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Tyler Cowen

China’s Economic Development Model Shows Some Cracks

The so-called Washington Consensus, which emphasizes market-based reforms, is looking better lately. 

A new city arises, Shanghai, November 2021.

A new city arises, Shanghai, November 2021.

Photographer:  Qilai Shen/Bloomberg

After nearly two decades, the consensus is shifting on the so-called Washington Consensus — and the political and economic ramifications are profound.

To recap, the Washington Consensus of the 1990s suggested that reforming and post-communist economies should move rapidly (it was known as “shock therapy”) to market prices and the private ownership of capital goods. China, of course, mostly rejected this model and engaged in limited privatization. Yes, China’s private sector grew, but so did Chinese state-owned enterprises, many of them even more.