> The free market fundamentally doesn't have a good response to this problem

The market may not for the most capital-intensive businesses, but US laws at least attempt to address the situation. In Boeing's case, for example, the McDonnell-Douglas merger likely could have been blocked under existing anticompetitive laws.

The US's longstanding refusal to apply antiticompetition law causes a number of harms to consumers, entrepreneurs, and the stability of our economy.

The simplest explanation is surely that China is new to having a highly educated workforce and the ‘failed for some fifty years’ claims the article makes don't mean much given it.

I don't think you need to entrain market arguments or whatnot to this, when it's only in the last decade China was a strong advanced manufacture player, and turbines are the kind of project that you probably wouldn't expect to go much faster than that regardless of the demand.

Boom Supersonic is entering the turbine engine market using private funding (they have received some limited government contracts and tax incentives). It seems like the free market is responding pretty well, although they still might fail.

https://aviationweek.com/air-transport/aircraft-propulsion/b...

> I think a lot of the jet engine manufacturers are seeing this same corporate rot process, the number of high profile scandals across the industry and reports of insiders on how the number crunchers are taking over the business are strangely reminiscent of what we heard out of Boeing and Intel.

And there's the opening for China. The 90s and early 2000s saw alot of innovation by engine manufacturers. Boeing and Airbus built their planes around the next generation of engines coming out. But over the past 10 or so years all the major engine manufacturers decided to stop investing in new civilian engines and maximize their dividends on existing models. That's what killed the A380--the A380 engines are 90's tech, and all the engine manufacturers declined to build a new engine for an upgraded A380, not even one that utilized the current tech, and not even if Airbus backstopped potential losses.

So now is probably the best time since the 1980s for China to play catch-up. But the biggest problem is as you pointed out--engines and airframes are developed together, and both Airbus and Boeing also decided to stop new aircraft development and instead coast and reap dividends for the next decade or two, so there's no market for China to break into. There's still development happening in the defense space, but that's not a market open to China, either. Their only potential market is primarily domestic, and it's not capable of incentivizing and demanding dogged innovation in the same way the international market could.

≥jet engines have a market structure that's uniquely terrible for traditional free market societies.

A lot of the theoretical concepts behind this... They need updating to account for the last generation of experience. For the most part, the concepts were developed in the context of the industrial revolution(s) and manufacturing.

We are talking about manufacturing here, but the US economy in the last generation is a story about software, services, non-manufacturing firms and manufacturing firms the side step (as best they can) the core paradigm of manufacturing economics.

Competitive pricing, substitutes and alternatives, a strategic paradigm governed by market prices, marginal costs, and manufacturing quality... This is relatively marginal paradigm in the US economy, certainly in terms of market cap. In china, it is their bread and butter.

Low margin, highly competitive components manufacturing... Is that really a forte a free market societies in 2026? We outsource the "commodity value add" parts of the process. We certainly do not put them at the center of corporate strategy.

I agree about "corporate rot." I don't think anyone has a good answer to this either. China included. In practice, the best solution appears to be young vibrant companies. VW or Ford vs Tesla & BYD. VW and Ford exist because of history. Tesla & BYD exist because they perform well.

Schumpeter's free market solution was creative destruction... But, we've never really had a system for promoting this.

Part of the problem is that in a global market, allowing a company to fail creates room in the market for renewal, but there's no guarantee that your country will fill it. If Germany had come down hard on VW after the turbo diesel scandal... They probably would have just ceded market share to Korea or China or the US or something.

> The free market fundamentally doesn't have a good response to this problem, excess capital is taken out of these companies during good times and then they run to governments seeking bailouts during bad times

This isn't a free market problem. Companies move money out to avoid corporation tax, and government bailouts are what stop the free market from operating as it should.

I'd expect the competition for these companies to come in not from someone using the same technology, but a different technology that serves the same purpose. Eg. what happened to Kodak and Nokia.

For jet engines, the only thing that comes to mind is electric aircraft. No single-crystal turbine blades needed at all.

I may have picked a bad example, but the principle stands.

EDIT: China has an extensive high-speed rail network. While those don't quite cover intercontinental flight, it is the sort of paradigm shift I mean.

> governments don't know how to mandate good corporate governance.

The correct answer to this is to break up consolidated markets with antitrust. Are there only two airframe manufacturers left? Then chop them into smaller pieces so there are more. Reduce vertical integration so that it gets easier for new entrants to compete at any given part of the supply chain without needing to duplicate the entire thing themselves. Let each of the spin offs start with a non-exclusive license to the no longer existent parent company's technology so they all have the chance to iterate on it and compete for providing it.

And don't let them buy each other again.

> The free market fundamentally doesn't have a good response to this problem, excess capital is taken out of these companies during good times and then they run to governments seeking bailouts during bad times but governments don't know how to mandate good corporate governance.

Sounds like the free market hasn't been tried, a key plank of the free market on the supply side is that incompetent managers have to go bankrupt and lose their capital or otherwise get squeezed out. If the government is going to bail people out then obviously the companies will take adopt a ridiculously risky management strategy because they get the upside and dodge the downside, so they just have to maximise the potential upside at any cost. No surprise if after getting a bailout people do exactly what they did that led to the bailout until they need another bailout. Why change?

The trick to "mandating" of good corporate governance is not to bail them out. Then at least the corporations will be governed in a way that they aren't likely to go bankrupt. Maybe even make things people want and sell them at a profit.

> here's a few industries where structurally, companies can only exit the market but it's almost impossible for a new company to enter. Airframes, jet engines, CPU manufacturing, lithography etc.

Is there actual evidence for this, or are the companies involved just doing a good enough job that the market doesn't see a need for new entrants? Because it actually seems a bit implausible that these technologies could just disappear or even become less available under a free market. What we actually see is the likes of NVidia or ASML, where other players can't catch up because the market leader is just pushing the cutting edge forward too quickly (spare a thought for Intel, who was the unbeatable colossus once).

> All the money and talent in the world...

One nitpick, all the money in the world would be able to achieve the goal by simply giving rides away for free.

Overall, I agree that any industry that is extremely optimized requiring ultra high precision+knowledge in multiple verticals makes the barrier to entry beyond difficult. It just requires too much up front cash.

> ...governments don't know how to mandate good corporate governance...

For a very brief moment, under the existential crisis condition of total war in WW2, the US government was somehow able to corral corporate governance towards a semblance of common purpose (survival). As I understand it from historians malfeasance was still widespread, but we arguably maybe got a good enough outcome?

This is the corporate equivalent of the shirtsleeves to shirtsleeves in three generations problem. And if that corollary is true, then I suspect the remedy is similarly not entirely amenable to deterministic antiseptic metrics and processes; they're necessary but not sufficient conditions.

> All the money and talent in the world can't replicate real users generating real data that you can use to improve

Basically, China excellence in EVs and Solar was driven by the market being new. It's hard (almost impossible?) to outrank an incumbent very entrenched in a big market. You need a paradigm shift (ie: iphone vs nokia) to make the change.

> The free market fundamentally doesn't have a good response to this problem

Free markets don't exist.

The problem isn't what you think it is. It's Dunning-Kruger effect and 99% of the population is living it loud and proud.