Ret. General Robert Spalding: Moon Landing Couldn’t Happen in Today’s Deindustrialized America; ‘We’ve Lost It All’ to China

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 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.”

“What we said in the National Security Strategy is … we need to do the same [thing China does],” recalled Spalding of 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 educating the next scientists that are going to take this Mars.”

Spalding examined how globalized capital flight from America’s economy — particularly driven by private equity and hedge funds — finances Chinese development.

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.”

Spalding recalled, “During the Cold War, we aligned our free trade principles with democratic principles. In other words, we were only trading with democracies.”

Manufacturing operations outsourced to China can return to America, said Spalding. “The other thing that cracks me up all the time is 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.”

Mansour asked, “What other country allows their strategic competitor to supply their military?”
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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Follow Robert Kraychik on Twitter @rkraychik.