Barry Naughton, The Rise of China's Industrial Policy, 1978 to 2020 (2021)

My friend Will Pyle described Naughton as the "dean of academic economists working on China," so I figured I had better read him ahead of teaching my course on capitalism(s) since 1945. Naughton argues that from 1978 to about 2006, China's unprecedentedly fast economic growth derived from the state ceding ground, in a haphazard, unplanned manner, to the market. Starting in the mid-2000s, however, China's leaders returned to the idea of industrial planning. They did so, apparently, largely in response to the slowing down of China's growth. However, Naughton doesn't explore in detail the reasons behind this epochal shift. What was at first a tentative turn to state steering gained momentum over the next decade. First, the Chinese state's significant expenditures in response to the 2008-9 Global Financial Crisis provided unprecedented funds for the dawning industrial policy. Then, around 2015-16, Chinese leaders became convinced that revolutionary advances in information and communication technologies, as well as artificial intelligence, provided a once-in-a-lifetime opportunity for China to seize the commanding heights of this epochal breakthrough. At the very least, China could not afford to fall behind. This rationale has since justified industrial policy far more ambitious than anything tried in any other country, including Japan and South Korea, with which China is often compared. Naughton suggests that it is too early to know whether these efforts will succeed or not - they constitute, in his eyes, a major gamble. Naughton's and Wang's books both ascribe significance to the Great Financial Crisis of 2008-9, but in different ways. For Naughton, as mentioned above, the Crisis necessitated a response by the Chinese state that made vastly more money available for an industrial policy that was already nascent. For Wang, the Crisis itself inspired a new goal for China: not to follow the US's path into financialization and becoming a service economy; rather, China should not deindustrialize. Naughton's periodization and argument will be of value for my course, which hopes to assess the relationship between wealth and power. For Naughton's argument implies, at least indirectly, that China's 2001 accession to the WTO was - contra some recent arguments - not a self-inflicted wound on the part of the US and the West. Pre-2006 China, even one growing rapidly, might have comfortably coexisted with the US. Technological powers, Naughton suggests, need not become enemies. Instead, he implies, the current hostility between the countries is due to China's choice to try to leapfrog the US and other leading technological powers. Yet another account might suggest that it's the nature of the current technological revolution itself - with its dual uses and exponential growth rates (Moore's Law) - which unavoidably generates mistrust - and fear of falling behind.