Book Reviews on Global Economy and Geopolitical Readings

Book reviews on global economy and geopolitical

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Easternisation: War and Peace in the Asian Century

Rachman, G. (2016), Penguin Random House, London.

“The West’s dominance of world politics is coming to a close. The flow of wealth and power is turning from West to East and a new ear of global instability has begun.”

“An America that steps back from its global commitments, such as the Trans-Pacific Partnership or the US-Japan security treaty, would further erode the post Cold War international order. That, in turn, would almost certainly encourage both China and Russia to seek to fill any vacuums left by US power.”

Summary

Western dominance in international politics is coming to an end. Wealth and power are shifting from the West to the East and a new era of global instability has begun. According to Gideon Rachman, Easternisation – the process that gives the book its title – is the dynamic which defines our age. The growing wealth of Asian countries is transforming the balance of power. This turn towards the East is affecting the lives of people in every corner of the world, the destiny of nations, and key peace and security issues. An emerging China, albeit with problems, is challenging the supremacy of the United States and the ambitions of other Asian powers, including Japan, North Korea, India and Pakistan, and it clearly has the potential to shake the whole world. In the meantime, the West is still struggling to overcome the economic crisis and political populism, the Arab world is in a state of flux, and Russia is aspiring to reclaim its status as a superpower. We find ourselves at a decisive moment in history, but Easternisation is a phenomenon which we will continue to observe for many decades to come. In this work, Gideon Rachman explains the dynamics and the implications of Easternisation, although he does not clearly specify what stances and strategies should be adopted in response to this process. The author

Gideon Rachman is the chief foreign affairs columnist for the Financial Times and author of the acclaimed Zero Sum World. In 2016, he won the Orwell Prize for journalism and the European Press Prize for commentator of the year. Previously,

Rachman worked for The Economist for fifteen years and he has been a foreign correspondent in Washington, Bangkok and Brussels. Key ideas and opinion

The idea that the age of the West is coming to a close seems self-evident, when viewed from a dynamic city such as Shanghai or Singapore. It is not just that the evidence of growth and change is clear, but that China, in particular, has a view of the past that is naturally cyclical. With a continuous history spanning thousands of years, the Chinese are accustomed to the idea of the rise and fall of dynasties, with periods of prosperity and progress followed by periods of chaos and regression. By contrast, the United States, whose history as a nation goes back only to the Declaration of Independence of 1776, has a more linear view of history. The history of this nation has only moved one way: towards greater prosperity and global power. The notion of national decline – and even cyclical rises and falls in power – seems much stranger and more alien to Americans than to the Chinese.

Rachman insists that the speed of the transformation in Asian economies and attitudes caught many in the West off guard. The ascent of China, in particular, has been spectacular. Statistics compiled by Yves Tiberghien of the University of British Columbia (Vancouver) show that the Chinese economy was just 6% the size of the American economy in 1990. By 2000, this figure had risen to 12%, by 2008 it was 30%, and by 2011 50%. Most economists, even in the West, predict that Asian growth will continue to outpace that of the West in the coming decades. However, the speed of this change has yet to be determined. In the US in particular, scepticism about the rise of China is strongly influenced by memories of previous erroneous predictions, fashionable in the 1980s, that Japan would pose a threat to America's global position. Although extrapolations about the future can prove wrong, Rachman believes that this time the situation is different. On the one hand, Japan is the home to one of America's largest military bases, whereas China is not part of the US-led military alliance in Asia. Indeed, China is the country that represents the biggest challenge to this system. The idea that Japan could become the world's largest economy was also inherently impossible, because it only had half the population of the United States. Therefore, the average Japanese would have to be twice as rich as the average American for Japan's economy to overtake that of the US. In contrast, there are approximately four times as many Chinese as Americans, so simple mathematics tells us that China only has to achieve a quarter of the GDP per capita of the US to become the world's largest economy.

According to the author of Easternisation, the political implications of this shift in economic power are profound. America became the world's largest economy in 1871 and held that title until 2014. In the immediate aftermath of World War II, the US alone accounted for one third of global economic output, and since the demise of the

Soviet Union in 1991 it has been the world's sole superpower. Today, the rise of alternative power centres in Asia – and, above all, China – raises the question of how long the United States can continue to dominate global politics. The very prospect of an end to American hegemony is already unsettling international politics and raising fears of war in Asia. Rachman notes that many academics and politicians in the United States consider that the periods in which an established great power is being challenged are the moments of maximum peril for the world. The figures put forward by the Harvard professor Graham Allison are revealing: since 1500, out of sixteen cases in which an established power has been challenged by a rising power, this situation has ended in war in twelve cases. One of China's pre-eminent strategic thinkers, Yan Xuetong, a professor at Tsinghua University in Beijing, also subscribes to this brutal realism. In his view of the world, Yan considers that foreign policy is essentially about power, and at times when there is a dynamic of rise and fall, emerging powers and established powers tend to enter into conflict. Yan believes that these two nations will not declare war since they both have nuclear weapons – but others are not so sure.

The United States continues to be the principal military power in the western Pacific, committed to defending its treaties of alliance with Japan, South Korea and the Philippines. However, the idea that US control of the Pacific can no longer be taken for granted still remains rather shocking in Washington. Robert Gates – who served as Defense Secretary for both President Bush and President Obama – explains that the Pacific had been viewed as a lake for the US navy since the end of World War II. But the Pacific is now contested territory. The US navy – which numbered almost 600 warships during the Reagan era – now has fewer than 300 ships. After an energetic building programme over the last twenty years, the Chinese navy now has more than 300 ships. What is more, most of the weaponry that China is buying is specifically designed to make it harder for the US to maintain naval dominance in the South and East China Seas. In response to these new Chinese capabilities, US military doctrine underwent a rethink: in 2010, Rachman explains, the Pentagon adopted a new concept called "Air-Sea Battle", which was specifically conceived to combat Chinese weaponry and called for taking the offensive early in a conflict with China. Alarmed by the implications of this doctrine, even some of the hawks in the US government argued that, in the event of conflict with China, the US should instead seek to strangle China economically through the imposition of a blockade.

For US officials, even contemplating these scenarios involved a delicate balancing act. If America puts too much emphasis on its strengths, it risks sounding bellicose and playing into the hands of China's hawks. But if America plays down its military prowess, it can also run the opposite risk: feeding the Chinese perception of growing American weakness and the idea that the US can be challenged. This said, to what extent is China ready to declare war on its neighbours, or even the United States? What are the intentions of the rising superpower of the 21st century? In Rachman's eyes, it would appear that the country is moving away from the prevailing strategy of the period

when Deng Xiaoping was in power, characterised by policies of economic reform and opening to the outside world. At that time, Deng's emphasis on humility and cooperation in international affairs seemed to make good sense both for China and the US. It was a policy that gave China room for manoeuvre to transform its economy while allowing the West to share in the wealth that China was creating. Deng's successors adopted similar policies. Under Hu Jintao, who headed the Communist Party from 2002 to 2012, China followed a policy that became known as “peaceful rise”. Both the US and China had a strong interest in maintaining a global system that worked well for them both. China had benefited from the benign, careful use of US power in the global system, while America profited from an orderly yet changing China under a strong, reform-minded leadership.

But when Xi Jinping came to power, this approach changed. The new face of China's foreign policy was Yang Jiechi, a man with a much more abrasive style. Jiechi was furthermore more inclined to use confrontational language avoided by an earlier generation of Chinese diplomats, brought up in the tradition of 'hide and bide time'. For the majority of China's nervous neighbours, Yang's image is defined by a notorious incident. In 2010, when Yang was foreign minister (a position junior to his current position of state councillor), Yang issued a blunt warning to other Asian nations not to try and push China around. At a summit of Southeast Asian nations in Vietnam, Yang declared: “China is a big country. And you are all small countries. That is a fact.” For many of the diplomats present, this was the moment when China removed its mask. In December 2012, one month after Xi took over as General Secretary and head of the army, Chinese military aircraft entered Japanese-controlled airspace for the first time since 1958. Rachman observes that Lee Kuan Yew, the former prime minister of Singapore and close confidant of successive Chinese leaders, always believed that China would ultimately seek to re-establish its historic grandeur. “Theirs is a culture 4,000 years old with 1.3 billion people, many of great talent… How could they not aspire to be number one in Asia, and in time the world?”, he argued. The fact that China – aided by a massive injection of government funds – recovered from the shock of 2008 considerably more quickly than the West further bolstered Chinese self- confidence.

In their more reflective moments, American officials recognise that a confrontation between an emerging China and the US is not simply the product of a new mood of nationalism in Xi Jinping's China. It is also a result of an almost instinctive American response to the rise of a new superpower. It was a historic irony that the year in which the United States announced its decision to rebalance its foreign policy towards Asia (2011) was the very year that the Middle East exploded into a cycle of revolution, repression, turmoil and war that was initially given the optimistic label of the Arab Spring. The result was a constant tension in foreign policymaking between the desire to maintain a strategic focus on Asia and the permanent distraction of the pounding

headaches of turmoil in the Middle East (and subsequently, turmoil generated byRussia).

Indeed, the idea that China would be a responsible stakeholder in a US-led global system seemed less and less convincing. According to one of Obama's top aides, “it's true that China needs stability and the cooperation of the US to complete its rise. But it also sees the US as the biggest impediment to that rise.” In Rachman's view, there was a difference between the consensus in the US government regarding the need to pivot towards Asia and the debate without clear positions being taken over what stance to adopt. The main question that political leaders in the US are asking themselves is how to achieve a balance at a time when America increasingly sees China as a rival rather than a partner. In Rachman's opinion, the key event here was the debacle over China announcing in 2015 that it intended to set up an Asian Infrastructure Investment Bank, a decision viewed by Washington as suspicious and hostile. This was a new institution that China would clearly dominate, since it would be based in Beijing, and it looked like a potential instrument for Chinese foreign policy.

After the United States' frustrated attempt to prevent other countries from joining the new bank, Washington launched the idea of the Trans-Pacific Partnership (TPP), a giant free-trade deal for the Asia-Pacific region first mooted in 2005, which became the most ambitious venture of Obama's administration. The TPP would include 12 nations, which accounted for 40% of world trade, including the US and Japan, but excluding China. Just as the US navy was attempting to stop Chinese dominance of the Pacific in strategic terms, the TPP was intended to stop China dominating the Asia-Pacific in economic terms. The principal support for this initiative came from Japan, whose prime minister Shinzo Abe saw the agreement as a crucial strategic thrust, aimed at putting the brakes on China. The fact that Abe was granted the honour of being the first Japanese prime minister to address a joint session of Congress symbolised the increasing importance that the US was investing in its relationships with other countries in the region. Nevertheless, this closer relationship between America and Japan is also risky. The dynamic Japan of the 1980s is long gone. Today's Japan, while still rich and technologically advanced, is an ageing society with a shrinking population and an economy that has been stagnating in the last twenty years. It is also a country with a strong nationalist faction and a worryingly ambiguous relationship with its wartime past.

There can be no doubt that this situation complicates America's efforts to build a united front in response to an assertive China. To add to this dilemma, there is a widespread demand from countries in the region for greater military protection from the US, while apparently none of them are prepared to do much to contribute to collective defence. If ASEAN – whose members have a combined population of 500 million – were able to act as a determined and coherent bloc in world affairs, it would be a powerful counterweight to Chinese influence in Asia. At present, Gideon Rachman

emphasises, China finds it relatively easy to find and exploit divisions within the bloc to its own advantage.

Another key nation to be taken into account is India. The legacy of India's anti-colonial history continues to shape the country's instincts. For older Indians, in particular, the country's moral authority continues to derive from its status as a spokesman for the poorest nations in the world and the victims of colonialism. Suspicion towards Western capitalism will always be present in Indian thinking. While many liberal economists insist that India can reap enormous gains from globalisation, the country is still conditioned by a fear that a powerful West might impose disadvantageous agreements for the “Southern Hemisphere”. Modi's government is currently facing the key question of how to position India as a “leading power” in a rapidly changing world. Should India continue to be the leader of the South, as it was during much of the Cold War? Should it see itself as part of the rising East? Or should it see China as its biggest rival, and not as a potential ally? A fourth approach would consider that India's strategic thinking should be dominated by the existential threat on its border in the form of a nuclear-armed Pakistan. For the moment, India is being courted by more than one suitor. Obama paid two state visits to the country while he was president. Abe said he only followed three people on Twitter, one of whom was Narendra Modi. And Xi was the first Chinese leader to visit India in almost a decade. The idea that India might position itself at the fulcrum of global economic development shows that Easternisation is a process that goes beyond China, and even Asia.

The shift in economic and political power from west to east is reshaping the whole world. The fact that most of the foreign-policy crises of the Obama years have taken place outside Asia – whether it is the civil war in Syria, the dramatic deterioration in Western relations with Russia, or the political and economic disarray in the European Union – only reinforces this idea. The unifying thread connecting these seemingly disparate events is the West's growing inability to function as a pole of stability and power, imposing order on a chaotic world. Of course, even in the heyday of American or European power, there were wars, conflicts and revolutions. But what is new is that the political, strategic and ideological dominance of the West is now under challenge in every region of the world: in Asia, the Middle East, Latin America, Africa and Eastern Europe.

The notion that the US was weak had become a global theme by the end of the Obama years. Rachman emphasises that the killing of Osama Bin Laden in 2011 failed to create an enduring aura of strength. Instead America's image was being defined by events in Crimea, Syria and the South China Sea. In particular, the president's failure to enforce his own “red line” over the use of chemical weapons and take military action against Assad's regime came to be seen as emblematic of a US government that was unwilling to back up harsh words with actions. With respect to Russia, the US had warned that military intervention in Ukraine would be a grave mistake, language that many

interpreted as a threat of military response. In practice, the US government only enforced economic sanctions against Russia and refused to supply arms to the Ukrainian government. In Asia, many felt that the US had turned a blind eye to Chinese aggression around Scarborough Shoal, emboldening the Chinese to take a more aggressive stance in the East and South China Seas.

At the beginning of the 21st century, when China was already beginning to emerge as the dominant economic power in the Pacific and was rapidly closing the economic gap with the United States, American foreign-policy thinkers – particularly in the realist school – began to take a more cautious view of America's global reach. Stephan Walt of Harvard observed that “it is highly unusual for a country with only 5% of the world’s population to be able to organise favourable political, economic and security orders in almost every corner of the globe and to sustain them for decades.” The line taken by thinkers such as Walt advocated a strategy in which the US would adapt to the relative decline in its power by avoiding large military deployments around the world, instead using regional allies as proxies to balance potentially hostile powers.

The problem with this strategy, Rachman observes, is that the relative decline in America's capacity to intervene overseas has not been compensated by stronger action on the part of its regional allies. While non-Western powers – such as China, Russia, Saudi Arabia and India – have increased their military budgets, America's allies are cutting theirs back. The countries of the European Union, beset by the economic crisis, are spending less and less on defence. In the year 2000, the US accounted for 50% of NATO's military spending, with the Europeans and Canadians accounting for the other half. In 2012, America's share rose to 70%. In theory, NATO members commit to spending at least 2% of their GDP on defence. In practice, only the United States, the United Kingdom and Greece (due to its worries about Turkey) meet this commitment. Even in Asia, America's allies spend less than their potential adversary, China. Australia never reaches 2%. Although a frightened Japan announced its largest ever defence budget in 2015, it cannot be denied that the country has its limits, with colossal national debt exceeding 200% of its GDP. Thus, the failure of America's friends and allies to share the burden of maintaining Western military dominance threatens to turn one of the US's greatest strengths – its network of allies – into a potential liability.

This situation does not appear to be sustainable, especially with the growing challenges from China and Russia. While the European Union is increasingly unable to think globally and shows an aversion to hard power, Russia displays the opposite attitude. The confrontation between the West and Russia over Ukraine immediately revived memories of the Cold War. In Rachman's view, Russia's estrangement from the West forms part of the same phenomenon as the increasing power and strength of China. Both phenomena are signals that the world that emerged in 1989 after the fall of the Berlin Wall is increasingly challenged. Now, the relative decline of US economic and political power – together with the much more rapid decline of European power –

is encouraging rival nations to explore whether US dominance can be challenged and whether, in this new world, there are strategic and ideological alternatives to the paths promoted by Washington and Brussels.

The fact that most of the formal and informal institutions that play a critical role in the governance of the global economy and international politics are situated in the West is a main source of political power. However, Rachman wonders whether this advantage will last in the era of Easternisation. The answer to this question will depend on the capacity of those holding economic power to decide who ultimately has control of these global institutions. If economic power is what counts above all else, we can expect the world to shift further towards Asia in the future. But other factors may have an influence. In the author's opinion, as long as the United States and the European Union are perceived as players capable of implementing the rules predictably, impartially and swiftly, powerful countries and institutions may continue to prefer to use the institutions based in the West, despite the fact that its economy is waning.

In the meantime, across Asia, from democratic India to authoritarian China, popular rage against corruption has become central to political life. International comparisons, such as those carried out by Transparency International, still suggest that Western institutions are relatively cleaner than their counterparts in Asia, as a result of which the West enjoys an institutional edge for the moment. Nevertheless, the perceived bias towards the West is beginning to cause problems. One notable example is the reform of the IMF: in 2014, Brazil, Russia, India and China produced 24.5% of the world's GDP, but had a voting share in the IMF of only 10.3%. On the other hand, Germany, France, the UK and Italy produced 13.4% of the world's GDP and held a voting share of 17.6%. To correct this imbalance, the IMF and its principal members agreed to a reform of its voting system, shifting 6.2% of quota shares towards emerging countries. But even in the case of such a modest change, the US Congress took 5 years to give its approval.

In conclusion, Rachman emphasises that the relatively subtle questions of living standards, corruption and institutional power will matter a lot to the global balance of power (if international peace and stability is maintained). But if the dark, violent and anarchic forces that have shaken the Middle East during the Obama years spread to other parts of the world, international politics will be shaped by cruder forces, and military and economic power will be key. In this context, Rachman insists, “an America that steps back from its global commitments, such as the Trans-Pacific Partnership or the US-Japan security treaty, would further erode the post-Cold War international order. That, in turn, would almost certainly encourage both China and Russia to seek to fill any vacuums left by US power, accelerating the process that has already begun during the Obama years.”