Economic Conference Asks “What Would (Alexander) Hamilton Do?”

The Information Technology and Innovation Foundation held a day-long conference on April 27 asking the question: what would Alexander Hamilton do given our current malaise with China?

Leading experts and policymakers in attendance and on the stage were asked to talk about the sort of national development, or industrial policy, espoused by one of America’s founding fathers. “Hamiltonian economics” is based on protecting and promoting American industry and commerce through government intervention. Hamilton believed that a strong domestic economy was necessary for the success and security of the United States and was an advocate of tariffs, strong intellectual property protections, and national investments in infrastructure. The Bipartisan Infrastructure Law was passed in November 2021.

Rob Atkinson, founder and president of the Foundation, summarized in his keynote speech that a nation’s economic opportunities are not about opening markets and prices. It is more about its economic capabilities and its ability to innovate. In his presentation, several charts were shown to depict the U.S. a below-average in advanced industries. The U.S. has large trade deficits in all advanced technologies, with the exception of aerospace manufacturing.

Atkinson was critical of New York Times columnist Paul Krugman, who argues that globalization is not a zero-sum game. Atkinson says it is. Countries do compete with each other. It is a win-lose competition and we want to win. If you don’t try to compete, you will lose, he said.

On what Hamilton would do, he said in his keynote that he would reject neoliberal and neoclassical economics, embrace national developmentalism and help U.S. businesses gain global market share. He would also want to limit China’s ability to profit from “innovation mercantilism.” And to integrate geoeconomics and geopolitics.

Michael Lind, who wrote the highly recommended book “The New Class: Saving Democracy from the Managerial Elite,” said free trade was never really accepted as gospel in the world of commerce and economics until the British Empire adopted it in the 1840s.

“With the end of the Cold War and the opening up of China and Asia and Latin America in general, suddenly you had two billion workers joining the labor market. The defenders of globalization in the US, whether they were lying, or deluded, this was always about labor arbitrage,” he Lind. “They just spun a fairy tale that Nafta and the WTO was opening up markets for manufactured goods from the U.S. But it wasn’t. It was meant to send manufacturing to cheap labor countries, or free labor countries in dictatorships. The U.S. retreated from that and had higher-tech products made here and commodity components made here or Europe. But China is not growing up that supply chain, so are other countries. Do you accept being a deindustrialized country? The Biden administration has good instincts on this. But using industrial policy just to promote renewable energy isn’t enough. It’s about value-added manufacturing. It makes no sense saying we are going to make windmills and car batteries and solar panels, but not going to make other things. If you can make those things, you can also make refrigerators and small airplanes.”

In another panel on aligning corporate interests with national goals, Mike Brown, ex-CEO of tech company Symantec and now a partner at Shied Capital, said the private sector is too focused on the short term. “We need more long-term thinking here,” he said.

Former IBM CEO Sam Palmisano, now chairman of the American Frontier Fund, joked and said he would not use the words “industrial policy” so as not to offend the polite society of the economics departments at Stanford’s Hoover Institute. When it came to markets being too short-sighted, or the American economy being way too financialized compared to Hamilton’s day, he said, “You’re not going to change the capital structure of the U.S.”

Elected officials from the House and Senate also spoke.

Sen. Todd Young (R-IN) said the subject of state-directed industrial policy was “an unnatural one for a limited government Republican.” But added that many Republicans are coming on board due to the national security implications and supply chain risk.

Sen. Young was joined by Sen. Chris Coons (D-DE). Both agreed the U.S. needed what one called a “robust and secure cutting-edge manufacturing sector.” Sectors discussed included biotech and pharmaceutical medicines, a segment the U.S. is heavily reliant on foreign imports and is one of the main sources of the goods deficit.

Coons talked about a town called Seaford in his home state, which got whacked once a Dupont chemicals plant closed. Coons said Seaford was the nylon capital of the world and is now relatively depressed.

Rep. Ro Khanna (D-CA) and Oren Cass, Executive Director of American Compass, debated industrial policy in a panel moderated by WSJ reporter Greg Ip. Cass is a big believer in “decoupling” from China, but has been highly critical of giving Washington too much control over the economy. He warns that partisan bickering is a huge stumbling block for Hamiltonian economics, which makes industrial policy for America a hard row to plow.

Rep. Ro Khanna with the microphone at the ITIF conference held in Washington DC on April 27, 2023.

One note, however, is how Khanna is setting himself up to be one of the strongest voices for domestic manufacturing in Congress. He mentioned what he called “basic things” like baby formula, and face masks, are either in short supply or wholly dependent on imports. “We need more industrial policy in the U.S.,” he said, adding that Trump recognized the working class has been hurt by free trade deals. “We are too conjoined with China. I don’t want an immediate decoupling, that’d break companies. I want to rebalance trade. For industrial policy, I’d want to look at steel and aluminum, where we can make more here with a much better carbon footprint,” he said. When asked about how other countries in the World Trade Organization might react to a more inwardly focused Hamiltonian-style U.S. economy, Khanna said: “I’m an economic patriot. I can still care about the rights of people beyond that and not be unhealthy, or exclusive. I think it is important to manufacture in the United States, but if you are going to have an Asia hub because you want to sell to Asia, then you can look to do that. Europe can’t complain. I don’t want to be lectured by Europe. They have subsidies, and they have a huge trade surplus with us.”

Liza Tobin, member of the Trump National Security Council, said giving China Permanent Normalized Trade Relations status did not go well for domestic producers. “We need a more disentangled world,” she said.

The Information Technology and Innovation Foundation is a non-partisan research and educational institute that focuses on technology policy. It is based in Washington, D.C., and founded in 2006.


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