An uncomfortable but profound question is being asked around Washington DC these days: has American capitalism failed, and if so, can it be rescued? This inquiry is central to a debate playing out in the heart of the U.S. political establishment as policymakers, experts, and others grapple with the geostrategic challenges of our time.
    At the heart of this discussion is a small but increasingly influential center-right think tank, American Compass, and its founder, Oren Cass. A leading conservative domestic-policy wonk and former policy director for (now Senator) Mitt Romney’s 2012 presidential campaign, Cass started American Compass to “restore an economic consensus that emphasizes the importance of family, community, and industry to the nation’s liberty and prosperity.” Better yet, as described by the Washington Post when the think tank was first launched, Cass and his followers are mounting:
    …a frontal assault on the most hallowed principle of modern conservative economic policy — that market transactions should be given preeminent weight when setting public policy. [...] Cass and his allies, however, stand for the opposite idea: only democratic politics permits the collective judgment of the people to be heard, distilled and implemented. That judgment has a healthy respect for markets and economic freedom, but it has the wisdom to know when liberty becomes license and when the freedom of some is injurious to the health of society. In those cases, Cass and American Compass hold, it is not only proper for society to intervene in the market but also necessary for it to do so.
    In the three years since its founding, American Compass has come far. Just one week ago, the organization held a fully-attended forum within the Russell Senate Office building that saw the participation of four Republican senators (Tom Cotton, Marco Rubio, J.D. Vance, and Todd Young), packs of congressional staffers, numerous influential commentators, policy wonks, and more. It is worth emphasizing how significant this is: in U.S. politics, proximity to political power is de facto power in and of itself. That a small think tank can host such an event within the literal halls of power is no small feat.
    At this event, Cass and his team gave out multiple copies of their recently completed and appropriately named handbook, Rebuilding American Capitalism: A Handbook for Conservative Policymakers. This 104-page tome, loaded with analyses and policy proposals covering a broad number of issues—globalization, industry, finance, family, education, labor—is both a political platform and a definitive answer to the question raised at the outset: yes, American capitalism has failed, and yes, it can be rescued.
    All this is timely and of particular concern to foreign policy practitioners and American strategists, especially given the return of great power competition and the coming multipolar geopolitical environment.
Great Power Competition Requires Great Industrial Capacity
    The cold reality is that strategic competition between great powers in the modern era requires not only ample resources—a large, healthy, and growing population; a strong agricultural base; access to key mineral resources—but also sufficient financial and industrial capabilities.
    As history has advanced, great power competition has increasingly required greater technical expertise. Technological advancement means new innovations, devices, and weapons, which must be designed, built, maintained, and upgraded. Moreover, the production of all these requires a sufficiently large industrial base that must be supported, conserved, and prioritized. Ensuring a steady supply of technical experts and financing is thus also essential—and increasingly so—to great powers.
    The totality of this dynamic was made most clear in the European World Wars of the twentieth century. Warfare relied not just on millions of armed and trained men, as has long been the historical norm, but also on a wide variety of vehicles, machines, and gadgets. All of these devices—themselves products of an inherently scarce supply of experts—in turn, relied upon vast manufacturing and logical systems of production: industrial-scale farming, mining, refining, fabrication, shipping, and so on, all of which had to be supported by a strong financial sector and credit-worthy government. This dynamic was just as clear throughout the Cold War: the United States’ primary advantage throughout the conflict, and the reason for much of its current global primacy, is because it led the world in technological development throughout the twentieth century, which itself was largely derived from its mammoth post-World War II industrial capacity and economic model.
    This longstanding historical norm—the struggle over resources, productive capacity, and technical know-how—was broken with what may now be called the post-Cold War Interregnum. The United States, left as the world’s hegemon after the fall of the Soviet Union, chose to embark on a mission to promote and support an integrated globalized economy. The result, it was declared, would nominally be mutually beneficial to all participants, with economic liberalization giving way to political liberalization, the advance of democratic progress, human rights, and economic prosperity for all.
The Free Market Nightmare…
    This dream failed to materialize. In the Foreward of Rebuilding American Capitalism, Cass bluntly describes what the neoliberal, overly pro-free market economic policy of the post-Cold War era has produced in practice:
    Comparative advantage is supposed to allow a developed economy like America’s to focus on the most advanced technologies, but the U.S. trade balance in advanced technology products has swung from a $60 billion surplus in 1992 to a $190 billion deficit in 2020. Innovation is supposed to drive productivity but, in the manufacturing sector, productivity growth has turned negative, with factories producing less per worker in the early 2020s than the early 2010s.
    The economic system’s malfunction has dire human consequences. Whereas 40 weeks of the typical male worker’s income in 1985 could provide the middle-class essentials for a family of four, by 2022 he needed 62 weeks of income—a problem, there being only 52 weeks in a year. Nearly half of Americans report having fewer children than they want and, outside the most highly educated and compensated households, affordability is the most frequently cited obstacle. The average American can no longer expect to earn more than his father did at the same age. Poorer regions can no longer expect to catch up with wealthier ones. The bottom 50% of households had less wealth in 2019 than in 1989, though the top 10% added $29 trillion. Life expectancy is falling.
    The fundamental issue at hand is not capitalism itself. As Cass notes, “the first 200 years of American history, as a backwater colonial republic grew into a continent-spanning industrial colossus and home of the world’s middle class,” demonstrates that the economic model can function quite well. The problem, rather, in Cass’ words, is an ideological belief that took hold which posited that economic activity should occur with zero government involvement, based on the grounds of maximizing individual autonomy: “...free individuals exercising free choice in the market, each presumably able to optimize his own life. The failure of families to form reflected merely a preference for other pastimes.” People, in other words, vote with their wallets. The result, which has amounted to companies opting to off-short and out-source industry in the pursuit of greater efficiency and higher profits, justified by delivering lower costs to consumers, has been:
    …a disaster for the nation. Globalization crushed domestic industry and employment, leaving collapsed communities in its wake. Financialization shifted the economy’s center of gravity from Main Street to Wall Street, fueling an explosion in corporate profits alongside stagnating wages and declining investment. The decline of unions cost workers power in the market, voice in the workplace, and access to a vital source of communal support. These trends [...] contributed to rising inequality, slowing innovation, narrowing of opportunity, and loss of middle-class security.
    Aside from devastating damage to Americans’ economic livelihoods and futures, the United States has also de facto surrendered away its industrial-technological capacity, and with it, the country’s ability to self-renew its competitive advantage. Off-shoring manufacturing has not only resulted in the loss of millions of jobs and falling productivity growth but also a decline in our ability to produce new technologies. To quote Sridhar Kota and Tom Mahoney, “once manufacturing departs from a country’s shores, engineering and production know-how leave as well, and then innovation ultimately follows.” Studies have shown this to be true, with spending on research and development moving abroad to be closer to production and engineering. With the departure of that industrial capacity goes not only America’s ability to produce needed armaments on a war footing but also its ability to innovate and its technological-military advantage.
    The Department of Defense has likewise sounded the alarm on these developments. In their FY20 Industrial Capabilities Report, which transcribes the department’s “priority industrial base risks and vulnerabilities,” the Pentagon provides a stark warning:
    Together, a U.S. business climate that has favored short-term shareholder earnings (versus longterm capital investment), deindustrialization, and an abstract, radical vision of “free trade,” without fair trade enforcement, have severely damaged America’s ability to arm itself today and in the future. Our national responses – off-shoring and out-sourcing – have been inadequate and ultimately self-defeating, especially with respect to the defense industrial base. 

    This off-shoring/out-sourcing trend, when combined with environmental concerns, is limited not just to production but also to basic resource acquisition. Consider that U.S. leaders have neglected to maintain the country’s access to the critical minerals and materials necessary not only for retaining our military advantage but also for high-tech manufacturing and renewable energy technologies. Without these resources, twenty-first-century industrial leadership and real economic progress itself become impossible. America closed down its own primary rare earth minerals mine in Mountain View, California in the 1990s. Since then, China has come to account for 90 percent of global rare earth production, establishing its dominance in both mining and refining and leaving America to depend on a strategic competitor for 80 percent of its critical mineral imports. Once again, the Department of Defense has sounded the alarm on this matter, also noting in its 2020 Industrial Capabilities Report that:
    [Emerging] technologies pose new problems for defense contractors and for the Pentagon in securing a trusted supply chain for critical items such as processed rare earth elements and microelectronics, where gaps and unanticipated interruptions can be triggered by the loss of a sole supplier for purely economic reasons, or by an embargo or military action by an adversary. Events of either type can jeopardize a sustainable industrial base. 
    The United States—having shorn its industrial-technological capacity and forfeited control over key resources and supply chains—is thus ill-prepared for an era of great power strategic competition. The ongoing Russo-Ukrainian War—arguably a de facto proxy war between the West and Russia over Ukraine’s agricultural bounty, energy and mineral resources, industrial base, and ability to project power over certain geographical regions—illustrates current circumstances. Whether it be in ammunition, shipbuilding, or weaponry, it is now reasonable to worry that the United States does not have the material capacity to fight a large-scale industrial war.
…and the Danger to American Democracy
    But perhaps most damning of all—even more than wrecking the industrial basis necessary for the United States to remain a pre-eminent geostrategic and economic actor in international affairs—is what the failure of the neoliberal agenda has meant for the U.S. political system itself.
    When first established in the United States, corporations were oriented toward encouraging national development and pursuing economic achievements that no individual or family firm could do alone. Consider, for example, that Alexander Hamilton, the first U.S. treasury secretary and the father of U.S. finance and industry, helped co-found the Society for Establishing Useful Manufactures in 1791. This early corporation aimed to promote industrial development along the Passaic River in New Jersey, resulting in regional industrialization for over 150 years.
    However, this model ran into problems from the 1880s through the 1930s. Corporations, simply put, were spectacularly successful—too successful, even. Such was their financial and industrial power—and their consequent political power—that they began to supersede or even capture the power of the state. The resulting situation, with a handful of individuals wielding disproportionate influence over the levers of government and public policy, was antithetical to republican governance.
    Elected politicians of the time period were keenly aware of this in their efforts to restrain corporate power. Senator John Sherman, the statesman behind the eponymous 1890 Sherman Anti-Trust Act, declared, “if we would not submit to an emperor, we should not submit to an autocrat of trade.” Senator Joseph O’Mahoney stated in 1934 that “many of the modern corporations engaged in interstate commerce are greater and more powerful than most of our sovereign states.” President Franklin D. Roosevelt’s attorney general, Francis Biddle, declared in 1944 that “When the industrial life of a country passes into the hands of a few individuals, their power over the direction of public affairs exceeds the power confided by the people to their elected representatives in the government itself.”
    It is with great trepidation then that we hear contemporary elected officials talk about multinational corporations in the current political environment. Senator John Kennedy in 2019 declared that Google and Facebook “aren’t just companies. They’re countries.” Large commodity traders can determine the fate of entire nations through their control of energy and food. A number of banks and financial institutions are so powerful that they are, as the term goes, “too big to fail.”
    It is through this lens, then, that the ongoing political debate of U.S. economic policy and the mission of American Compass, Oren Cass, and his various allies and followers must be understood: at stake is not only the future of U.S. geoeconomic (and thus, geopolitical) power, the livelihood of its citizens, and the fate of the current international order, but also, implicitly, the fate of the United States as a sovereign republic.
Can America Save Itself?
    The challenge that Oren Cass and his colleagues have undertaken is thus great but not insurmountable. If anything, several recent political trends are in their favor.
    Abroad, the war in Ukraine put the reality of America’s poor military-industrial situation in stark relief, triggering something of a political awakening. Leading Washington think tanks, from the Center for Strategic and International Studies to the Center for New American Security, have published reports and studies of varying quality proclaiming the newfound need for industrial policy. Elbridge Colby—a former deputy assistant secretary of defense who led the development of the 2018 National Defense Strategy (and is widely considered to be a future secretary of defense)—has been warning that a war with China could be lost if the U.S. industrial base isn’t up to par. For a high-level official (who notably was also special assistant to the president for the defense industrial base in 2017–2018) to issue such warnings is quite telling, especially given consistent signs that he’s correct. Overall, Washington officialdom—and consequentially, policymakers—have suddenly discovered that the industrial base really matters.
    Domestically, political progressives focused on economic policy are also beating the same drum as Cass and his followers. This neo-Brandeis movement, focused on reviving 1930s-style antitrust enforcement, has gradually gained power and scored victories. It is telling, as leading antitrust policy wonk Matthew Stoller notes, that the Wall Street Journal editorial page has written 64 attacks on Federal Trade Commission chair Lina Khan in less than two years. Stoller’s own organization, the American Economic Liberties Project, something of a left-wing counterpart to Cass’ American Compass, has also been making great strides in influencing Congress, the Biden administration, and Washington officialdom and policy thinkers more broadly. For once, reforming America’s economic model appears to be a genuine bipartisan cause.
    Time will tell how Cass, American Compass, and its ideological allies fare in the coming years. The success of last Wednesday’s forum paints a rosy picture. There remains, however, a few major concerns with Cass’ agenda that this humble observer cannot shake off: a broader reform of American capitalism and its current economic incentive structure will mean addressing thorny political issues.
    Consider some practical national security concerns in the world of technology. Google, Amazon, Microsoft, Facebook, and Apple may be hulking giants with more power than some countries, which needs to be restrained. But it is precisely their size and scale that allows them to render services—such as cybersecurity for the ordinary user/consumer—that otherwise wouldn’t be possible. Would a thousand small companies, rather than a handful of large ones, be able to mount a comparable cybersecurity defense effort against foreign adversaries? Would Americans’ personal data really be safer if it were shared with smaller companies, as some argue, if foreign actors could acquire those smaller companies? It is doubtful. Like telecom companies, Big Tech firms may be natural monopolies, requiring political compromise and extremely detailed regulation.
    Likewise, consider what the re-orientation of economic incentives in the U.S. economy might look like in practice. The push for globalization and the off-shoring of American industry and jobs, for instance, was driven by the argument that everyone would benefit from lower costs. Yes, jobs are lost, but consumer ultimately benefits from cheap food, consumer goods, cheap labor, and so on. Cass and cohort would propound, correctly, that this trade was certainly not worth it if it came at the cost of American livelihoods and the country’s industrial base (with its strategic value)—to say nothing of American democracy itself.
    That is certainly true, but consider what reversing some of this would look like in practice. Suppose, for example, that fair trade laws were to be reintroduced, as Mattew Stoller argues. This would certainly go a long way in checking the power of large retailers and “empowering Main Street over Wall Street,” as it were. But it would also mean an increase in prices for the ordinary consumer, who might very well revolt at the ballot box.
    This, perhaps, is the real question that American Compass, and Americans more broadly, must wrestle with: are U.S. voters ready and willing to accept that a higher cost of living and some economic pain in the short and medium term, if not longer, is the literal price for the preservation of U.S. democracy?
    It is hard to say now, for this thesis has yet to be tested. Pessimists would contend, not unfairly, that the prospect is dubious. But given Americans’ historical tendency toward grit, endurance, and hope for a better tomorrow, the answer may yet surprise us all.