We Need a More Resilient American Economy

Americans are a resilient people. We persevere through difficult circumstances and arrive triumphant on the other side of adversity. It’s in our national DNA.

Once again, Americans are rising to the challenge before us. Medical professionals are meeting the call of duty and tending to our sick at great personal risk. Grocery stores, takeout restaurants and pharmacies remain open as Americans show up for work to give the rest of us access to essential goods. Families are working to overcome the tremendous economic damage they face as a result of the coronavirus.

Though I believe resilience is one of the defining traits of an American, I also believe it’s been absent from our public policy for too long. And this has become devastatingly clear in the current crisis.

Over the past several decades, our nation’s political and economic leaders, Democratic and Republican, made choices about how to structure our society — choosing to prize economic efficiency over resiliency, financial gains over Main Street investment, individual enrichment over the common good.

Any prudent policymaker should recognize that both efficiency and resiliency are values we should prioritize and seek to balance. But that’s not what we have done in recent decades. Those choices, from offshoring to building an economy based on finance and service, have produced one of the most efficient economic engines of all time. But a pendulum can swing too far in one direction. And when an economy lacks resiliency, it can be devastating in a crisis.

On the 2016 campaign trail, I spoke repeatedly with hard-working Americans who felt helpless as they watched jobs disappear and their communities crumble because businesses and lawmakers prioritized maximizing short-term gains over the long-term security of America, its communities and its people.

My time serving on the Select Committee on Intelligence was similarly transformative; in instance after instance, it was clear that many of the serious problems we face originated in our economic relationship with China. As did many, I believed capitalism would change China for the better; instead, China changed capitalism for the worse. This new status quo means younger generations, including my children, will grow up in an America of reduced economic prospects.

Today, the result of these failed policy choices is that our manufacturing base is severely diminished, and millions of productive jobs that relied on it are gone. The American domestic supply chain devoted to producing vital medical supplies like generic pharmaceuticals and respirators has withered. For decades America made the conscious choice to facilitate offshoring to China, where labor was cheap, and, critically, the Chinese Communist Party assisted businesses in long-term productive capital development that might seem irrational in the short term. Decisions such as to allow Beijing into the World Trade Organization threw fuel on the fire.

And look at what happened the moment the world faced a pandemic — an inevitability, considering the historical record.

Having monopolized those critical supply chains, the Chinese Communist Party pointed them inward. It ensured that face masks being manufactured in China, for example, went to domestic consumption and their own fight against the virus.

Largely unable to import supplies from China, America has been left scrambling because we by and large lack the ability to make things, as well as the state capacity needed for reorienting production to do so. As a result, doctors are forced to ration supplies and, in some cases, cease using necessary protective equipment.

And while some heroic businesses have shifted production to help fill this gap and produce masks, hand sanitizer and other goods, the nation is still behind.

One reason is that as manufacturers fled to China, our nation’s economy transformed into one dominated by service industries, which survive on person-to-person transactions like the ones now restricted. And unlike industrial economies, service-based economies lack the flexibility that comes with producing physical goods that can either be sold later or repurposed to meet a sudden shortage. This makes us especially vulnerable to this kind of shock.

A commensurate shift in corporate behavior away from investment in workers, equipment and facilities, and toward churning out short-term financial gains to shareholders has only further sapped our resiliency. Why didn’t we have enough N95 masks or ventilators on hand for a pandemic? Because buffer stocks don’t maximize financial return, and there was no shareholder reward for protecting against risk. Even in government, we became infatuated with the “just in time” acquisition model, as opposed to “just in case” contingency acquisitions.

Today, we see the consequences of this short-term, hyperindividualistic ethos. Americans cannot leave their homes. Neighbors are unable to shake hands. Places of worship are closed. The labor market, especially for working-class Americans in those service industries, is in free-fall.

With the steadfast resolve of American communities and with government support to provide businesses the resources they need to pull through, Americans will overcome the challenge before us. But the society that follows should not be what it was before. We won’t properly absorb the lessons from the coronavirus crisis if we fall back into the traditional Republican and Democratic model of politics. We need a new vision to create a more resilient economy.

I have worked to put forward a foundation for this, calling for the re-shoring of supply chains integral to our national interest — everything from basic medicines and equipment to vital rare-earth minerals and technologies of the future. Before the pandemic, I proposed a reauthorization of the Small Business Act to serve as a template for how we could make our economy more productive. There is a clear need for a sweeping pro-American industrial policy, brought into sharp relief by this crisis.

We need to apply this thinking to the conditions that intensified the continuing pandemic. In February, I submitted a bipartisan plan to require drug producers to identify where ingredients are produced, create tax breaks for U.S. producers of these ingredients and mandate that federal buyers purchase drugs made in America.

A sensible industrial policy will also mean creating federal incentives for productive investment in workers and equipment through tax policy and robust federal guarantees, while discouraging unproductive corporate behavior like stock buybacks. Where foreign subsidies draw away investment outside our own borders, the federal government should introduce cooperatives to spur the creation of domestic supply chains.

Though rebuilding a more productive and pro-worker economy will take time, we can achieve it and ensure that America’s next economic chapter will owe its character to the same spirit of resiliency, solidarity and collective pursuit of the common good that our people are now displaying to the world.

Mr. Rubio, a Republican, is chairman of the Senate Committee on Small Business and Entrepreneurship and a member of the Committee on Foreign Relations.

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