I’ve read Gabriel Wildau’s piece at Bloomberg urging the United States to emulate China’s industrial policy a couple of times now and I still don’t understand what that would actually look like. Maybe it’s because I understand China’s success differently than he. I see what has transpired over the last 40 years is China’s imitating the Soviet Union’s actions of 80 years ago, moving relatively unproductive labor resources from agriculture to manufacturing. Unlike the Soviet Union before it China has managed to accomplish that without reducing agricultural production. China has now reached the end of that process and, predictably, its economic growth has faltered just as the Soviet Union’s did. It’s now flailing trying to keep the party going.
Can you see the United States implementing the web of state ownership of businesses, subsidizing underdeveloped sectors, forced migration, and import barriers that prevails in the United States? Me, neither. Not to mention that in the United States subsidizing industry inevitably means giving money to politically connected insiders.
This passage from the piece did catch my eye:
China’s recent launch of a second state-funded semiconductor development fund valued at $29 billion, following an earlier $20 billion fund for the same purpose, prompted a former U.S. assistant trade representative to complain that “China is doubling-down on the state-led practices and policies that led to the trade war.†But China’s strategy resembles what Mariana Mazzucato, economist at University College London, calls the “entrepreneurial state.†Her 2013 book chronicles how state investments were crucial in fostering industries that the U.S. still leads, such as IT, biotech and fracking.
When you combine state capitalism with nationalism and China’s notable racism, isn’t that the dictionary definition of fascism? Is Mr. Wildau recommending fascism as the solution to the U. S.’s economic woes?
Black humor (apologies if it comes off as insensitive).
Italy, Germany, and Japan’s fascists did revive their economies in the 30’s by state spending and preparing their armies for war. Then they became economic miracles from 1950 to 1990 after the war they started destroyed everything in those countries and they “enjoyed†rebuilding growth.
This post is intended to be along the lines of a cautionary tale. Be careful what you wish for.
Appears to my untrained eye, in China, business is captive to Government, while here, verse visa. Business may be subject to regulation, but they have some say in it, as well as some say as to who is in Government. They rent their ears. They’ll dance with whomever is elected, as long as they retain their property rights, physical and intellectual.
What will tell the tale is how much Google, (or Alphabet) will give in to the Chinese government in collecting data and developing infrastructure with no such guarantees. They will also be asked to relinquish control of their own objectives and ideals.
If they find success bowing to the regime, then maybe we’ll try it here.
Emulating the Chinese method of economic growth would require the ability to steal wholesale trade secrets and intellectual property from other nations. Exactly which nations would Wildau suggest we steal from?
To paraphrase Orwell, there are some ideas so absurd only an intellectual would propose them.
Additionally, although we think of China as a huge country and in some respects it is, in one respect it is relatively tiny. The number of “mainstream consumers” is relatively small—about the same number as in the Czech Republic. Even if Chinese consumers were at liberty to buy whatever products they cared to, it isn’t worthwhile for U. S. companies to tailor products for the Chinese market. There aren’t enough “mainstream consumers”.
“. I see what has transpired over the last 40 years is China’s imitating the Soviet Union’s actions of 80 years ago, ”
Just slightly OT so I waited, but I have never thought of Russia’s industrialization as very successful. Nothing like China has accomplished. I certainly dont think of Russia as a manufacturing giant. I tend to think of what they have done as mostly catch up growth, though it has gone beyond that.
Steve
In the 30s it was and there were any number of newspaper and magazine articles talking about the “Soviet miracle” in pretty much the same terms as have been used with respect to China. It wasn’t completely unrealistic. WWII was terribly hard on the Soviet Union, both in terms of material and human damage. They lost much of a whole generation of men.