To Beat China, Turn to India

Plus: There’s no need to embrace Beijing-style industrial policy

Letter to The WSJ. 

"Shyam Sankar’s recommendation that the U.S. copy China’s industrial policy is compelling but misguided (“Why the China Doves Are Wrong,” op-ed, Oct. 18). State-led industrial policy makes economies weaker, not stronger.

Researchers at Stanford found that receipt of billions of dollars in direct subsidies from Beijing was “linked with lower firm productivity growth and only modest growth in R&D spending in subsequent years.” A recent International Monetary Fund working paper argues that China’s industrial policy has led to reduced aggregate productivity.

To beat Beijing, we ought to allow its products to reach the hands of productive Americans. We have 12.7 million workers employed in manufacturing; China has some 212 million. That they only produce twice as much “manufacturing value” as we do despite having more than 16 times as many workers is evidence enough that we needn’t embrace their policies.

David Hebert

American Inst. for Economic Research"