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12:01AM

Op-ed in China Daily: "China, US as strategic collaborators"

China, US as strategic collaborators

by Thomas P.M. Barnett

 

The word "war" has been appearing increasingly in American debates about China, with the range of potential venues expanding with each new "intractable" issue that arises. Pile enough of these wooden scenarios atop one another, and eventually someone will strike the match. There will always be self-interested parties eager for confrontation, even though the two countries' peoples seek nothing but peaceful coexistence.

Today we share a world more prosperous and more at peace than at any time in human history, so why are we on this undesirable path? Besides the Cold War and the legacy issues retained to this day (Taiwan, the Democratic People's Republic of Korea), there is no historical enmity between our peoples. Since neither situation logically triggers direct military conflict, all of our potential conflicts must be recognized as wars of choice.

An objective examination of globalization's current state and future evolution reveals far more complimentary interests than conflicting ones. As the global financial crisis revealed, China and the United States face shared dangers that must be eliminated - whether we welcome this joint responsibility or not. Neither side's political system presents an ideological threat to the other. Each country's internal structural challenges are its own business or choice, and each will force evolution at a pace its society can handle or demands. Despite these current rumblings, let me tell you why strategic collaboration between China and the US is essential.

In the business world, companies seek partnerships when the proposed relationship is:

  • Critical to a core goal of the enterprise;
  • To exploit a core competency;
  • To effectively counter a competitive threat;
  • To provide flexibility regarding future choices; and
  • To reduce a significant risk.

The US' grand strategy for the past seven decades has been to create the globalization we know today. Our firm belief being that the world is a better and more prosperous place when everybody has an "open door" on trade and investment. This is how the United States of America truly united.

Starting with Deng Xiaoping's historic reform, China integrated its economy with that of the rest of the world, marking the tipping point between an international liberal trade order built on the West and finding completion with the "rest".

But China's participation comes at the cost of a dangerous resource dependency far greater than the US has known. Over time, China's economy will depend ever more on energy and minerals. For now, the US essentially covers that security risk through its global policing role, but that effort is unsustainable. For China to succeed in its core goal of creating a well-off society, globalization must be simultaneously advanced and stabilized.

Sino-US strategic collaboration plays to each nation's current core competencies. China does not have a military with global reach, but the US has one now and it is deeply experienced. Yet the US forces struggle with nation building, while Chinese multinationals clearly excel at creating infrastructure, markets and opportunities for income growth in developing economies. China is also a major contributor of peacekeeping troops to the United Nations.

Today, as the primary face of globalization, the US is targeted by virtually every threat mounted by the enemies of global integration and economic modernization. China has already surpassed the US as globalization's primary integrating force - and inevitably its face too. Irrespective of China's intent, it will become the main target of violent extremists bent on keeping globalization at bay. Today the "long war" belongs to the US; tomorrow it will burden China.

For years I have written of Washington's need to "lock in China at today's prices", meaning the cost of China's cooperation would rise with time. Back then I believed that, without such cooperation, the US' strategic choices would narrow considerably.

That day has arrived, meaning the choice is now China's: lock in US cooperation in safeguarding China's vital global export and supply lines or watch your own strategic choices narrow. Imagine a Middle East regional war years from now that the US chooses not to manage because it's primarily China's energy that's at risk. That burden will be devastating for China.

Thus, Sino-US collaboration on stabilizing less-developed regions mitigates significant strategic risk to both nations. Globalization, buttressed by Sino-US strategic cooperation, cannot possibly fail. But globalization, when divided in spheres of influence, dissolves into zero-sum contests where humanity is the ultimate loser.

About such danger, our collective past speaks clearly to our shared future.

The author is the chief analyst of Wikistrat, an Israeli startup company that offers strategy consulting, and has several books, including Great Powers: America and the World After Bush, to his credit. 

Find the original 12/9 post at China Daily.

COMMENT:  I love the cartoon and will probably have it framed.  I am also getting used to having the word "Israeli" follow my name, which . . . is different.  Actually, I like it in that "I'm Spartacus!" kind of way.  I mean, who doesn't want to be part of an Israeli start-up?

WHERE IT HAS ALREADY BEEN PICKED UP (these being ones my contacts at China Daily found significant):

 

12:01PM

China Daily interview video re: grand strategy term sheet

12-13 minutes long.  Find it here.

12:01AM

Indian Express on the Sino-American grand-strategy term sheet

Piece by K. Subrahmanyan, a name you might recognize from his frequent publications.

From his Wikipedia entry:

K. Subrahmanyam (Tamil:கிருஷ்ணசுவாமி சுப்பிரமணியம், born 1929) is a prominent international strategic affairs analyst, journalist and former Indian civil servant. Considered a proponent of Realpolitik, Subrahmanyam has long been an influential voice in Indian security affairs. He is most often referred to as the doyen of India's strategic affairs community, and, more contentiously, as the premier ideological champion of India's nuclear deterrent.

Somewhat unsurprisingly, Subrahmanyam takes the "G2" approach, assuming the zero-sum outcome for India and the rest of the world.  Nothing could be further from the truth, but one must expect this sort of response.

The Sino-American relationship is central to globalization's success or failure--hard to deny that.  That relationship is not in good shape right now, for a lot of reasons.  Trying to address that cluster of macro-imbalances is a worthy goal, but such effort does not--on the face of it--automatically insinuate the creation of G2, and when that charge is so reflexively slung, you have to say that it tells us more about the provider of the feedback (as in, this is how this proposal makes me feel!) than the effort itself.

It is certainly in some people's best interests to keep the U.S. and China at odds, but I honestly don't believe that to be the case for India, when the facts and trends are viewed objectively.

From his piece ("The return of G-2"), I limit the exerpts more to his commentary than his recitation of the proposal, which--of course--is a work in progress and is already significantly altered as we receive significant feedback here in Beijing.  Suffice it to say, nobody here in Beijing is interested in "G2," even as they are highly interested in a more productive relationship with the U.S. 

Even as President Obama and Prime Minister Manmohan Singh talked of a 21st century world order based on their shared values as leaders of the world’s two largest democracies, a newspaper run by the Chinese Communist Party published a plan for an alternative world order, based on a mutuality of interests between China and the US. It asserted, though, that the article, in the November 22 edition of People’s Daily Online, represented only the views of the authors — who include John Milligan-Whyte and Dai Min, authors of China and America’s Leadership in Peaceful Coexistence, and Thomas P.M. Barnett, the author of The Pentagon’s New Map, and leading Chinese policy experts.

The article describes the benefits of the grand strategy they propose: “[it] will promote US economic recovery, increase US exports to China, create 12 million US jobs, balance China-US trade as well as reduce US government deficits and debt. Furthermore, it will stabilise the US dollar, global currency and bond markets. It will also enable reform of international institutions, cooperative climate change remediation, international trade, global security breakthroughs . . . 

There is no doubt that while this is not a formal proposal from Chinese official circles; this is kite-flying, to test public reaction in the US. It is possible that the idea is to suggest that the US and China can accommodate each other to mutual benefit — and China shares the US view that a war between two such powers in the 21st century would not make sense. It also holds out certain assurances that China will accommodate the US’s concerns on Southeast Asia as well as on North Korean and Iranian proliferation, provided the US reciprocates on Taiwan, Tibet, Xinjiang, and human rights. The US must also forget down its desire for regime change in North Korea and Iran. And, in return for the US lifting its high-technology trade ban, China will invest $1 trillion in the US, presumably in new technologies, as well as help in balancing trade and enabling the US to manage debt reduction.

But the glaring gap in the proposals is that there is no mention of Pakistani proliferation and Pakistani sponsorship of terrorism. While all the other issues listed by China are important to the US, casualties are being incurred by the US on the Pakistan front, and the US homeland is under threat from Pakistani terrorist organisations that are fielded by the Pakistan army behind the nuclear-missile deterrence shield that China provides to Islamabad. This may have one of two implications: either Pakistan, unlike North Korea and Iran, is not under Chinese influence; or Pakistan, in Chinese strategic interests, is a non-negotiable factor.

There is also no mention of US interests in India — even after the development of the Indo-US strategic partnership. Does this mean that China hopes to wean the US away from its strategic partnership with India, as part of the price for the deal? Or do they hope to frighten India into a non-aligned submission to China’s hegemony over the mainland of Asia (less Asean)?

China’s, and the authors’, value systems are evident from their advocacy that such a Sino-US deal should be outside the purview of the US Congress purview: they say it should be “agreed upon by the presidents of both nations through an ‘executive agreement’ not subject to US Senate ratification.” Surely, now that these ideas have been publicised, the present US president — with two years to go before seeking re-election — will find it difficult to move in this direction, as there will be accusations of his selling out to China.

It is also clear that there are sections in China who are of the view that, just as the US helped China’s rise to second position in the world so that its resources and cheap labour could benefit US multinationals and US consumers — both by way of cheap consumer goods and credit expansion in the US — now the US will help China by releasing high technology, and thereby help themselves, benefiting through job creation and debt reduction. And once China has access to US high-tech, its demographic advantage over the US will ensure it will become the superior knowledge power this century.

A significant number of people in this country imagine that there is an adversarial equation and a conflict of interest between China and the US, and thus, it will benefit India to be non-aligned. This article — published, significantly, on the eve of Prime Minister Wen Jiabao’s visit to India and Pakistan — holds out the possibility that China thinks it is possible to use the US to attain hegemonic power. Let us wake up to reality!

What to say?

First, the non-inclusion of the Pakistan-India dyad hardly amounts to signaling any desire to leverage this relationship to their collective or singular advantage or disadvantage.  It simply reflects the reality that when people on both sides of the Sino-American dialogue speak to its ups and downs, those issues aren't considered central. Important? Sure.  But not central.  No one is saying that Pakistan and/or India constitute the core of what's wrong or going wrong with the Sino-American relationship right now.  Reflective of it, perhaps, but not among its primary causes.

Noting the suggestion that the proposal be done as an executive agreement (longstanding practice of U.S. presidents for such matters) hardly suggests something extra-constitutional or politically devious.  Just the opposite!  It says we see no purpose in suggesting something on the level of a treaty requiring Senate ratification.  None of this is intended as "law of the land"-caliber stuff:  we simply come to certain understandings that allow an economic rebalancing to proceed.  That is classic, within-the-president's-foreign-policy-purview stuff.  Suggesting otherwise is sheer ignorance of how our political system works and has worked for decades. The economic rebalancing itself would need some political direction from above, but it would be overwhelmingly a private-sector-driven affair.  If you're a U.S. business and don't want any investment from Chinese companies, then don't ask for any and none could ever be forced upon you. From the Chinese side, they simply will not enter into alliances or treaties implying any such commitment, so no sense in supposing such grandiose mechanisms are useful here.  

It's as simple as that.  

Yes, you will get some of this, "the Chinese will own America" fear-factor, but if majority ownership is out of the question (and we don't suggest that--just the opposite), then the question becomes, Should Chinese money flowing into America be used to facilitate even more public debt and welfare payments or should it be put to use putting Americans to work?

I honestly believe that it's much easier to argue that China does a great job of destroying America's competitiveness by enabling our addiction to federal debt right now than it does by being stubborn on the renminbi's value. History (especially past history with Japan) tells us that revaluing the RMB will not solve our trade deficit with China.  We also screw ourselves by restricting high-tech exports to China due to military concerns, because they simply turn around and buy the same from the EU (like most such sanction efforts, we only hurt ourselves in this globalized economy, achieving nothing on the security side).  But somehow we've let ourselves be convinced that China's potential military threat outweighs all such considerations--as if Mutual Assured Destruction somehow gets invalidated in the process!  To me, that's just nuts, or--put more prosaically--bad leadership in Washington.

Again, the proposal is driven by a simple logic:  There is a profound imbalance of easily-accessible investment capital in the world system right now.  China's got a ton and America (and Europe) are somewhat starved by comparison and wracking up unsustainable public-sector debt that is already causing default crises in the EU, soon to be followed by some variant at lower levels of US government (cities, states).  You can judge that dynamic from a lot of angles, but just to say, "Ahah!  Now China has the West in its grips!" is rather silly. China presses its temporary advantage too much in the short term and all those trillions can end up being worth nothing.  Business is about parties and counterparties--as in, you need two to tango.  

Judged objectively, China has let in a lot of foreign direct investment over the past two decades, to the point where majority portions of its exports in certain sectors are actually controlled by foreign firms!  Imagine the U.S. putting up with that?

On the other hand, it's clear that the U.S. has shouldered the bulk of the global policing role over the past two decades.

So in both instances, we need something more balanced, more reasonable, and more sustainable.

This proposal simply begs the question:  if such rebalancing is necessary, what would the nature of such transactions look like if they weren't simply conducted according to America's preferred outcomes but actually reflected a compromise between the U.S. way and world vision and the Chinese way and world vision?

I know, I know. This is kowtowing to those communist Chinese! But more seriously, didn't we just try a long stretch of my-way-or-the-highway BS with Bush-Cheney?  And how well did that work?

How anybody can feel threatened by such dialogue is beyond me, given the seriousness of the current imbalances in the world system and how their solution is in everybody's best interest. Again, let's get our inner FDR on and have some faith in who we are and stop being such wimps on dealmaking.  Our inability to motivate ourselves beyond sopho-moronic internal arguments is our greatest weakness right now.  Oooh wee! The GOP just nailed Obama on tax cuts!  So now we get to extend unemployment benefits while refusing to pay for it.  What a fab signal to send the world!

Honestly, the immaturity factor in Washington right now is almost unbearable to witness.  It's just so embarrassing to endure when you travel abroad--especially in China.  How can we be taken seriously when we act this way?  We are just kidding ourselves if we think no one takes note.

India cannot want a U.S. and P.R.C. turning on each other and destroying globalization in coming years, because India cannot possibly prosper in that environment.  You can say, such a bad thing would never happen, but to me, this is a head-in-the-sand sort of optimism.

The Global Financial Crisis does not disappear simply because of the somewhat successful (less in West, more in East) public-sector stimulus push in the initial phase.  Much of the crisis's underlying causes are simply transmuted into the current/looming sovereign debt crises that worry so many leaders and--quite frankly--a decent chunk of the American middle class as captured in the Tea Party anger (which you can ridicule at your own risk, because history says that, when the U.S. middle class ain't happy, ain't nobody gets to be happy in our political system).

You can also say, China is right to lecture America now on its bad economic behavior.  But such lecturing gets both sides--and the world--nowhere.  For China to expect all the adjustment to happen now solely on America's side is unreasonable, just as unreasonable as the U.S. expecting somehow that all the adjustments should be on China's side.

But the dialogue, as it current stands, consists of both sides talking past each other and hoping that--somehow--this all balances out on its own over time.  I think such a mindset it truly naive.  Both sides have plenty of incentives and reasons not to budge, leaving both with increasingly unpleasant tools/weapons for seeking redress.  I think that pathway is a bad one, and so I got together with the Center for America-China Partnership to change the conversation.

Such an attempt can be criticized from numerous angles, and the Indian Express piece offers one such angle. But we've got to get over the fear of exploring real solutions with real compromises and real adjustments on both sides--simply because it will make others around the world nervous.  That would be the opposite of global leadership, which both countries owe the world right now.

Personally, I will always be warned not to get involved in this sort of manner, because it will cost me my credibility as a strategic thinker.  My response to that logic is, What is the use of being a credible strategic thinker if all you do is sit on the sidelines at such moments?  I hope to leave behind six kids who'll need a strong America and stable world to live and work and prosper within.  I see no reason to amass a reputation (such as it is!) that can suffer no risks.  Geez, anybody who knows me knows how much I like being an unreasonable troublemaker!

I have no fear of altering my positions and vision to fit reality as it unfolds.  I marry myself to as few core interest propositions as possible, because the more you accumulate, the more dead your thinking becomes.  I want America at all times to succeed to the best of its ability in prospering and continuing to shape this world for the better.  I think we do that better than anybody, but I also think our approaches have to change when success/failure stare us in the face (usually at the same time, as we now face the great success of our globalization process AND the addiction to cheap money created by the dollar's standing as reserve currency).  I cannot, for example, logically argue for regime-change in NorKo right now like I did in 2004-05.  The system wouldn't handle it well right now, the Sino-American relationship couldn't handle it right now, and there's just bigger fish to fry.  

You see such vaunted and highly-respected figures like Krugman, Tom Friedman, Niall Ferguson and Zakaria expressing extreme alarm on all these same issues, so this is exactly the sort of nexus where strategic thinking that posits win-win scenarios has to be employed.  Just this week on Zakaria's GPS, Ferguson raised the issue of the EU possibly needing a huge flow of Chinese capital down the road.  So this proposal is in the right zip code even as we hammer out its weaknesses with a steady stream of sit-downs with Chinese experts this week in Beijing.

As for personal risks, you've got to get over that stuff (and yourself, quite frankly).  I don't get 50 lives to test out various pathways for useful application of my ideas.  I get this one, and this one has this big issue staring it right in the face right now, and so I participate with likeminded people in China--none of them perfect and all with their biases, but likewise all with their hearts in the right place. I'm still unduly Catholic:  I prefer to sin first and seek forgiveness later.  

I believe in having your own foreign policy and have said so many times on this blog.  This is the point of being in the field in the first place. If I were good at following the command chain, I wouldn't have gotten fired from the Naval War College and I'd probably being living some quiet existence as a CIA analyst (the organization correctly turned me down in 1990 for having the "wrong personality type"!).  

Frankly, this sort of bold scenario work is exactly why I linked up with Wikistrat.  I want nothing better than to undermine conventional thinking at this point in history, because I believe it to be America's worst enemy in these tumultuous, system-shaping times (the second biggest danger being the lack of competent strategic-thinking counterparties around the world because we've so long been the only country blessed with the strategic means to encourage such strategic thought--a situation changing rapidly before our eyes).  

Personally, I think this is the best time to be in this business--the best time since WWII.

9:08AM

A deep discrediting of the political process in Washington

Economist story on party affiliation and op-ed from the NYT comparing now to the Gilded Age--a favorite theme of mine.

As I've long argued, the Boomers have been a terrible generation of political leaders.  As in the case of most revolutionary generations in history, once the initial stab at change in their youth fell to the wayside, the real talent went into business and technology and changed the world--dramatically--for the better. The dregs went into politics and, in the process, have managed to thoroughly discredit it as a career and force for good in our society.

Last time it was this bad in America was those latter decades of the 19th century.  The "revolution" then was the U.S. Civil War, and the crew that came out of that crucible was dramatically altered in character and vision and--most importantly--in personal connections.  The bonds forged by war led to a lot of follow-on business development during a great and lengthy boom time.  But it was an era much like today:  frontier integration thanks to a rapidly expanding continental economy, the knitting together of a sectional economy into world-class "rising China" of its age, huge flows of people and FDI into the country--a miniature version of today's globalization.  

And during that age of booms and busts and the early populism that accompanied it, politics became a very dirty profession, so much so that when progressive icon TR decided to step into the fray, his wealthy NYC family begged him not to do so--it was considered such a huge step down from respectable obscurity. Few of us came name any politicians from that era (distant relation Grant being my favorite), but we all remember the industrial-financial titans, whose very names equal wealth: Rockefeller, Carnegie, Morgan, etc.

We live in very much the same age now, poised to move into a progressive era.  I know that word is a favorite target of Glen Beck with his whacked-out history lessons, but it's clear to me we need a cleaning-up period much like back then.  Politics needs to be re-credentialized, but it can't happen so long as the current cast of small minds (I'm with Michael Bloomberg on this one) are on the stage.  The downshifting in talent and vision over the past three decades has been supremely depressing.  I grew up with WWII-era giants in politics, and I miss the class and the intelligence and professionalism and--most of all--the ability to forge deals.  Now we suffer such unbearable fools.

And so we get "change" after "change" election, a good corollary to the Gilded Age.  I think we'll need a few more before the next generation of leadership starts making itself known.  Obama was an avatar of this movement; he just turned out to be too much like Jimmy Carter when he got into office.

The Economist piece demonstrates the popular disaffection with politics: we are more and more a one-third, one-third, one-third electorate--as in, one-third Dem, one-third GOP and one-third Independent.  I would count myself in the Independent crowd, as I have a hard time imagining myself in either party.

When does the big change come?  A peer-to-peer generation is already remaking a good chunk of our society/economy. Eventually the Millennials move into the political realm and have their impact.  

Like so much of what I track, then, this is another thing that registers more in the 2020s/2030s, signifying the 2010s as a transition decade to be finessed--and survived.  

We navigate an age where we should setting up the big deals that shape our future, like transitioning from old alliances to new.

8:22AM

Two I've been waiting on: UAVs poised to explode across civilian sector and China's preference for boys eroding

WSJ story up first.  Dovetails very nicely with the "Six Degrees of Integration" entry we had in the sample Wikistrat "CoreGap Bulletin."

The first prediction was an easy one for anybody who's worked for the military as long as I have:  UAVs will become a part of everyday life, just like the Internet and GPS before them.  When you work with the military, you simply come to accept these fantastic advances as routine, especially when you have years to get used to them mentally before they're unleashed upon the public.  I didn't come along early enough to catch arpanet (DARPA's original Internet; DARPA being the Defense Advanced Research Projects Agency), but I had years of exposure to GPS prior to its release into the wild, and it wasn't hard to imagine that it would change things--always being able to track exactly where you are. 

So with the UAVs getting smaller and smaller, the difference between them and what model plane enthusiasts have long toyed with gets less and less, meaning the latter enter the game. Already, as the piece points out, there's this gray area of regulation known as "recreational use of drones."  As one former CIA counterterror guy who now works for a drone company puts it, "The only thing you're bounded by is your imagination--and the FAA in the United States."

I used to predict that UAVs would be all over by now, because I could see the trajectory unfolding a decade ago, like with GPS, but then 9/11 kind of chilled that feeling, because all of a sudden, everybody was scanning the skies for dangerous objects. But with the Long War providing such a strong and persistent requirement, things got quickly back up to speed. 

And when you think about it, helicopters are actually pretty hard things to fly and so they come with plenty of crashes, so unless carrying bodies is a requirement, why not switch over to drones everything else.  Think of all the traffic and weather copter work. Then there's the paparazzi stalkings of celebrities or using helos to scout disaster zones.  None of that requires a body in the vehicle--just the video feed.

I know, I know.  Politicians looking for photo ops will suffer, but so will celebrities seeking to avoid them.

Great line from the piece from a divorce attorney:  "If the Israelis can use them to find terrorists, certainly a husband is going to be able to track a wife who goes out at 11 o'clock at night and follow her."

Safety issues galore.  Wait until the first murder happens in a civilian context.  Privacy issues too, of course. Bullying will follow, as will scams.  It'll be a new way to sneak into ball games or to virtually attend exclusive events ("Look, there's the President!"). And, of course, terrorists will use them successfully.

And many journalists will write "Pandora box" pieces, but life will go on, becoming that much more interesting/complex/weird and ultimately routine enough on this score.

Second one I've been waiting on and it's apropos of my Chinese daughter's birthday this week:  FT story on how property bubble is latest bit to erode Chinese preference for sons.  

The one-child policy came faster than urbanization could change age-old norms, so we soon got the dearth-of-females issue that a few demographers have beat to death as a cause for future wars ("Horny guys of the Middle Kingdom--unite and let's conquer . . . oh hell, let's just hop a plane to Vietnam and get a bride this weekend  I'm buying the first round!").  But when we were there adopting Vonne Mei, I remember all these young women seeing me hold her:  they'd bring over their boyfriends, point at me, and then punch them in the shoulder, spewing a few sharp lines.  Guy would look stunned and embarrassed, rub his shoulder while staring at me, shake his head a bit, and then meekly follow the young woman away.  You could just imagine what she said. 

But the vibe was really two fold:  "See!  Americans like girl babies!" and "See, that's how a Western man helps his wife by taking care of the child!"

You could see both norms beginning to take hold in the minds of young women who were getting better educations, were no longer trapped in the village, and were looking at urban careers in their future.  All these things combine to delay pregnancy, but they also shift the preference from boys to girls.  You need boys if working the fields is the big thing, but if you're going to age in urban settings, it's the girl who's far more likely to take care of you in your old age in an interpersonal sense (the Chinese adage of "A daughter is a warm jacket for a mother"), and if she's going to have a career now, then the difference between her and the moneymaking son erodes further, especially since the daughter doesn't cost as much as the son when it comes to marrying them off.  Custom in China has it that parents must buy the son a flat before he can marry.  

The FT piece points out that the tide has already turned in major metros like Beijing, going back almost 15 years.  China went majority urban a few years back and will urbanize at a stunning rate going forward.  Hence, the big sex imbalance fear, like most demographic issues, is already finding solution by the time we discover its outlines.  Doesn't mean there won't be a single generation significantly impacted; just means the problem is a lot more temporally bounded than realized.

And when you talk about that one generation being impacted, remember that a lot of these guys, if unable to find wives at home, will either travel for them or emigrate on that basis.  My favorite historical example of such willful flexibility:  Chinese male "coolies" come to America in the 1800s and end up building big chunks of the frontier West as manual laborers--like the RRs. They can't bring their women along and many are never able to return.  So who are one of their prime targets for inter-racial marriages? Irish Catholic widows, showing that where there's a will, there's a way.

In the end, China's "unique" problem goes away like it does everywhere else, because modernization tends to erase such "unique" values (that weren't really unique in the first place but simply represented a people trapped in time). Now, you could say Chinese couples are "time traveling"--a concept I want to explore in the Wikistrat globalization model: when change comes so quickly that it makes people feel like time is being compressed and thus they're rocketing forward in time in some domain. Think about it here:  thousands of years of custom altered in roughly one generation. That, my friends, is real time travel.  And it's social revolution.  China's rise has this impact at home--and abroad.

9:14AM

WPR's The New Rules: A Zero-Sum Future Doesn't Add Up

Writing recently in the Financial Times, long-time economic journalist Gideon Rachman lamented the passing of a post-Cold War "golden age," in which "countries shared a belief in globalization and Western democratic values." In Rachman's calculation, that consensus has been battered by the global financial crisis, which ushered in a "new, less-predictable era."

Rachman, whose book entitled "Zero-Sum Future" comes out next February, is clearly prepping the literary battlefield by positioning himself as an "anti-Robert Wright." The latter's book, "Non-Zero: The Logic of Human Destiny," argued that human progress has been characterized by -- and thus depends on -- our increasing appreciation for and adoption of cooperative behaviors. So when Rachman predicts more unpredictability, he's really predicting less cooperation and more conflict -- today's currency wars translated into tomorrow's shooting wars.

Read the entire column at World Politics Review.

1:00AM

Taiwan Relations Act: The Brer Rabbit defense

My friend Galrahn dutifully--and correctly--takes me to task for not specifying, in last week's post, that the Defense Department is obligated by law to both provide for Taiwan's defense against China (sell them arms) and maintain a US military capacity to resist Chinese force.  He says that my critiquing the Pentagon on this is unfair.

While Galrahn's points are technically correct, it's also certainly true that the Defense Deparment has a lot of leeway on how they can interpret meeting that requirement.  After all, what stops us from simply noting that we've got a lot of nukes and they can be enough to deter China from invading Taiwan.  Nothing in the Taiwan Relations Act of 1979 specifies conventional capabilities versus nuclear.  It just says "to maintain the capacity of the United States to resist any resort to force or other forms of coercion that would jeopardize the security, or the social or economic system, of the people on Taiwan." Give Taiwan enough defensive firepower, promise a nuclear back-up and call it a day.  But we choose, or rather, our Defense Department now chooses, to build an entire big-war warfighting concept around this scenario (no, no, nothing provocative there).  Nothing in the law demands that level of strategic focus or conventional effort.  So no, Galrahn, my rant wasn't misdirected. Pointing the Pentagon's finger at Congress and saying, "I'm just following orders" doesn't cut it here.

We've made a series of choices inside the Pentagon to elevate the meaning of Taiwan going back a decade and a half.  No outside power forced these choices; the military made this call on its own. The Taiwan scenario has become the calling-card scenario for the big-war force, much sturdier than the pathetic North Korean scenarios of collapse, or the bomb-heavy vignettes for Iran (unless you think we want to occupy that place too any time soon).  Simply put, until the Taiwan Strait crises in 1995-96 got the DoD turned-on to China as the near-peer competitor, you simply never heard about the Act as a baseline justification for force structure.  It merely explained arms sales to the island.  I know this, because I worked force structure issues for the Navy at the Center for Naval Analyses in the early 1990s (it was, like, bullet 4-a on slide 53, and when you saw it, you'd turn to the guy next to you, and intone knowingly, "Of course, the Taiwan Relations Act of 1979," and then you'd be back to business).  The Act was a completely backburner issue until the Sov residual threat got so low in those early post-Cold War years (after it became likewise apparent that the "rising sun" wasn't going to fulfill anybody's fantasies except Michael Crichton's--yes, I actually had senior military officers tell me in great seriousness to read the book to understand the future looming Japanese threat), that the Act sort of surfaced like a bureaucratic bedrock at low tide.

The Taiwan Strait crises also birthed many of the original network-centric warfare concepts.  It really was a seminal series of events--the proverbial wake-up call.  But then 9/11 comes and we don't hear about it all that much anymore--save for those pesky arms sales and the usual huffing and puffing from Beijing on the subject. 

The difference today is that the AirSea Battle Concept--basically a navalized, mini-me version of the AirLand Battle concept vis-a-vis the Sovs in Europe during the 1980s--is clearly based on this scenario, with a paltry assist from Iran (not a great country you want to lump in, image-wise, when you seek China's help on Iranian nuke developments, but a sale is a sale).  And I gotta tell you, that's some chutzpah, basing a new high-end combat ordering principle on the same nation you're seeking all this cooperation from--like salvaging your economy right now.

Seriously, anybody has to admit that making an entire air-sea, big-war battle concept out of the Taiwan Relations Act is going above and beyond the call of duty.  In my opinion, it goes beyond defense policy to a good share of foreign policy as well, cementing in something for the long haul that may not serve our overall purposes in our evolving bilateral relationship with China.  

Is this a step we debate as Americans?  No.  Is this something our president explains to us, or our Secretary of State?  Not really. It's just an inside-the-Beltway affair led by a think tank that results in some language here and there in various planning docs and ultimately finds its expression in the budget.  Would the Navy or Air Force protest?  Above their pay grade, as they say, although plenty of retired flags from both services will tell you openly they think this is an odd path to be on, given the larger picture.  But most, if not all, will readily admit, as I do in an upcoming China Security piece, that, once you accept the deterrence logic on Taiwan, America needs to make the AirSea Battle Concept happen as merely the next-step ante to stay in this poker game.  And frankly, given the shopping list ginned up, any protest would sound very much in the Brer Rabbit mode.  After all, these are tight budgetary times, and quite frankly, Gates' logic begins with the need to find synergistic savings.  So why target the best thing going (enshrined in law!)?  I mean, the Chinese do the same, do they not?

My point is this:  is this the best we can do at this point in history?  China doesn't need any help triggering a balancing response across Asia, as I've noted here many times; they do it brilliantly on their own.  Frankly, we don't need much of a hedging strategy as a result; the containment policy writes itself--again, thanks to Chinese heavy-handedness.  

But the larger effort isn't particularly being made:  we are not building a better, bigger positive relationship with China, especially in mil-mil relations, to supersede the legacy negative one.  You can tell me that the Pentagon is just doing its job--following Congressional orders, as it were.  I just want something more imaginative at this point in history, you know, something that preps the diplomatic "battlefield" a bit--something the navy does well throughout history.  

And I just don't see it happening.  Our offers of cooperation with China typically involve asking them to join our party on our terms, whatever the situation in question.  Will you do what we want you to do in Iran/Sudan/Myanmar/North Korea/South China Sea/etc.?  You know, show us you're responsible by giving us what we want.  [Then there's the awkward but oddly workable--if entirely unfair in burden sharing--"limited liability partnership," as I call it, in Iraq and Afghanistan, where our blood pays for Chinese treasure.]  

And big surprise, rising powers don't negotiate well on those terms.  America rarely did during its decades of rising. That sort of trajectory makes you arrogant and full of yourself, and China is definitely in that mode.  

And yes, while that sort of thing needs to be subtly resisted, we need to be preparing for the leaner years--as in, our leaner years and China post-some crash or inevitable slowdown.  We need to building something--again--positive, and mil-mil relations can be spectacularly positive in that way.

I don't think we've thought through, in any comprehensive sense, what our devotion to this blue law from from the Cold War is costing us--opportunity-wise, or the signals that it sends, or what we risk with it in a strategic sense.  I think it's simply on the books, so the bureaucracy grinds its answer, and when sanctuary from a scary budgetary climate is sought, that "requirement" is not just an oldie but a very goodie.

It's just not where we're going as a power or where this system is going.  We are steering by our wake, because it feels comfortable and good, and--damn it--it's the law!

And I don't see a lot of strategy in that.  I see people, like Galrahn, patting the Obama administration on the back for simply having foolish behavior fall into their laps and doing the right thing by it--again, because it feels good and it makes us seem more important than--quite frankly--we really are.  Our "cooperative strategy," as he calls it, is pretty much what it's always been in the Pacific:  make us the most important bilateral partner with as many states there as possible.  Again, with the Chinese playing the fools (i.e., old Soviet role) on this one, that's not a hard strategy to pursue, but it's one that retards the Asian integration process to a certain extent, in the name of hedging against, and somewhat containing, China.  

And if we were set to play global policeman with budgetary ease for the next couple of decades, I would be the first to say, fine and dandy.  Wait on these guys to grow up, and democratize, and a whole bunch of other requirements.  But I don't think our finances or globalization will wait on those evolutions, so I think we need to start thinking about making do with the landscape--and players therein--as they're presented to us.  Because keeping China in this retarded state of "pol-mil" development (and I use that term of art purposefully) isn't wise, in my opinion.  I think we need to do more--faster--than just keep them in their place until they demonstrate the preferred type of global following skills (I mean, leadership).  I think that attitude retards our own, much needed pol-mil development (yes, we actually have some things still to learn about this globalization of our making).

Unless you think U.S. military power is what makes us who we are. I've always thought it enables us to display leadership, but that it's not a substitute for it.  

And that worries me--this unstated, barely articulated strategic course we seem to be on.

I got accused a lot--and rightfully--of granting Bush-Cheney better rationales for their policies than they themselves had. I think Galrahn does the same here with Obama and Clinton.  I think Hillary is the shining star simply by default, because I see no great accomplishments, just well-worn reactions to a perceived rival's foolish behavior.  Remember, these guys came in with Jim Steinburg's "strategic reassurance," when "nice" China was having a good year (2008-09) and we were grateful for their saving the global economy (and let's admit it, no China, and things get a whole lot worse).  Now China is having a bad year, as Galrahn rightfully notes, and now we're all about overstating our interest in the South China Sea so as to match China's absurd claim of sovereignty.  If that's isn't chasing events or trends, than what is?

This is Schadenfreude masquerading as grand strategy--too much of it, actually, on both sides.  Mirror-imaging in this regard ("Look how popular we are in Asia right now!  Vietnam loves us! Take that, China!") isn't all that imaginative.  China's "charm offensive" got offensive, so now we've fallen into one by default.

And you know, hoping Brett self-destructs isn't the same as getting the Packers into the Super Bowl.

There are other paths and there are other voices.  If we want to get this future right, we should invent it ourselves.

11:18AM

Deng: Develop the place, then decide the sovereignty

Another John Milligan-Whyte & Dain Min piece, this time in China Daily.com.  They argue that China needs to stop standing on the sidelines fuming about joint US naval ops/exercises with locals and simply join them, which I think is brilliant.  If China wants to assert the normality of their naval ops in their local waters, then they need to exercise with everybody at every opportunity.  They need to make their presence a welcome, stabilizing thing, because right now, their own operations in their own waters ARE destabilizing, because they are perceived to be about establishing/claiming sovereignty in a way that trumps the diplomatic process.

The underlying logic of the piece is even smarter--right out of Deng's mouth:

What can China do about having jurisdictional disputes with its neighboring countries which have now been complicated by China and America asserting conflicting "vital national interests" in the South China Sea? How can China put jurisdictional disputes back into their normal peaceful mode? China and the nations that it has jurisdictional disputes with can form a joint development corporation called "South China Sea Joint Development Corporation" to economically develop the disputed areas peacefully. It is easier to negotiate the size of each participating nation's investments, responsibilities and share of the profits of such a corporation with multinational win-win policies. The joint development corporation approach avoids the zero sum game ownership disputes during which no nation can safely develop the economic benefits nor safe guard its national pride and interests in the disputed areas.

On February 22, 1984 Deng Xiaoping discussed what now for decades have been China's successful solutions to the Taiwan and Hong Kong sovereignty issues with the Center for Strategic and International Studies. He said, "I have also considered the possibility of resolving certain territorial disputes by having the countries concerned jointly develop the disputed areas before discussing the question of sovereignty. New approaches should be sought to solve such problems according to realities."

Smart stuff.

Make the development happen first, and then calmly divide the spoils, rather than get all huffy up front and suggest the only acceptable answer is that somebody wins and somebody must lose.  In the end, China will end up winning most of the time, NOT because of the supply of its military power, which will consistently backfire in its application, but because of the power of its domestic demand, which everyone will want to satisfy because there is good money to be made in doing so.

11:32AM

Another mention in People's Daily.com

Once again it is John Milligan-Whyte and his partner Dai Min, who write a weekly column for both People's Daily and China Daily.  If you recall, they mentioned my stuff once before, sent me a copy of one of their books, and I wrote a WPR column about it.  As I said in the WPR article, their stuff is clearly biased toward the Chinese case, much as mine is biased toward the U.S. case (they make no bones about it and neither do I), but it's the best, most straightforward counterparty example I have come across on the Chinese side for Sino-American alliance in this century, so you have to take it seriously if you take that goal seriously.

To remind from their byline:

John Milligan-Whyte has been called the "new Edgar Snow" and "21st century Kissinger" and is the winner of Social Responsibility Award from the 2010 Summit of China Business Leaders. John Milligan-Whyte and Dai Min are co-hosts of the Collaboration of Civilizations television series, founders of the Center for America-China Partnership, which has been recognized as "the first American think tank to combine and integrate American and Chinese perspectives providing a complete answer for the success of America and China's success in the 21st century," and the authors of the America-China Partnership Book Series that created a "New School of America-China Relations." 

I recently had a long Skype call with the two, because I wanted to check them out and get some sense of where they're coming from.  John has a long legal background as a lawyer in Bermuda for several decades.  He connects with Dai Min a few years back and makes the permanent leap to Beijing, sensing an historic opportunity for business dealmaking, especially as China's second-tier cities take off.  But what really drives these two is their unwavering commitment to fostering a better relationship between China and the U.S., which is what drew them to my stuff. 

I get asked a lot:  does anybody push for Sino-American strategic alliance in the US like you do?  And I always say, in terms of the strategic thinking community, no.  Some, like Niall Ferguson, speak about the symbiotic nature that already exists, but more as a symptom than as a basis for larger cooperation.  The reason why I push on this is that, like I argued in China Security (see just below) back in 2008, my logic of global integration and globalization's advance says this relationship must be or globalization essentially goes backward, something I don't think the planet could handle in many ways, because the sheer numbers involved in an emerging global middle class mean we've reached that all-sink-or-all-swim-together moment--resource- and cooperation-wise.  Knowing my timeline on the inevitability of political pluralism in China (I target a late 2020s/early 2030s as the rough half-century mark after Deng's initial revolutionary reforms), I then see the next two decades as perhaps the most crucial in human history--as in, get the big pieces right and all works out, but set the two biggest pieces against one another, and this can all go very badly--and backwards.

So I'm comfortable being perceived as too out-there and a bit naive on this subject, because I know I'll see the day when this logic comes to pass, and I'll be on the right side of history--betting on improvements and compromise and cooperation over degradation and ultimatums and conflict.

And so I do find these two thinkers awfully interesting, because they're tilting at the same windmill, but on the other side, where, quite frankly, I think the receptivity is much better at this point in history (a faltering #1 is more scared and thus more inflexible than a rising #2).  Thus I see a future collaborative effort between my work and what these two are seeking to accomplish via their center and foundation.  Collectively, we're a bit rag-tag compared to the powers-that-be, but I enjoy living and working primarily on the basis of the power of my ideas, and John and Dai Min are very similar in this regard (John, arguing like a lawyer in court, and Dai Min, possessing the mind of a business-developer/marketer).  Like most visionary types, they come as awfully self-promoting (John's theatrical way of speaking makes you realize this guy is ALWAYS in court), but being one myself (and long being accused of the same--to include the "entertaining" delivery), I don't have a problem with that. I enjoy working with people who really want to change the world and aren't shy about it (working with Steve DeAngelis is very similar, as he too is always about not just a business but a revolution in doing business).  I have no desire to live a life that does anything less.

Anyway, here's snippets of the piece (the start and the finish--where I am mentioned again):

President Obama announced he was launching a new era of partnership when he was in the process of recruiting the team of veteran China policymakers and advisors. Nonetheless, the positive approach he instinctively favored disappeared. Conventional and then hostile policies and actions began defining his administration's relationship with China. 

His policymakers are implementing an increasingly hostile approach referred to as hardball in the US press. It could be deliberately seeking to cause China to not continue Deng Xiaoping's successful policies of opening up economically to U.S. companies and of peaceful coexistence with America and or other nations. It could be simply disastrous U.S. policymaking responding poorly to the U.S. economic and national security crises. In any case, the hardball approach makes collaborative and therefore successful U.S. and Chinese policies hard to imagine or implement.

A U.S. president launching a new era of partnership with China is unconventional. It goes against the US policymakers' views and widespread U.S. feelings that China is a threat to Americans. But leading the changing of the direction of U.S. policies toward China is a presidential prerogative whether it begins covertly at the height of the United States' unsuccessful Vietnam War or covertly and then when private agreement is reached, it is changed once more overtly during the current U.S. economic, employment and other crises. 

A U.S. president cannot effectively begin to successfully establish a new era of partnership or solve economic and national security problems until he finds advisors and experts with policies able to achieve his goals. To do so, President Nixon reached out to Professor Kissinger at Harvard because Kissinger shared his worldview and goals and others did not. President Obama is currently overseeing the changing of many advisors who were key players in the first two years of his administration. He is looking for but not yet finding breakthroughs or new policies providing solutions to U.S. economic and national security problems. 

Neither America nor China can fully meet the economic and national security needs of their nation without the sincere, coordinated and constant help of the other. It is not possible in this century for one of the two largest economies in the world to fail, and the other to succeed. Because his administration is not finding the effective policies toward China needed to solve the U.S. crises, President Obama is open-minded and decisive. If China presents him with and supports solutions, he will grasp why they are solutions and lead in explaining them to U.S. policymakers and in implementing them. But until he finds solutions and has China's support in implementing them, he cannot take on the fear of China and hardball thinking policymakers in the US. Let's be clear about this, he needs Chinese policymakers to reach out to him with solutions because neither he nor his advisors have them today. Second, he can only act when a set of solutions has been privately negotiated and agreed, Kissinger style, and he is absolutely sure China will support the solutions when he announces his support for them . . .

...

. . . President Obama has pledged that he will double U.S. exports to China in an effort to increase U.S. competitiveness and stimulate its economy. To increase exports to China, the United States will need to remove policies that restrict trade with China and propose policies that are mutually beneficial for both nations. 

Increasing U.S. exports to China also requires preventing a trade or currency war. Nonetheless, economic and trade policymakers in President Obama's administration have implemented tariffs on steel, tires and other goods made in China, introduced more than 23 anti-dumping, anti-subsidy and special protectionist tariffs, and launched at least six Section 337 investigations against China for alleged unfair practices in export trade. At least a 53 percent increase in the number of cases involved 7.6 billion U.S. dollars worth of Chinese exports, which is 800 percent more than in the previous year. The U.S. is seeking to increase its exports to China while setting up trade barriers for China's exports. China is the world's largest importer, and currently China and the U.S. are each other's second largest trading partners. There are threats of new tariffs if China does not agree to the United States' proposed carbon emissions cap and trade proposals and lately talk of a currency war and tariffs over cap and trade. This is occurring in addition to longstanding U.S. trade restrictions on what can be sold to China because U.S. military strategy is traditionally preparing for war with China. 

This is not the optimum path for American policymaking. Or is it? Americans are suffering from relentless and unsuccessful wars, unsustainable global trade deficits and government debt, high unemployment and the worst economic crisis in a hundred years. To many U.S. policymakers who learned their craft in the Cold War, hard ball seems to be the realistic approach to the United States' most important bilateral and multilateral relationship. It is obvious to them that China, with its second largest and fastest growing economy, is an increasingly dangerous threat to U.S. economic and national security. Their zero sum game view of how global economics and geopolitics work assumes and acts as if for America to be successful, China must be unsuccessful. They are wrong. They do not realize that or they do realize that and are trying to engineering or blundering into a showdown. 

The key point is that until President Obama and the American people are presented with a plan for how America and China can both be successful in the 21st century, we are on the slippery slope. Chinese policymakers' safe response is to provide President Obama with a new grand strategy introduced for discussion in a white paper for the Presidents of American and China. China's leaders and President Obama should also read and discuss Thomas Barnett's "The Pentagon's New Map and Blueprint for Action: A Future Worth Creating." The Sino-U.S. relationship must be made profoundly better soon. Therefore it must be fundamentally different soon. The 20th century is over.

12:11AM

Blast from my past: "The Inevitable Alliance" (2008)

Debating China's Future

with 

Li Cheng, Thomas P.M. Barnett, Harry Harding, Cui Liru, John J. Mearsheimer, Joseph S. Nye Jr., Rob Gifford, Mao Yushi, Bates Gill, Tang Shiping, Zhao Tingyang, Robert J. Barnett, David Shambaugh, June Teufel Dreyer, Pan Zhenqiang, Dan Blumenthal, Shi Yinhong, Robert S. Ross, Kenneth Lieberthal, Zha Daojiong, John Hamre and Xiang Lanxin

CHINA SECURITY, VOL. 4, NO. 2, SPRING 2008

 

Thomas P.M. Barnett

The Inevitable Alliance

China’s main strategic vulnerability right now is that it possesses economic and network connectivity with the outside world that is unmatched by its political-military capacity to defend. This forces Beijing to “free ride” on Washington’s provision of global security services, a situation that makes China’s leaders uncomfortable today – as it should. American blood for Chinese oil is an untenable strategic transaction.

The United States faced a similar situation in its “rise” in the late 1800s and set about “rebranding” its military force over a several-decade period that culminated with a successful entry into World War I. Since World War II, the United States has maintained a primarily expeditionary force that is able to access international crises, and since the end of the Cold War has done so with unprecedented frequency. This too is an untenable strategic burden.

America needs to encourage China’s effective re-branding as an accepted worldwide provider of stability operations. The problem today is two-fold: 1) major portions of America’s military require China to remain in the enemy image to justify existing and new weapons and platforms; and 2) the Chinese military is hopelessly fixated on “access denial” strategies surrounding Taiwan, meaning it buys the wrong military for the strategic tasks that inevitably lie ahead.

So long as both nations insist on such mirror-imaging, their respective militaries will continue to buy one military while operating (or, in China’s case, needing to operate) another force that remains under-developed. Such strategic myopia serves neither great power’s long-term interests, which are clearly complimentary throughout the developing world.

The good news is that both China and the United States are within a decade’s time of seeing new generations emerge among their respective political and military leaderships. These future leaders view the potential for Sino-American strategic alliance far differently than do the current leadership generation. If Washington and Beijing can navigate the next dozen or so years without damaging current ties, I fully expect to see a Sino-American strategic alliance emerge.

I do not present this as a theoretical possibility, but as my professional judgment based on years of extensive contacts through both nations’ national security establishments.

Grand strategy often involves getting leaders to understand certain future inevitabilities. The global primacy of the Sino-American strategic alliance in the 21st century is one such future inevitability.

Thomas P.M. Barnett is the senior managing director of Enterra Solutions, and author of The Pentagon's New Map: War and Peace in the Twenty-First Century (New York: G.P. Putnam’s Sons, 2004).
9:00AM

Quick! Spot the resource war!

I know it's in there somewhere, just waiting to break out!

 

10:02AM

WPR's The New Rules: Defusing the Global Currency War

After having cooperated to an unprecedented degree -- on stimulus spending and new bank rules, for instance -- to avoid a global meltdown these past two years, the world's major economies now appear ready to turn on one another with truly self-destructive vengeance. Poorly informed Americans are increasingly convinced that free trade pacts -- and not our uniquely high corporate tax rates -- are responsible for sending jobs overseas, and they want to see China punished with tariffs on its imports for its undervalued currency. With China's neighbors intervening heavily to keep their own currencies from rising too high in response, global chatter about the unfolding "currency war" has reached a fever pitch. Is this any way to manage a tenuous global economic recovery?

Read the entire column at World Politics Review.

12:01AM

Drug war logic repeated on China currency question

Lemme see: inside every Chinese peasant is an American consumer just waiting to break free!

Stephen Roach piece in WSJ.  He's the former Asia head for Morgan Stanley now back to Yale.

Roach is one of those economists who points out that past experience with Japan says gets a revalued currency won't change our foreign trade deficit with China, which is really with Asia as a whole and has been consolidated by China over the past decade or more through its efforts to become the final assembler of note.

Some bits:

The currency fix won’t work. At best, it is a circuitous solution that would address only one of the many pressures shaping the imbalances between our two nations; at worst, it would lead to a trade war, or risk jeopardizing China’s understandable focus on financial and economic stability.

Besides, in a highly competitive world, there are no guarantees that currency shifts would be passed through to foreign customers in the form of price adjustments that might narrow trade imbalances. Similar fixes certainly didn’t work for Japan in the late 1980s, and haven’t worked for the United States in recent years . . . 

Contrary to accepted wisdom, America does not have a bilateral trade problem with China — it has a multilateral trade problem with a broad cross-section of countries.

And why do we have these deficits? Because Americans don’t save. Adjusted for depreciation, America’s net national saving rate — the sum of savings by individuals, businesses and the government sector — fell below zero in 2008 and hit -2.3 percent of national income in 2009. This is a truly astonishing development. No leading nation in modern history has ever had such a huge shortfall of saving. And to plug that gap, we’re left to borrow and to attract capital from lenders like China, Japan and Germany, which have surplus savings.

If Washington were to restrict trade with China — either by pushing the Chinese currency sharply higher or by imposing sanctions — it would only backfire. China could very well retaliate against American exporters, and buy goods from elsewhere (a worrisome development in what is now America’s third-largest export market). Or it could start to limit its purchase of Treasury securities.

The United States would then have to turn to some other nation or nations, at a higher cost, to finance our budget deficits and make up for our subpar domestic savings. The result would be an even weaker dollar and increased long-term interest rates. Worse still, as trade was redirected away from China, already hard-pressed American families would be forced to buy products that are noticeably more expensive than Chinese-made imports.

But Washington remains unwilling to address our unprecedented saving gap, and instead tries to duck responsibility by blaming China. Scapegoating may be good politics, but proposing a bilateral fix for a multilateral problem is just bad economics.

China should stay the course with its measured currency reforms, allowing the renminbi to continue to appreciate gradually and steadily over time. Contrary to the inflammatory rhetoric of China’s critics, this is not “manipulation.” It is a reasonable strategy to anchor the renminbi to the world’s reserve currency, the dollar, in an effort to maintain financial stability in an all-too-unstable world.

True, but by doing so (see reference #2), China is creating a beggar-thy-neighbor bandwagon effect, as Taiwan, Japan and South Korea all start intervening to keep their currencies cheaper, to the point where Brazil's finance minister declares that an "international currency war" has broken out.

Roach then goes on to talk about fixing China's low consumption rate (only 35% of GDP, or about half of the US), but here I think he falls into the trap that Michael Pettis warns about: there is no easy shifting from investment driving most growth to consumption stepping up.  In short, anything but a slow redirect gets a crash, and so long as the redirect is slow, it's unlike to effect a serious shift.  When you stack those two analyses one on top of the other, you get the feeling that China will go on as it does (addicted to exports) until a crash there forces otherwise.  It would seem we've taken sufficient lumps to force the necessary change here--one hopes, which is the big reason why we feel so down on ourselves right now while wildly elevating China in our minds.

But as I like to say, the China model is brilliant until the first big crash.

The thought that prompted the post was that, just like in the drug war, we want our "enemy" to stop exporting so much of that stuff to the U.S., when it's our demand for that stuff and our lack of self-control which is the real issue.  But as Roach points out, we don't like to deal with our own issues, and in a classic psychological trip, we transfer our anger over our lack of self-control by blaming our "dealer."

Not exactly the Opium Wars, but you get my drift.

8:53AM

WPR's The New Rules: Global Warming Shifts Focus to Friendly North

 

From the Arctic Council's website.

According to virtually all global warming projections, humanity faces significantly more conflict in the decades ahead as we fight over dwindling resources in climate-stressed lands. However, those reports typically overlook one likely outcome that could counterbalance the more negative impacts of global warming -- that of northern territories becoming significantly milder, more accessible, and, most intriguingly, more hospitable to immigration. This is the essential good news to be found in Laurence C. Smith's fascinating new book, "The World in 2050."

Read the entire column at World Politics Review.

Read about the book because of Smith's piece in the WSJ, which I blogged.  Asked Putnam for the book and got it pronto.  Like I hint at in the piece, Smith's survey of futurism was only average and didn't really add anything to the book.  I have no idea why he or his editors felt the need to promise "the world in 2050," because the text simply doesn't deliver. But the book-within-the-book on the "New North" was eye-popping. I would have loved to hear more about that and skip all the surveying.

12:07AM

USA-EU differences on role of PRC

FT piece on polling that says Euros take more pessimistic view of China possibly showing global leadership in years ahead than Americans do.  Oddly enough, the Germans were the most pessimistic.  Why odd?  Germany is doing so well economically WRT China.

Polling by German Marshall Fund.

Data says Americans to the tune of 91% predict China will exert strong leadership within next five years.  That may just be our ennui talking.  Only two-thirds of Euros think this.

I think the Euros are being more realistic, as I think China global leadership will be underwhelming for a long time.  Bluster will go up, as will hubris, but serious visionary leadership?  Not China's style nor comfort level--not yet.  In a single-party state, people who go out on ledges get pushed off.

12:01AM

Charts of the Day: World Economic Forum survey on US competitiveness

Annual WEF "most competitive country ranking," where US now drops to fourth after Switzerland, Sweden and Singapore.

Of course, my usual counter is to say we're comparing a multinational state of 50 members to unitary states, so just as reasonable to see where those three stack up against our 50 individuals members as the other way around, but I quibble.

What's interesting is checking out the details, as in, when you see where we're still near the very top (innovation, labor market, business sophistication, higher education, infrastructure, technology--almost all in the private realm) versus where we've fallen lowest (public spending, public debt, national savings rate--more in the political realm).

So the question begs: What is really "broken" in America?  Capitalism or the political system?

12:04AM

Why China will continue to disappoint as a "near-peer" rival

NYT's Keith Bradsher in early Sept regarding a visit by Larry Summers in Beijing:

Top Chinese officials are calling for quiet discussions instead of open friction with the United States, after a summer marked by bilateral disagreements over the value of China’s currency, American military exercises off the Korean Peninsula and American efforts to resolve territorial disputes in the South China Sea.

State media showed China’s president, Hu Jintao, meeting Wednesday with Lawrence H. Summers, the director of the National Economic Council, and Thomas E. Donilon, the deputy national security adviser. American and Chinese officials have been trying to lay the groundwork for a state visit to the United States this winter by the Chinese president.

Wednesday’s meeting with Mr. Hu followed earlier talks this week in Beijing by the two American officials that were aimed not at fashioning new pacts, but at maintaining a dialogue that had been strained at times in recent months.

“Strategic trust is the basis of China-U.S. cooperation,” said Dai Bingguo, a Chinese state councilor who met with them, the official Xinhua news agency reported.

Prime Minister Wen Jiabao told the two Americans that China and the United States should not view themselves as rivals, according to the Chinese state news media.

Part of the dynamic we witness in elite US circles right now is an attempt to redirect our fears away from non-state actors and back toward the rising "near-peer"--an old Pentagon code phrase for China.  It is seen as part and parcel of admitting our need to get our own economic house in order, pull back from "empire" and keep our powder dry for the real threat down the road.

For many, this is a highly tempting path.

But the problem with it is, the Chinese will continue to disappoint.  They simply will not maintain sufficient counter-party status to sustain a truly hardened competition.  There will never be an opportunity for a true American shove because the Chinese will always be careful enough to avoid the push necessary to trigger that. They simply have too many stakes in the fire to ever fully give themselves--and their future--over to America and its tendency to go overboard in "crusades." Yes, we can chase them around that block for quite some time, but it will not give us the economy nor the military power we need for the future; it will just give us familiar detours from the changes we ultimately must make.

Meanwhile, vast collective problems will remain poorly addressed, because so long as Sino-American strategic partnership remains stunted, a critical mass of great-power cooperation will remain out of reach.  And no, I'm not being unrealistic about what that partnership may entail.  China and the US have vastly different economic needs:  China has no choice but to shrink the Gap economically while the US has little choice but to continue working the Gap militarily.  There is vast strategic overlap there that provides both sides missing assets, so long as both sides can become far more realistic about what cooperation would entail and yield.

Both sides currently lack the leadership to make this happen, I fear, especially in combination with even more unrealistic and uninformed domestic constituencies standing behind them.  But the efforts to foster such links will and must continue, even if we're collectively just killing time.

There is no faster nor surer path for America and China to become second-tier powers than for rivalry to fester into conflict. That's the real lesson to take from Britain and German in the first half of the 20th century.

Our present success in fostering an American-style globalization vastly outpaces Britain's success in establishing its colonial-style globalization of the late 19th and early 20th centuries, so the strategic risks we face is sharing power are completely different, no matter how slowly China has evolved toward something more pluralistic in terms of their politics.  We have won all the major battles worth winning in getting China's buy-in on markets and globalization, securing a fifth-generation-warfare victory that--yes--may still take a good two decades to unfold.  

The greatest danger we face today is our own desire to self-sabotage that delayed win, primarily because we are led by too many people lacking the strategic imagination to see it in the distance.

But fear not, our numbers are growing--and not just in business circles.

12:03AM

The "great wall of America" masks boiling points on both sides

LA Times column via WPR's Media Roundup.

Whenever I feel the urge to criticize Israel's security fence, I usually put down my brick when I realize what a glass house we live in back here in the States.

The opening:

Between cynicism and hypocrisy lies the 2,000-mile U.S.-Mexico border. America is raising a wall in the desert to separate Mexican drug exporters from American drug consumers, to separate Latin American peasants who will work for low wages from the Americans who would hire them.

The Great Wall of America, straddling less than half the length of the border, descends into canyons and across the desert floor. For the Mexican, it represents a high hurdle. For the American, it is an attempt to stop the Roadrunner's progress with an Acme Border Sealing Kit.

In some places the wall is made of tennis-court-style cyclone fencing or dark mesh of the sort used for barbeque grills in public parks. In other places the wall is a palisade of 20-foot-tall bars that make a cage of both sides. The most emphatic segments are constructed of graffiti-ready slabs of steel.

Richard Rodriguez, the author, adeptly compares our fence to Israel's, but the larger point is that we should be expanding our definition of America, not contracting it.

On patriotism-for-profit talk radio and television, the illegal immigrant is, by definition, criminal. She comes to steal the American dream. But in my understanding, the dream belongs to the desperation of the poor and always has. The goddess of liberty in New York harbor still advertises for the tired and the poor, the wretched refuse. I tell you, there is an unlucky man in the Sonoran Desert today who will die for a chance to pluck dead chickens in Georgia or change diapers in a rest home in Nevada.

Great empires expand beyond their own borders. Empires in decline build walls.

Nicely stated.

I watched Robert Rodriguez's "Machete" last week.  It captures, glancingly, some of the intense, thoroughly righteous anger from the other side (albeit with rather fantastic expressions of gratifying violence), and when you examine the economic roots of that anger, it's not all that different from that of the Palestinians vis-a-vis Israel.

12:05AM

More natural counter-China balancing in Asia: Vietnam + US

AP story on growing mil-mil cooperation between US and Vietnam via Stewart Ross.

Cold War enemies the United States and Vietnam demonstrated their blossoming military relations Sunday as a U.S. nuclear supercarrier cruised in waters off the Southeast Asian nation's coast — sending a message that China is not the region's only big player.

The visit comes 35 years after the Vietnam War as Washington and Hanoi are cozying up in a number of areas, from negotiating a controversial deal to share civilian nuclear fuel and technology to agreeing that China needs to work with its neighbors to resolve territorial claims in the South China Sea.

But I say again, cannot the Assassin's Mace render this all asunder, with a flip of a button?

Yes, yes.  As the Pythons used to note, "No one expects the Spanish Inquisition!"

To which I now add, "Nyyyoooooobody eck-spects the Assassin's MaSSSSSSSSSSSS!"

[It's a fair blog.]

12:06AM

Sad commentary: the public resistance to mosque construction--in Lower Manhattan and elsewhere in America

NYT story on public resistance across America to mosque construction.

Not a new story:  public education in America took off in the 1830s in response to the rising influx of Irish Catholics and their parochial schools.  And whenever the middle class income takes a hit, resistance to foreigners swells.

But it's particularly galling to see Americans resist a group trying to organize themselves religiously in our midst, because freedom of religion brought so many of us to these shores.  Starting a church is such an American thing, and these people are declaring themselves openly and rooting themselves in our society--who doesn't want to see that sort of upfront behavior?

To me, the suspicious ones are the ones who don't want to build out in the open and declare themselves, so formal connectivity is always to be welcomed.

Sad state of affairs.  

When I first heard of the mosque proposal in Lower Manhattan, I thought it was perfect--very American.  But too many of us are reaching for the lowest common denominators, which usually are based on fear and ignorance.

No way to win a Long War, say I.

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