Wednesday, January 11, 2017

The End of the Asian Century: War, Stagnation, and the Risks to the World’s Most Dynamic Region

I am hunched over, almost on my hands and knees, nearly 250 feet below ground. Behind me is close to a mile of tunnel, hewn through solid rock. In front of me is a steel door set into a concrete barricade. Through its tiny window I can see another barricade and steel door, maybe another one hundred feet ahead. Beyond that lies North Korea.

I have crawled into one of the dozens of “tunnels of aggression” dug by the Pyongyang regime into South Korean territory. Discovered in 1978, it lies only twenty-seven miles from Seoul and was designed to bring waves of North Korean saboteurs and special forces under the heavily defended border to wreak havoc in case of war. It is the only tunnel open to the public, and the tour buses that bring visitors to this no-man’s-land pass by hills that still contain hundreds of land mines aimed at stopping an invasion from the North.

Yet as much as Tunnel Number Three is a reminder that the Korean border, the ironically named “Demilitarized Zone,” remains one of the most dangerous spots on earth, it also is a metaphor for all of Asia. While dynamic and peaceful on the surface, the continent is riddled with unseen threats, from economic stagnation to political unrest and growing military tensions. These risks also threaten the rest of the world, thanks to the extraordinary economic, political, and military growth of Asia over the past decades.

To put it starkly, what we are seeing today may be the beginning of the end of the “Asian Century.” For decades, prominent and knowledgeable observers, from bankers and industrialists to scholars and politicians, have predicted the rise of the Asia-Pacific and an era of unparalleled Asian power, prosperity, and peace. At the same time, many writers assure us that the East is replacing the West, in a great shift of global power that will permanently reshape our world. All those predictions now are themselves at risk.


Such a view remains controversial. Only in recent months have the popular press and casual observers begun to worry about growing risk, from China’s stock market collapse to the danger of armed conflict in the South China Sea. But in a world where headlines continue to focus on the bloody spread of the Islamic State or on Russia’s invasion of Ukraine and intervention in the Syrian civil war, only cursory attention is being paid to Asia’s dangers.

As this is being written, China’s economy has dramatically slowed, North Korea claims that it has a hydrogen bomb and is widely believed to be able to put nuclear weapons on top of ballistic missiles, Thailand’s military has launched its second coup in a decade, and Chinese newspapers warn that war with America is “inevitable” if Washington does not back down from opposing China’s territorial claims in the South China Sea. These are just some of the more visible dangers that perturb the Indo-Pacific. We are on the cusp of a change in the global zeitgeist, from celebrating a strong and growing Asia to worrying about a weak and dangerous Asia. For all its undeniable successes and strengths, the broader Indo-Pacific region faces significant, potentially insurmountable challenges.

The rest of us should worry because none of these problems threaten only Asia. Whether one cares about the Indo-Pacific or not, it is half of our world. Today, one out of every three persons on earth is of Chinese or Indian descent, and the countries of the Indo-Pacific account for nearly 60 percent of the world’s population. The World Bank estimates that the economies of Asia produce nearly 40 percent of total global output, and they are central to everything from weaving textiles to crafting the most advanced electronic technology. The militaries of Asia’s countries have grown dramatically, and China, India, and North Korea are nuclear powers. Democracies jostle with authoritarian states as neighbors in the world’s most dynamic region.

But the globalization that we continue to celebrate has its dark side as well. If an economic or security crisis erupted in Asia, it would reverberate around our increasingly interconnected world. Those risks are festering, some visible, others still hidden. The number one priority for the countries of the Asia-Pacific, and the rest of the world, over the coming decade is managing and mitigating the risks that threaten the Asian Century.

To properly conceive of these trends, one must imagine a “risk map” of Asia. Unlike a traditional geographic map, this map is a conceptual tool for identifying the most important trends in the region and assessing their risk. This book maps out five discrete yet interrelated risk regions.

The first such region is the threat to Asia’s growth from the end of its economic miracle and the failure of reform. Thousands of headlines and dozens of books continue to proclaim the economic miracle as if it were destined to last forever. Yet dig beneath the headlines, and you find major problems, many of which national governments are failing to solve.

From Japan to India, the nations of Asia struggle to maintain growth, balance their economies, and fight slowdowns. For most of these countries, the days of high-flying growth are long over, while for others, they never began. It is past time for the rest of the world to pay attention to the threats to Asia’s economic health. Uneven development, asset bubbles, malinvestment, labor issues, and state control over markets are just some of the features of economic risk in the Asia-Pacific. And because Asian economies are increasingly interlinked, problems in one country spill over to others.

This region of Asia’s risk map, economic slowdown or collapse, directly concerns non-Asian nations. Global stock markets tanked in the summer of 2015 and the beginning of 2016 when China’s stock exchanges collapsed. Even if Asia’s economies manage to muddle through, the world must ask what will happen to global trade and investment if growth in Asia simply cools off. It is increasingly prudent to prepare for a far less economically energetic Asia than we are used to. And we must account for both long-term structural stagnation, as in Japan, and the style of house-of-cards capitalism currently practiced in China. There is little doubt that the world must prepare for a China whose growth has dramatically slowed if not stagnated, and for mature economies like Japan’s never to recapture their former vibrancy. As for the developing states, the risk is that they will never attain the growth needed to ensure the modernization of their societies.

Economics, being about people and wealth, leads us directly into the second region of Asia’s risk map: demographics. All of the Indo-Pacific faces a Goldilocks dilemma: either too many people or too few. I once visited Tokyo right after spending nearly a month in India; I received a palpable culture shock in going from a seething kaleidoscope of people in Delhi and Calcutta to the rapidly aging Japan.

Most of Asia’s developed countries, including Japan, South Korea, Taiwan, and Singapore, are facing or will soon face unprecedented demographic drops. China’s one-child policy and horrendous environmental pollution will also bring a population decline in the world’s most populous nation, at a time when the country is not yet rich enough to deal with the resulting dislocation. On the other hand, India has a growing surfeit of young people and needs to improve educational standards, expand its urban and rural infrastructure, and find them all jobs. Much of Southeast Asia is in India’s situation, offering opportunity along with challenge.

The costs of Asia’s rapid modernization have long been ignored, foremost among them environmental damage. The polluted skies and waters of Asia affect demographics as much as do fertility rates. The horrors of Japan’s Thalidomide babies during the 1950s may seem a relic of another era, but images of the darkness of Chinese cities at noon, thousands of dead pig carcasses floating down major rivers, and towering garbage heaps reveal the almost inconceivable environmental harm that now threatens the future of youth in some of Asia’s major countries. Demographics will put enormous pressure on Asia’s domestic political and economic systems; understanding this is a must for understanding risk in the region.

The third enormous region of risk on our map comprises Asia’s unfinished political revolutions, in both democracies and autocracies. How political leaders respond to economic and social challenges will ensure domestic tranquility or produce civil unrest. Ever since the last Chinese emperor left his throne in Beijing’s Forbidden City, Asia’s political his- tory has been one of unfinished revolution.


Given the ongoing struggle for the political soul of Asia, Americans should not be complacent about the future of democracy there. The fight is far from over. Hundreds of millions of men, women, and children have been freed from oppressive governments but have not completed their journey. The gains of democracy continue to be put at risk by corruption, cliques, protest, cynicism, and fear of instability. The spread of democracy, which has succeeded so well in recent decades, may be reaching a limit—how temporary is impossible to say. Even mature democracies, like Japan and India, face a crisis of political confidence and a “political arthritis” that leaves vital problems unsolved.

Autocracy maintains its grip on China, North Korea, and other Asian nations. The cold stares of security forces in Tiananmen Square and the empty chair of Liu Xiaobo at his 2010 Nobel Prize ceremony showed Chinese and foreign observers alike that China remains decades, perhaps generations, away from political freedom. As long as China remains un- free, democracy and autocracy will remain in a stalemate.

Yet autocratic regimes face their own grave dangers. There is probably no more important risk factor for Asian politics in the coming years than China. Talk to ordinary citizens in Beijing or Shanghai, and their pride in their country’s economic growth quickly turns to silence about its political future. Despite its economic successes, the Chinese Communist Party has become ever more isolated from the citizenry and is seen as corrupt, inefficient, and often brutal. With over two hundred thousand protests of varying sizes every year, China’s society is at more risk than most people realize. The party has kept a lid on dissent, but it has been able to do so in part because of the country’s huge economic gains. As growth starts to wane, unrest will very likely increase.

Visitors to Southeast Asia come away with similar concerns for long-term social stability. The question of whether to allow greater political participation is central to the politics of Indonesia, Malaysia, and Singapore, where the ruling parties are all grappling with how to maintain power while defusing popular demands for more open electoral systems. On the other hand, democracy can be swept aside, as in Thailand, whose continued instability appears to be a quasi-permanent threat to democratization. For Vietnam, how to ensure Communist Party control yet provide continued opportunity for business, as in China, is the overriding concern. The ultimate test will be how governments and their societies react to growing pressures and unmet expectations.

Although Asia’s nations face many of the same problems, there is little that links those nations together. Beyond a rudimentary sense of “Asianness,” there remains no effective regional political community. There is no NATO, no European Union in Asia that can try to solve common problems in a joint manner or to address bilateral issues in a broader framework. This lack of regional unity constitutes the fourth region in our risk map.

The danger is that there are no mechanisms for mitigating such deep antipathy, certainly between major players such as India and China or Japan and Korea. A nation like China is all too ready to threaten economic or political action in response to its antagonists. The various nations have few working relationships that can help defuse crises. Nor is there a core of powerful liberal nations committed to playing an honest broker’s role or trying to set regional norms. How well can Asia weather another regional economic crisis like the one in 1997, or a major border dispute?

This litany of economic and political risks might be enough to cause observers to alter their long-term assumptions about Asia’s prospects. Yet there is a fifth risk to be mapped, the most dangerous of all: war and peace. How close is Asia to seeing conflict erupt, and where? Not every dispute threatens peace, but today, the Indo-Pacific region is regressing to a nineteenth-century style of power politics in which might makes right. With the world’s largest and most advanced militaries other than the United States, and including four nuclear powers, a conflict in Asia could truly destabilize the global economy and spark a conflagration that might spiral out of control.

The immediate cause of rising insecurity is simple: as China has grown stronger, it has become more assertive, even coercive. Beijing has embraced the role of a revisionist power, seeking to define new regional rules of behavior and confronting those neighbors with which it has disagreements. Japan and Taiwan, along with many countries in Southeast Asia, fear a rising China, as does India, though to a lesser degree. That fear, fueled by numerous unresolved territorial disputes in the East and South China Seas and by growing concern over maintaining vital trade routes and control of natural resources, is causing an arms race in Asia. The region’s waters have become the scene of regular paramilitary confrontations. These fears and responses are triggering more assertive policies on the part of all states in the region, which only raises tensions further.

The “Asian Century” thus may not turn out to be an era when Asia imposes a peaceful order on the world, when freedom continues to expand, or when the region remains the engine of global economic growth. What it imposes may instead be conflict and instability.


 invented by Teads

If we wish to avoid the potentially catastrophic consequences of a war in Asia or a widespread economic collapse, we need to understand the diversity of risks the region faces and to begin thinking about how to manage those risks. Given the importance of the Indo-Pacific, we have little excuse for being taken by surprise by an Asian crisis. Nothing in this book predicts or presupposes any particular dire outcome, yet the very act of identifying dangers and thinking them through can lead to wiser investment decisions, policies, and intellectual engagements. This is risk analysis on a broad palette.

Michael Auslin is a resident scholar and the director of Japan Studies at the American Enterprise Institute, where he specializes in Asian regional security and political issues.

Image: Shanghai skyline at night. Yang

Editor’s Note: Excerpted and used by permission of Yale University Press, from The End of The Asian Century by Michael R. Auslin.


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