It’s All About the Economy, Part Two

by Kevin D. Freeman on May 7, 2013

Carnegie ReportOn 5 May, we posted our analysis of an excellent paper written by a top team from the Carnegie Endowment, China’s Military and the U.S.-Japan Alliance in 2030: A Strategic Net Assessment:

It Is All About The Economy

In that post, we made the case that the primary difference between success and failure in Asia is determined by relative economic strength. We then went on to share the likelihood that potential enemies were well aware of this and have targeted our economy as a result.

While we tend to view the global economy as a marketplace, our enemies view it as a battle space.

We indirectly received criticism from the original authors of the Carnegie study that we felt was worth mentioning. Basically, the criticism is that my interpretation should not be assumed to be accurate as it appears based on a summary provided in WIRED magazine. Have to say, guilty as charged. I did read the Executive Summary as well as the WIRED interpretation.

Now, to be fair to the authors, here are the excellent Key Findings the actual study lists:


The most likely potential challenge to the U.S.-Japan alliance over the next fifteen to twenty years does not involve full-scale military conflict between China and Japan or the United States—for example, one originating from Chinese efforts to expel Washington from the region.

  • ƒƒThe likeliest challenge instead stems from Beijing’s growing coercive power—increasing Chinese military capabilities could enable Beijing to influence or attempt to resolve disputes with Tokyo in its favor short of military attack.
  • ƒƒAn increase in the People’s Liberation Army’s presence in airspace and waters near Japan and disputed territories could also heighten the risk of destabilizing political-military crises.
  • ƒƒSignificant absolute and possibly relative shifts in the military balance between China and the alliance in Japan’s vicinity are likely.
  • ƒƒIn the most probable future scenarios facing these three actors, the U.S.-Japan alliance will either only narrowly retain military superiority in the airspace and waters near Japan or the balance will become uncertain at best.
  • ƒƒA significant drop in the potential threat posed by China is also possible if the Chinese economy falters and Beijing redirects its attention and resources toward maintaining internal stability.
  • ƒƒMore dramatic shifts in the strategic landscape are unlikely in the fifteen- to twenty-year time frame. Such shifts include an Asian cold war pitting a normalized U.S.-Japan alliance against a belligerent China and a major withdrawal of U.S. presence that heralds either the dawning of a Sino-centric Asia or the emergence of intense Sino-Japanese rivalry with Japanese nuclearization.

After receiving the criticism, I went back and reviewed the entire 422-page study. I can now share that I did not accurately reflect the conclusions of the full study as written by the study’s authors. I did, however, assume them to be true and applaud the team for excellent work.

Ironically, my conclusions were based rather neatly on their assumptions, or more precisely on their input variables. In other words, I reverse engineered the study and drew an entirely new set of conclusions as a result. After thorough reflection, I stand behind what I concluded and still applaud the excellent work of the study. Here is Figure One from the study’s Executive Summary:

Analytical Framework

Basically, I looked at the three prominent outcomes as described by WIRED and focused on the independent and exogenous variables. Of greatest interest were economic and technological capacity, sociodemographic factors, and wild cards such as global economic crisis and energy shocks. From my work, these are not external to the equation but meaningfully part of it based on the Unrestricted Warfare view. This view states, for example, that external energy shocks can be weapons used to create a desired outcome.

It is important to note that my analytical approach is actually typical for financial analysts but atypical for academic analysts. A financial analyst has to absorb a great deal of data and draw a rapid buy/sell conclusion. A financial analyst can’t enjoy the luxury of stating that a stock is a buy if the company meets its earnings targets as that information will instantaneously be priced into the stock when announced. A number of direct assumptions have to be absorbed rather quickly and the entire system must be taken as a whole.

To be certain, our approach is much more a “big picture” approach than the detailed and specific analytics required of many other disciplines. A recent consideration of “forest vs. trees” also illuminates a difference between a Western and Eastern approach. This was illustrated in COMMENTS ON AUSTRALIA’S STRATEGIC EDGE IN 2030, recently sent to me by an Australian analyst:

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 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’. 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.” 

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.

What this suggests is that what we may see as independent variables and exogenous factors may be viewed by the Chinese as elements of power , not separating military and non-military as we tend to do in the West. That matches with what we have learned from Unrestricted Warfare:

“…the new principles of war are no longer ‘using armed force to compel the enemy to submit to one’s will,’ but rather are ‘using all means, including armed force or non-armed  force, military and non-military, and lethal and non-lethal to compel the enemy to accept one’s interests.'”

Now, when you add this to thoughts from Gordon Chang in 2010, you can see the serious problem we potentially face:

Opinion: Is China Dreaming of Global Dominance?

 by Gordon G. Chang, March 5th, 2010

Editor’s note: Gordon G. Chang is the author of “The Coming Collapse of China.” He writes a weekly column at

Does Beijing want to take over the world?

It definitely does, according to Senior Colonel Liu Mingfu of the People’s Liberation Army. “China’s big goal in the 21st century is to become world number one, the top power,” he writes in The China Dream, a book released in January but sold publicly only now. “If China in the 21st century cannot become world number one, cannot become the top power, then inevitably it will become a straggler that is cast aside.”

The words are strident and the thoughts sharp, but are they also shared by senior civilian leaders? “This book represents my personal views, but I think it also reflects a tide of thought,” Liu said to Reuters in an interview released Monday.

He appears to be telling the truth. Beijing’s civilians once referenced win-win concepts and spoke in soothing terms, but now their tone is one of assertion and even entitlement.

In any event, the book could not have been released without comprehensive reviews of its content by the all-powerful Central Military Commission and civilian censors. “Senior Colonel Liu’s view reflects the consensus in the Communist Party leadership,” writes John Tkacik, a Washington-based China watcher. “They see the achievement of preeminent global military and political power as the ratification of the Party regime’s legitimacy in the absence of either a coherent Marxist-Leninist orthodoxy that places the Party at the ‘vanguard of the Proletariat’ or the ‘consent of the governed.’ ”

China’s leaders have no choice but to listen to the increasingly bellicose statements of flag officers. Since the middle of this decade, the brass has been reversing a three-decade trend by gaining power within top Communist Party organs. There are various reasons for this, but two of them stand out. First, Hu Jintao, the current Party and state leader, has enlisted general-officer support in his ongoing political struggles with Jiang Zemin, his predecessor, who tried to linger in the limelight.

To Continue Reading at….

Of course, that was 2010. Now in 2013, however, the slogan “The China Dream” seems to be increasingly adopted as official policy.

From a 29 April NPR story:

Chasing The Chinese Dream — If You Can Define It

Published: April 29, 2013 by Louisa Lim

Forget about the American dream. Nowadays, the next big thing is the Chinese dream. In Beijing, it’s the latest official slogan, mentioned on the front page of the official People’s Daily 24 times in a single week recently.

With this level of publicity from the official propaganda machine, the Chinese dream even looks set to be enshrined as the new official ideology.

But what exactly is it?

According to Chinese President Xi Jinping, the Chinese dream is “realizing a prosperous and strong country, the rejuvenation of the nation and the well-being of the people.” He first invoked the concept within two weeks of being elevated to party chief in November.

The man who first made the phrase famous, Senior Col. Liu Mingfu of the People’s Liberation Army, is uncompromising about what he sees as the main planks of the Chinese dream.

“One, it means to be No. 1 in the world. Secondly, it’s the rejuvenation of the nation,” he says.

Liu wrote a book called The China Dream three years ago, which is now taught in Chinese military schools alongside the work of Carl von Clausewitz. To Liu’s great delight, it’s also mentioned in former U.S. Secretary of State Henry Kissinger’s book On China.

In the book, Liu argues that China needs to return to its former glory — as the world’s top superpower. He is sure that President Xi’s version of the China dream is the same as his.

“I’m [just] a scholar at [China’s] National Defense University, but when I talked about China wanting to be No. 1 in the world, Americans were very unhappy. If China’s president talked about being No. 1 in the world, Americans would be unable to bear it,” he says. “We can’t use the same language. But my Chinese dream and the president’s Chinese dream are in essence the same.”

To Continue Reading at NPR….

Will the China Dream be belligerent? Does it require Economic Weapons? Can we afford to not take it seriously?

This is a global economic war whether we know it or not. It is a matter of seeing the forest through the trees.

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