Western Ideologues Can’t Figure out China’s Economic Success

After predicting for years that the Chinese economy would soon be on the verge of a financial blowout and a plunge in growth, honest Western economists, even of the rabid monetarist stripe, have to admit that the Chinese model of economic development does seem to work. Take the case of Michael Schuman, who penned an article in Bloomberg Business Week, of Jan. 29, under the title “What if China Is Exempt from the Laws of Economics?” . And an eloquent subtitle: “Beijing’s policymakers seem to be doing a lot of things right — and that may upend much of basic economic thinking, especially our faith in the power of free markets.”

“Recently, my faith in this corpus of collected wisdom [about economics] has been badly shaken. By China,” he wrote. “The more I apply my rules of economics to China, the more they seem to go awry. China should be mired in meager growth, even gripped by financial crisis, according to my maxims. But obviously it’s not. In fact, much of what’s going on right now in that country runs counter to what we know — or think we know — about economics.

“Simply, if Beijing’s policymakers are right, then a lot of basic economic thinking is wrong — especially our certainty in the power of free markets, our ingrained bias against state intervention, and our ideas about fostering innovation and entrepreneurship….

“Yet as China marches forward, we can no longer dismiss the possibility that it’s rewriting the rulebook. Beijing’s policymakers are just plain ignoring what most economists would recommend at this point in its development. And, so far, they’re getting away with it.”

Further on, Schuman notes:

“if things continue as they are, we have to take seriously the possibility that China has found a way to coordinate state action with just enough market influence to target and achieve positive results that a more open economy may not be able to match. Perhaps China really is refashioning capitalism.”

In reality, China is not rewriting the book of rules. It is applying the basic principles of the original American System of Economics, devised by the first Treasury Secretary Alexander Hamilton and which Lyndon LaRouche has fully espoused and developed over the past decades in his own science of physical economy. At various times, other countries applied those same rules of public investment in infrastructure and production, and went on to experience the same phenomenal growth that made the young United States a model for the world at the time. That system was explicitly opposed to the “British Empire” system of looting resources abroad and exploiting the population at home.

Is it not ironical that the European Union as well as the United States have adopted that failed British system, while China has opted for what used to be known as the original American system? The latter is the core of the economic program which the LaRouchePAC has vigorously campaigned for in the United States, and which the Schiller Institute has promoted worldwide for decades.