How the White House Thinks About Economic Security

these long term scarcities that are strategic in nature. So suddenly people worried about, well, do we have the minerals that we need in order to build out a domestic electric vehicle supply chain, do we have the industrial to build out things like semiconductors, concerns about the medical supply chain. And these are like long term strategic questions that aren't just related to sort of that exogenous shock that we got in March twenty twenty.

through the rest of the economy. That was before we all started talking about the resurgence of industrial policy, but like, this is kind of what we're talking about.

Part of it is sort of like pure economics, but is where you get this real intersection of economics and international security geopolitical anxiety, because a lot of this stuff is like building up capacity domestically in areas in which possible strategic rivals are independence of our.

New York Fed and Goldman and p Jim. So truly the perfect lots guest. Delip, thanks so much for coming on the show.

Some might say an incoherent one. But yes, I've spent roughly half of my career in the private sector, first in the tech boom during the nineties, then in financial markets at Goldman as the world hyper globalized during the two thousands, and then after the Financial Crisis of eight I've mostly been in government service at the Treasury, FED and now at the White House, excluding a year and a half at PGM as the Global Chief Economist and a similar type of role during the early Trump years.

But really, the way I make sense of it is I've just my careers lived at the intersection of economics, geopolitics, and markets. It's essentially what I studied as an undergrad. Also in grad school. I actually thought, coming out of grad school, I might start a company in a developing country that could do well and maybe do some good. But my timing was pretty terrible. I was coming out of grad school in two thousand and three just after the dot com bubble had burst, and the moment wasn't

exactly right for someone like me to get funded. And I also had hundreds of the hundreds of thousands of dollars in debt, so I grambled and took the only offer that was made to me, which was at Goldman Sachs.

But you know, it gave me a particular lens through which to view the world, and over time I realized that sometimes you can see the world most clearly through the lens of markets, but I wanted to have I mean, I recognize that sometimes that lens can get distorted, and at other time it's better to look at the world through the lens of geopolitics or economics or technology. And my aspiration was to acquire as many lenses as possible. You know, if you want to make a push on

the world, towards what it should be. You first have to see it for what it is.

us to lead abroad. And if we can lead abroad from a position of strength, we'll create a safer, more prosperous world that reinforces all of our efforts at home. So I mean to bring it to life. Yeah, let me just give you an example of a few examples of what I do and no particular order. How can we launch a positive democratic alternative to the belt Road initiative? Can we design sanctions that change the calculus of Putin

on prosecuting his war in Ukraine? Can we unlock the value of the Russian Central Bank reserves that we froze for the benefit of Ukraine as it fights for freedom. Can we design export controls in a way that don't dull the incentive for innovation You were talking about this in your opening, without seeding our crown technological jewels to a strategic adversary. Can we help to break the dead impact in the developing world to showcase our value proposition

to countries that might be skeptical about our intentions? And then the passion project for me really is, can we reimagine, invent or revitalize the tools and institutions of American financial firepower? Because I mean, my view is we're living in the most intense period of geopolitical competition, at least since the

Cold War ended. Maybe going much further back, and since the great powers of today are also nuclear powers, you know, barring catastrophic miscalculation, the logic of mutually assured destruction probably suggests that when confrontation occurs, it's less likely to play out on the military battlefield than it will in the theater of economics and technology. So we'd better go into this competition well armed, and we need to actually think really hard about how to.

Suddenly there was a shortage. How do you in your position even begin to identify potential risks in the supply chain, and how do you go about evaluating their relative strategic importance.

try to explain what I mean. So when people use this term supply chain resilience, the first question that we ask is resilience against what kind of shocks? Because they could be economic shocks, they could be geopolitical, climate health, all of the above. And each of these shocks, if they occur individually or collectively, they impose different kinds of stress on supply chains. So first, resilience against what? And then the second question is how do you define resilience.

It comes in many different forms. It could be production capacity, It could be diversification of suppliers and buyers, you know, it could be having sufficient stockpiles that could plausibly absorb an exogenant shock, or it could be supply chain agreements with trusted partners that can surge capacity when the good or technology is scarce at home. And so, you know, what we have to evaluate now is should we think of these forms of resilience as economically equivalent or politically equivalent?

And then is it really resilience that we're after? You know, maybe resilience is appropriate for certain supply chains, like you mentioned masks. In that category of good, you could argue we have no comparative advantage and margins are quite low,

and so maybe resilience is the right word. But maybe resilience isn't really enough for a supply chain in which we have a clear national security nexus, like leading edge semiconductors, where the barriers to entry are very high, the economies of scale are very large, and you really want dominance. So I think there's a continuum between resilience and dominance, and you have to decide where do you want to

be on that continuum. And then the fourth step is once once we define what we mean by resilience and we clarify with ourselves and our partners, is it really resilience we're after in this supply chain? What are the tools that we have and that we can deploy. Some of them are regulatory, that could be procurement, could be multilateral agreements, could be stockpiles. You know, it could be

changed to our immigration policy. And then the last question, this is the hardest one, and this is where we really have to build our analytical muscles within the US government, is can we stress test and simulate if we use our tools in the way that's optimal for the United States, and we make assumptions about what our adversaries do, and then also non aligned countries and allies and partners, if we make assumptions about how that plays out over the

course of five or ten years, are we net better off in equilibrium? That's the framework that I think we're trying to apply in every supply chain, and every supply chains a different story. I mean, there's some kind of Tolstoy logic behind it. And so pick a supply chain and we can get into the details.

the analysis would suggest we should. But we first have to do our homework. If we have tools that can boost our supply chain resilience, really you can apply the use of tools to any kind of geopolitical objective, not just supply chain resilience. Can we take inventory of all of those tools, When have they worked well when they're used alone or in tandem, when they're used unilaterally versus multilaterally with allies and partners. What are the limitations of

using those tools, What are the trade offs? What are the spillovers? And then I don't think we have good models yet for thinking about how we're left in a if you want to think about it in a general equilibrium sense, if we deploy the tools that we have and they play out in the manner that we expect, how do we think about whether we're not better off when we consider how our adversaries might respond, or allies or partners or not aligned countries. Those models don't exist.

I mean, I don't think you can use the fed's large scale general equilibrium models to find an answer. We have to invent those. So that's just the analysis part. And I think we have to build, my mind, a multidisciplinary swat team of sorts, with different kinds of expertise and a variety of disciplines I mean microeconomics, macro financial forensics, trade finance, diplomacy, international law, domestic law. And that's going

to take time to build. Ultimately, though, I mean, you're asking the question of what happens if you have an abrupt political shift and we no longer stick to the plan that might have been imagined by a previous administration. That is a feature of democracy. You can look at it as a bug because we can't make long term plans in the way that an autocracy can. But it also prevents us from making big mistakes. You could argue, we have these checks and balances and we have to convince.

I mean, a lot of the work that I think I do our team performs it should have bipartisan appeal. We think all the time about how do we sustain our technological pre eminence, how do we ensure that we have energy security, how can we shore up our resilience and critical supply chains. I don't think of those as

being inherently partisan issues. Of course, they become part of the theater, but in their essence, we're just trying to think about what are the long term strategic objectives of this country, putting aside the politics of the day.

than the rest of the world. That means the Arctic ice is melting, and the melting accelerates the warming because the sea absorbs the heat from sunlight, whereas ice reflects it. And less ice means more Arctic shipping lanes that have shorter transits that bypass choke points in the Suez or Panama Canal. And less ice also means more commercial opportunity if you want to extract critical minerals or lay undersea

data cables in the Arctic. And then it also creates and this is where my role at the intersection of economics and national security comes in. It creates geopolitical space to project military power, and Russia and China both have high ambitions in the Arctic. With a larger surface fleet that will be able to navigate the Arctic in ways that it couldn't when there was more ice. But for any of those opportunities to be realized, you need ice breakers. We only have two of them. Both of those ice

breakers were built in the nineteen seventies. They're both past their service life, and it's taking a long time and a lot of money to replace these ice breakers and build a full US fleet to take advantage of the opportunities I mentioned. So that means we have to rebuild our productive capacity in building this highly specialized, highly complex niche of ships called polar ice breakers. And if you want to do that, you first have to have no

how and expertise. You probably need to have economies of scale to make it financially viable, and then you need a steady demand signal to justify the upfront costs and capex and also investments in the workforce. Well, this is where your allies matter. Friends matter. So enter Finland. It's a newly minted NATO ally right. It joined after Russian invaded Ukraine. It's widely recognized as the world's best designer and leading producer of polar ice breakers. You may have

heard at some point about the Helsinki Shipyard. It's actually produced more than half of the world's total fleet. Canada is also a leading player, and actually one of its firms bought the Helsinki shipyard after its previous owners, a couple of Russian oligarchs were caught up in sanctions after

Putin invaded Ukraine. So this gets really interesting. And the deal we announced at NATO is for Finland and Canada to share their expertise with US and make investments in US shipyards to grow our collective production capacity to build ice breakers. And what do they get. Well, in exchange, we agree to integrate our ice breaking supply chains so

that they are interoperable at every stage of production. And then ultimately our vision collectively all three countries, it's to create a suppliers club that can capture a greater share of the global order book. And it's a big global order book. There's a long list of allies and partners that understand what's happening in the Arctic and they want to build ice breakers for the same reasons that we do,

but they don't have a shipyard. And our best estimate is that the global total global demand for ice breakers over the next decade from allies and partners is between seventy and ninety vessels. That's a lot. And so if we can pull this off, we get three benefits at once. We revitalize our capacity to innovate and produce at scale in a key industrial segment number one. Number two, we safeguard our national security and project power in a key

geostrategic region number two. And then number three, it's not zero sum. You know, we strengthen our allies and partnerships as we execute this deal. That's not a bad trifecta.

geopolitical vulnerability that has been exposed in recent years. Now we could decide should we compete writ large in shipbuilding. I think we should, but we have to start somewhere. And so what we're doing is picking a niche that plays to our competitive strengths, because, as I mentioned, this is a this is a highly specialized niche, the one that I'm describing with polar ice breakers requires a lot

of technology. Finland and Canada are best in class, and if they're willing to partner with us and share with us and rebuilding our productive capacity, that's why this deal makes sense. In terms of the numbers we're actually working on an MoU, I can't give you the exact numbers, but I mean I would go back to the Global order book that I mentioned. There are seventy to ninety ice breakers that the likes of India and Brazil and Argentina and Chile and Sweden many countries one ice breakers.

We want to be their supplier of choice. All three of our countries do. And so instead of building two ice breakers in the past fifty years, we want to capture, you know, let's say ten twenty thirty ice breakers of demand over the next decade. And you can only have the kind of investments and workforce development that I'm describing if you have that sort of demand signal.

industry that we do want to build up. I'm thinking specifically about domestic electric vehicle manufacturing, there is sometimes a tension between building up our own domestic capacity and our own independence supply versus the interests of some of our allies and specifically Europe in that case, Can you talk a little bit about how you balance those competing interests.

It's how China has gained dominance and steel and solar and wind and medical devices, machine tools. But now the trend is broadening, it's intensifying, it's moving up the value chain. So evs are a good example of how they're doing so, but semiconductors or batteries would be other good examples. And the starting point is one of the worrisome aspects because China already accounts for thirty percent of the world's manufacturing sector and value added terms, and that's more than the

US and Germany, Japan, India, and Mexico combined. And look China's dominance, if it's growing dominance of these sectors was merely the result of indigenous innovation and market forces, you know, we should apply, we should applaud the positive spillovers that would accrue to the rest of the world. But The reality is that the China is competing with massive state support. It's beyond anything we've seen in any other industrialized economy, and you can see it. I mean, we could talk

through the metrics. There are volume based metrics, nominal metrics, financial results from its exporters. You could measure the scale of policy support directly. You could look at market structure and how much it's concentrated. You arrive at the same conclusion. And so your question is the right one. How do we confront that challenge without alienating allies? And we've tried to articulate three levers that we deploy and which lever

you deployed and to what extent. It's more empirical than ideological. But the first lever is, yes, we are going to make investments at home to strengthen and scale up our productive capacity. I mean much in the way that I described for the Icebreaker deal. And that's an R and D and infrastructure and technology and manufacturing. It's also the size and skills of the labor force that's required to build out the capacity that you were trying to generate.

But the second is partnerships, So partnerships with countries that are playing by the same rules to give each other access to our productive capacity and our purchasing power. And then the third part of it is, and it's regrettable, but it's the use of restrictive tools like tariffs with on trading partners that are not playing by the same rules. And that really is to prevent our investments from getting undercut.

And I really do wish we didn't have to use tariffs, but the reality is that we're not competing by the same rules, and the harm from standing aside and doing nothing is not acceptable to our economic strategy, or our national security, or to our political economy. Now, I mean the challenge in terms of keeping our allies and partners with us, it's how exactly do you calibrate the use of all three of these levers and the optimal scale

and scope of tariffs. It really depends on the pace at which we in our allies are deploying productive capacity and the extent to which our investments are getting multiplied by the private sector, and how China responds with affirmative measures or restrictive measures of its own. So this gets back to the point I was making earlier. I mean, we want to partner with our allies in terms of this analysis of multi stage multiplayer game theory. You know, we have choices to make, so does China. So do

our allies, and so do non aligned countries. So we want to we actually want to roll up our sleeves with allies, think several steps ahead, anticipate their response from other players, and then make x anti judgments about whether our interventions, whether they're affirmative inducements in our productive capacity, or whether they're tariffs to remedy harm. Are they going to make us net better off in equilibrium for decades to come collectively, And that's the kind of conversation they welcome.

And you know, I know we've had endless inkspilled about whether allies are alienated by our actions. But I have to say the technocratic dialogue that's taking place and really it's I mean, I was at the G seven earlier this summer as well. The dialogue at the highest levels of government it has become. I would say it's remarkably constructive. You know, I was away for a year and a half. I came back and the tone has really changed.

sort of economic balancing effect. In fact, you wrote a piece that got published in the FT in February with previous odd Lad's guests are the data about this, But then there's talk about, well, can spr like mechanisms be used for other strategic commodities such as the various minerals that are necessary for say, EV batteries. Except for where are we on this? Is this still just in the

sort of tweets and blogs and white papers world? Or is there a trajectory for more spr like infrastructure to stabilize a market induce demand for these other critical commodities.

large stockpile as a buffer against shocks. Now everyone knows we're a net exporter, but we have quite a bit of vulnerability on many of the inputs that are needed to make clean energy transition, and also for many of the refined products that come from petroleum that sometimes become scarce, particularly during the winter months. So can we broad in the concept of the strategic petroleum reserve to think about

resilience more generally? And if you want to think about critical minerals, the reality is if you look at each of the markets and they're really embryonic markets for many of the critical minerals that are needed like lithium or nickel, or manganese, graphite, et cetera. We are facing serious shortfalls and under investments in you supply, and much of the investment problem relates to price spikes and just outright volatility

in these markets. And I don't think the market is going to solve this problem by itself, and because the risks for producers, they're asymmetric to the downside, it's they undersupply a critical mineral. Okay, they may lose a little bit of profit. If they oversupply, they are potentially facing insolvency. They always of course, there's a sort of damicles hanging over all of these markets, which is China flooding the market.

So there's an opportunity for the public sector to step in, and we really with some novel financial tools, can we think about an authority that gives us a demand backstop, the the ability to create a demand's backstop with price floors or guarantees or insurance mechanisms or a buyer of

last resort function. Could we have the ability to intervene in markets to buy when the spot market is depressed and then sell the equivalent amount in futures markets, or create a synthetic reserve by selling put options without actually having to physically stockpile the mineral. If it's feasible, you know, if the good allows for it, can we stockpile. Can we provide non recourse bridge financing to a liquid but

solvent producer. Can we create a marketplace for high standard critical minerals, the kind of minerals that have high standards for labor and environmental impact, or just transparency. These are all the kind of authorities that when I talked about reinventing or reimagining our tools, these are examples of the kind of tools I think we're going to need as we undergo this transition over the next few decades.

think there is something to what you're asking. I mean, there's another idea that is worth thinking about more, which is, you know, should we create a pool of patient capital that could be invested with flexibility and at scale to advance strategic objectives that the private sector left to itself may not prioritize, especially during moments of exigency, and food

security could be one of those objectives. So, for example, and you can call this what you want, but if you had a pool of flexible capital, perhaps we could give discretion for the US government, with all the appropriate guardrails, to make investments at home or abroad to advance strategic objectives that Congress or some other form of democratically legitimate

deliberation decides are worth advancing. It could be energy security, could be food security, could be addressing supply chain vulnerabilities. It could be sustaining technological pre eminence. That could be one purpose of it. A second would be and this maybe gets to the more likely use case for food security. Could this pool of capital help US respond to or deter a disruptive shock, particularly a disruptive shock from economic coercion.

And this happens all over the world, It's happening right now to some extent in the Philippines. And then three, could this pool of capital just help address what I think goes back to one of your questions from before, Joe, a strategic US disadvantage compared to some of our adversaries. Who can make very long term strategic investments over the course of decades. We don't have anything like that, but

they have sovereign well funds, many of them do. It helps them gain a first mover advantage or just a competitive edge in many in many critical supply chains or foundational technologies, and it can confer a lot of soft power. So should we have something comparable to that. That's another you know, if you ask me what's in the R and D lab, this is something we're thinking about.

as powerful as we thought. And there's a lot of a lot of articles about how the Russian economy, for example, is doing much better than people would have expected in the spring twenty twenty two after the sanctions were first hit. Maybe it's not booming, but it does not seem like it's totally crippled. And then in the context of China, for example, you talk about tariffs, we've had technology export controls, things like that, constraints on what Nvidia can send to

them and so forth. You hear, well, this is just going to prove to be an accelerant for their own domestic initiatives, and that it's going to cause they're going to do even more and they're going to do better et CETA than the otherwise would have been because they're gonna have to double down on homegrown technology. Taking that

latter one, do you buy that premise? Do you think that China is making progress faster than it otherwise would have because of certain constraints that have been imposed by this administration in.

I believe that. I mean, the first rule is do no harm, right, because our capacity to innovate, we know it's one of our superpowers, maybe it is the most important superpower we have as a country, and we do not want to dull the incentives for renovation, neither here or anywhere abroad. And we don't want to reduce our companies access to foreign markets unless we're confident that there

is some national security objective that's implicated without controls. But here is the reality, and this is why the China export controls are absolutely necessary. There are a set of technologies that are they're foundational to economic growth, potential and national security, AI, quantum semiconductors, biotech, hypersonics. I mean that list is going to change over time, and those of us in government need to be humble. We're always going

to be behind the frontiers of the private sector. But let's just stipulate there is a list of so called foundational technologies that really really matter. Number two military civil fusion. In China, it means the CCP doesn't make a distinction between its commercial and military sectors. And then three is our private sector. The private sector everywhere in the world, it does have this overwhelmingly strong incentive to sell cutting

edge technology to an enormous Chinese market. And so that's the problem is that if we had unfettered diffusion of our most foundational technological advances that would be tantamount eventually to giving up the crown jewels of the American economy. And that's why we're pretty emphatic about not letting that happen. And export controls are just an acknowledgment of that geopolitical reality.

They're not an attempt to hold China back. But that's why that you've heard my boss Jake Sullivan, one of my bosses, talk about the need to be careful and precise, the metaphor of a high fence around a small yard. And so what does that mean? I mean here again, like I can share with you a bit of the thinking, the framework. I mean. Number one, it's what are the technologies that are likely to be foundational to US national

security and economic growth potential? So come up with that list number two of that of those technologies on the list, where do we have the largest lead and therefore, where will we most likely see maximal effort by our adversaries to close the gap if the diffusion of US technology was uncontrolled, And then conversely, where are we behind and therefore most vulnerable to foreign controls that might slow or

impede our own technological development? And then three, we do think really hard about whether and to what extent the targets of export controls have substitutes for US foundational technology, either through indigenous development and there's been a lot of pressive course about what China's doing and lagging edge semiconductors in this regard, or from third countries. Can they get

the supply from somewhere else? And then four is can you build a coalition how broad and how deep and could we plausibly sustain it around any control for foundational technology? And the fifth part of having a small yard high fence or a strategic anchor is again stress testing and simulating if we get into an escalatory tip for tat of technology controls with our adversaries, how does it play

out in a multiplayer, multi stage contest over time? And then put a guardwill on ourselves that any imposition of control it has to surpass some threshold of efficacy compared to the next best alternative. Is it going to make us net better off? So this is not like arbitrary and reflexive placing of controls on really important technologies for really important markets. We are taking this process very seriously. I'm trying to give you a bit of a flavor for that.

reserve status. So a lot of what we've been able to do is because the US dollar is central in the financial system and there are a lot of flows that go into dollar assets and things like that. So as a result, we have seen more concern about potentially countries like Russia and China maybe moving away from the dollar,

maybe moving into gold or the un or whatever. Is that something that you are actively concerned about, And then how do you balance the I guess the power that the dollar's special status gives the US with maintaining that special status and not I guess overreaching in terms of weaponization.

I mean dollar primacy. It's a privilege. Perhaps it's exorbitant that and it allows us to fund our government, our households, are businesses much more cheaply than would otherwise be the case. It allows us to absorb a shock like no other country. And yeah, with sanctions and other forms of economic statecraft, that does give us a unique capacity to deliver a shock. And every time you use sanctions, especially when you do so forcefully, you do create an incentive for some countries

to hedge against the dollar based financial system. And we've got to take that very seriously. But look, you also have to, I think step back and look at the numbers right now. If you think about the measure of primacy, is the currency used, how is it used to save to borrow in the transact? Right now, the dollars global shares on the order of sixty, sixty and forty percent on those measures. The rem and be share is somewhere between zero and two percent, and euro is in a

distant second place. Somewhere around twenty twenty and maybe thirty five percent on those measures, And so the dollar still is the operating system of global finance. It has incredibly powerful network effects. And my view is that displacing the dollar would essentially require us to commit a series of unforced errors that you would think of as a failure from within. And I think that kind of failure would also have to be coupled with a more credible alternative

to have sustained impact. And that is somewhat hard for me to see with Europe still challenged by internal divisions, Japan trying to break out of multi decade stagnation, and China just obviously moving in the wrong direction in terms of institutional reforms. But look, I mean, as I mentioned dollar primacy, it's a network. All networks have tipping points. Those tipping points are often psychological ones that are really hard to identify in advance, and we know from the

study of networks. Anybody knows doesn't matter whether you're talking about biology or technology or finance, or like my daughter's lunch table at school, they lose value slowly, then very suddenly. So we're always going to be paranoid about dollar privacy, will never take it for granted. We'll always try to build a better product. And so it really depends on our policy choices what kind of country you want to be.

We need to put to rest questions about whether the dollar's institutional strengths are going to be sustained across political cycles, rule of law, transparent regulation, independent judiciary, deep in liquid capital markets. And the most important from my perspective, is our story. Our ability to generate trust and to attract ideas and talent and investment. That's really ours to lose.

seem to really be struggling. And I'm thinking of Going in particular, and I'm thinking of tell in particular, which is like, Okay, it's great if we have new things, but these are like our powerhouses, and they're not doing well on a raft of measures.

they bring it to shore. It may not sound like it, but this is a critical piece of legacy, you may call it legacy legacy, relatively lower tech infrastructure that really matters. And it has a real vulnerability because the vast majority of the goods that enter or exit our economy they're shipped to ports and they're pulled off of ships with cranes.

Here's the digital aspect of it. These cranes have onboard electronics that allow for remote software updates, and they can allow a foreign actor to interfere with port operations during a crisis, maybe even shut it down. Well, China makes eighty percent of these cranes that are used in the US. It's priced out the competition with massive subsidies to a

state owned crane producer called ZPMC. So that gives China tremendous opportunity to collect information on what's coming in or out of the country, including for goods that supply our military. So the risk of another Huawei situation, it's non trivial. And so I'm mentioning this because what to do about it. It's similar for many other industries that you could reference,

many companies that you could reference. It has to start with public investment to catalyze, ideally through the private sector, the rebuilding of our production capacity so on ship to shore cranes. Last month, this administration announced it was going to take twenty billion dollars from the bipartisan Infrastructure bill and start building cranes again because of the national security threat that it poses. But then the second piece of it, and it relates to a lot of the questions you've asked,

you need friends to do this the right way. Friends with expertise in building cranes in this case, and here Japan is one such friend. I mean the twenty billion dollars that I referenced, a good part of it is going to go to a US subsidiary of Mitsui, a Japanese company, and they're now going to build the first domestic option for ports on ship to shore cranes in thirty years. And hopefully we'll give this firm a chance to scale up and compete with a heavily subsidized Chinese rival.

But to give that a better chance, the President did propose twenty five percent tariffs on Chinese ship to shore cranes. And the last bit is the Coastguard is going to in the meantime it has been given authority to inspect all cranes for any signs of hackers that are burrowing into the software violating security protocols. So in any of these industries, Joe, I mean, this is going to be

a painstaking process. It's going to require years of effort to do the basically the economic forensics of where do we have vulnerabilities to what extent is it critical for our industrial base, does it have a nexus with national security, and what combination of investments and diplomatic agreements and in some cases restrictive measures can give us a chance to compete in a much more contested environment. I mean, this

is not las a fair free market economics. You know, I came of age in the nineteen nineties and we're just not in that world anymore. So this is what industrial policy is going to look like.

serious is that idea being taken? And then secondly, in the realms of it building out industrial policy or capacity, one of the discussion points that you sometimes hear is whether or not it's more valuable to throw money at the initial investment, so building the first factory or whatever, versus the government committing itself in one way or another to longer term forward purchasing agreements so that there's always a flow on demand and companies can kind of plan

accordingly and maybe avoid big cycles where demand is like vacillating up and down very dramatically. How are you thinking about that?

I mean, I think what we're going to do if we have time and political spaces to continue to identify sectors that we think are going to be foundational to economic growth and essential for national security, and where the private sector on its own likely doesn't have the incentives to make the investments we need at tas and with scale to compete. And that really is all about identifying

where they're clear market failures. It could be an infrastructure, it could be in particular sectors, it could be in

the size and skills of our labor force. But we do know if we don't, if we don't prioritize growth in these strategic sectors and make sure that we have enough investment and we have enough diplomatic partnerships to help them scale, then we're probably going to have a continued hollowing out of our industrial base, and we're going to be vulnerable to shocks all manner of shocks, and we're probably going to have a political economy that becomes more

and more disillusioned and we'll have a feeling that they've been left behind, and that leads us to a very bad place.

build out that capacity, it can be difficult to maintain continuity. Obviously, we're in an election year. We don't know who's going to be president just yet, but it will be really interesting to see in twenty twenty five, like how much of this has continued.

and so that's all good. I think where it's worriesome specifically is that if you have priorities that shouldn't necessarily be particularly controversial, such as say I have icebreakers, right, but if you have a political system that's sort of like so like polarized and perverted, that everything automatically becomes

in this hyperpartisan lens. You can see then how any sort of priority becomes very difficult to execute on because as he said, people will see Zono politically one way or another, even if in theory it shouldn't be well.

Is there a concern that if they commit to a specific thing, then maybe in four years or in a year or whatever, the political circumstances will change and US interest won't be there in the way it was previously.