China's Emergence as a Superpower (till 2014)

[Uboat509]

No, that's entirely unrelated.

On the contrary, if the state is going to pour a bunch of subsidies into a business they are usually doing it with the expectation that the business will return to profitability at some point in the future.

It's questionable whether this "temporary" is really a good idea. in regard to industries which face foreign competition. Subsidies or another privileged status can make sense as permanent institution if they lead to the lesser evil.

How often does that happen?

Not really. It's 40-60% for all developed countries. This automatic return plays a huge role in regard to arms purchases; it means a factor 2 preference for domestic suppliers. They're often effectively cheaper even if their price is substantially higher.

Actually the top rate in the US is %35. Most of the employees will be in a lower tax bracket and will not pay that much. The Corporate tax take will also be lower than that after deductions. The bottom line is that subsidies will not pay for themselves over the long term.

I tell you that the vast majority of those workers will often end up unemployed or employed in such poor jobs that keeping them in their old job means a vastly higher productivity even before taking subsidies into account.
It makes no sense whatsoever on the macroeconomic scale to tolerate such a change.

I am not sure that is true but even if it is, pouring subsidies into an uncompetitive business simply maintain employment crosses the line from economics to social welfare. As someone pointed out already, as long as the business remains open, new workers will be brought in to replace those who leave thus passing the cost of maintaining the business open on to a new generation. As a social welfare program this would do nothing to address the problem all the while being a net drag on the economy. A far better way to spend social welfare money is on programs like job retraining schemes.

I don't care. I was pointing at an optimisation problem that's only visible if you're willing to look at issues on a case-by-case basis. Nobody will ever recognise such counter-intuitive details if he or she only applies general rules or even ideologies.
The optimisation problem does not require an answer to your question, in fact my remarks about the problem already reveal a decision model that leads to an optimal decision without any addressing of the underlying cause of competitiveness.
Shed off the blinders and forget this overemphasis on relative performance (competitiveness). In the end, absolute performance should not drop.

You cannot simply ignore the cause of uncompetitiveness. Throwing money at the problem while failing to address the underlying cause is treating the symptom while ignoring the disease. That can only work in the short term. Ignore the disease long enough and it will kill the patient. The question then becomes how many resources will be expended in fruitless palliative measures before the patient dies?

That's wrong. Many industries are very mature and have next to nothing left to innovate. Moreover, some sectors are so much privileged (as oil in the U.S.) that even the worst management debacles don't keep the company from producing a huge profit.

Which industries have nothing left to innovate?

Industries in mature economies that fail to compete with rising economies' industries don't do so because they're not innovating (often times the upstarts innovate nothing).
The typical reasons are rather
* a wage disadvantage that's outweighing transportation issues only until the rising economy has reached a better income level about a decade later
* subsidies and other privileges offered in the rising economy
* low profit in the mature economy (not the same as lack of competitiveness at all, for the foreign competitors who rise often do so with a string of losses; see South Korean shipyards). The low profit cuts the chance to finance necessary re-investments with outside capital.

All of those things will provide short term benefits but ultimately only the persistent innovators can hold market share. Apple did not get where it is through subsidies wage advantages etc, they did so through innovation. The oil companies are continuously innovating (fracking for instance). Auto makers must innovate or die (Saab). In short, anyone who is not looking for a way to provide a product or service that is better, faster and/or cheaper will eventually lose out to someone who is. There are some few exceptions but that is not the norm.

I should mention that good marketing can mitigate a lack of innovation to some extent but only in the short term for the most part.

[Fuchs]

On the contrary, if the state is going to pour a bunch of subsidies into a business they are usually doing it with the expectation that the business will return to profitability at some point in the future.

You probably haven't heard of the German coal subsidies...

Actually the top rate in the US is %35. Most of the employees will be in a lower tax bracket and will not pay that much. The Corporate tax take will also be lower than that after deductions. The bottom line is that subsidies will not pay for themselves over the long term.

The U.S. is easily in the 40-60% bracket because of second-order effects. Workers may pay up to 35% taxes on their income, but then they pay VAT in many places, pay fees, qualify for less transfers...

I am not sure that is true but even if it is, pouring subsidies into an uncompetitive business simply maintain employment crosses the line from economics to social welfare. As someone pointed out already, as long as the business remains open, new workers will be brought in to replace those who leave thus passing the cost of maintaining the business open on to a new generation.

You really don't know German coal subsidies.

The Ruhr area coal sector as a whole was subsidised, but one mine after another closed. very few new workers were hired, and very few old workers were fired. The sector largely dismantled itself over decades.

You cannot simply ignore the cause of uncompetitiveness. Throwing money at the problem while failing to address the underlying cause is treating the symptom while ignoring the disease. That can only work in the short term. Ignore the disease long enough and it will kill the patient. The question then becomes how many resources will be expended in fruitless palliative measures before the patient dies?

Some diseases cannot be defeated, and simply giving up the countries' industrial base is no option. Without it, the country tumbles sooner or later to a much lower material standard of life.

Which industries have nothing left to innovate?

Many. One example being the producers of ceramic underground sewage tubes.
It's not important, though; specifically the Chinese upstarts are NOT competitive because of their innovation (in)capability.

All of those things will provide short term benefits but ultimately only the persistent innovators can hold market share. Apple did not get where it is through subsidies wage advantages etc, they did so through innovation. The oil companies are continuously innovating (fracking for instance). Auto makers must innovate or die (Saab). In short, anyone who is not looking for a way to provide a product or service that is better, faster and/or cheaper will eventually lose out to someone who is. There are some few exceptions but that is not the norm.

You vastly overrate innovation. Almost all of what passes as innovation is actually merely adaption of others' innovation or superficial fashion stuff.

Again; low prices (at times including subsidy-driven dumping and undervalued currencies) drive the gaining of market shares by developing countries, not innovation.

Innovation is no great problem; the Japanese were the horror of the Germans in the early 90's and only half a decade later the Japanese advantages in management had been adapted.
Companies which fall behind in productivity/competitiveness are much more likely to do so because of a lack of capital investment or because of management errors.