Since the end of WWII, we have pursued a whole bunch of tax and regulatory policies that have driven businesses offshore. As Zeihan points out, coming out of Bretton Woods we sacrificed economically to bribe an alliance to win the Cold War. We pursued bad economic policy in favor of good security policy. We brought China into the game later, even though they were hardly an ally, but we were able to triangulate them against the Russians a bit. It worked, Western Europe and Japan were rebuilt, the world economy soared, and we beat the Russians economically so they surrendered without military conflict. But as soon as the Berlin Wall fell, that whole approach became outmoded.
Ross Perot said in 1992 what I had been thinking for some time, "In the post-Cold-War era, economic power will become more important than military power." China got the message, loud and clear. They have created spheres of interest in the Indian Ocean and Africa, and are starting to get a toehold in South America, without a single Chinese soldier spilling a drop of blood.
But we never rebooted. We have remained focused on finding a military solution to the Middle East, which does not seem to admit any solution. We need to come home from the Middle East, because it's not our problem. It's actually China's, and we will put them in a bit of a bind if we do withdraw.
Like Russia before it, China is very much a paper tiger with (if I may mix metaphors) feet of clay. It has the same problem Russia had--there are no young Chinese--but in their case it's because 30 years of one-child policy leaves you short of 20-somethings and younger. China's economy is heavily over-leveraged. They have to put people to work doing things that make no economic sense--like building empty cities--in order to keep them too busy to revolt. So they export, export, export, and they then loan that money out to anybody who will put people to work, whether the deal makes economic sense or not. They are doing the equivalent of the Obama "stimulus" every six weeks or so--it's a much larger country, population-wise, so that is not as extreme as it sounds, but it's still pretty extreme. And the third leg is that they are almost entirely dependent on Middle Eastern oil, and until somebody figures out how to build a pipeline over the Himalayas, that oil has to come by sea--through Hormuz, around India, and through Malacca or some other path through Indonesia. That means any of three countries--Iran, India, and Indonesia--could close down their economy tomorrow, And one of those is unstable, one of them hates China, and the third both is unstable and hates China. And China is probably 20 (absolute best case) to 50 (most likely case) years away from having a blue-water navy that can secure that supply chain. They absolutely depend on us to keep their oil supply chain open, the legacy of that old Bretton Woods bribe.
What I think we need to do includes:
1) Get rid of the economic favoritism that we have shown the rest of the world for 75 years. To me this means revising our tax policy to rely heavily on a national consumption tax (VAT/GST/Fair Tax), like every other developed country, which under international law we get to charge on imports and rebate on exports. And reduce costs for domestic companies by using the consumption tax revenues to fund Bismarck universal private health care (so they don't have health care costs), a universal basic income (UBI) at subsistence level, based on Milton Friedman's negative income tax (NIT) or the Boortz-Linder predate/prefund, and broadening and flattening and lowering income tax rates to world levels or lower. Do those things, and you'd see a mad dash of companies trooping back here and outside investors launching hew ventures here.
2) Build the strongest military in the world, bar none, actually one capable of taking on the rest of the world (although we would never try that), and never use it because nobody dares pick a fight with us and we don't go around picking on them. We can actually do that for less than we are spending now. Number one, getting out of winless Mideast wars saves about $50 billion a year. Number two, going to the Israeli/Swiss/Swedish (and frankly, Russian and Chinese) model of transferring a lot of active-duty slots to a larger number of reserve slots. By my calculations, we could drop 400,000 active duty military slots and replace them with 1 million reservists and save $20 billion a year. We could probably save another $20 billion on procurement. ComNavOps (civilian commentator) at
https://navy-matters.blogspot.com has come up with an approach that would save about $30 billion ($6 billion a year) in navy procurement alone, by going with proved technology (Nimitz carriers versus Fords, no Zumwalts, and so forth) instead of cutting edge, and one would presume that the other services could do as well. Finally, cut overhead. In this regard, it is worth noting that McKinsey, the consulting firm, did an analysis of defense spending by the 30 or so OECD (developed) countries (
https://defense-aerospace.com/dae/articl...nce_VF.pdf) and found that on average OECD defense spending goes 26% to combat, 11% to combat support, and 63% to admin/other. That's bad enough, but the US is much worse. We spend 16% on combat, 7% on combat support, and 77% on admin/other. ComNavOps has also come up with about $42 billion in savings over 5 years ($8.5 billion a year) for the Navy alone in cutting overhead at the top. Again assuming comparable numbers for the other services, we can easily see $115 billion a year in defense cuts ($50B never fight a war that you don't intend to win, $20B active-to-reserve, $20B procurement, and $25B admin/overhead). Put half of that back into improved combat and combat support, and save the rest.
3) Adopt not an isolationist, but a non-interventionist foreign policy. North Korea is isolationist, Switzerland is non-interventionist, to give you an idea of the difference. As long as our Navy can control the world's sea lines of communication, and it can for the foreseeable future, particularly if we reorient some of the thinking per above, then we don't need to go meddling in everybody else's business. China is the #1 enemy now, global terrorism #2, and Russia no higher than #3. I think we can do some get some leverage from triangulating Russia and China. As I see it, there are three potential world hot spots--Eastern Europe, the Middle East, and Southeast Asia. In all three, I think our proper approach is to support our allies to a level that they can maintain some sort of equilibrium in each, and use our military to keep anything that flares up from expanding globally.
If we take that three-pronged approach, I think we will see a huge resurgence in investment and growth, across the board, here in the US.
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[NEWS] Tom Cotton Debuts Plan to Take Pharma Production Back From China
....especially the fify....
