Not to sound like a broken record here but the big problem is housing. When housing becomes the best investment, it cannibalizes capital investment into productive output.

There have been other errors along the way, such as the Bayh-Doyle Act [1], a law signed by Jimmy Carter in a lame duck session after losing to Ronald Reagan to essentially give away NIH research. I'm a firm believer that federal research dollars should come with equity strings attached in the results. Otherwise, fund your own research. And in pharmaceuticals, it's basically all federal research, despite the myth that Big Pharma invests in a lot of research. It doesn't. Actually there's one thing it does invest in: patent extension.

Also, we've addicted to fossil fuels, IMHO because it induces demand for weapons.

One big difference between the US and China is that China has significant capital controls so China has a captive market of over $100T in household savings that has to be invested in something and it can't just leave. This too creates problems but the gains in China and decrease in costs cannot be dismissed easily. Also, China has basically managed to recreate all the technologies the US has tried to restrict from being exported to China, everything from welding large container ships to the latest and greatest lithography and manufacturing.

But housing absolutely needs to stop being an investment. It's a huge reason why the manufacturing sector has been hollowed out in the West.

[1]: https://issues.org/bayh-dole-innovation-policy-woodson/