Posts by RobertKelly:

    Will Japan Get Sucked into the Post-PCA Ruling South China Sea Mess? Yeah, Probably

    September 26th, 2016



    I was thinking about what if any impact the recent Permanent Court of Arbitration ruling on the South China Sea, and China’s full-throated objection to it, will have on Japan. Three things come to mind:

    1. Given the size of Japan’s economy, Japan is more absolutely dependent on SCS freedom of navigation than anyone else. Its straight-up dollar interest in FON down there is huge. It is hard to imagine Japan not getting pulled in just by the criterion alone.

    2. China need not start a war or do anything very dramatic to cause genuine trouble for Japan in the SCS. It only needs to stop a few transiting ships for a few days for ‘health inspections’ or ‘environmental concerns.’ Or its fishermen or coast guard could ram or block ships. Once the pressure of an incident rose, China would release the ships, saying that they were now in compliance with some bogus regulation. This would send a clear signal that China has its boot on Japan’s windpipe but in a very oblique way that would make responding to China very hard. The Chinese have proven themselves adept at this sort of salami slicing. Future one- or two-day stoppages for specious health or traffic safety reasons would constantly be hanging out there as a potential threat. At the very least, it would drive up the cost of shipping and insurance.

    2. The US is probably not going to fight a major conflict with a near-superpower just over shipping lanes. Were Japan directly attacked, sure, the US would intervene. But the Chinese aren’t stupid. They learned from the massive counter-balancing the Soviets incurred when they tried to bully everyone during the Cold War. The Chinese are much more oblique and crafty, and they’ll work hard to avoid a direct military confrontation with the US. This too will likely force Japan to get more involved.

    The full essay follows the jump.

    Last month the Permanent Court of Arbitration in the Hague delivered a major defeat for China in the South China Sea. Unanimously rejecting Chinese historical claims to the vast majority of the space, the court sided with the Philippines: China had trespassed into Filipino waters and was illegally occupying islands and reefs in the area.

    The South China Sea contains significant oil reserves, and countries in the region are eager to set up refineries (this is particularly true for energy-starved China). Particularly large quantities lie off the coasts of the Philippines, Vietnam, and Malaysia. The East China Sea is also home to natural gas and fertile fishing grounds.

    One month since the ruling, little has changed in China’s behavior. Nevertheless, the Court has given the smaller regional states a powerful public relations tool: China now looks like an outlaws. More lawsuits are likely to follow in the next several years.

    China Ignores the Ruling

    China dismissed the findings of the Hague court almost immediately. President Xi Xianping wholly rejected the ruling, calling it ‘baseless’. And there has been no reduction of Chinese naval and commercial activity in the disputed areas.

    Though the PCA ruling is binding, there is no enforcement mechanism. Formal enforcement would risk an armed clash with China. There will be little consequence in the short term, and China will likely proceed with artificial reef creation and illegal fishing. Nevertheless the findings set a precedent that will likely embolden other countries in the region, namely Vietnam, Japan, and Taiwan, to bring similar lawsuits against Beijing. It is also an important loss of face, which is central to the justification of the Chinese Communist Party’s continuing dictatorship.

    Great powers are prone to ignore international law they dislike. In 1986 the Court issued a similar ruling against the United States for illegal mining Nicaraguan waters. Like China, the US similarly dismissed the ruling and continued its operations. But the episode emboldened Congress to cut funding to the Nicaraguan contras, a key tenant of Reagan’s foreign policy, as well providing a foundation for lesser, smaller states to voice their concerns. China will likely face such legal harassment in the years to come. The ‘rules of the road’ in the South China Sea will become a permanent nuisance for Chinese participants in international fora.

    Shipping Threat

    A permanent Chinese presence in the South China Sea is a growing issue for Japan and others whose shipping transits the area. In fact, geoeconomic leverage, not military engagement, has been China’s modus operandi for years. Beijing punished the Philippines in the past with trumped-up safety regulations over imported mangos, as it is threatening to do so again after the PCA ruling. State-run media ran anti-Japanese editorials that encouraged Chinese consumers to boycott all Japanese products (leading to protests and demonstrations that severely dampened trade for years between the two countries). Korean cell phones were banned completely in the so-called ‘garlic war’ in 2000.

    Thus, simply the threat of disrupting trade flows in the South China Sea could have consequences. The South China Sea is arguably the most important trade route in Asia. Over $5 trillion of commercial goods pass through the area each year. Japan and Korea rely on energy imports from the Middle East. Indonesia and Australia send through millions of tons of coal, and Thailand and Vietnam send rice.

    China can use this leverage. It could assign arbitrary passage or docking fees, expand its coast guard to ‘randomly inspect’ certain vessels, or temporarily detain Japanese shipping for ‘health inspections.’ It may well declare an air defense identification zone over the space. These transaction costs would reverberate down the supply chain. Suddenly coal shipments might take twice as long to reach South Korea, threatening electricity for millions. Insurance costs would rise as companies feared delay and disruption. All this would not require overt military action.

    Japanese Naval Power Projection

    Under the 1982 UN Convention of the Law of the Sea, states may claim an Exclusive Economic Zone (EEZ)of up to 370 kilometers from its coast(s). States have full and exclusive rights to natural resources within their own EEZs, but must permit safe transit through these zones according to the convention. Many countries in the South China Sea have overlapping EEZs, and China has disregarded all of them.

    Hence the debate in Japan over an expanded military role may be overtaken by events. The United States is unlikely to wage a major conflict against China solely for regional states’ shipping concerns. Yet without some kind of regional coalition, China is unlikely to stop building just because of the PCA ruling. Among Asia’s democracies, only Japan is economically large and modern enough to lead such a bloc of resistance. China will not stop for the PCA or the delicacies of Japan’s constitutional debate. This challenge to Japan is materializing now.

    This is the English-language original of an op-ed I published in this week’s Newsweek Japan.

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    What a Trumpish GOP would Mean for Asia: Reduced Trade & Migration, and More Defense Spending

    August 19th, 2016

    By Robert Kelly.



    This a re-print of an op-ed I just published with the Lowy Institute.

    I’ve argued elsewhere that I don’t think a President Trump would pull the US out of Asia. That would requiring battling a deep Washington consensus of government officials, think-tankers, military, and the rest who strongly support a continued American presence out here. Trump is too lazy and too ill-informed to try that. So don’t worry about that. Nor will Trump win. So don’t freak out yet.

    But I do think Trump has changed the GOP a lot, and that he will have successors. Trump just proved that the median GOP voter doesn’t give a damn about Reaganism. Republican voters are now lower middle class and downscale (whites), and they are not anti-statists who want tax cuts for the rich. Nor are they neocons (it’s their kids that fight the wars), nor are they social conservatives, as their rates of divorce, single parenthood, and substance abuse make clear. What they do want though is a dramatic reduction of immigration in order that the United States remain majority white longer.

    In short, Trump has just showed the potential for the US to have a European-style nationalist-rightist party, complete with a whiff of fascism in Trump’s authoritarian posturing.

    So my prediction is that: 1) Trump will lose, but 2) post-Trumpers will pop-up and try to use his message to win GOP primaries. This will ignite a serious civil war inside the GOP between the establishment – who are mostly Reaganites like Paul Ryan but who have weak roots among actual GOP voters, as Trump just illustrated – and white nationalist post-Trumpers who actually speak to issues the GOP base cares about. It’s not clear to me who will win, but the post-Trumpers have the votes and the passion.

    The full essay follows the jump.

     The US Republican Party will gather from July 18 to 21 to formally nominate Donald Trump as its presidential candidate. This may be contested – the ‘Never Trump’ movement is searching for a way to open the convention – but regardless, Trump has already altered the Grand Old Party (GOP) dramatically. The convention may be contested, and Trump will likely lose in November. But ‘Trumpism’ – white nationalism, America First, overt hostility to Islam and the growing diversity of the United States, border control, and foreign policy disinterest – will survive. And if it feeds through into policy, it will impact America in Asia.

    Fossilized Reaganism

    Trump himself is a terrible messenger for his ideas – buffoonish, undisciplined, fraudulent – but the ideas themselves clearly resonate. Almost out of nowhere, Trump managed to defeat nearly twenty other rivals. Those rivals spoke the well-established Reaganite language of the modern GOP. They promised the usual mix of libertarian economics, foreign policy hawkishness, and social conservatism in a Christian idiom.

    This was an exciting and relevant package in the late 1970s. The economic doldrums of that decade inspired supply-side economics, and the Reagan-era economic boom suggests that tax rates were probably too high. Détente with communism never sat as well with Americans as it did with the allies. And the social tumult of the 1960s and 70s had inspired a Christian-moralist backlash. Reagan fused these three agendas as none of his successors ever would.

    In the years since though, that Reaganite package has lost much of its appeal. Decades of tax cuts have left the US with a huge debt and deficit, and most Republican voters today, downscale whites, do not wish to see the welfare state, funded by those taxes, reduced. Neoconservative belligerence shattered on the rocks of Iraq and the intractable war on terrorism. And resistance to social change simply no longer motivates Americans that much; most have come to accept a great deal more sexual and gender freedom, such as divorce and gay marriage.

    With astonishing speed, Trump demonstrated just how ossified this 40-year old message is. He won the GOP primary with no almost staff, money, intellectual or organizational preparation, or campaign strategy. He clearly ‘wings it’ through most of his speeches. He alienated most of the GOP establishment. He fought with its premier media organ, Fox. And he still won handily, with over 14 million votes and roughly 45% of the GOP primary vote.

    Trump’s Inevitable Successors

    Trump’s ‘revolution’ is to show that Republican candidates can dispense with the Reganite superstructure and win with direct appeals to the Republican id, particularly the ‘angry white men’ who are the core of the GOP voter base. As David Frum put it, “Trump is running not to be president of all Americans, but to be the clan leader of white Americans.” For decades Republicans have danced around the mobilization of white identity politics. Trump, with his characteristic bull-in-a-china-shop, win-at-all-costs approach, he has thrown out that pretense and appealed openly to white Christian racial/cultural loyalties.

    That this worked so well, so fast, and for such an obviously unqualified candidate, means it will almost certainly be picked-up by a post-Trump generation – slicker, better organized, and disciplined enough to properly exploit the opening Trump has created. Think of Trump as the National Front’s first leader, Jean-Marie Le Pen – the frightening, undisciplined buffoon who gets the nationalist ball rolling – and his successors as daughter Marine, sharper, smarter, less overtly scary.

    Trump shown a new method to win the GOP primary. We should expect successors. In the years before the next presidential primary, a civil war will be fought in the GOP between an establishment desperate not to appear racist, clinging to a fossilized Reaganism that no one in American really wants, and an insurgent, Trumpish white resentment that would remake the GOP as a European-style nationalist-rightist party. It is not clear who will win.

    What Will a Trumpist GOP Mean for America in Asia?

    The Reaganite GOP has traditionally appealed to Asian elites. Republican belief in free trade allowed export-oriented economies around the region to trade freely, even as Asian mercantilist strategies blunted US imports. Republican hawkishness and obsession with credibility served American allies’ security. Despite reasonable concerns that America’s Asia allies cheap-ride on US guarantees, that debate almost never arises in the GOP. Instead, anxiety runs the other way: GOP elites constantly worry that American allies doubt US commitment, therefore arguing that America must give the allies more attention, resources, and so on. Finally, GOP hawks strongly support American global preponderance. The GOP supports the maintenance or expansion of US bases around the world and a forward US military presence that is frequently interventionist. If the GOP controlled the White House today, the US would be far more heavily involved in Ukraine, the South China Sea, and Syria. All this takes the pressure off US allies to respond to Putin, China, ISIS, and so on.

    Trump, for all his foolishness, raises the obvious question of whether all this forward engagement is actually good for the United States. With the exception of free trade, it is not immediately clear that it is. Almost thirty years of US intervention in the Persian Gulf has probably worsened American security in the Middle East. Taking the lead in Ukraine would once again let Europe off the hook regarding its own security. If the Americans were not around to bail-out European security, would the Brexit debate have focused on so narrowly on parochial issues like the National Health Service and housing? In Asia, wealthy American allies can clearly spend a good deal more on defense – and should with China and North Korea in their neighborhood. Nor is it immediately clear that Trump’s support for Japanese and South Korean nuclearization is a bad thing – both are liberal democracies mature enough for nuclear command-and-control, and allied to the US. A lot of Americans, including Trump voters, would like to see a less expensive, less interventionist US foreign policy, with the dividends of that caution brought home.

    Specific policies from a Trumpish GOP might include:

    – A substantial immigration reduction: If there is one thing that the white working class across the West – which is fueling Brexit, Trump, Marine Le Pen, and others – want, it is reduced non-white immigration. This would effect southeast Asia more than northeast Asia.
    – The end of the Trans-Pacific Partnership and new FTAs: Free trade is an easy target for nationalists. Trade with Asia has a racial edge to it as well.
    – Expanded Asian defense spending: Post-Trumpers will likely be far more serious about burden-sharing division than any US administration since Nixon.

    The Pivot and Its Problems

    I have long argued (short version, long version) that the US pivot’s achilles’ heel is public opinion. A commitment to Asia interests American elites but does not really grip the US median voter. Americans do not know or care that much about Asia – it’s far away, the languages are very hard (no Spanglish?), the religious beliefs are even more foreign than Islam (which is at least monotheistic), the food is a challenge, we don’t learn about it in school, there aren’t many Asian-Americans (-5%), and so on. Even at this late date, more Americans study Latin than Chinese.

    As post-Trump candidates pick-up his threads, expect his America First-ism, focus on allied free-riding, and hostility to trade deals, to push the GOP away from its previous Reaganite internationalism. This year’s primary revealed the Reaganite GOP establishment as the emperor with no clothes; neither Democratic nor Republican voters actually want what the GOP in Washington is selling. Trump (of all people!) just proved that, and that is a titanic shift in American politics. When the GOP establishment eventually reflects its voters’ actual preferences, the GOP of recent decades, which Asian elites know, will fade.

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    How Japan Manages to Hang Tough in History Debates with Korea & China

    August 14th, 2015


    By Robert Kelly.


    This is a cross-post of an essay that went up today at the Lowy Interpreter.

    I was wondering why it is that Japan seems to be able to duck-and-weave on thorny East Asian history questions, when these are settled in just about the rest of the world? Even the Japanese left admits the nasty stuff the Empire did, so how is it the right hangs on in denial?

    Some of it, to be sure, is domestic politics. The uyoku dentai certainly keep up the pressure on Abe & co. to give up nothing. And my own experience with them on Twitter has lead me to block them a lot, because they’re so visceral and racist: ‘Koreans are immoral’ and so on. But they’re no more than a few hundred thousand people at most, out out 126 million Japanese total.

    The IR academic in me instinctively looks to foreign pressures, and here one can really see how the Chinese Communist Party’s appalling history toward its own people conveniently lets the Empire off the hook. The CCP will lose a ‘who was worse to the Chinese people than who’ contest with the Empire. Similarly, the ROK’s instrumentalization of the relationship with Japan for national identity-building purposes allows the Japanese right to stonewall, the logic being ‘Korea will never stop demanding apologies, so there’s no point engaging them anyway.’ As usual, it’s a tangle.

    The essay follows the jump:

    In my last essay for the Interpreter, I argued that Japan needs at some point to come around on the history questions that divide it so sharply from South Korea and China. I argued that Prime Minister Shinzo Abe and his coalition persist in interpretations of the empire and the war that are accepted nowhere outside Japanese conservative circles. Brutalities such as Unit 731, the Rape of Nanking, and the comfort women are established fact in historiography everywhere else in the world. Normatively and empirically, the Japanese right will never win Asia’s ‘history wars.’ At some point it would help enormously if Tokyo would just admit what the rest of the world already knows anyway. The whole thing is fairly fatiguing, not to mention immoral.

    But I received a number responses from Japan-watchers noting that despite all the moral pressure, the US arm-twisting for rapprochement, and the enormous light on the subject right now, including both the 50th anniversary of Japan-Korea diplomatic normalization and the 70th anniversary of the war’s end this summer, Japan has given rather little. Why so?


    Regarding China, geopolitics enables obfuscation. China is authoritarian oligarchy which opportunistically manipulates the Japanese invasion for political legitimacy. Sadly, Japanese behavior in China was probably the most appalling in the entire empire, but the Chinese Communist Party’s (CCP) authoritarianism and its own historical myopia – Mao is responsible for far more Chinese deaths than the empire was – basically lets Japan slip off the hook. Of course Japan should be honest about its record, but so long as China is not a democracy and so obviously lies about its own history, then the political pressure on Japan is considerably blunted. Certainly the Americans, for example, will not push Japan over this. The same applies – probably even more so – to North Korea.

    South Korea

    South Korea is a far tougher case, because it is a democracy. It can therefore claim a moral and normative legitimacy in its calls for restitution which China cannot. But here too, Abe has proven surprisingly recalcitrant for several reasons:

    1. Geopolitics: South Korea is simply not as important to the United States as Japan, so there are limits to how far the US will push Tokyo. And so long as the US provides strategic security to both, Japan is shielded from regional pressure on its unwillingness to move. (In the same way, the US alliance also enables Korea’s Japan maximalists.) I have called this ‘moral hazard’ elsewhere.

    2. Park Geun-Hye’s Flailing Presidency: Park is very unpopular. After multiple scandals and public safety disasters, her approval rating is around 30%. She is desperate for some kind of victory to turn around the incompetency narrative surrounding her presidency. This has weakened her hand; Seoul’s sudden climb-down on its opposition to Japan’s recent UNESCO bid looks suspiciously like a concession to get a rumored comfort women deal.

    3. Exaggeration: Korean critics of Japan often compare the imperial occupation of the peninsula to the Holocaust. I think this parallelism is deployed, because it carries so much weight before a Western audience and implies that a Willy Brandt-style, on-your-knees apology from Japan is the appropriate outcome. It is up to Koreans to decide what kind of apology they will accept, but I wonder if Koreans actually realize just how ‘eliminationist’ the Nazi Neuordnung was, particularly toward the Jews, Poles, and Russians.

    The Japanese Empire intended to absorb Koreans as something like sub-Japanese second-class citizens. Hence the ‘cultural replacement’ efforts, such as forcing Japanese language instruction and insisting on Japanese names. By contrast, the Nazis intended to exterminate peoples wholesale, by the millions. There were no death camps in Korea.

    A better, if far less evocative, analogy might be English control of the Celtic fringe in the British Isles, especially Ireland. There, a far longer period of colonial control did indeed significantly eliminate the original language (Gaelic), anglicize much of the population, and lead to so much socio-political assimilation that Irish ironically went out into the further Empire as imperial representatives. Like Japan in Korea, there were both collaborators and brutalities, most notably the insistence on food exports during the Great Famine, but these were not deliberate, planned exterminations.

    4. Politicization: Elsewhere I have argued that South Korea’s legitimacy needs fire a politicization of the colonial period. My critics reject the notion that South Korean ‘anti-Japanism’ is driven by anything other than legitimate objections to Japanese behavior from 1910-45. Several data-points suggest this is not so, all of which make it easier for Japanese conservatives to muddy the waters by claiming that “South Korea demonizes Japan beyond reason” (as I heard a Japanese scholar say at a conference once):

    a. North Korea does not fixate on Japan the way South Korea does. The primary objects of North Korean enemy propaganda are the ‘Yankee Colony’ South Korea and the United States. Japan is a surely villain but mostly serves as a foil to demonstrate Kim Il Sung’s early heroics and nationalist commitment. If anti-Japanism were a deep, Korea-wide sentiment, surely the North would use it more for legitimacy’s sake, instead of the far-away Americans, or the preposterously mystical ‘Baekdu bloodline.’

    b. Dokdo military drills. Japan and South Korea are US allies. A war between them is unthinkable; indeed, given that US commanders are strew throughout the defense structures of both, it would be nearly impossible for each to seriously fight the other. Were a conflict to break-out between them, the US would likely leave the region, an eventuality no decision-maker in Seoul or Tokyo would risk. Yet the Seoul nevertheless annually runs military exercises around the islets, such as test flights of combat aircraft or amphibious landings. These could be called off with no detriment to Korean security – because of the mutual US alliances – nor reduction in the sovereignty claim to Dokdo – because Korean police, fishermen, and tourists would still be present. In short, the exercises serve political rather than military goals.

    c. The Sea of Japan re-naming campaign. This appears almost purposefully antagonistic and political. One can certainly understand how the body of water to the east of Korea would be the ‘East Sea’ in Korean – just as Germans refer to the Baltic Sea in German as the ‘East Sea’ too. But why should such a non-descript name – there are many places ‘east’ of the other places – be a new global standard? Should the Indian Ocean be renamed for Sri Lankans? Should the Arabian Sea be renamed for Pakistanis? If the Sea of Japan becomes the East Sea, should the Korea Strait be renamed the South Strait, as the Japanese will almost certainly insist?

    d. Ethnic Korean lobbying against Japan inside the United States. Ethnic Korean-American lobbying has brought comfort women memorials and the ‘East Sea’ to the United States. This is marketed in South Korea as spreading global concern over Japanese recalcitrance, when in fact, these are the outcome of concentrated Korean-American interest group politics in the US with strong support back home. This is South Korea competing to negatively define Japan to the United States, even though Japan is a US ally.

    Each of these actions make sense within the framework I provided in my earlier Lowy essays – that Japan acts as a national identity other against which South Korea constructs its political self. Each has an obvious political-theatrical element that does not advance the cause of Japanese softening on Korea’s concerns. Rather, each clearly provokes Japan the other way, to stiffen its spine and hang tough as Abe has done – a point I have heard from many Japanese colleagues and friends over the years.

    The Korean, and Chinese, moral positions on the war and empire are correct. But a great deal of politics has enabled surprising Japanese recalcitrance. While no one expects moderation from the CCP, South Korea might smooth the path by rolling back some of its most maximal positions, such as points 3 and 4 above. None directly impact South Korean security or growth. All would strip the political cover from Japanese conservatives who claim ‘Korea fatigue’ as cause to reject concessions.

    For more on Robert Kelly’s articles go to:

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    Will South Korea Eventually Feel Compelled to Bomb NK Missile Sites?

    April 2nd, 2015


    By Robert Kelly.

     The picture to the left is the poster from a South  Korean film in which a North Korean coup forces  South Korea to launch on air-strike on Nork missile  sites. It’s not very good (it’s the Top Gun of Korea),    but it’s the closest pop-culture reference I could think  of to the argument I make below.

     My growing concern for years now is that the more  nuclear missiles North Korea acquires (read this on  just how many and when), the more they threaten  South Korea’s very existence. To date, North  Korea’s missile and nukes have generally been  understood as a tool for regime security – to  prevent an American ‘regime change’ attack – or as a gangsterish way for NK to shake-  down SK, Japan, and the US for concessions. As  Robert Gates and Hillary Clinton both noted, the  Norks are great at selling and re-selling their nuclear program for aid.

    But, if NK gets dozens, or even hundreds, of nuclear warheads and missiles, then the NK nuclear program is no longer about regime security or blackmail. It would then have grown into an existential threat to SK as a state and society. This is why I am such a strong supporter of THAAD. NK is moving from being a frightening rogue state obsessed with survival, to a major threat to the constitutional order and even physical survival of the ROK (and Japan). To be sure, the USSR and US were that to each other in the Cold War, but both developed technologies (SLBMs mostly) that allowed them to survive (or ‘ride out’ in nuclear parlance) even a massive first strike and still retaliate. This ‘assured second strike’ capability dramatically reduced the incentive for either side to strike first, so stabilizing the nuclear competition despite the huge size of the arsenals. By contrast, neither NK nor SK have assured second strike (SK might because of the American alliance, but that’s not entirely clear) which therefore incentives attacking first.

    Further, both NK and SK are very vulnerable to a first strike, so again the incentives to move first are high. NK cannot hide its nuclear weapons; it is too small and US satellite coverage too intrusive. Nuclear facilities are big and vulnerable, and a obvious temptation for an allied preemptive strike. This creates a ‘use-them-or-lose-them’ dilemma for Pyongyang. And this dilemma worsens as Pyongyang builds more and more, and spends more and more. The more nukes North Korea deploys, the greater the allied temptation to destroy them before they could be used (this was American thinking during the Cuban Missile Crisis too). This vulnerability, in turn, incentivizes NK to use them before they’re struck. It’s a nasty spiral of paranoia.

    SK too is vulnerable, which again incentivizes moving first. SK cannot ride out a serious nuclear assault, because it is a small, highly centralized state with a highly concentrated population defenseless against missile attack. It would not take many nuclear strikes to destabilize the Republic (unlike the US or USSR in the Cold War). As Nork nukes move from a few for security, to many as a state- and society-breaking threat to SK (and even Japan), the incentives to preemptively destroy them first will grow also. This is a classic nuclear security dilemma, straight out of the Cold War in the 1950s.

    The best way out of this nasty, worsening game would be nuclear restraint on the NK part (a pipe-dream, that), and/or robust missile defense on the SK side. THAAD is really, really important to slow the security dilemma paranoia that accompanies arms build-ups, especially nuclear ones. The Chinese ought to think about that before they come out so strongly against THAAD:

    If South Korea is entirely ‘naked’ or ‘roof-less’ against missile attack, when NK has 100+ nuclear missiles – a capability that could destroy South Korea in just a few minutes – what does Beijing think will happen? That Seoul will just sit back and do nothing because of trade with China? I doubt it. No SK president could tolerate such a stark, asymmetric threat to the ROK’s very existence just to keep the Chinese mollified. That would border on dereliction of duty. Even if SK did not want to strike North Korea’s nuclear sites (which I don’t think it does), it might feel compelled to out of sheer fear.

    These ideas were first fleshed out at The Diplomat here. That essay is re-posted below and repeats the above discussion:

    “As North Korea continues to develop both nuclear weapons and the missile technology to carry them, the pressure on South Korea to take preemptive military action will gradually rise. At some point, North Korea may have so many missiles and warheads, that South Korea considers that capability to be an existential threat to Southern security. This is the greatest long-term risk to security and stability in Korea, arguably more destabilizing than a North Korean collapse. If North Korea does not arrest its nuclear and missile programs at a reasonably small, defensively-minded deterrent, then Southern elites will increasingly see those weapons as threats to Southern survival, not just tools of defense or gangsterish blackmail.

    During the Cold War, the extraordinary speed and power of nuclear missiles created a bizarre and frightening ‘balance of terror.’ Both the Americans and Soviets had these weapons, but they were enormously vulnerable to a first strike. Under the logic ‘use them or lose them,’ there were enormous incentives to launch first: if A did not get its missiles out of the silos quickly enough, they might be destroyed by B’s first strike. One superpower could then hold the other’s cities hostage to nuclear annihilation and demand concessions. This countervalue, ‘city busting’ temptation was eventually alleviated by ‘assured second strike’ technologies, particularly submarine-launched ballistic missiles (SLBM). SLBMs ensured the survivability of nuclear forces; hard-to-find submarines could ride out an enemy first strike and still retaliate. So the military value of launching first declined dramatically. By the 1970s, both the US and the USSR had achieved enough survivability through various ‘hardening’ efforts that nuclear bipolarity was relatively stable despite the huge number of weapons in the arms race.

    The Korean nuclear race does not have this stability and is unlikely to ever achieve it. Nuclear Korea today is more like the cold war of the 1950s, when nuclear weapons were new and destabilizing, than in the 1970s when they had been strategically integrated, and bipolarity was mature. Specifically, North Korea will never been able to harden its locations well enough to achieve assured second strike. North Korea is too small to pursue the geographic dispersion strategies the Soviets tried, and too poor to build a reliable SLBM force or effective air defense. Further US satellite coverage makes very hard for the North to conceal anything of great importance. North Korea’s nuclear weapons will always be highly vulnerable. So North Korea will always face the ‘use it or lose it’ logic that incentives a first strike.

    On the Southern side, its small size and extreme demographic concentration in a few large cities makes the Republic of Korea an easy target for a nuclear strike. More than half of South Korea’s population lives in greater Seoul alone (more than 20 million people), and Seoul’s suburbs begin just thirty miles from the demilitarized zone. This again raises the temptation value of a Northern strike. Both the Soviet Union and the United States were so large, that only a massive first strike would have led to national collapse. In South Korea by contrast, nuking only about five large cities would likely be enough to push South Korea toward national-constitutional breakdown. Given its extreme urbanization and centralization, South Korea is extremely vulnerable to a WMD and/or decapitation strike.

    While large-scale North Korean offensive action is highly unlikely – Pyongyang’s elites most likely just want to survive to enjoy their gangster high life – nuclear weapons do offer a conceivable route to Northern military victory for the first time in decades: a first-strike mix of counterforce detonations to throw the Southern military into disarray; limited counter-value city strikes to spur social and constitutional break-down in the South; followed by an invasion and occupation before the US military could arrive in force; and a standing threat to nuke Japan or the United States as well should they intervene. Again, this is unlikely, and I still strongly believe an allied victory is likely even if the North were to use nuclear weapons. But the more nukes the North builds, the more this threat, and the ‘use it or lose it’ first strike incentives, grow.

    It is for this reason that the US has pushed South Korea so hard on missile defense. Not only would missile defense save lives, but it would dramatically improve Southern national-constitutional survivability. (Decentralization would also help enormously, and I have argued for that repeatedly in conferences in Korea, but it is unlikely.) A missile shield would lessen the military-offensive value of North Korea’s nuclear weapons, so reducing both first-strike temptations in Pyongyang and preemptive air-strike pressure in Seoul. Unfortunately South Korea is not hardened meaningfully to ride-out Northern nuclear strikes. Missile defense in South Korea has become politicized as a US plot to dominate South Korean foreign policy (yes, really) and provoke China. (Although opinion may, at last, be changing on this.) Air drills are routinely ignored. And no one I know in South Korea knows where their shelters are or what to do in case of nuclear strike.

    Ideally North Korea would de-nuclearize. And we should always keep talking to North Korea. Pyongyang is so dangerous that freezing it out is a bad idea. Talking does not mean we must be taken advantage of by the North’s regular bargaining gimmicks. But we must admit that North Korea seems unlikely to give up its nuclear weapons. The program goes back decades, to the 1960s. Rumor has it that Pyongyang devoted more than 5% of GDP in the last two decades to developing these weapons. The program continued through the 1990s, even as more than a million North Koreans starved to death in a famine resulting from post-Cold War economic breakdown. The North has repeatedly lied and flim-flammed to outsiders like the ROK government and the IAEA to keep its programs alive clandestinely. Recently Kim Jong Un has referred to nuclear weapons as the “nation’s life.”

    We could even go a step further and admit that a few Northern nuclear missiles are tolerable. If we put ourselves in Pyongyang’s shoes, a limited nuclear deterrent makes sense. Conventionally, North Korea is falling further and further behind. No matter how big the North Korean army gets quantitatively, it is an increasingly weak shield against high-tech opponents. US regime change in the Middle East has clearly incentivized despots everywhere in the world to consider the ultimate security which nuclear weapons provide. The North Koreans have openly said that nuclear weapons ensure their post-9/11 regime security. As distasteful as it may be to us, there is a logic to that. A small, defensive-minded deterrent – say five to ten warhead-tipped missiles that could threaten limited retaliation against Southern cities – would be an objectively rational hedge against offensive action by the US or South Korea. Indeed, this is almost certainly what Pyongyang says to Beijing to defend its program to its unhappy patron.

    But this is the absolute limit of responsible Northern nuclear deployment and probably where the DPRK is right now. Further nuclear and missile development would exceed even the most expansive definition of North Korean security and takes us into the realm of nuclear blackmail, highly dangerous proliferation, and an offensive first-strike capability. Pyongyang does not need, for example, the ICBM it is supposedly working on.

    In this context, my greatest fear for Korean security in the next two decades is North Korean nuclearization continuing apace, generating dozens, perhaps hundreds of missile and warheads, coupled to rising South Korean paranoia and pressure to preemptively strike. There is no possible national security rationale for Pyongyang to keep deploying beyond what it has now, and if they do, expect South Korean planners to increasingly consider preemptive airstrikes. North Korea with five or ten missiles (some of which would fail or be destroyed in combat) is terrible humanitarian threat, but not an existential one to South Korea (and Japan). South Korea could ride out, perhaps, five urban strikes, and Japan even more.

    But a North Korea with dozens of nuclear missiles, possibly one hundredsome of them on submarines, would constitute a state- and society-breaking, constitutional threat to South Korea and Japan in case of conflict. That in turn will incentivize pre-emptive airstrikes. This spiral of paranoia between North Korea nuclearization, and pressure on Seoul (or even Tokyo) to preemptively defang North Korea before it can threaten state-destruction, is entirely predictable – and the reason why everyone, even China and Russia, wants North Korea to stop building. Let’s hope they listen (but they won’t).”

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    4 Hypotheses on Why China Suddenly Declared this New Air Defense ID Zone?

    December 21st, 2013

    Answers by Robert Kelly.

    Interview by Dan Drezner.
    26071410If you haven’t yet seen the zone’s geography, here it is to the left, complete with its overlap with the Korean and Japanese zones. The most important conflict of course is over Senkaku, but Korea watchers will also note that the Ieodo submerged reef, which Korea claims, is also in the zone. Gotta wonder what the Chinese were thinking by giving Korea and Japan common cause over anything. Foolish.

    Dan Drezner asked the question I think pretty much everyone is wondering now: did the PRC really expect the US, Japan, and SK to just accept this out of the blue? Obviously they’re not, and it’s hard to find anyone besides the Fox News of Asia Global Times who thinks they should.

    I got called about this by my friend Sam Kim at Bloomberg. Needless to say, all my comments didn’t make into the story, so here is an edit of my email comments with Sam on why the Chinese seemed to just do this out of the blue.

    SK/BB: Why are the Chinese doing this?

    Me: “I see 4 possible explanations (each is roughly tied to a level of analysis in international relations theory):

    1. Belligerence (anarchy, straight-up realism): the Chinese really are picking a fight with Japan. This is the worst possible reason. They may figure that the Hagel visit to Japan a couple months ago has made Japan into an open challenger to China now. And that is kinda true. America is hedging China, ducking and weaving, trying hard to avoid an open confrontation with it. But Japan is increasingly unabashed that is it balancing China directly as a threat. Abe is increasingly willing to call out China openly. So Asia is becoming a serious bipolar contest, and maybe the Chinese are thinking: ‘to hell with it; Abe’s playing tough; we have too also.’ Certainly my Japanese colleagues in this area increasingly talk about China this way.


    2. Blowback (domestic politics, ‘myths of empire’): the CCP is doing this for domestic legitimacy purposes. CCP ideology since Tiananmen is nationalism, not communism. And Japan is the great foreign enemy in that narrative. The CCP may not want a conflict with Japan, but it’s been telling Chinese youth for 20+ years that Japan is greatly responsible for the ’100 years of humiliation.’ So now the CCP is stuck; they have to be tough on Japan – even if they don’t want to be – because their citizens demand it. The CCP has created an anti-Japanese frankenstein at home that has to be placated. They have to ride the anti-Japanese tiger their education/propaganda has created, or risk a domestic backlash.

    3. Incompetence (bureaucratic politics): the CCP and PLA didn’t really realize just how sharply locals and the US would react. Maybe they’re reading too many of these books claiming that China is about to ‘eclipse’ the US and ‘rule the world’ and all that. lol. Maybe they’re starting to believe their own hype and got overconfident. Chinese bullying in the SCS has worked out reasonably well so far, so maybe they felt they were on a roll and could do the same in the ECS. But China’s NEA neighbors are much more capable than in SEA.

    4. The Transition (leadership, psychology): Xi Jinping wants to make a splash as the new boss. Our knowledge of CCP factions is weak (coastal Shanghai princelings vs hinterland populists is the usual breakdown, with Xi being from the Shanghai clique), but we know Xi was not a shoe-in. There was an internal contest, so Xi might be consolidating power with a flashy foreign crisis. Khrushchev did this sorta thing, and the NK leadership too frequently expresses internal splits by provoking foreign crises. There has been a lot of talk that Xi is consolidating foreign policy authority around himself through a new ‘national security council.’


    The problem is that Chinese foreign policy decision-making is so opaque, that we have almost no idea which of these options is most accurate – or if it’s something else entirely. My guess is #2, because the Chinese have always struck me as pretty cautious, even crafty, in managing their rise. It’s true that they’re a lot more aggressive since 2009, but I don’t see them suddenly becoming reckless. The post-Mao oligarchy system that runs China is designed to avoid exactly that. And I always found that factoid that the PRC spends more on internal than external security to be indicative that CCP is, in fact, very insecure at the top. It’s gotta have an ideology with foreign enemies, otherwise the Chinese people might see the real enemy: the CCP’s corruption, rejection of democracy, and unwillingness to admit the horrors of Maoism.”

    SK/BB: Is China’s Blowing the Opportunity of South Korean-Japanese Tension?

    “I do think this will alienate South Korea, and it makes me wonder once again, as I said to Andrew last night, what is going on inside China. My sense has always been the PLA and CCP are much smarter than the Kremlin of Soviet days ever was. Sun Tzu said, “When your enemy is in the process of destroying himself, stay out of his way.” So if you’re China, just stay out of the way while SK and Japan tear at each other. But now, China has given cause for Japan, SK and the US to come together. Very foolish. And for what? Are the Chinese really go to force down or shoot down civilian airliners in the zone? That would be madness. It would alienate everyone in Asia, and China really needs local friends to avoid isolation by a coalition of the US, Japan, and India. I would imagine then that the US will play up this Chinese move to Japan and SK to suggest what US analysts have been saying for a long time – that Japan and Korea have a lot more in common than they admit and face much greater external threats than each other. Koreans take Ieodo pretty serious. They built that research facility on top of it and even made a monster movie about it. I don’t think China gets that, as throwing Ieodo and Senkaku in the zone together gave Japan and South Korea common cause overnight. And in fact, the Korean response on Ieodo was swift and entirely predictable. The Chinese need to hire some Korea experts, I think.”

    SK/BB: Will This Escalate?

    Me: “I am actually surprised the US challenged it so fast. The US has been hedging rising China for awhile now, but Japan is increasingly openly balancing against China. So I expected Japan, especially under Abe, to do something like this. But not the Americans. It makes me wonder who authorized that. Did it go all the way to POTUS? But challenging the zone early is a way to prevent it from sinking in. So from a brinksmanship perspective, it makes sense to respond immediately.

    It is so hard to say if it will escalate. I will hazard a guesstimate and say no. China is still not capable of winning an air and/or maritime conflict in East Asia. Indeed, even without the US, I still think Japan would win a major skirmish around Senkaku. China is still mostly a land-power, while Japan has focused on air and sea power since WWII. Also, if China forces Japan’s hand, it will burn bridges throughout Asia and provoke an encircling coalition, possibly running from India all the way around up to Japan: . I don’t think Beijing is that foolish or the PLA that reckless. If I had to guess, this air-zone was declared, not to provoke a conflict with Japan, but to bolster the nationalist credentials of the CCP at home.

    On the airlines, yes, I did hear that now they are not going to tell China anything after all. Wow. I wonder if the Chinese realized that they would be in a position where they might have to force down civilian airliners in order to back up their claim! Again, I just can’t imagine the PLA is that out of control. So my sense is, it’s a bluff and nothing will happen to those airliners. But if China were to repeat a KAL-007 resolution, it would vindicate Japan overnight and alienate Southeast Asian states, whom China needs to prevent encirclement, for years.”

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    Admit it: South Korea President Lee Myung-Bak Was Pretty Good

    June 5th, 2013


    By Robert Kelly.



    So President Lee has been out of office for a bit now, and the retrospection will begin soon. And while he left with really low approval ratings, I always thought that was pretty unfair. I am pretty sure history will be kinder to him than the SK public was during his tenure. Particularly the growing critique on the South Korea left that current President Park Geun-Hye’s many staffing gaffes means she is out of her depth also suggests that LMB was at least ready and professionalized enough for the responsibilities of the office. The essay below is a longer version of an op-ed I wrote for the JoongAng Daily.

    In passing, I should say that yes, I am aware that this is the sort of column that drives folks like Glenn Greenwald, whom I really admire, up the wall. If you’re convinced, like my students, that I’m a conservative pretending to be a moderate, here’s your evidence. Call it shameless right-wing hackery, sycophantic shilling for the powerful, craven attention-seeking, but it’s also true: Lee Myung Bak was a lot better than most Koreans give him credit for and is probably Korea’s best president in its democratic history.



    Most Koreans don’t think so. Like Bush 2, whom I think was his model, at least originally, he left office controversial and unloved. When I defend Lee to students, family, and colleagues I get regular groans: The Four Rivers Project has turned into another slushy, environmentally destructive, unnecessary white elephant vanity project (mostly true). Thechaebol on Lee’s watch have become even more powerful and intertwined with Korea’s political elite (absolutely); desperately needed anti-trust action has not occurred (very true). Borrowing from the GOP, Christianity has entered Korean politics as a wedge-issue (I don’t really see that, but every Buddhist I know dislikes Lee). Crony capitalism and corruption are still a big problem (definitely), and the surveillance scandal (another bad Bush habit) means Lee may be indicted, continuing Korea’s ignominious tradition of prosecuting its ex-presidents. Lee did little break the nepotistic oligarchy that dominates Korea and so badly alienates its under-40s.

    But here are four big things Lee has done right for which he, inexplicably, receives almost no credit:

    1. Despite the Great Recession, which occurred on Lee’s watch through no fault of his own, unemployment stayed below 4% for his entire tenure and GDP never contracted. Wow. Obama would have sailed into reelection with that record; that is simply astonishing. American employment peaked close to 10%, and European unemployment more thantripled Korea’s rate. More generally, as the rest of the OECD entered a nasty recession, Korea did not; Korea grew, even in 2009. In fact, the Great Recession barely reached Korea. No banks collapsed. No European-style austerity riots broke out. Exports held up. A wisely-sought credit line from the US Treasury defended the won, which bounced back quickly after a one-year decline. For all the talk of inequality and ‘economic democratization,’ Korea’s Gini coefficient, a formal measure of inequality, is lower than in the US, China or Japan. Lee also pushed through two major free trade agreements, obvious boons to growth given how trade-dependent Korea. (The Korean left’s shameless demagoguing of deals so clearly healthy for an export economy was both intellectually dishonest and bad for growth.) If any western leader had this record of economic management in the last five years, they’d be hailed as the reincarnation of Adam Smith, yet Koreans seem unwilling to admit this tremendous achievement.

    2. Lee also contained Korea’s debt and deficit during the Great Recession – an amazing achievement yet again, given the budget-busting we see in the EU, US, and Japan. During Lee’s presidency, the budget ran a deficit only once (in 2009), and debt as a percent of GDP rose just 2.5%. And somehow Korea’s aggregate tax take is just 23% of GDP while nonetheless providing universal healthcare and expanding free school lunches for children (a big issue here in the last year or so). Wow. Who else in the G-20 or OECD can chalk up post-Great Recession numbers like that? America has added some 5 trillion USD in new debt since 2007, pushing its total public debt stock close to 80% of GDP. Its deficit exceeds a staggering one trillion USD and cost the US its AAA credit rating two years. Mercifully, Korea entirely lacks the endless budget shenanigans that have crippled American politics for 30 years, with its regular threats to basic safety-net programs like Social Security. In Europe and Japan, it is somehow worse. Japan’s debt-to-GDP ratio now exceeds a frightening and historically unprecedented 200%; nothing seems to make Japan grow (until now, we hope). And Europe of course is caught in triple crisis of political gridlock, harsh austerity, and the never-ending euro-drama. By contrast Korea has calm and well-managed budgets, reasonable taxes and acceptable safety-nets, despite the Great Recession. That Koreans won’t credit President Lee for this huge achievement just baffles me.

    3. Lee ended South Korea’s role as the ‘sucker’ with NK while prudently managing crises like Yeonpyeong. In 1997, genuine rapprochement with NK was untested; Kim Dae Jung’s Sunshine Policy détente was worth a try. But by the mid-2000s, it was also clear that it had failed. The Sunshine Policy was evolving into permanent appeasement and, paradoxically, a lifeline for a brutal regime that regularly threatened and bullied SK. Lee was right to pull the plug without concrete change Kim Jong Il was obviously unwilling to make. Inevitably, NK hit back, and Lee managed the fallout well. He withstood the bizarreconspiracy theories from the left about the Cheonan sinking, while also muzzlingconservatives ready to risk escalation after the Yeonpyeong shelling. The latter case was particularly dangerous, as the possibility of uncontrolled escalation loomed if hot-headed decisions to hit back were made. Lee wisely choose prudence over the ideological satisfactions of the Korean right and media.

    In short, managing NK – without simply buying it off as the previous two presidents did – is extraordinarily hard, and Lee did a really good job given the weak hand he has to play. By weak, I mean things like the extraordinary concentration and vulnerability of SK’s population to NK strikes; the bizarre and genuinely disturbing sympathy of the SK left for NK; the growing belligerence of the SK right regarding NK (if another Yeonpyeong happens, a counterstrike is likely); and the awkward but necessary role of US forces in Korea in all this. Managing this tangle is very difficult, yet of existential importance to SK. I can’t see how any other Korean leader could have down substantially better, and worse could easily have occurred.

    4. Lee reaffirmed the critical American alliance. Much of Korea’s latent anti-Americanism comes, understandably, from its very unequal, almost clientelistic, relationship with the United States. Korea is very dependent on the US, both for security and economic growth. For proud, nationalist Koreans, this is a bitter pill, and it leads to strange outbursts like thebeef protests that were more about Korean pride against American domination than beef. But it is undeniably true that the US-Korea alliance hugely benefits Korea while providing no obvious gain for the US. Were NK to absorb SK, the US would scarcely be affected, as the Cold War is now over. Polling data from the Chicago Council on Global Affairs has found since the mid-2000s that only 40% of American want to fight in a second Korean war, even if NK provokes it. While NK is an obviously critical issue for locals like Russia, China, and Japan, not to  mention SK itself, the leninist global threat to the US, once represented by the DPRK, is long gone. Today Korea is simply one more issue among many for the US, including terrorism, Iran, Pakistan, the drug war in Latin America, and transnational problems like global warming and proliferation. Further, SK is more than capable economically of defending itself. SK spends a paltry 2.7% of GDP on defense, and Ron Paul’s traction last year in the US stems in part from the growing belief in the US that it is overcommitted overseas.

    In short, it would have been very easy for the US-SK relations to drift further (as under Lee’s predecessor who dislike George Bush intensely), with the long-term result that Korea would stand alone. Given that Korea is encircled by large powers, plus NK, the external patronage of the US is very valuable. In the past, Korea was always in someone’s orbit (usually China). The US alliance helps forestall that now. Recognizing that US security interests here are waning, but great value of the alliance to Korea, Lee swallowed his pride and went to the Americans as his predecessors would not. The Korean outrage over the golf-car ‘incident’ shows just how touchy this can be for Korea’s sensitive to the obvious inequality of the US-Korean relationship. But Lee, unlike so many S Koreans, realizes that the alternative to the US tie is not full-throated Korean autonomy against the world, but isolation in a very tough neighborhood where S Korea is both small and vulnerable. Trying to hold the Americans here as long as possible is very wise, and Lee deserves great praise for grasping that uncomfortable truth over politically easier nationalist posturing of his predecessors. Like the NK issue above, this is existentially important to SK, and Lee made the right choice. That’s historic.

    Bonus pride moment for Korea: Lee gave the Somali pirates the defeat they deserve, demonstrating, to everyone’s great surprise I think, that Korea can in fact project power. Nice.

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    Asian Peace & Economic Miracle

    May 14th, 2013

    By Robert Kelly.

    Newsweek 3rd coverNewsweek Japan asked me to write an introductory essay for its January 16 special issue on tension in Northeast Asia (cover story to the left). I should have put this up 4 months ago, but I forgot and the arguments are still valid. Anyway, here is the link in Japanese, but I thought it would be useful to publish the original, untranslated version as well. (If you actually want the Japanese language version, email me for it please.)

    The essay argues that Northeast Asia has benefited enormously from an ‘Asian peace’ in the last 35 years. All the remarkable growth in China and South Korea (as well as India and Southeast Asia) would not have happened without it. So fighting over some empty rocks (Liancourt Rocks, Pinnacle Islands) is a terrible idea. And for political scientists, the current Sino-Japanese tension is a good test of the hypothesis that economic interdependence brings peace. It’s fascinating to watch China especially try to figure out just how much economic gain to forego in pushing Japan over the Pinnacle Islands.

    This was intended for their print edition, so there are no hyperlinks included in the text. Here we go:

    “1979 was an important year in modern East Asia. It captures two of the region’s most important trends. It was the year of both the last serious military conflict between two East Asian countries – a Sino-Vietnamese border war – and the start of China’s capitalist modernization under Deng Xiaoping. These moments usefully frame the following thirty-four years: much of Asia has gotten substantially wealthier, and no major conflicts have broken out to upset that upward economic swing. This magnificent regional achievement has catapulted Asia, particularly East Asia, into the center of world politics.


    China alone has pulled two-thirds of its population out of absolute poverty – defined by the World Bank as living on less than $1.25 per day. In absolute terms, this is close to one billion people – a staggering achievement in human betterment and the fastest, widest modernization in world history. China now has the world’s second largest gross domestic product (GDP), an aggregate figure used by economists to tabulate all the good and services produced in a country. And China should overtake the United States as the world’s largest economy within a decade. Japan has the world’s third highest GDP, and South Korea is ranked number thirteen despite its small size. So dramatic has East Asia’s economic rise been that the analyst Thomas Barnett calls the region the ‘new core’ of the world economy. (The old core is the West.)

    Investment by Japanese and western firms has helped fire this rapid growth. But such gigantic financial commitments do not occur in regions racked by inter-state or civil conflict. Areas like Africa or the Middle East often lose foreign direct investment because of their instability. This means that the post-1979 ‘Asian peace’ is a central, if underappreciated, part of the Asian economic miracle. Were China still a belligerent Maoist state exporting communist revolution, foreign investors would certainly not have brought their money. Were Japan and Korea fighting to control the Liancourt Rocks and the Sea of Japan, their respective GDPs would be substantially lower. In short, Asian wealth is inextricable from its geopolitical calm, a point Asia’s many nationalist elites would do well to remember.

    Today, that post-1979 Asian peace is being stressed as never before. China has become increasingly belligerent in the past few years. The conflict over the Pinnacle Islands (Senkaku/Diaoyou) is worsening rapidly. Japan and South Korea, two liberal democracies, still cannot fix their differences, which flare up with disappointing regularity. North Korea is now a confirmed nuclear power, and it seems hell-bent on developing intercontinental ballistic missiles no matter how much alarm this creates in the region.

    All these tensions are made more dangerous by Asia’s new wealth. China, South Korea, and Japan are all wealthy enough today to spend far more on defense than they do. Even crushingly poor North Korea seems to find the resources to field a massive army and develop weapons of mass destruction and missiles. Were this the 1970s, when all four players were substantially poorer, that weakness would have made the situation less dangerous. But today all four have substantial capacity to project power against each other. New wealth means a vastly more expensive and dangerous arms race would be affordable.

    A useful analogy here, with some relevant geopolitical parallels, is Europe before World War I. Late nineteenth-century Europe, like Northeast Asia today, was a crowded neighborhood growing rapidly. In the space of a few decades, modernization and industrialization had created vastly larger and more effective militaries backed up by large economies that could afford arms build-ups as never before. Like Asia today as well, nationalist grievances were common. They were frequently stoked by nationalist education systems that taught dubious race and eugenics theories (also a problem in Asia).

    While such social Darwinism turned out to be poor science, it helped harden European populations’ attitudes toward each other. National communities were glorified, and triumphalist historiography made empathy between countries harder. Minor conflicts – frequently in the colonial peripheries of Africa or Asia – became tests of national honor where compromise would be an impermissible loss of face. Long before 1914 and the ten million dead of the ‘Great War,’ European diplomacy experienced crisis after crisis, with elites increasingly unable to control their nationalistic populations and militaries. Finally, like Northeast Asia, territorial disputes enraged public opinion and aided the rise of hawkish, nationalist elites. Germany and France disputed their border zone, Alsace-Lorraine, for nearly a century. This helped plunge them into three wars in just seventy years (1870, 1914, 1940).

    If this sounds similar to Asia today, it should. Many analysts have sketched these parallels in the last two decades. The title of one famous academic article on this is, ‘Will Europe’s Past be Asia’s Future?’ European states and their populations had to fight two disastrous ‘civil wars’ within European civilization (i.e., WWI and WWII) before they could learn to live with another in peace. It would be a shame if Asian states had to go through a similar catastrophe in order to learn to step back from the nationalism that threatens the Asian peace today.

    But there is another model, also derived from the European experience of war and conflict. From the ashes of the wars of first half of the twentieth century, the Europeans slowly built the European Union in the second half. Today the EU is struggling of course. The euro crisis is genuinely severe, but an unraveling of the larger European project is unlikely. Nor is the EU’s demonstration value for Asia tied to the common currency’s fate. Instead, Asian policymakers might learn how the EU bound its members together tightly enough to make war on the continent unthinkable.

    Specifically, the EU sought to use economics to overcome deep political divisions. The earliest version of the EU, the European Community, encouraged economic interdependence. The idea was that the creation of a continent wide-economy would make it hard for countries to ‘de-link’ from each other. Discrete national economies, with few connections to neighbors, could be mobilized more easily against those neighbors for war. (This, not coincidentally, is the intent behind North Korea’s juche ideology of economic self-reliance.) But economies that had grown together – where goods and services flowed easily across borders, where foreign customers and producers were critical for GDP, where tariffs and protectionism were minimal – would be less able to de-link for national war-making. Populations would also be less willing to de-link and forego the benefits that came from trade.

    All this would also improve the EU member-states’ national security. Participation in a liberal security community, where no one was arms racing against anyone else, meant that threats were low. States did not need to field massive militaries. Helpfully, small, weak militaries are also very inexpensive, allowing for other, more socially valuable spending.

    Germany’s history is particularly instructive here, especially for strategists in Beijing considering a tougher line on Japan and in the South China Sea. In 1914 and 1939, Germany sought security through expansion, seeking to subject Europe to its hegemony. Despite some successes – Germany defeated Russia in 1917 and France in 1940 – these bids for continental dominance lead to German encirclement and crushing defeat. So toxic was Germany by 1945, that early postwar thinking considered permanently de-industrializing it, throwing it back into the Middle Ages, to prevent it from ever threatening European security again. (This idea was derailed by the need for Germany to help contain the Soviet Union in the Cold War.)

    By contrast, Germany’s integration into the European security community of the EU has brought it far greater security, and wealth, than its previous war-making. Today, Germany is the dominant state of Europe and the anchor of the euro, even though it spends only 1.2% of GDP on defense. That is a remarkable achievement, and one that Japan and China especially might think about.

    Viewed this way, the rapid economic growth of China, and Asia generally, is a gamble. The upside hope is that economic growth, from regional integration and peace, would dull nationalist paranoias. Asians would slowly cease arguing about history and a few small rocks in the sea somewhere, in order to capture the benefits of integration and cooperation. As the new Asian middle class came to appreciate their HDTVs, cars, and tourist opportunities, the ideological satisfactions of nationalism would decline – as in the EU.

    The downside of this gamble is that existing Asian disputes could be so much worse if all players grew wealthier but did not moderate. If GDP growth did not smooth away the grievances of history and territory, then new wealth could be spent on militaries to pursue those grievances even more vigorously. This would be the worst of both worlds – anger, plus wealth, leading to arms racing and threats of war.

    Today, East Asia stands at a juncture of these two paths, a test of hypothesis that economic integration can restrain and soften political competition. Can thirty-plus years of economic integration make conflict in Asia so costly that nationalists will step back from the brink? The world is watching as China and Japan decide just how much wealth and economic benefit to forego over their Pinnacle Islands’ dispute.

    Hopefully, various Japanese proposals about an ‘East Asian Community’ might be a way out. Post-1979 Japan spread out production and aid in East Asia. This tightened economic interdependence and laid the groundwork for a nascent community. The basic deal was that Korea and China would get richer and less upset with Japan because of its good neighborliness, while Japan would get regional acceptance and less hostility. To smooth it over, everyone would get wealthier from trade. This basic arrangement is still a pretty good one for Asian prosperity and peace. Let’s hope it weathers the rising nationalist storm.”

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    ‘Rodman-gate’: Can ‘Useful Idiots’ please Stop Shilling for North Korea?

    March 10th, 2013

    By Robert Kelly.


    rodman nk

    Studying North Korea inevitably means people ask me pretty outlandish stuff. People have asked, if the North really believes long hair is bad for socialism, if that goiter on Kim Il Sung’s neck made him crazy, if Kim Jong Il’s platform shoes meant that he liked disco, and if North Korean women are good looking because a food shortage would mean everyone is slim. (I presume that last one is a reaction to obesity epidemic in the US.) So I tried to avoid this latest outbreak of Norko bizarreness with Rodman. But people keep asking me, so here a few thoughts to the effect that: no one should shill for NK – ever.

    Call it yet another chapter in the history of clueless foreigners getting lost in and manipulated by North Korea – what Lenin used to call ‘useful idiots,’ knaves from the West who defended the Soviet experiment, blissfully ignorant of the camps. Who knows what to make of that utterly weird photograph of Rodman in bling and Kim Jong Un dressed like Mao. There are so many contradictions in there, it’s not even worth unpacking.


    But I will say that it would sure be nice if show-boating foreigners who have no idea what they’re doing in NK would stop using it for self-promotion, and stop toadying to get their visa renewed. That would include not just Rodman but Eric Schmidt, Parag KhannaEuna Lee and Laura Ling. Same goes for all these wannabe Christian missionaries who wander in and get caught, and then have to get fished out by Bill Clinton. Their freedom is inevitably at the cost of some back-room deal and pay-off to the North Korean elite: shaking down outsiders for cash, premium booze and smokes, and car parts is a well-established North Korean tradition. Let’s stop handing the North hostages to play as cards in brinksmanship.

    There are two obvious problems with these sorts of trips:

    1. Lest it need to be repeated – and I can’t imagine anyone wouldn’t know this – NK is a hellhole, and any credibility you lend to it with your reputation is immoral. So don’t write articles about how NK is not so bad after all. Don’t put some kind of positive spin on the leadership as actually technocratic, developmentalist, East Asianist, ‘focused on the future,’ etc. Don’t suggest that NK is ‘actually doing a pretty job job defending Korean identity’ while the South is a globalized multiculture. Don’t say ‘Kim Il Sung may have been a despot, but at least he: …built the Pyongyang subway/fought the Japanese/redistributed farmland/loved his wife/gave everyone free health care/genuinely believed in communism/etc.’ I’ve heard all that and more.

    Some of this may be true; others not. But all of it blurs the issue or changes the subject by implicitly excusing NK awfulness. The issue that should drown out all others in dealing with NK is a human rights record worse than the Taliban. No discussion of NK should leave out this point – which I tried to argue a few weeks ago at CSIS-USC.

    I hear similar talk in SK all the time. ‘Well, Park Chung-Hee overthrew the constitution, but he made us rich, so he’s pretty great.’ Or ‘Park Chung Hee’s wife may have abetted dictatorship, but she loved her family, so she wasn’t so bad.’ Hitler built the autobahn and was a stickler for dental care, but so what? Enough toadying.

    And in the case of NK, the awfulness is SO awful, that it really should overshadow everything else.

    2. North Korea desperately, desperately needs international recognition, so every time some western celebrity goes there, the regime manipulates it. The KCNA coverage – or so I heard, because I can’t actually get it in SK, because the national security law blocks it – portrayed Rodman as a supplicant coming to KJU, who ‘graciously’ took him to a game.

    As BR Myers has argued, this idea that foreigners come a-begging to Pyongyang is actually pretty important for the regime. It suggests to the NK population that even though they are poor, others see NK as a some kind of great place they love to visit, or as your NK guide will tell you, “the whole world knows we Koreans are best!” And of course, the Kims graciously accept these benighted outsiders and share the light of juche with them. This is why whenever a US delegation has to go to NK to get out an American, the North always insists on a picture with Northern leaders. It helps legitimize the regime and suggest the benevolence of the Kims. At least Bill Clinton knew to look mildly pissed off in his photo, while Rodman called KJU a ‘friend for life.’ Good christ!

    In short, Rodman should just be quiet. KJU is not his friend for life; it’s highly unlikely they’ll even meet ever again. Given that no one’s heard from Rodman in years, he may have done this just as a publicity stunt, just lie Ling and Lee also traded on their experience to get gigs. Visiting North Korea is morally defensible (although a big debate rages about that). I’ve done it, and I would recommend it to others. But the right approach of travellers to NK is moral distance: say as little as necessary, only bow when you absolutely must (which is only once), and never, ever indulge their craving for respect.


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    South Korea does not need nuclear weapons yet

    March 1st, 2013

    By Robert E. Kelly.

    In teaching international security in Korea, I am regularly asked if Korea should have or will have nuclear weapons. North Korea has them obviously, so, not surprisingly, South Koreans are increasingly thinking they should have them too. While it seems straight-forward to say the North has them, therefore the South should have them too, I think this is inaccurate ― and not because America doesn’t want the South to nuclearize.

    Koreans bristle at this, as many states in the world do, because they feel that the Nuclear Non-Proliferation Treaty (NPT) constitutes nuclear discrimination. The haves (including the U.S.) get to keep their nuclear weapons, while the have-nots stay de-nuclear on the vague promise that the haves will build down to zero. Needless to say, the NPT haves have done little on this, leading to regular cries of hypocrisy (although President Barak Obama seems to genuinely want “global zero”). So last decade, India openly rejected this logic and went nuclear despite the nuclear haves’ resistance. Pakistan, Israel, and North Korea followed.

    But the South’s potential possession of nuclear weapons would not actually serve local security from the North. Pyongyang’s nuclear use would immediately trigger the South’s invasion of the North. It is impossible to imagine the South absorbing a nuclear strike without this finally forcing Seoul’s hand to invade the North and end the long inter-Korean stalemate.

    A nuclear strike would be so devastating that no other possible retaliation ― airstrikes, port-mining, more sanctions, closing Gaeseong ― would be seriously countenanced. While the initial casus belli would be to suppress the North’s nuclear capabilities and force regime change, in reality, the invasion would quickly to turn into a war of national unification ― a second Korean war to finally close the rift. Every analyst I’ve ever heard or read thinks that the South would win such a war ― even without U.S., Japanese, or U.N. help. It would be a harder slog alone of course, but victory is still quite likely.

    In the wake of its victory, the South would have to rebuild the North, including cleaning up blast zones in the North from the U.S. or the South’s own nuclear strikes a short time earlier. As such, the South is unlikely to ever launch in the first place. There is no point in creating mass devastation one must fix a short time later. More formally stated, a second-strike by the South is irrelevant, because a first-strike by the North would change Seoul’s preferences toward from defense and deterrence to irredentism. The North’s first-strike would end the South’s hesitation and confusion regarding the communist state, and push it openly toward intra-Korean “imperialism,” i.e., irredentism and unity.

    Note the difference between the two Koreas, and the U.S. and the USSR. Neither the U.S. nor the USSR had any compunction about nuking each other’s homeland, because neither expected to bear the clean-up costs. The same might be argued for the Indo-Pakistani nuclear competition today. But Korea is different. The South would not nuke the North in response to a first-strike and then just walk away. The North’s first-strike ― given the special “divided nation” status of the peninsula ― would push the South into the long-awaited, much-speculated-upon Second Korean War. And this time there would be a clear winner who would then have to pay for all the reconstruction. So it would be better in a unified Korea to have, say, just five blast-zones in the South, rather than yet five more in the North.

    The only possible alternative is the South’s nuclear use on the North if the South was actually losing the unification war. If the North launched a first-strike that devastated multiple Southern cities and threw the military into disarray, then the South might consider a “counter-force” nuclear strike on the North Korean People’s Army in order to slow it down and buy the Southern military time to reorganize and win the war. NATO considered similar counter-force strikes in WWIII scenarios.

    If the Red Army was rolling through Western Europe on the way to victory, NATO reserved the right to “first-use” against military assets to stem the Soviet tide. But even these strikes would be very limited in Korea ― likely low-yield battlefield nuclear weapons. The idea of nuking Northern cities ― “counter-value” city-busting ― is likely off the table due to the massive reconstruction costs that Seoul would have to carry for such strikes a short time later. And global opinion would likely regard strategic counter-value strikes in the North as a war crime.

    Beyond the North, the South’s nuclear weapons might be construed against China, Russia, and Japan ― the first two of whom are nuclear. Charles de Gaulle famously said French missiles pointed “360 degrees.” And the initial aim of the French nuclear program was as much Germany as the Soviet Union. After three German invasions in 70 years, the French military wanted the ultimate guarantee of French sovereignty that nuclear weapons would give. South Korea might think the same way regarding Japan, the former colonizer (a surprising number of Koreans still think Japan has imperial designs on Korea). And of course, the South lives next the Chinese goliath. Should the U.S. alliance with South Korea dissolve under the weight of American indebtedness, the South might seek nuclear weapons to hedge China. Finally, the South might nuclearize solely for prestige purposes as India did.

    But extra-peninsular deterrence is rarely discussed in the Korean media, where most of the nuclear focus is on the North. Yet the South is so unlikely to nuke the North because the former would carry the clean-up costs, that the latter would read Southern nuclearization as a hollow gesture. Worse, the North would likely spin Southern nuclearization as “aggression” and yet another reason for the Korean division. Post-unification however ― and especially if the U.S. slowly retrenches from Asia ― the South’s nuclearization is far more likely.

    Robert E. Kelly is an assistant professor of international relations in the Department of Political Science and Diplomacy at Pusan National University. More of his work may be found at his website, The views expressed in the above article are the author’s own and do not reflect the editorial policy of The Korea Times.

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    RNC: Don’t Speak in a Publicly-Built Facility when you Attack Government – D’oh!

    September 23rd, 2012


    By Robert Kelly.

    I got bogged down with NK for awhile, so I missed a chance to comment on the RNC and the US election more generally. I have some thoughts after the break, but a Democrat friend of mine wrote the following, which is a pretty good first draft of the GOP’s problems, I think, in this election cycle:

    “On the whole, I found the Republican convention disgusting and not simply because I disagree with their policies. They substantively are disconnected from the problems of the average person. They offered nothing which will help average people and, what they do offer, is bereft of details. They said nothing – NOTHING – about the two wars they started and the one that is still ongoing.  (They do however feel we should have wars, or at least brinksmanship with several other countries.) They have no narrative connecting who they were just four years ago with who they think they are now.

    The narrative they do present is a fantasy beyond what even Republicans of a prior generation would present.  They stand in a publicly-built convention center preaching nothing but disdain for the role of government. They parade women, Latinos and an African-American secretary of state who talk about the ‘bootstrap’ mentality of their parents with no mention of the giants of civil rights and the role of government which reformed the bigoted society which their beloved founding fathers gave us.  That reformation – more than their parents – allowed the likes of Condoleezza Rice to be where she is today.


    They reach out to women with symbolism and yelps of ‘I love you women,’ but want to savage Medicare and Medicaid, both programs disproportionately benefiting women (remember, Medicaid is also a program for the elderly medical class who enter nursing homes). They are utter hypocrites on things like government stimulus – Romney first supported it and Ryan voted for Bush’s Tarp and took money from Obama’s stimulus. Even by politicians’ standards, their willingness to lie about Obama’s policies and statements is breathtaking.

    But what bothers me the most is this ‘we built it’ mentality which they go on with.  The US’ post-war middle class and social stability would not have existed without government.  Support for college education, a redistributive tax structure, a modest social safety net, civil rights, Keynesian counter-cyclical spending, massive government infrastructure programs from highways, to the space program, to the defense establishment contributed mightily to every American’s success. This includes the success of their plutocrat leader Mitt Romney who made his money during the tech boom of the 1990s, a tech boom built on government research in computers and the internet. It includes the success of his running mate Paul Ryan whose family made much of their money building government-funded roads. “

    I would add that I wonder how much ‘risk’ himself Romney has ever actually taken, given that dramatically pairing back the welfare state is emerging as the GOP meme for this election? If the Randian superman who ‘built it all himself’ is the economic ideology of the GOP, then it becomes central just how much Romney, Ryan, Cantor, Limbaugh, etc. exploit government services. Ayn Rand herself accepted Social Security and Medicare late in her life. That strikes me as fairly fraudulent, as does insisting that SS and Medicare be retained for today’s elderly but not tomorrow’s. I’m sure that the likelihood of older voters to vote GOP and younger voters to go for Obama has nothing to do with that…

    For example, did Ryan try to steer government money into his district, as a congressman, as most congressmen do? If he did, isn’t that hard to justify given what he’s saying now? It seems increasingly obvious that Romney never did without in his life in a meaningful way, never went through a ‘back in grad school when I lived in a crappy apartment and ate ramen’ phase. He “refused to head up Bain Capital until Bain promised him he would get back his old salary and interest if he failed. He risked nothing.” He’s also done a fair job of using the government to make a mountain of money – whether that be fixing the Olympics, getting a sorta government bailout, using a battery of accountants to gin up such amazing tax shelters that he doesn’t want to release his returns, or working in government itself – governors get paid a lot more than most Americans. I don’t mean to begrudge Romney his success, but profiting handsomely from government while you promise to tear it down for those who come after you strikes me as fairly selfish.

    More generally, I would ask how the GOP thought that a guy who’s practically a caricature of Gordon Gekko could get elected just 3 years after white shoe banking nearly wrecked the world? That just staggers me. And the scandals that continue to come out – LIBOR most recently – have made it obvious to just about everyone except Jamie Dimon that Wall Street needs a tighter regime, most obviously the Volcker Rule. Given just how much we’ve all learned about the financial industry since 2009 (in a bad way), I can’t imagine Romney – who’s so obviously steeped in the values of that class, right down to his perfect hair and willingness to say anything to please – winning. I can’t imagine Tea Partiers who share the Occupy Movement’s disdain for too-big-to-fail banks and slick ‘masters of the universe’ being enthusiastic for this guy either. Good lord, even Sandy Weill is now saying the banks need to be broken up. Yet in the first presidential election after the mostly-Wall-Street-caused Great Recession, we’re going to elect such an obvious product of the financial services industry? Wow. God help me for saying it, but where’s Santorum or Bachmann (at least they were honest) when you need them? It’s a measure of just how bad the economy is and just how weak a president and candidate Obama is that Romney is competitive at all.

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    MBC brings Multicultural Panic to Korea

    July 21st, 2012
    By Robert Kelly.

    Xenophobia so sloppy and racist, Glenn Beck himself would blush…

    I came late to this controversy, but it merits some quick comment given just how creepy the above vid is.

    This ‘report’ was shown in primetime on Korea’s largest TV network, on a holiday when people would likely be home with family (and was then rebroadcast until the explosion of response halted it). While xenophobia is fairly common in the Korean media, this is so nasty – especially at this very late date in the long, tiresome ‘Korean women dating western men’ discussion – that it has gone viral in the expat blog world of Korea. It even got into the Wall Street Journal.

    I rarely blog about this sort of thing. As an IR academic, domestic politics and sociology aren’t really my area, and I don’t really see myself as a ‘k-blogger’ or whatever. I don’t like blogging about identity politics in Korea, as I think it is prone to recycled stereotyping that tells us little. And I have broadly argued against our (foreigners) participation in the Korean multiculturalism debate, because it’s their country and they themselves need to decide what they want from us. It’s their choice.

    But this is the nastiest race-baiting – primetime, slap-dash unprofessional, on a major network, for a general audience – I’ve seen in my time here. (Full disclosure: my wife is Korean). Casual racism is a widespread problem in Korea, as any foreigner living here can tell you. Wide-eyed kids shamelessly point at you like you are a martian; people stare at your body hair; grade and high schoolers giggle and smirk; the old ladies glare at you on the subway; average folks on their cell phones will pause their conversations to remark, ‘hey, a foreigner just walked by me!,’ as if it’s some kind of major event in their day (presumably they think I can’t understand that, or maybe they don’t care?). It’s all fairly fatiguing (read this for a good example), and that’s for white westerners. I can’t imagine being from Southeast Asia or an LDC here. In fact, Cambodian import brides have been so badly abused, the Cambodian government made it illegal for its citizens to marry Koreans. (This hugely embarrassing and deeply disturbing restriction was scarecely reported by the Korean media.) And when the Korean race hang-up gets wrapped into sex, it breeds genuinely disturbing levels of xenophobia, especially for an OECD/G-20 country that really ought to know better. Hence this vid.

    Here is some good background on just how prevalent this sort of ‘pot-smoking foreign perverts steal our women!’ schtick really is in Korea (follow the many, many depressing links). Here is more that captures just how much the Korea media trafficks in creepy race-mongering. The WSJ link above is helpful too, as is this review of this ‘foreigner-gate.’

    Next, here is the Facebook page to join to encourage the Korean media to stop this kinda stuff. It’s better than you’d think, complete with discussion of MBC’s soap opera where the foreigner gives his Korean girlfriend… (wait for it)…syphilis! Good grief.

    Finally, don’t forget the really serioues problem of race in Korea – not the discomfort over westerners, but the treatment of guest-labor from LDCs.

    This is all terribly ugly and should embarrass all those Sarah Palinite Koreans, who never cease to insist to me that Korea is the most amazing country ever. No. It’s not actually, because racist outbursts like this vid are downside of all that self-congratulatory, ‘Korea power,’ minjeok nationalism taught in the schools. So can the government and Arirang TV please stop shamelessly pushing resident-foreigners into mawkish, forced displays of over-the-top ‘Koreaphilia’? Enough with the propaganda!

    Enjoy this response video. It’s funny and clever.

    The guy’s shirt says ‘foreigner’ in Korean.

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    How Long can the US Borrow to Sustain Hegemony – up to a 100% Debt-to-GDP ratio?

    June 20th, 2012

    By Robert Kelly.

    As part of a now lengthy chain (onetwothreefour) on US allies and the likelihood of US retrenchment (hat-tip to Andrew Sullivan for referencing this chain of posts yet again), I argued that American hegemony, despite America’s huge debt and deficit, is more financially stable than almost anyone expected. Because foreigners’ appetite for dollars seems unquenchable and because we print the global reserve currency, borrow in it, and face no serious reserve challengers (the euro and RMB maybe, see below), US can exploit this ‘exorbitant privilege’ far worse than anyone ever thought.

    For example, I think almost everyone expected the bond-market to turn against the US in the last decade given: exploding debt and deficits, huge welfare state expansions like Medicare part D and ObamaCare, the expensive and financially-unplanned GWoT, China’s relentless ascent, the Great Recession, and two rounds of quantitative easing. Wow – that’s a helluva list. Despite all that, interest rates and inflation are low, because we can exploit (and have) that exorbitant privilege. Stein’s Law says there must be a limit, but I think almost everyone is amazed at just how deep confidence in the dollar goes.

    More simply put, all this means is that foreigners so want dollars, that America can just print more and more dollars without consequent inflation, and borrow from foreigners a lot cheaply (because they want those dollars so badly). This means America can borrow and/or just print huge amounts of money at very low interest and inflation rates. That is ‘exorbitant,’ because no one else can do that without Greece-style financial trouble. We can borrow at low interest rates (the rate on the US ten-year bond is around 1.5% right now) and print lots of money (the recent quantitative easings, e.g.) without suffering like so many others who over-borrow and run the printing press. Barry Eichengreen’s book on this is helpful if you don’t quite get it.

    Vikash Yadav gave such good commentary on this tangle over at Duck of Minerva, that I have reposted our full debate on US borrowing and hegemony below. Warning: it gets fairly wonky, so please be sure to read the OP. Also, further IPE are comments wanted. Specifically, someone tell me please when the US will finally hit the ‘soaring’ inflation and interest rates regularly predicted by deficit hawks at the WSJ or CNBC? This is what Romney means when he says we will become Greece, but I just don’t see any evidence of that. Does anyone have a good guess on the timeline for exploiting the exorbitant privilege? When does it finally give way? When do foreigners turn against us in the bond market? As I said in the OP, I think it (super cheap US borrowing) has gone on already far longer than anyone expected. But I also think that a 100% debt-to-GDP ratio might be the bond-market turning point. That is a pretty big psychological benchmark.

    So here is our debate on this:

    Vikash Yadav: “While I generally agree with your argument about America’s exorbitant privilege (and I can just see DeGaulle and D’Estaing spinning in their graves) there may be some other ways to read the data on international reserves.

    First, I believe the US dollar as a percent of international reserves kept by other countries has actually fallen from about 72% in 2000 to somewhere around 62% in 2011. It will tick back up a bit after this year, but certainly not back to what it was a decade ago. So there does seem to be a slow decline if we look at the composition of foreign exchange reserves. Of course, since there has been a dramatic increase in the amount of reserves being kept in the last decade, the US can borrow very easily.

    Second, the dramatic growth in the amount of reserves being accumulated, particularly in Asian emerging markets since the Asian financial crisis, most likely represents a form of insurance against reliance on the IMF in crisis situations. As such, this somewhat weakens the ability of the IMF to advance a stark ideological agenda (through conditional lending in the context of a crisis) which has largely been shaped and spread by American trained economists (in what James Boughton rightly described as the Silent Revolution) and the US government since the 1982 debt crisis. If global hegemony consists of more than just the ability to project military power, then American hegemony is not rolling along all that smoothly. It is also worth noting that a very large chunk of the reserve holdings is probably attributable to two Asian countries, Japan and China. My hunch (and I haven’t checked the numbers) is that around three quarters of world reserves can be attributed to about seven or eight Asian countries (particularly if we include sovereign wealth funds in the mix). So I think it is inaccurate to imply that foreigners in general have an unquenchable desire to hold dollars.

    Finally, to your point about China slowing down and thereby giving the US a breather or a chance to “recover in a way”… China is currently set to surpass US GDP in 2018 if it grows at 7.75% in real terms and the US grows at around 2.5%. Let’s say the Chinese growth rate slows to 5% because it fails to make serious reforms, the US won’t get more than three years of a breather b/c Chinese would still surpass the US in 2021 (for underlying assumptions see:… ). It is in the realm of possibility that China could derail in the next decade, but China does not really need to make major reforms to surpass the US. And since the neo-liberal American state has squandered its borrowing on wars and consumption, it hardly has made the kind of infrastructural and human capital investments that could spark a resurgence in the next decade. Meanwhile, if China does reform at least its monetary policies and shore up its banking sector by injecting its banks with capital, Christine Lagarde has stated that the Yuan could become an international reserve currency in the future – a prospect not wholly threatening to the Chinese government.”

    Robert Kelly (me): “Stein’s Law – if something cannot go on forever, it will stop – was conceived with exactly this current account imbalance problem in mind, but printing the reserve currency seems to let it go on and on, long past what everyone ever thought. My inclination is to agree with you, and originally I thought a lot about retrenchment because of this concern. But US borrowing costs are going down (1.44%), not up; foreign ownership of US assets is going up, not down:… and informal dollarization is widespread:…. Not even the GWoT-Great Recession-QE three-step – cue the Ron Paul freak-out over the gold standard – lead the bond-market to turn against the US. Wow. I just can’t figure that out…

    I used to believe folks like Niall Ferguson or Barry Eichengreen on this:…. But these inaccurate predictions have been made since Nixon closed the gold window unilaterally – 40 years ago!

    This tells me that there is a lot of confidence in the dollar, or to be more specific, there is little confidence in other fiat currencies, which is all the dollar really needs. The euro-zone crisis particularly is a huge boost for the US. And I am pretty skeptical of the internationalization of the RMB. Exchange rate manipulation has been a pretty central element in the ‘Asian miracle’ formula since 50s. Japan has never really permitted proper internationalization of the yen even though people talked about that a lot in the 80s and 90s. And given how much poorer and poorly governed China is by comparison, I have large doubts that China will internationalize the RMB properly or soon. Maybe, but just consider the amount of corporate governance improvement (all the sunlight in dark corners of the banking system) required for China’s banks to really open up. That could get really ugly and even threaten CCP rule because of the sheer scale of corruption I am almost positive it would unveil.

    Finally, there is a problem in just comparing raw GDP sizes. As Wohlforth and Brooks argued in World Out of Balance, simply adding more and more poor people will eventually give any state the world’s largest GDP. Instead, absolute GDP must be cross-referenced against GDP per capita. What exactly is the right ratio of GDP vs GDP-per-capita in making the calculation of whether a state is great power or not, is actually a really good question. I.e., China won’t displace the US superpower when its GDP is larger absolutely, but it is also so demographically big, that it probably doesn’t need to equal US GDP per capita to displace the US either. What would a reasonable GDP per capita threshold be – 50%?”

    VY: “First, like you, I don’t think the current account situation will force retrenchment of alliance partners. What we are seeing instead is a continued hollowing out of the state over time but this may be unrelated to the dollar’s status as the premier international reserve currency (a status propped up not so much by faith in the US economy as rational attempts by emerging markets to shield their sovereignty from American economic imperialism) except to the extent that the dollar’s status facilitates easy credit to continue the trend. An economically neo-liberal state stakes its claim to sovereignty mainly on the provision of (domestic and cross-border) security and opportunities for unrestrained consumer consumption. The evidence of US decline will not be found in military sector or in the prison industry; decline is evident in the neglect of infrastructure, education, healthcare, etc. while inequality grows and democratic governance fades. The state will still be able to project power for decades to come but it will gradually erode the basis for internally regenerating that power and it will have to rely more and more upon poaching talent, financing, and resources from other countries.

    Second, the establishment of the Yuan as a reserve currency would take at least a decade, probably two — as it did for the US near the start of the 20th century. But I would not be too concerned about transparency in the banking sector. The US financial sector is clearly non-transparent, over leveraged, excessively inter-dependent, and brittle as the last crisis showed. Some reform is necessary to be sure in both countries, but the banking sector is not the main barrier to the Yuan becoming a reserve currency.Third, I think GDP at market rate is the appropriate comparison for our purposes. Measuring GDP per capita (particularly at PPP) is more useful as a rough indicator of economic development (if it is coupled with data on income distribution and broader indicators of human development). Aggregate GDP comparisons are more useful for our purposes because this tells us something about what the state can tax and use to build or purchase military resources. The new great powers will be different from those of the last century, they will be characterized by the persistence of mass poverty alongside the accumulation of massive revenue — as great powers were before the industrial revolution. What is important to note is that China is on track to surpass the US and once it does it will continue to generate ever greater GDP even if it only increases productivity by a little bit each year. It will take about four decades before China catches up in per capita terms, but the Chinese state will gain significant resources well before then. Of course, (and as you noted) China has long since realized the pitfalls of translating economic power into military power too quickly — so I don’t think it will aim to displace the US so much as to assume its rightful place a major power.”

    RK (me): “Our comments are becoming more dense than the post itself. I guess we are fairly close. I would add a few final points.

    1. I am not sure how neoliberalism or the economic sovereignty of LDCs plays into this.

    2. When it comes to hollowing out, I don’t actually see that so much. Borrowing allows the US to put off choosing between guns and butter, and that ‘putting off’ has lasted far, far longer than anyone ever thought possible. That is what is remarkable and what motivated the post. The last decade expanded, not hollowed out, the welfare state with Medicare Part D and ObamaCare. The real welfare question at home, IMO, is not raw levels of funding declining under the weight of defense spending, but distributional issues; i.e., transfers are increasingly upward, from poorer healthier workers, to wealthier, unhealthier retirees.

    3. Obviously spending of any kind is fungible, so defense spending obviously leaves less for everything else. In that general sense, one could argue for hollowing out. But I think a better question is, if we can no longer borrow to have both guns and butter, what will be choose? One read of the GOP’s effort to delegitimize ObamaCare, SS, and Medicare is to pre-set the ground for this debate. If the GOP convinces Americans that the welfare state is for lazy slacker wimps, that makes it easier to ring-fence defense and so keep hegemony rolling along.

    4. But I don’t honestly think Americans will choose guns over butter. No matter what the GOP says, SS, Medicare, and Medicaid are part of the US social contract now. They’ve been around a long time, and people have come to expect them; they feel they are ‘rights,’ not ‘programs.’ Norquist may think ‘starving the beast’ will work, but so far it hasn’t, because the government borrows, not cuts, when taxes short-fall. The GOP is fundamentally out of step with American expectations of government assistance, but it has (very destructively) convinced the median voter that he shouldn’t have to pay for such assistance (hence we borrow). So when Perry and others call SS/M/M ‘ponzi schemes,’ people worry, just like W’s second-term effort to privatize SS failed miserably. In fact, I think if Americans were really forced to choose between more aircraft carriers and checks for grandma, they would choose the latter. This is one reason I find the DC foreign policy consensus for hegemony so toxic and support retrenchment. I don’t think most Americans want ‘empire;’ they want welfare and safety nets (in part because exceptionalist, ‘foreign-aid-is-for-third-world-socialists’ Americans generally couldn’t care less about foreigners. It’s DC elites who get teary-eyed comparing the US to Pericles Funeral Oration and say we must be the ‘weary titan’ who sacrifices at home for a ‘national greatness’ cause abroad.

    5. On RMB internationalization, I am far more skeptical than you. Agreed, the US banking sector is a mess, but comparable to China, really? The difference is still vast to my mind – can foreigners even list on Chinese stock markets? I wonder how many people would really be prepared to hold serious savings and value in a currency from a still technically communist state whose banking and corporate governance ‘rules’ are shot through with famialism, corruption, and informal political manipulation. These problems still plague the won and the yen, and Japan and SK are decades ahead of China in terms of openness and development. Is China really ready for serious, long-term foreign ownership of major assets and to allow the market to set the RMB’s value without tinkering? I doubt it; no one else in Asia does that and never has. I still think currency manipulation and other gimmicky nationalist barriers are central to the Asian growth model. Here is a nice example of just how bad this can be, even in supposedly-open Korea.

    6. And that brings me to my last point on Asian self-insurance. I agree that some of Asian stockpiling is to prevent IMF ‘imperialism,’ but Japanese, Korean, and Chinese stockpiles go far, far beyond what is needed for reasonable exchange rate defense. In fact, all three purposely and regularly intervene to make their currencies even softer, making me wonder what ‘defense’ is needed. IMO, these reserves really reflect, 1) Asian mercantilism, the very deep social belief in these states that they absolutely must run a trade surplus, and 2) the enormous political power of mega-exporters in these states. Asian consumers are punished with insane foreign reserve levels and exorbitant prices because the kereitsu, chaebol, and Chinese super-exporters are deeply tied at the highest levels to political elites in tight collusive circles of corruption. The bizarre side-effect of this East Asian crony corporatism is massive US dollars holdings which the US can then borrow at insanely low rates – hence the point of the OP.”

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