In fact, the destruction of America’s once vibrant military and commercial industrial capacity in many sectors has become the single biggest unacknowledged threat to our national security. Because of public policies focused on finance instead of production, the United States increasingly cannot produce or maintain vital systems upon which our economy, our military, and our allies rely.
In some cases, our competitive edge has not just been eroded, but is at risk of being—or already is—surpassed. The Chinese surge in 5G telecom equipment, which has dual civilian and military uses, is one example. China is making key investments in artificial intelligence
Wall Street, and its pressure on executives to make decisions designed to impress financial markets, rather than for the long-term health of their companies.
First, in the 1980s and 1990s, Wall Street financiers focused on short-term profits, market power, and executive pay-outs over core competencies like research and production, often rolling an industry up into a monopoly producer. Then, in the 2000s, they offshored production to the lowest cost producer. This finance-centric approach opened the door to the Chinese government’s ability to strategically pick off industrial capacity by subsidizing its producers. Hand over cash to Wall Street, and China could get the American crown jewels.
The loss of manufacturing capacity has been devastating for American research capacity. “Innovation doesn’t just hover above the Great Plains,” Mottl said. “It is built on steady incremental changes and knowledge learned out of basic manufacturing.”
The United States has, for instance, lost much of its fasteners and casting industries, which are key inputs to virtually every industrial product. It has lost much of its capacity in grain oriented flat-rolled electrical steel, a specialized metal required for highly efficient electrical motors. Aluminum that goes into American aircraft carriers now often comes from China.
the United States no longer has the capacity to do high quality castings
***This shift happened because Wall Street, or “the LBO (leveraged buy-out) guys” as Hickey put it, bought up manufacturing facilities in the 1990s and moved them to China. ***
“The middle-class Americans who did the manufacturing work, all that capability, machine tools, knowledge, it just became worthless
Our policy empowering Wall Street and offshoring has also damaged the more specialized defense base, which directly produces weaponry and equipment for the military.
How pervasive is the loss of such capacity? In September 2018, the Department of Defense released findings of its analysis into its supply chain. The results highlighted how fragile our ability to supply our own military has become.
Stoller and Kunce’s conclusion:
In short, the financial industry, with its emphasis on short-term profit and monopoly, and its willingness to ignore national security for profit, has warped our very ability to defend ourselves.
The US failure to produce adequate amounts of munitions and weaponry for Ukraine demonstrates that fact.
An investment suggestion:TDG
TDG buys up companies that are sole or single-source suppliers of obscure airplane parts that the government needs. Then bumps the price up 8 to 10 times. It’s gross margins are both of 50%. And the military must pay the ransom.
Much more at the link above.