Today's China is replicating the United States' "Roaring Twenties."
A popular joke recently goes like this:
The anticipated "first years" in 2026 include:
1. The first year of autonomous driving
2. The first year of liquid cooling
3. The first year of domestic HBM
4. The first year of edge - side AI
5. The first year of solid - state batteries
6. The first year of artificial intelligence applications
7. The first year of quantum computing
8. The first year of in - memory computing chips
9. The first year of brain - like computing
10. The first year of the low - altitude economy
11. The first year of industrial and commercial spaceflight
12. The first year of humanoid robots
13. The first year of silicon photonics
14. The first year of controlled nuclear fusion
There are so many "first years" of technologies in 2026. It sounds like a kind of mockery and a doubt about technology, and it also reflects the cynical atmosphere in the current economic transformation. However, in my opinion, this "first - year" atmosphere is actually more of a sign of the current surge in technological innovation:
Needless to say about the achievements of "Made in China 2025", and the US "Genesis Mission". Both are about integrating the scattered technological development resources at present to achieve the prosperity of the technological "species", which shows the forward - looking grasp of this wave of technological explosion by the elites of the two countries.
As for the deflationary spiral that many people have been concerned about, when placed in the context of this technological explosion, it is often just an insignificant footnote of a certain era. Looking back, the rapid iteration of technology makes the so - called chill penetrate, but in the end, it brings a calm situation.
If we look back at the United States in the 1920s 100 years ago, we can find both the similar rhythm of the era with China today and the differences brought about by different stages of technological development. But generally speaking, we can boldly assert:
Today's China is exactly replicating the US "Roaring Twenties" at a pixel - level.
01
The End of Prosperity
The economic situation of the United States at the beginning of 1920 has a similar rhythm to that of China today:
With the start of World War I, federal government spending soared from about $700 million in 1916 to a peak of $18.5 billion in 1919, an increase of nearly 26 times. The size of the military expanded from more than 200,000 before the war to more than 4 million. There was a huge demand for military uniforms, weapons, ammunition, ships, airplanes, food, steel, and chemicals.
After the end of World War I, the demand for the war economy that supplied the entire European battlefield disappeared rapidly, and the supply - demand relationship reversed quickly.
With the end of the war, European agricultural production gradually recovered, but the purchasing power in the economy collapsed significantly. The exports of American agricultural products and raw materials began to decline rapidly. And the demand for military rations, armaments, and military uniforms of the US military also disappeared as 4 million soldiers returned home.
From 1920 to 1921, the United States experienced painful over - capacity reduction and strong deflation. After the armistice in November 1918, government orders evaporated instantly: federal spending plummeted by 75% in the 1920 fiscal year (from $18.5 billion to $6.5 billion), and a large number of wartime factory orders were cancelled or significantly reduced.
The wholesale price index: It plummeted from its peak in May 1920, and by June 1921, it had cumulatively declined by about 36.8%–45%. This was the most severe single - year decline in wholesale prices since the American Revolutionary War.
The consumer price index (CPI): It declined by 15.8% from June 1920 to June 1921, and the consumer price declined by about 11.3% throughout the year.
Among them, the prices of agricultural products and raw materials crashed the most severely. For example, for wheat, cotton, corn, and pork, the bankruptcy rate of American ranchers who made a fortune from beef and cowhide during the war was 3 - 4 times that before the war, and thousands of ranches declared bankruptcy.
Reflecting on the current situation, the start of the 1920s in the United States tells us:
What really hurts you is not the depression, but the prosperity. Most of the supply established during the prosperity period has extremely high costs and is the first to be eliminated during the depression.
The pain of this stage is comparable to the current experience of China's real - estate market clearing:
The national unemployment rate in the United States reached nearly 12% at its peak. Shipbuilding orders plunged by more than 90% in 1920, the operating rate of steel mills dropped to 30 - 40%, the founder of General Motors went bankrupt due to inventory backlogs, the DuPont factory that produced explosives turned to losses after the war, and the over - capacity reduction in agriculture, with hundreds of thousands of farms going bankrupt every year, lasted throughout the 1920s.
The price avalanche, oversupply, and extremely high unemployment rate only differ from China's current long - term clearing in terms of time length, and there is no essential difference in the experience:
The boom brought by prosperity makes the costs of too many participants extremely high. During the contraction cycle, these eliminated costs become a long - term and huge burden for the participants.
02
Silver Lining: The Supply - Side Technological Explosion
However, during this painful clearing process, the rapid emergence of new technologies and, more importantly, their adoption rate were greatly underestimated, which precisely marked the beginning of the "Roaring Twenties" until 1929.
First of all, there was the rapid popularization of electricity:
The electrification rate of American manufacturing jumped from 55% to 90%. The importance of the popularization of electricity to American industry in the 1920s is almost equivalent to the role that large models and robots promise for industrial revival in the eyes of all AI technology enthusiasts today.
After electrification, automobile factories no longer relied on centralized steam drive, and they no longer needed all links to start working simultaneously to operate. The assembly time of a single car in Ford factories was reduced from 12 hours to less than 1.5 hours, and the annual output increased from hundreds of thousands to 2 million.
Not only in the automobile industry, but also in the textile and metal - processing industries, productivity was greatly improved through the introduction of electricity, and industrial workers also benefited from it. The real wages of manufacturing workers increased by 50% in 10 years, which also laid the foundation for the well - known Ford effect:
As workers' wages increased and car prices decreased, workers could afford their own products, which quickly created the first generation of blue - collar workers in cities. Installment - plan payments and consumer finance also rose rapidly. The rapid popularization of household electricity led to a sharp increase in the sales of household appliances in the 1920s, and the living standards of workers' families were greatly improved:
By 1929, more than 10 million families owned radios, the number of families with vacuum cleaners doubled, and the adoption rate of refrigerators and small household appliances increased from 0 to more than 30% directly.
What can serve as a reference for both sides of the current AI debate is that electricity was not invented in 1920, but the adoption and popularization of electricity in the 1920s are the real manifestation of technology changing society:
The popularization of electricity brought about the electrification dividend, large - scale production of household appliances and a significant price drop, an increase in the wages of the middle class and a huge demand for labor liberation, and ultimately laid the foundation for the super - prosperity of the Roaring Twenties.
Among them, the popularization of radios had more superimposed effects:
The radio in the 1920s was one of the most revolutionary media technologies in American history and was regarded as the most typical product of "supply - side technology popularization" in the "Roaring Twenties".
As a result of the significant increase in productivity, by 1930, 40% of American families owned radios:
Americans listened to the same program "simultaneously" for the first time, whether it was news, music, sports, or the president's speech, which eliminated the geographical/urban - rural isolation. Whether in New York or on farms in the Midwest, people could hear the same jazz or boxing match, forming a "national real - time culture".
But for the consumer side, more importantly, radio suddenly became the earliest "national advertising platform":
The rapid emergence of sponsored shows, live - broadcast advertisements, and jingles made national consumer brands such as Coca - Cola and Jell - O instantly well - known across the country.
More importantly, advertising as a business model officially stepped onto the historical stage. Its revenue soared from zero in 1929, which promoted the rapid rise of the national consumer economy we see today. The consumer - oriented culture that has run through American history for a century and today's 4A advertising and the shaping of the global consumerist atmosphere all originated from this.
In a sense, today's Li Jiaqis and live - streaming rooms are mapped one - to - one with the radio - based consumerism a century ago.
Today, the ubiquitous Temu and TikTok, as well as the concentrated investment and optimization of China's supply chain by various elites, are all re - enactments of the traction of the demand side by the technology and supply - side changes a century ago: more efficient supply and stronger productivity changes are the fundamental driving forces for consumer growth.
03
The Faintly Visible Empire: Supply - Side Technological Leadership
The situation in the United States in the 1920s, with its avalanche and upsurge, is mapped to a certain situation of today's [Note: There might be a mistake here, perhaps it should be a specific place or entity, I'll keep it as it is for now]. The United States in the 1920s still focused on industrial production and efficiency improvement during the depression, which is also a kind of mapping of today's [entity].
Different from the current global - leading economic thought of demand - side stimulus, the economic miracle of the United States in 1920 was completely the traction of demand by the supply - side technological revolution.
During that decade, the proportion of American industry in the global total increased from 30% to 50%, which laid the foundation for the United States' global industrial hegemony before World War II and actually shaped the imperial dividends that have lasted for 80 years since World War II until now.
Thanks to the popularization of electricity comparable to the AI revolution, the industrial production efficiency of Ford Motor was greatly improved, allowing more and more Americans to drive Model T cars. Ford also went from bankruptcy to becoming an American industrial superstar that spanned several decades.
The popularization of cars, combined with the rapid development of railway and highway infrastructure, made a large number of Americans start to travel south for vacations from the northern industrial cities, creating a real - estate boom in the entire Florida:
In movie theaters, hotels, and residential areas, a large number of young people seized the opportunity of the large - scale development in Miami, Florida, and started to speculate in real - estate pre - sales. The public at that time called these real - estate speculators "binder boys", meaning that young people who only paid a deposit started to speculate in real - estate pre - sales.
They paid a small amount of money as a "binder" (deposit) to lock in the land. They had to pay off the full amount within 30 days, but they often resold it to the next buyer within a few days to earn the price difference. The same piece of land might be resold multiple times (paper profits), and many people never really owned the land. At the peak from 1924 to 1925, many binder boys became millionaires from poor boys in a short period.
In fact, there are many such examples of seizing opportunities to rise rapidly during the depression:
John F. Kennedy started to become a stockbroker during the depression when everyone stayed away from stocks. Through various means, he laid the first - bucket of - gold for his family to become super - rich later.
Howard Hughes, who broke the record for cross - continental flight in the United States, founded the predecessor of today's Baker Hughes, the strongest oil - service company in the United States.
Compared with today, there are also many adventurous Chinese entrepreneurs. For example, Great Wall Motors, a global expander, has started to lead the trend of technological change today and is also using more wealth to break yesterday's prejudices.
04
There Was Also an OpenAI in the 1920s
The most important example among them is RCA (Radio Corporation of America):
From 1920 to 1929, its market value soared. RCA, which produced radios, was the most typical representative of "technology stocks" in the Roaring Twenties and was regarded as the Cisco or NVIDIA of the 1920s, soaring hundreds of times from a very low starting point.
RCA owned the core patents for radios, and the rapidly increasing sales made RCA's future look extremely bright. At the same time, radios formed a never - before - seen business model as an advertising platform. A large number of consumer giants began to invest heavily in radio advertising, creating a brand - new business model for the national advertising industry.
This also forms a mapping with today's Chinese AI. In the stock market, there is Tencent, which is reluctant to participate in AI, and Alibaba, which is all - in on AI. And the market value of Cambricon and other upstream chip companies has increased by one trillion in a year, attracting a large number of investors.
Many people saw the bubble and its burst, but no one saw the technological change and the rapid increase in productivity brought about by radio, which is comparable to today's large models:
First of all, news, prices, weather, agricultural information, and business instructions could instantly reach factories, farms, offices, and even battlefields.
The change in communication technology was the core pillar of the more than 5% productivity growth in the United States during that decade.
Secondly, radio allowed brands to quickly establish national recognition, which made large - scale production more cost - effective and the cost decreased rapidly. Advertising expanded from regional to national. This was the case for automobiles, household appliances, and cosmetics. A large number of super - consumer giants were thus born.
The real dividend of radio did not emerge until after the 1930s. This paradox of lagging productivity greatly underestimated the influence of radio in that era.
Isn't the current criticism of Chinese GPUs and Chinese large models by everyone just a reflection of the backward mindset?
05
Conclusion
The 1920s in the United States had disappointments and unwillingness, but also had an industrial upsurge and a series of legendary wealth - creation stories. All these form various mappings with China today.
But the most obvious lesson is that the improvement of productivity on the supply side is real, but the dividends often appear with a lag. During the Great Depression in the 1930s, radios became a cheap form of entertainment instead.
The stock market crash in 1929 caused RCA's stock price to plummet by 98%, but there was no "bubble" in radio technology itself. It truly changed the economic and social structure of the United States.
Just as many people today only see the high valuation and "bubble" of AI stocks but ignore the potential for underlying productivity improvement, the same was true for radio in the 1920s: The bubble burst, but the technology remained.
For today's China, which is replicating the US "Roaring Twenties", which disappointments and losses will be surely forgotten, which bubbles will leave definite technological impacts, and more importantly, which people will use this "Roaring Twenties" to achieve the wealth - creation legends mentioned above. These are the questions that everyone today needs to think about.
This article is written based on publicly available information and is only for information exchange purposes and does not constitute any investment advice