Carl Benedikt Frey
In Washington today, a familiar anxiety hangs in the air. American policymakers fear that China will leapfrog the United States in the technologies that matter most, including robotics and artificial intelligence. The United States has been here before, in the 1980s. Then, the specter wasn’t Beijing but Tokyo. Best-selling books such as Japan as Number One warned of Japanese dominance. The PBS series Frontline aired the documentary “Losing the War to Japan.” Silicon Valley looked spent after U.S. producers exited the market for memory chips such as DRAM. Detroit, humbled by the Japanese carmaker Toyota’s lean production, seemed a cautionary tale. Japan’s grip on automobiles and consumer electronics appeared unshakable.
But by 1995, when the information technology boom finally showed up in productivity statistics, the United States had pulled decisively ahead. Forecasts of relative American decline were wrong not because Japan stumbled but because the United States excelled when it mattered at the opening of the computer age. The United States didn’t beat Japan by building tariff walls or propping up national champions. U.S. leadership rested on open competition and the flexibility to rewire supply chains globally as technology shifted—in a word, dynamism.
Today, the Trump administration seems to have forgotten that lesson. Since returning to the presidency, Donald Trump has urged Intel’s chief to resign, demanded a 15 percent remittance to Washington on certain Nvidia and Advanced Micro Devices chip sales to China, and carved out a government “golden share” in U.S. Steel as part of the Japanese company Nippon Steel’s takeover. Such arbitrary, deal-by-deal interventions break with the rules-based approach that kept the United States ahead of Japan.
How the United States outcompeted Japan is more than history: it’s a guide to the China challenge. Tokyo’s economic model looked unbeatable for a time, as Beijing’s does now. But the tools that make U.S. markets more innovative and, in the end, more competitive haven’t changed—and Washington should not discard policies that have worked.
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