What China Knows – Econlib

Dan Wang’s book, Breakneck, sheds light on the competitive advantages that China holds over the United States, particularly in the realm of process knowledge. This knowledge, often referred to as tacit knowledge or know-how, is essential for designing and operating factories efficiently. Wang emphasizes the importance of this intangible asset, which is mostly embodied by an experienced workforce like the one found in Shenzhen, China.

In his book, Wang highlights the challenges faced by American workers who lack the tacit knowledge acquired by Chinese workers through hands-on experience in manufacturing. He argues that outsourcing the production of smart phones and electronics has put American workers at a disadvantage, as they miss out on the opportunity to develop the process knowledge needed to compete in the global market.

Economists have long recognized the value of tacit knowledge, with scholars like Kenneth Arrow and Paul Romer emphasizing the importance of learning by doing. Wang draws on the insights of these economists to underscore the role of process knowledge in driving worker productivity and competitive advantage.

China’s heavy investment in process knowledge is attributed to its engineering-focused governance, in contrast to America’s lawyer-dominated leadership. Wang points out that China’s political elite is predominantly composed of engineers, who prioritize infrastructure development and technological innovation. In contrast, American leaders, including presidents and members of Congress, are more likely to have legal backgrounds.

Wang highlights China’s impressive infrastructure projects, such as the extensive highway network, high-speed rail system, and renewable energy capacity. He contrasts China’s engineering state with America’s legalistic society, which has shifted its focus towards litigation and regulation since the 1960s.

While acknowledging China’s engineering prowess, Wang also criticizes the country’s approach to cultural issues, such as the one-child policy and zero-covid measures. He points out the shortcomings in China’s monumentalistic approach, highlighting issues like the lack of toilet paper in public facilities and unsafe tap water in some regions.

Overall, Wang’s Breakneck serves as a wake-up call for America to reassess its approach to process knowledge and industrial competitiveness. By recognizing the value of tacit knowledge and investing in skills development, the United States can better position itself to compete in the global economy. In his book, Wang discusses the importance of addressing cultural problems as a way to tackle societal issues. He poses a thought-provoking question – what if, instead of complex negotiations and lengthy statutes, the US government had focused on reshaping Wall Street’s risk management culture in response to the 2008 financial crisis? This idea challenges the traditional approach to problem-solving and highlights the potential benefits of confronting cultural norms.

Wang also criticizes the lawyerly society’s tendency to prioritize legalistic solutions over practical action. He highlights examples such as the slow progress of initiatives like Internet for All and the lack of operational electric vehicle charging stations despite significant funding allocations. These instances underscore the need for a shift towards a more proactive and efficient approach to problem-solving.

Looking towards the future, Wang envisions a world where countries like China and the United States can learn from each other’s strengths and weaknesses. He suggests that China should embrace pluralism while enhancing legal protections for individuals, while the United States should focus on rebuilding its capacity for infrastructure development and public service.

In his vision for America, Wang advocates for elevating the status of engineers in comparison to lawyers, emphasizing the importance of practical skills and problem-solving abilities. In China, he suggests a different approach, prioritizing legal expertise and protection for individual rights.

Overall, Wang’s insights encourage readers to think differently about how we approach complex issues and consider the role that cultural norms play in shaping our responses. By challenging conventional wisdom and promoting a more holistic approach to problem-solving, Wang offers a fresh perspective on creating positive change in society.