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Jul 25, 2021Liked by Noah Smith

This is not new for China. China led Europe in many respects in the 16th century, but the Emperor recognized (correctly) that the rising merchant class was a threat to his power and reined it in. This kept the Emperor the supreme power while European monarchies lost relative ground to the bourgeois. Of course, it was detrimental in the long run to technological and economic development which meant Europe conquered China rather than vice versa—but in the long run….

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That sounds fancy but where is your source? China merchant class was far from being any kind of threat to the monarchy. There most notable revolution in the Qing dynasty was Taiping rebellion and it was basically just another monarchy.

Besides, the Emperor had no ideology. You can call CCP names but it has an ideology and agendas, go along the line of national glory and prosperity something something. It would be disingenuous to say that all it sets out to do is blindly hoarding power. Those Chinamen are stupid I guess?

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Well one, it happened. In Europe, the merchant class eroded the power of the monarchs faster and earlier than in China. In China, the Emperor (whose ideology is power—as is the case for monarchs generally), in fact, put significant restrictions on foreign trade—when Columbus squeaked across the Atlantic, China was sending much larger fleets to Africa. The emperor quashed that. As to source, I first read the idea in Guns, Germs and Steel by Jared Diamond—but it’s the facts, not the source, that show what happened. And it wasn’t stupid for the emperor—the Chinese (I refuse to use your slur), were ahead of Europeans in many ways at that time—so hardly stupid. What’s your rationale for why China lost so much economic and technological ground to Europe from the 1600s through the 1800s?

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thanks for completely missing the point, let me make it short to you: what China TODAY is doing MIGHT not be shortsighted.

Saying you recognized that they are "hardly stupid" and not call them slur (well done sir?), yet then proceed with the theory that China is driven by such a sophisticated ideology as "power, period" is hypocritical.

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Unless the West find something radically new to blunt Asia's rise, West's run will end very soon and focus and power will be shifting back to mid east Asia and will be there for a long time. This thought of course discounts possibility of a world war where all major nations of Asia are badly affected, which would then allow West to continue their hegemony

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I find this POV fascinating as it tracks closely to what many of my other well educated, liberalish, western friends hold and I find myself arguing with when it comes to China.

Your main thesis is that the predominant influence on any decision made by the Chinese government is their desire for power - both over their citizens and over the world.

Would this change if you approached the question with the assumption that, like many people who enter government globally, they are trying to do what they believe is best for their citizens and their nation. Yes, there are some influenced by power and influence etc, but I still believe most people entering government have an underlying patriotism. This is not something unique to the US.

If you start from that basis - which seems relatively fair given the incredible benefits that the Chinese citizens have obtained over the past thirty years (yes I’m starting from the cultural revolution onwards) and the corners they could have cut for much larger personal gain - then you can argue that rather than “they are doing it for power” that they are doing it to ensure a less divided nation, a more prosperous nation, a nation controlled by itself rather than outside interests, a nation responding to climate change.

Then you get to a more interesting argument of is this the correct way, do we see free market capitalism as better or is there something else.

If you read Joe Studwells book “How Asia works” you’ll see that they are just following the same playbook as Japan, Korea, Taiwan in reaching advanced economy stage - though with the large difference of also having a foreign policy independent to that of the US. And these all saw the tight linkage of government and business, with business often being reminded that it exists for the service of the nation (similar to US industry in the 50s and 60s).

It is hard for westerners to understand that a government may only be operating to protect its citizens and build its nation and that this doesn’t automatically doesn’t lead to conquest. Difficult because western nations have always turned to expansion and colonialisation when they have had the power.

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If you cared about your citizens, you would allow them freedom of thought and expression. You wouldn't arrest journalists for writing the truth. You wouldn't massacre the students in Tiananmen Square.

Furthermore, if you investigate the core members of the CCP, you will find that they are significantly wealthier than the average Chinese citizen because they use their positions for personal enrichment.

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The problem is when their policies are so far off from what's best for their citizens it's really, really hard to make that assumption. The genocide that is currently happening there COULD be partially caused by a want for "less division" and "a more prosperous nation." The same goes for their foreign policy. But why would we assume this is the primary cause?

I think you have to grapple with the fact that "wanting a less divided nation" and "wanting a sovereign nation" are objectives that most governments have. So why does Chinese policy tend to differ?

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Which policies that they have followed over the past thirty years are “so far off what is best for their citizens”. Which model should they have followed if not the statist, export led model that they have followed - a model that has proven to help rapidly industrialist Korea, Japan and Taiwan since the Second World War. Is there a democratic system you can point to that rapidly industrialized in forty years and brought such prosperity to its people?

Given the current overall satisfaction of the Chinese people with their government, as well as the rising wealth and the fact that they haven’t had a severe crisis for forty years (which if you know chinese history is rare) I tend to support the government over some unproven theory that just by providing liberty and the vote people will be better off.

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> "Is there a democratic system you can point to that rapidly industrialized in forty years and brought such prosperity to its people?"

Surely the answer is all of them?

One of the most frustrating aspects of debate about China is the continuous incorrect assumption that the government there deserves credit for its economic development. If you look at the other examples you name like Korea, Japan and indeed Taiwan they have all achieved much greater levels of wealth than China, and they did so far quicker. The state of China today is the state it's in despite the CCP, not because of it. When Deng Xiaoping "reformed" China, all he was really doing was stopping the government screwing the country up as much as it had been doing previously, resulting in a much delayed developmental spurt that nonetheless, even after many decades, still left China behind other comparable countries that were never captured by communists to begin with. Now Xi Jinping appears to be rolling back those reforms, we can predict the consequences because we've seen it before. Perhaps they will now not ever reach the wealth of Taiwan or Korea, or at least not in our life times.

> "Given the current overall satisfaction of the Chinese people with their government ..."

You don't actually know how satisfied Chinese people are with their government.

1. People who aren't satisfied with their government have to hide it.

2. The ones that can't end up in prison.

3. Any information that might make people dissatisfied is systematically erased.

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> “You don't actually know how satisfied Chinese people are with their government.

1. People who aren't satisfied with their government have to hide it.

2. The ones that can't end up in prison.

3. Any information that might make people dissatisfied is systematically erased.”

Introducing: Sina Weibo (A Chinese version of twitter).

You will learn how Chinese people express their discontent literally.

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I know about Weibo, WeChat and other Chinese social media. Mostly because every time I hear about something going viral on it related to discontent it's in the context of "censors raced to clean it up and it was suppressed hours later". There's no way to objectively measure discontent based on a system like that.

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One may not know about the scale, (it is actually showed in the number of likes and retweets), but one can definitely know about the depth of their hatred

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Thanks for the answer ;-) but you didn’t point to a rapidly industrialising nation that did it while also maintaining democracy and “freedom”.

Korea, Taiwan and Japan were all one party states and limited if non-existent democracies. Korea and Taiwan military dictatorships until the 80s and 90s and Japan has pretty much only had one government in seventy years - apart from 4 years. And yes the CCP screwed the country in the 60s and 70s. That’s why my argument is about the growth that has happened since 1976.

But the government deserves a lot of credit for this. Read “How Asia Works” and you’ll understand the incredible amount of heavy lifting and government guidance that went into ensuring the economic developed at the speed it did.

The CCP basically followed the blueprint laid out by Korea, Taiwan and Japan for industrialization. Is there another form of government and policy that you think they should be following that would be better for increasing the overall well being of their people?

I’d argue that what Xi is doing now is as much as re adjusting the economy away from the purely growth years of Deng (to get rich is glorious) to trying to ensure a more egalitarian society.

2. Most surveys (Pew etc) show relatively high satisfaction rates of the Chinese people with their government. There isn’t much I can do if you just assume that they are all lieing and there is seething discontent amongst the chinese people.

Having lived there for a long time I can assure you that isn’t the case. Of course not everyone is happy with the government but overall there is a level of positivity and energy that doesn’t resemble people who hate their situation.

https://news.harvard.edu/gazette/story/2020/07/long-term-survey-reveals-chinese-government-satisfaction/

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as a Chinese anarchist, I can say that you never know how severe that Chinese speech control are. all of our articles use black words to circumvent censorship,The anarchism forum section in the largest Chinese forum "Baidu tieba"was banned (one of them was banned last mouth, now there is no rest as I know)and all of the Anarchism articles are blockaded. So what is gonna happen? all of the people are educated with nationalism and statism from everywhere, even the childcare center.athe speech are guide from the

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from the official media, and also they have inflitractor who pretend as the normal chinese citizen to comment

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I just told you one-- what they're doing to Uyghurs. Are you really going to deny the genocide they're committing there? What about their restrictions on accessing the Internet? I'm not talking about their economic model, but their policies in general. It's cool that they're a big country and they've become more capitalist and caused some QoL increases to their people. It doesn't mean that characterizes their politics or their politicians.

I really want to invoke Godwin's law here but I'm not. But I do think the moment you're arguing against democracy and liberty, you've probably lost the plot.

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I just argue for more nuance and understanding. the “genocide” argument is one such issue where it’s not as simple as what is reported in even newspapers i trust (BBC, guardian etc).

It has made me also rethink and question how I consume information and also frustrates me because, whenever I talk about the good that China has done for its population I’m drowned out by relatively uninformed people shouting “Genocide” and Hong Kong.

Did you know that while this “genocide” has been occurring the Uighur population has actually increased? It has forced countries claiming this to call it “cultural genocide”. Did you know that not one Muslim nation signed onto the UN declaration of cultural genocide. That there are currently more African american males locked up in prison in the US then uighurs in China? That China has multiple Muslim populations in its country who are not being killed or locked up and enjoy full rights? That the main scholar reporting on Chinese atrocities is a Christian fundamentalist (and one who is right out there) who is supported by an American organization called the Victims of Communism foundation. Really, go read a bit about Adrian Zenz and when you know his name you will see it in every single article reporting on Xinjiang.

I don’t in anyway support what the Chinese government is doing in Xinjiang. But if we argue that the Chinese government is relatively pragmatic why would they even bother doing what they are doing - given they don’t hate Muslims and are currently establishing relations with the Taliban - since it gives western countries such a cudgel to wield in any argument.

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It’s not surprising at all that this devolved into denying the genocide. Go read the wokeglobaltimes articles and you’ll see the case is much more than Zenz. It’s pragmatic for them to try to put down other cultures and promote “assimilation,” yes.

Please take your apologia for a genocide elsewhere, dude, this is literally despicable behavior.

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See, this is why it becomes so hard to argue about China.

Me “China has brought 800 million people out of poverty”.

My friends “They are genocidal murderers”.

Me “Their Uighur population has increased. What is your definition of genocide?”

My friends “the Uighur culture is disappearing.”

Me” development tends to do that”

My friends “you’re an apologist for a genocidal (government) race who all they want to do is wipe out and assimilate cultures”.

Me “China has actually done pretty well in promoting its more than 60 minorities that make up less than 3% of the population and given them more freedoms than most Han Chinese. In fact, until the mid 2010’s were relatively loose with controls on the Uighurs. do you know what also happened in the 2010’s? the rise of fundamentalism, an increased in terrorist attacks by Uighur separatists, a US caused failed state on its border with Xinjiang.

Are they perfect, hell know. Should they be criticised. hell yes. but no nation is free of criticism when it comes to its treatment of minorities. Also, what benefit does China take if we accept they are genocidal that outweighs the opprobrium leveled against it.

I just think there’s more subtlety to what’s happening in China - but unfortunately we never get their because I’m obviously someone who supports mass murder.

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hey dude, truth doesn't come from words, but from your eyes. whether you or other people are brainwashed, go to Xinjiang and China, which is not locked for foreigner at all, talk with Uyghurs of local place.

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I'm chinese and I can tell you that genocide is fucking bullshit, but you can keep thinking that way, cause it will cloud your judgement. A man couldn't even see the politics behind the genocide narrative tries to analyze the economic policies, that is a fucking joke.

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Wow, I love the source of "I'm Chinese," dude. Imagine someone saying "I'm an American and I can tell you that the election of Biden is fucking bullshit," lol two sides of the same coin.

If you're actually interested in talking about whether it exists or not you can look at the source I mentioned or bring up one of your own. Thanks!

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very simple, CCP use "education camp" to lock up the extremists and change their minds if possible.

terrorism has been a long-standing problem in Xingjiang, In 2012, one of my schoolmate comes from Xingjiang showed me a video on his phone, the video was shot through the window of the second or third floor of a building near a street, and on this street, A serious terrorist attack is happening, these fucking brutal terrorists kill everyone they meet, no matter Uyghur or Han, adult or kid, man or woman, cries and screams, run and chase…, that was the first time in my life to see such inhumane thing happen, and also the first time I began to realize that there is terrorism problem in Xingjiang, because as a “southerner”(xingjiang is located in the northwest of China), it’s not that easy to get to know this kind of information.

Obviously, CCP on the one hand block the information of terrorist attack to prevent the hatred towards Uyghurs, on the other hand, take strict measures to tackle the problem.

The controversial part is the “education camp” is not under public scrutiny, and in the purpose of the Criminal law, you basically can not declare somebody guilty just for he/she has the though to make a crime.

I don’t think it’s a kind of cultural genocide, CCP give a shit about which religion/culture you believe in, CCP cares about does the religion/culture pose a threat to national unity. The purpose of “education” is to remove the “bad” part of the religion/culture.

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Jul 25, 2021Liked by Noah Smith

Great post. Early on there were valuable tech infrastructure and scaling innovations that came out of FB and Google, and web development libraries that came out of Twitter. You don't hear so much about that anymore. I always wonder what keeps top engineers at these places anymore. What drives them? Ad optimization? What a thing to base your career, and blood sweat and tears on.

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Jul 25, 2021Liked by Noah Smith

It's still happening. React, k8s, TensorFlow, Google's incredible quantum computing and security work. So much of the work at these companies is at best indirectly related to ads. Ultimately, ads pay for almost everything, but building the infrastructure and countless new products that never go anywhere or get cancelled keeps folks busy and motivated.

Of course very high comp helps as well. It's pretty much working at FAANG and making $$$$, or making half that at a startup that might feel more meaningful and gives you a lottery ticket.

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That's just masturbation. They're rewriting the same code using more and more clever packages. That's why the web keeps getting slower and slower even as communication and computer speeds keep increasing. A growing sector of the software industry is starting to recognize this. Not that masturbation is bad.

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The question was why engineers stay there if all they do is serve ads. You got your answer. Tech masturbation and $ is keeping them.

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I'm only a software engineer so what do I know, but I feel those kind of tech is easy. Innovation seems harder on the hardware, like semiconductor, or battery tech. The US have companies that do those too but they're pale by comparison to companies making cookie cutter apps or self-serving "tech" such as front-end libraries of the month. That shows where the focus is for silicon valley.

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React and tensor flow are years old now. Is there still serious innovation driving tech industry coming out of there other than the quantum parts (which is still tbd)?

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Google publishes more papers on machine learning than most of the top universities combined, I think.

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Google has done and is doing some excellent work in machine learning, but the number of papers is not a very good innovation metric. ML is a great tool, and, like regression modeling which it resembles, it has enabled a lot of good stuff. Still, how many dollars of revenue at Google or elsewhere can be traced to Google's ML work? I'm guessing they use it in their search and spam filtering, but those were making money already. No one is switching to Chrome to get those great ML benefits.

The problem with counting the number of papers, or patents for that matter, is that the big innovations usually pivot on a small handful of papers. All the rest are just infill. They're invaluable, but there's a difference between traffic on a freeway and building the freeway.

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I'm not sure how much Bell Labs contributed to Bell's revenue, but it sure did push science forward a lot!

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Bell Labs, Xerox PARC, IBM Watson (the research lab) and the like were a result of strict anti-trust policies. For decades, there was a dance with Uncle Sam and Ma Bell with the latter following the moves to defuse anti-trust measures. Eventually, Uncle Sam had to end the dance.

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Without sounding like a jerk, this is ludicrous.

“Where’s Google’s innovation?”

“Tensorflow has proven to be a big deal”

“That’s old; what are they doing *now*?”

“They’re working on some pretty cutting edge stuff and investing a lot of resources.”

“That’s new; what has already shown *results*?”

Surely you see that you can’t have it both ways?

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You're right on that. Google has been extremely innovative. The railroads were very innovative. Standard Oil was very innovative. Kodak was very innovative. AT&T was very innovative. They were all innovating quite nicely, so my what have they done lately argument is rather lame.

The real argument in the US is what have they prevented lately. In the US, there is all sorts of innovation that is effectively suppressed by the market and technical power of the dominant corporations. There are all sorts of small companies with great new ideas and products, but once they reach a certain size, they are usually squelched or bought out and, often, nothing further is heard about their product. Entrepreneurs have gotten the lesson. Innovate, grow, sell to a big corporation and give up any dream you might have had. No headlines or A320 for you.

In China, the worry is less about innovation and more about whether Chinese firms should be allowed to become multinationals. I don't think the Chinese government considers innovation for its own sake to be a positive value. They're very systems oriented, thanks in part to Qian Xuesen, so it's about what serves the party and the nation, not some abstract goal. They've been very transparent about this.

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Google’s mission statement is “to organize the world's information and make it universally accessible and useful.” They are better than anyone at it (for now). Ads are just a (temporary?) means to finance it.

The tech being developed at a furious pace has numerous applications everywhere. E.g.:

https://www.nature.com/articles/d41586-021-02025-4

This is high impact work and I doubt that star employees have any issues with motivation or job satisfaction.

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I think it's more than just star employees. Google is still a pretty great place to work, and they are still doing good research. On the other hand, search has been going downhill for ten years now. You won't notice if you are just looking for stuff to buy or official government stuff, but a lot of the web is basically hidden unless you know the words associated with Google's semantic categories. It's as bad as Netflix or Amazon. (For Amazon, maybe half the time I search for a book by title it comes up on the first page of results.)

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Huge amounts of Google's revenue comes directly from ML and has done for many years pre-dating the current neural net driven revolution. In 2004 they launched a new ML model driven ads serving system that gave them an instant 20% revenue boost that quarter. That sort of thing was happening all the time when I was there. The fact that this company keeps finding ways to grow its revenue year after year despite online ads being a mature market, and despite already being a market leader, is an astonishing feat.

By the way, I always laugh when people dismiss ads optimization as somehow unimportant, or not a good way to spend your life. Although often dismissed derisively, an ad targeting engine is basically an economic engine. It's a force multiplier for a societies wealth that lets people who want to buy things find people who are selling things. Without ads the internet would be hopeless for commerce - searching for something like "flowers" on valentines day would get you wikipedia's entry for flowers. Totally useless. Every time a tech firm optimizes their ads system by another 5% it's like greening the desert. New firms spring up, existing firms get stronger, the economy moves faster, less money get spent on visual ad spam like billboards or TV ads, and we all end up with higher quality of life. That's the core of economic progress. I never directly worked on ads at Google but I wouldn't have had any problem with it because I could directly see the positive impact it was having on the world.

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deepmind literally publish the new alphafold2 which shatter ground (again) a few days ago.

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Stock options. For most people, stock options in a tech company are their best chance at getting their f--k you money. Really. I know people in the business.

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You clearly don’t know what you’re talking about because Google doesn’t compensate anyone in stock options. They compensate in RSUs. And no one in the industry has viewed them as “the chance at getting f—k you money” for at least half a decade because Google, Amazon, etc. were already half trillion $ companies and their stock grants are never going to 10x. People looking for “f—k you money” are either trying to climb the ladder or are working at startups where their equity can plausibly 10-20x via IPO.

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I've gone through this myself. From the point of view of choosing an employer, RSUs and stock options are more or less the same thing, a way to get capital gains based, in varying ways, on long term corporate performance. There are all sorts of technical differences, so I found it worth sitting down with a lawyer who understood what was going on and could explain the differences. Needless to say, I also had to consider salary, working conditions, title, medical plan and a host of other things. I was pretty spoiled, I'll admit, but the right technical degree at the right time can get you that.

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Jul 25, 2021Liked by Noah Smith

Excellent post and I’ve shared it to several people. Thanks very much.

One additional aspect is the sociological one: what benefits do these companies produce for the hundreds of millions of Chinese with rural hukou (over 60% of the population,) many of which are presently workers without a high-school education or children unlikely to complete high school? Perhaps the CCP has decided that high-margin businesses that produce few working-class jobs and create wealth only for the highest-skilled workers — like FB — are “not what China needs right now.” I don’t know if that’s good judgment by CCP but it seems to me like a plausible model of their reasoning.

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A well-balanced, reasonable article. Almost had to check whose Substack I was on...

I'd add 1 small note which neither Noah or Dan Wang mentioned: the notion that what Tencent/Facebook/Alibaba/Amazon do isnt 'real' Tech, has got significant support from many in the Chinese tech industry. When assessing the angst of young Chinese tech engineers, too much attention has been placed on the terrible work-life balance encapsulated by '996' and yet the frustration that these bright young minds have towards their work/taskflow has been relatively ignored.

There is a restlessness amongst Chinese tech workers in their 20s and 30s: a fear that the low-hanging fruit has been picked, that the giants who picked it are now in a position to squash any little guy with a bright idea and most importantly, that nothing they do on a day-to-day basis is truly 'innovative'.

These people love Elon Musk. Elon Musk is a hero to young Chinese scientists who view him as inspiring/employing people to do 'important' work that helps push boundaries, not simply some Jack Ma-sh*t where employees are locked in a dark basement and forced to write code simplifying client-facing delivery timetable interfaces for his glorified online warehouse business.

50% of these people will experience burnout. 30% will become jaded and compromise with the system. The remaining 20% will shake the world. As Noah points out, the 'tech' they want to work on, is exactly the tech China / the CCP needs. Of course, this has more to do with the economic/industrial component of the 'Comprehensive National Power' equation rather than the military element that Noah spotlights (because he obviously would!). Personally, if I was experiencing the early-stages of a Tech blockade which in 1 stroke legitimized all of my preexisting fears of externally-sourced economic debasement, I would damn well be doing the same thing.

I would also be extremely hesitant to claim or imply that consumer-facing tech has a short lifespan now that the government has arrived at its own, hard-edged, definition of 'tech'.

1) Such a view neglects the symbiosis between the two and the fact that the Chinese government's hard-tech strategy already reaps substantial synergies from consumer tech like WeChat. I also would reject the idea of Ant being in any way classed as frivolous consumer tech. Nor will the CCP crack down on FinTech when it readily acknowledges that it needs a healthy financial system and is actually borrowing from the neoclassical playbook to reform it (competition, liberalization, etc).

2) And no, the CCP isnt waging a war against 'fun' because it needs everybody 'focused' and 'committed' to an overall goal of national rejuvenation - fearful that any lull in activity would invite revolution. That's a terrible take by Brooker/Booker. The CCP thought process more recently has been to give people more time and reduce the rat-race at certain levels of society. It wants more babies, fewer 6-year olds with spectacles, etc etc. I'm sure there are a bunch of weirdos in Zhongnanhai who would rather this free-time was spent 'productively' with the boys doing push-ups and the girls sowing, but even they know the nature of the times they live in.

3) Its tempting to string a pattern together. Its also time-saving and very convenient. Didi, Ant, Tencent....what do these cases have in common? The CCP! Duh. Control, Leninism, Military tech, etc etc. Let's welcome the same tired cliches and shibboleths! In fairness, Noah does highlight some other justifications/rationales behind the tech crackdown but he makes the same mistake the others do: He bunches all cases/firms/examples under 1 roof. It could be that there are different reasons why the above 3 were cracked down on and/or that in each case multiple factors came into play. For eg: Ant truly was a regulatory nightmare that had to be put in line sooner or later but Jack Ma's public intransigence made sure it would come with a healthy dose of CCP vindictiveness.

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Is Noahpinion not your first stop for well-balanced, reasonable articles? :-)

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China is literally the only country that can successfully pull off a Conspiracy theory.

My company (Siemens Energy) has recently partnered with a local Chinese company...which involves tech sharing and an innovation center.

Hydrogen is going to be a big focus with development along the normal Wind and Gas Turbines.

Hydrogen technology is one of those things where it would be nice to China really invest in. They have the capital and political will to bring down costs and solve various issues.

And... hydrogen tech is exactly the sort of big payoff that China might be eyeing. If it works (yes their are issues), being a world leader will be worth something.

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Jul 25, 2021Liked by Noah Smith

Excellent, with Ma I wondered if it was because he became too rich and powerful, and thus a threat. If they really are going to crush the consumer/network sector, that's a lot of profit to forego. One wonders if their humanness, jealousy, revenge, perceived threats are showing.

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Jul 27, 2021Liked by Noah Smith

Great article and provides refreshingly new perspectives. However, I disagree with the central theme.

Why would China go around destroying something if their goal is to build a military industry complex or whatever? It's not as if these are sucking up capital that's in short supply. The recent crackdown on tutoring companies is another outlier that's not explained by this logic either.

The attacks on Bitcoin mining provides a clue IMHO. It is the good old "if we can't control it, and if it gets too big, it's not good" thing. While it was under radar and confined to fringes, it is no big deal.

This is a common issue even in democracies and for communist regimes it basically decides their survival.

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Jul 25, 2021Liked by Noah Smith

Double Plus Good!!!

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Jul 28, 2021Liked by Noah Smith

China looks at the stock market as a means to raise a lot of money the easy way. Now that the max has been raised (primarily from western investors including pension funds), now it is time to scoot before the trade sanctions arrive. This could also be a way for China to pull back from the US financial system and allow the market to implode on its own - the equivalent of a WMD. As you say, making "real things" is the key to long term sustainability. Everything else is a derivative based on these "real things". And who controls the production of "real things", controls the gold - and the man with the gold makes the rules.

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Jul 25, 2021Liked by Noah Smith

This is an article I enthusiastically endorse. Recall the importance of "Wealthy Country, Strong Military" (fukoku kyohei) that was a prime ideological principle of Japan during the Meiji Era and even into the 1930s. There was a back and forth swing between political leaders encouraging the zaibatsu in their efforts to gain commercial muscle on the global stage and those who wanted to focus on building a military-led effort to create a "Greater East Asian Co-Prosperity Sphere" driving out the Western powers and in particular keeping the United States and the League of Nations at bay. That there is a kind of contradiction built into this two-pronged approach is pretty evident. The problem for China is that it has increasingly alienated most of its immediate neighbors something Japan managed to avoid until it bombed Pearl Harbor in 1941,

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I think China wants this too but this kind of expansionism was easier during the end of colonialism as Japan was really the only country these former colonies can somewhat relate & look up to. The Pacific was also uncharted territory at that time. These days, the US, Japan, Korea, Australia all have a strong presence and actively push propaganda against China. Singapore is the only regional power that still sticks to neutrality and "co-prosperity".

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Jul 25, 2021Liked by Noah Smith

What utter balls

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Thank you

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Jul 25, 2021Liked by Noah Smith

Thank you for this. I don't know if you're right or not, but it's the most rational explanation I've heard so far.

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The flaw in your logic is that surplus (aka, profit) is what allows societies to invest in soldiers and weapons. China has be able to expand its military capabilities in the last two decades because its economy produces a surplus that it can be invested in soldiers and weapons. The industries that produce the greatest surplus are in tech and finance. Smashing them will kill the goose that lays the golden egg. That golden egg is necessary to China's to plan to build a military to challenge the US.

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What is "surplus"?

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Surplus is what an economy creates in excess of what it needs to feed and shelter its people. In Jered Diamond’s Guns, Germs, and Steel he talks about how farmers (agrarian societies) were able to outcompete hunter/gatherers because farmers produced a surplus that could be invested in having full-time soldiers and outfitting them with weapons while hunter/gatherers had to spend all their time hunting and gathering—they could not afford a soldier class. The US has been the dominant military power for the last century because it could feed and shelter its citizens and still afford the biggest military in the history of the world. Just look at how many empires have been brought down when they could no longer afford to garrison their conquests (i.e., Rome, Britain, France, etc). China wants more than just to wash away the humiliation of its past. It wants to recreate the glory and the spoils of it’s past empires. Taiwan is just one piece of that empire. The waters and islands in the South China Sea are another piece. Other pieces may lie in the Indian Ocean and beyond. To generate the necessary “investment capital” for its hegemonic ambitions China must create a surplus beyond what is required to keep it’s 1.2 billion people fed and sheltered. China needs to be in profitable industries like tech, finance, and life sciences that are highly profitable to that it has the capital it needs to finance its hegemonic ambitions.

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What sort of "surplus" does consumer internet create?

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It generates large quantities of tax revenue, directly from their operations and indirectly via the accelerated economic growth that efficient commerce platforms generate.

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try to be less literal

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A bit more. Do you know the concept of “profit pools”? Analyzing an industry to see where profits are made. For instance, looking at the mobile phone industry you find that Apple might not make the greatest number of phones, and it might not be in every step of the production process, but it makes most of the profits. Applying the profit pool concept to nations makes it clear that nations that have the most profitable industries create the greatest economic surplus. Some of that profit (surplus) can be taxed and invested in soldiers and weapons (or social capital, infrastructure). As competition increases (and profits fall) in contract manufacturing China will be pressured to move toward more profitable parts of the value chain and to more profitable industries. Those business and industries can afford to pay the taxes that will finance hegemonic ambition.

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I think Noah addressed this argument in the post by positing that tencent, Ali et al might be rentseekers rather than generating real value. I.e. other companies will rise up and take their profits. We are already seeing other rideshare companies coming up to gobble Didi's market share. Ultimately, profit will still be made without Didi.

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Ride share companies that gobble up Didi’s market share will do so by competing on price and, thus, compete away rents. That’s good for Chinese consumers but maybe not so good for the CCP. I would think it would be preferable to tax big companies like Didi or Alibaba than to raise taxes on workers. The displeasure of the masses with rising taxes has been at the root of many worker uprisings.

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I think there is a very fundamental difference in the worldview which is not really caught in the comments below.

Politicians in the west look things in election term cycles, which is the main reason the west does not any more invest in long term projects and cannot solve hard problems (Climate Change, migration from hydrocarbons, global food security, global security, etc).

The Party is in the game for the really long run, and their agenda has an inter-generational perspective (can be seen with the Senkaku / Diaoyu islands, or Taiwan for instance).

They want to rule perpetually and rule the most powerful country, which means it has both to have the element of military power as it has been written below (albeit in a very American, military-only view imho), but also food security, energy, resource, IP and R&D independence, exclusion of foreign influences and influence on countries that can be useful strategically and resource-wise.

In order to achieve this, you need people focusing on solving big problems (semiconductors, renewable energy, food production) instead of ad delivery optimization.

What they are doing is removing sections of the economy which benefit from rent and generate enterprises that don't add any value to the economy and the country (similar to Facebook in the west), and divert the public opinion.

If someone sees things from this view, the Party's moves do make sense; it is just perceived and executed in a way which is alien to Western practices and views.

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Is that not rather a flattering image of China? The west has invested in many very long term projects with unclear payoffs, like the famous "war against cancer", the only slightly less famous war against Alzheimer's disease, self driving cars, rockets that can land and take off again, open source smartphone operating systems, etc. Meanwhile China is not only incapable of "solving" climate change but appears actively disinterested in it, hence the popularity of "there's no point because of China" as an argument against decarbonization initiatives.

Fundamentally the idea that democracy leads to short term thinking is not what we see when we look at history. The USSR did not excel at long term planning, instead it showed a dystopian and myopic obsession with heavy industry to the near total exclusion of consumer goods. Western democracies on the other hand produced much more dynamic and reactive economies, in which the private sector could, did and still does take on long term projects, secure in the knowledge that their efforts won't be suddenly nationalized or simply wrecked due to the shifting sands of party politics.

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Hey Mike,

It is true that the vast majority of modern inventions and discoveries have been done by institutions ran under democratic regimes. My point is more about that the Western countries would finance longer term projects in the past (moon landing, war against poverty in US, supersonic flight in Western Europe, Marshall Plan, etc), which is not happening anymore.

The reason imho is not about democracy itself (which is what we should be always aiming) but about the penetration of lobbyists that have leaned national agendas towards corporate and elite interests.

Regarding China and climate crisis, China has 1/3rd of the installed solar capacity while US has 1/10th, and they are the biggest investments in the field by far. What they also do is not to commit to very strict commitments, in order to be able to pollute more if they need to stimulate the economy. This is why I wrote that the perspective in China is really different compared to the West and needs to be seen as such.

So if people use the argument "there is no point because of China", it is simply a lame excuse for not wanting to change their habits (consume less, stop driving a SUV, stop changing a phone every 2 years, eat less meat, etc).

About the USSR, in the 60s at the end of the Stalinist era their system of governance was relatively similar to Xi's China and they created the Anthrax vaccine, the first space rovers, the first satellites, first manned space mission, many medical innovations (search for Ilizarov Apparatus , the Autojektor and the invention of the artificial heart), irrigation under harsh climates and multi stage rockets.

When their politics started serving the elites they ended up just the way you are describing, so the parallelism of the late USSR with many government's in the West nowadays is sensible.

Regarding companies that have made long-term investments, I am still looking for examples that didn't divest in a recession or a change of management. I guess you have in your mind Tesla and SpaceX but both companies are still in their infancy so time will tell how they will fare, especially after Musk steps down.

Thank you for the great response!

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Come on, it's hard to take China seriously on climate change and migration from hydrocarbons : see how China promised to start curbing their coal CO2 emissions by 2030... but which is also the expected date for China's peak coal !

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You're welcome.

WRT long term corporate investments, I guess I named a bunch already but Google is obviously the most famous example. Most of its projects are multi-decade efforts. The reason nobody can beat Google in web search despite huge financial incentives to do so is because Google sank billions into R&D every year for decades. Their lead is insurmountable due to the massive long term investment. And that's just web search! Chrome and Android are both by now more than decade long investments. You may object that these projects became useful quicker than a decade, although that is of course not a bad thing. For a case of pure monetary loss over the long term, their self driving cars are by now a more-than-ten-year investment with so far no ROI. There are plenty of other example where companies invest over the long term, they are just less famous e.g. quantum computers. I am familiar with computing examples because it's my field. So I don't think it's really true that we don't finance long term projects. SpaceX is a prominent example but there are plenty of others. Especially this is true if you allow a project to be built incrementally, with some utility being delivered faster than 10 years, which of course we'd hope is the standard way to do things!

NB! The USSR famously had a max planning horizon of only 5 years. So in the west there are even corporations, not just governments, with more than double the size of the Soviet's longest term planning.

Communist regimes tend to over-invest in heavy industry because it's very visible and simple, so it's within the abilities of a small group of dictators to understand and direct. They under-invest in everything else (usually vaguely described as consumer goods) because they run out of mental bandwidth - their central planning cannot scale to the levels required. Missiles: possible. 100 brands of breakfast cereal: not possible. The latter has more benefit to the average person's life though.

China: it is difficult to know what their CO2 emissions truly are for the usual reasons, but solar cannot make any significant difference because they would still need their non-renewables as backup capacity for night time, when the sun is obscured etc. Nuclear might be a better example of how they're reducing carbon emissions, but, they still have a long way to go. Their CO2 per capita will presumably equalize at some point at western levels but their unwillingness to make any commitments speaks volumes.

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That's silly. Who controls the world supply of batteries and solar cells?

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The heart of the matter seems to be a difference in core economic philosophy. Americans tend to see the economy's primary goal as fulfilling personal consumption desires. The Chinese government see the economy as a vehicle to fulfill its domestic and international political goals. As an Indian, I am reminded of Nehru's (in)famous commanding heights comment. I wonder what the Chinese public think.

An aside, there seems to be a notion that writing production/library level code is somehow easier than making microchips. This is an extremely limited view. The question always is what is the level of performance you expect from your work. Google is maintaining or even improving your search speed even as the demands from their systems grow rapidly every single day. Playing chess looks easy but playing chess against Gary Kasparov is very, very hard.

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