In the 20th century, national economic strategy continued to be central to Franklin Delano Roosevelt’s wartime policies, and to Cold War strategies of technological investment. The idea was that if America had a possible military weakness, the government would step in to foster the industries necessary for military defense. Silicon Valley grew, in part, from investments by the National Security Agency and the C.I.A. in radio wave military research at Stanford. Cisco and I.B.M. got off the ground with federal funds and contracts. Even as he liberalized the economy, Ronald Reagan maintained an industrial policy aimed at burying what his administration saw as “sunset” industries like steel and cars to focus on high-tech industries, like fiber optics, particularly useful for military purposes.
Times have changed, but the Hamiltonian roots of American economic policy remain in place. Though it is one of the most technologically advanced countries on earth, America lags in key industries. Market forces, along with Chinese subsidies, have made it that militarily essential American national industries depend on Chinese parts, expertise and manufacturing. American companies may yet have the capacity to meet strategic security needs without government intervention, but the development of the chip industry so far makes it fair to argue that they have not. As in Hamilton’s time, the market looks for profits before security.
Few on the right acknowledge that Mr. Biden’s CHIPS and Science Act and Inflation Reduction Act have also come as a response to the very state subsidies they complain about, and which have scored successes in supporting Chinese industry in the important domains of computers, cellphones, solar power and electric cars — China’s BYD has become the biggest electric vehicle producer worldwide, putting pressure on Tesla and other American companies. With recent chip technology breakthroughs, China is rapidly catching up to the United States in semiconductor capacity precisely because of state strategy and support.
Government intervention and research investment in semiconductors could be seen as a gamble, but they in no way constitute a radical departure for American policy. Mr. Biden’s economic plans look even more Hamiltonian in contrast with Donald Trump’s suggested 10 percent tariffs on all imports and 60 percent tariffs on all Chinese goods. Republican leaders have yet to weigh in on these disastrous proposals, in spite of leading economists of all stripes predicting dire consequences for the American economy, let alone security alliances, if they were adopted.
Hamilton’s main concern was that America compete successfully to build industry to defend itself. He was looking to protect the future prospects of a fledgling nation in a hostile world of industrially and militarily powerful countries, and he did not hesitate to bring the state into the equation. With neo-Hamiltonian securonomics, Mr. Biden is doing the same.