If you replace "taxes" with more general "investment", it's everywhere. A good example is Amazon that has reworked itself from an online bookstore into a global supplier of everything by ruthlessly reinvesting the profits.
Taxes don't usually work as efficiently because the state is usually a much more sloppy investor. But it's far from hopeless, see DARPA.
If you're looking for periods of high taxes and growing prosperity, 1950s in the US is a popular example. It's not a great example though, because the US was the principal winner of WWII, the only large industrial country relatively unscathed by it.
With the odd story that we paid the price for it in the long term.
This book
https://www.amazon.com/Zero-Sum-Society-Distribution-Possibi...
tells the compelling story that the Mellon family teamed up with the steelworker's union to use protectionism to protect the American steel industry's investments in obsolete open hearth steel furnaces that couldn't compete on a fair market with the basic oxygen furnace process adopted by countries that had their obsolete furnaces blown up. The rest of US industry, such as our car industry, were dragged down by this because they were using expensive and inferior materials. I think this book had a huge impact in terms of convincing policymakers everywhere that tariffs are bad.
Funny the Mellon family went on to further political mischief
https://en.wikipedia.org/wiki/Richard_Mellon_Scaife#Oppositi...
Ha, we gutted our manufacturing base, so if we bring it back it will now be state of the art! Not sure if that will work out for us, but hey their is some precedence.
The dollar became the world's reserve currency because the idea of Bancor lost to it. Thus subjecting the US to the Triffin dilemma which made the US capital markets benefit at the expense of a hugely underappreciated incentive to offshore manufacturing.
You can't onshore manufacturing and have a dollar reserve currency. The only question then is, Are you willing to de-dollarize to bring back manufacturing jobs?
This isn't a rhetorical question if the answer is yes, great, let's get moving. But if the answer is no, sorry, dollarization and its effects will continue to persist.
This is the silver lining in many bad stories: the pendulum will always keep on swinging because at the extremes the advantage flips.
I'll take a look at that story later. I'm curious though, why is US metallurgy consistently top-notch if the processes are inferior? When I use wrenches, bicycle frames, etc from most other countries I have no end of troubles with weld delamination, stress fractures compounding into catastrophic failures, and whatnot, even including enormous wrenches just snapping in half with forces far below what something a tenth the size with American steel could handle.
> I'm curious though, why is US metallurgy consistently top-notch if the processes are inferior?
I really wonder what you're comparing with.
Try some quality surgical steel from Sweden, Japan or Germany and you'll come away impressed. China is still not quite there but they are improving rapidly, Korea is already there and poised to improve further.
Metal buyers all over the globe are turning away from the US because of the effects of the silly tariffs but they were not going there because the quality, but because of the price.
The US could easily catch up if they wanted to but the domestic market just isn't large enough.
And as for actual metallurgy knowledge I think russia still has an edge, they always were good when it came down to materials science, though they're sacrificing all of that now for very little gain.
Also those old open hearth furnaces are long gone, see
https://www.youtube.com/watch?v=BHnJp0oyOxs
There are people making top quality steel in the US today by modern methods but it wasn't like the new replaced the old, the old mostly disappeared and we got a little bit of the new.
Yes, I should have been more clear there: they could catch up in volume but it will require a different mindset if they want to become a net exporter of such items.
To add a meta contribution to yours using anecdotes:
US pipeline for metallurgical R&D broken (by financial/cultural incentives)
This guy studied metallurgy in Carleton U, Canada, switched to CS, founded YC, emotionalized the decision
https://news.ycombinator.com/item?id=39600555
Who knows, he might have become John Carmack's John Carmack, building rockets better than Carmack or Elon
And yet, it could be done, I'm pretty sure of that.
Which are these other countries? Have you tried something actually made in Japan, or in Germany, for instance?
What you describe seems like very cheap Chinese imports fraudulently imitating something else.
> the state is usually a much more sloppy investor
I don’t find this to be true
The state invests in important things that have 2nd and 3rd order positive benefit but aren’t immediately profitable. Money in a food bank is a “lost” investment.
Alternatively the state plays power games and gets a little too attached to its military toys.
State agencies are often good at choosing right long-term targets. State agencies are often bad at the actual procurement, because of the pork-barrelling and red tape. E.g. both private companies and NASA agree that spaceflight is a worthy target, but NASA ends up with the Space Shuttle (a nice design ruined by various committees) and SLS, while private companies come up with Falcon-9.
Sounds like a false dichotomy. NASA got all these different subcontractors to feed, in all these different states and they explicitly gutted MOL and dynasoar and all the air force projects that needed weird orbits and reentry trajectories so the space shuttle became a huge compromise. Perverse incentives and all that. It's not state organizations per se but rather non-profits that need to have a clear goal that creates capabilities, tools and utilities that act as multipliers for everyone. A pretty big cooperative. Like, I dunno , what societies are supposed to exist for.
But DoD with its weird requirements, and the Congress with its power to finance the project and the desire to bring jobs from it to every state, and the rules of contracting that NASA must follow, are all also part of the state, the way the state ultimately works.
Yeah, our use of our military force provides some of the most obvious cases of "bad investment". Vietnam, Iraq, etc
And there are many others that might've been a positive investment from a strictly financial perspective, but not from a moral one: see Banana Republics and all those times the CIA backed military juntas.
> Taxes don't usually work as efficiently because the state is usually a much more sloppy investor. But it's far from hopeless, see DARPA.
Be careful. The data does not confirm that narrative. You mentioned the 1950s, which is a poignant example of reality conflicting with sponsored narrative. Pre WOII, the wealthy class orbiting the monopolists, and by extension their installed politicians, had no other ideas than to keep lowering taxes for the rich on and on, even if it only deepened the endless economic crisis. Many of them had fallen in the trap of believing their own narratives, something we know as the Cult of Wealth.
Meanwhile, average Americans lived on food stamps. Politically deadlocked in quasi-religious ideas of "bad governments versus wise business men", America kept falling deeper. Meanwhile, with just 175,000 serving on active duty, the U.S. Army was the 18th biggest in the world[1], poorly equipped, poorly trained. Right wing isolationism had brought the country in a precarious position. Then two things happened. Roosevelt and WOII.
In a unique moment, the state took matters in their own hands. The sheer excellence in planning, efficiency, speed and execution of the state baffled the republicans, putting the oligarchic model of the economy to shame. The economy grew tremendously as well, something the oligarchy could not pull of. It is not well-known that WOII depended largely on state-operated industries, because the former class quickly understood how much the state's performance threatened their narratives. So they invested in disinformation campaigns, claiming the efforts and achievements of the government as their own.
1. https://www.politico.com/magazine/story/2019/06/06/how-world...
What does WOII mean?
I assume you are talking about WW2 and at first thought it was a typo.
WOII is how dutch speaking/writing people would refer to WW2, it is literally 'wereld oorlog 2'.
BTW the New Deal tried central planning and quickly rejected it. I'd say that the intense application of the antitrust law in the late 1930s was a key factor that helped end the Great Depression. The war, and wartime government powers, were also key: the amount of federal government overreach and and reforms do not compare to what e.g. the second Trump administration has attempted. It was mostly done by people who got their positions in the administration more due to merit and care about the country than loyalty, and it showed.
The post-war era, under Truman and Eisenhower administrations, reaped the benefits of the US being the wealthiest and most intact winner of WWII. At that time, the highest income tax rate bracket was 91%, but the effective rate was below 50%.
> It's not a great example though, because the US was the principal winner of WWII, the only large industrial country relatively unscathed by it.
The US is also shaping up to be the principal winner in Artificial Intelligence.
If, like everyone is postulating, this has the same transformative impact to Robotics as it does to software, we're probably looking at prosperity that will make the 1950s look like table stakes.
Are you sure that in today's reality the fruits of the AI race will be harvested by "the people"?
Early on in the AI boom NVidia was highly valued as it was seen as the shovel-maker for research and development. It certainly was instrumental early on but now there are a few viable options for training hardware - and, to me at least, it's unclear whether training hardware is actually the critical infrastructure or if it will be something like power capacity (which the US is lagging behind significantly in), education, or even cooling efficiency.
I think it's extremely early to try and call who the principal winner will be especially with all the global shifts happening.
> The US is also shaping up to be the principal winner in Artificial Intelligence.
There is no early mover advantage in AI in the same way that there was in all the other industries. That's the one thing that AI proponents in general seem not to have clued in to.
What will happen is that it eventually drags everything down because it takes the value out of the bulk of the service and knowledge economies. So you'll get places that are 'ahead' in the disruption. But the bottom will fall out of the revenue streams, which is one of the reasons these companies are all completely panicked and are wrecking the products that they had to stuff AI in there in every way possible hoping that one of them will take.
Model training is only an edge in a world where free models do not exist, once those are 'good enough' good luck with your AI and your rapidly outdated hardware.
The typical investors horizon is short, but not that short.