1/9 The FT's Tej Parikh makes a very important point here. China's industrial policies have involved among the greatest support and subsidies for technology in history, and we've clearly seen the benefits when it comes to advanced technology. https://www.ft.com/content/b44...
2/9 But in the roughly two decades of their implementation, not only have we not seen a corresponding rise in productivity, but in fact China's fall in productivity has been extremely steep, and has occurred at a much, much lower level of development than it had occurred...
3/9 in other economies that followed similar strategies, e.g. Japan, South Korea, Taiwan, Singapore and Hong Kong. The point is not that China doesn't have great technology. It is that Chinese technology doesn't seem to make Chinese workers more productive.
4/9 But I am not sure this is as much of a paradox as some analysts think. The USSR in the 1960s (and Japan in the 1980s, to a lesser extent) showed pretty conclusively – as I've long argued – that producing great technology doesn't make you rich if it isn't economically viable.
5/9 Overspending on glittering projects and glamorous technology can make you feel good for a while, but the net costs in resources in the end might only make you economically worse off and eventually insolvent. The world is littered with such examples.
6/9 That is because the associated surge in debt and the continual transfer of resources to non-productive uses eventually become unsustainable, and can lead to a very difficult adjustment as all the hidden costs are finally realized.
7/9 The fact that China has spent far more on advancing technologically than did Japan, South Korea, Taiwan, Singapore and Hong Kong, may even be the reason why the productivity benefits stalled at a much earlier stage of development. This may in fact be the lesson of the USSR.
8/9 But we have to be careful of the lesson we draw. It is not that industrial policy and support is a bad idea. There are many cases (including just in American history alone) where it has proven very successful, and China's EV industry is probably just such a case.
9/9 The real lesson is that good things can be taken to extreme. Too much industrial policy can be just as damaging to an economy as too much indifference to industrial policy. @RanaForoohar https://www.ft.com/content/583...
@michaelxpettis “But in the roughly two decades of their implementation, not only have we not seen a corresponding rise in productivity, but in fact China's fall in productivity has been extremely steep.” WTF you talking about dumdum?
@michaelxpettis What do you have to say for yourself young man?