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Accidental Conflict: A Conversation with Stephen Roach

In Accidental Conflict: America, China, and the Clash of False Narratives, Stephen Roach discusses the misguided forces driving conflict escalation between America and China. Based on a hard-hitting analysis of both nations’ economies, politics, and policies, Roach offers a new road map to restoring a mutually advantageous relationship. Here, he talks to us about his plan for conflict resolution and the challenges of “keeping up” with current developments in a rapidly changing conflict.

This book and your previous one, Unbalanced, both rely on the metaphor of codependency to describe the U.S.-China relationship. What inspired you to make use of this diagnosis from the DSM, and does psychology appear anywhere else in your work?

SR: I have been focusing on the U.S.-China relationship for about 25 years. I was always struck by the increasingly powerful two-way connection. At the same time, I have long been taken with the implications of behavioral economics—a new and exciting offshoot of traditional economics. When I was a Wall Street economist, I drew heavily on behavioral economics to help me understand the “asymmetrical impacts” of the bursting of the U.S. equity bubble in the early 2000s—more pain from the loss of wealth than joy from the accumulation of wealth. Fast forward to the early 2010s and it made great sense to think about a behavioral overlay for the relationship dynamic between these two powerful nations that were increasingly drawing on the other to sustain their economic growth imperatives. I wondered how stable this codependency might be in the end. Being married to a psychotherapist also had an impact on my fascination with behavioral economics and my related interest in viewing the U.S.-China conflict as a relationship problem.

You mention the prevalence of online extremism, particularly involving social media, in the U.S.-China relationship. Do you have any ideas for how to de-escalate this discourse?

SR: I am deeply troubled by the polarization of online extremism as amplified by social networks. Accidental Conflict frames this as a key accelerant of the viral dissemination of false narratives, both in the United States and China. In China, social networks amplify the spin of heavily censored Chinese discourse power. In the United States, social networks amplify a virulent strain of information distortion that fuels divisiveness and extremism. The Big Lie of a stolen 2020 U.S. presidential election is a glaring case in point. The American strain of information distortion needs to be addressed by the U.S. Congress. As I note in my new book, Frances Haugen, the Facebook whistleblower, made this apparent in her stirring testimony in front of the U.S. Congress in October 2021, and former President Barack Obama was emphatic in raising similar concerns in a stirring speech in Stanford University in April 2022. Just as state-directed censorship is a breeding ground for China’s false narratives, polarized information distortion poses a grave threat to American democracy. Sadly, online platforms have become lethal weapons of social decay and political intolerance. Regulatory oversight is imperative.

How did your three decades with Morgan Stanley inform your present work and perspective?

SR: There were two distinct halves to my Morgan Stanley career—the first being a focus on the U.S. economy and the second as the global chief economist focused initially on Asia during the Asian Financial Crisis of the late 1990s and then increasingly on China as the new post-crisis leader of the Asian economy. When I came to Yale on a part-time basis in 2010 and then permanently in 2012, it made great sense to me to pull the two strands of my Wall Street career together in developing new courses like “The Next China” and “The Lessons of Japan.” Both of these courses are deeply grounded in my first-hand experience as Morgan Staley’s chief economist and then as the Hong Kong-based Chairman of the firm’s Asian businesses. These experience-based insights were important as a teaching device in the classroom that made these courses especially popular with the current generation of Yale undergrads.

How can China and the U.S. maintain the high growth rates you write are necessary for economic success while achieving sustainability targets?

SR: In both Unbalanced and Accidental Conflict, I raise concerns about the long-term implications of China’s hyper-growth gambit—30 years of 10% real GDP growth from 1980 to 2010—that led to worrisome structural imbalances in the economy and ominous sustainability concerns. I urged China to refocus away from excessive emphasis on the quantity and speed of top-line growth and place greater emphasis on higher-quality, albeit slower, economic growth. Since 2011, while Chinese real GDP growth has slowed to a 6.7% average annual pace, it is not clear that this reflects a new emphasis on higher quality economic growth, as there has also been a marked slowing in the growth rate of total factor productivity (TFP). The United States, with equally worrisome TFP concerns, faces similar challenges. If both nations are to hit sustainability targets associated with reduced greenhouse emissions and increased emphasis on alternative (non-carbon) energy consumption, then TFP-led growth must be an increasingly urgent priority. This will require emphasis on indigenous innovation and investment in human capital—challenges now widely recognized by both nations and their leaders.

In the final chapter of Accidental Conflict, you suggest a bilateral investment treaty and U.S.-China secretariat as a plan to begin relationship repair between the two countries. Why might this approach make a difference to conflict resolution?

SR: I start with the premise that the current approach is an abject failure. Whether it has been a series of Strategic and Economic Dialogues—which devolved into unproductive event-planning exercises—or highly scripted leader-to-leader meetings and phone calls, the relationship has gone from bad to worse in recent years. Since 2018, the United States and China have been embroiled in a trade war, a tech war, and now the early stages of a new cold war. The failed “Phase I” trade accord between the United States and China signed in January 2020 illustrates the serious shortcomings of this approach. I argue that the emphasis needs to shift from a zero-sum bilateral trade perspective to a positive-sum market-opening growth initiative such as a bilateral investment treaty (BIT), where U.S.-China negotiations were near the finish line in late 2016. I recognize that implementation and compliance are key to a successful BIT, and my focus on a bilateral U.S.-China Secretariat was made with that key consideration in mind. The secretariat also meets my objections to the inadequacies of the current state of the dialogue between the two nations noted above. The world’s most important relationship is deserving of something far better than infrequent and episodic exchanges of views. As I detail in the book, a full-time secretariat located in a neutral jurisdiction would go a long way in filling that void and providing energy and shared commitment to relationship management in the years ahead.

You mention the rapid news cycle you engaged with while drafting this book—what is your preferred method of keeping up with developments in current affairs?

SR: No shortcuts here. Three priorities—read, read, and listen. I skim at least five newspapers daily, headlines and stories from well-known news and intelligence aggregators, major news and cable platforms, and I try to stay up to date with an overflowing email inbox of messages and updates (recently adding Twitter to the inflow). It’s actually pretty exhausting to keep up with today’s increasingly intense high-frequency news cycle. When writing, I hit the off button for extended periods. When I re-engage, the rush of developments often feels like I am diving head-first into a high velocity wind tunnel! In truth, “keeping up” has become something of an oxymoron.

Accidental Conflict notes the uncertain state of Sino-American affairs has been worsened by China’s new “unlimited partnership” with Russia. How does Pelosi’s recent visit to Taiwan contribute to the mix?

SR: The basic premise of Accidental Conflict is that the worrisome trajectory of conflict escalation between the United States and China would not have happened were it not for the unfortunate clash of false narratives that both nations have with respect to the other. The bulk of the book, which details false narratives on both sides of the relationship, underscores the potential combustibility of the high-octane fuel of increased conflict that could be ignited by any one of a number of sparks. With missiles flying in the Taiwan Straits, only time will tell if the clash that has arisen from Speaker Pelosi’s recent visit to Taiwan will be such a spark. Nor is Taiwan the only such possibility, especially as Russia—China’s new unlimited partner—wages unthinkable war in Ukraine. The point is that with the two nations now on an ominous trajectory of conflict escalation, it wouldn’t take much to spark ignition of the high-octane fuel of conflict escalation.

Stephen Roach is a Senior Fellow at the Paul Tsai China Center of the Yale Law School and the former Chairman of Morgan Stanley Asia. He is also the author of Unbalanced: The Codependency of America and China.

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