What’s the Matter with China

Posted December 30, 2009

Categories: Articles, China

You might have missed the news: China is now No. 3.

Statisticians have finally crunched the 2007 numbers and discovered that China surpassed Germany that year to become the third-largest economy in the world. With its gross domestic product (GDP) at $3.32 trillion, the Chinese economy is now poised to overtake No. 2 Japan at $4.38 trillion. The global economic crisis is bringing down Chinese growth figures — probably to around 8% for 2009 — but that’s still way better than the anemic growth or even contraction that the major industrialized countries will experience.

As a Merrill Lynch economist in Hong Kong put it: “In 2007, the gap between the growth rates of China and other big countries was huge. Actually in 2009 the gap between will be even bigger.”

Whether China still qualifies as a poor country given its per-capita GDP of only $2,500, whether it can sustain its growth and contain domestic unrest, whether the global downturn in consumer spending will eventually drag down China’s export industries, whether China will surpass the United States to become the largest economy in the next decade: These are interesting questions. But they’re not the questions that interest me at the moment. I’m concerned about another figure — China’s military spending — and what it will mean for the region, for the United States, and for the global military industrial complex.

China increased its military spending about 18% last year. Given the still considerable economic growth projected for 2009, it’ll probably do the same this year as well. The modernization of China’s military is mirrored by similar transformations in Japan, South Korea, and Taiwan. Even though the global recession will hurt these three countries, they are still moving ahead with expanding their air, sea, and land power — in part to balance China.

The United States, too, is eyeing China’s military spending. The Pentagon has routinely identified China as the only viable competitor on the horizon. China’s ability to weather the current economic storm and overtake Japan in the near future as No. 2 will only serve to narrow the Pentagon’s focus.

Like the state of Kansas Thomas Frank wrote about — soon to be a movie — China isn’t acting in its own interest. By building up its military, Beijing is diverting precious resources that could go to equitable economic growth or, as Foreign Policy In Focus (FPIF) contributor Eugene Coyle writes in Postcard from Beijing, sustainable energy projects. China is setting into motion a regional arms race. It’s handing the Pentagon an easy argument for budget increases of its own. There are, as in Kansas, some non-rational factors at work, such as Chinese nationalism. Still, when will China wake to the realization that such military spending is, in the end, self-defeating?

China isn’t, of course, the only reason for military budget increases among its neighbors and competitors. In all of these countries, at a time when a peace dividend should augment a stimulus package, a new military Keynesianism has instead emerged. This belief that the defense sector can pull the economy out of the recession is particularly evident here in the United States, even though numerous studies have shown that civilian sector investments produce more jobs.

As I write in The Risk of Military Keynesianism, “Defense contractors are scrambling to prove that they play an essential role in keeping factories running and workers employed. Lockheed Martin recently ran a full-page ad in The Washington Post that linked its F-22 Raptor — an expensive weapon of dubious utility in today’s strategic context to 95,000 jobs in 44 states. Not to be outdone, the shipbuilding industry lobbied Congress to send a letter to Obama arguing for a doubling of the rate of naval shipbuilding — to preserve 400,000 jobs in 47 states. With the U.S. economy shedding nearly 600,000 jobs in January, these arguments find a receptive audience on Capitol Hill.”

Beware of that other dodge of military Keynesianism: selling arms abroad to help defense contractors at home maintain production. “In 2008, as in each of the previous seven years, the United States led the world in arms sales at $32 billion,” writes FPIF contributor James Carter in Obama: Cut Arms Exports. “In 2006-2007, the U.S. sold weapons to more than 170 nations, up from 123 at the start of the Bush administration.” One of the big deals, announced last October, was a $6.5 billion arms package for Taiwan.

Which brings us back to China. Secretary of State Hillary Clinton is going to Asia this week on her first foreign tour. Her recent predecessors in the position, going back to Cyrus Vance, all went to Europe or the Middle East on their first overseas ventures. The trip sends a signal that despite the wars in Iraq and Afghanistan, Asia is still important to the White House.

Although Clinton will have a busy schedule, what with exploring a new “comprehensive dialogue” with China and firming up alliances with Japan and South Korea, one issue that she hasn’t so far included on the agenda will be the pernicious impact of all this military spending. The five countries negotiating the end of North Korea’s nuclear program — the United States, China, Japan, Russia, and South Korea — are responsible for 65% of global military spending (with the United States alone accounting for nearly 50%). Indeed, when it comes to our allies in the region, Washington wants more military spending and more burden-sharing.

I devoted an earlier World Beat to this Asian arms race. Now, however, there’s something we can do about it.

Activists in the United States and Asia have launched the Pacific Freeze campaign to freeze and then reduce the military budgets of the countries in the Six Party Talks. As our campaign’s Call to Action states, “A freeze on military spending is just the start. Reducing military budgets — as well as freezing arms exports and imports to the region, stopping the construction of new military bases, and halting the construction of new weapons systems — will also be critical components of a collective peace and security system for the region. As the leading military spender, the United States must lead the way with military reductions. We recommend that a portion of the savings go into an Asian Green Fund to help countries in the region address global warming.”

As FPIF contributor Wade Huntley writes in The Promise of the Six-Party Process, the Pacific Freeze’s “goal of freezing military spending by all Asia-Pacific governments takes seriously all facets of the security dynamics of the region. At the same time, the focus on spending on military capabilities itself, rather than on just the uses for which these capabilities are employed, is a distinct step away from viewing regional security needs through a strictly sovereign state lens.”

Read the call; sign the petition; join the new campaign. Also, consider attending the upcoming conference on U.S. bases, Security Without Empire, here in Washington at the end of this month. The problem isn’t just with China. Even after the election of Barack Obama, many are left wondering: What’s the matter with us?

Glass Half Full?

Vice President Joe Biden’s speech at the big security confab in Munich over the weekend was a perfect example of old, new, borrowed, and blue. Joe offered to “press the reset button” with Russia and move toward deep cuts in the nuclear arsenals of the two countries. And he promised to emphasize diplomacy, development, and democracy over military action. Not bad.

But Biden also supported the old policy of missile defense and the borrowed policy of pressuring European allies to send troops to Afghanistan. And the promises to talk with Iran were largely a repeat of the Bush approach, which also offered negotiations but only if Iran first ended its nuclear program. So, Joe, why not press the reset button on Afghanistan, missile defense, and Iran as well?

In the first month of the Obama administration, we continue to argue over the water level in the glass: fewer troops in Iraq but more in Afghanistan, closing Guantánamo but bombing Pakistan, promising more diplomacy but boosting military spending.

Then there’s the issue of women’s reproductive rights. In Un-gagging Women’s Human Rights, FPIF contributor Yifat Susskind hails President Obama’s decision to rescind the global gag rule imposed by the Bush administration that cut off funding to any foreign organization that performed, counseled, or advocated for the legalization of abortion

.”The gag rule’s repeal is welcome news,” she writes. “So is Obama’s announcement that he will restore funding to the UN Population Fund and join “180 other donor nations working collaboratively to reduce poverty, improve the health of women and children, prevent HIV/AIDS and provide family planning assistance to women in 154 countries. But these are only the first of many changes needed in U.S. reproductive health policy. Remember, the Bush administration set the bar extremely low, denying emergency contraception to girls raped during the war in Kosovo and barring access to condoms and sexual education in AIDS-ravaged Africa.”

More Suggestions for Obama

One of the few areas of the world that prospered during the Bush years was Latin America. Washington was too preoccupied with other parts of the world to meddle much in its own backyard, aside from the usual shenanigans in Colombia and Cuba — as well as a newfound habit of intervention in Venezuela. Why not go further, write FPIF contributors Philip Brenner and Saul Landau, and declare the end of the Monroe Doctrine that justified U.S. interventions in Latin America and the Caribbean. “President Barack Obama could swiftly improve U.S. relations with Latin America by announcing the death of the Monroe Doctrine and then presiding over its funeral,” they write in Farewell, Monroe Doctrine. “Such a statement would cost him little domestically, and win him praise and appreciation throughout Latin America and much of the world.”

Here are two more suggestions for the Obama administration. FPIF contributor Usama Khalidi suggests that Washington put pressure on Riyadh to convene a kind of religious reeducation program for the Taliban. “A well-publicized open forum in Kabul or Peshawar, with Saudi and Egyptian ulema or Islamic scholars speaking of Islam as practiced in their own countries, is bound to get the attention of the extremist Taliban and also strengthen the moderate elements,” he writes in What Saudi Arabia Should Do. Saudi Arabia “launched a large-scale educational reform that includes the rewriting of school textbooks to eliminate derogatory references to other religions. Its elites are hopeful of seeing a ban on women motorists lifted and other rights expanded. Women already have the right to hold a job, to own a business, and to stay in a hotel unaccompanied by a male relative.”

Finally, on the global economic crisis, Washington should reconsider its position on capital controls, by which governments regulate the flow of money in and out of their countries. Although many countries have successfully used capital controls to address market volatility, the United States “stuck with its crusade against capital controls,” writes FPIF senior analyst Sarah Anderson in Obama: Sweep Away a Free Trade Relic. “After the Asian crisis erupted in 1997, it galloped full speed ahead, initiating agreements limiting capital controls with 22 countries. Now a total of 52 nations have become bound by such pacts forged since the late 1980s.”

Even the International Monetary Fund now recognizes the utility of capital controls. It’s time for Washington to do likewise.

FPIF, February 10, 2009

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