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America Leaps Into China's Way of Competing

Froma Harrop on

China is America's economic rival. The way capitalists deal with rivals is to compete. President Joe Biden vows to compete with this rival on the rival's terms. He calls it "extreme competition."

China has built a massive semiconductor industry with massive government spending. It is about to send another $200 billion to its semiconductor sector through 2025.

The U.S. Senate, in a fit of bipartisanship, just approved spending up to about $250 billion for science research, subsidizing computer chip makers here and expanding the National Science Foundation. Europe is also spending big.

Why is this so important? Semiconductors are the little brains that now run appliances, airplanes, mobile phones and cars. You can't have a modern economy without them.

And the reason for building up this domestic industry goes beyond creating and keeping chip-making jobs at home. As the coronavirus disrupted the world's supply chains, U.S. manufacturers suffered a shortage of semiconductors. Our auto industry has slowed production for lack of them.

A military rival as well, China claims sovereignty over Taiwan and, some fear, could invade it. Taiwan produces over 60% of the world's computer chips. And so, semiconductor independence has become a matter of national security.

 

Consider what happened when Australia called for independent investigators to be let into Wuhan to study the origins of the virus. China responded with reprisals against a variety of Australian products -- coal, wine, beef, cotton and barley -- exports worth about $25 billion in 2019.

The Biden administration called China's retaliatory move "economic coercion."

The practice of governments making major investments in their own companies is called "economic nationalism." This kind of state intervention does not sit well with some ideologies. Conservatives traditionally believe that the governments should not mess with market mechanisms. Let the private sector make such decisions.

Only one Democrat voted against the Senate bill. That was Vermont Sen. Bernie Sanders, who complained that it amounted to "corporate welfare" to big, rich companies. Suffice it to say, if the companies could have become richer doing this on their own, they would have done it.

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Copyright 2021 Creators Syndicate, Inc.
 

 

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