Myths, Prescriptions, and Observations

David P. Goldman, AKA “Spengler”, has a good post at American Mind I wanted to call to your attention. In it he lists five myths about China:

1. America is making China rich, and can weaken it by reducing imports, investment, and so forth.
2. China depends on stolen American technology.
3. China faces demographic collapse.
4. China wants to take over Taiwan because it is led by an expansionist Marxist-Leninist party that hates and fears democracy.
5. We can deter China by shifting military forces to Asia and adding to conventional capabilities.

For the details read the whole thing. He also makes five prescriptions:

• We need to fund federal R&D at the Reagan level, that is, an additional 1% of GDP, or roughly $2 trillion over ten years;
• We need a radical revision of tax and regulatory policy to favor capital-intensive manufacturing;
• We need selective subsidies for mission-critical industries;
• We need to shift in educational priorities toward engineering and hard science; and
• We need to shift defense priorities away from legacy systems toward innovation, including space-based missile defense, directed-energy weapons, cyber war, and drone swarms.

He also makes some solid observations. For example:

Six trillion dollars of stimulus bought Chinese rather than American goods, because our creaky supply chains can’t meet a surge in demand.

which aligns with observations I have been making since long before the pandemic. We don’t make enough consumer goods domestically for consumption subsidies, e.g. “stimulus packages”, to have the effect our political leaders seem to think they will have. They are more likely to stimulate the Chinese economy than they are ours. Except for Jeff Bezos, the Wall family, and a few others.

I don’t agree with everything he says and I think there are some omissions. For example:

There are two possible remedies for a declining work force: import young workers, or export capital to where young workers live. China’s Belt and Road Initiative plans to assimilate more than a billion people from the Global South into China’s economic sphere.

Neither of those strategies will revitalize the American economy. The immigrants we will attract in the greatest numbers can contribute to agriculture and manual labor. That will continue our transition to a peasant society. That will be more like an early 20th century America than a 21st century America.

Also, burn this into your brain. Production engineering follows production; design engineering inevitably follows production engineering; junior engineers today become senior engineers tomorrow. It isn’t enough to “shift educational priorities”. The reason more kids aren’t studying engineering in the U. S. is because engineering is hard, not everybody can do it, and you must be able to recoup the investment made in time and money over the course of a stable career. Seeing the jobs you might have sought

Another point about R&D investment. The best strategy is to establish a long-term objective and create a bipartisan commitment to fund that objective. Example: the moon race. The objective must be feasible, agreed upon, and funded. Basic research is good but a mass engineering project is better. A “war on cancer” won’t do for two reasons. The first reason is that particular “war” has been going on for 50 years and the second reason is that we have reached the point of decreasing returns to scale.