Editor’s note: This is the second part of a two-part story about the strategic situation, key dilemma and best solution in the South China Sea. For a better understanding of the second part, the reader is encouraged to read the first part, which lays out the situation and the problem in the region.
As promised, my friend and I met after the holidays to discuss the South China Sea issue. In our previous conversation, I used a fable to clarify the situation and the key problem in this region. We employed this language again when discussing how to solve the problem because it helped us to focus on the essential, remove distractions and minimize irrelevant attachments to real names.
“Did you find a solution to the dilemma?” I greeted my friend provocatively.
“Your story left me with more questions than answers,” he replied with his usual smile.
“Tell me your questions,” I said, curious.
“Is the robber really a robber?” my friend asked musingly. “He wants to live with the neighborhood’s residents as an extended family in which he is the uncle. If the policeman stopped patrolling the street, the robber might stop robbing.”
“The word ‘family’ suggests warmth, which sometimes translates into insulation from the law, but the word ‘uncle’ implies a hierarchy of unequal rights,” I said, tried to explain to him what “family” and “uncle” mean in the Asian context. “Most of the residents want equal rights and impartial laws, but the guy in the biggest house in the neighborhood wants to stand above the law with his ‘historical rights,’ and above the other residents as their uncle.”
Now it was my friend’s turn to turn curious: “How can he stand above the law and above the other residents?”
“By overwhelming force or money, firm resolve and serpentine tactics,” I answered. “One tactic is to give aid with no strings attached initially—but the strings would come later, as a consequence of the structural dependence. Another is to create new facts on the ground in ways that rig the landscape without triggering a large fight. And the occasional robbery is part of this strategy, too. He robs not only the policeman, but also other residents on the street.”
“But why does he want to be their uncle?” My friend’s curiosity did not appear to subside.
“He has a dream,” I explained. “He dreams of a future that resembles the glorious past of his own family. He calls it the ‘great rejuvenation’ of his family. In the past, his family stood above everyone else in the neighborhood, and they ruled the neighborhood not by law, but by a combination of overwhelming force and rituals that reinforced their roles as uncle and nieces or nephews.”
“Does everybody in his own family now share his dream?” my friend continued to interrogate.
“Of course not,” I responded. “But he wants everyone in the family to dream his dream, and those who have a different dream are powerless.”
“Can we empower those who have a different dream?” asked my friend.
“That’s as difficult as changing his dream.”
“But we can change his dream,” argued my friend, his eyes full of confidence.
“How?” I got excited.
“With the right incentives and disincentives, you can even change people’s dreams,” he declared with a smile. “But I need a little more information about the uncle.”
My friend inquired: “What does he want most, and what does he fear most?”
“Power,” I summed up quickly, then elaborated: “What he wants most is to stay in power, and what he fears most is the loss of power as head of the family.”
“How does this relate to his dream?” my friend continued his investigation.
“He relies on three key tools to hold on to power,” I answered. “He uses force to repress those who oppose his role. He also uses material benefits to buy the support of others. And the dream of rejuvenation creates a rallying point for his family members to endorse his leadership.” Pausing for a moment, I remarked: “What’s interesting is that force and material benefits are expensive to maintain, while the dream of rejuvenation is far cheaper, because it is aligned with psychology and rooted in culture and history.”
“Hmm, so his role as head of his family and his dream as boss of the neighborhood are inextricably intertwined,” noted my friend. Then he turned to a different matter: “What about the economy of the uncle’s house?”
“They have undergone a long period of high growth, which catapulted them to the second place in the world, second only to the policeman’s,” I answered. “According to the latest data, their annual income is more than a half the neighborhood’s total, and about 60 percent that of the policeman’s house.” (This is the neighborhood of the East and South China Seas.)
“How did they achieve this feat? What is their recipe?” asked my friend.
“They capitalized on the huge number and cheap labor of their people,” I explained. “But the key to their miracle is twofold. They were able to save extremely high portions of their income, which allowed them to invest at extremely high rates; and they were able to acquire technology at very cheap prices by leveraging their very large size to force others to transfer advanced technologies to them.”
“So their investment should be both huge and efficient,” commented my friend.
“Huge, but not very efficient,” I replied. “The downside of their growth model is the lack of investment discipline, which has accumulated a giant mountain of bad debts that cannot be repaid.”
“How did they survive under this mountain of debt?” my friend was eager to know.
“By growing quickly,” I responded. “Fast growth makes large bad debt manageable. But once the economy slows down, it will break down under the weight of the debt mountain.”
“When will their economy slow down?” inquired my friend.
“By my estimation, the long boom of their economy will come to an end sometime in the next five years,” I answered. “After that, their average growth rate will sink to about half that of the previous period. At the same time, they will have fewer working people to support more retired ones, and this will effectively reduce their ability to save.”
“So the mountain of bad debt will get out of control,” my friend noted.
“Yep,” I concurred. “And they will have a severe financial crisis, which may eventually usher in a lengthy period of stagnation.”
“So the big house will face a decline in the long run?” asked my friend.
“Not really,” I replied. “Because their growth rates will continue to be higher than those of the policeman’s house for about two more decades.”
At this point, my friend asked for another cup of coffee. After a few sips, he said musingly: “I think in the long term the policeman will have to resign from his current job. It’ll be increasingly both unfair and unsustainable for him to perform this job by himself. If resolve correlates negatively with distance, he alone will be unable to deter the robber.”
“So who will be protecting the law?” his conclusion made me worried.
“Those who want to protect the law,” said my friend matter-of-factly. “They’ll have to cling together and fight if they don’t want to live under the ‘historical rights’ of the uncle. Alone or timid, they will fail.” Then he added: “I suppose they aren’t confined to the neighborhood’s residents.”
“Correct,” I concurred. “Some of the frequent users of the main street live outside the neighborhood in the surrounding district or even farther. They don’t want to be subject to the uncle’s ‘historical rights.’ And some big houses outside the neighborhood don’t want the neighborhood’s residents to become nieces and nephews of the uncle.”
“But who will be the new policeman?” I wanted my friend to be more exact.
“Anybody who would volunteer to do the job,” my friend replied, then added immediately, “but it would be more effective if there would be a committee of law-protecting users of the street, who would make arrangements about how to keep the street free of robberies and other unlawful activities.”
“What if they don’t share the same interpretation of the law,” I raised my concern.
“They don’t need to agree on everything,” my friend retorted. “The main point is that they oppose the uncle’s ‘historical rights’ and endorse the law. As long as they are resolute to prevent the robber from becoming the neighborhood cop, they’ll be able to make their common denominator large enough to pose a clear alternative to the uncle’s ‘historical rights.’”
“Do you think the committee will be strong enough?” I pushed for more clarity.
“The committee’s strength comes from three major sources,” my friend elaborated. “The first is their combined capabilities; the second is the compensation for one’s disadvantages by another’s advantages; and the third is the rules-based and open nature of the committee.”
“Let me check.” I wanted to see if my friend’s theory could be supported by reality. After collecting some data and doing some math, I said, “The policeman’s participation is indispensable. Without him, any alliance of the rest of the district would be no match for the uncle. Suppose that we have a coalition that includes the policeman, the second- and third-largest households in the district, and some of the houses that are located strategically along the main street. If income were the indicator of capability and after discounted for distance and other concerns, the combined capabilities of this coalition would beat that of the uncle by a ratio of about 1.7 to 1. This ratio is likely to improve for the uncle in the next decade, as his income will grow faster than those of the two largest members of the coalition, but the third-largest member’s will grow faster than the uncle’s, and the overall ratio is unlikely to go lower than 1.1 to 1. This conservative estimate is very rough as an index of relative capabilities, but it shows that the coalition is not a hopeless enterprise.”