Tuesday, January 21, 2020

Competing against China

New York Times columnist David Leonhardt has just returned from an extended trip to China. By his lights, China is doing rather well. For all of the American anguish about how repressive and totalitarian China is, the truth on the ground looks rather different.

And Leonhardt notes that China is catching up with America because America has been stagnating. In fact, he claims that America has been stagnating for the past decade or so. Being blind to his own prejudice, Leonhardt blames it on President Trump. He offers not a single word about the feckless leadership of the Obama presidency, about its obsession with strangling business in regulation, in undermining patriotism and in waging war on thought crimes.

One is certainly willing to consider that President Trump, who takes the competition with China more seriously than have any of his predecessors, might have made some mistakes.

But, if the argument is designed first and foremost to blind us to the Obama administration’s failures, it discredits itself. If Leonhardt recommends more policies like those in the Obama presidency, those that produced the stagnation, then he is blind to his own bias.

So, how does China look to Leonhardt:

The maturing of the economy felt particularly striking to me as I compared my two visits. Although growth has slowed, from about 10 percent a year at the decade’s start to less than 7 percent now, part of that slowdown was inevitable, as the country became less poor. The encouraging news for China is that, as Neil Shen, the founding partner of the venture capital firm Sequoia Capital China, says, “the quality of the growth has been much improved.”

When I talked with Chinese leaders and business executives in 2010, they spent a lot of time lamenting two problems — a lack of innovative companies and a low level of consumer spending. I didn’t hear those laments this time.

As we have reported on occasion, China is now becoming a technology innovator. While it has certainly stolen American intellectual property in the past, we are facing a day when it does not need to do so. That is surely an important fact.

He continues:

Today, China is home to perhaps the world’s hottest social media app, TikTok, which is more popular than Facebook among American teenagers, according to a recent survey. Other innovators are likely to follow, because China’s digital economy now has some advantages that not even the American version does.

Instead of being fragmented among dozens of apps — one for Starbucks, others for Amazon and airlines and so on — much of Chinese commerce happens within one of two digital networks — WeChat Pay and Alipay. People open one app and can pay for almost anything, in stores or online. The simplicity encourages further retail innovations, and Facebook and Google are trying to mimic this model. It feels like the future of commerce.

China is also less dependent on exports, because its growing consumer economy creates a giant market for its goods:

It’s also part of a larger advance in China’s consumer economy. Consumer spending now accounts for about 39 percent of China’s G.D.P., up from a low of 35 percent in 2010. The word “consumerism” may have negative connotations in the United States, where such spending accounts for about 68 percent of G.D.P., but it means something quite different in recently poor countries. It signifies a shift away from an economy dominated by sustenance farming and smokestacks and toward the comforts of modern life.

Leonhardt describes today’s Nanjing:

One of my stops was Nanjing, China’s 12th-largest city, best known to outsiders as the site of a civilian massacre by Japanese troops in the 1930s. That history makes the city a symbol of the humiliations China suffered for much of the 20th century. Those humiliations continue to shape pop culture; a remarkable share of contemporary television shows cast the Japanese military as villains.

More quietly, though, Nanjing embodies the growth of a middle-class consumer culture. The city’s subway system opened only 14 years ago and now transports one billion riders a year. It’s clean and bustling, and the trips I took each cost either 2 or 3 yuan (about 28 cents or 42 cents). Nationwide, almost 30 other cities have opened subways since Nanjing did, giving China the world’s largest subway ridership.

Nanjing is also one of the stops on the high-speed train line that opened between Shanghai and Beijing in 2011. Nanjing is roughly as far from Beijing as New York is from Cincinnati, and the express train takes less than four hours.

This infrastructure makes all kinds of economic activity easier — commuting to work, taking vacations or simply going shopping. On a recent Saturday night at Nanjing’s seven-story Deji Plaza mall, the restaurants were packed, as were the aisles at Uniqlo, even at 9 p.m.

China has also made great progress in scientific research and develoopment.

Beyond the economy, China has also made stark progress in other areas over the past decade. It is close to becoming the world’s leading funder of scientific research and development, thanks to soaring increases in China and meager ones in the United States. The quality of American science remains higher, but the gap has narrowed.

China’s military has also become stronger. China is now the largest trading partner not only of Japan, South Korea, Thailand, Vietnam and Indonesia but also of Australia, Brazil and South Africa. And start-up companies have become dynamic enough to lure a growing number of Chinese graduates of American universities to return home, Matthew Slaughter, the dean of Dartmouth’s Tuck School of Business, told me — shortly after he had attended an alumni event in Beijing.

And China has also gained pride in achievement. Apparently, the Chinese are not choking on unearned praise, as in the American obsession with self-esteem:

China’s leaders, in turn, have started shedding the humility that had characterized much of their foreign policy since Deng. At a recent conference I attended on the outskirts of Beijing, with Bill Gates, Henry Kissinger, Henry Paulson and many American officials and executives, the swagger of the Chinese officials was notable. Some of the Americans delivered blunt criticism of China’s economic policy. Chinese officials largely ignored the complaints.

“We Chinese people know very well what we have, what we want and what it takes,” Wang Qishan, China’s vice president, told the conference, the New Economy Forum. “We have the confidence, patience and resolve to realize our goal of great national rejuvenation.”

Finally, Leonhardt, true to his leftist ideology, says that American can only advance by reducing inequality and investing in the future. By the latter, he obviously means more government spending:

One summarized the steps that China needed to take in the years ahead to become stronger — increasing consumer spending, strengthening its scientific sector, becoming more innovative and so on. The other listed the steps the United States should take to stay strong — like reducing inequality and investing more in the future. The contrast, between progress and stagnation, was clear. I think the rational conclusion is to be worried about the future of American power.

America, he explains, has become dysfunctional:

Incomes, wealth and life expectancy in the United States have stagnated for much of the population, contributing to an angry national mood and exacerbating political divisions. The result is a semidysfunctional government that is eroding many of the country’s largest advantages over China. The United States is skimping on the investments like education, science and infrastructure that helped make it the world’s great power. It is also forfeiting the soft power that has been a core part of American pre-eminence.

Why does it not cross his mind that the infrastructure spending bill is being held up by Congressional Democrats, like Nancy Pelosi? As for investing in science and education, we have long since abandoned the search for academic excellence in favor of diversity quotas.

At the least, let’s not blame it on Trump.


David Foster said...

"Instead of being fragmented among dozens of apps — one for Starbucks, others for Amazon and airlines and so on — much of Chinese commerce happens within one of two digital networks — WeChat Pay and Alipay. People open one app and can pay for almost anything, in stores or online. The simplicity encourages further retail innovations, and Facebook and Google are trying to mimic this model. It feels like the future of commerce."

So, if the computer industry had continued to be dominated by IBM to the extent it was prior to 1980, and the networking industry had been totally dominated by AT&T, then we would have had more technology innovation than we in fact did?

trigger warning said...

Mr D. Foster: We regret to inform you that your question incurred -5.0 Social Credits.
--- Wha Chu Upto, Social Engineer

UbuMaccabee said...

"The other listed the steps the United States should take to stay strong — like reducing inequality and investing more in the future."

We can't even speak clearly about the most important things. First, we have to parse the threadbare bromides our elites offer, and next, we have to dissect it to remove the destructive propaganda it contains.

Inequality will be magnified if we are to compete effectively with China. Inequality means we are doing it right--provided the inequality is meritocratic. If that means there are no blacks in every STEM program in the US, so be it. We have the advantage, but we won't use it because we care so much about feelings, and not so much about results.

"Investing in the future" is right up there with "diversity is our strength" for insipid slogans. What he means is more idiotic and wasteful government spending toward either no goal, or worse, a stupid goal that does not pay any real dividends. Anything we spend on "climate change" I would put into this category, but the list of bad investments in our future is almost endless. Look at the steel pylons in Fresno to see our engineering prowess. Walk the streets of SF and tell me we can compete with China; we can't even keep shit off the sidewalks. We'll drop billions on windmills but nothing on thorium nuclear reactors. Bad decisions as far as the eye can see.

Our problem is our leadership, media, and our institutions are malfunctioning, and they will get us killed unless we begin swapping them out for functional models. If we continue to allow people like David Leonhardt, the reporter, to have a perch of influence at places like the NYT, then we are screwed. David Leonhardt the jazz pianist is fine, continue on, we need more of that.

David, I have plenty of extra credits to give you. I'm close friends with Ho Lee Fuk, the airline tycoon, and he's awash in benefits.

Sam L. said...

TikTok, I suspect, is much like Siri and Alexa, which I call as "the Stasi agents you are paying to spy on you".