Vulnerability of the Western economy

 "China has gotten high-speed rail right, where the United States has not. China is increasing its strategic R. and D. as a share of its economy in a way that we have let deteriorate. We’ve lived through a decade where China has been meticulously thinking about making those investments, marshaling those investments — not all successful but all with a deliberate focus on trying to build its own industrial base and its own intellectual and innovation base. And we have, for the better part of a decade, ignored or derogated those levers. So whatever argument there was for making those investments a decade ago is more pertinent now.

But I think the second element of it is that in the wake of the last four years among our allies and among our global counterparts, there is a big question about, can the United States deliver for its own citizens? Can the United States competently govern and invest in things that are obviously beneficial to its own welfare, its economic strength, its economic resilience? Because the world has watched now for a couple of years where the United States operated in a way that was very difficult for our international counterparts to fathom. That is really the dominant question. I think now more than any time in modern history, the world is watching U.S. domestic policy. This question of whether or not the rescue plan would pass was a top question at the G7. And I think that that reflects the fact that the world is asking this question: If the U.S. is going to lead again internationally on an issue like climate change or an issue like global health and pandemic response, first and foremost, the question is, can the U.S. get its house in order? And that question is inevitably framed vis-à-vis China.

They are the ascendant economic and military power in the world. And so for geopolitical and economic reasons, their economic strength and their national security strength will loom larger than others. I think that that’s No. 1.

No. 2 is, because of the investments that they have made, they’ve positioned themselves in a number of critical areas to our global economy and to supply chains as a critical actor. As we think about the competitive dynamics with China, we need to ask ourselves a more serious set of questions about our own vulnerability.

But it’s not just China. This isn’t just a great power dynamic between the U.S. and China. It’s also that this pandemic has exposed for us in the U.S. the vulnerability of our economy and our supply chains to an unrestrained globalized economy, where the supply chain vulnerabilities often are connected to China but are connected in very complicated ways.

The semiconductor shortage we have in the United States today is a complicated story that involves lots of countries and lots of elements of the supply chain and where your second-tier supplier sites are in Europe, even if the ultimate place where the wafer is being manufactured is in Asia. That’s a reality of the global economy, but those realities are creating vulnerabilities for the U.S. economy that I think have been more difficult to see or at least people haven’t focused as much on them until something like this pandemic happens and exposes us so viscerally."