The Full-Set Economy Begins with a Machine Tool Industrial Policy

The United States faces a growing gap between its technological ambitions and its productive base.

Major national goals from expanding energy infrastructure to strengthening defense readiness depend on physical manufacturing capacity that has eroded over several decades. 

After writing Machine Tool Mismanagement as an introduction to this sector, I wanted to go a little deeper for those interested in policy and education.

This article titled, Supply-chain delays, rising equipment prices threaten electricity grid should serve as a wake up for a return to a sane industrial policy.

Transformers are key to the electricity grid: They regulate voltage as power travels across the wires, increasing voltage for more efficient long-distance transmission, and decreasing it for medium-distance travel and again for delivery to buildings. The National Renewable Energy Laboratory estimates that the U.S. has about 60 million to 80 million high-voltage distribution transformers in service. More than half of them are over 33 years old – approaching or exceeding their expected lifespans.

Replacing them has become costly and time-consuming, with utilities reporting that transformers cost four to six times what they cost before 2022, in addition to the multiyear wait times.

The North American Electric Reliability Corporation says the lead time, the wait between placing an order and the product being delivered, hit roughly 120 weeks – more than two years – in 2024, with large power transformers taking as long as 210 weeks – up to four years. Even smaller transformers used to reduce voltage for distribution to homes and businesses are back-ordered as much as two years. Those delays have slowed both maintenance and new construction across much of the grid.

Transformer production depends heavily on a handful of materials and suppliers. The cores of most U.S transformers use grain-oriented electrical steel, a special type of steel with particular magnetic properties, which is made domestically only by Cleveland-Cliffs at plants in Pennsylvania and Ohio. Imports have long filled the gap: Roughly 80% of large transformers have historically been imported from Mexico, China and Thailand. 

Decades of financialization and globalization hollowed out the industrial base of the U.S. economy. What good is the stock market mutual fund if you can’t turn on the lights in your house? We are in this perilous state due to the mismanagement of our political leaders of both parties. Where is the industrial leadership?

Now let’s begin with the concept of a Full-Set Economy, which ultimately means sovereignty and the ability to stand, innovate and produce without dependency on foreign choke points. And machine tools sit at the center of this architecture yet rarely enter political and economic discussions. Machine tools are the first derivative of industrial capability, the tools that build all other tools.

Machine tools are the foundational equipment that shape, cut, grind, form, and measure the materials out of which all modern equipment is built. They produce aircraft parts, semiconductor components, electric motors, agricultural equipment, medical devices, turbines, rail systems and nearly every manufactured good. A nation’s ability to innovate in advanced industries rests on its ability to design and build the machines that make those products possible.

No major industrial power has reached global leadership without building a strong machine tool sector. The countries that hold the largest shares of global production—Germany, Japan, South Korea and China—did not achieve this position through laissez-faire policies. They used deliberate, coordinated strategies that blended public investment, private-sector expertise, technical education and long-term procurement. 

Their experiences offer a clear reminder that productive capacity is a result of institutional design, not an accident of market forces.

For most of the 20th century, the U.S. practiced its own version of guided development. It established federal armories to standardize interchangeable parts, created engineering universities through the Morrill Land-Grant Acts, built an arsenal during World War II that required large-scale machine tool investment and sustained research through agencies like the National Institute of Standards and Technology. 

Much of this history has faded from view, leaving the mistaken impression that the country never relied on industrial policy.

Today’s geopolitical and economic landscape requires a new examination of that legacy. Understanding how the machine tool sector is built—elsewhere and at home—is essential to strengthening domestic capacity in a disciplined and forward-looking way.

Machine Tool Case Studies for a Full-Set Economy

Before the current energy policies, Germany’s strength in precision manufacturing was supported by an ecosystem built through long-term coordination. Its universal banks and regional development banks provided stable financing for capital-intensive firms. Applied research institutes linked scientific advances to industrial needs. Apprenticeship programs supplied a continuous flow of skilled workers. The result was an industrial base capable of sustained productivity improvements and steady export performance.

Japan’s rise from the postwar period offers another example. Through the Ministry of International Trade and Industry, the government prioritized machine tools, robotics and precision manufacturing. Targeted credit, restricted imports and technology partnerships helped firms such as FANUC, Okuma and Mazak master advanced control systems and high-speed machining. These capabilities later supported Japan’s leadership in electronics, automotive manufacturing and industrial automation.

South Korea followed a similar path. During the 1970s, the government launched the Heavy and Chemical Industry drive, directing state credit and technical training into steel, shipbuilding and machinery. Domestic machine tool companies gained the scale and experience needed to compete globally, forming a core part of the country’s broader industrial development.

China’s approach is the most extensive contemporary example. Its five-year plans designate machine tools as a strategic sector. State-owned enterprises receive direct support for expansion, while provincial governments foster regional clusters. The government also invests in ultra-precision R&D, additive manufacturing and domestic CNC control systems. China has become the largest producer and consumer of machine tools in the world.

China explicitly pursues a full-set economy, to produce every critical industrial input domestically. Machine tools are at the top of its national strategy through:

• Made in China 2025

• National laboratories

• State-guided capital

• R&D megaprojects

• Export credits and supply chain mapping

The shared element across all four cases is coordination. Each country used finance, training, research and procurement to build long-term capability. Their policies reveal consistent patterns: the machine tool sector grows when nations commit to patient investment, develop a skilled workforce, support applied research and sustain customer demand through stable procurement.

By contrast, U.S. policy drifted toward dependency. Today more than 60 percent of U.S. machine-tool demand is met by foreign imports. Many precision components used in infrastructure and defense originate in foreign supply chains beyond our control. This is incompatible with national security, economic stability or democratic autonomy.

The U.S. Tradition of Directed Development

The United States built its early manufacturing system on similar principles outlined in the case studies. Federal armories at Springfield and Harper’s Ferry standardized machining methods and precision gauges during the 19th century. These techniques spread through the private sector, forming the basis of the American System of Manufactures. The Morrill Land-Grant Acts created colleges that trained engineers and machinists who staffed emerging industries.

The New Deal investments in energy infrastructure like the TVA and rural electrification propelled World War II mobilization as the federal government invested in new machine tool plants, expanded existing facilities and coordinated output through the War Production Board. 

Federal procurement sustained innovation in milling, turning, grinding, and gear machining. After the war, the Defense Department continued to serve as a major customer, supporting advances in aerospace, electronics and nuclear technology. 

The Defense Production Act of 1950 created additional authorities for targeted financing of essential industries. The National Science Foundation and the National Bureau of Standards (now NIST) expanded research into machining science, measurement and materials. Technical colleges and vocational programs developed pathways into skilled trades.

These policies helped make the United States the world leader in machine tools for several decades. The decline since the 1980s reflects a shift in policy priorities rather than a lack of capability. Without the political will for coordinated investment, training and procurement, the sector has contracted, leaving gaps in supply chains that have become more visible as global competition has intensified.

Missing Pillars: Labor, Trades and Public Credit

A machine-tool revival cannot happen through procurement incentives alone. The United States must rebuild the pillars that historically supported its industrial strength.

Machine-tool manufacturing depends on high-wage, high-skill labor for tool-and-die workers, machinists, patternmakers, CNC programmers and metrology specialists.

Labor unions, especially the machinist and metal trades are essential partners. Union training centers have historically produced the world’s best machinists.

Their involvement ensures:

• Skilled apprenticeship pathways

• High-quality training

• Stable career ladders

• Safety standards

• Wage floors that support middle-class communities

A strong tooling sector is inseparable from a strong industrial labor movement.

Trade Schools, Apprenticeships and Technical High Schools

America’s machine-tool golden age was supported by thousands of vocational instructors, technical colleges and high-school metal shops. These were the engines that produced a skilled industrial workforce.

Rebuilding the sector requires:

• Precision machining academies

• Modern CNC and metrology labs

• Dual-enrollment programs with industry

• Federally supported apprenticeships

• Veterans-to-machinist pathways

• Equipment grants to trade schools

Workforce renewal is the core of the strategy.

Public Credit for Productive Investment

Private finance, optimized for short-term returns and outsourcing, will not rebuild heavy productive capacity. A machine-tool revival requires public credit, modeled on the Reconstruction Finance Corporation, the Federal Financing Bank or modernizing the Small Business Administration’s 7(a) and 504 programs with long-term, low-cost, productive loans.

Public credit should support:

• Machine-tool startups and expansions

• Modernization and automation

• Domestic component reshoring

• Cluster-based R&D infrastructure

• Technical school capital equipment

• Small- and mid-size manufacturers lacking collateral

  
  

Public credit built the TVA, rural electrification, the interstate system and wartime industry. It can rebuild our tooling sector too. 

A Machine Tool Reconstruction Strategy

A modern industrial policy for machine tools would begin with a clear institutional structure. A National Machine Tool Agency could coordinate federal programs, pool technical expertise and support regional clusters. A complementary Machine Tool Development Bank could provide long-term loans for plant modernization, capacity expansion and advanced R&D.

Workforce development is equally important. Machining, toolmaking and metrology require rigorous hands-on training. Expanding apprenticeships, revitalizing technical high schools and updating the GI Bill to support industrial careers all would help rebuild the talent pipeline.

On the research front, the United States already has infrastructure through NIST, DOEs national labs and university engineering departments. Strengthening these institutions through targeted investment in ultra-precision machining, CNC controls, metrology and additive-subtractive hybrid systems would support innovation.

Federal procurement remains a powerful tool. Long-term contracts for critical machinery can stabilize demand and give firms the confidence to invest. Prioritizing domestic sourcing for defense, energy and infrastructure equipment would rebuild scale and capability.

Finally, improved data collection would support better planning. A national database tracking domestic machine tool inventory, supply chain dependencies, workforce needs and regional cluster performance would help policymakers and industry leaders identify gaps and measure progress.

These measures, taken together, would not recreate past systems but would update them for present challenges. The goal is a competitive and resilient industrial base that supports national objectives without relying on unstable or concentrated foreign supply chains.

Legislation With Intent

A Machine Tool Revitalization and Industrial Sovereignty Act should include:

1. Machine Tool Public Investment Fund

Long-term credit for domestic producers, modeled after past federal development banks.

2. Domestic Procurement Standards

Federal infrastructure, energy, and defense projects must use U.S.-made machine tools meeting defined domestic value thresholds.

3. Workforce Reconstruction

A national machinist apprenticeship program, equipment grants to trade schools, veterans training pathways.

4. Regional Machine-Tool Clusters

Federal support for Midwest, Northeast, Mountain West and Southern manufacturing hubs.

5. R&D and Innovation

National centers for metrology, additive machining, cutting tools and automation systems.

6. Supply Chain and Capability Mapping

A national database identifying gaps, dependencies and strategic priorities.

7. Export Promotion & Trade Enforcement

Support U.S. machine-tool exports while defending against dumping and subsidized foreign competition.

Walk The Path Forward

Rebuilding the machine tool sector is a recognition that modern economies depend on physical production and that certain capabilities are too important to leave to chance. 

The international record shows that countries that sustain strategic industries do so through aligned policies, steady investment and institutional continuity.

The United States has the resources, talent, and legacy to rebuild its machine tool sector. Doing so would strengthen national security, support high-quality jobs and provide the productive foundation required for long-term innovation. It would also help the country function as a full-set economy capable of meeting its own needs while contributing to global industry in a stable and responsible way.

A focused and coordinated strategy would address a structural weakness that undermines a wide range of national goals. As the country debates the future of its economic and industrial policies, the machine tool sector deserves a central place in the discussion.

Reconstruction of this foundational capability would not be a return to the past. It would position the United States for a more resilient and productive future, built on tools capable of shaping the next era of technological progress.

(Follow the conversation at https://politicaleconomyproject.substack.com.)