Between the Eagle…(part 2)

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In my first post on Thomas Barlow’s Between the Eagle and the Dragon, I reported the author’s view that the United States remains a much more innovative society than China, even though China is well on its way to becoming the world’s largest economy. Chapters 4 and 5 of the book take a closer look at China.

In a section called “The lessons from China’s history are not promising,” Barlow describes the China of the past as a society that had many of the requirements for rapid economic growth but failed to capitalize on them. “For hundreds of years, China had a unified market, a commercially integrated economy and a well-educated workforce. Yet…all of this has failed to generate rapid technological progress.” He attributes this especially to a history of authoritarian governments that allocated capital inefficiently and repressed creativity.

By the early nineteenth century, China accounted for about one-third of the world’s gross domestic product, but that was because it had about a third of the world’s population. By the mid-twentieth century, China’s share of world product had dropped to less than one-twentieth, as more innovative societies–most notably the United States–surged ahead. The US share of world product was over four times its share of world population. “No other society has ever brought such high relative wealth per capita to such a large population over such a long period of time.”

Barlow describes two alternative views of where China stands now, without trying to settle the matter one way or the other. The first view is that because of recent economic reforms, China is ready to put its past behind it and take its place among the most innovative and dynamic nations of the world. The second view is that “the economic rise of China has enabled Chinese policymakers to construct a facade of dynamism and innovation that is not entirely genuine.” The Chinese are publishing more scientific papers, filing more patents, and exporting more high-tech manufactured goods, but the amount of indigenous creativity going into these products is questionable.  Barlow finds Americans far too quick to accept the appearances at face value: “Americans…are more likely to believe that China is the world’s leading economy than to recognise that they are living in it.”

China’s population of 1.3 billion is about four times the size of the US population. Even if one focuses on the more urban and educated population–especially important to an innovative society–China compares well in sheer numbers. It has more people living in large cities and more college graduates, especially in the sciences. It is graduating ten times as many engineers. This is true despite China’s lower overall rates of urbanization and college completion.

Development in China is very uneven, with ten provinces on the eastern coast accounting for almost three-fourths of business research & development (while containing 40% of the population). The province of Guangdong rivals Silicon Valley as a center of high-tech innovation. On the other hand, much of China’s R&D is directed toward lower-tech areas such as construction, oil and gas production and mining. “The overall impression that the data engender about Chinese innovation is one of heterogeneity and uncertainty.”

Chinese investment is strongly guided by government policy, and critics complain that investment is too concentrated in large infrastructure projects and politically favored firms. Chinese scientists have complained that funding depends more on “schmoozing with powerful bureaucrats” than doing good research. Barlow concludes:

The Chinese political system has never fully trusted the Chinese consumer or the Chinese entrepreneur….By giving precedence to stability over freedom, to political rather than meritocratic processes, and to a subservient professional class rather than a politically independent middle class, the Chinese state has strengthened its own power at the expense of the country’s long-term innovative potential.

In Chapters 6 and 7, Barlow explores the potential for both confrontation and collaboration between China and the United States. One source of conflict is the accusation that China is relying on espionage and cyber warfare to catch up in military and industrial technology. Another is Chinese trade policy, which deliberately holds down the value of the Chinese currency in order to make exports cheaper, hurting both Chinese consumers and American manufacturers. Still another is the concern that Chinese scientists compete unfairly, claiming Western ideas as their own or publishing fraudulent data.

On the other hand, the two countries are becoming so interdependent that “both societies now possess strongly shared incentives to see sustained, stable growth in the other.” Although the imbalance of trade in manufacturing goods gets most of the attention, exchanges of advanced technology products are increasing rapidly. The US has a trade surplus with China in areas like aerospace and biotechnology, while US imports of information, communication, and optoelectronics products from China increased tenfold between 2000 and 2010. For research papers with international co-authorship, each country is the leading provider of co-authors for the other. China is also the leading source for international students studying in the US (although it may soon be surpassed by India), and over 80% of the Chinese earning doctorates in the US elect to stay in this country. Barlow describes the emergence of “a new transnational professional class of individuals who travel regularly between the US and China, maintaining links and sometimes joint residences in both nations.”

In the end, Barlow doesn’t try to say whether the twenty-first century will be “China’s century.” The country is developing so quickly that it does have that potential. But even if the United States declines in relative importance as China and other countries develop, it is such an innovative society that it is unlikely to be eclipsed by them anytime soon.

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