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U.S. Senator Marco Rubio (R-FL) spoke on the past, present, and future of the United States’ relationship with China at a finance conference hosted by American Affairs. Watch the speech here and read an edited transcript below. 

 

 

I was born in 1971 and raised in the 80s. I was raised during the Cold War, when the whole world was defined by this battle between the Soviet Union and the United States — not so much commercially, but certainly geopolitically and ideologically. 

 

I’m not going to lie and say that I was reading National Review when I was in ninth or 10th grade, but I always was interested in politics, so I vividly recall when the Berlin Wall came down in 1989 and the Soviet Union collapsed shortly thereafter. It was like having your entire world turned upside down overnight. The world changed dramatically.

 

At that time, I was taking a course on the Soviet Union, and my professor’s entire academic career was built on this belief he had that the Soviet Union would eventually overtake the United States and dominate the world. So it’s not just the Soviet Union that was collapsing, but his entire academic career. 

 

The point is that that was a dramatic moment. Looking around the room, some of you may not have even been born at that time. Others perhaps lived it more vividly. But it was a period that led to triumphalism. 

 

“This is it. History is over. Everyone’s going to become a democratic, free-enterprise country. The economy is going to be global. There’ll be no barriers. Things are going to be made in the most efficient place. It’s going to mean cheaper goods. Yes, some jobs are going to vanish from America, but the people who once had those jobs will find new jobs that are even better than their old jobs, and they’ll have more money in their pocket. And by the way, no one’s ever going to go to war again.”

 

One of the refrains at the time was, “No two countries that have a McDonald’s have ever gone to war.” Well, Ukraine has a McDonald’s, and Russia still has some version of McDonald’s. That refrain appears really silly in hindsight, but that’s the way people viewed the world. 

 

It became a governing consensus in our country for the better part of three decades — a governing consensus that crossed the political spectrum and that everything was organized around. That was the political framework when I entered public service. Which brings us to the issue of China.

 

I still recall, post-Tiananmen Square, even into the early 90s, that China was largely known for thousands of people on bicycles up and down the street all the time. Well, it’s not the same China anymore. But the argument that very smart people would make at the time was that once the Chinese become rich and prosperous, they’ll become just like us. 

 

The theory was that they would become democratic, because people that have money in their pocket demand more of government. But the theory was also that they’ll adhere to the rules of the U.S.-led international system. “It’s okay to let them cheat now, because they’re a developing country. But once they develop, these rules will benefit them, and they’ll sign on to them.” 

 

Well, it didn’t actually work out that way. China developed by taking advantage of all of the benefits of the rules-based system, trade, and commerce, and by holding to none of its obligations. Our posture was not unlike the posture the United States took towards Europe after the Second World War. “Yes, they’re going to violate some trade protocols. But that’s okay, because it’s a lot better to let them cheat and rebuild from World War II than it is to have them fall behind the Iron Curtain or become victims of a communist internal revolution that overthrows them.” 

 

And then, suddenly, there was the realization that history did not end, human nature has not changed, and there are bad consequences to letting a neoliberal view of the world take hold.

 

There are three things that I want everybody to keep in mind. Number one is the world is rapidly moving towards a geopolitical arrangement split into the United States and its allies; China and junior partners like Russia and Iran, who don’t benefit from the Western-led order; and then dozens of developing countries that are saying: “We’re going to cut the best deal we can by leveraging each side against the other.”

 

This is already playing out in the Middle East and Africa and Latin America. One of the places I keep a very close eye on is Colombia. People say that Colombia’s new president is a leftist or a socialist. No doubt. But he’s also a leader who is saying: “I still want to sell flowers and coffee to the United States. But I also want to have a relationship with China and Russia, and I want to encourage their capital to come.” 

 

The second realignment that’s occurring is we have many, many people in this country who, either because they got the wrong degree or don’t have a degree at all, do not have the skills or the credentials necessary to acquire jobs that provide the pay and benefits and lifestyle that’s appealing. The industries that once provided that kind of work for people are no longer located in the United States.

 

That has political repercussions. The Democratic Party is increasingly becoming the party of affluent, urban or suburban, college-educated voters. The Republican Party is increasingly becoming the party of working-class voters, in some cases across ethnic and racial lines. Florida is a testament to it. Other places are as well. 

 

A lot of that is driven by the cultural issues that dominate both parties, but some of it’s driven by economics. The Trump message basically was: “You, the hardworking people in this country, got screwed, and you got screwed by [depending on the day, there was a different villain or culprit], and I’m the guy that doesn’t need any money from these people. I’ll go up there, and I’ll fight with these people.” 

 

I wish I had figured that out in 2016. I might have gotten elected. But that was the message Trump jumped on, and it’s a message that still defines a lot of our politics today.

 

Then we have this economic realignment. We woke up in the midst of a pandemic and realized, “Oh my God, you mean that we get that from there?” We realized that so many of the things that we depend on, from small components to big finished products, are made somewhere else far away from here, and they don’t just magically materialize. You have to actually make sure they’re being made, and they have to be shipped. When that’s disrupted at any level, you suddenly begin to feel it. 

 

That was because of a pandemic, which is unpredictable. But imagine the same predicament because of a geopolitical crisis. Imagine China saying, “We’re going to cut you off of this stuff, because it’s our leverage point against you in a conflict.”

 

In an economy where efficiency is the sole driver of investment, there is no thought given to what happens if a country decides to cut us off. The rationale is that they’re not going to cut us off because they’re making money. They have a vested interest in selling us things. But when that country happens to be China, everything is subservient to the state.

 

The Chinese openly invest in ventures around the world that are not profitable. They’re investing in things that make no market sense whatsoever. But they’re investing in these things for geopolitical purposes and market share. They’re willing to do that, because once they are the sole provider in the world, they can charge you whatever they want. 

 

What we’re confronting for the first time is a near-peer adversary, not just in military or geopolitical influence, but in commercial, industrial, and economic power. So where does it lead us today? 

 

Well, it doesn’t lead us to abandon capitalism. The answer to this is not, “Let’s just become like China.” Because for all of the threats that China poses, we also can’t ignore the fact that they have some internal problems that they’re going to face. I’m not just talking about demographics, which are very real. I’m talking about the fact that you can only invest in things that don’t make financial sense for so long before you get into financial trouble.

 

That said, the Chinese have one advantage, and that is that they have the capability to do 10-, 15- and 20-year plans. In America, we’re just trying to get out of the year with the government funded. In China, Xi makes a decision, the Party endorses it, and they move in that direction. If it’s the wrong decision, that’s bad for them, but it allows them to move very quickly.

 

But the answer is not to become China. The answer is to reorient the strength of the market and capitalism in a direction that happens to be both good for America and also good for the private sector. That’s what we’re grappling with right now. And it leads us to a couple of conclusions. 

 

The first is the belief that the market does not always support the common good. Challenge number one that policymakers face is what happens when the most efficient outcome is not in our national interest. It requires us to accept that America is a nation, not an economy. 

 

We already make decisions that prioritize the national interest over the market. People can pretend we don’t, but we do. We protect shipbuilding in America, because we want to make sure we don’t lose the capacity to build ships. We make sure that all of our defense procurement happens through American companies, because we don’t want Vietnam building the F-22 or the F-35.

 

But in other sectors of the economy, we have not made that decision, because we view those sectors’ products as purely commercial. The problem is we’re entering an era where a growing number of products are going to be of both commercial and geopolitical value. 

 

We all are well aware of semiconductors. We’ve all by now heard plenty about baseline pharmaceuticals. But it extends beyond that. For example, our ability to feed the people of our country — do we not want to be a nation that has an agricultural capacity, even if it’s cheaper to import food from other countries? Do we not want to be a nation that has the capability to lead in precision medicine, which is going to revolutionize medical care? 

 

Are we not a country that has a national interest in protecting the data of our society? Because that data is the most valuable commodity on this planet. And with that data, you can build all kinds of predictive models. That doesn’t just give your private sector an advantage in sales, it gives your military and your intelligence agencies a huge advantage in trying to socially engineer you in a way that positions them for victory.

 

There are a lot of places where we need to confront the reality that sometimes the most efficient outcome is not in our national interest. So what is the answer to those challenges? The answer is not that America should suddenly begin to buy up or own a bunch of industries. We should begin by identifying the critical capabilities that we have to have — industrial, technological and otherwise — that we’re going to need for the 21st century. 

 

Included in that analysis shouldn’t be just the things that we’re going to need to win a war against China or prevent one or remain a powerful country. We also have a vested national interest in ensuring that we have industries that create good, paying jobs for Americans, because the society will not be held together without good, paying jobs.

 

There’s a dignity attached to work, and when you remove it, it’s corrosive. I don’t care how many government checks you mail out to try to compensate for it. The impact that the lack and the disappearance of jobs has on communities is destructive and corrosive. It leads to social upheaval. It leads to fractures. 

 

And history has shown that when those disruptions happen, two groups of people step into the void — Far Left-wingers that argue capitalism fails and this is the time for the state to take over everything, and ethnic nationalists that argue that the answer to our problems is all these people that aren’t from here, and that we have to go after them. Both are destructive, both are dangerous, both need to be rejected. 

 

So our national interest is served by being able to lead in industries that are critical for our national and economic security, and also industries that create good, paying jobs for Americans. There’s a lot to unpack there, and it’s something we just don’t have a lot of experience doing, because people on my side of the aisle — in many cases, myself included — are allergic to the idea of the government heavily partnering with the private sector to lead in certain fields.

 

It’s a healthy allergy to have, because I work in a town where you could see somebody hiring the right lobbyist and raising the right amount of money to have their industry defined as a critical industry or to have their company defined as the sole provider of a certain good. You don’t want to create the sort of government-controlled monopoly or oligopoly that concentrates power in the hands of a few, because it hurts us. 

 

The lack of competition, the lack of innovation, and the lack of new entrants into a space — the consolidation of expertise in the hands of one company — ultimately becomes very dangerous. We see that in communications and technology today. But there are certain things that will not happen unless the government steps forward and, at a minimum, creates a demand for it.

 

Rare earth minerals, which really aren’t that rare, will never be mined or exploited in the United States, because the Chinese will never allow it. If it’s a pure market decision, no matter what we price it at, they will undercut us. We have to confront that reality. And in the process, we also have to accept the fact that our interest is not served by simply having American company names on the door. 

 

We’ve learned that just because a multinational company has its headquarters in the United States, it is not necessarily an American company. That does not mean these are evil people. It just means that, for the board of directors or the CEO of a publicly traded company, their job is to maximize the return on investment of their investors. That’s their fiduciary obligation.

 

But I have a fiduciary obligation to act in the best interests of the United States of America. Simply put, the challenge that we face today is how we can find an outcome that’s good for America but also positive for the shareholders of these companies. That is difficult to do for a couple of reasons.

 

The first is large corporations have invested very heavily in facilities in China and abroad. If you’re a long-term futurist at these companies, you realize: “This is really going to suck in about 15 years. But I won’t be around in 15 years. Right now, if we close these factories, this company is going to suffer. And by the way, my investors come from all over the world.” 

 

Is it the job of the government to step in and force companies to make these decisions? No, but the job of a public policymaker is to ensure that we don’t have any laws or any tax policies that incentivize or encourage or reward decisions that are bad for the future of our country. And then there are things that government can play a role in, though we have to be very careful about how we do it.

 

One is investment in basic research. A lot of the things that are commercialized in this country were the byproducts of the space program and the Department of Defense. Many of the things we rely on and we’ve led the world on are products that were created for the purpose of putting a man on the moon or exploring space or defending our country. So there are benefits to federal involvement. 

 

But it comes with caveats. Theoretically, should the United States be involved in making sure that we have a domestic semiconductor capability? Absolutely. But we shouldn’t do it in a way that doesn’t protect the intellectual property created with your tax dollars. If we know the Chinese are already stealing billions of dollars a year of intellectual property, should we pour billions of dollars more into the same system? Or should we create additional guardrails to protect our intellectual property? 

 

Of course, many of the people who do this research don’t want those restrictions. So you end up with a CHIPS bill that you actually were a part of starting but doesn’t do enough for security. Five years from now, stories will come out about how the Chinese stole five billion dollars’ worth of taxpayer-funded research, and people are going to say, “You guys voted for the bill.” I voted against it, because they’re not going to say that about me.

 

It’s not going to be easy to navigate this, but it is a really critical decision that we’re making. At the core of it is a fundamental question, and that is, do we want America to remain the world’s most influential and powerful country? We have no desire for conquering land. On the contrary, in my lifetime, there has never been a time when Americans are more allergic to intervening anywhere on this planet than they are right now. 

 

But right now there are only two countries in the world that have any chance of being the most powerful and influential nation in the 21st century. One is our country — not perfect, but better than anyone else’s — and the other is a communist regime that locks and welds its own people inside their homes during COVID, that takes Uyghur Muslims into camps and rips their children away from them, forces them to work, strips them of their names and their identities.

 

I’m not Nostradamus here, but if that regime becomes the most powerful country in the world, the world is going to not be a very good place. If it were Belgium or Luxembourg that was rising to the challenge, I would still want America to be more powerful, but I wouldn’t be scared. But these guys, they don’t respect their own people. Why would they respect anyone else’s? 

 

The Chinese are already controlling people outside their own borders. It happens every day when TikTok and ByteDance suck up billions of dollars’ worth of data from teenagers —  the people that are going to run this country in less than two decades. Remember the 20 year plan? If an American company operating in China was collecting that data, they would have shut it down so fast it would never have even gotten off the ground.

 

It happens in entertainment circles. You can’t produce a movie with a Chinese government villain. The NBA will kick you out of an arena if you wear a T-shirt in the front row that says “No slave labor” or “Hands off Hong Kong” or “Taiwan is not China” — not to mention you fire you if you’re a GM and actually express yourself on Twitter. 

 

These trends will only continue to accelerate. The Chinese don’t need to invade us to be able to shape the direction, not just of how China is covered by the media, but how it’s portrayed culturally. The economic implications are very significant as well. And so we have to think about these things and begin to act on them, because we’re already behind the curve. 

 

On the one hand, as financiers, you have an obligation, both legal and fiduciary, to invest money in a way that returns to your investors. Frankly, you won’t be in business very long if you can’t deliver that. But on the other hand, much of that is not going to matter in 10 or 15 years. In fact, we very well may be funding things that lead to the economic and geopolitical demise of the nation that we call home. 

 

We don’t want to fall into the trap of thinking the government should take everything over, because that never leads to positive outcomes. And there are plenty of people that believe that government should be more engaged and involved in controlling our economy that would use this as an opportunity to pursue their agendas.

 

But we also can’t continue with the failed consensus of 30 years that the market is going to figure it out. The companies that China launches onto the global stage only exist because the government of China allows them to exist. These are not independent companies. They’re backed by the state. And it is impossible to compete against them when only we are operating in the free market and they are not. It is like trying to play a basketball game where you have three players and the other team has six.

 

There are certain things that we have to have a domestic capacity for. And if it’s not going to be a domestic capacity, then it’s going to have to be an allied capacity. There are some things that may never return to the United States, but I’d much rather buy them from somewhere in the Western Hemisphere than China. 

 

I understand why factories aren’t being opened in Haiti right now. It’s a place with chaotic government. I understand some of the rule-of-law challenges in places like Honduras and Guatemala. But just imagine for a moment if some of these countries had the economic activity that is occurring in Southeast Asia for the last 20 years. We’d have a lot fewer people at the southern border. We’d have a lot more prosperity and stability in the region. 

 

If an industry is not going to come back to America, then we want to encourage it to go to places that have additional geopolitical benefits. There’s an opportunity here for some pretty important partnerships with advanced countries — for instance, on alternatives to Huawei and 5G with South Korea, with Japan, with the Europeans and others.

 

The equivalent of NATO in the 21st century cannot be a pure military alliance. It has to be a military-commercial-industrial alliance, in which countries agree, not just to partner, but to protect one another’s intellectual property, so that it can’t be stolen and reverse-engineered and used against them by an adversary.

 

But those consortiums will never come together unless the United States leads the effort. And the United States cannot lead the effort until there is a reframing of how we view all of this. Because we have a political process that doesn’t reward long-term thinking.

 

It presents a unique challenge to finance that really wasn’t before investors 10 or 15 years ago. How do we funnel and focus capitalism in a way that doesn’t just allow us to make a profit and grow our economy, but also serves our national interests — militarily, technologically, commercially, industrially, and in the creation of good, paying jobs for our people?

 

It’s an enormous challenge as well as a big, long-term commitment. I think it will require new alignments in American politics that don’t exist today. It’s an exciting thing to be a part of, but it’s going to take a lot of work and a lot of creativity and a lot of thought. We don’t even have the vocabulary for it yet, not to menti+on the public policy framework.

 

One good news item is that elections, particularly in my party, have brought to Washington a new generation of leaders, who see this, maybe not in exactly the same way that I do, but in a way doesn’t neatly align with the purist 20th century notions that the 21st century has proven are now archaic and out-of-step. 

 

There’s a lot of work to be done. I’m excited that all of you are focused on it, because, looking around the room, you’re a lot younger than the people I work with. All of you, in your professional careers, are going to be dealing with this for the next 20 or 30 years. To the extent that innovation is emerging from the financial sector as an answer for policymakers, you should not underestimate how important that is. 

 

As policymakers, we fly up to Washington every Monday or Tuesday. We go from committee meeting to committee meeting. We take votes on issues. We go back to our states. We come back the next week. We do it all over again. It is not a process that’s conducive to big picture thinking, so it requires policymakers that care about those objectives, and it really requires people outside of government who spend the time creating potential solutions, whether it’s in a specific industry or writ large. That’s the way it’s always worked in our country. 

 

Today, what people want to focus on is what’s going to be covered on the news tomorrow morning, not what’s going to define our country for the next century. I hope that I’ve encouraged some of you to continue thinking about this. At the end of the day, when they write the book about the 21st century, there’ll be a couple of chapters in there about Vladimir Putin. I hope there aren’t too many chapters in there about Iran or North Korea, because they won’t be good chapters. But the majority of that book is going to be about the relationship between the United States and China. 

 

It may be about a status quo power that declined while a new power emerged and reoriented the world. It may be about those powers reaching some level of equilibrium, buying time for the people of China to reform their own system to something that does not look like a Western European model but is still different from what it is today. Or it may be about how China collapsed under the weight of its own decisions, and the United States ushered in another American century. 

 

Only two of those three stories are acceptable. The second one is the ideal outcome, but it’s one we don’t have direct control over. Either way, that’s what that book is going to be about, the relationship between the United States and China. And it has the potential for a catastrophic conclusion. We need to care, because it’s the only thing that matters. And it’ll matter a lot more 10 years from now. 

 

We will probably not finish this decade without the Chinese Communist Party attempting to take Taiwan. That may not mean an invasion. It could mean Beijing’s ideal outcome — the Taiwanese become convinced that America is neither capable nor willing to go to war to defend a small island far from their homeland. “You might as well accept that if we invade, help isn’t coming, so cut the best deal you