The Mountain Pass Mine in California has a long history tied to America’s industrial fortunes. It was born out of prospecting for uranium in the 1940s Atomic Age. Through the 1960s it was responsible for much of the global production of europium, an element that ended up in color televisions and fluorescent lights. Today it has the distinction of being the U.S.’s only active source of rare earths, that 17-member suite of peculiar minerals—largely controlled by China—needed to make the magnets used in everything from electric vehicles to wind turbines to ballistic missiles.
The mine’s present-day status has also made it one player in what’s being framed as an existential American conversation about the resilience and future of the world’s largest economy. The discussion prompted by the
What Litinsky is really pushing for—and he confesses his own financial interests are at stake—is a new American industrial policy. And with that he’s tapping into what is potentially one of the most consequential economic conversations the nation is going to have in this presidential election year. One that, even in a divided America, the current crisis has turned into a growing area of bipartisan agreement rather than debate.
The role government plays in the economy has long been an ideological battle line between the Republican and Democratic parties. It is the context for all major American economic debates, from the structure of the U.S. health-care system to the role of banks and government regulation. And yet, with a wary eye on China and public nervousness about stretched global and domestic supply chains for food and medical products, Republicans are starting to join Democrats in advocating for a stronger government hand in directing America’s industrial resources.
Republicans who just a few years ago regularly scorned any idea of Big Government’s intervening in business and picking “winners and losers” are now happily calling for a national strategy to identify key sectors to protect and promote. In both Congress and the White House they’re discussing tax incentives and other ways to spur businesses to bring manufacturing home from China. Progressives, centrists, and right-wing economic nationalists alike are threatening government strictures on a corporate America that’s spent decades building sprawling “just in time” supply chains around the world in the name of economic efficiency and expansion into new markets.
At the center of the conversation, for now, are China and that amorphous economic demon, globalization—and America’s embrace of it. The debate hinges on how much control U.S. presidents and other policymakers can and should have in directing the country’s economic destiny. And whether the levers they have to pull can redirect the long-term economic interests of companies and consumers. It’s easier to have that conversation when you have an enemy.
The industrial policy playbook is more familiar to Democrats than it is to Republicans. It’s not that surprising when
Trump brought into office a more interventionist style alongside an “America First” trade agenda heavy on government action. His tariffs and Twitter fights with corporate chief executive officers have prompted plenty of quiet grumbling among Republicans on Capitol Hill. But what’s most interesting is how some Republicans are now front-running the president on the issue of industrial policy.
While the White House has been debating an executive order that would require more domestic production of antibiotics and other medicines—which is being pushed by
Although the phrase “industrial policy” has been treated as taboo in Washington for some time, the reality is that it’s quietly been featured in America for decades. The military-industrial complex has since World War II benefited industries from aviation to steel. Tax incentives for businesses are a feature on the state and federal level. So, too, are legislated Buy American provisions that promote the use of domestically produced steel or the military’s congressionally mandated purchase of U.S.-made sneakers. You could even argue that the willingness of legislators to introduce tax loopholes, and of tax authorities to look the other way as multinational companies exploit offshore havens, amounts to industrial policy.
People always point to the space race and its successes. But America’s past efforts to foster the development of certain industries haven’t all succeeded. Many administrations have used trade policy and other measures to protect the steel industry from international competition, with few long-lasting successes. The Obama administration’s attempts to use the stimulus packages passed in the wake of the last financial crisis to extend federal loan guarantees to support solar companies and electric-car makers failed miserably.
A 2014 push to double U.S. manufacturing exports, which hinged on encouraging investment in research into new materials as well as the creation of new training centers for manufacturing workers, had some accomplishments. It also ran into a manufacturing recession in 2015 and 2016, caused by a slump in oil prices that rolled through America’s industrial economy.
Today industrial policy may seem the obvious fix for our angst over the
In the debate over industrial policy, the Mountain Pass Mine is a good example to consider. Even as Litinsky calls for more help, the mine is already a beneficiary of government efforts to boost American industry.
The move is billed by the government as an important step. How long it’s taken to get there, however, is a testament to the difficulties that can confront American government efforts to encourage certain industries and how the market can intervene. The first big wake-up call about Chinese control of rare earths came in 2010, when Beijing imposed export restrictions that sent prices spiking around the world. The Obama administration responded by focusing on investment in alternatives to rare earths and taking China to the World Trade Organization, which eventually forced Beijing to lift its restrictions. Japan and other governments began offering cheap financing to non-Chinese producers in
The price plunge contributed to the 2015 slide into bankruptcy of
Litinsky insists things are different this time. But it’s not hard to see the problems that still face the mine, even if it gets the tax concessions and other elements of industrial policy that he is seeking. In a white paper published in April, analysts at the Department of Energy presented an array of challenges hindering efforts to boost U.S. production of rare earths, including the country’s lack of large-scale production of the
In the middle of a pandemic and an epochal economic crisis—both coinciding with a presidential election—everyone can agree there’s a problem and a need for a new American industrial policy. But most of the calls now are long on platitudes and short on specific policy pronouncements. What that policy looks like—what’s really needed—will be much harder to work out.
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