Chinese involution is perfect competition

"Enshittification" is a sort of "safe horny" term for what is really just outright impoverishment and declining living standards due to economic insolvency from deindustrialization, demographic decline, hyperinflation, etc.

You are just de-developing and becoming poor.

-Marko Jukic on X

"Enshittification" is a term that was coined to describe the sacrifice of user experience for increasing shareholder profits. Mr. Jukic expands this term to describe the general state of the Western economy. Paying the same (or more) for a increasingly bad product experience is not much different than paying more for an increasingly lower standard of living. In my view, his expansion of the term correctly describes what's going on in Western economies.

Han Feizi, a pseudonymous former head of China research for a top investment bank, (correctly) proposes that "Chinese involution" is the opposite of Western economic enshittification.

“Involution” is sort of a “safe humblebrag” term for what is really outright and spectacular improvements in quality, features, choice, service and rapidly rising living standards that China has been experiencing for decades, but especially after the Covid pandemic.

-Han Feizi in "US enshittification vs Chinese involution"

He cites China's rising standards of living, increasing quality of life and products that get better every year while simultaneously getting less expensive as evidence of this.

Both Han and Jukic are correct in their analysis and description but they (unintentionally, I assume) gloss over the reasons that China is experiencing involution and the West is experiencing enshittification.

Throughout my four decades of life, the stock market and shareholder returns have been the religion of the West. Before streaming and the internet, serious white-collar workers everywhere...fathers especially...turned into the "business news" to see "how the market was doing." And this continued as the millennials and subsequent generations came of age and moved into stock apps and widgets. All of society reorganized itself around and increasingly bet its future on a world of growing corporate profits and share prices.

The problem with this is that shareholders are not the only stakeholders in society. Increasing returns to shareholders ("producer surpluses" in economics terminology) comes at the expense of value for money and quality of life ("consumer surpluses").

Consumers want to maximize their value for money while producers want to maximize there profit. Profit is supposed to exist not as a mechanism for shareholders to generate passive income so that they never have to work again, but as a signal to other producers that they should enter the market and compete for a share of the profits. In an ideal world, as long as there is profit to be made, producers would keep entering the market until profit is competed down to zero. This is how consumer surplus - value for money and quality of life - is maximized.

This process is basically what happens in the Chinese economy. What is called "involution" is really just textbook competitive market behavior. Whenever and wherever there's an opportunity to make money in China, producers seem to continually enter or expand into the market to earn their share. In doing this, they offer better products at the same or cheaper prices than their competitors and, as would expect, prices and profit margins collapse. "Chinese involution" is really just a term for describing the much-closer-to-perfect-competition marketplace that exists in China and does not exist in the West.

Chinese-style "involution" is what should be happening in every economy. This especially true in Western economies where many people very loudly profess their belief in free market competition. The West shouldn't have just one Apple that sells us basically the same new phone every year while collecting massive profits, but 10 Apples each earning less than 1/10 of what Apple makes. There shouldn't be just one empire-wide Amazon that can charge merchants over 50% fees but multiple e-commerce platforms that compete for both merchants and customers by delivering the best service for the lowest price. The $40 trillion dollar question is why does "involution" only happen in China and not in the West? I'll leave that as an exercise for you, the reader, to figure out.