Is China an Engineering or a Developmental State?

Breakneck is excellent, but could use a touch more developmental thinking.

Plan Voisin (1925) by Le Corbusier

Dan Wang’s Breakneck is all over my feeds, and rightly so—its a must-read for anyone interested in more than the usual caricatures of China, whether as an authoritarian menace or a hyper-builder state the West ought to envy. I'll spare you a recap of its key arguments since readers of this newsletter have, given its topic, likely already encountered ample coverage of this book. So let me jump right in with some of my own thoughts.

Development is the driving logic

Wang's overarching framing that the United States is a lawyerly society and China is an engineering state comes from his complaint that the labels capitalism and socialism—and most of all neoliberalism—do not adequately explain the two countries and often, in fact, leads people to mischaracterize them. A so-called socialist state might, for instance, be expected to provide a robust safety net for the poorest members of its society, yet China spends far less on social transfers than the United States, the self-styled champion of capitalism. For from a self-proclaimed leftist state, China is also extremely socially repressive—labor unions are illegal, queer culture is squashed, gender roles are hardened, and activists are disappeared—to the extent that even the most right-wing conservatives in the United States would salivate at China's policies. I emphatically share his view on the inadequacy of these labels, thus the need for new ones.

However, although socialism and capitalism may have been the dominant way to describe a nation in the 20th century (a Cold War habit perhaps), they were hardly the only ones. Coming from the development literature, another binary mode of comparison that comes to mind is the developmental versus the regulatory state, something that Chalmers Johnson first wrote about in his analysis of Asia's then-rising giant, Japan.¹

As Johnson argues, the regulatory state (of which he includes the United States and other early developers) concerns itself with rules of economic competition but not with substantive matters of development—what the economy ought to look like, which industries boost, etc. By contrast, the developmental state (of which post war Japan is his main case) concerns itself with substantive matters like which industry matters for the national growth. The tools of intervention differ accordingly. The regulatory state erects strong legal institutions to protect markets (e.g., property rights). The developmental state, by contrast, empowers state agencies to pursue the agreed-upon goals—picking sectors or firms to support, mobilizing labor through targeted policies, and even setting export targets. The stuff of classic industrial policy.

When it comes to understanding the political economic logic of a nation, this distinction is more useful than the capitalist-socialist binary since it doesn't fixate on government size. Both regulatory and developmental states depend on a robust, professional bureaucracy. What matters is not whether the state intervenes, but how it intervenes.

To me, Wang's characterization of China as an engineering state is quite similar to Johnson's developmental state. In both postwar Japan and present-day China, we see a largely authoritarian state with strong views about the substance of the economy, backed by a capable and hierarchical bureaucracy able to act on those priorities. Both states also "engineered" labor suppression in order to become better building societies. And the outcomes (if we adjust for scale) are strikingly similar: extensive rail networks, robust urban infrastructure, and—most importantly—formidable manufacturing capacity. The similarities are striking, so much so that I might, and perhaps rather uncontroversially, say that China is a developmental state.

This distinction matters because whereas Wang attributes China's engineering state to the occupational choices of professional class, Johnson sees Japan's developmental state as a product of late development. On this point, I'm on Johnson's side. Japan's development is itself perhaps the best example. First of all, in the post-war years of massive build out, Japan's bureaucracy was staffed by lawyers, not engineers. And now that it has largely "caught up," it has shifted its orientation to something quite a bit more like the regulatory state: greater emphasis on strong legal institutions, less industrial policy of the classic sort, and more of a social safety net for its once heavily suppressed workers.

Things like social safety nets are less so the outcomes of the occupational leanings of the political elite; rather, they are more closely correlated to stages of development (even more so than political orientation). China is itself the best case-in-point: despite President Xi's fear that a social safety net promotes laziness (which needs to be socially engineered away), the country has nevertheless recently put in place new measures to expand its social safety net. This is quite uncharacteristic of Wang's "engineering-state" but perhaps unsurprising from a development perspective.

A key difference between post-war Japan and present-day China—and perhaps the reason such a comparison has eluded Wang's book—is in how each has presented themselves to the world during their era of breakneck building-driven growth: Japan a parliamentary liberal democracy vs China a Marxist-Leninist communist state. Both characterizations are smokescreens for what really matters: a hierarchical bureaucratic state with a clear view of what development requires—and a willingness to intervene directly in the substance of the economy to achieve it.

In the end, it is neither the Chinese government's Marxist-Leninist ideology nor its engineering-heavy occupational tendencies that has pushed it into one of the most capable building-nations there today. Lawyers or engineers, capitalist or socialist, which ever it may be, my money is that China will continue to build to drum beat of development.

Why does China have an abundance of process knowledge

This brings me to my next point about process knowledge and learning by doing. The point Wang makes with these concepts is that Chinese workers being the producers of most things in the world are more engaged in the process of technological learning than any one else; and when you have a whole city doing that, you end up with a community of engineering practice which makes the overall system much more adept at building stuff.

Part of what I love about Wang's writing is his ability to make even the most mundane ideas feel compelling. Learning by doing is an arcane academic concept that I've struggle to make sound like a profound insight when telling my friends about it. The idea is that the capacity for innovation improves through the cumulative experience of producing goods or services (that capacity is what Wang calls process knowledge).

This idea, as far as I know, was first written about by economist Kenneth Arrow in 1962, then brought into the context of development studies by way of Alice Amsden in her 1989 book about the rise of South Korea (also then a developmental state).² What she points out is that the best way for late developers (e.g., South Korea, also Japan and Taiwan) to catch up is not by inventing new technologies, but learning from advanced countries by doing their manufacturing. Thus domestic firms must first enter labor-intensive, low-value-added industries, where they can work with more advanced foreign firms, learn from them, build process knowledge, and eventually climb the value chain.

This probably sounds a lot like its describing China as well. In fact, the first few chapters of Breakneck really reminded me of many of the insights found in Amsden's book. Amsden, in her introductory chapter, even emphasizes that engineers were key actors in the development of South Korea. But her reason is quite different. In her telling, the opposite of the engineer is not the lawyer but the scientist. Advanced countries can afford to fund the risky research of scientists that may or may not become commercially viable technologies. Late developers, by contrast, must prioritize engineers, whose task is to serve as a vessel of technology transfer, absorbing process knowledge from foreign firms and diffusing it across the domestic economy. In other words, engineers matter not because they can impose an "engineering mindset" on society, but because they hold the keys to learning by doing.

When it comes to process knowledge, what Wang quite correctly observes about China is its complete dominance in process knowledge at every layer of the value chain—a result of its willingness to keep even low-value added segments within its borders. This seems to break from most patterns of development where production tends to move wherever labor is cheapest. That was true for the United States, and was true too for Japan and South Korea which quickly offloaded lower–value-added production to less developed economies (like China in fact) in order to focus on higher-value industries. Within the East Asian countries, this pattern became known as the "Flying Geese" model, after the cascading "V" formation of the migrating birds. China, by contrast, has largely kept production—and its associated process knowledge—within its borders, rather than letting it spill out.

In Wang's telling, this is because the engineering state obviously loves to build and thus wants to keep that capacity domestic. This may well be the case. But another explanation is that the country is itself huge. With so many still living in the rural countryside, and provinces the size of entire countries, an entire flying geese formation exists inside of the country. Each time a Chinese firm climbs the value-added ladder, lower value-added segments aren't offshored abroad but absorbed by the country's own vast supply of rural labor eager for development opportunities. This has enabled China to keep all production domestic allowing it to accumulate process knowledge at every layer of the value chain. What this suggests is that China’s process knowledge abundance stems less from the sensibilities of its "engineering state" and more from the vastness of its rural population.

While I disagree about the source of China's process knowledge abundance, I agree that the concept itself has never been more important. In the fading neoliberal order and a post-pandemic push for self-sufficiency, many countries are now racing to domesticate or near-shore their supply chains. In this context, process knowledge is critical not only for late developers but also for advanced economies like the United States, and Wang is absolutely right to put this front and center of his agenda.

Concluding thoughts

I'm a PhD student in the international development group at MIT's planning school, so it would've almost been irresponsible not to have written a review of Breakneck. But with this training, what stands out to me is how many of the core lessons of late development—from Chalmers to Amsden to the developmental state—have been forgotten and pushed out of the mainstream; and that's apparent in Wang's book as well.

This is hardly Wang's fault. In the 1980s, Washington Consensus economists (wrongly) cast Japan and Korea’s success as free markets triumphs. And as both countries successfully developed and transitioned toward something resembling a liberal market economy, the very idea of the developmental state faded into obscurity. Wang's book, however, has been such a joy to read precisely because it has rediscovered and now also popularized many of these ideas in his account of China's political economy—and for that, Breakneck is worth celebrating in full.

At the same time, however, his framing of China as an "engineering state" rather than a developmental one further obscures this rich body of work on the developmental state, and in fact, risks overstating China's uniqueness in development. While his label is indeed memorable, it fails to put China’s trajectory within the longer lineage of late developers that used a similar playbook—state led industrialization, learning by doing, and building a whole lot of stuff.

This is not to say China is no different from Japan or Korea. It obviously is, and in some previous pieces (here and here) I've argued why. But to disregard how China fits into the larger story of global development would risk producing yet another caricature—a task that this book has worked so carefully to avoid.

(While working on this piece, I came across Jonathon P Sine's excellent review of Breakneck—data-filled, extremely sophisticated, and complements the broad strokes I've sketched out in my review. It’s long, but well worth read.)

Litigation Nation, Engineering Empire

1. Johnson, Chalmers A. 2007. MITI and the Japanese Miracle: The Growth of Industrial Policy, 1925 - 1975. Reprinted. Stanford, Calif: Stanford Univ. Press.

2. Amsden, Alice H. 1992. Asia’s next Giant: South Korea and Late Industrialization. Paperback ed. New York: Oxford Univ. Pr.