Half-a-loaf reforms not enough to achieve economic stability
AT A time of lacklustre economic growth, countries around the world are attempting to devise and implement strategies to spur and sustain recovery. The key word is strategy: To succeed, policymakers must ensure measures to open the economy, boost public investment, enhance macroeconomic stability, and increase reliance on markets and incentives for resource allocation are implemented in reasonably complete packages. Pursuing only some of these objectives produces distinctly inferior results.
China provides a telling example. Before Deng Xiaoping launched the policy of “reform and opening up” in 1978, the country had relatively high levels of public-sector investment. But the centrally planned economy lacked market incentives and was largely closed to the global economy’s major markets for goods, investment, and technology. As a result, returns on public investment were modest, and China’s economic performance was mediocre.
