U.S. Foreign Policy

By Clyde Prestowitz

In his new book, The Next Asia, Stephen Roach demonstrates yet again why he is the best economic analyst out there, not only on Asia but on the structure and underlying dynamics of the globalization that is revolutionizing our world and dramatically shifting the balance of international power.

The Next Asia, a collection of Roach's columns and analyses over the past several years, could just as well be read from back to front as in the traditional front to back mode. Going backwards gives one the feeling of traveling with Sherlock Holmes as he unravels the threads of a great mystery to find the ultimate secret cause of the crime or accident. But either way you read it, the book is a constant reminder of how on target and correct Roach has been in his analyses of the causes and effects of economic trends over the past decade. In particular, he saw the recent crisis coming before almost anyone else, and also correctly foresaw that the much ballyhooed notion of Asian decoupling from the U.S. economy was a dangerous fallacy.

More important than what Roach saw in the past, however, is what he sees coming in Asia in the future. His fundamental view is bullish but realistic. The achievements of Asia, and particularly of China, in the past twenty years are presented not only as obviously impressive but also based on extraordinarily wise policies and leadership. At the same time, Roach focuses on the "four uns" of Chinese Premier Wen Jiabao whose statement at the conclusion of the March 2007 National People's Congress acknowledged the economy's strong performance but then went on to emphasize that despite its apparent strength, the economy was "unbalanced, unstable, uncoordinated, and unsustainable."

Coming more than a year before the fall of Lehman Brothers and the eruption of the recent crisis now being called the Great Recession, that statement was prescient not only for China but also for the whole global economy. In The Next Asia, Roach makes a double point. Whether China and India and the rest of developing Asia will continue to prosper and to lift hundreds of millions out of poverty while shifting the center of the world economy to the east will depend on removing the "un" prefix from in front of each of Wen's adjectives. This will entail two particularly daunting challenges. The Asian developing economies are unbalanced and unstable by dint of their reliance on exports to generate growth. To become balanced and stable, they must shift to domestic consumption led growth. That sounds easy but in fact will be quite difficult because the physical, institutional, political, and social structures are all organized around exports. Changing that will not be just a matter of a stroke of the Premier's pen. Similarly, the second challenge of developing in a way that does not result in unacceptable global warming and environmental degradation will also not be met only by making policy statements. Roach shows that spectacular as the Asian performance has been thus far, it will have to be even more spectacular going forward.

His second point is that the outcome is just as important to the United States and the rest of the world as it is to Asia, and that a positive outcome is not possible unless America also acts much more wisely in the future than it has in the past.

Clyde Prestowitz is founder and President of the Economic Strategy Institute. 

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This week, In Other Words reviews a new book, The Next Asia: Opportunities and Challenges for a New Globalization, by Stephen S. Roach.

In this collection of more than 70 essays, chairman of Morgan Stanley Asia and one of Wall Street's best-known economists, Roach takes a long hard look at the economy of the region and how it will shape the greater financial world of the future.

In The Next Asia Roach's analysis builds around five essential guideposts:

The world after the financial crisis; Asia's critical role in globalization; the upcoming rebalancing of the Chinese economy; a new pan-regional framework for integration and competition; and a frank discussion of the biggest risk to this remarkable transformation in the form of U.S.-China trade tensions."

Prior to assuming his current position at Morgan Stanley, Roach was the firm's chief economist, leading a global team of economists located in New York, London, Frankfurt, Paris, Tokyo, Hong Kong, and Singapore.

What follows this week is a running commentary with new discussion each day on Roach's book by special guest contributors.

By Peter Baker

The art of Kremlinology came back into vogue several years ago and among those who today make a living interpreting the byzantine machinations in Moscow rages a debate: Is Russian President Dmitry Medvedev his own man? And might he even be a closet reformer ready to break the shackles of his system?

To many skeptics, the very idea seems like the triumph of hope over experience. Medvedev owes his career to Vladimir Putin and served loyally at his side through the reconsolidation of state power earlier in the decade. While Medvedev has mouthed supportive words about the rule of law, his tenure has hardly seen much move in that direction so far.

Yet in Washington, London, Paris, and Berlin, many want to believe that Medvedev someday will emerge as a force for change in Russia, a young modernizer who subtly or openly will shift away from his patron and turn his country back onto the road toward civil society. The other night I heard a person close to the Obama administration argue that the smartest policy for the West is to give Medvedev room to maneuver and grow out of his early role as a Putin protégé.

It's interesting how familiar that debate feels when reading James Mann's excellent new book, The Rebellion of Ronald Reagan. The essential tension of the book pits Reagan against the conventional wisdom crowd in his assessment of Soviet leader Mikhail Gorbachev. While they dismissed the possibility that Gorbachev could represent anything other than a friendlier face for the old "evil empire," Reagan saw something else, a Communist general secretary ready to take on the system that created him to transform his own society.

Just how sharply Reagan tacked against the prevailing winds in Washington comes to life in Mann's account. In relentlessly pursuing accord with Gorbachev on arms control, Reagan the old Cold Warrior defied his conservative base, many in his own State Department and White House, and even Richard Nixon, the architect of détente. Although everyone told him that Gorbachev was faking his commitment to reform in order to strengthen the Soviet Union, Reagan believed his counterpart was the real deal.

As it happens, the skeptics included one Robert M. Gates, then a senior CIA official and now secretary of defense. Gates was so outspoken in his warnings about trusting Gorbachev's reforms that he clashed with some of Reagan's top lieutenants. In one memo on Gorbachev in early 1986 shortly before he became deputy CIA director, Gates wrote that all signs suggested that "on fundamental objectives and policies he so far remains generally as inflexible as his predecessors."

Gates ultimately was proved wrong. But does that mean that today's skeptics of Medvedev are? Not necessarily. The debate about Gorbachev has repeated itself since then with opposite results. When my wife, Susan Glasser, and I arrived in Moscow at the end of 2000 as correspondents for The Washington Post, many Americans wanted to believe in Putin the way Reagan believed in Gorbachev. After all, he was a young, energetic man installed by Boris Yeltsin and he was the first foreign leader to call then-President George W. Bush to offer his support after the attacks of Sept. 11, 2001.

What we saw up close, though, made clear that was a misjudgment in the other direction. Putin was not the democratic reformer Washington hoped he would be. He was a far more complicated figure intent on reestablishing strong central authority and rebuilding Russia into a great power again. He has not reestablished the Soviet Union, as some overstate the case -- everyday Russian life today is far freer today than it was when Gorbachev took over -- but Putin has labored to squelch any alternative power centers that could challenge him, from parliament and the governors to big business and the news media.

By turning over the presidency to his lieutenant, Medvedev, and becoming prime minister instead, Putin fueled new hope in the West. Many took heart from the fact that Medvedev was not among the KGB veterans known as "siloviki," or men of power, and accepted his promises to take on corruption and "legal nihilism" in Russia and "protect civil and economic freedoms" at face value. What that overlooked was the fact that Putin has said similar things over the years. And Medvedev, the professed champion of freedom and rule of law, previously served Putin as head of Gazprom, the state-controlled energy giant that has been used as an instrument of power against unfriendly media tycoons at home and uncooperative neighbors abroad.

Even as Medvedev flew to London to meet with President Obama for the first time this month, Russian authorities hauled onetime oligarch Mikhail Khodorkovsky from his jail cell to put him on trial again for what his lawyers call essentially the same charges. Many saw the move as a warning to anyone else who might get out of line like he once did -- and a sign that Moscow could not care less about protests from Khodorkovsky's friends in the West. And at the same time, Medvedev has done nothing evident to rein in Kremlin-backed Chechen leader Ramzan Kadyrov, whose enemies keep getting killed even as far away as Vienna and Dubai.

So Medvedev is no Gorbachev. At least not yet and maybe never. What Mann's book reminds us is how little we understand about what really goes on inside the Russian leadership. Russian leaders, after all, are acting not as we want them to but out of what they see as Russia's interests. Gorbachev believed it was in the Soviet Union's interest to open up a closed system and put an end to the arms race. Reagan recognized that and collaborated with him. After a decade of instability, Putin saw consolidating power both at home and in Russia's immediate neighborhood being in Russia's interest.

So when it comes to evaluating Russian leaders, American presidents have to rely on a mix of gut instinct, sober assessment, and healthy skepticism. And sometimes they will get it right, and sometimes they won't.

Peter Baker, a White House correspondent for the New York Times, is co-author with Susan Glasser of Kremlin Rising: Vladimir Putin's Russia and the End of Revolution.

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