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Asia's New Age of Instability

Asia's New Age of Instability

Mini Teaser: Asia’s four pillars of stability, bulwarks of a highly successful regional system crafted and fostered by America, are all crumbling. The region’s future will be shaped and defined by the struggle to replace those pillars.

by Author(s): Michael Wesley

A CENTRAL theme in the Obama administration’s recent foreign-policy narrative has been that the United States is returning to Asia after a decade of distractions in the Middle East. It is easy to argue that Asia should be America’s highest foreign-policy priority. After the financial crisis, Asia emerged as the growth dynamo on which the hopes for the revival of the American and global economies are pinned. At the same time, this very economic dynamism produces huge bilateral trade deficits and is largely responsible for the steady decline of American manufacturing. And Asia is home to the United States’ most serious strategic competitor: China.

America is about to discover that Asia has changed dramatically over the past decade. Its main strategic competitor is now its largest creditor; its most important regional ally, Japan, has entered its third decade of economic stagnation, demographic decline and toxic politics; and once-estranged countries such as India and Vietnam have become promising but demanding partners. America has changed too. It is constrained by a war-weary population and a stifling government debt burden.

The big question is where the United States fits into this changed Asia. Its current approach appears to be a mixture of updated Asia strategies of old and tactical responses to various demands of Asian competitors, allies and partners—some wanting the United States to be a guarantor; others wanting it to be a balancer; and yet others viewing America as an opponent. What is missing is a careful reappraisal of Asia’s new strategic dynamics, a hardheaded assessment of what America’s Asian interests are and a considered approach to fulfilling these interests.

Such a reappraisal requires a proper understanding of the pillars of America’s successful Asia policies in the last quarter of the twentieth century. It should include an analysis of the fundamental changes that have undermined these pillars and will likely erode them further in coming decades. It must then identify American interests within the new Asia and find the best policy levers for securing them.

IN THE quarter century after the 1975 fall of Saigon, U.S. policy in Asia was highly successful, based on economic and security returns against strategic investments. During this period, the economies of Pacific Asia grew faster than any region in human history and pulled the American economy into a robust growth cycle. Meanwhile, American strategic interests across the region were unchallenged, while political tensions over U.S. basing were managed effectively. Conflict within and between states declined steadily. Alliance relationships were straightforward and uncomplicated.

America’s successful policies in Asia were built on four interlocking pillars. The first was the inability of any Asian state to aspire to regional leadership. The region’s largest states were too poor and internally focused to make serious bids for predominance, while the richest and most cohesive were too small. With no state making a bid for leadership, Asian nations generally accepted Washington’s regional footprint.

But the United States carefully crafted a “hegemony-lite” alliance structure that maintained the region’s noncompetitive dynamic by ensuring a high cost to any Asian state that tried to assert its leadership. The alliance network and historical memories discouraged Japan, the only country large and wealthy enough to contemplate the possibility, from attempting to assert regional dominance. After the Vietnam War, the United States itself reduced its regional presence, and Asian nations viewed its footprint as light enough to ensure America was a nonthreatening guarantor of regional order.

The second pillar, interlocking with the first, was the belief among Asian elites that economic development trumped all other priorities and no political or strategic dispute should threaten the stability essential to development. The postindependence leaders in Southeast Asia believed that rivalry and confrontation resulted in widespread poverty and unrest. The formation of the Association of Southeast Asian Nations (ASEAN) in 1967 created a regional ethos—that stability was essential for development and development was essential for stability. This stimulated regional growth and spread across Pacific Asia in subsequent decades.

The United States invested in the second pillar by adding a third: it let Asian states institute distinctive political and economic models allowing them to nurture and mobilize domestic wealth and expertise free of external competitors and to minimize the impact of economic retardants. Japan, for example, constructed an economy closed to outside investment, structured around the domestic mobilization of capital and the close involvement of the state in the economy, and oriented toward the maximization of manufactures exports managed by a controlled exchange rate. South Korea, Taiwan, Hong Kong and Singapore adopted elements of the Japanese model. But they added a form of soft authoritarian governance to forestall any internal resistance to their rapid development.

The United States also kept its large, dynamic domestic market open to Asian exports, even in the face of mounting trade deficits. Meanwhile, America’s alliance system allowed the Asian tigers to stint on their own security investments while channeling resources into their economic development. The United States did not give such concessions to any other region. The third pillar validated and strengthened the first two by demonstrating quickly the returns that came from shelving ambitions and rivalries. It also stirred loyalty to the norms and structures of the global economic order without giving the Asian states any significant voice in shaping those norms. Even as the world’s second-largest economy, Japan played a relatively minor role in major decisions affecting the global economic order.

The fourth interlocking pillar was the close alignment between Asian states’ security partnerships and their trading and investment patterns. The noncommunist countries in Asia, whether American allies or passive beneficiaries of the alliance network, all became part of a Pacific Rim trading cycle that brought together American consumers, North Asian manufacturing, Southeast Asian labor, and Australian minerals and energy. It was a trading cycle that both compensated for the Cold War separation of Pacific Asia from its traditional economic hinterland in mainland China and promoted unprecedented growth rates.

The American alliance system, with its alignment of security and prosperity interests, made compromises easy: as Washington watched its allies and friends boom, it was easier to overlook their less-than-liberal economic and political practices. Meanwhile, as long as American troops and aircraft carriers stayed in the Pacific, Asia’s dynamic economies accepted Washington’s dollar-seigniorage privileges and its preferences for the global economy.

THE FOUR pillars of Asia’s late-twentieth-century stability now are under unprecedented challenge. The power distribution that ensured no Asian country was in a position to make a bid for regional leadership—the first pillar of stability—has given way to a more hierarchical order. China sits atop the Asian power pyramid, with substantial economic heft, high growth rates, geographic and demographic size, and military-modernization levels that provide ample capacity to assert regional leadership.

But China lives in a crowded and jealous neighborhood that includes direct rivals with competing territorial claims and historically uneasy relationships: Japan, Vietnam, Indonesia, India and perhaps Russia. These second-tier powers don’t want to cede regional leadership to Beijing, but they also don’t want to balance explicitly against China’s growing clout. They prefer to reach out to each other and to the United States through a network of less formal collaborations: investments in vital infrastructure, foreign direct investment, collaborative naval exercises, and joint ventures in energy and technology.

Meanwhile, the rapid growth of second-tier powers is raising apprehensions in some of their neighbors. A tertiary level of soft balancing has emerged in Asia as the neighbors of second-tier powers reach out to China for reassurance. China’s trade with India’s neighbors is almost four times the value of India’s trade with them, while Beijing’s closest relationships in Southeast Asia are with countries that have long lived in Vietnam’s shadow. A destabilizing dynamic of bids and counterbids for Asian preeminence is well under way.

The second pillar also is crumbling. After five decades of economic growth, the commitment of Asian elites to a mutual understanding on stability and development is giving way to an unstable mix of vulnerability and entitlement. Industrialization and urbanization have made Asia’s most dynamic economies heavily dependent on imports of minerals and energy, a dependence that will only increase. This has generated a sense of vulnerability in some Asian capitals based on concerns about access to reasonably priced resources and the capacity of strategic rivals to interrupt supply routes. At the same time, the sudden emergence of the big Asian economies as the growth dynamos of the global economy has generated nationalist expectations that they should be treated with greater respect by other countries. A mix of greater vulnerability and growing confidence has played out in an accelerating series of confrontations in the East China Sea, the South China Sea, the Sea of Japan and the Sino-Indian border region.

Pillar three also is under challenge. The United States and the world no longer want to allow the policy choices of Asian economies to fly under the radar of scrutiny and pressure, while their sudden prominence has led Asia’s major economies to demand a greater voice in global economic affairs. Concern about America’s trade deficits with Pacific economies is not new. In the mid-1980s, the United States pressured Japan to revalue the yen-dollar exchange rate via the Plaza Accord; a decade later, the Asian financial crisis and International Monetary Fund (IMF) actions delivered political and economic reforms that brought Asian countries’ policy settings into greater alignment with Washington’s preferences. The United States and Europe used China’s accession to the World Trade Organization (WTO) as leverage to gain Chinese economic reforms.

Image: Pullquote: For the first time in decades, the prospect of an Asian power hierarchy is imaginable, welcomed by some and feared by others.Essay Types: Essay