Monday, March 12, 2007

When Theories Fail

Zakaria throws down the gauntlet to various development economics orthodoxies:

It might be time to admit that we really don't understand China. The country simply does not conform to our most basic beliefs about what makes nations grow.

Hernando de Soto, the Peruvian scholar, has argued persuasively that clear and strong property rights are the prerequisite for economic growth. Except that China, the fastest-growing country in human history, has an extremely unclear and weak system of property rights.

Alan Greenspan has argued that the rule of law is the linchpin of market economics. Except that China has a patchy set of laws, unevenly enforced.

The Washington Consensus that the World Bank and the IMF have peddled across the globe claims that if currencies don't float freely, they will produce huge distortions in the economy. China has declined that advice and yet prospers.

So, instead of learning from facts and revising theory, we assume that the facts are wrong, that China is one grand charade.

No comments: