Chinese Paulian - AntiKeynesian Economist Zhang WeiyingSubmitted by Regnad Kcin on Sun, 10/14/2012 - 16:21
Worried investors want signs that Beijing remains committed to growth—and the sign they'd most like to see is a big Keynesian stimulus.
Zhang Weiying would say that they're wrong to panic. The economic slowdown, he calmly says over tea, is actually good news that "makes the government think we need to change"—toward reform and away from priming the pump. We aren't all Keynesians now in China, he insists.
Three years ago, Keynesianism was official policy. The 2008 financial crisis had Beijing gloating over the failure of the free-market "Washington Consensus" and touting the "China Model" of government intervention. Keynesianism fit the statist zeitgeist and Beijing then suffered an export slump, so the government allocated $3.5 trillion—or about 50% of gross domestic product—in bank loans and direct spending.
Mr. Zhang's academic colleagues were all praise for the "China Model," but in 2009 he was giving speeches entitled "Bury Keynesianism." Then a top administrator at Peking University, where he now teaches economics, he argued that since the financial crisis was caused by easy money, it couldn't be solved by the same. "The current economy is like a drug addict, and the prescription from the doctor is morphine, so the final result will be much worse," he said.
He invoked the ideas of the late Nobel laureate Friedrich Hayek and the Austrian School of Economics to argue that if the economy weren't allowed to adjust on its own, China's minor bust would be followed by a bigger one. He also advocated doing away with existing distortions such as the monopolies enjoyed in many industries by state-owned enterprises...
..."We human beings always seek happiness," says Mr. Zhang. "Now there are two ways. You make yourself happy by making other people unhappy—I call that the logic of robbery. The other way, you make yourself happy by making other people happy—that's the logic of the market. Which way do you prefer?"