The role of the state in economic growth

The United States and China took different paths to become the two largest economies in the world. In the postwar period, the US has been a dominant economic force, and its global leadership stems largely from its economic model. During decades of remarkable growth, China often sought to learn from the US to improve economic performance and reduce poverty. Recently, Chinese policymakers have grown more skeptical of the US system, while US global leadership faces novel challenges. This chapter examines US and Chinese approaches to four areas of government economic responsibility: macroeconomic policy; rule of law; investment in common goods; and management of externalities. The world is safer and more prosperous when Chinese growth can sustain the needs of its people and growing global stewardship responsibilities, but additional reforms are needed to achieve these objectives. The US continues to offer lessons for moving China towards a more open market orientation.