I would be willing to bet you that they have no interest in becoming a service economy. The US built its power up by having a mighty manufacturing sector - it's what let us build tanks and planes and all the other instruments of war so well in WWII. Another point to consider is that manufacturing jobs produce many more jobs to support the work than than do jobs in the service industry.

When economies 'de-industrialies' industry does not decline in absolute terms. Just the opposite is true. It's just that we became so damn good at manufacturing that with competition and all that - that we do not need so many people in the factories.

People have reacted to those market pressures and got into services. And so the share of industry went down in relative terms.

> I would be willing to bet you that they have no interest in becoming a service economy.

I completely agree with you. More so, I believe China (and other developing nations) is pursuing a knowledge economy. We were pursuing it too, until neocons like Brooks took over 7 years ago and got us stuck in the middle of the transition.

What is a knowledge economy, exactly? The Wikipedia article (http://en.wikipedia.org/wiki/Knowledge_economy) is a whole bunch of bullshit. Knowledge economy seems contradictory to me, because information is free.

Knowledge is not just information, it's one of those fuzzy humanistic things where cultural practices, ethical frameworks and individual talent allow some individuals to apply information more effectively than others. As an example consider Santiago Calatrava; there are probably several thousand people who know as much or more as he does about the history and engineering principles of building bridges, but he adds unique value to the projects he is given that would be difficult if not impossible for another engineer to duplicate.

The knowledge economy is a bit of a misnomer because by it's very nature knowledge creates multiple measures of value, not all of which can be measured in terms of _valuta_. It's also problematic in that knowledge is embodied in individuals, and while you can build information systems that support it's cultivation in individuals, it is not possible to treat knowledgeable individuals as interchangeable plug-compatible components.

It means an economy based on "knowledge workers" rather than industrial age laborers.

"the second meaning, more frequently used, it refers to the use of knowledge to produce economic benefits."

"A key concept of this sector of economic activity is that knowledge and education (often referred to as "human capital") can be treated as: - A business product, as educational and innovative intellectual products and services can be exported for a high value return. - A productive asset"

Its a fallacy that all knowledge is free. Localized, and application specific knowledge, are definitely not freely available.

Information is definitely not free, my friend. In the long run, yes, the value of information is zero. Yesterday's trade secrets are tomorrow's old news. But in the short run it can be extremely valuable.

Think about Seagate's QA numbers, or their profit margins, or Amazon's official opinion on FIFO warehousing, etc. All "secret" and all fairly worthless if they were leaked. But as they stand that data are vital to their businesses.

Yes, that is all valuable information, but it's a long way from forming the basis of an economy.

Basis? Maybe not. Linchpin? Absolutely.

knowledge != information

It mentions it - indeed it's built around the concept. It's just not corruption in terms of paying off A or B (such as in developing or modern - if you take the extreme view - democracies. It's corruption in terms of A (an academic elite) looking out for it's own interests.

I'm not qualified to judge the accuracy of the perspective. But the argument says a specific type of corruption is there and it's deeply rooted in the social fabric (even as he implies payoffs). If that's not corruption, what would you call it?

Yea, corruption is a big problem. Bribery, or gift giving, is a way of life for many Chinese people. When I was in elementary school, my mom made me bring food over every time I went to a friend's house. I'd show up ready to play Nintendo with a bowl of fried rice. It's part of the culture. It's a problem the Chinese government needs to work on.

BTW, bribery is alive and well in the US too, but it's wide open (suppose to be, anyway) and it's called "lobbying" or "campaign contributions".

I don't know what to call it -- corruption seems to be the best word for now. For our purposes an academic elite is the same as a political party -- it holds political power.

Whatever it is, the problem it presents is that there is not a single amount of predictable payments that can be made to create an economic transaction -- it's all up to the whims of the people who are involved. I guess it's possible to predict to some degree if you know all of the players, but there is no competition for doing it another way without the payments -- the same party owns the game, the tables, and all of the cards. I'm no expert either, but it seems that corruption in the states is of such a lesser degree to be of a different type altogether, at least as far as startups go. Likewise, corruption in some third world countries is so bad to make even the most trivial of enterprises fraught with hidden expenditures.

Here, if I want to make a startup to, say, sell fried chicken on the street corner, I've got 2 or 3 political people to meet and make happy. Now there might be lots of crooks in the local government, but each local government can be of a different political party, as can the state and federal governments. Even in a completely crooked world, that provides incentives for each section of political power to lower corruption, at least in sections controlled by the other guy. You simply do not have that somehow-it-works setup in China. And I think it's going to be a limiting factor in their growth.