I spend a lot of time reading about manufacturing and its evolution, which means I end up repeatedly reading about the times and places where radical changes in manufacturing were taking place: Britain in the late 18th century, the US in the late 19th and early 20th centuries, Japan in the second half of the 20th century, and (to a lesser extent) China today.
Very interesting! You could do a follow up piece on the parallels in the political realm — international colonialism/expansionism in the US in the 20th century and what China is attempting here in the 21st… Will require a bit more speculation but would be a useful exercise.
That point about how the United States had few (if any) prominent scientists in the late 19th century, but then went on to dominate in the next few decades, is a really interesting one that I hadn’t thought about as a comparison. But it seems absolutely relevant.
I think of the Michelson-Morley experiment as another important bit of American science in the late 19th century (not to mention Franklin’s work on electricity in the 18th century) but yeah, not much.
According to his biography, Master of Light, he was a brilliant experimentalist. He did a lot of high precision work on diffraction gratings, measuring the speed of light and, of course, his ether detection experiment. However, as physics became more theoretical and mathematical late in the century, he admitted that he was of the old school.
Gibbs, in contrast, did serious theoretical work in thermodynamics and other areas.
Friedrich List wrote the playbook, and it has worked for just about every developed, industrialized nation. The problems come in when the phase change nears completion and political changes are needed to grow demand. In Europe, this process was violent since the old aristocracy fought hard. In the US, there was violence, but some things like a written constitution and an elected government were already in place. I'm curious to see if China can continue its growth with making the requisite political changes. China doesn't push up and coming oligarchs out of windows like the Russians, but they have their own way of imposing party discipline.
The playbook works well until you need to throw it the hell away and pivot, and that's gonna be a bear. A decades-long slog. Japan, South Korea, and Taiwan are still struggling with it and Germany only made it partway through before giving up entirely.
We had a family friend staying with us in the States last week and my MIL made an offhand comment about how much more convenient it'll be for her to get back to their hometown (county seat of 300k or so) once the new HSR station opens up.
He and I spent the next hour commiserating about how the town still only has one good and two bad hospitals with a single MRI a piece, the schools are terrible except for one each at the elementary, middle, and high school level, basically all the kids leave to find work unless their family owns a decent-sized local business, most businesses are pivoting to feed export markets because domestic private/consumer demand is down 40-50% vs 2019, the county government is starting to gouge private firms for revenue as VAT and land sale receipts dry up, and the elderly are completely falling through the cracks... and yet they're getting an HSR line with a station 30 miles to the south, EV charging stations all over the place, a bunch of still largely-empty manufacturing parks that the local government is literally giving away ten-year leases on for free (inclusive of electricity), and the county has extended zero-interest loans to property developers to keep projects going and break ground on new ones even though there are as many as 15,000 units unsold from projects currently building.
This isn't a major urban center with pent-up demand for housing if there were hukou liberalization and price declines, it's a 6th or 7th-tier county-level city, in the bits of inland China which people keep telling me have seen a manufacturing and wage-growth boom since 2017. I... struggle to see it.
In the US the Progressive Era and the New Deal Era, along with the direct effects of the Great Depression, all delivered body blows to overinvestment in physical infrastructure and manufacturing of which the median American couldn't afford to enjoy the fruits. It took decades, basically from the panics of the 1890's through to 1945, to fully turn the corner. We ended up with an economic model with significant wage compression, that largely properly priced credit (the exceptions were aimed mostly at subsidizing middle- and working-class citizens), and provided sufficient investment in public amenities and services that ordinary people could be comfortable spending more freely to enjoy the fruits of their labor.
And that was with a flawed-but-functioning democracy.
This is going to be painful. As long as China can export goods to avoid a deflationary crisis, a la the Great Depression, that would force both market and policy to rebalance costs with wages, there's very little reason why the model will change because there's little incentive to the policymaking apparatus to take the risks reform entails.
It's weird. We seem to have solved the problem of production. The hard problem seems to be balancing it with the demand side. A lot of countries relied on export markets so that supply could grow and scale with the hope that domestic demand would follow.
I keep trying to imagine a steady state world with a roughly fixed population and sufficient supply and demand. My math background keeps suggesting eigenvectors, and its not hard to find a mathematical solution that has a stable worker-dependent ratio. It is much harder to solve the political and social problems. For example, supply side efficiency benefits from centralization, but there are good solid reasons for wanting regional import substitution.
One of the last jobs I would ever want would be ruler of China. Riding a bareback tiger does not sound all that attractive.
The sinews of industrial modernity and the good life it should make possible are all there, which is the thing that aggravates me so much. Occasional wumao propaganda notwithstanding, relatively few are yet *living* it, and those who are are filled with fear that it might screech to a halt. Even China's own policymakers and economists are well aware of this; no one credible claims that a Chinese factory worker is as well-compensated as their German counterpart, let alone American, nor that they have the same access to the building blocks of a decent life.
There is no reason for China to be manufacturing more high-speed rail sets and fewer MRIs, building more empty apartments and fewer hospitals, training more process engineers and fewer doctors, except that that's what already occurring, and policymakers are very, very afraid of the dislocations in employment markets and education systems that would come with allowing or encouraging a shift.
The lion's share of China's problems come down to fear in the hearts of those who are riding the tiger bareback, as you said. They are the ones who make decisions about what to emphasize and what to ignore, and ultimately those decisions dictate the terms of the credit markets, public expenditures, and subsidies, downstream of which her market mechanisms operate, struggling to allocate resources in a way that breathes life into her citizenry's hopes and dreams.
If they'd reached that broad upland plain after the hard climb, China would be producing very different goods, consuming 95% of them, and demanding the produce of other nations in exchange for that which it exports, not struggling to consume 80% of an industrial output disproportionately focused on capital formation and exchanging the rest for foreign IOUs just to keep people employed.
And in turn, the rest of the world would have a great many more things China wants to buy.
The next several decades will be dominated by the story of how or if China turns that corner, and whether or not she and America stumble into a war while that plays out.
I wonder whether China will follow the path of the U.S. in the 21st century by moving from a manufacturing-based economy to a service-based one. If so, which country will be the next China in terms of shifting from agriculture to manufacturing, transforming farmers into urban citizens? India, perhaps?
"Studies of China’s scientific progress often use metrics like number of papers published or number of highly cited publications, where it often ranks much higher, but it seems notable that it does noticeably worse on the hardest-to-fake metrics like prizes."
This is not exactly correct, while many chinese researchers do involve themselves in these acts it still does not disprove the fact that they have made significant strides in scientific thinking and innovation. These metrics do indicate the actual progress that has been made and cannot be simply attributed to faking. But they have become advanced and innovative only in applied sciences (some good examples are renewable energy, solar panels, pharma etc) and still lag behind Europe and the US in "core" sciences (ex. Physics, mathematics, biology, human psychology, economics, computer science, etc) that eventually lands these prizes.
What's the youth unemployment rate at now? Is it still over 50%? They shut down counting it because it got so high. I have a Chinese friend in Beijing. I promise you it is not all roses over there
1. "In the 1870s, the US grew somewhere between 4.5 and 6.7 percent annually in real terms, one of the fastest growth rates ever recorded”. Under embargoes and exclusions that make today's look feeble, Mao grew the economy 6.5% for 25 years and left the country with no debt.
2. "While today China is still behind the US in GDP (without adjusting for purchasing power, at least). China's productive GDP is 2x-3x America's. Everyone uses PPP and so should we.
3. "China, similarly, has not necessarily been a leader in scientific progress”. Chinese researchers lead the world in every science and their institutions occupy seven of the top ten institutions, compared to one in America.
4. " China built its success on the back of inexpensive labor, and it remains a middle income country”. Mebbe, but the average (median) Chinese family has four times the net worth of the average American family. As Carl Icahn observed, “Net worth of median households is basically nothing. We have major problems in our economy.”
Great article. I spent the month of September in China, and I’ve never driven through so many miles of bored tunnels. I worked on the bored tunnel under Seattle, which took too many years and billions of dollars. I asked one of the leading bored tunnel engineers in the world about this, and he said that China learned how to bore tunnels in the early 2000s and now controls almost all of the market. You might want to do an article about tunnel boring. I wish we could bore tunnels like China.
Very interesting! You could do a follow up piece on the parallels in the political realm — international colonialism/expansionism in the US in the 20th century and what China is attempting here in the 21st… Will require a bit more speculation but would be a useful exercise.
Might be interesting to see how the Monroe doctrine compares to China’s ambitions right now.
I'm American, I live in Wuhan, Hubei, PRC. This is spot on commentary, and it's accelerating.
This is great
That point about how the United States had few (if any) prominent scientists in the late 19th century, but then went on to dominate in the next few decades, is a really interesting one that I hadn’t thought about as a comparison. But it seems absolutely relevant.
I think there was Gibbs, and that was it.
I think of the Michelson-Morley experiment as another important bit of American science in the late 19th century (not to mention Franklin’s work on electricity in the 18th century) but yeah, not much.
According to his biography, Master of Light, he was a brilliant experimentalist. He did a lot of high precision work on diffraction gratings, measuring the speed of light and, of course, his ether detection experiment. However, as physics became more theoretical and mathematical late in the century, he admitted that he was of the old school.
Gibbs, in contrast, did serious theoretical work in thermodynamics and other areas.
Friedrich List wrote the playbook, and it has worked for just about every developed, industrialized nation. The problems come in when the phase change nears completion and political changes are needed to grow demand. In Europe, this process was violent since the old aristocracy fought hard. In the US, there was violence, but some things like a written constitution and an elected government were already in place. I'm curious to see if China can continue its growth with making the requisite political changes. China doesn't push up and coming oligarchs out of windows like the Russians, but they have their own way of imposing party discipline.
The playbook works well until you need to throw it the hell away and pivot, and that's gonna be a bear. A decades-long slog. Japan, South Korea, and Taiwan are still struggling with it and Germany only made it partway through before giving up entirely.
We had a family friend staying with us in the States last week and my MIL made an offhand comment about how much more convenient it'll be for her to get back to their hometown (county seat of 300k or so) once the new HSR station opens up.
He and I spent the next hour commiserating about how the town still only has one good and two bad hospitals with a single MRI a piece, the schools are terrible except for one each at the elementary, middle, and high school level, basically all the kids leave to find work unless their family owns a decent-sized local business, most businesses are pivoting to feed export markets because domestic private/consumer demand is down 40-50% vs 2019, the county government is starting to gouge private firms for revenue as VAT and land sale receipts dry up, and the elderly are completely falling through the cracks... and yet they're getting an HSR line with a station 30 miles to the south, EV charging stations all over the place, a bunch of still largely-empty manufacturing parks that the local government is literally giving away ten-year leases on for free (inclusive of electricity), and the county has extended zero-interest loans to property developers to keep projects going and break ground on new ones even though there are as many as 15,000 units unsold from projects currently building.
This isn't a major urban center with pent-up demand for housing if there were hukou liberalization and price declines, it's a 6th or 7th-tier county-level city, in the bits of inland China which people keep telling me have seen a manufacturing and wage-growth boom since 2017. I... struggle to see it.
In the US the Progressive Era and the New Deal Era, along with the direct effects of the Great Depression, all delivered body blows to overinvestment in physical infrastructure and manufacturing of which the median American couldn't afford to enjoy the fruits. It took decades, basically from the panics of the 1890's through to 1945, to fully turn the corner. We ended up with an economic model with significant wage compression, that largely properly priced credit (the exceptions were aimed mostly at subsidizing middle- and working-class citizens), and provided sufficient investment in public amenities and services that ordinary people could be comfortable spending more freely to enjoy the fruits of their labor.
And that was with a flawed-but-functioning democracy.
This is going to be painful. As long as China can export goods to avoid a deflationary crisis, a la the Great Depression, that would force both market and policy to rebalance costs with wages, there's very little reason why the model will change because there's little incentive to the policymaking apparatus to take the risks reform entails.
Thanks for the additional insight.
It's weird. We seem to have solved the problem of production. The hard problem seems to be balancing it with the demand side. A lot of countries relied on export markets so that supply could grow and scale with the hope that domestic demand would follow.
I keep trying to imagine a steady state world with a roughly fixed population and sufficient supply and demand. My math background keeps suggesting eigenvectors, and its not hard to find a mathematical solution that has a stable worker-dependent ratio. It is much harder to solve the political and social problems. For example, supply side efficiency benefits from centralization, but there are good solid reasons for wanting regional import substitution.
One of the last jobs I would ever want would be ruler of China. Riding a bareback tiger does not sound all that attractive.
The sinews of industrial modernity and the good life it should make possible are all there, which is the thing that aggravates me so much. Occasional wumao propaganda notwithstanding, relatively few are yet *living* it, and those who are are filled with fear that it might screech to a halt. Even China's own policymakers and economists are well aware of this; no one credible claims that a Chinese factory worker is as well-compensated as their German counterpart, let alone American, nor that they have the same access to the building blocks of a decent life.
There is no reason for China to be manufacturing more high-speed rail sets and fewer MRIs, building more empty apartments and fewer hospitals, training more process engineers and fewer doctors, except that that's what already occurring, and policymakers are very, very afraid of the dislocations in employment markets and education systems that would come with allowing or encouraging a shift.
The lion's share of China's problems come down to fear in the hearts of those who are riding the tiger bareback, as you said. They are the ones who make decisions about what to emphasize and what to ignore, and ultimately those decisions dictate the terms of the credit markets, public expenditures, and subsidies, downstream of which her market mechanisms operate, struggling to allocate resources in a way that breathes life into her citizenry's hopes and dreams.
If they'd reached that broad upland plain after the hard climb, China would be producing very different goods, consuming 95% of them, and demanding the produce of other nations in exchange for that which it exports, not struggling to consume 80% of an industrial output disproportionately focused on capital formation and exchanging the rest for foreign IOUs just to keep people employed.
And in turn, the rest of the world would have a great many more things China wants to buy.
The next several decades will be dominated by the story of how or if China turns that corner, and whether or not she and America stumble into a war while that plays out.
I wonder whether China will follow the path of the U.S. in the 21st century by moving from a manufacturing-based economy to a service-based one. If so, which country will be the next China in terms of shifting from agriculture to manufacturing, transforming farmers into urban citizens? India, perhaps?
book-worthy research. thanks.
would be interested to see these figures on per-capita basis, vice absolute.
growth of course, is sigmoidal over long terms, not geometric. Where are we on the S curve? Where China?
Of course, the trusty "good times make weak men" trope has some relevance. Will cultural rot set in faster Chez China, than at home, or vice versa?
"Studies of China’s scientific progress often use metrics like number of papers published or number of highly cited publications, where it often ranks much higher, but it seems notable that it does noticeably worse on the hardest-to-fake metrics like prizes."
This is not exactly correct, while many chinese researchers do involve themselves in these acts it still does not disprove the fact that they have made significant strides in scientific thinking and innovation. These metrics do indicate the actual progress that has been made and cannot be simply attributed to faking. But they have become advanced and innovative only in applied sciences (some good examples are renewable energy, solar panels, pharma etc) and still lag behind Europe and the US in "core" sciences (ex. Physics, mathematics, biology, human psychology, economics, computer science, etc) that eventually lands these prizes.
But otherwise, it's a really great article. Thanks for the insight
What's the youth unemployment rate at now? Is it still over 50%? They shut down counting it because it got so high. I have a Chinese friend in Beijing. I promise you it is not all roses over there
It’s probably useful to think about this as talking about China from 1980 to 2019!
wonderful piece!!!! the private capital in the USA during the gilded age explains the current reluctance to tax capital imo....
A wonderful overview! Many thanks. Some quibbles:
1. "In the 1870s, the US grew somewhere between 4.5 and 6.7 percent annually in real terms, one of the fastest growth rates ever recorded”. Under embargoes and exclusions that make today's look feeble, Mao grew the economy 6.5% for 25 years and left the country with no debt.
2. "While today China is still behind the US in GDP (without adjusting for purchasing power, at least). China's productive GDP is 2x-3x America's. Everyone uses PPP and so should we.
3. "China, similarly, has not necessarily been a leader in scientific progress”. Chinese researchers lead the world in every science and their institutions occupy seven of the top ten institutions, compared to one in America.
4. " China built its success on the back of inexpensive labor, and it remains a middle income country”. Mebbe, but the average (median) Chinese family has four times the net worth of the average American family. As Carl Icahn observed, “Net worth of median households is basically nothing. We have major problems in our economy.”
This reads like propaganda and is riddled with half truths and unsubstantiated assertions.
I'm just so delighted by the Bread Givers reference. I read it again and again as a kid and I seldom run into anyone else familiar with it.
Great article. I spent the month of September in China, and I’ve never driven through so many miles of bored tunnels. I worked on the bored tunnel under Seattle, which took too many years and billions of dollars. I asked one of the leading bored tunnel engineers in the world about this, and he said that China learned how to bore tunnels in the early 2000s and now controls almost all of the market. You might want to do an article about tunnel boring. I wish we could bore tunnels like China.
Do you think China is about to enter a period to similar to America's 1970s as it peaks in energy consumption?