There are words we have been fighting over for decades, and two of them are “capitalist” and “socialist.” Which one is China? Well, are we talking about the China that builds iPhones or the China of “Xi Jinping Thought”? Which one is the United States? The one where the iPhone was invented or the one where the Trump administration is building a portfolio of partially state-owned enterprises?
Dan Wang, a China-born, Canada-raised, U.S.-dwelling analyst of Chinese affairs, argues that these terms are no longer as enlightening as they once might have been. In his new book, Breakneck: China’s Quest to Engineer the Future, he characterizes China and the United States as an “engineering state” and a “lawyerly society,” respectively. You can hear Wang make the argument in his own words in today’s episode of The Remnant, which I had the honor of hosting.
(The timing was good: You can read me on “Chinese exceptionalism” this week, too.)
Wang is unsentimental about Beijing’s role in the world, but he argues that it is a mistake to see the Chinese regime in strictly authoritarian terms—it is not, he says, a state with a “free hand,” as evidenced by Beijing’s repeatedly thwarted attempts to enact a property tax that would have hit the new middle class right in the moneybags. (As he notes, China has remarkably light taxes for a socialist autocracy.) Though the dynamics of consent and accountability in China do not play out along familiar Western liberal-democratic lines (to say the least), these are nonetheless factors in Chinese public life. Not every protest ends the way Tiananmen Square did—sometimes, the protesters get their way, typically (though not always) on relatively low-stakes local issues. And the junta in Beijing knows that its mandate is to deliver steady improvements in the material standard of living of the Chinese people—and that failure to do so in the long run will mean facing accountability, very likely of a sort that is far more vicious than anything faced by elected officials in the West.
Chinese nationalism is a real thing, not exclusively a creation of Communist Party propaganda, but that nationalism is tied up in economic progress and in the genuine pride Chinese people take in the visible signs of their national prosperity, all those shiny new airports and highways and spectacular bridges and the rest of the infrastructure that the Chinese state uses to goose the economy. This is part of what gives the “engineering state” its legitimacy.
Another way of looking at the situation, as Wang puts it, is that China is (and perforce has been) a country focused on supply-side policies, bringing manufacturing concerns into existence through massive subsidies or direct state ownership, while U.S. public policy is oriented toward the management of demand, working to stimulate consumption through tax cuts or spending and then, when necessary, trying to slow the economy down a bit when inflation takes off. China is able to do what it does in part because authorities informed by that “engineering” mentality—enabled by a police state—can force trade-offs on the Chinese people that Americans simply would not accept, specifically a domestic standard of living for ordinary workers that has been artificially reduced (or, more precisely, in which the pace of improvement has been programmatically limited) for the benefit of exporters and the recipients of inbound investments by foreign manufacturers.
Ordinary Americans have the political power to say “Hell, no!” to such trade-offs, which is how they force so much of the full cost of American public spending onto their children and grandchildren in the form of ruinous government debt. Not that Beijing is immune from the allure of deficit spending: China’s debt-to-GDP ratio is almost 90 percent on paper, but its real burden is probably something closer to 200 percent or 300 percent of GDP when accounting for all of the corporate debt held by state-owned enterprises.
Wang is aligned with the “abundance” agenda championed by Ezra Klein, and his prescription for the U.S.-China relationship is for each nation to borrow a little bit of the other’s “pathologies” (his word).
If that sounds too close to Thomas Friedman’s “China for a day” stuff, it isn’t.
For China, reform presumably would mean more checks on unconstrained government power to run roughshod over individuals and communities, which, to say nothing of the moral questions involved therein, has produced some pretty bad economic and political results, too, even on the Communist Party’s own terms: If you think Americans were radicalized by COVID, do read up on the local reaction to Bejing’s “Zero COVID” crusade in Shanghai, which Wang is able to chronicle in interesting detail, having been there himself to observe it firsthand. And if you think the United States has a demographic problem, consider what the now-abandoned “One Child” policy has done to so profoundly deform Chinese life.
For the United States, reform means becoming a little less lawyerly when it comes to building housing in desirable metros or energy projects … anywhere, really. There is a reason the U.S.-China relationship has been so obviously complementary from a strictly economic point of view, but that complementarian character has enabled too much complacency on both sides of the Pacific.
You can listen to my wide-ranging conversation with Wang here—we cover everything from Deng Xiaoping’s place in history to the cost of laying a mile of subway track in New York City. And you can buy his book (Tyler Cowen calls it the best recent book about China and “arguably the best book of the year, flat out”) here.
My own view is that Washington keeps failing to get what it wants out of the U.S.-China relationship because Washington does not know what it wants out of that relationship beyond pretending that China is the reason the United States cannot return to some mythical 1957-style factory economy that, a careful reading of the relevant history will show, did not actually quite exist. China’s regional aggression and adventuring farther abroad may send up a lot of red flags at the war-planning desk and in the think tanks, but elected Washington sees the U.S.-China relationship almost exclusively (and mistakenly) in terms of lost factory jobs and “Made in China” labels on cheap junk at Walmart. Wang’s latest ought to help Washington policymakers figure out what they should want from China—and to understand that Beijing already knows what it wants from the United States.
