China's Emergence as a Superpower (till 2014)

[Uboat509]

The banking, oil, natural gas, nuclear power, defense, and agricultural industries disagree with you. Nat gas and nuclear might be more "new" industry, but all the rest have been around for centuries and depend enormously on government largesse/policy/regulatory authority to survive.

Banking is a special case. Countries need at least a functional banking system to grow and an outright collapse of the banking system will be devastating to the economy. Part of the problem with growth now in the rich world is that the banking system is only barely functional in many places.

Natural gas and oil do get significant help from various governments but remember, many of the states that provide these commodities and have gotten rich from them like Saudi Arabia, Russia and Venezuela for instance, are wholly dependent on them. A significant drop in commodity prices could be devastating to their economies. They can ill-afford not to support these industries in any way they can. Conversely, countries that are net fossil fuel importers are also dependent these commodities although it is a significant rise is prices that can devastate their economies. No other industry, with the possible exception of banking, has as much power to destroy a nation's economy.

The defense industry is another special case because the main customers for the defense industry are governments. The goods and services provided by the defense industry are important to their home states not only as providers of defense technology but also as useful tools of foreign policy.

Nuclear power is also a special case because of the immense (and necessary) regulation necessary to build and run a nuclear power plant as well as the huge start-up cost.

The enormous benefits that the agricultural industry has enjoyed in this country has far more to do with blatant populism than need. The only reason that we have not seen sharper cuts to agricultural subsidies in this country is that both parties lack the political will to make those cuts although that may be changing.

[Dayuhan]

US agricultural subsidies are 100% politics and make no economic sense at all... the Japanese and the Europeans are even worse.

The Chinese have of course taken a different approach to subsidizing export manufacturing, relying heavily on a distorted exchange rate and controls on lablr cost. How sustainable that will be remains to be seen. The extent of corruption in China, generally under-recognized in the West, will eventually become a significant stumbling block, I suspect. You can get away with a lot when everything's growing at 8-10% annually, but that's not going to last forever.