In his 1989 classic The Rise and Fall of the Great Powers, Paul Kennedy wrote, “To be a Great Power—by definition, a state capable of holding its own against any other nation—demands a flourishing economic base.” Kennedy should have added, “an economic (and technology) base that is flourishing more than its competitors.”
If that is the sine qua non of being a great power, then as Rob Atkinson writes in the National Defense University’s journal PRISM, the United States faces significant challenges and is at risk of losing its 75-year great power status. To stay ahead of China militarily and technologically, the United States will need to essentially put in place a new national innovation (and production) system, because the current one suffers from serious shortcomings.
After World War II, the United States created the world’s best innovation system (for example, the rules, incentives, funding, institutions, and relationships that support innovation and production). Once we won the cold war, U.S. leaders let it languish and shrink, while in turn embracing market fundamentalism (a belief that government should play a minimal role in supporting innovation) as the overarching economic policy doctrine that limits American freedom of movement to this day. Now facing a multi-decade great power conflict with China, it is time for the establishment of a revised and renewed U.S. national innovation system.
To increase the chances of that happening, U.S. national security officials need to become more forceful advocates not just of an improved U.S. national security system, but of a greatly improved American innovation and production system. This new system needs to be grounded not only on a rejection of market fundamentalist thinking and the minimalist policies stemming from it, but also on a recognition that the current advocacy of many progressives for an industrial policy grounded in climate mitigation and “inclusive growth” will do little to address the China challenge.
The new innovation system needs to be focused on making U.S. advanced technology leadership—in both innovation and production—the central organizing principle of U.S. economic and national security policy while embracing an all-of-government approach to achieve that. Unparalleled U.S. leadership in advanced technology innovation and production—commercial and defense—is the best insurance against Chinese aggression. But America is at risk of losing that insurance relatively soon without a major change in policy direction and the establishment of an improved and more robust national innovation system on the order of ambition of the post–war system Congress and multiple administrations put in place, but now with a focus oriented to new commercial, technology, and global realities.