China Explained with Dan Wang

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0:25David McWilliams: Grainger knows when you're a procurement manager for an office park, you're not managing one building. You're managing all of them. And to stay ahead, you need to see through walls and around corners.

0:36Dan Wang: Lights about to fail, filters ready to clog, HVAC on its last leg. If you wait until something breaks, you're already behind. Count on Grainger for quality products, easy reordering, and 24-7 support.

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0:58To understand the economy, you have to understand human nature.

1:04David McWilliams: This podcast is powered by Acast. Sitting in the bar, just one scoobage. The one. We'll have the one. Maybe some nuts. Bag of crisps. That'll lead on to another one. The salt really gets you, isn't it? Yeah, the saltiness. Well, you have to quench the salt. You do. We just might sneak into Arthur's just for the one. Yeah. I'm going to chase her. How are you doing there? It is the podcast. As you can hear from these two voices, it's Christmas season. Yeah. And the two lads were out last night and are feeling a little bit tender and we're contemplating whether we should go for the cure. The hair of the dog.

1:43David McWilliams: I think the cure could be an essential part of our Saturday morning. Well, it's almost afternoon. Yeah. Yeah. Anyway, enough of that carry on. Let us kick off. In fact, I'd love to do the podcast from the pub one day. Just from the back of the pub, just having the crack. Anyway, we will tolerate that. If you are also experiencing the fear of the night before, and you're also contemplating whether the one settler, the one pint of stout will settle the Ned for the weekend ahead, we empathize, we sympathize, we understand, we feel your pain. Yes, we do. We absolutely feel pain. We do. Now... I've got to sweat.

2:26David McWilliams: Me too. I'm sweating here in my own juices. It's brutal. Anyway, we are going to have a podcast today to die for because last week we were talking about this extraordinary book called Breakneck, which is a book written by Dan Wong about how China is engineering the future. And that was our discussion about the difference between lawyers and engineers. But the whole thing was how you build infrastructure, how you build manufacturing bases, how you build stuff in this early 21st century. Now, two things have happened to put this on the table. One is, John, I've just finished this book called Meet You in Hell, the story of Andrew Carnegie and Henry Clay Frick.

3:10David McWilliams: Now, why is this interesting? Just look at that. It's really, really good. It's an American book. I was walking past the Carnegie Library in Dundeeery yesterday, John. Oh, yeah. That was built by Andrew Carnegie. He built thousands of libraries. Carnegie was the man, the richest man in the world. He gave all his money away. Where was he from? He was from Scotland. He was born in Scotland, then brought up in Pittsburgh. He was the steel magnet. He was basically the richest man in the world during the Gilded Age. And the guy Frick. Elon Musk. He was Elon Musk. But unlike Elon Musk, Carnegie gave all his money away.

3:48David McWilliams: Oh, yeah, yeah, yeah. He built libraries all around the world. He built institutions, foundations, all that sort of stuff. He basically said, for a man to die rich is an aberration. Yeah. Which is just another way of saying, you can't take it with you, right? Yeah, yeah. Frick, the other guy, on the other hand, was his deputy. They fell out monumentally. They hated each other. So much so that Carnegie, at the end of his life, tried to, I suppose he was coming to the end, and he sent Frick a letter saying, why don't we bury the hatchet? right? If you just keep your head still. Yeah, exactly.

4:25David McWilliams: Just don't move there. And Frick said, Carnegie said, I'd like to meet you. And the response from Frick was, I will meet you in hell, which is where both of us are going, right? Whoa, that's good. And the reason is, I was at the Frick Museum in New York, which is an amazing art museum. And Frick was an art collector. And he bequeathed his amazing house on i think fifth avenue or madison avenue one of those upper east side places to the public to look at all this art anyway but the fascinating thing is those two guys built america they were steel magnets at the time when america used to build so this is why i was thinking about builders and people who tend to get things done yes yeah yeah and then as luck would have it john As a look, we'll have topically the good burghers of Ranala decided to, in a legalistic way, decided this week to take out a judicial review of the process whereby the subway, the Irish metro, is going to stop at Charlemagne, which is just in there in Ranala.

5:35David McWilliams: The reason it's stopping at Charlemagne and isn't even linking up, think about it, to the Green Line was due to another protest by Ranala residents. So this is twice the good burgers of Ranelagh. Are they the same? No, they're different ones. So this is why I asked the question, what's going on? What's the matter with Ranelagh, right? We need to talk about Ranelagh. We need to, yeah, yeah, yeah. We sit down and talk about Ranelagh. Simply because, and of course, this is emblematic of exactly what Dan Wong is about to talk to us about. Yeah. Which is the clash between the engineering state and the lawyery state.

6:07David McWilliams: Now, there's lots of arguments and there are subtleties and there's profundities. but the essential idea is how do you get shit done in a society which is biased towards litigation as a way from a society that's biased towards building stuff and of course what we end up in a situation in ireland which you could describe as banana yeah which is built absolutely nothing anywhere near anything yeah right are the other one i was just thinking it could be called these sort of litigators could be called cavemen. Cave means citizens against virtually everything. So this is the podcast. The cavemen. The cavemen of Ranala, okay?

6:52David McWilliams: The citizens against... And there's only a handful of them, as far as I understand. There's only a handful of them. And again, this comes out with this idea of minority rule. Yeah. So what is quite fascinating in democracies is we tend to think or assume that the ground rules of democracy is the majority rules but in actual fact what you find is that minorities can rule in democracies why because some people care too much about something yeah and the vast majority of us don't care enough right so the people who care the people who are the loud ones are the loudest ones the people who scream loudest can actually dominate the majority so the minority can dominate the majority this is something that you see in democracies all the time yeah you see i find i find it kind of really weird and ironic because i don't know any of these people who have signed up to this well i could be pretty damn sure that on a match day when ireland are playing you know new zealand not a soccer match not a soccer match and they'd be pulling on the green jersey and proud to be Irish and stuff but when it actually comes to doing something for the greater good you know it's all about me myself and I well the great expression here is a friend of mine described people from Argentina as great patriots and shit citizens yes yes yeah yeah yeah this is that's exactly the Irish version of it yeah which is great patriots and shite citizens yeah because citizenship requires you or requires you but assumes that you are going for the greater good you're into the notion that we're all this in this together anyway we will move along but think about the cavemen of ranelagh they offered us an open goal and last week i gave a speech john just after the podcast yeah to the society of construction lawyers and i felt like i felt like a biblical jonah going into the mouth of the whale okay as i walked up on stage and they were actually very pleasant it was very very pleasant and i think there was a lot of people were they slagging you i hope they were of course they were slagging me of course they were slagging me of course but it was actually an audience of both engineers from the construction sector yeah and lawyers so it was exactly the audience on different parts of the room yeah yeah yeah one was in green one was in blue right it's like they just wouldn't dog.

9:20David McWilliams: Remember like Match of the Day in the old days? It was black and white, so you couldn't see if it was a red or green. He'd play from right to left. Are the lawyers? Anyway, enough of that carry on. We are going to go and talk to the man who wrote the book about China, which synthesizes these particular arguments, but not only synthesizes them, in a way puts them on a much greater canvas, which is the fight between America and China for global supremacy. So let's go to States. Talk to Dan Wong. Now we have a special treat for you because you will have remembered the other day we were talking about Ireland's inability to build infrastructure at scale, at pace, at the proper cost.

10:02David McWilliams: And we touched on a thesis in a new book on China, which is called Breakneck, China's Quest to Engineer the Future. And Dan Wong is on the line. Dan, lovely to see you. How are you?

10:18Dan Wang: I'm very well. Great to be here.

10:20David McWilliams: Great. Now, Dan, let's go into, just before we go into breakneck, because this is the story of China, but it's also the story of China and America, the story of China's relations with itself, the story of China's relations with the world. Tell me a bit about yourself so the listeners get to know you before we start talking about the thesis.

10:40Dan Wang: Absolutely. My heritage is from the southwestern mountains of China, a region called Yunnan, just south. of Tibet. And we moved when I was little to Toronto. So I am a Canadian citizen, grew up in Canada, and subsequently studied in the US and have spent about equal parts of my life now between Canada, the US, as well as China. And I spent quite a bit of time in China between 2017 to 2023, working as a technology analyst, trying to figure out what's going on with China's industrial policies, what's going on with their semiconductor ambitions, clean technology ambitions, manufacturing drive before I wrote this book?

11:25David McWilliams: One of the points you make in Breakneck is that America used to make big things, right? When you go over the Williamsburg Bridge, when you see the American subway, as we spoke about in the podcast the other day, used to make big things, doesn't do so anymore. China, on the other hand, one of the many attributes of the Chinese miracle is making stuff. And you attribute this to the biases of the people at the top, the professional education, etc. The fact one is an engineering state, one's a lawyerly state. Explain this to the listeners. This will be fascinating.

12:02Dan Wang: One of the main thrusts of my book is to talk about China as an engineering state, because at various points in the recent past, the entirety of the most senior members of the Communist Party had degrees in engineering. And this is engineering of a very Soviet sort. Now, people were trained, the former general secretary was trained in hydraulic engineering. The premier was a geologist. And one of my points is that China can be understood as having spent the last 40 years being engaged in this giant spasm of construction over the physical environment. They've built so many roads, bridges, high-speed rail, coal, solar, wind, homes throughout the country.

12:45Dan Wang: They're also engineers of the economy. I spent 2021 living in China when Xi Jinping tried to have this controlled demolition of the property sector, as well as smack around a lot of tech titans like Jack Ma of Alibaba, the Henry Frick of today in China, and to try to push a lot of talented university graduates away from cryptocurrencies or consumer internet into semiconductors or aviation or other strategic technologies. I also write about how the Communist Party is made up of engineers of the human soul, which is a phrase from Joseph Stalin that Xi Jinping repeated a few years ago. And I spent a lot of time writing about the one-child policy, as well as zero COVID, which the number is right there in the name.

13:36Dan Wang: No ambiguity about what these policies could possibly mean. Now, as you noted, David, I've written a little bit about how the United States used to be an engineering state in itself. The Brooklyn Bridge connecting Brooklyn and Manhattan was one of the major megaprojects of its time. And I think between the century of roughly the middle of the 19th century to the middle of the 20th century, the U.S. accomplished these incredible projects of the technological supply in which it built things like the canal systems, the railway systems, the highway systems, the Manhattan Project, the Apollo missions, skyscrapers in Chicago, as well as Manhattan.

14:16Dan Wang: These were recognizably amazing projects, But the U.S. transitioned away from being engineer-led into being more of a lawyerly society.

14:26David McWilliams: Let's pick this up more from the personal point of view before we go into the analysis, because testimony is always fascinating. While you're living in China, while you're spending lots of time as a tech analyst, you're trying to understand what's going on tech. But what else are you absorbing as a Chinese emigre, as a Chinese American or as a Chinese Canadian while you're living there?

14:46Dan Wang: Yeah, also as a Chinese returnee. And one of the things that is apparent to everyone of Chinese heritage is that the Communist Party will regard everyone of Chinese heritage around the world as a ward of the state, no matter how they have moved away abroad. Even if they are these relatively unreformed Chinese who have moved to San Francisco a century ago, it doesn't matter because the Communist Party will always regard you as one of theirs. Now, if the Irish did that with all the Irish Americans in the world, then Ireland would look very different indeed. And so the first thing that I appreciate is that I think the Communist Party is a Leninist technocracy.

15:31Dan Wang: And they really regard the Chinese as different from everyone else. And because they disregard the Chinese as not only different, but better in so many ways, there is no reason that China should not be the great civilization of the world. And that is a part of how I understand their drive to show that they can build twice as many highways as the United States, that they can build the world's largest power station, which is the Three Gorges Dam, that they are deploying so much more solar than the rest of the world. China this year will deploy about 300 gigawatts of solar energy. The United States, by contrast, will deploy about 30.

16:13Dan Wang: And they really have this messianic drive really to prove that China is the world's best political system, economic system, and frankly, the best civilization. And that is one of these things that really permeates life in Beijing, Shanghai, as well as Hong Kong, all three cities where it used to live.

16:33David McWilliams: Let's just disentangle this a little bit. Does that come from an ancient sense of the Middle Kingdom, the clues in the name as to where the Chinese people regard themselves? Or does it come from something more like the hundred years of humiliation, that this is actually a way of reversing what happened to China from like 1850 to let's say 1950? Where does this messianic drive come from?

17:00Dan Wang: I think the answer is yes. and I think it has to come from a little bit of all of these sort of things. Now, the Middle Kingdom is one translation of the term Zhongguo, which is the way that China refers to itself. I think a slightly more apt translation would be the Central Kingdom, that this is the center of the world. This is not a left, right, and middle. This is the center of the world, that there really has not been any other name for China rather than a central position for a very long time. that the Communist Party continues to nurse all of these grievances of the century of humiliation in which it understands that China did not have technology and science, where yes, the Western imperialists, especially the British did, and especially the Japanese fascists did when they had a brutal invasion of China.

17:52Dan Wang: And so I think that China does have a lot of this sense of grievance about the past. But I also feel like this is something that it has nursed and nurtured because it has decided that it is politically useful to do that. And there is a little bit more of Chinese history in which they regarded themselves as being the civilized people, everyone else is the barbarians. There's all these indications of cuisine, of how the Chinese cooked their foods and the barbarians simply roasted their meats and everything else that we can go into that makes the Chinese still feel like they are pretty different from everyone else.

18:31David McWilliams: So let's focus just on the engineering state. Because what you make the point in the book, we make many points in the book, but one of the points you make is, on the one hand, the engineering state delivers extraordinary feats of engineering. And it does it at an extraordinarily rapid pace. And it's focused and it's deliberate. The execution is always impressive. That's on the one side. But on the social side, you talk about the same mentality being behind the, for example, the single child policy, the one child policy. It's kind of scientism gone mad in a way. And how do the Chinese people live with these two sides of the same coin?

19:13David McWilliams: One of which, let's say, Europeans would find very, very difficult to live with. The other of which we'd quite like to have slightly better bridges, but we quite like the social democracy side too?

19:23Dan Wang: Yes, I think you are exactly right to point out that they are two sides of the same coin. That I think that the fundamental problem with China is that they are not only physical engineers, but they are also social engineers. And they cannot stop themselves from, after having built these marvelous bridges, from treating the population as yet another building material that they can tear down and remold as they wish. And I think that the tragedy of so many parts of China is that there's two things that are true about the Communist Party that I think has to be central in our understanding of what China is.

20:06Dan Wang: First, China has really achieved astonishing economic growth over the past 45 years, which has lifted over a billion people out of poverty, a few hundred million people into the middle class, as well as a few million people into the recognizable global elites. At the same time, we should ask, why was China so poor? Why was China so poor three decades after triumphing in the Chinese Civil War before its economic miracle really took off? And I understand the Communist Party as having visited so many traumas upon the population. Things like the Great Leap Forward, the Cultural Revolution, the One Child Policy, which are kind of would be a national trauma that would fill the history books for any other country.

20:53Dan Wang: And yet the Communist Party delivered these at a pace of roughly once a decade over the several decades of its role. And so, you know, I think both things are true. And I think one way that Chinese are not so haunted by these political traumas is the fact that the economic growth is very real, that their lives do feel pretty good, that you could be living in a big city in China, you can be living in the countryside, and you will be able to get around. You will have cleaner air. You'll have better parks. You'll have more market access. These are all very real things. And I think these are both sides of one coin.

21:29Now, let's look at the staggering numbers

21:34David McWilliams: because when you hear, well, the economy has grown and people are renewed to that because it's a sort of broad generalization and it can mean a lot of things to a lot of people. But Dan, in terms of like just even a list of the extraordinary pace and breadth of Chinese accelerationism, let's call it, okay? Because what we're actually talking about is one economy accelerating into a future, engineered by a cadre at the top, but feeding off the amazing resources of the people and maybe the American stroke European civilization decelerating relative to China. So let's talk about what that acceleration looks like in real terms.

22:19Dan Wang: Yeah, well, if being inured like the Chinese, if they're inured, then I would like some of that anesthesia myself. And so how do we get our own medicine and some of this medicine that the Chinese have delivered? Just to give you a few figures. China built its very first highway in the year 1993. 18 years later, China built one America's worth of highways. Nine years after that, China built another America's worth of highways. So what that could mean in concrete terms is that imagine if you were born in the year that China built its very first highway, by the time you reach the legal driving age of 18 in China, you would be able to drive on an America's worth of highways.

23:00Dan Wang: And over that time period, between the early 90s to the late 2000s, you would see all of these astonishing skyscrapers, mostly covered in glass, being built across Shanghai, Shenzhen, many other cities. You would be able to be living in a civilization that is responsible for something like a fifth of the world's manufactured products, which has arisen to about a third of the world's manufactured output. in the world today, that this is a civilization that is on the cutting edge of producing electricity. About a third of China's energy needs are met by electricity. In the US, I believe the figure is something closer to 20%.

23:47Dan Wang: Right now, China has 33 nuclear power plants under construction. The United States has zero. And you would see all of these new things being built around you in cities like new subway stations. And David, I understand that Ireland right now has been trying to build more subways because traffic is snarrow. But is it right that there are no subways in Ireland?

24:11David McWilliams: There are no subways. We have had a subway under discussion, which goes back to your legalistic and lawyerly point, for, I would say, three decades under discussion. It is now at a point where we are consulting. The budget has exploded and there seems to be no cap at the end. But more importantly, even today, Dan, as we speak, I read in the newspaper that a well-heeled, organized residence committee is now going to bring the state to the high court, which is back to our lawyer point, suggesting that the subway is unconstitutional and interferes with their property rights.

24:59Dan Wang: Unconstitutional subway? What's going on?

25:01David McWilliams: You tell me. That's when lawyers get in control, man. That's when lawyers get in control. So you're absolutely right. So your intelligence on the ground, Dan, in Ireland is very, very accurate. Okay. Whoever is whispering in your ear knows exactly what's going on. But that's where I want to pick up is precisely this point, right? Is that the engineering state delivers. The lawyerly state that we live in here does not. Let's focus in on this particular aspect of your analysis.

25:32Dan Wang: Yes. And I wonder the extent to which Ireland is a lawyerly society. And so let me paint the picture of the US and you tell me how much this fits with Ireland. Now, I think the US is a country I call the lawyerly society because lawyers really dominate the political system. And they have done so since the early days of the founding of the republic. So if we take a look at the first 16 U.S. presidents, everyone from George Washington to Abraham Lincoln, 13 of them were lawyers. A lot of the founding fathers were lawyers. They defended the protesters or insurrectionists against the British prosecutors, namely folks like John Adams, the opening of the Declaration of Independence really reads like a legal brief.

26:17Dan Wang: And even today, the American presidents are still very lawyerly. Five of the last U.S. presidents went to law school. The Democratic Party is especially lawyerly. Every single presidential nominee between 1980 to 2024 among the Democrats, all of them had gone to law school, including Kamala Harris. And I think the US is a country that really feels like it is a government made up of the lawyers, by the lawyers, and for the lawyers. And you can really tell how if you graduate from Harvard Law School or the Yale Law School, where I used to be a fellow, that is really your ticket into the White House, whether to be president or as a member of the staff.

26:56Dan Wang: And I think the issue with lawyers is that they block everything, good and bad. So you don't have stupid ideas like the one-child policy. You also don't really have functional infrastructure almost anywhere in the U.S. after it stopped building in the middle of the 20th century. And so walking around New York, which I do often and which you've just done, David, it really makes me feel like we're walking amidst the ruins of a formerly great industrial civilization whose works are barely maintained and not expanded. But to what extent does that American diagnosis fit on to Ireland?

27:30David McWilliams: I think it does to an extent, except bizarrely, Ireland has a little bit of the acceleration of China in the last two and a half decades. A little bit, I mean, this economy, as you know, went from being the poorest of the rich, which is a sort of lamentable place to be, because you're not even properly poor. So you can't really identify with the properly poor to a country that has changed dramatically. Now, we've done this by piggybacking on American tech, a certain type of American tech. But nonetheless, the society has seen what the British used to call the white heat of technological increase.

28:13David McWilliams: And of course, the society's changing, much more immigration, et cetera. But our infrastructural deficit is enormous. It is persistent. And I think it definitely is partly a function of the lawyerly state. So, for example, 8 % of our politicians are lawyers. Less than 1 % of the population are lawyers. Consequently, lawyers are kind of eight, nine times overrepresented in public policy. But it's not just lawyers. It's people. It's the bureaucracy. It's a sort of a negotiated settlement. It's process over execution. All these ideas, the notion, as I said, that people can take a subway up to the Supreme Court and it can be hopefully, on their part, declared unconstitutional.

28:59David McWilliams: I mean, that is dysfunction on a monumental scale. Yes. So, yeah, there's lots of the American disease in us. But more importantly, we are now reaching a sort of a plateau in the growth rates. And that's why the bureaucratic stroke lawyerly problem is much more manifest.

29:15Dan Wang: I think the one problem I trace across the Anglosphere, I mean, part of why I call the USA Lawyerly Society is that it has this heritage of common law that it received from Great Britain, which spread it far and wide across the Anglosphere. This is a system much more of judge-made law in which anyone can take their case of the subways up to the high court and say that somehow a train system or the way to build it is unconstitutional. And what we see is is that it's not only the US, which is pretty difficult to build. It is also the Kiwis, as well as the Australians, as well as the Canadians. And my starting hypothesis is that where it comes to public works, we can't trust anyone who speaks English.

30:00Dan Wang: And so, you know, the first thing to do is to say, you know, should we think a little bit more about this common law system? Now, my understanding of the UK, at least, is that the politicians are not so lawyerly themselves, they don't all go to law school. But I think if there's only one thing worse than the lawyerly society, it is the PPE society, where all the prime ministers study politics, philosophy, and economics at Oxford University. That is a very strange concentration indeed. And so they're kind of much more of a regulatory state, much more of a bureaucratic state, not exactly per se lawyerly, but in some cases quite a lot worse.

30:39David McWilliams: And Dan, you also refer to the Europeans because you're absolutely right. So again, for listeners, PPE is a course that's not offered in Ireland, probably thankfully, but it is the gene pool from which an absolute preponderance of British politicians have come from. And it's kind of extraordinary. But we can talk about that again at another stage. But you also mentioned that you think that Europe is almost kind of a legacy society, nostalgic society. So if China is this engineering state, the Anglosphere is a sort of a lawyerly, bureaucratic, process-driven state. Your view of the European Union is that it's almost like a legacy state, something that did something very well at one stage.

31:24Dan Wang: Yes. I spent a lot of time in Europe. Over the summer, I spent a few months in Europe between Austria, France, the UK, but mostly my wife and I were in Copenhagen. We spent about five weeks in Denmark. And I always want to be more optimistic about Europe, but I think I still sign on to my view as expressed in my opening page that Europe is made up of a mausoleum economy, which has a sense of optimism only about the past. And I think what was remarkable to me was that being in Europe, I was in one of the most economically functional parts of the EU, Denmark, which has done very well, almost as well as Ireland in the last couple of years, mostly because Denmark has this wonder drug that is made by Novo Nordisk that is helping Americans atone for all these Big Macs that they've been eating.

32:19Dan Wang: But, you know, the Novo Nordisk has made Denmark do very well. And yet, when I was in Copenhagen in July and August, I cracked open the newspaper one day and I saw a headline saying that Novo Nordisk's share price fell by about 30%. They fired the CEO over the summer, mostly because of competition with American drug makers. And so here's where I'm quite concerned about Europe. And I'm wondering if the two of you could talk me out of my pessimism. But what I see is that very clearly, the Chinese are deindustrializing the German blue banana, the industrialized part of Europe, especially in Germany.

32:59Dan Wang: The numbers are already very clear that Chinese competences in automotives, as well as industrial robotics, as well as all sorts of goods, is clearly already deindustrializing Germany in particular. At the same time, American firms in biotech, software and AI, as well as financial services, are also quite a lot more competitive than the European counterparts. And I think these trends are that a lot of what's holding up the European equity market today is that a lot of Asian consumers are buying a lot of French handbags. And that doesn't really feel like durable equity market leadership to me. And if the Americans continue to outcompete the Europeans and the Chinese continue to de-industrialize Europe, the right populist parties seem to be outpolling incumbent ruling parties pretty much everywhere.

33:55Dan Wang: And as the economy weakens, I suspect the politics will not get better. And so I'm wondering, am I too pessimistic about Europe? Can all of this succeed in a much better way?

34:04David McWilliams: Well, I think the analysis is spot on. I would say that there's one thing that the mausoleum is quite durable in the sense that it's been open for business for quite some time. I do think that the right populist parties will absolutely take most of the gains over the next four or five years. It's interesting you mentioned Denmark because that's the one country where you don't have a populist right, but you have a populist left. You have an anti-immigration social democratic party. and they've shifted themselves from the center. And they are now doing policy-wise what the right-wing tend to be offering.

34:46David McWilliams: I think you're probably right. I think Europeans are much more concerned now at the moment. The immediate concern is re-militarization in Germany. I think the immediate concern is what's happening in Kyiv. I'm not too sure lots of well-armed Germans knocking around the central Europe is a great idea. We've been here before. But nonetheless, I think that Europe is definitely caught in this brace. I think you've identified it well. Between American high-tech and biotech, eating whatever lunch the Europeans had. And of course, Chinese muscular industrial manufacturing prowess, destroying what Europeans thought was impervious, which was German industrial dominance.

35:34David McWilliams: So yeah, we're kind of stuck. We're kind of stuck in the context of a world that decides to have free trade and globalization. Maybe the future is going to be de-globalization on a monumental scale and Europeans protecting themselves from China on the one hand and America on the other hand by actually moving away from, which is what the populist parties are arguing, a globalized world. And so you protect your way to health. But I don't think, as I've said before, secure economies and self-confident economies raise tariffs. Because in effect, tariffs are a suggestion that you're not that capable of dealing with the rest of the world.

36:15David McWilliams: And that just brings me on to the final part of our conversation, Dan, which is America versus China right now. What you say in the book is Americans and Chinese are surprisingly similar. I like this idea. Explain that to me as personalities. And then let's just talk about the final. Is there a final confrontation? Is there a showdown? Where do we go from here with this big superpower sort of face-off? Yeah.

36:41Dan Wang: I find that Americans and Chinese are the two most similar peoples in the world. And I feel this as a Canadian who walk around these countries where things are full of the thrilling as well as the bizarre, as well as the fundamentally deranged. And I also spend a lot of time in Europe because my wife is Austrian and we spend a lot of time thinking about how many places in Europe and Japan are really beautiful and fewer places in America and China are very beautiful. And so I find that Europeans and Japanese are very similar and Chinese and Americans are very similar. What Chinese and Americans share is a sense of hustle that sometimes manifests in taking a lot of shortcuts.

37:30Dan Wang: They share a love for the technological sublime, where they can be really impressed by a giant bridge. They are self-consciously great powers who view themselves as being great powers, and that the rest of the world, these other small countries really have to get in line behind them. When I feel like what Americans and Chinese both embody is that sense of drive where the entrepreneurs really want to make donuts. They care about money and the national governments have this really obvious craving, open craving for geopolitical power. Whereas Japan and Europe are much more beautiful. There's much more a sense of coziness.

38:13Dan Wang: And, you know, their croissants are so good. And yet there is just no real sense of craving for geopolitical power. Because something else that I observed when I was living in Denmark over the summer was that we watched all of these clips of von der Leyen going up to Donald Trump in the White House after he imposed all these tariffs on the EU to say, for von der Leyen to say, yes, thank you for these tariffs. We'll take it. And so what I would really love is for the Europeans to have a little bit more of a sense of national power among the governments, for the entrepreneurs to feel a hunger for making donuts.

38:56Dan Wang: Maybe we're not very happy with the Germans parading around in Central Europe, but maybe this will work this time. And I would really like to live in a world where the Europeans did have some sense of economic strength as well as political power, because they think that would be much better for the rest of the world.

39:15David McWilliams: Look, the European self-confidence when it comes to economic power has been kicked around for a long, long time. Certain countries have been able to preserve their lifestyles, but there is a sense of a continent, certainly astray, adrift, no centralized power. As you said, when Trump imposed tariffs, there was very much of a, well, thanks, thanks, that's nice, we will deal with that. We'll move on. But can I conclude, Dan, about the great superpower face-off between China and the United States. Your parents come from remote part of China, that expression, the mountains are high, the emperor's far away, sort of almost security.

40:04David McWilliams: It's like, stuff can happen over there, don't worry. They emigrate to the bustling center of Spadina, our closest Spadina in Toronto that I know myself. You then go to college in the United States. You live now in the West Coast. You have, it's fair to say, a foot in both camps, culturally, economically, probably professionally, et cetera. Where does this go, the relationship between China and the United States?

40:31Dan Wang: If I have a foot in both camps, I want to say that I wear on my sleeve I have a great pride in being part of the West and being part of Canada as well as the U.S. And after all, I spent six years living in China. And then at the start of 2023, I became a fellow at the Yale Law School's Peltzai China Center. And I feel like America is disappointing, but still the future in so many ways. And I believe in America because it embodies a sense of pluralism, which is something that we need lawyers to defend. And so I don't endorse the sentiment of Shakespeare's Dick the Butcher to say, first thing we do, let's kill all the lawyers.

41:17Dan Wang: I think that lawyers have a very important function, and that is to defend a lot of minoritarian views, which is not something that I felt was possible in China. And I crave the ability to engage in open debate, as one is able to do in the United States. So the U.S. is disappointing in so many ways, but I feel like it is still part of the future, in part because the U.S. is not only a one sort of superpower. It is a financial superpower. It is a diplomatic superpower. It is a cultural superpower in ways that the engineering state will never replicate because engineers are not good at creating culture.

41:58Dan Wang: You know what they do to comedians over there, John and David? There's a lot of censorship over there. There was a case in 2023 when one comedian made a joke, made a pun involving a military slogan. And he wasn't even making fun of the army, but he made a pun on a military slogan. And what happened next was that every comedy club in Shanghai, China's biggest city, shut down for something like two or three months. And all of these comedy shows have to pass through the censor's gauntlet where you have to submit your script to the censor before you get up on the comedic stage. I don't think that makes anyone a comedic superpower, do you?

42:39Dan Wang: Will that work? No, No, I don't think so. So I think the Chinese are also have very stiff capital controls because the engineers are very paranoid and they want to have capital controls, which gives them a measure of sovereignty, but also makes it much more difficult to invite private investors to invest a lot in China. And so I think that there are all sorts of ways in which the Chinese are winning. They're winning, especially in advanced manufacturing, and they are going to de-industrialize Germany in particular, as well as the broader West. And I don't see that there's enough momentum in the West, not even after putting up these protective tariff barriers, really to protect themselves against the wave of Chinese exports.

43:23Dan Wang: But there are still all sorts of cards that the West could play. And I'm very interested in trying to make sure that we have a world safe for pluralism, safe for debate, maybe even safe enough for the comedians.

43:36David McWilliams: Dan, that was extraordinary stuff. Really, really fascinating. And thank you so much for taking the time to chat to us.

43:43Dan Wang: Thank you very much.

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45:22David McWilliams: Having done the podcast last week and now listening to Dan is fascinating, but there's an awful lot to break down there, Mike. I mean, like, I thought what was really interesting is that when he was talking about China are not just physical engineers, but they're social engineers as well, which makes them totally different. His point that the one child policy was scienceism gone mad. Yeah. Engineering gone mad. And I think that's, you know, social engineering is exactly, maybe social engineering is the cost you pay for having fantastic subways and fantastic metros. yeah and the big cost right whereas the american approach which is the irish approach as well which is the liberty of the citizen is central to everything and it's obviously comes from common law british common yeah i thought he'd point about english speakers shouldn't do infrastructure i thought was quite good but basically you should get people whose first language is not english because we come from the common law tradition yeah and that's what we inherited and the irony is that Ireland, although we became a republic, we never changed the fundamentals of the British system that was here.

46:30David McWilliams: Do you remember we had Sean Keyes on a while ago and he was talking about the Italian government are just brilliant at building that kind of train, rail infrastructure. Italians are great at fashion. They're great at football. They're great at food. They're great at... They're great lovers. They're great lovers. For all John's Italian lovers. Anyway, no, the point he's making is really interesting, which is China, because of its engineering bias, is de-industrializing Europe because they're better at making stuff than we are. And we being essentially Germany and Italy, because Italy is Europe's second biggest industrial manufacturer, but getting smaller.

47:16David McWilliams: America has bet on AI and biotech and they are still preeminent in that area right and that's driving the america for now anyway for now for now and of course then what he said about europe being a mausoleum yeah that was a little bit but it kind of feels like that like if you go to europe what we offer the rest of the world is beauty and history and art and literature but he was also saying as part of that mausoleum economy type of thing is that we've no craving for global power but i think that probably comes from guilt from colonialism i know i know that irish people would say we didn't do it and that's fair enough right and that's our that's our calling card around the world we didn't do it right but as a general rule the people who colonized looked like us so if you're in a if you're in Africa, if you're in Asia, you know, the people who actually impose colonialism on you look like us.

48:14David McWilliams: So I think you're right. The Europeans have lost that. But also, I wouldn't negate the reaction of Europe via protectionism in the next five or six years that the Europeans actually just say, you know what, we're going to protect ourselves against China. But we go off the point because his point is and i come back to our ranelah case is that if you want fast competitive cost-efficient infrastructure to meet the demands of a growing economy and a growing population as we have you need to bias towards engineering in public infrastructural spaces and that again smashes into the common what law notion that everyone has a right to protect their own rights yeah and really i think at the end of the day john a fusion of these two is what we really need it's not a binary situation it's all engineers all lawyers we do need an actual fusion well it's something that works i mean it's interesting i got a quite a few messages from the last podcast One of them actually was from a friend of mine, Brian Cullen, who is CEO of VICO Infrastructure in Orange County.

49:33And they specialize in water and energy infrastructure.

49:37David McWilliams: And he set out a whole load of points. But I think one of the key ones he was saying was that one of the main difficulties in America is their procurement process and their contracting law. because each state has its own different versions of the law. So there's no federal, overall federal procurement and contracting process. So it means that if you're doing stuff in California, it's one set of rules. If you're doing stuff in Arizona or Oklahoma or wherever, it's all very different. So it makes it really difficult to get projects up and running. That's what he was saying. He said a whole lot of other stuff as well, but I thought that was interesting.

50:19David McWilliams: It means you can have 50 approaches to everything. But this, I suppose, is the essential heartbeat of the United States. We forget that the United States is the United States of America. Yeah. And it's the state part that we tend to overlook as foreigners, as non-Americans, because what we see is we see the American military, we see American foreign policy. And they are one of the very few areas where America projects its power as a unitary state. But when you live in America, it's the actual state. This is why they have the crazy electoral system, the Electoral College and all this stuff that we can't understand.

50:55David McWilliams: Because fundamental to the American Constitution is the notion that the states are independent and are in an alliance and a coordination together and a willing alliance together. So all 50 states have their own identity. And therefore, they have their own legal systems. Not systems, but legal approaches. So I think that's interesting what Brian's saying is that basically the Chinese have one state, centralized power, they can galvanize resources, they can move enormous amounts of people. Yeah, and a stroke of a pen. Exactly, and a bureaucratic pen, and the bureaucrats tend to be engineers, like Xi himself is an engineer, right?

51:30David McWilliams: Whereas the United States tends to be a little bit more chaotic. And of course, Europe is interesting as well because the vast majority of European legal systems are Napoleonic. Back to our friend Napoleon, whose great expression was to govern is to choose. You've got to make a choice, you've got to do something. Yeah, yeah. We are in the infuriating position, I think, of having British common law underpinning our legal system while at the same time we are in the European Union, but we are yet again an outlier because the jelling agent of the society, the legal system, is completely at odds with the rest of Europe.

52:07David McWilliams: Yeah. Which is why when Europeans come here, they can't understand that we have no subway. Yes. There you go. Talk to you Thursday.

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