Past successes to guide America’s future

As we celebrate the historic accomplishments of the Apollo 11 mission 50 years ago, it is important to reflect on how we got there. In 1962, when US president John F Kennedy set out to reach the moon, he put the full weight of the American government behind that audacious goal. In a famous line that captured his determination and that of a nation, Kennedy stated, “We choose to go to the moon.” He emphasized the frontier spirit of America and the freedoms Americans enjoy to choose their destinies rather than having it chosen for them.

The engineering, research and spending that enabled America to reach the moon and beyond were only possible because of the government’s support. Today, the only way the US government gets astronauts to the International Space Station is, ironically, aboard a Russian or private contractor’s rocket.

Not that that’s a bad thing. It’s natural for government to turn to the private sector to carry out work that businesses can perform more efficiently, less costly, and with R&D and other benefits that create whole ecosystems of innovation. However, no private company focused on quarterly earnings could have made the decades-long commitment to reach outer space that the US National Aeronautics and Space Administration (NASA) undertook.

The significant milestones reached by breaking the sound barrier in the 1940s and the Mercury, Gemini and ultimately the Apollo programs never had the reward of earnings and profits, but put the US far ahead in the global race to outer space. They also spawned a technology ecosystem that led to enormous private-sector advances in telecommunications, new materials, computing and many other areas.

The US became the most prosperous nation on Earth not because of government but largely because of the innovation, risk-taking and hard work of its private sector. But from time to time key infrastructure and technological advances were made possible only because they were underwritten by government

The US became the most prosperous nation on Earth not because of government but largely because of the innovation, risk-taking and hard work of its private sector. But from time to time key infrastructure and technological advances were made possible only because they were underwritten by government. The first transcontinental railway in the world was completed by the USA in 1869 and helped to bind the young nation together. It reduced what was a grueling 180-day voyage by foot and horse-drawn cart to a mere six-day trip by rail. This amazing feat of national infrastructure would never have been possible without government planning and support.

For decades, China has meticulously drawn a roadmap, planned years in advance and invested billions in the research, production and development of key industrial and technology sectors. Like Kennedy pursuing the moon landing, China focused on and supported the industrial sectors most likely to drive the next century of development. A traditional liberal approach assumes that companies pursuing their rational self-interest will drive innovation and growth. This would be ideal. However, over the centuries we have seen how mercantilist national strategies have been critical to achieving great advances that are just not possible by private enterprises focused on the next quarterly earning cycle.

The United States risks falling irrecoverably behind in key technology sectors over the coming decades. There are ways to begin to fix this, but they require a real commitment to identifying and financially supporting the sectors that will be most critical in the 21st century. Companies respond extremely well to tax incentives, for example. When the British Royal Navy required a global resupply footprint to feed and nurture its trade infrastructure, it achieved this footprint via crown chartered companies incentivized to establish trading posts and commerce. But tax incentives for long-term and large-scale research and development are not, in and of themselves, always enough – just as tax incentives would not have put a man on the moon.

A much larger and sustained capital commitment to strategic industries in the United States is needed. President Donald Trump’s administration appears to understand this. It has, for example, expanded the role and balance sheet of the Overseas Private Investment Corporation. This could be one of the main vehicles to provide the long-term and patient capital needed to rebuild the US industrial supply base.

OPIC is today the only part of the US government that actually produces a profit; its approach isn’t charity or subsidies. The OPIC model of private-capital-first, backed by patient strategic government funding, is consistent with America’s capitalistic tradition, and gives private enterprise that extra push it sometimes needs to undertake costly projects with a long time horizon. Realistically, it may be the only way to solve the development deficit the US is facing in telecommunications hardware and high-end industrial manufacturing, as well as key infrastructure sectors. If this development imbalance continues unresolved, the US will soon witness the dangerous capacity deficits typical of a fading world power.

The US economy is a locomotive that drives the economic well-being of billions of humans on the planet. We must makes sure that locomotive has access to all the critical elements to keep rolling forward – including, in some cases, direct government funding to the sectors that will drive growth and progress in the decades to come. America must make these changes to ensure it has control of its destiny, as our destiny is not something we should ever choose to outsource.