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Polish Perspective points us to a recent FT article: Window for poor countries to industrialise ‘closing fast’

TLDR:

1. Services trade is increasing much faster than goods trade(60% faster over the last decade, to be exact), and developed countries have a structural advantage in services trade. Moreover, this advantage has increased over the last decade. The few poor countries that do well in services tend to do so in more easily automated services (call centers), so their future prospects are shakier than for high-value added services, which they don’t well in.

2. Labour arbitrage is falling in importance for labour intensive manufacturing. It is now at levels not seen since the 1990s. This is bad news for poor countries given that manufacturing has been the traditional path to wealth unless A) you’re tiny and oil rich or B) you’re a tax-haven or C) you’re a city-state. But those are outliers.

3. Value-chains are increasingly becoming more knowledge-intensive. The figure is that spending on R&D, software development, IP etc has gone from 5.4 percent of revenue in 2000 to 13.1 percent in 2016. This is self-evidently not a strong suit of poor countries, else they wouldn’t be poor.

4. Trade regionalism is growing, led by Asia and Europe. If you’re outside of these tightly regional supply chains, then your scope to sell to the rich in order to get rich yourself is becoming harder.

As PP points out, while many of these factors might apply, the Occam Razor explanation that these people studiously avoid is that the remaining developing countries do not have the human capital – or the national IQ needed to generate that human capital – to ever converge.

This is Our Biorealistic Future, which continues to steadily come to fruition.

While it is true that globalization has maximized the potential for rapid convergence, provided that countries open up and try to adopt institutional best practices (i.e. which is now easier than ever), the key caveat is that this convergence doesn’t happen relative to developed country levels, but relative to the maximum level made possible by their national IQ. Though this is still a pretty good deal for the Third World, as poor institutions and restrictions on international capital movement on top of atrocious human capital have long prevented them from realizing even their limited potential.

What I would, however, additionally note is that countervailing technological trends may well widen the “natural” or institutions-adjusted gap between high IQ and low IQ nations.

1. It is well known that smart fractions contribute disproportionately to the wealth and poverty of nations even today, and this may be even more true tomorrow. More knowledge-intensive value chains and lower labor arbitrage means a continuing shift to the O-Ring sector (characterized by multiple, complex operations) of the economy, and “smart fractions” becoming ever more important. Due to the basic mathematics of the bell curve, the “smart fractions” advantage that smarter nations enjoy becomes more and more preponderant as you go up the IQ scale.

2. There will be steadily more automation, which will put an even greater premium on “smart fractions.”

3. Any further intensification of globalization – should it hold – will allow both capital and high IQ labor to migrate to countries with optimal legal and regulatory environments with ever greater ease; environments that are in turn produced by an informed, high IQ citizenry. While most of Latin America and Asia has dropped dead ends such as import substitution, they are not going to become Switzerland or Singapore even with the best intentions in the world. Indeed, since manufacturing no longer needs huge labor pools, the day may dawn when it abandons even the less competitive First World nations (e.g. Italy) to low-tax, offshore havens with superb institutions.

4. Any genetic augmentation of IQ will likely first take place in these elite countries and/or jurisdictions, which will lock in their human capital predominance.

 
• Category: Economics • Tags: Futurism, Globalization, Inequality, Iq and Wealth 
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  1. To make proper use*** of high IQ might be as important as an answer to the question, what should happen with the other citizens, whose IQs are lower. – And how to handle the overall dysfunctionality, that might be caused by those – such as the downfall of major cities (Detroit).
    Switzerland is not least so functional and profitable, because there are no outsourced lower classes to be found there.

    PS
    ***I think of the law and institutionalized religion as examples. If I look at the law and the juridical system: What percentage of high IQ people working in this field is useful – and from when on is this becoming counterproductive? – Did ever somebody try to quantify this problem?

  2. neutral says:

    They will converge, the gap between low IQ and high IQ nations will narrow as miscegenation and immigration will mean that the low IQs will make up all the nations of the world.

    • Replies: @Mark P Miller
  3. IoT says:

    I’d like to be the first here to blockchain your CRISPR.
    As a matter of fact, in most American cities, the largest employer is the local hospital. Occasionally it may be the local school system, or, where available, the state university. None of these are going to be automated.
    In fact, many of these employees are under a guild system that prevents outsiders from even thinking of trying. For example, if an automated system for reading X-rays would make a mistake, the College of Radiologists will provide expert witnesses at the trial who will swear that a human would not make that error. True, human radiologists make errors, but, again true, computer errors would of a different nature.
    Also, most of the service industry feeds on the old industry, and does not add any value. This is why America does not allow foreigners own airlines flying within America, ships traveling between American ports, or mere foreigners owning phone cables. This is why US gov does not allow export of unrefined oil, and taxes foreign steel. You don’t see any similar protectionist qualms in banking or Web hosting. Or AI.

    • Replies: @Thorfinnsson
    , @Mitleser
  4. IoT says:

    My point is that a country will be as rich as its natural resources and its military allow. In some cases, like Japan, it’s not the actual military, but their potential military power. That is, in a few months, Japan or Germany would be able to develop nukes better than anything Pakistan has. IQ may have a role in that, but it’s not all. Look at Australia if you don’t believe me.

    • Replies: @Beckow
  5. In the prewar era the development of global capitalism was considerably more uneven. Small countries other than Belgium (coal and iron) and Switzerland (Swiss) tended to be poorer rather than richer. Postwar the capitalist portion of the so-called “Global North” mostly converged by the 1970s other than South Korea and Taiwan.

    It’s quite possible that the uneven development of global capitalism is returning. The most advanced countries and firms have instituted their highly restrictive intellectually property regime on a global scale with considerable success (even China, by far the biggest violator of the regime, does honor it in many cases). At the same time they’ve successfully forced most less developed countries to permit market access for their MNCs. Furthermore, as Karlin notes, smart fractions of less developed countries migrate in large numbers to the advanced ones.

    Area to watch here is the EU portion of Eastern Europe. How far will Visegrad convergence go?

  6. @IoT

    There is plenty of protectionism in American banking. Try opening a deposit-taking bank as a foreign bank in America. American banks in trouble got TARP, foreign banks in trouble did not.

    Foreigners are permitted to own telecommunications infrastructure as demonstrated by T-Mobile (German) and Sprint (Japanese).

  7. @neutral

    I would argue the opposite:

    Symptaric speciation is real and existing conditions (near frictionless flow of capital, information) are turbo-charging assortative mating. Yes, the “smart fraction” will become an ever smaller fraction but they will have unprecedented tools at their disposal (esp wrt to genetics).

    It is an open question as to how quickly the wheels will come off the increasingly dysgenic global system, which will determine how big and how long the window will remain open for this elite cohort to slip through into a post-human future, but I give them better than even odds.

  8. inertial says:

    There will be steadily more automation, which will put an even greater premium on “smart fractions.”

    This is not true. Yeah, you need a small number of smart people (not even necessarily in your nation) to invent and implement new automation. But the common users could be dumb, likely even dumber than before the invention.

    Look at the original Industrial Revolution. All kinds of skilled artisans who spent lifetimes learning their trades were replaced by Charlie Chaplin on assembly line.

    [MORE]

    • Replies: @dfordoom
  9. AaronB says:

    Services trade is increasing much faster than goods trade(60% faster over the last decade, to be exact), and developed countries have a structural advantage in services trade. Moreover, this advantage has increased over the last decade.

    So the American elites decision to shift from a manufacturing economy towards a service economy wasn’t the incredibly stupid move people have been saying it was?

    And China, as a primarily manufacturing economy, isn’t in such a strong position?

    I am genuinely asking someone more knowledgeable about economics than me to answer.

    The examples of Germany and Japan show that it is relatively easy to re-establish a manufacturing economy in a fairly short amount of time, if desirable. I have always thought this factored into the calculations of American elites when they risked outsourcing manufacturing.

    • Replies: @Thorfinnsson
    , @neutral
  10. Institutional factors matter. The top 20 countries (give or take the EU as one country) account for about 90% of world trade. Most SS African countries do more trade with the colonial metropolitan than their neighbours. Much of this is about protecting rural voters from competition. Geography matters; protectionist economics will hold them back.

    Other absurdities can be found. In Zambia, fertilizer is so heavily subsidized that Phosagro, the Russian firm that dominates world markets, could not afford to build a plant there even with World Bank subsidy. Thus, shipments of subsidized imported fertilizer fill up capacity on the railways that could be used for higher value items. Thus more demand for subsidy to enlarge railway capacity. Zambiant farmers greatly overuse fertilizer and damage the environment.

    Electricity prices that did not reflect the cost of maintaining and expanding hydro stations mean that it is politically impossible to increase electrical power supply in Zambia.

    This is about the perverse incentives put in place by graduates of the London School of Economics (a hotbed of socialism) in the post colonial era with an Enarche helping. How does a political system rescue itself from socialism? Maggie had the EU to help her. Similarly Eastern Europe. How to desocialize Africa? They can catch up then. There is a substantial software industry developing microcredit and telephone banking applications for example. There are deals with India for bus ticketing apps. (The world’s biggest bus operator is an Indian ticketing App that owns no buses).

    India desocialized on the back of Hindu nationalism. A rare and incomplete example.

  11. @AaronB

    So the American elites decision to shift from a manufacturing economy towards a service economy wasn’t the incredibly stupid move people have been saying it was?

    There wasn’t so much a shift as much as the manufacturing sector was permitted to atrophy. The US has long had a highly productive service sector and a positive trade balance in services.

    I consider the decision incredibly stupid in the context of the nation’s economic health and military power. The decision created a permanent current account deficit, severely harmed the working class, and reintroduced substantial regional economic disparities. Essential aspects of military production now have large overseas supply chains and there is much less capacity to surge military production by converting civilian industry.

    However, the decision was not necessarily harmful for the national oligarchy or for the upper middle class. And while actual military power (and the capacity to generate it) has diminished as a result of the decision, country’s political and financial power has apparently increased as a result.

    The value of American financial assets has increased as a result of this decision. Furthermore, the labor share of national income has declined substantially. This has increased the wealth of the oligarchy. Upper-middle class white collar professionals have mostly been unharmed by the decline of the manufacturing sector and their real purchasing power may even have increased.

    “Rustbelt” industries and labor-intensive industries (e.g. textiles, assembly) failed to generate an effective political coalition to defend their interests and got steamrolled by financial interests and America’s foreign policy geniuses in the Pentagon and Foggy Bottom.

    Germany and Japan didn’t reestablish manufacturing economies. German and Japanese firms successfully beat American (and British) firms in competition for most complex manufactured products. While their working classes have also suffered from offshoring, they’ve succeeded in exporting high end manufactured goods and thus have structurally larger manufacturing sectors.

    The US decision to permit its manufacturing sector to decline strikes me as absent mindedness more than a concrete plan. It was assumed that American firms had a permanent lead, and that therefore commercial interests should be sacrificed for “security” interests. Free market ideology did much of the rest, and then in the ’90s we got the “New Economy” nonsense about how everyone was going to become a researcher.

    • Replies: @AaronB
  12. Beckow says:
    @IoT

    …country will be as rich as its natural resources and its military allow

    One more factor is the population size and its composition, people who share those resources. India a few thousand years ago was considered very rich (Greek ancient writings always described it as such). With the colonial and post-colonial explosion of population, India is now an unredeemable basket case.

    The best placed countries today are: North America (it is getting wobbly, but still), Argentina-Chile, Australia, Russia, Kazakhstan, and Scandinavia if they can find their balls. On a smaller scale, Central-Eastern Europe is well positioned. Having a low quality, heterogeneous, internally divided population never works, resources get squandered and the military loses cohesion.

  13. AaronB says:
    @Thorfinnsson

    Interesting. Thanks for the detailed response.

    By Japan and Germany showing a manufacturing base can be quickly rebuilt, I mean that after WW2 those two countries had their industrial capacity destroyed but swiftly rebuilt it.

    I imagine if there was a determined national will (the elites desired it), America can recreate world class manufacturing base in relatively short order.

    The American national character doesn’t prioritise the attention to detail and obsessive focus on craftsmanship that Japan and Germany does, and is more about splashy innovations. But national priorities cam be redirected of there is a critical need.

    • Replies: @Thorfinnsson
  14. @AaronB

    Germany’s industrial capacity wasn’t destroyed by the war. A supermajority of the nation’s capital stock remained in tact (along with, more importantly, the skilled workers).

    Japan is a bit of a different case for a couple of reasons.

    While most of the capital stock on the home islands survived, by the war a significant fraction of Japan’s industrial base was located in Manchukuo (most of which was dismantled and carted off by the Soviet Union). Korea and Taiwan also had factories. I don’t know what the percentage was, but I know that by 1939 iron & steel output in Manchukuo exceeded that in Japan itself.

    Second, wartime Japan was not at or near the technological frontier in any industry other than silk (where it was the world leader). German manufacturing productivity was only half the American level owing to smaller production runs (a problem later solved by European integration and GATT), but the country was at technological frontier in nearly all areas.

    So the Japanese Miracle was more impressive than the Wirtschaftswunder.

    Attention to detail and obsessive focus on craftsmanship are nice, but manufactured goods are mostly mass produced. No doubt Germany and Japan have many cultural traits that aid in their success in manufacturing, but one can name many American traits useful as well (including those splashy innovations).

    And yes, America obviously could (re)create a world class manufacturing base. How long that would take I have no idea, and it depends on how you choose to define world class. Catching up in, say, OLED panels would be very difficult. Textiles not so much.

    • Agree: AaronB
    • Replies: @Philip Owen
    , @Bill
  15. @Thorfinnsson

    Japan had an excellent base in electrical engineering particularly what became electronics. I recall a reference that said the largest electrical engineering course attendance in the world in 1890 was at Tokyo University. The Yagi aerial was an early indicator. However, as you suggest, heavy industry was a different affair. Manchuria had the coal. This is why Japanese trains went electric early, why they built nukes (they had their own tradition of nuclear physics research) and why their steel plants were coastal.

    I’ve worked on OLEDs (a lot of display technology is British by early invention and research). The chemistry to prevent water intrusion is extremely demanding as is coating it onto the substrate. Once cracked, the chemistry can be transferred. The process control is not so easy. 3M could do it in the US but they would be on their own. I saw Dupont try. Kodak could have done it once but they broke into pieces. Eastman Chemical is not capable. My team at the former ICI did it but for a different product. My manufacturing engineers had PhD’s in chemical engineering.

    • Replies: @Thorfinnsson
  16. @Philip Owen

    Japan had an excellent base in electrical engineering particularly what became electronics. I recall a reference that said the largest electrical engineering course attendance in the world in 1890 was at Tokyo University. The Yagi aerial was an early indicator.

    I don’t know about that. The primitive nature of Japanese radar in WW2 suggests otherwise. Japanese vacuum tube production had only a 15% pass rate in quality control compared to 80% at Sylvania in Pennsylvania in the same period.

    It may be that at the electrical engineering level Japan was top notch, but at the production level it was severely deficient.

    The most advanced Japanese heavy industry in the Showa period was shipbuilding (hardly surprising). This was also fast to recover and overtook Britain as the global tonnage leader already in 1956.

    I’ve worked on OLEDs (a lot of display technology is British by early invention and research). The chemistry to prevent water intrusion is extremely demanding as is coating it onto the substrate. Once cracked, the chemistry can be transferred. The process control is not so easy. 3M could do it in the US but they would be on their own. I saw Dupont try. Kodak could have done it once but they broke into pieces. Eastman Chemical is not capable. My team at the former ICI did it but for a different product. My manufacturing engineers had PhD’s in chemical engineering.

    The general issue in this industry, or any other industry in which one is deficient in, is reaching the stage of “world-class”. As you are catching up, others are advancing. We can look at the struggles of China to produce effective jet engines for instance. They still haven’t caught up with the Russians, who in turn are behind the West.

    The US does have a built-in advantage here however in the form of its vast internal market. Firms can make good profits without being internationally competitive, but the sheer size of the market means that they’re likely to eventually become efficient international producers on the basis of domestic competition. US shoe-making machinery for instance developed behind a protectionist wall, and then began displacing British shoe-making machine manufacturers from Britain itself by the end of the 19th century.

    It makes little business sense for American firms to enter such industries at present, so it will not happen absent government support.

    • Replies: @AaronB
  17. Mitleser says:
    @IoT

    You don’t see any similar protectionist qualms in banking

    Spiegel complained about the biggest German bank being targeted.

    Companies like Deutsche Bank, which has become a greater challenge to U.S. banks than any other foreign financial institution. Under former CEO Josef Ackermann, the company made major inroads in the U.S., right up until the 2008 global financial crisis. In doings so, the Germans riled both their competitors and the U.S. government. At the same time, Deutsche Bank made itself vulnerable through its involvement in numerous scandals, becoming the focus of numerous investigations and fines by U.S. investigators.

    The fact that Deutsche Bank’s dubious business practices resulted in expensive settlements is appropriate. But it seems fair to say that investigations into other banks were not subject to nearly as many leaks as those into Germany’s leading financial institution. In fall 2016, when the Justice Department forced Deutsche into a multibillion dollar settlement for dubious mortgage-backed securities, leaks about the possible size of the fine led to a collapse in the company’s share price and pushed the bank to the edge of the abyss. To this day, leaks continue to weaken the unloved competitor from Germany.

    On June 1, the websites of the Wall Street Journal and the Financial Times both posted bad news for Deutsche Bank at almost exactly the same time. They reported that the Federal Reserve (Fed) and the deposit protection fund Federal Deposit Insurance Corp (FDIC). had deemed Deutsche Bank’s U.S. operations to be in “troubled condition.” The astounding thing, though, is that the Fed made its decision a year ago and the FDIC at the beginning of 2018, but it was only months later, and then on the same day, that these damaging assessments of Deutsche Bank’s operations came to light.

    Coming as it did just before Trump declared trade war on the Europeans in the form of punitive tariffs on steel and aluminum, it came across as being a coordinated effort.

    A Deliberate and Targeted Manner?

    Insiders at the Bundesbank, Germany’s central bank, and at the Finance Ministry assume the crisis reports on Deutsche Bank were the result of a targeted leak intended to put pressure on the company and Germany. The bank’s American competitors have generally gotten off relatively lightly, these sources claim, suggesting that the U.S. authorities may have been sparing their institutions to provide them with a competitive edge. Given the amount of latitude the Justice Department has, the possible unequal treatment can’t be proven. Deutsche Bank did not want to comment on the matter.

    http://www.spiegel.de/international/world/donald-trump-making-life-tough-for-german-companies-a-1212271.html

    • Replies: @Thorfinnsson
  18. So what is the future for the 110 to 120 IQ semi spergy types with below average concientiousness? They cannot do sales or people type jobs, and they are too lazy for introverted things like coding.

    • Replies: @Mark G.
  19. AaronB says:
    @Thorfinnsson

    We can look at the struggles of China to produce effective jet engines for instance. They still haven’t caught up with the Russians, who in turn are behind the West.

    The Chinese struggle with jet engines, I think, because they are not very good engineers, and not because of the catch up effect.

    40 years after economic reforms, there are no world class Chinese engineered products, and all the various smaller Chinese states like Singapore and Hong Kong, which modernized earlier, are primarily involved in financial services and not engineering. There are no samples of great engineering from any Chinese community.

    Whatever combination of ability and personality are required for great engineering, the Chinese have conspicuously failed to demonstrate they have it, at least up until now.

    Brazil managed to develop effective jet engines, has it not? And the Soviets did, while under the same economic system as the China.

    Not all East Asians are good at engineering.

    • Replies: @Escher
    , @Thorfinnsson
  20. dfordoom says: • Website
    @inertial

    Yeah, you need a small number of smart people (not even necessarily in your nation) to invent and implement new automation. But the common users could be dumb, likely even dumber than before the invention.

    True. Good point.

  21. Sean says:

    Any genetic augmentation of IQ will likely first take place in these elite countries and/or jurisdictions, which will lock in their human capital predominance

    The intelligent elite within countries already have predominance, why should they allow a technology that removes their and their children’s advantage?. I think the seventeenth century Japanese elite choosing to halt firearm manufacturing and innovation gives one an idea what is likely to happen in the West. Don’t forget that these (high IQ) Western elites see biologically determined intelligence as a perniciously misleading idea by now, so there is a ready made moral case for banning enhancement. They could say it misses important aspects of real intelligence.

  22. i posted about this on here 10 years ago or so, and why ricardo’s ideas do not really apply to the world today. the strongest countries are better at everything – the weaker countries are not that good at anything, and can’t do any of the ricardo trade options.

    i don’t think ricardo was wrong when he was writing about this stuff 200 years ago, but his ideas come with certain assumptions and conditions that are not always accurate in all scenarios. and they’re not accurate anymore.

    not completely different from an AI economy versus a human one – what could the humans do that the robots would want? it quickly becomes almost all AI.

    the smarter countries are taking off and about to leave the other countries behind. if you look at GDP per capita, the difference is growing every year, not shrinking.

    • Replies: @Thorfinnsson
  23. “The Chinese struggle with jet engines, I think, because they are not very good engineers, and not because of the catch up effect. There are no samples of great engineering from any Chinese community.”

    definitely some quality electrical engineering out of chinese guys, even if they are diaspora chinese guys. particularly in electrical engineering for computer equipment. TSMC, guys at intel, nvidia, and so on, doing some of the important work in semiconductors. beyond that kind of stuff, yeah. not that good at engineering, relatively speaking. it’s 2019. china does not export a single car for sale to the US. this incredible fact seems to be overlooked by…everyone.

    i have a friend who supervises samsung’s QLED manufacturing operations in china. he goes over there every year, to make sure the chinese guys are not screwing it up. why samsung employs an american to supervise korean product output in a chinese factory is a separate question.

    have heard similar negative things from chrysler factory workers with regard to chinese supplies for automobile parts and raw materials such as steel. the chinese steel sucks, they all said. not like chrysler is a good company either, of course.

  24. SafeNow says:

    Here in California, I have observed a reverse-convergence. An observant friend quantifies at 15% the decline in proficiency/conscientiousness. In other words, the new, more relaxed standard of “get it basically right” is 85% of the prior performance level. PG&E recently acknowledged that their faulty power-line maintenance caused the tragic fires. However, I think they did 85% of the job, and could argue that this legally suffices. By analogy, a country doc is not held to the same standard of care that a Mayo Clinic doc would be. I would proofread this, but what the heck.

  25. Escher says:
    @AaronB

    Huawei is a world leader in telecom infrastructure. The Chinese seem to be doing cutting edge work in AI too (with creepy implications – social credit score and what have you)

  26. neutral says:
    @AaronB

    the American elites decision

    Let me correct you, it’s not American elites it’s simply (((elites))).

    • Replies: @Sean
    , @Thorfinnsson
  27. Sean says:
    @neutral

    I don’t think think any high IQ people including Jewish ones would be happy about their IQ advantage being wiped out by genetic engineering. I think in the West there will be furious attempts by the elite to stop it.

    • Replies: @DreadIlk
  28. @AaronB

    As Escher mentioned, Huawei is a global leader in telecom hardware (as is ZTE). China is also a technological leader in quantum communications and genetic engineering. In building the nation’s modern infrastructure China has developed extremely impressive civil engineering capabilities including, for instance, the factory mass production of skyscrapers by the Broad Group.

    The USSR acquired the complete designs, tools, and engineers responsible for several Junkers and BMW turbojet engines in 1945. The very big brained thinkers of Britain’s postwar Labour government also provided the USSR with the Rolls Royce Nene jet engine along with a license to manufacture it.

    • Replies: @AaronB
  29. @prime noticer

    Ricardo’s example applies where the factors of production are fixed. Hence the examples of wine and wool.

    Even in his day the factors of production had some mobility, but today insisting upon the validity of comparative advantage is absurd.

    • Replies: @Mikel
  30. @neutral

    The groundwork for the atrophy of America’s manufacturing sector was laid during the second Roosevelt term when the United States formally abandoned protectionism.

    I suppose Cordell Hull was a Jew…

    The first effects emerged in the 1950s when American motorcycle producers found themselves unable to compete with Italian and British ones. Nothing was done. By 1959 America had a trade deficit in steel.

    The most fateful decisions would be the 1962 decision to abandon the “Point of Peril Doctrine” during the Kennedy Round of GATT negotiations and of course the 1999-2000 decision to extend most favored nation status and sponsor WTO membership for the PRC.

    Plenty of Jewish culpability in 1999-2000 (and this was the one most harmful to the working class) but not the earlier decisions.

  31. AaronB says:
    @Thorfinnsson

    As Escher mentioned, Huawei is a global leader in telecom hardware (as is ZTE). China is also a technological leader in quantum communications and genetic engineering. In building the nation’s modern infrastructure China has developed extremely impressive civil engineering capabilities including, for instance, the factory mass production of skyscrapers by the Broad Group.

    This isn’t on the level of Germany, Japan, certain other European countries, or even South Korea. Genetic engineering is a life science, not really engineering, and very research intensive. 5G is an amalgamation of existing technologies, and not ingenuity driven. Ditto skyscrapers.

    Perhaps I shouldn’t have said they aren’t good engineers, but they aren’t first tier engineers.

    Maybe a respectable 2nd tier, with emphasis on implementation of large engineering projects utilizing existing technology that is widely available rather than creating novel applications, which actually suits the non-Japanese Asian ability profile very well.

    This is indeed impressive and a good place to be in, but isn’t on the same level.

    • Replies: @Thorfinnsson
  32. @AaronB

    China is at the same stage of its development that South Korea was in the 1990s. Do you remember Korean cars from that period?

    No, in general, China does not yet develop and produce first-class products. But there is not much reason to suspect they will not do so in the future.

    It’s not just about Japan either in Asia.

    South Korea is now one of the world’s most advanced engineering countries. The Koreans have cleaned the clocks of the Japanese in display manufacturing and shipbuilding. The Japanese have also been substantially forced out of the consumer electronics market. Does anyone buy Sony televisions anymore? Outside of electric rice cookers and microwaves, the Japanese don’t even compete in the appliance market abroad while Samsung and LG have become sales leaders.

    And while the robots in question are mostly Japanese, it is worth pointing out that South Korea now has the world’s highest robot density and its level as double that of Japan and Germany.

    • Replies: @AaronB
  33. songbird says:

    I thought it was globalist doctrine that “the world is flat.” And that the internet allows the Third World to compete on services. And that Africa is the next China, China’s China, and Djibouti the next Singapore.

    I guess they need to future-proof their ridiculous excuses.

  34. Bill says:
    @Thorfinnsson

    Germany’s industrial capacity wasn’t destroyed by the war.

    The Air Force has weirdly effective propaganda on this point. How is it that “everyone knows” German industry was destroyed by strategic bombing even though no such thing occurred?

    • Replies: @Thorfinnsson
  35. @Bill

    The Air Force itself is aware of this. While the study was flawed, the postwar United States Strategic Bombing Survey honestly admitted that German industry was not destroyed. Indeed, it admitted that one of the failures was to stop the huge surge in German production in 1944.

    The Air Force’s official line is that had the campaign continued longer that German industry would have been destroyed or at least rendered ineffective. Based on the success of the Oil Campaign this is likely accurate.

    Whether or not the Anglo-American decision to invest large resources into strategic bombing as opposed to alternate strategies (i.e. earlier invasion of Western Europe, or perhaps more focus on the Pacific War) was the correct decision is a more interesting question.

  36. The process “tools” used in semiconductor manufacturing are all made by American and Japanese companies except lithography, which is ASML, a Dutch company. All of the process equipment used to make displays are Japanese made (Screen, Anelva, Ulvac). China is at about the same development live as South Korean in the mid 90’s. This means they will make first rate technology in about 15 years.

    You talk to most Chinese technical people and they will candidly admit that they are still behind the curve and that they will take another 15 years to truly catch up technologically. Most Chinese people think it will take another 30 years for their economy as a whole to become truly “developed”, around 2050. Even the government itself has 2049 as the target date for China to be a developed country.

  37. Mark G. says:
    @Gummy bear

    I’m the 110 to 120 IQ semi spergy type with below average conscientiousness you describe. I work a government job. Everything has pretty much been computerized over the last 30 years but you still need people to input information into the computer and when people input the wrong information then you need other people with a slightly higher IQ to figure out what went wrong and to fix that and then someone with an IQ a little higher than that to act as supervisor. I’m at the figuring out what went wrong and fixing it level so I don’t need the people skills my supervisor has. We have lots of low IQ affirmative action hires and my job is basically cleaning up the messes they make.

  38. Thomm says:

    Meh…..obsessing too much over IQ leads to incorrect predictions. Remember that Ron Unz pointed out that Ireland had an IQ of 81 or so just sixty years ago. Now, Ireland has a higher GDP per capita than the UK.

    The only countries that are hopeless are ones that, as of now, have both a low per capita GDP *and* a low growth rate. For the most part, this is SS Africa (which includes Africa away from Africa, aka Haiti), and a few isolated basket cases like the ‘stans (where it is less about low IQ and more about various man-made problems).

    A country with low per capita GDP but a high growth rate will still escape before the factors mentioned in the article manifest. China today is where South Korea was in 1998 or so. India today is where China was in 2009 or so. VietNam and the Philippines also have high growth rates, and both are roughly on par with the Ukraine in GDP PPP per capita at this point.

    • Replies: @Mitleser
  39. AaronB says:
    @Thorfinnsson

    I’m extremely wary of extrapolating based on “trends”. And I’m extremely wary of saying things like country A is where country B was X number of years ago.

    These things are too abstract. Each specific country has a very unique ability and personality profile, leading to very specific strengths and weaknesses that go well beyond similarities in intelligence. And trends abrubtly reverse, or stall. Europeans, who have until recently been prolifically inventive, have recently expereinced a tapering off of innovation. 40 years ago, no one would have forecast this.

    I don’t lump all East Asians together. Having spent time with the Japanese and the Chinese, they strike me as extremely different peoples. I don’t believe for a moment that the Chinese will ever converge with Japanese engineering standards, just as the British are not as good engineers as the Germans despite both being Germanic peoples. I prefer a granular approach over an abstract aproach, and what I call “demonstrated ability” over speculative potential. (in the near term, in the long term Africans may become the new cognitive elite in future centuries, just as Northern Europeans overtook the ancient Medittereanean civilizations, totally unexpectedly. Long term trends are impossible to forecast).

    Is it possible the Chinese will develop into first rate enginners? Sure. Just as the poor student may suddenly blossom when he hits college. Its just unlikely. I actually know someone who was a deadbeat till his 40s, then started a successful business and became wealthy. But most people who are deadbits till their 40s die poor.

    Its not so much a question of intelligence as it is of personality, social priorities, social organization, and a bunch of other factors. Highest quality engineering requires a very specific temperament, and I would argue even very specific social organization.

    For instance, I would argue that the in Japan, the widspread availability of sex and booze for the high achieving salaryman, who can visit hostess bars multiple nights a week with his buddies, enjoy attractive young female companionship and indulge in extended drinking sessions, is compensation and reward for the incredibly long hours and hard work they put, and makes it possible. In short, a society must reward high level hard work if it wants to get it from its workers.

    People never think of these “soft” factors which are “irrelevan”, but I think they lay a huge role. A society is a series of interlinked “modules” that interact with each other in hard to map ways.

    My sense is that 40 or 50 years is enough to get a sense of what a country can do, where it will excel and where it will be deficient. Japan gave us a good idea of what it could do about 40 years after the Meiji Restoration. From a literally Medieval base, it was producing excellent products and defeating the Russians in that time period.

    At the same time, it was not coming out with revolutionary innovations, as the Western powers were doing in huge quantities during this time, demonstrating their limitations. The Chinese have been familiar with Western science from well before the 70s, and when they opened up finally, theyve had 40 years to show us what to expect. I suspect they have more or less peaked.

    The South Koreans also, starting from a hardscrabble base after the Korean War, in 40 years showed us more or less what they are capable of.

    Time will tell, and show us who is right. And soon, too, in the next 20 or 30 years, while all of us are still alive. I may be wrong, I have been hearing about the “future potential” of China for at least 2 decades. How it will very soon experience an explosion of innovatio and creativity. If in 20 years people are stil talking about the “future” of China, I think we will have our answer.

    We shall see.

    • Replies: @Thorfinnsson
    , @Hyperborean
  40. @Mitleser

    Mission accomplished.

  41. @AaronB

    China doesn’t need to converge with Japanese engineering standards in order to develop and create first-class products or innovate. The simple reason, of course, is scale. That would leave China has doing so less on a per capita basis than Japan, but still creating many great things.

    And there are possible reasons to suspect the Chinese won’t converge. Aside from cultural factors (even before either country modernized Japanese silks achieved a reputation for superior quality abroad), China will enjoy less access to other country’s markets and technology–harming its own efforts. Despite the tremendous successes of the past 40 years, China may also have a deficient economic model which will limit them.

    But the idea they’ve already peaked is dubious. When the economic reforms began they were as poor in absolute terms as the Soviet Union was in 1928 (to say nothing of relative terms).

    I don’t agree that the British are worse engineers than Germans. After the Germans caught up to the early British lead, both countries were closely matched for engineering prowess for decades with some sectoral differences (Germans in chemicals, Britain in ships and textiles). The Germans pulled ahead because of a string of bad decisions made in the aftermath of World War 2 by Britain.

    And there remains today very high-end, excellent British engineering still. The ARM architecture that underlies all our smartphones is British. The Eurofighter Typhoon owes much more to the British Aerospace Experimental Aircraft Programme than the Messerschmitt-Bolkow-Blohm TKF-90. The Airbus A380, the “Pride of Europe”, first took off with British wings and British engines.

    • Replies: @AaronB
    , @Thomm
  42. DreadIlk says:
    @Sean

    Or just to acquire it for them selves.

  43. AaronB says:
    @Thorfinnsson

    I would agree that the British are not innately worse engineers than the Germans, and even today produce some truly excellent enginnering, as does the United States. But a country truly excelling at engineering as a whole also depends on on social and cultural factors, part of wich are the bad decisions you allude to.

    I know there was a period when made in Britain was synonymous with quality. My father mentioned this to me as a kid. But weren’t the Germans ahead of Britian in engineering even in the 19th century? My personal sense is that the Brits are a bit too anarchic and individualistic to be a country renounced for engineering as a whole, although it clearly can and does have standout sectors.

    I am agnostic on whether the Chinese are innately worse engineers than the Japanese, but as a social unit, no Chinese community, as opposed to individuals, have displayed marked aptitude in this area.

    As for the issue of scale, you are correct. But my point was partially that if China, as a country, as a comunity, was capable of producing excellent engineering in some sectors even, than 40 years should be enough. I am unconvinced by Huawe and ZTE, despite the fanfare. I think relative wealth is the wrong metric. Even if China was as poor as the Russians in 1928, they were familiar with science for over a decade. Again I refer to my example of Japan after the Meiji.

    Time will tell, time will tell.

    • Replies: @AaronB
    , @Thorfinnsson
  44. Thomm says:
    @Thorfinnsson

    China doesn’t need to converge with Japanese engineering standards in order to develop and create first-class products or innovate.

    China will certainly converge to Taiwan’s level of prosperity, which is not that much lower than Japan’s.

  45. AaronB says:
    @AaronB

    Even if China was as poor as the Russians in 1928, they were familiar with science for over a decade.

    Over a century, sorry.

  46. @AaronB

    Germany was ahead of Britain (and everyone else) in chemicals in the 19th century. Not anything else.

    Some of Britain’s bad decisions, especially postwar business leaders, are surely explained by culture. But the decision to socialize huge swaths of the economy was arguably bad luck. Germany’s Social Democrats would’ve done the same thing if they’d won the postwar elections.

    Chinese communities in the past invented paper, gunpowder, and the magnetic compass.

    And Japan 40 years after the Meiji? That would be the year they invented MSG. Japan had an international reputation for badly made products (other than silks) until the 1970s and were accused of being mere copycats until quite recently.

    • Replies: @AaronB
  47. @AaronB

    Japan gave us a good idea of what it could do about 40 years after the Meiji Restoration. From a literally Medieval base, it was producing excellent products and defeating the Russians in that time period.

    Tokugawa Japan had fallen behind Western Europe, but they still had good roads, high literacy, a developed systen of commerce and artisan production, a sense of national-political unity, etc.

    “Exit Asia Enter Europe” (脱亜入欧) was a lot easier for Japan than other nations because they already had a good foundation.

    To simplify, Japan was attempting to overcome “a hundred years of development in fifty years”, whereas the other non-European countries were trying to leap forwards centuries.

    • Replies: @AaronB
  48. AaronB says:
    @Thorfinnsson

    Don’t knock MSG 🙂

    Most areas in which Japan excelled from the 80s on weren’t really around yet. And the Japanese genius lies in optimizing existing technologies, not inventing new ones.

    But by 1895 Japan was a serious military power and joined the imperialist game, a mere 27 years after Meiji, and they defeated Russia’s navy a mere 10 years later. By WW2 they had the best air fighter.

    40 years after Meiji, starting from a base of far less familiarity with science and technology than China in 1978, Japan appears to have accomplisehd more.

    But you seem to be correct that Japanese engineering only really took off after 1920, 52 years after Meiji, and then again only after the devastating destruction of WW2, where it took them a mere quarter century to begin to establish an engineering edge.

    So we will see with China. You may be right.

    Lets give them another 20 years. If the great China explosion hasn’t happened by then…

    But it will not be a great explosion. At best, it will be optimizing, refining, extending, existing technologies, and the world is going through a great stagnation.

    • Replies: @Thorfinnsson
  49. AaronB says:
    @Hyperborean

    I think its the opposite.

    Japan in 1868 was feudal, a Medieval soceity. Western science and technology was utterly alien to them. The whole mode of thought was alien.

    China in 1978 had more than a century of close familiarity with Western technology and science. In fact China’s poitical organization was recreated based on Western poitical theory.

    Progostications about the future are fun, and all sorts of facts can be trotted out pro and con any position one cares to hold. Then reality happens.

    There is a saying, “the best way to make God laugh is to make a plan”.

    • Replies: @Hyperborean
  50. @AaronB

    I like MSG. I have Accent in my pantry and often use it in my cooking. The fear that MSG is dangerous is FAKE NEWS. Thank you Japan.

    Japan’s modernization and early military achievements are impressive, but shouldn’t be romanticized too much. It first defeated a corrupt and collapsing China, and then it defeated a basketcase Russia operating thousands of miles from its heartland. For an example of what Russia with its act together could do to Japan, I encourage you to look into Khalkin Gol and Operation August Storm.

    The Zero was NOT the best air fighter. With well trained pilots it happened to be superior to other fighters it faced in the early Pacific War–the F4F Wildcat, the P-40 Warhawk, the Hurricane, and obsolescent types. It was inferior to fighters operating in Europe at the time such as the Spitfire, Me-109, Fw-190, and Yak-1. And its tactical superiority over its early antagonists masked some very dangerous design deficiencies which the Japanese abandoned in later designs.

    The interesting Japanese technologies of that time were the Long Lance torpedo, unquestionably the world’s most advanced torpedo, and some of their radial aircraft engines–especially the Nakajima Homare (which had an extraordinarily small frontal area).

    Western science and technology was actually not totally alien to Japan in 1868. Though the Tokugawa Shogunate pursued a policy of isolation, it also maintained an eye on Western developments through its limited trade with the Dutch at Nagasaki. The Japanese developed a discipline they called “Dutch Learning” (Rangaku) through which they monitored Western developments in science, technology, medicine, and so forth. This led to indigenous technological developments in for instance mechanical clocks, which today are consider part of Japan’s engineering heritage. The long, careful observation of Western development helps explain Japan’s early and successful modernization.

    There was also a considerable amount of indigenous development unrelated to the West within the Shogunate. The Japanese independently developed statistics and options contracts for instance.

    • Replies: @AaronB
    , @AaronB
  51. @AaronB

    I am not making predictions about either negative or positive indications regarding the future course of Chinese development, I am merely noting that Japan was already quite a developed economy by the time the Meiji Emperor ascended the throne in 1868.

    Meiji also came to power when ideas of reform in Japan had already started gestating for a generation.

    A short article that doesn’t cover everything but is decent under the MORE tag:

    [MORE]

    The Legacy of Autarky and the Proto-Industrial Economy: Achievements of Tokugawa Japan (1600-1868)

    Why Japan?

    Given the relatively poor record of countries outside the European cultural area — few achieving the kind of “catch-up” growth Japan managed between 1880 and 1970 – the question naturally arises: why Japan? After all, when the United States forcibly “opened Japan” in the 1850s and Japan was forced to cede extra-territorial rights to a number of Western nations as had China earlier in the 1840s, many Westerners and Japanese alike thought Japan’s prospects seemed dim indeed.

    Tokugawa achievements: urbanization, road networks, rice cultivation, craft production

    In answering this question, Mosk (2001), Minami (1994) and Ohkawa and Rosovsky (1973) emphasize the achievements of Tokugawa Japan (1600-1868) during a long period of “closed country” autarky between the mid-seventeenth century and the 1850s: a high level of urbanization; well developed road networks; the channeling of river water flow with embankments and the extensive elaboration of irrigation ditches that supported and encouraged the refinement of rice cultivation based upon improving seed varieties, fertilizers and planting methods especially in the Southwest with its relatively long growing season; the development of proto-industrial (craft) production by merchant houses in the major cities like Osaka and Edo (now called Tokyo) and its diffusion to rural areas after 1700; and the promotion of education and population control among both the military elite (the samurai) and the well-to-do peasantry in the eighteenth and early nineteenth centuries.

    Tokugawa political economy: daimyo and shogun

    These developments were inseparable from the political economy of Japan. The system of confederation government introduced at the end of the fifteenth century placed certain powers in the hands of feudal warlords, daimyo, and certain powers in the hands of the shogun, the most powerful of the warlords. Each daimyo — and the shogun — was assigned a geographic region, a domain, being given taxation authority over the peasants residing in the villages of the domain. Intercourse with foreign powers was monopolized by the shogun, thereby preventing daimyo from cementing alliances with other countries in an effort to overthrow the central government. The samurai military retainers of the daimyo were forced to abandon rice farming and reside in the castle town headquarters of their daimyo overlord. In exchange, samurai received rice stipends from the rice taxes collected from the villages of their domain. By removing samurai from the countryside — by demilitarizing rural areas — conflicts over local water rights were largely made a thing of the past. As a result irrigation ditches were extended throughout the valleys, and riverbanks were shored up with stone embankments, facilitating transport and preventing flooding.

    The sustained growth of proto-industrialization in urban Japan, and its widespread diffusion to villages after 1700 was also inseparable from the productivity growth in paddy rice production and the growing of industrial crops like tea, fruit, mulberry plant growing (that sustained the raising of silk cocoons) and cotton. Indeed, Smith (1988) has given pride of place to these “domestic sources” of Japan’s future industrial success.

    Readiness to emulate the West

    As a result of these domestic advances, Japan was well positioned to take up the Western challenge. It harnessed its infrastructure, its high level of literacy, and its proto-industrial distribution networks to the task of emulating Western organizational forms and Western techniques in energy production, first and foremost enlisting inorganic energy sources like coal and the other fossil fuels to generate steam power. Having intensively developed the organic economy depending upon natural energy flows like wind, water and fire, Japanese were quite prepared to master inorganic production after the Black Ships of the Americans forced Japan to jettison its long-standing autarky.

    http://eh.net/encyclopedia/japanese-industrialization-and-economic-growth/

    • Replies: @AaronB
  52. DreadIlk says:

    Karlin’s comments section the best comments section. Every time there is an esoteric discussion I learn a shit load of interesting facts that I never heard before. For example how Japan was well positioned to take on Western technological advances.

  53. Mitleser says:
    @Thomm

    Ireland is a tax haven, an outlier.

    2. Labour arbitrage is falling in importance for labour intensive manufacturing. It is now at levels not seen since the 1990s. This is bad news for poor countries given that manufacturing has been the traditional path to wealth unless A) you’re tiny and oil rich or B) you’re a tax-haven or C) you’re a city-state. But those are outliers.

    • Replies: @Thomm
  54. Mikel says:
    @Thorfinnsson

    Even in his day the factors of production had some mobility, but today insisting upon the validity of comparative advantage is absurd.

    Ricardo’s law of comparative advantages was probably good enough for his time but today economists defend free trade more on principles of competitive advantage, under which Ricardo’s seminal corollary continues to hold pretty well. Hence the intensification of international trade in a continuously growing global economy.

    For the American consumer it is advantageous to have China produce most manufactured goods, that they can thus purchase cheaper, and have the US manufacture airplanes, software and entertainment services. Comparative/competitive advantages lead to this set of geographical production choices and they improve the overall consumption possibilities.

    By the same token, you can grow corn in California and develop complex enterprise software in Iowa but comparative/competitive advantages lead most investors to choose the opposite alternatives and Ricardo’s proposal of national/regional specialization continues to hold in the general case.

    • Replies: @Mitleser
  55. AaronB says:
    @Thorfinnsson

    Agree on MSG, and I’m glad you see the light.

    On another thread, it’s been revealed that glutamate is actually an IQ enhancer, like nicotine – everyone should take note.

    The rest of your comment is interesting, and I did not know some of those details. Thanks.

    As for Japanese familiarity with Western science, true, but Japan as a whole did not seriously engage with it on a large scale until Meiji. I don’t think casting a watchful eye on developments through a handful of Dutch, to whom only a small number of scholarly Japanese were allowed access, really counts.

  56. AaronB says:
    @Hyperborean

    I’m sure that played a role, but I don’t think Japan in 1868 was more advanced in infrastructure than China in 1978.

    Surely China had a better base, at that time, from which to fully modernize. It was already an industrial country.

    I think the key factors were Japan’s willingness to emulate – a lack of stupid pride, in a sense, which paralyzed China. And continues to be a flaw in the Chinese character. And a sense of flexibility and willingness to adapt, which is probably easier for smaller nations.

    And finally, its culture of single minded pursuit of a goal, and willingness to make tremendous sacrifices for it.

    • Replies: @Hyperborean
  57. AaronB says:
    @Thorfinnsson

    For an example of what Russia with its act together could do to Japan, I encourage you to look into Khalkin Gol and Operation August Storm.

    This is also true. Japanese martial prowess is often overstated. It is forgotten how poorly the Japanese did against the Russians on land, and iirc, when American forces attacked well defended and fortified Japanese held islands in the Pacific War, this should have resulted in a casualty ratio of 3-1 in favor of the Japanese, who were the defenders, but often the casualty ratio favored the Americans, the attackers.

    I think Iwo Jima was like 18,00 Japanese dead vs 6,500 Americans or thereabouts.

  58. “By 1959 America had a trade deficit in steel.”

    this was mainly due to bessemer versus arc furnace steel. the US industry was mainly bessemer operations that had been going for decades by 1945, whereas the axis scientists had developed arc furnace. after much of the axis industrial capability was destroyed by 1945, they rebuilt immediately into arc furnace steel, and new plants outside the axis which never had much steel also built new arc furnace operations. while the US continued with bessemer steel, unwilling to pay to change over everything. that competition didn’t last long. i grew up in pittsburgh, always wondering what happened, it wasn’t until later, when i was older, and smarter, that i realized it was mostly a tech thing, and less of a trade thing.

    US has similar issues in other areas today. aluminum, lead, uranium production. casting huge steel parts. and many others i’m sure. where US companies just didn’t want to pay to keep up with the rest of the world. in other industries it was other things. over regulation chased them out of building commercial nuclear reactors, where they’re behind. other stuff is harder to explain, without getting to lawyer overkill, like why it costs 5 million dollars to build 1 mile of highway now, making it nearly impossible to build any new roads or rails or bridges.

  59. Mitleser says:
    @Mikel

    For the American consumer it is advantageous to have China produce most manufactured goods, that they can thus purchase cheaper, and have the US manufacture airplanes, software and entertainment services.

    What if China chooses to produce most manufactured goods and airplanes, software and entertainment services?
    Reminder that Boeing has recently opened a plant in the PRC.

    • Replies: @Mikel
  60. Thomm says:
    @Mitleser

    Ireland is a tax haven, an outlier.

    You are not making the point you think you are.

    You are effectively saying that since Ireland had an IQ of 81 in 1960, it would not have progressed if it had not been a tax haven.

    This is obviously not true. Being a tax haven made it more prosperous than the UK, but without tax-haven status, it still would have been at parity with the UK.

  61. @AaronB

    I think the key factors were Japan’s willingness to emulate – a lack of stupid pride, in a sense, which paralyzed China. And continues to be a flaw in the Chinese character. And a sense of flexibility and willingness to adapt, which is probably easier for smaller nations.

    While Maoist lunacy surely didn’t do many favours, I still think there are many echoes of the national characteristics that the missionary Arthur Henderson wrote about in Chinese Characteristics (1894), a book that despite Henderson’s professed sympathy for the Chinese is nevertheless quite critical on many levels.

    My father teaches Chinese university physics students and together with my own experiences with Chinese high schoolers I have based the impression (generalising a bit) that many of them are very, very good at ‘grindable’ activities, which works very well until they hit a certain plateau and then there are a large minority who simply fail.

    But they have difficulty when there are no formulaic answers or when independent evaluation is required. They may be able to overcome it, but for now this is a weak point.

    But it could worse, my father told me that when he was a student the Chinese foreign students would often spend most of their time simply copying the available books to take back it to the PRC.

    • Agree: AaronB
  62. Mikel says:
    @Mitleser

    What if China chooses to produce most manufactured goods and airplanes, software and entertainment services?

    It is not up to the Chinese to decide what they can produce in their territory and then sell to the US consumers. That decision is taken by private companies and ultimately by their customers, who decide if they will buy the goods offered to them by those companies or look elsewhere. Boeing may decide to assemble some stuff in China but I don’t see the Chinese replacing the entertainment production of Hollywood or American singers and artists any time soon.

    Besides, as the comparative advantage theory explains, it is not rational for the Chinese to try and produce everything. They make more money by producing the goods where they have the biggest advantage.

    More importantly perhaps, just do the exercise of having a look at your monthly budget and reviewing where you really spend your income: housing, groceries, utilities, loan payments, insurance, healthcare, transport, leisure, travel,… Only a small fraction of those expenses go to goods produced in China. If the Chinese managed to increase the size of that small fraction it would be by offering cheaper products and services of a similar quality, which would leave more disposable income in your pocket. When you spend that extra money, you will be again using most of that extra income on goods produced in your country. This is how we have increased our consumption of Chinese goods while at the same time continuing to enjoy economic growth and reduce domestic unemployment to historic lows (in the major Western economies).

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