Nuts, Bolts, Spare Parts, Catheters and T-bills: the Unplumbed Depths of America’s Weakness

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“For the want of a nail the shoe was lost,
For the want of a shoe the horse was lost,
For the want of a horse the rider was lost,
For the want of a rider the battle was lost,
For the want of a battle the kingdom was lost,
And all for the want of a horseshoe-nail.”
—Ben Franklin

Today our country is not just run, but utterly dominated, by business-school grads, bankers, lawyers as attorneys, lawyers as politicians, miscellaneous wordsmiths (PR folk, admen, and “operatives”) and “account executives.” Trump is just one of many business types from business school who run our oligarchy and—through donations and corruption—much of our government.

The American engineers, tinkerers and scientists who created the last century’s innovative wealth and power are a vanishing breed, at least here at home. Those still around often work in China, because that’s where the production—and increasingly the design—of things goes on.

All the people who now dominate our leadership have one thing in common. Few, if any, are trained to use their brains and hands to design and build tangible things. So they don’t mind that our economy has shifted from making things to performing services. They don’t even notice, because the “service” economy is where nearly all of them work. Doesn’t everybody?

Our economists go along for the ride. They tell us that that some 67% of our GDP involves services. They don’t seem to mind our plunging balance of trade in goods. They seem to think a service economy is a good thing because: (1) that’s how things are (confusing description with prescription), and (2) it all came about through free trade and free markets, so it must be good. The latter is a priori reasoning worthy of Archimedes.

But this state of affairs has consequences that few, if any, “serious” people have noticed. First of all, supply chains can be disrupted or unreliable. That’s why, six months in, we still don’t have enough PPE and test kits for Covid-19, and we haven’t from the outset of the pandemic.

Second, what happens in the event of a conflict with China?

How much leverage do we have a over a “partner” who makes the vast majority of stuff that we use in daily life? And if war starts, what happens when that “partner” cuts off our supply of nuts, bolts, spare parts and computer chips and electronic sub-assemblies? What will the “arsenal of democracy” in World War II do when it has to buy its nuts, bolts, spare parts and subassemblies from its adversary?

I notice these things because I’m probably one of a tiny minority of Harvard Law Review alumni who has a workshop with a drill press in his garage. In retirement, I fix and make things for the house and enjoy doing so. My first career was as an experimental physicist; part of it involved working with my hands and learning to handle machine tools.

Just now, I went out to my garage to make an informal survey of boxes of hardware with original labels still on—things like screws, hooks, T-nuts, toggle bolts, and washers. Of ten different products, eight were made in China, one in Taiwan, and the last (small washers) from flex-supplies in “Canada, China, Korea, Taiwan, or the US.”

That tally matches my impression of the sources of hardware, tools and appliances sold in Lowe’s, Home Depot and Walmart. So if this quick informal survey is representative, about 80% of our hardware comes from China, 10% from Taiwan, and 10% from other sources (possibly including China and Taiwan).

What do we do for hardware in a war with China over Taiwan? Rely on the other 10%? Wouldn’t that cut down volume, availability and maybe even quality?

I know, I know. There’s a thing called “Mil Spec,” short for “military specification.” Critical hardware and subassemblies for military equipment have to meet a list of stringent military requirements. Sometimes the requirements are excessive: a joke among engineers in my youth ran, “What’s an elephant? A Mil Spec mouse.”

One requirement of Mil Spec may be domestic manufacture. But what about the simple but necessary stuff, like nuts, bolts, plates and bearings, most of which we don’t make at all any more? Is everything that goes into a tank or plane, or into things like radios and electronics, Mil Spec with a domestic-sourcing requirement? I doubt it; there’s so much stuff we just don’t make any more. Likely laxity in sourcing spare parts for military equipment has exploded right along with our national infatuation with globalization, cheap parts and high profits for execs who’ve never worked on anything tangible.

And what about the rest of our economy? Does it make us stronger if China can, by turning off the tap, throw our non-military economy, including construction, into a depression for lack of hardware and spare parts?

The problem is not just that we don’t make much of anything tangible any more. It’s also that the vast majority of what we use comes from a single country, China, which also happens to be history’s most rapidly rising power and is beginning to throw its weight around.

It gets worse. I turned 75 this year, and I’ve had issues that require urinary catheters. The box of samples that my urologist gave me were proudly labeled “made in OH.” But the order of the exact same items from the factory came labelled “made in CN,” the two-letter country abbreviation for China. (Apparently the once-Ohio manufacturer, now become a mere distributor, tried to be a little coy.)

Now our increasing longevity (at least among our dominant class—our average longevity has fallen for three years) means that our bosses are getting older and older. Look, for example, at Trump (74), Joe Biden (77), and Commerce Secretary Wilbur Ross (82). What if one of them needs a urinary catheter during a conflict with China? It has taken us much, much longer to ramp up production of PPE for Covid-19 than it takes for a blocked bladder to burst.

Hardware and medical supplies are only the beginning. China also owns $1.8 trillion of our Treasury securities, or about 4% of the face value outstanding. What if, in a conflict, it starts to sell them? Won’t interest rates rise, increasing the cost of all the money we’ve borrowed and still must borrow in order to weather the pandemic?

In theory, the intertwining of our economy with China’s reduces the likelihood of war. Neither side has an incentive to fracture a mutually dependent relationship.

But a closer look at the relationship shows that most of the dependence is ours. We depend abjectly on China for manufactures; they depend on us only for specialized computer chips and subassemblies that they are already learning to make themselves (in part by stealing our know-how).

We, not they, face a serious balance-of-payment deficit in goods, which they are only too happy to make up partly in services. We have a national debt over $26 trillion (126% of pre-pandemic GDP), while theirs is only $5.48 trillion, or about 48% of their pre-pandemic GDP. We need the stuff they make and their forbearance in selling our debt more than they need us.

Viewed from on high, the problem is pretty simple to describe, if not to fix. Our leaders want to be bosses. They want to run things, both here at home and globally. They don’t want to actually do much but push paper. They want to be great thinkers and call the shots, primarily by investing.

But neither life nor geopolitics works that way. Kevin Phillips was Richard Nixon’s data man. In 2006, he published a book called American Theocracy. That catchy title was just for one-third of the book, about the rise of evangelicals in American politics. The other two parts covered oil money in politics and what Phillips called the “financialization” of the American economy.

More than two years before the Crash of 2008, Phillips compared our economy’s increasing reliance on financial services to the declines of the Spanish, Dutch and British Empires. He predicted our own similar geopolitical and economic decline if financialization continued.

Phillips was no engineer, industrialist or scientist. So he didn’t take into account the extent to which making things mattered in the twentieth century, let alone matters in the twenty-first. He didn’t consider how much faster a declining society’s fall would be when national wealth depends on making things and building infrastructure and the jobs that those tasks create. So our own free fall will likely be much, much faster than the respective declines of the Spanish, Dutch and British, all but the last of which occurred before the Industrial Revolution.

In the twenty-first century, when jobs and technological/industrial innovation are wealth, a society that just pushes paper and investments will be unable to compete in war or peace. We are well on the way to becoming such a society, while China is rapidly becoming the world’s factory, with control of innovation and industry to follow.

Thus the real threat of China’s Huawei is twofold. It’s not just the risk of putting a secret trap-door into the world’s 5G communications network. It’s also the risk of dominating that network with low prices and rapid innovation and so becoming something like a global Apple, Cisco and General Electric all at once. It’s the risk of China dominating one of the biggest industrial/infrastructure developments of our new century and racking up all the sales, development, innovation and jobs involved.

You wouldn’t expect people who make a living managing money and pushing paper to notice this threat. But it’s there nevertheless. If we don’t make a supreme effort to get at least some of our factories and research and industrial laboratories back, by mid-century we’ll be lucky to be as influential on a global scale as once-mighty Britain is today.

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