“Work harder and have less fun”? The US already has one of the longest workweeks among more industrialized nations. (What is life about if not having fun?) I think you made a gross generalization of the West, as bad as many westerners make of China. The decline of US competitiveness I believe is due to other factors (short-term profits, financialization of the economy, monopolies crushing innovation, etc). Otherwise, a very interesting article, and I appreciate your point of view!
Just because China “saved” Tesla doesn’t mean they didn’t have Tesla over a barrel and take full advantage of it.
And just because China was employing a “catfish” strategy doesn’t mean they weren’t ALSO forcing technology transfers that ultimately, by your own admission, led the domestic industry to outcompete Tesla.
Many different things can be true at the same time. You are genuinely insightful, but you also keep insisting that only either nation’s narrative can be true. Both can have aspects of truth and falsehood at the same time.
Valid points. Different things are true at the same time. I see my role here of adding the things (many of which are very important) that are absent from mainstream discourses.
Great post, and I complete agree about the competition between the people being determinate of future outcomes.
I'm not 100% sure if the west will take up the challenge of Chinese manufacturing. I think the culture of having Work Life Balance, 4 day work weeks and other worker centric policies is too ingrained (not to say that it's bad). It's a shame that the highest paid roles and the most competitive people in the west seems to be in finance and not in engineering.
The question for me is whether the west is willing to suffer relative economic decline as a trade off for better working conditions (assuming the current comparative advantage of resources, education, services and financial products stay in the west).
For me it's a classic case of you can't have your cake and eat it too. Either the consumer has to pay more due to tariffs, the populace needs to work harder to be more productive or the consumer has to put up with worse products.
Far too many economic commentators on China tend to be biased against China and at the same time have little direct contact or experience in China - a toxic combination which throws their analysis off kilter.
Worse is when these commentators talk about new technology without proper grasp of new technology - and instead assume you can simply steal new technology at scale in short order.
Yes, China has achieved unprecedented progress in new tech - not by stealing - but by hard work, intelligence, innovation, coordinated policy and above all by fomenting the most competitive industrial ecosystem in modern history. This has been well praised by Bill Gates, Elon Musk and other industry leaders.
It also doesn't hurt that that China has a high national IQ and smart leaders - who got there thru, yes, competition and own accomplishments.
Else, how would you explain that China leads the world in: STEM graduates, science and tech patents, scientific publications, the largest and most advanced high speed rail, green power power generation, UHVDC power grid, national data center network, heavy ship building etc etc in addition to building the world's largest and best Battery, EV and 5G Telecom industries.
China, like much of the Global South, believe in win-win and cooperation - as illustrated by the Belt and Road Initiative, BRICS, trade agreement etc.
China eschews win-lose, suppression, vetos, hegemony and ridiculous sanctions.
Remember, China leads in Trust in Government, Trust in Media and Trust in Business. Did China steal these measures too?
I agree there are a lot of internal things to examine at Tesla for why they are faltering, before getting into any forced technology transfer and other controversial issues between USA and China. I actually recommend https://bradmunchen.substack.com/ who tracks and makes compelling cases for shorting Tesla in the long term.
While Musk puts on a polite/guai face for Chinese authorities his behavior is the complete opposite in US. In fact he has become so erratic and involved in far right politics, conspiracies, and social destabilization it has actually turned me off from getting a Tesla for now.
Also the fact Tesla has scrapped Model 2, Musk divides his time between Twitter/Tesla/SpaceX and other things probably doesn't help. Now they are trying to go all in on AI (instead of just making a solid, affordable EV) just highlights how disorganized Musk's planning skill is.
I hadn't made the connection how much Shanghai factory actually bailed out Tesla during their struggles.
I forgot to mention decision to fire > 10% of Tesla workforce and the day after trying to reinstate Musk's 56$ billion Tesla compensation to cover the Twitter loan interest : )
His ego is just ridiculous at this point.
On a more serious note, since you have a lot of Tesla driving experience, have you spent time in the new wave of Chinese EVs? How do the stack up to a Tesla in your opinion?
I never drove one but I got into many of those during ride-hailing, and I like to chat with drivers about their experience with their vehicles, mileage and stuff. What I gather is that those vehicles are indeed very very competitive. Bearing in mind though most EVs used for ride-hailing are not even at the top their game. So the concerns for Tesla's future, not just in China but the whole world is real. Musk will have to do something really revolutionary and innovative again, really fast.
I have seen this manufacturing play out in the apparel space. We had an apparel factory in the US for decades before finally moving it to China. The factory floor workers here want to work hard and do overtime. We actually limit overtime sometimes because we see a rise in quality issues and a dip in efficiency. Folks in the US bemoan the flight of factory jobs but many Americans don’t want to do those jobs. Honestly, more than a few Chinese folks don’t want to do those jobs either but there’s just more Chinese folks working their way into a middle class living that they’re willing to do it.
I would argue that the IRA saved Tesla, specifically by strongly incentivizing all of the other auto brands in America to adopt the infrastructure that Tesla is built on. So while Tesla cars may dwindle in sales, the U.S. charging infrastructure will essentially be a Tesla-charging system.
Honestly Tesla should be doing a lot better if huge chunks of potential consumers are not actively boycotting the vehicles because the don't like Elon Musk. That anti-Musk sentiment is weighing on the company, highlighted by 10% layoffs last week and, much like SpaceX, I don't think this company would be much without serious help from the U.S. government.
I get that China is worth about 40% of its sales numbers, but I think they would have aggressively pulled back from their international market if the US sales started to seriously falter.
Anyway, I agree that China is not killing Tesla, but I also don't think it's the reason for Teslas sort of surge.
Very informative as usual! Yes, introducing an high end foreign competitior to jolt the domestic market while also improving the industries parts and services providers ecosystem was an apt move indeed. It never ceases to amaze me how current day China (it seems the center may be making moves that run the risk of changing this, lets hope not) and the old American Republic which was gone from all governance structures at all levels* by 1961, are the mirror images of each other. There are no other systems in the history of the world like them and only they are like each other and their physical forms are the inverse of each other. They are each others mirror image.
*The sole exception is the governance of the city of Chicago, which managed to hang on until the 80s or 90s
It's also amazing to me the parallel between Americans pouring milk during the height of the Great Depression and China's empty property and over-competitive, zero-profit sectors of today.
Yes, and its amazing how *IF* China makes the same error that the Old Republic made, it will be for such similar reasons, highlighted by the milk-property example you noted. The happening of a problem, which was in some ways inevitable, and not being able to resist the urge to solve it by thinking that the answer lies in "systems thinking" that holds that the whole nation must be parts of a fully integrated and coordinated truly seamless single system. I truly hate to engage in the annoyance of long quotes but I just can't resist here, in case any one is curious about the history of the America's transition from the Old Republic to what it is today. The below two passages are from Theodore J. Lowi, perhaps one of the few political scientists the USA's prestige universities has produced since the 1800s that are of any value.
"The culmination should have come in the 1930s when the collapse of the economy produced an urgency for bold action that justified the vaguest and sloppiest legislative drafting. There was a popular clamor for legislation not merely in the first hundred days but in the first thousand days. An overwhelming majority in Congress was ready to commit legiscide to provide the president with the means to restore faith that America could control its own fate. But if the emergency explained the New Deal's leap into great scope coupled with limitless abstraction, there should have been a change toward better legislation once the emergency was over. But that is not what happened. Public policies after World War II indicate that developments in the positive, liberal state were driven not by social/economic necessity but by ideology. There had been some systems thinking prior to the 1960s. For example, the Interstate Commerce Commission (ICC) under the Transportation Act of 1920 was expected to take into account the entire rail system as it determined its regulatory provisions. Some thinking of a similar nature was partly the obligation of the Federal Communications Commission (FCC) with regard to the new industry of radio, and similar thinking was to be expected of the Civil Aeronautics Board (CAB) and the Federal Aviation Administration (FAA) in regard to the fledgling industry of commercial airline service. But the sector by sector scale of those earlier efforts gave only the barest intimation of what was to come. Systems thinking drifted fairly quickly from the academic disciplines in the 1940s into the minds and hearts of public policy makers in the 1960s. From that point on, virtually all new programs defined the jurisdiction of the relevant agency as an entire system"
"The transition to the Second Republic began in earnest during the 1930s. A Second Republic might well have come into being during the Roosevelt era if domestic developments had not been cut off by World War II. The least significant characteristic of the New Deal period was the increasing size of the national government, measured in budgetary terms. Domestic expenditure increased from 0.8 percent in 1929 to 4.9 percent in 1939, but the factor of far greater significance is the new functions of the federal government. Subsidy policies continued to be enacted by Congress and implemented by the executive; in fact, growth in subsidies accounts for a large portion of the budgetary growth, and many of the new agencies were set up to administer subsidy programs. However, the federal government was adopting two entirely new kinds of functions, new at least for the federal government in the United States. These functions were regulation and redistribution. In adopting a large number of regulatory policies, the federal government had discovered that there was national as well as state police power. As for redistribution, conventional labels refer to fiscal and monetary policies, but these bland labels mask the true significance and the novelty for the federal government of this function. Regulatory and redistributive policies are quite different from each other, yet they share one very important characteristic which also distinguishes the two of them from almost everything the federal government was doing prior to the 1930s: These two new functions involved the federal government in direct and coercive use of power over citizens. Washington policymakers could no longer hide from themselves the fact that policy and coercion have common roots. There were, of course, precedents for both of these functions, ranging back to such significant examples of regulatory policy as the Interstate Commerce Act of 1887 and the Sherman Antitrust Act of 1890, and to such important redistributive policies as the early income-tax laws and the adoption of the Federal Reserve System. However, the New Deal is distinguishable because of the number of such policies adopted and because of the establishment of the constitutional right of the federal government to exercise police power and to manipulate the economy. These additions of function were accompanied by equally fundamental changes in institutional relationships and in public philosophy. In fact, the changes in function would probably not have lasted if there had not been some important adjustments in institutions and in public philosophy. In any event, it was during the New Deal that we began the probably irreversible change from a Congress-centered government to an executive-centered government. That development is in turn highly correlated, in cause and effect, to another commonplace feature of the New Deal, the rise of delegated power. The federal government literally grew by delegation. Although Congress continued to possess the lawmaking authority, it delegated that authority increasingly in statute after statute to an agency in the Executive Branch or to the president, who had the power to subdelegate to an agency. At first, this delegation of power was rationalized as merely “filling in the details of congressional intent” and therefore consistent with even the most orthodox definition of the separation of powers. But ultimately, delegation was recognized for what it really was—administrative legislation. A whole new jurisprudence was developed in order to justify it, and the federal judiciary adjusted itself accordingly. These very significant changes attributable to the New Deal should nevertheless be treated as transitional rather than final. There were many other characteristics of the New Deal period, and only the passage of time would tell which would take hold. The Second Republic emerges out of the pronouncement and validation of a few of these New Deal characteristics. The return of the Democrats to power in 1961 really signaled the beginning of the Second Republic. The return of the Democrats was accompanied by an entirely new attitude, and it is the attitude which selected out the particular New Deal characteristics that would ultimately become the basis of the new regime, of the Second Republic. This attitude at its most general level can be described as an eagerness to establish and maintain a national government presence in all aspects of social and economic life. If the 1930s had established a strong national state as politically feasible and constitutionally acceptable, the 1960s made the strong national state a positive virtue, desirable for its own sake. This was the major contrast between the 1930s and the 1960s. What had been done in the 1930s as a necessary evil justified by emergency became in the 1960s an obligation, a positive imperative."
I don't entirely agree with all of your points, but I think they're well presented, and I'm not in a position to dispute many of them anyway. I'm reluctant to make too many inferences based on my own experience (I'm an American employed by the US subsidiary of a Chinese company, so I have many Chinese colleagues both in the US and China, and our manufacturing is done in China). I will refrain from generalizing, but I'm very curious if some of the issues we face
Ugh, posted by accident before I finished my sentence. "[I]f some of the issues we face are common amongst US-China business operations." Anyway, I enjoyed reading this, and I will be reading your work in future. Cheers!
Thanks for your comments! Your experience sounds very interesting. At Baiguan we do podcast with readers as our guests. Will you be willing to share with us some of the experience, on name or no-name basis at some point in the future?
Hmm, I'd have to think about that. I wouldn't want to share anything too specific to our business, and I'm not sure I would be able to provide enough content to make a good podcast guest. Still, I appreciate the offer, and perhaps there's a way I can contribute something that will be of interest to your readers. I will consider it, and if I feel I can provide information in a way that will be interesting without reflecting on my employer, I will contact you.
Chinese people work 72 hours a week to save money to buy US treasuries so Americans can consume more than they produce. Both countries, but especially China, fund this by chewing through their demographic dividends.
It's an unhealthy relationship with an unsustainable pattern of specialization and trade.
But fixing it would require lots of changes by lots of parties, many of which Noah wouldn't like. It's easier to blame Elon Musk and nameless executives while calling for more political power for people like himself.
Bear with me as I'm a complete novice with trade policy, Chinese industrial policy.
Full disclosure, I've never been a fan of Tesla, I respect and admire the work, am giddy about Space X but would have much preferred the Hybrid market to flourish fully after the Prius. So I'm going to back even farther than 5 years.
I do think it's corporate shortsightedness along with with short term thinking for profit. I'd have to dig in all the way back to the early days of Walmart. Again if as people were contemplating real Free trade (NAFTA) for us and had invested in local supply chains like Canada and Mexico, South America 20 years ago, perhaps we wouldn't be having this conversation. The relationships started to evolve after WW2 based on politics and governance philosophies which were not, but should be agnostic. Barring extreme human rights of course.
I entirely agree about self inflicted wounds. Corporate greed, short-sighted governance policy screwed the pouch. I support globalization but regionalized first. Neighbors have a vested interest in peace.
I dont think I'm making the cognitive error of confusing people/state or painting the Chinese in a particular light. It's a fools errand for integrated technologies/economies and global well being. But just as the Chinese economy is closed to regions like the Defense sector, in a competition, regional supply chains make much more sense and so does a little bit of fencing
When Noah says the China cycle - not to speak for anyone - I take it to mean poor corporate domestic governance choices as well.
My two cents. Great read by the way. I've enjoyed your writing.
Thank you for your comment and readership! I agree some fencing is right. It’s just that EV and batteries may not be a good example for fencing. In fact, Tesla is a great example of the “competitive collaboration” between nations. Also, I am taking this opportunity to highlight a point i always want to make, which is the centrality of the people in all of these discussions. My genuine hope is that self-driven, talented people on both sides of Pacific Ocean will work harder to compete and collaborate.
I think you make some good points but you are a bit unfair to Noah’s article. Even as he argues that Tesla’s investment in China damaged it in the long run, he recognises how at the time it didn’t really have a choice, citing how“Tesla benefited enormously from its Shanghai Gigafactory, which now produces more than half of all Tesla vehicles and helped save the company from the verge of bankruptcy”.
And in response to your quip, “Noah, please get out of your theoretical armchair, travel back in your time machine to go back to 2018, and elaborate for Musk about your “far-sighted” strategy to make Tesla survive when its life was hanging on a thin thread”, Noah finishes with the suggestion of countervailing subsidies: “In 2018, the U.S. government could have thrown Tesla a lifeline by giving it the loans and other assistance it needed to ramp up its Model 3 production without going bankrupt.”
Much like the vaunted CCP all I really care about is war fighting.
However, just like the CCP I recognize there are economic aspects of war.
UNlike most other non-Chinese people I don't equate Russia and China, partly because I speak both those languages fluently, studied their ideologies, know their cultures and the relevant history. Example: Qin rose without allies. Thus China thinks it can and should so rise. No one at State seems to have noticed, but they are soft handed professional hypocrites so who can blame me for pointing all that out.
China isn't Russia and Russia isn't China.
Back to economics: "lure trap kill" is not any invention of my bourgeois finance capital mind.
However: having sought to radically reform China and actually gotten about 60% of the way there (or more) Western finance capital is having a massive case of buyers remorse.
I have to tell them: you can't put the genie in the bottle, and simply are stuck with Chinese governance such as it is and can
a) Have a new cold war with arms race and i won the last one but this will be very hard and not at all profitable.
b) Go mutual isolationist on national security issues, which is really unlikely
c) Finish what you started by fostering even more "high quality reform and opening up". This is likeliest to happen, since there will be opportunities for opportunists to profit.
I expect Tesla to go the way of NorTel.
I don't expect the CCP to go the way of the CPUSSR
I do expect the CCP to continue liberalizing, and ignorant stupid greedy liberal internationalists will moan, whine, scaremonger, and profiteer all the way.
Like I said, ALL I care about is war fighting.
Russia will lose in Ukraine. The quicker that happens the better for China. The more completely Russia is defeated, the better it will be for China.
See? I'm an equal opportunity kinda thug. But I don't do it for money.
Relative to their wealth, Americans work very hard. Europeans just gave up on doing anything interesting. Europeans taking more vacation time would be defendable if they at least had a higher fertility rate but they don't. They're just lazy and getting worse every year. Social democracy was a spectacular failure after all.
I totally get your point about self-inflicted pains Apple, Tesla, and others have inflicted and about the in the great, terrible hell of fire that Chinese EVs have all gone through. But are you saying that forced technology transfer and subsidies no longer occur?
If by "FTT" you mean the existence of a "market entry" in exchange for IP transfer type of thing, yes, I agree it exists. But if by that you mean it's "forced", that western companies do not have a choice, I don't agree. They can leave China market the way they want. Google left China for things they didn't like. I don't know why the word "forced" is used. Nothing can be forced in a fairly negotiated deal signed by two adults. So I really don't understand all the fuss about it. And by the way, I think the West can also use the same on Chinese companies when they want to tap western markets. I see no problem with it.
You are totally right about FTT not really being forced. It’s simply the practice of requiring companies that want access to Chinese markets to give up their intellectual property. German EV makers did the same thing, and then were shocked when near duplicates of German products were produced by China and then sold into the European market. The result was totally predictable…but somehow is causing a furor in Europe. in the case of Tesla, though, you make a really good point: that China essentially bailed Tesla out.
“Work harder and have less fun”? The US already has one of the longest workweeks among more industrialized nations. (What is life about if not having fun?) I think you made a gross generalization of the West, as bad as many westerners make of China. The decline of US competitiveness I believe is due to other factors (short-term profits, financialization of the economy, monopolies crushing innovation, etc). Otherwise, a very interesting article, and I appreciate your point of view!
I think if I have more time I could have found better way to word it. I will maybe try next time
Noah is clueless about most things. He's a perfect example of making a living on the internet by peddling conventional wisdom with a very slight edge
Just because China “saved” Tesla doesn’t mean they didn’t have Tesla over a barrel and take full advantage of it.
And just because China was employing a “catfish” strategy doesn’t mean they weren’t ALSO forcing technology transfers that ultimately, by your own admission, led the domestic industry to outcompete Tesla.
Many different things can be true at the same time. You are genuinely insightful, but you also keep insisting that only either nation’s narrative can be true. Both can have aspects of truth and falsehood at the same time.
Valid points. Different things are true at the same time. I see my role here of adding the things (many of which are very important) that are absent from mainstream discourses.
Great post, and I complete agree about the competition between the people being determinate of future outcomes.
I'm not 100% sure if the west will take up the challenge of Chinese manufacturing. I think the culture of having Work Life Balance, 4 day work weeks and other worker centric policies is too ingrained (not to say that it's bad). It's a shame that the highest paid roles and the most competitive people in the west seems to be in finance and not in engineering.
The question for me is whether the west is willing to suffer relative economic decline as a trade off for better working conditions (assuming the current comparative advantage of resources, education, services and financial products stay in the west).
For me it's a classic case of you can't have your cake and eat it too. Either the consumer has to pay more due to tariffs, the populace needs to work harder to be more productive or the consumer has to put up with worse products.
Thanks Robert. You make excellent points.
Far too many economic commentators on China tend to be biased against China and at the same time have little direct contact or experience in China - a toxic combination which throws their analysis off kilter.
Worse is when these commentators talk about new technology without proper grasp of new technology - and instead assume you can simply steal new technology at scale in short order.
Yes, China has achieved unprecedented progress in new tech - not by stealing - but by hard work, intelligence, innovation, coordinated policy and above all by fomenting the most competitive industrial ecosystem in modern history. This has been well praised by Bill Gates, Elon Musk and other industry leaders.
It also doesn't hurt that that China has a high national IQ and smart leaders - who got there thru, yes, competition and own accomplishments.
Else, how would you explain that China leads the world in: STEM graduates, science and tech patents, scientific publications, the largest and most advanced high speed rail, green power power generation, UHVDC power grid, national data center network, heavy ship building etc etc in addition to building the world's largest and best Battery, EV and 5G Telecom industries.
China, like much of the Global South, believe in win-win and cooperation - as illustrated by the Belt and Road Initiative, BRICS, trade agreement etc.
China eschews win-lose, suppression, vetos, hegemony and ridiculous sanctions.
Remember, China leads in Trust in Government, Trust in Media and Trust in Business. Did China steal these measures too?
DT
Good read Robert.
I agree there are a lot of internal things to examine at Tesla for why they are faltering, before getting into any forced technology transfer and other controversial issues between USA and China. I actually recommend https://bradmunchen.substack.com/ who tracks and makes compelling cases for shorting Tesla in the long term.
While Musk puts on a polite/guai face for Chinese authorities his behavior is the complete opposite in US. In fact he has become so erratic and involved in far right politics, conspiracies, and social destabilization it has actually turned me off from getting a Tesla for now.
Also the fact Tesla has scrapped Model 2, Musk divides his time between Twitter/Tesla/SpaceX and other things probably doesn't help. Now they are trying to go all in on AI (instead of just making a solid, affordable EV) just highlights how disorganized Musk's planning skill is.
I hadn't made the connection how much Shanghai factory actually bailed out Tesla during their struggles.
Happy Friday.
Exactly why I missed my 20-bagger at Tesla :( To this day I still doubt about the erratic behaviors of Musk.
You are not alone.
Musk should have stuck to Space X and Tesla instead of wasting 54 billion on making Twitter even worse than it was!
I forgot to mention decision to fire > 10% of Tesla workforce and the day after trying to reinstate Musk's 56$ billion Tesla compensation to cover the Twitter loan interest : )
His ego is just ridiculous at this point.
On a more serious note, since you have a lot of Tesla driving experience, have you spent time in the new wave of Chinese EVs? How do the stack up to a Tesla in your opinion?
I never drove one but I got into many of those during ride-hailing, and I like to chat with drivers about their experience with their vehicles, mileage and stuff. What I gather is that those vehicles are indeed very very competitive. Bearing in mind though most EVs used for ride-hailing are not even at the top their game. So the concerns for Tesla's future, not just in China but the whole world is real. Musk will have to do something really revolutionary and innovative again, really fast.
I have seen this manufacturing play out in the apparel space. We had an apparel factory in the US for decades before finally moving it to China. The factory floor workers here want to work hard and do overtime. We actually limit overtime sometimes because we see a rise in quality issues and a dip in efficiency. Folks in the US bemoan the flight of factory jobs but many Americans don’t want to do those jobs. Honestly, more than a few Chinese folks don’t want to do those jobs either but there’s just more Chinese folks working their way into a middle class living that they’re willing to do it.
Great articles as usual!
I would argue that the IRA saved Tesla, specifically by strongly incentivizing all of the other auto brands in America to adopt the infrastructure that Tesla is built on. So while Tesla cars may dwindle in sales, the U.S. charging infrastructure will essentially be a Tesla-charging system.
Honestly Tesla should be doing a lot better if huge chunks of potential consumers are not actively boycotting the vehicles because the don't like Elon Musk. That anti-Musk sentiment is weighing on the company, highlighted by 10% layoffs last week and, much like SpaceX, I don't think this company would be much without serious help from the U.S. government.
I get that China is worth about 40% of its sales numbers, but I think they would have aggressively pulled back from their international market if the US sales started to seriously falter.
Anyway, I agree that China is not killing Tesla, but I also don't think it's the reason for Teslas sort of surge.
Very informative as usual! Yes, introducing an high end foreign competitior to jolt the domestic market while also improving the industries parts and services providers ecosystem was an apt move indeed. It never ceases to amaze me how current day China (it seems the center may be making moves that run the risk of changing this, lets hope not) and the old American Republic which was gone from all governance structures at all levels* by 1961, are the mirror images of each other. There are no other systems in the history of the world like them and only they are like each other and their physical forms are the inverse of each other. They are each others mirror image.
*The sole exception is the governance of the city of Chicago, which managed to hang on until the 80s or 90s
It's also amazing to me the parallel between Americans pouring milk during the height of the Great Depression and China's empty property and over-competitive, zero-profit sectors of today.
Yes, and its amazing how *IF* China makes the same error that the Old Republic made, it will be for such similar reasons, highlighted by the milk-property example you noted. The happening of a problem, which was in some ways inevitable, and not being able to resist the urge to solve it by thinking that the answer lies in "systems thinking" that holds that the whole nation must be parts of a fully integrated and coordinated truly seamless single system. I truly hate to engage in the annoyance of long quotes but I just can't resist here, in case any one is curious about the history of the America's transition from the Old Republic to what it is today. The below two passages are from Theodore J. Lowi, perhaps one of the few political scientists the USA's prestige universities has produced since the 1800s that are of any value.
"The culmination should have come in the 1930s when the collapse of the economy produced an urgency for bold action that justified the vaguest and sloppiest legislative drafting. There was a popular clamor for legislation not merely in the first hundred days but in the first thousand days. An overwhelming majority in Congress was ready to commit legiscide to provide the president with the means to restore faith that America could control its own fate. But if the emergency explained the New Deal's leap into great scope coupled with limitless abstraction, there should have been a change toward better legislation once the emergency was over. But that is not what happened. Public policies after World War II indicate that developments in the positive, liberal state were driven not by social/economic necessity but by ideology. There had been some systems thinking prior to the 1960s. For example, the Interstate Commerce Commission (ICC) under the Transportation Act of 1920 was expected to take into account the entire rail system as it determined its regulatory provisions. Some thinking of a similar nature was partly the obligation of the Federal Communications Commission (FCC) with regard to the new industry of radio, and similar thinking was to be expected of the Civil Aeronautics Board (CAB) and the Federal Aviation Administration (FAA) in regard to the fledgling industry of commercial airline service. But the sector by sector scale of those earlier efforts gave only the barest intimation of what was to come. Systems thinking drifted fairly quickly from the academic disciplines in the 1940s into the minds and hearts of public policy makers in the 1960s. From that point on, virtually all new programs defined the jurisdiction of the relevant agency as an entire system"
"The transition to the Second Republic began in earnest during the 1930s. A Second Republic might well have come into being during the Roosevelt era if domestic developments had not been cut off by World War II. The least significant characteristic of the New Deal period was the increasing size of the national government, measured in budgetary terms. Domestic expenditure increased from 0.8 percent in 1929 to 4.9 percent in 1939, but the factor of far greater significance is the new functions of the federal government. Subsidy policies continued to be enacted by Congress and implemented by the executive; in fact, growth in subsidies accounts for a large portion of the budgetary growth, and many of the new agencies were set up to administer subsidy programs. However, the federal government was adopting two entirely new kinds of functions, new at least for the federal government in the United States. These functions were regulation and redistribution. In adopting a large number of regulatory policies, the federal government had discovered that there was national as well as state police power. As for redistribution, conventional labels refer to fiscal and monetary policies, but these bland labels mask the true significance and the novelty for the federal government of this function. Regulatory and redistributive policies are quite different from each other, yet they share one very important characteristic which also distinguishes the two of them from almost everything the federal government was doing prior to the 1930s: These two new functions involved the federal government in direct and coercive use of power over citizens. Washington policymakers could no longer hide from themselves the fact that policy and coercion have common roots. There were, of course, precedents for both of these functions, ranging back to such significant examples of regulatory policy as the Interstate Commerce Act of 1887 and the Sherman Antitrust Act of 1890, and to such important redistributive policies as the early income-tax laws and the adoption of the Federal Reserve System. However, the New Deal is distinguishable because of the number of such policies adopted and because of the establishment of the constitutional right of the federal government to exercise police power and to manipulate the economy. These additions of function were accompanied by equally fundamental changes in institutional relationships and in public philosophy. In fact, the changes in function would probably not have lasted if there had not been some important adjustments in institutions and in public philosophy. In any event, it was during the New Deal that we began the probably irreversible change from a Congress-centered government to an executive-centered government. That development is in turn highly correlated, in cause and effect, to another commonplace feature of the New Deal, the rise of delegated power. The federal government literally grew by delegation. Although Congress continued to possess the lawmaking authority, it delegated that authority increasingly in statute after statute to an agency in the Executive Branch or to the president, who had the power to subdelegate to an agency. At first, this delegation of power was rationalized as merely “filling in the details of congressional intent” and therefore consistent with even the most orthodox definition of the separation of powers. But ultimately, delegation was recognized for what it really was—administrative legislation. A whole new jurisprudence was developed in order to justify it, and the federal judiciary adjusted itself accordingly. These very significant changes attributable to the New Deal should nevertheless be treated as transitional rather than final. There were many other characteristics of the New Deal period, and only the passage of time would tell which would take hold. The Second Republic emerges out of the pronouncement and validation of a few of these New Deal characteristics. The return of the Democrats to power in 1961 really signaled the beginning of the Second Republic. The return of the Democrats was accompanied by an entirely new attitude, and it is the attitude which selected out the particular New Deal characteristics that would ultimately become the basis of the new regime, of the Second Republic. This attitude at its most general level can be described as an eagerness to establish and maintain a national government presence in all aspects of social and economic life. If the 1930s had established a strong national state as politically feasible and constitutionally acceptable, the 1960s made the strong national state a positive virtue, desirable for its own sake. This was the major contrast between the 1930s and the 1960s. What had been done in the 1930s as a necessary evil justified by emergency became in the 1960s an obligation, a positive imperative."
I don't entirely agree with all of your points, but I think they're well presented, and I'm not in a position to dispute many of them anyway. I'm reluctant to make too many inferences based on my own experience (I'm an American employed by the US subsidiary of a Chinese company, so I have many Chinese colleagues both in the US and China, and our manufacturing is done in China). I will refrain from generalizing, but I'm very curious if some of the issues we face
Ugh, posted by accident before I finished my sentence. "[I]f some of the issues we face are common amongst US-China business operations." Anyway, I enjoyed reading this, and I will be reading your work in future. Cheers!
Thanks for your comments! Your experience sounds very interesting. At Baiguan we do podcast with readers as our guests. Will you be willing to share with us some of the experience, on name or no-name basis at some point in the future?
Hmm, I'd have to think about that. I wouldn't want to share anything too specific to our business, and I'm not sure I would be able to provide enough content to make a good podcast guest. Still, I appreciate the offer, and perhaps there's a way I can contribute something that will be of interest to your readers. I will consider it, and if I feel I can provide information in a way that will be interesting without reflecting on my employer, I will contact you.
Chinese people work 72 hours a week to save money to buy US treasuries so Americans can consume more than they produce. Both countries, but especially China, fund this by chewing through their demographic dividends.
It's an unhealthy relationship with an unsustainable pattern of specialization and trade.
But fixing it would require lots of changes by lots of parties, many of which Noah wouldn't like. It's easier to blame Elon Musk and nameless executives while calling for more political power for people like himself.
Bear with me as I'm a complete novice with trade policy, Chinese industrial policy.
Full disclosure, I've never been a fan of Tesla, I respect and admire the work, am giddy about Space X but would have much preferred the Hybrid market to flourish fully after the Prius. So I'm going to back even farther than 5 years.
I do think it's corporate shortsightedness along with with short term thinking for profit. I'd have to dig in all the way back to the early days of Walmart. Again if as people were contemplating real Free trade (NAFTA) for us and had invested in local supply chains like Canada and Mexico, South America 20 years ago, perhaps we wouldn't be having this conversation. The relationships started to evolve after WW2 based on politics and governance philosophies which were not, but should be agnostic. Barring extreme human rights of course.
I entirely agree about self inflicted wounds. Corporate greed, short-sighted governance policy screwed the pouch. I support globalization but regionalized first. Neighbors have a vested interest in peace.
I dont think I'm making the cognitive error of confusing people/state or painting the Chinese in a particular light. It's a fools errand for integrated technologies/economies and global well being. But just as the Chinese economy is closed to regions like the Defense sector, in a competition, regional supply chains make much more sense and so does a little bit of fencing
When Noah says the China cycle - not to speak for anyone - I take it to mean poor corporate domestic governance choices as well.
My two cents. Great read by the way. I've enjoyed your writing.
Thank you for your comment and readership! I agree some fencing is right. It’s just that EV and batteries may not be a good example for fencing. In fact, Tesla is a great example of the “competitive collaboration” between nations. Also, I am taking this opportunity to highlight a point i always want to make, which is the centrality of the people in all of these discussions. My genuine hope is that self-driven, talented people on both sides of Pacific Ocean will work harder to compete and collaborate.
I think you make some good points but you are a bit unfair to Noah’s article. Even as he argues that Tesla’s investment in China damaged it in the long run, he recognises how at the time it didn’t really have a choice, citing how“Tesla benefited enormously from its Shanghai Gigafactory, which now produces more than half of all Tesla vehicles and helped save the company from the verge of bankruptcy”.
And in response to your quip, “Noah, please get out of your theoretical armchair, travel back in your time machine to go back to 2018, and elaborate for Musk about your “far-sighted” strategy to make Tesla survive when its life was hanging on a thin thread”, Noah finishes with the suggestion of countervailing subsidies: “In 2018, the U.S. government could have thrown Tesla a lifeline by giving it the loans and other assistance it needed to ramp up its Model 3 production without going bankrupt.”
Much like the vaunted CCP all I really care about is war fighting.
However, just like the CCP I recognize there are economic aspects of war.
UNlike most other non-Chinese people I don't equate Russia and China, partly because I speak both those languages fluently, studied their ideologies, know their cultures and the relevant history. Example: Qin rose without allies. Thus China thinks it can and should so rise. No one at State seems to have noticed, but they are soft handed professional hypocrites so who can blame me for pointing all that out.
China isn't Russia and Russia isn't China.
Back to economics: "lure trap kill" is not any invention of my bourgeois finance capital mind.
However: having sought to radically reform China and actually gotten about 60% of the way there (or more) Western finance capital is having a massive case of buyers remorse.
I have to tell them: you can't put the genie in the bottle, and simply are stuck with Chinese governance such as it is and can
a) Have a new cold war with arms race and i won the last one but this will be very hard and not at all profitable.
b) Go mutual isolationist on national security issues, which is really unlikely
c) Finish what you started by fostering even more "high quality reform and opening up". This is likeliest to happen, since there will be opportunities for opportunists to profit.
I expect Tesla to go the way of NorTel.
I don't expect the CCP to go the way of the CPUSSR
I do expect the CCP to continue liberalizing, and ignorant stupid greedy liberal internationalists will moan, whine, scaremonger, and profiteer all the way.
Like I said, ALL I care about is war fighting.
Russia will lose in Ukraine. The quicker that happens the better for China. The more completely Russia is defeated, the better it will be for China.
See? I'm an equal opportunity kinda thug. But I don't do it for money.
加油!
解放西伯利亚!
Relative to their wealth, Americans work very hard. Europeans just gave up on doing anything interesting. Europeans taking more vacation time would be defendable if they at least had a higher fertility rate but they don't. They're just lazy and getting worse every year. Social democracy was a spectacular failure after all.
I totally get your point about self-inflicted pains Apple, Tesla, and others have inflicted and about the in the great, terrible hell of fire that Chinese EVs have all gone through. But are you saying that forced technology transfer and subsidies no longer occur?
If by "FTT" you mean the existence of a "market entry" in exchange for IP transfer type of thing, yes, I agree it exists. But if by that you mean it's "forced", that western companies do not have a choice, I don't agree. They can leave China market the way they want. Google left China for things they didn't like. I don't know why the word "forced" is used. Nothing can be forced in a fairly negotiated deal signed by two adults. So I really don't understand all the fuss about it. And by the way, I think the West can also use the same on Chinese companies when they want to tap western markets. I see no problem with it.
You are totally right about FTT not really being forced. It’s simply the practice of requiring companies that want access to Chinese markets to give up their intellectual property. German EV makers did the same thing, and then were shocked when near duplicates of German products were produced by China and then sold into the European market. The result was totally predictable…but somehow is causing a furor in Europe. in the case of Tesla, though, you make a really good point: that China essentially bailed Tesla out.