Richard A. D'Aveni, Professor of Strategic Management

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When Consumers Win, Who Loses

For most companies, doing what’s best for consumers makes sense. But for economies, it can be dangerous.

To understand why, start by thinking of an economy as simply two groups: producers and consumers. Government policies can favor producers through import restrictions, low corporate taxes, low regulation, and easy commercial credit. Alternatively, they can favor consumers with free trade, low sales taxes, pro-consumer regulation, and easy consumer credit. Either group can also get direct subsidies: tax breaks and grants for companies or transfer payments for consumers.

Every economy is a mix, but usually one group gets more goodies than the other. China is famous for its producer-oriented economy—a capitalist paradise where tariffs, government supports, and generous bank loans make it easy to build a company. Consumers (and workers) have few rights and little access to credit. Experts often call on China to do more to favor its consumers.

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