Transcript
Danny Crichton:
Dan, welcome to the show.
Dan Wang:
Thanks very much for having me, Danny.
Danny Crichton:
Dan, you've been working on this book for a couple of years now. You lived in China for six years with Gavekal Dragonomics. And you just published this book as we're recording it yesterday, so this is very exciting, Breakneck: China's Quest to Engineer the Future. And in this book you have this thesis between the United States and China. In China you have this massive engineering society, a society that's built around outcomes. You focus on high-speed rail, subways, transportation networks. You take this bike ride across the province, through the mountains, across some of the tallest bridges in the world. And then you contrast that with the due process, lawyerly plotting culture of America. You've dichotomized this very, very well. Talk about, how did you generate the thesis, how did you get into this, and why write a book about it?
Dan Wang:
One of these strange things about superpowers is that they tend to specialize, and the US is obviously a lawyerly society. This is something that we can see from the very founding of the country. So many of the founding fathers had been lawyers. First 13 of the first 16 US presidents, from Washington to Lincoln, 13 of them had practiced law. And even the Declaration of Independence reads something like the start of a litigation document. And so the US has been very elite-dominated by lawyers all the time and I think this is something that we've known quite well, and this is something that's become especially true when every single nominee to be president of the United States in the Democratic Party between 1980 to 2024 had a law degree.
And that is a pretty striking contrast with China, where the elites since the 1980s have been much more significantly trained in engineering. I think this is something that has been in the air, so to speak, that sort of analogy between the US and China. And this became really apparent to me when I lived through the Zero-COVID experience. And thinking about Zero-COVID, thinking about the one child policy, these are policies where the numbers right there in the name, there's no ambiguity about what the one child policy really means. And thinking first about the one child and then reflecting on my experiences in China from 2017 to 2023, in which I lived between Hong Kong, Beijing, and then Shanghai over these six years, it felt like quite a momentous time to be in China because I lived through the first trade war, I lived through consolidation of power under Xi Jinping, and then I also lived through Zero-COVID.
And then moving from this engineering state to the Yale Law School where I was a fellow at the China Center there, it was really apparent that the US couldn't and wouldn't do something like Zero-COVID, couldn't and wouldn't do something like the one child policy, but also didn't really have any functional infrastructure anywhere. And so when I was a fellow at Yale, I was commuting every so often into New York City. The Metro North trains are actually quite good. They're comfortable, they're a little bit slow. I thought that was all fine, but then I came across a timetable from 1914 of the New Haven Railroad, and it kind of galled me that the trains were faster over 100 between Grand Central and New Haven Station than they are today. It's not quite a fair comparison because they're making more stops today, but at a first approximation, the US is moving slower than it did 100 years ago. And these are sort of the ways that, by lived experience, produced how engineers and lawyers are quite different.
Danny Crichton:
When you think about the history, we're going to celebrate the 175th anniversary of the Erie Canal here in New York-
Dan Wang:
Oh, wonderful.
Danny Crichton:
... in three or four weeks. The Erie Canal, one of the grand public works projects in US history. Opened up the Great Lakes, opened up an immense amount of economic growth, and really set the tone for the industrial era of the 1800's. As you point out, we've had lawyers from the beginning, but we have built incredible public works in a period of time, whether that's the Erie Canal, Hoover Dam, the interstate highway system. What changed over the last couple of decades? What brought us from a world where we did these grand projects to what we have today?
Dan Wang:
The lawyers changed. The lawyers themselves changed in character. I certainly acknowledge that there has been a lot of construction in America's past, which basically I would say lasted between the period of roughly 1850 to 1950. Maybe you can stretch this 100 year a little bit because Erie Canal is slightly older and American engineering projects like the Apollo missions stretch a little bit longer. So maybe call it the 150-year stretch. The US in the 19th century, built the canal systems, it built the transcontinental railway, it built these giant skyscrapers in Manhattan as well as Chicago. And then by the middle of the 20th century, the US built the Manhattan Project. It built the interstate highway systems, it built the Apollo missions, and it built a whole lot of other things. What happened was that the US did overbuild throughout the 1950s into the 1960s. A lot of the American public had revolted against so many aspects of the American engineering state. This was engineering state with American characteristics.
Throughout the 1960s, people had grown aware of the use of DDT and other pesticides across farmland. They were revolting over the highways that Robert Moses was ramming through New York City, as well as urban planners almost everywhere. There was broad exhaustion over the war in Vietnam, and there was also the sense that companies, especially the car companies as well as the oil companies, had grown too close to the regulators. And so I think the lawyers, up until and through the New Deal, were very much creative deal-maker types. Franklin D. Roosevelt was a lawyer, the New Deal cabinet was full of lawyers, and these were made up of lawyers who were maybe in the service of robber barons in the past that were trying figure out how to eminent domain people out of their homes in order to build a railway. Or they were raising bonds for this railway project. They were, let's call them Wall Street lawyers, who were very creative in making deals.
And then after this turn, the consolidation of the lawyerly society, the lawyers themselves became much more interested in being regulators and litigators. We have these slogans from students at elite law schools like Harvard Law and Yale Law, saying things like, "Sue the bastards." And by, "Sue the bastards," they meant the government that was spraying the pesticides everywhere or ruining a lot of the environment. And so you had a lot of, there was a new consciousness within the lawyerly class. There was a new consciousness within elite law schools, in which they kind of saw government as the problem, not the solution, a program that flowed really well to Ronald Reagan's mottos.
Danny Crichton:
And one of the things that, I sort of vaguely knew the statistic, but it always shocks me when I read it, is I believe the US has, what, three to four times the number of lawyers per capita of Europe. And why the difference there?
Dan Wang:
Well, within Europe, there's some variation. Per capita levels of lawyers in Italy is a little bit higher than in the United States, and the Nordics have far fewer lawyers as a share of the population. And partly these reflects different systems of common law, perhaps civil law. It partly reflects a sense in which of the esteem that lawyers are held within society. And one of the really striking things to me is how high and esteemed lawyers generally are held in American society. We've had these terms like lawyer statesmen, in which we had a lot of secretaries of state used to be predominantly lawyerly trained. We have a lot of folks that are prominent on Wall Street even today with law degrees.
There's been these really wonderful strange headlines from the Wall Street Journal and the New York Times saying things like, "Oh, who's out earning the bankers on Wall Street?" It is the lawyers. Lawyers are earning so much that they're being compared to the NBA right now. And so the lawyers occupy, I think this very nice niche they've carved out for themselves, in which they are protectors of the rich. Often they are the rich. Often they are held in much greater esteem than most other professions. Now, if we're thinking about other professions in the United States who are broadly respected, if you're introduced as an engineer, is that broadly respected? Maybe sometimes. If you're introduced as a dentist, I don't know. If you're introduced as an economist, you would be absolutely reviled. And so, lawyers have some status. That is part of the reason that people go to Harvard Law and Yale law. That is your ticket into the White House, and it sort of we're in the grips of the lawyerly society here.
Danny Crichton:
I would highlight two things. One is, throughout Breakneck you really have this sociological lens, which I think is fairly unique on coverage of US-China relations. Most people do come from an economics lens or a technology lens or one of these other fields. You come at it with a focus on society, on relations between people, status, stratification, etc. And you also emphasize this in the context of the China work, which is it's not just run by engineers. You actually describe it as an engineering society. Why the focus on society in that context?
Dan Wang:
I think this has to do with just the way that I was trying to figure out China when I was living there. When I was working at Gavekal Dragonomics, I was the technology analyst for an economic research firm, people who were trying to really get beyond the headlines from Bloomberg and the Wall Street Journal. These were pensions, asset allocators, hedge funds that were really trying to understand China's economy. And I was trying to figure out, how do I really deliver value? Well, there's an aspect of China, trying to study formal aspects of China, in which you have to read some of the party documents and figure out how the Communist Party fits together. There's an aspect of just being out on the streets and chatting with people, and maybe this is what more journalists do. There's an aspect of looking closely at the data, official data, unofficial data, whatever it is. That is what a lot of financial analysts had to do.
Maybe there's an aspect of chatting with the government and chatting with business executives, and that's what, let's say diplomats had to do. And I decided I'm going to do all of it and I am going to try to be synthetic, I'm going to try to bring all of these things in together. Because I don't think I was a really great financial analyst on my own. I'm not at all a diplomat and I don't think I have especially great skills at understanding the party state. But what I was always trying to do was to try to make all of these things fit together into this broad puzzle that I could abstract away. And that was kind of how I've come across this term of the engineering state and the lawyerly society, in part to move on from these 19th century political science terms like socialist or capitalist or neoliberal. I find these all very tiresome terms. I think they limit and they obscure more than they reveal at this point.
And so, I don't want to be too serious and literal about the engineering state, but these are some of my ways I think could be helpful for understanding the conflict of the future.
Danny Crichton:
When you look at the lens, obviously we're talking about the US, but when you go to China, obviously massive growth. I think all of our listeners have been focused on China for a very long period of time. You've doubled the size of the interstate highway system in just a decade-and-a-half, have built more high-speed rail than the next couple of countries combined. Certainly outclassing Excelle on the Northeast Corridor by many leaps and bounds. And you do have this running theme of the California versus China dynamic on high-speed rail that in four years between Beijing and Shanghai, and meanwhile in California, I think we have Bakersfield to Merced, the line that everyone wanted and everyone needs. Cities that I have driven through, very nice places.
Nonetheless, we were talking about the engineering state. You have this sort of compromise, which is on one hand there's immense value. We obviously see this in the US. You see this on YouTube videos as people show Shanghai Station and just the number of lines, the number of tracks, the number of trains. But there's a real human cost to the engineering state, and you talk about this across two different chapters. Why don't we talk a little bit about that?
Dan Wang:
A lot of the apparent successes and the failures of the engineering state was made obvious to me in the summer of 2021 when I bicycled from Guiyang to Chongqing, two cities in China's very mountainous southwest, because of COVID restrictions. Normally in the summers I try to go abroad, maybe I visit my family in the United States, but because it was Zero-COVID, I was kind of stuck. And so I rallied two friends to say, "Hey, why don't we go on a big cycling trip and see some big things?" And so a lot of what we went to, we focused on the southwest, in part because there are so many mountains, it's extremely beautiful. And my friends Christian, Tung, and I cycled through Guizhou, which is China's fourth-poorest province. Though it is China's fourth-poorest province with a GDP per capita of the level of about Botswana and it's very far behind the rich cities of Shanghai or the rich provinces of [inaudible 00:12:46], Guizhou has around 11 airports, many of them with fewer than a dozen flights a week.
Guizhou has extensive high-speed rail, much better than California High-Speed Rail. Guizhou also has a lot of subways as well as bridges that are about... I think Guizhou has about 50 of the world's hundreds tallest bridges. Though Guizhou is incredibly poor... And you can really see this poverty once you're over there and people don't really have that much to do. Most of the working age population have gone off to the coastal provinces where they can get a job. They've left their children in the care of grandparents and there isn't that much economic activity there. Though Guizhou is so poor, it has all this stunning infrastructure that people genuinely do point to with pride. And I think for the most part, I would say that there are plenty of problems with China's infrastructure build out, but most of the time I think they don't overwhelm the benefits that these have produced.
What are some of these costs of a lot of infrastructure? Well, there's a obvious environmental cost, in which you're pouring a lot of concrete, which is extremely carbon-intensive for goods that are perhaps not used very much and maybe not even needed. There is a human displacement cost because a lot of people have lost their homes, especially for hydraulic dam projects. There's a big financial cost because Guizhou is now having a lot of time servicing its debts, because these bridges were very expensive and there's no way to pay back the bonds involved in all of these things. And yet, I feel like for the most part, having a lot of infrastructure has been mostly really good for people, because even if you're building a bridge to nowhere, both ends become somewheres. When people say that their travel time between two villages or two markets have been cut from quite a few hours to 30 minutes or so, they are very happy about that. And the state has actually built a lot of useful infrastructure that people genuinely point to with pride.
And so these have not produced only a degree of economic abundance, they have also produced a degree also of political resilience for the Communist Party. What I'm always curious to ask is, why can't it happen here? Why can't California have better mass transit? To say nothing of high-speed rail, let's just have more frequent Caltrain service between San Francisco and Palo Alto and Mountain View every day. Why does it take about five years to renovate Port Authority Bus Terminal? As New York Governor Hochul recently said, "Fine, this is not a simple bus station, but it is still only a bus station, and it shouldn't take five years to renovate a bus station." And so this is why I want a little bit more engineering in the US.
Danny Crichton:
And we know, or at least I'm cynical enough to know, that this is never going to happen in five years. At least the discussion, I think it's been up to 10 or 15 years. But let me ask you this, because I think you bring up Robert Moses towards the end of the book and he's specifically focused on the subtitle of Robert Caro's book, which was, The Power Broker: Robert Moses and the Fall of New York. Moses leaves office and is sort of kicked out in the early 1970's. And sort of famously we had Drop Dead, New York, with Ford in 1975 saying, "Look, the city's bankrupt, to hell with you, you're going down to the drain." And part of that was overbuilding. Part of that was a fiscal profligacy that was not just around infrastructure, it's also around pensions and state employees and large amount of post-1960's spend to try to provide an equality and improve on it.
When you look at a poor province like Guizhou, it's gotten quite a bit of coverage. Bloomberg has covered it quite extensively. The debt situation is very bleak. You've had these massive projects, they don't make economic sense. Now, you sort of have this view that I think there's externalities to this. And I think of this as last year or maybe the year before on the podcast we had Ian Koss, who was focused on the Big Dig Project in Massachusetts, one that you probably have driven through as you go through Boston all the tunnels underneath the city. Gorgeous, completely revitalized downtown, 25 billion bucks. And he basically made this argument that was like, "Look, this was a torrentially large and profligate project, but in the end, if you look at the benefits that accrued to the city, it really does add up. This was worth $25 billion and we should have been willing to spend it.
And maybe it was extraordinarily hard. We put debt on every single agency. One of the reasons the subway has never been upgraded for the MBTA, the Massachusetts Bay Transit Authority, is that they're still paying off Big Dig loans from the early 2000's." How do you balance between, look, if you build it, they will come, with the fact that there is clearly overbuild and there's sometimes, hey, we have an empty airport, and how long can that last?
Dan Wang:
There is certainly overbuild in China. I think that both countries are overcorrecting their past problems. China since reform and opening really got going throughout the 1980s, had an extremely severe shortage of housing and infrastructure of all sorts. China's train systems were completely overloaded. People really didn't have enough housing. There was just not enough mass transit, and part of the recent death of the engineering state is organized to solve a lot of China's infrastructure problems around lack of capacity and power. There were regular rolling blackouts in Guangdong province, one of these major exporting powerhouses, because China just didn't build enough coal plants. And so China tried to really fix a lot of these problems.
Another one of big of the big problems in China is that, generally if you're a party secretary of Guizhou or anywhere else, the Chinese political system almost never lets you run your home province. That has been a practice from Imperial times. You don't have characters like Joe Biden who spent his entire life representing the state of Delaware, which is the place he's from. And so you could be a governor of a Chinese province in the Northeast, and now you're dropped in the Southwest where you have no real power base by design and you also have no real understanding. So, what do you do? Well, you just kind of do what the other guy did, which is to build yet another highway or maybe some weird European bizarre city square. The tendencies of China is still to overcorrect problems of the past, but I still feel generally for the most part, China is arguably built out sufficiently. I think that one can make a very defensible case about that.
But there is still some places where it could use a little bit more construction. And as you point out in the case of the Big Dig, is it good for a city not to be completely crisscrossed by highways? Yeah, absolutely. That is a horrible experience to be living under highways. None of us would ever really want to purchase a home there, which is part of the reason that a city is emptied out. But I also feel like we don't have to face this choice where the Big Dig costs $25 billion. Perhaps it could have been just as well for it to have cost something like $12 billion and for it to have been completed at twice the pace if we made a couple of big decisions earlier and then try to execute this project very well. It doesn't have to be the case that this has to spend so much time and effort in building important infrastructure.
Danny Crichton:
I think this was a key message of your book, and obviously I think it dovetails with a lot of the discussion going underway in 2025, Abundance with Derek Thompson and Ezra Klein, of this idea of better project management can get you a win-win where you can actually spend less and get more. You particularly, I think highlight this dichotomy in China where, private industry you focus particularly on Foxconn, but plenty of other examples, and the public sector are both very efficient, or at least use their resources, I think in a very effective way. In the US, I think we have a very, or at least personal opinion, we have a very efficient private sector that can be maybe over optimized for short-term value as opposed to long-term gain, but is designed around efficiency.
And then a very profligate public sector where, as you highlight in the book, and folks like Alan Levy and others who have done this with pedestrian observations, etc, the cost of a New York City subway line is multiples. And not just multiples against China, but multiples against France, a country that by no means is less historical, less complicated, in the case of Paris. Or particularly against Spain. Madrid is by no means any less complicated than New York, and yet in some cases is as much as an eighth of the cost per mile of subways. And so clearly there's some level of project management to be improved here, there's some level of process that can go on.
And then I think one of the things you highlight, I mentioned sociology earlier, one of the things that I always point out is, if you look at the growth of the New York City subway, imagine being a subway engineer who comes out in the 1940s. If you graduate and you learned engineering and you're like, "This has been the fastest expanding system. It's so exciting. I'm going to go build a ton of work around the New York City subway," and you never built anything. And you have this generational loss. You had all these skills. And you have a whole chapter on this, of obviously the academic and book learning skills, but also the tacit knowledge it comes with. How do you actually tunnel? How do you use a tunnel boring machine? How do you create safe structures? How do you optimize so that tunnel boring machine isn't overused and you're not building a tunnel that's two times the size of what you actually need?
That person never got to build, which also meant that no one actually followed in their footsteps. The next generation wasn't even there. And now we try to build and we say, okay, we need a subway all of a sudden, and we're not looking to learn from China and we're not even looking to buy Chinese trains, let alone learn how to use construction techniques from China. How do you start to think about those communities of practice? Because that's a phrase you used throughout the book quite a lot. In a country like the United States that has give up manufacturing, industrialization through deindustrialization, that gave up public works over the last 30, 40 years, how do you start to rebuild and regrow that talent base that is withered over the last couple decades?
Dan Wang:
Yeah, I think that's a really important point, and this is something I admire your thinking on, Danny, which is that you're good at thinking in time. And I remember you making this point of someone coming out of, let's say a PhD program in the 1960s. Is that when we did the last big immigration overhaul?
Danny Crichton:
'65, yeah.
Dan Wang:
Yeah, '65. And so you end up thinking like, oh, we will study the challenges of immigration reform, such that we're able to do it much better again, and then we never really do it again for 60 years. And where has this person's talents been deployed? And so I think thinking in time is very important. And what I want to point out is that China has seen an expansion in communities of engineering practice over the last 40 years, as China has acquired the ability to build pretty much everything, including some of the most sophisticated electronics on the planet, as well as very important goods in themselves like rare earth magnets, as well as electric vehicle batteries. And by contrast, what we have seen is a withering of process knowledge and these communities of engineering practice in the United States.
If we take a look at the data, real manufacturing output has never recovered to its levels in 2008. It's kind of fell and then has been kind of stagnant. US has lost about 1 million manufacturing employees since about that time. And especially if we take a look at some of the American apex manufacturers, companies like Intel, companies like Boeing, Detroit, they've all been suffering quite a lot over the last few years. We used to say that Tesla is a bright spot in American auto manufacturing. Now it's a little bit less sure given Elon Musk's divided attentions. And so I think that is kind of a really big challenge, that once communities of engineering practice dissolve, once a factory closes, it is really difficult to re-employ everyone and get that knowledge started again, because you have cascading knowledge loss.
Now, one simple thing that I would recommend the US to consider doing more of is to identify that China has a lot of process knowledge and that it has something to teach the United States in something like electric vehicle batteries. If it is the case that China got to where it is through force technology transfer policies against Apple or Tesla, or name your least favorite company, then why isn't the United States doing the same thing to CATL or BYD or DJI or any of these big Chinese companies? Why don't we have them set up shop in Wisconsin or Ohio or Pennsylvania, ring-fence some security around it, and then try to force technology transfer and get that technology over from them? Unfortunately, everything that we're seeing out of the Trump administration, let's say nearly everything, seems to present more headwinds than tailwinds in terms of technology pursuit. Maybe there's something positive to be said about Trump's energy agenda, maybe there's something more positive to say about his deregulatory agenda, but if we take a look at everything else, since Liberation Day the tariffs have cost about 40,000 manufacturing worker employment losses.
This is from the most recent data. About 40,000 manufacturing jobs lost over the course of the past four months. Kneecapping the NSF and the NIH is an unobvious way to attain technological scientific primacy. Attacking universities, same goes with that. And deporting quite a lot of the lower-skilled workforce, which are important for construction as well as manufacturing, and also deterring a lot of high skilled researchers from coming to US, most of these things are not going in the right direction. And so I'm hopeful that at least we can stop hurting ourselves. And then the important question becomes, how do we actually rebuild, not how do we actively tear down what we should really try to keep here?
Danny Crichton:
One of the subjects that keep coming up over the last two, three weeks is obviously the US seems to be going down the route of some sort of state capitalist agenda. Buying 10% of Intel, investing $500 million in [inaudible 00:26:05] materials and offering it an advanced purchase agreement. We saw this with US Steel, which was actually described as a golden share quite literally inspired by similar shares in China. Is it that the US is... We seem to be learning some lesson from China because this is the inspiration, and not just made up, but I actually talking to folks. In the Trump administration, they are looking to China and saying this is what worked for China. This is what we should be doing here. We'll put board directors on US Steel to ensure that the companies align with US objectives. The president will appoint those directors and run the company.
I've written, obviously very negative pieces on this, but nonetheless, that is where the inspiration is coming from. Are we learning the wrong lessons? Are we not taking the right inspiration? Is it just not compatible with the US system? What should we be taking from those sorts of actions and why they don't work?
Dan Wang:
I think we are absolutely learning the wrong lessons from China, and making Intel a state-owned enterprise with American characteristics, that's an unobvious way for that to make Intel much better. I'm very reluctant to believe that the US government running Intel could actually make it a better foundry and a better producer of microprocessors. What we are learning from China is a loss of data probity and appointing acolytes to run statistical agencies. China appoints central planners to run its economic planning agencies and statistical agencies, and something we know about central planners is that they always hit their target. What we are learning from China is visiting misfortune upon a lot of the downtrodden and surrounding the top leader with acolytes and producing the sense that every mistake is going to be the fault of foreigners or traders. And I think what we have in the US is, unfortunately, authoritarianism without the good stuff, because there could be some better things that the US could be learning.
Maybe the US could be learning the build out of better public transit. Maybe the US could be producing better public order in the streets. Maybe the US could be producing more functional cities and, let's say high-speed rail to connect these cities, or just better infrastructure overall. But right now what we're getting is this, not the build out of clean tech generation, power. We're not getting much by way of new build out of subway systems, to the extent that the US is trying to build and engineer anything. A lot of it consists of gilded ballrooms as well as detention centers, and I think this is not the right way for America to build.
Danny Crichton:
A couple of weeks ago we had the New York City Abundance crew, Ryder and Catherine, and both of them sit on the neighborhood associations, the boards that basically approve everything that goes on in the neighborhood. And I believe it was Catherine who was talking about how on the Land Use Committee, she spends hours a month on questions like, what color of a door should someone approve? You have this focus on proceduralism that shows up in the book over and over again. And you point out, as you just said, there's sort of a authoritarianism with only the downsides, not really the positive sides. But you also point out in the book, Focus on China, that only an engineering state could do the one child policy.
Only the engineering state could do the Zero-COVID policy, and specifically the lockdowns in Shanghai where for eight weeks everyone was locked into an apartment with drones circling them as soon as they try to go out. Which, from the American perspective, seems... You are not going to get New Yorkers to follow any policy. We can't get people to not take a dump on the subway, let alone stay inside their apartments for long periods of time. And so, I guess I have this tension of, clearly focused on door colors is not a productive use of most professionals' time on a review board to protect the character of a neighborhood. On the other hand, due process forums, areas of democracy, both very direct and very local, all the way up the presidency, are mechanisms to protect against abuses of power. How do you balance between these two, and particularly given your milieu recently at Yale Law School as you were writing this book, were you inspired by different models of constitutionalism as you think about this?
Dan Wang:
To give some credit to your friend, at least determining the color of a door is a debate about outcome, not process. I feel like it would be much worse if they spent all the time trying to form the committee to figure out the color of the door. I think what we have to do, there is no right answer in anything. I think something that we have to acknowledge is that the construction of almost anything at all is going to hurt someone, as simple as a wooden bench in a park or even a small playground. There's all sorts of lawsuits to prevent people from adding slides onto a park because, oh, maybe the kids will bring some level of noise pollution and will create all sorts of hazards. Construction of almost anything in New York, even if it's an apartment building, has nothing to do necessarily with the state government or the local government. That might hurt someone's light and that would also produce a lot of problems for different people.
And so the first thing that we have to do is to acknowledge that the construction of anything will produce some sort of costs, and then the question will have to become, how do we figure out how to distribute those costs? How do we have an equitable outcome? How do we have something that people buy into that they feel like produces a good outcome or a good process, or something that satisfies the legitimacy of this program? And I think what the US has erred too much on, is that it has the thought that what people demand the most is a checklist of processes in which the state can show that they checked every single box in the correct order in the way that it was meant to flow. But is it the case that native New Yorkers really care the most about whether MTA or any other sort of government agency built the subway stations or built the bus stations in the correct means and with the correct method?
Or is it the case that what ordinary people care about is having a subway connection that they understand not to have drained their public tax dollars excessively and get them to where they need to go? And I feel like what if too much of the American lawyers and too much of the proceduralists are excessively wedded to this view that legitimacy is produced through process, through the checklists, rather than through the outcome? I think what we should have a little bit more focus on is producing the outcome. And certainly, in every single case we will have to figure out, how do we minimize the costs? How do we minimize the distribution burdens? How do we make sure that things are built very well? And all of these require good questions.
But I think as a meta point I would offer is that, let's think a little bit more about what it is that people really want. Maybe sometimes it is the case that they want to feel that the contract on how to build the subway and who is subcontracting, that process is fair, but maybe often what they care the most about is having that new subway at all.
Danny Crichton:
I used to live in South Korea, much of the way that you lived in China. In South Korea, one of the most interesting, striking things coming from the US is there is a public infrastructure lobby and vote. People want subways to come to them, and if they don't have access... If anything, Korea has one of these big challenges where so many people want to access the subway, they overbuild. There's too many stations. Even Seoul Metro is now increasingly in the red because they've overbuilt into neighborhoods and cities, external in the suburbs, that honestly are not productive and are costing the city money. But that was a great vote getter, and so politicians kind of deliver this over and over again.
In Japan, you have a very similar process with the LDP, the Liberal Democratic Party, where from the '60s really into the 2000's it became known as the cement party or the construction party. There was this triad between real estate, the construction companies, and the politicians to say, look, there's a virtuous cycle. You donate to us, we will approve the projects. You build them, everyone makes money. This is super great. It worked all the way through 1989 and the crash in 1990. Kept going. Arguably, that's one of the reasons Japan has a massive debt load and has massive infrastructure costs. Why doesn't that loop work here? Because I feel like everyone can make money. That's a very positive [inaudible 00:33:59]. This is the argument for abundance and this whole movement progress studies. It's a win-win-win, and the only people against it obviously are proceduralists who are attacking it and going to the courts, and environmentalists. We sort of understand that. But why isn't the system capable of overcoming that traction?
Dan Wang:
Well, maybe we need a better class of Yakuza and maybe what we need is to rename the Democratic Party into the cement party. I feel like, yes, there is this virtuous loop, but the lawyers have gotten into the mix of every single one of these steps. I think what we have given is excessive veto power to the NIMBYs who are able to have a lot of lawyers to block the construction of wind turbines or block the construction of a new home or block the construction of a dormitory for UC Berkeley because students constitute some form of noise pollution. And I think it just takes a few lawsuits from a few committed people to say, what we really don't want is to turn this part of a parking lot near UC Berkeley into affordable housing for people or dormitories for students. And they have the power. And they have the power to break this virtuous loop.
It becomes really difficult for politicians to credibly promise these sort of things. And maybe the US has gotten to a level of wealth where the wealth is pretty entrenched. It no longer makes sense for the politicians really to promise these sort of things, because people are much more interested in protecting their home values than it is to build up anything around them, and they get really nervous about noise pollution or any sort of construction. The United States used to have a lot of mayors and governors that would attend these ribbon-cutting ceremonies. The last big spurt of construction of New York's subway system was in the year 1989 when the city opened, I think something like 11 subway stations all in one year. That was really the last big year of new subway construction. But it used to be the case that mayors established their, call it legitimacy, by delivering these sort of things. And you're right, it is quite interesting that elected officials in the US no longer even seek to promise these things. Why do you think this is?
Danny Crichton:
Why do I think? Well, I think there's a actually obvious answer, which is the projects takes so long to come to fruition. They start with years of planning and permitting. They take years of construction, years of finalization. The Second Avenue subway, we over-talk about it, but the core of it took about 12 years and you're going through multiple mayors. And so the person who really got it underway is not the person who gets to show up at the ribbon-cutting. The ribbon-cutting mayor sort of gets lucky on their predecessors, but then whatever they want to commit to, they don't get credit for. There's not a culture of bringing these people back. And so when you're out of term four to eight years and you can't build it in that timeframe, there's not really incentive to try to get this underway. You're not going to build the legacy around it.
I actually joked with some friends, I was like, "Penn Station is notoriously not named for a person. It's the most popular train station in North America. I would be willing to call it Trump Station if in the next three years we could transform it, give several platforms to Long Island Railroad, Amtrak, and all the other components of the subway system there. It's just not going to happen in three years, and so Trump's not going to be here, which means it won't get named, which means he doesn't have any incentive to care about it." There's just no loop there. And it's interesting, I feel like that's a huge part of it. Big Dig in Massachusetts, you look at the central subway in San Francisco that goes up Fourth Street and through Chinatown into North Beach. That construction, for the actual electrical work on that construction, started my first year as undergrad in 2007, and I believe it opened two years ago.
My entire adult life has been watching this subway station. There were five mayors in that timeframe, and so who gets credit? There were multiple governors. I think that that just comes down to there's no accountability that I did this, I got it done. Woo woo, me. I'm going to go from mayor to governor, governor to president.
Dan Wang:
Having lived in South Korea, do you think that South Korea is kind of an engineering state like Japan, Taiwan, South Korea, are all prototypical East Asian engineering states? Or what do you think are the differences between the engineering state of the Korean variety and the Chinese variety?
Danny Crichton:
Korea is very similar to China, in the sense that you have very large landlords who build large apartment complexes in Seoul, Busan, all the major cities. You have a massively growing subway system, although it's crushing a little under finances. Right now, Seoul is undergoing a massive system expansion similar to Paris, which is the Grand Seoul Express, or similar to the Grand Paris Express, 40, 50 stations across three lines that'll go at 90 miles per hour. Subway stations, this would be in New York something like JFK Airport to Penn Station in 15 minutes as opposed to an hour and 20, as it takes right now. Transformational, that you can move multiple miles in a couple of minutes as soon as you only have a couple of major hops across the system. And so there's still an immense amount of flow there.
Wealth is still very tied to real estate costs. Interestingly, that does not seem to affect people's desire to build housing. It actually encourages desire to build public infrastructure to make that housing worth more. It's kind of the opposite of what I would call cyber economics, which is all about exclusionary, zoning, all about maintaining a very tight supply and lid on housing growth so that your property becomes more and more valuable. And the apotheosis of that is probably California and Palo Alto and Menlo Park and Berkeley, where the fear is if we build a bunch of apartment buildings, somehow this idyllic place will suddenly not be worth what it is today. And you also see this desire, and I have a lot of Korean friends who are in this place, where there's a real desire to be bought out. They want their apartment to be purchased and reconstructed. There's real profit in this.
People actually buy their personal apartments with the goal of they think that this place will be redeveloped and they're going to get bought out and it's going to be a really big deal. And it was sort of a throwaway comment, I was actually curious about this because I just didn't know. I think it was in context with the Three Gorges Dam in China, you said, "Look, if you're bought out in China, it's actually a pretty good deal. But if you don't accept the deal, there are really serious consequences," and that was a difference from the United States. Is it a good deal to get bought out in China?
Dan Wang:
Sometimes. I hope I didn't put it universally. But I think there are enough stories of the state offering people really good land prices. If the state is now building an airport, say, and a lot of the rural corner of a city, a lot of farmers would have their land be expropriated. But most of the people that I've spoken to, and I've spoken to some people about this, they would be generally pretty happy that their site has been chosen over others to be the site of an airport and the state will give them a lot of money. But I think what ultimately is kind of the scary thing, is that the government will remove you by hook or by crook if they're unable to actually get your land.
You do occasionally have this interesting phenomenon of what are called nail houses in China, where you would have a lone building in the middle of a road or something because the state wasn't exactly able to expropriate that particular property. And so to me, that is a sign that their powers are still somewhat limited and they don't have the ability to do exactly what they want at all times, because every so often you come across these total eyesores of people who simply really did refuse to move and the state was unable to make the move.
Danny Crichton:
I have two comments to think about. One is, obviously you brought up Robert Moses in the context of the book. He has a multi-chapter sequence in The Power Broker focused on East Tremont, this neighborhood up in the Bronx, which was eviscerated in the Cross Bronx Expressway that Robert Moses built. And one of the arguments he really makes, and it's the part that was excerpted in The New Yorker, it's one of the most famous parts of the book, is the human cost of this construction, that most of these people were not given any compensation. They were essentially forced out. They lost access to their homes, neighborhoods were obliterated, and families were dispersed. And in many cases, he follows up 10, 15, 20 years later and then finds, look, none of these people really recovered. They were financially kind of wiped out. I do think it's interesting that in a country in which eminent domain is built into the Fifth Amendment, we have a mechanism in the constitution, Kelo V. New Haven or New Haven V. Kelo. I'm not a lawyer, I don't remember these things.
Dan Wang:
New London.
Danny Crichton:
New London. There you go. Someone who knows and fact-checks me live on the podcast. New London famously argued, the Supreme Court argued that the state can appropriate land under eminent domain just for the benefit of better taxes, because the property can be used better almost in a Georgian-like way. I believe in the context it was building out some sort of biotech hub, and there were residents there and it was like, look, we're going to make more property taxes from this. We have a state incentive to do that. And they can do a taking. Now, since then, I believe that was like '05, roughly, most states have put in extreme protections around eminent domain that makes it almost impossible.
When you look at the California High-Speed Rail, yes, there are these diversions that are very political that are going through mountains that do add costs. There are real trade-offs there, but the bulk of it is an eminent domain problem, which is trains have to be straight. You have property that's in the way. And there's no mechanism to say, well, you are a farmer, you have 10,000 acres. We need four of them in order to get the train through your property. Sorry, but we need to take it. And you're going to be equally compensated at a fair rate, but you can't hold up this train chicken-style straight out of game theory. Why has there not been a response in eminent domain? Are people just not willing to say, look, there's a real value to this and there's a way to recover from it?
Dan Wang:
Well, Kelo versus New London was one of these emblematic cases that I think consolidated the power of the very contemporary lawyerly society. I think it is a good question, and I want to go back to my maxims that there is no way to build anything without harming someone, with harm broadly defined. And yet I think we need to have a physically dynamic society that is capable of building something at all. And I wonder whether it was really the case that these people who were expropriated by Robert Moses to build the Cross Bronx Expressway, were they really unable to make a living? I remember the One Mile chapter very vividly because it is one of Robert Caro's best chapters. But America is a dynamic land. Many people have entered New York City through Ellis Island and then made their way onwards into the wonderful pastures of the American Midwest.
Was it really the case that some people lost their homes in New York and really could never recover for a long while? Maybe it was the case, but American mobility used to be much higher than it is today. And I also think that many other countries build much better infrastructure than the United States does. As you mentioned, Spain is able to build at one-eighth cost of the United States, or maybe just New York. Why don't we get to Spain? Why don't we get to Denmark? As Fukuyama might say, why don't we get to Japan? These are places that are not known for trampling through a lot of human rights issues, and yet they are able to build necessary infrastructure at pretty good cost and speed. And so I think I would, myself, resist the idea that every bit of eminent domain has hurt quite a lot of people. I think there is a judicious use of eminent domain, and maybe we do need to overcome some of these fears of Kelo versus New London and have a bit more of a rational discussion about this.
Danny Crichton:
At the end of the book, you talk about Sunset Park as an exemplar of a community in southwest Brooklyn, immigrant community for decades. Was harmed through an expressway and construction project, a Moses Expressway, but had resilience. It actually rebuilt. It actually is a vibrant neighborhood today. It's a very desirable neighborhood. Many people want to be there. It is going to go through, if it hasn't already gone through, a serious gentrification process over the next years. Why does that work? Why are some communities able to rebuild and go through that, whereas others like East Tremont have not?
Dan Wang:
Yeah. I wonder if East Tremont now has at all recovered? Have you been there? What is it like?
Danny Crichton:
I have not been there.
Dan Wang:
I think maybe we need to send Robert Caro to do a little bit more of a follow-up-
Danny Crichton:
Yeah, when he finishes the fifth book.
Dan Wang:
Yes, yes.
Danny Crichton:
And he's 88 years old.
Dan Wang:
We so much for Caro to do. God bless. I think that One Mile is one of the most famous chapters in The Power Broker. And the other one that spoke even more vividly to me is Sunset Park. And Sunset Park is, for me, kind of an ideal society that I want to resettle my parents in because it is this highly diverse neighborhood made up of, at the moment now, mostly Latino immigrants as well as Asian immigrants. It used to be dock workers from Norway, Finland, the rest of Europe that populated Sunset Park, people who are working through the harbors. And in one of these very vivid phrases from Robert Caro, he said that Robert Moses, quote, "Tore the heart out of the community by situating the Gowanus Expressway through Sunset Park."
And if you take a look and walk around Sunset Park today, yes, the Gowanus Expressway is a very big thing, this hulking highway elevated that is going through, I believe Second Avenue. But just walk through a few avenues to the east of the Gowanus Expressway, fourth, fifth, and sixth, I think are very vibrant places. There you will see these very vibrant Latino shops. You'll see these very vibrant Asian shops. And it sounds, as you're saying, Danny, that the hipsters have found Sunset Park and maybe they're setting up more cafes there as well. And this is, again, where I am pretty skeptical of this case that a single infrastructure project was able to do something as violent as tearing the heart out of a community. I think that communities are robust and resilient things. They do have the ability to move around and recover.
Something that I think Robert Moses doesn't talk enough about are these broader macro trends that are a little bit more difficult for our journalists to do reporting on. So what about this broad trend of manufacturing workers leaving New York City? Well, that's not really something that we hear much about in The Power Broker. What about this broad trend of immigration into New York City? New York City has been very consistently sustained by waves and waves of immigration. And it just doesn't quite make sense that because we put a highway through a very desirable area, Sunset Park has not only the actual park, Sunset Park itself, but it is also pretty close to Prospect Park. Through the subways, there are some parts where the express trains go through a couple of these hubs and bring you to Midtown fairly easily. Should we really not expect that a highly desirable place would remain unpopulated for very long?
And I think this is where this gets to kind of the heart of the problem with The Power Broker book, which is that Robert Caro wrote as a foregone conclusion, Robert Moses and the Fall of New York, that New York City would fall. And here we are sitting in New York, we're pretty close to Union Square, we're pretty close to the Flatiron Building, and New York is, for the most part, thriving. There's a lot of people who would still want to move here, and I just don't think that we could be so reductive as to think that one highway really destroyed, can destroy, a community writ large.
Danny Crichton:
I think there's a couple of things I think about. One is we had Yoni Applebaum a couple of weeks ago for his book, Stuck. And Americans are stuck and people aren't migrating. People are very fixed where they want to be. And you wish there was more of a Simone Veil rootedness that was sort of driving them, but in many cases, economic, many cases, just a lack of adventure, and a desire to hold onto what we already have as opposed to taking a risk in a gamble and moving onto something else. I also think about a book called Tokyology, which I don't think I've ever mentioned on the podcast, but a book from an architectural firm focused on Japan and Tokyo specifically, that looks at yokucho alleys and these sort of drinking alleys. One of the things that they've really focuses on is actually what people have done around train lines that go through Tokyo.
Because the equivalent in many ways to our highways and expressways are these massive train lines that go through the heart of Shinjuku and Shibuya. And people have actually taken advantages. They actually build housing underneath them. There are businesses alongside them. They start quite ugly, and in fact, they are turned into these really beautiful, functional, utilitarian spaces where the community actually centers themselves around these places that are otherwise considered polluting. I also think about that in the context of the EV transition, that as we move to more and more cars, the pollution around highways and expressways, the kind of undesirable elements may go away. There's still the tires and the rubber particles that are coming off of them, but nonetheless, there's stuff you can do with this. These are constraints you can work with.
And on your last point there about different neighborhoods, look, you look at Williamsburg as a neighborhood, it became popular with the hipster community in the '90s, early 2000's, got upzoned by Bloomberg in '05, and over the last 20 years has expanded dramatically to the pristine-ing Louis Vuitton and Hermes fashion district of Brooklyn. And that was a 20-year process, but this was 2005. And this is, to be clear for those who are not in New York, a part of the city, that you can go from Williamsburg to Union Square in five minutes on the subway. You can go to the heart of Manhattan in literally under 10 minutes consistently in a very reliable way. In Boston, you had Seaport, which is next to South Station across the river there. I used to live in the Seaport. This was a completely unused patch of land in the center of the city. You can walk to downtown in 10 minutes.
And for a while it was just a complete wasteland. And even when I lived there, there was only a small park called Four Point, which is the closest park. The rest of the entire land was completely unused and undeveloped. And so it's one of those completely wild and crazy things to me in the US, and maybe this is just part and parcel with the entire book's thesis of, look at how much engineering we could be doing, look at how much housing could just be... Not in a suburb that's five rings out. There is so much to be done in infill right in places that are already super valuable, and if we could just catalyze those projects and get them underway, how much value could be created very, very fast.
Dan Wang:
Japan is supposed to have cemented something like 97% of the Tokyo sea line. And so, too much of the Tokyo's harbor has been lay overlaid in cement, and so maybe we can totally agree that 93%, 97%, that is the wrong ratio. But let's get maybe a little bit higher than whatever it is with New York now. I think Boston, New York, there's plenty of places that desperately need all sorts of housing or infrastructure, and I think we can make some use of that.
Danny Crichton:
And same with Tokyology. One of the things I did not know is Tokyo was known as the City of Canals. It was sort of a Venice 400 years ago. There are dozens of rivers that are all throughout Tokyo, all of which have been paved over in the post-war period of time. And when you look at the original map, you're just sort of shocked of like, wow, this was all here. That's probably the wrong ratio. But I'll end on one thing, which is towards the end of the book and kind of prognosticating forward, you have this, I believe that the ratio is 70 to 30% around Xi Jinping, the current Chinese president, that he's 70% right, 30% wrong. In an engineering state where you have this sort of authoritarianism, you're sort of isolated from news, isolated from feedback shocks, the 30% can be extremely harmful when things go wrong because the policies are being enacted fully without any sort of due process.
In the United States, I would say that the ratio is not 70/30, but probably lower than that. But nonetheless, obviously pros and cons to both countries. You in the book, on a weird kind of somber-ish optimistic note, I don't know all the adjectives I'll throw into this, maybe there's some magic word in some language I don't know, but you sort of end with the, the governance seems to be declining in both countries. We're getting worse data. Just recently we had the Bureau of Labor Statistics director fired. We have a new BLS director coming in who says they're going to fry the data in order to make the numbers look good, in line with what's happened to companies over in China. A lot of data providers no longer give data. The central government doesn't give data. No one's allowed to have any kind of knowledge of what's going on in the macro environment going on over there.
At the same time, there's this insularity that's joining in the White House, in Tienanmen that's narrowing the perspectives of both leaders. And quite frankly, they're both aging. They're getting older. Trump is crossing the 80 threshold. Xi Jinping obviously has gone past his retirement age of 65 and is sort of breaking precedent on how old he is getting within the CCP system. Nonetheless, you have just a smidgen of optimism there. How do you combine this all together? It seems like a lot of things are going wrong in both directions, in both countries, but you still kind of remain optimist. How do you reconcile the two?
Dan Wang:
Well, Danny, I am somber because I am Canadian, but I'm also optimistic because I'm a Californian. I think that is how I try to reconcile a lot of these things. And I wonder, if we're tossing adjectives around, maybe there's a dark magnificence around both the United States and China right now. You're absolutely right that I am still broadly optimistic about both of these countries, and that has been reinforced over the last couple of months after I submitted my manuscript. But I just came out of two months of hanging out in Europe, and partly to visit family and partly just chill out in Copenhagen and Denmark. And there's all these wonderful things to say about these mausoleum economies, but generally, Europe has so much great food and great art and all the rest that we know about.
But there is this very strong sense that I feel that these countries are not going to change and these countries very much need change. Europe is now being actively deindustrialized by China. Its companies are under some sort of competitive threat with the United States. When I was in Denmark, the stock of its biggest company, Novo Nordisk, fell by about 30%, in part because of competition with Indiana-based Eli Lilly. And there's also the fear that right populist parties is going to overwhelm the political system because they're out-polling everyone else. And so these countries, maybe you can toss Japan into this mix as well, they really need new economic models. They really need new political models. And yet, I think they're incapable of change.
And for all of the reasons that I've already stated, I'm very skeptical of the Trump administration. I think overwhelmingly he's doing bad things to the United States. Trump himself represents this sort of dynamic spirit in which Trump is allowing a lot of questions to be asked. And I think his answers are universally wrong. But it is important to ask these sort of questions, because Germany should frankly be asking more of these questions. The US has some of this pluralism. It has sort of this disruptive dynamic energy, in which I think it is probably more plausible to expect that it would change more quickly than Germany can. And same goes with China. We can't take a look at the history of China over the last, call it 50 years, to see these transitions between Mao and Deng and now Xi Jinping, and say that this country is incapable of dramatic shifts.
The engineering state is capable of very dramatic shifts. Holding on super tight onto Zero-COVID before completely abandoning it at a stroke, and you can see this with reversals of the one child policy that have swerved into encouraging all women to have two or maybe even three kids as well. And China is led by this Leninist organization that is very intent on modernizing the population by hook or by crook. That is a lot of why Xi Jinping gets up every day. And the US has a little bit of this pluralistic dynamic energy that is much more evident if we contrast it between Europe and Japan. And so ultimately, I feel like both societies are capable of changing, and what we need is to turn that dark magnificence into bright magnificence. What do you think, Danny?
Danny Crichton:
I'm always dark. And as folks who have listened to the podcast a long, long time, I generally am very cynical. We're living in a cynical time, and I think even your own six-year experience in China has taken you from the dynamism of a Shanghai early on, the extreme intellectual business, cultural vibe, to what it is today. I have not been there, but it is supposedly a shell of what its former self due to the Zero-COVID and some of the damage from it. The US is clearly going the wrong direction. But I do agree with you that whole new questions are being opened up, and I particularly, to younger people than myself who are less jaded and are very excited, I say, look, there are questions around antitrust, there are questions around economics, there are questions around the court system that have not been asked in decades. And in that way, I don't think we see answers that are the right viable ones, particularly for the United States.
But to your point, this is the most intellectually-rich fertile period of time. And for those of us who are at least engaged in those issues, it's a really exciting time to be here.
Dan Wang:
Exciting indeed.
Danny Crichton:
Dan Wang, author of Breakneck: China's Quest to Engineer the Future, thank you so much for joining us.
Dan Wang:
Thank you very much, Danny.