Why America needs a new Office of Economic Defense
The following column is written by our occasional columnist Michael Magnani. His previous column was “Sacrifice and the Future of America.”
This week, the world held its collective breath as a kerfuffle in the South China Sea brought China and America’s mutual treaty partner the Philippines to the brink of armed conflict. The flashpoint centered on a decaying ship — the Sierra Madre — that holds the key over which country controls this blue swath of strategic waterways. The World War II-era ship is marooned on the contested Ayungin Shoal but is now rapidly disintegrating, and with it, the Philippines’ hope that it can hold China’s littoral ambitions at bay.
The State Department sent the Chinese a stern reminder about America’s alliance obligations, to scant effect. China’s implacable position begs the question: how can the U.S. hope to go to war with one of its largest and most important trading partners in one of the most contested and congested waterways in the world? The global economic effects stemming from a future conflict would far surpass anything seen during World War II.
It is imperative that the U.S. proactively seek to protect its economy in areas vital to its national security and prosperity. What we need — and urgently — is the creation of a new Office of Economic Defense.
Such an office wouldn’t be the creation of a new government agency with ever more paperwork, but would instead be a reorganization of existing bureaucracies and authorities whose duties are at the center of economic security but are largely spread across the federal government today. In this way, it would parallel what ultimately became known as the Office of Economic Warfare (OEW) the U.S. adopted during World War II, itself modeled after Britain’s (much more covert) counterpart, the Ministry of Economic Warfare.
President Franklin D. Roosevelt, knowing that America would likely enter into another world war in short order after the 1940 election, created a myriad of offices and boards to prepare for a wartime economy and then direct it once war started. For example, the Office of Economic Warfare would eventually encompass corporations focused on critical materials like rubber and petroleum as well as key financial institutions like the Export-Import Bank. Other examples during this time include the War Production Board (WPB), which was established as an interagency office with representatives from the departments of War, Navy, Agriculture and others to manage issues ranging from the allocation of scarce materials to the conversion and integration of factories into the sprawling war effort.
The OEW and the WPB, among the other contemporaneous entities created, coordinated an economy that would produce 40% of the world’s munitions from 1942-1945, enabling Americans and our allies to defeat the Axis powers. All the while, the standard of living for American civilians held relatively steady during the war.
As Philip Zelikow notes in his recent piece for the Texas National Security Review, when FDR began creating numerous committees and boards and offices centered around economic security and warfare in 1940, he knew that even if the war didn’t come to the United States, the country needed to be prepared, as a global crisis could hit at American economic security well before its military security.
We don’t yet hear the echoes of a looming war like those Roosevelt heard in the early 1940s, but even so, we are currently seeing some similar, proactive measures being undertaken to build resilience in the American economy. For example, the U.S. and Canada announced last month that the U.S. would publicly fund over $15 million into two Canadian mines that produce critical minerals such as graphite and cobalt. The target of such investment, of course, is China. It is currently the world’s largest graphite producer (~75%), while the Democratic Republic of the Congo (where China’s Belt and Road Initiative is hard at work) is the largest cobalt producer.
Diversifying and friend-shoring our critical mineral supply chains like this is a no-brainer, but $15 million is a paltry sum that will have minimal impact. These activities need to be done on a much grander scale if the U.S. is to keep its economy secure and mobilized as threat of great power conflict escalates.
That’s where a new Office of Economic Defense comes in. Its mission would be to coordinate a multitude of offices already in existence while synthesizing information and policy across federal agencies where inefficiency reigns and turf wars develop. The goal would be to streamline the necessary economic and security measures that should be taken for the country, giving American policymakers a more efficient platform to inform their decision-making.
For example, economic sanctions regarding trade and finance stem from Treasury’s Office of Foreign Assets Control, while export controls and other measures regarding sensitive and dual-use technologies are housed in Commerce’s Bureau of Industry and Security. While I am sure these two entities coordinate frequently, grouping them together under a single mission would streamline efforts on sanctions policy and make them much more effective.
Other tasks, such as U.S. and allied efforts to invest in more critical minerals, materials and technology, as well as efforts to near-shore/friend-shore key industries that would help revitalize our industrial base, could also find a home in this new Office of Economic Defense. Creating this interagency office under one roof could help avoid departments working at cross-purposes (as we have seen with Treasury and Justice) while accelerating America’s economic security goals.
An astute reader may note that one of the missions of the National Security Council (NSC) is to better coordinate interagency efforts across the federal government in matters relating to national security. Isn’t economic security part of national security? True, but today, the NSC has become far too bloated and limited in its efforts to coordinate in the areas I described earlier. With wars in Ukraine and Gaza, conflicts from Sudan and the Sahel to the South China Sea, and emerging threats like bioterrorism — who has time to think about nickel policy?
Short of a major effort by Congress to restructure the federal government, this Office of Economic Defense would initially have to fall under the leadership of someone akin to a White House Czar. A potentially interesting candidate for the role would be the Principal Deputy National Security Advisor for International Economics. This office is dual-hatted to both the NSC and the National Economic Council, where the current occupant Daleep Singh and his team focus on sanction implementation and economic statecraft.
Bringing the responsibilities for economic statecraft over from the NSC into this new Office of Economic Defense, as well as giving them coordinating authority over other offices and agencies tasked with economic statecraft and security, allows the U.S. to better prepare its economy for future crises on the horizon, just as FDR foresaw in the lead up to World War II.
As the U.S. and China continue to saber rattle in the South China Sea and in other regions, it is imperative that the U.S. starts to take the necessary economic security measures to better insulate the American economy from a future crisis or conflict. Proactive measures taken now, such as the creation of an Office of Economic Defense, could in turn lessen the sacrifices America would have to make in the future — and that’s better for all of us.
The Orthogonal Bet: SimCity, Maxis and the ambitious modeling of everything
The Orthogonal Bet is our ongoing miniseries of the Riskgaming podcast that explores the unconventional ideas and delightful patterns that shape our world hosted by our scientist-in-residence Sam Arbesman.
In this episode, Sam speaks with game designer and researcher Chaim Gingold, the author of the fantastic new book Building SimCity: How to Put the World in a Machine. As is probably clear from the title, this new book is about the creation of SimCity, but it’s also about much more than that: it’s about the deep prehistory and ideas that went into the game — from system dynamics to cellular automata — as well as a broader history of Maxis, the company behind SimCity.
Chaim previously worked with SimCity’s creator Will Wright on the game Spore, where he designed the Spore Creature Creator. Because of this, Chaim’s deep knowledge of Maxis, his access to the folks there, and his excitement about SimCity and everything around it makes him the perfect person to have written this book.
In this episode, Sam and Chaim discuss Chaim’s experience at Maxis, the uniqueness of SimCity, early 90’s gaming, the rise and fall of Maxis, Will Wright and his role translating scientific ideas for a general audience, and much more.
Lux Recommends
- The book has been mentioned before, but Sam loved Jonathan Rauch’s The Constitution of Knowledge: A Defense of Truth, which developed from his essay in National Affairs by the same name. Quoting from the latter, “The constitution of knowledge makes a very strong claim: a claim to supremacy in organizing social decision-making about what is and is not reality (much as the U.S. Constitution claims supremacy in organizing political decision-making). Of course, it's a free country, and anyone can say he has knowledge. But the constitution of knowledge is defined by a social pact: In return for the freedom and peace and knowledge the system confers, we ignore alternative claims on reality where social decision-making is concerned.”
- The Economist has a great overview of China’s great leap to the frontiers of scientific research and development, particularly in physical sciences like materials that have been increasingly underfunded in the United States. “In 2003 America produced 20 times more of these high-impact papers than China, according to data from Clarivate, a science analytics company [… but by] 2013 America produced about four times the number of top papers and, in the most recent release of data, which examines papers from 2022, China had surpassed both America and the entire European Union (EU).”
- Our Riskgaming consultant Ian Curtiss fervently recommends George Packer’s magnum opus of an article on the cover of The Atlantic this month, “What Will Become of American Civilization?” It’s a meditation on climate change, water and current American politics through the prism of Phoenix — its growth and potential as well as its limits from a dwindling supply of H20. The sweep and scope of this piece is just phenomenal — so much so, that I bought a paper copy to read.
- Chiara Negrello has a piece in Hakai on how drones are transforming rice cultivation in the Mekong River Delta. “Another young drone convert is To Van Hoang, 28. He started farming alongside his father 10 years ago on their 30-hectare plot and incorporated drones two years ago after learning about them through social media. They’ve radically changed the way he works: Previously, it took him five days of manual labor to spray the entire farm. Now he can complete the task in just four hours using 30 percent less chemical. ‘I have more free time, so I can also offer spraying service to other farmers to gain extra income,’ he says.”
- Finally, there’s no secret that China’s economy can’t produce enough good jobs for new graduates. So there was shock recently when a Stanford University PhD grad applied for a local government clerk position, an apparent mismatch of skills to job that is increasingly a pattern in the slowing Chinese economy. “Others pointed to the growing tendency for young Chinese to pursue careers in the public sector, which offers iron-clad job security and good benefits. ‘At the end of the universe, there is the bianzhi,’ one user wrote, referring to state-sector positions.”
That’s it, folks. Have questions, comments, or ideas? This newsletter is sent from my email, so you can just click reply.
