Assessing the Risks in Asia

The rise of Asia, and particularly of China—the tremendous growth in its economic, diplomatic, and military power—has not escaped the notice of anyone on this planet, and many commentators now take Asian ascendancy in the 21st century as an inevitability. Michael R. Auslin of the American Enterprise Institute (and formerly a history professor at Yale) has undertaken to correct that view.

Although his publisher could not resist the startling title The End of the Asian Century, Auslin disclaims any predictions. They slip out from time to time (vaticinari humanum est), but mostly he plays the role of a Wall Street analyst performing due diligence on the Asian juggernaut, probing its weaknesses and asking its enthusiasts, “Have you thought about what could go wrong?”

This is a valuable service, and Dr. Auslin is on target in some key respects. When, however, he suggests U.S. policies that he believes would be, in the book’s last words, “for the benefit of all nations,” this reader found him sadly unconvincing.

The author places the risks to Asia in five categories:

  • Economic decline or collapse
  • Demographic imbalances of one kind or another (outside of Southeast Asia)
  • Domestic political upheaval
  • The absence of effective regional coordinating institutions
  • War

These range themselves in different timeframes. He sees the danger of armed conflict as most imminent; economic decline is a more middle-term possibility; and demographic troubles as a long-term risk of very high probability.

Treating these issues with regional scope ensures that every reader will learn something. A few examples:

Expounding on the origin and role of the Association of South-East Asian Nations (ASEAN), Dr. Auslin explains why it has never amounted to anything and probably never will. He shows that in this case and in East Asia, as well, the lack of an effective regional institution is not merely an organizational oversight but arises from an intractable lack of trust between nations with roots in longstanding historical grievances.

Japan is contrasted with South Korea in thought-provoking ways. Exports make up almost half of Korea’s GDP, while the figure is only 16 percent in Japan, making the former much more sensitive to external economic shocks. Japan is a notoriously senescent society whose brilliant development of robotics has been spurred, in part, by the accelerating decline of the working-age population, whereas South Koreans are a younger people. Even so, the fertility rate is even lower in South Korea than it is in Japan; poverty among the elderly and reported stress among the young are both much worse on the peninsula.

Dr. Auslin’s portrait of India pays affectionate homage to a diverse and energetic people who are committed to the messiness of democracy. But he highlights the burden of a runaway population growth rate exacerbating acute and widespread poverty. Then there is the pervasive culture of corruption. He quotes a Western businessman on a two-stage bidding process in which “They wanted us to offer bribes” to win the chance to “make the serious bribes later on.” Then there is the exploitative and stifling Indian bureaucracy, the “license raj” which Dr. Auslin holds accountable for the underdevelopment of the country’s industries. Finally, there is sectarian tension, much of it fueled by neighboring nuclear-armed Pakistan. These are not conditions favorable to building national power.  The author concludes: “The greatest risk facing India is that it will never create an economy strong enough to change the lives of the vast majority of its citizens.”

Useful as this treatment of the entire region is, it was of particular interest to see what Auslin had to say about China.

His economic analysis highlights the oft-discussed hurdles faced not just by China but by all nations experiencing rapid growth through a reliance on exports and infrastructure investment. China has reached that difficult point where it needs to grow domestic consumption. Also the Chinese have amassed a colossal amount of debt, much of it hidden and hard to estimate. The heavy hand of the state is felt in the management of markets as well as the advantages accorded to state-owned enterprises. Last, but not least, is the criminal tinge that attaches to many mainland business practices.

On some key points, though, Dr. Auslin underestimates the capabilities of the Chinese Communist Party. For example, when he notes how much China’s rapid modernization owes to theft and imitation, he suggests that China is therefore unaccustomed to doing basic research and development and will have a hard time innovating. On the contrary, there is growing evidence that the Chinese prize basic research and are good at it—even if, until now, they have largely taken the easier route of cyber-theft and piracy. It should give Americans pause that the fastest supercomputer and (arguably) the leading edge of Artificial Intelligence research are now to be found in China.

Moreover, when he discerns a medium-term stability in the curious arrangement by which China has accumulated a vast trade surplus with us and used it to buy our debt, he does not address the efforts China is making to dilute the dollar’s status as the global reserve currency, arranging to purchase commodities with yuan or gold or Special Drawing Rights. These efforts, still at an early stage, should not be exaggerated but they do reveal a strategic intent that should be of concern to us.

In considering the possibility of China’s internal stability failing, Dr. Auslin avoids many of the pitfalls that Western commentators typically step into. He harbors no illusions that China will become democratic anytime soon. And while acknowledging that autocracy is firmly entrenched for the time being, he notes astutely that Xi Jinping’s gathering of vast powers into his own hands is probably sowing the seeds of a future instability much worse than a continuation of collective leadership would have done. Here again, though, he may be underestimating the success of the CCP’s public relations campaign with its own populace—Bruce Dickson’s book, which I’ll be reviewing next for Law and Liberty, is instructive on this point—and he errs in presuming an analogy with the Soviet Union when it is obvious by now that Chinese Communist rule, at least since Deng Xiaoping, has been more rational and effective, though not more just and humane, than Soviet rule was.

On the topic of regional security and the danger of war, the author deserves credit for recognizing that North Korea has made itself a nuclear power, and an utterly untrustworthy one. (At the time that The End of the Asian Century went to press, many commentators thought that we still had a bit more road down which to kick the can, or that an acceptable outcome could be achieved by negotiation without sanctions.) But he envisages the threat posed by Pyongyang as a re-run of the Korean War—a bloody bombardment and invasion of the South. He would do well to consider the thesis of Joshua Stanton that the Kim regime aims to subjugate the South without fighting a war, and has a plausible strategy for doing so.

For this reason, I disagree with his assessment that if war broke out, it would most likely break out in Korea.

As for the military ambitions of China, Dr. Auslin is refreshingly candid: “Its long-term buildup indicates a decision by Chinese leadership to try and reshape the regional security environment, and the understanding that to do so will require an overwhelming military capability.” And later, after detailing China’s formidable cyberwarfare capabilities, he writes:

Smaller Asian nations, which cannot sustain defensive cyber operations, would almost certainly be overwhelmed if such an attack were aimed at them. To critics who say that such fears are overblown, the record of China’s actions and the trajectory of its military development strongly suggest that Beijing is preparing to fight in cyberspace, cripple enemies’ domestic systems, and then use modern conventional weapons to dominate its region.

In his discussion of Taiwan, whose distinct and democratic culture he recognizes and clearly respects, Dr. Auslin appears to write the island nation off, sorrowfully, in view of the overwhelming force arrayed against it together with the mainland’s oft-expressed intention to annex the place and subjugate its people. But he does not address what would happen next. This event would prove a devastating psychological blow exposing the impotence of the United States in the Far East and making China appear unstoppable. It would lead our allies to rapidly make their own accommodations with Beijing.

It is this, in my opinion, that poses the greatest security “risk” in Asia—nothing else comes close—for its occurrence will not depend on accident or miscalculation, but on an intention avowed as a core interest for more than 50 years, during which we have watched China develop with single-minded determination the power to achieve it. Dr. Auslin describes with pride and awe the majesty of a great U.S. aircraft carrier; he also notes that China has developed anti-ship missiles that are accurate at extremely long range and could destroy carriers. The thoughtful reader will draw conclusions.

What then, is to be done? The author believes America can make a difference by promoting free trade, holding summits talking up the virtues of democracy, and “encouraging” Asian countries to respect Western values. He also calls for greater defense coordination among the democracies (even while acknowledging that India backed out of one such arrangement for fear of appearing hostile to China).

I took in his recommendations with growing incredulity. First of all, it was the exaltation of free trade, pursued with insufficient reference to long-term national security, that brought us to this pass. I remember meeting an American engineer in a hotel in Changsha in 1999. He worked for an aviation company that was selling high-performance engines to China. His voice trailed off as he said, “They could do a lot of damage with that technology someday.” But the deals were done, and some parties profited handsomely.

Second, while readers of Law and Liberty have a principled reverence for constitutional government and private enterprise, the respect enjoyed by those values around the world after 1945 probably owed much to the wealth and power of America. Perceptions have been changing, especially since the financial crisis of late 2007 to 2009, and American values have become harder to sell. Our government’s increasingly wanton disregard for its own laws hasn’t helped the case.

But third, and most important of all, it’s a matter of time and the correlation of forces. Dr. Auslin’s recommendations would have had some merit 20 years ago. Now, they come too late. One person who recognizes that the world has changed and familiar responses are no longer adequate is John Robb, a gadfly security consultant. His provocative recommendation can be read here. I am not sure he fully grasps the risks attendant on the action he suggests, but he provides clarity about the present situation.

It is telling that endorsements from George Shultz and Francis Fukuyama grace the dust jacket of The End of the Asian Century. While Dr. Auslin’s enumeration of challenges in Asia is frequently perceptive and bracing, his recommendations rest on the confidence of an era when our nation’s prestige, resources, and even competence stood far higher than they do today. I’m afraid our ability to influence the course of events is much less than he and I both wish, and than he believes.