6 internautes sur 7 ont trouvé ce commentaire utile
James R. Maclean
- Publié sur Amazon.com
I understand that Stephen Roach is one of the most widely respected economic analysts, and he's generally managed to resist popular _optimistic_ bromides that have had wide circulation. Roach has won a lot of respect for avoiding the "this time is different" disease, or "privatization = magic"(1) dogma that still seems to dominate Western economic thought. Still, whatever one thinks of his overall worldview, this book came as a great disappointment.
A: CONVENTIONAL THINKING
Take pretty much every mainstream media interpretation of economics, when times were bad: those interpretations are here. For example, he treats economic policy for both countries as exogenous, meaning decisions are wholly outside the economic systems of both countries. Other readers may disagree with me here, but I felt that Mr. Roach was content to treat the countries' policy choices as emerging from on high, and imputed them to simple delusions by the presumed architect. Unsurprisingly, US policymakers were supposedly weak, pandering to a sheeplike public with a distaste for sacrifice (2). In contrast, the authorities in reform-era China are mostly wise and far-sighted--they are supposed to be able to avoid adverse political feedback.(3)
Additional aspects of conventional economic thinking are: fallacies of composition in the sectoral balances of the US/Chinese economies, equating the loss of the gold standard as a moral failing of the nation, trade deficits as a decline in moral character (mostly) and so on. Economic growth is presumed to have no connection to existing per capita GDP (so that "tepid" American growth since 1972 is contrasted with robust Chinese growth since 1978); household saving rates are discussed as if households were pretty much the same (as opposed to varying vastly in income and wealth endowment).
Greece is corrupt and dragged down the EU; public deficits can be unilaterally slashed by the national government without consequences; tax incentives can induce anyone to save more.(4)
The association of US economic performance with decadence and Chinese performance with virtue appeals to common sense, but is misleading.
B: IGNORING THE REST OF THE WORLD
Europe is mentioned, in passing; but really, the book sticks to a very unhelpful treatment in which the USA and the PRC are the only two counties in the world. Setting aside the fact that Chinese and US policies (and their effects) are heavily influenced by OPEC, the EU, and other countries, we still could benefit from examining the policy approaches. For instance, the one major concrete policy recommendation Roach makes that I could find (p.228) was to replace the income tax with a consumption tax, presumably accompanied by a 75% reduction in all governmental spending at all levels. Most readers may feel this is unworkable politically, and wonder what is done in countries with large trade surpluses. The short answer is, something very different.
C: FRUSTRATING ECONOMIC ANALYSIS
Economics is supposed to provide tools for policy formation and critique. An economic analysis that insists on more virtue, or policy proposals that are impossible to implement, is a failure. In the case of aggregate spending by all levels of government in the USA, gigantic reductions on the order of 25%-75% are a staple of conservative political rhetoric but generally hopeless. Balancing the budget while concurrently shifting to a consumption tax that consumers would be capable of paying--say, a VAT of 25% combined with a virtually flat tax on income of 25%--would entail such a reduction (5). Roach then assumes that such a dramatic policy change would have no effect on the balance of the other sectors. In addition, there would be tax incentives (perhaps through rebates on VAT paid?) to save.
Roach is to be commended for attacking the China-bashing so popular in the media, especially in his chapter on "The China Gripe." This is very useful, although even he succumbs to the notion that Beijing can summon up its foreign currency reserves from the vasty deep. Otherwise, the book is pretty much Peterson Institute bromides, with a dash of Roach's signature fulminations from the wilderness--locusts, wild honey, that sort of thing.
(1) "This time is different" is pretty well-known, although I am applying it specifically to investment fads (e.g., the dot com bubble of 1993-1999). "Privatization = magic" is an idea still widely peddled, that somehow the mere existence of private equity ownership in a formerly government-administered service will automatically produce miracles of efficiency. Readers can (accurately) interpret me several different ways, as in: something can be "privatized," but avoid market discipline; or else, market failure is inherently endemic to certain sectors. And so on.
(2) I felt this exogenous fallacy was too obvious to need citations, but one example is: he persistently refers to "Washington" as a metonymy for policy choices generally. On p.143, in an otherwise-reasonably well-argued passage opposing trade sanctions against China, he warns that China could "sell off its massive position in US Treasuries." This is impossible because there is no one Chinese entity that owns those Treasuries; they have been used to recapitalize the Chinese banking system, and even a massively-coordinated dumping of those assets on global bond markets (which I seriously doubt is possible) would cost the Chinese banking system so large a share of its capitalization that it would be effectively bankrupt.
(3) The leaders of China certainly deserve some respect for this, although Roach is probably more concerned with over-correcting unduly negative views of Chinese leaders, than with a balanced judgment of his own. He cites Huang Yasheng's Capitalism with Chinese Characteristics (2008) when the latter writes about the early reform period (1978-1989), but ignores Huang's criticism of Chinese economic leadership since 1989. The entire point of Huang's book is that autocratic leadership has most of the same pitfalls as democracy in managing a capitalist economy, and China has fallen into the very pitfalls Roach objects to in the USA (see Huang Yasheng, 2008, p.16). The one difference is that the USA has a huge public sector deficit, and China's public sector deficit (while right behind the USA as a share of GDP) is more than offset by its immense household sector surplus.
(4) Roach's proposed changes to the tax code are extremely drastic (p.228); they include replacing the income tax with a tax on consumption.
(5) Daniel Altman, "What if a Sales Tax Were the Only Tax?" _The New York Times_ (17 Oct 2004); such a scheme was proposed by Rep. John Linder, with rates estimated by the author of the article. But 25% assumes only federal revenues would be raised in this way. An additional 9-10% would be required for state and local revenues.
2 internautes sur 3 ont trouvé ce commentaire utile
- Publié sur Amazon.com
Format: Format Kindle
So I read this book for old times' sake.
I've traded fixed income out of a good ten addresses, but not (yet??) Morgan Stanley. A decade ago, under Stephen Roach, they had the Street's undisputed #1 economics department. So my weekend would invariably start with the musings of Stephen Roach, Joachim Fels, Andy Xie and Robert Alan Feldman, with special attention given to avoiding anything Eric Chaney had to say, in case it inspired me to trade Sterling, where I have a solid record in losing money.
I'm happy to report he has not changed much. Others have tried to write this book (example: Michael Pettis) and failed. Stephen Roach has one story and he lays it out over 250 pages. Twenty five would have probably done the trick, but hey, he's got spare time out in Asia where they parked him once his perma-bearish outlook had become too uncomfortable for management. And if I read this right, he seems to be totally gone now and working out of New Haven. Yikes!
The story is not rocket science, but somebody had to write it: China has spent the last thirty years moving its population from the countryside to the megacities of the coast, where they assemble (but increasingly also design) consumer products that we buy in the West. It was a gamble and it's paid off, with China becoming the world's second largest economy, manufacturer and exporter. Perhaps even the largest on at least a couple of these measures. The model of the Chinese economy has become export-and-investment led, the two representing 72% of the economy (don't worry, imports bring the number back down somewhat), at the expense of the Chinese consumer, who's stuck at 36% of GDP and of the Chinese worker, who is having to look for work in the part of the economy (manufacturing) that is most open to advances in productivity.
Conversely, the US has completely given up on investment, has totally unlearnt how to save (at the government, corporate and personal level), has run a budget deficit since the Reagan years (a couple years of surplus at the height of the Clinton / Greenspan tech bubble notwithstanding), a savings deficit since 2008 and a negative current account balance since (you guessed it) the Reagan years and has made consumption (at almost 70% of GDP) the cornerstone of its growth story (perhaps even the whole planet's, at 17% of its GDP), most recently fuelled by a good 2 trillion of Treasury purchases by the Chinese central bank.
So the two states have become, in Stephen Roach's words, "codependent"
The book is a story of
* how we got here (It was an explicit and well executed strategy on the part of the Chinese, and a combination of 1. The politics of "growth addiction" and 2. Alan Greenspan's blind faith in markets on the part of the US)
* why we need to stop blaming the Chinese for allegedly stealing American jobs when (i) America shares at least half the responsibility and (ii) the US has a current account deficit with 102 economies, of whom China merely happens to be the largest but by no means the naughtiest on WTO measures
* how we can cause a 1930's style disaster if we unilaterally start a trade war
* what comes next (rebalancing, whether we want it or not, since we've reached the end of the road for both the US model and the Chinese model with the crisis of 2008)
* what specific measures both sides must take (the Chinese should promote labor-intensive services such as transport, retail, financial services etc., while the US must prepare to export such services to China, must cut its budget deficit, must give up on consumption that's never coming back because the middle class has either totally lost the assets that once drove its spending or is busy servicing the associated debt, must stop the Fed from further inflating assets because they belong to the class that does not spend anyway and must find ways to invest more, both in areas where it used to lead in, like education, healthcare and infrastructure, but also in growth areas of the future)
No doubt there are some contradictions here. Either the US government must cut the deficit or it must invest. Either the citizens should spend or they should chase even further into the sky via their saving money the very assets the Fed has inflated with its sundry bubblicious activities. But Stephen Roach loves a moan, so it's up to you the reader to draw the line somewhere; he won't.
And that, of course, is what we fanatics love about Steve Roach!