Can America outpace China to energy’s future?
Here’s the thing: A system so built on repression has rigidities that threaten its success
Itend to be paranoid about conversations that take place “spontaneously” in countries known for repression, so when an entrepreneur approached me at a Chinese technology conference I attended in 2017 and began explaining to me her happiness in China, I thought she was planted to do so by some crazed public relations specialist within the country’s intelligence apparatus.
The entrepreneur , who had studied in America, extolled the benefits of the Chinese system for backing innovation compared to the U.S. laissez-faire approach. She told me how she had launched her energy efficiency technology firm in Washington state, but uncertainty about changing regulations and tax incentives, permit difficulties and the uphill nature of selling a new product in mature markets like the United States caused her great difficulty in getting established. When, after several years of struggle, the Chinese government offered to relocate her business, she jumped at the chance. She said clear government mandates and incentives made her business take off, and she was glad to have come back to China despite her happy times in America.
China’s central economic planning has many drawbacks, but for clean energy deployment, its vast government support is paying off. China’s single ruling party can just impose the politically difficult but critically important policies needed to move a society forward in the 21st century. It is not an accident that China is committed to overtaking the United States in electric cars, solar power, energy efficiency, batteries, nuclear power and wind power. China’s leaders understand that in a world of exploding populations and rising emerging-market middle classes, demand for clean power and energy efficiency is going to soar. Beijing wants to make sure it owns that industry and is ordering the policies to do that, including boosting gasoline prices, from the top down. Finally, the U.S. is taking notice with the passage in the Senate of an industrial policy bill with wide, bipartisan support. The House should move forward on digital tech industrial spending packages put forward by the Senate, perhaps removing some of the other more controversial Chinafocused elements in those bills. Passage of the infrastructure bill, that includes electric vehicle charging stations and electricity system modernization, is another vital step.
The story of the entrepreneur I met reminded me of an op-ed I had read years before by columnist Thomas Friedman, writing on Chinese versus U.S. energy policy in 2009: I remember thinking how simplistic it was. I am not sure if I was more agitated by Friedman’s calling an authoritarian regime “enlightened” or by the idea that he believed China was going to overtake Silicon Valley because they wrote it down in a five-year
plan. For me the question was whether, in a place where rampant official corruption meant that merit did not always determine economic winners and younger-generation innovators did not have free access to information or freedom of speech, it was possible to create an innovation ecosystem that could beat out a system where any 18-year-old could invent something in his garage and, if it worked, potentially attract investors.
I get it. Not all of America is like the television show “Shark Tank,” and it can actually be hard to raise money in the United States, especially given the student debt crisis.
Still, the American system has clear advantages for innovation, and the U.S. has a global leadership role to play when it comes to digital technology and clean energy. The U.S. must lead not only in energy innovation but also in protecting individual rights, privacy, and the environment, as adoption of the new technologies take off.
As a rising China closes the technological gap, U.S. policy leaders are increasingly questioning whether the United States needs to update and improve its industrial and trade policies. One main concern is making the U.S. supply chain less vulnerable to shortages of rare metals and other processed components that go into smart and automated devices. Moreover, many advanced energy and transportation technologies developed by American firms for use in everyday products have dual-use direct applicability to defense and national security. For example, while drones are being auditioned in the commercial delivery sphere because of their advantages over human drivers and are also being plumbed as a way to ferry American commuters for short distances, the defense industry has harnessed them on the battlefield.
It is becoming increasingly clear that America cannot just rest on its laurels when it comes to digital technologies and energy. The United States needs to take additional steps to address
long-term capabilities, perhaps emulating some of what the Defense Department did to rev up the development of self-driving cars by U.S. firms. As China combines government-led investment and workforce development, the U.S. government will have to shape its own strategies to align publicly funded research with the ongoing product development strung across its private sector. That effort must focus attention on workforce development as well as basic R&D if the country is to have any shot at maintaining a critical edge.
But here’s the thing: In China, a system so built on repression has a rigidity that threatens its success. And that brings me to the rest of the story about my conversation with the energy efficiency entrepreneur.
As the conversation continued, she began to rethink her position out loud. At first she was explaining to me how convenient it was to be a working mother in China compared to the United States. She could order whatever she needed for her family online and, unlike in the United States, did not need to be home to accept a delivery. Her groceries would arrive at her housing complex, and the security guard there would bring them inside her home and put them in the refrigerator for her. He even policed the community. When a neighbor took a bicycle from her yard, he went and moved it back to her garage without any trouble for her, because it was clear to him from the community surveillance system that it was her possession. It was on this last point that her
confidence in her new life began to break down, because (I am just guessing here) it must have become clear from the look on my face that I myself would not want a member of the Communist Party whose job was to keep me under surveillance to bring my groceries into my house every day.
In China, the personal credit system is not a commercial endeavor based solely on how well you pay your bills. It is a social rating system that includes your personal associations, your community volunteering, and in fact, your social behavior. This social credit system via the National Credit Information Sharing Platform is supported by the big tech companies that my entrepreneur friend was describing, delivering all her purchases to her doorstep seamlessly. Alipay, the credit vehicle used by many Chinese to buy items from the internet, is involved in this system. If you borrowed someone’s bicycle without their permission in China, and certainly if you stole it, your credit rating might be damaged. I am guessing that if you attended an unsanctioned protest in China, face recognition software would be used to give you a credit demerit or worse. You would be labeled a “trust breaker” and could be penalized in a range of ways, including
being denied promotions at work or the right to own a house.
As my friend was sharing the benefits of her security guard for the digital retail economy, the tenor of our conversation became much more two-sided. She suddenly confided that she missed Seattle and that she actually liked going to the supermarket in America. I offered some comforting observations about how we American scholars know that democracy is a tortuous system of governing, but then added carefully that it has many lifestyle advantages, including the right to privacy and well-developed legal rights for individuals to hold businesses and government accountable via the courts. We talked confidentially for a little while about privacy and the impact of state corruption in China. When we got to the subject of local food contamination, she reminded me to be careful about where I ate, saying that her family only ate fish in places they knew and where they could see the fish live before they ate it. Before we parted, she confided that maybe she had made a mistake moving back to China.
These manifestations of China’s authoritarian system highlight the fact that such a system is replacing human initiative, accountability and transparency with repression as the counteragent to corruption, inefficiency and inequality. It is a weakness that China must overcome in stimulating an innovative technology culture, and it is one that gives the United States an edge to transcend China’s massive spending on digital research and development. More than 1.6 million Chinese die prematurely from the ill effects of air pollution each year. China’s aging population is expected to peak in 2029, eventually hindering workforce development and creating potentially crippling problems related to elder care and massive pension obligations. The entrenchment of Chinese state enterprise is another barrier to startup culture, which has begun to slow in the face of ongoing trade disputes with the United States.
The conflict between freedom and innovation and China’s repressive government started to come to a head in 2019, when a highly visible number of famous entrepreneurs began to be forced into retirement, amid an economic downturn propelled by the U.S.-China trade war and later reinforced by coronavirus. Among the high-profile executives were Jack Ma, founder of Alibaba, and Pony Ma, founder of internet giant Tencent, as well as Liu Chuanzhi, founder of computer manufacturer Lenovo. The retirements are further evidence that the Chinese Communist Party wants to ensure that the private sector and individual entrepreneurs do not become an alternative center of power.
By the end of our conversation, the entrepreneur admitted that all the surveillance made her feel anxious, even though she would never do anything “wrong.” It made me remember the counsel of a researcher from China who was visiting me at a U.S. university and looking at some data on my laptop. He told me to make sure to always put a piece of tape over my camera.
America can lead the way to the next energy future. We must develop focused key national strategies, invest in energy innovation and play our digital tech preeminence to our greatest strength — an open and free society.