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Notes -
US and Chinese national strategy
Here’s an article about DEI’s negative impact on the US CHIPS Act for reshoring semiconductors:
I note that this is an opinion piece. There are many other issues with the CHIPS Act, this rather dry article lays the blame on aggressive industry lobbying eating the original ‘boost US production’ idea and wearing it like a skinsuit:
Recently the Centre for Strategic Translations recently put out their take on a Chinese book “General Laws of the Rise of Great Powers”, a work designed to communicate to Chinese officials what the grand plan is, what China’s national strategy shall be and why.
Essentially, the book argues that while population size, land, resources and such are important for national strength, the most important thing is technology. Population and land get you into the game, (Iceland will never be a world power) tech lets you win it. With technology you get the military and economic power needed to rule the world.
All facets of statecraft are considered through the lens of how they can develop technology. The chapter goes through how some countries did well and did poorly: the Soviet bloc pursued imbalanced industrialization favouring heavy over light industry. The Great Leap Forward inhibited Chinese industrial development, damaging the agricultural base. Diplomacy affects how you industrialize and develop: Argentina foolishly moved towards the UK rather than the US in 1944 (I’ve never heard anyone else say this before), while West Germany and Japan had good relations with America and were able to quickly reindustrialize with their market access.
The authors regret that just when Song China was at the peak of science and industry, the Mongols showed up and wrecked their chance at early industrialization and world hegemony. Clearly technology used to be less of a key factor back in the day. But China’s time is coming! They conclude that the New China has stable foundations and has made prudent long-term investments in infrastructure and institutions. Unlike the silly Indian democrats, China has no need to pursue popular but foolish policies. Shortly they’ll achieve comprehensive scientific superiority to the US, as the huge Chinese population becomes highly educated. Replace ‘demographic dividend’ with ‘talent dividend’. That’s the plan anyway.
In another poll (scroll down to the graphs), Americans were far and away proudest about their country’s freedom. Wealth, military power, political system… all far behind freedom. What were the Chinese most proud about? Science and technology followed by economic development, then power and so on... See also the stats saying Chinese kids want to be astronauts, Americans want to be youtubers.
You can see a clear national strategy coming from the top down and widely embraced by the population, China wants to lead in all facets of science and technology. They’ve had great success in dominating whole sectors like solar panels, electric cars, 5G and drones. More electric vehicles are made in China than Europe, Japan and America combined.
In addition to science, there’s also ‘national rejuvenation’ which means annexing Taiwan and presumably becoming the world’s strongest superpower. A Chinese acquaintance told me about how the media was going on about the race to acquire ‘Zeus-shield’ (AEGIS-tier) destroyers, it reminded me a little of pre-1914 Dreadnought discourse: We want eight and we won’t wait! Those who are insufficiently nationalistic on the Chinese internet sometimes get cancelled and dogpiled by extremely online, hysterical women. They’re called ‘little pink’ and heaven help you if you besmirch the reputation of the People's Liberation Army - the censors will be knocking on your door. There’s a certain level of nationalist-jingoism in stuff like Wolf Warrior 2 and The Battle at Lake Changjin (China’s two highest grossing films) that might shame even neocons, were such a thing physically possible. I conclude that national rejuvenation is fairly popular too.
The Chinese ending caption:
I’m not saying that a focused national strategy is automatically great. The Soviets had a national strategy and failed because the strategy was based on wrong premises (that communism worked, for one). China’s system does encourage a certain amount of fraud, they accept that handing out billions to semiconductor development companies will produce a lot of waste and failures. That’s a price they pay for speed. However, it seems a much more effective national strategy than America’s.
If pressed, I’d define US national strategy as DEI, green economics and the Rules-Based International Order.
Firstly, the US’s national strategy is unpopular. A lot of people are unhappy about DEI conflicting with meritocracy, a race spoils programs has winners and losers within the country. Green economics are expensive and the rules-based order has many high-profile detractors – Trump for one. An unpopular strategy is harder to implement and it carries the risk of getting reversed. Strategic limbo is not a good place to be. What Americans actually want is freedom, yet US national strategy is going in the other direction.
Secondly, the US strategy seems much less workable. DEI saps efficiency but the rules-based order needs a powerful war machine to suppress two great powers. At the same time, green economics demands huge amounts of capital for investment. It has never been shown that a major economy can operate purely off renewable energy, green economics has a remarkable similarity to communism in its untested and transformative nature. While China invests heavily in renewables, they are also committed to coal power – China is building enormous amounts of power infrastructure generally as part of their commitment to industrialization and technology.
Charitably, there could be a synergy between DEI and the rules-based order in that privileging blacks will make them more likely to support the US in the global struggle. Even so, said synergy seems much weaker than the ‘technology -> economic/military power’ spiral that China’s committed to. African nations weren’t terribly powerful in the Cold War and they aren’t strong now. Wagner can casually coup three of them while mostly focused on Ukraine – Ukraine might be worth 50 or 100 Malis and Nigers.
Thirdly, the US strategy is unfocused and contradictory. There’s nobody at the top directing all the strands into a single, harmonious grand strategy. Thus the DEI strand can harm the Rules-Based Order and interfere with reshoring semiconductors. Greedy and unconstrained companies can consolidate or offshore their production in the first place, creating and maintaining these vulnerabilities. They can lobby so that the state won’t stop them doing share buybacks with their CHIPS funding. The American Affairs article suggests that recipient firms can even invest in Chinese manufacturing facilities under certain conditions, defeating the whole point of the operation! While the US might want to sabotage Chinese growth, they also want access to China’s huge solar industry.
There are also contradictions in China’s strategy – they admit the need to learn tech from overseas but national rejuvenation makes foreign countries anxious about China’s intentions. Nevertheless, the contradictions in US strategy seem greater to me. In the US you have many groups struggling for control, a multi-sided tug of war: hence the existence of this forum. China is not monolithic but the ruling faction enjoys incredible dominance over big tech, doves and liberals. After a significant state harassment campaign they shut down the Beijing LGBT centre.
Fourthly, US strategy seems more focused on wielding strength rather than accumulating it, spending rather than investing. Rhetorically, the strategy is justified with economic theory but those don’t seem to be the underlying reasons. For instance, globalization under the rules-based-order clearly hurt US power. American deindustrialization and offshoring of key industries was harmful and destabilizing. DEI cannot help but undermine meritocracy and efficiency. Recent research has undermined McKinsey studies on the [economic value of diversity](https://thefederalist.com/2024/04/03/new-study-shows-mckinseys-studies-promoting-dei-profitability-were-garbage/
In contrast, Chinese strategy revolves around cultivating strength. Technological power enables military strength, strength grants economic privileges. A victorious China could extract more resources from contested sea areas, Paperclip Taiwanese scientists, open up markets for their export industry.
Lest it seem that I’m slagging on the US excessively, my home country of Australia is just as bad, possibly worse. We dithered on procuring submarines for a decade, costing billions. Now we’re buying hypothetical Virginias that the US probably can’t even produce (the US submarine force is considered understrength already) after snubbing France and Japan. Our military is fundamentally unserious. Our national strategy is to prop up our economy selling iron and coal to China, even as we ally with America against China. Meanwhile we’re also playing the green/DEI game.
In my opinion, the US should follow a more defensive freedom-centric strategy. Dump DEI and green economics and reduce regulations to foster industry. Let people build things, fewer approvals and more construction. Less spying and less censorship. Lower taxes, lower spending. Defend allies without going off on overseas adventures. Instead of an expensive power-projection military, pivot towards a defensive military. More fortifications and missiles, fewer aircraft carriers. Instead of trying to penetrate defended airspace with stealth aircraft, try and defend airspace instead.
Now obviously this won’t happen. It takes a lot of luck, skill and organization to change course for a country like the US. Strategy isn’t coherently decided by a grand planner or a committee as in China, it’s a hodgepodge of vibes, class interests and traumas. Internal or external shocks are important – COVID prompted a global shift towards self-reliance.
Questions: Do you think national strategies are a good idea? Do you agree with my characterization of national strategy for either country?
I think a lot of this analysis is on the money, and the US doesn't realise its vulnerability. A lot of its policies are the kind of social engineering experiments you can get away with in a time of leisure and ease, but are unaffordable luxuries in a hostile world. But it's also worth noting some major US strengths -
(1) Attracting top talent. The US is still the world's number one destination for the smartest most talented people from across the planet. China doesn't offer a very compelling cultural package to anyone who isn't Chinese. Sure, you'll get your Filipino nurses and Indian janitors, but those people would much rather be working in the US. Being a global super-attractor for high-conscientiousness, high-g, high ambition individuals is an incredible strength.
(2) Economic security. If you're a billionaire, would you rather put your money in the US or China? Sure China might have less red tape to deal with, and fewer DEI requirements, but the government can also just seize your stuff or imprison you or kill you if you piss off the wrong person. Or they might suddenly decide to make your whole industry illegal, or put massive restrictions on it for ideological reasons. This is not the kind of climate that fosters daring investment decisions; the closest thing China had to an Elon Musk or Sam Altman figure was Jack Ma, and he has been aggressively slapped down by the CCP.
(3) Facilitating creative destruction. Related to the above, the US is a hub for social and technological change. Partly due to its size and partly due to its relatively laissez-faire governance, it's a haven for disruptive new technologies like crypto and AI. By contrast, I have low expectations of the ability of Chinese society as governed by the CCP to properly harness generative AI. Part of that is because China has some of the strictest regulations on AI in the world. But more broadly, AI is likely to cause massive destabilisation in job markets, information ecosystems, and education, and it seems unlikely to me that the Chinese government will just shrug its shoulders and let that happen.
(4) Market discipline. We talk about China's incredible high-speed rail network, but it's still possible this will turn out to be a boondoggle. Generally, the economics of high-speed rail suck, and it's not just Western inefficiency that holds it back - Singapore and Malaysia recently cancelled a line between Kuala Lumpur and Singapore because the numbers just didn't add up. By contrast, the economics of air travel are pretty straightforward, and the US has roughly 25 times the number of airports as China. To be clear, I'm not suggesting that the US is some kind of paragon of market efficiency, and it regularly throws taxpayers' money at stupid projects. But I think the combination of democracy and strong free-market foundations makes it harder for it to do this at the same scale and duration as China.
(5) Long-term economic trajectory. China's economics look vastly different now than they did 10 years ago. Back then, Goldman Sachs thought it likely that China would overtake the US in nominal GDP by the late 2020s. Now it's been pushed back to the late 2040s (crucially, well past the median projected date for AGI), and may indeed never happen if China's demographics don't improve. More broadly, China has yet to find an alternative solution to property development to be the second leg of its economy alongside manufacturing; it has far more property than it will ever use, and its attempt to use overseas construction projects as an alternative have had very mixed results (plus could never absorb the same amount of labour as domestic production). China's youth unemployment rate is high, and many of its young people are increasingly disaffected. Meanwhile, with the rise of "safeshoring" and "derisking", new FDI is flowing into alternative manufacturing hubs in India and Indonesia, which can increasingly compete with China on price. China seems to have fallen squarely into the middle income trap, at quite a low level, somewhere below Russia and above Egypt in GDP (PPP)/capita terms. None of this is to say that China's threat has receded - it is enormous, and even if its economy simply chugs along, it will remain a huge global producer. But it's not the all-powerful economic juggernaut it appeared a few years ago. By contrast, the US economy has performed very impressively, actually beating China in GDP/growth in Q3 last year (admittedly that one is a bit of an outlier).
(6) Friends and Allies. The US has lots of allies. Among its closest are three nuclear powers (UK, France, Israel), two permanent UN security council seats (UK, France), six of the world's largest economies (Germany, Japan, UK, France, Italy, Canada), and some of the world's largest raw mineral producers (Canada, Australia), and that's not even counting India and Indonesia, who the US is increasingly courting. It leads many of the world's most powerful international organisations like the World Bank and IMF, has a hugely outsize influence on culture, has military bases all around the world, and has no serious enemies on its own continent. By contrast, China's closest allies are Iran, North Korea, Myanmar, and Russia, who are as much liabilities as assets. It is on poor terms with several of its closest neighbours, notably Japan, South Korea, Taiwan, India, The Philippines, and Vietnam. It has very little cultural power and very few bases overseas.
So, I think it would be a mistake to throw up our hands in despair; the US has formidable structural advantages in any prolonged conflict with China. But none of this is a reason for complacency. Hopefully the Ukraine War has proven to be a shock to the system and will reinvigorate US ambitions.
All true, but I'd point out that these are the reasons why the US is currently on top. For the most part, it's where the US is coming from, not necessarily where it's headed. For many of those, the US is headed away from them. Like for (2), selective scrutiny of business dealings and of regulatory observance for being on the wrong side of politics is increasingly visible in the US; I don't know if it's more or less the case than before, but it's certainly more high profile. Musk might not be facing jail right now, but there's a large group of people, in some states a majority, who would electorally reward public officials for finding any reason to go after him. There's a large (and growing) group of people who believe Musk (or anyone) should not have been able to make that much money in the first place and that such wealth can only have come from some illegitimate or immoral acts, and while these people are not in power right now (because the elites don't believe it, they just use it for electoral purposes), it could only take one populist rising at the wrong time to ruin the idea that the US is a safe place to do business in.
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