Bloomberg Businessweek USA - January 25, 2018

Y MATH,

M STRENGTH

L SCHUMAN

f writing about eco-

ist of simple maxims

hold true. One is that

untry tumbled into a

ood chance another,

well. A second rule:

k. A policy that failed

results if tried again.

nalist watching what

o Russia to Spain—and

understand why things just go so

n, whether during the 1997 Asian

urmoil that nearly ripped apart

his decade.

h in this corpus of collected wis-

ken. By China.

y rules of economics to China,

awry. China should be mired in

pped by financial crisis, accord-

viously it’s not. In fact, much of

w in that country runs counter

know—about economics.

ymakers are right, then a lot of

wrong—especially our certainty

kets, our ingrained bias against

state intervention, and our ideas about fostering inno-

vation and entrepreneurship.

On the surface, that probably sounds ridiculous.

How could one country possibly defy the laws that

have governed economies everywhere else? After all,

whenever economists and bankers argue that “this

time it’s different”—such as the dot-com boom or the

subprime-propelled U.S. housing market—the good

times invariably end in tears. Recall, too, that back in

the mid-20th century, some experts were convinced the

Soviet Union had created a superior form of economic man-

agement, and in the 1980s, it was Japan that had successfully

reinvented capitalism. Oops.

Y Chi h f ard, we can no longer dis-

riting the rulebook. Beijing’s

ring what most economists

in its development. And, so

nfronts today are immense.

t fueled the nation’s rapid

tapped out, and the costs of

ng away at China’s low-cost

le to continue, China must

competitive, and allocate

Bloomberg Businessweek January 29, 2018

OF ECONOMICS

BEIJINGSEEMSTO DEFY

AS THECOUNTRY GOES FROM

TOSTRENGTH. BY MICHAEL

Over my two decades o

nomics, I’ve devised a li

that I’ve found generally

history repeats itself.Ifone cou

financial crisis, there is a verygo

facingsimilar conditions, will as

What doesn’t work, doesn’t work

isn’t likely to achieve any better

Id l dth littl les as a jour

om Japan to

attempting to uunderstand

wrongso ofte

crisis or the t

theeurozoneearliert

But recently, myfait

domhasbeenbadlyshak

The more I apply my

the more they seem to go

meager growth, even grip

ing to my maxims. But obv

what’s going on rightnow

towhat weknow—or thin

Simply, if Beijing’s policy

basic economic thinking is

in the power offree mark

state intervention and

Idevelopedtheselittlerul

works and what doesn’t—fr

attemptingtou

YetasChina marchesforwa

miss the possibility that it’s rewr

policliymakers are just plain ignok j t li ig

would recommend at this point

far, they’re getting away with it.

The problems that China con

The easy catch-up growth tha

gains since the 1980s has beent

doing business are rising, eatin

edge. For its economic miracl

become more innovative and TYPE ILLUSTRATION BY BRAULIO AMADO