The Chinese approach to promoting tech industries includes openly protectionist taxes and regulations, subsidies, and outright theft of intellectual property. Before you get too indignant about that, or attribute it to obnoxious socialist mercantilism, remember that the Europeans did it to the Chinese, and each other, centuries ago. It’s what the technological have nots do to the haves, regardless of ideology.
That said, given the nature of the Chinese regime and the uncertainty about its ultimate objectives, it would be dangerous not to view its efforts to grow indigenous tech industries as a threat to our national security, let alone our economy. How should we respond? Should we create a similar cocktail of tariffs, regulations, and subsidies? Or should we leave it to the free market?
In my opinion, the correct answer is as follows:
1. The free market is good at identifying and satisfying consumer desires that the consumer doesn’t even know he has–think of the iPhone or Facebook. That kind of imagination is not an attribute of a socialist system. In that respect, we are better off not emulating the Chinese.
2. In situations where an overriding public objective is easily identified, and the market simply won’t get it done, however, the government has to step in. The space program is the obvious example here.
3. If you’re looking for a modern equivalent to the space program, I would suggest energy storage. I know that the private sector is working on it, but I’m not sure that its efforts are sufficient, given the obvious importance of the matter. Increased government involvement in that sector would make perfect sense.
4. There are probably other examples. The bottom line is that government intervention is necessary in some instances, but we need to apply that approach sparingly, and to avoid being more Chinese than China. If we try that, our failure is inevitable. Flexibility and pragmatism are the key to success in this area, not ideology.