Peace in Asia?

Many predictions about Asia's future success in general, and China's in particular, have been misleadingly rosy. Our greatest conundrum is that what is happening in Asia today runs counter to our own narrative of modernization. The great worry is that Asia is moving closer to war rather than further away from it

Will Beijing become the capital of the world?
James Pethokoukis
On 25 February 2017 14:06

What follows is a Q&A format discussion between journalist James Pethokoukis and American Enterprise Institute Asia specialist Michael Auslin who has just published an acclaimed book, The End of the Asian Century which argues, among much else, that we should be much less sure about the inevitability of China's ultimate rise than many assume.

PETHOKOUKIS: Alright, so we’re going to talk about Asia. In the very first chapter you write, “Because the world has focused on Asia’s successes … even knowledgeable observers are unlikely to have a comprehensive view of the various risks Asia faces and how they are intertwined. Thus, many predictions are misleadingly rosy.”

I think it was during the midterms, the 2014 midterms, where there was this ad. I think it was called the Chinese professor ad. It was supposed to be an ad about maybe five, ten years in the future and it was a Chinese professor speaking to a group of students and talking about how America has collapsed and failed and they’re all laughing. So it was about American trouble, but it was also an ad about how ascendant Asia is, in particular China.

I think when most people think about Asia they think of past economic growth, a region on the rise, the wind is at the backs of Asia. They don’t think about the risks. So, first of all, why do we have that non-realistic view of this region?

AUSLIN: First, I think it has been a very realistic view. Asia, in our lifetime, has modernized and become so much more important to the global economy and global politics than was even conceivable a generation ago, or fifty years ago, that we were right to celebrate what individual countries had accomplished.

You start with Japan in the post-war period: the 50’s, 60’s, and 70’s. You move to the four tigers: South Korea, Taiwan, Singapore, Hong Kong. Then, of course, China has really been the story for the past 25 years. But, as we were celebrating what seemed to be a relentless rise upward of modernization, wealth creation, in many cases democratization, what we weren’t doing was looking at the problems that remained.

We had one story. It was the story that made the news and it was why many people started calling this the Asian century, or what the 21st century would be is the Asian century. That’s what why I titled this book The End of the Asian Century. In two senses: the first sense being that Asia faces real risks and real problems from economics, demographics, politics, and security that have been ignored or pushed under the carpet while it has focused, and we have focused, solely on the economic growth story.

The second way in which I wanted to title it The End of the Asian Century was the end of our own perception of what this coming decade, two decades, three decades would be and that, instead of celebrating a strong Asia in our own minds, we would begin to become aware of, think about, and try to plan for dealing with Asia’s problems.

So it’s not a book of predictions and it’s not to say that Asia hasn’t developed, but it’s to say here’s the rest of the story.

When you talk to policy-makers, folks on Capitol Hill, what is their perception of the region? Is it as I described, that everything seems to be going right for Asia, or is it more nuanced?

I would say that it’s becoming more nuanced. I started doing the research for the book in about 2010. Back then there was no South China Sea issue, there was no worry about the Chinese stock market, the real issue of corruption had not broken through to the headlines. So everyone had that first view that you mentioned.
The role of the United States is, in some ways, it replaces the fact that Asia does not have really a dominant country that is trusted by everyone. China is obviously the dominant country today but it has no real friends and allies. There’s no one that wants to become Chinese.

Growing at ten percent a year — I think they were still at double digit growth.

China was at double digit growth, India was close to double digit growth, obviously Japan was in the doldrums but it was still very rich. Everyone though look, if you look at the Middle East, you compare it to the Middle East, you compare it to Europe, you compare it to Africa, Asia is still the region that lays the golden egg.

Now, in 2017, in less than a decade, I think a lot of that common wisdom has begun to change. That is why I think the timing for the book just worked out providentially well. That, starting in the Summer of 2015 with the collapse of the Chinese stock market, everybody went wow, that wasn’t meant to happen, what does that mean, what is going on here. Suddenly they began to think about Chinese debt. In the South China Sea, you have warnings of war between Beijing and Washington. You have rampant corruption, you have political dissatisfaction, the South Korean President just being hounded out of office.

So now I think that people are beginning to get a more nuanced view, but the dominant narrative is still that Asia is the land of riches, and people are not paying attention to the risks it faces.

So we still think of it as a very dynamic place.

Which it is.

You wrote of the concept of Asianness as a not completely understood phenomenon. What is Asianness? What do we need to understand about that?

First of all, it is a very contested idea. What is Asia, what is not Asia? I define Asia as India eastward to Japan. So that’s India, China, South East Asia, Korea, Japan, even Far-Eastern Russia. It’s a great dynamic arc that sweeps upward. Usually we teach Asia, how I taught it at Yale and how most universities do it and how the US government does it, they divide it up. It’s East Asia, South Asia, Southeast Asia, Central Asia. Very few parts of government or universities look at it as a whole.

It’s a controversial concept. Is really Buddhist India and Buddhist Confucian China the same as Muslim Indonesia? Can you actually put them in the same basket? I think they can, certainly from an American perspective because it is a region linked by its waterways. As much as it’s continental, it’s linked by its waterways and that’s how we approach it. So, at least for Americans, I think that makes sense.

What you also see, though, to this point directly about Asianness is that Asians are beginning to think about themselves more as an integrated whole and a region. They’re talking about common problems and it really does peter out right when you get to India’s western borders. That becomes more the Middle East, it’s a different set of issues — India straddles that. But I think there is a growing common sense of identity, thought not a growing a common sense of working together.

If countries in the region are starting to think of themselves more as a region, they need to talk to each other, perhaps they need to work together. Is that just purely driven by their ascendancy and becoming more economically powerful? What role does the US have to play in how that region thinks of itself?

It’s a huge question, it’s a good question. I think, in part, Asians have started to think of themselves as Asians because of the modernization that has swept into the region. They see these commonalities between them: the fact that you’ve grown a middle class, that, in many cases, you have a more representative government, certainly that you trade more with each other and you trade with the world. When they see it happening, in many cases with their neighbors, they understand that it’s something that is shared among them. They don’t think of themselves about Europeans or Africans. This is something that has happened in Asia over the past three or four decades.

The role of the United States is, in some ways, it replaces the fact that Asia does not have really a dominant country that is trusted by everyone. China is obviously the dominant country today but it has no real friends and allies. There’s no one that wants to become Chinese. There’s no one that really wants to ally with China. They want to trade with China and make as much money off of it as they can, but trusting China and becoming a partner is a whole different story.

Same with India and Japan. You have the three largest nations in Asia essentially friendless. Japan has worked a lot to change that over the past several years, I think it’s making inroads, but none of them have allies, none of them have real relations of trust with their neighbors.

Then the United States comes in, it’s been there for 70 years, we’ve been there for 70 years, as an alliance partner to five of those nations, as a regular partner in economic and political ways to many more. Because we’re not geographically part of the region, there is a way in which they can see us as an honest broker and someone who can be more trustworthy because it’s impossible in a sense for us to be trying to take over territory, it just doesn’t work. Whereas India, China, Japan — they all have contested territorial relations with their neighbors.

You highlight five risk regions: you have the threat or the end economic growth and the failure of reform, demographics, unfinished democratic revolutions and a lack of political togetherness among the nations, and war. Is this going to be a region of peace over the next twenty or thirty years?

I think that the single greatest conundrum for us in thinking about Asia is that what we see happening today, especially in the security sphere, but also in the politics, the regional politics sphere, runs counter to our own narrative of modernization. The story we’ve told ourselves, basing it off of post-war Europe, is that as nations modernize, often liberalize, trade with each other, integrate with the world, they first of all form regional communities of interest because they find it useful in many ways to get rid of problems among themselves and often act collectively, you think of the EU and the like.

More important even is that they move away from war, they move away from relying on the threat of the use of force, or the actual use of force, to solve problems. They no longer think it makes sense to fight a world war over Alsace Lorraine, or the Pyrenees, or anything like that.

That’s not what we see happening in Asia today. As this region has become, by comparative historical standards, not equally and not for everyone, but overall phenomenally wealthy. As it has become so much more important politically, and in the world you think of the role of China, or Japan, or even India — it should be solving its own problems. And instead, it not only has not created a functional regional community of trust and working relations, we are closer to some type of armed conflict today in Asia than we were five years ago or ten years ago. Whether it is the South China Sea, the East Asian Sea, the Korean border, the Sino-Indian border. Collectively this region spends more on armaments and weapons than anywhere else in the world, any other region.

It is one where international law has proven to be ineffective. You look at The Hague ruling and China’s dismissal over it over the South China Sea claims last year. Instead you have air-forces, and navies, and sometimes even ground troops facing off over contested parts of territory.

The book, in its totality, is not predictive. I’m not predicting a war, or revolution, or economic collapse, but it is an analysis of what is happening and it asks the questions of why Asia, unfortunately, is moving closer to war rather than further away.

You mentioned Europe. Does it resemble Europe before World War Two, some place in the late 1800’s as far as these countries which have advanced, they have grown richer, yet they still fight?

Probably the 19th Century and pre-World War One. It is not the 1930’s with the rise of dominant ideologies that are battling it out. It is very much old fashion power politics. It is China taking territory, small bits and pieces from its neighbors like the Philippines in the South China Sea, claiming and controlling territory that India also claims. It is the inability to resolve the territorial disputes that leads to a cycle of distrust, and uncertainty, and, ultimately, instability.

And, again, these are nations whose greatest trade are with each other, by far. And China is the biggest trade partner for all of them. Yet there is a distrust of China because of these territorial issues. Immediately, and then secondarily, because of the oppressive nature of the communist party in China, how it acts towards its own people, gives other nations pause about becoming closer to it it that is really driving this dynamic.

It is a problem for the United States because we have an alliance with five of these nations, because we commit to upholding freedom of navigation, because we are seen, at least theoretically, as the guarantor, the underwriter of regional stability. But we were always able to do that when there was no real challenger in Asia. We were able to do it through the 50’s, 60’s, 70’s and onward because there was no one could really challenge our position.

But today, China can challenge our position. I think today we have not yet convinced the nations of Asia that we are credible, that we have a strategy and a plan for making sure that China does not become dominant because, in their view, they are becoming dominant.

Are we becoming more or less credible? It would be obvious that we have a new president who has perhaps been skeptical about US power projection — why do we have to get involved in things that maybe aren’t our trouble? He seemed to have a very high opinion of the brilliance of China. So do you think they’re more or less worries about the US as a guarantor of peace in the region?

I think it’s very early in the Trump years to figure out whether they’ll come up with a plan, whether it’ll be credible and accepted. I think that the news coming out of the last week or so has been good, that the president has re-committed to both the alliances with Japan and South Korea, and also good in a way that he has decided to not challenge the One China policy right off the bat without having a full understanding of the implications of that. Instead, he’s bought himself time.

But we lost a lot of ground in Asia during the Obama years. It’s not just because the Obama administration didn’t try, they did try. They had a re-balance, or a pivot as they called it initially. They did a lot of small, good things with a bunch of nations, but it didn’t add up to anything that changed the trend lines and I think that’s really what worries the Asians.

No one doubts that, at the end of the day, if you really had to have a knock-down, drag-out fight, the United States would win. I don’t think there’s anyone who questions that.

But it’s all the territory in between that allows China to gain influence, intimidate its neighbors, to get them to change their ways of doing business. Before the United States even gets involved they say that you guys haven’t been as serious, aren’t as serious about maintaining stability and, therefor, we’re worried about the trends if China continues this quasi-mercantilist, mock-politique approach to settling problems only in its own interest without trying to figure out a way of coming to common ground.

One of the other threats is the end of economic growth, failure of reform. Again, that may surprise some listeners. But there’s something called the middle-income track where we have very poor countries that grow very fast, begin to urbanize. Then that growth just peters out and they’re unable to make that next step up to becoming an advanced economy or a very rich economy like Europe, like the United States. Poor countries have not been able to do that. I think the last really poor country to get rich was Japan.


Oh yeah, Korea. Some of these other countries — do you see them breaking out of that middle-income trap, and what happens if they just never really get rich? Of course, the thing about China is they’re going to get to get old before they get rich. What if they never get rich?

As the mindset changes in Asia, that people realize that we’re not all going to become Japan or South Korea, then you have a whole new set of demands, pressures, and problems on governments, many of which do not have the capacity to resolve them or answer them.

First of all, there are always going to be elements that are rich. China has more millionaires and, I think, billionaires today, certainly millionaires than any other countries on earth. So there are parts of China that are very wealthy, just as there are parts of India that are very wealthy. But there are still hundreds of millions in both of those countries that live in absolute or near poverty, or barely are at a middle-class level.

I think that if there’s one area where the book really challenges the common wisdom it’s precisely in this: That Asia’s golden days of economic growth are over. It doesn’t mean there won’t still be growth, but that the story that we’ve told ourselves, again about 10% growth. If it’s not Japan, it will be China, and if not China it will be India, and if not India it will be Vietnam or somewhere else.

There’s always been another fast grower.

Right, there’s always been someone in line and I think that that really has come to an end now. And, again, it is the reason why we have had interest in Asia for the past forty years, it was to make money. So we don’t want to give up the idea that we’re not able to make money as quickly.

But that doesn’t help the Asians. Because you’re right, if you’re stuck at the middle-income track, where China really is right now, if you haven’t really achieved take-off level as the Mekong Valley nations haven’t, or some of the South East Asian nations haven’t, then where do you go? Because what happens, and why we literally made a map of risk in Asia — it sort of looks like a Lord of the Rings fantasy map — is that these regions share borders and bleed over into each other. So the lack of economic growth ultimately becomes a political problem and when there is a tension because of the politics and the economics it can become a regional problem because you want to divert attention from your failures at home.

As the mindset changes in Asia, that people realize that we’re not all going to become Japan or South Korea, then you have a whole new set of demands, pressures, and problems on governments, many of which do not have the capacity to resolve them or answer them.

And you mentioned just very briefly is the demographics, what I call the Goldilocks dilemma — either too many or too few people. In the case of China you’re going to have too few people because of the one-child policy, even though it’s become modified. But it will not become a wealthy per capita nation before that happens. Moreover, you have little capacity and no real tradition of providing public goods for its own people, providing social services and entitlements, and yet, as kinship networks in China shrink, what the Chinese have often relied on for support, they will look somewhere else for the demands, for these types of support. They’re going to look to the government, and the government is not either equipped or really willing to provide it.

So this is going to be the great driver over the coming generation in many of these countries, including in wealthy ones like Japan where an increasing number of people are elderly and they’re going to be making demands on the government, so watch the demographics.

With China, what is a reasonable expectation for American policy-makers to have as far as an expanding zone of freedom inside China? Again, if people have been waiting as the country got richer, people would demand more freedom, and eventually the government would give them more freedom — that seems to have plateaued or stopped.

Will China become less free over the next thirty years? 

Right, I don’t think we have to predict to be able to extrapolate from what we see today and the answer is no. In fact, what we see today is a U-turn, or at least a J-turn, from what appeared to be potential moderate liberalization inside China: the growth of civil society, the growth of NGOs, the attempts to give it a more internationally-normed legal system, the growth of social media — away from that.

Instead, we’re not going back to the Mao years, we’re not going to have 50 million dead, but President Xi Jinping has increasingly clamped down on civil society and I think he has done so, in part, because of the ruler’s fear, and the leadership’s fear, of the breakdown of that social contract. The social contract was not political for economic growth, but as economic growth dissipates or moderates, that’s the question we’ll have to ask. They’re worried about any type of dissent or unrest being expressed.

What are the expectation as you see it of the Chinese people, or the growing Chinese middle class? I remember, I visited China in 2011 and I was with a few of the other journalists and we were going through the Forbidden City. We had a guide, we had a couple of communist party minders — they were young, they were cool, they were hip, but they were communists. Theywondered off for a moment, so we were just with the guide and the guide leaned into us and said, “I believe in multi-party democracy.”

Quietly right?

Very quietly, it was more of a whisper than what I just gave.

It was like telepathy.

So what do people want? Assuming they can still have the economic goods, do they still want more democracy and will it become more dissatisfied?

You know, there’s 1.3 billion of them. The idea we can really figure out what people want, we don’t know.

We don’t know what Americans want.

Exactly. There are apparatchiks in China who want the system to stay what it is, there is an influential middle class that wants its own level of freedom but not for the peasants, there’s peasants who we really have almost no understanding of because we don’t get out there and spend the time to figure out what they want other than probably goods, and services, and job opportunities, and to be able to move to the city.

Look, China has never had a democracy. It’s not like a lot of other nations that have had periods of democracy and then periods of autocracy. It does not mean, of course, that people don’t want freedom. Certainly freedom to make decisions that they think are in their own best interests, but certainly something that represents, or is maybe closer to a representative democracy, is really just so far outside the Chinese experience that I just don’t think we can map over out templates and preferences and understand how you basically calculate the desire for a degree of stability, a degree of opportunity, and, yes, a degree of someone at least listening to your demands versus actually allowing you to openly access them.

But, in any case, we’re moving actually farther away from that and that’s a danger for a regime that is very brittle, I would argue. Successful so far, but still brittle. And also one that really doesn’t have a lot of legitimacy. It has authority, but it’s not beloved by the people and only a tiny fraction of Chinese are members of the communist party.

We’ve talked a lot about China. Obviously, the book is about more than just China. We touched a bit on Japan. India, again it’s in that middle-income trap. How are the challenges different? It’s a very different country: they’re a democracy, a lot of English-speakers, they seem to have a different set of problems. But yet they’re also unable to, it seems to me, move forward and be on a strong path to becoming a truly prosperous nation.

Right, well with India part of is it just the sheer size. Again, it’s over a billion people, it’s soon to be the world’s most populous country with more ethnicities than China has, more linguistic groups than China has.

Which also may surprise people, but China is actually a very diverse place. It’s not just homogenous China. A lot of dialects, languages, nationalities.

Yeah, but India has passed that. As a democracy India has decided to go down a far more complicated and messy road of compromise and liberalism and the like that makes it more difficult, as we know here, to resolve real problems.

You know, India occupies a unique role in that it has become vitally important in certain elements of the global economy. You think, the back-office services that it provides or the IT services that it provides. But, overall, it’s leading companies are much smaller on a global scale than those of China, or Japan, or Korea, or others. Yet their small size, both numerically and in terms of actual per-company size — they play an out-sized role in the economy. It’s still a very top-heavy economy and top-down with all the regulations, what used to be known as the License Raj in India.

India has come an enormous way in the 26, 27 years since the currency crisis, the current accounts crisis, where they actually literally had to airlift their gold to London to get further international credit. The country was at the point of bankruptcy. And that’s when the forms began and so India today has become far more open and far more liberal.

But the problems remain enormous. The corruption is absolutely staggering and endemic. When you go there and you travel, and you see the poverty, and you just see the sheer amount of diversity, you realize that it’s a little bit, as one Indian politician told me, it’s a miracle we’ve stayed together. Forget about the fact we’ve actually succeeded as a democracy and that we have raised hundreds of millions out of poverty, it’s just a miracle we’ve stayed together. And so I think that India will always stay with that.

I have a line, sadly incorrectly quoted in the book, that India, I called it Argentina, but Brazil, which people called the the country of the future and it always will be, that’s what I think India will be. I just sadly called it Argentina.

Well now we’ll call it India.

Well, I didn’t know I said it was like Argentina, the country of the future and always will be, as opposed to Brazil.

Just quickly, also, one concern is Korea, and people always ask this question. We worry about North Korea, we worry about how they have nuclear weapons. Why does China not just settle that problem? North Korea is highly dependent on China. Isn’t China worried about North Korea having nuclear weapons? Why are we worried when we have a big ocean and why does China not seem to be very worried about North Korea just being this crazy, out of control country. Why aren’t they helping disarm or help push them towards independence or unification with South Korea.

Well, if they are worried they’re not worried enough. What China definitely does not want is a unified peninsula.

American soldiers, right on the border.

They don’t want that. They’ve made the calculation that, as unpredictable and seemingly crazy and as clearly as dangerous as North Korea is, it’s better to have it as both a buffer between US-leaning South Korea and Japan, as well as a thorn in the side of the United States. That may change at some point of time.

But, increasingly, North Korea seems out of the control of China. You just saw the other day that North Korean agents assassinated the dictator’s half-brother, Kim Jong Un’s half-brother, in the airport in Malaysia. They clearly have no compunction about carrying out assassinations in third-world and third-nation states, third-party states, violating their sovereignty. This is something that has to worry Beijing, because these guys are just out of control in certain ways. But, at the same time, their calculation seems to be that it’s still worthwhile for them to have them as a problem for us.

As we wrap up, I can’t help but thinking if you had a sit-down with President Trump and you were talking with him for a half-hour and the meeting was over, what big idea would you want him to take away from that meeting? Either some insight or understanding — when you think about the region, remember this.

I’d say there’s at least two. The first one is this is not the region of golden dreams anymore. Be prepared for an Asia that is increasingly fraught with risk. Everything, as we’ve been talking about, from economics to demographics to politics and security. So number one, don’t presume that this is going to be safe region.

Number two, America remains the most important external player in Asia’s destiny. We have a role to play because of our trade, because of our alliances, because of the values that we hold. And most Asian nations want us to play a role. We can’t solve their problems, but we can help. Don’t think that we can’t play an important role. That’s why I think TPP was actually very important and we should not have gotten ridden of it. It’s why our alliances are important and it’s why our presence is important.

So number one, be prepared for a bumpy Asia. Number two, know that most of them want us to help make a positive difference and that we can make a positive difference. Now come up with the policy to do it.

James Pethokoukis is a columnist and blogger at the American Enterprise Institute. Previously, he was the Washington columnist for Reuters

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