China Was More Dangerous When It Was Poor

– January 4, 2021 Reading Time: 4 minutes

It’s not much of a known quantity today, but Lowell, MA, in many ways the oldest part of the “New World” that became the United States, got its start through intellectual property theft. Great Britain had rules against it, but Francis Cabot Lowell figured out ways to get into British factories in the early 19^th century, only to take accurate mental pictures of what he saw.

The above factoid is hopefully a reminder that intellectual property theft is arguably as old as intellectual property. And it’s still rampant today. Particularly in industry sectors defined by dynamism. In Mark Leibovich’s endlessly entertaining book on the NFL, Big Game, he makes plain that the League is defined by rampant copycatting.

Back to Lowell, let’s never forget that what some describe as IP theft is hardly simple. For one, genius is hard to mimic. Many music lovers know the words to Queen’s “Bohemian Rhapsody,” but how many can belt out the lyrics in the way that Freddie Mercury once did? Six-time Super Bowl winning head coach Bill Belichick coaches in an NFL littered with his former assistants who were hired precisely because they could bring the Belichick process to their teams. Most have failed. Texas just hired away Alabama assistant Steve Sarkisian with an eye on bringing to Austin some of the magic that Nick Saban has bestowed on Tuscaloosa for over ten years. Rest assured more than a few Longhorn fans are skeptical about Sarkisian, with good reason. Genius is once again hard to mimic, or transfer.

This needs to be remembered when Americans, and very surprisingly conservative Americans, bemoan the rise of China and its mimicking of American genius. It’s easier said than done. See above. Why then, are Americans like excellent Wall Street Journal columnist William McGurn, so concerned about Chinese copy-catting? Implicit in their worrying is that American ingenuity is so basic that it can easily be recreated. Not really. Consider Elon Musk, one of America and the world’s richest people. He manufactures in China, and has no problem with others viewing his processes. He’s confident enough in his genius to know that like that of Mercury, Belichick and Saban, greatness is not as transportable as some think. And if it is? Even better. The more that electric vehicles become common, the bigger the market size for Musk to compete for.

Which speaks to the other major challenge of so-called IP theft that has so many so needlessly up in arms. Implicit in their fear-mongering isn’t just that brilliance is easily recreated. Similarly implicit is that the future of commerce is clear, as opposed to impossibly opaque. Oh really? The record company suits thought Queen nuts to produce “Bohemian Rhapsody.” When conservatives lament theft of processes that produce products and services they’re revealing a very stationary outlook on the economy; that tomorrow will reflect today in terms of consumer wants and needs. Except that it rarely does as evidenced by the billions annually directed by venture capitalists to entrepreneurs intent on making tomorrow totally unlike the present. Most will fail, but that’s kind of the point too. The future, be it next week or next year, is hard to gauge. It’s a long or short way of saying that if conservative pundits really know what IP theft is actually harmful to the U.S. businesses, please call me. We could raise billions for an investment fund between breakfast and lunch. Any day this week. If anything, Chinese attempts at imitation reveal similarities between the U.S. and China much more than do differences.

But wait, some conservatives will say, the Chinese are engaging in state capitalism. That’s why, according to Michael and Leonard Hochberg at National Review, China’s “capitalist experiment” is winding down. The Hochbergs lament that China’s Communist Party is “installing” Party officials inside private Chinese firms. OK, and their point is? By that measure, the Chinese are copying the U.S. yet again. If anyone doubts the previous assertion, please read up on what former Obama administration economic officials are doing today for work. Please follow the aftermath of the Trump administration, and where economic officials end up. Democrats and Republicans who did their time in Washington are prominently placed throughout U.S. industry; earning enormous sums until Washington calls again. Pundits call this the “revolving door.”

This isn’t to defend the revolving door that defines U.S. industry, nor is it to defend the CCP installing its own people in commercial enterprises. In each instance the enterprises are weakened by it. But let’s not pretend China is unique.

The Hochbergs will say that “China” then subsidizes those businesses it places its people in, but what they miss is that the subsidies weaken their intended beneficiaries. As a rule. Conservatives used to understand this truth: that which blinds businesses to market realities (meaning subsidies), weakens them. Furthermore, the U.S. is not innocent on the subsidy front, unless readers think the Ex-Im Bank, among many, many others, is a private entity.

The great Glenn Reynolds lamented in a recent New York Post column that the Chinese spy on us. Sure, but everyone spies on us, including our allies. See Jonathan Pollard. Israel. Military secrets. That kind of stuff. Seemingly what Reynolds forgot to ask is what Chinese intelligence could possibly lift from a political class that just chose forced economic contraction as the way to deal with a virus. More broadly, the U.S. has always spied on seemingly everyone. Notably, the CIA’s spies concluded the Soviet and Chinese economies weren’t much smaller than the U.S.’s in the 1970s when both countries practiced true communism. Conservatives used to think government officials rather inept. Not when it comes to China. The bureaucrats there, to believe those on the right, possess otherworldly skills. China’s leaders are doubtless flattered.

What about China’s recent, and rather unwarranted mugging of Ant Group? Shameful, embarrassing, bad for capitalism. All true. Chinese officials were letting Jack Ma know who’s boss much as the CEOs of Alphabet, Amazon, Facebook, Twitter and other “too successful” tech firms were alerted to who rules the roost stateside by the U.S. political class.

Are those who lead China good people? Likely not. Politicians are often awful. They regularly break things. Here and in China. But in an economic sense, similarities between the U.S. and China are greater than some want to believe. Thank goodness they are. Unlike when China was poor, nowadays its people have a rooting interest in our success. And our people benefit from their success. In short, China is less of a threat as a global power than it was when it was desperately poor. Think about it.

Reprinted from Forbes