[fny]

1. Krugman admits at many points in the article you sent that protecting infant industries at times works. We're also not talking about infant industries.

2. VCs routinely use the strategy of subsidizing their startups to "disrupt" industries until they dominate a market. China does the same thing.

3. The costs of sacrificing domestic supply chains and development capacities do not fit neatly into macroeconomic models. National security issues present similar difficulties. Do arguments around comparative advantage apply to hostile adversaries that routinely break laws (i.e. ByteDance, IP theft) and provide natural resources to enemies?

4. While the US did not succeed with Intel, China has routinely subsidized industries while enforcing antitrust with far more success than the US. See the Alibaba breakup or the recently implemented antimonopoly laws as examples: https://www.gibsondunn.com/antitrust-in-china-2023-year-in-r...

[lazystar]

> See the Alibaba breakup or the recently implemented antimonopoly laws as examples

An argument could be made that any increase in competition is a side-effect, rather than the main goal, of their antimonopoly changes. Until China explains the full Jack Ma story, anything alibaba-related will be seen as political driven, rather than economic.

[fny]

China routinely punishes the private sector. Yes, Jack Ma had a gun to his head, but Alibaba hasn't been the only target. https://www.barrons.com/articles/chinas-anti-monopoly-crackd...

[VHRanger]

1. Absolutely correct, it works "sometimes", but not in the general case, and especially not in real life in the general case given how it skews the incentive structure of the firms.

The point remains that in general if a foreign country is over subsidizing an industry it's a good idea -- even if you don't like them -- to just buy a ton of the stuff.

2. It remains to be proven how good of an idea the silicon valley VC model has been in the zero-interest rate environment since it changed. Uber has had all of 5 profitable quarters in 15 years. Twitter had something like 4.

Many of those VC hypergrowth companies, except a dozen or so, are effectively a big game of hot potato The gap between investment and profit made is often still in the 9 or 10 figure range.

I'd wait another decade or so before proclaiming it's a good strategy. Predatory pricing doesn't even work in theory - there's was effectively a chapter in an industrial organization class I took, though I'd have to find the material again. It might work in practice if there's other effects not taken into account in the theoretical model, though.

3. I would agree with you there, and I think both banning tiktok and subsidizing intel (foundries only) are ideas I agree with even though controversial.

4. I wouldn't argue that the alibaba breakup was a good example - this sort of move creates a huge chilling effect on investors and entrepreneurs in China. The breakup was much more about Xi consolidating his grasp on power than anything else to be realpolitik about it.