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China Has a Master Economic Plan. Is it Better than America’s?
Former Trump White House adviser Steve Bannon told CNBC viewers back in May that China has “a master plan to become an economic hegemon.” I mean, yeah. Sure. A quarter millennium ago, China was the world’s largest economy and it is no doubt eager to regain that position if possible. And not just in terms of nominal GDP, but also as an economy on the technological frontier. Thus its efforts to leap forward in advanced manufacturing and AI.
The former, GDP, is easier to measure than relative tech prowess. Well, not that easy. My AEI colleague Derek Scissors has argued that “claims that China’s economy is already the world’s largest may be exaggerated by up to 30%.” And a comparison of national wealth shows “the American lead expanding.” But clearly the Chinese economy is pretty big and getting bigger and is technologically sophisticated in a way that the Soviet Union never was.
In those terms, America’s geopolitical rivals past and present are different. But they are the same in that both believed in the power of planning. But it’s tough for flawed models to execute even the smartest of plans. And as Bannon later said, “We have all the cards. The Chinese business model cannot continue. It won’t continue.” I think Bannon meant that the Trump trade war will cause the model’s demise rather than its own internal contradictions.