The Next Asia By By Stephen Roach Publisher: John Wiley & Sons Price: $39.95 | Pages: 141

There has long been a dispute over the English language translation of the Chinese word for crisis. One popular view is that weiji roughly translates into the compound phenomenon of both danger and opportunity. Unfortunately, that meaning—correct or not­—has been lost on a world in crisis. Today, more than ever, a world in crisis and recession needs to pull together—not push itself apart. Globalisation and its cross-border connectivity through trade and capital flows leave us with no other choice.  

The blame game is completely counterproductive in this environment. Those blaming surplus-savings economies such as China for America’s unsustainable spending binge ought to be embarrassed. This is a US problem and one that must be addressed at home with a new and disciplined approach to monetary policy, tough regulatory oversight, and more responsible behaviour on the part of consumers and businesses, alike. A bubble-dependent economy that lived beyond its means for a dozen years must now accept the reality of having to live within its means—and not holding others accountable for this painful yet necessary adjustment. 

Similarly, China needs to accept that the export-led growth formula always had its limits. An unprecedented external demand shock, driven by rare synchronous recessions throughout the developed world, drives this point home with painful clarity. Economic development is not just about producing for others—especially if those others are living beyond their means. In the end, export-led growth must eventually give way to the internal demand of a nation’s private consumers. China is ready for this transition and must begin the process as soon as possible. 

In short, it is high time for an unbalanced world to begin the heavy lifting of global rebalancing. By framing such an adjustment in the context of the United States and China, the verdict is clear: America needs to save more and consume less, while China needs to save less and consume more. 

Easier said than done. But a world in crisis can no longer afford to perpetuate an unstable status quo.

Global rebalancing is not a quick fix and therefore, is not all that appealing to myopic politicians. But in the end, it is the only way to put the world back on a sustainable growth track. If there is a silver lining to this crisis, it must be in the wake-up call that it sends to politicians and policy makers throughout this unbalanced world.