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Arthur Kroeber

lines on the record: 156
first: 2025-06-19
most recent: 2025-06-19
sittings or episodes: 1
sources: podcast

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“It's a good question, and we're verging a little bit beyond my sort of realm of competence here because I don't pretend to understand AI very well. I'm still very unclear as to economically where all the benefit accrues, right? And so I guess my theory, if I abstract away from AI and just think about this, okay, this is a situation where you've got a new technology, it's entering society. What is like the innovation cycle that's going to drive it? So I'm pretty partial to theories of innovation like the one that was propounded by a guy called Amar Budet at, I think, is it Michigan State, who wrote a book a number of years ago called The Venturesome Economy. And what he stresses there is sort of like the feedback loop between consumer demand.”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“To interconnect this via grid as efficiently as you can so they're leaders in ultra high voltage distribution technology. And we will be able to keep our electricity prices so low that that will make it very difficult for anywhere else in the world to compete with our manufacturing, with RIAI, with our whatever anything that electricity goes into. We will have this competitive advantage. And so they've been very, and I think they're basically right about that. And the point here is that if you're able to get a few of these sort of enabling All purpose technology decisions right earlier and then scale them up, then a lot of good things can happen as a result of that, regardless of how effective you are at picking winners sector by sector in industrial policy.”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“And they have also concluded that AI aside, that having cheap abundant electricity is really central to all of the major growth industries of the 21st century. So they are now determined, I think, on a strategic basis to have an electricity system that just produces as much power as humanly possible from whatever fuel source you can find”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“Build on one another, it was not that they had the intelligent design plan in the year 2000. It was just sort of all these things came together. And the result is today, China has generating capacity that is double, more than double that of the United States. Their renewables generating capacity alone is as big as the entire generation capacity of the United States. Electricity as a whole is now about 30% of China's total energy consumption. It's going up like this. It's rising very rapidly. Everyone else is increasing their electricity consumption very, very marginally. And now you see in things like AI, what is one of the big constraints on AI development at scale? It is essentially the power that you need to power these data centers. Who is best placed in the world to do this at home? China, right?”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“Huge draw on electricity. So we need to have a much more comprehensive idea about what our electricity grid is going to look like to support these industries that we want for other reasons. And then, well, where do we want this electricity to come from? Well, coal, yeah, we have a lot of coal, but it's really dirty. It's a climate problem. It's a very severe domestic air pollution problem. This is really dirty. So from an energy security and pollution standpoint, we're probably better off doing renewables because any other source of fuel for thermal power plants, we're going to have to import. We don't have enough natural gas, right? We can build nuclear, but that's hard to scale, and we don't have enough uranium. If we build a renewable powered domestic electricity grid, we are self-sufficient forever because you don't have to import the sun or the wind. It's just there. And so you can see how these things begin to”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“Domestic transport infrastructure wouldn't it be great if we had a giant high speed rail network just like Japan except we're 20 times larger than Japan so it has to be 20 times as big so let's do that and by the way this is all going to be electrified So they created a couple of core hub industries, the premise for which was you need gigantic quantities of electricity to get these things working. If everyone has an electric”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“China very early on recognized that they needed a lot more electric power. The original reason was very prosaic. They had a lot of power shortages in the early 2000s that were making it hard for their factories to run. And they said, oh, we've got to build a lot more generating capacity, most of it fueled by coal, just so we can keep our factories running. That was the first thing. And then they started to think about it a little bit more, and they started to say, hmm, actually, what do we want? Well, we know we're failing as we talked about earlier. We know we're failing in this drive to make cars with indigenous combustion engines. And it looks like we're never going to be able to crack that nut and have our own Toyota or General Motors. But no one's making electric cars. Maybe we can be the first to do electric cars, right? So they said, you got to do that. Then they said, oh, we need to enhance.”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“And now we have a panopticon because everyone is online. And if we control the online universe, then we see everything. And then we're pretty confident that we can keep the discourse under control. And they won that bet, right? So the comparable moves that they are making today, which I think is severely underappreciated, is that they believe in the power of electrification. So electricity has been around for a long time, but still in most countries, it only accounts for about 15 to 20 percent of the total final consumption of energy. So it is still actually a minor player in the global energy equation, despite having been around for 150 years and being very critical in a lot of applications.”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“All the time. We can see that. And this is the holy grail of Chinese leadership since the 2nd century BC. We sit on top of this vast empire. It's great. We have all this territory, all of this wealth is flowing in, and we have no idea what people are thinking or doing far away. This is bedeviled every Chinese administration for thousands of years. And even into the 1990s, it was an authoritarian system. It was very fragmented, and it was a very, very hard for the central government to really have any idea what was going on.”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“I think they have been proved absolutely correct in that bet on both counts. Clearly, their drive to network the entire society, which they started to invest in very, very early, initially just through ordinary fixed-line telecoms networks, but then they were very early in mobile, and then getting government network systems that communicated across the whole country. They invested huge amounts in that, and it's been, I think, very beneficial to the rise of all kinds of things. And it's why basically they were able to create an entire internet of their own with its own companies that doesn't have the participation of the U.S. global companies and is on its own terms basically just as successful. But it was also what they recognized is if everyone's on the internet and we have people watching the internet, then we know what everyone is thinking.”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“Control is no longer possible. Social control is no longer possible. Would that that were true, right? The Chinese government very, very early Said, no, that is wrong. We think That the internet can be an instrument that we can use to number one promote technological development at a high speed in China. And number two, enhance our control of society.”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“Policy Less because they picked the right industries and more because they were very adept at building the right enabling infrastructure. And I would point to two things in particular. One was a program that they had starting in the 1990s, which in English has the very ungainly name of informatization. So it translates a Chinese term Xinhua, which just means informatization, right? Taking information technology is the embedded term here and putting it everywhere in society. So they were early adopters of the IT revolution, including the Internet. And if you think back to the discourse around the Internet in the 1990s, everyone was saying the Internet is the death knell of authoritarian regimes because this empowers everyone to have information.”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“And with very different styles and sort of power bases and so forth. And they've managed to succeed through a range of these things. So that gives you more confidence that they're probably more likely to do it right in future than not. But a lot of concerns about that. And Xi Jinping has basically declared himself present for life. We haven't been in that situation in China for a long time. The last time we had that, it did not end well. And there's always been a trade-off between growth and control in China. This is kind of the central dilemma that the Communist Parties had. We want as much growth as possible, but we also want to maintain a pretty high level of control. And that pendulum has swung much more towards the control side of the equation the last few years, and growth is slowing, right? So a lot of problems. However, I would make a couple of points. One is China has been successful in its industrial”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“Actually, can I just stop you there? Because there are a couple things that you touched on there that I think are really interesting that I'd just like to pull on a little bit more So, you know, past results are no guarantee of future returns. So just because you didn't before doesn't mean you can keep doing it. We're seeing that now in the US. A few years ago, I would have said, I had very high confidence that the U.S. will be able to retain the basic political system and structure that has had for a really long time. And that's one of its enduring strengths that that infrastructure remains. I'm much less confident about that. Similarly in China, I think you have this problem that they've had a succession of top leaders since Deng Xiaoping, several.”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“With pretty high frequency. But a lot of it was essentially a random walk where a lot of things that were enabled then sort of started to interact with each other in the way that you've talked about AI. And then they create these other results which could not have been pre-planned.”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“I mean, I think you can scale that analogy up to China, just its total economy. I mean, a lot of the stuff that I've been talking about, about how they got here, I mean, the thing you want to be careful about is it was, this is not the result of some carefully crafted master plan that they knew all along. It was a lot of groping and a lot of random stuff. They did one thing for one reason and another thing for another reason. And then through this kind of random process, it all sort of coalesced in the end. But that was not, you know, the amount of intelligent design behind that was, I think, actually quite low. They got a few sort of big directional things, I think, correct, and they stuck with them. That's where I would give policy credit, and they were willing to adapt when things were obviously not working and cut things off and adjust.”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“Again, this gets back to the sort of like the techno-optimist view of things is that if you... If you have this very narrow view of the economy as purely the expression of the emanation from this technological core, you're missing a lot of stuff. And you will basically take yourself into a blind alley if you think that that is going to solve all your problems. And the Chinese government in the last few months, I think, has begun to recognize this and say, oh, actually, we need to have some kind of a demand strategy. This is very evident in their top-level statements. And the problem is they've been working for 45 years to build this magnificent machine of investment and industry and manufacturing. And they're very, very good at it. And they have basically devoted no time in the last 45 years to figuring out how to create a demand machine.”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“Just, you know, so this is what happens if you say Technological development, particularly in hardware, will solve all of our problems. It will generate all this growth, and so therefore we don't need this service sector, right? So we have a real life experiment, and what happens if you do that? And what happens if you do that is you get a lot of progress in the technological sectors, and you get basically a persistent shortage of aggregate demand, which means that even the people who are making all this great technology stuff don't have any pricing powers. They have to keep lowering their prices. So you get deflation. When you get deflation and less employment growth, people say at the household level, oh, people aren't hiring. So I guess I need to save more and spend less because my income is not going to go up. And you create the risk of this deflationary spiral, which they're sort of on the edge of right now. And so I think this is something.”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“Right, correct. It just seems like it's because it's a political choice. It's a political choice. That's right. And I think, you know.”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“About healthcare sector, opening that up to much more to private entrepreneurship, that again has been reined in. So you can go down the list. And there has been a massive re-regulation of the service sector, which limits the opportunities for profitable expansion by companies, limits the opportunities for entrepreneurship, and limits the opportunities for employment.”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“But they were severely constrained. They were much, much more tightly regulated. You look at the financial sector generally. It was significantly deregulated from about 2008 to about 2017, with some bad consequences, increased financial risk, shadow banking, lots of bad stuff, but also lots of good stuff. Private companies, which were essentially shut out of loan finance, got the ability to finance themselves through debt in the way that they had not been able to previously. You had a lot of new financial services going to households. And basically the government said, no, this is a little bit too dangerous, so we're going to re-regulate it. And now most financial activity in China has been constricted back into a small number of basically state-owned banks. So severe re-regulation of the financial sector. There was a lot of talk.”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“And basically told them there are things that you can do that are fine, and there are things that you cannot do. And there are a lot of business models that you might be interested in doing, such as fintech, such as telehealth, such as kind of wider social media applications that you may not do because we think it creates too much financial risk, we think it creates too much social stability risk, we think it creates too much political risk for us, the Communist Party. And so a lot of the avenues of growth for the internet companies were shut down. They still did okay. They're still very big companies. I think there's share prices fell way more than was justified by the actual loss in revenue. That's starting to correct. Alibaba 10%, they're still great companies. They're figuring it out.”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“Guys. So they did. But then they were also simultaneously concerned with a lot of other things that the internet platforms were up to. And so there was this broad-based regulation of the internet sector, which weirdly for about 20 years had operated in a complete free-for-all land of almost no regulation whatsoever except for political censorship.”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, it doesn't have to, but the way that they have, in fact, executed this tends to lead in that direction. And so here's why. So at the same time that they have been doubling down on industrial policy, they have also been much more tightly regulating their service sectors. So a few examples. The famous one is that they woke up in November of 2020 realized that Alibaba's financial subsidiary was about to do this gigantic IPO, the premise of which was that China should build a financial system that resembled that of the United States in 2005 and that this was a really smart idea. And they said, oh, actually, that's a really dumb idea because look what that led to the US. We don't want securitization. We do not want this financial risk generation that ant financial is trying to talk about. We really need to crack down on these guys.”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“Comes from intangible services. And so there's a more complicated interaction between this high tech core and wider economic growth. And I don't see in China how they set up the linkage between all these great high-tech industries that they have and the 90 or so percent of the economy, which is doing something else.”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“And we will create a financial system that produces very good financial rewards for the people that produce these kinds of services. And then you generate huge amounts of actually very high paid employment in the services economy. And I think the Achilles heel of any sort of industrial policy driven growth model like China, but you can see variants of this basically throughout East Asia, is they're very materialist. They're convinced that it's only really the physical stuff that matters. So if you get really good at making the physical stuff, that will somehow magically spill over into the rest of the economy. And I think the evidence that we have is that that actually doesn't work that much, that most of the demand in a modern industrial economy, the really high wage, high income economy.”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“And I think that is essentially what they sincerely believe, right? And I think there are some problems with that, which is that The vast majority of people in economy do not work in those sectors. So you can get very, very good at making semiconductors and industrial robots and whatnot. And the people who work in those industries do extremely well. But that is a tiny, tiny fraction of the totality of the population. And how do you have spillovers that enable everyone in the economy, regardless of how remote they are from this engine room of the high-tech sector, to enjoy gains to income, right? And the answer in the United States historically has been we're just going to have this great consumer economy. We're essentially going to be demand driven. And so consumers will tell us what they want and companies will arise to make what they want, which is increasingly not stuff, but services, experiences, and so forth.”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“So that was kind of an accelerant of this tendency. But then there is also, there is kind of a macroeconomic theory. And so if you go back and read some of the statements that he put out in the late 20s about their vision of the future, basically they said all of these technological developments by which they meant investments in, they didn't mean Alibaba and Tencent and all of these great internet companies. They meant physical technology, semiconductors, new material, green energy, industrial robots, all this kind of stuff. Essentially their view is this is going to be the productivity engine of the future. And so growth and growth in the overall economy and incomes, it's all going to be driven by these technological investments.”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“Particularly after Trump launched his trade war and the Biden administration followed that up with a lot of controls on exports of technology to China. I think the focus got intense because they were saying, oh, the US really wants to prohibit, constrain our technological rise. They kind of have the ability to do so. And so therefore we have to double down on efforts to replicate all of these core technologies so that we're not reliant on the US or its allies anymore. And we just have to go full tilt on technology at all costs.”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“Then Xi Jinping comes along in 2012, 2013, and says, well, okay, the problem with this is that it's now gone too far. It's led to a lot of corruption. It's led to a lot of inequality. It's led to a lot of local governments doing wasteful and duplicative things. And now we need to hunkered down and focus a little bit more on the really central task, which is this technology task. So less of growth at all costs. Basically, the implicit idea there is we've got this figure out. Growth will take care of itself. We have a growth machine in China. The resources of government now need to be focused on specifically the technology question. So everything that he has done, particularly since about 2015-2016, when you really started to see this come into focus, has been let's worry less about the growth target and more about the technology targets.”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“Is to maximize GDP growth. And that will make all of these other things happen. If we tell local government officials, your job is to maximize technology development. They'll do a lot of dumb stuff and waste a lot of money. That's not the right way to do it. Let's just... GDP as the KPI the end, right? And that turned out to be incredibly successful.”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“So, this is really central to the conception of Chinese elite thinking that the number one job of the government is to figure out how to mobilize the resources of Chinese society so as to maximize technology acquisition creation and upgrading. Starting in the 1980s, that was a big part of the philosophy. But the other part of the philosophy is we just have to grow as fast as possible. And we are fairly agnostic as to where the growth comes from. And we realize that there are many different sources of growth, foreign investment, exports, construction, infrastructure. We're going to do all of these things. And basically the incentive structure that we will set up is just to tell local officials your job.”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“This was kind of recognized among some elites, but it ran into a lot of encrusted political pressure in the late imperial Chinese regime. They didn't get very far. After the empire fell in 1911, you had a Republican government that basically, if you look back at the things that they were saying and doing, they're pretty similar to what the Chinese Communist Party has been doing, saying and doing, they just did them somewhat less effectively. They were dealing with civil wars and various other problems. But the basic insight remained the same, that we need to catch up with the West technologically. This is the fundamental thing. It's just a question of how do we do this. And so what the current regime in China has been able to do is to take that basic idea and actualize it. They have been successful at this task of technological upgrading and catch up and so forth.”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“You had this great Chinese empire that had been sitting around for a thousand years doing great. They thought they were the best in the world. And then these upstarts from England come and crush them repeatedly, militarily, and impose this very humiliating political settlement on them through the opium wars. And so the basic analysis among the Chinese elites was, oh, okay, we fell behind technologically, and so therefore we must catch up technologically. This is the central thing that we need to do.”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, well, and here you get to, I would say, the conceptual sort of fork in the road. I would say that in many respects, the Communist leaders in China have a lot in common conceptually with the techno-optinists of Silicon Valley in their what I would call sort of technological fetishism. So let me see if I can break that down. Chinese leadership throughout the last 40 years, but even going back further, has had this notion that technological upgrading is the key to wealth and power. And the fundamental idea here goes back to the 1840s.”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“Gone too far off the deep end of industrial policy and the supply side will solve all of our problems. Growth has slowed down quite a bit in the last few years. It's probably well below potential. I don't think that there's a lot of evidence that China's growth was below potential from 2000 until 2020 on average. I think there's a lot of evidence that it is below potential now. And so they are sacrificing the ability of the average Chinese person to do more rapid catch-up with living standards of the West in order to achieve these industrial policy technology goals.”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“And so I think what this tells you, the lesson of this is that there's an arithmetic problem there, that even if you do this on this unprecedented scale and do it faster and bigger than anyone has done it before, if you're trying to move 1.4 billion people into an income of the United States level, it just takes a really, really long time. And now, of course, what's happened is because they have, I think,”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“I just think it's physically impossible to achieve that on the scale of that China's been operating on of $1.4 billion. You look at the urban migration that they've done, it is completely unprecedented in the history of humanity, the speed at which they have converted people from rural residents into urban residents for many, many years. They were urbanizing the rate of 20 million people a year added to the urban population. I forget the precise calculation that I made, but in terms of, you know, they were effectively, in terms of housing and urban infrastructure, they were building the equivalent of, I think, I calculated New York plus Philadelphia plus San Francisco every single year for 20 years, right? No one has ever done anything like this before.”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“Effectiveness of achieving basically that's my basic thesis. And, you know, I think they've shown that this works quite well. And I think that's also part of the answer to why, well, why aren't they richer on a per capita basis? There are 1.4 billion people. It is just gigantic. If you just think about the scale problem, Taiwan, Korea, South Korea, they got to whatever they are relative to US per capita GDP 60, 70%, something like that, within a generation or two, because Taiwan, they had 20 million people. South Korea, they had 40, 45 million people to move that number of people and get them all working in high-wage industrial or service jobs in urban areas, you can do that in the course of a generation, right? 2025 years.”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“And they would probably have had a lot less growth because they were not willing simply to create that wall of money that would create broad-based growth. And they might, in fact, have had substantially more inequality than they did because this wasteful method allowed them to spread out investment in a lot of areas which were geographically disadvantaged, which might not have done so well in a purely efficiency driven system. So I think we need to be careful about assuming that inefficiency is bad. I think inefficiency sometimes can be, as long as it is a Basically, the result of a desire to be effective. That can be sort of a byproduct of a successful growth story. And I think that's basically my count of China.”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“Which is that economists who remember have all been basically all global economists macroeconomists have been trained in the United States Since the end of World War II, and particularly since the 1990s. So they view the US in its developed state as the norm rather than as the result of other processes. So it's like the way we operate now is the way we got here. And actually, that's not quite the case. The reason China was able to grow so fast for so long was that they were able to mobilize these huge swaths of resources, domestic savings, and throw them in a kind of uncoordinated way, a lot of problems. And there was a lot of waste along the way. That was part of the equation. So if they had tried to be massive,”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“And they were doing it just not for one or two years, but for 20 years in a row, people often say, well, there's all this waste and there's too much state on enterprises. And they could grow much faster if they were just more efficient. And it's like, really? Could they? They're already growing faster than anyone has grown before. Is it really the case that they could have grown a lot faster than they have? Maybe, but I doubt it. I doubt it. And the reason is I think there's what I would call kind of an efficiency fallacy.”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“Not successful enough. I thought one of the problems in the world that we're facing today is that they're too successful at too many things and that this is creating difficulties for other people. So yeah, that has come up from time to time. And during the period in the 90s and 2000s where they're growing at 10% a year, which is the fastest growth rate recorded by any economy in the history of mankind.”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“Get more profits, more cash flows, and a little bit more inflation into the system. And that would probably solve the debt problem over a decade or two.”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“That would generate more profits for companies. They would be able to more pricing power for companies. You would get a little bit of inflation. So you would have more cash flows within the economies that would enable people to and local governments to pay down debt, a little bit of inflation would erode the real value of the debt. And that's essentially how they got out of their last debt problem in the late 1990s. They had gigantic bad debts in the banking system, essentially representing legacy loans to state-owned enterprises. They had no way of paying them back. And they had a very, very growth-friendly program that generated a lot of growth, a lot of inflation, and that basically strengthened the debt problem. And what they need now is a kind of a revamped, updated version of that strategy where they do a lot more to promote domestic demand to get”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“Return on capital in future. And there are ways from solving that problem. To me, the fundamental issue is they have too much of a supply-side strategy, not enough of a demand side strategy. It's really a macroeconomic issue that if they had stronger domestic demand,”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“I think one of the things that you could say about debt historically in China was that it tended in general to finance productive assets. So whether it was industrial production or infrastructure for many, many years, China was a very infrastructure short country relative to its needs. And so you could justify quite substantial debt financed infrastructure investments on the basis that these would deliver good economic returns for many decades into the future. The case for that is a lot weaker now than it was before. The problem is, you know, how do you essentially retire this enormous stock of very low productivity infrastructure investments, debt financed, and how do you sort of move on and have a more productive”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“That is in the ballpark for highly developed economies. It is extremely high for middle income economies. So if you look at China as an economy that has Average per capita income that's kind of like Brazil, one of these countries. China is way more leveraged than any other country of its level of income. But it imposes attacks on growth, and it is one of the things that makes China's growth more sluggish now than it probably could be.”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, I don't have it off the top of my head. The federal government debt, I think, is around 110% of GDP, something like that. Total gross debt of all sectors, government, corporations, households, I think would be on the order of around 300% of GDP. In Japan, it's substantially higher. You can get into an endless debate on these things where it becomes kind of a numbers game. But I have a pretty high conviction that China has a, they have a significant macro leverage issue. So if you look if you take my numbers and say, well, gross debt to GDP, which by the way are the official numbers of the Chinese government and largely accepted with some structural modifications by the IMF and so forth, 300% of GDP.”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source
“So, you know, I think it's quite possible that the true debt level is higher than what we think it is. It's unlikely, in my opinion, to be as high as Victor says it is. And it also matters what the debt goes to and who is actually formally responsible for paying it. And are there like project flows or income flows that can be used to pay for it? So the servicing, just the structure of the servicing the debt matters, right? At the end of the day, we do have a pretty good sense from the macro data of how much total debt there is in the economy. It's on the order of 300% of GDP. So if you want to say that government debt is 200% of GDP, Then you're saying. Unless you're double counting, you're basically saying that everything else is a lot less than we think it is.”
2025-06-19 · Dwarkesh Podcast · Why China's manufacturing economy is dominating — Arthur Kroeber · IDENTIFIED FROM THE TRANSCRIPT · source