Lessons learned from the Apollo 11 moon landing — particularly the need for nationalized industrial policy involving investments in research and development and protective policies for vital industries — are being lost, said retired Air Force Brig. Gen. Robert Spalding, senior fellow at the Hudson Institute, in a Friday interview on SiriusXM’s Breitbart News Tonight with host Rebecca Mansour and special guest host Rick Manning.
Spalding began by noting China’s usurpation of America’s prior dominance in the realm of telecommunication technology manufacturing and development since the space race era.
“Let’s just look at the state of our telecommunications,” Spalding said. “There was such a large industrial effort for the space race. Back then, we were spending two percent of GDP on research and development. We had the industrial base that was the envy of the world. AT&T, at the time, was a monopoly, and with Bell Labs, was the standard for telecommunications.”
Spalding continued, “When you look at America today, we have no telecommunication equipment manufacturers left that are American companies. When China entered the WTO in 2001, from that time period to 2017, we lost 78,000 factories. We unemployed 3.4 million manufacturing jobs. In the same time, we spent trillions in the Middle East.”
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Opportunities for nation-building at home are being squandered by misappropriation of funds abroad, assessed Spalding. He said American investment in education, particularly in STEM fields, is falling behind Chinese competitors.
“We have, today, 152,000 Chinese kids in STEM education,” said Spalding, “where in one year [of spending] in Afghanistan, we could afford to put 200,000 kids through four years of STEM education here in the United States. Back then, for that space race, we educated the scientists that built the technologies that grew this economy to be the number one economy in the world.”
Spalding went on. “Whether it’s industrial policy, whether it’s research and development, whether it’s STEM education, there’s so much that we did and benefited from just on the basis of the industrial effort that went into the space race, and we’ve lost it all.”
Political narratives of economic determinism driving democratization — popularized by Francis Fukuyama’s End of History predictions and adopted by many political leaders — had borne out to be false while weakening America’s geopolitical position, determined Spalding.
“We fell into this trap of believing that open markets lead to wealth, and wealth leads to democracy, and, therefore, if we just open ourselves up to the world, that the world would automatically democratize,” noted Spalding. “In the space of that 20 years, we essentially deindustrialized our entire country to the point where we almost can’t manufacture any of the things we need to defend ourselves.”
Spalding warned of America’s growing dependence on China for military technology while noting America’s technology industry’s focus on software.
“We even have F-35 circuit boards that are manufactured by Huawei,” noted Spalding. “We’ve gone from being the most sophisticated industrial countries on the planet to being one of the least sophisticated. There’s this fallacy and belief that Silicon Valley is this great engine of innovation in the United States. All they really build are business models based on software. All the hard sciences, all the hardware, all the real science and engineering is going on in China, right now.”
A revamped Space Program may provide the national focus necessary for a revitalized national industrial policy, speculated Spalding.
“If we want to get back to that, we need to have a [national] focused effort. Maybe it is to go to the heavens. Maybe it is to go to Mars. But more importantly, when I got to the White House, all my colleagues that came from the Commerce Department and the Treasury Department said, ‘The United States doesn’t do industrial policy.’ I’ll tell you what: the countries that are actually creating the things that drive the world today do industrial policy. They actually focus on the things they think are important. They do research and development. They protect their industries. That is something that we’ve basically just gotten out of the habit of, and we stopped dreaming as a country.”
Mansour pointed out that the space program itself was “one giant industrial policy.”
“Let’s be real,” Mansour said. “This was a goal that was set by our government. It was the largest peacetime government initiative in our history. It employed nearly two percent of the workforce at that time, and we had huge benefits that came from it. Almost everything that we’ve got now in terms of technological know-how was a spinoff from the research that was done for the space race. How can we not understand that? Why are we so blind to this obvious fact that everybody else has figured out?”
Spalding answered by highlighted the demise of the iconic Bell Labs and its spinoff Lucent Technologies as an example of how insufficient industry protections against the exploitative behavior of state-backed Chinese enterprises have displace American technological dominance.
“When AT&T was broken up and they spun Bell Labs out to be Lucent, Lucent within a number of years was essentially destroyed by the non-market based activity of the Chinese Communist Party,” Spalding explained. “We created the conditions that led to the complete collapse of our ability to create the things that actually defend ourselves and really give us the opportunity to reach for the stars.”
The current emergence of the commercial space industry, with companies like Elon Musk’s Space X and Jeff Bezos’ Blue Origin, is not enough to secure U.S. dominance of the next generation of technological innovation, Spalding asserted.
“We actually have to spend U.S. dollars not on just being deployed around the world,” he said. “We have to do the hard science that actually becomes the fodder of companies that want to take that equipment and technology and commercialize it.”
Manning pointed out that the loss of American manufacturing poses the greatest challenge to the U.S. in determining whether America or China will control the technological future.
Even if we have the inventors to create the technology, “we don’t have the capacity to manufacture it,” Manning said. “We effectively allow [our technology] to be stolen… But right now our system is not one where we build it. And unless we fix that, we are basically going to invent the tools that will be used to destroy us by foreign competitors who will steal them, manufacture them, and then sell them to us for ten cents on the dollar or point them at us and say, ‘Surrender.'”
Spalding noted that China is also beating the U.S. in innovation because China is spending more money on research and development. Scientific innovation comes from data derived from “actually doing experiences and trying and failing.”
“That’s where China is putting their money. What we said in the National Security Strategy is we have to do the same,” Spalding, noting his his time at the White House as President Donald Trump’s senior director for strategy. “We actually have to invest in our industrial base. We have to invest in infrastructure. We have to invest in STEM education. We have to invest in research and development, and that’s the one thing we haven’t started to do.”
Spalding added, “We need to take part of our defense dollars — the $800 billion a year we’re spending on weapons — and actually turn some of that to doing the research and development that will drive the next level of technology and to educating the next scientists that are going to take this Mars.”
Mansour noted the positive history of government action in conjunction with the private sector to achieve a national goal — from the American “Arsenal of Democracy” winning World War II to the space program and the subsequent economic benefits that stemmed from such national endeavors. Mansour asked what has changed in U.S. policy since then.
By way of explanation, Spalding examined how globalized capital flight from America’s economy — particularly driven by private equity and hedge funds — has financed China’s development and gutted American manufacturing.
Spalding explained, “A lot of the way things are done today, especially with regard to private equity and hedge funds — let’s just take private equity as an example; they usually have a ten-year time horizon on the assets — and [this] happens time and time again, particularly with industrial assets, is they’ll leverage a lot of those companies up to the point where they can barely survive, and they’ll take profits, and what happens is they’ll offload the asset — when I’m saying ‘asset,’ this is a functioning asset that employs maybe 1,000 or 2,000 employees, and it’s barely on the cusp of survival — and they’ll sell the asset, and they’ll turn around and that factory or that refinery … will have a problem, and it’ll just shut down, and then those people will be unemployed.”
Over-leveraging and subsequent international liquidation of assets such as American factories or refineries destroy the economies of communities build around such assets, said Spalding.
“We don’t know how to keep our people employed because we forgot the things we learned during the time we were doing the space race,” Spalding stated.
Group investments, particularly third-party managed retirement funds, often fuel Chinese endeavors, Spalding warned.
“All these retirement funds — the Morgan Stanley Emerging Market Index just went from five to twenty — [are] wading in Chinese stocks,” Spalding said. “So now, our retirement funds are not only not investing in factories and production here in the United States; they’re basically sending their money to China so they can build Chinese cities that are essentially ghost cities so they can build Chinese excess manufacturing and so they can build the Belt and Road Initiative.”
Manning noted two key different between today and the space race era: First, the U.S. at the time was locked in a Cold War struggle for survival against the Soviet Union. Second, globalization had not yet undermining the America-centric orientation of the U.S. private sector.
“[During the space race], our corporate structure wasn’t a multinational structure,” Manning explained. “Our corporate structure was an American structure, and as a result it was more able to be insular in terms of its focus. Now, with the multinational structures that have been based upon the trade policies of the last 50 years, we have a different environment. So we really have to focus on how to deal in this different environment to create the 21st century American economy.”
Spalding recalled, “During the Cold War, we aligned our free trade principles with democratic principles. In other words, we were only trading with democracies.”
Mansour noted, “We live now in a globalist world with multinational companies that do not have loyalties to a specific American goal or to an American workforce. Is accomplishing something like the moon landing even possible today in this environment? And I ask this knowing full well that China is the most nationalistic country on the planet right now, and they are totally on board with setting their own national goals and building up their own national champions. Are we even able to compete then, when the attitude of our elites is so different?”
Manufacturing operations outsourced to China can return to America, said Spalding. “When people say, ‘The supply chain is what it is. We can’t reorient it.’ That is just complete fallacy because we actually moved the supply chain in a matter of twenty years to China. I don’t understand how anybody could think that we couldn’t — if we chose to — move those things that we think are important for us to manufacture here at home. I mean, if you’re having up to 30 percent of the F-35 manufactured in China, that really doesn’t make any sense.”
Mansour asked, “What other country allows their strategic competitor to supply their military?”
“They’re not a strategic competitor,” Manning answered. “They’re an enemy. They view themselves as our enemy, and we have to start viewing them the same way. Let’s just be clear. You would never allow someone who is building a military specifically designed to destroy your country — has an entire business plan to destroy your country — you would never put your entire ability to defend yourselves in the hands of that country. And yet that’s exactly what we’ve been doing, and it’s stupid. It’s suicidal.”
Spalding noted one example of how the American public is unwittingly financing China’s military.
“In 2017, the Chinese floated a billion dollar denominated bond in Frankfurt and at the same time announced that they were building an aircraft carrier,” Spalding explained. “And our institutional investors — our retirement funds — bought the bonds. So essentially, it’s almost like, during World War II, if we were buying German war bonds. That’s essentially what was going on. So Americans, through their retirement funds, paid for China’s aircraft carrier.”
Spalding also revealed the fact that NASA has assisted China’s scientists is acquiring the technology to overtake the U.S. in the new space race between the U.S. and the communist regime in Beijing.
NASA scientists educated China’s scientists on hypersonic missile technology at a university in China. “In 2017, in the spring, there was a hypersonics conference in Xiamen, China,” recalled Spalding. “I sent two of my folks down there to look around and see who was there. Who was teaching the Chinese to make hypersonic missiles? Our NASA scientists.”
Recent years have shown a shift in thinking towards China, assessed Spalding.
“I’ve been to the Hill many times in the last year, and every time I have a conversation about China — and every time I hear conversations about China — it’s clear people are beginning to wake up,” shared Spalding. “But they haven’t figured out that we actually have to protect our industries, [and] we actually have to invest our own dollars in our own country. Stop sending our retirement funds to China, and actually take that money — don’t invest them in algorithms in the stock market — let’s invest them in hard assets in America building things. We can do that.”
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