Top Ways to Kill Innovation(delphiinstitute.com)
delphiinstitute.com
Top Ways to Kill Innovation
http://delphiinstitute.com/wp/?p=863
11 comments
He's missing the top 2 historically: civil disorder, and excessively powerful central governments.
Excessively powerful, or excessively intrusive? A government can be very powerful, but choose not to use that power in wealth destroying ways (example: post-Deng China).
I can't think of a case where excessively powerful has not become excessively intrusive. Even if governments don't mean to interfere in the economy, they have to in order to protect their power, because money can be turned into political power.
You saw this particularly clearly with Putin. Anyone whose wealth was combined with any sort of political ambition got destroyed. He only had that problem because he inherited some rich and comparatively untamed people from the previous administration. You couldn't get rich in Russia today without already being a Putin loyalist. I suspect it is the same in China.
You saw this particularly clearly with Putin. Anyone whose wealth was combined with any sort of political ambition got destroyed. He only had that problem because he inherited some rich and comparatively untamed people from the previous administration. You couldn't get rich in Russia today without already being a Putin loyalist. I suspect it is the same in China.
It goes beyond that you can't get rich in China without being a CCP loyalist, it's that you can't function as a Chinese citizen in China without being a CCP loyalist. The idea of an outspoken political antagonist of the CCP even making it through college is laughable. An absolute rule of life under the CCP is that you do not question the ultimate authority of the CCP to rule China.
As for as economic intrusion goes, China is really a unique case. They've invented a new form of capitalism that works very well -- the state government owns some companies, the state government owns shares in other publicly traded companies, local governments own some companies or shares in companies, and some companies have no government ownership. They all compete against each other in the marketplace. There are 3 or 4 different Chinese state construction companies and they competitively bid against each other for projects.
There is indeed a meme in academic literature on China saying that their lack of freedoms and institutions will hold back innovation. This meme never seems to be very well sourced. Tsinghua University graduates engineers as capable as anywhere else in Asia. So far, Chinese engineers have lacked innovation, but if any country can prove that totalitarian rule does not stifle innovation it will be China.
As for as economic intrusion goes, China is really a unique case. They've invented a new form of capitalism that works very well -- the state government owns some companies, the state government owns shares in other publicly traded companies, local governments own some companies or shares in companies, and some companies have no government ownership. They all compete against each other in the marketplace. There are 3 or 4 different Chinese state construction companies and they competitively bid against each other for projects.
There is indeed a meme in academic literature on China saying that their lack of freedoms and institutions will hold back innovation. This meme never seems to be very well sourced. Tsinghua University graduates engineers as capable as anywhere else in Asia. So far, Chinese engineers have lacked innovation, but if any country can prove that totalitarian rule does not stifle innovation it will be China.
It goes beyond that you can't get rich in China without being a CCP loyalist, it's that you can't function as a Chinese citizen in China without being a CCP loyalist. The idea of an outspoken political antagonist of the CCP even making it through college is laughable.
Every society has its heresies and enforced loyalties. We have a term in the U.S. for heresy - "politically incorrect". In the U.S. it's hard to imagine an outspoken proponent of human biodiversity making it very far in life. No CEO would dare speak in favor of HBD advocate, it would open up the entire company to lawsuits.
As for as economic intrusion goes, China is really a unique case. They've invented a new form of capitalism that works very well -- the state government owns some companies, the state government owns shares in other publicly traded companies, local governments own some companies or shares in companies, and some companies have no government ownership.
In the U.S. the government exacts dividends from corporations in the form of corporate taxes, and exercises management control via regulation (OSHA, civil right legislation, workplace rules, etc. etc.) The Chinese system of openly owning shares is similar, but perhaps more efficient.
Every society has its heresies and enforced loyalties. We have a term in the U.S. for heresy - "politically incorrect". In the U.S. it's hard to imagine an outspoken proponent of human biodiversity making it very far in life. No CEO would dare speak in favor of HBD advocate, it would open up the entire company to lawsuits.
As for as economic intrusion goes, China is really a unique case. They've invented a new form of capitalism that works very well -- the state government owns some companies, the state government owns shares in other publicly traded companies, local governments own some companies or shares in companies, and some companies have no government ownership.
In the U.S. the government exacts dividends from corporations in the form of corporate taxes, and exercises management control via regulation (OSHA, civil right legislation, workplace rules, etc. etc.) The Chinese system of openly owning shares is similar, but perhaps more efficient.
Speaking of which: http://news.ycombinator.com/item?id=834521
China is definitely an interesting high level examples of what leads to growth. Surely its quite hard to say that the China could have grown faster if only XYZ. If there is always a correlation between growth and state non-intervention, it either does not apply in every case or isn't the only (or even the the strongest) predictor of economic growth.
I have heard a reasonably coherent argument that a strong central system can be beneficial to a state that is "behind." These are less reliant on big revolutionary innovations. They have industries that get a lot of benefit from just simple capital investment. Basically, since you can see the path to a more prosperous future relatively clearly from the present, you can plan the economy more efficiently. In some cases this might be more efficient then allowing the economy to plan its own course.
Take some large country with an underdeveloped economy but no prohibitive political or social hang-ups. If you try to imagine a prosperous future for it, you can usually see some of the parts of it. Agricultural methods (assuming that you think agriculture will play a big part of that economy) will need to improve. This will over time, yield 2-3 times more crops with the same amount of land and fewer workers. You know what those methods are and you might even be able to guess at the appropriate ownership structure (micro farmers vs larger farmers with employees vs cooperatives vs corporate farms, etc.) because you have examples. The country might need a industrial/manufacturing industry. You don't really need the market to figure out what a good industrial complex looks like or what conditions are needed because you have examples.
Germany (to take a random example) is not really in that position. You won't be as accurate in your guesses.
I have heard a reasonably coherent argument that a strong central system can be beneficial to a state that is "behind." These are less reliant on big revolutionary innovations. They have industries that get a lot of benefit from just simple capital investment. Basically, since you can see the path to a more prosperous future relatively clearly from the present, you can plan the economy more efficiently. In some cases this might be more efficient then allowing the economy to plan its own course.
Take some large country with an underdeveloped economy but no prohibitive political or social hang-ups. If you try to imagine a prosperous future for it, you can usually see some of the parts of it. Agricultural methods (assuming that you think agriculture will play a big part of that economy) will need to improve. This will over time, yield 2-3 times more crops with the same amount of land and fewer workers. You know what those methods are and you might even be able to guess at the appropriate ownership structure (micro farmers vs larger farmers with employees vs cooperatives vs corporate farms, etc.) because you have examples. The country might need a industrial/manufacturing industry. You don't really need the market to figure out what a good industrial complex looks like or what conditions are needed because you have examples.
Germany (to take a random example) is not really in that position. You won't be as accurate in your guesses.
[deleted]
Although this is probably not what PG meant, all central governments are excessively powerful and excessively intrusive. While you and I might agree that the Chinese government is relatively better than many others when it comes to avoiding wealth destruction, I think we'd also agree that they are still destroying wealth.
I think we'd also agree that they are still destroying wealth.
Compared to what? Compared to a system of city-states? Compared to total anarchy? Or anarcho-capitalism?
Compared to what? Compared to a system of city-states? Compared to total anarchy? Or anarcho-capitalism?
Probably all of the above. Artificial centralization does have a cost.