China vs America: Dan Wang and his sceptics

Anyone with more than a passing interest in China and its economic rivalry with America will have read Dan Wang’s Breakneck: China’s Quest to Engineer the Future, seen his newsletter, or absorbed one of the many reviews. The interest now is in the reaction of the commentariat.

Wang’s key framing is that China is run by engineers while America is run by lawyers. China does things that engineers are good at, such as infrastructure and manufacturing, while America’s lawyerly society produces over-governance, emphasising individual rights ahead of societal needs. China produces world-class infrastructure, even in its poorest regions. America’s richest cities struggle with century-old subways and decrepit airports.

Wang is not a starry-eyed promoter of China’s success. The engineers who build bridges and high-speed trains also want to control society ("engineering the soul"). He is scathingly critical of China’s one-child policy, calling it "rural terrorism...invading women’s bodies". Beijing is the "unmasked celebration of state power". China and America have much in common as "exceptionalist societies" sharing the same dynamic entrepreneurial spirit, both with a penchant for grand projects. America’s pluralistic society, with its greater freedoms, is his preferred home.

So, what do his critics find to dispute?

The engineer/lawyer framing is a neat heuristic device, but doesn’t stand up to scrutiny. Lawyerly America, in earlier times, achieved mighty economic goals, including infrastructure (FDR’s Tennessee Valley Authority; Eisenhower’s national highways), and pulled back only when visions rode roughshod over public opinion, as with Robert Moses’ re-engineering of New York.

Wang’s American critics, however, want something stronger than a mere re-framing of the argument. They have no room for two exceptionalist powers.

Tyler Cowen’s wide-ranging conversation provides the best foil. The Interpreter has already noted Cowen’s scepticism about China’s economic success. Cowen concedes nothing. America’s infrastructure deficiencies are minor irritations. Most Americans live happily in the suburbs, connected by cars, with planes for longer distances. Healthcare takes up almost 20% of GDP but it provides world-beating care for the top-half and produced the best vaccines for the many. America’s entrepreneurial dynamism is still on display in Silicon Valley and with Elon Musk’s Starships. America’s lead in AI will be decisive. China may be ahead in renewable energy, but America will get energy aplenty from fossil fuels.

For New York Times conservative commentator Ross Douthat, "America has outlasted challenges before and China has remarkable strengths but also serious weaknesses". He explores, perhaps with a hint of wistful hope, the idea that discontent (eg. the Covid lockdown) might produce some kind of political revolution, which Wang quickly dismisses. Perhaps China’s success is just catch-up, which will run out of opportunities for imitation? Perhaps Trump’s trade war will hobble China’s growth? Will the legacy of the one-child policy leave China, in the longer term, a society of ghost cities and monuments to engineering excess? The decisive argument for Douthat is America’s abiding attraction for migrants: not just those seeking higher education and high-tech jobs, but the 25,000 who traversed the Darien Gap in 2023 to enter America via the Mexican border.

All this still leaves Wang’s basic argument intact: that America has much to learn from China in manufacturing, and from Europe, Japan and Singapore in infrastructure.

Wang shares Jake Sullivan’s concerns that American defence production is so hollowed out that munitions would run out in a few weeks of conflict. It can produce few warships (the Virginia-class submarines are just one example) or commercial vessels. America’s auto industry is now specialising in yesterday’s ICE technology, leaving the world market to China, already accounting for two-thirds of global production capacity. America was once the hotbed of applied technology research (notably Bell Laboratories), fostered by DARPA funding. No longer. Trump has squeezed research funding and the universities. America’s apex industrial leaders — Boeing, Intel, General Electric — now struggle to stay afloat, unloved by capital markets, with funding flowing instead to the latest crypto or AI bubble.

Wang argues that America should define a core of manufacturing capabilities and relearn process skills, the shop-floor tweaks and tricks that allowed Japan to overtake the US auto industry and China to master iPhone production. This will not restore manufacturing jobs (65,000 have been lost since Trump’s "Liberation Day") because this type of manufacturing is highly mechanised. But it would reduce America’s vulnerability to the sort of supply-chain vulnerabilities experienced during Covid.

Wang focuses on the lawyers, but Wall Street also employs America’s best and brightest, exploiting trivial price discrepancies, trading Bitcoin and engineering competition-sapping mergers. This lawyer/finance governance overlay helps the US avoid China’s predilection for over-investment, but it also makes American companies risk-averse. It takes the determination of an Elon Musk to bust through regulatory constraints, and an investment bubble to get AI fired up. America is ahead on AI but it is running out of electricity to fuel the data centres. The regulatory strangleholds identified in the "Abundance agenda" are seen everywhere, but addressed nowhere.

Comparisons of America with China are inevitably tendentious. China is huge but poor, and at a different stage of development. Yet for Wang, China’s manufacturing domince makes it a match for America. It is not a threat as a global power or to America’s domination of the Western hemisphere, but will be the regional power in Asia, displacing America and exercising suzerainty over mainland Southeast Asia, with Japan and South Korea as wary well-armed neighbours.

Does this matter for America? Cowen envisages an America based on services such as health, entertainment, finance and education, propelled by AI dominance and the exceptionalism still found in America’s elites. For Wang, the shortfall in manufacturing capacity creates too great a vulnerability, as shown by China’s rare-earths embargo.