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647. China Is Run by Engineers. America Is Run by Lawyers.

Freakonomics Radio

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  • Censored Return: Banned Website And Fear
    • Wang recounts being treated as a ‘ward of the state’ in China despite foreign citizenship.
    • He experienced censorship, website blocking, and sought help from the Canadian consul general in Shanghai. Transcript: Dan Wang To benefit American investors, I’m curious how you were perceived. Oh boy, that makes my life sound even more complicated than I expected. If you are of Chinese heritage, the Chinese government will view you essentially as a ward of the state for as long as you live. It doesn’t matter if you haven’t spent any time in China. It doesn’t matter if your parents came to San Francisco 100 years ago, you will be viewed as a ward of the state. That is also one of these frightening things about China. I don’t want to be treated as a ward of the state forever. I am very proud to be a Canadian. I’m very happy to be a resident of the United States. And this is not how I would choose to be identified for the rest of my life. Were you concerned for your safety there? I was concerned at several points for my safety. At one point in 2022, Chinese government banned my website within China. I was thinking, well, all I have is this rinky-dink website. It’s just my name, danwan.co. Did Beijing really feel like I was on par with Wikipedia or the New York Times in order to have to ban me? I had to go see the Canadian consul general in Shanghai to ask whether they needed me to leave in a hurry. And what were you told when you went there? They said that maybe this was just an algorithmic decision by the government. It’s not very clear. I didn’t have any censorious doors I could knock on to ask, hey, what’s going on? Is there something I wrote? And so I had no idea. (Time 0:13:20)
  • Three Acts Of Zero COVID Experience
    • Dan Wang stayed in China from early 2020 through end of 2022 and experienced zero COVID firsthand.
    • He witnessed phases of anger, temporary acceptance, and a brutal Shanghai lockdown followed by abrupt abandonment. Transcript: Dan Wang I was in China at the start of 2020 until the end of 2022, basically having not left for three years. My observation of zero COVID in China was that it consisted mostly of these, let’s call it three acts, to put it a little bit dramatically. The first act of zero COVID consisted of a lot of anger at the Chinese government. This was really the winter spring of 2020, when we had heard of a new respiratory virus that had broken out of a city named Wuhan. And a lot of folks, including me, including a lot of Chinese around me, were angry that this was the second big respiratory virus to break out of China in two decades. The first one was SARS in 2003. And it followed some of those early issues of SARS in which the Chinese government tried to suppress some of these whistleblowers that were talking about medical conditions. The second act moved pretty quickly. By April and May of 2020, people saw that China actually contained the virus fairly well, and there was a bigger sense of appreciation that these methods of zero COVID, though very harsh, Was able to stomp out a lot of chains of transmission. Now, people were still straining under some of these difficult aspects of zero COVID, which included things like if you were tested positive, the government was going to make you go To a convention center or a stadium to quarantine with other folks. You had to go through these contact tracing apps. A lot of things were shut down. You had to wear a mask outside in most places. But most people decided that these costs were worth bearing. Restaurants were starting to come back online. A lot of the economy was returning to life. There used to be this early commentary at the start of 2020 that COVID was going to be China’s Chernobyl moment, which meant a natural disaster that triggered the political downfall Of the regime. And if anything, people thought that maybe COVID is the Chernobyl moment for everyone else because Donald Trump’s America in 2020 certainly didn’t seem like a really good place to Be. And that was the year that my parents did a very un-Chinese thing and said, Dan, don’t come back and visit us in Pennsylvania. It’s a mess over here. Just stay in China where life is better ordered. And then there was a third act of zero COVID, which started with the Shanghai lockdown in the spring of 2022. It was probably the most ambitious lockdown ever attempted in the history of humanity. China essentially demanded that its population in its largest city of 25 million people essentially could not leave their apartment compounds over the course of 10 weeks in the spring Of 2022 because the Omicron variant of the virus, which was highly transmissible, was spreading out of control in the city. Xi’an in the Northwest also was subject to a very long lockdown. And so people were kept inside. A lot of folks felt food insecure. The city had no plan really to implement a lockdown while delivering a lot of food to everyone. People who needed treatment for their diabetes, treatment for cancer, were essentially told, you need to stay at home because we don’t want COVID spreading. A lot of people across China were feeling very dissatisfied with zero COVID. In a few places, protests erupted. And I remember going to the Shanghai protests in October of 2022. Stephen J. Dubner Some residents of Shanghai protested the COVID measures by screaming out of their windows for hours. The government deployed drones to tell residents to keep quiet. The announcement says, please comply with COVID restrictions. Control your soul’s desire for freedom. Do not open the window or sing. Dan Wang And then the central government tried a different approach. The great denouement of zero COVID was that the central government essentially threw up its hands and said, we’re not going to pursue this anymore. Essentially, they dropped all of these barriers, not quite overnight, but over the course of a week in which zero COVID became total COVID. (Time 0:16:59)
  • Engineering State Drives Big-Build Mentality
    • China functions as an ‘engineering state’ driven to build large physical and economic projects.
    • That mindset treats social problems as optimization problems, producing both rapid progress and heavy social cost. Transcript: Dan Wang China is a state defined very much by a leadership that views itself as not so much interested in soft, fuzzy stuff of creative expression, but very much more interested in building Highways, building mega projects, building dams, building coal plants, building hyperscalers, building homes. That was the way for it to create political prestige over anything else. At various points in China’s recent past, the entirety of the senior leadership, all nine members of the standing committee of the Politburo, had degrees in engineering. And this was engineering of a very Soviet sort. We had top leaders that were hydraulic engineers and thermal engineers and mechanical engineers. And part of my central thesis is that China is ruled as an engineering state because China treats building a megaproject as the solution to any number of problems. Stephen J. Dubner What would you say are the key downsides of an engineering state? Dan Wang The problem is that they are fundamentally also social engineers that treat society as just a giant math exercise as well, which is why I spend a lot of time thinking about the one-child Policy as well as zero COVID, which the number is right there in the name. There’s no ambiguity about what this means. So China is made up of physical engineers, people who try to engineer the economy as well. They’re also social engineers. I think that for the most part, what the Chinese are interested in is being an engineer of the soul, which is a phrase from Joseph Stalin that Xi Jinping has recently repeated. They’re not just also social engineers, they’re also engineers of the soul. The main downsides are when the Chinese government decides that the population is just another problem to be optimized, as if the population could be controlled through a series of Valves. (Time 0:26:28)
  • Lawyerly Culture Shapes U.S. Inaction
    • The U.S. is described as a ‘lawyerly society’ where process, litigation, and property protection dominate.
    • That culture blocks projects and preserves elites even as it prevents harmful large-scale social engineering. Transcript: Stephen J. Dubner I think that the U.S. Dan Wang Is a lawyerly society because at first approximation, a lot of folks who end up in the White House have gone to Yale Law School. Stephen J. Dubner As Politico has pointed out, there were around 140 lawyers in the Biden White House, and about 25% of them had Yale law degrees. If we take a look at the founding of America, a lot of the founding fathers were trained as lawyers. Dan Wang If we take a look at the Declaration of Independence, essentially it reads like a lawsuit as the start of a great legal argument. The lawyerly society has persisted in the modern past, and the Democratic Party is especially lawyerly. I think the issue with lawyers is that lawyers are really good at saying no. Lawyers block everything good and bad. So on one hand, we don’t have functional infrastructure almost anywhere in the U.S., but we also don’t have stupid ideas like the one-child policy. Stephen J. Dubner I’d like to know why you call the U.S. A lawyerly society versus a lawyerly state, especially considering that so many of our elected politicians are lawyers. Dan Wang I call it a lawyerly society because this is something that we all participate in. One of the great things about lawyers is that they’re able to protect people with property. Unfortunately, what that has ended up in is that a lot of lawyers are protecting people who have already made it. They’re mostly already protecting the rich. (Time 0:30:27)
  • Rebuild Visible Infrastructure To Restore Trust
    • Do rebuild visible public infrastructure to restore civic optimism and connectivity.
    • Invest in transit, bridges, and power to create tangible benefits and political resilience. Transcript: Stephen J. Dubner I think the U.S. Dan Wang Needs a little bit of the engineering spirit of Robert Moses once again today. New York City has just not built enough infrastructure. Part of what China has really decided to build is a lot of infrastructure, mass transit, but also parks, a lot of power capacity, and also a lot of very tall bridges in the countryside. I think when people see that their cities have new subway lines, when the rivers are being connected by bridges, when their city is becoming more pleasant, they also have a broader sense Of optimism about the future. This is in part a redistribution strategy in which, you know, you have these bridges built in pretty poor areas in order to try to make them better connected. And so that has produced not only a lot of economic gains, but it has also created some degree of political resilience for the party. Because when Chinese are pointing to their high-speed rail networks or drone shows with pride, I think their pride is very real. So we can call it propaganda of the deed, but I think this is what people feel really good about. (Time 0:37:58)
  • Use Economics To Balance Engineers And Lawyers
    • Use economists’ empirical and systems thinking to blend engineering ambition with human-centered restraint.
    • Favor dynamic, data-driven policymaking over pure legalism or technical hubris. Transcript: Dan Wang Now, Stephen, you’re really trying to get me canceled by having to praise economists. Stephen J. Dubner Can I say, when I heard you explain this, you then said, but economists are the most reviled of the social scientists. And I was surprised to hear you say that. Economics has plainly taken its hits over time as any field does. But when you look at how influential it’s been in policymaking, especially compared to the other social sciences, there’s no contest. Dan Wang But again, that’s my assessment. Maybe I’m biased. I think that is still not a very good position to take in the academy because people attribute every wrong in the world to the evils of economists. I have great admiration for economists because I think they synthesize the best from the lawyers as well as the engineers. I think that economists are indeed very empirical. They look at a lot of data, and they also have a very keen sense of social science. They know that systems are dynamic. One of the things I will always be grateful to economists for is that economists were the greatest critics of the one-child policy in China, as well as briefly when it was kind of discussed In the U.S. After Ehrlich published the population bomb. Economists could tell in a way that many engineers could not that population change is a dynamic variable. We don’t reason through straight lines. When the population gets wealthier or better educated, the fertility rate might fall. And so I think the economists are good blends of both technocratic empirical expertise, as well as having enough humanistic tendencies to really have the right formulas. (Time 0:41:14)
  • Power Through Production And Prestige
    • China aims for great-power status through cultural and economic centrality rather than raw territorial conquest.
    • Producing superior goods and urban spectacle builds legitimacy at home and abroad. Transcript: Stephen J. Dubner Or did they just want to be, you know, a regional hegemon that gets left alone? Dan Wang I think that is a really important question to figure out. And this is something that the specialists are always up in a conniption about. I think the first thing to say is that, yes, China really does view itself as the center of the world. One can translate it as the middle kingdom, another way to translate it as the central kingdom. This is the center of the world. In the last days of the Qing Empire, this was the last empire of China before it became a republic, the Qing Empire also referred to itself as the celestial empire. Have viewed themselves to be the center of the world and everybody else is just another shade of barbarians. But what does this really mean? This is where the specialists debate. Does China want only regional hegemony? And what does regional hegemony really mean? Well, maybe it means something like demanding that the heads of state of Malaysia and Vietnam and the Philippines regularly come to the top leader in Beijing and kowtow for the emperor’s Pleasure. If that is the case, is that a very big threat for American interests if a lot of China’s near neighbors are paying fealty to China’s top leadership? I am a little bit skeptical of the case that China would want to be much more aggressive and try to, let’s say, seize Japan or seize Russia. I think that China is much more interested in declaring itself to be a great power with sufficient credibility for its own people by doing things like being a center of culture, being A center of order, producing many splendid goods that the rest of the world doesn’t have, which is how the Chinese have regarded themselves. The Chinese were able to make porcelain, were able to make silk, they were able to make tea, and the barbarians were not. That was really what defined Chinese apart from others. And I think what that means, perhaps in the modern context, is that China has these fantastic cities full of drone shows in which electric vehicles, the best in the world, are speeding Through. (Time 0:47:15)
  • Climbing Versus Laying Technological Ladders
    • China excels at climbing existing technological ladders while the U.S. often invents but fails to own industries.
    • Owning an industry yields strategic and economic advantages beyond original invention. Transcript: Dan Wang What? China has stolen a lot of American IP, and I think it is not the most relevant comparison for thinking about the U.S.-China competition. My starting point is to think that China is really good at climbing ladders and the U.S. Is really good at laying ladders. So what does that mean? The U.S. Invents major industries. I’m thinking about something like solar production. Do you know who invented the first solar cell? I guess you’re going to tell me it’s in the U.S. It is in New Jersey. It was Bell Labs of New Jersey that invented the first solar cell in 1954. And the U.S. Didn’t really do enough with the solar industry. It was really a big science project for a while. The Germans took a lot of the solar industry from the U.S. And the Chinese have completely taken it away from the Germans. So if you take a look at the solar industry, everything from the polysilicon processing in the upstream end down to the actual production of the solar photovoltaic cells, that is 90% A Chinese product. One of the things that I always like to ask American policymakers is, which has a greater glory? Is it to invent a product, but not really to own the industry? Or is it to actually own this industry? (Time 0:49:50)
  • Manufacturing Losses Erode Future Capabilities
    • Losing manufacturing erodes the ecosystem of skills needed for adjacent technologies.
    • Once production capability vanishes, building new advanced industries becomes much harder. Transcript: Dan Wang I would say that there’s a little bit more nuance than that, which is that technological advancement is a dynamic process. We can’t expect countries to be amazing at different technologies all out of their own. A lot of advancements in something like engines came out of really good machinery goods that were being produced in Germany that the British textile industry laid the basis for. Part of the reason that I’ve been concerned about America’s loss of manufacturing prowess is that the U.S. Lost a lot of production of televisions to Japan in the 1980s. At the time, policymakers were thinking, well, is this a problem? Maybe we don’t really care that much about television production. But if you don’t master something like television production, then it becomes quite a lot more difficult to master other aspects of consumer electronics. The first city that really produced iPhones at scale was Shenzhen in southern China, which is right across from Hong Kong. After Shenzhen mastered the iPhone production, workers in Shenzhen were pretty quickly able to turn their skills into building other major electronics products. It is no accident that Shenzhen also became the center of the worldwide drone industry. The world’s biggest drone maker is DJI. It’s centered in Shenzhen, also makes all sorts of other batteries. Let’s imagine that Apple, working with a contract manufacturer, not in southern China, but in, let’s say, the industrial Midwest in the United States, call it Pennsylvania or Michigan Or Wisconsin. Could it have been possible that drones and batteries and all sorts of other electronics advancements were made in the U.S. Midwest rather than Shenzhen? (Time 0:51:19)
  • Process Knowledge Trumps Patents
    • Process knowledge (tacit skills) is the decisive component of technology beyond hardware and blueprints.
    • China accrued deep process knowledge through mass production experience, enabling rapid industry creation. Transcript: Dan Wang If we’re thinking about what exactly is technology, I would propose that there are three different segments of technology. The first aspect of technology is the hardware, it’s the equipment, it is all these things that we can physically observe and use. If we wanted to use a kitchen analogy, I would say that technology is something like the stove, the pots, and the pans that we use to cook with. Second technology is written instruction. So these are patents, these are blueprints, these are the recipes from which we can actually make something. And the third, and I think the most important part, is process knowledge, which we can also call tacit knowledge. It’s just a practical experience of doing things. So if we wanted to put someone who has never cooked a day in his life to make something quite simple and we give him the most well-equipped kitchen as well as the most exquisite recipes, Are we sure that that person is able to do something as simple as fry an egg? That might be quite risky. That is really the fundamental Chinese advantage in technology. They’ve just been solving seven problems a day before breakfast because they have so many problems to solve. They have all of this experience that accrues, and then people take this process knowledge to invent whole new industries. (Time 0:54:00)
  • Act Fast On Reshoring And Industrial Policy
    • Do pursue reshoring with urgency and speed, not just funding promises.
    • Move faster on CHIPS, infrastructure, and industrial policy to avoid losing momentum and political credit. Transcript: Dan Wang I think the Biden administration was absolutely right to try to spend a lot more in the United States with big projects like the CHIPS Act, as well as the Bipartisan Infrastructure Act, As well as the Inflation Reduction Act. But the problem with a lot of these programs was that the Biden administration moved really slowly. It was plotting, it was proceduralist, it was lawyerly. And a lot of this money wasn’t even allocated by the time that voters chucked Joe Biden out of the White House and brought back in Donald Trump. (Time 0:55:15)
  • Expats’ Mixed Pride And Practical Choices
    • Many Chinese expats retain pride in China’s economic achievements despite political repression.
    • Some prefer living in Shanghai for convenience and higher savings even after experiencing life in the U.S. Transcript: Dan Wang There is a very broad sense that China has been able to achieve something amazing among developing countries. This degree of economic growth has not yet been matched by India and Brazil and Indonesia. China has been a much more decisive grower of its economy than these other countries. That in itself aspires quite a lot of pride. There is a sense of skepticism of a lot of the democratic impulses of the West. One sees a lot of the disorderliness in the streets of New York. One sees disorderliness on January 6th in 2021, there are a lot of people who do genuinely feel that China doesn’t have these sort of issues. There are also a lot of Chinese who lived in, let’s say, New York or California, who lived through life in the U.S. And have decided that it’s a much easier life to live in Shanghai. Let’s say you have a degree in the U.S. From a good school. You may well be able to earn roughly the same salary in China as you would in the U.S., but you can save a lot of money. You have a lot more convenience. The subway systems work a lot better. (Time 0:58:21)