[mitthrowaway2]

If the domestic industry had the capability of competing with China on mass-market goods at a profit but just chooses not to in order to pursue a higher-profitability niche, why not simply grow and do both at the same time, instead of yielding the mass market to China?

In my mind, if it can't do that, then it can't make the volume that China does at the cost that China does, which means it really isn't as capable as Chinese industry.

Perhaps at one time it could have, but those muscles have atrophied.

[zozbot234]

Because by pursuing a more profitable niche, you can grow quicker and make more profit. If you really want to do both, you enter the mass market from above, with only slightly higher quality products than what the market leader offers. And you do that after your position in the more profitable niches has long been secured. It's silly to do it any other way.

> which means it really isn't as capable as Chinese industry.

But this was always true. There was never really a time when Western industry was producing as much and as cheaply as China is today - that's the whole point. It makes more sense to diversify away from that, because non-trivial real-world markets will always reward increased variety.