Made in Democracy

This post launches my Made in Democracy series, part of my broader Mind the Gap effort to expose the distance between what democracies aspire to achieve and the tools they have prepared to achieve it.

From Arsenal to Afterthought

In the middle of the 20th century, the U.S. was the world’s leading manufacturer. The U.S. produced more than half of global industrial output, setting the stage for decades of prosperity and geopolitical dominance.

But that dominance has eroded. Today, China is the world’s factory, producing nearly a third of global manufacturing output—as much as the U.S., Germany, Japan, and South Korea combined. China produces more than half of the world’s steel and commercial ships, nearly 60% of aluminum, and more than 80% of solar panels and lithium-ion batteries. Its dominance extends into refining rare earths and critical minerals—the hidden ingredients of modern defense and technology.

China’s rise was not accidental. Beijing has been strategic in picking which industries to dominate: those with high barriers to entry, those essential to advanced manufacturing, those that yield geopolitical leverage. Through subsidies, state-owned enterprises, and military-civil fusion, it has methodically built capacity where it matters most.

The U.S., by contrast, trusted globalization. We shifted factories overseas, hollowed out our industrial base, and assumed the market would provide. Efficiency was prized over resilience. Now the bill is coming due.

Why Industrial Power Matters in Strategic Competition

Innovation remains America’s strength. Our labs design world-class technologies, our firms lead in software, and our universities produce path-breaking research. But innovation leadership, though necessary, is brittle without production. A brilliant chip design is meaningless if we cannot fabricate it at scale. A breakthrough defense platform is hollow if supply chains collapse in wartime.

Authoritarian rivals understand this. They wager that scale will outlast innovation—that even if democracies invent superior technology, authoritarian capacity to produce, replicate, and mobilize will prevail in a crisis.

Industrial power decides strategic competition because it underwrites every other form of power. Military power depends on shipyards, fabs, refineries, and munitions plants. Economic power depends on the ability to sustain production in crises and recover quickly. This is precisely why Resilience in my GRIPS framework for national strength is indispensable, why the location of your industrial Presence in my PIVOTmodel matters as much as overseas bases.

History is clear. In World War II, the U.S. was the arsenal of democracy because it could outproduce its rivals. Today, the arsenal looks different—semiconductor fabs, magnet plants, battery factories, transformer yards—but the principle is unchanged.

Setting Priorities: Criteria for Targeting

Industrial policy should not be framed in absolutes. Some argue we must produce everything at home. Others say markets alone should decide. Both extremes are flawed. What we need is precision. Three tests should guide priorities:

• Taiwan contingency vulnerability – Would disruption immediately impair warfighting or the economy?
• Domestic necessity – Must it be produced in the U.S. for security, classification, or surge capacity reasons?
• Allied leverage – Can trusted partners supply at scale, allowing us to diversify away from China faster than we could alone?

What to Make Where

Make at home: Goods essential to defense and wartime surge capacity, where allies cannot substitute quickly or may be compromised by geography or coercion. Advanced semiconductors, substrates, magnets, power transformers, precision machine tools, and active pharmaceutical ingredients (APIs) for essential medicines must have a minimum viable share of production on U.S. soil. The aim is not self-sufficiency, but resilience: enough to sustain wartime demand, keep the grid operating, and guarantee defense and health security.

Make with allies: Goods where democratic partners already have scale and capacity. But reliability matters: allies inside the weapons engagement zone could face disruption in a Taiwan contingency, and partners deeply dependent on China are vulnerable to coercion. Friend-shoring must therefore diversify supply, help allies reduce their reliance on Beijing, and build redundancy so that no single partner’s weakness becomes systemic.

Buy from cheapest sources: Goods with little strategic consequence—like textiles, toys, and many household appliances—can continue to be sourced from the most efficient global suppliers, even if that includes China.

The Danger of Broad-Based Approaches

Too often, U.S. industrial policy defaults to blunt tools. These approaches make for good politics but poor strategy.

• Broad tariffs raise costs for U.S. factories trying to reindustrialize, especially when they apply equally to allies and adversaries.
• Buy American rules sometimes prioritize job-rich but low-strategic goods—steel and aluminum for bridges—while overlooking true vulnerabilities such as magnets, substrates, and transformers.
• Untargeted subsidies risk waste, building capacity in sectors where resilience is less urgent while leaving gaps in those that matter most.

The result: ribbon cuttings and job announcements, but not necessarily resilience.

Policy Actions to Build Resilience

Achieving resilience requires more than aspirational rhetoric. It demands tailored action. In some sectors, the priority will be anchoring demand through long-term government contracts—guaranteeing a market for magnets, substrates, or APIs that private buyers alone won’t sustain. In others, it will mean targeted incentives, modeled on the CHIPS and Science Act, but extended to overlooked chokepoints such as transformers or machine tools.

Bottlenecks will not all be financial. Many will hinge on permitting and site readiness, or on the availability of skilled labor, requiring deliberate investment in workforce pipelines for advanced manufacturing and trades. U.S. support should leverage financing tools, like the Development Finance Corporation and the Export-Import Bank, to help trusted partners expand capacity that displaces Chinese dominance in critical categories. And in all cases, resilience will be strengthened by trade agreements that deepen cooperation, expand reliable supply chains, and help allies themselves reduce dependence on Beijing.

In short, there is no one-size-fits-all solution. Each chokepoint will require a specific combination. The common thread is precision: building capacity where it matters most, rather than spreading resources thinly across the industrial landscape.

The Strategic Imperative

Industrial policy must not be about nostalgia or jobs alone. It must be about resilience. In a Taiwan contingency, the U.S. cannot afford to discover too late that its factories, shipyards, and power grids depend on Beijing’s supply chains.

The U.S. once led the world in manufacturing. But reclaiming leadership should not be the goal. Resilience should be the goal. And that can only be achieved by being deliberate in choosing what to make at home, what to make with allies, and what to leave to the market.

Broad-based approaches will waste resources. Targeted approaches will build power.

In the end, the test is whether democracies can achieve Resilience (GRIPS), maintain secure industrial Presence (PIVOT), and ALIGN their efforts with allies. Only then can freedom truly be Made in Democracy.

In line with my belief that responsibly embracing AI is essential to both personal and national success, this piece was developed with the support of AI tools, though all arguments and conclusions are my own.