Hansjörg Herr

Credit expansion and development – A Schumpeterian and Keynesian view of the Chinese miracle

19 pages · 7.60 EUR
(May 2010)

I agree with the terms and conditions, especially point 10 (only private use, no transmission to third party)

In neoclassical thinking, insufficient development is considered the result of a lack of resources, and an inefficient allocation. Deregulated markets have to guarantee a better allocation of resources as well as a net resource inflow to augment the domestic physical capital stock. From a Schumpeterian-Keynesian perspective, it is not the lack of physical resources and optimal allocation which prevent development. It is first and foremost the lack of a sufficient credit-investment mechanism which leads to the perpetuation of underdevelopment. It is shown here that the Schumpeterian-Keynesian perspective gives a much more plausible interpretation of the Chinese development than the neoclassical perspective. It is also shown under which regulations and conditions a credit-investment process in developing countries is possible.

JEL classifi cations: E12, E44, F36, F43

Keywords: credit, economic development, Schumpeter, Keynes, China