The Wall Street Journal printed a fascinating interview on Zhang Weiyang, one of China's leading economists. He has criticized the government on their stimulus packages as a misuse and misallocation of resources. How you spend stimulus money matters. Just priming the the pump through extended bank loans to state enterprise will not provide the needed economist structures for sustained growth. The "China Model" of government intervention is not capable of making the proper allocation decision in a complex economy. These are views that do not come from the Keynesian playbook. While he has developed his views independently, he has all of the traits of an Austrian School economist and a follower of Hayek.
His views also are very appropriate for the US. If easy money was the cause of the bubble in the Chinese economy, then continued stimulus through further easy money will not solve the problem. Economic adjustments have to be handled through the market process.The same can be said about the US policies. If easy money during the Greenspan era was a cause of the housing bubble, then providing more easy money without a thought of the transmission mechanism is also bankrupt. Fiscal policy also can misallocate resources. The economic systems have to change to allow the market determine allocation decisions. These views are never acceptable by government policy-makers but the discussion is critical for how the global economy grows and adapts.
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