Credit where credit is due, is the blog’s motto. It would thus like to recognise the insight of co-author John Richardson in being one of the first people to warn publicly that the economies of China and India both faced enormous risks in their quest to reach developed country status.
“In recent years, it has become received wisdom that China and India will reach developed economy status. This will result in “the end of economic cycles,” as one excited chemicals industry executive said in 2008, because of the strength of their future growth.
For a while, it seemed as if he might be right as China’s economy expanded at more than 10% per year. At the same time, India began long-awaited economic reforms necessary to unlock its enormous potential. But as we discuss in chapter six of “Boom, Gloom and the New Normal,” there are major risks to this rosy scenario”.
Other commentators and analysts knew better, of course.
They declared that most Indians and Chinese, although earning only $10/day, were now becoming “middle class” and reaching Western living standards. They saw no relevance in the insights of Nobel Laureate Sir Arthur Lewis and his ‘Lewis Curve’ (above), about the likely difficult transition ahead. And they simply ignored repeated warnings from those such as China’s premier Wen that its economy was “unstable, unbalanced, uncoordinated and unsustainable“.
Today, of course, ‘received wisdom‘ now believes it was always ‘obvious’ that China and India would run into problems. But this view, like the earlier optimism, is not founded on John’s close analysis and inside knowledge of the markets. It simply reflects today’s reality that both economies have hit major road-blocks and are slowing fast.
This is a great pity. Things don’t simply ‘happen’ out of the blue. They have complex causes, which need to be carefully evaluated and discussed in order to reach intelligent conclusions. Equally, we need to recognise people who take the trouble to do this, and who have the courage to publicly stand out from the crowd.
The blog is very proud to work with John. It hopes its readers will continue to benefit from his insights for a long time to come.