20 May 2013
What Drives Shinzo Abe?
By Gwynne Dyer
Shinzo Abe, now six months into his second try at being prime minister of Japan, is a puzzling man. In his first, spectacularly unsuccessful go in 2006-07, he was a crude nationalist and an economic ignoramus who rarely had control of his own dysfunctional cabinet. By the time he quit, after only a year in office, his popularity rating was below 30 percent and his health was breaking down.
Last December his Liberal Democratic Party (LDP) won a landslide victory in the elections for the lower house of the Diet (parliament), and as party leader he became prime minister again – but what a difference six years makes. He’s still a radical nationalist who on occasion comes close to denying Japan’s guilt for the aggressive wars of 1931-45, but in economics he is now Action Man. His approval rating is currently over 70 percent.
In only six months Abe has broken most of the rules that defined Japan’s budgetary and monetary policy for the past twenty years, and he has promised to break all the old rules about restrictive trade policies as well. (Together, his new policies are known as “Abenomics”) He has launched a make-or-break race for growth that only the boldest gambler would risk. Who is this guy, and what happened to change him so much?
A resident foreign academic with long experience of Japan once told me that there were only around 400 people who really counted in Japan: they would all fit into one big room. Most of them would be there because their fathers or grandfathers had also been there, and Shinzo Abe would certainly be one of them.
Abe’s grandfather, Nobosuke Kishi, was a member of General Tojo’s war cabinet in 1941-45, a co-founder of the LDP in 1955, and prime minister in 1957-60. But heredity does not guarantee competence, and on his first outing in power Shinzo Abe was an embarrassment to the LDP. He has obviously acquired some braver and perhaps wiser advisers since then, most notably Yoshihide Suga, now chief cabinet secretary.
Abe put several ultra-right-wing ministers in the cabinet, and it is Suga’s job to keep them from giving voice to their revisionist views on history. “Our Cabinet will adopt a unified perception of history,” he told them. “Make no slip of the tongue because it would immediately cost you your post.” He also polices Abe’s own tongue: no more remarks like “It is not the business of the government to decide how to define the last world war” or “comfort women were prostitutes.”
Abe doesn’t mind, because he has bigger fish to fry this time round. He has launched a high-risk strategy to break Japan out of twenty years of economic stagnation by cutting taxes, raising government spending, and flooding the economy with cash. One of his first acts was to put his own man in as head of the Bank of Japan, and order him to break the deflationary spiral by adopting a target of 2 percent annual inflation.
He has also promised to smash the protectionism that has hampered the Japanese economy for so long, although this will require him to take on the powerful agriculture and small-business lobbies. He has even promised to join the Trans-Pacific Partnership (TPP), an American-led effort to liberalise trade in the region, in order to guarantee that the structural reforms will continue.
Structural reforms will have to wait until Abe also has a majority in the upper house of the Diet, which he confidently expects to win in the July elections, but already his strategy is showing results. Economic growth in the first three months of this year equates to about 3.6 percent annually, more than four times higher than the long-term average of the past two decades, and the Japanese stock market is up 80 percent since January.
The strategy is high-risk because Japanese government debt is already the highest in the developed world: 240 percent of Gross Domestic Product. If the surge in growth does not last, the government’s income from taxes will not rise (it is no higher now than it was in 1991) and in a few years the debt will soar to an unsustainable level. The country will essentially go bankrupt.
Of course, the surge may persist; creating a perception of vigorous growth is half the battle. But why take such a risk? Probably because Abe is keenly aware that Japan had the world’s second-biggest economy when he was prime minister the first time, and now it’s only the third-biggest. The country that overtook it was China.
For a thousand years China was the dominant power in eastern Asia. Japan wrested that role from it in the late 19th century, but now it’s going back to its natural home – and Abe would do almost anything to prevent that. That’s why he takes such a hard line on the dispute between the two countries over the Senkaku/Diaoyu Islands. But much more importantly, he must get the Japanese economy growing again, or the country will end up far behind China.
To avoid that, he will take any risk.
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To shorten to 725 words, omit paragraphs 4 and 8. (“A resident…them”; and “He has…continue”)
27 January 2013
Senkaku/Diaoyu: Another Falklands?
By Gwynne Dyer
Chinese survey vessels go into the waters around the disputed islands and Japanese patrol ships tail them much too closely. Twice last month Chinese maritime surveillance aircraft flew into the airspace around the Japanese-controlled islands and Tokyo scrambled F-15 fighters to meet them. On the second occasion, China then sent fighters too. Can these people be serious?
The rocky, uninhabited group of islets in the East China Sea, called the Senkaku Islands by Japan and the Diaoyu Islands by China, are worthless in themselves, and even the ocean and seabed resources around them could not justify a war. Yet both sides sound quite serious, and the media rhetoric about it in China has got downright bellicose.
Historical analogies are never exact, but they can sometimes be quite useful. What would be a good analogy for the Senkaku/Diaoyu dispute? The dispute between the United Kingdom and Argentina over the islands that the British call the Falklands and the Argentines call las Malvinas fits the case pretty well.
Worthless islands? Check, unless you think land for grazing sheep is worth a war. Rich fishing grounds? Check. Potential oil and gas resources under the seabed? Tick. Rival historical claims going back to the 19th century or “ancient times”? Check. A truly foolish war that killed lots of people? Yes, in the case of the Falklands/Malvinas, but not in the Senkaku/Diaoyu Islands. Not yet.
One other difference: the Falkland Islands have been inhabited by some thousands of English-speaking people of British descent for almost two centuries. Argentina’s claim relates to a short-lived colony in 1830-33 (which was preceded by somewhat longer-lived French and British colonies in the 1700s). Whereas nobody has ever lived on the Senkakus/Diaoyus.
Curiously, this does not simplify the quarrel. Neither China nor Japan has a particularly persuasive historical claim to the islands, and with no resident population they are wide open to a sudden, non-violent occupation by either country. That could trigger a real military confrontation between China and Japan, and drag in Japan’s ally, the United States.
It was to avert exactly that sort of stunt that the Japanese government bought three of the islands last September. The ultra-nationalist governor of Tokyo, Shintaro Ishihara, announced that he would use public money to buy the islands from their private Japanese owner, and the Foreign Ministry suspected that he would then land people there to assert Japanese sovereignty more vigorously.
The Chinese would probably respond in kind, and then the fat would be in the fire. But the Japanese government’s thwarting of Ishihara’s plans did not mollify the Chinese. The commercial change of ownership did not strengthen or weaken either country’s claim of sovereignty, but Beijing saw it as a nefarious Japanese plot, and so the confrontation began to grow.
It has got to the point where Japanese business interests in China have been seriously damaged by boycotts and violent protests, and Japan’s defence budget, after ten years of decline, is to go up a bit this year. (China’s defence budget rises every year.) It’s foolish, but it’s getting beyond a joke.
Meanwhile, down in the South China Sea, a very similar confrontation has been simmering for years between China, which claims almost the entire sea for itself, and the five other countries (Vietnam, Malaysia, Brunei, the Philippines and Taiwan) that maintain overlapping claims over various parts of the sea.
Military manoeuvres are taking place, non-negotiable declarations of sovereignty are being made, and navies are being beefed up. Once again there are fishing rights at stake in the waters under dispute, and oil and gas reserves are believed to exist underneath them. The United States, because of its military alliance with the Philippines, is also potentially involved in any conflict in this region.
All this nonsense over fish and petrochemical resources that would probably not yield one-tenth of the wealth that would be expended in even a small local war. Moreover, the oil and gas resources, however big they may be, will remain unexploited so long as the seabed boundaries are in doubt. So the obvious thing to do is to divide the disputed territory evenly between the interested parties, and exploit the resources jointly.
This is what the Russians and the Norwegians did three years ago, after a decades-long dispute over the seabed between them in the Barents Sea that led to speculations about a war in the Arctic.
The Japanese and the Chinese could obviously do the same thing: no face lost, and everybody makes a profit. A similar deal between the countries around the South China Sea would be more complicated to negotiate, but would yield even bigger returns. So why don’t they just do it?
Maybe because there are islands involved. Nobody has ever gone to war over a slice of seabed, but actual islands, sticking up out of the water, fall into the category of “sacred national territory, handed down from our forefathers,” over which large quantities of blood can and must be shed.
China will not just invade the Senkaku/Diaoyu Islands, because it is not run by a drunken and murderous military dictator (as Argentina was when it invaded the Falklands in 1982). But could everybody stumble into a war over this stupid confrontation? Yes, they could.
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To shorten to 725 words, omit paragraphs 10 and 11 (“Meanwhile…region”) and the second sentence of paragraph 14 (“A similar…returns”).
21 November 2012
Nuclear Madness
By Gwynne Dyer
After the loss of 10 million American lives in the Three-Mile Island calamity in 1979, the death of two billion in the Chernobyl holocaust in 1986, and now the abandonment of all of northern Japan following the death of millions in last year’s Fukushima nuclear catastrophe, it is hardly surprising that the world’s biggest users of nuclear power are shutting their plants down.
Oh, wait a minute…This just in! Nobody died in the Three-Mile Island calamity, 28 plant workers were killed and 15 other people subsequently died of thyroid cancer in the Chernobyl holocaust, and nobody died in the Fukushima catastrophe. In fact, northern Japan has not been evacuated after all. But never mind all that. They really are shutting their nuclear plants down.
They have already shut them down in Japan. All of the country’s fifty nuclear reactors were closed for safety checks after the tsunami damaged the Fukushima plant, and only two have reopened so far. The government, which was previously planning to increase nuclear’s share of the national energy mix to half by 2030, has now promised to close every nuclear power plant in Japan permanently by 2040.
In a policy document released last September, the Japanese government declared that “one of the pillars of the new strategy is to achieve a society that does not depend on nuclear energy as soon as possible.” In the short run, Japan is making up for the lost nuclear energy by running tens of thousands of diesel generators flat out, and oil and gas imports have doubled. In the long run, they’ll probably just burn more coal.
The new Japanese plan says that the country will replace the missing nuclear energy with an eightfold increase in renewable energy (wind, solar, etc.), and “the development of sustainable ways to use fossil fuels.” But going from 4 percent to 30 percent renewables in the energy mix will take decades, and nobody has yet found an economically sustainable way to sequester the greenhouse gas emissions from burning fossil fuels.
The truth is that as the Arctic sea ice melts and grain harvests are devastated by heat waves and drought, the world’s third-largest user of nuclear energy has decided to go back to emitting lots and lots of carbon dioxide.
In Germany, where the Greens have been campaigning against nuclear power for decades, Chancellor Angela Merkel has done a U-turn and promised to close all the country’s nuclear reactors by 2022. She also promised to replace them with renewable power sources, of course, but the reality there will also be that the country burns more fossil fuels. Belgium is also shutting down its nuclear plants, and Italy has abandoned its plans to build some.
Even France, which has taken 80 percent of its power from nuclear power plants for decades without the slightest problem, is joining the panic. President Francois Hollande’s new government has promised to lower the country’s dependence on nuclear energy to 50 percent of the national energy mix. But you can see why he and his colleagues had to do it. After all, nuclear energy is a kind of witchcraft, and the public is frightened.
The tireless campaign against nuclear energy that the Greens have waged for decades is finally achieving its goal, at least in the developed countries. Their behaviour cannot be logically reconciled with their concern for the environment, given that abandoning nuclear will lead to a big rise in fossil fuel use, but they have never managed to make a clear distinction between the nuclear weapons they feared and the peaceful use of nuclear power.
The Greens prattle about replacing nuclear power with renewables, which might come to pass in some distant future. But the brutal truth for now is that closing down the nuclear plants will lead to a sharp rise in greenhouse gas emissions, in precisely the period when the race to cut emissions and avoid a rise in average global temperature of more than 2 degrees C will be won or lost.
Fortunately, their superstitious fears are largely absent in more sophisticated parts of the world. Only four new nuclear reactors are under construction in the European Union, and only one in the United States, but there are 61 being built elsewhere. Over two-thirds of them are being built in the BRICs (Brazil, Russia, India and China), where economies are growing fast and governments are increasingly concerned about both pollution and climate change.
But it’s not enough to outweigh the closure of so many nuclear plants in the developed world, at least in the short run. India may be aiming at getting 50 percent of its energy from nuclear power by 2050, for example, but the fact is that only 3.7 percent of its electricity is nuclear right now. So the price of nuclear fuel has collapsed in the last four years, and uranium mine openings and expansions have been cancelled.
More people die from coal pollution each day than have been killed by fifty years of nuclear power operations – and that’s just from lung disease. If you include future deaths from global warming due to burning fossil fuels, closing down nuclear power stations is sheer madness. Welcome to the Middle Ages.
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To shorten to 725 words, omit paragraphs 4 and 9. (“In a policy…coal”; and “The tireless…power”)
24 May 2011
The World in 2050
by Gwynne Dyer
The economists, the statisticians and the investment bankers have done their work, and everybody in the financial world now has more or less the same picture of the future in their minds. The predictions are so consistent that even the general public thinks it knows where the trends are leading us: Asia and Latin America up, Europe and North America in a holding pattern, Africa and the Middle East down. But maybe the predictions are wrong.
Goldman Sachs started the game almost a decade ago with its study predicting that the BRICs, the four largest emerging economies (Brazil, Russia, India and China), would overtake the rich countries of the G7 (the United States, Japan, Germany, Britain, France, Italy and Canada) some time in the 2030s. The world’s economic centre of gravity, the study implied, was shifting from the West to Asia.
Hardly anybody disputes this model any more; the pundits just differ on the details, like when China’s economy will pass that of the United States. As soon as 2020, said PricewaterhouseCooper. 2027, says the latest Goldman Sachs prediction. 2035, says the Carnegie Institute. As late as the mid-2040s, according to Karen Ward’s recent study for HSBC. But they all agree it’s going to happen.
Ward’s study, “The World in 2050,” is particularly interesting for two reasons. One, because it is more realistic about China, whose economy is currently the biggest bubble in world history. And two, because it offers predictions for the world’s 30 biggest economies, not just the top ten.
China’s economy, at $25 trillion annually, is only a couple of trillion ahead of the United States in 2050. (All calculations are in constant dollars of the year 2000.) Then there is a long drop to India at $8 trillion and Japan at $6 trillion – and no other country reaches $5 trillion.
Places five to eleven are mostly filled by the rest of the G7 countries, with only Brazil and Mexico breaking into the magic circle. The rest of the Top Twenty, however, are almost all developing countries (Turkey, South Korea, Russia, Indonesia, Argentina, Egypt and Malaysia), with only Spain and Australia from the developed world. So in this model, Asia and Latin America really are taking over, with eleven out of the top twenty slots.
Now, you can quibble with bits of this, like categorising Russia as an emerging economy. In terms of infrastructure, average education level and birth rate, Russia is clearly a developed country. But if these predictions are roughly correct, then it is definitely Asia and Latin America up, and Europe and North America (plus Japan) in a holding pattern.
And are Africa and the Middle East really down? Up and down are purely relative, of course, and there are certainly some large African countries with quite respectable projected growth rates, like Nigeria and South Africa. But despite the world’s highest population growth rates, no African country’s economy makes it into the Top Twenty by 2050.
Of the Middle Eastern countries only Egypt scrapes in at No. 19, just ahead of Malaysia (which has only a third of Egypt’s population). Most of the non-oil economies face virtual stagnation, and there are big question marks over the claimed oil reserves of a number of the oil states. Africa and the Middle East down.
It’s only a game: only the very brave or the very foolish would base major investment decisions on such a long-term extrapolation of current trends. But it’s the sort of thing that the strategists and the geopolitics experts love – and it could be wrong. Not just wrong in detail, but utterly, spectacularly wrong.
All of these predictions assume that global conditions will remain essentially unchanged for the next forty years. That is highly unlikely.
The predictions are not simple-minded straight-line extrapolations. They all assume, for example, that China’s economy, which has grown at ten percent for the past twenty years (and therefore doubled in size every seven years), will drop to about half that growth rate (doubling only every fourteen years) well before 2050. But they do assume that energy – especially oil – will remain plentiful and relatively affordable for the next forty years.
Even more implausibly, they also assume that global warming will not cause serious disruptions in the world’s economies over the next two generations. Yet there is already enough warming locked into the system by past, present and near-future emissions that severe disruption is virtually guaranteed, especially in the tropical and sub-tropical parts of the planet.
The old-rich countries of the G7 are all in the temperate zone, which may get away with relatively minor damage from global warming in the period to 2050. All the big “emerging” economies except Russia and Argentina are located wholly or largely in the tropics and/or the sub-tropics. That means they will almost certainly suffer very serious disruption, including huge losses in food production.
This is monstrously unfair. Just when the poorer countries finally start to catch up economically with their former imperial masters, the warming caused by two centuries of greenhouse gas emissions by the rich countries knocks them back yet again. Which may also knock all those predictions that the emerging economies will soon overtake the developed ones into a cocked hat.
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To shorten to 725 words, omit paragraphs 7, 8 and 9. (“Now…down”)
Gwynne Dyer is a London-based independent journalist whose articles are published in 45 countries.