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The excessive corporate competition from involution contributes to China's overwork problem because it gives companies an incentive to work their employees to the bone in order to get a competitive edge. And worst of all, involution drives down prices, causing deflation that exacerbates the value of the debt left over from the property bubble.

So China's leaders are going on an“anti-involution” campaign. It's not clear what this means - the details of the policy are mostly out of the public eye - but if it's anything like what Japan's industrial policy bureaucrats did to stop“excessive competition” in the 1970s, it will probably involve telling Chinese companies to get together and all raise their prices at the same time.

That's going to mean slower growth. Why? Because demand curves slope down. If Chinese car companies all raise their prices, fewer cars will be sold. Another way of saying the same thing is that the easiest way to raise prices is to curb production. Either way, this means less investment, because Chinese companies won't need to build as many factories. And less investment means slower GDP growth in the short run.

In fact, this might already be happening. China's fixed-asset investment has begun to fall in the last few months, right around the time the anti-involution campaign began. Bloomberg reports:

And here's a chart:

Source: Brad Setser

This investment drop is a bit statistically weird, since it contradicts some other data sources. Data quality in this area is notoriously bad. But it seems to fit with some other pieces of data, such as slowing loan growth - especially industrial loans - and rising unemployment.

It also fits with the generally pessimistic mood that Chinese people express about their economy:

Put this all together, and it makes perfect sense that Chinese people - especially young people - would be feeling futile and pessimistic. They've been hit with a bunch of huge negative shocks, all within a short space of time:

• A real estate bust that destroyed a significant portion of their wealth, as well as their hopes of asset appreciation in the near future
• An economic slowdown that destroyed expectations of constantly rising living standards, made it hard for people to find jobs, and meant that lots of college degrees are going to waste
• A government industrial policy that encouraged“involution”, made a lot of people work hard for little gain, and exacerbated the hangover from the property crash

These negative shocks would be brutal for any country. But for China, which has known nothing but skyrocketing living standards for over three decades, it's especially galling to be suddenly thrust into a world where you have to run flat-out just to stay in place.

Ten years ago, Chinese people worked hard because they knew that tomorrow would be much better than today; now, they work hard because they know that if they don't, tomorrow will be much worse than today. Their dream has suddenly flipped from aspiration to survival.

All of this raises the question of who, exactly, the modern Chinese nation-state is built for. In many ways, China is the greatest nation on Earth - it has endless miles of high-speed rail, futuristic technological marvels, vast productive power, sprawling malls and highways and forests of towering apartment blocks.

Its cities sparkle with light, drones zip through its skies, and robots crawl along its streets. And yet many of its people now toil in quiet desperation. It feels like a nation built for the glory and greatness of its leaders and owners, rather than for the happiness of its regular people.

This was not always true, of course. Under Deng Xiaoping, Jiang Zemin, and Hu Jintao, China vanquished poverty, created a vast middle class, and made a concerted effort to spread its new prosperity all across the nation. That was always the deal - prosperity for political quiescence.

Now, under Xi Jinping, the deal has been altered. China's people are basically being told,“Let them eat national greatness.”

This article was first published on Noah Smith's Noahpinion Substack and is republished with kind permission. Become a Noahopinion subscriber here.