Japan’s Defense Future (2): Actions and Initiatives

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I am out of town this week, so here is a good guest post on Japan’s grand strategy troubles from a friend at the excellent Japan Security Watch. Part one is here.

 

Japan’s security situation is ripe for change. There are a number of initiatives Tokyo can take to strengthen its strategic situation without markedly increasing defense spending, or reciprocating the belligerency of neighboring states.

– Greater cooperation with South Korea and the United States. The three powers share interest in areas such as counterproliferation, ballistic missile defense, protection of the sea lanes, and anti-piracy in the Gulf of Aden. Direct, one-on-one cooperation by Japan with South Korea may not be feasible at this time, but both sides may be amenable to cooperating under an initiative led by the United States. In the area of Ballistic Missile Defense, all three powers are essentially threatened by the same nuclear-armed states, so it follows all might benefit from cooperation on ballistic missile defense. While Japan already has an effective ballistic missile defense, cooperation with other countries means access to shared assets and capabilities. An organization based on the North American Air Defense Command could be established to command and control regional BMD assets to provide a common response to threats.

– Evolve an Anti-Access/Area Denial (A2AD) capability. Japan’s Self Defense Forces are highly specialized and effective in preventing an adversary from establishing air superiority over Japan, successfully executing a BMD attack, closing Japan’s sea lanes, or invading Japan outright. But in order for Chinese naval forces to sortie into the Northwestern Pacific, they must transit areas close to Japanese territory. The ability to close off China’s access to the Northwestern Pacific with mines, small missile-armed craft, and submarines would go a long way towards curbing Chinese belligerence without resorting to a conventional weapons arms race.

– Increase the ability to project so-called “soft power”. Japan should commission one or more hospital ships with the ability to rapidly send medical and humanitarian expertise overseas. These ships could be sent throughout the Pacific Rim, even into the Indian Ocean and the coast of Africa, to provide humanitarian relief and assistance. Such ships would go a long way towards cooling anti-Japanese enmity in many parts of Asia. To avoid the appearance of being part of a more expeditionary Japanese military, these ships could be placed under command of the Japan Coast Guard, which is under the jurisdiction of the the Ministry of Transportation. In addition, the Ground Self Defense Forces, which have a prodigious number of engineers, could transfer some to the Ministry of Transportation as well, to create an organization capable of doing everything from building roads in remote areas to reopening airports and port facilities after a natural disaster.

– Drop the arms export ban. There is nothing intrinsically wrong in selling arms to responsible governments, and selling arms abroad to such governments could bring in much-needed revenue. The export ban is generally not seen by the outside world as a credible way to decrease the number of conflicts worldwide. (In comparison Sweden, which is one of the biggest arms exporters in the world, is generally seen as a country that promotes peace in useful ways that have nothing to do with arms sales.)

– Joint weapons development and procurement with other countries. The spiraling cost of weapons development, as well the relatively small number of per-unit weapons purchases by the Self-Defense Forces is making weapons procurement extremely expensive. Also, although Japan has a reputation for being a high-tech nation, it does lag behind other nations in the development of certain technologies, the most critical of which being fighter development. Japan could, for example, pair with the United States, Sweden, or France to undertake fighter development, all of which are friendly countries with advanced fighter industries.

Although Japan has had a longstanding tradition of building weapons domestically, it may be time for it to simply give up certain industrial bases in the interests of cost-efficiency. Japan could, for example, purchase amphibious vessels from France, and small arms from Germany. These are just examples, but they’re examples of areas where Japanese industry is either not up to world standard or would require a significant investment to begin production. Buying off-the-shelf in some areas would allow Japan to increase investment in other, vital areas.

– Generate the ability to pre-emptively destroy existential threats. If Japan were under threat of an imminent ballistic missile attack from North Korea, the lack of offensive weapons in Japan’s inventory means it could not strike first and destroy the threat even if it wanted to. Japan’s sole strategy would be to use its’ BMD defenses to absorb the attack, and then either wait until North Korea were out of missiles or convince the United States to retaliate. Either response would be entirely out of the hands of Japan. When diplomacy has failed, Japan must have the ability to destroy threats to its existence, particularly when those involved weapons of mass destruction

– The deeper Japan’s relationships with other countries, the safer it is. The next step for Japan is joint operations with other countries. Japan’s best bet for the future is to burrow into relationships with key allies as deeply as possible, and strive for maximum interoperability. Although the United States and Japan have enjoyed a bilateral defense relationship for fifty years, joint commands between the two have been unheard of. As an example, Raymond Pritchett at the naval security blog Information Dissemination has proposed putting Japanese fighter squadrons on American aircraft carriers.

– The redefining of Japanese security policy as able to accept collective self-defense, and a pledge to defend America would give Japan the more equal alliance with the United States that the new DPJ-led government proclaims it wants, but Japan seems averse to taking the step. Nevertheless, the inherent unfairness of Japan’s stance on collective security is obvious to all and must eventually change.

Altogether, the implementation of these suggestions would not only increase Japan’s security position, they would also help bring it, in international relations terms, into the realm of modern nations. A Japan that can project hard and soft power at will, act preemptively against threats, actively defend other countries, and is fully integrated with its allies is a Japan that has all the functions of a modern state.

 

Kyle Mizokami is a founder and editor of Japan Security Watch, a blog devoted to Japanese security issues. He also writes for the defense and conflict blog War Is Boring.

Japan’s Defense Future (1): A Security Environment in Flux

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I am out of town this week, so here is a good guest post on Japan’s grand strategy troubles from a friend at the excellent Japan Security Watch. Part two is here.

The end of the Cold War marked the beginning of a brief period of unparalleled security for Japan. The collapse of the Soviet Union, coupled with the U.S. – Japan alliance, made the 1990s probably the safest ten years in Japan’s history. However, a number of new potential threats, including a nuclear-armed North Korea, a muscular China, and threats to energy security have spelled a reversal of fortune for Japan that promises to make the early twenty first century radically different than previous decades.

Against these challenges and threats, Japan is fast approaching the need to make several critical defense-related decisions. Japan must re-prioritize its defense spending to effectively deter rising challenges without a substantial increase in the defense budget. Japan must also alter its existing defense policy, which remains rooted in the logic and of the Cold War. Here are challenges preoccupying Japanese policymakers.

– A greater array of threats. Japan faces a more diverse array of external threats than ever before. During the Cold War, the Soviet Union’s main threat to Japan lay in its ability to blockade the Home Islands and conduct a landing on Hokkaido. That threat is gone, but a new palette of new threats have replaced it, from the prospect of North Korean nuclear weapons, to various disputes with China, and even international terrorism.

– Increased belligerency from neighbors. After a relatively quiet previous two decades, China and Russia have become increasingly belligerent in their relations with Japan over the last year. China has begun asserting itself near the disputed Senkaku islands, sometimes aggressively, and went all-out to secure the release of a Chinese fishing boat captain detained when his fishing boat rammed a Japan Coast Guard vessel. Russia has re-emphasized its claim to the disputed Northern Territories, going so far as using the dispute over their ownership to justify purchasing large amphibious vessels.

– China now spends three times as much on defense as Japan. China’s defense spending over the past ten years has increased at an average of 15% a year. Japan, on the other hand, has kept defense spending flat. (Japan has a self-imposed 1% of GDP spending cap on defense, and currently that number is actually at something like .88% ) A prudent Japan can only look at that upward trajectory of Chinese spending and conclude that, with American power parceled out worldwide and Chinese power concentrated less than 1,000 miles from Japan, Japan also has to increase spending. The question is whether or not Japan will be wise enough to resist being dragged into arms races that count plane vs. plane and ship vs. ship.

– Doing away with the arms export ban. The arms export ban is based on the “3 Principles” laid out by Prime Minister Einsaku Sato in the mid-1960s: 1. no selling to the communist bloc, 2.) no selling to countries under UN arms embargo, and 3.) no countries involved in or likely to be involved in armed conflicts. While theoretically this only excluded a minority of countries, the arms ban was understood to apply to all countries with the exception of the United States.

Although it would be deeply unpopular with Japanese citizens, the ban appears set to weaken. The immediate cause of this is joint weapons development undertaken with the United States, which the U.S. will then seek to export to third parties. Farther out, there are other reasons: Japanese defense contractors are forbidding from selling their wares abroad, and the relatively modest size of the Self Defense Forces, coupled with the growing cost of modern weapons, ensures high prices for the government and low profits for the contractors. Exporting weapons that the government buys would allow all parties to take advantage of economies of scale. Finally, the insatiable global market for arms may not be something that Japan, which is known as a quality exporter and that could use another market to compete in, cannot ignore forever.

– A lack of “punch” in the Self Defense Forces. The SDF, true to its goal of being a purely defensive force, deliberately does not own such things as aircraft carriers, bombers, and cruise missiles. The lack of offensive capability in the Self Defense Forces means that, without American intervention, any country picking a fight with Japan would not have to worry about losing but instead merely not winning. Japan lacks the ability to carry the fight to an enemy’s homeland and actually win a war. Japan is also incapable of acting preemptively — for example, destroying a North Korean missile on the launch pad that is aimed at Japan. The immense destructive power of nuclear weapons, paired with missile delivery systems, raises the consequences of inaction even higher.

– Japan is incapable of standing alone in Asia. Whether some people in Japan like it or not, Japan is stuck with America as its key ally. Russia is unpleasant and uncooperative. Korea is divided and Korean nationalism will preclude any serious cooperation with Japan for the foreseeable future. In the latest iteration of the Pacific power triumvirate, Japan can stand with China or the United States against the other, but there are ideological and historical reasons that prevent Japan from siding with China. There is also a great deal of utility in aligning with other old adversaries, including Australia, Indonesia, Vietnam, and India.

– Japan needs to recognize it has the right to collective self-defense. One component of the U.S. – Japan alliance that some observers don’t realize is that while the U.S. is explicitly obliged to defend Japan, Japan is under no obligation to reciprocate. Japan currently interprets its constitution as expressly prohibiting “collective self defense”. However, to enter into more mature, mutually beneficial security relationships with other countries, Japan is going to have to accept responsibility for the defense of other countries. America’s alliance with Japan was a unique deal borne out of the Cold War, and no other nation will pledge to defend Japan without reciprocation

Kyle Mizokami is a founder and editor of Japan Security Watch, a blog devoted to Japanese security issues. He also writes for the defense and conflict blog War Is Boring.

NATO’s Biggest Problems in the Future will be Internal, not External

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If you missed the flap over Robert Gates’ speech to the Europeans over defense spending, start here. I am participating in one of those forums about the future of NATO. If had a dime for every time I have been to a conference or forum on this, or read an article on it from the Council of Foreign Relations, the German Marshall Fund, Foreign Policy…

I am amazed at the endless amount of navel gazing on this issue, especially by Europeans in conjunction with the (equally tiresome, endless, and speculative) ‘future of the EU’ debate. You could write a book about the future of NATO or the EU (and many have), but a far more interesting book would be on the cottage industry and rubber chicken circuit that has grown up around these topics. Most westerners still don’t know the difference between Sunnis and Shia, but there’s always more time and money to bemoan NATO’s lack of a ‘strategic concept’ or (worse) the EU’s rube goldberg institutional structure. My guess is the real reason we don’t close NATO is because about 10,000 transatlantic security analysts would be out of a job (but me too, so I’ll shut up now).

Anyway, here we go on the big problems for NATO in the next decade:

1. Coherence: The Soviet threat forced an unnatural level of coherence on alliance members that has since faded. Salafist terror is not a substitute (nor should be – god save us from the ‘long war’ and ‘world war IV’) . The policy struggles over NATO action in the Balkans, Afghanistan, Iraq, and Libya suggest this tussle (‘alliance politics’) will be a regular feature in the future. This will tempt the US to go it alone, especially as the European members are divided among themselves as well. So NATO will look less like an alliance and more like a club of democracies. Its operations will have a more ‘a la carte’ feel as members opt in and out of what suits them, such as Germany and Turkey’s rejection of the current Libyan operation. The more NATO operations move from consensus to majority decision-making, with ‘modalities’ of mixed cooperation, the less the ‘all for one, one for all’ Article 5 will mean. This will progressively unnerve eastern European members who now take Article 5 more seriously than anyone else in NATO.

2. European military capabilities: Collapsing European defense spending reinforces the slide from alliance to club. NATO was always unbalanced with no integrated European ‘pillar’ to complement the US one. This is worsening, because of growing Continental skepticism about the morality and utility of the use of force, and because of the ‘age of austerity’ cuts being forced on all NATO militaries (including the US soon, but worst in Europe). The back-biting and buck-passing of the Libya operation is likely to be repeated as NATO’s high-minded idealistic commitments collide with its operational limitations.

3. Out of area: The big NATO debate from the mid-1990s to mid-2000s was whether to go ‘out of area’ (out of Europe). Afghanistan was the first test of that, and no one seems to like it. European commitments there are so hedged with rules of engagement limitations, that US commanders simply go around them. European publics don’t support ISAF. Perhaps Afghanistan was too far away and too contentious to Europeans for its connection to the much-disliked war on terror. Perhaps Libya, Syria or Somalia might revive the idea. But European publics seem to have little taste for large footprint operations. Minimalist ‘bombing for peace,’ as in Kosovo and Libya, seems like about all the out-of-area European publics are ready to tolerate, again reducing the ‘alliance’ character of the alliance.

4. No one in Asia cares about NATO that much anyway. I have been teaching international relations in Asia for years, and in my experience NATO is seen as just a pleasant, somewhat dated, regional organization. Any hype about NATO as a global police force for globalization would crash right into the new core’s disinterest in any such role. Forget that.

5. Ad hocery is the rule now. In the endless speculation over the future of NATO, my sense is that the organization increasing suffers from the outsized, almost mythic expectations that have accreted around it over two generations. Call it the public relations inertia of NATO’s path dependent trip in the western mind – from hastily thrown-together alliance to the single most important international organization ever (particularly to Europeans). After 60 years, the notion of ‘NATO’ has taken such a hold of the public imagination, certainly among western foreign policy elites, that we are constantly calling for big plans to ‘revive’ it with ‘strategic concepts’ and the like, and we regularly lament that it is fracturing. We have talked up NATO into a powerful image of western solidarity and community, but one which members don’t really want to pay or sacrifice for. NATO’s own self-image often gets in the way of its likely and ad hoc role in the future. No one really knows what NATO is supposed to do after the Cold War, but inertia in the West means we are afraid to close it (which is why we have been having forums like this one for 20 years now). So we keep throwing missions at NATO, wondering whether or not they will work, unsure quite what to expect. Expectations management (read: reduction) is needed. NATO is highly unlikely to forge a widely shared geopolitical consensus, as in the Cold War. But we can try various missions and experiments. Some may work, some won’t. But holding NATO together as a symbol of western political unity is not a bad thing in itself.

The Impact of Arab Spring on North Korea (2): Cleave to China even more

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Part one is here.

This is the second part of a soon-to-be-published quick piece for the Korea National Defense University on Arab Spring and NK. Comments would be appreciated.

4. Find new nuclear clients, perhaps in Asia. It is widely argued that NK’s decision to nuclearize was foolishly expensive for an impoverished country. This might not have been true, as the DPRK has actively proliferated for cash – most notoriously with the AQ Kahn network and Syria. But as old autocratic buyers in the ME fade, pressure will grow to re-coup the expense of NK’s nuclear program elsewhere. Look for NK to probe new proliferation ‘friends,’ including Hugo Chavez, Mahmoud Ahmadinejad, the Burmese junta, and others; this will test the meaningfulness of the Proliferation Security Initiative.

5. Cleave to China, as the moral cover of fellow autocracies fades. Not only will there be fewer autocracies in the world as a result of Arab Spring, the remaining will be more morally intolerable. For two decades, the ME seemed impenetrable to the post-Cold War spread of liberal democracy seen in Eastern Europe, Latin America, and parts of Africa. Continuing ME dictatorships bolstered the moral ‘normalness’ of NK; if there are many dictatorships in the world, then NK is not especially odious. By contrast, if the world becomes more and more democratic, then non-democracies increasingly stick out. (This is arguably why China informally props up so many other dictatorships.) If this democratization of the ME is genuine, then many of the fellow autocrats who helped NK seem less uniquely awful will disappear, and NK’s isolation will deepen. NK already faces major restrictions on where its nationals and firms may operate. The loss of ‘friends’ like Qaddafi or Assad shrinks this further.

Worse, the debate in the West seems to be genuinely changing on the merits of looking the other way on dictators in the interest of stability. Western elites increasingly recognize the long-term unsustainability and ultimately self-defeating posture of tolerating dictatorships. As Western leaders scramble to get on the right side of history with the Arabs, their moral tolerance of dictatorship elsewhere will decline too. That obviously includes NK. If NATO can bomb for Libyans’ human rights, then why not for Ivorians, Syrians or North Koreans? This is opportune for the Lee Myung-Bak (LMB) administration. LMB’s rejection of the Sunshine Policy and tough line on NK has not been popular in the West. However, changing Western attitudes on the accommodation of dictatorships will likely generate new Western acceptance for LMB’s harder line. Post-Arab Spring, LMB’s rejection of the Sunshine Policy will go down more easily if detente is seen as coddling a dictator similar to Saleh or Assad.

If dealing with dictatorships becomes harder for democratic elites to justify and for democratic publics to accept, then the Six Party Talks are unlikely to resume, and NK will more openly become a Chinese client. It is no surprise Kim Jong Il now visits China regularly; it is all he has left to go to. Post-Arab Spring, the democracies of the Six Parties are even less likely to deal with NK. Losing its autocratic ME friends and unable to meaningfully negotiate with democracies, NK will (d)evolve into a Chinese satellite.

6. Do not give up the nuclear weapons – ever. This most obvious lesson is one Qaddafi, and before him, Saddam Hussein, learned the hard way. The CNN effect can chain-gang the West into places like Kosovo or Libya under R2P, but the West’s casualty tolerance is low. The West will not carry a war solely for human rights if casualties are high, and minimally interventionist air-power is the preferred tool. The easiest way to deter R2P interventions then is weapons of mass destruction (WMD). Libya turned away from its WMD program in 2003, for which it received an implied ‘no regime change’ deal from the Bush administration. The West then reneged on this deal, attacking Qaddafi, just as it was able to attack Hussein, because neither completed their WMD deterrent. Now with NATO insisting on Qaddafi’s ouster (likely resulting in his death at the hands of angry Libyans, as with Mussolini or Ceausescu), NK, especially the Kim family, will be that much less likely to deal on its nuclear program. If NK gives up its program today, it will be more open to democratic pressure and air campaigns tomorrow. Without nukes, one is vulnerable to R2P air interventions, but no democratic public is willing to tolerate a nuclear strike to push regime change. Bombing, yes; nuclear war, no. The lesson of Qaddafi, Slobodan Milosevic, and Hussein is that the West will only blink if you have WMD.

In sum, the overall lesson to NK of Arab Spring is, don’t change at all: permit no foreign reporters (they synergize the CNN effect), give as little information as possible to the NK people (rising expectations from the internet pushed Arab youth into the streets), push China as much as possible (it’s the only option), leave son-gun in place as a bulwark (when in doubt, massacre first, ask questions later). Indeed, this is the lesson of Arab Spring to all the world’s remaining dictatorships, and the worse the regime (Zimbabwe, Syria, NK), the more it applies. Moderately authoritarian states like China or Tunisia can flirt with reform, but for genuinely ferocious systems, like NK, any change risks a huge explosion, because so much social frustration has built up. There is no other way to maintain the state in its current configuration than to clamp down yet more. Sadly, Arab Spring’s liberatory potential in the ME is precisely why its impact in Korea will be a yet deeper freeze.

The Impact of Arab Spring on North Korea (1): When in Doubt, Repress

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Part 2 is here.

The following is a brief analysis of what NK will ‘learn’ from Arab Spring. The good people at the Korea National Defense University asked for a quick, non-jargony write-up. I have previously written for KNDU’s Research in National Security Affairs (RINSA) notes here (no. 70), about NK’s shelling of Yeonpyeong island last year. Northeast Asia security wonks would like RINSA.

Comments would be appreciated, as this will be published in the next few weeks. For my previous writing on Arab Spring, go here.

ABSTRACT

NK will draw six lessons from Arab Spring: 1. Quash protest as quickly as possible. 2. Give the military everything it wants. 3. Return to post-colonial ideology. 4. Find new nuclear proliferation clients. 5. Cleave to China, as the moral cover of fellow autocracies fades. 6. Do not give up the nuclear weapons – ever. In short – dig in your heel, clamp down harder, don’t change.

The Arab Spring revolts present a frightening prospect to any dictatorship. As the world’s most orwellian and repressive – Human Rights Watch has given NK its lowest score for almost forty consecutive years – the DPRK will clearly draw lessons from these events. Six ‘tips’ for NK stand out:

1. Quash protest as quickly as possible. Precisely because the Arab revolts drag on and on, they have held world attention long enough to force a major debate on the premises of Western policy in the Middle East (ME). The longer revolts continue, the harder it becomes for outsiders to ignore them and the louder calls for external intervention become. This ‘CNN effect’ – in which a steady stream of horrific images from conflict or other catastrophe raises hard, increasingly unavoidable moral questions about external intervention – precipitated US pressure on Mubarak, the French turn-around on Tunisia, NATO bombing in Libya, and a possible future intervention in Syria. The best way to keep outsiders out is absolute control. Tiananmen Square (1989), Burma’s Saffron Revolution (2007) and Iran’s Green Revolution (2009) were definitively crushed, while Mubarak tried to negotiate. Chinese overreaction to the proposed ‘jasmine revolution’ is the likely NK response to any civil protest, only yet harsher.

2. Give the military everything it wants. ‘People power’ does not undo dictatorships, splits in the regime, particularly the security services, do. Mubarak lost when the military split over the repression; Yemen and Libya’s rebels have strengthened as the militaries fractured. Son-gun was prescient in its blatant effort to buy off the KPA, even as it bankrupts the DRPK budget.

3. Return to post-colonial ideology. The growing global normative acceptance of the ‘responsibility to protect’ (R2P), the intellectual justification for external human rights-motivated intervention, narrows NK’s ideological space. R2P, for which even China and Russia voted in the UN, raises the ‘audience costs’ of the NK dictatorship. It posits that a legitimate government must meet a minimum threshold of good behavior toward its own people to preclude external intervention: some governments are so bad, they forfeit the right to rule. To date this has been used to justify interventions in Libya, Kosovo, Bosnia, and Somalia; it also impacted the debate on Darfur, Ivory Coast’s recent internal conflict, and a possible future intervention in Syria. This is an important breach of the long-standing norm of mutual, sovereign non-interference, behind which NK and most dictatorships hide.

No case more clearly meets the R2P benchmark than NK with its man-made famines, concentration camps, and extreme privation. The DPRK needs an intellectual response to this challenge, and anti-colonial nationalism is a good choice. Decolonization stirs strong feelings in the global South, the region most likely to confront R2P-motivated interventions. Qaddafi portrays the NATO bombing campaign as Western neocolonialism, with good effect in the African Union, which has repeatedly called for a NATO halt. A vigorous argument to global public opinion that SK is a US puppet bent on globalist exploitation of the peninsula would be a persuasive postcolonial counter to the ‘human rights imperialism’ critics fear in R2P. Further, ideological committed security forces, like Iran’s Basij, are less likely to split with the regime, so propagandizing the KPA complements ‘tip’ 2 above.

Continue to Part 2.

Erratum Notification for Korea Times Readers: I am not a US Imperialist

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On the editorial page of today’s Korea Times, a significant misprint of my writing occurred.

The editorial, “Implication of US Budget Deficit for Korean Security,” reads: “Although America should be globocop, America’s finances force the obvious question of whether it can.” It should have read: “Even if one believes America should be globocop, America’s finances force the obvious question of whether it can.” Due to this and other editorial issues, I have asked the editors to remove the electronic version and to print an erratum retraction tomorrow.

Readers interested in the original argument can refer to the original blog-post on which the op-ed was based – here.

Sorry for the misunderstanding. Thank you for visiting my website.

2 pm UPDATE: The editorial has since been republished in its correct form.

Unleash the ‘Animal Spirits’ of Korea’s Small & Medium Enterprises

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The Financial Times had an important story over the weekend decrying the emergence of a two-tiered economy in Korea, and it is getting some play in Korea. Koreans are loathe to admit this (don’t criticize the team to foreigners), but any outsider can see this almost immediately here, and just about every non-Korean social scientist I know in-country agrees that this is a huge problem.

By two-tiered I mean the enormous concentration of market power and political access concentrated in the largest 200 hundred or so Korean companies, while small and medium enterprises (SMEs) struggle to find credit, and Korean households pile up debt (now at 150% of income). Non-Koreans will recognize such brands as Samsung, Hyundai, or LG, but others include widely visible names in Korea like SK or Posco. Like Japan’s infamous keiretsu, Korean mega-companies often sprawl into many different sectors, building cross-sectoral conglomerates (the Korean word is chaebol). SK, e.g., owns a telecom service, gas station chain, and real estate distributor. The chaebol have become so massive, that they enjoy many distinctly unearned, oligopolistic benefits of size.

1. They are ‘too big to fail.’ Chaebol in trouble can usually go to the government for help, as many did in the Asian Financial Crisis (AFC). In the 1997 IMF bailout of Korea, the big IMF condition was breaking the chaebol into smaller, more competitive, less openly oligopolistic firms. The chaebol have fought this ever since, often using bribery and political connections, to re-scale the commanding heights. Even Korea’s ‘reformist’ administrations – Kim Dae Jung and Roh Moo Hyun (1997-2007) – got tarred with scandal for taking bags of cash from Korea’s biggest companies. By contrast, Korea’s small and medium enterprises have no such informal political safety net. Anyone walking down the same street in Korea for more than a year or two can see the dramatic merry-go-round of small businesses here. Korea is filled with mom-and-pop stores just one or two bad months away from bankruptcy.

2. Size means political influence. It should surprise absolutely no one that the sheer bulk of the chaebol gives them inordinate, collusive political influence. The most obvious mark of this is the pardons extended to top chaebol officials convicted of a crime. More important is the informal pressure of the government on Korean banks to loan to the biggest firms at generous rates. The not only encourages recklessness at the top, it squeezes Korea’s SME’s at the bottom. Perhaps most scandalous of all, the chaebol were able to terrify the Korean state and taxpayer into picking up the bill of the Korean AFC. The Korean AFC was not caused by reckless sovereign or household borrowing. It was the chaebol, who then, mirabile dictu, dumped their debt onto the state, which ultimately forced the government to approach the IMF. Koreans traditionally blame the IMF for the crisis, but it was in fact, because the Korean state, terrified of the consequences, ‘generously’ nationalized the debt of Korea’s corporate sector. In truth, I suspect the Korean government was bullied by the wealthiest corporate heads in 1997 talking about what will happen to Korea if the government doesn’t give them the money immediately – a shakedown.

3. Cross-sectoral holdings allow a firm to leverage success in one sector for success in another. Even within a sector, Korea is often oligopolistic. The telecom industry is dominated by just two providers (SK and KT – a duopoly), resulting in exorbitantly expensive IT/long distance rates. These sorts of oligopolistic effects are well-known. Yet worse is the regular invasion of wholly unrelated sectors, in which the market power of one sector is used to push into other. The best know example of this to westerners is Microsoft. For more than a decade, MS used its power in operating systems (Windows) and office software (MS Office) as leverage to crush rivals in other areas where MS was weaker – browsers (Netscape), instant messaging (ICQ), media players (WinAmp), etc. In Korea, it is vastly more predatory and oligopolistic, as the chaebol often expand into areas wildly unconnected to each other, a practice that can only be explained by extraordinarily weak anti-trust enforcement, regulatory ‘looking away,’ and the political connections to give an unstated veneer of approval. Even Adam Smith rejected excessive concentration (monopolies, duopolies, oligopolies), and I can think of not credible market explanation whereby SK is the country’s biggest telco, real estate holder and gas station chain simultaneously. These outcomes are so blatantly political and ridiculous, that I am amazed Korea sees so little populism.

But corruption, scale, and political influence can’t be the only reason. Korea could elect genuine progressives to push through deconcentration. Even the Reagan administration broke up AT&T, right? And here is perhaps the most insidious element of the chaebol – they have convinced Koreans, a) that they are the flag-bearer toward the rest of the world, and b) that if they went through bankruptcy that Korea’s economy would implode.

a) Corporatized nationalism. Korea is a small place, bullied often by its neighbors, with a language no one learns, a culture that’s not easily distinguishable from China or Japan, and a nuclear lunatic running half the country. But as anyone living here for about 5 minutes can tell you, they are intensely nationalistic and absolutely determined that the rest of the world know who they are. That is why Yuna Kim is a legend here – not because she is a good skater, but because she brings the world’s attention to Korea. The chaebol have masterfully exploited that absolutely desperate craving for attention.

When the EU FTA was up for debate, the government ran commercials on TV showing smiling white people in European locales using Korean goods – helpfully pointed out as from Samsung, LG, etc. In trains, airports, bus terminals, on the government TV networks, etc, one sees an endless stream of government promotional commercials and videos showing dynamic-looking Korean businessmen talking up this or that Korean export product to someone who looks like a foreigner (i.e., a white guy in a suit). The Korean news gives you a regular diet of chaebol agit-prop, as the ups-and-downs of Samsung, SK, LG, Kia, etc are reported religiously. And the dream job of just about every Korean student I’ve ever had is to be a jet-setting corporate executive for Samsung. Koreans have routed their nationalism through their MNCs, and the chaebol take advantage of this to blackmail the state when necessary – particularly soft loans from the government.

b) Korea is Korea, Inc. is chaebol-land. Almost as bad is the widespread belief in Korea that if the chaebol are threatened, then somehow Korea will collapse. I see this all the time in conversations here. Despite all the above arguments for anti-trust action, my interlocutors inevitably retrench to fear – what would Korea look like if Posco went bankrupt? That Korean demand for the products Posco used to make would persist and therefore encourage new market entrants seems to arcane. That start-ups are often more efficient and more innovative (Facebook vs Microsoft) suggests even more unnerving change. That shaking up markets usually reduces consumer prices by forcing established winners to work harder is irrelevant: Koreans are ready to pay higher prices at home if that it what is required for Korea, Inc. to carry the Korean flag abroad. In the end, Korea must have national champions – not because they are champions, but because they are national. If Korea is a divided country of minor global importance (ie, no one cares about us politically), then we must have, economically, megacompanies to broadcast our national awesomeness. In the end, if Korea must be Korea, Inc. in order to get globally noticed, then its ok to be chaebol-land.

If this is depressing, there are obvious answers that do not require the government to forcibly to delimit some areas for the SMEs and some for chaebol, nor to beg the chaebol to be nice. And these would bring Korea into greater compliance with OECD norms and best practices on corporate governance:

1. Halt easy credit for the chaebol, while creating a pool of such capital for small business, modeled on the US Small Business Administration. The Korean SME sector is the most dynamic economic force in the country, taking huge risks to build neighborhood-enriching corner shops. This is far gutsier than mega-companies with lots of government buddies producing variants on the same product every year. The Korean Jeff Bezos or Mark Zuckerberg is out there, but I guarantee he is not a mid-level salary-man at Samsung. The government needs to unleash the ‘animal spirits’ of Koreans; access to bank credit on an equal playing field is the obvious place to start.

2. Enforce anti-trust law. Oligopolies create so many negative effects that even the conservative Reagan administration broke up AT&T and achieved a 70% reduction in long-distance rates. There is no possible economic justification for consumer-punishing cross-sectoral conglomerates. Western regulators would long ago have forced chaebol spin-offs. More firms means more competition, more innovation, and lower prices.

3. Stop sterilizing the won’s appreciation. ‘Fine-tuning’ is a laughable euphemism for forcing depreciation at the behest of chaebol exporters. It creates obvious costs – 5000 won for an import beer at HomePlus – for consumers. Korea’s inflation rate is now 4.2%; an easy way to return purchasing power to Korean consumers would be for the currency to rise.

Robert Gates’ Final Speech on US Defense Cuts

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The Secretary of Defense is on his way out. To my mind, Gates was excellent, although, as Walt notes, coming after Donald Rumsfeld could make anyone look good. Gates, more than any SecDef since the end of the Cold War, has pushed the real ‘transformation’ of DoD – toward restraint and limits.

Readers will recall Secretary Rumsfeld’s original use of that term meant a smaller, lighter force that could intervene rapidly and globally to force local decisions on America’s terms. Afghanistan 2001 originally seemed like a model of this, but the bog-down of the war on terrorism has frozen the ‘revolution in military affairs.’ Rather it is Gates who has pushed the real change – nudging the US, specifically Beltway think-tank elites like Brookings or the American Enterprise Institute, to realize that the US can no longer afford the expansive globocop role we have become accustomed to in the ‘unipolar moment.’ Besides Walt, Fred Kaplan has been excellent on this.

Whoever comes after Gates will have a difficult time continuing this. There is a strong predilection in the Pentagon and on Capitol Hill for defense spending. It looks patriotic and exciting. Cutting it can be easily demagogued as ‘imperiling our national defense in an era of terrorism’ or something like that. Pentagon weapons procurement is notorious for placing bits and pieces of defense production in as many congressional districts as possible. This gives everyone a an economic and ‘patriotic’ stake in voting yet more cash to DoD. And the Navy and Air Force are genuinely terrified of a much-reduced role if the future use of American force becomes mini-interventions like Libya or (what was supposed to) Afghanistan. Watch for those parts of the force to hype the China threat (although I do think China containment, with a US supporting role, is probably inevitable).

Finally, it is simply undeniable that Americans sorta like ‘empire.’ We like the fact that we can go anywhere in the world and command a level of respect, because we are citizens of the ‘indispensible nation.’ Everyone uses the dollar and pays attention to the intricacies of our politics. (In Africa last summer, I got questioned regularly on Obama). No, I’m not saying we are the European caricature of global-strutting imperialist. But you only need to watch American film (or worse, video games) to see how attractive the idea of a big, bad-a—US is to Americans. We love the narrative of American exceptionalism; remember that George W Bush said ‘God has a special mission for America,’ and he got re-elected despite the Iraq War. You don’t have to be Noam Chomsky to think this; just live outside the US for a few years to see how ‘the rest’ think about us.

So Gates’ value, in the end, was seeing that the US simply cannot afford the neocon-liberal hawk synthesis in which the US use of force is a regular response to global problems. Even if you think America should be globobcop, America’s finances force the obvious question of whether we can. Historians regularly tell us that rising debt and long foreign wars are the death-knell of empires. Cut we must, or face a truly devastating melt-down at some point. It will take time for Americans to digest this reality, and Gates, with his huge personal prestige, started this process.

I say that quite aware that I supported NATO force against Gaddafi. (I would defend that position by noting that I argued for a super-light air intervention to stop a massacre. Beyond that, Libyans must achieve ‘regime change’ on their own.) I also say this with some trepidation, because part of me does think that unipolarity backed by US force, has made the world safer and the global economy function more easily. I worry too what a ‘post-American’ world will look like, especially if authoritarian China plays a much bigger role. While no fan of ‘empire,’ I will agree that this is unnerving.

But the larger concern of overstretch is now so apparent that Gates’ retrenchment position can either be, a) a choice now, in which we slowly retrench in order to better accommodate America’s fiscal mess and do so in a professional, ‘graceful’ manner, or b) forced on us later, when when we are genuinely broke because we continue to borrow $1-2 trillion dollars a year. Even America can’t do that forever, and cuts are coming whether we want them or not.

The Korean case has really forced my thinking about this, because Korea’s security is obviously dependent on a US commitment. Any war here will be bloody and expensive, far worse than the US post-Cold War wars in the Middle East. Americans are genuinely nervous about getting chain-ganged into a long conflict here. China, which holds around 1/4 of all US T-bills, would have an obvious incentive to stop buying if US Forces in Korea were suddenly marching toward the Yalu. And I can think of few uses of US force more noble than helping a democracy against the world’s last, worst stalinist tyranny. But that shouldn’t blind us to the obvious. Gates himself said, “any future defense secretary who advises the president to again send a big American land army into Asia or into the Middle East or Africa should ‘have his head examined.’” That should be a wake-up call.

Hence I have argued repeatedly here, especially for Korean readers, that Korea needs to be far more aggressive in preparing its own defense and imaging an East Asian alliance structure beyond simply a US guarantee. Korea should finally end the tiresome, endless Dokdo dispute with Japan, so that real joint decision-making on vastly greater issues like NK or China’s rise can begin. Korea should be looking further afield to other Asian democracies like India, Australia, and the Philippines. These are no substitute for the US of course, and the US isn’t simply going to leave tomorrow or next year. But the US will have to be further and further ‘over the horizon’ in the medium-term, barring some major turn-around of the US fiscus. Korea has the money and talent to fill in this gap, but first the recognition of US limits, pushed by no less than the US secretary of defense, needs to sink in – not just in Seoul, but in the whole US establishment in Korea, and in the Beltway think-tank industrial complex. I hope I am wrong…

Think You Can Do Grand Strategy in Asia? (It’s Really Hard Actually…)

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Regular readers will know that I part-time consult for a geopolitical consulting firm called Wikistrat, and this competition is a cool idea, especially for the IR types who likely read a blog like this. Graduate students especially should sign up for it. (And if you think you can hack it as an analyst, and you have some decent credentials, contact them. Good analysts are always in demand.)

It’s great practice for big thinking, as if you’re Clausewitz or Spykman or something, but always remember the well-know adage: “Amateurs talk about strategy, professionals talk about logistics.” Before you argue that China should fix Africa or the US should fix the Middle East, remember to figure out how to pay for it, and to plan your way to that outcome (i.e., avoid America’s mistakes in Iraq). For my own version of US grand strategy in Asia, read this.

I will be a supporting judge in the competition too, so please bring your good ideas so that I can repackage them as my own. Anyway, give it a spin; the blurb is below:

“Wikistrat is gearing up for an exciting International Grand Strategy Competition.

Select teams representing leading academic institutions from around the world are invited to participate in the first ever wiki-based grand strategy competition. Managed by Dr. Thomas PM Barnett, this competition will provide participants with the opportunity to test their skills with global counterparts and network within that community. Participants can demonstrate their capacity for strategic thought to agencies, institutions and firms seeking to recruit up-and-coming analytic talent.

We are currently reviewing applications by groups representing top Universities and Think Tanks worldwide. There are still open spots available for this exciting event.

To nominate a team, or to see if you institute has been invited, contact us HERE.

Participation is free, and winner team will get a $10,000 prize.

Some of the issues we will cover in the Competition include (Download the full PDF OUTLINE):

1. Global Energy Security

2. Global Economic “Rebalancing” Process

3. Salafi Jihadist Terrorism

4. Inevitable Sino-American Special Relationship

5. Southwest Asia Nuclear Proliferation

Some of the Scenarios explored will include:

1. Major Biological Terror Attack

2. “2.0 Revolutions” in Arab World

3. + Additional Surprise Shocks”

The EU has Sewn Up the IMF Race Already? …. plus some media

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I published an op-ed in the Korea Times last week on the IMF managing director (MD) race. For readers outside of Korea, the KT is a mid-level paper here in Korea, sort of like the Plain Dealer from my hometown Cleveland. The biggest paper in Korea’s landscape is the conservative Chosun Ilbo. The KT is smaller, and because it is written only in English, it has a substantial foreign readership beyond Korea. My op-ed is based on this post last week.

I am amazed at how quickly the replacement for Dominique Strauss-Kahn (DSK) is emerging as a European once again  – the French Finance Minister, Christine Lagarde (above). The Europeans seem to be moving lightning fast on this, before Asians or developing states can get their act together and congeal around one or two non-European alternatives. As I noted in the op-ed, there is no functional reason for the IMF MD to be a European. It has simply been precedent, justifiable so long as Europe was the second major pole in the global economy with the US. Well now there is a third, in East Asia, what Barnett calls the ‘New Core’ (the North Atlantic being the Old Core). Surely it’s time to give the new Core a shot at running one of the big international economic organizations of the world?

The EU has driven its economy into a ditch in the last few years, so I see no ‘competence’ reason why a European finance minister would be better than a Japanese or Singaporean banker, e.g. Nor have the last three European MDs of the IMF been very good. Horst Koehler (2000-04) and Rodriego de Rato (2004-07) were placeholding non-leaders who took the MD-ship in order to springboard into higher office back home. And of course, DSK just globally embarrassed the institution in a manner that basically epitomizes its critics’ worst fears. The narrative of a powerful wealthy white man assaulting an black immigrant female maid is straight out of the antiglobalization movement’s nightmare imagery. So there is no particularly history of ‘quality leadership’ from the EU to justify its sinecure either. In fact, quite given how bad the last three MDs in a row have been, it would be a good idea to drop the EU for a round or two.

So where is substance to the argument that somehow Europeans are somehow entitled to the MD-ship? There is none. It’s bogus. The real claim is tribal – the EU wants the position, because it bolsters Europe’s otherwise declining claim to global leadership and relevance. The EU is like a child running around the adult table waving its hands demanding attention. As Martin Wolf noted on this issue, if the IMF can’t change to accept new realities (the rise of  the rest, especially Asia and the BRICS), then unfairly excluded states will simply walk away from the institution. Asia has already flirted with this because it felt so high-handedly treated in the Asian Financial Crisis (AFC).

Finally, the argument that the IMF should have a European leader right now because the IMF will be working so much in Europe in the near-future, is so specious as to be nearly racist. I find this almost revolting. Back when the AFC hit (1997-98) and westerners were dispensing painful but necessary advice to Asia, no one in the West worried about white bankers dispensing hard medicine to Asians. To say, today, that German Chancellor Angela Merkel won’t trust anyone to run the IMF unless it’s a European she knows,  is so ridiculous, hypocritical, self-serving, and borderline racist, that it really should shock the non-western IMF members into some pretty harsh language in response. If the EU wants to run its economy over a cliff, that’s its own choice. But the EU has no special claim to line up the globe’s resources (through the IMF) to bail out foolish German bondholders badly exposed in Greece, Spain and Ireland. For a counter-example, ask if California, with its own nasty budget crunch, is getting a bail-out from the IMF? No; Americans will wrestle through that on their own, and the EU should too on Greece and the other euro-miscreants.

I find the sheer, bald-faced selfishness and parochialism of this just shocking, especially given how often the EU preens about the importance of multilateralism and international institutions, in obvious contradistinction to ‘mercantilist’ Asians and ‘cowboy unilateralist’ Americans. So here is a golden chance for the EU to really improve global governance, to make it fairer and more democratic. But no, they’d rather insist on tribal privileges. Bleh.

Does it need to be restated that the IMF is a global institution, not a European regional one? The IMF does have other lending responsibilities, and most of its non-European borrowers are vastly poorer than Greece or Ireland. The EU has huge resources compared to the many LDCs (less developed countries) of Africa, but I guess the IMF is really supposed to be a global slush fund for the euro mess.

As best I can tell, Lagarde is pretty competent, and may do a good job. I certainly hope so, and her first trip as MD should be to non-European borrowers, especially in Africa, to prove her credibility. But there is no substantive argument from her resume to set her apart. Try here and here for a nice run-down of all the good non-western candidates who won’t be considered, because Merkel couldn’t care less about global governance and multilateralism when her campaign contributors’ South European bond-holdings are about to be ‘hair cut.’ It’s all just tribalism and selfishness. The real European claim is narcissism – put off succumbing to the new global reality where Asian economies are easily as influential as the old Core’s.

Read this and this as well on this issue.