Leitmotif 9: It’s not the economy, stupid!

Chinese economic policy hasn’t been about economics; now America’s isn’t either

“It’s the economy, stupid!” – James Carville, Clinton-Gore campaign manager, 1992

Since China ended its “zero-Covid” policy in January 2023, Chinese growth has persistently disappointed market expectations. Two recent rounds of Chinese economic stimulus also underwhelmed markets. Most analyses of China’s economy accurately diagnose its problems and the deficiencies in Chinese policymakers’ responses. But commentators then puzzle over how Chinese leaders were able to raise a billion people out of poverty faster than any government in history, yet don’t appear capable of lifting the economy from its current funk.

A similar befuddlement – albeit usually dressed in condescending disdain – afflicts most market analyses of President Trump’s policies. Two common complaints are that tariffs either reduce American purchasing power or are futile when aimed at industries that no longer exist in America.

In both cases, the source of confusion is the “Carville assumption” that policies either are about the economy or that policymakers are stupid. They’re not.