Industrial policy has been a frequent subject on Smith's blog, for those who don't follow it. (He's for it, and thinks that Biden's industrial policy was mostly good - it's worth following the links in this post.) This post focuses on defense-related geopolitical industrial policy goals and pros and cons of anticipated changes under the incoming Trump administration and Chinese responses. Particularly, he highlights two major things China can do: Restrict exports of raw materials (recently announced) and use their own industrial policy to hamper the West's peacetime industrial policy (de facto policy of the last 30 years). These are not extraordinary insights, but it's a good primer on the current state of affairs and policies to pay attention to in the near-future.
Noah Smith: Manufacturing is a war now
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I fully agree but we need to first fix the leadership problem before getting into the specifics of damage control.
Why is China now the world capital of industry? Because we let them build up earlier as opposed to hammering them back when they were weak. It would've been so much easier to constrain their semiconductor industry 20 years ago. It would've been so much easier to stop them moving into the South China Sea before they put down all these airbases and artificial islands. It would've been so much easier to choke off their strategic industries when ours were bigger. It would've been so much easier to maintain military superiority if we weren't fighting stupid, expensive and pointless wars in MENA.
The US actually sabotaged and suppressed Taiwan's nuclear weapons program in the 1980s. Twice! Now it's far too late to put nukes there, the Chinese would go in before they could be set up.
Our strategy has been to appease China when they were weak and harass them now that they're strong. This is not wise.
Why has all this happened? The people at the helm have been arrogant fools. Biden laughed at the notion of a Russo-Sino-Iranian compact back in 1997, when there were so many ways we could've headed this off with lower costs and risks: https://x.com/SonjaEnde/status/1649318054969462788
Bill Clinton went 'oh the Chinese are trying to censor the internet, that's like nailing Jell-O to the wall!'. He was wrong. Censoring the internet is easy and desirable for any state, as we now understand.
Unless we get rid of all the arrogant fools from high office, there's no chance of success. They'll hector India for being too fascist, they'll open up yet another Middle East sideshow, they'll constantly cancel every naval procurement program so that billions are spent and no capabilities produced, they'll let in all these Chinese nationals to leading AI companies (and the military), they'll squander wealth on green technology, they'll DEI meritocracy away. They will find ways to blunder that we can't even imagine!
Even today people are going on TV saying '400% tarriffs! Let's bring Beijing to its knees': https://www.newsweek.com/kevin-oleary-donald-trump-tariffs-china-defcon-1-1992284
People like this are so stupid, it's laughable. That's not how tarriffs work and it misjudges the balance of economic power. But they are running the show, the lesson still hasn't been learnt.
You can easily access dissident material in China and most internet-literate Chinese could do so by VPN even with the crude blocking implemented as part of the great firewall. Chinese don’t do so not because they can’t, but because they don’t want to. The US should implement a similar policy of making socially deleterious messaging (like much of TikTok) hard to access for plebs, but easy for anyone with a modicum of intelligence.
China is a largely functioning, largely peaceful society. Democracy has nothing to offer them, countless genuine democracies in Asia, Africa and the Americas are complete shitholes with a much lower quality of life than China.
The Chinese don’t desire control of the world. They never have, it’s not in their genes. They want their little slice of East Asia, they don’t even really want Japan and are semi-ambivalent on Korea. They want to control the SCS, which is reasonable for the world’s second power given the US controls oceans and waterways many times further away from North America than the furthest extreme of the nine dash line is from mainland China.
As far as AI and related tech goes, they’ll have it anyway, it’s way too easy to steal cloud compute and divert GPU shipments and - even if it wasn’t - the Chinese could still just tune and run the models after they were created. The US needs peace with China, a 50 year plan to hand over Taiwan to the CCP in a negotiated fashion (OR a commitment by the Taiwanese that they’re prepared to fight this themselves, which they are not) and some kind of pathway to a settlement around the nine-dash that either extracts significant concessions from Southeast Asian allies or cedes the space to China in the interests of peace.
The Mongols desired world domination and a good chunk of their genepool is in China today.
And power is seductive. One could easily say 'America doesn't want world domination they just want to stay in isolation on their continent' back in the 19th century. But they had the power, they had global interests by virtue of their size, they got sucked in and began to enjoy wielding their strength.
The Chinese are the same. When East Asia was all they knew, they worked hard to dominate it. China today has global interests in market access, resources, ideological legitimacy. They buy Iranian and Russian oil, they're building ports in Argentina, they refine nickel in Indonesia, Chinese companies fight drug wars against Mexican gangs for distribution rights in US cities: https://x.com/SantsPliego/status/1748496050543837404
They are so big that they end up doing almost everything, almost everywhere. Every day there will be some dispute over fishing rights, some struggle with local interests, some crisis that needs a response. There is a voice shrieking 'use power' in the ear of their leaders every single day, from events and from their subordinates (who were raised in the atmosphere of intense nationalism they used to replace Maoism). It would require leaders of superhuman passivity and benevolence to resist the urge to start wielding their economic and military power forever.
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You know that for like two millennia China had a policy of "no equals, only tributaries and rebels", right? That's a large part of why the Opium Wars happened; Qing China insisted that it wouldn't treat the Western powers as sovereign nations - there were to be no negotiations, only tribute, acknowledging the Emperor as their feudal overlord, and begging him for magnanimity - and while the Dutch played along with the farce, the Empire on which the Sun Never Sets said "fuck that" and kicked over the anthill.
And the core tenet of the CPC's legitimacy is that that pratfall was a terrible injustice and that it will bring China back to the glory that preceded it.
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Or in other words, because American industry couldn’t compete with Chinese industry on an even footing. I’m open to tariffs and other things but the idea that America should pre-emptively destroy anyone who looks like they might be able to do better is not one that brings me joy.
What is an even footing?
China plays all kinds of games with its currency, industrial policy and so on. They have cards to play due to their privileged position in terms of size and talent pool. Since Deng Xiaoping they play the hand that they're dealt pretty well - not without mistakes of course but pretty well.
Western countries also have cards to play, we also have tariffs, industrial policy, currency manipulation and a privileged position in terms of a pre-built capital base and advanced technology. China was spending 1% of GDP on their military for many years as they focused purely on building up economically, that would've been a great time to impose military pressure.
If we don't play our cards, how can we expect to win? If we play our cards too late, how can we expect to win? Do we want to face weak enemies or strong enemies? Do we expect our enemies to show us the same level of mercy that we show them, if they have the upper hand?
Let's not forget that China has been a ruthless one-party state the entire time. The reformists got crushed in '89. They had a Taiwan Straits Crisis in the mid 90s. It really takes a world-historically stupid elite class to stay deluded about Chinese ambitions until the mid-2010s.
I’m fine with tariffs or industrial policy. Those strike me as ‘fair’ cards to play, preserving and/or improving your own industry. (I don’t approve of China’s dumping either fwiw).
What I don’t like is the idea that America should economically and/or militarily destroy anyone who might ever become its peer. I am not interested in living under a tyrant to protect me from living under a tyrant.
At this rate we're going to be living under a tyranny that fails to protect us from living under a tyrant.
But look back over US history. You guys stomped the Native Americans, conquered much of Mexico, ripped various colonies off Spain because you could, mandated that an entire hemisphere was yours alone to dominate. You took steps to crush Germany and Japan before they could even potentially threaten you (defanging Britain and France along the way). You then fought a fifty-year campaign to contain and eventually eliminate the Soviet Union. That ignores all the little wars, going in on Panama and Grenada, all the regime changes around the world, Operation Gladio, Iraq of all places...
The history of the last two hundred years is dominated by the US destroying real or imagined threats, wherever they are. Why stop when you face by far the biggest threat? For the first time in US history, you're up against someone as big, or even bigger than you guys. There won't be any allies that can do much of the heavy lifting this time, it's down to you. This is the final boss and it requires full commitment.
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Do remember that a lot of Chinese industry uses semi-slave labour and that there's substantial government support - Smith actually mentions the latter in the linked article.
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