President Joe Biden’s approach to China, along with the pandemic, ends 40 years of Reaganism, and not just in the United States.
Ronald Reagan’s appeal in his 1981 inaugural address which “The government is not the solution to our problem, the government is the problem” ultimately led to Australia’s full privatization of state-owned enterprises, starting with the Commonwealth Bank in 1991.
More generally, political and economic thought for most of those 40 years, both here and in the United States, has been underpinned by the idea that small government and free markets are better than the other way around.
But last month, the White House Biden released a 250 page paper with the kind of awkward, forgettable headline that usually means it’s not a big deal: “Building Resilient Supply Chains, Revitalizing American Manufacturing, and Fostering Growth at Scale.” 100-day examinations under Executive Decree 14017 ”.
In fact, it signals that America has had another “Sputnik moment”.
In October 1957, the Soviet Union surprised the world and stunned the United States by launching the first satellite, called Sputnik.
The Eisenhower government initially tried to dismiss him as a “useless piece of iron,” but the first thing John F Kennedy did when he was elected president in 1961 was to massively increase US spending on technology. space, in order to catch up and then overtake the Soviets.
In the 1960s, more than 10% of federal spending, or 2% of GDP, was devoted to research and technology, compared to 0.6% of GDP today, and peaked on July 20, 1969 with Neil Armstrong and Buzz. Aldrin walking on the Moon.
Most of the products we take for granted today – the internet, computers, cellphones, Silicon Valley itself, and America’s technological supremacy – date back to the increase in public funding in the 1960s. .
This outpouring of government support for technology was followed in 1964 by Lyndon Johnson’s “Big Society”, also known as the War on Poverty.
Johnson expanded the role of government in education and health care and passed a series of laws aimed at reducing poverty: the Economic Opportunities Act of 1964, the Food Stamp Act of 1964, the Primary and Secondary Education Act 1965 and Social Security Act 1965.
Reagan’s election in 1980, following the trauma of Watergate and Jimmy Carter’s single tenure, represented the US rejection of the broad government policies of Kennedy and Johnson, and launched decades of applied neoliberalism – a small radical government by cutting taxes and public spending, and privatization.
Twenty-seven years after Reagan’s inauguration speech, the GFC has taken a turn in the other direction.
Governments and central banks around the world had to step in and become the solution to capitalism’s failure – it was a financial “new deal” that persists today with fiscal monetary stimulus.
Donald Trump tried to reverse the rise of government, of Make America Great Again as he saw it, and he might have succeeded if he had been half Reagan politician and been reelected for a second term.
But like Jimmy Carter, he only lasted one term, did not complete his program, and was replaced by a large Democratic government.
This time, it’s not Russia that America is trying to catch up with, it’s China, and it wasn’t a satellite that provided the symbol, but a robot on Mars.
After the success of its Zhurong rover in May, China is now announcing that it will send a manned mission to Mars in 2033. NASA now has its schedule.
Trump has spoken out against China’s state-sponsored technological boom, but his solution was to try to ban them and subject them to tariffs and force American companies to decouple their supply chains from China.
But the companies did not comply and the tariffs were hopelessly inefficient.
Joe Biden channels both John F Kennedy and Lyndon B Johnson.
Biden’s Spending Madness
In addition to the $ 1.9 trillion infrastructure program and the $ 1.8 trillion “American Families Plan,” last month’s report “Building American Supply Chains, Etc. Basically says, “If you can’t beat them, join them.”
Unlike other big Biden programs, it doesn’t have an all-inclusive price tag – it’s essentially an open-ended funding plan and focuses on four key areas for government funding: semiconductor manufacturing and advanced packaging; large capacity batteries; minerals and critical materials; and pharmaceuticals.
Regarding semiconductors, the report indicates that their manufacture “on American soil” has increased from 37% 20 years ago to 12% today, and recommends “at least $ 50 billion in investments” by the government to prevent it from continuing to decline.
Regarding batteries, the report states: “Global demand for electric vehicle batteries is expected to increase from around 747 gigawatt hours (GWh) in 2020 to 2,492 gigawatt hours by 2025. In the absence of political intervention, production capacity US power is expected to grow to just 224 GWh during this period, but annual US demand for electric passenger vehicles will exceed that capacity. “
It recommends $ 5 billion to electrify the federal fleet with US-made electric vehicles and $ 15 billion in infrastructure investment to build a national charging infrastructure to facilitate the adoption of electric vehicles at scale. national (do you imagine the Australian government proposing either of these things?).
It also states that the Department of Energy should use its loan program to strengthen “critical materials and mineral refining and processing facilities and to re-equip, expand or establish vehicle battery cell manufacturing facilities. advanced technology ‘in the United States.
The recommendations on pharmacology are broad: that “the Department of Health and Human Services, the Department of Defense and other agencies increase their funding for advanced manufacturing technologies to advance continuous manufacturing and biofabrication of APIs. “.
They recognize that it is not “feasible, desirable or realistic” to expect every drug to be manufactured on American soil, so the plan is to work with “like-minded partners” to develop a supply chain that “is not too dependent on materials or manufacture from countries that do not have a common interest in mutually beneficial supply chain agreements”.
That is, anyone except China.
It took a while for Reaganism to come to Australia, in part because we had a Labor government at the time.
As America backs down, we have a small government, a ruling free market party that still uses Reagan’s handbook, so “Bidenism” might take that long to get here if there isn’t. no change of government.
But if there is any change, the new manual has been released.
Alan Kohler writes twice a week for The new daily. He is also editor-in-chief of Eureka Report and financial presenter on ABC news