Japan

There have long been indications of nationalistic fervour in Japan (see Reverting to the Soul of a Samurai). The latter includes reference to:

• December 2012 suggestions that nationalist factions were gaining political momentum in Japan;
• April 2013 concern about (ultra) nationalistic rhetoric from Japan's prime minister;

China

In March 2012 it was reported that the person who is expected to be China's president next year (Xi Jinping): (a) rejected US president Obama's proposal for a serious dialogue between US and China's armed forces; (b) is seen to tougher, more nationalistic and closer to the military than his predecessor (Hu Jintao); and (c) won't resist those who press for China to be tougher as the US is seen to be heading for inexorable decline [1]

In August 2012 a long term resident in China suggested that since its inception China's Communist Party had sought support from China's people on the basis of a vengeful nationalism.

In November 2012 it was suggested that China's new Politburo was dominated by conservative hardliners, rather than those who might have followed through on the political and economic reforms advocated by China's retiring president (Hu Jintao) .

In January 2013 attention was drawn to ASIO's concern that Australia could be the target of cyber espionage attacks that were believed to originate primarily with the Chinese Government (Joye C., 'ASIO espionage warning', Financial Review, 2-4/1/13)

In March 2013 China's ambassador to Australia outlined China's aspirations for peaceful development in an article that was superficially attractive but also replete with uncertainties because of the cultural issues that are addressed below.

In April 2013 it was suggested that though China's new president has promoted military cooperation with many countries, China's strategic ambitions and poor transparency have not changed. In the 1990s Beijing offered assurances of seeking a peaceful rise, and then from 2010 undermined their own rhetoric with escalating diplomatic incidents. This caused all countries in the region to seek closer security ties with the US and each other. China's defence budgets have increased faster than its GDP for 15 years, and its submarine program indicates that it is not merely interested in promoting regional security. The regional stampede to balance China has caused a 'diplomatic reset' by China's leaders - but its fundamental (expansionist?) objectives have not altered. [1]

In April 2013 attention was also drawn to the nationalistic aspirations expressed by the General Secretary of China's Communist Party - involving a dream of the resurgence of the 'Chinese Race'

After being appointed as party secretary Xi Jinping led Politburo Standing Committee on a tour of the The Road to Rejuvenation exhibition at National Museum in Beijing - and there promised to pursue the 'China dream' (ie the great revival of the Chinese race). The exhibition tells the epic tale of China's decline and dismemberment at the hands of foreign forces and the struggle of the Communist-led people to reclaim their national pride, dignity and power. China is seen to finally be in control of its own destiny after 170 years of struggle (from opium Wars). Modern Chinese leaders have tried to define their leadership through such slogans as the China dream - though achieving the 'Chinese races great rejuvenation' is now seen to be closer. The 'China dream' was originally the title of a book by Liu Mingfu (a PLA colonel) which addressed overcoming American hegemony and assuming global supremacy. It was initially banned, but then republished after Xi's museum visit. Its call for a revival of Spartan, martial spirit echoes the new leaderships crackdown on corruption and lavish living. The military (and its 'princeling generals') are key supporters / advisers of Xi, and China's more assertive foreign policy reflects the moralistic nationalism at the core of his statist vision. The Party's austerity program (outlined in Politburo's 'eight point regulation' aims to improve work styles and resembles the Maoist 'mass line'. In contrast to US approach this argues that China dream is a collective enterprise (ie the China dream asserts that if it is good for the country, its good for the nation and everyone benefits. This continues the cultural tradition of Eastern collectivism which holds that a big / powerful country safeguards the happiness of the people and allows everyone to share in benefits of state development. Individual dreams and state dreams are seen to be mutually related. This raises questions about whose dream matters most - the Party's or the peoples. On the Internet some Chinese dispute the 'China dream'. But others (soldiers and nationalists) embrace the dream. The China dream is a powerful method for grassroots mobilization - but the Party may not have the legitimacy / capacity to control the future. Xi's predecessor had a vision of 'China's peaceful rise'. Xi's 'China dream' may define the next decade or fizzle out. Xi is a relaxed / confident patriot who views his princeling status as mandate to rule. He is clearly different to his predecessor Hu - though both were risk averse - preserving the Communist Party's wealth and power above any other priority [1]

Anti-Western Communist Party documents show that Xi Jinping's presidency is set on a hard line against foreign influences. Officials are required to understand the harm of Western viewpoints, and emphasis the need for China to stand up to the West in becoming rich and strong. Battlefield tactics are expected to be used to defeat liberals and dissidents. China's universities have banned discussion of seven evil subjects: universal values; Western ideas of the freedom of the press; civil society; civic rights; historical mistakes of the Communist Party; crony networks; and judicial independence. China's journalists are not allowed to cite foreign sources in reports. While Xi and others have talked about bold economic reforms, it is clear that political change is not on the agenda [1]

In June 2014 it was plausibly argued that Xi Jinping's reforms had nothing to do with the economic and political liberalization that Western observers had anticipated but rather involved the re-establishment of something like China's ancient Confucian system of governance by bureaucratic elites (see The Resurgence of Ancient Authoritarianism in China)

In May 2016, it was reported that the US Pentagon believed that China was restructuring itself for war - by changes to command structure, strategies. The Communist Party's control has been tightened. The building on islands in the South China sea could be used to allow China's military forces to control the strategic Pacific - Indian Ocean waterway. The PLA's military build up includes new missiles, warships, aircraft and cyber-warfare capabilities. Corruption remains a significant constraint on China's military. China is expanding its ability to fight far from its home territory [1]

Australia remain trapped in the past re South China sea dispute, China has moved 1100 km south towards Australia - and deep into ASEAN territory. It now poses realistic air threat to Malaysia, Singapore, Brunei and Borneo. Australia hopes that US and ASEAN can deal with this. ASEAN wants to get code of conduct in agreement - but China has stalled. Some ASEAN countries have become pro-China. Australia needs to work with others to strengthen their ability to resist Chinese threats  [1] 

North Korea

In April 2013 North Korea threatened to attack both South Korea and the US (An Art of War Perspective on North Korea's Threats).

The Issues this Raises for Australia

In late 2014 it was suggested that 'pax Americana' (the post WWII international order featuring free markets, liberal democracy and a rule of law that had been sustained by US power) was likely to be severely challenged by the combined effect of: China's rise; Russian militarism; and Middle Eastern instabilities with an associated global extremist fundamentalism. Thus Australia would need to develop an overarching national security strategy which examined defense issues in a much broader context.

2014 may be the start of a shift to a more turbulent world no longer dominated by US values and power. Such shifts occur periodically and are often accompanied by war / revolution (eg 1918, 1945, 1989. Pax Americana arose from end of WWII when US and its allies established global institutions / norms that favoured the free market, liberal democracies and the rule of law. This was based on US's unrivaled military capacity and its global alliances. The US-led international order was not always peaceful - eg consider Cold War conflicts. However pax Americana is now being challenged by: China's rise, military assertiveness by Russia; disintegration of regional order in Middle East; and spread of virulent anti-Western fundamentalism. China has the strategic clout to pose challenges of a complexity and magnitude not previously experienced by US-led international order. Its population and economy dwarfs fascist Germany and imperial Japan - and 20 years of double digit defense spending have created a strong military capacity. China's recent behaviour suggests an unwillingness to conform to international norms. It has challenged the international order in Asia (especially at sea). China makes clear that it wants to use its power to change the rules of the game - and replace US as pre-eminent state in Asia. Whether it will have similar global ambitions depends on how successful it is in Asia. Examples of initiatives include: proposed Asian Infrastructure Investment Bank, FTA with Australia, gas accord with Russia and limited rapprochement with Japan. Regional development and economic integration are intended to reduce US economic influence in Asia. A second challenge had come from Russia's annexation of Crimea. Europe's leaders had wrongly believed that predatory nationalism and military aggression had been eliminated from that continent. Russia does not share Europe's aversion to the use of military force. Russia sees problems with international order that does not recognize it as a resurgent great power. Russia is flexing military muscle and rebuilding alliances worldwide. It has also had a pivot to Asia - developing relationships with China. Russia has also impeded efforts to prevent Iran from acquiring nuclear weapons. Iraq and Syria (two heartland states in the Middle East) are destabilized by conflicts. Egypt confronts its own internal potential instabilities. Arab-Palestinian relationships have deteriorated rapidly. Islamic state is a transnational movement with the trappings of statehood which makes it resistance to conventional deterrence abd counter-strategies. It is now in alliance with Al Qa'ida and other extremist groups with a goal of defeating pax Americana and all it represents. Given three major challenges and the West in relative decline, pax Americana cannot endure. The US can't provide the global leadership and authority that it used to. The geopolitical tensions and volatility of 2014 are likely to be the new normal until the transition to a new stable order is complete. This process could be even more difficult if accompanied by systemic (financial, economic, environmental) shocks. Australia's commitment to the US alliance system has allowed it to benefit from pax Americana - and it has much to lose if the old order shifts to a new order that is less liberal. Australia needs to be pro-active in shaping the new order. The US alliance has been beneficial - but it is no longer sufficient. Australia needs to re-examine its foreign policy, trade and defense policies and articulate a more overarching national strategy. As well as a Defense White Paper the government needs a major update of the 2013 National Security Strategy [1]

It was also argued that Australia did not have a fully-developed policy in relation to China.

China's president's visit in November 2014 raised questions about Australia's and NZ's relationship with the country that has become their largest trading partner. Many in the world want China to take on a more active role (on Western terms), it is ironic that China's leader made that point in Australia. Australia has no strong vision of its relationship with China. Some don't want a strategy about this - and many just want to stick with the US no matter what.  Xi posed the question about whether this is sustainable. Australia has long outsourced deeper strategic thinking to the US, and then just gone along. Both the US and Australia welcome a strong, peaceful, cooperative China- and want China to have a similar political image. Trouble arise in dealing with values and rights. Australia sounds like it has a policy (see Asia in the Asian Century white paper) but this has disappeared. This doesn't mean that Australia doesn't want a policy - but that it is leaving the heavy lifting of integrating China into the global system to the US.  China is not predictable enough for this to be viable. China's growth is recognised to be vulnerable. It's unity is not secure. Its political moderl is being changed - though not towards what Western observers would like. Its environmental problems are massive. China could easily suffer a killer blow, which then would 'kill' Australia. Australia needs to look at China's internal problems as see how they might be reduced. It also needs a strategy if China collapses. There is a need to think of China's rise in terms of what sort of China might exist in 10 years. China's president talked about Australia's role in an an increasingly China-influenced world. [1]

And in 2015 there was tension between the economic advantages that Australia sought, and the strategic risks it faced, in developing relationships in Asia

Australia's treasurer is in Beijing for discussions related to AIIB, while the world is being told that China intends to be a rule maker in the global system. There is deepening economic engagement - while strategic analysts believe a tougher line is needed. In 2005 World Bank president called for China to become influential stakeholder in the international system. But now China indicates that it will make its own rules. US primacy in Asia has eroded. After the Asian Financial Crisis Japan tried to get support for an Asian monetary fund - but failed. China is now being more successful. China is doing better because it is thinking bigger - with a strategic vision for the region, creating the AIIB and seeking to internationalize its currency. US opposition to AIIB has been labeled a strategic mistake. Australia's PM (who is strongly pro-US) has lamented lack of US support for AIIB. However China has failed to reassure the region on strategic front - and mistrust is growing - and countries are strengthening security ties with US. US must get the balance between engaging with and hedging China right . There needs to be a rules / law-based approach to resolving territorial disputes. However China will have its own view of the rules and the system [1].

CPDS Comment: This reflects a fundamental ignorance about the nature of the international order that China is seeking to create (and which Japan had sought using military tactics in the 1930s). Under the system favoured by Asian authoritarians, they would rule. There would be no law / rules to which they would be subjected - see Creating a New International 'Confucian' / Bureaucratic Financial and Political Order? 

This conflict between economic and strategic considerations parallels the challenge that Australia faced in relation to Japan's simultaneous militaristic expansion and demand for Australian iron ore in the 1930s.

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Australia's prime minister has launched a new era of relations with Singapore that includes increased intelligence exchanges, hosting Singaporean military in Australia and enhancing trade and investment links. It is hoped that Australia's relationship with Singapore will become as easy as that with New Zealand [1]

CPDS Comment: This proposed arrangement reflects some naivety.  Singapore is closer to being a dictatorship than it is to being a liberal democracy. This is apparent to businesses that have dealings in Singapore. But how this can be so requires understanding the nature of power under East Asian traditions (ie being associated with high status within an ethnic hierarchy rather than in the ways power is exerted through liberal Western institutions - see  Asian Authoritarians Can't be Contained without Understanding How They Exert Power).

Singapore, three quarters of whose population is ethnic Chinese, is a product of history. It is governed on the basis of a combination of Chinese and British practices.

There is a large Chinese Diaspora across SE Asia as the result of Civil Wars over the past 1000 years that drove the merchant class out of China in successive waves. And that Diaspora are the focus of a lot of resentment by other ethnic groups in SE Asia because of both their economic power and their behind the scenes distortion of local political systems.  Various observers have argued (see Civil Wars) that: 

• the Diaspora remain part of greater China and continue to focus on political and economic maneuvering within that framework;
• the Diaspora financed China's transformation into a major economic power [This suggestion needs to be considered in the context of: (a) Mao's efforts, through the Cultural Revolution, to eliminate Confucian traditions from China on the grounds that the social hierarchy this involves had oppressed Chinese people; (b) the restoration of a form of Confucianism as the basis of China's post-Mao economic development; and (c) the resentment this generates in China by those who favour social equality - see Confucianism versus Communism: The Continuing Contest in China];
• Chinese Triads (ie organized crime) are associated with the Diaspora business groups and used as a form of private army. Triads, it may be noted, were also used by the Chinese Government in suppressing student dissent against China's authoritarianism in Hong Kong in 2015;
•  the Diaspora earn significant income from drugs and prostitution;
• the Diaspora's involvement in corruption is common.

Singapore was established as a British trading center in the early 19th century and became part of Malaysia in 1963 - before being expelled in 1965.  Singapore's economic rise depended significantly on providing a relatively reliable institutional framework is a region of instability - though it was not entirely devoid of dubious practices, such as facilitating tax evasion and providing a haven for the proceeds of organized crime and corruption (see Singapore: The Rise and Rise of Asia'a Switzerland).

However, as is usual under the neo-Confucian methods that were developed by Japan as the basis for economic 'miracles' in Asia, Singapore's economic dealings tend to have strong political / power-seeking dimensions (ie there is no separation between geo-political / ethnic-nationalistic considerations and business dealings ie no significant enterprise that is genuinely 'private'). This point was explored in relation to the implications of a proposed Singaporean takeover of the Australian Stock Exchange (see Proposed ASX Takeover: Lifting the Level of Debate, 2010). It needs to be considered in relation to the view that close ties can easily be established between Australia and Singapore in all areas.

In late 2015 concerns were expressed about the sale of Darwin Harbour to a Chinese company. This has become part of strategic rivalry between the US, China and Japan.  No one in Canberra seems to have considered these implications as the Trade Minister and Minister for Northern Development viewed the issue only in economic terms.  Peter Jennings (ASPI) pointed out that NT Government had crafted the deal as a 99 year lease to avoid having to get FIRB approval. Defense Department privately communicated their concerns about the deal. Darwin in key to US / Australian military cooperation. Naval cooperation will have special emphasis on Darwin. A federal cabinet defence and security committee needs to review such decisions. Concerns about strategic issues fail to highlight the economic importance that Darwin now has - and will have in future (Darwin's history in terms of economic and military relationships with Asia were outlined) [1]

A need was seen in late 2015 for Australia to develop a new security plan based on closer relationships with the US and efforts to boost Australia's 'intelligence' capabilities.

Maritime incidents highlight the stress on regional security resulting from China's territorial claims and great power ambitions. Such incidents need to be viewed in context of review of Australia's strategy. Game Plan: The Case for a New Australian Grand Strategy (Ross Babbage) attempt to outline such a strategy. It urges closer US links - in contrast to others' suggestions. Australia's geography has always made defence a difficult task - and Australia is now moving to centre-stage in grand-power rivalry. Avoiding conflict is the best possible outcome. Keating, Fraser and White have argued that Australia should jettison US alliance and strike out alone. Babbage urges becoming the US's indispensible ally. Both US and China see Australia as having greater strategic importance than previously. US seeks support as China threatens long-established US bases in East Asia and Western Pacific. Advocates of abandoning US alliance fear being dragged into US efforts to block China's rise and its 'legitimate' great power ambitions. Australia is torn between trade with China and strategic relationship (and cultural affinity) with US. However that trade with China developed under liberal international order that US has built / protected since 1945 - and which is now under challenge mainly from China.  US seems weary of maintaining the international system - as the UK was before WWI. It does not seek war with China - but will need allies and defensive depth to maintain the liberal international order. Australia is crucial to US if it gives ground to China in Asia. Babbage urges thinking this through. Around 2000 Paul Braken (Yale) foresaw much of what has happened - while many analysts lost sight of strategic realities due to 911 and hope that China might become more liberal and tractable. The latter must end because of China's spiraling military spending and territorial claims that alarm its neighbours. Babbage recommends that Australia become 'the centre of intelligence excellence' for neighbour and allies as well as US's closest confident and best informed nation around SE Asian theatre. This would require a much more serious approach to collection / analysis / use of intelligence as well as counter-intelligence and counter-espionage. This requires a willingness to critically examine strategic policy assumptions (eg about China, US alliance, risks of military conflict, and international liberal order that has prevailed for the last 70 years) [1]

2016 Strategic Issues for Australia as the US Changed

In mid 2016 it seemed likely that China was headed for a financial crisis similar to that which disabled Japan's economy in the late 1980s and that China had been emphasising the development of its military strength (perhaps in anticipation of war) rather than seeking to make the extremely difficult financial-system changes required for ongoing economic success (see Importing Risks from China).

And Donald Trump emerged as a populist Republican contender for the US Presidency with a platform that: (a) included looking after US interests only - rather than continuing to promote a stable international order; and (b) was so light-weight than both the US and the liberal international institutions that it has supported since WWII would be at risk, thereby creating scope for the rise of authoritarian regimes as in the 1930s (see Should Donald Duck?).

There is a real possibility (though no certainty) that Trump presidency indicates a major change in US foreign policy. Economist Intelligence Unit rates Trump's win as one of 10 top global risks.  A very different world / US are possible. Australia now needs t re-assess its foreign policy and global interests. Trump's rhetoric ran counter to core values of most Australians (eg in relation respect for women, racial / religious tolerance, economic / social openness.  There will be continued support for US alliance - but it must continue to be defined by the principles that have always underpinned it - democracy, freedom and human rights. Common interests with US include: liberal open global trading system and collective responses to global challenges.  Some Trump views stand in contrast to those principles. While ALP supports constructive engagement with Trump, PM and ministers have engaged in domestic partisanship. Australia needs to consider how best to maintain relationships with the US and Asia - as world order changes. Australia needs to work harder in Asia - on economy / development / partnerships / human rights / security cooperation. A US approach to the region that prioritizes economic transactions, rather than soft power, inclusiveness, cooperation and multilateralism needs to be considered. Australia needs to work with regional partners on this. First to seek continued constructive engagement with the region. Australia needs an independent foreign policy within the framework of its US alliance - as Trump is not orthodox. Australia's interests / values call for pursuit of openness, tolerance and cooperation [1]

In history great empires change every 300-600 years. For 600 years European / Christian values have dominated global commerce and politics - most recently through US. But it has now started to change. Penny Wong thus asked how Australia should position itself in response to a vehemently anti-China Trump. After WWII the US battled with Soviet Union - and then stood alone from 1991. Then in 2008 hubris caught up with the US just as China readied itself to stand on the world stage as it had done centuries before. President Xi announced China's One Belt One Road policy in 2013 - as West remained introspective dealing with fallout from GFC. This was a massive investment proposal financed through China's AIIB - which is now becoming a reality. China will soon become the dominant global economy that it once was. As US shrinks and China rises - perhaps for centuries. Was Australia slow to sign up to AIIB because the US asked us not to.  Australia has not become involved in OBOR because US objected - and does not have its own position on south China Sea for the same reason. Australia was in Iraq / Afghanistan at US request. There needs to be better reasons that US requests 8 years into US decline. Perhaps Australia needs to become Asian. Xenophobia has existed about China since English settlement - now Chinese are blamed for inflating house prices - despite restricted supply, low interest rates and 3 decades of growth. Australia should not turn its back on US - but be cautious of of its military maneuvers. A fresh view of the AIIB should be taken. Options for Australia's exports through the OBOR program should be considered. Perhaps Australia's multiculturalism would enable it to be translator between two worlds as the empires shift. [1]

ALP will step back from Trump's America and re-assess while putting more emphasis on Asia - breaking a long consensus about Australia's main ally. Penny Wong endorsed continued alliance while noting that Australia should not be naive. PM has emphasized continuity and warmth - while ALP favours discontinuity and distance. Australia needs to work more closely with Asian countries - Wong says. Regional collaboration is needed about keeping US constructively engaged in Asia. An ALP elder statesman says Less America, more Asia. ALP leader rejects Trump's attacks on women, Mexicans, Muslims, free trade and open economies. Trump said that US can't be the world's police-man any more - and promised 45% tariffs on imports from China which has drawn threats of retaliation from China's state-media. Michael Fullilove (Lowy Institute) endorsed Wong' turn to Asia. It is inappropriate to look at everything through alliance prism. Better relationships are needed with China, India, Japan, Indonesia, Vietnam etc. More must be done with like-minded countries in Asia and Europe. Australia must also encourage Trump to continue strong / intelligent leadership in Asia [1]

[CPDS Comment: See 'Why Penny Wong is Absolutely Right About Reviewing Australia's Foreign Policies']

The battle in Australia between PM and Opposition leader over US alliance will damage the alliance. ALP's action is premature and unwise - as there are many foreign policy consequences. trump cast doubt on US alliances in Asia while exempting Australia. Now ALP implies scaling down the alliance. Penny Wong spoke of both maintaining alliance and reviewing it. But this suggests future major changes. Trump has elevated concerns about US in progressive politics (ie declining power, inability to manage China's rise, need to position Australia between China and US, reorient toward Asia as the gulf between US and Australian values widens. [1]

Australia's bipartisan consensus regarding its 65 year alliance with the US risks fracturing after Trump's victory in US presidential race. PM (Malcolm Turnbull) accused Opposition of using this to try to weaken ties with US (eg to exit from ANZUS alliance) and Opposition Foreign Affairs spokeswoman (Penny Wong) made a case for switching Australia's priorities to Asia. PM argued that national security would be at risk by breaking relations with Australia's strongest, most important / trusted / enduring ally. Wong had argued that trump's values ran counter to the views of most Australian - and his policies did not align with Australia's interests in the Asia Pacific. Former ALP leader suggested that Wong had reached the right conclusion but for the wrong reasons (eg because of Trump's identity politics rather than to Australia's compliance with US strategic mistakes re Vietnam, Iraq, south China sea. Trump had also questioned strategic partnerships in the region (eg that with Japan). Senator Wong rejected suggestions that she was opposed to ANZUS alliance - and instead expressed concern about Trump's potential trade war with China, questioning of US alliances and approach to climate change. Australia needs to consider the alliance in the context of those changes. James Carouso (US Embassy, Canberra) suggested that it was in US interest to lead, be a Pacific power and work towards greater regional integration. The ANZUS Treaty has been in place for 65 years - and has provided for mutual defence, regional stability and economic growth. US interest is to support a principle, rules-based, international order. Both Trump and Turnbull have re-affirmed the alliance. Former foreign minister (Bob Carr, who heads the Australia China Relations Institute at UTS) supported Wong in arguing for change because of policy flagged by Trump - as US was moving away from multilateralism and risked an arm's race in the Asia Pacific. Australia does not have a choice - as US ally is committed to trade war with China, to weakening alliance system, unraveling nuclear non-proliferation and downgrading multilateralism. These are not in Australia's interests - and happened without any decision by Australia. Hugh White (ANU, former deputy defence secretary) said that Australia could not assume that US would continue to play the same role in Asia. Opposition leader (Bill Shorten) said that alliance was important - but that Australia should also engage in Asia. Opposition defence spokesman (Richard Marles) said that alliance would continue to be central to Australia's defence strategy. Deputy ALP leader (Tanya Pliberseck) noted that under Trump US might be getting closer to Russia   [1]

In January 2017 a former PM (Paul Keating) suggested that Australia needs to take notice of the shift in US-China power balance - on the grounds that leaders have misread to rise of China, misjudged the limits of US power and the dynamics of the 21st century. There is substance in this argument - eg because of China's rapid rise. This was due to Deng Xiaoping's pragmatic approach to policy - which ended Mao's economically crippling / politically stifling orthodoxy by adopting 'socialism with Chinese characteristics'. To western authoritarians the notion of all powerful bureaucrats producing an economic miracle was inspiring. But it was capitalism and the power of markets tht produced this. In 2013 Third Plenum of Communist Party acknowledged the need to accept the private sector as the foundation of China's economy. China would seek to transition to an economy reliant on innovation, consumption and services - with a decisive role for market forces. But the party's political grip would not be relaxed - and President Xi now has pre-eminent authority. He favours a larger state sector - and seeks to purge corruption - which can be a tool for intimidation in an authoritarian country. The incompatibility of economic and political goals have limited China's economic potential. It now suffers capital flight and a potential banking crisis.  Australia should be clear in its US alliance - leaving Xi to decide between totalitarian rule and a liberalised economy [1]

China's leaders can't conceal their glee about Donald Trump's election. His promise to make America great again confirms their belief that it is in terminal decline. And if Trump carries out promise to abandon the alliance system and the liberal economic order that the US has maintained for decades through investment in diplomacy / security, then Pax American is over and China wins. Trump can do what he likes (eg with tariffs, changes to Taiwan's status, deals intended to make life difficult for Beijing) but China will win as long as: he takes a transactional approach to world affairs; undermines the rules based system; and destabilizes US allies. Australia could be knocked out too - and needs (not to align with China) but to identify problems in China just as has been done with the US. China's leaders have long complained about the principles, rules and alliance networks in the post-war international order that the US imposed. They argue this should no longer apply in Asia - but rather that international / regional rules need to be formulated by the countries concerned rather than dictated by one country. China is not the only country constrained by 'international rules' (eg consider Japan's nationalists). Japan's prime minister has hinted that post-WWII rules should no longer apply to his country either. China's concern about its place in the post-WWII order differs from Japan's mainly in that it has no tangible foundation. China argues that: America's alliance system threaten China; open markets mainly serve US interests; concern for human rights is just a basis for meddling in others' internal affairs; international currency movements are manipulated by US markets; and the freedoms of liberal western media mask anti-China sentiment. China: has a Leninist party-state constitution; does as it pleases globally; and points nuclear missiles everywhere. But no one stops it. Americans point to the fact that China has benefited most from the regional stability US security guarantees. America's open wallets, open society and open universities have been key to China's ascent. America: provided China's best hospitals / universities; ended Japan's occupation of China; secured the region; underpinned China's rise with a commitment to open trade. China's alternative to Pax Americana are not the absence of order but a new kind of order - grounded in values that are not universal and rules that are not liberal. China will never breach the hierarchical authoritarian principles of its one-party state. The CCP is already using local media and other sources to extend these values into Australia and other countries. China's government: promotes obedience to authority ahead of freedom; champions hierarchy over equality; and demands submission to an authoritarian state. Christopher Ford (Hudson Institute) has spelled out what extending these values in the region would mean. China aims to establish a regional order based on its own hierarchical, authoritarian and deferential style of government. All states falling under this new order would need to accept their place in a new order centered in Beijing. All governments would be expected to void saying anything critical of China. Australia is frequently told not to get involved in disputes about China's expansion in the South China Sea because it has no 'skin in the game'. But Australia's national security is critically involved. China could equally claim a right to invade Australia. China has expanded by conquest in the past - contrary to claims by supporters. In 2003 China's then president referred to expeditionary forces of China's Ming Dynasty reaching Australia and  then settling there for centuries. These claims are not based on historical evidence but on generations of myth-making by popular Chinese historians. [1]

Broadly based rejection of extradition treaty with China should be a reality check for those advocating closer ties with a country that shares few of Australia's core values. Chinese courts lack judicial independence and are subservient to will of ruling Communist party. Pragmatists assert that closer relations are needed because we live in a China world and Stephen Fitzgerald argues that this would allow influence over China's policies. The latter is unlikely. Moving closer to China would limit Australia's independence and increase the risk of being subject to pressures that South Korea recently was exposed to. Fitzgerald also highlights Australia's lack of knowledge of the Middle Kingdom. China's use of hard power to militarize the South China sea is an example of its willingness to flout international norms and laws. It increased use of soft power is a more difficult challenge because it exploits the openness of Western democracies. In China Matter: Getting it Right for Australia insights were provided into the enormous propaganda machine that Beijing deploys to burnish its image, influence elite and public opinion and control Chinese diaspora in Australia. Most of the 59 Chinese language publications in Australia are closely connected to state-owned media groups in China and there are now 14 Confucius Institutes and 60 Confucius Classrooms in Australia that proselytize for Chinese Government. People of Chinese descent are targeted to promote 'correct' images of China. All this is coordinated and resourced by propaganda arm of Chinese government (the Publicity Department). There is a strategic dimension to China's economic and investment policies and a linkage with its hard and soft power. AS a one party state China is better able than others to coordinate state power. All Chinese companies are ultimately subject to government control and direction in ways Australian companies are not. Chinese investment needs to be considered holistically to evaluate political and national security implications. Chinese leaders have made it clear that they are seeking advanced Western technologies - and this involves industrial espionage. However China is using financial techniques to achieve this - by state-funded acquisition of critical enabling technologies. Australia should proceed with caution in developing relationships with China. Government must also recognise widespread concerns about China's different value system and approach to human rights, the potential for interference in Australia's domestic affairs, the geopolitical aims of Chinese investment which can be the opposite of Australia's [1] 

Broader Resistance to Western Influence?: The PLA may not be Australia's only Asian security challenge for reasons outlined in the following overly-simplified and speculative scenarios. 

In brief it will be argued (and speculated) below that: 

• Japan's cultural traditions (which were derived from ancient China) are incompatible with liberal features of Western societies that derive from the latter's classical Greek and Judeo-Christian heritage;
• ultranationalists (who remain influential in Japan) believe that illiberal (ie ethnic hierarchical) East Asian social traditions are superior - and have sought to resist Western influence partly because of the latter's 'liberal'  social, economic and political institutions (ie those based on individual understanding and initiative); 
• After the Meiji Restoration in 1868 Japan first sought to resist Western influences by boosting both its economic and military strength. In the 1930s it collaborated with Europe's Fascist powers and tried through military power to create a Greater East Asian Co-prosperity Sphere where illiberal East Asian traditions would prevail.  After WW2 (while pretending to adopt a 'liberal democratic' system of political economy) Japan sought to become economically dominant apparently through leadership by a Confucian-style system of bureaucratic government like that by which East Asia had been administered on behalf of emperors for centuries prior to Western expansion - but which did not merely focus on wisdom gained from history as the basis for inculcating behaviours in Japanese people and organisations. Also:
  • Japan encouraged the use of methods like those that had been used to generate economic 'miracles' across the 'Co-prosperity Sphere' - ultimately to 'Communist' China in the late 1970s;
  • in the 1980s influential Japanese with criminal and government connections who had reportedly played a central role in the development of Japan's post-WW2 government and economic arrangements stimulated (perhaps intentionally) the development of infrastructure in Australia that would have facilitated Japan's WW2 invasion plan;
• China's economic miracle was achieved using similar 'neo-Confucian' methods to Japan - though though different government institutions. There are some indications that Japan and China are collaborating despite their public frictions, though competition to be the neo-Confucian 'top dog' is also possible;
• China now seems to be seeking to create an illiberal international political and economic order like that by which Asia was administered from China prior to Western expansion (and like Japan's Greater East Asian Co-prosperity Sphere was reportedly originally proposed to be before it was taken over by Japan's militarists);
• there are indications that other arrangements are being encouraged by Japan and China that might facilitate an invasion of Australia;
• while Japan seems to be the West's 'best friend' in Asia there are also indications that that earlier anti-Western ultranationalist factions remain extremely influential (eg such rhetoric is frequently expressed by Japan's current prime minister, Shinzo Abe.

Because of ongoing not-always-obvious developments like those argued (and speculated) above, strategic analysts should consider what has been happening in China (especially since the late 1970s) in the context of determined resistance to Western influence over recent centuries that was led by Japan (ie by ultranationalists who believe in Japan's racial and cultural superiority and whose rhetoric Japan's current prime minister often expresses).

In 1989 anthropologists suggested that Japan had maintained its traditional culture and ways of doing things virtually unchanged despite being exposed to Western influences:

"Japan has adjusted so well to Western influence that it has beaten others at their own game. Despite its initial mistake of emulating the colonial powers, Japan changed and adapted rapidly. However Japan remains the same on the inside as it has been for thousands of years. It is run according to a jealously-guarded set of concepts that Japan defends from any contamination. More than any other Pacific people, Japanese have retained their original culture and distinctive way of doing things. Many people and cultural influences came to Japan from China - though Japan's isolation allowed them to take their own distinctive form" (Thorpe A., and Raymond R., 'Man on the Rim', Angus and Robertson, 1989)

Western analysts of Japan's political economy typically view it through  distorted lenses as they have no idea what the original cultural arrangements were that these anthropologists were talking about - and presume that discussing Japan as a now 'Western' society allows it to be understood. Babes in the Asian Woods (2009+) refers to examples of cultural features that are simply not perceived when East Asia is studied from an Asia-illiterate perspective.

It is possible that a truly 'new' Japan has been created since the early 1990s as a result of its financial crisis and subsequent economic stagnation.  But this is anything but certain.

Good Cop - Bad Cop?

Ross Babbage's report focused on China, yet it is possible  (though not certain) that Japan is also a (perhaps 'the major') player doing a ‘good cop’ routine, while collaborating with China which is playing the the ‘bad cop’.

 Japan’s Predicament draws attention to the fact that Japan is currently facing many challenges. It focuses on post-1990 developments yet it is useful to consider the cultural and historical context (eg because of the continued strong ultranationalist rhetoric of Japan's prime minister, Shinzo Abe).

Japan’s cultural traditions are arguably:

• derived from, though different to, those of ancient China;
• incompatible with ‘liberal’ Western political and economic institutions - eg in relation to finance;
• difficult to understand - because 'understanding', which is central to problem solving in Western societies, is not important in East Asian epistemologies;
•  necessary to understand to perceive how real political and economic power is exerted within invisible hierarchical ethnic social networks; and
•  little changed, at least until the 1990s, from what they were centuries ago despite adopting liberal Western-style institutional forms (see above).

Japan (like other nations in East Asia) has cultural traditions that are radically incompatible with Western systems (and thus with the liberal international order Western nations established in recent centuries) in terms of the nature of: knowledge; power; governance; strategy; and economic methods / goals) - see East Asia: The Realm of the Autocratic, Hierarchical and Intuitive Ethnic Group? and Background Note. 

In 1996 Samuel Huntington, author of the Clash of Civilizations, characterized political culture in the [Sinic / Chinese] sphere as one with 'little room for social or political pluralism and the division of power' and also suggested that their 'international politics must be hierarchical because their domestic policies are".  He also speculated that Sinic world would eventually oppose the West's hegemony, probably through forming an alliance with the Islamic world.

The cultural differences involved are hard to understand (eg see Why Understanding is Difficult). None-the-less they have practical implications that must be understood to deal successfully / safely with East Asia (see Babes in the Asian Woods). Examples of apparent significant Western incomprehension are cited in the latter while others are mentioned below.   

Problem solving in Western societies makes significant use of abstract concepts – and social, political and economic institutions exist that allow abstract concepts (such as universal values, truth, law, profitability) to be effective in problem solving because of Western society's Judeo-Christian and classical Greek cultural heritage. Those 'liberal' institutions (which are based on the notion that people are individuals rather than merely parts of an ethnic community / 'tribe') furthermore depend on the presumption that widespread Christian adherence ensures that ethical behaviour is  most appropriately assured by individual consciences responsible to God - rather than requiring family, communal or state supervision (see Cultural Foundations of Western Progress: The Realm of the Rational / Responsible Individual).

This is not the case in East Asian societies with an ancient Chinese cultural heritage. Key issues are the absence of reliance on abstract concepts in East Asian thought and the presumption that compliance with others' expectations (rather than independent decisions by responsible individuals) is required for ethically-satisfactory behaviour. Decisions involve consensus in hierarchical social networks. As a consequence such societies traditionally lacked social, political and economic institutions in which abstracts (eg individual rationality, law or profitability) could be used reasonably reliably. Emphasis was rather placed on consensus within an hierarchical ethnic community - with members of those communities subject to community pressure to play their part in that consensus without individually seeking to 'understand' it as a basis of independent initiative. Also information was traditionally used primarily by those at higher levels in the ethnic social hiearchy as something like propaganda to influence the behaviour of their associates, subordinates and enemies rather to boost others' understanding. Inculcating behaviours rather than boosting understanding is also the way information is traditionally used in East Asian 'education'. Notions such as universal values, equality under a rule of law, profitability and concern for the welfare / capabilities of individuals had no part in those traditions.

 A significant difference between Japan and China lies in the large number of potentially-competing social hierarchies in China (which has been described as a 'tray of sand'), while Japan has been likened to a 'rock'.

Japan was forced to open to Western influences by Commander Perry from the United States in 1854. The then ruling Shoguns (hereditary military dictators) were displaced at the time of the Meiji Restoration (which was orchestrated by Ronin (former Samurai) with the support of Yakuza (ultranationalist gangsters who had also been Samurai). Those factions were committed to making Japan a modern economic and military power while maintaining its traditional cultural order and ethnic social hierarchies in the face of liberal (ie individualistic) Western influences.

Former Samurai played the most significant role in the Meiji restoration. For example the Ronin, Sakamoto, organised an agreement about this amongst competing factions [1, 2]). And Japan's highly nationalistic organised crime gangs, the Yakuza [1, 2, 3] whose predecessors had been samurai, also supported imperial restoration (eg consider Jirocho of Shimizu).

For this the Yakuza (gangsters with ultranationalist ideologies) gained a respected social role, ie as enforcers of social discipline amongst Japan's people on behalf of the ruling regime. That role would be disrupted under the rule of law that Western influences sought to promote - and this presumably explains why Yakuza have played such a prominent role (see below) in organizing Japan's political and economic systems.

Japan then moved heaven and earth to resist Western expansion (including ultimately playing a major role in WW2 as an ally of Fascist Germany and Italy). Japan sought to exclude Western influences partly because their 'liberal' (ie individual-based) social, economic and political institutions were incompatible with the illiberal (ie autocratic ethnic-social-hierarchy-based) cultural traditions in countries with an ancient Chinese cultural heritage.

According to Wikipedia, fascist movements shared certain common features, including the veneration of the state, a devotion to a strong leader, and an emphasis on ultra-nationalism and militarism.

Japan had sought Western recognition of its unique (‘superior’) culture in the 1930s (without actually explaining what was involved – a reluctance to enable others to actually understand that is traditional feature of East Asian cultures).

Western rejection of this unclear request was one factor that led to Japan’s militaristic attempt to create a Greater East Asian Co-prosperity Sphere in the 1930s and 1940s. After earlier 'incidents' (eg in Manchuria) Japan started the Second Sino-Japanese War in 1937. This was initially presented as a 'holy war' and the first step in a divinely ordained process (Hakko ichiu - 'eight corners of the world') to bring the world under the control of Japan's emperor. This process was to start with China - which was seen to have been Japan’s ‘big brother’ in ancient times in the so-called 'Great Han Race'.

The major ethnicities of East Asia are Han (in China), Yamato and Korean. The dominant influence historically has been China, whose area of cultural influence is generally known as the Sinosphere. Evidence of this can be seen in the cuisine, architecture, and lexicons throughout the region. In modern times, however, cultural exchange has flowed more bi-directionally. Major characteristics of this region include shared Chinese-derived language characteristics, as well as similar social and moral philosophies derived from Confucianism (see East Asia in Wikipedia's 'Ethnic Groups in Asia').

The dominant racial group in Japan is the Yamato whose origins are unclear - and presumably involved migrants from various parts of Asia. However some have argued that they were mainly Han Chinese.

Whatever their racial origins, there is little doubt that Japan and Korea (in particular) were heavily influenced by China (see also East Asian Cultural Sphere / Sinosphere and Korea: Comparisons with Japan and China).

The imperial Yamato dynasty had been established and gained control of Japan in the 6th century by one of Japan's tribes by copying then-dominant Chinese models. The Yamato language was adopted by all Japanese. Eventually 'Yamato' came to be associated with Japan generally.  Notions concerning 'pure blood' as a criteria for the Yamato started circulating in Japan around 1880. The Yamato Dynasty is another name for the current Imperial House of Japan (see Yamato Province, Yamato People, Imperial House of Japan).

In the 1930s, financial crisis and depression led to nationalistic, militaristic and expansionist movements in Japan. In 1940 Japan's government issued a white paper based on Hakko ichiu which: (a) referred to 'the establishment of world peace in conformity with the very spirit on which our nation was founded'; and indicated that the first step was the proclamation of a "new order in East Asia" - which later took the form of the "Greater East Asia Co-Prosperity Sphere". The term was used to indicate the making of a universal brotherhood implemented by the uniquely virtuous Yamato. Because this would bring people under the emperor's fatherly benevolence, force was justified against those who resisted (see Growing Expansionism in Hakko ichiu). 

Western attempts to understand Japan’s WW2 aggression perceived it to be about bringing ‘Asia’ under Japan’s control, without appreciating the cultural issues (eg excluding Western cultural influences – especially the notion of individualism and individual freedom from conformity to pressures within ethnic social hierarchies) that were presumably significant factors from the viewpoint of the ultranationalist militarists who then controlled Japan under Emperor Hirohito.

The Greater East Asian Co-prosperity Sphere was imperial propaganda used in occupied Asian nations early in the Showa [Hirohito] era by Japan's government and military. The Sphere covered NE / SE Asia and Oceania. It was stated in 1940 to be a bloc of Asia nations led by Japan that would be free of Western powers. A secret document in 1943 dealt with global policy with the Yamato race as nucleus - and described Japan's superior position in the Sphere. It stated Japanese superiority and that the Sphere would be hierarchical - ie that Japan would dominate. The scholar who first proposed the Sphere was opposed to militarism. An earlier version had encompassed NE Asia only. The original idea was to free Asia from colonial powers, but it soon was recognised as a way to access resources as raw materials for war. Many Japanese viewed the Sphere idealistically as a step towards peace. However the Sphere is remembered mainly as a front for Japanese aggression and for control of occupied territories by puppet governments. Japanese economic planners also envisaged a 'yen bloc' to break dependence on Stirling and $US zones. An attempt was made to develop a linked set of economic and political relationships in the areas Japan controlled. The concept of a unified Asia had first been proposed by a Japanese general in 1936. With the start of WWII Japan demanded that Western powers withdraw support from China under an 'Asia for the Asians' slogan - to which Western power did not respond. Many colonized nations in Asia initially responded favourably to Japan's efforts. Japan's failure to win the Second Sino-Japanese war (1937-1941) was blamed on Western support for China - though China received much more support from Russia. Initial favourable responses to Japan's occupation faded as the new Asian imperialists were seen to be worse that those from the West. China and other Asian nations were seen to be too weakened and lacking in unity to be equal partners with Japan. It was Japan's task to 'make men of them again' and liberate them from western oppressors. From Japan's viewpoint accessing China's markets was a key goal in initiating war with the allies. It was seen that the Sphere would be synonymous with Japan's empire. A Greater East Asia Conference was held (in English) in 1943 to illustrate Japan's commitment to pan-Asianism. The Sphere collapsed with Japan's surrender in 1945. Though Japan stimulated anti-westernism in parts of Asia, the role of Japan's militarists was damaging - because they saw everything from Japan's perspective. Everything had to be done the Japanese way. Quite different outcomes might have emerged if Japan had acted in accord with the rhetoric about the Sphere. Extensive propaganda efforts had been organized around the region. The land that Japan envisaged capturing extended well beyond Asia. Japan's WW2 goal was not to capture all this at once, but to lay the foundation for another war in 20 years. [1]

Japan’s post-WW2 economic and political regime was established as Allied Occupation Forces' control of Japan ended  (ie around 1952). The subsequently-long-governing party (the LDP) was formed by the amalgamation of earlier parties in 1955. What emerged nominally conformed with US expectations but in fact was anything but liberal and democratic – a fact that Occupation Forces did not seem to understand because of a lack of understanding of Japanese culture. That system:

• was apparently put into place by ultranationalist Yakuza factions that had Emperor Hirohito’s support; and
• involved a basis for economic ‘miracles’ through variations of traditional East Asian systems of bureaucratic Confucian administration that one Japan-watcher suggested were developed by the Japanese military in Manchuria in the 1930s.

This occurred despite the desire of US Occupation Forces to eliminate Japan’s imperial system because of its association with the ideological basis of Japan’s militarism in the 1930s and early 1940s.  

In the post-WWII era, Japan was governed by a (so called) Liberal Democratic Party. While this appealed to US sentiments, Japan’s government was neither liberal nor democratic (see above). Behind a democratic 'face' that allowed elected politicians many benefits, observers generally acknowledge that after WW11 Japan was governed in relation to financial and economic affairs by its bureaucracy. What they have not generally recognized was that (because Japanese people saw themselves as subordinates in an imperially-centred hierarchy) this would have required some sort of mandate from Emperor Hirohito and reproduced arrangements similar to the traditional process of government by elite bureaucrats on behalf of emperors by which East Asia had been ruled prior to Western expansion. The methods used by a modified Confucian bureaucracy would have been capable of achieving real-economy 'miracles' (by stimulating collaborative study of opportunities across whole industry clusters) - providing the bureaucracy could allow outcomes to be market-driven. This would not have been possible had the bureaucracy been democratically accountable (ie obliged to ensure that economic outcomes conformed to the wishes of influential interest groups).

How this arrangement seems to have been put in place is outlined (based on expert observers' accounts of what happened) in Establishing Japan's Post-WWII Political and Economic Systems. The latter indicates that US occupation forces were oblivious to the fact that Japan's post WWII bureaucratic, political, economic and financial system were probably orchaestrated on behalf of Emperor Hirohito by Yakuza gangs whose ultranationalist ideologies were the same as those that had been the basis for Japan's militaristic expansion prior two and during WWII.

This was likely to have created a real government (behind the nominal LDP government) that was dominated by many of the same bureaucrats who had stimulated Japan’s militaristic expansion in the 1930s (see why this was likely). Occupation forces eliminated Japan's more obvious militarists - without apparently considering that they might be the product, rather than the source, of influences that were centred elsewhere (eg in the 'belly' of Japan whose consensual conclusions traditionally give direction to bureaucratic elites and were influenced by the ultranationalist Yakuza - who (as the accepted enforcers of social discipline on behalf of the imperial system that had been restored at the time of the Meiji restoration) had a great deal of influence on, and were allowed to 'speak for', the grass-roots of Japanese society). Japan's post-WWII arrangements can best be explained by assuming that ultranationalist / Yakuza influences orchestrated a 'new' Meiji-like (but behind-the-scenes) restoration of imperial authority. They would have seen Japan's defeat in WWII as like the situation Japan faced after the Shoguns had proven unable to resist Western influence.

Japan, and other countries in East Asia, could not have achieved economic 'miracles' through the use of liberal Western-style economic and political institutions - because they lacked the required cultural preconditions as suggested in Understanding the Cultural Revolution Needed to Adapt to Western Financial Systems (1998).

In the post WW2 era, Japan adopted methods for promoting industrial development and international trade that involved a variation of the Confucian methods of bureaucratic governance on behalf of emperors by which much of Asia had been governed prior to Western expansion (see Understanding East Asia's Neo-Confucian Systems of Socio-political-economy). This included:

• bureaucratic guidance by Japan's Ministry of International Trade and Industry (MITI) in accelerating market-oriented economy-wide learning by study of Western practices. This process would not work in a truly democratic environment as outcomes would tend to be driven by interest group pressure rather than market demand - see Economic Solutions are Beyond Politics, 1996). Success also depended on the fact that traditional East Asian societies were virtual whole-of-society bureaucracies and thus amenable to the collaboration and consensus building that is the way complex problems are resolved by bureaucracies world-wide;
• a bureaucratically controlled banking system which provided funding to increase national economic strength but paid little regard to profitability. This had parallels with the way in which governments finance wars by selling war bonds. It also led to / required the favourable international financial imbalances and thus the ultra-loose monetary policies that contributed to the GFC (see Impacting the Global Economy);
• suppression of domestic demand (which generated demand deficits and savings gluts) so that there was no need for state-linked-banks with bad balance sheets to borrow in international financial markets.  

For decades before China had any significant economic role, Japan's economy had  involved mercantilist distortion of its financial system like that that emerged later in China as the basis for friction with US related to trade and financial imbalances (eg see Mikuni's Why Japan can't deregulate its financial system,, 2000). And, as seems normal in East Asia, there was no such thing as a market that was free of nationalistic political agendas (see In East Asia Deals Always Involve Politics/).

There are hints that the system of socio-political-economy that allowed Japan's economic miracle was orchestrated behind the scenes by Japan's ultranationalist factions. For example:

• Eammon Fingleton suggested (on what evidentiary basis is unknown) that Japan's post-war economic methods had been developed by Japan's military in Manchuria in the 1930s. He also suggested that Japan encouraged the use of those methods by various societies in East Asia with compatible cultures - ultimately including China in the late 1970s; and
• funding for special projects by Japan's Ministry of International Trade and Industry (which took the lead in stimulating accelerated economic development) was apparently provided by Ryochi Sasakawa - reportedly a notorious: ultranationalist / Yakuza boss; suspected war criminal who had worked with Yakuza organizations building infrastructure in Manchuria in the 1930s to facilitate Japan's invasion; outspoken admirer of Admiral Yamamoto (who had led Japan's attack on Pearl Harbour and military expansion into Asia); and top-level post-WWII 'kuromaku' (ie facilitator of relationships amongst Japan's government, business and ultranationalist faction) - a top-level fixer role which presumably implied that he had a mandate from Emperor Hirohito (see The Dark Side of Japan in Australia? below).

It can be noted also that:

• when originally proposed the idea of a Greater East Asian Co-prosperity Sphere had not involved any military component (see above); and
• Admiral Yamamoto (who commanded Japan's attack on Pearl Harbour and planned an invasion of Australia) reportedly believed that Japan could not win a war against the West (in relation to which observations about the limitations that wide consultation imposes on field initiative may be noted).

Japan encouraged the adoption of the methods it had used to achieve economic 'miracles' by other states in south and east Asia that had a Confucian cultural heritage. The Japan-watcher mentioned above has argued that Japan transmitted those methods to China in the late 1970s. In China those methods seemed subsequently to be implemented through the so-called ‘Communist Party’, rather than through an imperially-mandated bureaucracy as they had been in Japan. 

China's neo-Confucian (formerly Communist) regime could not disclose what happened because Mao's then-recent cultural revolution had sought to purge Confucian influences from China because they had oppressed the people (see Communism versus Confucianism: The Continuing Contest in China, 2011). As a result there was then, and remains now, strong grass-roots Chinese opposition to of the social hierarchy that is foundational to  in the current government in China.

The methods for resource allocation associated with Japan's economic 'miracles' were incompatible with Western profitability-focused financial systems. This:

•  led to a constant, but generally unrecognised, Japan-led effort to gain control of the international financial system; and
•  created a serious obstacle to sustainable global economic growth.

The incompatibility between the Western-style international financial systems and the non-capitalistic financial system that had been a component of Japan's economic 'miracle' in the decades after WWII led to increasing tensions and problems in the global financial system from the 1970s (see A Generally Unrecognised Financial War?) - though the significance of these was not understood because the neo-Confucian foundations of Japan's system of socio-political-economy were kept hidden.

Moreover those incompatibilities became a serious obstacle to global economic growth - because the financial repression that was needed to protect the suspect balance sheets of financial institutions under neo-Confucian systems meant that global growth could only be sustained if their trading partners were willing and able to tolerate large current account deficits and rapidly rising public and private debts (see Structural Incompatibility Puts Global Growth at Risk, 2003+).

At least until the 1980s, there was:

• a strong ultranationalist influence in Japan (eg Japan’s cultural superiority was reportedly emphasized in Japanese universities – though never presented in English);
• a  desire to become economically No 1 on the basis of that presumed cultural superiority; and
• extensive Western media commentary (that was similar to commentary more recently associated with China) on ultra nationalism and its contribution to the tensions between Japan and Western societies.

Ultranationalist factions (with strong Yakuza links) who pursue themes of racial / cultural superiority continued to play, an influential role in Japan while hidden in the shadows (see The Dark Side of Japan). The latter referred to: 

• reports of ongoing insistence on Japan's uniqueness and superiority in Japanese universities in the 1980s;
• the 'Tale of the 47 Ronin' being Japan's most popular folk tale - which concerns masterless samurai who pretend dissolute living for decades to gain an opportunity to kill their dead master's enemy;
• the lack of any sense of universal ethics - obligations exist only to those to whom one has a relationship;/li>
• traditional East Asian Art of War strategies (eg their emphasis on deception; getting close to enemies (which discourages them from looking at what is going on behind the scenes); holding up a 'mirror' so that when others look they see a reflection of themselves);
• Japan's post-WWII mercantilist economy strategy (ie one concerned with building national economic power, rather than creating opportunities for citizens as as investors / consumers) - and the apparent involvement of ultranationalist / Yakuza factions (presumably empowered by an Imperial mandate) in funding special economic development projects for the Ministry of International Trade and Industry and in coordinating government / business relationships;
• the expression of support for Japan's 1930's militarism and ultranationalist agenda's at the top levels of Japanese government that has continued to the present - combined with an executive reinterpretation in 2014 of Japan's war-renouncing constitution to reverse its intent;

An aside: if one goes to the Peace Memorial in Hiroshima and looks at the translation of the reasons that it is believed that the US chose to bomb Hiroshima, the preferred reason is that this was an opportunity to experiment with the effect of nuclear weapons on a previously undamaged city (ie the fact that Hiroshima was the HQ of the Japanese 5^th Army which had rampaged across Asia was apparently considered to be of secondary importance). The memorial in Hiroshima may not be to Peace.

And there were also indications (though no certainty) in the 1980s that Japan's ultranationalists might not have abandoned their military ambitions. Several elements of infrastructure in Australia that would probably have facilitated Japan's 1940's invasion plan were encouraged by a faction with both a very dubious reputation and high-level Japanese Government linkages (see The Dark Side of Japan in Australia).

The vigorous (virulent?) economic competition between the US and Japan (who was clearly seeking to become No1 economically in the 1970s and 1980s, ended in the late 1980s when Japan's distorted financial system collapsed under the strain of trying to win economically.

The question is: 'What has happened since"?

A 'New' Japan?

After Japan's continuance of ultra-nationalistic agendas into the 1980s and its financial crisis in about 1990, Japan changed to become the West’s 'best friend' in Asia. However it is unclear how deep those changes went.

A case was made in 2014 that Japan had fundamentally altered and embraced a truly liberal democratic system of political economy. 

The standing ovation that Japan’s Prime Minister, Shinzo Abe, gained from Australia’s parliament in 2014 will generate some resentment in China. China overtook Japan as Australia’s largest trading partner in 2007 – but Australia’s prime minister sees Japan and Australia’s ‘best friend in Asia’. Japan will be Asia’s most advanced / capable economy for decades – and is more important than China is in supplying capital and exporting innovations. It has a larger middle class and domestic consumption level. And Japan’s armed forces are still more than a match for China’s. As China’s power grows, its regional impact will depend on how it is governed. Japan’s political evolution and successful rise since WWII will provide an example of why liberal democracy remains the best option in Asia. Some see liberal democracy as a Western construction unsuitable in Confucian societies. But robust democracies in Taiwan, South Korea and Japan disprove this – in addition to democratic yearnings in Singapore and Hong Kong. Neither Confucian values nor ‘Chinese-ness’ are incompatible with liberal-democratic political reform. On the contrary Confucian societies – with their emphasis on social order, filial loyalty, learning and hard work – that pursued democratic reforms are the richest in Asia. In Japan a well-functioning multi-party system took time to take hold. However Japanese government put liberal institutions in place that have worked well. After WWII election laws were relaxed to allow universal suffrage. Freedom of association and unions were permitted. Peasants were given genuine land ownership. The dominance and power of the pre-war Zaibatsus (industrial and financial conglomerates linked with the imperial government – were wound back. A private sector was allowed to thrive and drive economic activity and innovation. Powerful economic classes independent of the government for opportunities and successes emerged. These conditions allow liberal democracy to thrive – a lesson for the Chinese Communist Party. In China the state has increased while the private sector retreated from the mid 1990s. Prior to that private initiative had driven economic growth in China. Sine mid-1990s SOE have driven economic activity – which prevented the emergence of a powerful economic / entrepreneurial class independent of government. SOE’s role in China now exceeds that in Japan at any time. China’s problem is that (except for oil-rich Middle Eastern states) the 30 countries that went from middle-income to high income status have adopted the same liberal economic and democratic political institutions. But China’s political class knows that this would undermine authoritarian politics. This affects future order in Asia – because the liberal order that underpins Australia’s past, current and future prosperity demands that private commercial and economic interest be separated from political, strategic or regime interest. Great powers must forfeit their capacity to engineer economic outcomes – and instead facilitate legitimate competition. Submission to the rule of law is not natural for any government – but is practised and entrenched in free markets overseen by liberal democracies, accountable to the law and people – but much less so in state-led economic and authoritarian systems. China argues that every country should determine its own pace of economic and political reform. However China is the authoritarian extreme in a region where every other major country has become a liberal democracy. Australia’s decision to move closer to Japan mirrors that in every maritime country in Asia. Australia is moving with, rather than against the crowd. It is to be hoped that Japan inspires the future blueprint for China.  (Lee J. ‘Abbott right to push for closer ties with Tokyo’, The Australian, 9/7/14)

The emergence of a truly 'new' Japan would be a very welcome development. However some reasons for caution are outlined below. These suggest the need to look behind the increasingly liberal 'face' that Japan has presented to the world to determine whether it reflects what is really happening. Some suggestions about how to determine whether Japan's new 'face' reflects the underlying reality are outlined below.

Caution is appropriate in assuming that the world is really dealing with a 'new Japan' because, for example: 

• Western observers face significant difficulties in 'understanding' what is happening in East Asia if their attempts to do so are based on Western institutions and ways of thinking.

For example there is no traditional emphasis in East Asia on 'understanding' as a basis for rational independent decision making and information is not traditionally provided to enable others to 'understand but rather to influence them to do things that are believed likely advantage the provider's ethnic community (see Why Understanding is Difficult).

Moreover traditional Art of War tactics emphasize deception and (for example) 'holding up a mirror' so that when others look at you they see a reflection of themselves.  

There are limits to what can be learned from public opinion or what is said by ordinary Japanese. ‘Public opinion’ polls tell something useful about Western societies – because ‘public opinion’ influences politics and thus government. This is not reliable in Japan. Japanese people are subordinates in a social hierarchy who conform to the prevailing consensus within that hierarchy – not independent individuals who make up their own minds. ‘Public opinion’ in Japan will tend conform to whatever the ‘system’ that runs Japan believes is most likely to be beneficial. Individual differences are encouraged - but not in relation to whatever come down through the social hiearchy.  In the 1980s the most popular folk tale in Japan was the ‘Tale of the 47 Ronin’ – which concerned master-less samurai who pretended dissolute living for decades in order to get a chance to avenge their dead master.  And this was probably a fair picture of Japanese ‘public opinion’ in that era. 

• there has never been any transparency about the likely deception involved in Japan's post-WWII pretense of a liberal democratic system of government (see above).

Japan's bureaucracy orchestrated market-oriented economic 'miracles' using a variation of traditional Confucian methods of government by bureaucratic elites on behalf of emperors. This could not have been achieved if post-WWII Japan had had a genuinely liberal democratic system of political economy. Economic 'miracles' can be achieved by what might be called 'strategic market management' which involve stimulating market-oriented learning by whole economic systems (eg by methods like those  suggested in Developing a Regional Industry Cluster that the present writer's experiments in the 1980s showed to be reasonably effective in stimulating market-oriented economic changes providing the process was not subject to democratic (ie interest group sensitive) oversight. Accelerating market-oriented economic change would be impossible if a bureaucracy were actually accountable to a democratic (and thus interest-group-focused) government (see Economic Solutions Appear to be Beyond Politics) .

And as noted above, Japan's post-WWII financial, economic and political institutions seemed to be put in place by ultranationalist yakuza gangs  presumably operating under a mandate from Emperor Hirohito. Those groups represented the ultranationalist ideology about Japan's racial superiority that had driven Japan's war of aggression in Asia in the 1930's and 1940s. Also in the 1980s a notorious ultranationalist / Yakuza boss / war criminal (Ryochi Sasakawa - who had been one of the three behind-the-scenes fixers who had facilitated the development of Japan's post-WWII political and economic institutions) allegedly still facilitated behind-the-scenes relationships between Japan's government, business, yakuza gangs and ultranationalists - while controlling a huge slush fund from gambling on speed-boat racing for use on MITI's special economic projects.

Such arrangements could only have been possible under a mandate from Emperor Hirohito. There has been no transparency from Japan about such likely deceptions.

It has been argued that the near-total control of Japan's government that the bureaucracy had in the post-WWII era was reduced as 'political' groups became more competent. However:

• it was also argued that the reforms that were undertaken in the 1990s reinforced the bureaucracies' dominance (especially in relation to the role of the Ministry of Finance as a virtual political institution in its own right) - op cit;
• the increased competence of 'political' groups might alternatively imply that some 'politicians' have to some extent taken the role that elite / quasi-aristocratic bureaucrats had played in orchestrating consensus-forming and action by hierarchical social networks that they head. On the other hand the fact that the LDP lost political power in the early 1990s would make this less likely.

• while it is possible to identify advantages for Japan in genuinely shifting towards a Westernised political and economic system, if Japan was not genuine there would also have been advantages in pretending to do so and becoming the Asian country that was most cooperative with the US.

Japan's post 1980s' shift in its relations with the US arguably needs to be considered not only in terms of its immediate benefits but also in a longer term / bigger picture context (and in terms of traditional East Asian ‘Art of War’ strategies).

In the 1990s, following its financial crisis in the late 1980s, Japan could no longer continue its trade-driven approach to becoming economically no 1. However geo-political / trade collaboration (eg with US) did not stop Japan continuing its financial / mercantilist assault on the US (ie its response to its economic problem was ultra-easy money policy which generated a yen-carry trade that continued the US’s role as the world’s ‘consumer of last resort’ and the accumulator of large public and private debts – which made a lot of sense from a mercantilist viewpoint). And the mercantilist assault on the US was by then being taken up by China – using a variation of the methods Japan had used.

Cooperating with the US in geo-political / trade issues provided access to information and insider influence – while encouraging the US to trust Japan (as no one in Asia traditionally does). The close / intensive media focus on the dark side of Japan, which had escalated in the 1980s, ceased. The US military also became dependent on Japanese components / technologies, while Japan gained access to US military technologies.

Also it needs to be noted that Islamists share some objectives with Japan’s ultranationalists (which Japan’s prime minister either is, or is pretending to be) – see Islamist Extremists are not Alone in Favouring Pre-modern Social Systems). And in relation to this:

• There are some indications that Japan’s ultranationalists might have played a role in encouraging attacks against the US by Islamist extremists (eg Osama bin Laden’s reference to a key agenda of Japan’s ultranationalists (ie the nuclear attacks that ended WWII) as one justification for the 911 attacks – when all other such ‘justifications’ reflected the agendas of groups with which al Qa’ida had almost certainly been negotiating);
• A role as trusted insiders in encouraging the US’s invasion-of-Iraq response to those attacks is also possible (and traceable to specific individuals) which: (a) diverted attention from the mercantilist challenge the US faced from East Asia; and (b) created a lot of problems in Iraq (problems that would have been obvious to Japan because it had spent 150 years confronting the fact that the liberal Western-style institutions that the US sought to introduce in the Middle East would only work in a supportive liberal social context which did not exist in the Muslim world any more than it did in East Asia).

• there were massive cultural obstacles to the genuine adoption of the sort of liberal democratic arrangements that the above article suggests have been put in place since 1990.

Those obstacles were indicated in Understanding the Cultural revolution Needed in East Asia to Adapt to Western Financial Systems, 1998 and Competing Civilizations, 2001.

The cultural changes needed to operate in anything but traditional ways do not seem to have been made. 

For example external observers usually believe that conformity (rather than individual freedom) remains Japan's dominant social characteristic. However the view that Japan was unusually conformist was disputed because, so long as others do not disapprove, difference is acceptable - and a similar limitation applies in Western societies in terms of compliance with social mores [1]. 

CPDS Comment: The key difference is that traditional Western constraints are based on universal values, whereas in Japan constraints are particularistic - ie depend on a local social situation. Thus:

•  'universals' such a rule of law and economic action that is based on notions such as the 'profitability' of independent enterprises do not fit within the framework of Japan's traditional culture;
• the willingness of Western individuals to do things that are incompatible with community expectations because they believe that they are 'right' does not exist in Japan.

Where community expectations are determined through an ethnic social hierarchy (that in post-WW11Japan seems to be headed by imperially mandated bureaucratic elite like that by which East Asia was ruled in the centuries prior to Western expansion) then individuals will 'conform' with that elites' requirements (eg being exceptionally friendly towards visitors to Japan especially since 1990). 

That unquestioning compliance with elite expectations is similar to (though different in relation to the nature of) the expectations about individual conformity that is the aspiration of Islamist extremists (see Islamist Extremists are not Alone in Favouring Pre-modern Social Systems). This might (or might not) be significant for reasons suggested below.

• Japan’s response in the 1990s to the financial crisis that emerged in about 1989 did not indicate that the fundamental changes needed to create a true liberal democratic system were being made.

In response to its financial crisis Japan did not significantly change. Doing so would have caused its (presumably imperially-mandated?) bureaucratic elites to lose their power to allocate national savings in what their major-business subordinates perceived by consensus to be the national interest - and also perhaps caused Japan's economy to collapse altogether because it was critically dependent on the bureaucracy's facilitator role. Rather Japan:

• continued, until very recently, with financial practices that seem to have corresponded to those associated with a non-capitalist corporate state (ee Mikuni's 2000 account of Why Japan Can't Deregulate its Financial System and more recent indicators);
• indicated an intent to 'internationalize' - which could imply either: (a) changing Japan domestically to conform with dominant international practices; or (b) seeking to create a world more compatible with Japan's domestic practices - which was the goal of Japan Greater East Asian Co-prosperity Sphere in the 1930s and 1940s; or (c) a bit of both;
• spent heavily on infrastructure (including 'bridges to nowhere') and created massive amounts of credit at near zero interest and and exported credit to the world through carry trades (because Japan's distorted financial system directed credit only to production and not to consumption - thereby preventing the availability of cheap credit from increasing domestic demand). The carry trades had the effect of  enabling Japan's export-led growth to continue to some extent by stimulating asset bubbles and excess demand elsewhere - particularly in the US. This process and the adoption across Asia of variations of the methods Japan had used to achieve 'economic miracles' contributed (presumably inadvertently) to the Asian financial crisis of 1997 and ultimately to the global financial crisis of 2008;
• became the US’s 'new best friend' in Asia. ‘Getting close to ones enemies’ (which discourages them from looking closely at what is happening behind the scenes) is a classic Art of War strategy. In the 1980s analyses of the 'dark side' of Japan were frequently published - but this virtually ceased in the 1990s; and
• encouraged the US Federal Reserve to adopt easy money policies. US Fed chairman, Alan Greenspan, often argued that easy money policies were needed to overcome the 'risk of deflation' - which was a risk that Japan faced, but that the US did not. The consequence for the US of adopting the role of 'consumer of last resort' when trading partners adopted repressive financial systems (ie directed credit into production but not into consumption so as to current account surpluses) was that the US built up large debts and eventually created the asset bubbles that triggered the global financial crisis (see Impacting the Global Economy). The US Federal Reserve eventually started copying the process of creating huge quantities of credit and exporting it to the world (perhaps 'to do unto others as others had been doing to the US'??) and this further increased global reliance on demand stimulated by asset bubbles (see Currency War).

Moreover when the Democratic Party of Japan displaced the LDP (from 2009-2012), it reportedly found government difficult because of behind-the-scenes activities that it was unable to influence politically.

Under the subsequent LDP administration, proposals for reform did emerge through Shinzo Abe's 'three arrows' agenda (Abenomics) . The first two involved fiscal and monetary stimulus measures while the third involved structural reform to encourage private investment. Very little seemed to be achieved under the latter heading [1, 2] though there was a report in 2015 concerning a requirement for companies to pay more attention to profitability. The latter would be significant by reducing: (a) the need for: financial repression (to suppress domestic demand); savings gluts; international financial imbalances; and dangerously easy monetary policies to sustain growth; (b) the risk of domestic and international financial crises; and (c) problems associated with rising social inequality.

• there is uncertainty about the role of ultranationalism in Japan and especially about the position of Japan's prime minister (Shinzo Abe).

There has been no obvious end to the significant behind-the-scenes influence that Japan's ultranationalists played in the post-WWII era (see The Dark Side of Japan) an). On the contrary there are indications that such factions may be increasingly powerful (see Reverting to the Soul of a Samurai? and Views of the Role and Power of Japan's Yakuza). <).

Moreover Japan's Prime Minister (Shinzo Abe) is often seen to have militaristic and ultranationalist leanings and has been described as the most dangerous man in Asia because of his ultranationalism. For example, Abe:

• presented Japan's WWII actions in Asia as part of a 'great cause' (ie to liberate Asia from Western colonisation and imperialism - and from Western liberalism);
• encouraged the production of text books to present that view to Japanese youth;
• shouted 'banzai' ('Long live the Emperor') at a ceremony to mark the end of US occupation of Japan;
• upset neighbouring states by visiting the Yasukuni Shrine which is seen as an ultra nationalistic theme park; and
• praised Japan's WWII war criminals for sacrificing their souls to create the foundations of Japan. 

In that political context Abe has also strongly pushed for an increase in Japan's military capabilities - eg in August 2016 he described frictions with China and Korea's nuclear / missile development as requiring a military build up by Japan [1]

Observers have different opinions (both of which are possible) about whether Abe's actions are mainly to gain the support of nationalists in Japan or to lead Japan again down the path of militarism and ultranationalism.

• despite the friction that had been seen to have existed between Japan and China, Japan indicated an intention in early 2016 to collaborate economically with China (eg in defending the yuan) at a time when China seemed to responding to its economic and political difficulties in ways that seemed incompatible with the liberal Western-style international order that had prevailed since WW2;
• several actions that would potentially be contrary to Australia's national interest were taken by an Australian Prime Minister (Tony Abbott) who had been seen to to have a close association with Japan's Prime Minister (Shinzo Abe).

Potentially unsafe actions by the Abbott Government included:

• an apparently-uncritical assertion that Japan was 'Australia's best friend in Asia';
• a proposal to source Australia's submarine fleet from Japan. Reasons to question the wisdom of such an arrangement were outlined in Would Buying Japanese Submarines be Clever?;
• a proposal to support Australia's participation in a China-led Asian Infrastructure Investment Bank. The AIIB needs to be recognized as part of a China-led process to create a new international order that would: (a) virtually amount the the establishment through political and economic tactics of the 'Greater East Asian Co-Prosperity Sphere' that was Japan's goal through military tactics in WWII; and (b) allow China's authoritarian ('bureaucratic non-capitalist') government to intervene directly in major economic activities in other countries (see Looking at the AIIB in Context).

However there was nothing unique about the Abbott Government in that respect. Because of the lack of serious consideration by the humanities and social science faculties of Western universities of the practical consequences of non-Western cultural traditions, naivety about East Asia has been widespread in Australia and elsewhere (eg see Babes in the Asian Woods and The Limit of Mr Turnbull's History Lessons).

• there have been developments that might have national security implications for Australia - including arrangements made in the 1980s by ultranationalist Japanese factions (see below) and recent developments related to both China and Japan that could all be interpreted by a sceptical observer as intended to facilitate a future invasion.

Possible National Security Issues

The risk of possible preparations for a future invasion needs to be considered in the context of:

• Japan's economic and military build up from the time of the Meiji restoration to resist Western influences and its ultranationalists' goal in the 1930s and 1940s in attempting militarily to create a Greater East Asian Co-prosperity Sphere. This reportedly involved gaining control of Asia so as to strengthen other East Asian societies (especially China) as the basis for a future broader war against Western influences. The latter were resisted because they: (a) exerted some degree of external control; and (b) favoured liberal social, economic and political institutions that were incompatible with East Asia's hierarchical / authoritarian social and political traditions;
• the uncertainties indicated here about the post-WWII emergence of a truly  'New' Japan;
• the activities in Australia in the 1980s of a notorious Japanese ultranationalist (Ryochi Sasakawa)  in stimulating development of infrastructure (including airports at resorts down the Queensland coast and the Darwin to Alice Springs Railway Line) that would have facilitated the plan for invasion of Australia that Admiral Yamamoto had formulated in the 1940s. The latter involved an overland thrust south from Darwin and a series of hops down the east coast. Sasakawa, who in the 1980s had top-level Japanese government connections, was: an alleged war criminal; apparently involved in developing infrastructure to facilitate Japan's invasion of Manchuria; a vocal admirer of Admiral Yamamoto; and one of the three main 'fixers' who facilitated the development of Japan's post-WWII political, bureaucratic and economic systems;
• The unpublicized adoption of a neo-Confucian style of socio-political-economy by both Japan after WWII (within a supposedly 'liberal democratic' framework) and China in the late 1970s (within a supposedly 'Communist' framework). These are variations on the Confucian methods of imperially-mandated 'bureaucratic' government that were widely used in East Asia prior to Western expansion, and were allegedly developed as a basis for economic management (and real-economy 'miracles') by Japan's military in Manchuria in the 1930s;
• the many indications of future security risks that Australia faces from East Asia - mainly, but not only, associated with China.  Australia's Increasingly Dangerous Environment speculates about the issues involved;
• The loud disputes by Japan and China over the ownership of various deserted islands - which justify both countries escalating development of their military capacity;
• Behind the scenes consultations by Japan and China (despite those frictions) about how China might avoid a financial crisis like that in the late 1980s which disrupted Japan’s economic ‘miracle’;  
• perceptions that China’s current military strategy is like Japan's in WW2;
• China's expansion of its territorial claims by the establishment of military bases in the South China Sea - which, when fully established, would facilitate southward military thrusts and be complemented by transport infrastructure established under international (for example) 'New Silk Road' and 'One belt, One Road' programs;
• recent understanding of China's so-called 'hundred year marathon' to dominate over Western influences (The US's Most Significant Intelligence Failure?) - which parallels Japan's economic / military efforts before WW2 and its economic efforts for decades after WW2;
• the ‘slicing the onion’ tactics that are reportedly being used by both China and the US to achieve (in incremental stages) strategic goals that would be rejected if presented as a whole;
• China’s apparent attempt to create an authoritarian international order which would have similar effects to the originally non-militaristic style of Japan’s 'Greater East Asian Co-prosperity Sphere' – and parallel domestic attempts to purge China of Western cultural influences. It can also be noted that a key feature of China's attempt to create an international China-centered political and economic system involves investment in transport networks (eg the so called New Silk Road and Maritime Silk Road) which could have military as well as economic implications (see Developing the Infrastructure for a New Chinese Empire?);
•  the lease of the Port of Darwin to a Chinese company with state / PLA links – which would facilitate the development of other Darwin-linked transport facilities;
• proposals for presenting outback Australian road signs in Chinese;
• the positioning in late 2015 of a very high resolution (Himawari-8) geo-stationary satellite over Australia by the Japanese Space Agency. The images it produced were made available to the Australian Bureau of Meteorology, and thus improved the quality of weather forecasting [1]. However it needs also to be recognized that, if the high resolution images from that geo-stationary satellite were made available to a potential future invading force, it would make a dramatic difference to their awareness of defense arrangements in Australia;
• China’s severe risk of a financial crisis (and serious ongoing financial problems in Japan's system itself) that would generate domestic political instability – and perhaps might (especially in China) be seen to require external conflicts to promote national unity.

It can also be noted that Osama bin Laden reportedly mentioned the US nuclear attacks on Japan that ended WW2 as one of the justifications for the 911 attacks in America. This is an agenda of Japan’s ultranationalists. All of the other justifications that bin Laden referred to involved issues of concern to groups with whom Al Qaida would have been expected to be negotiating. There are parallels between the ideology of Islamist extremists and East Asia’s ultranationalists (eg both object to the freedom from family / community / state supervision that individuals have as a consequence of the West’s Christian heritage – and to the associated liberal political and economic institutions). There are also significant differences (see Islamist Extremists are not Alone in Favouring Pre-modern Social Systems). The views on the possibility of such cooperation by Samuel Huntington (author of the Clash of Civilizations and the Remaking of the World Order, 1996) can also be noted.

• Japan faces renewed risk of a financial crisis (similar to that which China faces) because of the concealed bad-debts of its non-capitalistic financial system and the heavy government debts that have been needed to sustain growth over the past 2 decades (see Japan's Predicament). This could potentially create social and political instability like that that resulted from the Great Depression, and motivated / permitted Japan's militarists to seize power in the 1930s;

Telling the Difference

In order to determine whether Japan's 'new' face reflects the underlying reality it would be desirable to (say):

• consider what is known of the behind-the-scenes thinking of Japan's emperor - as this, under Japan's imperial traditional, will determine whose advice he will tend to listen to and whose activities he will tend to 'smile upon' - and thus what ultranationalists who subscribe to Japan's imperial traditions will tend to act upon;
• who are the current 'kuromaku' (ie the behind the scenes fixers who exert influence on Japan's system) on behalf of the Emperor, and what are their agendas? Presumably such roles were refilled when the post war 'kuromaku' died;
• identify the attitude of Japan's ultranationalists to the divinity of their emperor. This had been the foundation of the ideology of Fascist Japan in the 1930s and 1940s. And the unifying authority of Japan's emperor had been the basis of creating Japan's post-WW11 'liberal democratic' political and economic institutions - that were dominated by an imperially-mandated bureaucracy;
• determine the extent to which major Japanese companies are independent of Japan's bureaucracy. In Japan's pre-1990 'miracle economy' companies were dominated by former senior bureaucrats who 'descended from heaven';
• examine the role of Japan's bureaucracies. To what extent are they now genuinely responsive to the people's elected representative? Or do they continue to govern Japan in collaboration with ultranationalist factions operating under Imperial mandate as appears to have been the case prior to the 1990s. Observers have suggested that the LDP now seems increasingly dominated by former senior bureaucrats;
• consider the content of material in Japan's universities by translating text books - noting the reported emphasis on racial and cultural uniqueness and superiority in the 1980s.  The reported support by Japan's prime minister (Shinzo Abe) for a new school text book which puts a 'noble cause' interpretation on Japan's militarism in the 1930s and 1940s needs consideration in that context;
• investigate whether undisclosed activities by such groups to achieve ultra nationalistic aspirations (such as those speculated below in Other Possibilities)  might still be affecting international affairs - for reasons suggested in Look at the Forest Not at the Trees. Analyses of the 'dark side' of Japan were frequently published in the 1980s - but this ceased in the 1990s either because the 'dark side' had been suppressed domestically in Japan or because no one thought it still needed to be investigated;
• seek feedback about the reality of a 'new' Japan from within East Asia - while making allowance for the region's chronic distrust of Japan as a bye-product of its history.

The basic point is that it should not be assumed that what seems to Western observers be happening in East Asia is not necessarily what is actually happening. The region does not traditionally work in a straight forward way. It is understood that in Asia it is normal to assume that when things go wrong, that one's enemy is likely to be responsible. It would not be expected that it would usually possible to trace how whatever went wrong was made to happen.

Efforts to look behind the scenes (based on attempts to understand the region in its own terms and the use of methods such as those suggested above) are needed.

In 2030 timeframe ADO will need to deal with: help in civil disasters and in resuscitation fragile countries / regions; help in border security; counter-insurgency campaigns in distant theatres; launching counter terrorist operations; and direct defence of Australia. Security environment will be different due rise in China’s People’s Liberation Army (PLA) and China’s more assertive behaviour – and this requires refocusing Australia’s defence capabilities despite the many opportunities to work cooperatively with China. The PLA’s rise is associated with: sophisticated surveillance and targeting systems; missile systems; submarines; surface vessels with cruise missiles; better aircraft; missile defences; space warfare capacity; cyber capabilities; a sophisticated command and control network; and nuclear weapons. This challenges assumptions that are the basis of Australia’s and allies’ security planning – related to security of the US and its allies in space and Western Pacific. Planning needs to start now for capabilities needed in 2030. US capabilities are constrained by GFC. US Department of Defence is however working to counter the anti-access area-denial capacity of China and Iran. Australia can’t ignore this. By 2030 PLA will pose direct threat to Australian sovereignty – and many of PLA’s capabilities are being spread throughout South and SE Asia – thus changing the environment for future military operations. Thus ADF won’t have numerical superiority, and will have lost technological edge. Australia’s national security community will need to be different – focused on applying asymmetric leverage – either in collaboration with US or independently (eg because US might be distracted elsewhere). Four options are available (a) modernised general purpose force (as in 2008 National Security Statement and 2009 Defence White Paper) – which would offer only limited leverage against great powers; (b) build stronger regional alliances – which assumes that they share Australia’s concerns about the PLA; (c) reduced dependence on US combined with heavier investment in asymmetric military capabilities – an option that would be effective but relatively expensive; and (d) developing capacity for asymmetric leverage in close collaboration with the US. The latter would involve heavy investment in: regional engagement; cyber capabilities; underwater systems; advanced air combat; and next generation special forces. Key effect of PLA’s expansion is to make US operations in Western Pacific more risky – and Option 4 would allow Australia to offset this. This option would also be costly. Option 4 is favoured, though a lot more work is needed on it (and plans could usefully be reviewed every 3-5 years). There is also a need for: mastery of strategy at highest strategic level, as well as at campaign level; general acceptance of asymmetric thinking; evaluating total force capacity, rather than individual elements; fostering innovation; seeking efficiency / effectiveness in overhead functions; resilience; building a culture of whole-of-nation national security planning; and fostering exceptional military / civilian leadership.

Other Key Points in Australia’s Strategic Edge in 2030

China’s surging influence has been based on its economic success, and this has gained more attention than its military development (p1). Various different responses to China’s development seem to be envisaged by others – and this paper proposes both economic cooperation and a broader security approach towards China (p2). This implies the need for a more sophisticated approach – and to be able to do more than one thing at a time, as doing only one of these could be risky (p3). This paper focuses only on China’s military challenge, as many others have written about economic / political relationships (p3-4). China is close to being able to deny US and allied forces access to Western Pacific – thus eliminating a fundamental assumption in Australia’s security planning. US Defence Planners are developing counter-strategies (p4). Australia faces key questions about China’s 2030 capabilities; how US and other allies will respond; options for a ‘strategic edge’; and whether modernisation of Australia’s defence forces would be enough (p7). National security planning requires looking many years ahead – and this is not easy (p8) During that time scale, continued stresses in the Middle East and Africa can be expected – while China will be most powerful state in Western Pacific and the main strategic rival to US (p9). Strategic thinkers see four scenarios for PRC in 2030-2040 period: (a) continued rapid economic and military growth – 20% (p9); (b) slower and broader growth – 60%; (c) much reduced growth and military modernisation with serious internal problems – 15%; and (d) serious internal disturbances which result in attempts by government to build nationalist sentiment by focus on external challenge (p10). In defence planning it is not only necessary to consider the probability of outcomes, but the severity of consequences. Thus the prospect of a much stronger PLA potentially impacting on Australia needs to be considered (p11). China’s rising power has been driven by rapid economic growth – with high levels of economic integration with Western Pacific neighbours (eg 30% of Japanese companies manufacturing output comes from China). China’s defence spending has grown faster than economy – and is now 10 times that in 1989 (p12) and likely to continue growing at 12% pa for 20 years. US concerns are with character of China’s defence spending as well as with its size (p13), in terms of (a) strategic nuclear forces (p14); (b) wide-area surveillance and targeting (p15-17); (c) new missiles (p17-20); (d) larger modern submarine force (p20-21); (e) stronger surface forces (p21-22); (f) new advanced fighter bombers (p22-23); (g) modernised air defences (p23); (h) space warfare capabilities (p24); strong cyber capabilities (p24-25); and hardened command and control. Analysts have sought to understand the goals of China's defence investment. These include (a) keeping PLA happy with political leadership (26); the opportunity created by economic success; the need to ensure raw material sources; preventing other's interfering in China strategic interests; an ambition to restore China as a great power / civilization. Emphasis has shifted from major land war to ensuring security of access routes and undertaking distant peace-keeping - eg related to piracy  (p27). The main focus of 'Far Sea Defence' is to prevent foreign forces operating in western Pacific - possible a result of Taiwan Strait crisis of 1996. Reference is often made to 'offshore defence' and to 'assassin's mace'  (p28) - which suggests an interest in using surprise strikes in asymmetric manner to cripple a superior enemy. Main elements of PLA strategy seem to involve: blind US / allied surveillance and disrupt command / control systems; launch surprise / pre-emptive attacks on US, Japanese and other forward allied forces;  (p29) and long range attacks (eg on US West Coast or Australia). It then seems to be assumed that US and allies would be forced to negotiate regional withdrawal and accommodation with Beijing. This bears strong resemblance to Japanese Imperial Forces strategy in 1941-42 (30)  ---- incomplete

Australia’s Strategic Edge in 2030 byby Ross Babbage has near mathematical elegance. He wants Australia to do to China what China is doing to US (ie make it dangerous for US forces to operate in Western Pacific). China uses asymmetric warfare methods to do this (eg via cyber warfare, space warfare, submarines and missiles) – an anti-access denial strategy. Western way of war depends on vast flows of digital information – so destroying satellites prevents this. Missiles would also prevent access to Western Pacific by US carrier groups – and could attach Guam and Okinawa. Babbage argues that PLA’s build-up has changed strategic environment – thus threatening US military superiority and Australia’s security. Australia can help overcome this by hosting US forces here, and by developing Australia’s own asymmetric approach to china. He suggests build-up of cyber-war capabilities to protect own assets and perhaps attach Chinese systems. Buying nuclear submarines from US would be better than developing Australia’s own. They are very effective, would reinforce US capabilities and would be easier to keep operational. Babbage does not advocate conflict but argues that nuclear submarines would be an effective deterrent. Babbage would also seek missiles that could be launched from ‘arsenal ships’. Creating US bases in Australia would increase the likelihood of US involvement if Australia were threatened. If Australia has a real prospect of doing significant damage to China, conflict would be much less likely to occur. Babbage’s description of what China has done to strategic environment deserves most attention. He sees this rising PLA as most serious challenge Australia has faced since WWII. He does not speculate on China’s motivation for PLA build up – as this can’t be known, could change. Military capabilities have seldom been acquired without being used in China’s history. China is seen to have developed capacity to destroy US sanctuary in space; in Guam; in Japan. Surface vessels 1200km from China’s coast are no longer safe. China alone amongst nuclear powers plans to double or triple its nuclear weapons by 2030. Australia is already in range of many weapons. US is developing its own counter-plans. China is active in cyber war – with thousands of infiltration daily – and this could have major effects. Babbage’s paper should be the starting point for a broad national debate. (Sheridan G. ‘Time to beat China at its own gamea>’, The Australian, 5/2/11)

Australia needs a 40% increase in defence spending because of increasingly militaristic China, which shows strategic thinking similar to Japan’s preparations for Pearl Harbour. The Kadoka report details increased Chinese military spending, and suggests how Australia should arm (eg with nuclear submarines and arsenal ships) to resist it). Paul Dibb (ANU) suggests that this proposal would be a bad idea (Nicholson B., ‘Chinese military plans like Pearl Harbour’, The Australian, 8/2/11)

National security policy is too important for federal ministers to stay silent when bad ideas are put forward. Foreign Affairs minister (Kevin Rudd) and Defence Minister (Stephen Smith) should reject proposals by Ross Babbage that Greg Sheridan reported on. It turns reasonable concerns about China’s military expansion into virtual hysteria. Proposals are ill-defined / uncosted, and would be counter-productive or dangerous. 2009 defence white paper set out costed and coherent policy. Babbage proposes increasing white paper’s finding of the need for Australia to have independent military means to ‘impose substantial costs on a major power adversary operating in our approaches’. Such proposals to rip an arm of China could provoke Beijing. Rudd and Smith should say that Australia will neither appease nor provoke China – and argue that its military build up enables China to defend itself and also support US in dealing with serious military threats in Asia-Pacific. Babbage reportedly does not believe that US / China conflict is imminent. His proposals lack details and costings. He proposes increased cyber-warfare capacity, which white paper already proposes. Babbage is concerned about China’s military expansion and aggressiveness, but assumes this is only about countering US naval assets, whereas there are other goals. Pentagon argues that China’s main aim is to fight and win short duration conflicts against high-tech adversaries along its borders – but has little ability to sustain military power at a distance. Though the latter capabilities are being created, they won’t be effective until the 2020s and are undermined by inferior national defence industries. Rudd and Smith should insist that Australia’s most rational response to China’s military expansion is to strengthen US alliance, and go ahead with planned re-equipment. No senior official has yet endorsed Babbage’s arguments (Dibb P., and Barker G., ‘Panicky response would harm our interests’, The Australian, 8/2/11)

Kokoda Foundations, Australia’s Strateigic Edge in 2030 shows flaws in Defence White paper process. That prcess was better than its predecessors, but inadequate and never kept to by governments. There is rather a need for a formal strategic intelligence estimate of possibilities and best responses. All countries need this to prevent emergence of another Cold War (James Neil, Flawed Process, The Australian, 8/2/11)

Ross Babbage argued at one time that Australia needed the military strength to ‘rip the arm off’ any major Asian attacker – and now suggests this in relation to China. Launching 'Australia's Strategic Edge in 2030' he described this as response to rapid growth of PLA. China’s expanding capabilities mean that: assured access to space and air in Western Pacific is no longer available; key US bases are at risk; Australia’s allies could fall into China’s sphere; China’s reach will extend to near Australia over the next 20 years. Report is based on consultations with those concerned about China, but Babbage assumes full responsibility. Babbage demolishes fundamental assumptions about Australia’s security (*eg US operational sanctuary in space, security of US bases in Japan / Guam, uncontested US shipping and air access to Western Pacific). He suggests in response: seeking nuclear not conventional submarines; building stealthy arsenal ships; reconfiguring army for long-range special force operations; create deeper partnership with US; and make large cyber / space warfare investments. This would make dealings with china difficult. Babbage will stir debate. (Dobel G., ‘Rip off a Chinese arm;, The Interpreter, 7/2/11)

Babbage’s report suggests China’s military build up constitutes the biggest threat Australia has faced since WWII, and that there is a need for strong deterrence power which is not currently available. PLA has acquired modern combat aircraft, a substantial submarine force and surface fleet, advanced missiles, modernised nuclear force and growing ability to wage war in space and cyberspace. China has defence white paper, but has not explained strategic rationale for acquiring such an extensive range of capabilities. Babbage suggests that China does not seem to understand that war with US would not finish quickly. Strategy of taking out US bases in a few hours seemed like Japanese strategy around 1940. Some Chinese strategic writing was like Japan in lead up to Pearl Harbour. China seems to be naively assuming that US would just go away – and this is unlikely. (Blenkin M. China biggest security challenge since WW2, 7/2/11)

Governments around the Pacific are preparing for war with China at some future time. Most people are unaware of this – but preparations are being made (for example) in India, Vietnam and Australia (one of whose strategic advisors has just suggested acquiring nuclear submarines). Behind closed doors there is fear of China – who doubt the peaceful rise of the world’s most powerful totalitarian state. China is doing the same as everyone else – arming themselves. In 2005 a Chinese general threatened a nuclear response to US positioning guided missiles to target China. China would expect all of its cities east of Xl’an to be destroyed – while the US would lose hundreds of cities. Professor Ross Babbage’s report argued the need to prepare to counter a Chinese Pearl Harbour like strike. (Birmingham J. ‘Why we’re all up in arms over China’, The Age, 8/2/11)

These observations are based on an attempt to understand the intellectual basis of the models of socio-political-economy that have permitted rapid advancement (ie economic 'miracles') in societies with an ancient Chinese cultural heritage (initially Japan and ultimately China) - see brief summary in East Asia in Competing Civilizations. These observations could easily contain misperceptions, as they are based only on information that has been available to the present writer.

They were not based on formal 'Asian studies'. Rather the possibility that quite different intellectual traditions to those of Western societies were involved emerged from: (a) experience and study of bureaucracy and of strategic management in government and economic affairs (see also Background notes in Competing Civilizations); (b) a detailed examination of what was said about Japan; and (c) direct exposure to what appeared to be undesirable influences in Australia that Australians generally did not recognise.

When examined from this viewpoint much of what was said about arrangements in East Asia seemed much easier to understand than when examined in terms of Western practices.

While there have been some opportunities to get feedback from others, these have been limited because few seem to have been interested. Mainstream (eg economic and political) analysts have viewed 'Asia' through parallels with Western societies, which provides little basis for understanding. And students of the humanities, who presumably should have been concerned with the practical consequences of cultural traditions, appear to have been off on a post-modern 'trip' (see Competing Civilisations).

The Need to do More than Prepare for the Last Great Battle of WWII (email sent 16/2/11)

Professor Ross Babbage,
Kokoda Foundation

I should like to make some preliminary suggestions following your recent report on responding to potentially-major security threats to Australia posed by China’s rising military capacities. Those suggestions are outlined on my web-site in Comments on Australia’s Strategic Edge in 2030.

As I have no expertise in defence planning, my comments are based primarily on attempts to understand the intellectual basis of the ‘economic miracles’ achieved in recent decades by East Asian societies with an ancient Chinese cultural heritage. Moreover they are limited to trying to illustrate the breadth of issues that need to be considered in seeking a strategic edge in ‘Asia’. In that context possibilities (in relation to both the nature of the strategic challenge and appropriate remedies) emerge that are quite different to the ‘hard power’ options normally considered by defence planners. None-the-less considering those possibilities could be a useful exercise – because (even if the particular possibilities suggested don’t stand up to close scrutiny) they illustrate the types of possibilities that need to be considered.

In brief my preliminary suggestions are that:

• Your report’s conclusion about the need for a whole-of-nation approach to security is sound. Thus the focus of most your report on traditional ‘national security’ capabilities is too narrow. Economic, social, governance and intellectual (ie ‘soft power’) capabilities are arguably even more important in gaining a strategic edge. Analysis of ‘hard power’ options should be used initially to show others what might be needed if ‘soft power’ options fail;
• The PLA’s build-up described in your report suggests that China expects to be either: (a) attacked by the US; or (b) at risk of being blockaded to deny access to resources. China may fear aggressive reactions to: (a) disruption of the established democratic-capitalist basis of the international order by an emerging neo-Confucian order; and / or (b) belated recognition of how the US’s economy has been ‘attacked’ (and perhaps even how the US may have been deceived);
• The most effective way to counter the threats posed by the build-up of PLA capabilities is probably to eliminate the motives behind that build-up. This might be achieved by (for example): promoting China’s people’s understanding of their options; increasing ‘Asia literacy’ in the West; and depriving unbalanced / mercantilist systems of socio-political-economy of the current account surpluses that they need for stability;
• Very large defence cost savings could be achieved in the medium-long term by broadening the concept of ‘national security capabilities’. Most of what is required to ensure a ‘strategic edge’ might be more appropriately described as ‘nation building’ (eg eliminating domestic weaknesses associated with ignorance and ineffectual governance).

I would be interested in your reaction to my speculations.

John Craig

Ignorant Diplomacy Sill Risks Catastrophe - email sent 23/6/12

Max Suich,
c/- Editor, The Australian

Re: Diplomacy that led to Human Catastrophe, The Australian, 23/6/12

I should like to submit that your useful account of the role that tensions over ‘race’ played in the lead up to WWII missed the most important point – namely the incompatibility between:

•  the international order established on the basis of cultural traditions that had allowed Anglo-Saxon empires to be successful; and
•  the radically different order that would have been (will be) associated with the ‘Asian Co-Prosperity Sphere’ that a frustrated Japan sought China’s support in establishing through military methods after WW1, and through more traditional long-term ‘Art of War’ tactics after WWII.

The primary source of past (and potential future) conflict did (does) not lie in Western racism, so much as in East Asia’s deliberate inscrutability (ie preventing others understanding one’s ‘shape’) and the failure of students of the humanities and social sciences in Western universities to try to understand (because understanding is hard, and domestic ‘racism’ is a much softer target). This was disastrous because with understanding differences can be managed, but without understanding differences become ‘racism’.

My interpretation of your article: Australia’s hostile, clumsy and rarely coherent policies towards Japan after WWI have parallels with current policies towards China. Geoffrey Blainey (in Causes of War) argues that Australia played a significant part in events leading to the Pacific War with Japan (eg with disputes over raw materials access; market competition leading to trade war; hostility based on racial pride and imperial alliances). Australia confronted Japan, the then new Asia / Pacific power, with careless hostility based on excessive faith in a declining ally. This is relevant again today in relation to China – though there are differences (eg China is not the dissatisfied militaristic nation that Japan was). Australia was a vociferous partner with UK / US before start of Pacific War, and had been antagonistic towards Japan from 1919 (eg by vetoing Japan’s request to be recognised as an equal with Anglo-Saxon empires in foundation documents of League of Nations). This compounded resentment of discrimination against Japanese in immigration, trade and investment, and boosted the position of militarists and nationalists in undermining relatively liberal forces in Japan. Billy Hughes had a major role in this – and exploited Australians’ nationalism, convictions and prejudices. He gained support for protecting the White Australia policy and opposing concessions to Japan (ie though Japan’s original demand for recognition of racial equality had been reduced in League of Nations preamble to recognising equality of nations, he vetoed this). Historians have written about this (eg Naoko Shimazu and Neville Meaney). Meaney suggested that Hughes believed that Japan’s proposals were intended to knock down the walls of the White Australia policy. Shimazu argues that this reinforced Japan’s rejection of the West and the search for an independent path that led to invasion of China and ultimately to war in the Pacific. Carl Bridge, by contrast, sees the Paris Peace Conference as Hughes’ finest hour, producing outcomes that advanced Australia’s long term interest. However, like Hughes, he paid little attention to the advantage that militarists and extremists gained from this in Japan. This helps sustain the assumption that Australia had no role in the origins of the Pacific War. Hughes embodied British race patriotism – and this was appreciated in Australia, and continued by Menzies. Meaney sees this as failure, while Shimazu notes that an arrogant and immature Japan felt that it had to prove in Asia that it was not less than the West. Japan was not fighting for universal racial equality (as it discriminated against others in Asia), but for itself as the leader of Asia. The final wording of the equality clause was like ‘all men are created equal’ – though Hughes disagreed. There were negative consequences for Australia of Hughes’ veto (eg UK support for Japanese territorial expansion to placate Japan). Some in Australia saw Hughes action as consolidating all of Japan behind the imperialists, and proposed measures to avoid offending Asian nations and to ease immigration restrictions.. Hughes rejected the latter, and praised the US Exclusion Act (which paralleled the White Australia policy). In 1931 Japan’s Kwantung Army falsely accused Chinese dissidents of armed rebellion and used the incident to seize Manchuria (and create Manchukuo). Japan’s civilian government (which Hughes had not supported) was undermined. Japan was then on a war footing – and this increased its obsession with resource security. In 1937 after several years of creeping military takeover of northern China, Japan launched a full scale invasion of China. Might Japan have been diverted from the militaristic cause by granting the racial equality clause or would this have merely encouraged Japan to believe that it should have a sphere of influence in Asia (like the European empires)

The real point at issue in Japan’s search for ‘racial’ equality was not about race, but rather about the capabilities of different cultures. Yet this was not perceived, because Western observers viewed ‘Asia’ through the lens of the universalism of Western social, political and economic institutions, while traditional East Asia Art of War tactics emphasise deceiving others about what is going on.

Australia’s current prime minister has commissioned the production of a White Paper on the (possible) Asian century, and this seems to be based on the same ignorance about what is different about East Asia as led to the pre-WWII frictions described in the above article. My reasons for suggesting this, and an attempt to identify what is significantly different about societies that have an ancient Chinese cultural heritage, rather than the West’s classical Greek, Roman and Christian heritage, is in An Asia-literate Approach to 'Asia'. The latter suggests, for example, that:

•  an 'Asian century' implies that intuitive, hierarchical and autocratic ethnic groups would prove better able to deal with ongoing economic and political challenges than rational / responsible individuals operating within the framework of individual liberty, a rule of law, democratic governance and profit seeking enterprises that Western societies have adopted;
•  this represents the practical consequence of a different approach to epistemology (ie a rejection of the reliance on understanding and rationality that has been the foundation of Western strengths).

An attempt to consider the geo-political implications of the modern version of the tensions with Japan that gave rise to the Pacific War is in Comments on Australia's Strategic Edge in 2030. The latter includes:

•  The Need to do More than Prepare for the Last Great Battle of WWII, which implied (as your article does in a different way) that post WWII frictions have parallels with those after WW1;
•  Suggestions about why it is difficult to understand societies whose strengths and weaknesses are based on their rejection of the relevance of understanding;
•  Reference to the present writer’s exposure in the 1980s to Japanese ultranationalist factions, with close connections to the Japanese state, who seemed to be still trying to win WWII; and
•  Suggestions about a strategic response which emphases ‘soft power’ methods to defuse tensions.

I would be interested in your response to my speculations. 

John Craig

Soft power: Active as well as Passive - email sent 14/6/12

David Smith
University of Sydney

Re: Has Australia fallen for Obama’s soft power?, The Conversation, 13/6/12

I interpreted your article as implying that ‘soft power’ is passive (ie related to others having a favorable impression of a nation). However I suggest that ‘soft power’ can also be (and needs to be) active.

My reasons for suggesting this are implied in Comments on Australia's Strategic Edge in 2030 (2011). This suggests, in relation to defence considerations in an ‘Asian century’, that:

• Inhibiting outsiders’ understanding on how you operate is a conventional East Asian ‘Art of War’ tactic – so gaining such understanding is a necessary ‘soft power’ tactic;
• The main thrust of traditional ‘Art of War’ tactics involves ‘soft power’ methods – so as to weaken others internally;
• There are active ‘soft power’ tactics that could be used to reduce in reducing the potential for conflicts.

Active ‘soft power’ methods that might have been used to defuse the risks associated with violence by Islamist extremists were suggested in Discouraging Pointless Extremism (2002).

I would be interested in your response to my speculations.

John Craig

A Better Australian Response to US Defence Proposals? - email sent 2/8/12

Harley Dennett

Re: Nuclear drumbeat grows as US eyes Australia, Crikey, 2/8/12

Your article suggested that proposals from the US Center for Strategic and International Studies for basing nuclear-powered aircraft carriers in Western Australia may have had more US government support than Australia’s Defence Minister (Stephen Smith) acknowledged.

Whether or not this is correct, I should like to suggest for your consideration that the US’s apparent intention to respond to China’s rising military capacities and militarism by increasing its ‘hard power’ assets in the Asia Pacific region (including some in Australia) would not only be expensive but also relatively ineffectual. That the US has such an intention is implied by various recent proposals in relation to locating forces in Australia, and reportedly also by discussions between Australian defence analysts and their US counterparts.

A better alternative, involving a primary emphasis on a soft power response, is suggested in Comments on Australia's Strategic Edge in 2030, The latter (which comments on what seems to be an Australian analyst’s response to information from US analysts) suggests that the US and Australia may have been suckered for decades by traditional ‘Art of War’ methods, which primarily involve the use of ‘soft power’ – because: (a) the possibility that such games may have been being played was not considered; and (b) there was no awareness of even what to look for due to a pervasive lack of Asia-literacy.

If Australia wants to assist the US in countering China’s rising military capacity and militarism, the most effective way to help would be to boost general understanding of traditional strategy in East Asia – perhaps by methods like those suggested in An Opportunity to Boost Asia-literacy.

John Craig

Beyond 'The China Choice' - email sent 14/8/12

Hon Paul Keating
c/- Editor, The Australian
[Not for Publication]

RE: A case for Chinese legitimacy, The Australian, 11/8/12

Your overview of The China Choice (by Professor Hugh White) suggested that China’s authoritarian system of government should be accepted as legitimate because it has been successful in lifting huge numbers of people out of poverty very quickly. The problem is that this achievement (like the economic ‘miracles’ in other East Asian states) has apparently involved a neo-Confucian system of socio-political-economy that: (a) makes global economic growth unsustainable; and (b) is alien to prevailing international political and economic institutions.

Whether Australia should promote such systems to the world as legitimate / desirable is more complex than was indicated by your article (or apparently by Hugh White’s book). Geopolitical issues related to East Asia need to be considered in terms of how things have traditionally been done in that region, rather than by assuming that something like Western-style institutions, methods and motives are involved.

My interpretation of your article: At the start of 20^th century Europe ran the world – through British and German empires. Within 40 year this was torn apart by two world wars. Now the issue is Deng Xiaoping’s restoration of China’s economic power. Can the world adjust to centre of global economic power in Asia? Hugh White, in The China Choice, points out that the US never faced a country as rich and powerful as China (eg USSR never matched US) – and wealth gave power. China’s military has long been preparing for war with US, and US’s military is now making similar preparations. Conflict could arise at short notice. China won’t do what Japan did – become a strategic client of US. US must recognise that the shift in the economic situation leads to a strategic shift also. Asia’s stability can’t be ensured by a non-Asian power – a point made by a former US national security advisor (Zbigniew Brzezinski). The failure of US wars should convince US that wars on Asian mainland are unwinnable. Stability in Asia requires constructive regional relationships, not divisive external linkages. US should not be drawn into Asian wars unless these involve countries with which the US has treaties. The US needs to decide what characteristics of China pose a threat, and which can be accommodated. China needs to be encouraged to participate in the region, without dominating it. If either the US or China says that Australia has to choose between them, then Australia does have to choose. Australia doesn’t want to make such a choice, and in a cooperative structure would not need to do so. Thus Australia needs to convince the US that it needs to adapt to China’s rise. For more than a generation Australia has not engaged in serious debate with US – but has simply cooperated with US foreign policy. China’s rapid rise demands more than that. Asia will be safer place with ongoing US engagement – but as Australia’s trade is increasingly with north Asia (especially China) a cooperative US / China structure is in Australia’s interests. This requires recognising China’s legitimacy, its great power prerogatives and the legitimacy of its system of government. This is not possible if only democracies are considered legitimate. While peace prevails amongst democratic states, Kenneth Waltz argues that structure of international policy is not transformed by internal changes in states. China has been criticised on the basis of human rights and values, though the human condition has improved across China. US president Obama argues that prosperity without freedom is just another form of poverty, though China has achieved the largest and fastest increase in human material welfare in history. This is discounted by those who simply pursue human rights issues. Peace is a value also – so reducing the risk of war is desirable. The China Choice is an exceptional synthesis of the arguments and influences that bear upon the future of the Pacific.

While the following is anything but the last word on the subject, I suggest that a cooperative structure in the Asia Pacific can’t be achieved simply by (say) convincing the US that China’s system is legitimate because:

• Cultural differences (and more particularly the failure of students of the social science and humanities to consider the practical consequences of those differences) have been a major factor: (a) in the relative economic success and failure of different societies; and (b) in international tensions / conflicts (see Competing Civilizations, 2001+). The latter included: (a) speculations about the intellectual foundations (and consequences) of East Asian economic ‘miracles’ (which China finally copied); and (b) an outline of the origin of the ideas presented here. The former suggested, for example, that East Asian economic ‘miracles’ have been built on an approach to knowledge, power, governance and economic goals that is different to that underpinning Western success and power in recent centuries (which was achieved because Western political / economic institutions enabled initiative by responsible rational / responsible individuals);
• Understanding those differences and their practical consequences is quite difficult (for reasons outlined in Understanding ‘Asia’). And few, if any, of the analysts who seek to offer prescriptions in relation to the response by Australia or the US to China’s rising economic and military power seem to have bothered trying to understand (see Risks from Asia-illiterate Policy Making). For example:
  • Zbigniew Brzezinski’s argument (that the US should play a mediating role in Asia) is unrealistic, because what he suggests is impossible without a deep understanding of how and why East Asia works (see US can't play a 'conciliation' role in Asia without understanding it). Likewise Australia can’t play a mediating role between the US and China (as Hugh White apparently suggests) without a serious effort to understand East Asia (see Can Australia Help China and the US to Get Along?);
  • A real ‘Asian Century’ (ie one in which East Asian traditions were globally dominant) would imply that political and economic institutions that are built around the notion of responsible individual liberty (such as egalitarian citizenship, independent business enterprise and democratic politics) would no longer have a significant role (see What does an 'Asian Century' Imply?);
• Economic ‘miracles’ in East Asia have involved non-capitalistic financial systems in which major business investments are made by state linked-enterprises with limited regard to expected profitability and draw on national savings mobilized by state-linked banks. Thus those systems:
  • Are incompatible with sustainable global economic growth, because those systems require large domestic demand deficits (which some have labeled ‘savings gluts’) to avoid the need for international borrowing. It has only been the willingness and ability (to date) of their trading partners (especially the US) to continue increasing their debt levels, that prevented: (a) the global economy from stagnating because of inadequate total demand; and (b) the ‘miracle’ economies from suffering financial crises like the Asian financial crisis of 1997 (see Are East Asian Economic Models Sustainable?, 2009); and
  • Constitute a generally unrecognised form of industrial protectionism, which economists would regard as undesirable if they understood (see Resist Protectionism: A Call That is Decades Too Late , 2010);
• China (like Japan) is facing a severe economic reversal because such financial arrangements seem unlikely to be viable in future, and this financial vulnerability may well be exacerbated by the response that others will need to take in their own interests (eg see China may not have the solution, but it seems to have a problem). And in China’s case political instability is also a real risk because the methods it used to emulate Japan’s economic ‘miracle’ have created the world’s most extreme wealth imbalances, and this is so incompatible with China’s nominal communism that another Cultural Revolution against China’s Confucian social elites has been seen as a real possibility (see Heading for a Crash?);
• The methods of collaboration that are used under East Asian neo-Confucian systems involve collaboration amongst subordinates within a social hierarchy. This is not compatible with collaboration under the prevailing international institutional framework (see Eurocentric Aspirations in a World of Rising 'Asian' Influence, 2011). International collaboration that is compatible with China’s domestic political system would probably involve something like the China-centred trade-tribute system that existed in Asia prior to Western expansion (eg see Creating a New International 'Confucian' Political and Economic Order, 2009);
• The US’s response to the challenge to the West’s global dominance from East Asia has been very slow to emerge, and thus remains clumsy and unsophisticated at this stage. It was slow presumably because:
  • the challenge emerged quite rapidly, and the US was focused on a ‘war against terror’ (which may or may not have been the result of an intentional tactic – see Attacking the Global Financial System?, 2001);
  • there is (as noted above) a pervasive lack of deep understanding of what is different about East Asia, despite the West’s very long military, diplomatic and economic engagement in the region - so domestic politics dominates over the national interest;
  • US monetary authorities (ie the US Federal Reserve under Alan Greenspan) apparently expected that financial markets would force changes to East Asian financial systems that required large ‘savings gluts’, and in 2008 were clearly very surprised when a financial crisis emerged first in the US;
  • the US Government seems to be conditioned to think about geopolitical issues primarily in terms of military capacity, and this is clearly only a small part of the equation in the Asia Pacific (see Comments on Australia's Strategic Edge in 2030, 2011 and particularly A Better Australian Response to US Defence Proposals? ).

Thus there is probably a need for a much deeper assessment of the issues than appears in your introduction to The China Choice.

Moreover, it is arguably not sufficient merely to seek a more cooperative approach amongst states in the Asia Pacific. Humanity faces many challenges (including economic stability, peace and environmental limits) that can’t be resolved so long as the focus is on who is the ‘top dog’, rather than on what social, political and economic system is most likely to lead to those challenges being successfully met. Despite Francis Fukuyama’s proclamation of ‘The End of History”, the post WWII global order built on Western style democratic capitalist principles (and with US leadership) has continued to be at risk even though the long Cold War against Soviet-style Communism was won (eg see The Second Failure of Globalization?). The latter addressed:

• The lack of effective international institutions – partly because many states that participate in the UN (for example) do not operate domestically on compatible principles;
• the international communities’ failure to agree (after the 911 attacks in America) on how to deal with the threats to others that would arise if Islamist extremists (for example) gained access to weapons of mass destruction (and the inadequacy of the US’s unilateral and primarily security / militaristic response to the 911 attacks);
• The threat from the failure of global financial institutions and systems in 2008, and the inadequacy of the international response to the GFC despite the establishment of the G20. Counter-cyclical policy responses (involving fiscal or monetary stimulation) can do nothing to deal with structural problems – such as non-capitalistic financial systems that require severe international financial imbalances if global economic growth is to be maintained (eg see Asia-illiteracy as a Factor in the IMF's Counter-cyclical Response to Structural Problems , 2011).

It might thus be better to promote a more cooperative approach globally, if this offered a reasonable prospect of reducing the particular risk of rising tensions in the Asia Pacific. Some, undoubtedly inadequate and now-quite-dated, speculations about how this might have been achieved were in A New 'Manhattan' Project for Global Peace, Prosperity and Security (2001). This suggested a process to raise awareness of the issues that needed attention to create an international environment in which all might reasonably hope to succeed, and a process whereby all participants could develop a response within frameworks that reflected their own cultural traditions. Some parallel speculations (in Competing Civilizations) concerned changes to Western-style democratic capitalism that might be considered in such an environment.

I would be interested in your response to my speculations.

John Craig

Friction between China and Japan: The End of the Asian 'Century'? - email sent 28/9/12

Greg Sheridan
The Australian

Re: Beijing worrying many neighbours, The Australian, 27/9/12

Your article noted that China is pursuing territorial claims (including one that risks conflict with Japan) with unusual and unexplained aggression. I should like to suggest a possible (though by no means certain) scenario under which this could presage the end of the Asian ‘Century’ – at least in the sense that this would involve ‘Asian’ leadership in a Western-style democratic capitalist international environment.

This requires considering that China may face difficulties in the presently-unstable international economic environment that are not apparent without taking account of characteristics of the neo-Confucian systems of socio-political-economy that Japan first developed and that have been the basis of economic ‘miracles’ across East Asia, ultimately including China.

My interpretation of your article: For the first time in many years China is pushing territorial claims in the East China Sea (ie a dispute over the Senkaku / Diaoyu Islands which Japan has administered) and South China Sea (ie claiming sovereignty over the whole sea to the coastal waters of The Philippines, Vietnam and Malaysia). This is being done aggressively (eg with coast guard fleets violating other’s territorial waters, and violent anti-Japanese protests). The dispute with Japan is exceptionally dangerous – because both countries have roughly equal military strength and Japan has a giant economy and is a US ally. US policy towards China has changed under President Obama. The first phase (offering many concessions to China) achieved nothing, and in 2010 China started bullying many of its neighbours. The US then became more hard headed, and Obama announced an economic and security ‘pivot’ towards Asia. Finally it has been seeking to engage positively with China – and to encourage China to take a greater international role. Beijing’s motives for its current behaviour are perplexing. Comments from Singapore’s Institute for SE Asian Studies (Rodolfo Severino) are that pushing China towards legal adjudication / clarification on its South China Sea claims would harden China’s claims. Zheng Yongnian (East Asian Institute) drew attention to China’s nationalism, and the leadership transition in China. China’s government has fanned nationalism - which has created an independent force within China. Increased democracy in China would thus lead to more chaos / violence, and perhaps international conflict. China’s development is not unique. Like other countries in East Asia it has engaged in government-led / sometime ruthless capitalistic development. However in China there has been no parallel social development. Thus Chinese people feel insecure. Most people are impoverished. The government is not respected – because of corruption. If China were a democracy, Chongqing Party boss Bo Xilai would be elected president – because of his populist style and direct income redistribution. Much of what he did was illegal – but this is not unusual, as there is little respect for law in China. Leftism and nationalism have deep roots in China, but liberalism does not. China’s biggest task is to develop its middle class. At present government is strong / rich, while people are weak / poor. Middle class has no institutional protection. China could experience social chaos. There is a race between reform and social uprising. Growing the middle class is needed, as otherwise democratisation could make things worse. Most of the dynamics that govern these matters are internal to China, so China’s politics are the worry.

The situation needs to be considered in context. The global economy is in a perilous state. Europe is in recession, and instability threatens because of the debt / deficit exposure of many governments. The US is also facing its ‘fiscal cliff’ which will lead either to a serious recession or financial market concern about escalating US government debts [eg see 1]. Japan faces government debts that are 200% of GDP. China’s massive investment program to maintain growth since the start of global financial crisis (GFC) is recognised to be unsustainable. While many emerging economies have been doing fairly well, they (in common with Australia) have generally done so on the basis of strong export demand. Though the reserve banks of major economies are boosting liquidity, it is anything but clear where the demand to sustain future global growth can come from.

[Note added later: Increasing liquidity through quantitative easing by reserve banks does not automatically increase demand - especially where:

• households and governments are heavily indebted, because easy money policies (which encourage increasing debts) have been used for decades to stimulate growth as an alternative to tacking the structural demand deficiencies associated with international financial imbalances - eg see Structural Incompatibility Puts Global Growth at Risk (2003), Asia-illiteracy as a Factor in the IMF's Counter-cyclical Response to Structural Problems, Sustainable World Growth Requires More than Counter-cyclical Policies, G20 in Washington: Waiting for Hell to Freeze Over? and Global Impact of Booms Stimulated by Easy Monetary Policies;
• aging populations reduce both: (a) government revenues (due to a relatively smaller number of taxpayers); and (b) the propensity of households to consume]

In this environment China (and also Japan) are facing serious risks. These risks include, but go beyond, the issues mentioned by the Singaporean experts that your article outlined. A key point is that the rapid economic advancement that has been achieved in East Asia (including Singapore) has involved neo-Confucian systems of socio-political-economy which are anything but ‘capitalistic’ (ie they are not driven by a search for profit by independent enterprises – but rather by a state-driven goal of boosting the economic power of ethnic communities). The financial institutions in affected economies would suffer crises (like the Asian financial crisis of 1997) unless domestic demand is suppressed to the point that current account surpluses make it unnecessary to borrow in capitalistic / profit-focused financial markets. The resulting demand deficits (‘savings gluts’) are macroeconomically unsustainable, and compensating for this has been one significant factor in the heavy debts that their trading partners have incurred and also in causing the GFC (see Impacting the Global Economy).

Speculations about China’s predicament now that this strategy is becoming unsustainable are outlined in Heading for a Crash or a Meltdown? The latter suggests that China’s problem is not just financial and economic, but that for various reasons the neo-Confucian system of socio-political-economy that has been the core of its rapidly developing economy since the late 1970s is an obstacle to developing solutions. Japan, it can be noted, is also approaching a financial crisis – because it is on the point of incurring current account deficits and thus having to borrow externally with a non-capitalistic financial system.

This may be significant in relation to the emerging frictions between China and Japan because:

• A close observer of East Asia (Eammon Fingleton) has suggested that Japan played a significant (but undisclosed) role in introducing into China a variation of the neo-Confucian system of socio-political-economy that had been the basis of economic miracles elsewhere in East Asia. And there are reasons to suspect that Japan and China might have been motivated to enter into a cooperative arrangement at that time – ie a shared desire to create an international economic and political order that was not based on Western-style democratic capitalism (see Coalitions of Interests?);
• One of the two main factions contending for future control of China (ie that centred in Shanghai, and closely aligned with China’s Diaspora) seems likely to have played the major role in operating that Japanese-sponsored system in China (see China’s Political Tensions).

If so then confrontation with Japan could be expected not only to divert the nationalism of China’s people towards support for the Communist Party but also to undermine the position of factions within the Party that are most closely associated with the economic methods that were adopted from Japan - and which have now created: (a) obstacles to China’s future economic progress; and (b) commercially-focused social elites and wealth imbalances that are incompatible with China’s nominal ‘communism’ (and which Mao’s cultural revolution had sought to purge from China).

Thus conflict with Japan could perhaps be regarded as an effective proxy for civil conflict within China.

There are many other interpretations that could be placed on current events. For example China-Japan tensions could be:

• simply intended to unify China's people in a common cause;
• related to contests for control of China's communist party [1];
•  the outcome of an agreement between China and Japan to demonstrate to others in Asia that an alliance with the US is worthless - assuming that China's pressure will Japan to capitulate [personal communication];

However, no matter what the basis of these tensions, it is strongly suggested that what is different about the way things are traditionally done in Asia needs to be considered in seeking to understand, rather than trying to understand in terms of Western concepts (such as capitalism and democracy) which don’t have anything like the same implications as they would in the West (eg see Embracing Asia Requires Understanding). In particular, it would also be desirable to recognise that traditional Asian Art of War tactics feature deception – so what seems to be happening (or is said to be happening) may not be a reliable guide to what is actually happening.

John Craig

Nationalist Rumblings in Japan - email sent 13/12/12

Professor Tessa Morris-Suzuki
ANU

Re: Japan’s paradoxical shift to the right, Inside Story, 6/12/12

I should like to draw your attention to some speculations about the possible influence of Japan’s ultranationalist factions, which your article suggests are again making an attempt to gain power in Japan.

My interpretation of your article: Nationalist political factions have re-emerged in Japan, which could be troubling for the region. Three years ago the Democratic Party government after years of LDP dominance brought hopes of real two party politics. But this experienced difficulties because of: (a) the earthquake / tsunami which damaged nuclear power industry; and (b) the character of politics in Japan (which is closed / cliquish so that grassroots social movements don't trust it). Vacuum is being filled by groups exhibiting alarming nationalism. Tokyo governor (Shintaro Ishihara) proposed purchase of islands in East China Sea, which (a) generated conflict with China, and (b) diverted attention from nuclear industry problems. Ishihara is notorious racist / sexist / homophobic. Japanese people feel the need for strong leadership. Osaka mayor launched Japan Restoration Party (espousing nationalist, neo-liberal economics and political system changes - a single chamber parliament and a directly elected PM). He also endorses the need for dictatorship, and criticises apologies for abuse of 'comfort women'. Hashimoto's policy of phasing out nuclear weapons ended when Ishihara emerged as Restoration Party's leader - advocating acquiring of nuclear weapons. Abe has emerged as head of LDP - with similar views on 'comfort women' and nuclear weapons. All these groups endorse expanding Japan's scope for military action - and this would escalate tensions in Northeast Asia.

By way of background I note that I had some involvement in the 1980s in concept development for the MITI-sponsored Multi-function Polis project (to establish a centre for cultural and technological interchange), and:

• Thus put in a good deal of effort trying to understand the intellectual foundations of the economic ‘miracles’ that Japan had pioneered (see East Asia in Competing Civilizations for an outline of the conclusions);
• Immediately found myself up to my armpits in allegations about the involvement in the development of the MFP proposal of yakuza and ultranationalist factions (under Ryochi Sasakawa) who seemed to be both: (a) extremely well connected into the Japanese Government, and possibly playing a key role in organising Japan’s economic ‘miracles’; and (b) still trying to win WWII – see The Dark Side of Japan in Australia?).

As a consequence, I have taken a somewhat cynical view of events over the past couple of decades. Some speculations about the possible effect of behind-the-scenes influence on Japan by ultranationalist factions are in:

• Unrecognised Clash of Financial Systems – which:
  • suggested that the incompatibility between Western-style international financial institutions and the methods that had been the basis of Japan’s post-war economic miracles (which were allegedly eventually introduced to China by Japan) may have had a significant effect on global history; and
  • referred in passing to indicators of the continuing significant influence in post-WWII Japan of ultranationalist factions (see The Dark Side of Japan);
• Coalitions of Interests? (in Comments on Australia’s Strategic Edge in 2030) which: (a) notes that Japan’s primary tactic in seeking to establish an Asian Co-prosperity Sphere in the 1930s and 1940s involved an unsuccessful effort to mobilize China’s support (see Broader resistance to Western Influence?); and (b) tries to draw conclusions about Australia’s appropriate response to autocratic East Asian states.

These speculations are clearly not the full story (or even adequate in themselves). However I submit that they such possibilities need consideration, and would thus be interested in your response to my speculations.

John Craig

Looking for meaning in war warnings from Asia - email sent 25/3/13

Ambrose Evans-Prichard
The Telegraph

Re: The dangerous drift towards world war in Asia, The Telegraph, 24/3/13

You are getting into deep waters – and those waters are murky. I should like to suggest considering the possibility that the ‘war’ issue in Asia might not be the one that is most obvious – and which was the subject of your article.

An alternative scenario was the subject of Comments on Australia's Strategic Edge in 2030 (2011). The latter was a response to earlier concerns about the implications of China’s rising militarism that apparently originated in US defence circles. It advocated a soft-power response to what seem to be war rumblings in Asia.

It was based on:

• Extensive work on the intellectual foundations of East Asian economic ‘miracles’ in the 1980s;
• Direct exposure to elements of the ‘dark side’ of Japan in Australia, who seemed to be: (a) right at the center of the behind-the-scenes networks that run Japan; and (b) still trying to win WWII – an exposure that led to efforts to collect information about those factions (eg see The Dark Side of Japan);
• Speculations about a possible undeclared and virtually invisible ‘cold’ war related to financial manipulations over several decades (which might have included collusion with Islamist extremists, with whom some strategic goals are shared, to divert the US’s attention from the associated financial system threats through encouraging militaristic responses to other perceived (but ultimately less significant) threats;
• A visit to the Peace Memorial in Hiroshima that your article mentioned – which suggested that it might not really be dedicated to peace;
• Eammon Fingleton’s claim that the (neo-Confucian) methods that have been the basis of Japan’s economic ‘miracles’ were developed by Japan’s military in the 1930s and transmitted to China in the 1970s (suggestions that are plausible, though not proven as far as I am aware);
• The expectation that both Japan and China could be headed for financial and economic failures if the international political / financial regimes that affect them remain unchanged because of problems in their national balance sheets that result from the way in which economic development has been financed (eg see Japan's Predicament and Heading for a Crash or a Meltdown?);
• Recognition that one cannot take what is said in East Asia at face value. Deception is a key element in the Art of War.

At the very least three scenarios need to be considered: (a) there could be a risk of war between China and its neighbours (including Japan); (b) Japan and China could be colluding with the intention of engaging jointly in military adventures against the US; and (c) there may be no real war risk, but rather a ploy to ensure that a military bias dominates US foreign policy in Asia. The lunatic threats currently emanating from North Korea (arguably a Chinese vassal state) suggest to me that the ‘war in Asia threat’ is more likely to be a deception than a reality.

John Craig

Whose intentions: Kim's or China's? - email sent 4/4/13

Greg Sheridan

Re: Hard to fathom Kim’s intentions, The Australian, 4/4/13

There is a possibility that your article did not consider plausible – namely that China does actually have a great degree of behind-the-scenes influence in North Korea. And, if so, then what has happened perhaps involves encouraging an unstable (virtually lunatic) regime to threaten attacking others in the expectation of thereby boosting China’s global status (ie its shift towards a new ‘Middle Kingdom’ role) by encouraging (perhaps forcing) the US to rely on China to bring what is in effect China’s ‘attack dog’ to heel.

This scenario is anything but certain – but it should not be ignored. ‘Art of War’ precedents in history might usefully be researched.

John Craig

An 'Art of War' Perspective on North Korea's Threats - email sent 5/4/13

North Korea’s threats to attack the US and others seem incomprehensible to Western observers.

However the real problem may be that such observers can’t see the forest for all of the trees (ie particular threats of war).

Some speculations about: (a) the nature of the ‘forest’ (ie the big picture) that might make it easier to understand the ‘trees’; and (b) about the desirability of a serious soft power response are on my website. The source of the problem may lie in the influential neo-Confucian networks that have been responsible (behind the scenes) for orchestrating economic ‘miracles’ in East Asia who now find that their efforts are likely to result in failure.

John Craig

Detailed 'Art of War' Speculations about North Korea's Threats [Working Draft]

Background: The present writer's background for these speculations includes a lot of study of what has been written about Japan as the basis for a possibly-successful effort to 'reverse-engineer' the intellectual basis of East Asian 'economic miracles'.

Interpreting Tensions in East Asia

The following account seeks to consider North Korea's threats of war in a broader-than-usual context. For example, this involves those threats possibly being one amongst several manifestations of a long term 'civilizational' contest between Western and East Asian societies that is perhaps coming to a head because growing economic and military strengths in East Asia's 'family states' have been built on neo-Confucian methods that are incompatible with those implicit in the the West's universalist / liberal traditions that the US's 'pivot to Asia' would seek to reinforce in the region.

It is by no means necessary to take such a broad view to produce reasonable explanations of tensions in East Asia.

Three big things are going on in east Asia. The most visible / disruptive is China's rise. Next comes resurgence (especially in Japan) of competing / mutually reinforcing nationalisms. Then is dangerous unpredictability of North Korea. South Korea's foreign policy think tank (Asia Institute) held conference on New World Disorder. Residents in Seoul are used to North Korean threats and don't behave as if they are at risk of imminent attack. The real risk arises when North Korea puts a nuclear warhead on a missile. Many others would be affected by Korean peninsular conflict. Chinese diplomats express frustration with Jong-un. But its influence is limited. North Korea can be as hostile to China as to US. China has probably concluded that living with Kim is better than the alternative - collapse of his regime and re-unification of the peninsular which would give the US a foothold (perhaps a military one) on China's border. Though some in Communist Party have suggested that North Korea has become a liability, giving it up would be seen as a a sign of weakness. China has never clearly articulated its ambitions - but rising military spending, a combatative approach to territorial disputes - suggests a desire to gain regional primacy. This is to be expected, However it generates resistance from neighbours. And xenophobic populism in China's blogoshpere fans nationalism elsewhere. This has pushed Vietnam and the Philippines closer to US. South Korea suggests that US should locate tactical nuclear weapons there, and raised questions about South Korea itself developing nuclear weapons. Japan's government has a nationalist pose that worries others. Disputes over islands have become entangled with Abe government's revisionism of Japan's WWII occupation of China and Korea. US has a problem. Its pivot to Asia was meant to underscore permanence of US balance of power in Asia - thus encouraging allies and deterring Chinese expansionism. However the US fears that Japan can treat US treaty as a shield behind which it can confront China. Some see the tensions in East Asia as a sustainable equilibrium, but this may not be so [1]

However, it is arguably worth considering the alternative, because different ways of thinking in East Asia lead to ways of doing things (including trying to win wars without fighting by deceiving enemies into doing foolish things) that are quite different to those that Western observers are likely to be familiar with.

Look at the 'Forest' Not Just at the 'Trees'

There is a saying that some people ‘can’t see the forest for all the trees’.

This could be costly or perhaps even dangerous in relation to North Korea's threats of war (including nuclear attacks) against the US and South Korea, because that particular 'tree' (ie threat) has emerged in a 'forest' that involves an historical and geo-political contest (in which Korea currently has a foot in both camps) between the West's 'rational / responsible individualism' and various 'authoritarian / ethnic family-state' alternatives that have been developing in East Asia for decades.

The 'forest' implies the (uncertain) possibilities that  apparently-crazy threat by North Korea's 'supreme leader' could be intended (for example) to:

• draw the US and its allies into an ambush (and perhaps that April 29 might be a critical date for a nuclear attack) because East Asia's 'authoritarian family-states' are currently facing severe risks - risks that are not obvious to outsiders but may have resulted in the apparently unexplainable war-rumblings (from China in particular) that have emerged across the region over the past couple of years; or
• re-establish China's role as Asia's 'Middle Kingdom" by mediating the reunification of North and South Korea (under an 'authoritarian family-state' model?) if the US and its allies: (a) prove unwilling to engage in another Korean war because of the risk of being 'ambushed'; and (b) can't come up with any other effective response; or
• prevent a new 'Middle Kingdom' domination of Korea because of the passionate commitment to 'independent development' that is the core of North Korea's church'e (Juche) ideology and which it views itself as the 'centre of the world' in promulgating.

One problem in assessing North Korea's threats is that Western observers seem much more likely than those in East Asia to be unable to see the 'forest' for all the ‘trees’.

“..... researchers used an eye-tracking device to pinpoint exactly where participants look when given a photo with a salient object (e.g., a train) set against a busy background. Americans looked outside the object an average of one time but had eight or nine fixations on the actual object. On the other hand, Chinese participants had one sharp initial fixation on the object followed by five or six fixations on the background context. “If people are seeing different things, it may be because they are looking differently at the world,” ....” (West C. How Culture Affects the Way we Think’, Observer, V20, No 7, 2007)

This difference in ways of looking at a situation is not limited to visual perception. Western minds rationally focus on specific causes and effects (ie ‘trees’), while an East Asian assessment of a situation will tend to be in terms of all the factors present and how they relate or can be made to relate (ie ‘forests’), rather than on individual elements. A noted Japanese ultranationalist once enigmatically remarked that 'The only things in this room that are truly Japanese are the things you cannot see' (ie what was truly Japanese was not the things, but the way they were arranged / related).

Illustration: Japan has many 'things' / 'trees' that look familiar (eg democratic / elected governments, a bureaucracy, banks, businesses) but it is misleading to assume that when one looks at those apparently familiar 'things' that one has understood Japan - because those 'things' operate in a way that Western observers won't be aware of (eg are driven by hierarchical social relationships rather than abstract concepts such as law or accounting principles) because of invisible cultural differences. And the consequences [??] can also be virtually invisible to those who think that looking at the apparently-familiar 'things' / 'trees' is sufficient to provide understanding.

Western methods of dealing with problems tend to focus rationally on individual components / projects subject to well established 'rules of the game' (eg law, accounting principles) which make it possible to ignore other parts of the 'forest' when dealing with a particular 'tree'. However in East Asia 'rules of the game' are not respected. Mao was criticised by his successors in China because of his inability to 'break any rules' (ie to do things in totally unprecedented ways) - see Communism versus Confucianism: The Continuing Contest in China. Deng Xiaoping (China's former paramount leader and the architect of 'socialism with Chinese characteristics') famously argued that whether something worked was the sole criteria for whether or not it was good: "It doesn't matter whether it's a white cat or a black, I think; a cat that catches mice is a good cat." [1]

Problems are traditionally addressed without assuming that there are any unchangeable 'rules of the game' by bringing the problem to the attention of all the 'trees' and then trying to bring together diverse and mutually-reinforcing contributions from all over the 'forest' into a solution (which then reinforces the power of an established regime, or becomes a new political power base - as Bo Xilia seemed to be attempting in China).  Power is not associated with making decisions but with using strategic information to induce others to take favourable actions. The Japanese strategy game of Go does not involve a single contest, but rather involves multiple, simultaneous contests anywhere on a large board. Where interests clash and neo-Confucian methods are being used to seek power, nothing may be publicly said but diverse and apparently unrelated contests will occur in many different places.

Similar observations have been offered in relation to China where 'wei qi' (the Chinese name for Go) has been used as an analogy for China's approach to economic development. Little attention is paid to the profitable use of capital in relation to particular investments - as most emphasis is placed on the benefits of the synergistic relationships that can be established between diverse activities.

Thus in seeking to understand East Asia it pays to give more attention to relationships amongst events / interests, than to individual elements.

In assessing increased security risks in East Asia (which include friction between China and its neighbours as well as North Korea’s blustering), it may help Western observers to pay more attention to the ‘forest’ (ie to the context, what else is going on, what other threats exist) than to the ‘trees’ (eg a particular threat of war viewed in isolation). And this needs to be done in 'Asian' (rather than Western) terms - which can be a quite difficult intellectual challenge.

The present attempt to look at the 'forest' suggests that, while North Korea has its own agendas that need to be considered, the source of these threats may lie in coordinated or conflicted behind-the-scenes efforts to defend / advance the position of Asia's 'authoritarian family-states' by nationalistic neo-Confucian networks in Japan’s bureaucracy, China’s so-called Communist Party, China’s worldwide Diaspora (ie in 'Greater China') as well as in North Korea's regime. And this possibility needs to be considered in traditional Asian 'Art of War' terms (eg featuring deception; very long term agendas; etc) rather than being taken at face value and considered only in terms of current events.

It is suggested below that rather than being an ignorant ideologue as it appears, North Korea's 'supreme leader' may be acting out the role of what can be likened to a 'barking dog' to attract attention to the Korean peninsular and thus either: (a) create an opportunity for China to increase its status as regional power-broker in Asia at US expense (eg by successfully promoting reunification of North and South Korea as 'autocratic family-states'); or (b) prevent the loss of North Korea's independence that that that outcome involves. 

Alternately, and less likely, it could be that North Korea is acting as 'attack dog' on others' behalf - and under one version of that scenario:

•  a nuclear attack against the US could actually happen in parallel with apparently unrelated financial, cyber, terrorist and diplomatic actions; and
• in providing military support to South Korea the US and its allies could find that they have been enticed in to an ambush because the threat actually comes from the entire 'forest' (autocratic Asia) not just from the 'tree' that is shouting threats. 

If so there would be a need to to simultaneously deal with several complex threats simultaneously and collaboratively - which would be a significant, though not impossible, organisational challenge.

Why: One scenario suggested below involves efforts to undermine the liberal Western international order through diverse, individually-complex and complementary actions that would have mutually-reinforcing feedback effects. To even understand the risks there is a need for those with state-of-art expertise and experience in several different areas to be involved, and supported by generalists with sufficient competence to act as rapporteurs in developing integrated responses.

Failure to deal simultaneously with multiple areas of quite different expertise is costly - as can be illustrated by the primarily security / military response to terrorist threats posed by Islamist extremists, because: (a) the costs of security / military responses were high, and the results were unsatisfactory; and (b) there were arguably options to dramatically reduce the terrorist threat by discrediting the ideology of the extremists' spiritual leaders (eg as suggested in Discouraging Pointless Extremism, 2002+). But the latter required mobilizing knowledge and experience that were beyond the competence of those dealing with the threats from a security / military perspective. A narrow focus was arguably also costly because other parts of the geo-political 'forest' (ie developing financial system and economic difficulties) were 'off the radar' of authorities who were focused on dealing with security / military 'trees'.

One feature of 'forest-oriented' Art of War tactics is to create diverse complex and mutually reinforcing challenges whose overall implications are difficult to understand. Some suggestions about how this difficulty might be overcome are suggested (in relation to Australia) in  A Nation Building Agenda.

Features of the 'Forest'

Some features of the ‘forest’ that may need to be considered include:

• A ‘clash of /  competition between civilizations’ that has been underway for centuries between Western societies (the Realm of the Rational / Responsible) and East Asia (The Realm of the Autocratic, Hierarchical and Intuitive Ethnic Group) – see Cultural Foundations of Western Strength and East Asia in Competing Civilizations.

Some speculations about how that clash / competition might have been working out in recent decades if one takes a traditional Art of War perspective are outlined in Broader Resistance to Western Influence?.

The latter (which is a possibility rather than a certainty) draws attention to indicators of long-term mercantilist (ie economically-based) efforts by Japan to achieve its WWII goal of creating an 'Asian Co-prosperity Sphere' relatively free of liberal Western influences and the possibility (though not certainty) that: (a) China's so-called Communist (but now actually neo-Confucian) Party might have entered into a coalition with Japan's ultranationalists to achieve this goal; and (b) Islamist extremists (who share some anti-liberal interests with Japan's ultranationalists) might have entered into a similar coalition with Japan's ultranationalist in order to divert US attention and resources from the economic contest by encouraging a 'war against terror' .

Various scenarios suggesting how threats from North Korea (which also has an 'authoritarian family-state' system, though in a different form to those in Japan and China) might make sense in this context are outlined below.

• The neo-Confucian methods that have been the basis for orchestrating economic ‘miracles’ in East Asia (see Understanding East Asian Neo-Confucian Systems of Socio-political-economy).

Elaboration: The methods described in the latter may be relevant because they:

• Involved neo-Confucian elites accelerated economic ‘learning’ in whole industry clusters (eg consider the ‘vision development and administrative guidance’ process used as the basis for industry policy by Japan’s Ministry for International Trade and Industry). In China this neo-Confucian catalytic role appears to have been taken after Mao's death by the so-called Communist Party rather than by the bureaucracy as was the case in Japan presumably because under Mao the Confucian bureaucracy had been portrayed as oppressing the masses (see also China's Bigger Secret);
• Were suggested by Eammon Fingleton (with unknown validity) to have been originally developed by Japan’s military in the 1930s, and transmitted from Japan to China in 1979;
• Resulted in bad national balance sheets because national savings were committed without reliance on calculating such abstracts as 'profitability' (see Indicators of a lack of attention to profitability), and thus a constant risk of financial crises. Efforts to guard against crises:
  • Adversely affected the global financial system - because demand had to be repressed to ensure that there was no need to borrow in international profit-oriented financial markets and this required trading partners to be willing and able to sustain large current account deficits and ever rising debts (see Impacting the Global Financial System);
  • Led to ongoing contests over the nature of the global financial system (see An Unrecognised Clash of Financial Systems); and
  • Potentially made global economic growth unsustainable (see Structural Incompatibility Puts Global Growth at Risk, 2003+ and Debt Denial: Stage 3 of the GFC?). Unless asset values are rising rapidly to create a 'wealth effect' amongst those with significant existing assets (as they were prior to the start of the GFC) it is very difficult to maintain growth if the first several percent of domestic demand goes to meet demand deficits elsewhere that are generated by financial repression to protect underdeveloped financial systems. Moreover when international financial imbalances remain large it is arguably impossible for counter-cyclical fiscal or monetary policies to create sustainable economic recovery (see Counter-cyclical policy can't solve structural problems );
  • May have led China to seek to establish to yuan as an international trade currency in the expectation that if it were to be backed by gold reserves, it might be accepted in exchange for hard currencies without anyone looking closely at China's national balance sheet (see also Buying Chinese War Bonds? in relation to the need to do this and Interpreting the Canary in the Gold Mine in relation to the potential divergence between the value of physical and paper gold)
• Have created serious risks of political instability in China because its post-1978 'socialism with Chinese characteristics' (ie the undisclosed reintroduction of an elitist neo-Confucian social order to drive an economic 'miracle') was incompatible with the popularly-supported equality aspirations of China’s nominal communism (see Communism Versus Confucianism: The Continuing Contest in China) - especially because some in the so-called Communist Party took the opportunity to enrich their families (and thereby created what is arguably the world's most inequitable distributions of wealth).

• China's likely efforts to create a new international neo-Confucian order on the basis of its growing economic and military strength - ie an order similar to that which existed in Asia prior to the arrival of Western influences - and of which Western societies have no recent experience. That this is under way is indicated by the apparently-easy potential cooption of Australia as a 'tributary state' under such an arrangement (see A Diplomatic Coup in Beijing: By Who?).  The creation of such an order would involve the use of behind-the-scenes  methods for influencing neighbours to collaborate in addressing supposed civilizational challenges that they face from outside. In East Asia such  invisible-to-Western-observers influences might be either welcomed or: (a) the source of growing war-rumblings across East Asia; and (b) tension with Japan and North Korea in particular because of the view of ultranationalists in Japan and devotees of church'e in North Korea that their own ethnic communities should be the 'centre of the world' in using those methods to achieve somewhat different goals;
• The US's 'pivot towards Asia' to promote universalist values - which has the potential to provides a rallying-point for the various East Asian 'family states' and their potential allies world-wide who oppose those values;

In relation to the goals of the US's so-called 'pivot to Asia' it has been suggested that:

"As the President explained in Canberra, the overarching objective of the United States in the region is to sustain a stable security environment and a regional order rooted in economic openness, peaceful resolution of disputes and respect for universal rights and freedoms." [1]

Moreover, while many will believe that universal rights and individual liberty are widely accepted values that should attract general support, counter-arguments can be offered. For example:

• East Asia's neo-Confucian 'family states' (eg Japan, China and North Korea) are anything but committed to economic openness; or universal anything; or individual rights at the expense of the 'family state' as a whole. To varying degrees their political and economic systems are incompatible with such values (to a high degree in the case of North Korea and with increasing subtlety in the cases of China and Japan) - and collectively their economic and military power is formidable.
• Islamist extremists have a similar viewpoint (eg see possible collaboration with radical nationalists) - and their influence in the Muslim world remains non-trivial;
• Despite expressed preference for peaceful resolution of disputes, recent attempts by the US and its allies to defend and expand economic openness / universal rights and freedoms have been based primarily on hard-power methods which have generated collateral damage, and soft power alternatives have not been serious deployed (eg consider Discouraging Pointless Extremism). While ignorance is more likely to be defeated in the academy than on the battlefield, the contest has been conducted mainly in the battlefield;
• the intellectual / academic case for Western culture has been undermined by the dominance of 'post-modern' assumptions in the social science and humanities faculties of many universities. The view that cultural assumptions are merely a matter of preference and have no practical consequences is invalid, but seems to be 'politically correct' (eg see Eroding the Foundations of Western Culture and of a Liberal International Order).  In Australia a national history curriculum was adopted that did not even provide students with an ability to understand the foundations of their own liberal institutions and past strengths (see National History Curriculum: Information without Understanding);
• various features of profit-focused Western financial systems have contributed to global economic dislocation (eg easy money policies, the emergence of complex financial systems and the adoption of the Euro without fiscal integration in Europe);
• there is a widespread view that profit-focused Western style financial systems are solely responsible for economic dislocation. Such views are naive (eg see Soros might also see the world through blinkers), but have not been challenged because of a lack of any serious evaluation of the cultural issues involved. Thus resistance movements (such as the Occupy Movement) have emerged;
• a loss of individual responsibility has undermined the viability of liberal Western institutions, and invited external contempt (see Eroding the Moral Foundations of Liberal Institutions).

And opponents of Western values would potentially be further encouraged by the perception that the West (the realm of the rational / responsible individual) is in terminal decline anyway. 

The values that the US 'pivot to Asia' seeks to promote are worthwhile, but substantial changes are probably needed before it is likely that such a process will be successful.

• The parallels and differences between North Korea's system of socio-political-economy and those in (say) Japan and China. North Korea's church'e ideology involves an  extreme / isolationist form of East Asian cultural traditions (especially Confucianism) combined with Marxism - and suggests: (a) what China would have been like if it had not repudiated Maoist Communism in the late 1970s; (b) why China maintains ties with North Korea; and (c) that North Korea might resist China's domination. Though the issues involved are complex (see following notes) it appears that there is a cultural and ideological basis for either collaboration or conflict between North Korean, Japanese and Chinese nationalists that is not obvious if they are examined only from a Western perspective (ie in terms of concepts such as democracy, capitalism, socialism etc that do not really capture the radically different way in which East Asia thinks and works).

The North Korean Context: An overview of North Korea is provided by Wikipedia. A commentary [1] on the domestic environment in North Korea (which is relatively resource rich but economically underdeveloped) referred to:

• its long history as the site of conflicts;
• a commitment to 'self reliance' after 1948 (ie closing the country off economically and diplomatically) and to a philosophy of self-mastery (ie for North Korea to rely on itself alone). Independence was sought even in the face of famine, as was a strong defence system;
• perception of the ruling dynasty as somewhat supernatural and 'born of heaven';
• large numbers of people live in prisons and are subjected to abuses;
• daily life being dominated by the family and propaganda;
• an education system that does not involve learning - and does not prepare students for the modern world.

The apparent 'brain-washing' of North Korea's population raises questions about its cultural and educational  environment, it relation to which it has been noted (in sources many of which date from the 1990s) that:

• North Korea's Juche (church'e) ideology holds that the masses are the masters of a country's development - and in the basis of a strong military posture and reliance on Korea's resources. It can be seen as a 'spirit of self reliance, and according to Kim Il-sung, Juche is based on the belief that "man is the master of everything and decides everything" [1];
• Church'e is the cornerstone of North Korea / the monolithic ideology of the Party / the embodiment of Kim's wisdom. It was proclaimed in 1955 as the basis of a Korean centred revolution - rather than one to benefit other countries. It sought independent foreign policy; a self-sufficient economy and defence capacity. It was intended to build a monolithic system of authority under Kim's exclusive leadership. During the first 10 years of North Korea's existence from 1945 Marx-Leninism had been endorsed, and nationalism was minimized out of deference to China and the Soviet Union. Church'e was presented as meeting a need for a way to authoritatively interpret Marx-Leninism in Korea [1].
• Marxism did not show how to achieve socialism, and this created scope for church'e. North Korea's leadership was influenced most by China's communist model (and Kim can be likened to Mao). But North Korea's system differs from China's - intellectuals were never seen as a class of exploiters (but were included). Its political system is best seen as corporatist (ie one that an involves and organic politic to the liberal, pluralist alternative). Kim is seen as the 'head and heart' of the body politic, not just as a victorious commander. There is an assumption that Korea is the centre of the world, radiating outwards the rays of church'e - especially to third world countries. The world's attention is focused on Korea. Society involves ever widening social circles revolving around Kim. The family remains the model for social organisation. One the outer circle are foreigners - as a reflection of Korea's extraordinary unity and history of exclusionism. However the circle keeps expanding to encompass foreigners under Kim and his church'e ideology [1]
• Juche (church'e) ideology involves a fusion of Korean tradition (Confucianism) and Marxism. North Korea's system is different to that in other socialist states. Confucian culture ruled supreme for 500 years during the Joseon (Chos'n) dynasty. It led to an authoritarian political culture, that influences North Korea.  Confucianism provides: political ideology; a means for communication / ethics to bind society together; a view of education as a behaviour changer - and a way of creating a new humanity by internalising of control and discipline. As in Confucianism Juche stresses the formation of a new communist humanity. It puts action before theory. Confucianism which had previously been accepted by criticised during Japanese colonial period (eg because of its emphasis on five relationships (ie father and son; ruler and minister; husband and wife; elder and younger brother and amongst friends) and three bonds (ie to father / ruler / husband) - but was later incorporated into the Juche ideology as the basis for authoritarianism in North Korea (The Resurrection of Confucianism in North Korea, Review of Korean Studies, 2010)
• North Korea's experience of Japanese colonialism (1910-1945) had a major impact on the country. It brought development / underdevelopment, agrarian growth, industrialization, dislocation. It spawned a new role for the central state / new political leaders / communism / nationalism / armed resistance / treacherous collaboration. Koreans had always felt superior to Japan, because of its closer links with China. After 1910 Japan substituted its ways for Korea's (ie it brought in a Japanese ruling elite. modern Japanese education (replacing the Confucian classics), Japanese capital and the Japanese language). This was seen as illegitimate and humiliating - especially as Japan and Korea had formerly been very similar. Japan's bureaucracies were big by colonial standards. Many new institutions were established. Koreans became second class citizens. Japan held Korea tightly and watched it closely. The strong highly centralised state mimicked that in Japan (intervening in the economy / suppressing dissent). Koreans always saw all benefits going to Japan, but Japan's strong colonial state, the multiplicity of bureaucracies, administrative guidance of the economy, repression of labour unions and dissidents provided a post-WWII model for both Korea's. Japan showed Korea an early version of the bureaucratic-authoritarian path to industrialization [1].
• North's Korea's modern revival of Chosn Confucianism is an ideological phenomenon (ie it involves the use for Confucianism as a way for political elites to manipulate the population and legitimize their role). The image of the family-state comes from the regimes political discourses. Its Church'e (Juche) ideology has been systematised and transformed through Confucianism. Confucianism has been used to legitimize the regimes political power [1]
• Church'e is a break with the Confucian past. It was developed by Kim Il Sung during the period of struggle against Japanese imperialism. It emphasises cultural / economic and political isolationism - while stressing the error of imitating others or becoming international. North Korea has promoted church'e thought worldwide. It provides a relentless emphasis on self-sacrifice and hard work. Everything is expected to be possible through dedication and hard work [1]
• North Korea has created a system of totalitarian control which exceeds anything in the Soviet Union or Eastern Europe. The population is rigidly controlled. Individuals rights are subordinate to the state and the Party. Education, mass mobilization, persuasion and coercion are used to ensure political / social conformity [1]
• Formal education has been central to social and cultural development for centuries. During the Chosn Dynasty the royal court established Confucian schools. There was a neo-Confucian emphasis in the sixteenth century. In the 19th and 20th early 20th centuries, Western curricula started to be taught. After the separation of North Korea, the education system was modelled on that of the Soviet Union [1]
• Neo-Confucianism (which combines the social ethics of the classic Chinese philosophers with Buddhist / Daoist metaphysics) was the dominant value system of the Chosn dynasty. "One of neo-Confucianism's basic ideas is that the institutions and practices of a properly ordered human community express the immutable principles or laws that govern the cosmos. Through correct social practice, as defined by Confucian sages and their commentators, individuals can achieve self-cultivation and a kind of spiritual unity with heaven (although this was rarely described in mystic or ecstatic terms). Neo-Confucianism defines formal social relations on all levels of society. Social relations are not conceived in terms of the happiness or satisfaction of the individuals involved, but in terms of the harmonious integration of individuals into a collective whole, which, like the properly cultivated individual, mirrors the harmony of the natural order." This became rigid by the sixteenth century - with an emphasis on hierarchy in social relations and individual self-control. There was no emphasis on individual rights. [1]
• North Korea's official religion in the 1990s was the cult of Kim Il Sung. North Korea has sought to use its few Christians to promote links with South Korea and the West and the North's reunification agenda. Those Christians see no contradiction in venerating the 'great leader' and his secular church'e philosophy (just as Japan's Christians had been forced to accept the divine status of Japan's emperor before WWII) [1]
• North Korea's primary / secondary education system includes a balance between academic and political subjects - though there is a strong political component in some 'academic' subjects. Special deference towards political leaders is expected [1];
• The role of literature and art in North Korea is primarily didactic - ie an instrument for inculcating ideology and the need to continue the struggle for revolution and the reunification of Korea. Foreign (especially Japanese and American imperialists) are predicted as monsters. The state and the Korean worker's Party control the production of literature and art - and there are no underground movements like those in the Soviet Union of China. There is little or no exposure to foreign influences. There is an emphasis on: taking the best from the past and discarding change; and collective consciousness [1]

Comparing North Korea  with Japan and China

North Korea apparently combines traditional East Asian cultures with Marxism, while Japan and China have combined those traditions with something like democratic non-capitalism and socialism  respectively. It is noted (somewhat randomly) that:

• there are some common features of all three systems - including the image of the 'family-state' and the role now played by neo-Confucianism (see features mentioned above) in enabling social elites to influence the 'family's' thinking and actions. In both North Korea and Japan the 'family-state' is a single unit, whereas in China it comprises many different sub-elements (ie China is a 'try of sand' rather than a 'block of granite'). Strict control is sought in all cases, though the degree of subtlety varies (being greatest in Japan and least in North Korea). China apparently / possibly intends to shift towards an education system based on traditional systems of Chinese thought that could make a population unthinkingly responsive to leaders' suggestions and willing to sacrifice self for the community (ie in the direction of North Korea);
• Chinese nationalists view both Korea and Japan as having been colonised by the 'great Han race' [1]
• both Korea and China used Confucianism as the means of interpreting Communism in 'Asian' terms (ie as 'socialism with Chinese characteristics' and North Korea's church'e ideology respectively), while Japan used it as a means for interpreting democracy and a non-capitalistic market economy in 'Asian' terms;
• in both North Korea and Japan there is a Confucian perception that leaders have a link with 'heaven' (ie with an expectation that they will act in accordance with what is for the good of their ethnic community), and in China there is a search for ways to overcome problems of corruption / abuses of power - perhaps through redeveloping the Confucian expectation of a 'mantle of heaven';
• Japan's ultranationalists have a view that Japan could take the central role in the world that parallels North Korea's perception under its church'e ideology. This could potentially lead to conflicts of interests amongst leaders in those countries as China increasingly uses into increasing economic / strength to assert its status as a new 'Middle Kingdom' in Asia (which requires that others accept tributary status). Not everyone can be the 'centre of the world', and the fact that all share neo-Confucian methods does not mean that those  methods are being used to achieve identical / compatible goals;
• Korea (both north and South) endorses an ethnic nationalism (ie the view that Koreans form a race / ethnic groups and a distinct culture). This emerged during Japanese occupation - and was a motive for resisting Japanese occupation. It parallels the views of Japanese ultranationalism and German Nazism that prevailed prior to WWI - and continues to the present in Korea with a commitment to the ethnic homogeneity and pure bloodline of the 'Great Han' race [1]
• North Korea, China and Japan all share a passionate commitment to the uniqueness of each society, and a resentment of the economic, military and political power and influence of Western societies with their commitment to universal values and to individuals (rather than the 'family-state'). China's international relations are based on non-interference - and a disregard for what Western observers see as 'human rights' abuses. North Korea's church'e ideology is all about self-reliance and not being influenced by others. Japanese prime minister expressed a desire to 'get our culture back', and growing nationalism in Japan can be interpreted as a desire to turn inward [1].

North Korea's isolationism might also indicate how Japan and China might turn inward at some future time, as they have in the past when coping with the outside world seemed too hard / not worth it (eg after the voyages of China's Admiral Zheng He, and as Japan did during the Tokugawa period from the start of the 17th century until it was forced to open by Admiral Perry).

• The increasing signs of resurgent (ultra?) nationalism in Japan - including the portrayal of Japan's early 20th century colonial and military interventions in Korea and China as part of a noble cause (see Reverting to the Soul of a Samurai);
•  South Korea's apparent shift to a more liberal / Western-style political and economic order in recent years (eg reducing the role of the chaebol as economic instruments of the state) - after having used Neo-Confucian methods initially as the basis for its rapid economic modernisation,. This could be seen as treasonous by those committed to what are believed to be proper 'Asian' (ie autocratic family-state) models for the region's development. Moreover this approach might be reversing under South Korea's new apparently-more-China-friendly president;
• The growing risks of either: (a) a crippling global financial / economic crises; or (b) financial / economic crises (and thus severe social stresses and perhaps even political failure) affecting countries such as Japan and China because of the the incompatibility between what is required for global financial stability and the imbalances that have been intrinsic to 'Asian' mercantilist economic strategies (see Japan's Predicament and China: Heading for a Crash or a Meltdown).

Elaboration: These risks are not easily seen but relate to the way financial systems have been used by Japan and China to achieve political / mercantilist goals (see above) and the incompatibility between these and the Western-style international financial system which facilitates commercially oriented initiative by independent enterprises to meet the needs of individuals as savers or consumers. It can be noted that:

• serious problems affecting the global financial system are becoming increasingly obvious that can't be resolved without addressing the mercantilist economic tactics used by countries such as Japan and China;
• countermeasures are available that should be effective (eg see China may not have the solution, but it seems to have a problem). However if such counter-measures are not put in place the financial systems that are the foundations of Western economic and military capabilities could be seriously compromised;
• the US is showing signs of: (a) recognising that it has been the subject of mercantilist challenges from East Asia, and also increasing military challenges; (b) economic recovery driven (for example) by a housing recovery and shale gas developments; and (c) the adoption of tactics that might enhance its economic competitiveness;
• the trigger point for a financial crisis in (say) Japan or China would involve the emergence of current account deficits that forced such countries to rely on borrowing in international profit-focused capital markets to fund growth. This is not immediately likely because of the accumulated foreign exchange reserves eg that a former World Bank expert China noted that those reserves protected China from the 'sovereign risk' otherwise associated with its financial practices. However there is a limit to which foreign exchange reserves can provide such protection;
• Japan is already experiencing current account deficits, and China is headed that way. Though statistics showing a sudden Chinese export boom emerged in early 2013, they were not matched by trading partners' trade data;
• China has sought to promote the use of its currency (the Renminbi / Yuan) for trade. In the absence of a current account surplus, China would no longer have a torrent of $US from net exports to prevent the need to borrow in international markets. Thus it might hope to obtain foreign exchange to cover any current account deficits in return for the Yuan. The problem with this is that it is not clear why anyone (other than a 'tributary' state) would want to hold the Yuan [1]. The latter is a 'political' rather than a 'commercial' currency. It is a component of an economic system that allocates 'market oriented' resources on the basis of consensus amongst the ethnic connections of a neo-Confucian elite (rather than on the basis of profit focused judgements by independent enterprises) and is not backed by a solid financial market.

• The inability of the neo-Confucian groups who dominate East Asia to communicate through dialogue outside the boundaries of their own ethnic community (because the role of those of those with power is to enforce the consensus of their subordinates, and traditional approaches to communicating with outsiders involve anything but straight talking). Thus they have been unable to ask for the help that has been, and remains, desperately needed.

There are undoubtedly other features of the 'forest' that have not occurred to the present writer.

Implications for Security Threats: Some Scenarios

The possible implications of the ‘forest’ in terms of various security threats that are emerging in East Asia were previously speculated in Looking for meaning in war warnings from Asia and Whose intentions: Kim's or China's?.

In brief: The former suggested that, though there were various ways to interpret the friction / sabre rattling between Japan and China, the possibility of an anti-Western coalition between the neo-Confucian factions that dominate both should not be ignored.

The latter suggested a 'barking dog' scenario under which North Korea's blustering might usefully be viewed as a means of achieving relatively low-cost strategic gains for China at US expense.

However these are by no means the only possibilities, and other scenarios can be suggested in relation to North Korea's threats.

Firstly North Korea could be simply an isolationist rogue state. This seems to be the case, and what is happening makes no obvious sense - though North Korea apparently believes that its church'e ideology (see above) provides a possible model of world-wide relevance under Korean leadership. This belief might justify 'making a lot of noise' to attract attention (especially the attention of less developed nations).

However, while North Korea's threats may reflect such ambitions and / or domestic political agendas, given the 'forest' mentioned above there is a case for taking a broader view.

A second alternative is that North Korea could (as also suggested above) be a 'barking dog' - ie making a lot of noise in the hope of generating relatively low-cost strategic gains for China relative to the US because of:

• the probability that neo-Confucian methods can encourage or discourage aggressiveness in what is perhaps a Chinese vassal state (and perhaps also a 'China in training') [eg by encouraging Kim Jong-un (Korea's young leader) to believe that acting tough is the best way to secure his political position and get a good deal / concessions / cash for North Korea - as suggested below];
• the costs to the US of increasing its military involvement in Asia both financially and in terms of again dislocating efforts to maintain / increase its economic strength and develop effective non-military collaboration in Asia. One observer pointed to the obvious difference between the US's military deployment and China's economic collaboration emphasis in their efforts to boost their relative influence in Asia (see The Future of Asia: Hard Liberal versus Soft Autocratic Options); and
• the potential for demonstrating to Asia and the world both: (a) that the US’s military capacity is of no use against lunatic regimes; and (b) that China’s behind-the-scenes methods of exerting influence can (in due course) be more effective – perhaps as part of a process to re-establish China’s role as the ‘Middle Kingdom’. Boosting China's role as the regional power-broker (which 'trees-focused-and-forest-blind' Western observers immediately and predictably perceive as the best way to solve the problem) could be a primary motive for the whole exercise.  Suggestions from China that South Korea should look to China's leaders (rather than to the US) to reduce its risk of being attacked by North Korea can also be noted [1] - as can the fact that China would be more willing to provide such support if South Korea steps back towards an 'authoritarian family-state' model rather than towards towards the West's 'rational / responsible individualism'.

An Explanation in Terms of Boosting China's Role. A contact in Australia who it was reasonable to assume had good Korean connections provided a possible explanation in terms of Korea's political situation (and China's potential role) along the following lines:

North Korea’s threats to attack South Korea and the US are the result of political contests within North Korea, and its international relationships (especially with South Korea, China, Russia, Japan and the US). North Korea’s new president Kim Jong-un (born in 1983) is seen by some in North Korea as too young, and has been competing to retain power with the husband [ ???] of one of his father’s daughters [???]. The husband is both older and more willing to listen to China. To prove himself Kim Jong-un tries to prove that he is very tough.

North Korea has already moved most of the equipment and forces that it would need for an attack very close to the border. [[This view was contradicted [1] by a source who privately claimed reliable Chinese and North Korean contacts  - and the reality was impossible to ascertain]]

Kim Jong-un’s goal is to gain concessions from other major powers with an involvement in the Korean Peninsula, as well as money.

The best solution for Korea would be for the US to remove its forces out so that China can help North and South Korea to re-unite (as East and West Germany did). They are one people, and have complementary strengths – the north is resource rich while the south has sophisticated economic capabilities. Together they could become very strong.

South Korea’s new president (Park Geun-hye) is much more willing to listen to China than her predecessor (Lee Myung-bak)

To understand this there is a need to consider 'who's who' in the Kim dynasty. This includes:

Kim Il-sung (1912-1924) who led North Korea from its establishment in 1948 til his death. He: was autocratic; established an all-pervasive cult of personality; promoted the church'e ideology; and is still regarded as the 'Eternal President'

Kim Jong-il (1941-2011) who succeeded his father, Kim Il-sung  as 'supreme leader' in 1994 until his death

Kim Jong-un (1983- ) is the third son of Kim Jong-il, who was appointed as his father's successor in 2009, and is North Korea's current 'supreme leader' (though he is a member of a tripartite committee that in theory equally share one third of the president's powers - the others being Kim Yong-nam (1928- ) Kim Jong-il's eldest son and who is chairman of the Supreme People's Assembly and Pak Pong-ju who is Premier of North Korea).

Against this is the apparent church'e view that Korea should be independent of all foreign influences, including China's, despite the features they have in common. However this objection might be negated by a claim that China would merely act as peacemaker between North and South Korea, and the assumption that a war-weary and internally divided US might be willing to accede to this in preference to becoming involved in a new Korean war that could result in being 'ambushed' (as in many Western movies) if the 'US's posse chases the gun-toting outlaws up a dry gulch'.

A weird, but not necessarily impossible, version of the 'barking dog' scenario is that North Korea's (partly Western educated) 'supreme leader' might be desperately trying to get an opportunity to get outside help to head off a China-sponsored reunification of Korea as a Chinese tributary state (which is one possible outcome).

In support of this scenario it is noted that:

• Kim Jung-un reportedly asked US President Obama to 'just phone me';
• a domestic political power contest may exist between the young Kim Jong-un and an older leader who might be more willing than he is to 'listen to China';
• a passionate commitment to 'separate development' is the foundation of North Korea's church'e ideology and the view that North Korea is the 'centre of the world' in promulgating that world-changing ideology;
• there are indications that war-rumblings between Japan and China could emerge from China flexing its diplomatic muscles in Asia, in ways that threaten Japan's perceptions of its status;
• the 'leadership' role of elites in East Asia can consist of creating 'chaos' which forces their subordinates to collaborate in creating a new order - and the undoubted chaos being created by Kim Jong-un (which will force many global powers to collaborate in finding a solution) can be viewed in that light.

The third alternative is that North Korea might be an 'attack dog' - seeking to generate real conflicts to enable itself and allies to obtain vengeance for perceived historical injuries, or to progress emerging conflicts. Two different scenarios can be envisage involving either:

• an attack against Japan in retribution for past North Korean grievances and in support of China's current friction with Japan; or
• the threatened (possibly nuclear) attacks against South Korea and the US being just one of several coordinated initiatives to disrupt the Western-style international order that the US has championed.

Elaboration: As a 'barking dog' North Korea has: (a) a militaristic population with the world's largest army (including reserves) of 8 million; (b) second rate weaponry; and (c) no allies. However as an 'attack dog' acting on behalf of others North Korea might not only possess an army of 8 million but also: (a) sophisticated weaponry / logistic capabilities provided by allies; and (b) unexpected allies.

North Korea has threatened pre-emptive (perhaps nuclear) strikes against the US and South Korea.

Attack Dog Scenario 1 ('We Fooled You')

However as an 'attack dog', it is possible that North Korea's real target could be Japan (if the friction between China and Japan is real and relates to the injuries that Japan inflicted on China in the 1930s and 1940s - as North Korea maintains massive resentment of Japan because of both this and Japan's 1910-1945 colonisation). If China were encouraging North Korea as an 'attack dog' as its proxy for action against Japan, US intervention on behalf of Japan would presumably be limited to destroying the 'dog's' ability to launch further attacks. One problem with this revenge-for-the-1930s-and-1940s scenario is that it is not clear, from North Korea's viewpoint, why such an attack would be launched now - though Japan's increased nationalist rhetoric and suggestions that the early 20th century colonisation of Korea was part of a noble program might provide an explanation..

However China's motivation under the 'Attack Dog 1' scenario might involve North Korea acting as China's 'attack dog' in relation to the current sabre-rattling between China and Japan which could have its origin not only in history but also in: (a) Japan's increasingly nationalist rhetoric and attempt to rationalize its invasion of China in the 1930s; and (b) the serious current political and economic difficulties that China now faces as a consequence of the apparent transmission to China's so-called Communist Party in the late 1970s of the neo-Confucian methods that had been the basis of Japan's pre-1990s economic miracles.

Attack Dog Scenario 2 ('Don't say we didn't declare war before we attacked this time')

However, if the possible anti-Western-liberalism coalition between neo-Confucian elites in Japan and China is real, then the 'attack dog's' target for attacks could be South Korea and the US in order to:

• discipline South Korea for its perceived treason through apparently accepting a more 'liberal' / Western approach to 'Asian' development (an action that would be 'justified' on a similar basis to the Tiananmen Square massacre) and draw the US into what would amount to an 'ambush' as it provides military aid to South Korea against an attack that seems to be coming only from North Korea but could actually involve many different apparently unrelated elements;
• help gain revenge for: (a) centuries of perceived injuries that resulted from Western expansion, for which the US is the main current banner carrier; (b) US Admiral Perry's intervention in the mid-19th century that forced Japan to open to the West; (c) Japan's military defeat in WWII, in particular in relation to the atomic bombing of Hiroshima and Nagasaki; and (d) the outcome of the Korean War; and
• reduce the risk of the financial crises that will affect Japan and China if the global financial system is stabilized / reformed under Western-style rules (ie if action is taken against systems dependent on 'financial repression' to defend poorly developed financial systems).

The sudden and unexpected drop in the value of gold in April 2013 seems likely to presage a major new financial crisis and also affect the way the global financial system evolves (as suggested in Interpreting the Canary in the Gold Mine).

Though a run on physical gold that caused problems for holders of paper gold may have been a factor in the gold crash and though China and various other countries have been prominent boosting demand for physical gold, it seems most likely that the event was simply a product of the interaction of diverse causes.

In relation to this way-out (and thus not necessarily likely) version of the 'attack dog' scenario it can be noted that:

• There are reasonable indications: (a) that Japan's ultranationalist factions and neo-Confucian bureaucracy have sought to use traditional Art of War tactics to undermine the US since 1945 through mercantilist economic tactics, despite Japan's official position as the 'good cop' in Asia (from a US perspective); and (b) that China was brought into this process in the late 1970s;
• China and North Korea might participate in a coalition with Japan (even though they have strongly resented Japan's colonial and military interventions prior to 1945, and the lack of any apology) if:
  • private apologies for historical offences have been offered;
  • Japan's pre-1945 'Asian Co prosperity Sphere' ambitions and post-1945 mercantilist economic tactics were presented as compatible with China's and North Korea's current ambitions;
  • it was seen as possible to make a significant difference to the US's (and thus the West's) economic, military and political power through a diversity of coordinated but apparently unrelated actions.

 Such coordinated attacks might include:

• the threatened (possibly nuclear) attack from North Korea - which would either: (a) generate a massive US response (eg 'turning North Korea into a car park') that further weakened the US's international status (see below); or (b) bog the US and its allies down in another more-or-less-conventional 'Asian' war in defence of South Korea - and thus impose unwanted costs and disrupt US efforts to get its economy and a liberal global financial system back into order;
• further disrupting the global financial system (and also and the Internet), which are critical elements of the 'nervous system' of the Western-style global order, but much less important to the way East Asia operates (see below);
• unexpected new attacks against US targets by Islamist extremists worldwide (noting the uncertain possibility that the latter were acting in coalition with Japan's ultranationalists in launching the 911 attacks - eg Osama Bin Laden's reported reference to the US atomic attacks in Japan at the end of WWII as one of the justifications for the 911 attacks);.
• efforts to lay foundations for international collaboration independent of post-WWII Western-style international machinery (through the BRICS network and otherwise)

Speculations about Disabling the Financial System and the Internet

The global financial system is weak (see Debt Denial: Stage 3 of the GFC) largely, though not solely, as a consequence of the macroeconomic distortions associated with East Asian systems of socio-political-economy . Moreover:

• when / if the international financial system recovers East Asian economies are likely to suffer serious relative decline for reasons referred to above;
• capitalistic (ie profit-oriented) finance is the 'nervous system' of Western economies - but much less important in East Asia where economic coordination tends to be achieved through social relations (rather than by independent calculations of profitability). As noted above the West's strength in economic affairs lies in dealing rationally with individual activities ('trees') in an ordered environment (eg involving a rule of law and profit-focuses accounting principles), while the strength of East Asian neo-Confucian traditions lies in developing consensus without reliance on any given 'rules of the game'.  Thus creating chaos in financial system might incapacitate the West economically, but be less serious in East Asia ;
• the global financial system could be weakened further by cyber attacks against financial institutions (eg consider China's alleged involvements cyber warfare) or by irresponsible quantitative easing.

  In relation to the latter, there is a need to consider: (a) the role that Japan played through easy money policies and 'carry trades' in creating the asset bubbles that contributed to the GFC (ie Japan was for many significant years the world's main source of credit) (see An Unrecognised Clash of Financial Systems and GFC Causes); and (b) its recent monetary actions seem to have gone beyond the measures adopted by reserve banks in the US and Europe.

  FiFinancial repression in Japan (ie a financial system that is arranged to direct savings / credit into investment, rather than to households for consumptiona>) is arguably the reason that Japan has experienced two decades of deflation. This is are now being used to justify extreme quantitative easing that will presumably be intended to: (a) direct new credit into carry-trades and asset bubbles elsewhere; and (b) devalue the Yen - both of which might reduce Japan's need to borrowing in international profit-focused financial markets.

  What actually happened as a consequence is difficult to interpret as it was suggested that:

  •  this presumption about substantial capital outflow was the reverse of what was actually happening [1], but that
  • interest rate risk increased in Japan - perhaps in recognition of its government's extraordinarily heavy debt levels. Under some circumstances this could lead to a flight of capital from Japan into $US [1]

ThThe Internet is now a critically important element of the 'nervous system' of Western societies (ie it allows analysts with different perspectives to communicate to make rational sense out of a complex and rapidly evolving political and economic environment). However the Internet is much less important in East Asia (because abstract understanding is less important than intuitive consensus), and is potentially vulnerable to the cyber warfare capacities that China is seen to have been developing.

If North Korea is acting in coalition with Japan and China it might then posses an army of 8m 'virtual samurai' and also: (a) more advanced technological capabilities (supplied by allies) than those publicly demonstrated; (b) unexpected logistic capabilities and (c) an ability to launch nuclear attacks against the US using long range missiles, for which any nuclear responses would be limited to North Korea (ie the 'attack dog' might be willing to be sacrificed - noting the emphasis on self-sacrifice that is a major element of North Korea's national ideology - and to expect that its allies would significant weaken the US and its allies through 'unrelated' attacks on the the West's (financial / communications) 'nervous system'). China and Japan would not be seen to be involved in a military sense and could continue uninterrupted economic and military build ups.

If a nuclear attack on the US provoked a severe military response, then the US's global status (and liberal geo-political agendas) would be eroded (as occurred after the 911 attacks) because, its response would be:

• directed against one of the world's most backward societies - and one whose 'mission' has been to mobilize support for its church'e ideology from other poorly developed societies;
• popularly portrayed in China as an attack by capitalist-imperialists on a Chinese ally, and equated in Japan with the still-resented US nuclear attacks on Hiroshima and Nagasaki to end WWII;  andli>
• viewed with limited sympathy in many parts of the world because of the sorts of blowback that has been the outcome of US efforts to use military force to support the creation of a democratic capitalistic world order - in an environment in which that order is increasingly strained and questioned because capitalism is seen (arguably incorrectly) as the main cause of the GFC.

In support of the Attack Dog 2 Scenario is that:

• some possible components are in clearly place. North Korea has threatened war. Japan has launched an aggressive (?) program of quantitative easing that could be expected to stimulate asset bubbles and further increase the already-significant risk of another financial crisis. China's cyber-warfare capacities seem to be well developed, and to have been causing security concerns;
• the US 'pivot to Asia' in support of liberal Western values could provoke a reaction from the 'family states' (notably Japan, China and North Korea) opposed to those values (see above);
• the out-of-the-blue terrorist attack on the Boston Marathon suggests the possibility  that a new program of attacks by Islamist extremists could be experienced. However it certainly does not prove this - especially if there is only one isolated incident and as responsibility for that attack has not been established (though it appears that Islamist links are possible [1, 2]);
• Japan's prime minister has also made nationalistic remarks that could be seen to inflame tensions in the region (and perhaps would be a way to both encourage nationalists across the region, and also divert suspicion from Japan if the US and South Korea were attacked by North Korea). [1];
• the General Secretary of China's Communist Party has espoused a nationalistic vision of the resurgence of the 'Chinese race' - which is significant in that: (a) China's nationalists reportedly perceive both Korea and Japan to have been colonised by the 'Great Han Race'; and (c) Japan's ultranationalist regarded Japan's Han origins as the basis for efforts to co-opt China (Japan's 'big brother') in the 1930s as part of Japan's push for an Asian Co-prosperity Sphere.

Against the Attack Dog 2 Scenario is that:

• the elements of an Attack Dog 2 scenario could be in place without necessarily implying any collaboration amongst those involved;  
• Xi Jinping's nationalistic vision of of the resurgence of the 'Chinese race' could be purely for domestic consumption - to motivate China's people to look past their disaffection with the inequalities and abuses of power associated with rule by the so-called Communist Party;
• it would require a lot to convince China and North Korea that they really can trust Japan now. Elsewhere in Asia, Japan appears to trigger not only resentments for past actions but a general perception that it simply can't be trusted;
• there are reportedly signs of real frictions between Japan and China in relation to Asia-wide governance arrangements (ie those related to the way in which regulatory networks operate) [1]. The fact that Nomura (as significant player within Japan's financial institutions) has publicised weaknesses in China's financial system also reduces the likelihood of behind-the-scenes collaboration [1]. China Communist Party reportedly used anti-Japanese rhetoric connected with Japan's WWII actions in Japan as a means for building nationalistic support in the post Mao era [1];
• it could be seen as an unnecessary overkill because: (a) there are alternative, less extreme, tactics for dealing with the challenges that the neo-Confucian 'autocratic family-states' face; and (b) the West (ie the realm of the rational / responsible individual) can be perceived to be in terminal decline anyway.

However if the Attack Dog 2 scenario is realistic then it might be that April 29 could be the date on which a nuclear attack on the US would be launched.

Why: April 29th is Shōwa Day - the anniversary of the birth of Emperor Hirohito (Japan's emperor from 1926 to 1989). As the head of Japan's 'family-state' Hirohito's approval would have been required for Japan's 1930s militarism and post-WWII mercantilism - by 'smiling on' those kuromaku (fixers in the relationship between government, business, Yakuza and the military) of whom he approved. The 'tale of the 47 ronin' has been said to be Japan's most popular folk tale - and concerns ronin (masterless samurai) who pretend dissolute living for decades after their master had died while trying to defeat an enemy so that they could get an opportunity to finally kill his enemy. A nuclear attack by North Korea on Shōwa Day (the day on which Japan not only celebrates an emperor's birthday but contemplates its struggles during his reign (the Shōwa era), including the still-resented US atomic attacks that ended WWII) would leave no one in Japan with any doubt about what was going on (even though nothing would need to be publicly said).

Overall the 'barking dog' scenarios (even including the 'weird' version) seem most likely, but the 'attack dog' scenarios (which could have more dire consequences for the world) should not be ignored. Even if they are invalid, there is a pressing need for greater awareness amongst Western observers that they might be possible.

A Soft Power Response

A possible ‘soft power’ response to early perceptions of security risks in Asia (ie China’s military build-up) was suggested in Comments on Australia's Strategic Edge in 2030.

With appropriate modification this might also be relevant to developing a strategy for responding the specific security threats, such as that associated with North Korea’s blustering. This might involve, for example:/

• ensuring that defence, security and emergency response organizations as well as those dealing with financial / telecommunications systems consider the implications of broader views of North Korea's blustering such as those speculated above;
• drawing public attention to such speculations, while denying that they were being considered;
• seeking assessment of the situation from experts on Asia's 'Art of War' traditions;
• promoting strategic Asia literacy amongst business, community and political leaders - and on this basis encouraging research into options for more financially / economically sustainable and less internationally-disruptive systems of socio-political-economy in countries such as Japan, China and North Korea;
• highlighting in international forums (eg G20) the impossibility of achieving sustainable economic growth by counter-cyclical fiscal / monetary policies while substantial international financial imbalances remain unresolved - and thus bringing serious pressure to bear for reform of economic and financial systems in East Asia, while offering Asia-literate help in achieving those reforms;
• a minimalist / reactive military response to North Korea's threats and actions as the lessons of Western efforts to use military force to establish a foundation for political and economic success in countries such as Iraq and Afghanistan (as in Vietnam) is that what works in Western societies does so because of many cultural and institutional pre-conditions that are not automatically present elsewhere (see Fatal Flaws and Saving Muslims from Themselves);
• strengthening domestic economic and political institutions.

Do Others Share the China Dream? - email sent 6/5/13

Dr James Leibold,
La Trobe University

Re: The Impossible Dream, Inside Story, 22/4/13

Your very useful article dealt with the meaning of the ‘vision’ that is being presented to its people by China’s current leadership. I should like to suggest implications of the ‘China dream’ beyond those your article mentioned.

My interpretation of your article: After being appointed as party secretary Xi Jinping led the Politburo Standing Committee on a tour of the The Road to Rejuvenation exhibition at National Museum in Beijing - and there promised to pursue the 'China dream' (ie the great revival of the Chinese race). The exhibition tells the epic tale of China's decline and dismemberment at the hands of foreign forces and the struggle of the Communist-led people to reclaim their national pride, dignity and power. China is seen to finally be in control of its own destiny after 170 years of struggle (from opium Wars). Modern Chinese leaders have tried to define their leadership through such slogans as the China dream. Achieving the 'Chinese races’ great rejuvenation' is now seen to be closer. The 'China dream' was originally the title of a book by Liu Mingfu (a PLA colonel) which addressed overcoming American hegemony and assuming global supremacy. It was initially banned, but then republished after Xi's museum visit. Its call for a revival of Spartan, martial spirit echoes the new leadership’s crackdown on corruption and lavish living. The military (and its 'princeling generals') are key supporters / advisers of Xi, and China's more assertive foreign policy reflects the moralistic nationalism at the core of his statist vision. The Party's austerity program (outlined in Politburo's 'eight point regulation') aims to improve work styles and resembles the Maoist 'mass line'. In contrast to US approach this argues that China dream is a collective enterprise (ie the China dream asserts that if it is good for the country, it’s good for the nation and everyone benefits. This continues the cultural tradition of Eastern collectivism which holds that a big / powerful country safeguards the happiness of the people and allows everyone to share in benefits of state development. Individual dreams and state dreams are seen to be mutually related. This raises questions about whose dream matters most - the Party's or the people’s. On the Internet some Chinese dispute the 'China dream'. But others (soldiers and nationalists) embrace the dream. The China dream is a powerful method for grassroots mobilization - but the Party may not have the legitimacy / capacity to control the future. Xi's predecessor had a vision of 'China's peaceful rise'. Xi's 'China dream' may define the next decade or fizzle out. Xi is a relaxed / confident patriot who views his princeling status as mandate to rule. He is clearly different to his predecessor Hu - though both were risk averse - preserving the Communist Party's wealth and power above any other priority.

The potential pursuit of a Spartan / martial spirit (that you suggest was the original meaning of the ‘China dream’ and is compatible with newly emerging Politbureau policy) is clearly incompatible with the world’s (and Australia’s) expectation that China is preparing to shift from export and investment driven growth onto consumer-driven growth that would provide the demand to drive global growth that heavily indebted Western nations can no longer provide. However such a Spartan / martial spirit is compatible with:

• The apparent shift in China’s education system towards starting education with rote learning of the Chinese classics (see Competing thought Cultures). That approach to education can be expected over time to create a community that is conditioned to comply with suggestions from the state, and not to place much emphasis on individuals thinking for themselves or on their individual interests;
• The suppressed domestic demand that was critical to China’s role as the ‘Middle Kingdom’ prior to Western expansion (see Creating a New International 'Confucian' Political and Economic Order ). The latter involved tributary states gaining net material benefits from accepting China’s dominance as China’s people worked hard for limited reward;
• The austerity and individual-sacrifice-in-the interest-of-the-nation-state that characterises North Korea (see North Korean Context);
• The samurai spirit of which signs are re-emerging in Japan (see Reverting to the Soul of a Samurai which amongst other things refers to the current Prime Minister’s view of Japan’s 20^th century invasion / colonisation of Korea and China as part of a ‘great cause’).

It can also be noted that:

• Presenting a vision (such as the China dream) is a neo-Confucian technique for mobilizing a community (see also Look at the 'Forest' not just at the 'Trees' in relation to differences between East Asian and Western ways);
• Chinese nationalists reportedly argue that the ‘great Han race’ colonised Korea and Japan centuries ago (see link in Comparisons with Japan and China) – and in the 1930s a similar belief in the ‘Han race’ led Japan to invade China (seen as Japan’s ‘big brother’) in an unsuccessful attempt to mobilize China’s support in establishing an Asian Co–Prosperity Sphere;
• Incompatibilities between continued global economic growth and the financial systems that have been the basis of neo-Confucian economic ‘miracles’ in East Asia suggest that the region can’t simply keep going as it has been going (see Fasten Seat Belts: Rough Weather Ahead ).

The similarities between the aspirations of nationalists in Japan, China and North Korea do not help in resolving the question of whether they are currently in conflict or collaborating (an issue that is considered in 'Art of War' Speculations about North Korea's Threats). Concealed collaboration is possible (eg see Broader resistance to Western Influence?), but is by no means assured.

I would be interested in your response to my speculations.

John Craig

Soft Power Requires Changing Minds more than Providing Aid - email sent 8/6/13

Dr Susan Harris Rimmer,
Director of Studies
Asia Pacific College of Studies,
ANU

Re: Why soft power is so hard: the impact of aid cuts on regional security, The Conversation, 7/6/13

Your article made a good case for a comprehensive and balanced approach to promoting Australia’s regional security, and for a significant role for ‘soft power’ in that mix. I should like to suggest ‘soft power’ options that are potentially both more effective and much cheaper than conventional foreign aid.

My interpretation of your article: Opposition foreign affairs minister said that Australia foreign policy assets (military, defence, economic, trade, diplomatic and foreign aid) will focus on economic diplomacy. This view of the role of foreign aid is important because of confusion in this year’s budget about this. The key question is what will make Australians secure in this region in the Asian century? Arguably foreign aid and development policy should be a core of Australia’s regional identity and ‘soft power’ in the Asian Century. Australia consistently under-invests in soft power (given that having the winning story is more important than having a winning army). Australia has a great story to tell (eg of humanitarian assistance). Yet this is not recognized in the budget. Aid should help overcome poverty. John Howard once suggested that building Mosques to support moderate Islamic schools helped reduce terrorism – and this probably doesn’t hurt. NGOs argue that health and education programs in PNG and community buildings in Afghanistan help. ASPI argued the need to carefully consider the link between aid and national security – though some NGOs object. The involvement of military forces in providing aid encroaches on the role of impartial NGOs. The US talks of three national security pillars (development, diplomacy and defense). The strategic use of soft power is a better solution.

Some suggestions about the importance, and nature, of ‘soft power’ options to improve Australia’s regional security are in Comments on Australia's Strategic Edge in 2030 (2011).

The latter points to the fact that ‘soft power’, ie the manipulation of access to information by Confucian intellectual elites: (a) was for centuries the primary method whereby political and economic power was exerted in China (and over China’s tributary states); and (b) has been the foundation of ‘economic miracles’ in authoritarian East Asian ‘family states’ (such as Japan and China) in recent decades. The assumptions that have been made about the nature of a possible Asian Century in the federal government’s white paper (ie that an Asian Century would involve Western-style institutions and methods in a different setting) appears quite inadequate (see Australia in the Claytons Century: The 'Asian' Century you have when you are not having an Asian Century, 2012). The possibility that an attempt is currently being made to recruit the US as a ‘tributary state’ by the use of ‘soft power’ methods is suggested in Will the US / China Summit be a Western or an East Asian Meeting? (2013).

The importance of ‘soft power’ in relation to reducing terrorism by Islamist extremists was suggested in Discouraging Pointless Extremism (2002) and We need Enlightenment to Combat Radicals (2013). The former argued that Australia should assist Muslim communities to understand what would be required for political stability and economic success, and thus demonstrate to extremists’ potential recruits that the extremists would further exacerbate the constraints on modernisation that Muslim-dominated societies have experienced for centuries. However, for reasons suggested also in Saving Muslims from Themselves (2012), the constraints on initiative that are implicit in the way Islam is enforced even by moderate Muslims implies that merely building mosques cannot be enough to eliminate the breeding grounds of extremism.

However Australia has made no serious use of ‘soft power’ – and this is, for example, arguably the main source of what is currently seen as an increasing security risk – ie that associated with the uncontrollable flow of asylum seekers from failing Muslim-dominated states (see The biggest issue missing from the asylum seeker debate, 2012).

Australia needs to get serious about ‘soft power’ – but not just (or even primarily) through providing conventional foreign aid.

I would be interested in your response to my speculations.

John Craig

The Future of Asia: Hard Liberal versus Soft Autocratic Options - email sent 15/10/13

Dan Steinbeck
Difference Group

Re: Two Visions: U.S. and Chinese Rebalancing in Asia, EconoMonitor, 14/10/13

Your article pointed to the discrepancy between the way in which the US and China seem to be seeking to boost their influence in Asia – the US seems to be giving priority to boosting its military capacity (which some could see as promoting a new Cold War) while China seeks greater influence through promoting economic collaboration.

There is little doubt that the US’s efforts to date have been poorly considered. Boosting support for liberal political economic and political institutions (relative to autocratic Asian alternatives) could be far more effectively achieved by ‘soft power’ methods – for reasons suggested in Comments on Australia's Strategic Edge in 2030. And the economic imbalances that have had their origin in East Asian systems of socio-political-economy could probably be challenged most effectively by methods that have nothing to do with the deployment of military forces (eg see China may not have the solution, but it seems to have a problem).

The US’s military emphasis is perhaps due to warlike rhetoric from the region (especially from China, Japan and North Korea) and a lack of strategic understanding of how East Asia traditionally operates (eg that Art of War strategies emphasise deception and traditionally seek to ‘win without fighting’).

However such strategic understanding is arguably also necessary to make sense of China’s ambition to create a Maritime Silk Road as the basis for a common destiny for China and ASEAN.

Some speculations about the way in which ASEAN countries (and perhaps others) might be linked into a China-centred ‘soft-power-empire’ were outlined in Creating a New International 'Confucian' Economic and Political Order? (2009). The latter referred to the likely recreation of tributary relationships similar to those that existed in Asia prior to Western expansion.

I would be interested in your response to my speculations.

John Craig

Is China Heading in the Direction of North Korea? - email sent 26/10/13

Ambrose Evans Prichard
Telegraph

Re: China turning into 'giant North Korea' say panda pundits, Telegraph, 25/10/13

Your article referred to claims by Minxin Pei and Jonathan Fenby that China might be reverting to sinister police-state Maoism (and become a giant ‘North Korea’ held down by repression alone). I should like to put a different ‘spin’ on that possibility.

My interpretation of the balance of your article: It is thus claimed by Minxin that people are losing faith in China’s ability to engineer a ‘soft’ political landing. However a member of China’s upper house recently claimed that Edmund Burke’s evolutionary conservatism is the new Maoism – and this is incompatible with Minxin’s claims (eg that the Communist Party is in a state of decay; core values are eroding; corruption is endemic). He also argues that high income economies tend to be democracies – as middle class fury does not tolerate such features. Recent cuts to bank lending rates are meaningless as most companies can’t borrow from banks – which gives rise to shadow banking. If interest rates were liberalized many SOEs would go bust. A recently establish free trade zone does not seem to be really politically supported or practical. China can’t open its capital accounts because capital would flee – and capital flight is already under way. Foreign exchange reserve claims are exaggerated. President Xi Jinping is seen to have taken over Bo Xilai’s vision – contrary to the perception that he was cut down for reviving talk of Red Guards and visions of the Cultural Revolution. Xi has revived self-criticism sessions – even in politbureau. He is quoting Mao and speaking of class enemies – which are Leninist reactions. Anti-corruption drives are seen as internal party warfare. China is not following Taiwan – as Taiwan was never totalitarian. Security forces are now in full control, but this may not continue. The rise and fall of Chinese dynasties depends on control of army. Xi’s party loyalists have been put into top military posts. Hopefully China will break historical determinism and find a civilized way forward. But clamping down on the Internet and Maoist revivalism makes this difficult

The claim outlined above, ie that China might actually be preparing for inward looking repression rather than the outward looking liberalization that is being proclaimed, is based on a perception that: (a) the Communist Party is becoming repressive rather than truly reformist; (b) a recently announced free trade zone does not seem to be genuinely supported; and (c) reliance is increasingly being placed on security forces to maintain control.

I should like to draw attention to other possible indications of inward-looking repressive intent.

First China’s education system is reportedly being organised to build education on the foundation of rote learning of certain Chinese classics (see article, The Poor Understanding of two thought cultures, referenced in Competing Thought Cultures). My understanding is that the primary intent and outcome of such an education system would be to create a compliant population – because (contrary to the intent of Western education) those Chinese classics seek to inculcate a view that attempts by individuals to understand what is good for themselves or the community is futile. This is thus probably a shift in the direction of thought control that seems to characterise North Korea (see North Korean context) and seems incompatible with the economic liberalization agenda that China has officially endorsed (see Financial and Educational Reform in China: Headed in Opposite Directions?).

Second there seems to be a lack of realism in emerging claims about China’s potential for financial system reform and its ability to provide a major stimulus to international trade and investment (see Preparing for a 'Con'?). The latter points, for example, to: (a) external observers’ beliefs that China’s economy has been being kept afloat by massive increases in credit a fair amount of which may be poorly directed (eg perhaps $230bn new credit was created in September 2003 alone); and (b) recent claims that China’s major banks are arranging write offs that would have a ‘big effect’ on fixing their balance sheets. If hundreds of $bns of bad debts are emerging annually, then the $4bn recent write-off by China’s major banks would be hardly likely to have a ‘big’ effect.

Third China’s likely actions may best be understood by considering the influence of a form of China’s traditional Confucianism (whereby society is controlled by bureaucratic / intellectual elites through the deployment of strategic information through a social hierarchy responsible to the source of military power) – rather than the possible ideological directions outlined in your article (ie that China may be reverting to ‘Maoism’ (Minxin’s view) or that something like Edmund Burke’s ‘evolutionary conservatism’ might be the ‘new Maoism’) . A modified form of Confucianism:

• Has some characteristics that could be likened to ‘evolutionary conservatism’ (as described in your article, China embraces 'British Model', ditching Mao for Edmund Burke) if the fundamentally different cultural foundations of East Asian societies with a Chinese heritage are ignored;
• has arguably been the basis of East Asian economic ‘miracles’ (Understanding East Asia's Neo-Confucian Systems of Socio-political-economy);
• was probably secretly reintroduced into China in the late 1970s (noting Eammon Fingleton’s observations) and then used by the so-called Communist Party as the basis for orchestrating China’s economic modernisation / opening;
• may be a little-known common feature shared by China and North Korea. Both seem to involve the use of neo-Confucian ‘family state’ methods as the basis for their ‘socialism-with-Chinese-characteristics’ and ‘Marxist’ regimes respectively. It is possible to develop scenarios on the basis of such common features under which North Korea’s threats of war against the US and others might involve North Korea acting as an ‘attack dog’ or a ‘barking dog’ on behalf of China and perhaps others (see 'Art of War' Speculations about North Korea's Threats). There are, of course, other ways to interpret North Korea’s actions.

The late 1970s reintroduction of a form of Confucianism into China by the so-called ‘Communist Party’ would have had to be secretive because Mao’s cultural revolution was specifically targeted at purging Confucianism from China. Mao’s view had apparently been that Confucianism had been responsible for oppressing Chinese people for centuries (see more in Communism Versus Confucianism: The Continuing Contest in China). The latter notes that the significance of the Bo Xilia case in China was perhaps that there is widespread support in China for restoration of the social equality that Chinse people enjoyed under Maoism (ie all were poor but at least were equal) and considerable resentment of the fact that the methods that have since been used by the ‘Communist’ Party have reintroduced a form of Confucian social hierarchy.

Finally it seems possible that China is facing immense structural obstacles which might encourage its current leadership to conclude that inward-focused repression (perhaps combined with the establishment of a tributary empire like that which existed prior to Western expansion – see Xi’s Maritime Silk Road) might be the best option for maintaining their future power.

John Craig

Penance in the Politburo? - email sent 1/11/13

Ambrose Evans –Prichard
Telegraph

Further to my response (Is China Heading in the Direction of North Korea? ) to your article about Minxin Pei’s observations of apparent decay in the Chinese state, I should like to draw attention to a ‘possible’ explanation of president Xi Jinping’s reported revival of self-criticism in the Politburo.

My hypothesis is that this does not reflect a desire to ensure that all members are committed to collectivist ‘working class’ goals (which would be the Leninist position that Minxin spoke of) but rather to promote their commitment to elitist communitarian behaviour (ie to submitting their personal interests to their roles as the head of an ethnic ‘family state’). This hypothesis is based on:

• The apparently discrete adoption of neo-Confucian methods by the (so called) Communist Party as the basis for orchestrating China’s economic opening / modernisation from the 1970s;
• A (plausible) account of the way in which China’s willingness to maintain high rates of capital investment to drive economic growth may be rationalised (see Outline of 'Rise of the Ferro Dollar'). The latter suggests that the achievement of spin-offs and synergistic relationships (which neo-Confucian methods of stimulating real-world / market changes would be effective in achieving) is the rational for that strategy;
• The apparent inadequacy of those economic spin-offs / synergies in compensating for the rapid rise in China’s debt levels that accompanied widespread investment with limited regard to the profitable use of capital – so that China is potentially facing a debt-driven financial crisis (see Preparing for a 'Con'?);
• The fact that members of the Communist Party have exploited their positions to benefit themselves / connections is presumably one of the reasons that the positive spin-offs / synergies have not been adequate to compensate for the limited emphasis on return on investment in particular endeavours. This would not be the only reason for this problem. However it might justify seeking ‘penance in the Politburo’.

I give no guarantees about the reliability of this hypothesis but merely suggest that it is worth considering.

John Craig

Smarter Authoritarians? - email sent 1/11/13

Editor
The Australian

Re: Psssst. Everybody’s doing it’, editorial, The Australian, 1/11/13

Your article realistically pointed out that espionage is central to protecting freedom and fighting terrorism.

I should like to suggest for your consideration that the current pressure that is emerging around the world to constrain (in particular) efforts by the US to collect strategic intelligence is thus (perhaps) a reflection of the behind-the-scenes influence of those who are motivated to constrain freedom and / or engage in terrorism.

The US has taken a global role since WWII in promoting a liberal international order – backed by its economic, diplomatic and military strength which in turn has relied on the collection of strategic intelligence. One can realistically argue that these US efforts have not always been effective or well directed. However blocking intelligence gathering on the grounds that it is a threat to others’ privacy would be a major step towards further undermining the US’s ability to use its economic, diplomatic and military capacity to influence global events.

When casting around for suspects to consider in orchestrating such a program it might be worth considering the nature of East Asian traditional ‘Art of War’ methods (which involve primarily the use of ‘soft power’ methods to undermine opponents’ capacities). Some suggestions on what this implies are outlined in Broadening the Scope of National Security and Look at the 'Forest' not just at the 'Trees'.  

The latter are part of a document, Comments on Australia’s Strategic Edge in 2030, which basically suggested that there is a need for much greater awareness and use of ‘soft power’ methods in dealing with smart authoritarian regimes.

John Craig

---

A Note on Possible Motivations: (added later) - The above is only one way of interpreting pressures that are emerging to constrain the collection of strategic intelligence by the US and its allies.

However it is worth recognising that liberal Western institutions (reliant on the rational social, economic and political initiative of individuals) have for decades apparently been facing increasing challenges (see Competing Civilization) from authoritarian systems involving:

• East Asian nationalists who have built economic strength on Confucian-style enforcement of elite consensus; and
• Islamist extremists who have been using terrorist tactics to promote further repression of individuals as the 'answer' to the historical problems affecting the Muslim world.

 There is also some possibility that:

•  these factions may have been collaborating; and
• a crisis point may be emerging - related to: (a) the risks of financial / economic crises and political instability in East Asia; and (b) conflicts across the Muslim world (See An Approaching Crisis?).

Another possibility is that Western factions may have unwittingly been aiding the world's more authoritarian ideologies. It is, for example, suggested that the a British newspaper (The Guardian) had had access to information provided by Edward Snowdon about US intelligence gathering and had been going through those documents carefully and using then 'strategically' [1]. The irresponsibility of using stolen secret information that had presumably been gained in an effort to reduce security risks without an alternative method to deal with those security risks was suggested in Must Authoritarianism Triumph This Time?

Changing Australia's Security Approach - email sent 5/11/13

Murray Hunter

Re: Change needed in intelligence approach, Online Opinion, 4/11/13

Your article (which was clearly based on careful intelligence gathering) suggested that Australia should eliminate much of its intelligence gathering capacity and should not align itself with the US in order to avoid ‘missing the boat’ on a big shift in regional influence.

However the nature of the change in the international order and regional influence that is under way is by no means certain. The shifts in regional influence that Australia now needs to cope with were certainly not those described by the simplistic and over-optimistic Australia in the Asian Century White Paper (see ‘The ‘Asian’ Century you have when you are not having an Asian Century).

Quite the reverse in fact as the most probable imminent changes in the regional environment (see An Approaching Crisis?) will arguably involve:

• financial crises (especially in Japan and China) associated with their huge state debts, casual accounting practices and evaporating ability to rely on export-driven growth; and
• potential conflicts emanating from North Asia – to complement and increase the global risks of conflicts that are emerging in the Muslim world.

I should thus like to submit for your consideration that the change that Australia mainly needs in relation to its intelligence operations is probably not to eliminate them but rather to introduce more real Asia literacy (eg as suggested generally in Comments on Australia's Strategic Edge in 2030).

Eliminating intelligence-gathering would merely weaken the foundations of defence capabilities and facilitate gains by the breed of authoritarians that the world is currently confronting (for reasons suggested in Smarter Authoritarians?). It is by no means certain the authoritarians will be the ones who determine the ‘big shift in regional influence’ that Australia needs to avoid ‘missing the boat’ on (eg see Must Authoritarianism Triumph This Time?).

John Craig

Knowledge is Power: If You are Clever in the Way You Use It - email sent 11/11/13

Rowan Callick
The Australian

Re: Beijing pursues a global image with forceful projection , the Australian, 11/11/13

Your article drew attention to China’s probable expansion of a domestic method of exerting control (by influencing the nature of available information) into the international arena.

Might I respectfully suggests that the implications of this needs to be considered in the light of the fact that under East Asian traditions power in exerted, not by the Western method of making decisions on the basis of rational understanding, but rather by control (by highly educated elites) of the information that subordinates use as the basis of decision making (see comment on power and China's Bigger Secret).

John Craig

Coordinated Efforts to Undermine Western Intelligence Gathering? - email sent 19/11/13

Mark Kenny

Re: Caught red handed, without an easy fix, The Age, 19/11/13

Your article pointed to Australia’s diplomatic embarrassment about intelligence gathering activities in Indonesia, and to suggestions that a coordinated effort might be being made to undermine Western intelligence gathering generally (an activity that is a critical foundation of effective international relations and of defence / military strategies, and has to draw on more reliable sources than the local media).

“All countries gather information, but the first rule in the spy game is don't get caught. Just as was the case with the WikiLeaks docu-dump, Australia has been caught red-handed courtesy of the security failures of its senior alliance partner, the US. The information has come to light through Edward Snowden, who is now protected in Russia. This has raised suspicions that his information is being used for partisan strategic purposes. The claim is that information is being released in a manner designed to do maximum harm to potential weak points in the Western alliance. First came the hammer blow to US-German relations through the revelation of US hacking of Chancellor Angela Merkel's phone. Now we have another hit to Canberra-Jakarta relations “

Attempts to put such a coordinated effort into context are in Smarter Authoritarians and Changing Australia’s Security Approach, while the wisdom of continuing to collect intelligence in Indonesia is implied by the reportedly rising influence of more rigid / intolerant Islam (see Even Moderate Islam seems Damagingly Rigid and The Muslim World Seems to be Headed for Chaos) - even though all indications are that Indonesia's current regime is not complicit.

Clearly, as your article noted, intelligence gathering efforts require diplomatic skill. It also requires ensuring that such activities are well managed, and not able to be abused.

John Craig

Speculations about Asia's Arm's Race - email sent 7/12/13

Callum Newman

RE: Australia's Box Seat View of the Next Arms Race, Morning Money, 7/12/13

It is worth considering whether the potential conflict between China and Japan over a few islands is real, or whether it is a front for efforts by both to run up their military capacity in preparation for a confrontation with the US and its allies.

These possibilities are considered in both: Comments on Australia's Strategic Edge in 2030 and Art of War Speculations about North Korea's Threats. In relation to this it is noted that:

• China certainly has a grievance against Japan which could generate conflict because of Japan’s militaristic actions in the late 19^th / early 20^th century and in the 1930-40s. However both Japan and China have grievances against Western societies (eg dating to the Opium Wars in China and Admiral Perry’s pressure on Japan to open to the world in the 1850s);
• China’s Communist Party apparently justifies its authoritarian rule on the grounds that the Party is the means for China to gain vengeance for past oppression – and this seems to refer back to the time of the Opium Wars (as well as to Japan’s aggression in the general community mind);
• Nationalists in China, Japan and Korea view all three countries as having been a product of the Great Han Race – and all now rely on neo-Confucian methods in implementing their socialist / democratic non-capitalist / Marxist systems respectively. Those methods involve massive difference in the way in which society is conceived and organised relative to Western traditions (eg see What does an 'Asian Century' Imply);
• In the 1930’s Japan’s primary tactic for establishing an ‘Asian Co-prosperity Sphere’ involved gaining control of China’s emperor so as to (hopefully but unsuccessfully) bring China onside in pursuing that agenda because China was seen as Japan’s ‘big brother’;
• The tactics that have been the basis for ‘economic miracles’ in East Asia were developed in Japan and spread across Asia. Those tactics were based on a modified form of the Confucian methods that prevailed across North Asia prior to Western expansion (whereby power was exerted by intellectual elites through control of the information available within the community). Eammon Fingleton (a Japan watcher) claims that those tactics were developed by the Japanese army in Manchuria in the 1930s and were passed to China in the late 1970s;
• In the 1980s, while working for Queensland Government, I had direct exposure to Japanese ultranationalist factions acting on behalf of the Japanese government who seemed to be still trying to win WWII. This involved a 1945 Class A war criminal (who was a vocal admirer of Admiral Yamamoto who had developed Japan’s invasion plans for Australia in the 1940s) sponsoring the development in Australia of infrastructure that would have facilitated Yamamoto’s plans;
• Traditional East Asian ‘Art of War’ tactics feature (for example): very long term action; deception; holding up a ‘mirror’ so that when others look they see a reflection of themselves; getting close to enemies; and winning before military conflict by encouraging enemies to become weak by serving them.

The possibility of collaboration (rather than conflict) between Japan and China should not be ignored by those having a box seat view of Asia’s coming arms race.

John Craig

Danger from Japan? - email sent 17/5/14

Rob Copeland
Wall Street Journal

Re: Chanos: Japan’s Shinzo Abe Is ‘Most Dangerous Figure in Asia’, Money Beat, 16/5/14

Your article drew attention to a view that Japan’s prime minister is the biggest threat to Asia’s economy because he is an ultranationalist.

However there is nothing new about ultranationalist influences within Japan’s government. Considering post WWII history in the light of this is arguably worthwhile (eg as suggested in Broader resistance to Western Influence?). It is also worthwhile considering the relationship between the aspirations of Japan’s ultranationalists and the neo-Confucian systems of socio-political-economy that Japan pioneered as the basis for its pre-1990s ‘economic miracles’ - and which have been spread across much of across East Asia (see Understanding East Asia's Neo-Confucian Systems of Socio-political-economy). The latter do not involve acceptance of the universalist values or concern for the welfare and capabilities of rational individuals which have characterised Western systems.

John Craig

Beijing Could Not Afford to Wait - email sent 11/6/14

Dr Benjamin Herscovitch
Centre of Independent Studies

Re: Beijing’s real international ambitions, China Spectator, 11/6/14

Your article suggests that the existing liberal international order that the US supports will carry China to international pre-eminence – and that territorial disputes are the only real threat to peace in Asia. I would like to argue the reverse – ie that China’s current leadership is in an increasingly perilous position in a liberal international environment and that China’s territorial posturing is largely a diversionary tactic.

My interpretation of your article: Hans Morgenthau argues that ‘international politics, like all politics, is a struggle for power’. He saw the drive to live, propagate and dominate as inherent to human nature. The pitiless power politics in Asia seems to confirm this. Washington and Beijing are divided by strategic distrust. China seeks to bully its maritime neighbours – and countries in the region are expanding defence budgets and seeking US security assurances. How far Beijing will go is the question. China won’t challenge US-led Asian order of free-trade and free navigation. China complains about US ‘great power chauvinism’ and ‘superpower hegemony’ – and wants to see US unipolar international system replaced with a multipolar world. But China does not want to be the region’s new hegemonic power. China’s foreign minister emphasised that China does not want to replace US in its position in the world. For China, the benefits of usurping US leadership would be minimal. China is likely to have world’s largest GDP by 2019 – and China does not need to challenge US to achieve this. US-led liberal economic arrangements will allow China and other nations to surpass the US. However, while China might be content with slow decline of US-led unipolar international system, it may seek to change the territorial status quo. In 1982 Deng Xiaoping suggested that China would defer action on territorial disputes – and thus implied that these might be revisited in future. And as China’s power relative to its neighbours grows there may be a temptation to unilaterally seize territory. But Beijing’s revisionism is cautious and considered, It will allow US decline to loosen American pre-eminence and won’t resort to violence unless maritime neighbours block its territorial aggrandisement. China will employ tactics of domineering power politics when it can’t get its way by more enlightened means.

China’s rapid economic advancement has been built on a variation of the non-capitalistic neo-Confucian model that Japan pioneered (see Understanding East Asia's Neo-Confucian Systems of Socio-political-economy, 2009). This involves state-orchestrated economic development under which state-linked enterprises are funded by national savings that are mobilized through state-linked financial institutions with limited regard to return on capital (see Evidence). It does not rely on decisions by independent profit-seeking enterprises. Under Confucian teachings wealth is accumulated by savings, not by earning a return on capital (ie profit). Thus financial institutions tend to accumulate bad balance sheets and a financial crisis is inevitable in a liberal market environment unless the need to borrow from international profit-focused financial markets can be avoided by suppressing domestic demand so that investment is funded domestically through ‘tame’ banks. The Asian Financial Crisis in the late 1990s demonstrated the hazards facing countries with cronyist financial systems that lacked the protection of current account surpluses.

However seeking protection from financial crises by suppressing domestic demand is unsustainable in the long term (see Structural Incompatibility Puts Global Growth at Risk, 2003). Trading partners must be willing and able to sustain significant current account deficits and rising (eg household and government) debts if global economic growth is not to be stifled. They can’t do this forever. Accumulated debt now increasingly constrains the ability of the rest of the world to provide the excess demand that has been vital to protect the major non-capitalistic neo-Confucian economies from financial crises. China, for example, has been recognised to need to shift from export-dependent growth to domestically-driven growth – and thus must eventually face current account deficits and the hazards of having to import capital through financial institutions whose balance sheets would not withstand external scrutiny. Financial crises are now a significant risk for the major non-capitalist economies (see Japan's Predicament and China's Predicament). And if anyone bothered to publicise the macroeconomic constraint that the global economy faces from economies with non-capitalistic financial systems, the countries involved would presumably soon lose international standing (eg see China may not have the solution, but it seems to have a problem , 2010).

In this environment China is apparently seeking to establish a new international China-centred tributary system like that under which Asia was ruled prior to Western expansion so that it would hopefully not face the financial disciplines implicit in the liberal international order that the US has championed (The Resurgence of Ancient Authoritarianism in China). And the countries most at risk from those financial disciplines seem to be seeking to build their military capacities to defend their preferred authoritarian order as fast as they can – perhaps using trivial territorial disputes as a pretext.

I would be interested in your response to my speculations.

John Craig

Scratching the Surface of the 'New Japan' - email sent 14/7/14

Editor
The Australian

Re: Welcoming the New Japan, editorial, The Australian, 9/7/14

Your editorial suggested very appropriately that Australia should welcome a ‘new’ Japan. The problem is that, if one looks below the surface, it might be found that creating a ‘new’ Japan remains a future challenge, rather than a past accomplishment. If so Australia’s leaders and their allies perhaps will require a ‘new’ (and high) level of Asia literacy if they are to successfully meet that challenge.

My interpretation of your editorial: Shinzo Abe’s speech to Australia’s parliament signified the richness, depth and breadth of Tokyo’s relationship with Canberra. Shared interests and common ideals include: open political systems, competitive markets, free trade, human right and the rule of law. Friendship has been built despite wartime events. The moment was also testament to the emergence of new more confident Japan following two decades of economic stagnation and the strategic rigidity of its post-war pacifist constitution. A once-militarist state, Japan has become a good international citizen – and has helped promote stability and prosperity in the Asia-Pacific region. It now wants to be seen as a more normal nation. This will be a diplomatic challenge for Australia, as China has argued that Japan is using Australia to build a network against China – Australia’s biggest trading partner. Others suggested wrongly that Abe’s visit will create new instability in the region. Beijing has increased its rhetoric and aggression in several territorial clashes with neighbours. Abe has called for the seas and skies of the Pacific and Indian Oceans to be open and free. Australia’s prime minister has advocated improving all of Australia’s international relationships – rather than taking the view that it is necessary to choose between (say) the US and China. Abe suggested that there should be no limits to Australia’s strategic and economic partnerships. Japan has played a key role in developing industries in Australia – and has more than four times China’s investments here. The trade pact will bring prosperity and friendship to both Japan and Australia.

There is a profound incompatibility between the cultural traditions that long prevailed in East Asia and the liberal Western-style aspirations (such as universal values, social equality under a rule of law and an emphasis on the welfare and capabilities of individuals) to which Asia was exposed as a result of rapid Western progress in recent centuries (see Competing Civilizations, 2001+). Japan, more than any other country, long struggled to resist such challenges to its traditional culture and social order. Now resistance most obviously comes from China's current regime.

Moreover, though Japan adopted nominally liberal political and economic arrangements after WWII, there are convincing indications that Japan’s resistance to liberal Western practices clearly continued behind the scenes at least until the late 1980s (see Broader Resistance to Western Influence?). Key points from the latter are outlined in an Attachment following this email.

There are undoubtedly indications that Japan has undergone a fundamental transformation since around 1990 after the financial system that underpinned its post-WWII mercantilist economic strategy collapsed (see A ‘New Japan’).

OnOn the other hand the latter also suggests that there are also reasons for caution (eg a lack of transparency about Japan’s probably-imperially-mandated (rather than truly democratic) post-WWII system of government; the massive cultural obstacles to genuinely adopting liberal democratic arrangements; the difficulties that Western observers have in perceiving what is going on in cultures that lack transparency; the nature of traditional Art of War tactics; Japan’s response to its late-1980s financial crisis; recent indications that Japan’s financial / business dealings remain incompatible with a liberal market economy; Japan’s renewed risk of a massive financial / economic crisis – like that during the Great Depression which led to power being seized by Japanese militarists in the 1930s; and widely-expressed concerns about the possible ultra-nationalistic / militaristic aspirations of Japan’s prime minister (Shinzo Abe).

On balance it seems that looking below the surface of the ‘new’ Japan could well reveal … the ‘old’ Japan. The vision of a ‘new’ Japan is highly desirable – but Australia’s leaders (and their allies) may require a great deal of relevant knowledge and skill to help make it happen. Some speculations about a possible ‘soft power’ response to China’s increasingly assertiveness (and apparent efforts to create a new international order on the basis of traditional East Asian authoritarian / communitarian alternatives to liberal Western traditions) were outlined in Suggested Strategic Response.

If close examination of the ‘new’ Japan reveals it to be the ‘old’ Japan wearing new clothes, then a similar response to Japan would be appropriate.

The background to the present writer’s attempts to understand the issues outlined above is on the CPDS’ web-site.

John Craig

Attachment: Key Points in Broader resistance to Western Influence?

In brief this drew attention to:

• The massive cultural differences between Western societies and those in East Asia with an ancient Chinese cultural heritage (eg in terms of the nature of: knowledge; power; governance; strategy; and economic methods). East Asian communities that (say) opened to international trade to boost their economic and military strength lacked the foundations needed for success through simply copying Western institutions;
• the Meiji restoration in 1868 to promote Japan’s economic and military strength to resist liberal Western influences. The imperial restoration was apparently stimulated by nationalistic samurai - with Yakuza (Japanese organised crime pan class="auto-style3">gangs whose predecessors had often been samurai) playing a supporting role. Ultranationalist groups (including Yakuza gangs) have since then apparently consistently pursued themes of racial and cultural superiority and had significant political influence;
• Japan’s unsuccessful efforts in WWII to use its military power to mobilize China to support the creation of an ‘Asian Co-prosperity Sphere’;
• The post-WWII establishment of a nominally liberal democratic system of government in Japan, behind which power seems to have been actually exerted by Japan’s bureaucracy through a modified version of the Confucian methods whereby East Asia had been governed on behalf of emperors for centuries prior to Western expansion;
• Japan’s post-war economic ‘miracles’ that were apparently orchestrated by Japan’s bureaucratic elites and financed with national savings to boost Japan’s economic power with little regard to return on capital. Though nominally independent, Japan’s banks and major companies were closely linked with agencies such as the Ministry of Finance and the Ministry of International Trade and Industry (MITI). The goal of those methods was mercantilist (ie building national economic power) rather than creating opportunities for citizens as investors / consumers;
• The possibility suggested by an experienced Japan-watcher that those economic methods had been developed by Japan’s military in Manchuria in the 1930s and that they were transferred to China in the late 1970s;
• The role a prominent ultranationalist, Ryochi Sasakawa, had in providing gambling-sourced funding for MITI’s special projects and as one of three top-level facilitators of relationships between government, industry and ultranationalist factions – a top-level-fixer role which in Japan would have required a mandate from Emperor Hirohito;
• The virulent economic contest to be economically No 1 that Japan launched in the 1970s and 1980s – followed by the financial crisis that resulted in about 1990 when Japan’s non-capitalistic financial system collapsed as the result of creating vast quantities of credit for non-financially-viable investment;
• The incompatibility between the non-capitalistic financial system that had been a core component of Japan’s post-war economic ‘miracles’ and the profit-focused international financial system which led to increasing difficulties (eg international trade and financial imbalances) and attempts by Japan from the 1970s to sponsor the creation of alternatives to Western-style international financial machinery.

Broader resistance to Western Influence? is part of a document (Comments on Australia's Strategic Edge in 2030, 2011) whose basic theme was that:

• Australia’s strategic position is being challenged not only by the ‘hard power’ that China’s increasing belligerence implies, but also by the ‘soft power’ methods that characterise traditional East Asian Art of War strategies; and
• The possibility of a hidden anti-Western coalition between Japan and China through their respective nationalistic factions should neither be ignored nor taken as given.

Are Analysts Making a Big Mistake about China and Japan? - email sent 18/8/14

Professor Hugh White
Australian National University

Re: Is China making a big mistake about Japan?, China Spectator, 14/8/14

Your article raised questions about whether Japan might in future accept a subordinate status in a China-led Asia, or whether it might seek to establish itself as a major regional power in competition with China. However anti-Western collaboration by Japanese and Chinese nationalists is another possibility t that would explain both the failure of Chinese analysts’ to portray Japan as a strategic competitor and the casualty-free Senkaku / Diaoyu Islands dispute which justifies military build-ups all around.

My interpretation of your article: It has long been assumed that China does not want a rearmed, strategically independent ‘normal’ Japan. But China’s assertive policies are pushing Japan to rearm and become strategically independent (ie a ‘normal’ Japan). This is the reverse of what analysts usually expect is in China’s interests and leads them to conclude that China is making a mistake and there is thus no threat to US regional leadership. However there are also other possibilities. China’s actions seemed designed to undermine Japan’s confidence in US protection – and this seems to have worked in terms of boosting Japan’s emphasis on collective self-defense and search for allies. Alternatives to assuming that China has made a mistake are: (a) China’s leaders assume that Japan is incapable of becoming a normal military power again (given demoralization by economic stagnation, political drift, demographic decline and natural disasters). Amy King (ANU) has argued that this is what China thinks. Chinese statements never mention Japan as a possible strategic rival. If Japan can’t respond to China’s assertive tactics, it may have no choice but to acquiesce to China’s regional leadership. However Japan may not be willing to do this – given its sense of identity and fears about what might happen under China’s regional leadership. Brad Glosserman (CSIS) has implied that Japan would accept a subordinate status in a China-led Asia. However there is also a real possibility that China has misunderstood Japan – and that Japan might respond to any decline in US influence by seeking to itself become a great / nuclear-armed state. This creates a dilemma for China – as to whether it would rather face Japan or the US as its major strategic rival in Asia.

In assessing what is happening it is desirable to recognise that the ancient Chinese cultural heritage of counties in East Asia (including Japan) involves ways of thinking, social organization and government that are quite different to Western traditions. An attempt to outline the intellectual foundations of those cultures and some of their consequences is in East Asia: The Realm of the Autocratic, Hierarchical and Intuitive Ethnic Group? 

Japan’s nationalists have a long history of resistance to Western influences presumably mainly because of the latter’s emphasis on liberal institutions that promote individual welfare and initiative (rather than the welfare and initiative of ethnic communities as a whole under the guidance of authoritarian social elites). After being forced to open to trade in the mid-19^th c century Japan’s nationalists sponsored the Meiji Restoration (ie renewed imperial rule) to build Japan’s economic and military strength. After the political and economic dislocation associated with the Great Depression in the 1930s Japan’s nationalists promoted military rule on behalf of the emperor and invasion of China in an effort to mobilize support from China (as Japan’s ‘big brother’) in establishing an ‘Asian’ Co-prosperity Sphere. And there are reasons to suspect that Japan’s nationalists (who apparently still remain extremely influential) might have orchestrated some sort of new / hidden / partial imperial restoration after 1945 in relation to the organisation of Japan’s post-war economic ‘miracles’ and the virulent contest with the US to be ‘No 1’ that lasted until the 1980s (see Broader Resistance to Western Influence). While there is no certainty, the latter refers to features of post-WWII Japan that seem more compatible with a variation of rule by Confucian bureaucracies on behalf of emperors that had been widespread in East Asia prior to Western expansion than the post-WWII democratic political system that Japan appeared to have adopted.  

It is also worth recognising that:

• an experienced Japan-watcher suggested that Japan’s post-WWII economic methods had been developed by its military in Manchuria in the 1930s and transmitted to China in the late 1970s;
• recent changes to government in China appear to have confirmed that the (so called) ‘Communist’ Party is also something like the Confucian bureaucracies that ruled across Asia for centuries on behalf of emperors prior to Western expansion (see The Resurgence of Ancient Authoritarianism in China) – and, if so, this raises questions about which ‘emperor’ the (so-called) ‘Communist’ Party would see itself as being accountable to;
• China’s diverse attempts to promote a new international economic and political arrangement in competition with the post-WWII liberal Western-style international institutions can be seen as an attempt to re-create something like the trade-tribute systems under which Asia was administered from China in the centuries prior to Western expansion (see Creating a New International 'Confucian' Financial and Political Order?); and
• JaJapan had sponsored efforts to create ‘Asian’ alternatives to Western-style financial systems since the 1970s because of a fundamental incompatibility between prevailing international institutional arrangements and the non-capitalist financial systems that have been part of the mercantilist (ie power rather than profit seeking) economic ‘miracles’ of the major East Asian economies (see A Generally Unrecognised 'Financial War'?) .

It is arguably unwise to try to understand East Asia's virtual 'whole-of-society bureaucracies' simply in terms of Western analogies for reasons suggested in Babes in the Asian Woods. And this applies in particular in relation to strategic / defense considerations. Ancient East Asian ‘Art of War’ strategies have features that derive from the region’s traditional cultural / social / government arrangements that have no close Western parallels – a point that is developed further in Comments on Australia's Strategic Edge in 2030.

Regards

John Craig

Notes added later: In September 2014, soon after Western powers had committed themselves to what seemed like another extremely long and demanding military / security contest with Islamist extremists in the Middle East (ie the (so-called) 'Islamic State') and the extremists' domestic allies within Western societies, it was reported that Japan and China were on the point of resolving their differences and moving towards collaboration  [1]. This development might usefully be considered in the context of questions raised in Is the Barbarity of ISIS Another Attempt to Ensnare the US in the Middle East? and Islamist Extremists are not Alone in Favouring Pre-modern Social Systems .

In early 2015, it was noted that China and Japan have very similar economic systems, and that (despite the the chill in diplomatic relationships from 2012) there had been a great deal of informal / behind the scenes collaboration because China seemed likely to face the same sort of risk of a financial crisis as Japan experienced after 1990, and it was believed that Japan's experience could help China avoid that fate.p>

Countering Non-military Security Threats to America from East Asia - email s sent 28/9/14

Joseph Bosco
Centre for Strategic and International Studies p>

Re: China's Deadly Miscalculation in the Making, Real Clear Defense, Sept 26, 2014

Your article suggested that ‘China thinks it can defeat America without Battle’.

This is, of course and as your article noted, the essence of the traditional East Asian ‘Art of War’ methods. Defense against those methods (which seem to have been deployed against America since the end of WWII by covertly making real world social, political and economic changes that expose the US to diverse risks) can’t primarily involve ‘military’ considerations – for reasons suggested in Comments on Australia's Strategic Edge in 2030. As the latter suggests the US’s significant security threats in Asia from an ‘Art of War’ perspective are probably not limited to China (eg see Are Analysts Making a Big Mistake about China and Japan?). In ‘Asia’ America is dealing with societies that think and do things differently (eg see Look at the 'Forest' not just at the 'Trees').

I would be interested in your response to my speculations

John Craig

China as a Dominant Power - email sent 24/11/14

John Lee and Paul Dibb

Re: Why China Will Not Become the Dominant Power in Asia, Security Challenges, Nov 2014

Your article, which was summarised as follows, seemed to reach a conclusion that is very reasonable at the present time.

“The belief that China will soon become the dominant power in Asia is based on assumptions that its continued and rapid economic rise, and its emergence as a regional peer of America’s in military terms is all but assured. Such a belief underpins arguments that a fundamental strategic reorganisation of Asia is inevitable, and that it will be necessary and perhaps even desirable to concede to China significant ‘strategic space’. Dependent largely on linear extrapolations about the future, such arguments ignore the implications of China’s economic, social and national fragilities, its lack of major friends or allies in the region as well as the considerable military deficiencies and challenges faced by the People’s Liberation Army. With the Defence White Paper due for release in 2015, the government should bear in mind that planning for an era of Chinese dominance in the region—or even its emergence as an American strategic peer in Asia—would be premature if not improbable. Australia should not design its defence force for war with China, but it should be able to counter Chinese coercion and contribute to Allied military operations if necessary. “

However I should like to suggest for your consideration that it would be useful to bring an ‘East-Asian Art of War’ perspective into such an analysis. China seems to be engaged in efforts to transform its global political stature using methods like those used to generate economic ‘miracles’ in East Asia in the past. This could make an appreciable difference in the time frame of any Defence White Paper – and thus needs to be recognised.

The ‘Art of War’ is to win beforehand – by building up one’s own strength and encouraging enemies to become weak. It is understood that a classic tactic to defeat strong enemies is to serve them so that they become weak, dissolute and dependent – and then to build the strength to defeat them in a weakened state. This potentially involves concerted action over a long period (eg several generations). In dealing with cultures that use such methods any Defence White Paper by the Australian Government needs to take a very wide / long-term perspective on what constitutes strength and weakness.

Moreover quite different ways of looking at things are involved (eg see Look at the Forest Not at The Trees). And these translate into different methods. Western societies tend to focus on specific things that are believed to be the most relevant (eg the factors considered in your paper). East Asian societies tend to look at ‘everything’ because they don’t believe that it is useful / possible to identify what is relevant. Observations about the different way of thinking involved were outlined by Reg Little (a former DFAT Asia specialist who was arguably the first Western analyst to anticipate China’s rise) – see outline in Competing Thought Cultures. Western thought involves the use of mental models on the basis of its classical Greek heritage. This is useful as the foundation of rationality in analysis and decision making by individuals. However from an East Asian perspective this is narrow and limiting. There is no emphasis on mental models that reflect the way things were done in the past (and which lead Western analysts to focus on what can be expected to be relevant – and ignore what seems likely to be irrelevant). Anything can be evolved into anything. Things can be done in radically new ways. Rather than creating ‘law’ (ie rules on how individuals behave or should behave) government under East Asia’s Confucian traditions itself stimulates changes in the way social, economic and political systems as a whole behave through the influence of highly-educated bureaucratic elites.

For example, East Asia is associated with ‘economic miracles’ (ie economic outcomes that defy explanation in accord with traditional economic expectations). These ‘miracles’ are a by-product of quite unique ways of doing things (see Understanding East Asia's Neo-Confucian Systems of Socio-political-economy). After WWII Japan did the reverse of what Western analysts believed was appropriate (ie Japan concentrated on Western societies’ areas of highest productivity (mass production manufacturing) rather than on the labour intensive industries that were seen to be its area of comparative advantage). And from the 1950s consensus-forming methods to accelerate economic learning were used by Japan’s bureaucratic elites (ie in MITI and the MOF - presumably operating under some sort of imperial mandate) to gain dominance in those sectors. The result was that in the 1960s and 1970s de-industrialization in Europe and North America created significant economic problems. Similar methods of orchestrating economic ‘miracles’ were then adopted by the Asian ‘tigers’ and by China from the late 1970s. Economic strength then became the foundation of increasing military capacity.

A feature of those ‘bureaucratic’ methods for economic learning / coordination is limited concern for profitability in the use of capital, because emphasis is only placed on ‘real economy’ outcomes. Symbolic outcomes (such as the profitability that allows rationality to be used as a basis for decision making by independent enterprises in a Western context) are not emphasised. This lack of emphasis on profitability can lead to a debt crisis – as in Japan in the late 1990s and China now. However unless this difference in economic methods is made explicit the application of models related to ‘productivity’ (which your article cites in relation to China’s economy) can’t completely accurately capture what is happening from an East Asian viewpoint.

East Asian attempts to gain power are not limited to the economic and military domain. ‘Everything’ is in play. Some suggestions about what this implies in terms of what ‘defence’ has to involve are in Comments on Australia's Strategic Edge in 2030. Social, political and even criminal efforts will all be dedicated to achieving a bureaucratically coordinated outcome. Also under ‘Art of War’ traditions very long term time scales and deception are expected to be involved. Looking at what seems to be the ‘main game’ in terms of political and military capacity can lead to neglect of what is the ‘main game’ from an East Asian viewpoint (ie creating new capacity in non-traditional and unexpected areas that eventually starts the have a strong influence on what had previously been the ‘main game’). Any analysis that presumes that the analyst knows what is going on through the use of established concepts can be misleading. Things that look familiar (based on traditional mental models / concepts) can have quite different functions to those it looks like they would have. Under traditional Art of War methods, things that are real threats can look quite innocuous. Deception is the core of those methods. There is also a need to look at what is actually being done, not at what one would presume is being done on the basis of traditional mental models. There is a need to look not only at what is happening in the ‘main game’ but also at what is happening elsewhere.

Methods of exerting power are unlikely to correspond to Western models / assumptions about how this could / should be achieved. For centuries prior to Western expansion Asia had a China-centred administration under a trade-tribute regime that bears no relationship with Western methods and models. Moreover, there are reasonable grounds for suggesting that attempts have been made for several years to establish something similar (see Creating a New International 'Confucian' Financial and Political Order, 2009+). The latter referred to the pressures that are making this necessary, to the ‘soft power’ methods that are being used and to the large number of initiatives that are under way to create such as framework.

ItIt is also worth noting that Mao defeated the Nationalists in China by capturing the country-side – and thus making the cities (which the Nationalists held) vulnerable. China’s current efforts to create a new China centred international order have apparently been focused on emerging economies (though those efforts are now also starting to be used in Asia). It was recently pointed out that China is now the dominant foreign investor in Africa and is squeezing out Western competitors (eg see Larkin S., Why China’s wealthy move fast in global markets’, Business Review, 22/11/14). And the BRICS group (which is being orchestrated by China’s bureaucratic elites – ie the so-called Communist Party) is being presented by European opponents of Anglo American traditions as a vehicle for creating a new international order (Global systemic crisis 2015 – The dynamics of the future distance Europe from the rationale of a Western camp war , 15/11/14). The latter analysis is not earth shattering – but it does suggest that China’s current regime (like Mao) is probably seeking to ‘capture the countryside’ as a means for defeating those who ‘occupy the cities’. This is not reflected in any analysis that focuses on Asia and is based on traditional perceptions of what comprises political and military strength. China might currently be seeking, not so much to gain political and economic power in Asia, but rather to challenge the West’s current are of greatest strength – ie the US’s influence over global political and economic institutions. Challenging the West’s area of greatest economic strength (ie mass production manufacturing) was what Japan did successfully after WWII. And methods like those used domestically to achieve economic ‘miracles’ seem to be in use internationally to build a global political power base.

I am not suggesting that the conclusion of your article is wrong at the present time – merely that presenting an ‘East Asian Art of War’ perspective on what is going on should provide readers with a better understanding of how the situation might change. Until 1945 the ‘war’ against the West by East Asian nationalists was fought by trying to use Western methods. This didn’t work – because those methods were incompatible with East Asian cultures. Since then more traditional Art of War methods seem to have been favoured – and these now need to be recognised in geo-political analysis and thus in any Australian Defence White Paper.

Speculations about what a Defence White Paper might include to counter the use of ‘Art of War’ methods are in Suggested Strategic Response.

John Craig

The US's Most Significant Intelligence Failure? - email sent 10/2/15

Dr Michael Pillsbury,
Centre for Chinese Strategy,
Hudson Institute

Re: It’s becoming clear we made 5 dangerously wrong assumptions about China, Business Insider, Feb 9, 2015

Your article provided an outline of some key points in your recent book on China’s long term strategy (ie the so-called The Hundred Year Marathon). You argued that the US’s failure to recognise that it has been deceived about China’s strategy from the 1960s has been its greatest intelligence failure. There is little doubt about your core contention (ie that China has been engaged in an extremely long-term strategy to gain a dominant geo-political status). I should like to suggest how it is possible to gain greater understanding of why and how this has been happening by giving specific attention to core cultural differences between Western societies and those in East Asia with an ancient Chinese cultural heritage. Also I should like to suggest that the US’s inability to perceive China’s long term strategy may not be its greatest intelligence failure.

My Interpretation of your article: strong>Successive US administrations have been urged to provide support to China since the late 1960s. It was believed that this would help China become a democratic / peaceful power without ambitions of regional / global dominance. It was believed that engagement would lead to cooperation on policy problems. It hasn’t. Views on regional / global order were supposed to converge. They haven’t. Cooperation against terrorism, for example, has been limited. It was believed that democracy would evolve in China – starting at the village level. However it was clear in 1997 that local democracy was highly constrained (ie neither the Communist Party nor opposing candidates could be criticized). In the 1990s study tours to China were repeatedly given reasons why China’s progress was at risk (eg environmental constraints, restless ethnic minorities, corrupt officials). At the same time China continued to achieve very high and sustained growth. Americans like to believe that others aspire to be like them. But in the 1940s efforts to understand the Chinese mind-set found that there was a preference of indirect action / ambiguity / deception – as compared with the US preference for direct action / clarity / transparency. Deception is highly prized in Chinese literature. It is now recognized that deception has been the main feature of China’s recent strategy. China seeks to encourage its enemies to act inexpediently. Chinese ‘hawks’ have long encouraged the Chinese leadership to mislead and manipulate US policy-makers. This started in the era of Mao Zedong – with an intent to avenge a century of humiliation and an aspiration of replacing the US as the world’s economic, military and political leader by 2049. This plan is called ‘The Hundred year Marathon’. Revelation of this plan was greeted with disbelief in the US. The strength of the Hundred Year Marathon is that it operates by stealth. The plan is so well known that it is never written down – though now it is well advanced there is an increasing willingness to discuss it more openly. There is now more open discussion of a ‘Chinese-led world order’ because it is believed that the US is in unrecoverable decline. The Communist Party is seeking to restore China’s ‘proper place’ in the world. There is pride in the fact the US had not even realized that the ‘Marathon’ was even underway. This has been the US’s most significant intelligence failure.

I should like to offer some observations about the issues raised by your article. The background to these is that I had an opportunity some time ago to ‘reverse engineer’ the intellectual basis of East Asian economic ‘miracles’ and thus to compare these with Western methods for achieving social, economic and political progress (see Background Note).

The key to understanding East Asian societies with an ancient Chinese cultural heritage is arguably to recognize the absence of the emphasis on the ‘rational’ / abstract methods of problem solving that Western societies gained from their classical Greek heritage. Likewise the welfare and contributions of individuals is not valued in the way Western societies do because of their Judeo-Christian heritage. Some suggestions about the traditional East Asian alternative to the use of information as a basis for understanding and rational decision making by individuals in diverse contexts are in East Asia: The Realm of the Autocratic, Hierarchical and Intuitive Ethnic Group? (2001+).

Such worldviews do not involve belief in universal values, law as the basis for guiding individual behaviour, profitability as a guide to resource allocation, or interchange / dialogue as a basis for building cooperation. Deception is foundational because the purpose of providing information (ie education, management, government, international relations) is not to enable others to understand, but rather to encourage them to do things that are believed likely to benefit the provider’s ethnic community (see Why Understanding is Difficult, 2011). Power is often exerted indirectly by influencing the whole system in which others operate and by which they are constrained, rather than directly by dealing with individual ‘things’ (see Look at the 'Forest' not just at the 'Trees' ). And such indirect system-as-a-whole methods necessarily require a long (eg multi-generational) time horizon. And outsiders’ failure to understand how this works can be hazardous (see Babes in the Asian Woods, 2009+).

Confucianism was the traditional method by which imperial bureaucracies governed and exerted power by using information to manipulate an ethnic nations’ behaviour within a social hierarchy. This was an extension of traditional East Asian educational methods. And a modified version of Confucianism seems to have been the basis of ‘bureaucratic’ government in those major East Asian societies that achieved post-WWII economic miracles (see Understanding East Asia's Neo-Confucian Systems of Socio-political-economy, 2009). Consider, for example, the process of ‘vision development and administrative guidance’ that Japan’s bureaucracy used to develop whole industrial clusters. Similar methods are also arguably the basis of an attempt now to create an China-centred international order that: (a) is similar to the trade-tribute system through which Asia was administered from China prior to Western expansion; and (b) potentially provides China’s elites with a means to intervene economically and politically in other countries (see Creating a New International 'Confucian' Financial and Political Order).

Your article suggested that the US’s inability to see through China’s likely deception about its ‘Hundred Year Marathon’ to gain vengeance for its historic humiliations was its greatest intelligence failure. However I suggest that it is possible (though not certain) that the US may have been subjected to a similar deception by another major East Asian power (ie Japan) - see Broader Resistance to Western Influence?, 2011+. It is worth noting for example that: Japan’s post-WWII economic development methods were plausibly seen to have been developed by its military in Manchuria in the 1930s; those methods could not have been successfully used by Japan’s bureaucracy to achieve market-responsive economic outcomes in a truly democratic environment – which implied that the post-war bureaucracy had to be operating under an imperial mandate (as Confucian bureaucracies traditionally did); Japan played the lead role in a generally unrecognised ‘war’ against liberal Western-style financial systems for years before China became economically significant; and a variation on the ‘bureaucratic non-capitalist’/ neo-Confucian methods that Japan had used to achieve economic ‘miracles’ somehow came to be adopted by China (presumably as the best hope of achieving the goals of China’s ‘hawks’) in the late 1970s (ie after the economic failure of the ‘Communist’ methods that had been used in the Mao era).

I would be interested in your response to my speculations

Regards

John Craig

Would Buying Japanese Submarines Be Clever? [August 2015]

Andrew Bolt argued (Let's not sink cash into subpar subs, Courier Mail, 6/8/15) that Australia should not buy technically inferior submarines from Adelaide merely to preserve industry and employment in that state - but should instead buy Japanese submarines because peoples' lives and Australia's national security could depend on acquiring a superior product.

However there is a geopolitical complexity that needs to be resolved first - because it is not completely clear whose side Japan would be on in a potential future conflict. The issues involved (but not a definitive answer) are outlined in The US's Most Significant Intelligence Failure above, and include:

• the long term / carefully disguised nature of strategy under East Asian traditions - as illustrated by China's apparent deception of the US in relation to its intentions;
• the significance of hard-to-understand cultural features (which are radically different to the cultural foundations of Western societies) that give rise to such strategic methods, and to unfamiliar / invisible ways of exerting power (ie through status in an ethnic social hierarchy rather than through making decisions);
• the possibility that the US has been even more completely deceived by Japan over an even longer time scale in relation to which it is noted that:
  • Japan's post-WWII political and economic systems were almost certainly created by the same imperially-mandated ultranationalist factions that had led Japan in the 1930s to invade China to gain its support in building an 'Asian Co-Prosperity Sphere' (ie a region dominated by authoritarian elites where liberal Western traditions would not be influential). An imperially-mandated bureaucracy (rather than the so-called Liberal Democratic Party) became the real post-WWII government  of Japan (especially in relation to economic affairs). US occupation forces were concerned about some of these developments (eg the continuance of Japan's Imperial system which was seen as responsible for Japan's militaristic extremism in the 1930s), but saw Communism as a greater threat;
  • a key behind-the-scenes 'kuromaku' / fixer (Ryochi Sasakawa - now deceased) was:(a) involved in the development of infrastructure to facilitate Japan's invasion of Manchuria; (b) a suspected war criminal in 1945; (c) central in facilitating the creation of Japan's post-WWII economic systems - and enabled to provide multi-$bn gambling-sourced special projects funding to Japan's economic agencies; (d) a vocal admirer of Admiral Yamamoto who had planned Japan's Pearl Harbour raid and intended invasion of Australia and concluded that Japan could not win a 'war' against the US; (e) a notorious ultranationalist and Yakuza boss; (f) politically and economically influential in Queensland in the 1980s - which led to the present writer's awareness of his role; and (g) apparently involved in stimulating the development of infrastructure in Australia that would have facilitated Yamamoto's 1940s' invasion plan;
  • Japan used a variation of traditional methods of exerting power through elite Confucian bureaucracies to orchestrate economic 'miracles' with mercantilist aspirations (that were very obvious in the 1980s) to build a globally-dominant economy (ie its methods were a way of boosting national power rather than citizens' individual welfare). Those methods were suggested by a close Japan-watcher to have been: (a) developed by the Japanese military in Manchuria in the 1930s; and (b) transmitted to China in the late 1970s. Those methods involved financial systems that were incompatible with established international financial systems - because they involved little concern for financial return on levels of national savings that were forced so high through constraining consumption that there was no need to borrow from international profit-focused financial institutions. For decades this amounted to a Japan-initiated / hard-to-understand 'financial war' that has contributed to international financial imbalances and instabilities and to the escalation of debts that increasingly constrain global growth;
  • From the late 1970s China used a variation of Japan's neo-Confucian methods (which involved control through what was still ironically called its 'Communist' Party) to orchestrate the rapid development of its economy and geo-political role. As in Japan and Singapore (in different ways) authoritarian state dominance of the economy (as well as of the society generally) was ensured by banks and business groupings that were either owned by the social elites that controlled government (or by their cronies; 
  • the international neo-Confucian economic and political order which China now seems to be seeking to create to challenge the liberal Western-style international order parallels Japan's 'Asian Co-Prosperity Sphere' ambitions in the 1930s. China's version would be a 'soft-fascist' system in which the power of ethnic elites would not be constrained by democratic or financial considerations, and probably parallel the 'trade / tribute' system by which Asia had been administered from China prior to Western expansion. This system is being developed through China's role as a facilitator of the aspirations of emerging economies. At the same time Japan develops relationships and dependence on its military technologies in the developed world - which may, or may not, be strategically connected with China's efforts to build global economic and political power;
  • though Japan became the US's 'best friend' in Asia after its financial system failed in the late 1980s, its government and economic systems were not fundamentally changed .'Getting close to enemies' and 'holding up a mirror so that when others look at you they see a reflection of themselves' are classic East Asian Art of War tactics;
  • Japan's current prime minister expresses ultranationalist rhetoric (whose core is the presumed racial and cultural superior of the 'Great Han Race' that is seen to be common to China, Korea and Japan);
  • vocal disputes by Japan and China over uninhabited islands provide both with a harmless justification for military expansion;
  • Japan reportedly provides behind-the-scenes advice to China about how to now avoid the financial failures that crippled Japan's aspirations to become No 1 economically in the late 1980s.

As noted above, evidence and reasons for these assertions were presented in more detail in The US's Most Significant Intelligence Failure (and in other linked references).

It has been suggested recently that the US has pressured Australia to buy Japanese submarines as part of its efforts to manage the development of its allies' defense capabilities in the Asia Pacific [1]. While the US's judgment in such matters area should not be ignored, it should also not be presumed to be infallible.

The above does not prove where Australia's submarines should be built. It merely seeks to identify issues that need to be evaluated.

Understanding What is Going on is the Best Response to China - email sent 18/8/15

Professor Alan DuPont
University of NSW

In Deeper US-Australian defense links best response to China (The Australian, 18/8/15) you drew attention to two reports which suggested that defense links between Australia and the US needed to be stronger because of China’s military expansionism (ie you referred to ANZUS Alliance in an Ascending Asia – by Strategic Defense Studies Centre, ANU and Centre for Strategic and International Studies; and to Babbage R., ‘Game Plan: The Case for a New Australian Grand Strategy’, Menzies Research Centre).

However, there is arguably a need for a more fundamental approach – for reasons suggested in Asian Authoritarians Can’t Be Contained without Understanding How They Exert Power (2015), Comments on Australia's Strategic Edge in 2030 (2011) and Creating a New International 'Confucian' Financial and Political Order (2009+).

John Craig

As Power Shifts from the US to the Soviet Union, to Japan, to China, to .... - email sent 26/9/15

Michael Fullilove
Lowy Institute

RE: Australia’s global role will change as power shifts to China, The Australian, 26/9/15

Your article points to the fact that the world is in a mess – and that the international order that has maintained stability in recent decades is failing. Some reasons to suspect that this diagnosis is correct are in An Approaching Crisis - From Late 2013? (which is a recent addition to The Second Failure of Globalization, 2003+).

Your article also takes it as given that, as the liberal (ie democratic capitalist) international order that the US has championed since WWII fails, a new authoritarian China-centred international order will replace it. There is little doubt that China’s leaders would like this to be true and have been manoeuvring to achieve this outcome (see Creating a New International 'Confucian' Financial and Political Order, 2009+).

However there is very considerable doubt that China’s leaders will succeed in their ambition – because China’s recent and current huge rate of poorly-directed investment is unlikely to any more sustainable than was: (a) the Soviet Union's huge rate of poorly-directed investment in the 1950s; and (b) Japan’s huge rate of poorly-directed investment up to the 1980s.

China’s current regime is in VERY serious difficulties (see Ongoing Uncertainty) because: (a) its neo-Confucian elitism is widely resented by Chinese people; (b) the so-called ‘Communist’ Party maintains power purely on the basis of sustaining economic growth; (c) doing so has required incurring huge debt levels – similar to those that derailed Japan’s ambition to become No 1 economically in the 1980s; and (d) China’s efforts to avoid Japan’s fate by creating new state-manipulated 'market’ methods of generating capital for investment seem to be failing.

John Craig

The Limits of Mr Turnbull's History Lessons - email sent 1/10/15

Peter Cai,
China Spectator

Re: The value in Turnbull's history lessons, China Spectator, 25/9/15

Your article highlighted Mr Turnbull’s interest in history as a guide to dealing with the foreign policy and economic issues raised by China’s rising influence.

My Interpretation of your article: Australia’s prime minister, Malcolm Turnbull, is a history buff – which means that he can see current issues in a broad historical context. He quoted Thucydides on the Peloponnesian War to explain Australia’s strategic challenges. He compared the US with Sparta at a time when Athens was gaining ascendency. There is a need to ensure that Americans (unlike Spartans) do not engage in reflexive antagonism to a rising power that could end in conflict. Classically trained prime ministers have set a high standard in parliamentary debate. However there is a need to see why the Peloponnesian War is relevant in analysisng Australia’s foreign policy. It has been seen as relevant in modern times by Donald Kagan (a historian and strategist); US Secretary of State in 1947 (George Marshall); and former US Sectary of State (Henry Kissinger) in relation post Cold War rivalry between China and the US. Kissinger was critical of the lack of education about history that foreign policy makers have. History is important in developing foreign and economic policies. Australia’s new PM has an interest in history as it relates to China’s rise – eg how its traumatic past shaped its current practices. If one does not understand other people’s history, one won’t understand what they will do. Margaret MacMillan (Oxford University) quoted two examples of where this was not done. First the US lost the war in Vietnam (according to Robert MacNamara) because it did not understand affected peoples’ history, culture, politics and the personalities / habits of their leaders. Second Tony Blair consulted Middle Eastern experts before agreeing to participate in Iraq invasion – but then ignored their advice that doing so would not be welcomed. Tony Abbott would have been wise to avoid East Asia’s wars in praising Japanese soldiers – as doing so recently caused an uproar in China. Historical lessons are also relevant in developing economic policy. Ben Bernanke (ex Federal Reserve Chairman) said that lack of attention to economic history (eg of the 1929 Great Depression) was a major problem. Australia has had 23 years of uninterrupted prosperity – and many believe economic crises only happen to others. It is good to have a leader who thinks deeply and seriously – and can draw upon an understanding of history.

Undoubtedly history can have lessons. However a recent address by Mr Turnbull to the Australia-China Council strongly suggested that Australia desperately needs genuinely Asia-literate advice about China. Without this, it will be impossible to reach foreign and economic policy conclusions that are any more constructive than the Vietnam War and the invasion of Iraq no matter what the ancient Greek historian Thucydides had to say about the contest between Athens and Sparta.

My reason for suggesting this are outlined on my web-site. For example:

• While history shows that instability and conflict can arise where major powers compete, deep understanding about what is different about the ‘other’ is vital to competing successfully – a conclusion that both Japan and China eventually reached;
• When Western influences expanded into Asia, China’s long established Confucian system of imperially-mandated bureaucratic government did not cope well. It had emphasized guiding society simply on the basis of wisdom gained from a study of history – and this was found to be inadequate in dealing with societies that had economic and military strengths on the basis of cultural traits that China had never encountered before;
• A modified and unpublicized form of Confucian government has been the basis of real-economy ‘miracles’ in countries such as Japan and China behind a democratic-capitalist and socialist ‘face’ respectively. However this has been very poorly understood by Western observers because: (a) that system is built on cultural, social and political foundations that are radically different to those of Western societies; and (b) deception is the essence of traditional Art of War strategies;
• The state-manipulated financial systems that have been involved in neo-Confucian real-economy ‘miracles’: (a) have contributed to global financial and economic instability; and (b) now put China at risk of a major set-back.

John Craig

Detailed Comments

The Limitations of History  

It was suggested that Australia's Prime Minister (Mr Turnbull) is a 'history buff' who believes that important lessons can be learned, for example, from what Thucydides wrote about the history of ancient Greece.

Thucydides’s History Lesson: The history of ancient Greece that Thucydides wrote about illustrated the potential for instability and conflict where major powers compete. What he had to say about foreign policy is described in Kemos A., The Influence of Thucydides in the Modern World. He wrote a theory of the ‘realist’ foreign policy that dominated in the US during the Cold War. This rationalized drawing on support from unsavory regimes if they could help in the contest with Communism – ie the end was considered to justify the means because there was no basis for judging morality in international affairs.  

After 'realist' foreign policy was ultimately recognized by CIA to lead to ‘blowback’ against the US, ‘realism’ was replaced with foreign policy ‘idealism’ under the post 911 influence of the so-called Neocons. This rationalized using US military power unilaterally to change unsavoury regimes (eg by the invasion of Saddam Hussein's Iraq). Since that (predictably) proved problematic, the US has apparently ceased assuming that military force could achieve ‘idealist’ changes in other regimes and moved back towards a more ‘realist’ stance through diplomatic engagement sometimes with less than ‘ideal’ partners in order to deal with the greatest perceived threats. [In the gap created by the end of the US's unilateral use of its military power to install regimes it prefers, Russia now seems to have taken it upon itself to try to do so - eg in Crimea, Ukraine and Syria]

However what Thucydides wrote is of very limited relevance in relation to the challenges and opportunities arising in East Asia. Those challenges and opportunities involve cultural traditions that are radically different from those in Western societies, and unless those differences are understood any foreign policy and economic strategy calculations can’t be realistic.

China found that history was an inadequate guide to coping with expanding Western influence in the 19^th century.

The Qing Dynasty (1644-1911) that controlled China in that era was governed in accordance with Confucian traditions. The latter involved guidance of society by imperially-mandated bureaucratic elites on the basis of the wisdom that they gained from intensive study of history. However historical wisdom simply didn’t work in dealing with expanding Western influence because the latter was so different to anything China had encountered before, and those cultural differences were the basis of strategically-significant advantages.

Thus one critically important lesson from history is that reliance on the lessons of history is inadequate when dealing with unfamiliar social, political and economic systems.

Learning the Limits of History in Asia: This was a lesson that Japan had learned by 1868 (ie by the time of the Meiji Restoration). Imperially-mandated samurai were given control of Japan’s government and economy and charged with boosting Japan’s economic strength (and thus its military potential) by emulating Western practices. And, over 100 years ago, China also demonstrated the limitations of wisdom derived from a study of history history. The Confucian Qing dynasty was displaced in 1911 and, after decades of turmoil, the Chinese Nationalist Party gained power with a variation of European-style (ie democratic capitalist) political ideals. It was then defeated in 1949 by the Communist Party which under Mao sought to adopt a version of Western socialism. And then, in the late 1970s, after the failure of Mao’s supposed Great Leap Forward and his Cultural Revolution to purge China’s residual Confucian influences, the ‘Communist’ Party adopted a variation of East Asia’s traditional Confucian system of government. Japan had discretely adopted such a system after WWII and had demonstrated that the guidance of elite imperially-mandated bureaucrats, whose wisdom was not solely derived from the study of history, could be the basis of catch-up real-economy ‘miracles’ (see Understanding East Asia's Neo-Confucian Systems of Socio-political-economy, 2009+).

A General Lack of Asia Literacy

Unfortunately understanding societies with an ancient Chinese cultural heritage has been very limited in Australia. ‘Asia’ has been assessed largely in terms of parallels with Western concepts and institutions, though real Asia-literacy has been critically important to formulating defense, foreign and economic policies (eg See Babes in the Asian Woods, 2009+; and Comments on 'Australia's Strategic Edge in 2030', 2011+).

Critical differences arise from cultural features that have no relationship with the Judeo-Christian and Greco-Roman foundations of Western societies – as suggested in Competing Civilizations (2001+).

And one of the features of those cultures is that information is not be provided that would enable others to understand (see Why Understanding is Difficult). The purpose of providing information is to encourage others to do things that would be advantageous to a person's ethnic community, not to help them 'understand'

An Example: Not Understanding Japan: Though US occupation forces were concerned about the post-WWII continuance of Japan's imperial system because of its association with Japan's war-time ideologies, there was no appreciation of the significance of the post-WWII creation of Japan's democratically-unaccountable (and thus presumably imperially-mandated) economic bureaucracy (see Establishing Japan's Post-WWII Economic and Political Systems). The methods used by that economic bureaucracy (developing vision and promoting nationalistic collaboration within industry clusters and financing the resulting consensus through state-linked banks) was effective in achieving real-economy 'miracles' - because the economic bureaucracy was not responsive to interest group pressures and could thus allow market-driven outcomes to emerge. Those methods were suggested to have been developed by Japan's military in Manchuria in the 1930s. However what was happening was simply invisible to US and other Western observers because of their lack of understanding how power is exerted in East Asia (ie power is not associated with making decisions but with occupying a high position in an ethnic social hierarchy (as Japan's emperor did) and having subordinates (eg ultra-nationalistic Yakuza gangs) who: (a) actively influence a society's social, political and economic arrangements; and (b) will comply with one's wishes - wishes that reflect the consensual view of their subordinates).

Over-simplifying Economic Options

Mr Turnbull’s recent speech to the Australian-China Business Council (ChAFTA and Rebalancing of Chinese & Australian Economies, 6/8/15) illustrated Australia’s problem. For example:

• Mr Turnbull identified collaboration between China and the US and Australia during WWII as the basis for future collaboration. This was simplistic. As noted above, the Chinese Nationalist Party that led China’s resistance to Japanese invasion had European-style political ideals, and these (and Mao's version of Communism) have since been supplanted (as in Japan) by a variation of traditional Confucian government which needs to be understood if one is to understand China. Moreover China seems to be seeking to create a new Confucian international order like that by which Asia was administered from China's prior to Western expansion - and this is quite incompatible with liberal Western institutions. As far as China is concerned, Australia's choice is presumably whether or not to take the role of a tributary state in China's new order (eg by a focus on economic opportunities without consideration of broader issues);
• Mr Turnbull discussed ‘economic’ opportunities purely in terms of economics though, as a by-product of traditional  culture, social, economic, political, military and even criminal affairs can’t realistically be addressed separately in East Asia. Thus:
  • It is not sensible to try to deal with national 'security' issues in isolation (See Comments on 'Australia's Strategic Edge in 2030', 2011);
  • There is no such thing (in relation to significant economic activities) as truly 'private' enterprise. Countries such as Japan and China are corporate states. The 'private' sector is viewed as an extension of the state. State corporatism is a system of political economy that differs from both democratic capitalism and socialism - and was characteristic of fascist regimes in the 1930s. Though enterprises may not be state owned, they are dependent for success on social connections which ultimately lead back to, and up, the state. And l'aw' does not exist to create an environment in which independent entities can take actions that are in their individual interest, but rather to disciple those whose actions don't conform with the national consensus;
  • Business relationships will have political implications (see In East Asia Deals Always Involve Politics; 2012 and  'Free' Trade with China: Not Likely under a Neo-Confucian Regime, 2013); 
• Mr Turnbull did not seem to recognize that the 'real economy' opportunities that China's economy presented to Australia have been built on an irresponsible expansion of credit that puts their continuance at risk (see below).

Financial Systems: Where the Rubber Hits the Road

Much deeper understanding is now important in any future development of foreign and economic policy because the financial practices associated with the neo-Confucian systems that achieved economic ‘miracles’ have had seriously adverse domestic and global effects. National savings were allocated to significant economic undertakings by elite social consensus rather than by calculations of the ‘profitability’ of each endeavour (see Evidence). This:

• is a by product of traditional epistemologies that (unlike those derived from the West's classical Greek heritage) place no emphasis on the use of abstract concepts (such as law, truth, universal values and profitability) as a basis for rational independent decision making;
• makes it impossible for affected communities to operate within the framework of Western-style financial systems without difficult cultural change - because of: fundamental differences in the way information is used; the need to change economic goals from economic 'power' to financial returns; the inseparability of economic issues from questions of social / political power; and the lack of appropriate legal systems (see The Cultural Revolution Needed in 'Asia' to Adapt to Western Financial Systems, 1998);
• laid the foundations of a challenge (led initially by Japan) to the prevailing international financial system (see A Generally Unrecognised 'Financial War'?); 
• imposed severe constraints on global growth. Structural demand deficits in the neo-Confucian systems (ie the suppression of demand below national income) were needed to protect financial institutions with suspect balance sheets from any need to borrow in profit-oriented international financial markets (see Structural Incompatibility Puts Global Growth at Risk, 2003). The resulting 'savings gluts' and international financial imbalances would have stifled global growth unless their trading partners (especially the US) had been willing and able to sustain strong demand  by adopting dangerously easy monetary policies to allow debt-and-wealth-effect-driven demand well in excess of their national incomes(see Impacting the Global Economy, 2009);
• resulted in very high levels of poorly directed investment in the neo-Confucian systems which:
  •  led to a financial crisis in Japan in the late 1980s and to its subsequent decades of economic stagnation;
  • created a risk for China like that which had previously derailed Japan’s advancement. This risk seems to be forcing China to try to establish an international order in which the constraints on autocratic rule by social elites that democratic and financial accountability impose would not apply (see Creating a New International Confucian Political and Economic order, 2009);
• is now likely to put an end to China’s rapid economic advancement, because the methods that China has been seeking to use to generate capital for investment without ever-escalating debts (ie through state-manipulated 'markets') don’t seem to be working (see As Power Shifts from the US to the Soviet Union, to Japan, to China, to ...., 2015).

Conclusion 

It would be naïve for Australia to attempt to encourage the US to develop strategies for responding to China’s increased economic, military and political role without deep understanding of these issues.

Any contest between the US and China (like the contest with the Soviet Union in the 1950s and Japan in the 1980) is primarily a matter of the unlikely sustainability of economic systems where potential competitors make huge badly-directed investments. What Thucydides said about the Peloponnesian wars is probably of limited relevance.  

The Complexity of National Security - email sent 21/10/15

David Wroe

Re: Yes, terrorism in Australia is horrible. But we also need to talk about the threat of war with China, Brisbane Times, 21/10/15

Your article offered very useful perspectives on the complexity of Australia’s national security challenges. Some parallel observations about the complexity of dealing with national security in relation to China are in Comments on Australia's Strategic Edge in 2030 (2011).

The latter suggests that a key current obstacle to dealing with national security issues properly is a pervasive lack of serious attention to the practical (eg intellectual, political, economic, strategic) implications of cultural differences. The difficulties in dealing with ‘Asia’ that arise from a lack of attention to the consequences of fundamental cultural differences are also mentioned in Babes in the Asian Woods (2009) and The Limits of Mr Turnbull's History Lessons (2015).

However ‘Asia’ is by no means the only arena in which the a pervasive lack of serious attention to the practical consequences of culture make national security challenges much more difficult than they need to be (see Competing Civilizations, 2001+ and Encouraging Reform of Islam: Mr Turnbull's Opportunity to Counter Islamist Radicalization, 2015).

John Craig

Consider Also Port of Darwin's Potential Significance in any Attempt to Invade Australia - email sent 10/11/15

Nicholas Rothwell,
The Australian

Re: Disquiet over sale of Darwin Harbour to Chinese Landbridge Group, The Australian, 7/11/15

Your article pointed to some national security concerns related to the lease of Darwin’s Harbour to a Chinese company and to the lack of coordination that seemed to exist between those concerned with Australia’s economic and defence challenges. I should like to suggest additional reasons for such concern. Darwin is not only a key centre for trade and US / Australian military cooperation. It could also be a key target in any future attempt to invade Australia.

My Interpretation of your article: In late 2015 concerns were expressed about the sale of Darwin Harbour to a Chinese company. This has become part of strategic rivalry between the US, China and Japan. No one in Canberra seems to have considered these implications as the Trade Minister (Andrew Robb) and Minister for Northern Development (Josh Frydenberg) viewed the issue only in economic terms. Peter Jennings (ASPI) pointed out that the Northern Territory Government had crafted the deal as a 99 year lease to avoid having to get FIRB approval. Defence Department privately communicated their concerns about the deal. Darwin is a key to US / Australian military cooperation. Naval cooperation will have special emphasis on Darwin. A federal cabinet defence and security committee needs to review such decisions. On the other hand concerns about strategic issues fail to highlight the economic importance that Darwin now has - and will have in future [Darwin's history in terms of economic and military relationships with Asia were also outlined]

In the 1940s Admiral Yamamoto, who had planned Japan’s attack on Pearl Harbour, also laid plans for an invasion of Australia. Those plans apparently involved an overland thrust south from Darwin combined with a series of ‘hops’ down the Queensland Coast.

The possibility that a future invasion attempt could also involve a strategy in which Darwin is involved should be considered, as well as Darwin’s role in trade with Asia and in US / Australian military cooperation, because:

• It is now being publicly acknowledged that China seems to be trying to create a new international order to challenge the liberal international order that the US has championed since WWII (see Monk P. A New Security Plan Needed, The Australian, 9/11/15). The latter also drew attention to suggestions by Professor Ross Babbage that Australia needs to give much higher priority to Asian intelligence gathering, and to critically examining current strategic policy assumptions;
• The ‘international order’ that China seems to be seeking to create appears similar to the way Asia was administered from China prior to Western expansion (see Creating a New International 'Confucian' Financial and Political Order, 2009). As the latter suggests, that international order also appears to be one that: (a) has some parallels with the ‘Asian Co-prosperity Sphere’ that Japan’s then-ultra-nationalist regime had sought unsuccessfully to gain China’s support in establishing in the 1930s and 1940s; and (b) involves ‘quasi-fascist’ rule by social elites through hierarchical social networks without the institutionalized democratic or financial constraints that apply to liberal Western states;
• There is a need to recognise the possibility of political motivations in major investment decision by significant Chinese enterprises – because China (like Japan) has become something of a corporate state – ie one in which non-state-owned enterprises act as an extension of the state because of their social connections (see In East Asia Deals Always Involve Politics, 2012);
• China’s attempt to create a new international order through political and economic influence seems likely to fail – as its economy is heading for major setbacks. China’s effort to by-pass the bad-debt constraints that derailed Japan’s economic ambitions in the late 1980s isn’t working (see Financial Systems: Where the Rubber Hits the Road, 2015). Thus, unless ambitions to create an alternative to the liberal international order are abandoned, more forceful methods may be considered;
• In the 1980s there were indications that ultra-nationalist Japanese factions (with some, but perhaps not great, government connections) were involved in stimulating the development of infrastructure in Australia that would have facilitated Yamamoto’s 1940s' plan for an invasion of Australia in which Darwin played a key role (see The Dark Side of Japan in Australia in Coalitions of Interests?, 2011);

 Australia remains (as it has been for many decades) an important source of raw materials for major East Asian economies and thus a potential military target if trans-Pacific diplomacy proves unable to deal with economic and military tensions.

Your article highlighted Australia’s apparent inability to coordinate assessment of proposals (such as that related to Darwin Harbour) that have both economic and strategic implications. However merely dealing simultaneously with both the economic and strategic implications of such a proposal would be inadequate without deep understanding of the cultural factors that affect the way economic and strategic goals are perused in societies with an ancient Chinese cultural heritage (for reasons suggested in Babes in the Asian Woods, 2009 and Comments on Australia's Strategic Edge in 2030, 2011). Traditional Art of War strategies in East Asia are not the same as those in Europe – and can involve a close linkage between economic and military actions.

John Craig

Related Items Added Later

Outline of 'Military Ties to Darwin Port's Chinese Owner Landbridge group' (Nicholson B., the Australian, 13/11/15)

Defence experts believe that the new Chinese operator of Port of Darwin should be under more scrutiny - because of evidence of its close links to PLA and its efforts to set up its own internal militia. Defence Department approved the 99 year lease last month.  But the company is seen as commercial front for the Chinese military and Communist Party. NT Chief Minister (Adam Giles) endorsed the deal - but company web-site reveals its establishment of a 'people's armed militia' (which demonstrated links to Communist Party and PLA). Mr Giles reports that Landbridge says that its web-site was misinterpreted - and proposes to get a proper interpretation. Federal Defence minister (Marise Payne) remains happy with the lease. Landbridge is owned by Ye Cheng - a former senior military officer and Communist Party official. Its secretary (who controls the company's port development activities) is a former PLA officer. Geoff Wade  (Chinese linguist at Crawford School of Public policy) says Landbridge is a commercial front closely tied to state-owned operations, the party and the PLA. Navy describes Darwin Port as vitally important - as a base for border protection operations. Wade argues that Darwin deal is an attempt to weaken Australia / US alliance - and thus is a cause of security concern. It also demonstrates the need for review of Darwin contract and a data-base which records China's interconnected economic, cultural and political activities in the region. Such links are typical of large Chinese firms - and this does not tend to be understood in Australia because businesses are presumed to be like those in Australia. These connections make Chinese firms susceptible to pressures to assist PLA and Chinese intelligence services. Defence Department Secretary (Dennis Richardson) indicated a lack of concern about the lease because it involved a commercial port - not a naval base. Defence (including Australian Signal's Directorate, Defence Security Agency and Defence's strategic policy area) had examined security issues when advised on the lease - and had had no concerns. The Navy was concerned only about access - because this involved a commercial port, not a naval base.

Road Signs in Mandarin: A Symbol of Australia's Incorporation into the Empire China Hopes to Create? - email sent 9/12/15

Jessica Marszalek,
Courier Mail

Re: Get Visitors on the Road, Courier Mail, 9/12/15

Your article indicated that the federal tourism minister (Richard Colbeck) will ask state tourism ministers to translate road signs into Mandarin to coax more cashed-up Chinese tourists into Australia and onto the wide open road.

This seems naïve, because:

• China’s prospects are poor for reasons suggested in Ongoing Uncertainty. China has built a strong real-economy on the basis of the very bad balance sheets that results from the nature of its financial system – and, as happened to Japan when its equally-dubious financial system imploded in the late 1980s, China now seems very likely in the not too distant future to experience significant economic reversals. This at the very least will probably make ‘cashed up Chinese tourists’ somewhat thin on the ground. In fact China’s situation could become much worse because (unlike Japan) political stability is not assured in China if (as seems likely) its growth juggernaut is derailed;
• In order to head off this risk China’s leaders have apparently been trying to create an authoritarian international trade / tribute regime which they could control to challenge the prevailing liberal Western-style order (see Creating a New International 'Confucian' Financial and Political Order). Road signs in Mandarin would be a great symbol of Australia’s acceptance of a tributary status in a hoped-for international order that is dominated by China’s ‘princelings’.

Australia’s federal government has a singularly poor understanding of what it is dealing with in East Asia – eg as suggested in Australia in the Claytons' Century (2012) and The Limits of Mr Turnbull's History Lessons (both of which referred to an apparent huge lack of Asia-literacy) and Power in East Asia Comes from Organising Things Through 'Connections' not from Holding Port Sites (which commented on the controversy about apparent federal government naivety in relation to the leasing of the Port of Darwin to a PLA-linked Chinese company).

A serious study by state tourism ministers (and others) of differences that need to be considered in dealings in East Asia (eg as suggested in Babes in the Asian Woods and Comments on Australia's Strategic Edge in 2030) would seem to be smarter than debating a proposal related to road signs without considering its international economic context and symbolic ‘big picture’ implications.

John Craig

Scepticism about Japan - email sent 5/1/16

John Lee,
Hudson Institute

Re: Malcolm Turnbull’s Day Well Spent with Trusted Partner, The Australian, 19/12/15

I should like to suggest that there is a need for very deep analysis before Australia should choose to rely on Japanese submarines as the key obstacle to any future attempt to invade Australia. There is no doubt, as your article suggested, that Australia has had a ‘blind spot’ in relation to Japan. However blindness is not necessarily a ‘good thing’, and there are grounds for suspecting (though no certainty) that Japan may not really be ‘Australia’s best friend in Asia’.

My Interpretation of Your Article There was little fanfare to Malcolm Turnbull’s recent meeting with Japan’s Prime Minister, Shinzo Abe. More attention needs to be paid to what has become an Australian blind spot. Many in the diplomatic community were worried when in 2013 Tony Abbott praised Japan as ‘Australia’s best friend in Asia’ and expressed enthusiasm for replacing locally made submarines with an advanced Japanese-designed model. The latter would give Australia the best diesel-powered submarine for our conditions, and allow Australia to play a stronger role in SE Asia and the South Pacific. And the US indicated that fitting US weapons systems would be easy. This would bind Australia’s biggest defence scheme to the US alliance and a deepening strategic alliance with Japan. Apart from China, Asian countries seemed happy about this as they are nervous about China’s expansion and want to see US allies in the region assume more of the defence burden. And, apart from US, Japan and Australia have the strongest naval capabilities in the region. Trilateral US-Japan-Australia cooperation would complicate China’s plans for strategic and military dominance – and thus perhaps force it to integrate peacefully into the existing security order. Now Malcolm Turnbull is committed to open / competitive tender process for these submarines – so Japan no longer has favouritism over competing French and German alternatives. However Abe presumably stated his case well. Turnbull re-emphasised Japan’s strategic value to Australia. So Abbott’s preference may still happen. Japan’s submarines can probably more than match competitors in terms of capability / cost. Options to attract investment from technologically advanced firms would also help Australia’s economy. And despite uncertainty about Abe’s economic reforms, Japan’s economy are well positioned to boost Turnbull’s innovation agenda. Japan should not be seen as a great power of yesterday – as its political evolution and successful rise after WWII are a reminders of the benefits of democracy, liberal institutions, and the rule of law – as well as limitations on the role of government in the economy and society. China may be a larger economy but unlike post-war Japan its behaviour can be predatory, its future precarious and its political economy unstable.

My reasons for suggesting a deeper assessment of Japan are presented in some detail in Broader Resistance to Western Influence?

Very briefly, the latter suggests that:  

• Cultural traditions in East Asia are: (a) very different to Western societies’ emphasis on individualism and individual freedom / initiative; (b) incompatible with liberal Western-style institutions in ways that have significant practical consequences – especially related to government and financial systems; and (c) very hard to understand from a rational Western viewpoint – though understanding is vital to deal with East Asia successfully / safely;
• Because of those incompatibilities Japan resisted Western influences for centuries (eg noting its rapid development of economic and military strength after the 1868 Meiji Imperial Restoration and its failed military attempt in the 1930s and 1940s to create a Great East Asian Co-prosperity Sphere to exclude liberal Western influences);
• At least until the late 1980s, Japan’s post WWII efforts to become No 1 economically involved methods that were quite different to the liberal democratic ‘face’ that Japan put on. They involved a variation of traditional ‘Confucian’ government by Imperially-mandated bureaucracies which was how East Asian societies had been governed for centuries prior to Western expansion. 'Neo-Confucianism' expanded the source of the 'wisdom' that bureaucracies drew upon in inculcating behaviours in Japanese people and organisations (which had previously been limited to wisdom gained from history) and thus allowed real-economy ‘miracles’ to be engineered – and also laid the foundations for future financial crises because of the lack of emphasis on return on invested capital by independent profit-focused enterprises;
• Japan encouraged the use of similar methods across South and East Asia – including previously ‘Communist’ China in the late 1970s thus laying the basis for China’s subsequent neo-Confucian economic ‘miracle’ (and financial risks);
• China is currently trying to create an authoritarian international ‘Confucian’ order like that by which Asia was administered from China prior to Western expansion – and which parallels Japan’s Great East Asian Co-prosperity Sphere aspirations in the 1930s and 1940 (before that plan was militarised);
• Financial risks (and thus a potential for serious social and political instability) exist to the viability of such systems within a Western-style international order. Thus the military build-up in Asia might lead to real conflict;
• Cooperation between current regimes in Japan and China on the basis of centuries’ long resistance to liberal Western influences is possible – despite public frictions related to WW2 events and the ownership of uninhabited islands. Competition, with each trying to be the neo-Confucian ‘top dog’, is also possible;
• Infrastructure / arrangements in Australia have been encouraged (by Japan since the 1980s and China’s current regime recently) that, in addition to their official purpose, would seem to facilitate Japan’s 1940s’ invasion plan; and
• There are diverse reasons to doubt the reality of the ‘new Japan’ that has emerged as the West’s ‘best friend in Asia’ since its late-1980s’ financial crisis (eg the ultranationalist rhetoric of Japan's prime minister, Shinzo Abe, which has caused him to be seen by some as the most dangerous man in Asia).

Your article referred to the economic benefits of technological interchange with Japan related to a submarine deal. However that proposal did not seem to benefit Australia’s economy much (see Naivety About Boosting Australia's Innovation Capabilities).

In relation to this it is also noted that the present writer was involved in investigations related to a 1980s’ Japanese proposal for cultural and technological interchange with Australia. This provided both:

•  an opportunity to reverse-engineer the intellectual basis of Japan’s post-WW2 economic ‘miracle’ – work which Professor Chalmers Johnson, a US expert on Japan’s economic ‘miracle’, described as ‘on the leading edge of the social sciences’; and
•  exposure to notorious ultranationalist and criminal groups who seemed to play a significant Japanese-government-supported role in influencing Australia’s political and economic affairs (see The Dark Side of Japan in Australia).

Some suggestions about how the current behind-the-scenes reality in Japan might be assessed are on my web-site. This, and assessing the security implications of major infrastructure investment, should have priority over promoting public enthusiasm for reliance on Japanese submarines. If a sceptical view of Japan turns out to be justified and military tension in Asia continue rising, those submarines might suddenly stop working in a decade or so just as an invasion fleet is steaming towards Australia.

It is certainly possible that a ‘new Japan’ has emerged since the early 1990s – but it is anything but certain that the cultural revolution needed for this appearance to reflect the underlying reality has actually happened. And deception is the core of traditional East Asian ‘Art of War’ strategies.

John Craig

Email response from Greg Rudd (personal not corporate opinion - reproduced with permission) - 6/1/16

I just want to say I always find your articles a worthwhile contribution to a fairly naive Australian perspective on our interaction with East Asia.

I often say to senior Chinese in China, in Australia we largely trust someone when we first meet them until they prove otherwise. In China it's the opposite. You trust no-one from day one. You use politeness, entertainment and ceremony as a tool. Naive Westerners think you actually like and respect them because you make them feel important. These are private conversations and few disagree with me. 

As you so often say, most of our politicians don't understand that deception is at the heart of most negotiations in East Asia.

Deception by public act rather than premeditated private intent is often at the heart of how Western politicians and democracies work also. Not done purposefully... it just goes that way because the system doesn't allow most Governments to deliver.

I'm a big believer in democracy. But I also firmly believe we can improve the model to get wiser and more beneficial outcomes.

The only thing stopping us is us.

China's Strategic Approach to its Economic and Political Problems: A Speculation - email sent 20/1/16

Editor, The Australian
Not for publication

Re: Lee J., China’s economic woes: credit flood bursts bubble, The Australian, 15/1/16

I should like to suggest that, while Dr Lee’s article provides a fair account of China’s economic woes, such analyses now need to be presented with reference to ‘Asian’ cultural, economic and political traditions and practices rather than by describing events and preferred solutions simply in terms of Western analogies. China’s primary goal is arguably not to improve its position in the prevailing Western-style international order, but to boost its power in a possible future world in which social, economic and political outcomes are determined more by ethnic social hierarchies (the East Asian tradition) than by the independent initiative of free / rational individuals (the Western tradition).

My interpretation of Dr Lee’s article: China's politics had been seen as economic virtue - ie the idea that authoritarian leaders could easily identify / fix problems. However it is now obvious that this is not so and the country has problems - both a growth rate much below official numbers and concern about the viability of its authoritarian model. In the 1980s and 1990s China advanced because policies increased domestic private sector's ability to thrive - but since then state sector has become increasingly dominant. A property bubble emerged as a government-driven response to GFC which had devastated China's advanced economy exports. State-owned banks were forced to lend mainly to SOEs to build more things to get headline growth - thus creating ghost cities. From 2008 to 2014 there was a $20tr increase in credit to economy. With excess capital around, it flooded into stock market. These fixes are being applied to enhance the dominant state sector at the expense of households and individuals - and this has just been making things worse. The repayment of $trs of local government debt (that had been wastefully incurred by their SOEs) has been delayed - because state-owned financial institutions and other SOEs have been forced to buy it. While liberal-democratic economies have their problems, China’s problems are worse. A radical transfer of wealth away from SOEs to the rest of the economy is needed.

I would like to suggest that China’s problems are even more profound than Dr Lee’s article indicated, and that China’s current regime is arguably seeking to resolve them in ways that most Western observers are unlikely to suspect.

China’s economic ‘miracles’ since the late 1970s seem to have been achieved in much the same way as those in Japan – ie through neo-Confucian practices which are variations of the methods used for government in countries with an ancient Chinese cultural heritage in the centuries prior to Western expansion. In a neo-Confucian context it is not valid to suggest (as Dr Lee’s article did) that China’s problem could be solved by transfer of wealth to its ‘private’ sector. China’s significant non-SOEs (lie their Japanese counter-parts) seem to be anything but ‘private’ enterprises as would be understood in a Western context (see cultural obstacles).

Elaboration: In China since the late 1970s everything has come to depend on ‘connections’. Both SOEs and significant non-SOEs are instruments of a corporatist state (ie one in which the ‘private’ sector is viewed as an extension of the state – as applied in Europe’s fascist states in the 1930-40s). Control in both types of enterprises was exerted through consensus building in hierarchical social relationships which ultimately led to and up the so-called ‘Communist Party’ (just as, in Japan’s case, they had led to the bureaucracy). Both types of enterprises were funded by state-linked financial institutions – apparently with a primary goal of building economic power (eg market share / cash flow) with limited regard for return on / of capital. It is not possible to have real 'private' enterprise without an effective rule of law - to create a framework for relationships amongst independent entities. However in China, law is not a framework for independent initiative but rather is a means of disciplining those who deviate from the consensus developed through ethnic hiearchies.

In fact the lack of an independent profit-driven ‘private’ sector (which is a product of East Asian cultural traditions) created global financial and economic problems – because huge domestic macroeconomic imbalances (savings gluts as a result of financial repression) were needed to avoid financial crises (see The Cultural Background to East Asian Savings Gluts and Escalating International Financial Crises, 2015). Moreover those non-capitalist financial practices ultimately created:

• a risk for China of a financial crisis like that which Japan suffered in the late 1980s (because of undisciplined funding of capital spending);
• a domestic political problem which required the recent emphasis on SOEs that Dr Lee’s article mentioned. Party insiders had abused their positions with China’s supposedly ‘private’ (ie non-SOE) enterprises to divert resources to themselves, their families and their friends – thus leading to: (a) the most extreme imbalance of wealth in the world – which was widely resented by grassroots Chinese people; and (b) the current Chinese regime’s anti-corruption drive; and (c) a re-emphasis on SOEs.

Other useful accounts of the challenges that China and the world faces have suggested that China’s response (which primarily involves seeking to consolidate government power rather than liberalize its economy) implied that China’s regime does not know what it is doing (eg see Cai P. A Vital economic history lesson for Beijing’, China Spectator, 14/1/16 – outlined here - and Ergas H., The China syndrome: China poses a risk to the world economy, The Australian, 16/1/16 – outlined here).

However on the contrary it seems likely that China’s current regime is simply not interested in seeking to adapt to a liberal international order, but is rather:

• seeking (in what some see as a ‘post-pax-Americana world’) to create a new international order (similar to that by which Asia was administered from China prior to Western expansion) in which rule by autocratic social elites would not be impeded by democratic political or free-market financial constraints (see Creating a New International Economic and Political Order, 2009+);
• making compatible domestic political changes (see The Resurgence of Ancient Authoritarianism in China) – ie towards consolidating the power of Communist Party ‘princelings’ and China’s president (Xi Jinping) in particular;
• seeking to maintain growth (as had been done before for export manufacturing by neo-Confucian hierarchies under the ‘Communist’ Party) by orchestrating the development of consumer industries – because maintaining growth through high rates of infrastructure / property investment had led to dangerous debts. China’s history of forcing through economic changes that eventually succeeded – even though its economy suffered in the process - was noted in an article mentioned above. Those methods also seem to be being used to move some manufacturing up the value chain through establishing innovation capabilities;
• hoping that the international financial system will be seriously damaged by the risks to which it is currently exposed (especially the risks associated with unsustainable debt levels). That financial system is the ‘nervous system’ of Western economies (and the latter would be badly damaged if financial institutions don’t work) while the ‘nervous system’ of East Asian economies primarily involves ethnic social hierarchies (which not only determine the allocation of resources but seek unquestioning compliance by grass-roots members of their communities).

It can be noted that:

•  China’s regime is reportedly seeking to ensure that its education system encourages compliance, rather than independent thinking, by China’s people;
• an attempt is apparently being made to re-establish a (Confucian) religious basis for state authority and to purge Western cultural influences (ie independent individualism);
• efforts have been made to overcome China’s financial constraints by: (a) state efforts to orchaestrate ‘profits’ in real estate and share markets; and (b) establishing the yuan as an internationally traded currency. If the former had been successful, it would have provided a source of capital for investment without continually expanding debts (see Context to China's Share Market Boom and Bust). And the latter (if it had not been undermined by significant capital flight) would have provided a means for providing huge amounts of credit for domestic and international investments under the control of China’s ‘princelings’ irrespective of China’s underlying balance sheet; and
• seeking to gain support from significant emerging economies - which parallels revolutionary efforts to gain control of the ‘countryside’ (as the base from which to later overwhelm the ‘center’) by Mao in China and Ho Chi Minh in Vietnam.

In analysing China’s challenges and responses, the relevance of East Asian cultural traditions (of which the above comments are by no means a definitive view) now needs to be given much more serious attention than has been the case in the past.

John Craig

The US's Preference for Australia to Buy Japan's Submarines Needs Asia Literate Assessment  - email sent 22/1/16

Andrew Shearer
c/- Lowy Institute

Re: Stewart C., US eyes strategic benefits from Japan submarines deal, The Australian, 22/1/16

A deeper (Asia literate) assessment of Japan’s motives and methods is needed in relation to this submarine proposal.

My Interpretation of the above article in which you and Michael J. Green (US CSIS) were quoted: US believes that Australia would benefit militarily / strategically from buying Japanese submarines – according to Tony Abbott’s former national security adviser (Andrew Shearer). There would be a superior capability and long-term strategic benefits. This will alarm those proposing other options. Mr Abbott first proposed the Japanese option on Mr Shearer’s advice – but was forced to call open tenders. In a recent National Interest article Mr Shearer said that senior US officials have argued that Japanese submarines have superior benefits – and that this matters because of China’s rise and the resulting potential importance of undersea warfare. In an article, co-written with Michael Green (former White House official now at Centre for International and Strategic Studies) it was argued that Japan’s move to a less pacifist posture opened opportunities for Australia – especially in acquiring Japanese submarines as this would also strengthen the trilateral (Japan, Australia and US) alliance. For more than a year this US preference has been rumoured. However no matter what submarine in chosen, the US will have an interest because they will deploy US combat systems, weapons and stealth technology.

As I understand it, the referenced article by yourself and Michael J. Green which suggested that the US would prefer Australia to buy Japanese submarines was Mr Turnbull Goes to Washington (The National Interest, Jan 17, 2016) . This took it for granted that Japan would be a reliable ally whose undersea warfare capabilities (which would be critical if conflict developed with China) should be preferred.

Unfortunately there has been massive official naivety about the nature of what the US and Australia have been dealing with in East Asia (eg see Babes in the Asian Woods, 2009+ and Scepticism about Japan, 2016). For example:

• the Gillard Government’s white paper on Australia in the Asian Century presumed that Asia will rise economically within a Western-style social, political and economic framework and thus create opportunities that suit Australia’s public and private institutions (rather than under a framework that suits East Asia’s radically-different and unfamiliar traditions) - see Australia in the Clayton's Century: The 'Asian' Century you have when you are not having an Asian Century (2012). Your own view of that paper, ‘Asia White Paper Makes no Sense’ (The Interpreter, 24/1/12), was critical because of the White Papers’ limited recognition of the US’s likely dominant influence in the region in the future. However this did not point out that the White Paper reflected official ignorance (which the US seems to share) that the way things are done in East Asia can be quite different to Western practices. And that those differences are (probably) being given practical expression is illustrated by The Resurgence of Ancient Authoritarianism in China and Creating a New International 'Confucian' Financial and Political Order;
• the US was seen by some to have been deceived since the 1960s about China’s apparent ‘Hundred year Marathon’ to gain geo-political dominance - and it is possible that the same applies to Japan (The US's Most Significant Intelligence Failure? 2015);
• the US never understood that Japan’s post-WWII system of government was quite different to what it seemed to be (as suggested in Scepticism about Japan). It is well known that Japan’s economic bureaucracy was a law unto itself (ie not accountable to Japan’s nominally governing ‘Liberal Democratic Party’, LDP) . This needs to be considered in the context of: (a) the pre-Western Confucian tradition of government in East Asia by bureaucracies on behalf of emperors; (b) the role that ultranationalist criminal groups apparently had in maintaining Japan’s post-WWII imperial system and in establishing both Japan’s post-WWII economic machinery and the LDP; (c) the ability that neo-Confucian bureaucracies would have had (providing they operated under a mandate from Emperor Hirohito rather than the LDP) to orchestrate economic ‘miracles’. The present writer’s career experience shows that methods like those of central coordinators in governments everywhere can be effective is stimulating effective system-wide strategic change providing the process is depoliticised – and such methods would be useable in countries like Japan and China because the social hierarchies that characterise Confucian societies means that their economies can work like whole-of-society bureaucracies.

While undersea warfare capabilities would be critical in the event of future conflict with China, submarines from Japan might not necessarily be reliable in that role (as suggested in Scepticism about Japan). What has been happening in Japan requires serious consideration from an Asia-literate viewpoint – not just pronouncements from security experts who presume that Western societies’ values and methods apply everywhere.

I would be interested in your response to my speculations

John Craig

Is Japan our best strategic partner for submarines? - email sent 5/4/16

Michael J. Green and Andrew Shearer,
Centre for Strategic and International Studies

Re: Japan is our best strategic partner for submarines, The Australian, 4/4/16

Your article (in response to Paul Kelly’s recent Alliance loyalty won’t decide ­submarine contract) suggested that Japan is Australia’s best choice for submarines because Japan demonstrated in the early 1990s (eg by collaborating with the US in developing its F-2 fighter support jet) that the Cold War US-Japan alliance would be maintained.

However I would like to suggest that there is a need to consider carefully whether there has been a real post-WWII / Cold War strategic alliance between the US and Japan. There is little / no doubt that:

• the liberty that individuals enjoy under Western traditions is incompatible with Japan’s / East Asia’s cultural traditions – under which individuals do not act independently but as components of an ethnic social hierarchy;
• Japan’s 1868 Meiji restoration of Imperial rule was put in place to boost its military capacity and thus resist incompatible Western cultural influences by former Samurai (Ronin) who strongly supported Japan’s traditional social order. Under the restored emperor Ronin gained control of Japan’s government and businesses. Other former Samurai (who had formed crime gangs - Yakuza), provided support – especially in promoting order within / compliance with the desired social hierarchy;
• Emperor Hirohito’s supporters in government and the military had been responsible for the War in the Pacific from the 1930’s (ie to create a Greater East Asian Co-prosperity Sphere – and thereby hopefully to ‘make men’ of those East Asian powers (especially China) who had not successfully resisted Western influences, as the basis for a second war some decades later that would be global);
• The historical record is clear that Japan’s post-WWII political and economic arrangements were again put in place by ultranationalist factions (ie those who regard Japan as racially / culturally superior) who were loyal to Emperor Hirohito. Yakuza gangs were the instruments in that case. The methods used: (a) involved a variation of the Confucian bureaucratic rule on behalf of emperors by which East Asia had been ruled prior to Western expansion; (b) had been developed by the Japanese Army in Manchuria in the 1930s – according to a respected Japan-watcher; and (c) were effective in stimulating economic ‘miracles’ (for reasons that are not obvious if considered in terms of Western systems of political economy);
• Until the late 1980s it was obvious that Japan was waging an economic / financial ‘war’ against the US (ie to prove the superiority of its neo-Confucian system to others in East Asia with a Confucian cultural heritage by becoming No 1 economically);
• China adopted a variation of Japan’s neo-Confucian methods for organising economic ‘miracles’ in the late 1970s. Under China’s variation the neo-Confucian role in catalysing market-oriented economic change was played by members of the Communist Party (rather than by the bureaucracy as had been the case in Japan);
• When Japan’s system failed with a massive financial crisis in the late 1980s, it did not significantly change its domestic arrangements but internationalized its strategy (eg by becoming the US’s ‘best friend’ in Asia). The latter may or may not reflect the classic Art of War tactic of becoming close to one’s enemies;
• There are indications of the need to look closely, and from an Asia-literate viewpoint, at how / whether Japan has changed since the late 1980s (eg consider Japan’s prime minister’s ultranationalist rhetoric and heroic endorsement of its war criminals).

My reasons for the above suggestions are outlined in Broader Resistance to Western Influence? My background for involvement in this area is outlined here.

There is I submit a need to seriously consider the nature and substance of the US-Japan alliance – and on this basis to consider whether Japan is the best strategic partner for Australia’s submarines (rather than asserting this as unchallengeable fact).

John Craig

Is Singapore 'Family'? - email sent 6/5/16

Sid Maher
The Australian

Re: Singapore to train 14,000 troops on our shores, The Australian, 6/5/16

Your article pointed to a diversity of arrangements that would see Singaporean troops training in Australia (and various other changes to promote close Singapore – Australia relationships). This had been set up following negotiations last year between Australia’s then prime minister (Tony Abbott) and Singapore’s prime minister (Lee Hsien Long) at which time Mr Abbott had reportedly described Singapore as part of Australia’s ‘family’ just as much as New Zealand.

“During the visit to Singapore, Mr Abbott agreed to “seamless” exchanges on counter-terrorism, defence, investment, education and immigration. He said at the time that Singapore should be seen as “family’’ as much as was New Zealand.”

The unfortunate reality, however, is that: (a) Singapore is nothing like other members of Australia’s ‘family’ (for reasons suggested in ASX Merger with Singapore Exchange, 2010 and following items - and also here); and (b) Mr Abbott’s judgment in relation to dealings in Asia did not seem to be based on any deeper understanding than has been typical of Australia’s political and policy establishment generally (eg see A New Japan? and Babes in the Asian Woods).

John Craig

Developing the Infrastructure for a New Chinese Empire? - email sent 27/5/16

Malcolm Broomhead,
c/- Asciano / Orica

Re: Callick R. One Belt, One Road China advisory group launches in Melbourne, The Australian, 27/5/16

You were quoted as suggesting that President X’s invitation for Australia to participate in China’s ‘One Belt, One Road’ (OBOR) strategy ( ie to develop infrastructure linking China with Europe and also building infrastructure in north Australia) would offer Australia economic advantages. However, I should like to suggest that there are broader strategic issues that need to be considered by the ‘OBOR’ advisory group that you are to chair.

Firstly, China’s proposal for the OBOR scheme needs to be viewed in the context of an apparent attempt to create a new international trade / tribute regime like that by which Asia was long administered from China prior to Western expansion (see Creating a New International 'Confucian' Financial and Political Order, 2009 and Looking at the AIIB in Context, 2014). As Rowan Callick’s article noted, participation in the OBOR project depends very much on top-level support in China – and this is available to those who are prepared to accept a subordinate status to China’s autocratic elites.

Secondly, China’s ability to bring the OBOR scheme to fruition is uncertain given its current potential financial crisis (see Importing Risks from China). And, as the latter also noted, some observers believe that China is moving away from the financial / economic reforms needed to overcome its financial constraints – and is rather emphasising the development of its capacity to expand its influence by force. Clearly the OBOR strategy (and any infrastructure extension into north Australia) would need to be considered by the OBOR advisory group in terms of its potential military, as well as its economic, implications.

Finally, there are other indications of the need to consider the security implications of infrastructure development – especially that in north Australia (see Possible National Security Issues). In considering the security implications of the OBOR scheme, the advisory panel will hopefully take those other developments into consideration.

John Craig

Australia's Increasingly Dangerous Environment - email sent 12/8/16

Professor Paul Dibb,
Australian National University

Re: Wedged West Faces Violent Geopolitical Threats on Emerging Fronts, The Australian, 10/8/16

There is no doubt that, as your article suggests, Western societies face an increasingly dangerous international environment that they are poorly equipped to cope with. As you noted obvious military threats are rising from Russia (and China to a lesser extent) at the same time that Islamist extremists mount terrorist attacks. Responses are complicated because economic difficulties have led to disaffected communities, political instability and a desire to retreat from global engagement in Europe and the US. Other observers have expressed similar concerns in diverse ways (see Geopolitical indicators of a Potential Crisis).

My Interpretation of your article: The world is exceedingly dangerous and is challenging Western values – a fact that has gained no political attention in Australia. Russia and China (authoritarian powers) are challenging the Western liberal order through military force and coercion. This is happening at the same time that Western electorates have established a major gap between the governed and governments (eg in relation to the impact of globalization, illegal immigrants and border control). There are also assaults by Islamist extremists. Russia is seeking to be a great power and to recover lost territories. Putin speaks of Russia's civilizing mission in Europe. The will to use force seems absent in Europe. There is a challenge emerging from China - but it does not pose the same threat to world peace that Russia does. China is not yet using force to assert its territorial claims. Joint Russian / Chinese naval exercises are being conducted in the South China sea - just as the US and Britain are being obsessed with concerns about the effects of globalization on domestic politics. This is a deep seated anger about job losses and falling living standards. Populist, xenophobic and anti-globalist political factions are rising in both Europe and the US. 20 years ago capitalism was seen to have no rival - now the question is whether it can adapt. At the same time the West faces barbaric attacks from Islamist fundamentalism. Suppose this results in civil war in a country such as France. Parallels can be seen with the situation at the start of 20th century that led to WW1. History may not repeat itself, but a dangerous era is emerging.

The situation does indeed have parallels with that at the start of the 20^th century when the prevailing international order was challenged and disrupted (especially by Germany at that time) and WWI resulted. However there are also differences because East Asia is heavily involved – and traditional East Asian Art of War strategies have to be considered to understand what is happening (eg because deception; holding up a mirror so that when others look at you they see a reflection of themselves; and state-coordinated social, political, criminal, economic, academic and military actions can be part of a very long term strategy that does not initially seem war-like). To win without fighting is seen to be best (ie by getting close to enemies to use behind-the-scenes influence to encourage them to weaken themselves prior to conflicts emerging – eg by becoming economically dependent / institutionally inept / disunited). To avoid defeat by such ‘soft power’ early-stage tactics requires economic strength, competent institutions and unity. All of these could be improved if a serious effort were made to do so, and thus enhance the West’s ability to cope with rising authoritarian challenges to the post-WWII liberal international order.

Some speculations about the parallel between the current situation and that in the period prior to WWI (while also considering ‘clash of civilizations’ aspects) are in Competing Civilizations (2001+) and The Second Failure of Globalization (2003+). These suggest that East Asian societies with an ancient Chinese cultural heritage experience profound difficulties in a global system built on Western-style institutions (eg because of the effect of different traditions related to the nature and use of information and the role / importance of individuals). These have been the primary motivation behind the long-developing challenge to the Western liberal order that is now again becoming obvious because of its militaristic manifestations. For many decades after WWII that challenge had taken a primarily financial and economic form that could not be appreciated without close study of the cultural foundations of East Asian political, financial and economic systems.

 It is inappropriate to view the threats Australia faces solely or even primarily in military terms – for reasons suggested in Comments on Australia's Strategic Edge in 2030 (2011). Doing so would imply that Russia’s militarism and Islamist’s terrorism are the major threats. However misunderstanding China’s intentions (ie presuming that its post-Mao regime was primarily concerned with increasing Chinese people’s economic welfare rather than the regime’s international power) has been seen to be The US's Most Significant Intelligence Failure? And Western analysts may have had an even greater intelligence failure because they did not study the cultural reasons for Japan’s resistance to Western values from the time of the Meiji Restoration in 1868 and the methods that could be used to give effect to that resistance (see Broader Resistance to Western Influence?). Australia faces potentially serious military threats from East Asia, which it would be foolish to ignore. However the military dimensions are only part of a broader set of challanges.

Likewise it is unwise to consider the threats of violence posed by Islamist extremists as purely a security issue that is unrelated to the clash between Western and East Asian civilizations. Both East Asian ultranationalists and Islamists favour a social, economic and political order dominated by elites rather than by the initiative of free individuals – though the (respectively social and religious) nature of the elites is not the same (see Islamist Extremists are not Alone in Favouring Pre-modern Social Systems, 2015). Thus the possibility of behind-the-scenes collaboration between such groups since before the 911 attack in America by Islamist extremists should not be ignored. And collaboration over the last few years between Russia’s current regime and East Asian nationalists seems very likely because of many Russians’ traditional preference for authoritarian governance and their distrust of liberal institutions. In practice a major effect of the September 11 attack in American in 2001 was to encourage a security / military / Middle Eastern focus by the US administration which significantly reduced its ability to deal with the much greater challenge to the post-WWII liberal international order that was coming from East Asia. Russia’s current military activities in Eastern Europe and the Middle East presumably have a similar effect.

As noted above financial and economic dimensions have long been dominant in the East - West ‘clash of civilizations’. These have had disruptive implications for Western societies in terms of: (a) eroding competitiveness in what had previously been the main basis of broad high wage employment in Europe and North America (ie mass production manufacturing); (b) the limited economic effectiveness and the erosion of government competence associated with the market liberalization strategies adopted to accelerate then-essential economic adjustment; (c) macro-economic imbalances that resulted from ‘savings gluts’ in East Asia and required the adoption of easy money policies elsewhere to avoid global economic stagnation by creating a temporary wealth effect amongst those with significant existing assets to increase consumption until ultra-low interest rates ultimately made national debt levels dangerously high; and (d) the adverse effect that easy monetary policies had on increasing economic inequality – and ultimately on contributing to political instability and incompetent governance (see Who Is Failing the Lower and Middle Classes? and More on: Should Donald Duck?).

However it is not only Western societies that bear social, economic and political scars from the post-WWII financial and economic ‘clash of civilizations’ (eg see Heading for a Crash or a Meltdown? in relation to China’s predicament and Impacting the Global Economy in relation to global effects). Now the ‘clash’ is no longer simply confined to financial and economic considerations. Attempts have apparently been being made to create a new international order like that by which Asia was administered from China prior to Western expansion. This would involve exerting power through hierarchical social networks, rather than through liberal Western-style institutions – see Creating a New International 'Confucian' Financial and Political Order. That system is being used by China’s regime to exert economic influence externally like that it exerts domestically (eg see Developing the Infrastructure for a New Chinese Empire? and A Made-in-China Disaster Waiting to Happen). And these attempts to internationalize the political and economic influence of China’s regime are being complemented by China’s efforts to boost its military presence in, and control of, the strategically-significant South China Sea.

Clearly the situation is rapidly evolving. However a starting point for thinking about a response to these challenges was outlined in Comments on Australia's Strategic Edge in 2030 (2009). This basically involved: (a) the use of innovative methods to increase Australia’s economic productivity and competitiveness; and (b) boosting the competence of civil institutions, universities and public services in supporting democratic political systems in coming to grips with the challenges that your article outlined. Such reforms to cope with an increasingly hazardous international environment have been needed for a very long time (eg see Australia's Governance Crisis and the Need for Nation Building, 2003+). The formation of a government of national unity might also be helpful to reduce the risk that political infighting over the sharing of national wealth is an obstacle to dealing effectively with rising external threats.  Parallel suggestions in a global context are included in Seeking a Liberal International Order (2010+). This includes suggestions in relation to one question that your article posed, ie how capitalism might adapt to the challenges liberal institutions currently face.

John Craig

Why Some Assets Should Not Be Sold to Foreigners - email sent 13/8/16

David Uren,
The Australian

RE: China snub puts asset sales at risk, The Australian, 13/8/16

Your article drew attention to pressure on the federal government to clarify the national security criteria that are the basis of decisions about which assets can be sold to foreigners.

My Interpretation of your article: Business is calling for clarity about what assets can be sold to foreigners – following the last-minute rejection of Chinese bids for NSW electricity assets. Former chairman of Infrastructure Australia and British Airways (Rod Eddington) says he could not understand the decision. Andrew Parker (PWC’s Asian practice) says that sovereign risk fears and confusion are emerging in China and Japan – because the process seems shambolic. WA premier (Colin Barnett) suggested that privatization of WA’s electricity grid could be an early casualty. Malcolm Turnbull could face questions at next month’s G20 summit where there is concern about rising anti-globalization sentiment. While the PM says the decision was not aimed at China, Chinese observers suggest that it is and expressed concerns about ‘China-phobia’. ASPI director (Peter Jennings) said the decision reflected national security issues being taken more seriously. In the past China’s rise had been viewed as ‘peaceful’ and no problems had appeared with China’s purchase of other state electricity assets. But under president Xi Jinping China had become more assertive and aggressive. Its foreign policy now seems like Russia’s. NSW premier (Mike Baird) expressed frustration because the decision should have been made months ago – and (because the reasons for the decision were unknown) it was impossible to know if changes could be made to make it acceptable. Innes Willox (Australian Industry Group) said that there was a need for more clarity. James Pearson (Australian Chamber of Commerce and Industry) pointed to the costs of the review process for bidders – and thus the need to understand the criteria. Repercussions from the decision could include fewer students or tourists from China. Bill Shorten and Chris Bowen (ALP) were given a classified briefing on the reasons for the decision and, while agreeing that some assets should not be sold for national security reasons, they said that this should be made clear earlier. Why would strategic assets be put on the market for anyone to buy in the first place?

I have no inside information about the decision your article mentioned or about the criteria that are used in national security assessments. However one criteria that should now be being considered is whether assets could facilitate future attempts to invade Australia – or allow a purchaser to influence the development of new infrastructure that might do so. My reasons for suggesting that attention to this long ignored risk is now necessary are in Possible National Security Issues.

However rejecting the purchase of assets that might facilitate a future invasion is by no means all that Australia needs to do to cope with its increasingly dangerous international environment. Other probably-desirable responses are suggested in Australia's Increasingly Dangerous Environment. And, in response to any questions directed to Australia’s Prime Minister at the G20 meeting in China, it might be desirable to raise questions about the need for reform of China’s financial system so that the credit required for the purchase of foreign assets can’t be provided by institutions that would probably be insolvent if their balance sheets were reliably assessed (see International Regulation of Lending Standards).

John Craig

In August 2016 questions started to be asked about Chinese influence in Australia - following revelations about substantial political donations being made by Chinese companies and proposals to celebrate the 40th anniversary of Mao Zedong's death. For example:

Australian Examples [>]

Some people are starting to worry about Chinese influence in Australia. Local Chinese businesses are planning to stage concerts to celebrate Communist Party dictator Mao Zedong. There have been media reports of large donations by Chinese business people to state political parties. Chinese language media in Australia have become dominated by pro-Beijing owners. Australia's Chinese population is about 1m - of whom 1/3 were born in China - and 140,00 are studying as students. Motivations for coming to Australia vary - but relaxed ways of life are significant.  Being able to build their own lifestyles without big brother breathing down their necks is valued. People with Chinese heritage make valuable contributions. For most of these China means a broad-based culture and a place of family / friends. However for some China means only the People's Republic and its ruling party. Some see Australia's laid-back lifestyle as lacking the vitality / purposefulness of the Party's culture - and want to imbue the Chinese community (and then all Australians) with a sense of this. Some also seek advantage from public demonstration of their solidarity with those causes. Chinese officials in Australia have difficulty with this - even though some see them as puling strings. 25% of Australians were born overseas - but those from PRC grew up without experience of migrants around them. Australians in China can't play a political role there. However it has been suggested that Chinese in Australia should seek to build strength in politics - eg with cash / votes and also with political operations. Chinese business figures are seeking an ability to exert influence. Even if they become Australian citizens that are seen by PRC to remain Chinese in important ways - though their links to state / party agencies in China remains unknown. There are many different views amongst Chinese in Australia - and concerts to celebrate Mao could promote distress amongst his victims as well as enthusiasm amongst his fans. [1] 

Senator Sam Dastyari is reported to have sold out his party / country for a modest sum - but is not alone. 10 years ago Beijing spotted a weakness in Australia's national leadership and started offering cash for comment. This was a highly strategic intervention. During resource boom years industry / government leaders reassured each other that Australia could pursue shared trade and investment relationship with China without invoking the different values and security interests of the two countries. Business leaders warned about interfering in what China was doing in South China Sea because of effect on their lucrative businesses. Beijing-linked companies contracted retired ministers to lobby for them. Alexander Downer accepted board position on Huawei and spoke on that company's behalf in the face of national security concerns. Bob Carr founded China Relations Institute at UTS using funds from businessman committed to advancing Beijing's policy position in Australia, The latter was not effective but a journalism program Carr runs with funds directed through China's Central Propaganda Bureau effectively conveys Beijing's message through Australia's mainstream media.  This is one of six commercial media agreements signed between Chinese and Australian entities under the auspices of China's Central Propaganda Bureau.  For a price, all major Fairfax Media titles now carry monthly China-friendly inserts without indicating that they are advertisements. The ABC was caught censoring Chinese language content to ensure that it maintained a friendly relationship a Chinese media partner. Many Chinese-Australians are concerned about what has been happening - as reflected by their establishment of the Embrace Australian Values Alliance [1]

Federal parliament is more open to corruption that state governments. NSW ALP senator (Sam Dastyari) has attracted attention for accepting payment from a Chinese company - though he broke no law. Head of property development group (Yuhu Group) argues that Chinese need to be more efficient in combining political influence and donations. He has paid $1m+ to Australian politicians, and financed Bob Carr's pro-China Australia-China Relations Institute - which has led to complaints about Carr's 'China-whatever' comments.  He paid $40,000 to Dastyani in 2014 - at a time when Dastyari called for Australia to respect China's South China Sea decision. China's president has called for overseas Chinese to be patriotic in advancing China's interests in other countries. China's Communist Party has a department which coordinates Chinese diaspora and international communities to achieve political goals. There is a group of Chinese Communist Party connected influences in Australia who do not just act for personal / commercial advantage but for China's national interest. ASIO has warned that some Chinese donations to political parties raise national security risks - an indication of growing concern about the use of such soft-power methods in Australia. Taking a tough position on China's disputed South China Seas claims cost Labor a lot of money. ASIO is very concerned about the use of donations to buy access and influence. It is a challenge to Australia's sovereignty that the federal system is unprepared to deal with. ALP is calling for a ban on foreign political donations [1] 

Labor senator Sam Dastyari pressed senior Defence and Foreign Affairs officials in 2014 and 2015 estimates hearings to reveal how Australia would respond to conflict in South China Sea and the impact of buying submarines from Japan on Australia-China relations. He now faces questions about whether he was paid to take a pro-China stand [1]

A claimed 'non-government, non-profit community-based organisation' is the major link between Chinese donors and Australian politicians. The Australian Council for the Peaceful Reunification of China (ACPRC) is a branch of a global chain of similar councils linked to a central Council in China. Its website is linked to official Chinese government web-sites - which is impossible without their approval. The Council's chairman is linked to China's powerful Politburo standing committee.  He suggests that maintaining that Taiwan is part of China is sacred duty for all sons and daughters of China. Chinese businessmen who have made large political donations in Australia are linked to ACPRC. Its patrons have included many Australian politicians. Helen Lu, a wealthy Chinese businesswoman, who befriended then ALP Defence Minister (Joel Fitzgibbon) was also a member of the Council. Its goals include no only re-unification but also economic and cultural exchange between Australia and China. China experts characterize the Chinese council and its global look-alikes as part of Communist Party's 'united front' strategy of drawing in overseas Chinese to support its causes. In some countries re-unification councils have explicitly endorsed Chinese government policies - though this has not happened in Australia. Steve Tsang (Nottingham University) states that many organisations that present as NGOs work very closely with the Chinese government to promote Chinese Government views / policies. This is a way of engaging others to ensure that they either support China or remain neutral. Bruce Jacobs (Monash University) states that Chinese system does not allow any independent organizations. Organizations that claim to be NGOs often have ket Chinese leaders as their heads [1] 

China is not only using military might to build harbour for its navy in South China sea in defiance of international law. It is also using economic power to push its interests via 'soft power' persuasion. Occasionally charm slips as when state-owned newspaper Global Times dismissed Australia as a 'paper cat' and suggested that Australia would be an ideal target for China to warn and strike if it did anything related to South China Sea. This sparked bilateral meetings between China and Australian leaders during G20 meeting. China's 'soft power' also emerged as an issue in many other ways. Australia's Government should have run harder on the subject. China maintains large world-wide network of 'citizen spies' as well as engaging in electronic and cyber spying. One key objective relates to re-unification with Taiwan - and the group (ACPPRC) promoting this is a common link in the payments by Chinese businesses to Australian politicians. Politicians should support organisations that promote bilateral ties - but ACPPRC has an intensely nationalistic agenda. ALP frontbencher suggested that there was a problem also with politicians linkages to Taiwanese and Israel - but neither of the latter are engaged in a military build-up that might be detrimental to Australia's security [1]

A 'pro-Australia' movement and leader (John Hu) has emerged out of controversies around Australia's 1m Chinese community. The new Embrace Australian Values Alliance is the opposite of Australian Council for the Peaceful Reunification of China that is the common denominator between major Chinese donors and Australian politicians / political system. Hu suggests that donors have two aims (a) personal profit - which is ineffectual because it reflects a communist way of thinking (ie that decisions can be influenced by buying the person at the top); and (b) to please people back in China where business and government work closely together. Many Chinese real estate developers are not making money in Australia. The new alliance was set up as a reaction to concerts proposed to celebrate Mao Zedong. The alliance (which has no political allegiance) has many different viewpoints - but believes that those who live in Australia should agree with Australia's values - eg related to freedom, democracy, equality, tolerance [1] 

Debate about Chinese investment and the presence of a large Chinese community raises questions about China's influence and intentions. Though China's accumulated investment is well below that of Britain, US and Japan - its current pace is raising nationals security issues. Half of Chinese investment is by SOEs. There are 1m Chinese residents in Australia - of whom 1/3 were born in China and 140,00 are current students. Much of older Chinese community is fully integrated and able to voice criticisms of China there is evidence of rising pro-PRC attitudes and Chinese language media is almost exclusively controlled by pro-Beijing groups. Economists and businessmen cant see why Chinese investment should be treated differently to that from UK, US / Japan (eg all could use investments in Australia to intercept intelligence communications). Australia China Relations institute (UTS) suggests that there should be 'negative' list in which foreign investment would not be allowed. Such issues should be elevated from FIRB to national security committee of cabinet. The fact that China has different values to Australia (ie is a one-party communist state; lacks press freedom / judicial independence; has a bad human rights record) can't be ignored. It is not right to suggest that because China has had remarkable economic achievements its human rights record should be ignored. Its one-party state was at east as murderous towards it people as the former Soviet Union. Australia experts believe that there has never before been such an overwhelmingly pro-PRC attitude in Australia's Chinese community. China's embassy pus the strings in his regard using cultural influence and threats of retribution against relatives in China to achieve this. Celebrations were planned for life of Communist Party dictator Mao Zedong. Chinese business people are also making donations to state political parties. If there are many Chinese resident who have nostalgic attitude to PRC, Australia has a dangerous situation involving a large group who are not integrating and owe allegiance to a foreign power. This risks increasing antagonism in relation to foreign investment [1]

The Chinese company that made payments on behalf of Senator Sam Dastyari has formal ties to the Communist Party through its own internal Communist Party committee [1]

Senator Sam Dastyari has been forced to quit the ALP front bench because of ongoing revelations about his links to China-backed donors. He was the ALP's lead campaigner against banks and big business who also made suggestions about the South China Sea dispute that were at odds with Australian foreign policy. At a news conference he was unable to explain why he had approach a Chinese businessman to pay a travel bill. There were doubts about his ability to withstand the further scrutiny he would have been exposed to if he had not resigned [1] 

Defense Industry minister (Christoper Pyne) argued that there is nothing wrong with foreign political donations - so long as they are properly declared - but that payment of personal debts did not constitute a political donation [1]

Local councils and charities in east coast hot-spots are gaining payments from Chinese interests [1]

It is important to understand China's 20th century history (eg in terms of the role of the Nationalist Party til 1949, Mao's subsequent Cultural Revolution and China's post-Mao reforms and opening).

A tipping point in the debate about the nature of Australia’s Chinese community came with revelations about proposals for comments to celebrate Mao’s life. Why does he still provoke strong feelings. For people in China it is as if he is still present. His image is on banknotes and in front of Forbidden City in Beijing. His body lies in state in a temple in Tiananmen square. Xi Jinping says Party should espouse the spirit of Mao – and regard the 30 years of his rule as of equal value to the 30 years after opening and reform. Xi’s father was a famous revolutionary figure – and is thus a ‘red prince’. Though his family was exiled during the Cultural Revolution, Xi argues that the party has to unite behind Mao’s reputation – or risk the catastrophic end the Soviet Party suffered after Khrushchev exposed Stalin’s cruelties and Gorbachov adopted a glasnost policy. The Mao who is revered is an idealised figure not the deeply flawed character Deng perceived. Beijing will have no formal acknowledgement of Mao’s death. Much of what is learned about him in China is mythical. Children learn he established the People’s Republic in 1949 – reportedly saying that ‘The people have stood up’. Subsequent years were painful for China and school children learn nothing of what happen from 1949 to Deng’s reform era. Mao created the image of China’s first emperor (Qin Shi Huangdi) whose tomb an army of terracotta warriors was supposed to guard. Qin was detested in China’s history as a tyrant – but Mao admired him for unifying China and ruling harshly. Mao was proud of killing more than Qin had done.  Frank Dikotter (Hong Kong University) suggests that China before Mao was starting to benefit from modernity, freedoms and success – prior to the Japanese invasion and the subsequent communist insurrection.  An unelected government as in China can’t base its legitimacy on being elected but has to rely on history as its foundation. Little was known about China for decades – so perceptions were shaped by people ideologically attracted to the PRC. Those discontented with democracy saw China as an alternative – an orientalist dream.  Dikotter has been ostracised by other academics – especially in the Anglophone world. Australia was impossible because China had too much influence. Its regime had huge support from foreign scholars.  The Party and the Sinological community worked closely to discredit pre-1949 China and were unwilling to see the Republic in terms of anything but warlords / imperialism / and disintegration. Something must have been bad because there was a revolution.  Soviet Russia’s role in Mao’s rise has been downplayed. Mao would have achieved little without Stalin. The US asked Stalin to attack Japan – and this allowed China’s Communist Party to win. The red Army invaded Manchuria just as it did Eastern Europe and handed it over to Mao. China, especially before the Japanese invasion, was far more open / accountable / democratic than much of Europe in the 1930s. Westerners can decide what human rights and free speech mean – but experts believe that China is different / hard to understand / more complex – and is too big for democracy. Dikotter also obtained information about the Cultural revolution. He suggests that a dictator controls the rate of killing – and Mao did this with the Cultural Revolution which Sinologists call a campaign to suppress counter-revolutionary elements. Mao wanted 1 in 1000 killed. The Cultural Revolution happened because Mao realized he did not know everything – and could change the rules overnight and determine the fate of thousands. Loyalty to the chairman fed a frenzy – and he felt the need to destroy the social fabric so there was no loyalty left to anything but himself. This created chaos. He unleashed the Red Guards to attack his enemies but they themselves were the children of elites. Others set up their own Red Guards. They then led to proletariat to stand up and they started fighting each other. Thus rebellion started in the army. Mao was a great student of Stalin, Mussolini and Hitler. All had presented themselves as centralising democrats. Mao saw himself as a philosopher king. He never showed any regret for the millions who died to fulfil his dreams or for the old comrades he discarded. [1]

In early 2015 the federal government set up a wide ranging intelligence and analysis effort to try to chart the extent of Chinese government influence in Australia. The analysis found many grey areas where activities were not illegal but still harmful to Australia's interests. It sought to find out how Beijing coordinates the different levers of influence - military / diplomatic / budget / ethnic Chinese populations / Chinese language media; universities / Chinese students / patronage networks amongst social elites / intelligence and cyber-intrusion policies. Chinese sources are responsible for largest share of foreign-linked political donations in Australian politics. The study showed unprecedented effort by China to penetrate and manipulate Australian elites [1]

Chinese telco Huawei is continuing to provide federal MPs with trips and entertainment despite being blocked from NBN supply contracts because of security concerns [1]

Australian authorities are worried about a tide of money from southern China - including that linked to organised crime [1] 

Doing business in Asian economies - apart from shipping goods there or educating students - is still viewed as too hard by large numbers of Australian companies  [1]

State-linked Chinese companies have been seeking to facilitate the development of opportunities by Australian industries through processes that would give them effective control of the future of those industries ( Are Service Exports to Asia Australia's Best Economic Options? and Enabling China's Regime to Gain Increasing Control of Australian Food Producers and Manufacturers);

China's regime continues to increase its campaign to influence Australian universities - as the same time that UTS academic Chongyi Feng was being interrogated in China. Head of Chinese government department which seeks to influence Chinese living abroad toured Australian universities. It met with UTS donor Huang Xiaogmo who resigned as chairman of UTS Australia Chinese Relations Institute amid controversy over Chinese 'soft power' in Australia - but has become an adjunct professor at UTS [1]

Dennis Richardson (outgoing Defence secretary) accused China of spying on Australia, targeting Diaspora communities and controlling locally-base Chinese-language media. Former foreign minister backed Richardson's warning about US-China conflict but was unconcerned about espionage as all countries do it.  Richardson advocated building relationship with China while recognising complexities. Australia and China are not allies  [1] 

In September 2016 comments were being offered on China's global influence

Examples Elsewhere

China's president (Xi Jinping) is (like Mao) seeking to exert worldwide influence - but through money rather than ideology. This has become feasible as China has become rich - and is the strategy behind Xi's regional 'new silk road'. Confucius Institutes are the same - it is all about seeking influence. It is doubtful if Western audiences will accept communist ideology - and within China spending on influence is attracting criticism - because it is believed that money should be spent on social security, health and education instead  [1] 

Preliminary CPDS Comments

The issues involved here are very complex, because:

• Chinese Diaspora across SE Asia appear to reflect communities from (materialistic / commercially-oriented) southern China who have been driven out in numerous historical wars with (spiritual / rural) northern China (see Seagrove S., The Lords of the Rim). The latter suggests that the Diaspora: (a) continued to concern themselves with and participate in mainland Chinese politics; and (b) have achieved economic success / dominance in their many adopted countries and exert behind the scenes political influence - partly through corruption and party through the role of their 'private armies' (ie organised crime / triads). In affected countries their economic and political influence generates considerable  local resentment - a fact that presumably led, for example, to the establishment of Singapore as a separate largely-ethnic-Chinese state. Not everyone with a Chinese heritage will see themselves as part of what is often called 'Greater China'. And not everyone who identifies as part of 'Greater China' will align with the regime that rules mainland China - but some will for reasons that will entirely elude observers who don't try to understand what is different about East Asia;
• Confucian methods of government by elite bureaucracies on behalf of emperors had been the basis for government in countries with an ancient Chinese cultural heritage for centuries prior to Western expansion (see Soft Power Takes Many Forms in East Asia). A variation of those methods had been the basis of the 'real economy' miracles that Japan achieved in the decades after WWII (and its late 1980s' financial crisis) - see Understanding East Asia's Neo-Confucian Systems of Socio-political-economy. Those methods had been transmitted to other countries in East and South Asia with a strong ancient Chinese cultural influences (who became the Asian 'Tigers'). China's at-the-time-Communist Party appeared to be persuaded in the late 1970s (presumably by the Chinese Diaspora and / or Japan) to adopt a variation of those methods - which China officially referred to as 'socialism with Chinese characteristics'). This was the basis of China's subsequent 'real economy' miracle - and its now-looming financial disaster which seems similar to that which crippled Japan's economy in the late 1980s;
• Mao's 1966-76 Cultural Revolution in China had been primarily oriented to purging China of Confucian influences - as China's traditional Confucian system of rule through elite social hierarchies on behalf of emperors was seen to have been oppressive;
• Political tensions in China in recent years seem to reflect disagreements between those who favour the social equality that Mao had sought to bring to China through Communism and the social-hierarchies implicit in the neo-Confucian methods that have come to be used from the late 1970s by China's (so-called) 'Communist' Party (see Communism Versus Confucianism: The Continuing Contest in China). And though Confucian-style administration was not specifically targeted, 2014 student protests in Hong Kong (by the Umbrella Movement) objected to 'Confucian' features of China's changes to Hong Kong's government (ie limiting candidates in elections to those with good connections in Beijing; patriotic 'national education' in schools to promote conformity; and shifting from a 'rule of law' to a 'rule by law');
• To avoid the risk of being crippled by a financial crisis under prevailing international financial practices, China's regime seems to be seeking to establish itself as the centre of a new international order that would exert power in something like the Confucian way that Asia was administered from China prior to Western expansion (see Creating a New International 'Confucian' Financial and Political Order). This basically involved: stimulating the development of 'consensus' amongst powerful groups through hierarchical state-centred social networks; manipulating decisions reached through 'suggestions' based on access to high level strategic intelligence; and enforcing decisions reached by the state-centered social hierarchy through the use of state power / 'law'.
• Chinese influence in Australia has been suggested (see here and here) to have occurred in many ways / contexts, eg:
  • in 2013 it was claimed that the political department of China's PLA was conducting systematic programs to influence / deceive foreign leaders (presumably through state-connected individuals who become 'friends' and 'advisers' to foreign businessmen, politicians, academics and journalists);
  • the articles outlined above refer to current indicators of diverse methods being used by groups directly connected to China's 'Communist' Party to influence opinion leaders in Australia;
  • Sinologists (ie China specialists) in Australia's universities are seen to have been heavily supported by China and to strongly favour China's Communist regime and to discredit its predecessors;
  • it has been suggested that China's propaganda agencies: (a) exert control by strictly controlling the information that is available to ordinary people in China; (b) exert similar controls over the information available through Chinese language sources in Australia; and (c) provide financial incentives to some media outlets in Australia to gain their agreement to only present the Chinese regimes' version in reporting on issues affecting China; 
  • as such methods of exerting power are traditional in East Asia it would be likely that other East Asian ethnic groups have been using similar methods in Australia and elsewhere (see here in relation to Japan and here in relation to India, Singapore and Japan as well as China).

It is probably misleading to suggest that either China's authoritarian 'Communist' Party or their opponents who want to celebrate the anniversary of Mao Zedong's death now support anything like Cold War era Communism.  Those who endorse Mao Zedong are likely to be demonstrating their preference for social equality rather than the 'Confucian' authoritarian / hierarchical social order which is now supported by China's 'Communist' Party (see Communism versus Confucianism: The Continuing Contest in China).

None-the-less, because of the way behind-the-scenes power is traditionally exerted in East Asia, the fact that no one succeeds under neo-Confucian systems without support of the state-centered social hierarchy and the Art-of-War emphasis on deception (to encourage enemies to do things to weaken themselves), it is desirable to make Australians generally aware of what is involved (eg see Australia's Increasingly Dangerous Environment, A Made-in-China Disaster Waiting to Happen  and Economic Babes in the Asian Woods and What is Soft Power?).   There is a need also to be aware that the behind-the-scenes manipulation to re-engineer or create whole social, economic and political systems that is the goal of the exercise of power in East Asia can be very potent - and there are indications of dysfunctions in Australia some of which could well have been to some extent the result of unrecognised manipulative 'behind the scenes' suggestions in the past.

It is also necessary to recognise that if China is unable to create a new international order using traditional methods of exerting power (ie through the persuasive / manipulative influence of elite state-centered social hierarchies) it will have a choice of: (a) turning inward - as in the 15th century when China believed it had no need of external connections [1, 2, 3, 4]; (b) trying to use military power (as Japan did when it faced financial disaster in the 1930s); and (c) adapting to a liberal international order. The latter is not the goal of China's current president, but might be a worthy / culturally-challenging goal for those who would prefer to see China as a constructive player in a continued liberal international order (if the latter is now sustainable).

Debating the Australia - China Relationship (see also Chinese Influence in Australia)

In 2016 various proposals were advanced for closer relationships between Australia and China

Examples: see overview of, and comments on: (a) 'Partnership for Change: Australia China Joint Economic Report'; and (b) 'The Long Boom: What Rebalancing Means for Australia's Economy'. 

In late 2016 the extent of Chinese influence in Australia was publicly recognized , leading to both concern and debates about Australia's relationship with China (see Chinese Influence in Australia which included CPDS comments on the situation). [>]

Australia has been forced to debate China's role in Australia's future. The Chinese Government mouthpiece, The Global Times, mocked this (noting that: MPs were given a briefing of risks with China's 'Belt and Road' initiative; payments to politicians caused a stir;  US believes Australia faces difficult choice between US and China; Chinese can't understand why Australians express alarm; Australia has more security concerns about China that SE Asia - which is closer; Australia's geographical position gives it security - which is undermined by paranoia; China won't force Australia to choose between trade with China and security links with US; Australia would pay a heavy price if it sends warships to South China Sea). China is happy to be friends if Australia stays out of strategic tensions. US analysts point to Australia's limited economic vulnerabilities (eg related only to travel or the activities of SOEs) if Australia does something China considers provocative. However the open / rules-based international system is under threat on several fronts - including from China's challenge to maritime rules of South China Sea. Australia would be severely harmed by a collapse of 'rules based' multilateral system. Defence spending would have to escalate. A new Cold War would emerge. US would shift to policy of containing China. Old school strategic thinkers now argue that Australia needs a foreign policy in relation to China - which politicians find too hard to deal with. It may be possible to ignore this for a while but the problem will keep rising. Australia's independence within the US alliance is turning Australia into a perceived hot spot for Chinese espionage. PM does not seem to have taken warnings from intelligence experts about this seriously. There is always spying - but the level of this that China is engaged in is extreme. Payments are being made to Australian politicians by groups with direct links to the Chinese Communist Party. Australia could cease to be seen as reliable in sharing intelligence . Australia should not allow tension between economic and strategic outlook develop further. Exports of raw materials (eg iron ore) are not the issue - as this supports the international rules-based system because without commodities no one can grow and invasions for access become rational policy choices.  The rules-based system keeps trade flowing. The real issue is tension between where Australia's economy is going (ie selling China everything; 'exporting' citizenship) is incompatible with US alliance. This involves entering a much deeper relationship with China - that will make Australia strategically dependent on China no matter what it decides to do about rules-based system. There would be no independence within that alliance. Australia could chose the China option - but would need to recognise that it is totalitarian and might at some time rely on external aggression to support internal power. The US has the ability to support international rules-based system. Australia could take away China's leverage by: policing foreign property buyer rules; banning Chinese investment in strategic assets; reducing immigration; improving general economic competitiveness - to build tradable sectors instead of relying on selling everything off; and banning political donations.  [1]

There is a need for informed debate about the implications of China's rise. Paul Keating's view is that Australia should not support US containment strategies - but he  seems wrong in relation to his view of how Australia should react to China's rise. Keating assumes that China will replace US as dominant power and Australia needs to adjust to this now. However in terms of investment / military capacity there is not yet evidence of this. China's bullying approach (eg in South China Sea) to expanding its influence does not suggest success. It suggests that China's elites see their country's status as the dominant power which requires military deference from others. Threats are made to others (including Australia) who do not behave with due deference. Australia is far from being alone in terms of concern about China's aggressive conduct. Australia has its own interests in freedom of navigation that have noting to do with alliance with US. Accommodating the vision of a rising power that explicitly denigrates independence of action by small and middle powers should not be treated as a serious option [1] 

Australia's PM (Malcolm Turnbull) has rejected the idea that Australia and its neighbours need to choose between the US and China in a coming contest for dominance. US Army Assistant Chief of Staff (Tom Hanson) suggested recently that Australia had to make a choice. PM's view parallels that of senior Australian officials that China's rise will continue for decades and that there will be points of tension for years at which time Australia will need to be guided by its values. Turnbull emphasised the importance of a rule of law - as this underpins everyone's prosperity [1]

The fallout from Sam Dastyari's actions is more important than the effect on his career. This makes it hard for Australia to: generate independent policy on China; have a sensible debate that takes account of China's viewpoint; and act in Australia's best interests rather than remaining locked into hypocritical US doctrine.  Anyone offering an alternative to US vision of China is accused on being a traitor / being on China's payroll. What China is doing in the South China Sea is ugly - but this is what big powers always do (eg consider Russia, US). China's artificial island's are defensive against a remilitarising Japan and an explicitly threatening US. China needs to grow up, have more confidence in itself and promote mutual security with its neighbours. The US might not be Asia's dominant power for decades - given threats to China, encouraging Japan to re-arm and India to boost nuclear capabilities - all of which will encourage China to escalate its military power. US sees China as like Nazi Germany - rather than as like pre-WWI Germany which felt encircled. This is perhaps the worst of the US policy blunders of the past half century.   [1] 

Bob Carr is missing the point in criticising those who are critical of Chinese influence in Australia. The argument is not with Chinese people - but rather with the ruling Communist Party and the ideology it imposes through militarisation of the South China Sea and soft power subversion of the West. Separation of free trade from political ideology must be a priority. An EU-style attempt to use trade to empower supranational totalitarianism while blackmailing dissenting states into submission must be avoided. Like the EU the Chinese Communist Party has used trade and soft power to impose its ideology. Soft power is unremarkable in itself - but the Chinese Government is using soft power to propagate Maoist values and influence others foreign policies. China's Government has established research centres and institutes in leading Western universities. From 2004 to 2014 the number of Confucius Institutes rose from 1 to 350. The goal is not research in the time-honoured manner - but pro-CCP propaganda. Since 2008 there has been concern that Confucius Institutes have been used to censor free speech on Western campuses.  The American Association of University professors condemned them as an arm of the Chinese state. Some Confucius Institute contracts include a clause that restricts criticism of the Chinese Communist Party - and reference to the defining values of iberal democracy. Despite positive developments such as China's liberalization and adoption of capitalism, much CCP ideology remains Maoist. China is Australia's largest trading partner and maintaining productive trade relationships is important. Recent free trade agreement will signal an era of prosperity. Liberal coalition is treading a fine line between welcoming foreign investment and managing risks to national security. Chinese investment in critical infrastructure also concern UK government, Carr wants Australia to remain open to China - but does not say whether he means Chinese people or the Communist Party. Without discrimination the foundations of freedom can be eroded. [1] 

How much should / can Australia integrate its economy with a political culture whose values it does not share. Manuel Panagiotopoulos has written for Australia Japan Foundation about 'creating a new economic paradigm'. Japan is Australia's second-largest trade partner and second largest source of investment. China is the biggest trade partner - while US is biggest source of investment, Japan passed UK to be in second place 9 years ago. This relationship started with long term contracts and minority equity relationships between Australian and Japanese companies in the 1960s. Now Australia's and Japan's geopolitical and economic interests interest's overlap sharply. Russia had been economically enmeshed globally during the Cold War - but the trust needed to build a strong relationship was absent. When Australia-Japan Commerce Agreement was signed in 1957, just 12 years after WWII, it would not be seen to have been based on shared values.  But the latter has developed over the years. Both Australia and Japan are strong in intellectual property protection. The US treated Japan as the new enemy in place of the Soviet Union for some years - according to Joseph Nye who coined the notion of 'soft power'. This did not happen in Australia until the long stagnation set in and capital was withdrawn. China has now become a proxy for doing business in Asia - which Japan never was - and those who find China hard assume that Asia is not for them. Will Australia's relationships with China become as easy as they are with Japan? Those links are cultural, commercial, diplomatic, academic, political and legal. Japanese firms now assist Australian companies developing opportunities in Asia. There are many places in the Asian value-chain where the many assets / capabilities of Australian and Japanese firms to collaborate.  Japan's overseas investments involve technology transfer, higher productivity and the capacity to facilitate Asia's next level of economic growth. Could this also be true of Chinese dream of Beijing as the hub of a vast infrastructure network reaching to Europe. China has changed a lot in recent decades. However its government has not changed since the People's Republic came to power 67 years ago. It has agreed to share some values (eg via WTO and UN participation). But the values of Communist Party (and its claims on China's people) are unique and pervasive. It is important to debate these issues. For Australia Japan and China are not either or - but it might be useful to consider the different levels of engagement that are made possible by shared values [1] 

There is concern about the influence of People’s Republic of China’s government's influence in Australia. One claim was that hundreds / thousands of Chinese citizens in Australia are gathering information for Chinese authorities. China is Australia’s largest trading partner and the source of growing direct foreign investment. Chinese-derived funds also support Australia’s higher-education sector, media organisations, research initiatives (eg Australia-China Relations Institute) and individual politicians and political parties. Only the tip of the iceberg of the influence China’s government wants to exert is yet visible – and, as China’s power grows, more attempts to wield influence should be expected. China Matters was established to introduce realism into discussions about Australia-China ties. Most China Matters discussions of sensitive issues take place behind closed doors to prevent the sorts of public uproar that resulted from public reports of influence-buying from Chinese individuals / entities. Last week 30 prominent Australians met to develop policy recommendations about this. China Matters does not accept Chinese funding and does not believe that China should be allowed to affect Australia’s politics or university curricula. But common sense, facts and impartiality need to be the basis of Australia’s response.  1m Australians have Chinese ancestry. 500,000 were born in the People's Republic.  ‘Chinese’ people should not automatically be seen as on a mission from the Chinese government.  However there is tension because of differences between Australia’s political system and China’s civilizational heritage. However even identifying what can be detrimental to Australian values and what would be an alternative approach to Australia’s deepening relationship with China is difficult. There needs to be transparency about this from both Australia and China. We must not lose sight of China’s impact on Australia’s prosperity and Australian Chinese contributions to a thriving multicultural society – while also focusing on preserving the values that underpin Australia. Black-and-white portrayals of China’s interests are detrimental. The insistence of Australia-China Relations Institute on taking an ‘optimistic and positive attitude’ towards the China relationship is not a basis for unbiased work. However assumptions by those from the Australian Strategic Policy Institute that actions by China’s SOEs are automatically part of a strategic plan to gain influence are unhelpful. Getting Australia’s relationship with China right is a complex challenge – because of the maze of controversies in dealing with a society so different to Australia’s. [1] [See CPDS Comment in Understanding China Matters)

The rise of China and other Asian economies means that nothing will be the same again - but Australia is sending mixed /confusing messages about foreign investment according to BCA. Some companies / policy-makes want to return to Australia's comfort zone where North America and Europe drive global growth. Unless change is accepted, Australia will be anti-growth, anti-corporate, anti-innovation and also isolationist / xenophobic and dangerous. This arose in the context of business frustrations about government rejection of foreign investments - and inflammatory rhetoric about immigration in parliament   [1] 

Much has been written about China's soft power influence in Australia (from universities to politics). Stephen Fitzgerald (Australia's first ambassador to China) describes China's soft power as having a hard edge. However many of China's soft power efforts failed - eg that related to celebrating Mao's legacy. India however often outshines China in soft power - eg encouraging Infosys to choose India over China as its global hub (based on its legal system and English language). However China's soft power does have on strength - getting things (such as infrastructure) done. India's systems are slower but seen to be more sustainable [1] 

Former Australian Ambassador to Australia (Stephen Fitzgerald) said Beijing's influence in Australia might become a harder problem that disputes over South China Sea. He wrote for China Matters Conference that Beijing's sway over ethnic Chinese communities in Australia is palpable. Some activity in Australia is being directed by Propaganda Department of CCP Central Committee whose role in China is to police people's adherence to the views of the Party and enforce 'correct thinking'. China's influence in Australia brought Australian and Chinese national issues / values into direct contention - challenging fundamentals of our system such as freedom of speech / media / enquiry and the validity of Australia's political system. Flow of Chinese funds to universities / media / political system is designed to general broad uncritical approval of Chinese government and its policies. Embassies have fronted universities and other institutions pointing out that 'China' will not be happy if things are not changed or reversed.  [1] 

Beijing is tired of foreign analysts criticizing it for being what it is - and believes that it must be accepted for what it is. But what is China? What does China's engagement with the Chinese community and social media tell us about Chinese state? If China is to be accepted for what it is, would China appreciate plain speaking about what it is up to in Australian community media? A more frank conversation about Chinese propaganda operations in Australia should allow a stronger basis for future relations.  The Chinese term for 'China as it is' is guoqing. It refers to the unique historical condition of a wealthy / powerful Communist Party state - and that lacks democratic accountable government; that allows no independent courts / security / media and few independent corporations or social / civic institutions; that denies universal adult political participation; that does not defend rights to free speech / religion / assembly. The Communist Party governs everything and answers to nothing but itself. It is above the law. There is no constitutional / institutional restraint on the exercise of power - that's guoqing. It accounts for its strength in achieving goals that other developing states have failed to achieve (economic development, social policy, education. It is also able to act brutally / continent wide / every day. It is massive / capable / authoritarian / indifferent to the rights of individuals / resentful of liberal West / jealous of its own standing / here to stay. Over the past 7-8 years Beijing decided it needs to spread its special national culture abroad.. The Central Propaganda Bureau chief (Li Yunshan) oversees China's whole propaganda and education apparatus. He oversaw signing ceremonies with Fairfax Media / Sky / Australia-China Relations Institute and 3 other media outlets to ensure that China's guoqing is widely disseminated in Australia. In projecting guoqing abroad, China seeks to penetrate / influence Australia's small / open society - to restrict freedom of speech / religion / assembly. It threatens social harmony / breaches Australia's sovereignty / security. The main issue is not influence on the media - but rather people's inability to communicate because they know that China's propaganda and security systems have migrated to Australia. The key task of China's state propaganda apparatus is not to inform / persuade but to monopolize / control all flows of information / police ideological / civic conformity / censor the media. It is false to claim that China's attempt to take its culture and values abroad is like the success of the BBC's World Service - as the latter does not seek monopoly control of information. The salient feature is not its content - but its efforts to suppress and control content. The Chinese media are not allowed to mention democracy / free press / universal values / civil society - or to hint at criticism of the regime. Its does not seek to inform / persuade anyone through quality programming - but to silence certain viewpoints, perhaps by intimidation / extortion / organising demonstrations. Firms individuals are forced to pay for favourable stories - or face publication of unfavorable stories. Chinese people do not trust state propaganda. However over half Chinese newspapers in Australia are sourced from China. Most of the pressure for this comes from Australian media side - because there are commercial opportunities (for real estate, tourism, services) in presenting China's favourable view of itself - and not presenting counter views. Those who don't do so (or families in China) are severely punished. Chinese radio stations in Australia are supervised by Chinese Radio International. China's supervision of Chinese social media in Australia is even stricter - and puts the Chinese community in Australia into a different position to the mainstream community on issues such as South China Sea. References to ABC and SBS articles are constantly censored from Chinese social media WeChat. Would Australia allow other foreign governments to do this? What can be done about this. Highlighting the issue is necessary - but can result in allegations of racism. The problem might be overcome by a greater cultural diversity in mainstream Australian media - so that Chinese social media (which is censored) became less significant. Legal challenges to Chinese media interference in Australia would be difficult. China's authorities could show goodwill by lifting restrictions on freedom of speech. If China's guoqing is accepted, Australia can't hold China's leadership to account for being Marxist-Leninist. However unless Beijing adjusts its behaviour to accommodate the liberal values / public trust / open-inclusive civic culture that make up Australia's national character there can be no basis for a relationship beyond trade [1] [See CPDS comments in Toeing the Party Line]

Australia's recent anti-China panic seems to impeded the development of a positive relationship with Beijing. Obviously inaccurate claims have been made. Tony Abbott's speech in New York ('History haunts us in China: Abbott') dismissed Cold War concerns about China and embraced foreign policy realism. This accords with prevailing conservative thinking about China (eg by Turnbull and Howard) - ie a generally-positive view of the Australia-China relationship. Abbott is prepared to say that the US should not expect to dominate China any more than it did during the Cold War. US primacy / dominance in Asia can't be expected forever. Abbott endorsed US role in ensuring freedom of navigation and its alliance relationships - but did not suggest that Australia run patrols inside the 12 nautical mile radius of territory China claims. There is possible risk in US-China relationship - ie tension between rising and established power. Howard foresees a long period of tension without conflict. Abbott refers positively to China's FTA with Australia - the first between China and an advanced economy. He nominates joining the China-led AIIB as a significant achievement - as China should not be rejected when its 'plays by the rules'. Doing so in the face of contrary US advice shows Australia's independence - despite comments from ASPI and former public servants. He favours constant dialogue with China as an antidote to mistrust. The 'comprehensive strategic partnership' his government concluded with China conforms with that pattern. He recognizes internal debate in China about foreign policy. And many Chinese people now travel abroad which was not true under Marxist-Leninist models. This must feed the 'taste of freedom'. Market freedom will produce social / academic and political freedom. When a country becomes predominantly middle class - as China will be in the 20202 it can't be locked into authoritarianism. Turnbull's position on China would be similar - and this can be seen as the ruling wisdom on China of Australian conservatives [1] 

Senior ALP figures have emphasised importance of US alliance to Australia - and the need therefore to support freedom of navigation operations in the South China Sea.  The situation is complicated by Philippines' president's rejection of US relationship and possibility that Trump victory in US presidential would lead to US withdrawal from Asia. Many other nations in the region face the same challenge that Australia does in this regard. What is happening in South China Sea illustrates China's approach to the region (ie it seeks military dominance; it breaches norms - such as rule of law - in doing so; and conducts a serious of 'tests' to see if others will react.   [1] 

Australia comes second to US as destination for Chinese investment - and needs to work out how to deal with it. Australia needs foreign capital and that from China can bring benefits in the same way as capital from elsewhere. But there is a question about what can be left to the market. There was an early issue related to ownership - as a lot of capital came from China's SOEs. Was such investment 'strategic' or 'profit based'? Some investors are still waiting for a return. Australia still continues to worry about SOE investment - and what types of investments are appropriate. Australian firms have also invested in China - but often find 'behind the border' problems. A great deal of China Inc wants to invest offshore (given their governments' emphasis on SOEs) - and the private sector's role is increasing every year. Chinese investment is not only questioned in Australia. Increasingly Chinese money (like Japan's before it) is coming via JVs. Chinese companies that seem to be privately owned can be as subject to state influence just as  much as SOEs. The key is trust - placing one's cards on the table.  Does it matter that Gina Rinehart's 33% partner in proposed Kidman takeover is director of an organisation that works under the party's United Front department which is chaired by former United Front chief who is now secretary of party's central committee. United Front's chief aim is to manage relations within China / elsewhere between party and non-party elements. The biggest problem has been a lack of transparency and understanding of how China works. Australian decision-makers need to better understand the issues [1] 

Australia's first ambassador to China (Stephen Fitzgerald) has raised alarm about China's influence in Australia's higher education sector - especially Bob Carr's Australia China Relations Institute (ACRI) on the grounds that universities need clear firewalls between donations and research. ACRI was established with large donations from the same Chinese business man who had been involved with controversy related to Senator Dastyari. Former Australian foreign minister, Bob Carr, disagrees - arguing that this involves continuance of Cold War and an unwillingness to frame a pragmatic national-interest China policy. There has also been concern about hundreds of other language and culture centres that have been established worldwide through confidential agreements between universities and China's education ministry. Fitzgerald argues that such centres (Confucian Institutes) should have no place in Australian higher education - because they can be associated with attempts to influence what is taught. The University of Sydney had a confidential plan which included provision for existing Chinese language programs to be taught through a Confucius Institute. Professor Jocelyn Chey, former Australian Consul general in Hong Kong, argues that university authorities did not know what they would be letting themselves in for. Academics must not only teach but also have freedom to research. She recommended rejecting the Confucian Institute. It was accepted - though with some of the changes that Professor Chey had recommended [1]

China centres in Australian universities are vulnerable to external influence because they do not receive sufficient university funding  [1] 

The present writer's interest since the 1980s in study of the differences between Western and East Asian societies has led to the production of documents which may be relevant to this issue including:

• Competing Civilizations (2001+) - which amongst other things sought to identify the core intellectual and social-organization differences between Western and East Asian societies. It also included reference to: (a) an apparent new / undeclared / very-hard-to-understand 'Cold War' that arose because because of the way those intellectual / social-organization differences distorted East Asian and global financial systems; and (b) the role that the spread of post-modern ideologies in university humanities' faculties have played in inhibiting understanding of the practical consequences of cultural differences;
• China's Development: Assessing the Implications (2003+) - which amongst other things collated diverse observers' ongoing comments on developments in China and the obstacles to the continuation of China's rapid economic progress that have been obvious since 2014;
• Babes in the Asian Woods (2009+) - which suggested that attempts to understand East Asia / Greater China in terms of Western concepts and analogies would be misleading and potentially hazardous;
• Are East Asian Economic Models Sustainable? (2009+) - which amongst other things considered: (a)  the workings of the neo-Confucian systems of socio-political-economy that allowed 'real economy' miracles  to be achieved in East Asia - while also leading to regional financial crises; (b) how this had also contributed to international financial instability and current constraints on global growth; and (c) how China now seems to be trying to create a new neo-Confucian international order like that by which Asia was administered from China as the 'middle / coordinating / organizing kingdom' prior to Western expansion. Amongst other things this would involve boosting China's status as a competent / coordinating 'middle kingdom' by using soft power methods to undermine others' knowledge / competence / unity;
• Comments on Australia's Strategic Edge in 2030 (2011+) - which responded to emerging recognition by strategic policy analysts of the need to consider national security issues in terms of civilizational differences. This also included Broader Resistance to Western Influence?(2011+) - which sought to place current events in a long-term historical context; Suggested Strategic Response (2011);   Indicators of Rising Security Challenges in Asia (2012+); The Issues This Raises for Australia (2014+); Port of Darwin's Potential Significance in any Attempt to Invade Australia (2015); Australia's Increasingly Dangerous Environment (2016); Chinese Influence in Australia and Elsewhere (2016) - which included preliminary CPDS comments on the complex issues being raised;
• Importing Risks from China (2016) - which pointed to the economic risks that Australia faced as a consequence of China's apparently-unsustainable economic and political model;
• A Made-in-China Disaster Waiting to Happen (2016) - which suggested that China's undisciplined investment in Australian real estate which maintained growth in the post-commodity-investment-boom era was likely to lead to financial problems;
• Economic Babes in the Asian Woods  - which pointed to the hazards of trying to develop a way to bridge the civilizational gulf between Australia and China primarily in terms of economic opportunities and without close collaboration with Australia's allies;
• Chinese Influence in Australia and Elsewhere - which outlined public concerns that were being expressed about this in late 2016;
• Are We Prepared for the End of China's 'Never-ending' Boom? (2016) - which suggested that assumptions that China's economic power would continue rising indefinitely were likely to be wrong;
• What is Soft Power? (2016) - which sought to identify what is different about the way power has traditionally been exerted in East Asia - and to suggest how this may have had, and be having, an influence on recent and current history in Asia, Australia and elsewhere.

Proposals for closer relationship between Australia and Japan or Singapore arguably require the same depth of consideration as any with China (eg see Scepticism About Japan; Deeper Engagement with Japan Requires Analysis Equally from National Security and Economic Viewpoints and Is Singapore 'Family'?). 

China's Challenge to Australia's Values and System of Government - email sent 29/9/16

Chris Uhlmann,
Political Editor, ABC

Re: Chinese influence 'challenging fundamentals' of Australia, says Stephen FitzGerald, ABC News, 28/9/16

Your report (which I have outlined here) concerned a former ambassador’s concern about Chinese Government influence in Australia

Understanding China Matters may be of interest in relation to this. It draws attention to the need to understand how power is traditionally exerted in East Asia. Soft power methods such as those now being used in Australia can, for example, make it hard for others to understand what is going on and promote disunity so that ‘Asian’ powers (eg China) can become a ‘middle / coordinating / organizing kingdom’ because they are the only ones capable of reliably facilitating international action.

The relevance of what is happening in the so-called same-sex-marriage ‘debate’ to reducing Australia’s ability to resist such manipulation can also be noted (see If You are Right Australia is in Trouble).

John Craig

Australia Must View Chinese Investment and Other Activities Through a Geo-political Lens - email sent 13/10/16

Rowan Callick,
The Australian

Re Australia must learn how to handle Chinese investment, The Australian, 13/10/16

Your article (which I have outlined here ) realistically drew attention to Australia’s need to learn how to deal with Chinese investment. However, in addition to potential commercial considerations, there is a need for business, governments and the general community to consider the geopolitical dimensions because:

• prior to Western expansion Asia was administered from China through a ‘trade / tribute’ system – which involved China’s Confucian bureaucracy (as agents for emperors) stimulating and coordinating economic activities in the region amongst those who provided ‘tribute’ (ie acknowledgement of superior status) to China. Thus in East Asia stimulating / coordinating economic activities can be part of a process of seeking political control;
• China’s ‘real economy’ miracle since the late 1970s has been based on stimulation and coordination by a neo-Confucian bureaucracy within the so-called ‘Communist’ Party (ie it replicated the post-WWII neo-Confucian role of Japan’s economic and financial bureaucracy (ie MITI and the MOF) in stimulating and financing a ‘real economy’ miracle and laying the foundation for an ultimate financial crisis). Under those systems investment is determined by state-linked elite consensus about maximizing market power / cash flow – rather than by calculations of return on capital by independent enterprises;
• China now seems to be facing a financial crisis like that Japan experienced in the late 1980s and apparently is seeking to create a new international order which it would dominate that would be like its earlier trade / system tribute. This would be a ‘rule of man’ system which would be incompatible with the ‘rule of law’ traditions that are the foundation of Australia’s political and economic institutions;
• There are indications of Chinese state-linked efforts to: (a) influence and limit Australians’ understanding of their environment and options (which is central to traditional ‘soft power’ methods of exerting power in East Asia which China’s regime continues to use on its own people); and (b) to facilitate investment / economic activities across Asia and in Australia in ways like those used under earlier ‘trade / tribute’ systems;
• Some investments in Australia can be interpreted as having national security implications (eg potentially facilitating invasion) in a regional environment that militarily seems increasingly like that prior to WWII.

There is no doubt that, as your article suggested, Australia’s decision makers need to better understand the issues involved – for reasons also suggested some years ago in Babes in the Asian Woods (2009), Comments on Australia's Strategic Edge in 2030 (2011) as well as more recently in Economic Babes in the Asian Woods, Chinese Influence in Australia, Debating the Australia - China Relationship, What is Soft Power? Understanding China Matters, China's Challenge to Australia's Values and System of Government and Toeing the Party Line?.

John Craig

Don't Ignore the Geo-Political Implications of the TPP - email sent 18/10/16

Peter Martin,
The Age

Re: ACCI comes out swinging against aspects of the Trans Pacific Partnership, Brisbane Times, 17/10/16

Your article pointed out that the Australian Chamber of Commerce and Industry has expressed concerns about the Trans Pacific Partnership (TPP) on the grounds that it did not involve ‘free trade’ but merely added to the already large number of ‘preferential’ trade agreements whose conflicting / complex requirements are an obstacle to ‘free’ global trade.

While this is undoubtedly correct, the question should be what can be done about this and whether the TPP might be a least-worst alternative.

There is no prospect of workable ‘free trade’ arrangements that would involve China under its current regime (eg see 'Rules' that favour state-linked businesses are not the only behind-the-border problem in economic dealings with China, 2013 and ‘Free’ Trade with China Remains Highly Unlikely, 2014). Moreover China now seems to be seeking to establish an international order somewhat like that by which it’s elites administered Asia prior to Western expansion as an alternative to the liberal international order that the US has championed since WWII (see Creating a New International 'Confucian' Financial and Political Order, 2009). Under that ‘trade / tribute’ system, trade was facilitated amongst those who provided ‘tribute’ (ie acknowledgment of superior status) to China as the ‘middle / coordinating / organizing kingdom’.

The TPP can be seen as an attempt to create a forward-looking international framework for trade in the Asia Pacific region which would exclude China’s anything-but- liberal methods. As many observers have noted the TPP would be highly imperfect. However, as suggested above, the real question has to be what alternative would be better.

It can also be noted that: (a) there has been increased concern about China’s use of ‘Soft Power’ methods to exert behind-the-scenes influence on the understandings and ideas of foreign political leaders, universities, economists and media; and (b) both contenders for the US presidency have reportedly expressed opposition to the TPP because of its inadequacy without indicating awareness of its geo-political implications.

There is a clear need for public understanding of the geo-political implications of both what China seems to be trying to do and of the TPP as a partial response. It has been plausibly suggested that, without international support for attempts to maintain a liberal international order, the US could well retreat into isolationism as it did in the 1930s.

John Craig

Should Learning Chinese Be Top Priority in Australian Schools? - email sent 26/11/16

Alex Malley,
CPA Australia

Re: Why learning Chinese should be compulsory in Australian schools, Brisbane Times, 23/11/16

Your article suggested that Australians need to learn how to speak Chinese to cope with the ‘Asian Century’.

“While we all wait with bated breath to see how Asia responds to the prospect of Donald Trump in the White House, some introspection about how well Australia is prepared to fully engage in the Asian Century would be prudent. China is Australia's biggest trading partner. Our freshly minted free trade agreement, delivered by the Abbott government, directly links Australian expertise with China's exploding middle class and is all about job opportunities for our children.”

However the first issue that needs to be addressed is whether an ‘Asian Century’ (or one in which China has a dominant role) is even likely.

The fact that under president-elect Donald Trump the US won’t continue supporting the post-WWII liberal international order does not necessarily mean that China’s unaccountable authoritarians will succeed in their desire for China to rule as a new ‘middle / coordinating / organizing kingdom’ (ie in something like the way China used to rule Asia prior to Western expansion).

The is little prospect that China’s unaccountable regime will be able to avoid a massive financial crisis (see Importing Risks from China). China’s growth has been driven by rapidly growing debts (and bad debts) – which have reached dangerous levels. And, though China’s financial system is state controlled and protected by significant foreign exchange reserves, very large and now apparently-increasing capital outflows (presumably involving a great deal of capital flight because of obvious economic mismanagement in China) have been eroding those reserves despite Chinese regime’s attempts to prevent them. China’s debt crisis will probably: (a) block its regime’s ambition to control the world; and (b) make Chinese people unwilling to tolerate continuing rule by a social elite whose claim to power has been based only on their success in growing China’s economy.

A useful perspective on the world’s future was presented by Paul Kelly (A Protectionist, Isolated US will Put the World on Notice, The Australian, 23/11/16 – outline here). This suggested that the desire of Trump’s America to consider only its national interests (and, as it decided to do in the 1920’s, not to take a role in maintaining a liberal global economic and political order) seems like a massive strategic gift to China. However it also suggested that global chaos is the most likely outcome if the current global order collapses – and that chaos could include China’s current regime losing its ability to maintain control of China.

Surely CPA Australia should be concerned with more fundamental issues than whether Australian children should all learn to speak Chinese. Some items that might provide an aid to doing so are referenced in CPDS Documents on the Challenge of Asian Authoritarianism. In particular it seems vital to consider the nature of China’s system in speculating about its future prospects and how Australia should respond (eg see The Infantile US vs China Debate, 2013; Beyond the China Choice, 2014; The Limits of Mr Turnbull's History Lessons, 2015; Understanding China's Regime, 2015; and Australia's Increasingly Dangerous Environment, 2016).

It may also be unwise to write the US off completely. The methods that president-elect Trump’s supporters believe would ‘make America great again’ are based on naïve understandings (see Observer’s Views of the Trump Presidency, Overview of Issues Being Raised and Preliminary Conclusions). And, as the latter notes, Australia’s experience is that: (a) leaders who gain power on the basis of insubstantial populism don’t maintain effective power for long because the democratic process quickly exposes their limitations; and (b) much more than repeatedly exposing the limitations of politicians is needed to come up with viable policies.

John Craig

Adapting to Changing Geo-Political, Civilizational and Economic Relationships - modification of email sent 7/12/16

Professor Joseph Camalleri,
La Trobe University

Re: Australia’s political elites are fiddling while Rome burns, The Conversation, 6/12/16 – which is outlined here

There is no doubt that, as your article argued) Australia’s political system is having trouble developing a sensible narrative about the disruptive implications of past economic changes and of currently changing geo-political, civilizational and economic relationships.

Some suggestions about why policy competencies are weak (both in the public sector and in civil institutions) and about what has thus not been done in addressing Australia’s economic challenges are in Playing Political Games When Major Reforms are Needed.

Other suggestions about the economic, geo-political and civilizational issues Australia has to confront are referenced on my web-site.

I would be interested in your response to my speculations

John Craig

Why Penny Wong is Right About Reviewing Australia's Foreign Policies (Draft December 2016)

In Why Penny Wong is absolutely right about China (New Daily, 16/11/16 which is outlined here), Professor Andrew MacLeod (Kings College London) referred to Senator Wong’s suggestion that Australia needs to rethink its foreign policy interests (ie to Wong P. Trump's election is a turning point for Australian foreign policy, Sydney Morning Herald, 15/11/16 – which is outlined here).

However he did not seem to reflect what Senator Wong actually said. Rather he suggested that Senator Wong believed that problems in a Trump-led US required Australia to accept the inevitability of a new world order under China’s control. Such a reinterpretation of Senator Wong’s argument was unreasonable. That would be incompatible with her sensible emphasis on not being naive.

First the principles that Senator Wong espoused for Australia’s foreign policy were incompatible with accepting global dominance by China’s unrepresentative / autocratic regime. The latter has been adopting a variation of the Confucian methods that their counterparts used to administer Asia (ie as the ‘middle / coordinating / organizing kingdom’) before European / Christian influence demonstrated the potential of liberal systems(ie those built around individual freedom under a rule of law).

Second, rather than being an unstoppable rising power as your article implied, China seemed to be headed for a financial / economic crisis with possibly-destabilizing political consequences because of the weaknesses that are implicit in its non-capitalist financial system. Such a financial system was part of the variation of a traditional Confucian system of government that China’s regime discretely adopted in the late 1970s after its experiment with Communism failed (see Importing Risks from China and Communism Versus Confucianism: The Continuing Contest in China ).

Third the distortions involved in the non-capitalist financial systems associated with major neo-Confucian regimes have not only led to domestic financial problems. Because of the need to avoid immediate financial crises from having to borrow externally through banks with poor balance sheets, demand deficits / savings gluts were also needed that distorted international trade. Global economic growth was at risk unless their trading partners’ accepted a rapid rise in debts to finance consumption in excess of income. This could be achieved for a time with easy monetary policies. However the latter: (a) put the stability of the international financial system at risk; (b) distorted investment; and (d) increased inequality (eg see Global Implications of Corruption in China and More on: Should Donald Duck?).

Fourth, Australia shares with many other countries;

• A need to develop strategies to counter the financial / trade distortions associated with non-capitalist / neo-Confucian systems. Australia suffers from social / political stresses (ie due to poor job prospects / weak incomes) like those that led to Trump’s successful presidential candidacy. Market liberalisation strategies were adopted from the 1980s to speed adjustment in the face of the rapid development in the neo-Confucian systems of ‘real economy’ capabilities in previously high value added manufacturing industries. However market liberalization was intrinsically inadequate in creating a strong basis for high wage job growth (see Defects in Economic Tactics, Strategy and Outcomes, 2000);
• Security risks because of China’s: (a) military, economic and geo-political expansionism; and (b) increasing ‘soft power’ machinations that resemble the manipulation of community knowledge and understanding that is a major factor in the control that China’s regime exerts in China itself.

Finally there are no currently-accepted options for creating a sustainable basis for global economic growth and political stability.

Why? China’s system is on a path to a debt crisis and probable political instability - which could make China’s regime believe that it is necessary to engage in external conflicts to promote national unity.

However Trump’s proposals for a large increase in military spending to offset China’s military expansionism is not a formula for peace. And, given China’s risk of financial, economic and political failure because of its debt exposure, large scale US military expansion would seem to be an inefficient / costly way to overcome any military threat from China.

And the world seems to be at risk from another financial crisis associated with the adverse effects on banks’ / business’s / households’ / governments’ balance sheets of probably-rapidly rising interest rates as the era of macro-economic management through easy money policies is over. That era is over because of the adverse side effects of ultra-easy monetary policies and their inadequacy in stimulating sustainable growth – a transition that is being accelerated by the large stimulus of the domestic US economy (ie tax breaks and increased military / infrastructure) that is part of the Trump plan for ‘making America great again’. Fiscal stimulus combined with inward-looking protectionism would compound, rather than overcome the constraints imposed by high government debt levels. In fact, if China’s prospects were not constrained by its domestic debt crisis, the Trump economic agenda would seem likely to have the reverse of its intended effect (see Does Donald Trump Really Intend to Concede World Leadership to China? ).

Possible options to reduce these problems were outlined in Alternatives to Monetary Policy

Thus (within a framework of principles like those Senator Wong suggested) Australia needs to engage with many other countries (including China which faces serious problems and an American president-elect who aspires to ‘make America great again’). For example:

• China is headed for financial, economic and political crises and needs help because of its adoption of  neo-Confucian systems of social, political and economic organization which generate: (a) real economy strength; (b) financial weaknesses; (c) political authoritianism; and (d) a social hiearchy that is widely resented by ordinary Chinese people.  Some now-dated suggestions about options that might have been helpful were included in Comments on Australia's Strategic Edge in 2030 (2011+)
• under president-elect Trump the US is moving towards confronting very real domestic and international challenges. However the methods proposed were grossly inadequate (for reasons suggested in More on: Should Donald Duck? and Preliminary  Conclusions About Donald Trump's Policy Agenda ).

While the situation is hazardous Australia can perhaps assist other parties in the discovery of peaceful and constructive solutions (eg as speculated in Australia's Increasingly Dangerous Environment).

China's Impending Crisis Needs to be Considered - email sent 24/12/16

Rob Burgess
New Daily

Re: One Nation’s China crisis is mostly imagined, New Daily, 23/12/16

I should like to suggest that there is a need to look more deeply at the issues that you discussed in this article. One Nation’s first Asian-born candidate (Shan Ju Lin) seems to be raising issues of real concern to Chinese people even though: (a) the ‘Communist’ label being used to describe China’s regime needs reconsideration; and (b) the threats that are seen to exist are likely to change when China’s debt crisis strikes.

My Interpretation of your article: One Nation has recruited its first Asian-born MP, Shan Ju Lin. It originally feared being ‘swamped’ by Asians but now distinguishes ‘good’ and bad’ Asians. Its concern now is with an invasion by ‘Communist Chinese’. Ms Lin is concerned that the Chinese Communist Party (CCP) threatens Australia by buying businesses, real estate and infrastructure – and will gain power / form own government. However while CCP is not democratic, it has 89m members who vote at branch meetings. The political ‘elite’ forms 6.7% of the population – which about 13 times the percentage in Australia. However the biggest misconception is that China is still Communist. Its dysfunctional collectivist economy was dismantled by Deng Xiaoping in 1978. Ronald Coase and Ning Wang (in How China Became Capitalist) argues that an entrepreneurial / capitalist economy is thriving within a one-party political system. China became a market economy by the end of the 1990s before it joined the WTO in 2001. Though China’s government promulgates a state-centered account of reform, the forces that transformed China’s economy were private farming, township and village enterprises, private businesses in cities and Special Economic Zones. None of them was initiated from Beijing. The WEF notes that before reform 75% of the country’s economy was in SOEs, but that in 2010-2012 about 70% was produced by private sector firms. One Nation seems to be making a bogy man out of Australia’s biggest trading partner – where 70% of production is in the private sector and 13 times as many people are directly involved in policy making as in Australia. There is more reason for concern about what is happening in Australia (eg government support for big four banks). All this is made possible by a political duopoly in Canberra and the clique of journalists surrounding it.

The main problem in terminology is that (as you noted) ‘Communism’ ceased to characterize China’s system in the late 1970s and that ‘capitalism’ (which implies independent profit-motivated investment) does not really exist in China either (see evidence and Don't Accuse China of Maoism or Capitalism: Neo-Confucianism is the Go, 2016). There are no large truly ‘private’ enterprises in China any more than there are in Japan. The ‘rule of law’ needed for independent / 'private' initiative does not exist. Everything depends on ‘connections’. Significant economic activities in China are organized (and are financed) within the framework of an ethnic social hierarchy which leads to an up a quasi ‘bureaucratic’ hierarchy in the (so called) ‘Communist’ Party. The ‘Communist’ Party does not itself initiate enterprises in conformity with any plan, but ensures that they cannot be independent and must act as its agents in the pursuit of nationalistic, rather than solely private, aims (see In East Asia Deals Always Involve Politics). This is a state-corporatist arrangement (ie treating the ‘private’ sector is an extension of the state) similar to that in fascist regimes in the 1930s. The ‘Communist’ Party members who participate in policy making constitute a virtual state bureaucracy – and do not necessarily act on behalf of ordinary Chinese people. The latter have no real say on policy. As the modernization of China’s economy proceeded, senior ‘Communist’ Party officials corruptly enriched themselves at the expense of the community. This was seen to require an anti-corruption campaign under President Xi and the adoption of Confucianism as an official state religion to promote both moral behaviour and compliance with others’ / authorities’ expectations.

Following the collapse of its dysfunctional collectivist economy in the 1970s, China’s ‘Communist’ Party adopted a variation of the authoritarian Confucian social hierarchy like that which governed China prior to Western expansion (and enabled China to administer Asia as the ‘middle / coordinating / organizing kingdom’ in an international trade / tribute order) - see Understanding China's Regime. The rule by Confucian bureaucracies was seen by China’s real communists to have oppressed Chinese people – and many Chinese people supported Mao’s efforts (eg through his Cultural Revolution) to purge ‘oppressive’ Confucian influences from China. The now-obvious modern dominance of an authoritarian social hierarchy in China seems to be the main cause of current ‘Asian’ concern with the (so-called) ‘Communist’ Party (see Communism Versus Confucianism: The Continuing Contest in China, 2011 and The Resurgence of Ancient Authoritarianism in China, 2014), and this is presumably why some Asians are seen to be ‘good’ while others are ‘bad’.

Australia (like grass-roots Chinese people) is at risk from China’s authoritarian neo-Confucian / quasi-fascist system because:

• Australia’s economy has become dependent on commodity exports to China and China’s ‘non-capitalist’ financial system now puts it at risk of a financial / economic / political crisis (see Importing Risks from China);
• China is trying to expand international control (probably in collaboration with Russia) using methods that are: (a) like its domestic system; (b) hard to understand from a Western perspective; and (c) likely to involve overlapping social, economic, political, military and criminal goals (eg see Creating a New International 'Confucian' Financial, Economic and Political Order, 2009; Australia's Increasingly Dangerous Environment, 2016; China as a Dominant Power, 2016; Towards a New World order in Eurasia: The Role of Russia and China (2016); Chinese Influence in Australia ; China's Challenge to Australia's Values and System of Government, 2016; Australia Must View Chinese Investment and Other Activities Through a Geo-political Lens, 2016; and Examples of Possible Soft Power Manipulation in Australia and Elsewhere);
• The incoming US Trump administration seems incapable of understanding or responding constructively to these challenges. It may do more harm than good as the fact that China is likely to collapse if left to itself is being ignored by those advocating an aggressive response to China (see Preliminary Conclusions About Donald Trump's Policy Agenda; Does Donald Trump really Intend to Concede World Leadership to China? and Why Might Russia Prefer Donald Trump?).

Many observers have thus pointed to the need for Australia to seriously consider its options and best strategy. Even if the US proves an unreliable ally for some time, there will be many other countries (in Asia and elsewhere) who will also find a need to cope with an unstable financial, economic and political environment and Asian (? Eurasian) authoritarianism.

If you do not favour One Nation’s proposals for responding to the latter, it would be useful to: (a) produce a deeper analysis of the reasons that many Chinese people (like Shan Ju Lin) are concerned about the (so called) ‘Communist' Party; and (b) pay serious attention in doing so to the cultural obstacles that exist to effective communication – such as a tendency to make vague allusions to an issue rather than ‘tell it like it is’ (see Babes in the Asian Woods, 2009 and Understanding is Difficult, 2011).

Your concluding comment about the need to also carefully consider what is happening domestically in Australia seems valid. Some suggestions about this are in A Queensland View of 'The Plight of Australia' (2016).

John Craig

Take a Closer Look at China - email sent 25/1/17

Glenda Korporaal,
The Australian

Re: Take a Chance on China, The Australian, 25/1/17

Your article drew attention to the belief by various business groups that Australia should concentrate narrowly on seeking economic opportunities for itself by developing closer relationships with China – now that the United States under President Trump seems likely to be interested only in itself and take an inward looking / protectionist approach.

However, while President Trump seems likely to end the significant international role and influence that America has had since WWII, China is unlikely to be the solution to the economic and geo-political challenge that this creates for Australia and most other countries. China is facing serious domestic financial and political challenges (see China’s Financial and Political Risks). There is thus little plausibility in the recent proposals to the World Economic Forum by its President that China should replace the US in taking responsibility for promoting global ‘free trade’.

Moreover there are geopolitical issues involved. China’s current system of government is hierarchical and authoritarian – and China’s current regime has been seeking to expand the influence of that system internationally (see Hierarchical Authoritarian Government). Without major changes, any trade that China would promote would be anything but ‘free’ (see Can President Trump Contain China’s Hierarchical Authoritarianism?). And, as the latter points out, the characteristics of China’s systems that are incompatible with Australia’s (ie traditional approaches to the use of information and to social organisation) are also the major reason that China is probably headed for a financial and political crisis.

Australia is facing a difficult and very complex environment (see Comments on Australia's Strategic Edge in 2030, 2011 and Australia's Increasingly Dangerous Environment). It would be extremely hazardous to try to make decisions about future strategic directions purely on an ‘economic’ basis (see Economic Babes in the Asian Woods).

The Trans Pacific Partnership (TPP) was an attempt to create an international environment for future-oriented trade and investment in the Asia Pacific that would be based on a liberal democratic rule of law (see Don't Ignore the Geo-Political Implications of the Trans-Pacific Partnership). The TPP initially excluded China, presumably because China would have been unable to participate without very significant changes to liberalize its political and economic systems (see Gomes L.. ‘End of the TPP’, New Daily, 24/1/17 and Sheridan G., Trans-Pacific Partnership is void, so get real on replacement, The Australian, 25/1/17). The China-sponsored schemes that your article referred to (eg China’s Regional Comprehensive Economic Partnership proposal and its One Belt, One Road plans) and many others would reduce the international influence of a liberal democratic ‘rule of law’ and boost the ‘deal-making rule of the most powerful men’ status of China’s unaccountable elites to something like that their predecessors had prior to Western expansion as the heads of what was then the ‘middle, coordinating, organising kingdom’ (see Inadequacies in Foreign Policy Populism).

Hopefully the business groups that your article referred to will take a closer look at China than they have done to date. The risk of international economic and geo-political difficulties that are now unfolding has been apparent for many years. A 2011 Suggested Strategic Response by Australia is arguably still relevant. This included not only making Australia less naïve in dealings in East Asia, but also trying to help China to overcome the difficulties implicit in its current hierarchical authoritarian systems that: (a) make it unable to participate in a liberal democratic rule-of-law environment; and (b) are now likely to lead it to financial / political crises.

Helping China to adjust in the context of participating in the proposed TPP arrangement might be a start to achieving this. This would then allow the numerous defects in the initial version of the TPP to start to be ironed out. Such an approach should reduce the risk of global financial and economic crisis and military conflicts that are currently emerging. The apparent recognition by China’s regime in December 2016 that ‘business as usual’ is too financially dangerous to continue and warnings by a key rating agency that China will be unable to attract large capital inflows without joining the ranks of the world's modern, transparent economies could provide a starting point for an approach to China about the sorts of changes it would need to make to participate in a liberal / democratic / rule-of- law based TPP.

John Craig

Qualification: The TPP Can't Be the Basis of the Solution: It has been suggested that that it would be better for Australia to promote new arrangements for pursuing freer trade rather than to trying to build on the TPP [1], because:

•  it is impossible to proceed with the TPP without American participation. There is a provision that half the original 12 signatories must participate and that these must reflect 85% of their collective GDP. America alone accounts for 60% of total GDP;
• there were flaws in the TPP (ie it arguably did not genuinely reflect a free trade arrangement) because there were seen to be unbalanced benefits favouring US corporations - and these were the reason that there was widespread opposition to the TPP.

An inability to use the TPP as a starting point would make it harder (and easier) to try to create the framework for an international trading regime that would reduce the risk of financial and economic crises and military conflicts. However the benefits of doing so successfully would remain huge.

Malcolm Turnbull Needs to Get with the New Reality: But What Will That Reality Be? - email sent 30/1/17

Terry McCrann,
The Australian

Re: Malcolm Turnbull needs to get with new Trump reality program, Weekend Australian, 28/1/17

Your article suggested that Australia needs to get with the ‘reality’ of a world where Donald trump is US president and will have a transformative geopolitical, economic, trade and investment influence. The problem is that while the first is true, the assumption that President Trump will be able to achieve anything much is suspect. And China’s influence could well be much different to what your article implied. China could be a much weakened source of instability, rather than a more demanding version of what it has been. Those possibilities need to be considered in developing Australia’s strategic response to its changing environment.

My Interpretation of your article: Donald Trump’s election changed everything (ie the geopolitical environment and dynamics of international political, policy and economic / trade / investment intercourse). It also changed the immediate US / global economic / investment outlook – and also potentially the monetary policy outlook. This demands reassessment of narrow down-under policy imperatives / options. At the same time a major reassessment of China’s role in Australia’s future is needed. The China that was content to benefit Australia by paying high prices for commodities is hopefully still there. But it will be more demanding in terms of geopolitics and capital / trade flows. Yet this does not seem to have got through to the federal government (eg considering the prime minister’s embarrassing response to Trump’s ending of the Trans Pacific Partnership, TPP). He clung to TPP – and also suggested that China might be substituted for the US. This showed a total lack of preparedness for Trump’s arrival at the White House. Australia should not just scramble aboard the Trump bandwagon, or claim that it will lead to ‘broad sunlit uplands’. But there is a need to accept reality. Government advisers should be asked what is likely in a Trump ascendency. It was obvious that Trump would end the TPP, yet the prime minister was totally unprepared. And Trump wants to slash the corporate tax rate from 35% to 15%. Australia will need to adjust. Trump has unleashed business ‘animal spirits’, and this is likely to lead to stronger US economy and higher interest rates which the RBA will presumably respond to.

There is no guarantee that President Trump’s agenda will be effective in constructively changing very much (see Preliminary Conclusions About Donald Trump's Policy Agenda).

For example: Your article referred to adopting a 15% corporate tax rate. This would undoubtedly: (a) make businesses more profitable; (b) significantly reduce government revenues (because little extra economic activity can be stimulated in an economy that is already near full employment); (c) renew ‘fiscal cliff’ disputes about the sustainability of US Governments debts; (d) encourage very large capital flows into the US because of its new ‘tax haven’ status; (e) strengthen the $US; (f) thus weaken America’s international competitiveness; (f) reduce the incentive for export-oriented investment in US; (g) require other countries (especially those who depend on capital inflows such as Australia) to adopt competitive corporate tax rates; and (h) thus reduce government revenues worldwide. The latter would in turn reduce the ability of many governments’ to: (a) provide the further fiscal stimulus (eg through increased infrastructure spending) that is now seen to be needed to escape a global debt / deflation cycle because monetary policy has lost credibility as an economic stimulus and has dangerous long term side effects; and (b) continue to service the high debt levels that they incurred at low interest rates to provide a fiscal stimulus after the GFC.

Since the start of 2017 analysts and foreign governments have started to seriously consider President Trump’s agenda - and few seem to believe that it will be effective. All of President Trump’s proposed policies to unleash business ‘animal spirits’ suffer complexities like those associated with corporate tax changes. The latter seems to be the only significant reform where analysts believe that President Trump will get enthusiastic Republican Party support – and then only on condition that: (a) cuts to business taxes are offset by politically-challenging cuts in government welfare payments; and (b) the fiscal implications of replacing Obamacare are already known (which could take years). It is thus unwise to assume that the US Congress / Senate will quickly assent to President Trump’s proposals to ‘unleash animal spirits’.

Analysts pre-election view that President Trump’s agenda had not been well thought out seems to be being confirmed. This in turn has been encouraging others (eg the Prime Ministers of Australia, Japan and Britain) to start developing alternative proposals and to seek support for their preferences from other countries and / or the Trump administration.

There are moreover reasons to believe that China’s position will be quite different to the more demanding version of its recent self that your article suggested because it is on the point of a debt crisis and a potential political crisis (eg see Take a Closer look at China and Promoting Liberal and Democratic Western Values: A Suggestion).

As your article suggested, Australia’s Prime Minister needs to get with ‘reality’. But what President Trump and China’s regime would like future reality to be are not the only scenarios that need to be considered.

John Craig

The Risks from China and 'Trumponics' Both Matter - email sent 7/2/17

Stirling Larkin,
Australian Standfirst

Re: ‘Trumponics’ gaining attention but it’s China that matters, The Australian, 7/2/16

I should like to endorse your view that Australia needs to watch China closely. However I also suggest that China’s influence is more likely to be the result of financial and political instability, rather than being determined by the ‘feng shui’? ambitions of China’s President and its so-called ‘Communist’ Party (ie their desire to be seen as the source of power and stability).

My Interpretation of your article: While attention is given to Donald Trump, what China will do has been dangerously sidelined. However what China’s Communist Party and its reticent President are about to do is important for Australian investors. China is about to have its own ‘election year’. This will set the direction for President Xi’s second term and this could affect Australia in many ways (eg ASX, real estate, trade, $A value). ASX rally in late 2016 appeared to be a ‘Trump rally’ but probably related most to commodities’ recovery in China and its industrially integrated neighbours – especially after a trade surge in late 2016. Commodities’ prospects appear good. ‘Trumponics’ is likely to be associated with: fiscal stimulation; a strong $US; rethinking globalization; and Republican control of the legislature. But no one knows: whether China’s stimulus will continue; directions for yuan and offshore renminbi reforms; what China will do in relation to redefining globalisation; and China’s future presidency beyond 2022. This creates unusual geo-political and trade uncertainty. President Xi will seek to cement his power and avoid events that make him seem weak. Australia’s efforts to block investment on national security grounds could thus be a target. For Australia what happens in China leading up to the October party congress matters more than anything else.

Your article implies that the outcomes of President Trump’s policies are more or less predictable. However I suspect that he is likely to struggle making significant progress in achieving his policy aspirations (for reasons alluded to in Malcolm Turnbull Needs to Get with the New Reality: But What Will That Reality Be?). The latter also, like your article, drew attention to Australia’s need to consider what is happening in China. However it argued that China may be not be where Australia’s best future prospects may be being determined any more than in President Trump’s America.

China has been headed towards a severe debt crisis, and there are signs that this could be getting out of control (see China's Likely 2017 Financial Crisis and Why China Has a Financial Problem). These noted that China’s regime apparently concluded in late 2016 that its massive debt / GDP ratio and dependence on rapidly increasing debt make ‘business as usual’ too dangerous (eg because of the high levels of capital flight that its huge debt exposure and unreliable state-manipulated financial system induce). Potentially-disruptive efforts already seem to be being made to offset the risk of a collapse in the yuan due to capital flight and rising problems in attracting foreign investment. A severe clamp-down on outbound corporate foreign investment and on capital flight reportedly started in late 2016 – and both will have significant effects on foreign investment in resources, industry and real estate in Australia and elsewhere. Moreover this may not be enough to prevent China suffering an uncontrolled ‘hard landing’, as it’s regime struggles to stabilize national debt levels. Given that China has been responsible for about 50% of the new debt created globally to drive economic growth with cheap credit, any more serious attempt by China to stabilize its debt / GDP ratio would be VERY disruptive. China would arguably need to cut the amount of credit it creates annually by 2/3. This would result in a 1/3 cut in global credit creation (and thus a non-trivial reduction in global final demand). It would also tend to force interest rates up, unless demand for credit collapsed as the result of another global financial crisis.

As your article suggested Australians need to keep a close eye on what is happening in China (and in the US). However it would be dangerous to just assume that: (a) China will inevitably be a source of regional financial and economic stability; and (b) the national security implications of foreign investment don’t really need study (see Australia Must View Chinese Investment and Other Activities Through a Geo-political Lens. 2016)

John Craig

Will China's Desire to Ignore Its Dangerously High National Debt Make Australia Shine? - email sent 15/3/17

Robert Gottliebsen
The Australian,

Re: Australia set to shine on Asia’s Trump aversion, The Australian, 13/3/17

Your article suggested that China has recognised that Australia will benefit economically from the ‘Anti-Trump’ revolution that is sweeping Asia and the Middle East. The benefits resulting from an ‘Anti-Trump’ revolution were suggested to include: (a) the return of Chinese to buying ‘off the plan’ apartments in Sydney and Melbourne; (b) increasing numbers of overseas students; (c) increased demand for tourism and health services; and (d) providing capital to support unregulated Australian lenders (the so-called shadow banking system) in preventing Australian banks incurring significant losses in Melbourne’s apartment market.

I should like to suggest that, while there may be an ‘Anti-Trump’ revolution, Australia should be very cautious in putting a lot of economic eggs in the ‘China basket’ (and in ‘Asia’ more generally because of the likely adverse regional effect of China’s debt crisis). As you will undoubtedly be aware China’s government has now acknowledged that it does face a problem with excessive debt. However anyone who believes that what China has suggested that it is going to do about it would be adequate has obviously not done the sums (see Reform Proposals in Early 2017).

China’s reversal of its ban on offshore property investment is reminiscent of its’ regimes erratic response the 2015-16 Shanghai share market crash. What was done did not actually stop the crash and cost China’s regime a great deal of credibility. And rather than suggesting that it is desirable for Asian capital to reinforce the support that an Australian ‘shadow banking system’ has been providing to prevent the collapse of Melbourne’s Chinese-driven apartment market boom, it would seem wiser to consider the suggestion by the Australian Bankers Association that unregulated ‘shadow banking’ operations increase the risks of a worsening property bubble and thus of very large losses by major banks (see Roddan M., Call to rein in unregulated shadow loans, The Australian, 11/3/17).

John Craig

Donald Trump and the US's Allies Need to Think About North Korea - email sent 2/5/17

Peter Hartcher,
Brisbane Times

Re: Donald Trump is learning a lesson from North Korea - and so are US allies, Brisbane Times, 2/5/17

Your article suggested that US President Trump and the US’s allies are discovering that it will be difficult to deal with North Korea’s nuclear missile and conventional military threats.

I should like to suggest that would be desirable for those concerned about North Korea to think about the bigger picture. Reasons for doing so are suggested in An 'Art of War' Perspective on North Korea's Threats (2013). This suggested (amongst other possibilities) that North Korea (one of China’s few formal allies) might be playing an ‘attack dog’ role on behalf of a coalition of East Asian ultranationalist factions. Its recent very loud threats forced the Trump administration to deviate from its intended economic and military challenges to the authoritarian political and economic systems that have been developing (currently under China’s leadership) as a global alternative to the liberal international order that Western societies have supported.

John Craig