The Great Crash of 2008; Gravity Shift: How Asia's New Economic Powerhouses Will Shape the Twenty-first Century; Strategic Asia 2009-10: Economic Meltdown and Geopolitical Stability

In This Review

The Great Crash of 2008
By Ross Garnaut with David Llewellyn-Smith
Melbourne University Press, 2009
272 pp. $19.99
Gravity Shift: How Asia's New Economic Powerhouses Will Shape the Twenty-first Century
By Wendy Dobson
University of Toronto Press, 2009
224 pp. $35.00
Strategic Asia 2009-10: Economic Meltdown and Geopolitical Stability
Edited by Ashley J. Tellis, Andrew Marble, and Travis Tanner
National Bureau of Asian Research, 2009
328 pp. $34.95

With the recent global economic crisis, the West has stumbled. Garnaut's book is chiefly about why, Dobson's is chiefly about how, and the Strategic Asia volume examines the resulting strategic shift toward Asia. But all three works agree that the ensuing power shift need not cause alarm. According to Garnaut, a leading Australian economist and former ambassador to China, the financial crash merely accelerated a movement long under way toward a "quadripolar" power structure consisting of the United States, the EU, China, and India. He rejects the theory that a Chinese savings glut is to blame for the crisis, placing primary responsibility on weak U.S. regulation. And he counsels that it will take time to rebalance the Chinese economy toward more domestic consumption, although he acknowledges that both China and the West would have suffered less if Beijing had done more rebalancing before the crash. Nothing can stop future bubbles, he believes. But the consequences could be mitigated if the United States and China were to cooperate on macroeconomic policy next time.

Dobson, a Canadian economist, argues that the ongoing "gravity shift" to the East has potential economic upsides. Sometime after 2030, she predicts, following a short reign as the world's largest economy, China will be displaced by India. Compared to China, India has long-term demographic advantages (a younger and faster-growing population) and a more drawn-out path of growth (a larger proportion of its population has yet to transition to industry from agriculture). Since domestic consumption will grow in both Asian giants, if all the economic powers adopt sensible policies, everyone could benefit from the new business opportunities.

The contributors to Strategic Asia explore the impact of the financial crisis in Asia, country by country. Long-running trends have been accelerated: Japan's economic clout has declined, South Korea's links to China have tightened, and economic hardship and political stress in Russia and Southeast Asia have intensified. Pieter Bottelier fends off the blame that some have directed at China for causing the crisis and sees wisdom even in Beijing's much-criticized maintenance of a stable dollar-yuan relationship. The editor Tellis argues that the prospects for U.S. preeminence remain bright in the long run because of the United States' open political system and adaptive institutions.

The optimistic scenarios presented in these books will come true only if the major powers maintain political stability at home and among themselves. But if that is achieved, the authors believe that common economic interests will tie the main countries together, leaving 2008-9 to be remembered as only a blip in the trajectory toward a more open global trading system.

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