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The main reason we’re talking about manufacturing is military. In conflict simulations against China, we’re toast each time. (Watch the full clip of what Palmer Luckey, founder of military contractor Anduril has to say.)
That’s because war is transitioning to cheap, high volume weapons, while our Military Industrial Complex milks fat contracts for big, expensive planes and missiles from the Cold War era. The F-35 alone cost us $2T to develop but might never fly in combat. It’s got all the efficiency of California building a high speed rail to Mars.
These two paragraphs from The New York Times are damning:
[subscribe_to_unlock_form]Consider the bill: Two aircraft carrier strike groups, each of which costs about $6.5 million per day to operate, are now parked off Yemen’s coast. Radar-evading B-2 bombers, which were designed to blitz the Soviet Union and cost about $90,000 per flight hour, have conducted airstrikes. In the first month of the operation, those bombers, along with dozens of fighter jets and drones, have dropped more than $250 million worth of munitions. The Navy is firing antimissile interceptors, which can cost some $2 million, to blast Houthi drones and missiles, which can cost just a few thousand dollars apiece. The tally for a military operation in Yemen, the Middle East’s poorest nation, is now expected to reach $2 billion in May, congressional aides say.
One of the deadliest attacks of the campaign came last week, when the United States bombed an oil terminal and killed at least 74 people, according to the Houthis. The next day, the Houthis shot down a $30 million MQ-9 Reaper drone and yet another on Tuesday night — the fifth and sixth since the mission began in March. The bombing raids, called Operation Rough Rider, show the United States has yet to establish air dominance above the country, despite hundreds of airstrikes that put pilots at risk as they routinely conduct attacks against Houthi militia forces.
The POOREST NATION in the Middle East is impoverishing us. Can you imagine what China could do? No wonder Trump was in a hurry to strike a deal with the Houthis, sans Israel. The price tag and embarrassment were palpable.
Iran and Russia have already deployed cheap suicide drones and missiles against Israel and Ukraine to overwhelm their defenses, which rely on expensive low volume, precise American weapons. Iran’s Shahed drones cost $35,000. A Chinese CH-5 drone costs ~$1-2M each, compared to the US MQ-9 Reaper at ~$30M. You can find one, scattered across the Yemeni desert.
We’d go broke in a week shooting $13M THAAD interceptors at Chinese Temuhawks, aka DF-16’s costing $1M. We’re still paying the Amex bill for that missile we used to vanquish a $300 Chinese weather balloon. America could be bankrupted by Chinese meteorologists!
We don’t even have an answer to Russia’s or China’s hypersonic ballistic missiles. Russia has used these in Ukraine to destroy billions of dollars in US missile batteries, tanks, and priceless Hunter Biden paintings.
We’re building mainframes in the age of smartphones.
China now has a manufacturing capacity greater than the next 6 largest producers combined. The scale of this operation can’t be overstated. One call from Xi and most of it can be re-tooled for military use.
China’s commercial drone production, alone, is nine times ours.
Look at how long it would take to replenish our best weapons. Eight years for Javelins, seven for Excaliburs. Stingers? 18 YEARS!!! Mid-war, that’s like Bill Belichick calling a time out…for six months, mid-Super Bowl.
Strategic goods
It’s not just military that determines our safety. The pandemic exposed how reliant we are on China and other overseas suppliers for essentials, like masks and medications. War is bad enough, do you really want to experience it with your spouse off Zoloft? In an emergency, we need the ability to make strategic goods here, not rely on outsiders, who might also be adversaries. As with all supply chains, things are complicated…
Some wild quotes from this article on China’s chokehold on US medicine:
“United States relies on China for 95 percent of the key ingredients needed for generic drugs.“
Even if the United States were to reduce its reliance on drugs sourced directly from China, it would still need to purchase pharmaceuticals from countries that rely on China for critical components, such as active pharmaceutical ingredients (APIs) and key starting materials (KSMs).
The pharmaceutical supply chain often involves a tiered production process where core ingredients, KSMs, are produced in China and then transferred to countries such as India for the production of APIs. China is also the dominant producer of APIs. Some good quality drugs and APIs are also produced in Ireland. Then the finished product is sold back into the United States.
“Without the KSMs, you can’t make APIs. Without APIs, you can’t make finished drugs. So China sits at the foundation of the global drug supply chain,” Einhorn said.
“The problem is 90 to 92 percent of most of the prescriptions that Americans take are from the generic side. So that’s the side that I think the government has the biggest role to play, because that side doesn’t have the same investments from the venture capital and private equity that you see on the big branded side.”
Suarez also advocates for a strategic reserve for pharmaceuticals similar to the Strategic Petroleum Reserve that the United States has maintained since the 1970s.
Strategic goods are as diverse as Penn Station. They include electronics, food, energy, and of course, Big Macs.
Our current state has been intolerable for years. We banned Huawei phones, suspecting they were riddled with tracking and spyware. Same goes for popular Linksys routers. And Lenovo has been caught installing spyware multiple times. Wonder why their stuff is so cheap? Same reason Gmail is free. We’re part of the trade. At least Google is domestic adware. Only accept domestic privacy invasions!
TikTok is both spyware and mind virus, curating what information enters American brains. Ah, those precious American brains. We know TikTok’s a weapon because it’s banned in China (except for limited educational and patriotic videos). At the same time, American social networks are banned from China. And our own tech executives restrict their kids from using these platforms.
Though we don’t think of it this way, food production is strategic. It’s essential for sustaining a population in case of emergency. It’s why we subsidize grain. We can debate the impact of that choice, which is at the heart of our…heart disease, diabetes, and obesity epidemics. But we chose grains because they’re highly storable with great shelf life, unlike say, broccoli. Or, sushi. Do not expect a Strategic Sushi Stockpile anytime soon. Though I am optimistic about a comeback for Government Cheese, if we can find a big enough cracker.
Protect or create jobs
Politicians, mostly on the right, love talking about unleashing “job creators”. It’s mostly a smokescreen to cut taxes and regulations. No one starts a business to “create jobs”. They do it to solve a problem. If they’re right and execute well, the market rewards them and they end up employing more people. As in business, American jobs are a hopeful consequence of re-industrialization. I’ll get into how probable that is later in this series.
Strengthen American industries
Protectionism might protect an industry from foreign competition in the short term. In the long term, it weakens them. By servicing a local market, and likely being blocked from foreign ones, means they don’t have to compete with foreign innovation. They also don’t get to collaborate with international partners and suppliers in ways that make both countries’ products (and economies) better. Right now, car manufacturers regularly swap platforms and technologies across brands, models, and countries. Globalism is good, but it is out of balance.
Sneak Peak of Episode 3:
In the next episode, I’ll answer, ‘Does America need to make missiles and Maybelline? Why not just focus on strategic industries?’. The crazy thing is— my research proved my hypothesis wrong. I bet you’ll be as surprised as I was to learn about Indian manholes. Enjoy and tell a friend.
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