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Comment by hodgesrm | Hacker News Reader

In addition to direct costs, there are the opportunity costs of these terrible wars. Since 2001 we Americans allowed US manufacturing to be hollowed out, failed to solve immigration, stood idly by as wealth accumulated in the hands of an ever smaller percentage of our citizens, watched drug deaths climb over 100K per annum, ...

If this is what victory looks like, I would hate to see defeat.

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This is, perhaps, a consequence of countries like China choosing to subsidize their manufacturing sectors at the expense of domestic demand. China subsidizes, producing cheaper goods, which are gobbled up by the west, leaving China w/ excess dollars that it then needs to park in US Treasuries, depressing lending rates and making it cheaper for the USG to run deficits. https://twitter.com/michaelxpettis is a big proponent of this sort of reasoning.

Lol you can’t blame China for doing business with US corporations. It was many two way transactions

The US makes different to subsidy or protection choices with their own effects. selective agriculture is subsidized and insured while things like Trucks are protected - inflating the size, pollution footprint, and selection of vehicles in the US.

We also have an indirect manufacturing & tech subsidy through military spending. Not super efficient at developing our economy but not a small effect either.

I support where the US is rethinking the balance of subsidy and protection on computer chips but wish some of the existing ossified decisions were revisited or rebalanced.

It's not that I'm blaming China as much as I'm trying to explain the mechanics. Of course US consumers and corporations chose to take the path of immediate gratification, leading to the hollowing out of the American working class and mfg base. But it also led to decades of low inflation, a soaring bond market, and increased standard of living for Americans overall(even though some classes, like blue collar workers(particularly men) suffered).

How I'm reading your comment in the context of the topic is that if the US hadn't been involved in a costly war effort, they could have perhaps countered the moves China made by allocating trillions to support their own industry. They might not have, but at least it would have been possible without the war.

I don't fully understand all the dynamics, but you run into the https://en.wikipedia.org/wiki/Triffin_dilemma if you want to be the world's reserve currency while simultaneously possessing a competitive manufacturing and exporting sector. So even if the US hadn't been involved in the war, its industry would have been hamstrung and unable to compete effectively due to a strong dollar.

Can we stop this non-sense? China cannot subsidize industries out of thin air, especially that they came off as a poor country. What China did is they kept their wages lower to "expand" or as we say in Tech "scale". It certainly didn't pay you to get their products and that would not be possible especially at China's scale.

> China cannot subsidize industries out of thin air

Correct. Their industrial subsidies come at the expense of China's domestic spending ability. Many pundits, including the one I linked, believe that China must allow increased domestic demand but this is politically unfavorable in China due to the entrenched interests and beliefs in the necessity of a strong industrial base.

How is this different than saying every investment is a subsidy? China's future domestic spending capability is obviously expanding as it invests in industrial capability.

Thanks to compounding, if they have consistently spent half as much as "they should" elsewhere for decades, there is some moment where they will reach more absolute domestic spending without ever raising that rate to where it "should" be.

I don't know, if you're interested I'd read more from the guy I pointed out above.

Off the top of my head, I'll say that China is making a trade-off to subsidize manufacturing at the expense of wages. This can take the form of 'malinvestment' or misallocation of capital(see the ghost cities, trains to nowhere, "Belt and Road" malinvestment, etc) which boost manufacturing in the short term while leaving little benefits in the long term. It also leaves China with weak domestic consumption so more of the GDP growth must be derived from manufacturing in order to meet CCP growth targets.

Further, the subsidies come at the expense of efficiency. For instance, China leads the world in cotton subsidies despite having 4x competing countries' costs to grow cotton. These subsidies do not necessarily translate into some future benefit for Chinese citizens.

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