New Books in Economics Isabella M. Weber, "How China Escaped Shock Therapy: The Market Reform Debate" (Routledge, 2021)
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Aug 17, 2025 Isabella M. Weber, a political economist and Assistant Professor at UMass Amherst, dives into China's unique economic reform strategies. She contrasts China's gradual marketization with the shock therapy approach that led to turmoil in Russia. Weber discusses the pivotal debates of the 1980s, the importance of grassroots student movements, and the balance between academic rigor and practical policymaking. She highlights how insights from Eastern Europe shaped China's dual track journey, detailing the complexities and challenges that emerged during this transformative period.
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What Shock Therapy Actually Is
- Shock therapy bundles price liberalization, macro austerity, trade liberalization, and privatization into one package.
- Its logic: create market prices then transform state firms into private actors reacting to those signals.
Upstream Price Shocks Can Trigger Inflation
- Liberalizing upstream prices set below cost risks sharp cost-push inflation if firms pass on higher input costs.
- Without strong budget constraints and price stability, rapid liberalization can trigger hyperinflation and chaotic transition outcomes.
Two Competing Reform Logics
- China’s reform debate split between blueprint package reform and experimentalist gradualism.
- Experimentalists emphasized local trials, learning, and scaling rather than a single theoretical big bang.
