(This piece is my year in review; here’s my letter from 2019)

I. Inspiration

It’s difficult to identify a great economic reason to explore space. There are easier ways to extract minerals, doing anything at all is terribly expensive, and Mars is a hard place to make a living. The benefits of space exploration are instead mostly inspirational. Few other human activities are so grand to captivate the imagination, and doing these uneconomic projects have pulled forward technological capabilities that may otherwise have languished.

It’s difficult to identify a great economic reason to practice socialism. Its historical results have ranged from catastrophic misallocation of talent at best to mass deaths at worst. But socialism still retains appeal to broad segments of many populations, which shows that it has considerable inspirational value. For better or for worse, there are still many advocates for the creation of some form of a more equal society.

This year, I read every issue of Qiushi (translation: Seeking Truth), the party’s flagship theory journal, whose core task is to spell out the evolving idea of socialism with Chinese characteristics. For those not familiar, Qiushi reads like a cross between the New Yorker and the Federal Register. Published twice a month, the magazine features lengthy essays, thick pages, and some of the finest writers in the party. Each issue starts in the same way: a reprint of a speech or essay by top leader Xi Jinping—in a font distinct from the rest of the magazine’s—and then commentary and reports from the rest of the party state. Accompanying pictures feature either the country’s leaders making inspections, scenes of the people, or major pieces of infrastructure and heavy industry.

Its audience? People with nothing better to do than read the party center’s commentary, like retired cadres, or those who are keenly interested in Beijing’s priorities, like local officials. Reading party speeches with its various annexes and cross references echoes my main professional activity these days. That is the study of the US sanctions regime—namely Commerce’s Export Administration Regulations and Treasury’s IEEPA-based authorities. Party speeches and US regulations are both made up of arcane, formal language that make references to more obscure texts, which themselves hint at still more distant and terrible truths. US sanctions lawyers, I suspect, can have a splendid time with Qiushi.

Steady engagement with the journal throughout the year has forced me to think more deeply about the Chinese Communist Party. There are many things that Xi wants to do, I believe that his most fundamental goal is to make this Marxist-Leninist party an effective governing force for the present century. His patient work to reshape the bureaucracy is aided by a distinctive feature of the Chinese system: the use of propaganda to create centralized campaigns of inspiration. Some of Xi’s efforts have borne fruit. The country’s governance capabilities have markedly improved, a trend that is apparent in daily life. At the same time, the state has grown much more repressive. A focus on repression shouldn’t neglect the improvement in the country’s institutional and commercial strengths; and appreciation of this improvement ought to be tempered by the party center’s growing mania for control.

When foreign commentators discuss the experience of reading state media, they rarely fail to attach a reference to its “turgid prose.” While some partyspeak is indeed unreadable, I’ve always seen that dismissal as a signal of contempt for the party’s pronouncements, thus deterring people from taking it seriously. But there is reason to treat its content with care. Though propaganda may not matter to you, it matters to the party. Anne-Marie Brady has pointed out that the leadership considers propaganda to be the “lifeblood” of the party state. 1 Propaganda work is considered so powerful that the person in charge must be only a functionary. Brady shows that the head of propaganda always has a seat on the Politburo, but shouldn’t usually be allowed to reach the standing committee. He is not to be too imaginative, or he might dominate the entire political system. Propaganda is key to understanding the party, since it governs not in itself, but in symbiosis with state institutions. For the most part, the party’s role can be boiled down to two items: inspiration, by setting the ideological direction, and control, through its power to select personnel.

Qiushi offers an authoritative articulation of the central government’s priorities at any moment. Its job, like the rest of the state media, consists of repetition and explication of a few phrases. It’s easy to roll one’s eyes at crude sloganeering, like the two centenary goals of achieving a “moderately prosperous society in all respects” by 2021 and “a modern socialist country and the great rejuvenation of the Chinese people” by 2049. But the need to fix slogans makes good sense in Chinese governance: the party center has to speak to all local officials as well as the entire population. As Richard Epstein has argued, the greater the complexity in a system, the simpler the rules that govern it must be. One should allow, for example, extensive and nuanced bargaining between buyer and seller at the vegetable stall, but for an online marketplace to manage millions of transactions a day, then its rules must be very simple indeed.

It’s up to the party center to adjust and refine slogans to signal the priorities of the moment. The easiest way to appreciate the importance of that effort is to consider Deng Xiaoping’s efforts to shift the country to pragmatic governance through Reform and Opening—itself a named initiative. He invented or instrumentalized a series of ingenious phrases that include “development is the only hard truth,” “cross the river by feeling the stones,” and “practice is the sole criterion for the determination of truth.” My favorite is his declaration at the 13th party congress that China is in the “primary stage of socialism.” Left unspecified is how long this stage will last and how many more stages there will be before the people can enjoy the full deal.

Many of the party center’s slogans tend to be deliberately vague, thus permitting lower-level officials to figure out implementation. My one-sentence definition of Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era is: “To achieve the two centenary goals—under the leadership of the party—by accomplishing tasks that include but are not limited to eliminating poverty, advancing the socialist rule of law, improving party discipline, etc.” That concept is still an evolving one. Meanwhile, we await better explication of the hot slogans this year: “dual circulation” and “demand-side reform.” Some of it however can be absurd: I’m skeptical that anyone can readily explain the nuances between “rule of law,” “socialist rule of law,” and “socialist rule of law with Chinese characteristics.”

When it’s not being vague, the party can be trying to have things both ways. Xi declared at the third plenum in 2013 that market forces would have a “decisive” role in allocating resources, while at the same time the state sector would have a “leading” role. It’s not unusual to see a great deal of semantic acrobatics. Deng declared that socialism means the capacity to concentrate resources to accomplish great tasks; under that definition, the Apollo and Manhattan projects were exercises in socialism. In July, Xi reminded us that “socialism with Chinese characteristics has many distinctive features, but its most essential is upholding leadership by the Chinese Communist Party.”2 In other words, socialism with Chinese characteristics means the party is never wrong. Either the market or the state sector can be more important at any moment: it is the party’s pleasure to decide.

Centralized campaigns of inspiration, which usually manifest through fixing slogans, is a distinctive feature of the Chinese political system. In the US, political candidates trot out slogans when they run for election; in China, one is never far from the next big named initiative. At its best, defining major goals is the essence of political leadership, and nowhere is this principle better illustrated than Apollo. John F. Kennedy announced the target in 1961: land a man on the moon and return him safely to earth before the decade was out. By fixing this clear goal, as well as committing the necessary spending, he accelerated the creation, development, and deployment of technologies that made the lunar landings possible.3

Xi grasps this idea of leadership. He has unleashed a torrent of new initiatives during his tenure. In my view, Xi feels strongly that the practice of governing China under socialism cannot be an exercise in sustained mendacity. The political system can no longer continue to be an unstable structure based on ad hoc compromises; instead it must have a clear organizational structure, with the party at the top. And the ruling party needs to have the political consciousness of an effective governing force.

Consider two of his most important initiatives: the campaign against corruption and the move toward law-based governance. Xi has decided that corruption is not a mystery to be endured, but a problem to be solved. A few years past the peak of the crackdown, it’s fair to say that the campaign hasn’t solely been effective in removing his adversaries, but has also been broad enough to restore some degree of public confidence in government. A few commentators contend that removal of opportunities for graft have prompted talented people to leave government. But the flip side of that coin has been the improvement in morale among the civil servants who found corruption among colleagues to be intolerable, and can finally see themselves doing public work well.

And for years, Xi has emphasized following clear rules of written procedure, under the rubric of “law-based governance.”4 Since then, the state has improved regulatory systems, for example in setting clear standards for license approvals, as well as creating effective securities and antitrust regulations. The state has removed some of the arbitrary aspects of governance, thus bringing serious enforcement actions following the passage of relatively clear regulations. That has improved facts on the ground. Companies and lawyers tell me that a decade-long effort by the State Council to ease doing business has yielded real results. Obtaining business licenses no longer requires a relentless pace of wining and dining, and has instead become close to a matter of routine. I haven’t been able to verify this fact for myself, but one of my friends told me that the office of the National Development and Reform Commission used to be ringed by some of the fanciest restaurants in Beijing, offering mostly private rooms; many of these restaurants have now closed, following the professionalization of business approvals.

The lived experience of being in Beijing has improved in parallel. I remember what a nightmare it was to buy a high-speed rail ticket for the first time years ago, which involved lots of yelling and multiple people cutting in line. Today, I purchase one on my phone, with no need to obtain a paper ticket, and the lines to board are more or less orderly. Consumer products of all sorts are getting pretty good, and the customer service experience of engaging with any of these companies tends to be not unpleasant. There’s certainly still all sorts of disorderly behavior, but anyone can notice the improvement on all fronts of daily life. In more macro view, some of the breathless stories from years ago on China’s growing capabilities look at last like they’re on good ground today: the country has produced credible companies, have many investable assets (especially in fixed income), and are building globally-competitive brands.

It’s easy to enumerate the grave problems facing the country, but critics tend to under-appreciate its strengths. Chief among them, in my view, has been the party’s surprising adaptability. At any given point, commentators have said that the problems have become too big for the government to handle. Meanwhile, the country has achieved a good record of pulling itself out of sticky situations: in 1992 when it restarted reform, after the financial crisis of 1997, and again in 2008. That record was validated most spectacularly again this year in the aftermath of the Covid-19 outbreak.

This year made me believe that China is the country with the most can-do spirit in the world. Every segment of society mobilized to contain the pandemic. One manufacturer expressed astonishment to me at how slowly western counterparts moved. US companies had to ask whether making masks aligned with the company’s core competence. Chinese companies simply decided that making money is their core competence, and therefore they should be making masks. The State Council reported that between March and May, China exported 70 billion masks and nearly 100,000 ventilators.5 Some of these masks had problems early on, but the manufacturers learned and fixed them or were culled by regulatory action, and China’s exports were able to grow when no one else could restart production. Soon enough, masks were big enough to be seen in the export data.

It’s obvious that the authorities in Wuhan screwed up big, but it’s also the case that the central government organized an effective response to virus containment. It’s not just the manufacturers: the consumer internet companies leapt into action in a way that their US peers did not. 6 Francis Fukuyama states that high-trust societies have “spontaneous sociability,” in which people are able to organize more quickly, initiate action, and sacrifice for the common good. On each of these metrics, I submit that China should receive high marks.

As every discussion on China grows more strident, and as every proposition about it has to be vested with sentiment, I submit that it’s all the more important to be able to see things as they are. That entails having coming to terms not just with a rise of its repression, but also with its growing commercial and institutional strengths. US elites have abandoned the idea that China would liberalize nicely. They should put another idea to bed: that this authoritarian system, riddled with weaknesses, is on the brink of collapse. The country’s strengths are real and improving while the government becomes more nasty towards its critics and the rest of the world.

China is neither a Marxist fundamentalist regime nor a universally-surveilled open-air prison, in which one is free to do nothing but worship the party and carry out its edicts. That is however the impression created by quite a bit of the media. 7 I think that’s not the fault of individual journalists, instead more structural explanations are at work. News bureaus are highly concentrated in Beijing, due in part to natural corporate consolidation, but mostly because the government maintains a strict cap on foreign journalist visas. As a result, the bulk of journalists are based in the part of China that has the most politics and the least sense of growth. Everything here is doom and gloom, a fact well conveyed to the outside world. What’s missing are the facts of more pleasant life and higher growth in other cities. In an ideal world, it should not be crazy to imagine that the papers should have correspondents based in places like Chongqing, Hangzhou, or Xiamen, all of which have interesting stories to tell.

Xi is preparing to face a more challenging international environment with a raft of initiatives. He has consistently said over the last few years that “we must handle our own affairs well.” That has meant building up domestic capabilities while not lashing out against American firms. He has also invoked history to strengthen morale in the party. 2021 is the centenary of the party’s founding, and the major slogan of the past two years has been: “Remember where we started from, pursue our destiny, the struggle is forever.” 8

Given the importance of the slogan, it’s worthwhile to try to come to terms with the fondness and reverence his generation has for the party’s early days. Many of the people tormented by the party center, including Deng and Xi’s father, have ended up being fiercely loyal to the party.9 That shows not just that human nature is complex, but also that the revolutionary heritage of the party instills pride. The CCP started out as a combat party constantly at the mercy of forces grander than itself, achieving its goals after a long struggle that repeatedly brought it to the brink of death. Daniel Koss reminds us that the longer that revolutionary parties have to struggle before consolidating power, the stronger their ideological commitments and the greater their governance durability tend to be.10

Xi is keen to reflect upon the regime’s history. He has decided that the party must believe in itself, and that it is correct to do so: “If our Party members and officials are firm in their ideals and convictions and maintain high morale in their activities and initiatives, and if our people are high-spirited and determined, then we will surely create many miracles.” 11Furthermore, he has stated: “The prospects are bright but the challenges are severe. All comrades must aim high and look far, be alert to dangers even in times of calm, have the courage to pursue reform and break new ground, and never become hardened to change.” 12

Thus I’ve arrived at the idea that a commitment to centralized campaigns of inspiration, represented by the tendency to fix clear goals, is the booster stage required to leave the gravitational pull of decadence and complacency. Ross Douthat laments that “a consistent ineffectuality in American governance is just the way things are.”13 And he references Jacques Barzun, who defines a decadent society as one that is “peculiarly restless, for it sees no clear lines of advance.” As a society grows rich, its problems become social: an organizational sclerosis, which no technology is sophisticated enough to solve. No great effort is required to identify the comprehensive paralysis in the US. And that is the political and social current that Xi is trying to reverse in China.

One way to do that is to continue to pursue GDP growth, which has mostly become an unfashionable idea today in the west. Xi reminded the state in July that “economic work must be our core task, if we succeed in that, then the rest of our tasks become easy.”14 Barry Naughton has noted that “China’s system of incentives for local bureaucrats to encourage growth is extremely unusual, and seems only to exist in China. It is a blunt and powerful instrument.”

This emphasis on growth makes it less likely for China to develop into American complacency or decadence. There are other types of paralysis that it stands a good chance of avoiding. With its emphasis on the real economy, it is trying to avoid the fate of Hong Kong, where local elites have reorganized the productive forces completely around sustaining high property prices and managing mainland liquidity flows. With its emphasis on economic growth, it cannot be like Taiwan, whose single bright corporate beacon is surrounded by a mass of firms undergoing genteel decline. With its emphasis on manufacturing, it cannot be like the UK, which is so successful in the sounding-clever industries—television, journalism, finance, and universities—while seeing a falling share of R&D intensity and a global loss of standing among its largest firms.

Douthat’s book does not deal seriously with China, only with a fantasy of a universally-surveilled society under the rubric of a social credit system. If he looked more closely, he might pick up what Frank Pieke has termed “neo-socialism,” which is the attempt to harness market liberalization to strengthen state capacity and this Leninist party.15 In return, the state provides purpose and direction, as well as inspiring the rest of society with a transformative mission. It helps, of course, that Xi is a genuine believer in socialism, which to him is both an instrument as well as an end. He’s leveraging that belief to reject decadence and assert agency to point out new lines of advance.

II. Control

That was quite a lot of theory. Where does it fall apart?

Xi has said: “If we turn a blind eye to challenges, or even dodge or disguise them; if we fear to advance in the face of challenges and sit by and watch the unfolding calamity; then they will grow beyond our control and cause irreparable damage.”16 Instead of heeding this warning, authorities in Wuhan suppressed reporting of a spread of a novel virus. At a time when they should have imposed restrictions, they congregated thousands around a gigantic potluck. That has indeed unfolded into a calamity.

Xi has said**:** “Some officials are perfunctory in their work, shirking responsibility when troubles come and dodging thorny problems. They like to report every trifle to their superiors for approval or directives. In doing so, they appear to be abiding by the rules but are actually avoiding responsibilities. Some make ill-considered or purely arbitrary decisions. They place themselves above the party organization and allow no dissenting voices.”17 But as economic growth slows down, the country is doubling down on centralized government. Over the last several years, the state is taking more of a leading role in the economy, which means a larger role for bureaucrats.

Xi has said: “Self-criticism needs to be specific about our problems and needs to touch underlying questions… We must be gratified when told of our errors; we must not shy away from our shortcomings. We must accommodate different opinions and sharp criticism.”18 When medical professionals spoke up about a strange new virus circulating in Wuhan, police gave them reprimands. More and more often, the state is simply arresting critics. Even though the government has every reason to be confident about the effectiveness of its virus containment, it has issued a jail sentence to a citizen journalist under the catch-all charge of “picking quarrels and provoking trouble.” For all the emphasis on seeking truth from facts, the state still maintains this practice of shooting the messenger or jailing its critics.

On its own terms, the party center’s instruction is unevenly followed. And there are plenty of reasons to doubt the sustainability of Chinese growth that exist beyond the party’s capacity for self-reform. The following have all received extensive treatment: demographics will be a clear and serious drag in only a few years; a buildup of debt is now accompanied by growing investor discomfort with strategic defaults; the environment is bearing greater stresses; and based on the state’s aggression abroad and the operation of detention camps for minority groups at home, the rest of the world has become much less friendly towards China. One can add more items here, I want to consider the problems with centralized campaigns of inspiration.

The creation and repetition of key slogans isn’t just crowding out the room for other ideas. The state has prosecuted a decade-long effort to suppress the views it doesn’t like. Not only has the government ramped up censorship, society as a whole is developing greater intolerance for dissenting ideas.

It’s difficult to draw a clear line from tighter speech restrictions to worse economic outcomes. Greater censorship over the last decade has coincided with still-impressive levels of economic growth as well as the growing competitiveness of many more companies. And I think it’s worth considering that the authoritarianism of the late-Prussian and early-German state coincided with the creation of the modern research university as well as fantastic advances in chemistry, physics, and electrical engineering.

But there’s more on-the-ground evidence that ordinary people are growing nervous. In so many settings, one has to tread on eggshells in a public discussion in China, with organizers taking pains to remind audience members of sensitivities. Sometimes even in private, people beg off with an embarrassed laugh that they can’t discuss a subject due to unspecified difficulties. WeChat blocks sensitive keywords, which today includes “decoupling” and “sanctions.” It’s now inconvenient to use the app for professional conversations, and I’ve been pretty insistent to my contacts to use Signal instead. And since I brought up Germany, I wonder if the right analogy for China today is as a successful East Germany.

It’s hard to imagine that this increasingly censorious environment is conducive to good thinking. Actions from the government seem to be matched by a growing intolerance among the population for dissenting views. That’s due in part to their sense of feeling besieged after international opinion on China turned sharply negative after the virus outbreak. That hasn’t made it any better for Fang Fang, the novelist in Wuhan whose journal entries documenting the pandemic were first widely-read and then widely-criticized after she authorized an English translation. At that point, critics charged her with “blackening China’s name” and “handing a knife to China’s enemies.” The abuse wasn’t confined online: prominent personalities in state media have led criticism campaigns against her. I wonder if this society can be reflective and thus capable of self-improvement if it is so intolerant of criticism.

It might not be clear that censoriousness is hurting the creation of new companies, but it is clear that it’s becoming more difficult to create better cultural products. Over the last decade, China’s most successful cultural exports include TikTok, the Three-Body Problem, a few art house films (mostly directed by Jia Zhangke)… and that might be it. The Three-Body Problem was published in 2008 and translated into English in 2014; today, the series looks more like something that was able to escape the system rather than the vanguard of a great Chinese outpouring of marvelous cultural creations. Not content to allow science fiction movies to develop independently, the film authorities have this year released guidelines on the correct ideological direction of new films.19 Films more broadly are facing censorship. The two blockbusters released this year (Guan Hu’s Eight Hundred and Zhang Yimou’s One Second) were both mysteriously pulled from festivals and released to the public this year after the state demanded edits.

My best cultural experience this year was to see the Met’s production of Porgy and Bess. It is one of America’s greatest dramas: the story of the marginalized community of Catfish Row, written by an outsider whose works defy easy categorization, and featuring music of surpassing beauty. As I watched a production with superb voices and exuberant dancers, in one of the most lavish theaters in the world, I wondered whether China might one day produce a story of such power. Or if instead every new work must encapsulate core socialist values and the spirit of the 19th party congress.

This lack of compelling cultural creations matters for many reasons. One of them is that people who’ve never been able to make a visit cannot really visualize the life of an ordinary Chinese person, only the dystopia that has become the way that most foreigners think about the country. The propaganda department has not only failed to directly create globally-appealing culture, it has regulated private creative efforts out of existence. For all of Xi’s insistence to “tell China’s story well,” the Chinese regime seems congenitally incapable of allowing good stories about itself to be told, because of its obsession with exercising total control.

For most of the last few decades, the state has not been so repressive as to smother the most dynamic elements of the economy and society. And I think it is still intent on controlling a limited number of areas it has determined to be political threats—and that it will do very strictly. But every few months brings greater risk that dynamism decays from the shrinking space for acceptable speech and thought. The direction of travel has not been a happy one. As recently as five years into Xi’s term, there were still optimists who believed that his regime might turn out to be more kind. The removal of term limits routed that camp, and few recent events can re-instill confidence that the state sees a limit to greater repression. Detention camps have not gone away, and I wonder if they will be expanded to more than a few sites in western provinces. Surveillance capabilities have significantly scaled up. And everyone knows that the regime is serious about instilling discipline and control.

There has been a more obvious way that the state has set back leading companies this year: through greater assertiveness abroad. The Ministry of Foreign Affairs has peddled inflammatory and sometimes false claims, angering other countries. These acts are contributing to the steady closure of developed markets to Chinese firms. Local ambassadors and official spokespeople have sometimes threatened to halt key projects or cut off the Chinese market to major companies. After economic threats against countries like Australia, the foreign ministry is strengthening arguments among national security hawks in the west that countries should be less dependent on China. In some ways, Chinese diplomats have become the greatest threats to Chinese exporters.

III. A clear line of advance

Meanwhile, the state is growing more deeply involved in the economy, especially in technology. This has been a pivotal year for China and tech, which will be a good area for observing the party’s tactics on inspiration at work. A relentless pace of US actions targeting Chinese companies has delivered unmistakable setbacks to their operations. That has triggered a whole-of-society response to build up domestic technology capabilities, an effort that will be guided at the highest political level.

I wrote last year: “The US responded to the rise of the USSR and Japan by focusing on innovation; it’s early days, but so far the US is responding to the technological rise of China by kneecapping its leading firms. So instead of realizing its own Sputnik moment, it is triggering one in China.”

This year, the US doubled down. It produced two rounds of novel restrictions on Huawei, threatened wider restrictions on Tencent and ByteDance, forced the sale of TikTok to a US consortium, and limited technology exports on SMIC, DJI, and dozens of other companies. Aside from Alibaba, it’s hard to name many big Chinese tech firms that have not faced sanctions or the threat of one from the US.

The actual effects of these regulatory actions have been uneven. Designation to the entity list hasn’t always had a major impact on every company’s operations. Federal courts have tied up the bans on Tencent’s WeChat and ByteDance’s TikTok. At the same time, Huawei is trying to work through major difficulties, especially in its smartphone business. TikTok, China’s most successful tech export, still might be sold off. And more generally, Chinese firms are starting to be locked out of developed markets. Lack of access to the richest and most discerning consumers makes it more difficult to make the best products in the world.

The US can revel in Huawei’s pain. But its actions have not been costless to itself. By withholding components that Chinese companies have relied upon, the US government has turned American firms into unreliable suppliers. These restrictions can sometimes block non-American firms from making sales too. In an extraordinary assertion of extraterritoriality, the US declared in August that any company, anywhere in the world, needs to apply for a license to sell a product to Huawei if it is produced on the basis of US technologies.

Nothing can be easier to destroy than trust. Chinese companies have responded by de-Americanizing their supply chains because they have no choice. US politicians can observe the sometimes-devastating impacts of sanctions. What they don’t seem to realize—or want to believe—is that they’re simultaneously pummeling the American brand writ large. I’ve documented for Dragonomics the uncomfortable questions American companies tell me they’re starting to face on whether they can credibly be long-term suppliers. Elsewhere, the Economist has reported that even poultry farmers in China are wondering if they’ll be able to import baby chicks from the US. 20 And there are now multiple reported instances of Japanese companies marketing themselves as more reliable than their American competitors.21 Moreover, I hear growing unease from companies in the rest of Asia and Europe on buying American. Can everyone really be sure that this denial campaign will be limited to a handful of bad Chinese actors? Or is a better model of the US government that once it has found a fun new toy, it will keep playing with it until it is no longer fun?

With these regulations, the US has initiated one of the greatest and strangest antitrust actions ever, against potentially all American exporters. The US Treasury has for years expressed worry about the potential decline of the dollar’s dominance following excessive use of blocking sanctions. This fear is turning into reality for the real economy. One might expect alarm bells to be going off in DC, but it doesn’t appear that there’s much pushback against these regulations, except for murmurs from trade associations. It’s possible to defend these moves as correct—for example by justifying that the costs on American firms are worth it for the chance to slow Huawei down right now—but the government does not appear to have had a vigorous debate about the tradeoffs. Instead, the strategy seems to be a result of bureaucratic kludges, pushed forward by whichever faction has the upper hand, made mostly because the financial sanctions office has resisted dealing a serious blow to Huawei in a single stroke.

For the most part, the control hawks faction of the government has had a run of the table, shown by the fact that US agencies have been more focused on taking down Chinese firms than extending US strengths. At a time when it’s more important than ever to advance its semiconductor companies, the government is crippling their sales to their largest or fastest-growing market. When research capabilities at US universities need to grow, the government is denying them students. And when the US should be attracting more talent to its shores, the government has made it more difficult for people to immigrate. Thus the US looks committed to a strategy of destroying the scientific and industrial establishment in order to save it.

Meanwhile in China, these actions have triggered a surge of interest in mastering technology. For the first time arguably since the industrial rise of Japan in the 1950s, a major country is committed to thinking deeply about the invention of its own tooling. A whole generation of scientists and engineers must examine foundational problems like to build leading tools (like lithography machines) and create the best materials (like wafers and chemicals). And the state is fully behind that effort. After steady calls from Xi throughout the year to master technology, the Central Economic Work Conference announced in December that science and technology work will be the top priority in 2021; the conference has never broken science and technology out as an independent item, never mind give it top spot.

I wrote a column on what a gamechanger these actions can be for Chinese industrial policy. Hardly any of China’s largest technology companies have escaped some form or threat of US sanctions, and many more are wondering if they will end up on some poorly-understood blacklist. Thus the US government has aligned the interests of China’s leading tech companies with the state’s interest in self-sufficiency and technological greatness. Huawei, the greatest victim of US actions, is now in the position of NASA in the 1960s when it comes to chips: a cash-rich entity willing to purchase on the basis of performance, not cost. Access to leading and demanding customers can give a chance to local suppliers who never would have had a shot competing against well-established American firms.

US restrictions are setting back Chinese companies in the short term, but I think it’s unlikely they can crush the broader effort to catch up. No country has monopolized a key technology forever: instead, the history of technology has mostly been a history of diffusion. And Chinese firms are hardly starting from a base of zero. The country has demonstrated a growing ability to master most industrial products and is doing well enough in digital technologies. It remains a dynamic market with a good and improving base of human talent. And perhaps most importantly, it is where most manufacturing is done today, which means its workers have the greatest exposure to technological learning. These advantages don’t guarantee success, especially not on a short timeline. But there’s a chance that things improve rather quickly. The development trajectories for many technologies were pulled forward with unexpected speed after Kennedy announced his moon target.

Is it a drag that the state is so involved in this effort? Well, yes, and China might well repeat the industrial policy mistakes that have stymied projects in the past. But the state doesn’t feel like it can afford to be hands off. Commentators who criticize China’s efforts as doubling down on a state-led approach seem not to realize that the world has fundamentally changed in the last few years. First, the US cannot credibly guarantee to sell goods that Chinese firms need. And second, US actions have removed the political room that Chinese companies have had to push back against state demands that companies buy domestic. Apart from the processor, a Huawei phone is using comparable amounts of Chinese hardware as the iPhone. ByteDance, Alibaba, and Tencent have been using the best-in-class software and hardware, which are usually American. The state will have an easier time now enlisting these companies to use alternatives.

While promoting the status of science and technology with one hand, the Chinese government has with its other hand reined in the activities of consumer internet companies. I’ve never stopped lamenting the marketing trick that California pulled off to situate consumer internet as the highest form of technology, as if Tencent and Facebook are the surest signs that we live a technologically-accelerating civilization. The “tech” giants are highly-capable companies that print cash. But they’re barely engaged in the creation of intellectual property, excelling instead on business-model innovation and the exploitation of network effects. It’s become apparent in the last few months that the Chinese leadership has moved towards the view that hard tech is more valuable than products that take us more deeply into the digital world. Xi declared this year that while digitization is important, “we must recognize the fundamental importance of the real economy… and never deindustrialize.”22 This expression preceded the passage of securities and antitrust regulations, thus also pummeling finance, which along with tech make up the most glamorous sectors today. The optimistic scenario is that these actions compress the wage and status premia of the internet and finance sectors, such that we’ll see fewer CVs that read: “BS Microelectronics, Peking; software engineer, Airbnb” or “PhD Applied Mathematics, Princeton; VP, Citibank.”

While China is ahead on this attitude shift, I think the US is starting to undergo the same conversion. On this theme, I think it’s worth reflecting on the Chinese actions that drove out Google and Facebook a decade ago. That move blocked a major market to these companies, potentially depriving them of significant revenues, and effectively split the world into two internets. And it has since become part of the justification for US actions against China’s technology champions. But US actions have been an order of magnitude more severe: by attacking Huawei’s supply chain, it can terminate the operations of the entire company, and thus represents a massive escalation. In any case, the Chinese ban of Facebook today looks like a prescient action, given how much the company’s activities have enraged western governments, who complain about the circulation of conspiracy theories and other misinformation on social media platforms. It’s harder to argue that China was foolish to ban products so wondrous that their CEOs need to be hauled on a regular basis before political leaders to endure demands to fix the social problems their platforms are allegedly amplifying.

Instead of coddling the internet companies, Xi has declared that China must never deindustrialize or lose its manufacturing capabilities. There’s some chance that Chinese scientists and engineers never make the breakthroughs that free them from dependence on foreign supply. But I think it’s unlikely that they completely fail: they only need to re-invent certain wheels, which does not mean dreaming up unheard-of new technologies. In the worst case, Chinese scientists engage in pure re-invention, making up for the technologies that they can no longer buy. The more optimistic scenario is that they’ll find new ways of doing things after re-examining established ideas. The retreading of old paths might reveal vistas that were passed over too quickly, and which might offer new rewards once properly explored.

Whatever its other worries, the party leadership doesn’t have to fret about becoming a decadent society. Given that its per-capita GDP is still around a sixth of US levels, it still has substantial room for catch-up growth. And it won’t lack for identifying clear lines of advance. On top of eliminating poverty and saving the environment, the party can now add the goal to master technology. The leadership has already held collective study sessions on topics that include artificial intelligence and quantum computing. But it’s going to need to come up with some new tricks to inspire people in science and the industrial world.

There’s nothing like a good space project to captivate the imagination. I find it remarkable how little we discuss the fact that there are almost certainly warm oceans on the moons of Jupiter and Saturn which presents the possibility that we find extraterrestrial life within our very own solar system. Imagine the inspirational value that can flow from fixing a target, say the year of the 2049 centenary, to land a probe on these moons to explore for life.

I thank a number of people for reading a draft of this section or discussing the core ideas with me.

***

It’s time to talk about books.

This year, I re-read Proust. The first time I did so was during college, this second time was more rewarding. I learned to skip the most tedious parts: the endless descriptions of the French countryside, our narrator’s torment over his love of Albertine (and Gilberte, and Mme. de Guermantes), and how much he’s looking forward to seeing Venice. Instead, I focused on the descriptions of the personalities, for every shade of human vanity is depicted in these pages.

The novel describes the most intense lovesuffering, caused by suspicion, made worse by the most stupid mistakes, caused by pride. Much of the story is taken up by the effects of mad jealousies, which grip every major character in turn, with the same destructive effects on each. On this reading, I was struck by how much the novel is useful as a book of ethics. Many scenes easily resonate today, like how fiercely Mme. Verdurin or Mme. de Villeparisis must beg and threaten for people to show up for their little parties. It’s not just our narrator who is exposed to be acting ridiculously. Outrageous behavior from every character (driven by pride, vanity, or ambition) receives careful treatment and then a comprehensive skewering.

The key to reading Proust is not to pay too much attention to the plot. It’s of no great import, and one has to get used to abrupt shifts. In this way the novel is like Moby-Dick, which can shift from the politics of dining at Ahab’s table to a loving tour of the literal interior of a sperm whale’s head. Couldn’t find the transition? No matter, that detracts not at all from the wonderfulness of the scenes. Focus instead on the humor. There are many funny things that take place in the aristocratic set pieces, such as the constant misunderstandings of M. de Charlus at the dinner of the Verdurins, or his suspicion at the violinist who professes to enjoy solving algebra equations until late into the evenings, or his interactions with the Duc de Guermantes. Really anything with Charlus portends comedy.

Not everyone loves Proust’s sentences. I thought that Penguin’s translation made them enchanting. In between the humor and the yearning, an air of melancholy is never distant, which gives the books extra depth. The ending is especially sad. Our narrator, whom we knew as a boy and then a young man, suddenly becomes quite old in the second half of the final volume. The novel reaches its climax with a lengthy and beautiful epiphany, like in Mann’s Magic Mountain, in which our narrator realizes a fierce urgency to write this book.

This was a good year for reading long books. In the early months of the pandemic, I went through Jürgen Osterhammel’s The Transformation of the World, a history of the nineteenth century. It’s chock full of facts and too difficult to summarize. In science fiction, I enjoyed Neal Stephenson’s Anathem. Stephenson has an amazing ability to locate all the nerd pleasure centers in one’s brain and then jam his fingers hard on them. Anathem is a bit of a twist on Stephenson’s usual trick: instead of presenting loving rewrites of his favorite Wikipedia articles, he serves us instead loving rewrites from the Stanford Encyclopedia of Philosophy, all wrapped up as usual in a delicious plot. (I want to thank my friend Thijs not only for insisting that I read the book but for mailing me his copy from Amsterdam.)

I continued my Christmas tradition of reading about the second world war. This year: Britain’s War by Daniel Todman. The British perspective is interesting for its focus on the empire: having to think about the colonies was a distraction to the British leadership, but the ability to draw upon disparate resources and produce goods from multiple base areas was a major factor in victory. I never find scenes of battle to be so interesting. Instead, the pleasure I draw from war books is to think through the logistical efforts involved in producing goods and delivering them to the front. The best war books treat these as mathematical problems.

Todman is good on this bureaucratic side of war: “In 1942, there were 1,850 admissions to hospital per 1,000 troops on the Burmese front.” And he allows one to get inside the planning effort: “The average round trip from the UK to North America took two months and twenty days; that from the UK to the Indian Ocean area, seven and a half months. These rhythms dominated planning and the pace of the war.” Logistics has always been an underrated discipline, especially now in the time of vaccine distribution. And pacing in personal life is something we should all be more actively thinking about. It’s not enough to have a big goal far out in the future, success requires identifying milestones and achieving them at a steady pace.

Mao’s Third Front by Covell Meyskens is an account of the effort to make China undefeatable in the ‘60s. How? By relocating heavy industry from the coast into mountainous Sichuan. During the worst years of the Sino-Soviet split, Mao imagined that he might have to fend off an invasion from the revisionist Soviets as well as from