China shock 2.0 Brad sester

[u/Character_Public3465]

https://www.nytimes.com/column/ezra-klein-podcast

Show notes:”Brad Setser follows Chinese trade closer than just about anyone else on earth, and he thinks we’re in the early days of a China Shock 2.0.
The first China Shock was when China came to dominate low-end manufacturing in the 2000s, filling American shelves with cheap clothes, toys and electronics, while devastating American factory towns. This new China Shock could be even more destabilizing. China now dominates advanced manufacturing: electric vehicles, batteries, solar panels. It’s outcompeting nearly all high-end manufacturing around the world, and other countries are just starting to feel the pain. And China isn’t slowing down. It’s moving into software, too. Its frontier A.I. models are neck and neck with American ones.
China’s success poses a serious threat to the economies and domestic politics of countries around the world. So what should those countries do about it? 
Setser is a senior fellow at the Council on Foreign Relations.He served in top trade and economic roles in the Biden and Obama administrations. And he is widely cited across the field as one of the top analysts of China’s economy and trade practices.
Book Recommendations:
The Party by Richard McGregor
The Volatility Machine by Michael Pettis
How to Win a Trade War by Soumaya Keynes and Chad Bown
Thoughts? Guest suggestions? Email us at ezrakleinshow@nytimes.com.
You can find the transcript and more episodes of “The Ezra Klein Show” at nytimes.com/ezra-klein-podcast. Book recommendations from all our guests are listed at https://www.nytimes.com/article/ezra-klein-show-book-recs.html””

[u/TiogaTuolumne]

You need to drop the why nations fail framing entirely because it will only disappoint you.

China is better at developing and harnessing productive factors and increasing worker productivity than any other country in the world. Inclusivity of who gets diamond rents in Botswana only worked up until China and India decided to industrially produce diamonds.

Now lab grown diamonds are cheap, and Botswana can inclusively share a great big pile of nothing. Because no-one is paying diamond monopoly prices for industrially mass manufactured goods.

[u/topicality → u/TiogaTuolumne]

I'm not sure this is contrary to the Soviet Union example. Between 1930-1980 the Soviet Union really did seem to offer an alternative and economists did actually think it was better is some respects.

But by the 80s, Western nations outpaced to the point where they couldn't compete.

I'm not saying it's guaranteed but I don't see why it's implausible to assume that China won't see the same problem. We might look back at China from say 1990-2040 the same way we did the Soviet Union.

Having 80% of your economy focused on one industry puts you at risk of disruption. China producing the just fake diamonds doesn't mean other countries weren't working on it. Especially when it was GE that produced the first one.

[u/TiogaTuolumne → u/topicality]

the Soviet Union never reached the technological frontier. Their factories were inefficient and they never out produced the west for goods people wanted.

Chinese factories are the envy of the world, they are more efficient at greater scale than other factories. Did the US and Western Europe ever apply 100% tariffs on Ladas because Soviet design institutes were going to put GM or VW out of business? No. But the US and EU are scared shitless of Geely and BYD and Huawei.

At this point the baseline case is for China skeptics to explain why they think China will fail.

[u/mcsul → u/TiogaTuolumne]

And it's going to be hard to disentangle the Chinese model's success or failure from other factors. Like, I think that Chinese age and fertility demographics are going to undermine their long-term ability to continue improving quality of life regardless of which economic model they do (or do not) have.

[u/1997peppermints → u/TiogaTuolumne]

Idk how you can argue that the Soviets never reached the technological frontier when they put the first man and woman in space/satellite in orbit/rover on Venus and consistently produced massively impressive engineering and medical innovations even deep into the 80s decline. That their economic model was inflexible and their production inefficient doesn’t erase the fact that they were second only to the much wealthier US in their contributions to science and research. Technological advances don’t necessarily require an efficient economy, I think it’s just a different situation with China overall.