A hole in the &quot;USA out innovated&quot; premise is that Silicon Valley was based on military spending. See Steve Blank&#x27;s &quot;Secret History&quot; series for examples.<p>And, speaking more generally, the U.S. Department of Defense is the world&#x27;s largest employer, 3.2 million strong. When taking into account benefits, pensions, etc., it may also be called the largest socialist program.<p>That statistic paints a big picture; it&#x27;s not that having a market economy was sufficient to become the sole superpower of the 1990&#x27;s. It was that the U.S. had a lot of centralized spending in &quot;the right places at the right times&quot; and then allowed the marketplace to pick up the results and run with them wherever convenient. However, it&#x27;s very difficult to backpedal and reallocate now that this has been done, and the status quo probably won&#x27;t change until a crisis motivates it.<p>The pattern of every emerging market - Japan, Korea, China - is that state power still entangles itself somehow, even if there is a marketplace at the low level. We have never had a &quot;purely ideological&quot; state anywhere.