Jake Sullivan has authored a very important piece in the Council on Foreign Relations\u2019 magazine Foreign Affairs<\/em> entitled \u201cHow to Reindustrialize America \u2013 The Case for a Strategic Investment Fund.<\/a>\u201d<\/p>\n American System Now<\/em> believes that any significant attempt to resurrect Hamiltonian economics and methods in the U.S. (see the summary below) needs to be brought to the attention of our readers, as our late founder Nancy Spannaus long fought to bring that approach to the forefront of the debate over reversing the decades long de-industrialization of America.<\/p>\n The solution Sullivan proposes, a $50 billion fund (for starters), is based solidly on the American System precedents of Alexander Hamilton and FDR and his Reconstruction Finance Corporation. With the detailed plan outlined in the piece, it seems likely that Sullivan\u2019s plan may be introduced as a bill before Congress, and we would hope, with bi-partisan support.<\/p>\n American System Now believes that this proposal, which includes a crucial element of advanced planning for America\u2019s strategic investments, is long overdue. \u00a0Such an approach could act as a complement to the proposed $5 trillion National Infrastructure Bank proposal (H.R. 5356), which is also modeled on the Hamiltonian approach. The logical third leg of this stool should be the other FDR bill which tamed the speculators \u2013 Glass-Steagall.<\/p>\n The American System of Hamilton was common knowledge in this country until the turn of the twentieth century, when many in the U.S. still thought ahead in terms of government channeling of national investment into infrastructure and manufacturing. Still, most of the time these methods have only been invoked in periods of dire crisis. And by and large, many of those who cite Hamilton rarely understand the deeper principles behind his economics.<\/p>\n Nancy Spannaus fought to deepen that understanding. She opened her book, Hamilton Versus Wall Street: The Core Principles of the American System of Economics,<\/u> with the following quote from Alexander Hamilton\u2019s Report on Manufactures: \u201cTo cherish and stimulate the activity of the human mind, by multiplying the objects of enterprise, is not among the least considerable of the expedients, by which the wealth of a nation may be promoted.\u201d<\/p>\n At this moment when we face our breakdown as a great-industrial power, including the disintegration of our education system and our infrastructure, we need to admit that this was not caused by China. They borrowed some of our ideas (good for them), and now it is time for us to embrace our own.<\/p>\n \u00a0<\/p>\n JAKE SULLIVAN CHANNELS HAMILTON AND FDR<\/span>\u00a0<\/span><\/p>\n \u00a0<\/span><\/p>\n On July 29, Foreign Affairs, the journal of the New York Council on Foreign Relations,\u00a0published\u00a0an article by former Biden Administration National Security Advisor Jake Sullivan, arguing for the creation of a Strategic Investment Fund on the model of Alexander Hamilton\u2019s First National Bank and President Franklin Roosevelt\u2019s expanded use of\u00a0the Reconstruction Finance Corporation to bankroll the New Deal and the Arsenal of Democracy.\u00a0<\/span>\u00a0<\/span><\/p>\n Sullivan is now on the faculty of the Harvard Kennedy School. His essay, \u201cHow to Reindustrialize America: The Case for a Strategic Investment Fund,\u201d began with an accurate account of a looming \u201csecond China shock\u201d with the People\u2019s Republic assuming a commanding lead in global high-tech manufacturing and supply chains and now nearing US prowess in innovation.<\/span>\u00a0<\/span><\/p>\n Sullivan warned: \u201cAt the same time\u202fChina\u202fwas building its industrial strength, the United States was allowing much of its productive base to migrate abroad. For a few decades, that shift\u00a0appeared to carry\u00a0few strategic costs. America\u00a0remained\u00a0the world\u2019s leading center of research and invention even as manufacturing employment\u00a0fell\u00a0and supply chains stretched across continents. But the costs of separating innovation from production are now too great to ignore. As factories have moved offshore, the United States has lost much of its skilled workforce and the\u00a0expertise\u00a0to build at speed and scale. If it does not change course, the country could cede its technological edge, and, in time, its broader global leadership, to China.\u201d<\/span>\u00a0<\/span><\/p>\n Sullivan\u2019s solution?\u00a0\u00a0America should return to the successful policies of Alexander Hamilton and Franklin Roosevelt.<\/span>\u00a0<\/span><\/p>\n He wrote: \u201cSince its founding, the United States has treated finance as an instrument of sovereignty. In his 1791 Report on Manufactures to Congress, Hamilton made the case that economic independence was inseparable from political independence. The young republic, he argued, had to use public credit to nurture productive industry and national strength. Hamilton envisioned a pragmatic model of state-enabled capitalism, in which loans and bounties encouraged `infant manufactures,\u2019 tariffs protected strategic sectors, and public institutions channeled capital toward long-term national aims. Whenever the United States has faced existential tests, its leaders have returned to Hamilton\u2019s logic.\u201d<\/span>\u00a0<\/span><\/p>\n He cited FDR\u2019s\u00a0use of the\u00a0RFC to channel government funds and private capital into the recovery and war mobilization: \u201cWhen credit markets froze during the Great Depression and\u00a0World War II,\u202fthe Reconstruction Finance Corporation (RFC), created in 1932, filled the gap and served as a strategic investor, financing banks, utilities, housing, and manufacturing, earning returns and restoring confidence in U.S. markets. Its wartime subsidiary, the Defense Plant Corporation (DPC), built more than 2,000 factories and shipyards, eventually transferring them to private operators, creating the foundations for America\u2019s postwar dominance in steel, aviation, and chemicals.\u201d<\/span>\u00a0<\/span><\/p>\n During the Cold War, government institutions like DARPA,\u00a0NASA, and the Atomic Energy Commission played a similar role channeling a combination of\u00a0Federal and private funding to\u00a0Apollo and other projects that\u00a0drove American prosperity.\u00a0But by the 1980s,\u00a0the US had gone through what he called a \u201cbrawn drain\u201d\u2014the loss of a\u00a0skilled industrial labor force.<\/span>\u00a0<\/span><\/p>\n \u201cMIT\u2019s\u00a0Task Force on Production in the Innovation\u00a0Economy\u00a0has\u00a0demonstrated\u00a0that in complex, high-value industries, innovation depends on proximity between design and production. When manufacturing migrates abroad, the feedback loops between engineers and factory floors break down and innovation suffers. Reindustrialization, done right, is a precondition for renewing the United States\u2019 inventive edge and the foundation of its strategic strength.\u201d<\/span>\u00a0<\/span><\/p>\n Sullivan noted that even as the Trump and Biden Administrations diagnosed the challenge, efforts to rebuild America\u2019s high-tech industrial base\u00a0and secure supply chains\u00a0have so far been disjointed\u00a0and blocked by bureaucratic regulations and private capital\u2019s risk aversion.<\/span>\u00a0<\/span><\/p>\n Sullivan\u00a0then\u00a0presented\u00a0his\u00a0proposal:<\/span>\u00a0<\/span><\/p>\n \u201cThroughout its history, the United States built institutions that channeled capital toward a national strategy. Resurrecting that tradition today would mean establishing a new kind of public investor: a U.S. Strategic Investment Fund (SIF), a federally chartered, market-facing public investor with its own balance sheet, designed to invest alongside private capital in strategically critical industries, both mature and emerging, where markets alone have proven insufficient.\u201d<\/span>\u00a0<\/span><\/p>\n Acknowledging the skepticism and institutional pushback that such a Hamiltonian institution would\u00a0likely generate, Sullivan proposes a modest beginning\u2014an initial capital base of\u00a0$50 billion\u00a0to be quickly scaled up as\u00a0the SIF demonstrates an ability to generate private capital investment in vital\u00a0areas of economic security.<\/span>\u00a0<\/span><\/p>\n \u201cThe fund would build on recent initiatives to invest in American industrial competitiveness at home and abroad, including the Pentagon\u2019s Office of Strategic Capital and Economic Defense Unit, the Department of Energy\u2019s Loan Programs Office, the Development Finance Corporation, and the CHIPS and Science Act, as well as ad hoc capital interventions from Departments of Commerce and Energy. Rather than replace these efforts, it would effectively unite the nation\u2019s investment, trade, procurement, and regulatory tools within a single framework of economic statecraft.\u201d<\/span>\u00a0<\/span><\/p>\n After briefly proposing a structure for the new Strategic Investment Fund, to be led by\u00a0Cabinet secretaries with a private labor-industry-finance advisory board, Sullivan returned to the\u00a0essentials:<\/span>\u00a0<\/span><\/p>\n \u201cFor more than two centuries, the United States has shaped its financial institutions to meet the strategic demands of the era. Hamilton\u2019s Treasury built national credit in the young republic. The RFC built\u00a0industrial\u00a0scale during the nation\u2019s economic nadir. The innovation\u00a0agencies built\u00a0America\u2019s technological leadership as it\u00a0emerged\u00a0from World War II. Each moment required the same act of imagination: treating capital as a tool of national purpose and industrial power.<\/span>\u00a0<\/span><\/p>\n \u201cThat imagination is sorely needed today.\u00a0China\u2019s rise has forced Washington to answer whether open, market-based democracies can still mobilize capital to serve national ends. The United States still commands the world\u2019s deepest markets and its most capable entrepreneurs. What it lacks are modern instruments to align them with long-term national aims. A strategic investment fund would ensure that the future is not only imagined in America, but made in America, too.\u201d<\/span>\u00a0<\/span><\/p>\n \u00a0<\/span><\/p>\n \u00a0<\/span><\/p>\n \u00a0<\/span><\/p>\n \u00a0<\/p>\n Tags:<\/strong> Alexander Hamilton<\/a>, Alexander Hamilton on Finance<\/a>, and Debt<\/a>, credit<\/a>, infrastructure<\/a>, infrastructure funding<\/a>, Reconstruction Finance Corporation<\/a><\/p>\n<\/p><\/div>\n\n","protected":false},"excerpt":{"rendered":" Jake Sullivan has authored a very important piece in the Council on Foreign Relations\u2019 magazine Foreign Affairs entitled \u201cHow to Reindustrialize America \u2013 The Case for a Strategic Investment Fund.\u201d American System Now believes that any significant attempt to resurrect Hamiltonian economics and methods in the U.S. (see the summary below) needs to be brought […]<\/p>\n","protected":false},"author":1,"featured_media":7040843,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[12032],"tags":[200040,203267,203268,235,2049,13439,34434,15649,23529,203269,9822],"dealstore":[],"offerexpiration":[],"class_list":["post-7040842","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-american-history","tag-alexander-hamilton","tag-alexander-hamilton-on-finance","tag-and-debt","tag-credit","tag-hamilton","tag-infrastructure","tag-infrastructure-funding","tag-moment","tag-reaching","tag-reconstruction-finance-corporation","tag-sputnik"],"yoast_head":"\n![\"image_pdf\"](\"https:\/\/i0.wp.com\/americansystemnow.com\/wp-content\/plugins\/pdf-print\/images\/pdf.png?w=887&ssl=1\" "\\"View")
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