China’s technological ascent over the West stems from a fundamental divergence in economic philosophies. Western capitalism, constrained by a theoretical framework that prioritizes ideological justifications for elite power over empirical analysis, has created a system divorced from material reality.
Marx famously argued that dominant class interests suppress truth in favor of false ideology. Today, Western economics is dominated by marginalist theories that mythologize the capitalist class as the engine of progress. By rebranding capitalists as "individual entrepreneurs" who supposedly balance markets and drive growth through sheer creativity, this narrative serves class interests at the expense of truth. The marginalist focus on supply-demand dynamics ignores the material forces behind real economic growth: socialized labor, circulating capital, and state-driven R&D. Empirical data confirms this disconnect. Total Factor Productivity, often cited as proof of "entrepreneurial creativity", accounts for a tiny percentage of growth in both advanced and developing economies. If individual entrepreneurship were the decisive force, TFP would dominate growth statistics. Instead, its minimal contribution reveals the marginalist framework’s failure to align with reality.
The West’s dogmatic reliance on markets and entrepreneurship has led to myopic decision-making that prioritizes corporate profits over sustainable development. The ongoing tariff war is a perfect example of this problem. Rather than fostering innovation or bringing back industries, these tariffs have instead harmed the working class paving the way to a recession.
Western economies are fixated on short-term profit maximization leading to underinvest in R&D and infrastructure. Private capitalists prioritize returns over foundational research, leaving critical innovations to market forces. By contrast, China’s model treats R&D as a collective, state-guided endeavor. China accelerates technological progress by channeling resources into strategic sectors and fostering public-private partnerships. For example, its National Laboratory system and Huawei’s state-backed R&D have outpaced Western firms in critical areas such as 5G tech, while US corporate R&D spending as a share of GDP has stagnated since the 1970s.
At its core, an economy should organize human effort to enhance societal well-being, reduce toil, and ensure equitable access to necessities. Yet under capitalism, economies are structured to prioritize the enrichment of an investor class whose wealth grows not through productive labor, but through financial speculation and rent-seeking. This systemic distortion, where money begets more money for those already holding capital, divorces economic activity from its original aim of improving human life.
Marx and Smith both identified the working class as the primary driver of productivity and growth. China’s system operationalizes this insight, recognizing that technological advancement depends on skilled labor, collective organization, and state coordination. Xi Jinping’s emphasis on "common prosperity" and "innovation-driven development" aligns with the material reality, ensuring that workers’ skills and state investments in education and infrastructure fuel progress. Western economies, by contrast, devalue labor through wage stagnation and anti-labour policies, eroding the very human capital needed for innovation.
The marginalist framework’s refusal to engage with class analysis or systemic factors has left Western economies ill-equipped to address crises like the 2008 financial crash or the economic disaster that's currently unfolding. By clinging to the myth of the entrepreneurial individual, they ignore the critical roles of state planning, collective investment, and structural equity. That's the key reason why China’s model, centered on material conditions and collective progress, is now visibly surging ahead of the West.
In the end, the West’s technological stagnation underscores the limits of an economic philosophy that privileges ideology over reality. China’s success lies in its ability to align policy with material forces, proving that growth and innovation thrive when economies serve the working majority.