China´s Anti-Keynesian Insurgent, Zhang Weiying, and his warnings that stimulus spending would lead to mal-investment were once ignored. Now official ministries invite the follower of Hayek to speak.
Three years ago, Keynesianism was official policy in China. 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 Zhang 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.