Even if the United States is able to outclass China in diplomacy, finance, and innovation, the contest between these two great powers is going to be close if the United States can't build anything in the physical world.
The strongest wind in China’s sails is the entrenched technological workforce that preserves process knowledge that I wrote about in Chapter 3 on tech power. Though 50 percent of China’s economy might be dysfunctional, 5 percent is doing superbly well (an approximation I borrow from Greg Ip at the Wall Street Journal).
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As China emulated America’s past successes, the US government got busy undermining its own strengths. A procedure-obsessed left conspired with a thoughtlessly destructive right to constrain the government. Neither the left nor the right allows the state to deliver essential goods expected by the public. The Biden administration may have ushered through historic bills on industrial policy, but executive agencies were so obsessed with procedural concerns that little building actually took place before voters reelected Donald Trump, who has threatened to cancel many of these projects. The United States is still a superpower that is able to outclass China on many dimensions. But it is also in the grips of an ineffectual state where people are increasingly concerned with safeguarding a comfortable way of life.
By the mid-2010s, Chinese companies figured out how to make all the German tools, as well as the entirety of the solar value chain. The plunge on solar power costs over the last decade has been driven less by breakthroughs in science— which is the United State’s strong suit— than by efficient production, which is China’s strength. The beneficiaries are not only the climate but also China’s national power.
Science matters of course. China remains weak in chips and aviation in part because these are much more scientifically complex industries than solar. Not every technology improves through iterative adjustments to manufacturing processes, but a great deal can follow its logic. When lots of companies are doing similar things, in a brutally competitive environment where profit margins are small, they establish communities of engineering practice like Shenzhen. These factories will never be as glamorous as the desirable branding represented by Apple or Tesla. Every day, millions of workers go to factories to build up technological process knowledge.
The engineering state still has many strengths. There is one thing I haven’t changed my mind about since 2017: I remain more confident than ever that China will become a technological leader in manufacturing industries.
Marxists like to reason through contradictions. What is the central contradiction facing China? I submit that we must reconcile two realities when we read the headlines. First, the rich, the creative, and the desperate have chosen to rùn from the economic and political gloom that pervades Xi’s third term. Second, the manufacturing sector continues to go from strength to strength in the mastery of electric vehicles, clean technology, and other advanced technologies.
How might they be reconciled? With the idea of the engineering state.
The control neurosis of the engineers is the fundamental limit to China’s power. But it will also push China to be an advanced manufacturer with dominant positions in many of the high-tech supply chains of the twenty-first century, with military capacity to match and a good chance to challenge US hegemony in Asia.
Sometimes I think that the United States’ tech competition with China— chaotic policymaking under Trump, porous implementation under Biden— has ended up in the worst of all worlds. These restrictions have scorched China’s most dynamic companies without killing them, which riles them up to break free of American restrictions.