In American Amnesia: How the War on Government Led Us to Forget What Made America Prosper (2016), Jacob S. Hacker and Paul Pierson challenge the claim that free markets alone produced American prosperity. They argue instead that the United States historically thrived through a mixed economy in which active public investment, effective governance, and private enterprise worked together to generate broad-based growth. The erosion of this institutional memory, they contend, has weakened both U.S. economic performance and democratic capacity.
The authors trace the turn against active government in the late 1970s and 1980s to a convergence of economic shocks, political realignment, and ideological entrepreneurship rather than to clear empirical failure of public action. This argument has gained renewed urgency amid contemporary efforts to reshore manufacturing, as strategic competition with China has laid bare the limits of anti-government ideology. Rebuilding domestic industrial capacity increasingly requires precisely the kinds of public coordination, investment, and state capacity that American political discourse has long been trained to distrust.
From Market Fundamentalism to Strategic Statecraft: Reassessing U.S. Political Economy from the 1970s to the Era of U.S.–China Competition
The ideological turn against active government in the United States during the late 1970s and 1980s emerged from a convergence of economic disruption, political mobilization, and intellectual reframing. The postwar mixed-economy consensus—under which public investment, regulation, and social insurance coexisted with private enterprise—was destabilized by stagflation, oil shocks, and intensifying global competition. These shocks undermined confidence in Keynesian policy tools and made government an easy target for blame, even though many of the underlying problems were global and structural rather than the product of domestic public action.
This loss of confidence was then consolidated through organized political effort. Business elites and allied policymakers built a durable infrastructure of think tanks, lobbying organizations, and media narratives that portrayed regulation, taxation, and unions as impediments to growth. Market fundamentalism gained ideological dominance by simplifying complex economic realities into a stark dichotomy—efficient markets versus wasteful government—while obscuring the historical role of the state in building markets, technologies, and national capabilities. What followed was not merely a shift in ideas, but a reallocation of power that narrowed the scope of legitimate public action.
Today, intensifying competition with China exposes the strategic limits of that ideological settlement. China’s economic rise has rested on an assertive mixed economy: sustained public investment in infrastructure, education, and research; coordinated industrial policy in critical technologies; and long-term planning insulated from short-term market pressures. By contrast, decades of U.S. underinvestment have weakened supply chains, eroded manufacturing capacity, strained public infrastructure, and reduced funding for basic science—outcomes consistent with an economic model that privileges short-term private returns over long-term national capability.
Great-power competition highlights a basic truth that market fundamentalism obscured: markets alone cannot solve coordination problems central to technological leadership, energy transition, infrastructure resilience, and defense preparedness. Effective competition requires state capacity—competent institutions able to invest, coordinate, and partner with private firms over long horizons. This is not a call for indiscriminate expansion of government, but for restoring its strategic role where markets predictably underperform.
The irony is historical. The United States achieved its greatest economic and geopolitical successes through deliberate state–market partnerships, from wartime mobilization to the development of foundational technologies. China now draws on a version of that playbook, while the U.S. remains constrained by an ideology born of a specific past crisis. Reassessing that legacy is not about emulating China; it is about recovering an American tradition of pragmatic political economy suited to contemporary strategic realities.
Why Manufacturing Reshoring Cannot Succeed on Market Forces Alone
Efforts to reshore manufacturing to the United States are unlikely to succeed if they rely solely on market mechanisms such as tax incentives, deregulation, or tariffs. While these tools may marginally alter firm-level cost calculations, they are insufficient to rebuild the dense and resilient manufacturing ecosystems that modern industrial production requires. A strategy grounded only in “getting government out of the way” risks producing results that are fragmented, shallow, and uneven across regions and sectors.
As Hacker and Pierson’s analysis implies, manufacturing capacity does not arise spontaneously from price signals. Complex supply chains, skilled workforces, specialized suppliers, and logistical networks are collective assets that develop over long time horizons. China’s manufacturing dominance illustrates this reality: it is not the outcome of laissez-faire markets, but of sustained state coordination encompassing infrastructure investment, patient financing, industrial policy, and workforce development. Ignoring this context leads to a false belief that private firms, acting independently, can reconstruct such systems from scratch.
Expecting reshoring to occur without parallel rebuilding of public capacity repeats a familiar policy error—strategic amnesia about how industrial strength is actually created. Without intentional public investment and coordination, private capital will rationally avoid the risks and costs of rebuilding entire ecosystems. Successful reshoring, therefore, depends not on withdrawing the state, but on reengaging it as an active partner in long-term industrial development.
Strategic Competition and the Case for Capable Mixed Economies
Contemporary strategic competition between major powers is often mischaracterized as a contest between free markets and state control. This framing obscures the more consequential reality: the decisive variable is not ideological purity, but the effectiveness of a country’s mixed economy. All advanced economies combine public authority and private enterprise; what distinguishes success from failure is how well those elements are integrated and governed.
From this perspective, the rise of China reflects not the triumph of state dominance over markets, but the operation of a coherent mixed system. China has built strong state capacity, maintained the ability to coordinate industrial strategy, and pursued long-term objectives that align public investment with private production. These features allow firms to scale, innovate, and compete globally within a framework shaped by national priorities.
By contrast, the United States since the 1980s has weakened its own mixed-economy foundations. Fragmented public authority, persistent anti-government ideology, and chronic underinvestment in shared goods have eroded the state’s capacity to act as an effective partner to the private sector. The central risk identified by American Amnesia is therefore not excessive government intervention, but insufficiently capable government—one unable to mobilize resources, coordinate actors, or sustain long-term commitments.
Strategic competition rewards countries that can align public investment, private innovation, workforce development, and modern infrastructure into a mutually reinforcing system. That alignment depends less on limiting the role of the state than on strengthening its competence. Where ideology constrains capacity, competitiveness suffers. In this sense, the core challenge facing the United States is not choosing between markets and government, but rebuilding a functional partnership between them that can operate at scale and over time.
Reindustrialization Begins with Rebuilding the State
Efforts to reshore manufacturing to the United States will fail unless they are preceded by a serious reconstruction of the country’s public foundations. As American Amnesia makes clear, industrial policy without institutional renewal is largely symbolic. Production does not relocate simply because incentives are offered or wages narrow; it relocates where the underlying systems that support complex manufacturing are strong, reliable, and coordinated.
Infrastructure is the most visible of these systems. Modern manufacturing depends on ports that move goods efficiently, rail and road networks that minimize delays, power grids that are resilient, and broadband that supports advanced production and logistics. When these systems are weak or fragmented, costs rise sharply—often exceeding labor cost differentials. In this sense, infrastructure quality is a more decisive factor for competitiveness than wage levels alone.
Human capital is equally critical. The United States has allowed technical education, apprenticeships, and community colleges to atrophy, even as advanced manufacturing has become more skill-intensive. Sustained investment in STEM education and research is not optional; it is the backbone of industrial capacity. China’s advantage lies not merely in labor costs, but in the scale of its skilled workforce and the tight coordination between education, industry, and the state.
Finally, reshoring requires a capable state. This means permitting processes that are fast yet credible, procurement systems that reward long-term investment rather than short-term cost cutting, and public agencies staffed with real technical expertise. Hollowed-out bureaucracies cannot plan, execute, or sustain industrial strategies. Without rebuilding state capacity, attempts to reshore manufacturing amount to performance rather than structural change.
In short, reshoring is not primarily a question of trade policy or subsidies. It is a question of whether the United States is willing to rebuild the public foundations—physical, human, and institutional—on which durable industrial strength depends.
Industrial Policy as Continuity, Not Rupture
Industrial policy in the United States is often portrayed as a novel or radical departure from tradition. In reality, it represents a return to a well-established historical pattern. For much of the twentieth century, the federal government played a decisive role in shaping markets, technologies, and productive capacity—simply without labeling these actions as “industrial policy.” Defense procurement, NASA, federal research and development, the interstate highway system, and land-grant universities were all deliberate public investments that structured entire industries and regional economies.
These long-term commitments laid the foundations for sectors that now define American economic strength, including semiconductors, aerospace, advanced manufacturing, and modern computing. Their success was not accidental. It rested on sustained funding, institutional continuity, and a close coupling between technological development, workforce formation, and geographic diffusion of economic activity. The lesson is not that government intervention crowds out innovation, but that capable, mission-driven public institutions can catalyze it.
Current reshoring efforts—such as those embodied in the CHIPS Act—fit squarely within this historical lineage. They echo the strategies that previously enabled the United States to build and retain strategic industries. However, their effectiveness depends on whether they are treated as enduring national commitments rather than temporary political gestures. Short-term subsidies, disconnected from workforce development and regional investment, risk repeating a cycle of forgetting what made past successes possible.
To succeed, modern industrial policy must be sustained across administrations, integrated with human capital and place-based strategies, and insulated from ideological hostility toward government competence. When these conditions are met, industrial policy should be understood not as an aberration, but as a reaffirmation of the approach that has repeatedly underpinned American economic leadership.
Unequal Gains and Political Instability as Structural Barriers to Reshoring
Economic strategy and political stability are inseparable, and this linkage is especially decisive for reshoring efforts. When the benefits of renewed domestic manufacturing accrue narrowly—to firms, investors, or senior executives—while workers and regions experience little material improvement, the political foundations of industrial policy weaken. Inequality in outcomes erodes public trust, fuels resentment, and intensifies perceptions that government is either captured by elite interests or incapable of delivering broad-based progress.
These dynamics generate political backlash that undermines policy continuity. Industrial strategies such as reshoring require long planning horizons, sustained public support, and credible long-term commitments. When political fragility increases, policies become vulnerable to reversal, dilution, or abandonment. Firms, recognizing this instability, hesitate to make capital-intensive, long-duration investments, regardless of subsidies or short-term incentives.
China’s advantage in manufacturing, therefore, is not rooted primarily in regime type, but in policy durability. The ability to maintain consistent industrial priorities over time reduces uncertainty and anchors investment decisions. The American experience demonstrates that broadly shared economic gains are not optional or merely normative goals; they are strategic necessities. Without inclusive outcomes that reinforce political legitimacy and stability, reshoring efforts risk collapsing under their own social and political contradictions.
Competing With China While Abandoning the Foundations of American Power
A central risk in contemporary U.S.–China competition lies not in China’s strengths alone, but in America’s growing refusal to acknowledge the legitimacy of the very tools that once underpinned its own success. The United States increasingly seeks to compete with a state-coordinated rival while denying the necessity and authority of its public institutions. This contradiction weakens national strategy at its core: it demands results that historically depended on collective capacity, while politically discrediting the means required to produce them.
The consequences are structural rather than incidental. Industrial policy is underfunded and politically contested, public programs are sabotaged in the name of ideological purity, and reshoring initiatives lack coherence or durability. What emerges is a form of symbolic nationalism—assertive in rhetoric but thin in material capability—unable to mobilize the long-term investments, coordination, and institutional confidence that serious competition requires.
This dynamic reflects the institutional “forgetting” described by Hacker and Pierson: a loss of memory about how American power was actually built. Past economic and geopolitical successes rested on active public institutions, sustained state capacity, and pragmatic coordination between government and markets. Attempting to confront a state-capitalist competitor while rejecting those foundations is not merely inconsistent—it is strategically self-defeating.
Final Thoughts
Reshoring manufacturing is not a task that private initiative can achieve alone; it is inherently a public–private endeavor. Strategic economic and technological competition rewards capable states, not ideologies that oppose government intervention. To compete effectively, the United States must relearn its own history: throughout its rise to manufacturing leadership, it consistently relied on a competent and active government. The question is not whether America can rebuild its industrial base without strong government involvement—the answer, as history shows, is that it cannot.