intelligence, green energy and semiconductors. China's plan to increase annual R&D spending could make it the world's leading investor in the sector, a far cry from its position as the world's 12th largest spender, with 2.55% of GDP going to R&D.

But why is R&D so important? Economist Mariana Mazzucato notes that many important technological advances in the United States have been achieved through government support and government funding. Mazzuccato wrote that between 1971 and 2006, 88% of major innovations were entirely dependent on federal research support. Government-funded research such as the Department of Defense, DARPA, and the National Science Foundation led to the development of touchscreen technology, the Internet, SIRI, GPS, and even the Google algorithm. Likewise, Elon Musk's Tesla and SpaceX have received billions in government subsidies. The United States has a long history of government intervention while openly extolling free market capitalism and small government while downplaying the central role of government. China hopes to replicate the success of US-backed research and development projects.

However, if the United States has always been this center of government-led innovation, why is industrial policy now back in the spotlight?

For starters, America is still in a laissez-faire economy with various powerful corporate players acting as their own profit drivers. Mazzucato describes this phenomenon, the "socialization of risk and privatization of reward," as a trap of American policy that invests heavily in research, such as high employment, tax revenues, and exports of goods and services. Instead, these awards are privatized and marketed by corporate venture capitalists. Such individuals and organizations are adept at tax avoidance and evasion and seek to maximize their profits by engaging in inefficient practices such as outsourcing/manufacturing and share buybacks. The negative impact of moving manufacturing to China has already been seen in the rampant theft of intellectual property, which has allowed China to divert this valuable R&D investment and use the stolen technology domestically.

The following observation is that the US government is less centralized than the Chinese state. Despite heavy government interference in the United States, conglomerates and individuals are allowed to operate while making high profits, comparable to the Chinese Communist Party's system of coordination and persecution. Capitalist elites with different interests. The CCP is the center of power in China, with scattered systems of private and public interests in the US.

American politics is a constant struggle for power between these individuals, and these interests often conflict with each other. a more financially lucrative group endangers national security interests than the intelligence community should protect. There is less geopolitical and security risk associated with China than in previous years, which means that "private equity and venture capital have been the real policymakers," as Steve Blank says. American industrialist. This will lead to successful cooperation with China, which will further increase national security concerns. This high degree of risk again feeds into the realism of international relations, which means that security undermines the economy.

Techno-nationalism

This is what the new industrial policy is trying to achieve. Techno-nationalism is known as "a new mercantilist ideology that directly links technological innovation and efficiency to a nation's national security, economic prosperity, and social stability." In response to the West's increasingly short-sighted laissez-faire model and China's state-centric capitalism, they called for more government intervention "to protect against opportunistic or hostile governments and non-state actors".

The United States is forced to reevaluate its laissez-faire attitude and adopt a similar attitude toward the role of government in markets. However, it is not a replication of China's industrial policy, but a consolidation of policies that the United States has always supported.

While Washington has pioneered its own innovation through DARPA, the National Science Foundation, and the Department of Defense, it has not successfully demonstrated, nor approved, that these technologies have been exploited through intellectual property theft. . A strong and important national manufacturing industry for the introduction of new technologies. In the case of cheap consumer goods such as plastic toys and sweatpants, offshoring poses little security risk and intellectual property theft carries little weight. On the other hand, the offshore manufacturing of semiconductor chips presents many new challenges. The growing industrial politics of techno-nationalism focuses on the key role of highly sophisticated technology and the threat to a country's national security if this technology is misused.

In President Joe Biden's latest speech, he lamented the decline of America's domestic manufacturing industry, saying America "imports goods and exports jobs." In particular, they singled out the semiconductor industry, which created American chip technology but now accounts for only 10 percent of global supply. Biden noted that disruptions in the supply chain would highlight the shortcomings of overseas manufacturing. The president's speech, especially in Echoing Trump's 2016 campaign, showed the continued importance of such industrial policies. Biden's comments relate to the CHIPS and SCIENCE Act, which provides $52.7 billion in funding for domestic semiconductor manufacturing, workforce development and research and development. The US wants to merge domestic rivals Nokia and Ericsson with Huawei. In addition, just as China's Made in China 2025 policy document focuses on the development of advanced AI technology, the United States is also seeking to increase its power while challenging China in a technological arms race.

This phenomenon is not limited to the United States, as we see Australia taking a similar position in this emerging geopolitical competition, reflecting Australia's DARPA development programs and interest in its own industry. Semiconductor and rare earth filters.

From this we can conclude that the era of globalization of independent power is slowly coming to an end. This new industrial policy redevelops the concept of "keeping your thumb on the scale rather than assuming that market outcomes will be more profitable". Markets are fueled by a variety of incentives that conflict with national security and policy. Economists have expressed concern about the trade tariffs, which were first imposed by Donald Trump but have remained in place since his administration ended with more sanctions and expanded protections. Wherever it leads, geopolitical imperatives have warned of the many downsides of globalization and forced governments to rethink technology-based industrial policies.

Jasper Hansen holds a BA in Political Science from the Australian National University. His main interests include geopolitics, national security policy, and political theory.

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