Wasted Efforts

 
Michael Pettis wrote:

They failed to recognize in their projections that as investment levels remained high – higher than the economy could productively absorb – an increasing share of growth could only be created by that part of the economy that operated under soft-budget constraints. 

This "growth" – which was really just activity and not growth – could only exist as long as the government and banking system were willing and able to tolerate an unsustainable increase in the debt associated with that activity. 

That means that as soon as debt levels became too high to continue managing, or once policymakers decided they had to address the debt before it became too high to manage, we would see much of the previous GDP growth reversed from the economy. 

Janos Kornai (Kornhauser) already discovered this in Budapest. Communist forced industrialization led to much activity and much waste.