Pretty much. All big players (US, EU, China) must maintain domestic strategically important industries (aerospace, energy, semiconductors, telecom, drugs/biotech ...) even with government subsidies.
The goal of strategic investment is to stay as one of the major players in the industry. Being the leader is not necessary, but letting the deep core and knowledge in manufacturing to erode is strategic weakness.
Exactly the opposite happened in Russia and other ex-soviet countries. The factories were sold and dismantled under the pretense of “transitioning to market economy”.
That’s exactly the narrative that was used. I guess that’s why Yeltsin was such a good friend to the west and why he’s despised by many Russians.
I mean, sure, many factories were not competitive since they were highly subsidized and faced no competition on internal market. But USSR had an immense R&D potential and engineering education was top-notch.
Price signals following the soviet collapse were non functioning ( see the current oligarchs ). It’s hard to know how many of these factories could have adapted over a slightly longer time frame or with some slight investment restructuring.
When the price of a corporation falls below their paper assets it tends to attract A certain kind of investor disinterested in long term value. I’d venture a good number of soviet parts suppliers saw their revenues dry up when their clients were dismantled, it wouldn’t have taken more than a few such links in the supply chain being dismantled to break the entire supply chain given the level of centralization.
No. There’s significant evidence that sudden overnight market manipulation (e.g. setting exchange parity to the eastern and western Deutsche Mark destroyed all eastern consumer goods industries, which were bought for symbolic sums and then deliberately shuttered.) it’s obvious that any such fundamentalist and radically liberalist policy would have tore through any economy, but the point was to smother Carthage, and sow salt on its ruins
this graph does not take into the account the massive geopolitical difference between ukraine and poland, especially considering poland had far more possibilities in regards to joining and integrating with western european economies compared to ukraine.
Don't forget that prior the collapse of the USSR, ukraine was not an independant country from russia, while poland has always been "independant" during socialist times.
This is not true, several precision mechanics factories (or parts of factories) in Hungary were producing for Western export and yet they let them rot apart.
Same happened in Latvia where the largest soviet chip maker ALFA was dismatled under silly (but efficient) propaganda premises. It was top notch and had great contracts with US and Russia at the moment. Decades later the retired goverment officials confirmed they were "advised" and said "we did not understand what we were doing very much back then". Of course, they were ex-soviet middle level officials and anti soviet activists who suddenly found themselves in power and needed such advices.
The true reason for those who wonder was the fact that ALFA was making electronics for MiG, Su, Tu and for missiles. I had family and friends working there btw.
Indeed. In my hometown - Gyula, Hungary - there was a precision mechanics factory, for phones, faxes, communication relays called Integra. It wasn't huge, employed a couple of hundreds people. In '89, Olivetti bought it for peanuts to close it down.
This was quite a classic move during the "privatisation" in '89-90.
Some fertiliser plants (Achema for example) still rely on exclusively signed contracts with Russia for buying cheap natural gas (its main cost) aka there’s some underwater influence there.
Most of the time with countries not directly aligned to the west, the preaching is for us to sell our strategic industries in name of liberalism and "economic openness", usually spreading lies and misinformation about the company's efficiency. When it's the other way around, it's protectionism and good old Keynesian economics: China can't buy that company, their 5g is evil etc.
I know this first-hand because it has happened to my country each and every time an US backed president was elect. It's happening right now, they're attempting to sell our only semiconductor company.
The Soviet Union was destroyed from within much the same way the 2010s arab springs/ukraine and more recently also tried with HK.
There is a popular myth that 'there was a mighty USSR and some enemies ruined it'.
The Soviet Union collapsed because of massively broken economy. That's just basic science. They exported oil and imported grain. Russia imported GRAIN for gods sake. Then oil prices collapsed. Next? They did nothing and just ate through the resources until they were no more.
And then 'evil liberals/evil west destroying the great country' happened, when finally USSR had no money to pay for the social obligations and for massive military.
This are the undisputed facts, supported by a vast trove of internal documents from the late USSR and first years of the Russian Federations.
A monograph by Egor Gaidar [1] is an excellent source referencing tons of the original documents.
Sorry for Russian, not sure this is available in English anywhere.
I get that it's easier to think that source of our problems is some evil mastermind and conspiracy. But think of the Occam's razor — this is explained much easier by sheer incompetency and stupidity and no checks and balances to mitigate them.
The truth is in between. Was USSR full of internal problems? Yes. Did USA and allies want USSR destroyed and actively work on? Also yes. Saying that Cold War and the arms race had absolutely no role in USSR collapse is either a blatant lie or incompetence.
Exactly. Had the west not interfered, the USSR would recover from the 80s crisis. Instead, they took advantage of its shortcomings and managed to break up the union: Gorbachev is considered by many Russians a traitor, but he was not the only western investment in toppling the Soviet Union.
Let's remind that full-on opening of the market was not what the west promised, but it's what they pushed for once the reforms passed a point of no return and they wouldn't take "no" for an answer. Propaganda is what won the cold war.
I think you miss a crucial fact here - large part of Soviet block was incorporated by force and wanted to get rid of their influence as fast as possible. Nobody misses USRR here in Poland.
Poland is a weird example since it doesn’t seem like they fit in the EU either, almost like an outcast.
But let’s look at other ex-Soviet countries. Territorial quarrels and dumb nationalism were unthinkable back then. Look at Azerbaijani and Armenians, ethnic Ukrainians and Russians in Ukraine, Georgia...
If only we ("other ex-Soviet countries") could stop our "dumb nationalism" and go back to being nice "little-brother nations", speaking Russian, fighting Western imperialism together somewhere in Afghanistan after being drafted to glorious Red army... Those where the times, comrade!
Or you can compare countries from a similar regions that decided to stick close to Russia (Ukraine and Belarus) vs countries that decided to stick with the West (Poland, Estonia, Lithuania, Latvia).
> Also yes. Saying that Cold War and the arms race had absolutely no role in USSR collapse is either a blatant lie or incompetence.
USSR could've easily continued its existence if it went full "North Korean." Union's army had no problem to force populace to eat grass in case of a complete economic collapse.
I attribute the single most important contribution to Union's collapse to US funding exchange visits for hundreds of USSR's senior officials, and completely nullifying their will to struggle: https://news.ycombinator.com/item?id=24728237
The very same thing has happened to China, and Xi is trying hard to undo it.
His message of absolute committment to, and inreversability of "opening up" don't mean anything to 99% of ordinary citizens.
Whom he addresses these messages to are not ordinary Chines, but elites whom he tries to convince to the best of his abilities to not to drop the ball on him, and the system.
> The Soviet Union collapsed because of massively broken economy.
Which was a direct consequence of surreal levels of corruption, incompetence, and double digit percentages of country's GDP coming, and going out of existence annually as a result.
If anybody are to call names, those would've been the most hardcore brezhneviks themselves.
> They did nothing and just ate through the resources until they were no more.
Those resources they ate through -- when were they accumulated? I find it hard to believe that they became a superpower by just coasting on the wealth that existed in 1917.
You seem to forget that oil became an increasingly important resource. And the USSR had a LOT of oil. Look at how Saudi Arabia, the UAE and Norway developed, and then look at the USSR.
> The economic development achieved by the Soviet Union in the first half of its reign was incredible.
That's a regurgitation of a great lie. Krusev indicated in his memoire that economic data of Stalin's years was defying kindergarden level arithmetics, was utter garbage, and he gave few convincing examples of that, and here, I would believe him.
Union's economy saw few ups, and downs during its existence, and those under Stalin, and Breznev were not ups by any extend of imagination.
Up to 40% of the tanks that fought on the Russian side in these battles were supplied by the British. UK provided a huge amount of war material to the USSR that helped keep it in the war.
I do not think that is true. Maybe 40% of the types of tank.
Some facts from Wikipedia: At the opening of operation Barbarosa the Red Army had four to one advantage over the Nazis in tank numbers.
By 1941 lend lease tanks were 6.5% of Soviet tanks, about a quarter of medium and heavy tanks.
Where do you get "up to 40%" from?
Even if true my point still stands.
According t Alex Nove in 1900 there was not a metal lathe in all of Russia. They could de clinker locomotives, but not make a gear box. By 1941 they were out stripping the Germans.
That is the greatest economic achievement of the twentieth century.
(IMO the Bolsheviks were sadistic psychopaths, but credit where credit is due)
> According t Alex Nove in 1900 there was not a metal lathe in all of Russia. They could de clinker locomotives, but not make a gear box. By 1941 they were out stripping the Germans.
Again, you are regurgitating a myth.
I would not doubt the 4 to 1 outgunning of USSR vs. Germany. Indeed Union's army was incomparably materially superior due to decades long total dedication to military buildup, but that does not preclude the fact the industry was still barely going, and that this material advantage melted like butter within first months of war.
The lie is the Soviets were bad economic managers. They pulled off the most incredible feat in industrialising their economy in less than fifty years, more liek twenty five useful years.
The millions of starved peasants, slaughtered "class enemies", exiled dissidents.... They were there too. Not pretty, not moral, not desirable, but incredible achievement nonetheless.
I am not sure, how in the context of such a system "efficiency" can be measured. But in raw capacity there has never been anything like it until the Chinese in the nineties and naughties with their own millions of starved peasants, slaughtered "class enemies", exiled dissidents....
German army mostly found that Union had more soldiers than they had bullets, and that wehrmacht got to Moscow on the fumes.
The "massive industrial advantage" was nothing not to be expected from the most resource rich country on the planet.
Yet, the country was, by all accounts, from both most staunch communist party sources, and contemporary anticommunists, completely incapable of running during the crisis, and "all in" strategy of manufacturing one gun, one tank, one shell, one plane in massive amounts was a result of desperation, not industrial might.
And what was the alternative? The German’s objective was to literally clear the land out for German settlers. By killing everyone inhabiting those lands. For soviets it was a matter of giving at least some chance of survival to women and children they were trying to protect. Imagine all those soldiers who knew they had to sacrifice their lives.
And you try to reduce their bravery to being “Stalin’s targets”.
But never could make consumer goods. When the economy had to pivot to a consumer lead one, they found that all the economists with different ideas had been shot....
Would be interested in links discussing this, if you know good ones (in English!). Who's the anti-Gaidar one should read to see his opponents point of view?
Sadly I don’t know any serious economist who would oppose him. But yes, he was demonized by state run media in the last years and hence is a controversial figure.
> Airbus is absolutely crushing Boeing in terms of quality. Granted, we are woefully behind on the 'space' part of aerospace
Such a hyperbole statement.
Airbus has the edge in the narrowbody aircraft market, especially A321, while Boeing is plagued by 737 MAX problem.
OTOH Airbus is well behind Boeing in the widebody segment. Boeing had 1,464 787 orders as of Aug 2019, 882 of those had been delivered. Airbus had only sold 913 A350. A380 has been discontinued while Boeing can still count on B748 freighter.
Of course 2020 threw a wrench to the airline industry and it remains to be seen how well it will recover post pandemic. Both Airbus and Boeing are affected deeply.
You conveniently forgot the a330 which is Airbus' most successful widebody.
You are right that for now, Boeing is better in widebodies. But let's see Boeing new aircraft program, because currently Airbus is better prepared for the future.
How much of Huawei's research is done in EU? They have at least three research facilities in Sweden alone. Ericsson does a lot of research in the US. All of these companies are global, so to assign their research to only the country where they're headquartered gets a bit nonsensical.
Huawei’s tech is better per $ because they skipped years of R&D that they didn’t have to price in. I remember when their products included Cisco manuals.
> CERN is anchored to the EU. ITER is anchored to the EU.
Anchored, yeah sure. So you're listing something that isn't in the EU, which is revealing. ITER is entirely irrelevant. It's a pork project that won't result in much. The biggest breakthroughs in fusion will derive from smaller projects, not giant slow-moving projects like ITER. The next 20-30 years of energy generation is wind, natural gas, oil, solar, some hydrogen and nuclear (and primarily only China is brave enough to build that). Fusion will make zero contribution in that time.
> BioNtech made the first breakthrough on a COVID vaccine.
Moderna was just as well positioned as BioNtech, you're more than reaching. Russia and China also have apparently successful vaccines being deployed.
> The EU has many issues, but losing leadership in the sectors you mentioned is not one of them.
That's true in the sense that the EU never had leadership in most fields to begin with.
Fusion research needs a lot of money and resources. I honestly doubt it can be done by a startup. Nuclear fission was done by very well funded military research. It is true that China has licensed basically every nuclear design, but France is still a leader in nuclear fission.
I believe that if startups can keep losing billions each year and go public without ever running a profit, then startups may just as well be able to create a fusion power plant.
> Anchored, yeah sure. So you're listing something that isn't in the EU, which is revealing
It is surrounded by EU
countries, in a country that is a pseudo-EU member. You're reaching.
> ITER is entirely irrelevant. It's a pork project that won't result in much.
Unless you have a seer's eye, these kinds of claims are baseless.
> The next 20-30 years of energy generation is wind, natural gas, oil, solar, some hydrogen and nuclear (and primarily only China is brave enough to build that)
Agreed and a sad state of affairs
> Moderna was just as well positioned as BioNtech
Which makes Moderna a leader too? It doesn't diminish BioNtech's work.
> That's true in the sense that the EU never had leadership in most fields to begin with.
You literally had to ignore multiple points in my parent comment to even be able to make this claim. Revealing..
Edit: not to mention we are commenting under an article that partly concerns ASML..
One might wonder if the EU has leadership capacity to be able to maintain domestic strategically important industries.
Generalising from 40 years of EU history, I have little confidence. The top US and East Asian processor and semiconductor companies all are extremely successful in the marketplace, in addition to consuming government subsidies. Fostering a competitive market has not been the EU's forte. Indeed the EU narrates this funding as a need to address a "market failure" [1]. I feel that this is one-dimensional, bur entirely predictable from the structure of EU decision making.
Just today, at midnight, the EU lost ARM and DeepMind as domestic industries.
I know nVidia bought Arm, but what is about DeepMind being lost as domestic industry?
It raises to prominence after becoming a Google wholly owned subdiary. I have repeated multiple times in other comments that DeepMind's success is at least built on top of Google's tech and capital.
Interesringly, Google's tech infrastructure were blueprinted by a lot of pioneers and two of the most well known are Urs Hozle and Luiz André Barroso both are of Eu descentdent.
There is no evidence that whatever DeepMind did can be done with another EU partner. Or even anyone who is not Google, largely thanks to Larry and Sergey's personal tastes and experience. I doubt Msft or Amazon have the right culture for DeepMind.
The whole alphabet thing was engineered to allow independency. So that, among other things, a more pure research org can work without the ever encroaching of the profit driven hands inside Google. Mind you, DeepMind absolutely put itself above Google, or at least firmly distance itself from Google, GCP once proposed to use DeepMind brand in marketing materials, and was sharply rejected citing "conflicting brand images".
Leadership or "leadership"? EU is full of "leaders", those that self-titled as such.
It lacks motivation, there is no SV in Europe because one cannot pay competitively with SV for top talent when you tax to death. It is a lot easier to become a billionaire from real stuff (not manipulating stock markets or other financial trickeries) in US than in EU, so the smart and motivated in EU move to US; what is left is ... what is left: either less motivated or less smart or less both.
The parent is alluding to the notion that govt investment made for sluggish state owned industries which aim to be second and suck the life out of any domestic competition.
There are a variety of ways to cultivate a domestic industry, govt committees directly investing doesn’t seem like the leading candidate can. Trade barriers and state sponsored industrial partnerships.
The goal of strategic investment is to stay as one of the major players in the industry. Being the leader is not necessary, but letting the deep core and knowledge in manufacturing to erode is strategic weakness.