Loading summary
Transcript44 lines
- [00:00]
A
I think the drawback of the lawyerly society is that lawyers are mostly focused on obstruction and so they stop everything good or bad. And what you don't have are stupid ideas like the one child policy. What you also don't have is functioning infrastructure almost anywhere in the United States because it just simply cannot build a lot of pretty important things.
- [00:25]
B
And now the good fight with Yasha Monk. Why do Americans find it so hard to build infrastructure, railways, housing? Why has China succeeded at many of those tasks but is seeing many of its richest, most influential people flee the country? What does the future hold for the increasingly contentious competition between China and the United States? Well, one of the more interesting books of this year attempts to answer this question. In Breakneck China's Quest to Engineer the Future, Dan Wang argues that the key to understanding this moment is to realize that America is a society of lawyers and China a country of engineers, and that this has deeply shaped how each country is developed. On the podcast this week, Dan and I debate how useful a metaphor this is for understanding each country, why he is so pessimistic about Europe's ability to compete, why America is falling behind but may not be fully out competed by China, and many other topics. In the rest of this conversation we talk about artificial intelligence. How is it that the development of artificial intelligence is different in a society of lawyers like the United States, where ChatGPT, where text based forms of artificial intelligence are the key product, and in China, a country of engineers, which is ahead of the United States in many applications of artificial intelligence to the physical world, to robotics, to manufacturing. And we also talked about why it is that despite the strengths of China, despite the fact that many Chinese take pride in the fact that unlike their parents or grandparents, they didn't need to leave a country to pursue economic opportunity, they so many Chinese are leaving the country, some poor people crossing the desert to try to get into the United States, but also some rich people with many, many millionaires fleeing the country. And we also talk about whether, as Dan hopes, America is actually going to be able to learn from China in the right way rather than in the wrong way as perhaps is happening under Donald Trump. To listen to that part of the conversation, please become a paying subscriber. Please help us make these conversations happen. Please go to yashamonk.substack.com that's yashamonk.substack dot com. Dan Wang, welcome to the podcast.
- [03:25]
A
Thank you for having me, Yasha.
- [03:28]
B
You know we are in the south seventh round of what probably is going to be a 35 round trade war between the United States and China. Who knows exactly where it's going to stand? What's going to happen to that trade war in the few days between when we're having this conversation and when it'll likely air. But I think you have a kind of helpful way of thinking about the broader contrast between the United States and China. And there's obviously many similarities in many contrasts, but the key contrast you draw is between a society of lawyers and a society of engineers. What do you mean by that? And how could that help us illuminate the political tensions between China and the
- [04:08]
A
U.S. yeah, well, in the first Trump administration, I was living through the third and fourth bout of the trade war when I was living in Beijing, and we thought, oh, well, third or fourth rounds of a seven, eight round fight, that's not so bad, you can see the end. But now we're in round 17, so who knows where the end is? And I am still pretty struck by my time in Beijing when it seemed like either side was going to move pretty quickly to a trade deal and then either side walks away. There was a time when Trump walked away, there was a time when Xi walked away. And after Xi walked away, the Trump administration designated Huawei onto the entity list, which really morphed the, the trade war into much more of a tech war. And so I think it's always really dangerous to try to predict what happens. But my sense is that the negotiation talks are probably not going to produce any sort of a durable piece in our lifetime for a very long while. I think the difference, it seems like
- [05:11]
B
neither a hot war nor a cold war, but a kind of series of indeterminate skirmishes where each side so far has pulled back from the brink, but also not really wanted to embrace a trade piece. And to stay with a metaphor, well,
- [05:25]
A
I wonder what a skirmish looks like. I think if we were in something like a cold war, perhaps that would be something more desirable. Now, I think the previous Cold War was a complete disaster for all sorts of third countries. The Cold War grew very hot for them. But if we understand the Cold War as not hot war, first of all, and second of all, competition on the level of two systems, in that case, then maybe we should hope for something like a cold war in which we're competing without hot means through two systems. Now, I was really struck by the early days of the second Trump administration, when Trump announced really high tariffs on China, tariffs that eventually reached to 150% before pulling back pretty substantially. What made Trump pull back pretty substantially conclude a trade truce with China before concluding one with any putative American allies like Canada or Europe or Japan. Well, it was because Xi Jinping decided to retaliate pretty severely and limit the exports of rare earth minerals. And without rare earth minerals, as well as their associated magnets, a lot of auto manufacturers in the west, including in Germany as well as in the US they could no longer maintain production. And so there were these news headlines saying that Chicago plant of Ford Motors had to stop production of a line because they could no longer get rare earth minerals. And I think the really striking contrast between the US And China is also illuminated by this trade war. The trade war itself is a product of the lawyerly society using these tariffs as well as legalisms to try to constrain China's rise. And Xi Jinping responded by being an engineer and saying, well, we're not going to give you some of these products that we alone know how to make. And so rare earth magnets are something that China makes about 90% of the world's supply of. And by denying that to the Americans, it's really been able to strangle a lot of the American economy.
- [07:29]
B
So tell us about what makes America a loyal society. I mean, I have some questions, but that can really help to explain the present moment or not. But before we get more to talking about China, what do you mean by saying that America is a loyalist society and what strengths and weaknesses as vector of the United States?
- [07:45]
A
The US has been ruled by lawyers for a very long time. If we take a look at a lot of the founding Fathers, most of them were lawyers. The Declaration of Independence reads like the start of a legal brief. Among America's first 16 presidents, from George Washington to Abraham Lincoln, 13 of them were lawyers. And the lawyerly society has persisted into the present day, especially among the Democratic Party. Among the Democratic nominees to be president, every single nominee between 1980 to 2024 went to law school. If we take a look at that's
- [08:22]
B
actually a remarkable stat. I mean, it was obvious to me that laws play a huge role in American society. And that point about the Founding Fathers, I didn't find that surprising. And I guess I knew individually about each of the Democratic Party nominees or presidents that they had gone to law school. But the fact that every single one had gone to law school is really quite striking. Since 1980.
- [08:42]
A
Since 1980. And I think there is a sense in which Donald Trump is somewhat a product of the lawyerly society as well. Now, Trump is not a lawyer. He did not go to law school. But there's a lot of parts of his governing style which seem to me to be a product of the lawyerly society.
- [08:58]
B
So this is where I was a little bit skeptical earlier. So when you were saying the trade war is a product and part of that lawyerly society, and I think as a general diagnosis of what America is like, that seems to me quite right. But isn't a lot of Trumpism, isn't a lot of populism a rebellion against the lawyerly society? And isn't the way to understand the current administration in many ways about the will to break with a lot of the kind of democratic norms and the regular procedures that make it impossible for a properly elected non lawyer as president to do what he really wants and what he claims really represents the will of a people? Isn't what we're living through in many ways precisely rebellion against the lawyerly society.
- [09:42]
A
Here's the theory of the case that Trump is a product rather than a rebellion against the lawyerly society. You cannot understand the business career of Donald Trump without seeing that lawsuits are absolutely central to his career. So this man has sued absolutely everyone. He sued his former business partners, he sued his political opponents, he sued his former lawyers. He has, as president, sued the New York Times for $15 billion, which a judge quickly tossed. And so this is a man who's been with lawyers throughout his entire life, and he understands the law very well. I think there is something in his governing style in which he is flinging accusations left and right. He's trying to intimidate people. He's trying to intimidate. He's trying to establish guilt in the court of public opinion as a way to try to make people seem unfit. Now, the issue with the lawyerly society is that I think the drawback of the lawyerly society is that lawyers are mostly focused on obstruction. And so they stop everything, good or bad. And what you don't have are stupid ideas like the one child policy. What you also don't have is functioning infrastructure almost anywhere in the United States because it just simply cannot build a lot of pretty important things. And I think a virtue of the lawyerly society is that it guarantees a degree of pluralism. It guarantees a degree of due process. And these are all correct and important. But I think a virtue and a benefit, both at the same time, is that I think the lawyerly society works really, really well for the rich. There is no better country in the world where it's great to be the super rich. If you're super rich. In China, the communist Party will probably cut you down at some point. If you're super rich in Europe, they face super high tax rates and there's all sorts of issues there.
- [11:37]
B
But America, it's hard to become super rich.
- [11:39]
A
In Europe, yes, it's impossible in the first place. And in America, the country works really, really well for the super rich. If you're a rich in New York City, you don't really have to deal with the high housing costs. You buy one of these unit and one of these skinny skyscrapers that overlook Central Park. You don't take the subway to work. That's quite fine. In the US you can pretty easily transmute your wealth into political influence in some way. And here again, I think this describes Donald Trump relatively well. This is someone who understands the law. He is able to take advantage and abuse the system in all sorts of ways. And I think there are all sorts of ways in which Donald Trump is wrecking political norms as well as judicial norms as well. But I think that I would say he is more a product than a rebellion against the society.
- [12:31]
B
Right, we'll come back to this discussion. Tell us about the other half of that contrast. If America is a loyalist society and that really helps to explain how the country works, you're saying China is a society of engineers. How is that true and what does that tell us about China?
- [12:51]
A
Let's look again at the elites. China is a country I call the Engineering State because at various points, the entirety of the Standing Committee of the Politburo have had degrees in engineering. And this is engineering of a very Soviet sort. In 2002, in the Hu Jintao era, every single member of the Standing Committee had degrees in subjects that included hydraulic engineering, geology, electrical engineering, thermal engineering, et cetera. The issue with engineers is that they tend to treat the physical environment as purely an engineering exercise. So China has really distinguished itself over the last few decades and being able to build a lot, whether that's highways, bridges, hyperscalers, homes, coal, solar, wind, nuclear, you name it, China has really been able to build it. And you can really go through some of the countryside as well as some of the big cities in China and see exactly how much they've been able to build. They also treat the economy as an engineering exercise. I was living in China in 2021 when Xi Jinping, off the hubris of feeling like he controlled zero Covid, decided to initiate what he thought would be a controlled demolition of the real estate sector based on the leverage rates of state owned developers. And he also decided to smack around a lot of Tech companies, including folks like Jack Mac, including sectors like online education, as well as video games. And I think the problem with China is that fundamentally the Communist Party also sees itself as engineers of the soul. And so they engage in a ton of social engineering as well. So I write a lot about the one child policy as well as zero Covid in which the number is right there in the name. There's no ambiguity about what one child or zero Covid really means. They engineer the environment and the economy as well as society.
- [14:53]
B
So I want to return to understanding the US through this lens and China through this lens. But just to push on this analogy a little bit, to start off with a couple of objections, the first is, is this really about a different way in which those two societies are shaped, or is it about different stages of development? You go back to the United states in the 1930s, and it was also true that the Founding Fathers had all been lawyers. It was also true that a lot of the presidents during that period were trained as lawyers. It was also true that relative to every country in the world, America had a huge number of lawyers per capita. But America was able to build, and it did build. When the Empire State Building went up, the speed which it was built was incredible. And at some point, one floor went up per day. And some of that seems to me to be about how developed a society is where if you're still relatively poor, if you have a lot of space that hasn't really been occupied, if the value and the worth of existing property is much less, if your processes haven't yet become Byzantine over the course of many decades and centuries of people trying to defend their property, then you go into value, the creation of new things more than the maintenance of everything that exists. Once societies are very rich, once existing property is worth an incredible amount of money, once incumbent interests have had many, many decades to be able to seek rent and be able to put procedural roadblocks into further development, it's going to get harder and harder. And so I think there's a very clear contrast between America 80 years ago, 100 years ago, and today, which isn't obviously explained by the fact that America somehow wasn't a society of lawyers then. I think it's explained by the fact that the economy has matured in positive but also in very negative ways since then. And I guess the question is, might China not face some of the same problems? When you look at something like the huge dam projects that China built, those I think were obviously disruptive to a lot of people. They also created A lot of economic value that was easier to do at a time when the villages that were displaced were very, very poor and perhaps were both more open to the opportunities that would bring. And that's powerful in trying to defend themselves against those kinds of changes. If a government now wanted to put into place some policy was similarly disruptive to the residents of Shanghai or Beijing or even some other second or third tier city, it would be much harder to do both because of the actual economic dislocation and because the people who would be impacted by that would have more power that they can exercise even in a non democratic regime in various ways. So is this actually about China versus the US or is this about societies at a very rapid pace of development as America was in the 1920s and 30s and China is today versus societies that have been affluent for a much longer time and therefore start to atrophy in all kinds of ways?
- [18:09]
A
I think there is certainly a lot to this Master Olson case of interest groups really slowing everything down. Now, first thing I'll acknowledge is that the United States was a proto engineering state itself. And I trace this history of basically between the middle of the 19th century to the middle of the 20th century in which the political elites, who were indeed all lawyers, realized that they have this vast territory with immigrants flowing through. And the political elites absolutely decided to try to build a lot of infrastructure everywhere throughout the country. And so there were canal systems, there were train systems. Chicago and Manhattan built these skyscrapers that the world hadn't seen before. And then in the 20th century there were these giant projects like the Hoover Dam as well as Manhattan Project, Apollo missions, the interstate highway systems. And then what happened? I think what happened was throughout the 1960s, people rebelled against the proto American engineering state. People were really tired of Robert Moses ramming highways through dense New York neighborhoods. People were tired of realized that the Department of Agriculture was spraying DDT everywhere as well as other pesticides that hurt a lot of the ecology. And people were tired of rule by technocrats in the Pentagon who got America into these gigantic land wars in Asia. And so people reacted against the American engineering state. I think the character of the lawyers themselves substantially changed. So if we take a look at 100 years ago, most of the lawyers were working for places like Wall Street. They were creative deal making types. They were working for the robber barons trying to raise bonds for railroads or use eminent domain to turf people out. Even in the New Deal, when America was building quite a lot of stuff, FDR's cabinet was totally full of lawyers. But then things shifted throughout the 1960s and the 1970s in which people reacted against the engine state and the lawyers turned into folks more like litigators as well as regulators. This was really led by Ralph Nader as well as a few other student leaders that did everything they could to constrain the government. And if you take a look at some of Ralph Nader's rhetoric, it really converges with Ronald Reagan's rhetoric saying that government is the problem, not the solution. They said sue the bastards, referring to the government, not necessarily to the companies. And so that is the history I trace of how the lawyerly society in its modern incarnation really took shape. Lawyers shifted from being dealmakers who were creative into being litigators interested in stopping power. And I also believe that China will not have similar problems because China has no lawyerly tradition. I think really to draw from the law has never been a major practice in China. In the Confucian schemas, you have civil servants, you have the military, you have merchants at the bottom. And so where are the lawyers in all of this?
- [21:22]
B
You do have a tradition of Chinese legalism as a philosophical kind of tradition that was always in some complicated ways a counterpoint to Confucianism. It is sort of the minor key of Chinese history. But it is a minor key that pervades Chinese history.
- [21:38]
A
Yeah, well, there are some people who would argue that actually it is a major key. And in fact, the confusion and the Buddhism and the Taoism is much more the minor key. And I think my sense of China's history is that there hasn't been the development of a major liberal tradition, mostly because I would say the emperor captured the entire intelligentsia through the exam system. If you wanted to get anywhere in court, you had to take these examinations, exams. And you don't get very far in court by advocating for constraints on state power. And so there was no liberal tradition emergent in China to say, well, maybe the emperor should respect the aristocrats, should respect the merchants, whatever else, because everybody was interested in maximizing the discretion of the court rather than maximizing the discretion of the individual. And so given that China has less of this liberal tradition really to draw on, they're still building a lot of stuff. And you mentioned dams. China built the Three Gorges Dam mostly throughout the 90s and the early 2000s. What have they just announced? Earlier this summer, they've announced another dam that is going to be three times larger than the Three Gorges Dam, which is going to be high up in the Himalayas in Tibet. And so that's going to displace fewer people because fewer people live there. But they are very much building. And I expect that the composition of the Chinese elite will not change substantially to to be educated at law schools anytime soon. And I think they will continue to build because they really value building.
- [23:13]
B
So tell us a little bit about how this engineering state has built the country. Obviously, generally educated people and listeners to my podcast in particular will be aware of some of the huge industrial progress in China, of astonishing progress, infrastructure of speed with which China has gone to having no high speed rail, to having the majority of all the high speed rail lines in the world. But tell us a little bit, as somebody who has both lived in China and who has traveled widely in China, how that really has shaped modern China.
- [23:50]
A
Let me start with a story. In the summer of 2021 when I was sweltering in Shanghai, I decided to scare up two friends to go with me on a bike ride. And we went to the southwestern province of Guizhou, which is relatively inaccessible. It is pretty poor, China's fourth poorest province, far away from the prosperous coasts. And over five days of cycling through the Chinese countryside, I saw that Guizhou has much better developed levels of infrastructure than basically anywhere in the United States and arguably most parts of Europe as well. So Guizhou, again, China's fourth poorest province, has about 15 airports, it has 45 of the world's tallest bridges, it has high speed rail. And I was thinking that New York State or California, two of America's richest states, basically don't have very functional infrastructure at all. And so this is where I go back to my schema, that the lawyerly society works really well if you are the American super rich. Doesn't work very well if you're among the working class or the middle class. And so I understand China, the engineering state, to say that it is just going to build a lot of stuff. It has determined that the interest of the public is just in having more infrastructure. And perhaps they're right. I don't think that that is the biggest thing that residents of Guizhou want, yet another bridge or an airport, which they might never be able to afford to fly on. But the lendinist system of China is to say we know what's best for you and we're going to give you a lot of infrastructure, good and hard. And so that is kind of one of these distinguishing features of China in which they have built just a ton of infrastructure of every sort of. Now China built its very first highway in the year 1993, 18 years later it built an America's worth of highways. Nine years after that, it built another America's worth of highways. If we take a look at energy deployment, China is on track to deploy about 500 gigawatts of solar. This year, the US is on track to deploy about 50. So that's one order of magnitude difference. And so China is just building, building, building, and that is a distinguishing feature.
- [26:10]
B
So I have traveled much less in China than you have. But it is astonishing to see how developed these high speed railway lines are. And not just when you go between major cities like Shanghai and Nanjing, or Shanghai and Beijing on the same line, but also if you go to somewhat smaller cities like Yiwu, which are connected by exactly the same kind of high speed rail line, also have these giant stations, very frequent trains. And I think that that probably does do a lot for ordinary people. These trains are relatively cheap and they're widely used. When I had Peter Hassler on the podcast, in his book, he talks about how long it would have taken to go from the town in which he toured in the 1990s and Sichuan to the next sort of regional capital. And it would have been basically a day's journey using a mixture of boats and trains and so on. And now you get there in an hour and an hour and a half. And that I'm sure is a genuine benefit to people there. Of course, the question is, when do you start hitting diminishing returns or when do you run out of road? At some point you've built high speed rail between all of the first tier cities and all of the second tier cities, and all of the third tier cities and fourth tier cities. And then at some point continuing to do so no longer makes sense. Now obviously you can then go into the business of maintaining all of this amazing infrastructure. And that itself is a pretty heroic task if you build all that much of it. But it does feel like that is a toolbox that is more useful to a particular kind of stage of economic development than a later stage of economic development. And once you've connected every damn town with a high speed railway line, you have to think about other ways in which you can sustain economic growth.
- [28:06]
A
Yes, I think that is they are slowing down. And I think that there is realization that they shouldn't build so much. I mean, I think at a first approximation they would say something like, are we building too much high speed rail? Well, what we are doing is lifting the third tier cities into second tier cities. And once they have high speed rail, that will happen. And if you say you're building a bridge to nowhere. Well, they say two nowheres will become two somewheres once we have this bridge. There is something to that logic. But I absolutely agree that they are going to be hitting diminishing returns. They probably hit diminishing returns five years ago, and yet they do continue to build. And so I think that is a problem. But I also want to say that the other part of the engineering state is manufacturing success. And so we can take a look beyond public works and just take a look at how much China has built in terms of pretty much goods of every sort. Right now, China is making about one third of global manufactured products. And so one third of manufacturing is in China. And over the next few years, it is set to rise. China is obviously a leader in electric vehicles. Right now its electric vehicles are better and cheaper than their European, Japanese or American counterparts. China is a leader in all sorts of clean technology. It is a leader in all sorts of industrial robotics. It is going from strength to strength. It is patching up its weaknesses in semiconductors, while the US as well as Europe seem to be de industrializing in part due to China. And so the engineering state is also really good at making all sorts of products that people really want to.
- [29:48]
B
And the striking thing about that is that it used to be that China was the manufacturing center for cheap goods around the world. And it still is able to compete on price for many goods to a considerable degree. In part because despite the overall size of the Chinese economy and the fact that there's now many affluent Chinese, there's still a huge portion of the population that doesn't make all that much money by global standards. But China has really moved up the value chain and is now competing with very specialized, high skill manufacturing, not just in headline industries like electric vehicles, but in all kinds of different industries. And so a place like Germany, that used to find itself in being the export world champion, is now suddenly facing this competition on quality and on the ability to deliver on very specialized, very intricate goods, not just in the car sector, but in all kinds of other branches of industry as well. Do you think that that is a recipe for ongoing economic growth and affluence? Is there a space in the world economic system for a large country like China really being specialized in those kind of manufacturing goods? Or does China have to both change its internal economic model to encourage a lot more consumption and move far more into the provision of global services and other things in order to be able to sustain its economic growth over time?
- [31:26]
A
Yeah, well, another part of my case that China is an engineering state is that it has been profoundly uninterested in getting more into consumption. Now there is greater lip service saying that consumption should be more important. But China is simply not doing enough redistribution throughout its economy. And I am really struck that this country that is ruled by a Communist party, that celebrates the birthdays of Karl Marx, that sings the International, that has all the pageantry of a beautiful communist state, it seems to me to be one of the most right wing regimes in the world. And so if I take a look at China and the degree to which it is really valuing manufacturing as well as keeping out immigrants, this seems to me to be 1950s Eisenhower America. China's transfer payments are really low. According to the OECD figures that I see scrounged up, about 30% of Europe's economy is spent on redistribution. About 20% of America's economy is on redistribution. In China that figure is 10%. And so it has a pretty threadbare social welfare net. This is a country that arrests union organizers, that tries to disrupt Marxist reading groups, that has very traditional gender norms. And so at a first approximation, it looks like the most right wing big country in the world. And I think there is something quite striking about how they are really focused on production and not very much on consumption. And I think there's been calls by economists, very reasonable ones, for a very long time, that China needs to rebalance. But it doesn't really look like Xi Jinping is interested because they are really motivated on producing quite a lot of more goods. I think every country in the world would like to say, yeah, we like technology, yeah, we want to be a high tech leader. But I think the Communist Party means that and believes it more than any other entity. They are willing to invest a lot into semiconductor projects that fail. They have relatively strong risk tolerance even when there's a lot of frauds. They don't throw up their hands to say, let's give up on technology pursuit. They still really, really want to have this. And I am quite nervous about the future fate of Germany, Europe in general as well as the us. Can I make a case that Europe is really screwed here? Are you interested?
- [34:05]
B
Yes. I'm always interested in pessimistic takes about the continent of my birth. And sadly I feel that I'm going to agree with your analysis, but go ahead. And then I want to return to some of these themes about China.
- [34:17]
A
I spent quite a lot of the summer traveling throughout Europe. My wife is from Austria and so we spent a little bit of time In Austria, Switzerland and we spent the majority of two months in Denmark. And Denmark is a country that is supposed to have done very well in the European Union and indeed it has,
- [34:41]
B
mostly thanks to American over consumers and the extent to which wage rate drugs have floated the Danish economy.
- [34:49]
A
Yes, we can thank McDonald's for that. But I think there is a pessimistic case even on that. When I was living in Copenhagen, I was really struck one day that I was checking the news and the share price of Novo Nordisk fell by 30%. They fired the CEO. And what happened there? Well, it turns out that it is in substantial part because of competition from American biotech firms. Eli Lilly has really outcompeted a lot of Novo Nordisk. Novo Nordisk also had its own missteps. But if I am thinking about Europe and as I spent two months over the summer, it still felt super, super complacent to me. I think that on the one hand they're going to be deindustrialized by the Chinese Already can see that the German industrial sector has been substantially shrinking. Some of the estimates I've seen is that Europe's energy costs are something like five times higher than China's energy costs. It is really obvious now that European manufactured exports have been going down to China and Germany wouldn't be in a technical recession if it was still able to export quite a lot to China. And so on the one hand it is going to be deindustrialized by China. On the other hand it is going to be its leading firms are going to be out competed by the American biotech software financial services firms. And right now a lot of the European equity market is held up by the fact that rich Chinese are buying French handbags. And this doesn't really seem like a really durable long term success. And I think that Europe has not much of a software sector. Its financial sector is also going to be ravaged by American competition who is just much, much more efficient. And as the economy weakens, I don't expect that the politics will get better. And I think that it looks like in every major country now the right populist parties are out polling the ruling incumbent parties. Last year the fpu, the right wing party in Austria, already won a plurality. There's always a couple of cases in which these right wing parties win pluralities but are unable to form coalition ruling governments. But I wonder if as the economy weakens, the politics will probably not get better. That's my pessimistic case for Europe. Yasha, am I wrong?
- [37:21]
B
No, I Fear that you're right. Just to underline it with a few facts and observations, I may have said in this podcast before that Nvidia, the largest US company, is worth more in terms of stock market capitalization than the entire German stock market. So one American company is now the size of all German companies that are public companies, public corporations put together, which is really astonishing. The largest tech company in Germany is called SAP. It was founded in 1968 and the only times I encounter SAP is when I have to file my expenses to Johns Hopkins University or in other contexts where there's sort of legacy software systems that have been difficult to replace and transition away from. And that is the great hope of software in Germany. I participated recently in the launch in France of a thing called Project France 2050, which is organized ironically by the Ministry of the Plan that used to make the French five year plans after World War II.
- [38:35]
A
What is that ministry called? What is the modern name? Do you know?
- [38:39]
B
It's called the Ministry of a Plan. Okay, that is its name. And then I think it has some longer name. It involves strategy or something. But the word plan is in the name of. Of his entity. But they did an opinion poll which is very interesting, which showed that most French people didn't expect huge changes. When they're asked about all kinds of different ways in which the country might change in fundamental ways, they tended to say that it's unlikely. But then when you ask them are things going to be better or worse? Is the economy going to be better? Is the ability to find a job going to be better? Is equality going to be better? Is democracy going to be better? On all of those things they think it's going to be somewhat worse. And so the vision that Europeans have is of a future that's kind of like today, just in worse. It's kind of like today, except everything is going to be a little bit less good. And I actually think that future doesn't exist. I think that Europe either manages to re reinvent itself and to recognize that it needs to be a first rate player in the world. Perhaps not in every dimension dimension, but at least in many dimensions. That it needs to be able to compete with manufacturing in China or with services in the United States, or ideally with both, that it has to play a role in the technologies of the future. Not just electric cars we've been talking about, but of course artificial intelligence, which Europe just plays no significant role in at all. Or I think it's going to crash in a way that's much worse than those pessimistic respondents to that poll. So I think Europe's future is actually quite bifurcated. There's a small chance of Europe managing to reinvent itself and understand the gravity of the situation and make fundamental reforms, or I think the decline may be much more steep and rapid than even those pessimistic respondents to that poll assumed.
- [40:24]
A
Yeah, well, something I'm struck by with Europe is that they're constantly talking about this is now a wake up call for Europe. And I see a dozen wake up calls a day before breakfast for Europeans. And they don't seem to really refer to reform themselves very substantially. Russia's invasion of Ukraine was supposed to be a wake up call for Europe. Donald Trump's threats against Greenland was supposed to be a wake up call. China's denial of rare earth magnets to German automakers, yet another one. And so the more wake up calls you have, the more you declare something to be a wake up call, I think the more drowsy it makes people because they're kind of tired of this sort of rhetoric. And what I'm, I don't quite understand is I start my book by saying that Chinese and Americans are the most alike people in the world. And I have plenty of Americans who tell me who have worked in Chinese factories, who have gone over there. They tell me, yeah, they feel much more comfortable with Chinese than with Europeans. Europeans are kind of just a different species from the Chinese and American culture, which really prizes hustle. They are entrepreneurial people. They are pragmatic people, both the Americans and Chinese and both have a get it done energy. They both have a love of the technological sublime and they are both great powers which have a sense in their superiority and that other smaller countries simply have to listen to them. What that results is a lot of shortcuts that both of these countries take. But I think the shortcuts is part of the hustle energy. And the Americans have a term which is that that the private entrepreneurs really want to make donuts and that the countries on the level of the governments are really interested in craving raw geopolitical power and they'll get it by hook or by crook. And this is just something that I think is missing in Europe. A lot of people don't even seem in Europe to be interested in making money anymore. The salaries in Europe are so low and the taxes are so high, nobody wants to make donuts anymore. And when I take a look at the eu, they really seem to be just waffling around if Donald Trump raises tariffs on them. Von Der Leyen's response is okay, how much? And so there's no sense of power among the Europeans either. And so how do you actually achieve a wake up call when all of these other calls have failed to rouse you?
- [42:51]
B
How would you rate the United States compared to Europe? You're talking about the fact that America has a more entrepreneurial spirit, that people still want to make donuts and all those things at the same time. Of course, some of the problems you identify are there in the United States as well. America has been de industrializing not as steeply as Europe, but to a significant extent as well. Part of a problem of a society of lawyers, as you pointed out, is the impossibility of building high speed rail. And you have a nice contrast between high speed rail in California or the lack of high speed rail in California, rail in California and high speed rail in China. In the book, there are many dimensions on which it would be possible to be similarly pessimistic about the United States. At the same time, some of the biggest companies in the world and many of the most inventive companies in the world remain in the United States. And it's very striking that when you look at the last 30 or so years, Europe's share of global GDP has gone down a lot. America's share of global GDP has gone Down a little bit, but really it has managed to keep its place in the sum to an astonishing degree. And America today retains something like, I think 60 or more percent of world stock market capitalization. So is America still the 444 and it's not going to be able to retain that incredibly privileged position in the world economy? Or do you think that America, unlike Europe, has genuine strengths that are going to allow it to keep being economically successful in a very different mode from China for a long time?
- [44:28]
A
Very difficult to say. But I think on that I am much more optimistic for the United States, at least relative to Europe and I think still relative to China. I think the first issue is that I think the United States has deindustrialized more than Europe, not less than Europe, as you suggest. About 11% of America's GDP is involved in manufacturing. If we take a look at a highly industrialized country like Germany, it's closer to 20%. And obviously Germany is different. But Europe has, I think, better manufacturing success than the United States. The US Manufacturing sector has been very, very weak. If we take a look at these apex manufacturers like intel or Boeing or Detroit automakers and Tesla, all of them have run into pretty substantial problems, not related, actually Much to China and its defense industrial base has also substantially rusted and they can't build any rail. And the high speed rail in California I think should be recognized as a national humiliation and it should really be either canceled or completed, ideally by the Chinese, because this should not be dragged out for too much longer. But I guess the case that I am still somewhat optimistic or hopeful for America is that the entrepreneurs, as the kids say in Silicon Valley, where I'm speaking to you from, the entrepreneurs in America still have to choose. They are interested in making donuts. Nvidia is worth over $4 trillion. There's a couple of handful of companies worth over $3 trillion. And that we can debate how much these valuations really matter. I'm a little bit skeptical of these valuations. That's simply a financial fiction. But that is still pretty worthwhile and significant that there are all sorts of ways in which the entrepreneurial class in America still looks transcendent and much more powerful than their European counterparts. And it was actually spending quite a lot of time in Europe that made me a little bit more hopeful about Donald Trump as well. Let me say pretty clearly that I am disappointed, shocked and stressed out by most of the actions that Donald Trump has imposed throughout his second administration. Attacks on the judiciary, ICE raids, the sort of terror that he is spreading among the less fortunate Americans. I'm stressed out by all of these sort of things that I was actually walking through Copenhagen, which feels so stable, that made me a little bit more hopeful about Trump. And as I spent enough time in Copenhagen, I thought that Donald Trump is kind of the wrong answer to every question. But he is able to raise a lot of these questions that maybe should be asked what should be done with parts of the American economy, parts of the American government, parts of higher ed in America. Again, he is always the wrong question, the wrong answer to these questions. But at least these questions are being asked in a way that I think that Europeans are not in fact very interested in asking questions.
- [47:48]
B
So how, from a perspective that is between the continents, do you see the American debate about abundance? I assume that you agree, as do I, with a broad premise that we need to build a lot more things, that the answer to many of our social and economic and political problems is actually just to have more housing available, better infrastructure and all those things, and create more economic opportunity. And they would deal with problems like the rising costs of housing which now take away so much of America's putative affluence. But do you think that America is going to be able to put into place an abundant society. Do you think that the society of lawyers is going to be able to learn some of the lessons of the Chinese engineering state? Or are you rather pessimistic about America's prospects in this regard?
- [48:39]
A
Generally my disposition is to be a gloomy pessimist. But given that I'm speaking to you now from Silicon Valley, I want to self identify as a bright and sunny optimist from California. So on abundance, I want to be optimistic. Just to put my cards on the table, I am a partisan for abundance. I spoke at the abundance conference last month and I want to be hopeful that we are able to figure out abundance. And to me, abundance has two clear pillars, which is mostly speaking to the left. To say that the left needs to be. The American left needs to be much more focused on the supply side rather than just subsidizing demand whenever prices rise. And that abundance is interested in building state capacity such that California high speed rail is is able to build rather than to be mired in the desert. And that seems to me to be a very clear and strong political program that California and New York as well as other blue states should not simply tolerate the emigration of its people into red states because they cannot afford to build. And there is something very strange that I don't understand how the Democrats cannot grasp this fact that the more that people emigrate, the less they will have political power. And I think that liberals, the left should be interested in building greater state power. Now can the lawyerly society actually overcome this? I think that is going to be a challenge because as I state, the Democrats are the more lawyerly party. They are the party where the law school students tend to go. And so I think the level of cultural change I'm interested in is to shift some more law students away from the problems of the 1960s. I think that still plenty of folks in law school, and again I was a fellow at the Yale Law School and I saw this up close. They're still mostly interested in solving the problems of the 1960s. People regularly invoke the name of Robert Moses to build almost anything at all. People are very interested in feeling that social impact legislation is just the highest form of practice. And I think we should maybe think about building capacities within government rather than trying to tear down government once more. And so what I'm interested in is to change the culture of the lawyerly elites to say that it is good to build. It is great to build political power rather than litigating the problems of the 1960s that solved the problems of the 2000 and twenties.
- [51:20]
B
There's one thing that I find really striking about China today and I've been trying to understand. I've asked a bunch of people about it and I've never had a fully satisfactory answer, and that is that China is now influential in many realms. The word really continues to lack is in soft power, in particular in cultural influence around the world. Chinese cuisine is very popular and I love Chinese cuisine, by the way. There's a lot of Sichuan food around the world. There's not very much Yunanese food around the world, but there's really excellent culinary nutritions in Yunnan. So there's still reserves of Chinese dishes that foreigners can come to discover and love. But for example, I'm trying to learn Chinese and I find it really hard to find Chinese shows that I personally find to be watchable. It just speaks very little good content in terms of just an average sitcom you could watch, an average drama you could watch and not feel like it's a slog. Japan and South Korea have had these big cultural moments with anime, with South Korean movies and TV shows. China really hasn't had that. In the same way, I'm struck by the fact that I think most very educated people in the west would struggle to name more than three or four living Chinese people that are not of Chinese origin, but that are actually living and doing the work in China. They can name Xi Jinping, and perhaps they can name AI Weiwei, and perhaps they can name one or two athletes, but that's about it. And so do you share that diagnosis? Do you think that's about to change? Is it just that China's wealth is so recent that China hasn't had the time to grow that soft power yet? Or do you think that there's more fundamental reasons for why China is lacking that soft power? Perhaps in part related to the ways in which a non democratic regime constrains creativity?
- [53:28]
A
I think that unfortunately the answer is very simple and I fully agree with your diagnosis. And actually one of the most controversial claims I've been making, and I've been making this claim for years, is that China is a puny underperformer in terms of the creation of a global culture. And I think it is a puny underperformer because it is the engineering state. Now, what are some of these cultural products? I mean, cuisine I think is not a recent cultural creation. But what are some cultural products that China has actually produced over the last few years, last few decades? I think people might be able to name the three body problem, Perhaps people might claim TikTok, although TikTok is mostly not showing Chinese content for people. Maybe a few arthouse movies, maybe Yao Ming and basketball, but that's kind of it. And relative to Japan and South Korea, I think that is exactly the right comparison. You've got out of Japan, anime, manga, the Sony Walkman, the Game Boy movies, Mario, whatever. And out of South Korea you have K Pop and Squid Game and Parasite and all sorts of great movies. I think the simple answer is that the engineers cannot take a joke. Engineers are not very fun people to talk to at parties. They don't even want to talk to you most of the time. I was really struck that last year a comedian in Shanghai made a joke involving a military slogan. In response, China closed pretty much all comedy clubs in Shanghai over the period of several months. And so that is the sort of thing where the engineers are censorious people. They censor whatever they cannot understand. And I think that is the chief reason that China, even with people that I think is incredibly creative, Chinese youths have amazing memes. I think that Chinese people are very funny.
- [55:20]
B
I come from Yingdan, and puns and a certain kind of verbal creativity play a huge role in Chinese culture.
- [55:27]
A
Traditionally, I am a partisan for the southwest of China, where I think people from Sichuan and Yunnan really do like to sit around over teas all the time to make jokes. And I think we are the funniest region of China. And I think I'm always very sad that all of these creative talents are suppressed and strangled by the engineers. I wish that Yunnan food could become globally popular. But the challenge, I think, is that Yunnan really prizes these fresh ingredients like mushrooms. And it's hard to get even great Yunnan cuisine in Beijing and Shanghai, to say nothing of London or Amsterdam. So I wish that Yunnan cuisine could be exported. I actually had great Yunnan food in Cupertino last week. But, you know, let's make Yinan cuisine more global. I'm all for that.
- [56:22]
B
Thank you so much for listening to this episode of a Good Fight. In the rest of this conversation, I talk about a topic that I've been thinking about a lot recently, which is artificial intelligence. How is it that the different respective strengths of China and the United States are going to shape the future of AI in America and in China? How is that determining what areas America is leading in and in which areas China may leapfrog the United States when it comes to AI, in particular, the ability of AI to manipulate the physical world? We also talked about why so many elite Chinese are fleeing the country and whether America is going to be able to learn from China's strengths. To listen to this part of the conversation to support this podcast to stop hitting this annoying paywall, please go to yashchamung.substack.com and become a paying subscriber. Sam.