From Protectionism to Robotics: Reconsidering the McKinley-style 'American System'

Reflecting on the 'American System' (the formation of industrial clusters through protectionism) adopted by the United States in the 19th century, and citing President McKinley's policy shift during the Second Industrial Revolution (from high tariffs to reciprocity), Andreessen points out that 'policy flexibility tailored to the times is essential for successful industrialization and a smooth transition to free trade.' Meanwhile, in the modern era, he argues that 'the AI wave is the bipolarization of the US and China' and 'the next era is physical AI, or robotics', asserting that new manufacturing clusters should be fostered domestically and the fruits of growth distributed to rural areas. He also touches upon the current situation where the financialization and deindustrialization of urban areas are excluding the middle class from cities and impoverishing rural regions, as well as the issue of DEI* and high-skilled immigration alienating local talent. Finally, from the perspective of national security, he emphasizes the necessity of building an 'autonomous manufacturing base that does not rely on Chinese robots,' as well as regulatory reform and the development of energy and infrastructure.

1. Historical Perspective: American Protectionism and the 'American System'

1-1. The 'American System' Since Hamilton

Andreessen explains that 'this (the American System) was envisioned by Treasury Secretary Hamilton at the end of the 18th century,' and that the heavy protectionist policy to counter Britain fostered the entire domestic industrial ecosystem. By comprehensively strengthening not only urban factories but also parts suppliers and peripheral infrastructure, they achieved an 'industrial clustering effect.'

1-2. The Role of President McKinley and the Second Industrial Revolution

At the end of the 19th century, President McKinley promoted domestic bootstrapping in railways, steelmaking, and the chemical industry under the banner of 'high provisional tariffs.' Once export competitiveness was achieved, he introduced 'reciprocity' and realized tariff reductions from other countries through negotiation. This two-stage policy shift propelled the United States to the center of the world's 'Second Industrial Revolution.'

2. The Shift from Protectionism to Free Trade

2-1. The Introduction of Protectionism and the Formation of Industrial Clusters

'Protectionism is effective only in the early stages of industrialization,' says Andreessen. Tariff measures on specific sectors spread to the entire ecosystem, including parts manufacturers and R&D institutions, accelerating innovation.

2-2. Export Expansion and the Practice of Reciprocity

Once the industrial base was established, McKinley moved to a phase of 'selling American products to the world' and steered toward negotiations to mutually lower tariffs with other countries. This flexible policy change supported the global expansion of American manufacturing.

3. Changes in Economic Structure: From Manufacturing to Services, and to AI/Robotics

3-1. The Shift to a Service Economy and Slowing Growth Since the 1960s

Since the 1960s, the United States has promoted a shift toward services, with the financial industry and knowledge-intensive industries rising to prominence. However, at the same time, the growth of total productivity has slowed, and the growth rate has fallen from three times its peak to about one time today.

3-2. The AI/Robotics Revolution as the Third Wave

Andreessen points out, 'AI has now moved beyond the software stage to physical AI, which is robotics.' The autonomization of self-driving cars and drones is already underway, and he presents the prospect that 'billions of robots will be running around in the next decade.' The 'future of manufacturing,' which designs and builds these domestically, can become a new engine for growth.

4. Economic Disparity Between Cities and Rural Areas: A Political Economy Perspective

4-1. Concentration of Elites in Urban Areas and Over-regulation

High-value-added services are thriving in large cities, but at the same time, soaring housing prices and the exhaustion of public services are becoming serious. Andreessen criticizes that 'regulations and political structures favor elites and low-income groups, while excluding the middle class.'

4-2. Exclusion of the Middle Class and the Decline of Rural Regions

As a result, even police officers and firefighters are forced to commute long distances, and the exodus to rural areas is progressing. Andreessen summarizes this by stating, 'The policy choice to deindustrialize cities left no middle-class jobs in the regions.'

5. Human Resources Policy and the Immigration Dilemma

5-1. Highly Skilled Immigration and the Impact of DEI

'The combination of immigration and DEI* has distorted the talent supply structure within the United States,' Andreessen points out. The ratio of international students at top universities and admissions systems that favor donations and athletic quotas have become factors that shut out talented individuals from rural areas.

5-2. Utilizing Potential Talent in Rural and Midwestern Areas

On the other hand, there are many 'smart young people who are not sufficiently educated or employed' in rural areas. If growth can be achieved in the AI and robotics fields, there is a possibility that they can be turned back into 'subjects of opportunity.'

6. Future Policy Challenges and Outlook

6-1. Attracting Next-Generation Manufacturing and National Security

'An autonomous manufacturing base that does not rely on Chinese robots' is the cornerstone of national security. It is necessary to foster the AI hardware and robotics industries domestically and aim for sustainable productivity improvement.

6-2. Regulatory Reform and Growth Strategy

In the housing, medical, and education sectors, despite the fact that technological innovation could lead to price suppression and quality improvement, excessive regulation and political interests are hindering transformation. Deregulation and the promotion of entry into new industries are urgent tasks.

6-3. An Economic Growth Model That Includes All Generations

Against the backdrop of high growth and technological progress, building a growth model where 'benefits reach not only cities but also workers and families in rural areas' can be said to be the most important challenge for the future U.S. economy.

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