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Sanjeev's avatar

China looks more equipped with industrial policy because of -

1. China has Policy direction certainty - While US political system is deeply paralyzed. From Congressional Republicans blocking everything, to Supreme Court, to Trump's threat etc. The policy making in America is difficult & creating great uncertainty.

2. Technocracy in China - US politicians are mostly hacks and lobbyists with little enthusiasm of policy making. They pass policies dictated by their donors. And donors, the wall street conglomerates mostly think about their own corporate gains rather than long term picture from national perspective. The motivation of US industrial policy is driven by threat to profits of US conglomerates, not really with any national strategic viewpoint.

3. China has SOEs in its toolkit which can help regulate private competition, economic demand, adoption of technology or discarding of old technology much faster, working in conjunction with private players for implementation of national policy. The managements of SOEs (as you also mentioned in earlier article) is professional and competitive, making them compatible with market economy. US doesn't have any analogous policy tool like this.

James Galbraith on US industrial policy is also a good read.

https://www.ineteconomics.org/perspectives/blog/industrial-policy-is-a-good-idea-but-so-far-we-dont-have-one

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Sanjeev's avatar

While China can mobilize capital quickly in a particular direction, US has advantage of deep financial markets that can finance enormous capital (this is prominent in IT sector). While both US and China pour subsidies into their strategic sector, US financial markets acts as a steroid which motivates private players in taking bigger risks. If private players innovate and succeed, the rewards are huge. And if the private players fail, that's loses which US financial system tolerates well and continue to roll as new players try new ideas.

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