By Stephen Roach
Published by Yale University Press (£20)
(Buy at Amazon)
The imbalances between China and the United States played a big part in the financial crisis, according to many economists. As China flooded the world with cheap goods, wages and jobs in the US were hit. US households took on big debts, while China became hooked on exports. Stephen Roach’s Unbalanced: The Codependency of America and China looks at how this happened and what is to be done.
The first two chapters set out the basic arguments of the book, including the importance of China’s reforms in the 1970s and the unprecedented integration of the two countries.
The next three chapters consider the leaders who have shaped Chinese and American policy during the last 35 years and compares economic policymaking in the two countries. The final eight chapters look at the progress of globalisation, the events that triggered the crisis and possible solutions.
Roach is optimistic about China’s medium-term future. He grudgingly concedes that it’s “far from perfect”, but believes that, thanks to reforms over the past decade, China’s economy is now no more interventionist than Japan in the 1970s or 1980s. He also thinks that it is successfully making the transition from a labour-intensive economy to one where capital investment plays a large role.
He even sees the creation of “ghost towns” – entire cities built with government stimulus money that now stand virtually empty – as a sign of forward-looking planning. Indeed, it almost seems that he thinks American policymakers could learn more from China than vice versa.
While China has overcome many problems, this argument is too bullish. Despite reforms, the state controls large swathes of industry. Trade is another area where the book’s conclusions seem debatable.
On the one hand Roach is dismissive of those who want to impose tariffs on Chinese goods as punishment for its currency manipulation. But on the other hand he wants the US to adopt a policy of “managed trade”, with the government trying to promote various strategic sectors.
Despite these problems, Unbalanced is still worth reading. Kirkus Reviews describes it as “full of implication, well-written and of much interest, especially to fiscal policy wonks”.
Glenn Altschuler, writing in The Huffington Post, thinks that it is “lucid and accessible, immensely informative and insightful”. He considers it to be “one of the most important books on the relationship between the United States and China to be published in at least a decade”.
• Unbalanced: The Codependency of America and China by Stephen Roach is published by Yale University Press (£20).