Perhaps the most toxic fallout from 2008–09 was not economic but rather geopolitical. It severely damaged faith in free markets in much of the world–most ominously in Beijing–even though government folly brought on the crisis. Policy errors that subsequently stunted U.S. growth for nearly a decade reinforced the perception in China, Russia, Iran and North Korea that the U.S. was a declining power, and they acted accordingly. It will take a few years of good, solid growth in America to put an end to this kind of deluded–and dangerous–thinking.
Whatever differences it had with the U.S., China believed Americans understood money and finance. The disillusionment triggered by the crisis quickly set in motion a resurgence of Chinese government intervention in the economy that goes on to this day. Violations of international trading rules that Beijing had agreed to honor proliferated. Forced transfers of know-how and trade secrets from foreign companies to Chinese ones mushroomed, as did involuntary mergers with domestic entities.