The horizon is not so far as we can see, but as far as we can imagine

Using Comparative & Absolute Advantage To Explain China’s Rise

Economists spend a lot of time talking about comparative advantage: France has just the right climate and land to make great wine, for example. In the Industrial Revolution England had good quality coal in just the right place. Germany has a lot of good industrial workers and craftsmen.

Most comparative advantage, however, is cost advantage. If it’s cheaper and you can produce it for less, it’s hard to compete against you.

Absolute advantage is different. Absolute advantage is when you are the only one who sells something other people want or need. For most of the 20th century if you wanted commercial airplanes you could only get them from the US or Europe or Canada (until Canada’s aviation industry was mostly destroyed in the 50s under threat from the President of the US.) Cars were available from the West and the USSR, then from Japan and Korea. Most advanced medicines were made only by the West, though India came on strong for a lot of generics towards the end of the century.

Absolute advantage is far superior to comparative advantage: you can charge much more.

This is the second article on the West’s situation via China. If you haven, read the first “You can’t run industrial policy or a war economy under neoliberalism.”

Absolute advantage can be created. The rise of England didn’t start with the Industrial Revolution, it started when England banned exports of wool to the Netherlands. Be clear, English weavers sucked in comparison, but it didn’t matter. England produced most of the wool, and if you wanted woolens, you had no choice but to buy them England, inferior thought they were at the start, or do without.

This sort of policy used to be fairly standard. When I was young Canada would not export raw logs or raw salmon, for example, but by the 80s we had begun to do so. African nations have recently started insisting on doing primary processing in country: refine the ore or hydrocarbons, tin the fish, and so on. It’s not the same as advanced manufacturing, but it captures more of the value. If you have a resource there is more demand than supply for, you can insist. Perhaps tinning or smoking fish in the US or Mexico saved ten cents a can, but so what, before fish farming there was never enough salmon.

The problem with absolute advantage, though, is it makes you lazy. When you’re competing on comparative advantage, you have to drive down costs or increase quality, or ideally both. People don’t have to buy your goods, so they have to be better or cheaper.

Now the problem is that for about two centuries the West has had absolute advantage. For most intents and purposes everything we made had absolute advantage outside the West. We had better weapons, machines, clothes, medicines, transport. Everything.

Japan was the first non-Western nation to catch up, but an island nation without significant resources, it couldn’t compete and was conquered and made into a satrapy. South Korea was given the same treatment, and allowed to industrialize, as was Taiwan.

I was a young adult when Japan roared in the 80s, but Japan was never a serious threat, simply because it didn’t have enough population. It was never going to unseat the US or Europe, only claim its place in the (still) Western system.

China is a different matter. The reason China is eating the West’s lunch is that it has overcome most of our absolute advantage and is now competing with us on comparative advantage: Chinese goods are cheaper and in some cases, like EVs, Chinese goods are better. This often isn’t a small difference: you can buy an EV in China for 14K, and it’s a decent car.

Further, China has a massive domestic market. Oh, incomes are still not as high in the West, but the population makes up for it, and Chinese industries mostly aren’t oligopolies or monopolies. In 2019 there were over 500 EV companies. As of 2023 there were still about a hundred. The competition was fierce. There is nothing like it in the west, where car companies are essentially an oligopoly, and don’t truly compete on either price or quality.

China moved up the technological chain. They actually practice competitive market capitalism much more than we do: their markets are closer to “free” than any western country’s. They have effective subsidies due to the exchange rate and direct government intervention, of course, but that’s not the key issue any more (though it was for a long time), it’s that they are genuinely better at manufacturing than we are, and more responsive to what buyers actually want.

Many nations in the West used to have competitive internal markets, with a myriad of companies competing, but under neoliberalism, and to be fair to a certain extent under Bretton Woods liberalism, they were replaced by oligopolies. The problem with real competition is that you might lose. Fake competition is far safer, and offers far better returns for the ownership and executive classes.

Until, of course, you run into companies which are used to real competition, and they eat your lunch and you scream to the government for tariffs and trade war.

Mind you tariffs aren’t a bad idea, but if they are to work, Western companies must actually become competitive again and they don’t want to do that, it’s too much like work. Nor, as I’ve noted before, is it easy for them to do. Internal rent in the West is very high, and thus so is the cost of living. If they’re involved in a trade war, they have to sell to their own citizens, but the only way they know to reduce prices is to crush wages and if they do that, well, the internal market isn’t what it needs to be. (This is what FDR and Keynes realized, which is why New Deal and post-war capitalism emphasized having wages rising faster than inflation. It created a robust market.)

Offshoring anything another country doesn’t already know how to make is stupid, because when you offshore the locals learn how to make what you offshore and eventually they make it themselves for themselves and compete with you. “Friendshoring” can’t work, it can only crate new competitors with lower costs.

The days of the West’s absolute advantage are over. We threw it away for a few decades of high profits funneled to elites, and now we must learn to compete on comparative advantage again, something we mostly don’t have and aren’t used to being necessary.

It’s the bed we made and we have to lie in.

You get what you support. If you like my writing, please SUBSCRIBE OR DONATE


You Can’t Run Industrial Policy OR A War Economy Under Neoliberalism


Israel’s Ground Forces Are Even Worse Than I Believed


  1. (China’s) markets are closer to “free” than any western country’s
    Some will not comprehend this because they’ve been conditioned into thinking “free market” means “no government” and “oligarchs can do what they want”.
    Bill Gates, Bezos, every rich person in the healthcare industry are rich because the government grants them monopolies.

  2. mago

    It’s more like you made your bed, now sleep in it, rather than it’s your bed now lie in it, although everybody’s lying about something, aren’t they?

  3. Joseph

    You have mentioned before the parallels between what’s going on in the west and what happened to the Soviet Union. Our feedback loops (competition) are broken, the markets can’t be rational when they are rigged and/or have bad information/inputs.

    It’s bad, and with climate change continually hammering and hammering against us like king tide waves, the whole civilization is in peril. I’m sad my kids have to be old men when it gets really bad.

  4. bruce wilder

    What I like most in your post is the observation “Internal rent in the West is very high, and thus so is the cost of living.” It certainly is. Another way of saying the distribution of risk, wealth, income and political power has evolved to become very highly skewed to the benefit of a very few at the expense of the many, which I think almost all readers of this blog appreciate.

    What I am struggling with is finding the analytic nugget in your distinction between “absolute” and “comparative” “advantage” that helps to understand or change that.

    What is economic rent? What is its relation to absolute or comparative advantage?

  5. Ian Welsh

    If you can make something that others can’t, you have absolute advantage. For a long time, for example, only the EU and the US could make airliners. Only the US could make a number of medicines. Only the west could make fighter jets. Only the west could, for a long time, make ironclads and other similar ships. In the late 19th century the US and Euros would sometimes just sit a ship off the coast of a city and bombard it. There was nothing their victims could do about it.

    The Brits in the late 19th century would often defeat native armies 10x their size.

    Absolute advantage can also be obtained by quality advantages which are large enough. Think old Soviet equipment going up against modern NATO stuff in the 90s and 00s.

    Most of the West’s dominance came from absolute advantages: in production, military and engineering. I (and you, I believe) are old enough to remember the 70s, when we still had this advantage over everyone except the Soviets. Everyone else who had advanced tech was our ally or satrapy.

  6. GlassHammer


    Glad you hinted to a seldom mentioned dynamic between the current West and current East i.e. “growth mostly through sales and some loans” vs “growth through some sales, some loans, and the concurrence of many shareholds.”

    To put it bluntly the West decided not to “grow mostly through sales and some loans” which is why the products are getting worse.

  7. Jan Wiklund

    You have told the regular story as told by (among others) Charles Kindleberger, George Modelski, William R Thompson and Bas van Bavel. It begins when a class faction invents a new, more efficient way of doing things (and – important! – has the state on its side). Economy flowers, all the others copy the method, and everyone gets richer, even the workers. Then, after some three generations the owner class gets tired of the cumbersome task to organize production and begins living off its wealth. Which means that every other gets poorer, especially the workers.

    This has happened again and again. Probably Roman empire, Abbasid Iraq, Sung China, Renaissance Italy and Spain, England and the US.

    The cycle may reverse, however. In western Europe there was a false start of rentierism and neoliberalism in the late 18th century, but the French revolution cut it short. Then there was another one in the mid 19th century that was cut short by Chartism and the revolutions of 1848; another around 1900 was cut short by trade unions and a fourth in the mid 20th was cut short by anti-colonial movements and a world war. The ruling class had to get serious and convince the middle class not to support the revolutionaries.

    It seems that the good old tradition of radical egalitarian movements with the ability to put a blowtorch in the arse of the upper class has got lost. For that reason the decline will continue. Let’s hope the Chinese will re-invent that too when their billionaires want to stop organizing production to live off their wealth in 50 years or so.

  8. Jan Wiklund

    A little story about the Industrial Revolution in England I read recently in a book by an Indian, Prasannan Parthasarati: Why Europe grew rich and Asia did not, Cambridge 2010. In the 17th century India dominated textile industry, the edge industry at the time. It could sell better textiles at a lower price than any other. The Europeans tried to protect their own indstries with customs duties, but the English went further. They decided that they must do better textiles than the Indians and started a research program. The program was successful in the 1750s after a state-sponsored flood of inventions, and the English began to outcompete the Indians.

    This was a perfect illustration of absolute advantage. You will never have heard about it, because it doesn’t fit into the neoliberal stor-telling.

    Of course, the English also conquered India and destroyed its industry (which it could do because the Indians had outsourced government jobs to private businesses). But it wouldn’t have needed to bother. At that time England dominated textiles all the same.

  9. @ Jan Wiklund

    There are many, many examples of this dynamic scattered throughout small towns in the Rustbelt.

    The WW2 generation built small to medium size light-industrial manufacturing concerns, usually feeding components into larger supply chains. Think tool and die outside, plastic injection molding, that sort of thing.

    The next generation, inheriting these firms, were distinctly uninterested in growing or even maintaining them. They simply inserted themselves into existing enterprises that their fathers and grandfathers had built, did not innovate, didn’t invest much, just siphoned off cash flow until they became wholly uncompetitive. NAFTA lit them on fire and the 2008 crisis buried them. Now the buildings sit either vacant or badly underutilized, as crash pads where the third/fourth generations hang out and drink beer purchased with welfare checks.

    It was sad, sad cycle. wholly preventable had a more robust, energetic, innovative people been in place. Alas, that spirit died and is yet to be rekindled.

    The people in these towns blame a lot of external factors for their demise. They aren’t wrong. NAFTA and general financialization were body blows, no doubt. But the ultimate fault lies within. They were a demoralized people bereft of the spirit that drove their grandfathers to build the enterprises they lost.

  10. Ian Welsh

    The title is a hint. “Using absolute and comparative advantage to”

    There are bunch of different lenses one can use to view history through. The 3 generation cycle is one, so is the 7 generation cycle. You can use culture or geography or geology or climate.

    Absolute vs. comparative advantage is, however, a good lens. Plenty of groups have had it — the Greeks had it, the Romans did, the Chinese have at various times. Various Mesopotamian empires had it. The Mongols had it. The trick is always to ride it for as long as you can. At some point people either figure out how to do what you do, or figure out a counter.

    It’s important to understand when you just have a comparative advantage. Greek successor states vs. Alexander, for example. And it’s important to understand the conditions under which your absolute advantage operates: its limitations.

    What’s interesting about the Western absolute advantage is that we finally had a group of elites stupid enough to just give it away for very temporary advantage. It took over two centuries for that to happen at a civilization (rather than country) level, but it eventually did.

    Both Japan (the first time) and the US were raised up by the UK, by the way. The US might have managed it without British idiocy, but it would have taken a lot longer.

    The three generation cycle is too fast to explain such rises and falls, as a rule. The US took the lead industrially in the late 19th century, but it’s true that the final fall almost always happens at a “third generation” point. 1st and even 2nd generations are rarely so stupid.

    The other question, of course, is “how does a society obtain an absolute advantage in the first place?” Lots and lots of books written about how and why the industrial revolution happened when and where it did. Sometimes such advantages lay latent for a long time: horse nomads on the Eurasian steppes had the potential basically from the invention of the stirrup, but it took a genius like Genghis Khan to pull them together, formalize tactics and enforce the necessary discipline.

    Generally luck plays a huge role, however. Without coal of the right quality in the right location the Industrial revolution would not have happened, and various other things like enclosures (which started in the 1500s) were also necessary, not because they increased agricultural productivity (that’s a myth, common fields were almost as productive, and more so for certain crops) but because you needed a population which couldn’t produce what they need to work in the factories and buy the goods. (Imperial possessions were also helpful, as Lenin/Marx and other have pointed out, and the initial possessions were the result of guns and cannon, another advantage.)

  11. Jan Wiklund

    I think the cycle, whatever long it is, can be broken and started anew if there is a revolt from below that is sufficiently threatening. That is what happened about 1790, about 1850, about 1900, and about 1945, all after some 20 years of speculation. The selfdeclared elites took fright, straightened up, and started to work seriously in order to stay in power.

    Nothing of that kind happened around 2000. There was a relatively small revolt, the socalled global justice movement. But it was mainly limited to family farmers from the global south and to slum-dwellers in Latin America. Not solid enough to change the power relations of the world, not solid enough to scare the western elites to work seriously.

  12. Jan Wiklund

    PS I write more about this at

  13. Ian Welsh

    I note in this article from 2016 that India had more factories than England until the invasion. It’s fairly well known, if you’re familiar with the lit.

  14. Mel

    Seems to me that the Western elites of the late 20th century believed they had an absolute advantage in management. They would provide the world with its Executive Suite, and delegate all the base labor. It worked pretty well until it didn’t; the trouble with Russia and China is that they won’t follow orders. We’ve tried to fire them (sanctions) but they won’t quit working their own way.

  15. Jan Wiklund

    Well, the crucial thing is that they also were better, according to Parthasarati.

  16. different clue

    This may sound like a quibble, but I don’t think it is. I read that there is also something called ” natural advantage”. A “natural advantage” was an advantage inherent in nature itself. Hard-Winter mid-upper North America has a natural advantage in sugar maples because sugar maples can only grow where the winters are long and hard. Sub-tropical North America ( Florida, South Texas, etc.) have a natural advantage for oranges because these places have a lack of Hard-Winter which would kill orange trees. So Hard-Winter and Near-Tropical parts of North America would have to trade oranges and maple syrup with eachother if each section wanted to have some maple syrup and some oranges. I believe ( non-economist that I am) that David Ricardo used the term “natural advantage” for this concept. Later economists concocted the sleight-of-mouth bait-and-switcheroo shell game of ” comparative advantage” hoping to get people to confuse it with “natural advantage”.

    If Country A has high wages, good high-cost social conditions, legality of labor unions and police forces which exist to protect and serve the citizenry, and Country B has low wages, bad low-cost social conditions, absolute illegality of labor unions and police forces whick exist to oppress and persecute the inhabitants ( most of all to prevent any effort to improve social conditions, legalize labor organizing and/or raise wages), then Country B has a “comparative advantage”. ( I would say a concocted and enforced “natural advantage”). If Country B has such a durable and long-lived oppression regime that it can always maintain its low-price/low-wage anti-standards anti-social conditions, then it could perhaps be quibble-said to have created an “absolute advantage” for itself.

    In the example offered in this post, England had the Natural Advantage of being about the only place able to grow wool, and could certainly turn it into an Absolute Advantage by refusing to export its raw wool. Perhaps one could call that an Absolute Natural Advantage.

    English Person: ” Do we have a Natural Advantage or a Comparative Advantage?”

    English Ben Franklin Equivalent: ” You have an Absolute Natural Advantage, if you can keep it.”

    Was Canada forced to begin selling raw logs and raw salmon in the 80’s or did certain Canadian Biznismons decide to do so all on their own?

  17. different clue

    . . . ( in the second paragraph, 8 line down, I used the word “concocted natural advantage” when I meant to use the phrase ” concocted comparative advantage”) . . .

  18. different clue

    @ Stephen of Ohio,

    How is it that the fault ” lay within”? Didn’t the people of the Light Supply-Chain Feeder Industrial Midwest” fight againt NAFTA and etc. as hard as they could? Weren’t they tricked and betrayed by Clinton’s double-cross lie about “opposing NAFTA as is without corrective changes?

    Perhaps one could say that the “failure which lay within” was the failure, or perhaps lack of ability, to mobilize hundreds of thousands of Midwestern Citizens with hundreds of thousands of reasonably high-powered firearms, plus reasonably high-powered knowledge of explosives to be able to “reach out and touch” so many Forcey FreeTrade supporters that the rest would be convinced to give up on trying to make NAFTA and etc. the law. One could call that a “failure which lay within”, I suppose.

  19. responseTwo

    Good article. Having grown up in the 50s/60s, I lived through the destruction of the American middle class and the redistribution of wealth to the tiny top.

  20. StewartM

    Having spent time in Vietnam quite a bit, I can personally attest that Vietnam has more of a free market than any neoliberal Western country.

    It’s always why Asia has had less a problem with inflation than us. Nothing works to hold the line at prices than real (as opposed to fake) competition. In addition, it’s a joy to engage with someone who actually is strongly motivated to please you as a customer, rather than someone who is trying to screw you as a customer along with their employees because you’re not one of the sainted stockholders (the only people who matter).

  21. StewartM


    but it took a genius like Genghis Khan to pull them together, formalize tactics and enforce the necessary discipline.

    What about the Huns before them?

    (I know, a geeky objection, but as someone who knows a few people from that part of the world, I marvel at how both groups just ‘came out of nowhere’ to shake empires East and West–the Chinese of course had to deal with them before they impacted Europeans).

  22. Purple Library Guy

    While I entirely agree with your analysis, IMO you are using an . . . idiosyncratic meaning for the terms “comparative advantage” and “absolute advantage”. That’s fine, since you’re clear about what you mean by them, but if people read this, agree with it, and then go talk to someone there will be communication problems.

    When you say “comparative advantage”, what you mean by it is what is normally called “absolute advantage”. When you say “absolute advantage”, what you mean by it is something like “monopoly” (on a country, rather than firm-by-firm, basis). And you don’t talk about actual comparative advantage at all, which is something different.

    So, what comparative advantage actually is, is “whatever thing a country does that it is better at than anything else it does”. The thesis about trade and comparative advantage is that a country should specialize in whatever it is best at compared to other things, even if other countries still do it better. The idea is that if country a sucks at everything, and country B is three times as good at making commodity 1, but only twice as good at making commodity 2, then country A can still sell country B some commodity 2 because country B would rather be making commodity 1 that it’s really good at, and everyone is best off if that’s what happens. This only works if the capitalists of country A can only invest in country A, and explicitly assumes that; if capital is mobile, the capitalists can instead pursue absolute advantage by just all letting country A collapse and instead investing in country B. Also note that the theory assumes that countries’ capabilities are static and unchanging, and in that way technology is just like natural resources. Or to put it differently, in the real world the theory of comparative advantage is irrelevant rubbish.

    Absolute advantage is things a country does that it is absolutely better at than other countries, like France with wine or China with high speed trains or whatever. It’s not things only country A can do at all, it’s things country A has an advantage over other countries in doing. Modern globalized free trade with mobile capital was always about seeking absolute advantage–the cheapest production, usually via the cheapest labour with the worst environmental/safety/whatever standards. The only reason anyone ever invoked comparative advantage when talking about modern globalized free trade was simply that it was more convincing. Ricardo’s theory of positive outcomes from trade via comparative advantage is widely accepted by economists and laymen acquainted with economy, and had pretty math that was agreed to work given its assumptions, whereas there was never any economic theory that did anything like that for absolute advantage, so they tried to pretend that Ricardo’s thing was what they were doing, even though it wasn’t.

    As I say, you’re still right in your analysis of what is going on. Just being a pedant here.

  23. StewartM


    They were a demoralized people bereft of the spirit that drove their grandfathers to build the enterprises they lost.

    I would also argue that they lack the technical skills (born on living in a non-technical culture) and moreover a big problem even with that there’s not enough of them. They are unhealthy physically too.

    A HUGE problem is that for the last generation or more, US companies starting with Jack Belch Welch have run their operations chronically short-staffed. US industry cannot grow and innovate and compete because it just has enough hands hired to man the pumps, and little more. Broken-record-me has been saying for years immigration is not a problem, those workers are not driving down wages but would be an asset, becasue most US companies are running about 25-30 % understaffed of what they would need to have to actually develop new products/services and technologically innovate.

    When I hired in I saw the last holdouts of the old FDR economy, where a saying went “we won’t let a [insert low-cost item or service here] ‘nickel’ hold up a project dollar”. That makes perfect sense, if you see your job as innovating new technology. Ah, but to the Jack Welches of Wall Street, that nickel could be eliminated, then the dimes and quarters after it, if that cost the holy stock price to go up.

  24. Purple Library Guy

    A note about coal and the industrial revolution: I recently finished reading a very interesting book called “Fossil Capital”. It notes that the industrial revolution, involving factories with powered machinery replacing or multiplying human labour, started before the invention of the steam engine. It used water power, and for some time there was a good deal of doubt as to whether coal or water would prevail. Water had certain advantages–for one thing, you didn’t have to pay for coal. But coal had advantages that were particularly important in the context of capitalism, such as location: You could locate the factory where there were plenty of workers available, allowing you to, for instance, sack them all if they formed a union and hire new ones–whereas with water, you had to put your factory where the water was, and either lure workers with good conditions or employ slave labour which was hard to motivate. Fossil fuel power was, in general, more completely controllable. But the two methods co-existed for decades before coal became the clearly prevalent power source.

    If there had been no coal, the industrial revolution would thus still have happened, and it still would have begun in England–given that its beginnings in England did not, in fact, use coal. But capitalism really started before the industrial revolution–if you look at Adam Smith’s famous “pin factory” example, there is no industrial technology involved at all. It’s just a bunch of people using division of labour because they have a capitalist boss making them. It might be argued that it was the capitalist form that created the drive for devices that multiplied the productivity of labour.

  25. Ian Welsh

    Different clue: fair enough. They weren’t the only ones, but they produced more than anyone else.

    At first I believe it was voluntary, but by the later 80s it was illegal under the free trade deal that came before NAFTA, iirc.

    StewartM: to some extent. But other people could, say, make ships, they couldn’t make ironclads. The Mongols didn’t lose a battle for over a century. Alexander using the martial technology and techniques of his father was unbeaten, even against far larger armies and not all led by cowards like Darius.

    A quality advantage can be so great as to be an absolute advantage.

    Ricardo assumed capital was not mobile. I wrote about it in “Ricardo’s Caveat.” Capital not used to make wine in Britain would be used for something else in Britain. With free capital flows (and knowledge transfer) the benefits of comparative advantage don’t work.

    ResponseTwo: the Huns were not nearly as successful as the Mongols. To be sure horse nomads were dangerous before Genghis, but he brought it to a whole other level. Much of that was personal genius: Temujin was very careful not to fight battles he couldn’t win. He refused to attack the Chinese capital multiple times, waiting till he knew he would win, for example.

    Atilla wasn’t half the leader or general that Temujin was.

  26. bruce wilder

    @ Purple L G

    nice job with the pedantry. your definitions are correct, well and politely put. I admire the effort.

  27. GM

    Everything you say is true, but it is true within the context of the assumption that the goal is a growing economy and developing markets.

    The real elephant in the room is that this is the root of all of our problems, and what needs to change first before anything else can be fixed — the economy has to shrink quite a bit, become a steady-state one, and do away with all those ideas about growth.

    Otherwise it will all go to hell.

    So we in the West are multiple levels removed from having anything close to a realistic understanding of the situation humanity is in. What we do doesn’t work even in the catastrophically faulty framework it exists in.

    Although, on the other hand, on at least one issue paradoxically there is more realism in current Western policy than I see in the “newly emergent order”. The West is going for broke trying to secure the remaining scarce resources, to the point where it is actively directly militarily attacking Russia (Russia being the place with the most of those resources, and also the place that is best positioned to cushion the effects of climate change). Meanwhile the Russian and Chinese are talking pompous nonsense about “multipolarity” and thinking they will be able to work out a deal with the West instead of seriously fighting back, and I see no signs there of any serious understanding of the global ecological predicament driving policy making either. It is growth, growth, growth, and to hell with the consequences just as much there as it is here…

  28. Ian Welsh

    Coal and the steam engine was required for significant take-off. Wind/water had been used before that and division of labor, but they would not have given Britain and later Europe the power they had in the 19th century. The technology matters. A lot.

  29. Jan Wiklund

    This was also the opinion of William Thompson & Leila Zakhirova, in Racing to the top, Oxford 2019. The Dutch had peat and wind, the English had coal, the Americans had oil; each cheaper and handier than the one above. Which allowed them each in its turn to be hegemonic.

    The obvious choice for the Chinese should be sun, because that is cheaper than the above, see, but Thompson & Zakhirov, looking at the statistics as of 2019, doubt that they will achieve it. However, in 2022 the Chinese started quintupling installed solar panels and if that will continue they will have substituted coal and oil by 2030.

  30. Bill H.

    Some sixty years ago, commenting on “the service economy,” my father commented, “Hell, we can’t all make a living selling each other hamburgers.”

    With consumer spending now 70% of our economy, we are proving him both wrong and right. We mostly are making a living selling each other hamburgers, but we are running out of the materials we need to make those hamburgers.

  31. Purple Library Guy

    Mr. Welsh, that is the most common view to be sure. But I really recommend the book, which again is “Fossil capital : the rise of steam-power and the roots of global warming” by Andreas Malm. I find its take on the reasons for the rise of coal very persuasive, and they are significantly different from the most common view–and much more involved with class politics.

  32. @ Different Clue

    The generation(s) of owner-managers who inherited Rustbelt New Deal light industrial enterprises failed in two key respects: they failed to iterate and innovate their products and business models, and they failed to train/manage/adapt their workforces to the new realities, especially younger generations.

    The paradigmatic example is the machine tool industry:

    In short, they got fat, happy, lazy and incapable of innovating sufficiently to outcompete foreign enterprises.

    The enterprises that survived did so by achieving sufficient scale, or by establishing themselves at the very top of the value chain in their respective sectors. Either get huge, or get incredibly specialized and more skilled/precise than third worlders were capable of achieving. Everyone in the middle died.

    External pressure was inevitable. You can’t shut your economy out from imported competition and also maintain the global reserve currency. These small firms, and more specifically the men who managed them, lacked the necessary spirit and culture to adapt and survive through the change. They were fat and happy and comfortable. Younger, leaner, hungrier cultures ate them.

    My hometown of Dayton is really great example. At its peak, this city was the #1 global producer of 50 different manufactured commodities, from step ladders to bicycles and pretty much everything in between. This is no exaggeration, this was the #1 producer of patents per capita in the entire country.

    The managers of these firms failed utterly to understand the consequences of Globalization. They could have been the winners! But they lacked the vision, spirit, drive, and leadership skills.

    Today, these towns are managed by a generation of utterly demoralized men who not only cannot imagine brighter futures, but actively desire stagnation, view stagnation as a positive end, and implement public policy intended to encourage and maintain stagnation and decline, deliberately and by choice.

  33. Stephen of Ohio

    To expound on the last point, try to go into a small rustbelt town in Ohio, buy one of the old light industrial buildings, and start a modern niche manufacturing enterprise. You will be stonewalled at every turn. The men running these towns do not value dynamism. They *like* their stagnation. It makes them happy. They are comfortable drinking beer and mowing their lawn and living astride the decayed remains of once prosperous specialist manufacturing concerns. They are living exactly the lifestyle they desire.

    Small rustbelt towns are dead because NAFTA killed them, yes. But they are also dead because the managers of these town *want them to remain dead*.

    Thus, I say they are a demoralized people bereft of the animating spirit so prominently displayed in the souls of their fathers.

    They not only lack a positive vision of the future, they actively desire their stagnant present.

  34. Senator-Elect

    Thanks, Purple Library Guy, for correcting Ian’s terminology. I’ve been meaning to for a few articles now. It’s ECON 101.
    Sadly, economists and others will dismiss this article out of hand for not using their terms “correctly”. As you say, the points still stand, but the gatekeepers will have a hard time overcoming the misuse of absolute vs. comparative.
    The article makes really good points on the competitiveness of Western markets: businesses only seem to compete on how quickly they can crapify their products and customer service, how effectively they can strip mine a viable firm for fees and dividends paid to investors or on how much data they can scam or sneak from users or customers.

  35. Carborundum

    The thing that would greatly enhance these types of big picture political economy pieces is discussion of the associated demographics. Demographics may not, as some have said, be destiny – but it plays a much, much larger role than political economy-based interpretations give it credit for. My view, it is much like how Buffet thinks about industries – even the best management can’t make a company in a declining industry outperform a poorly-run company benefiting from the tailwinds of being in a great industry.

  36. Scott Stiefel

    Cory Doctorow had a post about how much capitalists hate actual capitalism the other week

  37. Kouros

    The technical genie is out of the bottle and cannot be put back again.

    Also, the energy issue, and its cost and access…

  38. Altandmain

    One thing that hasn’t been addressed is that the Chinese are heading towards a situation where they will have a large amount of absolute advantage over the rest of the world.

    That’s going to mean that in the near future (and this will happen much sooner than many people in the West seem to think), the most advanced technologies will come from China.

    It will be incredibly hard for the West to regain control of leadership after that happens. China has been investing a large amount of money into basic research and into converting that research into consumer products. The Chinese also widening their lead in manufacturing technologies.

    Unless the Chinese ruling class really messes up (and so far it looks like the CPC has been very competent), there does not appear to be any real option for the West to catch up. The West has built its economies on elite rent seeking The ruling class doesn’t know how to reorient its economy to a legitimate technology and manufacturing-centric economy.

  39. Ian Welsh


    agreed, I’ve done a couple posts on their the fact that they’re “tech velocity”, as it were, is higher than anyone else.

  40. zapster

    China’s greatest innovation is its system of raising competent administrators and efficient systems. This is why China is so quick to solve systemic problems. And since Xi, corruption is being absolutely slaughtered–sometimes literally (death penalty for taking very large bribes is not uncommon, tho usually commuted for good behavior.) No one reaches high office without 30 years of proven service to the people. That pretty much guarantees that everything works.

Powered by WordPress & Theme by Anders Norén