Economic Club of New York
As Prepared for Delivery
Good afternoon, everyone. Thanks to Barbara Van Allen and the entire team at the Economic Club of New York for hosting me today. It’s great to be here.
In the early days of the Republic, Alexander Hamilton prepared a series of reports to Congress that laid the intellectual foundations for the young American economy. The first report was about securing the public credit. The second was about establishing a national bank. And the third—his 1791 Report on the Subject of Manufactures—offered a vision for a strong industrial system in America.
In the United States, he argued, “the public purse must supply the deficiency of private resource. In what can it be so useful as in prompting and improving the efforts of industry?”
That imperative has a contested history in American economic policy. For much of the last half-century, even uttering the words “industrial policy” was met with something between derision and concern. But our economy has changed, and the world has changed, too.
My core point today is this: it is a critical and urgent imperative for the United States to chart and implement a modern American industrial strategy.
Properly conceived and implemented, an industrial strategy is an economic resilience and capacity strategy. Investments in our industrial capacity will leave our economy better positioned to weather future shocks—and to help all Americans thrive.
Ten months ago, I proposed the idea of a modern American industrial strategy to describe what animated President Biden’s approach to strengthening the economy. The turbulent, historic economic events of the last year have underscored the case. The question should move from “why should we pursue an industrial strategy?” to “how do we pursue one successfully?”
When the pandemic began, our economy suffered its sharpest contraction since the end of the Second World War. Job losses were the worst since the Great Depression—with communities of color and young people hit hardest.
President Biden came into office and set the nation on a new course, taking immediate action to fight the virus and deliver economic relief. History will judge the virtues of our crisis response—there’s room for debate. But there’s no question the President’s strategy helped generate the strongest recovery in modern history—with the fastest economic growth in nearly four decades; the strongest labor market recovery ever recorded; and record progress for Black and Hispanic Americans, the long-term unemployed, and others often left behind in a slow-growth economy.
Yes, our economy faces significant challenges. Our convulsive, pandemic-constrained recovery has produced high inflation globally and domestically. The pandemic exposed structural vulnerabilities—resulting from decades-long underinvestment in our industrial strength—that have continued to generate supply-chain bottlenecks across the economy. And now, Russia’s unprovoked invasion of Ukraine has compounded these challenges—exacerbating supply constraints, pushing up prices, and straining the post-Cold War world order.
Even so, the United States retains a stronger economic position than any other major country in the world, based on economic growth, job growth, consumer spending, and household balance sheets—even taking inflation into account.
What we have now is an opportunity, amid historic uncertainty. We should seize it—with an economic strategy that matches the moment.
- Reviewing Our Progress
Today, I’d like to take stock of how far we’ve come and reassess the case for an American industrial strategy going forward. For the past year, we’ve centered on two core principles:
First, strategic public investment must serve as the backbone to a strong industrial base.
The Bipartisan Infrastructure Law is a case in point. Yes, it will make our supply chains more durable and reduce price pressures. Yes, it will connect more people to more places, create jobs, and push innovations from laboratory to market.
But it also represents the most significant effort in the last half-century to make a sustained, long-term public investment in America. This year, for the first time in two decades, America’s infrastructure investment will grow faster than China’s.
We need to build on this model. We’re within reach of passing the Bipartisan Innovation Act, which will help reclaim America’s leadership in semiconductors; authorize historic investments in basic R&D; advance our leadership in technologies like artificial intelligence, 3D printing, telecommunications, and biotechnology; and spur innovation in places previously left behind.
The economic and national security threat of industrial weakness is accelerating. Congress urgently needs to send this legislation to the President’s desk so we can get to work rebuilding our industrial strength without delay.
Second, we need to identify sectors where private industry, on its own, has not mobilized toward our core economic and national security interests—and lay the foundation for investment.
There’s a longstanding critique of industrial policy that it amounts to government picking “winners and losers.” There’s wisdom in this concern. Ill-conceived government interventions in private markets can produce inefficient and, worse, corrupting outcomes. But allowing this critique to reflexively hold back action misses the current global moment.
To make critical goods, American companies need access to key inputs like raw materials. They need secure and reliable supply chains that the private market won’t deliver on its own—and potentially cannot deliver if geopolitical dynamics prevent them from accessing those inputs. These gaps can have major security implications.
Individual companies will rise and fall on their own merits. But it’s incumbent on us to support an ecosystem that enables American businesses to stand at the vanguard of solving these problems.
That’s what we have sought to do. Last June, we published a first-ever diagnosis and prescription for our most acute supply-chain vulnerabilities. Earlier this year, we released detailed resilience strategies across sectors like defense, public health, IT, and energy.
Consider critical minerals. Lithium, nickel, and cobalt are building blocks in everything from computers to appliances to electric vehicles and other clean-energy technologies—and demand is set to skyrocket.
Yet the United States depends heavily on foreign sources for many of these critical minerals. China, for instance, is estimated to control 85 percent of refining capacity for rare earths.
So far, private investment has fallen short of our national needs. But through strategic coordination, we can open channels for companies to invest.
That’s why President Biden invoked the Defense Production Act to support domestic production and address immediate security risks, consistent with our values. That’s why the Defense Department contracted with a Nevada-based company to establish the first end-to-end domestic supply chain for “permanent magnets”—with capacity to power 500,000 electric vehicles per year. And that’s why the Department of Energy is poised to invest nearly $7 billion to strengthen our end-to-end domestic battery supply chain.
We’re seeing companies respond. They’ve announced more than $200 billion in critical manufacturing investments in the United States. Manufacturing has seen its strongest job growth in three decades.
- Re-underwriting the Case for Our Industrial Strategy
We can be proud of this progress. But the global economic landscape is evolving rapidly.
Russia’s unconscionable invasion of Ukraine is imposing a global supply shock on an already supply-constrained global economy. And COVID remains an acute risk to global supply chains, particularly in places like China.
Given this evolving landscape, how do we re-underwrite the case for a modern American industrial strategy? I would offer four reflections.
First, we need to make our economy more resilient while working to lower price pressures across the economy today and over time.
Given the supply and inflationary pressures we’re facing, some may argue that investing for resilience and industrial strength tomorrow could push pricing higher today. This critique counsels caution, but misses an important point: ignoring resilience is ultimately more expensive.
The pandemic laid this bare. Our supply chains were put to test, and the allure of “just in time” turned into a cacophony of disruptions, long lead times, complexity, and massive costs.
Companies are confronting this reality. They’re recognizing that when disruptions happen, well-prepared companies can bounce back and even gain market share over competitors. Yet investments in resilience require time and resources up front, when the whole economy is supply-constrained.
We recognize this. It is why we’re aggressively working to make our global logistics supply chain more fluid and lower price pressures right now across the economy. These actions create space for longer-term investments in industrial resilience and capacity to take root.
We’ve worked to move our ports to 24/7 operations and reduce container dwell times, which are down 50 percent. We’ve also worked to recruit more truck drivers and improve the quality of trucking jobs; and trucking employment is up 35,000 over pre-pandemic levels.
Looking ahead, we need to bring our supply-chain logistics capabilities into the twenty-first century. We are now working to develop a reliable digital infrastructure to make our supply chains more agile. We should consider stress-testing private-sector supply chains to future shocks. The pandemic has underscored how major physical shocks can be both impulsive and inexorable, and we know climate change will only exacerbate them.
Second, we need a modern American industrial strategy that expands and enhances international economic engagement.
I hope this point rings clear: You are not witnessing an American retreat from the global economy. Rather, you’re witnessing a new stage in how and why we engage—which will better serve the American middle class and American workers, while prioritizing our key global partners.
For America and the world, economic concerns are becoming more tightly linked to national security and national interests more broadly. In this environment, any thoughtful industrial strategy should prioritize partnerships with countries that respect fundamental norms and values—countries we can rely on—around transparency, open and fair rules-based trade, worker’s rights, and equity and opportunity.
This modern industrial strategy is centered on the reality that it’s neither feasible nor advisable to produce everything domestically. We need to both build resilience and capacity at home and forge more effective partnerships abroad. The Administration has sought to show that this clear-eyed approach to global economic ties can work—that we can assemble broad coalitions that amplify our own domestic strength.
This is what we’ve done in renewing our economic relationship with Europe, including the world’s first carbon-based sectoral deal on steel and aluminum trade. It’s also what we did—in bold and serious terms—when we led an historic global tax agreement with 136 countries to halt the race-to-the-bottom on corporate taxes.
And it’s what we aim to do in the Indo-Pacific region, with an economic framework for sustained collaboration on everything from data flows to supply chains to clean energy.
We should consider the full scope of tools for cooperation—whether it’s strengthening a partnership with one trusted ally, reaching a broad multilateral agreement, or, as Secretary Yellen recently said, constructing a network of “plurilateral” trade arrangements.
We also need to reexamine existing barriers—whether that’s through additional “tariff exclusions” processes or other warranted steps, to make sure our trade policy serves American economic priorities.
Third, a modern American industrial strategy needs to demonstrate that America can build—fast, as we’ve done before, and fairly, as we’ve sometimes failed to do.
Core to rebuilding our industrial base is exactly that: building. We need to unpack the many constraints that cause America to lag other major countries—including those with strong labor, environmental, and historical protections—in delivering infrastructure on budget and on time.
At the same time, past efforts to build fast often entailed discrimination and subjugation—running roughshod over already disadvantaged communities and places. Our generation must do better.
We’ll need to confront complex, multilayered challenges that lack easy answers. For instance, building more affordable housing is vitally important, but it doesn’t happen instantly. It requires action by many stakeholders. It involves changing norms, incentives, and activities in highly localized ways.
The good news: the solutions don’t map onto traditional political, economic, or geographic divides. And the federal government can lead by example:
- We can establish coordinated federal decisions on permitting, instead of siloed agency actions, so projects can move forward with confidence, without sacrificing our values.
- We can make the most of federal incentives, like conditioning transportation grants on land-use policies that help us build more efficiently and equitably.
- We can pursue place-based policies—and build in geographies that may not only cost less but also have greater impact. The pandemic’s fundamental, structural disruption to how and where we work offers a unique moment to broaden the geographic aperture of economic opportunity in America.
Most building will be carried out by state and local partners. The federal government will need to build capacity; demand progress over inertia; and learn from local innovation.
From the transcontinental railroad in the nineteenth century to the interstate highway system in the twentieth, Americans have shown their capacity to build great things. One powerful example stands a few blocks from here: the Empire State Building. It was constructed in just over a year. Nearly a century later, it remains an icon of American ambition and ingenuity. That’s the drive we’ll need to bring to our generation’s challenges.
One last reflection: these priorities are overlapping and reinforcing. There’s no clearer example than building resilience to energy shocks.
The global market for hydrocarbons is not a free market. It’s influenced by the geopolitical impulses of petrostates, some of which don’t share our interests or values. At the same time, the latest U.N. climate panel report confirms we have a narrow window to avoid the most devastating impacts of climate change.
In these two realities lies an opportunity: an industrial strategy for true energy security will reduce our reliance on volatile commodities and protect against the costs of the climate crisis. As the President said recently, “We need to choose long-term security over energy and climate vulnerability.”
By enacting long-term, technology-neutral incentives to generate zero-carbon energy and innovation, we can lay the foundation for more American-made clean-energy technologies and bolster domestic supply chains. We can partner with allies to expand our collective capacity to produce clean energy, while opening new export markets for American products.
And we can do it in a way that lowers immediate costs for Americans, keeps our affordable-energy advantage, and accelerates growth in energy communities transitioning toward industries of the future. Congress urgently needs to act here as well.
From Delta and Omicron, to supply-chain disruptions, and now to Russian aggression—our economy has shown striking resilience over the past year. But our most important work lies ahead.
What people will remember fifty years from now is whether we as a nation met this global moment. Did our economy emerge more resilient? Did it set the pace for generation-defining technologies? Did our alliances emerge more cooperative and unified in purpose?
In his Report on Manufactures, Hamilton argued that expanding American industry would be “favorable to national independence and safety.” America had just achieved independence, but building a strong industrial system would truly secure it.
The American economy has been transformed many times over since then. Yet this economic and national security imperative endures.
Hamilton had one more insight we should heed today. “To increase the total mass of industry” in a country, he wrote, “is ultimately beneficial to every part of it.” We must ensure the gains are shared broadly by all Americans.
And we need the business community to step up and join us in this national renewal. If we strike the right balance, the American economy—and our democracy—can emerge more vigorous, more prosperous, and more resilient to whatever challenges come our way.