Manufacturing vulnerability: can the U.S. survive in an era of economic warfare
The world's major global centers remain vulnerable to shocks caused by geopolitical crises, economic downturns and changing environmental conditions. This is the conclusion reached by experts after identifying the clear threat of a collapse in global food security and energy markets during both the coronavirus pandemic and the conflicts in Ukraine and the Gaza Strip.
The United States, commonly held up as an example of sustainable development, ranks only 13th on the Global Food Security Index with an extremely low adaptability score. To survive in this new reality, the world's second largest economy needs to change its food supply system as soon as possible and, in the face of rapidly growing inequality, increase access to economic and security goods and services.
How the United States missed out on long-term policy in favor of short-term profits
At the peak of World War II, Franklin Roosevelt turned America into an arsenal of democracy: the U.S. industrial complex was mobilized and partially privatized to protect national ideas. Later, this model of economic construction would become an important post of statehood, a symbol of patriotism and sacrifice of the nation, a special motivation that made it possible to redistribute industrial forces for the defense of the state to the detriment of economic interests. However, the two largest wars in human history were replaced by the era of scientific and technological development. The leaders of progress were the United States, which had a favorable geographical position - the country's territory was not affected by military actions, a broad domestic market, an incoming "force" in the form of highly educated emigrants, and economic benefits from the hostilities in Europe.
In the 90s, in parallel with globalization, technological boom and the development of the sphere of management and administration, there was a trend towards cheap production and fast money. The largest American companies began to move their production to Asian countries, especially China, India, Taiwan and South Korea, where the cost of labor and materials was 30-50% lower. Thus, at the beginning of the 21st century, the United States actively used a model in which technologies were created domestically and then exported abroad for cheap production. On the one hand, this was economically reasonable and made it possible to increase the rate of production at minimal cost, but on the other hand, it was a strategic mistake, which today, in the long term, has become obvious. The U.S. government's global supply chain has become so fragile that it threatens the nation's national security. The culture of short-term profit, the face of which the United States has effectively become in the 21st century, has fundamentally transformed the postwar approach to national defense: and while business continues to support the military, the manufacturing base in the long term has atrophied. Thus, the arsenal of Franklin D. Roosevelt's arsenal of democracy, built on a nationwide idea, finally lost its main incentive in the form of the nation's ideological beginning in the pursuit of short-term profit.
Working on supply chain disruption and the chip issue has opened my eyes to how vulnerable the United States is and overly dependent on individual countries for specific commodities, which greatly destabilizes our supply chains.
Over the past three years, pandemic-related shortages have led to the realization of U.S. supply chain weaknesses, while global conflicts have highlighted the dangers of economic connectivity and even U.S. dependence on other nations, including China, for technology and innovation leakage. Against this backdrop, the U.S. government has become active in promoting food security initiatives: in 2023, G7 leaders pledged $4.5 billion in aid to countries in need, with the United States assuming more than half of the commitments. Uzbekistan and Tajikistan are also among the beneficiaries, mostly in Africa. In addition, Central Asian countries and the U.S. are actively approaching each other in the "C5+1" format to strengthen and develop regional economic cooperation. This diversification of aid and interest in regional development can be explained by the U.S. desire to create redundant supply chains, strengthen its own food security by entering national markets, increasing its share of influence and, consequently, pushing out interested third countries.
Critical U.S. dependence
For decades, American capital has financed the growth of Asian countries. Thanks to this, a new technological leader has appeared on the world map - China - which has managed not only to challenge the dominant role of the United States, but also to overtake it in many respects. And although Washington realizes the growing threat, conducting a campaign to limit the access of some Chinese giants to the national market, we can no longer speak of technological dominance. The PRC is actively stimulating R&D, as well as developments in the field of artificial intelligence, and thanks to its ability to quickly adapt to new realities and its huge potential, the country has become a key player in the global market. The total cost of research and development in China has increased almost 16-fold over the past two decades: from $32.9 billion in 2000 to $525.7 billion in 2020, with the share of private funds exceeding 75%.
As of 2019, the PRC overtakes the United States and ranks first in the number of patent applications, and according to the Australian Strategic Policy Institute's Critical Technology Tracker, it leads in 37 out of 44 areas of science. For reference, the United States ranks second in the corresponding ranking, leading in only 8 areas (among them: small satellites, space launch systems, quantum computing, production of integrated circuits and means of protection against diseases, vaccines).
Under the pressure of China's growing technological power, Washington is trying to reduce financial flows abroad and limit business activities, but, judging by the available figures, it is extremely difficult to do so due to the established system of production and supply, reputational ties, and extremely high costs. For example, in 2020, the U.S. invested nearly $14 billion in Chinese manufacturing of computers and electronic products, while equivalent Chinese investment in the U.S. amounted to only $141 million. Major U.S. companies such as Amazon, Apple, and Google rely on Taiwan to manufacture 90% of their semiconductors. Such critical US dependence on the Asian market carries clear threats to the country's national security. China has a huge economic influence on the West, and it follows that, first, in the event of a global conflict, China can act against the U.S. with the same weapon that the U.S. government is accustomed to using - sanctions, and the economic blockade can be quite effective. Secondly, the U.S. has neither economic nor infrastructural tools to strike back at China - the sanctions are unlikely to be supported by the international community, especially by business, given the dependence of global companies on the Asian market.
Today, the fragility of critical industries such as microelectronics due to the structural characteristics of supply chains is a major concern for the U.S. government. A geopolitical crisis, foreign economic instability, or the imposition of protectionist policies by any nation that is a link in the chain could freeze the industry and lead to disastrous results. China's technological growth forces the United States to work on the mobilization of production facilities and technology development within the country, as well as the search for new regional partners where cheap labor and materials can be obtained. One thing is clear: the United States' manufacturing vulnerability, which was seen as a short-term measure to build up capital, has led to a global threat to national security and has challenged the country's technological sovereignty.