Breakneck - Hegelian Engineering
A review of Dan Wang's recent book on China. I think engineering is important, but I think they might also just do capitalism better.
Breakneck: China’s Quest to Engineer the Future
By: Dan Wang
Published: 2025
288 Pages
Briefly, what is this book about?
The rise of China’s immense manufacturing prowess, where it comes from (a culture of engineering according to Want), and where it might be going.
What’s the author’s angle?
Wang has been putting out a well regarded annual letter on China for many years now. This is a distillation of his thoughts in book form. Also he has Chinese parents who often regret leaving China when they did.
Who should read this book?
If you’re at all interested in what’s happening with China you should absolutely read this book.
Specific thoughts: Which theory of China is correct?
This book has gotten a lot of coverage. It’s been reviewed by The Economist, The Wall Street Journal and the Financial Times, along with numerous blogs. Wang has been on numerous podcasts. It’s hard to talk about China without referencing Breakneck, and we talk a lot about China. Given all of this I’d be surprised if you hadn’t heard of Wang or his book. If you have, then you’re familiar with the basic thesis. China is a nation of engineers, while America is a nation of lawyers. Given that you’re very likely to have already seen a discussion on this dichotomy, and that I’m publishing a post tomorrow that explores it more generally. I thought I’d head in a different direction with this review.
I don’t claim to be an expert on China, but I have read quite a few books on China, and from that reading I’ve been collecting China paradigms—ways of understanding Chinese behavior, their manner of operation, their motivations, etc. On top of that I’ve also been collecting strategies for how to engage with China. I don’t have the time to go into every paradigm or every strategy.1 Plus it would be weird to spend 90% of this book review talking about other book reviews. But I thought I’d preview a couple to give you an idea of the space we’re talking about.
One of the first paradigm’s I came across was from a book called What’s Wrong With China by Paul Midler. (See my discussion here.) Midler is a Mandarin speaker who spent decades living and working in China as a manufacturing liaison for western firms.. Most accounts of China are pretty high level. Not Midler’s, he really takes you into the belly of the beast, which I appreciated. As far as paradigms go, Midler points out that the Chinese have a very cyclical view of history. As opposed to the western view of continual progress, the Chinese know deep in their bones that the good times are not going to last. And when they do inevitably end, the Communists want to hold on to power. They do this through having lots of great achievements. The chief of which would be reunifying with Taiwan. Under this paradigm most of what the Chinese leadership does can be viewed as desperate attempts to get while the getting is good.
One of my favorite paradigms, because I came up with it myself, is the idea that China is a Hegelian synthesis of authoritarianism and market capitalism. There’s a long backstory involving Francis Fukuyama and his book The End of History and the Last Man. Fukuyama is Hegelian but thinks there is no governmental synthesis left after liberal democracy, that it is the final form of government. Given his Hegelian background I’m not sure why he won’t entertain the idea that China could be one step farther along the path. Also, I think this combination can be a pretty good description of China without necessarily implying that China is somehow more advanced than the US or other liberal democracies.
Having now given you a flavor of the sorts of things I’m talking about, let’s turn to the book. I think the book covers a lot of great ground, but that the central lawyers vs. engineers thesis, only partially explains what’s going on. I think the key difference between the US and China is not the level of engineering, but the level of capitalism.2 I would argue that in the deepest sense, China is just more of a capitalist country than the US. This seems a strange assertion to make about an authoritarian, ostensibly communist, centrally managed state, but stay with me for a second.
You may recall this quote from my review of Apple in China:
There was a bunch of stuff that we at Apple were very used to doing, that just didn’t work anymore. Like, we’re very fond of making custom fastening hardware, custom screws— you know, little nuts and stuff like that. Well, in China, if you’re building and it’s like, “Oh, shit, the screw is too short,” and like, “I need a longer one,” you call someone on a cellphone and 1,000 are at the factory tomorrow. That was not a thing in Texas. It would take two months. It was absurd.
That’s pretty hardcore capitalism. And this sort of manic wheeling and dealing isn’t a recent phenomenon. The Chinese had paper money (in the 1020s AD) centuries before the West had the printing press. So they’ve been doing it for a long time and they’re good at it. Note the economic dominance of the Chinese in Malaysia.
Still there is a lot of central planning, which does not jibe well with capitalism. Closely related there’s significant industrial policy (government support of industries) which also is pretty anti-capitalist. How do we square these things?
This is the insight I had, not from this book—though it did offer some counter examples which I’ll get to in a second—but from the discussion the book engendered.
The Chinese do industrial policy differently than the US. The most recent example we have of industrial policy in the US is the government taking a 10% stake in Intel. We picked a single national champion and decided to prop it up. China offers support to dozens of companies but then culls them through Darwinian struggle. Additionally there’s a large element of federalism to this project. Each province is competing with other provinces for money and attention, in large part because the leaders of these provinces are competing for power within the communist party. This competition ends up producing outcomes that are virtually indistinguishable from a well functioning market. One that functions better than our own.
This works well when you’re developing an industry. It’s unclear what happens as these industries mature. China currently has 130 some odd electric car companies. Obviously some of these companies are going to do better than others, there will be bankruptcies, acquisitions, mergers, etc. Will there eventually only be three or four companies? What happens then? Industrial policy and federalism work a lot differently when there are three companies as opposed to 130. Does Darwinian competition turn into state ownership once the number of companies is small enough?
Should this happen it would probably be disastrous, and here we finally return to the book. Wang makes it clear that central authoritarian decision making, when it’s not encouraging competition, can end up being disastrous. A point left out of most of the coverage. The book has a chapter on the One Child policy and a chapter on the draconian Chinese COVID lockdowns.3 He points to them as examples of engineering gone bad. And indeed a certain amount of naive “we’ll just turn some dials” engineering went into both, but also neither of them would have or could have happened if not for the centralized authoritarianism of the state.
All of which is to say, engineering is a part of the story. But I think an unusual form of capitalism is in there as well. Our own capitalist economy has developed some interesting quirks as it’s matured. What sort of quirks will Chinese communism develop as it matures? Will it be a Hegelian triumph or will it mark the end of yet another historical cycle?
“Hegelian Triumph” feels like a great name for a Marxist hard rock band. And of course “We Are Not Saved” could be a great industrial nihilist band. I am neither Marxist nor nihilist, I just inadvertently come up with great band names. If that’s the kind of thing you want to see more of, consider subscribing.
There are a LOT! For those that want a taste here’s a smattering of them: Peter Zeihan on geography. Chris Miller on computer chips, Newt Gingrich on tariffs, Stein Ringen on China as a pre-fascist society. Samuel Huntington and the Clash of Civilizations. (No, I’m not going to link to all of them. You’re a big boy you can search my blog yourself.)
I’m actually not sure if “capitalism” is the right word, or if it’s better to use the term “competition”.
Out of seven chapters there are the two I mentioned covering “engineering” failures, and two that paint a mixed picture of China’s attempt to “engineer” things.
I think the Chinese perspective is less 'good times won't last' and more a sense of continuity. In contrast the West is obsessed with revolutions, resets, the fall of empires etc. Zombie apocalypses and such are a sign of what to them may seem like a very childish impulse to imagine the world of 'grownups' can be swept away so the story can center on the survivor and they can do whatever they want. Even Western faiths like Christianity can only go a few centuries at best before someone decides they need to be reinvented (or 'rediscovered').
The theme in other words is the west is obsessed with imaging the Fall of Rome is about to happen again every other year while China's perspective may be more "we had writing for thousands of years and we're going to have it thousands of more. Things will change but operating from "let's reset back to the Garden of Eden" is a nonstarter".
Do I think this offers any insight into current incentives to explain the US and Chinese geopolitics? Probably not other than to say maybe they remember a bit too much and we remember a bit to little.
The model described of competition with selection mirrors Joe Studwell's book "How Asia Works", which was about the Asian tigers rather than China. They followed a model where:
1. Land reform broke up large holdings by 'lords' to give to individual peasants. This:
a. increased food yield (the amount of food you can grow on land is proportionate to the labor you put into it. Peasants who own a small plot get all the rewards from getting as much as possible out of it to sell).
b. Relieved pressure on rural areas to send their sons to the city, where they become more to feed.
2. Industrial policy had gov't rewarding industry with loans and grants but it was conditioned on the firm's success in export markets. That acted as a check on political favoritism. The son of a high ranking official may get a loan to start a car company but that wouldn't make Americans and Europeans want to buy his products unless they were good.
3. Capital controls limited the ability for profits to be invested or spent abroad so investment in cities and real estate would expand the ability for rural areas to migrate into urban ones without creating mass slums or problems of famine.
What strikes me here is that this is not very much in line with what would be viewed as old school socialism (gov't running the factories) or the newer old school definition of socialism (a strong social safety net). Nor is it quite the free market, free trade ideology the IMF loved in the 90's and early 00's.