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China’s Quarter-Century

The picture of the two Asian giants that most people carry around in their heads shows China racing ahead economically while India bumbles along, falling ever further behind. People even talk about the 21st century as “China’s Century”, just as they called the 20th century the American Century. But it may turn out to be only China’s Quarter-Century.

The headline economic news this year is that India’s economy is growing faster than China’s. Not much faster yet, according to the official figures – a 7.5 percent annual rate for India vs. 7.4 percent for China – but there is good reason to suspect that the real Chinese growth rate is considerably lower than that.

Anybody who goes to both countries can see that India has a huge amount of catching up to do. The contrast in infrastructure is especially striking: China has 100,000 km of expressways (freeways, motorways); India has only 1,000 km. But the differences in income and productivity are also very big: Gross Domestic Product per capita in China is between three and five times higher than in India, depending on how you calculate it.

But that is a snapshot of now. It was very different thirty-five years ago, when per capita income in India was still higher than it was in China. It was then-leader Deng Xiaoping’s decision in 1978 to open up the Chinese economy that unleashed the spectacular economic growth rates of the recent past, and an economy growing at ten percent a year doubles in size every seven years.

That means (allowing for a little slippage) that the Chinese economy has grown more than twentyfold since 1978. That’s why it is so far ahead now. India’s growth rate was a quite respectable three or four percent for most of that period, but that gave the Indian economy a doubling time of around twenty years, so it has only grown around threefold during the whole period. India is not chronically poorer than China. It just missed that particular bus.

The next bus has now arrived: India actually could catch up with China if its economic growth rate is now really surging ahead of China’s. There is good reason to believe that it is, because China’s declared growth rate for this year is pure fiction.

China avoided the global recession after the 2008 crash by opening the credit taps to full and embarking on the largest spending spree on infrastructure (roads, housing, railways and airports) that the world has ever seen. But capitalist economies cannot avoid recessions forever. The country is now full of empty apartment buildings, the private debt load has doubled in five years – and the recession is coming.

More than that, China’s period of high-speed growth was probably always going to be limited. Japan enjoyed a quarter-century of ten percent annual growth in 1955-80 and became, for a while, the world’s second-biggest economy. But once its per capita income reached developed-world levels, the growth rate dropped down to developed-world levels too: between two and four percent. (Now it’s almost nothing.)

In fact, all the East Asian economies (except North Korea, of course) have followed the same pattern: a lengthy burst of ultra-high-speed growth, followed by a fall to the developed-state norm once a certain level of prosperity has been achieved. South Korea and Taiwan both did it – and then subsided to a growth rate not very different from that of the United States.

China has also had its quarter-century of ten percent growth, and it is probably over. The official figure for economic growth last year was still over seven percent, but the less easily manipulated numbers for rail freight, electricity production and bank lending suggest that the real growth rate was only around three percent. That is to say, less than half of India’s.

The other thing that will hold China back in future is a steady fall in the population of working age. India’s birth rate is still 2.7 children per woman (though it’s falling fast). China’s is at most 1.7, and the one-child policy means that it may even be lower than that. So fewer and fewer young Chinese are entering the work-force, whereas there will be no shortage of young Indians.

India’s total population will overtake China’s in less than five years (they are both around 1.3 billion), and after that the gap will steadily widen. While China’s population shrinks and its economic growth slows, India is only now entering the golden quarter-century of high-speed economic growth. In 25 years’ time, India may be back in the position it occupied for most of the past two thousand years: the biggest economy in Asia.
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To shorten to 725 words, omit paragraph 9 (“In fact…States”)

Peak Everything

Peak oil is so last year. Now we can worry about peak everything: peak food, peak soil, peak fertiliser, even peak bees.

Let’s start small. We depend on bees to pollinate plants that account for about one-third of the world’s food supply, but since 2006 bee colonies in the United States have been dying off at an unprecedented rate. More recently the same “colony collapse disorder” has appeared in China, Egypt and Japan.

Many suspect that the main cause is a widely used type of pesticides called neonicotinoids, but the evidence is not yet conclusive. The fact remains that one-third of the American bee population has disappeared in the past decade. If the losses spread and deepen, we may face serious food shortages.

Then there’s peak fertiliser, or more precisely peak phosphate rock. Phosphorus is a critical ingredient of fertiliser, and it is the eightfold increase in the use of fertilisers that has enabled us to triple food production worldwide from about the same area of land in the past sixty years.

At the moment we are mining about 200 million tonnes of phosphate rock a year, and the global reserve that could be mined at a reasonable cost with current technology is estimated at about 16 billion tonnes. At the current level of production it won’t run out entirely for eighty years, but the increasing demand for fertilisers to feed the growing population means that phosphate production is rising fast.

As with peak oil, the really important date is not when there are no economically viable phosphate rock reserves left, but when production starts to fall. Peak phosphate is currently no more than forty years away – or much less, if fertiliser use continues to grow. After that, it’s back to organic fertilisers, which mainly means the urine and faeces of ten or twelve billion human beings and their domesticated animals. Good luck with that.

Peak soil is a trickier notion, but it derives from the more concrete concept that we are “mining” the soil: degrading and exhausting it by growing single-crop “monocultures”, using too much fertiliser and irrigating too enthusiastically, all in the name of higher crop yields.

“We know far more about the amount of oil there is globally and how long those stocks will last than we know about how much soil there is,” said John Crawford, Director of the Sustainable Systems Program in Rothamsted Research in England. “Under business as usual, the current soils that are in agricultural production will yield about 30 percent less…by around 2050.”

The United Nations’ Food and Agriculture Organisation estimates that 25 percent of the world’s soils that are currently under cultivation are severely degraded, and another 8 percent moderately degraded. (Even “moderately degraded” soil has lost half its capacity to store water.) And the only way to access new, undamaged soil is to deforest the rest of the planet.

All of which brings us to the issue of peak food. And here the concept of “peak” undergoes a subtle modification, because it no longer means “maximum production, after which yields start to fall.” It just means “the point at which the growth in production stops accelerating”: it’s the peak rate of growth, not actual peak production. But even that is quite ominous, if you think about it.

During the latter part of the 20th century, food production grew at around 3.5 percent per year, comfortably ahead of population growth, but the dramatic rise in crop yields was due to new inputs of fertilisers and pesticides, much more irrigation, and new “green revolution” crop varieties. Now those one-time improvements have largely run their course, and global food production is rising at only 1.5 percent a year.

Population growth has slowed too, so we’re still more or less keeping up with demand, but there are signs that food production in many areas is running up against what researchers at the University of Nebraska – Lincoln in a report last year called “a biophysical yield ceiling for the crop in question.” Production of the food in question stops rising, then may even fall – and extra investment often doesn’t help.

The “peak” in this context is an early warning that there will eventually be a complete cessation of growth, possibly followed by an absolute decline. Peak maize happened in 1985, peak rice and wild fish in 1988, peak dairy in 1989, peak eggs in 1993, and peak meat in 1996. (The numbers come from a recent report by scientists at Yale, Michigan State University and the Helmholtz Centre in Germany in the journal “Ecology and Society”)

More recent peaks were vegetables in 2000, milk and wheat in 2004, poultry in 2006, and soya bean in 2009. Indeed, sixteen of the 21 foods examined in the “Ecology and Society” report have already peaked, and production levels have actually flattened out for key regions amounting to 33 percent of global rice and 27 percent of global wheat production.

So we are already in trouble, and it will get worse even before climate change gets bad. There are still some quick fixes available, notably by cutting down on waste: more than a third of the food that is grown for human consumption never gets eaten. But unless we come up with some new “magic bullets”, things will be getting fairly grim on the food front by the 2030s.
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To shorten to 700 words, omit paragraphs 5, 7 and 12. (“At the…fast”; “We know…2050″; and “Population…help”)

Abe’s Gamble: Snap Election in Japan

“I need to hear the voice of the people,” said Japan’s Prime Minister Shinzo Abe. “I will step down if we fail to keep our majority because that would mean our Abenomics is rejected.” And with that feeble excuse he announced that he was calling an election two years earlier than necessary, on 14 December.

“Abenomics”, the prime minister’s  drastic strategy for kick-starting Japan out of twenty years of deflation and economic stagnation, has not actually been rejected by the public, but it is failing nevertheless. After an initial burst of growth last year, Japan has fallen into a recession despite the trillions of yen that the central bank has pumped into the economy.

Japanese voters would love to see “Abenomics” succeed. It’s no fun living in a no-growth economy, and Abe’s plan was the first they had seen in a long time that had even a chance of turning that around. But two years in the kick-start has stalled, and Abe’s public approval rating recently fell below 50 percent for the first time. Maybe he’s just going for another four years now because he fears that later the prospects will be even worse.

To be fair to the prime minister, “Abenomics” didn’t actually cause the recession. The problem was that Abe raised the sales tax from 5 percent to 8 percent last April, in obedience to a law passed by the previous government. Unfortunately, Japanese consumers responded by cutting their spending, especially on big-ticket items – and so the economy tumbled into recession.

Abe has learned his lesson, and he is now promising that the scheduled second rise in the sales tax next year, from 8 percent to 10 percent, will be postponed until 2017 if he wins the election. In fact, he is portraying the election as a referendum on whether the public wants him to kill the next tax rise – as if they were likely to demand that he go ahead with it.

If he can keep the debate centred on the economy, Abe should cruise to an easy victory, for the opposition parties are divided and disorganised and have no plausible alternative solution. However, if the focus shifts to Abe’s plans to restart the country’s nuclear power stations and remove the pacifist elements from the Japanese constitution, the election’s outcome will get much harder to predict.

On the nuclear issue, as on the sales tax, Abe is doing the sensible thing. Nuclear power used to provide 30 percent of Japan’s electrical power, and the shutdown of all the country’s reactors has compelled it to spend huge amounts of money on imported energy.

It’s now high time to turn the nuclear reactors on again. But the Japanese public, post-Fukushima, has an acute nuclear allergy, and the opposition to re-starting the reactors is large, vocal, and well-organised. If that becomes a central election issue, Abe will lose a lot of votes.

And then there’s the constitutional question. Abe has long detested the constitution, written by Americans during the post-1945 occupation, that forbids Japan to send military forces abroad. He says he wants to rewrite it to allow Japan to send its troops to the aid of allies who are under attack. His critics see it as the entering wedge for a full-scale remilitarisation of the country.

“The global situation surrounding Japan is getting ever more difficult,” Abe said in a televised press conference last summer, in an attempt to justify his proposed constitutional changes. He was really talking about the growing tension and even hostility between Tokyo and Beijing, of course, and China’s Xinhua news agency replied with an editorial that verged on the hysterical.

Abe is “leading his country on a dangerous path” by “gutting the constitution,” Xinhua wrote. “No matter how Abe glosses over it, he is dallying with the spectre of war.” And it really doesn’t help that some of Abe’s hard-right friends and political associates dabble in anti-Chinese invective and deny Japan’s war crimes before and during the Second World War.

There are a great many people in Japan who find this attempt to change the constitution frightening. Nobody knows exactly how many (it depends on how the opinion pollsters pose the question), but it may well be a majority. So Abe really needs to keep this from becoming the dominant issue in the election.

The fact that it will be a relatively short campaign helps Abe, but if these two issues catch fire he will be in serious difficulty. It’s unlikely that his Liberal Democratic Party, in power for 53 of the past 59 years, will actually lose control of the Lower House of the Diet, but it could lose enough seats to force him to drop his nuclear and constitutional projects.

And there is an outside chance that he could actually lose the election.
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Gwynne Dyer is an independent journalist whose articles are published in 45 countries.

To shorten to 725 words, omit paragraphs 10 and 11. (“The global…War”)

Obama in Asia: The Elephant in the Room

By Gwynne Dyer

Poor old Tony Blair is condemned to spend the rest of his life trying to justify his decision to help George Bush invade Iraq. He was at it again recently, insisting that the threat of Islamist extremism is the great problem of the 21st century. Western countries, he said, must put aside their differences with Russia and China in order to “cooperate” in the fight against radical Islam.

President Barack Obama, however, is tending to his real priority in world affairs: deciding whether the US-China relationship will be one of cooperation or conflict. Not that that is the stated purpose of his current Asian tour. Officially he is discussing a free-trade deal, the Trans-Pacific Partnership, with three countries that have already joined the negotiations (Japan, Malaysia and the Philippines) and one that probably soon will (South Korea).

It’s a very big deal. The twelve countries on the Pacific Rim that are currently in the negotiation – Canada, the United States, Mexico, Peru and Chile on the eastern side, Japan, Brunei, Malaysia, Vietnam, Singapore, Australia and New Zealand on the western side – account for nearly 60% of global GDP and over a quarter of world trade. But there is an elephant in the room (or rather, not in the room): China.

China is  the second-largest economy in the world and trades extensively with almost every member of the Trans-Pacific  Partnership (TPP) – but it is not part of the negotiations, or at least not yet. If it is kept out permanently, many consequences will follow.

None of the twelve governments negotiating the deal has said that it wants to exclude China. The usual formula is to say that China would be welcome to join if it can meet the standards of financial transparency and equal access to domestic markets that are being accepted by the TPP members – but of course it can’t, unless the regime is willing to dismantle the controls on the economy that it still sees as essential to its survival.

Keeping China out of this planned free-trade area, the biggest in the world, is economically attractive to the current members, and especially to the United States and Japan: the TPP would give  US and Japanese companies preferential access to Asia’s markets. But the real motive driving the deal is strategic: they are all worried about what happens when China’s military strength matches its economic power.

The Chinese regime insists that it has no expansionist ambitions, but it has alienated most of its neighbours by pushing hard on its extensive claims to islands in the East China Sea (the dispute with Japan over the Senkaku/Diayoyu Islands)  and to seabed rights in the South China Sea (where it has disputes with Vietnam, Malaysia, Brunei and the Philippines). They all want to nail down US support, including military backing, if those disputes flare into open conflict.

The US is willing to oblige. Even before leaving on his trip, President Obama publicly assured Japan that the US military commitment to defend Japan included the islands claimed by China. He will doubtless give his hosts in South-East Asia comparable assurances in private about American support in their seabed disputes with China. The TPP is not a military alliance, but it definitely has military implications.

That is not to say that a great-power military confrontation in Asia is imminent, let alone that China is really expansionist. What drives the process, as usual, is more likely to be the threat that each side sees in the power of the other.

Asked in a recent BBC interview about President Obama’s decision to shift US naval forces from an equal division between Atlantic and Pacific to a 60:40 ratio in favour of the Pacific, retired Major-General Xu Guangyu, former vice-president of the People’s Liberation Army Defense Institute, replied: “How would (the Americans) like it if we took 60 percent of our forces and sailed up and down in front of their doorstep?”

Then Xu added: “We want to achieve parity because we don’t want to be bullied. It will take us another 30 years.” That’s no more than anybody else wants, and it’s hardly imminent.

Former US Assistant Secretary of State Philip J. Crowley was expressing essentially the same sentiment when, commenting on Obama’s trip, he said that “Many traditional allies…value a strong US presence in the region to balance against an assertive China.”
In other words, it doesn’t take evil intentions to produce a tragedy. In any case, it’s not likely to happen soon. The point for the moment is that the strategic balance in Asia is what the US cares about most, not the Middle East or even Russia.

The United States still drops drones on the heads of various bearded fanatics in the greater Middle East, but they are just a nuisance, not a real strategic threat.

Washington has just sent 600 American troops (600!) to reassure allies in eastern NATO countries that are worried about Russian intentions, but it doesn’t really anticipate a new Cold War with Moscow, nor would it feel really threatened if that happened. Russia is not the old Soviet Union, and the US defence budget is ten times Russia’s.

The real strategic game is now in the Asia-Pacific region. Which doesn’t mean that it’s any less futile and dangerous than it was in the old days.
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To shorten to 725 words, omit paragraphs 5, 8 and 11. (“None…survival”; “The US…implications”; and “Then…imminent”)