China is not about to eat America's lunch
Commentator Vijay Vaitheeswaran says America's culture of creativity and innovation beats out China's state-run capitalism.
Listen to some of the heated rhetoric from politicians today and you might think that China is about to eat America's lunch because of its superior economic model and cultural values.
I say nonsense!
Sure the Chinese government has launched a big new push for what it's calling "indigenous innovation." It's identified a range of industries, including clean energy and next-generation Internet, and is spending tens of billions of dollars trying to create dozens of new Silicon Valleys across China.
But here's the dirty little secret: the best industrial policy is no industrial policy. China's state capitalism, which directs subsidized capital through state-run banks to dinosauric state-run enterprises, actually sucks oxygen away from the country's genuinely entrepreneurial "bamboo capitalists." The system starves the nimbler firms of financing, and government-anointed companies crowd the upstarts out of the marketplace.
That is why American innovators should be wary of calls for a new "moonshot" for, say, clean energy. Innovation is in its essence a bottom-up process of destructive creation, a dynamic dance connecting mind and money to markets. The right role for our government is to stick to the enablers of innovation like research funding, education, and infrastructure -- not picking industrial winners and losers.
In a world in which brain is prized more than brawn, the lion's share of future economic rewards will go to those able to come up with fresh thinking that actually creates value. That's why America needs to shore up its historical strengths in creativity and individual expression.
In the edeas economy: standardization, harmonization and memorization will surely be trumped by creative destruction and disruptive innovation.