In 1998, Communist China was trapped in crises. The Asian financial crisis precipitated sharp falls in incoming foreign investment and outgoing exports in China; violent protests against the United States brought Sino–American relations to near a halt; nationwide crackdowns on the religious movement Falun Gong pitted the state against its own society. Deng Xiaoping had just passed away a year earlier. Against this backdrop, Beijing’s decision to join the World Trade Organization was almost like “raising a white flag”; both liberals and conservative members of the ruling elite felt that “doomsday” was near. People of that era could not have expected that the Chinese economy could go so far so fast.

The SMG analysis has established that the WDP, like the BRI and CGG, was launched by the political leadership, who were facing economic recession and other challenges, and then mobilized subnational and commercial actors to improvise growth-reviving endeavors in their own purviews. This chapter focuses on three tasks: First, it presents the reform-era developmental history of western China and captures how the WDP and globalization have interacted in this region; second, it elaborates on the process and phases of WDP implementation and explains how state roles have adapted to different periods of developmental challenges in the country; and finally, it uses three large infrastructure projects in the WDP as examples to illustrate that, while expanding globalization, the WDP’s implementation has also intensified centralization and political penetration by the ruling party into inland China.

China has an authoritarian political system, with the political leadership concentrating major powers at the apex of the regime. China also has a state-controlled economic system, in which the state owns the financial resources and largest companies, as well as powerful local governments. Under this political–economic system, when a political leader announces an ambitious strategy to expand Chinese influence abroad, it is natural for observers to conclude that this strategy will cohesively pursue the autocrat’s expansionist aims.

The Introduction provides a guided tour of the content of the book, highlighting its main themes and historical sequences of crises and slumps. It discusses the frequency and intensity of recessions; the relationship between war and recessions; the impact of hyperinflation on economic activity; the role of currency crashes, debt, and macroeconomic crises on output; and the role played by populist political cycles in producing severe economic contractions.

The global and European financial crises since 2008 have made abundantly clear, once again, the extremely serious economic and political consequences of financial instability. In their study of the costs of systemic banking crises in industrialized and emerging markets since World War II, Reinhart and Rogoff (2009a) find that crises trigger “deep and prolonged” asset market collapses; on average, real estate markets collapse by 35 percent over six years, while stock prices fall by more than 50 percent, on average, over more than three years. The damage to the real economy from financial crises is even more severe: economic output in the wake of crises falls, on average, by 9 percent over two years, while unemployment rises by 7 percent over more than four years. Similarly, Romer and Romer (2017) find that GDP in OECD countries is typically 9 percent lower five years after an extreme financial crisis.

Chapter 3 studies the impact of World War I and World War II on aggregate economic activity in the countries engaged in these two armed conflicts. The chapter shows a variety of effects (stimulus, slump, economic disintegration) and seeks to explain many contributing factor (including levels of defense spending) in generating these different outcomes. The chapter also examines the causes and consequences of hyperinflation in Austria, Hungary, Germany, Poland, and Soviet Russia in the first half of the 1920s.

Chapter 6 examines severe and protracted economic contractions following the Great Recession of 2008–09 in two countries on the European periphery: Latvia and Greece. It documents the evolution of main macroeconomic aggregates and social indicators in these two countries before, during, and after the 2008–09 crisis. The chapter also critically examines the role played by the International Monetary Fund (IMF) and other European institutions in the design and implementation of austerity in these economies, and draws lessons for other nations from these two experiences. The chapter also discusses the futility of democratic consultation (referendums) in Greece for the amelioration of conditionality and austerity.

O Canada! This is the national anthem of Canada, of course. But lately these words have been uttered in the most unlikely of contexts. Residents of countries around the world who have experienced the anguish of banking crises have looked at Canada’s remarkably stable banking system with awe and envy. Beginning in 2008, a global financial crisis swept North America and Europe, and several long-standing financial institutions with prestigious names – Lehman Brothers, Bear Stearns, Northern Rock, Merrill Lynch, Wells Fargo, and Fortis, to name a few – collapsed or required emergency bailouts. The crisis hit the United States the hardest, but the United Kingdom, Switzerland, Germany, Belgium, and many other countries faced debilitating bankruptcies and bank runs through 2010. Canada was different. No Canadian bank failed or required emergency funding from the government. Some Canadian banks even posted healthy profits during the height of the crisis, seemingly in proud defiance of their southern neighbor’s faltering financial system. Unsurprisingly, policymakers and social scientists around the world have wondered whether Canada holds the secret to financial stability, and if so, whether it can be replicated elsewhere.