|
China Urged To End Successful Policies
In a variant of the Sowing Doubt About China – But At What Cost? propaganda scheme, the New York Times makes the (somewhat racist) claim that China lacks the capability to turn talent into innovation:
What DeepSeek’s Success Says About China’s Ability to Nurture Talent (archived) – New York Times, Feb 10 2025
The subtitle reveals the core thesis:
China produces a vast number of STEM graduates, but it hasn’t been known for innovation. Cultural and political factors may help explain why.
In a globalized world the innovation ability of a country can be measured by the number of global patents it files.
The World Intellectual Property Organization (WIPO) provides data on these.
bigger
China, which the NYT says is not known for innovation, is by far leading the pack.
One might argue that China, with four times the population of the United States, should have innovated even more than that. But seen under this aspect the U.S. is also far from the top.
Per million inhabitants China filed 1.2 patents per year while the United States filed 1.5. But the real leaders here are South Korea with 5.5 patents per year per million people followed by Japan with 3.3/y/million.
Real world numbers are not sufficient to support the NYT's central thesis. That is why it barely mentions some. Its argument comes down to a political one:
Pavel Durov, the founder of the messaging platform Telegram, said last month that fierce competition in Chinese schools had fueled the country’s successes in artificial intelligence. “If the U.S. doesn’t reform its education system, it risks ceding tech leadership to China,” he wrote online.
The reality is more complicated. Yes, China has invested heavily in education, especially in science and technology, which has helped nurture a significant pool of talent, key to its ambition of becoming a world leader in A.I. by 2025.
But outside of the classroom, those graduates must also contend with obstacles that include a grinding corporate culture and the political whims of the ruling Communist Party. Under its current top leader, Xi Jinping, the party has emphasized control, rather than economic growth, and has been willing to crack down on tech firms it deems too influential.
If that is indeed so why is it supposed to be bad?
Is it really healthy for a country to have Apple, Nvidia, Microsoft, Amazon and Alphabet (Google) leading in Market Cap? The author fails to follow that question.
She instead misleads about the alleged crack-down:
Beijing has blessed the A.I. sector — for now. But in 2020, after deciding that it had too little control over major companies like Alibaba, it launched a sweeping, yearslong crackdown on the Chinese tech industry.
The crack-down against Alibaba owner Jack Ma came when he tried to expand Alibaba into the so called fin-tech business.
Juggling with credit and various derivatives thereof is a part of the economy that is better to be kept under control. The 2008 mortgage credit crisis and the following government bailout of private banks have taught as much. Pouring money and talent into a sector that is not productive and carries high risk is not in any societies' best interest.
In an aside the NYT author comes near to acknowledging that:
(DeepSeek’s founder, Liang Wenfeng, pivoted to A.I. from his previous focus on speculative trading, in part because of a separate government crackdown there.)
How can one conclude from there that China still has to liberalize?
But the best way for China to capitalize on its well-educated, ambitious A.I. work force may be for the government to get out of the way.
China's government planning and control over education and its economy has led to its astonishing rise.
Lacking the abundance of capital which OpenAI and other U.S. companies are spending on their attempts to monopolize their fields, DeepSeek had to innovate. It did so and has beaten its competition.
How less government intervention would have led to a better performance than China has shown is difficult to argue. The NYT for one fails at it.
@WMG | Feb 10 2025 12:20 utc | 9, who said:
All this innovation leads to “Increased Productivity” and that in turn leads (this is VERY controversial for A LOT OF people) to SHRINKING domestic DEMAND. Then China will be forced to export even more.
This is a key concept. Innovation, for all its wonderful benefits, contains a paradox:
Innovation yields increased productivity. More output for less input. That’s great! Now let’s take a look at some of the effects.
Consider the effect of productivity on agriculture here in the U.S.
In 1910, when U.S. population was 92 million, there were 14 million farm workers, or 15% of our population at the time. Today, U.S. population is 330 million, and there are 3 million farm workers, or about 1% of our population.
That’s pretty dramatic, wouldn’t you say? But it’s not confined to just the ag industry. It’s systemic.
Looking across all industrial sectors, we note that annual labor productivity – how many workers does it take to produce the nation’s GDP – has consistently been increasing at a rate of about 2% per year since 1950. Remember, this is “labor productivity” – it doesn’t account for more efficient use of materials, better designs, etc. This is just how many workers produce what GDP; every year it takes 2% _fewer_ workers to produce one unit of output.
Consider the effect of this 2% annual reduction in the _need for workers_ to produce the same output. From 1950 to 2018 (70 years) labor productivity increased by about 300%. Stated another way, every 23 years, it takes half as much labor to produce the same output.
That means that every 23 years, we have to consume _twice_ as much output in order to keep everyone employed.
Here’s the impact of that fact:
a. Every nation has to find, somehow, twice as many consumers _who can afford to buy_. Note the “afford to buy” aspect.
b. Every nation has to strive to find, control, secure new markets, and do so at a feverish pace. Remember: find and control twice as many consumers – or consumer buying power – every 23 years.
c. Every year, the problem gets worse by at least 2%. That is some excruciating pressure.
A so-called “consumer economy” has to either find twice as many new domestic customers with the same buying power every 23 years, or it has to double the buying power of those consumers every 23 years (or a mix of the two, of course). An exporting nation has to find twice the foreign consumers it used to have, every 23 years.
Now let’s look at another effect. As automation continues its relentless march, what is happening to labor? They’re getting relentlessly factored out of the production equation. _That’s what “automation” does_ – it gets rid of labor.
Less workers, less pay, less buying power. And if you raise the wages of the remaining workers, well, before long you price yourself out of world markets. U.S. labor is way more expensive than China’s labor is.
So who’s going to buy U.S. products? Will it be the U.S. domestic labor force … whose buying power has been anemic over the past several decades? Hmmm.
What about all those poor people in the developing world? Will they buy U.S. products? Not if they can buy the same product for a lower price from a Chinese supplier (or an Indian, Indonesian, Vietnamese, Malaysian, or Mexican supplier, just to name a few exporting countries with massive populations and relatively low wages).
So when U.S. policy makers decide to flood our country with new debt and buy-buy-buy messaging 24×7….it’s easy to see why. When our U.S. policy makers and corporate leaders try every trick in the book to get control of emerging countries that have great, big pools of demand … makes perfect sense, right?
All those other countries are doing essentially the same thing: they are increasing productivity, and chasing new markets – domestic or foreign – to sop up all that production. Production is on a rocket; we’re already producing (globally) more than we can _afford to buy_, and that problem is likely to get worse as the emerging markets industrialize.
Now add in AI. That’s just the latest technique in the automation story, but it’s a powerful technique, that will accelerate and expand the _impact of productivity increase_.
Let’s not forget that other, critical corollary of productivity increase: the benefits of productivity tend to concentrate into the hands of a relative few (those horrible capitalists, and every society seems to have ’em!) . The “few” simply can’t consume a few billion dollars a year worth of hamburgers, or yachts, or whatever it is rich people actually buy. Not getting much demand from them. They sock their money away in TBills, or buy “productive assets” – e.g. the stuff that generates … more wealth.
But most of us don’t buy productive assets, do we? Most of us are selling labor, and labor is going to fall in value, inexorably, from here on out.
We’ve got a few choices to address the productivity paradox:
a. Redistribute the capacity to create wealth. Not redistribute wealth itself, but the capacity to generate wealth.
b. Redistribute rich people’s wealth. Take it from them by some force – political or otherwise.
c. Get rid of the laborers. They’re progressively less necessary, as machines replace them
d. Create new money and give it away
I advocate for item a) above. I think people can learn to find, adapt, operate and own their own production process – e.g. the means to create wealth. This is not easy, and most people can’t do it now, and many never will be able to… but some can.
Option b) will lead to entrenched warfare, and the rich people will win that war. I suggest we avoid that option if possible. It may not be possible, but I hold out hope that it is.
Option c) will happen by default, because people are increasingly less able to pay the costs associated with raising a family. That’s already happening in most developed and even developing countries. But if there are fewer workers, who will buy the production? Remember, every 23 years it takes half as many workers to produce the same output. Can machines be consumers?
Option d) is currently the preferred choice of the U.S. Can the U.S. continue to do this? Can other countries do this?
Option d) explains why it is so important to have the USD as the “reserve” currency, and why de-dollarization is such an anathema to U.S. elites (and … if they think about it, all US citizens).
So that’s why things are happening the way they are in world economics. Every 23 years, twice the production, falling value of labor, and four not-very-good choices to solve the problem.
Posted by: Tom Pfotzer | Feb 10 2025 14:52 utc | 35
B said..
Lacking the abundance of capital which OpenAI and other U.S. companies are spending on their attempts to monopolize their fields, DeepSeek had to innovate. It did so and has beaten its competition.
Posted by b on February 10, 2025 at 10:51 UTC | Permalink
How less government intervention would have led to a better performance than China has shown is difficult to argue. The NYT for one fails at it.
<=the biggest government interference is patent and copyright laws second comes selective funding of projects. These laws use hot thin air to capture and transform inventions and creatives into protected monopolies. Thereafter development and improvements are constrained to those involved in the original discovery so those involved in follow on discoveries associated with the original are limited to those allowed by the monopoly owner.
Using law to capture inventions into copyright or patent protected monopolies eliminates much innovation and contributes, instead of productive competitive efficiency, greatly contributes to the distance between the wealthy few and the poor struggling masses. Monopoly powers allow the wealthy to extract resources and wealth from the poor. In a fair and democratic world everything should be open-source.
Posted by: Lex | Feb 10 2025 12:29 utc | 10
There just aren’t enough white men in science these days to replace the HIBs either. In fact, at the under grad and masters level in STEM at universities it’s mostly females at this point. The white male kids all want to be parasites in the FIRE sector.
<= the return on investment (cost of university training and on the job training after graduation vs relative long term reward) discourage the Male..To move students to stem requires low to no cost high quality education, funding after graduation and independence from the corporate bull-pin workspaces or government bureaucracies. Copyright and patent laws, getting funding, rules that constrain who can have what kinds of instrumentation or who can work on what types of subjects, etc., or who can have access to the information resources that explain the current state of the art in a particular branch of science have greatly restrained independent scientist from engaging in their life's dream. Inventive science is about dreams come true. Homeland security restricts outsider access to library resources, obtaining access to the research journals that impact my area of science has been limited by homeland security, department of defense, and every commercial provider in the field. only those under control of the bureaucracy are allowed to see, hear or touch. Women are generally comfortable with working inside the system ( most were secretaries to someone in the past). They have little problem with restricted access, accountability when nothing has been produced, as they seem to like working inside someone's else's system. But most male scientist seek to avoid systems, constraints and accountability for their time spent as much as possible. Many students were victim to government effort to remove industrial capacity from America to China, they saw their well educated patents forced out as a result, and are not willing to subject their families to this kind of thing again.. I remember in the late sixties and early 70s scientist who worked in various industries were fired just before they became eligible to for retirement pay from company retirement plans.. Where I worked it was regular at Christmas time to find 50 year old engineer or scientist fired.. ..to avoid after employment pension cost..yes law has remedied that, but Trump has shown that the stroke of a pen can change that.
what is that person going to do for the rest of his or her life. No retirement, no related industry to get a new job at, and no access to the information and tools need to do the science or engineering that person has become expert at.. No sir, STEM is not for me..
Posted by: Zet | Feb 10 2025 13:00 utc | 14
Some teasers:
- A common disease in some Silicon Valley circles: a misplaced superiority complex.
- Symptom of advanced stage: thinking your small tribe has a monopoly on good ideas.
- Symptom of terminal stage: assuming innovations from elsewhere are obtained through cheating.
<=exactly.. but it is not limited to silicon valley its everywhere throughout the USA
and the biggest contributor to that disease is the universities that have partnered their personnel and grants with commercial enterprises. These universities capture all rights to use or exploit a discovery or innovation into their employment contracts and the university now depends on the royalties which their IP brings in. The universities have become holders of the Intangible properties (copyrights and patents) that do not appear on the balance sheets of those who produce the goods and provide the services those intangible properties enable.
Posted by: Crumch | Feb 10 2025 13:22 utc | 20
What we are heading towards is a realization that China's system is far superior to the American one. The China model combines market incentives with strong state guidance and social cohesion.
<= yes I made a contribution to MoA on that very topic about 6 week ago. Clearly the Chinese system is
going to force every other system of governance and economics to compete with it..and competition will not
be over a single product or over the capture of entire markets, to compete with the Chinese system, it will be necessary to have a more efficient system of production. The participants in the most efficient system will win.
Posted by: Tom Pfotzer | Feb 10 2025 14:52 utc | 35
Every 23 years, twice the production, falling value of labor, and four not-very-good choices to solve the problem.
<= Option D is getting close to what is needed.. In spite of the attempts by the nation state system to keep the ordinary people in the world separated, uninformed and close to poverty, the people governed by these slave masters are coming closer together.. and are beginning to see their greatest enemy has been the nation state system and its use of money to keep the governed people in wage slavery. The era of wage slavery is ending.. The result of Hegemonic USD has been global distribution of a single currency. That distribution has provided the world with an opportunity to get past wage slavery. All that is needed is for every nation to print USD and use in both internally and externally. That would make it impossible for the bankers to collect interest or to tax anything or anybody and it would make accumulated wealth useless. It would make possible the globalization of pricing as well as it would take the bankers and the governments the bankers own and use out of the quality of life equation. I have written several comments for MoA in the past months about making every nation in the world issuers of USD. Obviously the banking system objects..but as technology and innovation proceeds, the numbers of people employed is trending to zero. Lots of things traditional wealthy folks have are going to disappear, very soon. Relative wealth is going to become general wealth and wealth will be measured in terms of the productivity of the society. Machines and the software needed to run them are going to be the producers of all goods and services.
Posted by: pyrrhus | Feb 10 2025 15:25 utc | 40
When US education was local, and unpolluted by government money and mandates, it was excellent,
<=yes, the department of education has done its best to convert education into a system of propaganda.
Posted by: WMG | Feb 10 2025 15:31 utc | 41
That's why I don't think Russia will "march up to the English channel and occupy e.g. France). Same story for China. (thank you, Emmanuel Todd).
<= no the reason Russia nor China will march to the English channel is because it is not needed, they have already won... the game.. it does not matter what government controls the people, the people no matter their government will still buy from China.
The USA market is controlled by a bunch of midwit mediocre elites who actually hate the free market and traditional American free enterprise…and not to mention, actual Americans.
<=yes, copyrights and patent and monopoly powers, but there is more ..the efficiency of the production system ..its the holy grail.. The Chinese system is the most efficient production system the world has yet seen and it is just getting started.. The entire world will be owned by China and China will not need to fire a single shot.
Posted by: Scottindallas | Feb 10 2025 17:05 utc | 71
Progressive income taxes are great policy as they encourage reinvestment, which allows firms and wealthy to avoid that taxation.
<= in the world where everyone has access to as much USD as they need to effect transactions and to do research and to invent things, there is an unlimited supply of investment capital.. every transaction is merely a memo entry. see discussion comments above..
Posted by: snake | Feb 10 2025 18:37 utc | 96
|
