Lawless state capitalism no answer to China’s rise

It is tempting to frame the Sino-American economic rivalry as a clash between engineering doers and lawyerly naysayers, as the Chinese-Canadian analyst Dan Wang does in his new book Breakneck: China’s Quest to Engineer the Future. But this is a false dichotomy, because law is a crucial feature of US capitalism.

- CURTIS J MILHAUPT ANGELA HUYUE ZHANG

We have heard the lawyers-versus-engineers argument before. Forty years ago, Japan’s economic rise induced similar anxieties, most famously articulated in the American sociologist Ezra Vogel’s book Japan as Number One: Lessons for America. Commentators fretted that America was mired in lawsuits while Japan’s best minds were solving problems and driving their country's meteoric growth. Yet over the ensuing decades, the United States, with its mammoth legal industry, outperformed Japan by a wide margin.

Today's panic about an Asian economic challenger is equally unwarranted and counterproductive. Invoking national security and the competition with China, Donald Trump's administration is pursuing increasingly anti-capitalist and legally dubious interventions into private industry, with potentially high costs for American dynamism.

Consider the whirlwind of deals struck this summer. Just 11 days after Intel's CEO, Lip-Bu Tan, met with Mr Trump, the White House announced that the US government had taken a 10% stake in the company.

The Trump administration also secured a “golden share” in US Steel as a condition of its sale to Nippon Steel; forged a multibillion-dollar partnership between the Pentagon and the rare-earth producer MP Materials; and negotiated revenue-sharing agreements with the chipmakers Nvidia and AMD in exchange for easing export restrictions. Apple, for its part, pledged another US$100 billion (3.1 trillion baht) in US investment in return for tariff relief.

None of these startling moves was approved by Congress, nor has any been challenged in court. Corporate America has remained silent, apparently cowed by Mr Trump's intimidation of universities, law firms, and other institutions.