President Donald Trump should launch a “Manhattan Project program to dominate technology” and “restore American technological leadership,” said David P. Goldman, economist, author, senior fellow at the London Center for Policy Research, and Asia Times columnist writing under the pseudonym “Spengler,” in a Monday interview on SiriusXM’s Breitbart News Tonight with hosts Rebecca Mansour and Joel Pollak.
Mansour asked what the Trump administration can do to restore domestic manufacturing industries lost abroad in the midst of ongoing trade disputes with China.
“There’s no way to level the playing field except to counter the massive subsidies that China and other Asian governments give to capital-intensive industries and bring those industries — or large parts of them — back to the United States,” replied Goldman. “If I were advising the president, I’d tell him, ‘Go to Rice University where John F. Kennedy announced that we’d be on the moon by the end of the decade. Announce a Manhattan Project program to dominate technology in 5G telecommunications, in quantum computing, in a whole range of game-changing technologies, and restore American technological leadership.'”
Goldman continued, “I don’t believe in the Asian model, which is the government simply paying you to put up a factory, but I do believe that the Reagan-style defense drive or the Kennedy-style defense drive, where we used to spend a point-and-a-half of GDP on federal subsidies for R&D and made America the technological wonder of the world, that model works.”
Asian governments, including China, incentivize businesses to move their high-tech manufacturing operations to their countries with “massive subsidies,” noted Goldman. “I think the reason we have a massive trade deficit with China is because American tech companies stopped investing in physical production of goods — computer chips, sensors, and lasers — and moved all that production to Asia a decade and a half ago. And the reason they did that is because the Asian governments — China, Japan, South Korea — all subsidize capital-intensive industries, so if you want to build a chip fabrication plant, which today can cost up to $40 billion, you’ll go to a country which gives you a subsidy to build it. The same reason you’ll build a stadium in Nashville instead of Knoxville: because the city government gives you a subsidy to build it there as opposed to somewhere else.”
America has lost its technological dominance in the realm of high-tech manufacturing to China and broader Asia in the 21st century, explained Goldman in May, highlighting the absence of comparable subsidies in America to attract high-tech manufacturing enterprises.
“The basic problem is we’re losing our high-tech industry,” assessed Goldman. “We’ve lost almost all of it. We’re about to lose the last vestiges of the American semiconductor industry. All these things we invented — from computer chips to lasers to sensors and so forth — are now being produced almost exclusively in Asia, and I don’t believe we can be a great power [or] military power unless we have a dominant position in a few of those industries. That’s a separate issue [from the tariff issue].”
China is signaling confidence in its capacity to defeat America in a trade war, estimated Goldman. “I think the Chinese decided to take the velvet glove off the steel fist and indicate that they were prepared to fight. … [China’s] depreciation of the Yuan — the RMB — is one element, and equally important is the order the Chinese government gave to state-owned firms not to buy American farm products. … With those two announcements, the Chinese basically rebuffed the president’s latest attempts to put pressure on them and said, ‘Bring it.'”
“It’s quite a frightening situation for investors,” pointing to stocks suffering their biggest sell-off of the year on Monday amid market fears of Chinese retaliation against Trump’s new tariffs. “This could be a prolonged, all-out, nasty trade war, and if so, I think we’ll take a lot of market damage and some economic damage.”
Goldman warned, “The Chinese haven’t cracked. These trade wars occur is because both sides have different views of the likely outcome, and the Chinese are telling us they think they can tough it out. They’re not going to be subject to pressure. They can get through a trade war. They think we’ll take more damage, and we’ll cry uncle first. That’s what makes it so dangerous.”
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