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Michael Pettis

China Reforms Face Headwinds at Home and Abroad

In the late 1980s, University of Chicago professor Robert Aliber proposed, partly in jest, what he called the Andy Warhol theory of economic growth: “In the future every country will grow rapidly for 15 years.” He had in mind the plethora of so-called miracle economies that seemed to take off one after the other in the postwar era. In every case, decades of high growth, almost always driven by very high levels of investment, eventually faltered.

With the exception of South Korea, Taiwan, and perhaps Chile, none of these entities were able to break into the rich-country club. (Japan had already been a member when its growth miracle began.) Even among the “successful” economies, the period of growth was sooner or later interrupted either by a debt crisis and many years of negative growth, or by a lost decade of very slow growth and burgeoning debt.