NAH, TOO MANY OPPORTUNITIES FOR GRIFT: China’s Industrial Policy Is Failing. Will American Politicians Take Notice?

With the old model reaching its end, it would make sense for China to pursue another phase of liberalization, evolving toward a freer economy with a focus on consumer spending and service industries. But that clashes with President Xi Jinping’s vision. Instead, the government is scaling up another round of industrial policy focused on semiconductors, artificial intelligence, and direct government spending on cultural items such as sporting events.

“The leadership also worries that empowering individuals to make more decisions over how they spend their money could undermine state authority, without generating the kind of growth Beijing desires,” the Journal reports.

That line does a pretty great job of summing up what’s at stake in China. There’s no doubt that governmental stimulus spending can drive economic growth higher over the short term, but the bill eventually comes due in the form of higher debt and wasted resources. Sustainable, long-term economic growth doesn’t come from officials issuing edicts. It comes from the individuals’ power to pursue their own needs and desires in the marketplace—even if some of those desires aren’t aligned with what the government wants.

We watched Japan go through something similar in the ’90s — immediately following a decade of fear about “Japan, Inc.” surpassing the US. This time, though, Washington seems determined to relearn the lesson the hard way, if that.