Book review: Unbalanced - the Codependency of America and China, by Stephen Roach
The United States and China have become the world's ultimate odd couple, thrown together by circumstance but now so destructively co-dependent that neither seems able - or willing - to go it alone.
by Stephen Roach
Yale University Press
4 stars
David Bartram
The United States and China have become the world's ultimate odd couple, thrown together by circumstance but now so destructively co-dependent that neither seems able - or willing - to go it alone.
This is the picture painted by Yale senior fellow and former Morgan Stanley chairman Stephen Roach, who argues that the two largest economies have become so entwined that dangerous short-termism is being mistaken for mutual benefit; unhappy lovers kept together only by a shared fear of being alone.
Roach is well qualified to discuss the issue, having witnessed first-hand China's economic miracle and the Asian financial crisis while at Morgan Stanley in the 1990s. The equation he presents is simple: China is over-reliant on American consumers buying the goods it produces; and the US is over-reliant on cheap Chinese goods and Chinese investment to fund its debt.
It shouldn't take an economist to come up with the solution: China needs to consume more while the US needs to produce more. But there are many political, social and historical barriers that make such a transition easier to present on a spreadsheet than to put into practice.
Roach does an excellent job outlining these barriers. He warns against political posturing on both sides. He is even-handed in his analysis of the pros and cons of the Chinese and American political systems.
This is a topic on which plenty has already been written, but Roach approaches it with academic rigour and a knack for explaining complex ideas in simple terms. There is a passage outlining a hypothetical trade war which could work as the backdrop to a financial thriller.