APRIL 27, 2023 whitehouse.gov
I want to start by thanking all of you for indulging a National Security Advisor to discuss economics.
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As most of you know, Secretary Yellen gave an important speech just down the street last week on our economic policy with respect to China. Today I’d like to zoom out to our broader international economic policy, particularly as it relates to President Biden’s core commitment—indeed, to his daily direction to us—to more deeply integrate domestic policy and foreign policy.
After the Second World War, the United States led a fragmented world to build a new international economic order. It lifted hundreds of millions of people out of poverty. It sustained thrilling technological revolutions. And it helped the United States and many other nations around the world achieve new levels of prosperity.
But the last few decades revealed cracks in those foundations. A shifting global economy left many working Americans and their communities behind.
A financial crisis shook the middle class. A pandemic exposed the fragility of our supply chains. A changing climate threatened lives and livelihoods. Russia’s invasion of Ukraine underscored the risks of overdependence.
So this moment demands that we forge a new consensus.
That’s why the United States, under President Biden, is pursuing a modern industrial and innovation strategy—both at home and with partners around the world. One that invests in the sources of our own economic and technological strength, that promotes diversified and resilient global supply chains, that sets high standards for everything from labor and the environment to trusted technology and good governance, and that deploys capital to deliver on public goods like climate and health.
Now, the idea that a “new Washington consensus,” as some people have referred to it, is somehow America alone, or America and the West to the exclusion of others, is just flat wrong.
This strategy will build a fairer, more durable global economic order, for the benefit of ourselves and for people everywhere.
So today, what I want to do is lay out what we are endeavoring to do. And I’ll start by defining the challenges as we see them—the challenges that we face. To take them on, we’ve had to revisit some old assumptions. Then I’ll walk through, step by step, how our approach is tailored to meeting those challenges.
When President Biden came into office more than two years ago, the country faced, from our perspective, four fundamental challenges.
First, America’s industrial base had been hollowed out.
The vision of public investment that had energized the American project in the postwar years—and indeed for much of our history—had faded. It had given way to a set of ideas that championed tax cutting and deregulation, privatization over public action, and trade liberalization as an end in itself.
There was one assumption at the heart of all of this policy: that markets always allocate capital productively and efficiently—no matter what our competitors did, no matter how big our shared challenges grew, and no matter how many guardrails we took down.
Now, no one—certainly not me—is discounting the power of markets. But in the name of oversimplified market efficiency, entire supply chains of strategic goods—along with the industries and jobs that made them—moved overseas. And the postulate that deep trade liberalization would help America export goods, not jobs and capacity, was a promise made but not kept.
Another embedded assumption was that the type of growth did not matter. All growth was good growth. So, various reforms combined and came together to privilege some sectors of the economy, like finance, while other essential sectors, like semiconductors and infrastructure, atrophied. Our industrial capacity—which is crucial to any country’s ability to continue to innovate—took a real hit.
The shocks of a global financial crisis and a global pandemic laid bare the limits of these prevailing assumptions.
The second challenge we faced was adapting to a new environment defined by geopolitical and security competition, with important economic impacts.
Much of the international economic policy of the last few decades had relied upon the premise that economic integration would make nations more responsible and open, and that the global order would be more peaceful and cooperative—that bringing countries into the rules-based order would incentivize them to adhere to its rules.
It didn’t turn out that way. In some cases it did, and in lot of cases it did not.
By the time President Biden came into office, we had to contend with the reality that a large non-market economy had been integrated into the international economic order in a way that posed considerable challenges.
The People’s Republic of China continued to subsidize at a massive scale both traditional industrial sectors, like steel, as well as key industries of the future, like clean energy, digital infrastructure, and advanced biotechnologies. America didn’t just lose manufacturing—we eroded our competitiveness in critical technologies that would define the future.
Economic integration didn’t stop China from expanding its military ambitions in the region, or stop Russia from invading its democratic neighbors. Neither country had become more responsible or cooperative.