DefenseManufacturingSupply ChainMining

Panel on Industrial Policy for National Security | Hoover Institution

Hoover Institution (Stanford)
Hoover Institution (Stanford)•Apr 7, 2026

Why It Matters

Misguided industrial policies risk amplifying U.S. strategic dependence on adversaries, while well‑designed, goal‑oriented initiatives can safeguard national security and preserve economic competitiveness.

Key Takeaways

  • •Industrial policy often becomes entrenched and hard to reverse.
  • •Vague objectives lead to underperformance and unintended economic costs.
  • •Successful policies require clear, measurable goals and finite timelines.
  • •Overreliance on tariffs and subsidies can weaken national security.
  • •U.S. strengths lie in research, talent, and capital allocation.

Summary

The Hoover Institution panel examined the role of industrial policy in U.S. national security, questioning whether government‑directed initiatives can effectively address strategic supply‑chain vulnerabilities. Panelists highlighted historical successes—Manhattan Project, Operation Warp Speed, and the Apollo program—where clear, time‑bound objectives enabled decisive outcomes, contrasting them with contemporary efforts to push electric‑vehicle adoption and battery production that have deepened dependence on Chinese supply chains. Key insights centered on eight lessons: policies become politically entrenched, vague goals undermine performance, market mechanisms enforce discipline better than political processes, and tariffs often distort rather than protect critical industries. Speakers warned that the United States lacks the high‑quality primary/secondary education and job‑training infrastructure that underpins successful industrial strategies in East Asian economies, and that rent‑seeking behavior can proliferate when executives chase government favors. Notable quotes included a former Defense Secretary’s reminder, “You go to war with the army you have, not the army you might want,” and Steve Davis’s observation that “industrial policies are hard to kill even when they fail.” Josh Ralph emphasized the rare‑earth supply‑chain risk, noting China’s export‑control history and the 29‑year lead time to develop domestic mining capacity. The discussion concluded that any future U.S. industrial policy must be narrowly targeted, measurable, and time‑limited, leveraging America’s strengths in research, talent, and capital markets while dismantling ineffective subsidies and permitting bottlenecks. Without such reforms, policy‑driven rent‑seeking could erode both economic performance and national‑security resilience.

Original Description

Steve Davis highlighted the challenges of industrial policy. They are hard for the political process to assess, rife with unintended consequences, hard to fix, and hard to end when obsolete. A basic challenge is that we execute industrial policy with the government we have – not the one policy mavens imagine. Successful industrial policies often involve clear, easy-to-grasp objectives for which success or failure is evident to voters and political leaders. In contrast, industrial policy initiatives in pursuit of vague, open-ended objectives are especially problematic. Davis also explained why import tariffs are poorly suited for most national security objectives. He warned that a heavy reliance on industry policy fosters a rent-seeking outlook among business leaders. Despite these challenges, Davis noted that there is a case for some forms of industrial policy just as there is a case for government provision of national defense.
Josh Rauh noted that free trade is an important foundation for prosperity, but the assumptions underlying it break down when a strategic rival like China can weaponize supply chains, dominate strategic inputs through state-driven distortion, and leave the United States unable to rebuild critical capacity quickly in a crisis. Chinese-linked inputs now run through important U.S. weapons systems while America faces a near-total lack of rare earth domestic refining and processing capacity. At the same time, policymakers must resist turning every trade issue into a “national security” issue, because doing so dilutes attention and credibility away from truly defense-critical sectors like rare earths, defense-grade semiconductors, and certain specialty minerals. The right response is therefore not the scattershot protectionism or subsidization of certain industries that we have seen in US industrial policy, but rather (1) removal of regulations that get in the way of domestic production in strategic sectors; and (2) a narrower and more disciplined industrial policy centered on supply-chain transparency, targeted DoD procurement commitments, and stricter standards for what qualifies as a national security intervention.
Philip Zelikow distinguished industrial policy to improve national competitiveness from industrial policy for national security. There he defined a narrower goal and focused on the capacity to produce essential goods or technologies at scale. He noted that the ecosystems for innovative production in the US have withered in comparison to the World War II years, although the US may again face challenges on that scale. Calling out contemporary challenges, as in semiconductors, Zelikow used World War II experience to illustrate the policy problems associated with “resilience” and drew out the ingredients of successful industrial policymaking.
Dan Wang spoke about China's long record of using industrial policy to pursue technological ambitions. These efforts have created American dependences on Chinese rare earths, electronics products, and pharmaceuticals. Dan spoke about Beijing's relative tolerance for waste, which it tries to control through anticorruption measures. And he points out that China has developed new technologies based on present foundations.
To read the event summary, click the following link
To read Steve Davis’s paper, click the following link
To read Steve Davis’s slides, click the following link
To read Josh Rauh’s slides, click the following link
To read Philip Zelikow’s slides, click the following link
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