With the United States lagging behind China in most of the most important technology areas, a new calculation is needed to align public and private sector interests with the common objective of regaining and sustaining competitive advantage.
Industry should take further steps to align national security interests with corporate investment objectives, and public-private efforts should shift the weight and strength of the U.S. market to developing countries and provide guardrails for strategically important emerging technologies.
To stay competitive, America must remain a magnet for the world's best talent, technology, and low-cost capital — all of which underpin our democratic economic and policy model. Injecting financial capital into innovative projects is the first step in technological advancement. This is a prerequisite for national security investment.
Major geopolitical conflicts are being fought, and increasingly won, on the battlefield of economic, financial and digital competitiveness. As the primary creators and managers of innovation and financial capital, the private sector and strategic forces that have established New York and Silicon Valley as centers of global influence and growth are playing a fundamental role.
The realities of our political and economic systems shape how we compete. The efficiencies of the authoritarian model allow China to steer industrial resources in line with its technological priorities over decades, challenging our own inefficiencies of short-term budget cycles, political turnover and conflict, and extensive procurement schedules.
But democratic governance and free markets provide unique advantages in terms of industrial scalability. America's global leadership and military power are built on economic and technological strength that is founded on democracy and human rights.
The idea of private companies looking beyond their direct business interests to support broader societal good is not new. Driven by regulatory pressures and growing social awareness, environmental, social, governance and impact investing are now firmly embedded in corporate practice and investments.
Five years ago, the Business Roundtable's historic declaration, signed by hundreds of CEOs, asserted that the purpose of business goes beyond making profits to building an economy that serves “all Americans. ” National security interests, alongside these objectives, should be recognized as a source of good and a focus for private investment.
Key areas of expected national security investment are critical emerging technologies that support U.S. economic and military competitiveness, as well as trust and safety technologies. Industry investments in guardrails for highly sophisticated and scalable technologies such as AI will safeguard trillions of dollars of promised economic growth while limiting risks such as the massive expansion of fraud and cybercrime.
In March, thousands of industry and academic leaders signed a letter calling for a “pause” on big AI experiments, an effort that could have had a much greater impact if it had committed to a surge in R&D investments in technology compliance and safety solutions to oversee and guide the growth of responsible AI.
Our national security investment strategy should also focus on investments in other developing countries and sectors that are critical to our interests, such as ports, energy resources, critical minerals, transportation infrastructure, and technology.
This could provide a significant alternative to large capital infusions from China, which often come with one-sided terms and corruption, in regions such as Africa, South America, Southeast Asia and the Pacific Islands. U.S. influence in these regions may be waning, but regional resentment over China's predatory practices opens the door to U.S. investment.
There is great potential and urgency for collaboration: the United States is reportedly lagging behind China in the most important technology areas, while China is leading the way in contributing to the growth of global research and development.
Looking back, advancements like the Model T and electricity took roughly 10 to 25 years to become widespread. Today, many breakthrough innovations are happening simultaneously, including advanced computing and manufacturing, energy sustainability, AI, fintech, and biotechnology. Industries and products that once took decades to evolve are now happening in periods closer to two years.
Our government, which funded the development of Silicon Valley more than 50 years ago, is now scaling up to meet this challenge with investments in semiconductors under the CHIPS Act, defense investments, reducing bureaucratic barriers to procurement through programs like In-Q-Tel and DIU, and insurance to attract capital to war-torn Ukraine.
Governments have many tools at their disposal to attract commercial capital investment and should consider new instruments, such as U.S. sovereign wealth funds and government-backed innovation bonds, that point to strategic national security investments where people can safely put their money.
Private equity firms and technology developers can find strategic guidance for national security product development and investment in government strategy documents, regulatory objectives, and agency research and development guidance.
As governments attempt to balance the carrots of subsidies and funding with the sticks of regulations that target adversaries' unfair trade practices and the acquisition of sensitive data, technology, and investments, government agencies have an opportunity to develop a clear, comprehensive vision for industry and competitiveness.
Drawing on lessons learned from the industrial mobilization of the early 1900s, U.S. industry and government agencies must step up to strengthen financial and technological competitiveness at this critical juncture.
The right talent is also critical to making these partnerships happen: governments need to build teams of industry leaders, a modern-day model inspired by Lt. Gen. William Knudsen, whose heroic efforts to combine business expertise with industrial mobilization saved the free world.
Government cannot act alone. We need industry to move with the pace and adaptability necessary to harness the transformative potential of technology to strengthen our national security.
This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.
Author Information
Carol House is Executive in Residence at Teranet Ventures, a Fellow at the Atlantic Council's Geopolitical Center, and an advisory member to financial regulatory agencies including the CFTC. She previously held leadership roles on the National Security Council, FinCEN, the Office of Management and Budget, and the U.S. House of Representatives.
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