Ends meet: Carl B. Frey’s “How Progress Ends”
What does it mean to argue that both the US and China are in decline?
About six weeks ago I reviewed Dan Wang’s Breakneck, the Gavekal analyst’s take on the China-US duo and what ails them. What made Wang’s book so readable was his posturing China as the engineering state and America as a state of lawyers and regulation, and he concluded that each could use a little less of their own obsession and borrow more from the other.
But what can be a useful framework for difficult questions risks becoming glib, and that’s what I fear happened in Wang’s book, as I argued in my review.
Having now read Carl Benedikt Frey’s How Progress Ends: Technology, Innovation, and the Fate of Nations, I feel even more confident in my take. Frey is an economist and economic historian, as well as a professor of AI and Work at Oxford. It is his deeply researched base in history that reveals complex and seemingly contradictory trends to arrive at an understanding of what we face today.
I also find in his work a synthesis of arguments about American technology, innovation, and prosperity or its lack. J. Storrs Hall has argued, in Where Is My Flying Car?, that US government funding and regulation has distorted and undercut American innovation over the past fifty years. Others such as Daron Acemoglu (with various co-authors) find laissez-faire Reagonomics laid the foundations for decline and technological usurpation by malignant oligarchies. Which is it?
Frey takes his argument to the technological frontier, finding the institutional structures that propelled both the US and China to dominance now function as barriers to further progress.
Different institutional arrangements are optimized for different stages of technological and economic development. Centralized bureaucratic management, Frey argues, is highly effective in exploiting the low-hanging fruit of available technology, enabling rapid catch-up with leaders when the path forward is clear and established. This pattern is illustrated in the historical trajectories of the Soviet Union, Germany, Japan, and China in their periods of rapid growth: strong states coordinated resources, suppressed dissent, and scaled existing technologies efficiently.
In contrast, decentralized systems excel once a nation reaches the technological frontier. Here, further progress relies on the exploration of new pathways. These involve processes that are inherently uncertain, noisy, and resistant to top-down direction. Modern progress depends on dynamic efficiency, sacrificing some present output for the sake of experimentation and new discovery. This was the secret of British and American leadership during the most productive phases of the Industrial and Computer Revolutions, driven by competitive markets, open intellectual networks, and frequent entry of outsiders.
Decentralization is the fountainhead of innovation when the next leap is unknown. Frey traces how the collapse of centralized structures in Europe – the end of the Roman Empire – produced fragmented state systems. Political divisions fostered experimentation, rivalry, and competition, not only among states but within them, as cities, guilds, and universities jostled for primacy, fueling both technological and institutional innovation. One of the best parts of Frey’s analysis concerns decentralization among Chinese provinces, which under Qing or Communist rule have operated with suitable latitude that, at times, has allowed for experimentation—although this has its limits.
In contrast, China’s early technological leadership in the Tang and Song dynasties was linked to its highly centralized state; breakthroughs were state-driven and incremental, serving royal priorities. The Chinese bureaucracy’s quest for impersonal meritocracy paradoxically stifled grassroots initiative and diversity of thought. Without constraints on state power, order and stability were prioritized over discovery, and intellectual autonomy was sacrificed for scale and administrative uniformity. Institutional inertia became a barrier to experimentation and adaptation, which is crucial once the backlog of imported technology diminishes, made worse by China’s lack of a strong framework for private property and contracts and over-reliance on personal patronage and state interest.
So again, which is it: China as a place of exploration and technological advancement, or a misbegotten tyranny? The answer depends on both the degree to which China is playing catch-up (low-hanging fruit) and the variable of administrative competence.
Frey documents examples of how top-down, centralized states have enabled astonishing acts of economic growth and technological catch-up. Indeed, catch-up growth depends heavily on the state’s bureaucratic capacity and the willingness to override vested interests in favor of technical virility. Frey highlights Prussia, Meiji Japan, and postwar France as exemplary cases where reformist, competency-oriented bureaucracies channeled resources, repressed traditional elites, and orchestrated technology transfer and industrial take-off. But even these success stories turn into stories of stagnation, once the low-hanging fruit has been plucked. Then these same institutions become conservative guardians of the status quo.
Importantly, Frey observes that postwar Europe and East Asia enjoyed explosive growth not because of homegrown innovation, but because they could copy, adapt, and absorb American advances across mass production, management, and infrastructure. This was even true of the Soviet Union. The US, by contrast, produced the technological breakthroughs others absorbed. Frey’s argument is that over the past few decades, American institutions have become captured by incumbents and bureaucratic inertia.
When does this tipping point become apparent? A powerful bureaucracy can facilitate catch-up, but only if it is meritocratic, adaptable, and insulated from rent-seeking interests. When it becomes an entrenched patronage system or is redirected toward repression, it turns into a barrier to creative destruction.
Today, Frey argues, both China and the US suffer from a bureaucratic sclerosis. In the US, special interests and captured regulators have raised entry barriers for new innovators, eroded dynamism, and tilted regulation in favor of entrenched giants. In China, the Party’s unchecked power, suppression of legal counterweights, and renewed centralization under Xi have undermined the capacity for local experimentation and co-opted successful private entrepreneurs into party structures.
This rhymes with Dan Wang’s “engineers versus lawyers” narrative, but it is rooted in much deeper and global trends. Wang sees China and the US as “bizarre” nations that are unlike other states. Frey puts both of them in a global and historical context. They are neither bizarre nor aberrations, which means they can be analyzed if you have the right tools.
So what does it mean if both China and the US are stagnating?
Silicon Valley’s historic vitality came from openness, horizontal movement of talent, weak ties to established industries, and robust antitrust enforcement that broke up monopolies and enabled new entry. But American institutions have recalibrated toward protecting incumbent interests and consolidating power, at the expense of openness and competition.
China today, despite impressive scale in low-cost manufacturing, faces challenges in shifting from incremental improvement (catch-up) to fundamental scientific breakthrough, constrained by top-down control, legal uncertainty, and the dominance of state-linked incumbents. Corporate lobbying and the quiet erosion of antitrust have allowed large firms to entrench themselves, raising entry barriers for start-ups and concentrating innovation in fewer hands. I also sense that Chinese decision-makers are quite happy to adapt and scale technologies such as AI for purposes of state power, at the expense of consumerism and economic dynamism; it is too soon to know what roads are not being taken because the state dominates technological budgets.
Similar distortions are happening in America, too. Reading Frey provides a smarter way to think about current politicking about the American obsession with the “China threat” and how it has led to massive intervention in the economy, from Biden’s industrial policy to Trump’s anti-market meddling from tariffs to subsidies to price controls. The AI industry is the legacy Big Tech industry’s best example of manipulating public sentiment – and the public purse – to protect incumbents in the dubious name of national security. The vested interests of the US AI industry is also now completely leveraged against a single bet, on hyperscaling large-language models, to the detriment of other lines of AI-related research, let alone major investments in other types of technology.
Meanwhile in China, bureaucratic centralization and Party dominance, while facilitating earlier spectacular catch-up and technological absorption, now obstructs breakthrough innovation. Academic autonomy is suppressed, foreign ties are severed, and anti-monopoly acts are wielded against challengers who threaten party lines rather than to protect competition for its own sake. The mass expansion of patents, often of little value, reflects a focus on quantitative targets and scale rather than qualitative leaps.
Both nations, in Frey’s view, now invest heavily in surveillance, AI-driven optimization, and bureaucratic control, aiming to plan or manage economic activity at scale. But such strategies, while suited for harvesting known technologies or suppressing dissent, inherently limit the spontaneous experimentation needed for true progress. He cautions that “technologies that strengthen bureaucratic control later hinder new discoveries and sow the seeds for stagnation,” echoing the fate of previous empires that consumed their own institutional foundations.
Extrapolating from Frey’s book, one view is that when we talk about both China and the US in decline, it doesn’t mean someone else will surpass them. It’s unlikely that an India, a Brazil, or a Germany will assemble the necessary components for a homegrown innovation cluster that drives the rest of the world. At least, not in my professional lifetime. Rather it means a general degradation of growth and productivity. The rest of the world will still play catch-up, from AI to electric vehicles to quantum computing, but the technological frontier has closed in, and there is increasingly less fruit to pluck, whether it hangs high or low. I believe this is what informs the book’s downcast title.
Stagnation is not inevitable, of course. The US in particular has a track record of reinvention, and perhaps the next generation will regain some of that American mojo. But this requires the rekindling of institutions that allow genuine competition, openness, and the freedom to experiment, and I don’t see that in today’s politics. Without this, both China and the US may remain locked in a race of scale and iteration, unable to break new ground.
Frey, Carl Benedikt, How Progress Ends: Technology, Innovation, and the Fate of Nations, Princeton University Press, 2025.