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Drifting toward decline

I have just returned from a week visiting Hong Kong and Japan.  What I found there was inspiring and somewhat hopeful in Hong Kong, but distressing in Japan.

In Hong Kong — which in many ways represents China’s best hope for a place where pluralism and free speech and free markets can produce the innovations that China needs to move its economy up the ladder to breakthrough products, instead of labor-intensive manufacturing and local services — China has commendably refrained from harsh repression.  Yet while waiting out the protests, instead of seeking to build trust with the youth of Hong Kong through discussion and some half-measures, it has condemned them as traitors to China’s harmonious order, accusing them of following the promptings of Britain and the US to undermine China.

The courage of the young people of Hong Kong and those who have supported them is inspiring, as was their orderly, disciplined and non-violent protest;  Beijing’s response, while perhaps predictable, is disappointing nonetheless.   My hope is that the determination of Hong Kong’s youth to continue to strive for democracy, but doing so with order and reasonableness, will eventually produce some modest improvements to support Hong Kong’s democracy, such as stronger political parties, or a more effective legislative council.  But my fear is that China’s new leader Xi Jinping will see Hong Kong’s freedoms only as a threat and not appreciate what it can offer to China.  It would be a tragedy, not only of risks of confrontation and clashes, but of lost potential for China, if Hong Kong is slowly drained of its freedoms.

And in Japan, which remains a model of freedom and prosperity, one sees a desperate race with time, technology and culture to adjust to dramatically changing circumstances.   The race with time is against the rapid aging of Japan’s population, which has already begun.  Within another fifteen years, the large post-war cohort, which propelled Japan’s economy and society through economic reforms which made Japan one of the world’s largest economies and the dominant power in East Asia, and in return enjoyed secure employment for life, will enter their seventies.  At the same time, entering the work force will be the smallest cohort of 20 year-olds in history, and moreover a cohort that has already experienced a shift toward temporary employment instead of stable careers, young men who have opted for video games over dating and marriage, and young women for whom work is a greater priority than families.  On current trends, Japan’s working-age population (15-64) will decline by one-quarter in the next thirty years.

With a very low birth rate, and high longevity, after 2030 Japan will have more people aged 80 and over than aged 15-24; this raises the question of who will care for the elderly, and whose wages will be taxed to pay for their health care and pensions.  Japan has responded to increasing government expenses for its aging population by borrowing rather than raising taxes; at over 200% of GDP it now has the highest debt of any developed nation.  This is an awkward situation from which to face another doubling in the ratio of elderly to workers that will come in the next two decades.

While the obvious solution is to encourage immigration of young workers from the still growing nearby populations of the Philippines, Indonesia, and Vietnam, the Japanese population has rejected that solution.  As I was told, the view in Japan of a population facing a decline in workers and rapidly growing needs for elderly care is “We would rather be taken care of by robots than foreigners.”   The distrust and anxiety regarding foreigners is so great, the Japanese would rather gamble their future on technical breakthroughs than recruit willing workers from abroad.

Will it work?  For the technological gamble to pay off, two things have to happen.  First, Japanese companies need to find technology to replace workers and upgrade technology fast enough to generate positive economic growth despite a workforce that will decline by about 1% a year.  This means the productivity of the existing workforce has to increase by 2-3% per year.  Only this will keep the economy growing and provide the resources to care for the fast-growing ranks of the elderly without punitive taxes on the working population.  Second, Japanese companies need to find technology for care of the elderly – everything from providing medical and surgical care to nursing home and companionship – with robotics instead of human workers.  And they need to have all this move from experimental stages to real-world deployment, at affordable cost, within fifteen years!

While one cannot dismiss the possibilities of such breakthroughs out of hand, the past decade does not inspire hope.  In the last few years Japan’s economy has stagnated, with real GDP and GDP/capita flat or declining; productivity has risen but only because hours worked have fallen so that the existing capital stock has been deployed by fewer workers.  Japanese companies have lost market share to Korean and Chinese competitors (and even US and European competitors in autos and computing), as they no longer are producing world-beating advances in quality or design.

Japan has made  huge advances in producing humanoid robots (with smiling faces and the ability to hold simple conversations) and pet robots (which do produce an emotionally positive response).  Humanoid robots that can lift elderly humans start at about $80,000, but a humanoid robot that can climb and descend stairs costs over $2,000,000.  Perhaps crash development for what will clearly be a big market will lead to breakthroughs that allow a robot in every home by 2040!

Could robots be to the Japan of the 2030s what automobiles were to the Japan of the 1970s and 1980s — a world-beating export industry that establishes Japanese industrial leadership and economic power?  That is clearly the hope and prayer of Japanese business and political leaders.  The difference is that automobiles were a well-established consumer good with a simple design; Japan only had to learn to produce them with higher quality and lower cost than inefficient competitors to take over a large portion of the world market.  Here Japan has to pioneer an entirely new product, establish its safety and desirability for different markets, and produce it in large volumes at low costs.  Perhaps a better analogy is the Walkman or SLR camera; new products in which Japan became a world leader.  But again for those products Japan’s global leadership was brief, before I-pods and digital cameras made the Sony’s and Pentax’s of the world also-rans instead of global leaders.

Meanwhile, Japan’s youth avoids marriage, struggles to find secure work, and takes refuge in video games; and its politicians and older generation stick to xenophobic Japanese nationalism.

Japan has a further cultural problem to overcome — it’s traditional attitudes toward women.  Japan has the lowest rate of female labor force participation in the developed world; and women’s prospects for executive positions remain slim.  Japan thus is seeking to rebuild its future with gender bias effectively tying one hand behind its back.  To be sure, women are highly educated and effective workers; the problem is corporations’ reluctance to promote them and trust them as leaders.

So Japan has to overcome technical and cultural obstacles, and soon.  Otherwise, its slide will accelerate and its time as a dominant power in East Asia will be a memory by the second half of this century.


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Hong Kong is NOT Tiananmen

Hong Kong’s protests present a major problem for China’s leadership in Beijing. This is not 1989, when China used its army and tanks to dispel student protests in Tiananmen Square.  Both China and the world have changed; and Hong Kong is not Beijing.

In 1989, China could easily control media coverage of its actions, both within China and to the world. And while there were protests in many cities, the action in Beijing was concentrated in the giant central space of Tiananmen Square, a place served by broad boulevards where one could bring large infantry formations and even tanks to bear.  Such forces were easily shifted from distant areas in northern China and deployed to the capital.  After a warning, Chinese authorities could turn out the lights and send forces to disperse the students in the square, who had little recourse.  China suffered some international outrage and a brief spell of sanctions, but these hardly affected its booming growth.

Today, it is far more difficult to suppress news of events in Hong Kong within mainland China, and virtually impossible to prevent images of events in Hong Kong from reaching the outside world.   Suppression of these protests is thus much harder to carry off without creating outrage.  Indeed, within Hong Kong – as in Gezi Square in Turkey and in the Maidan in Kiev – the adoption of harsh crowd control tactics by authorities made matters worse, provoking far more people to join the protests than had originally participated.

In China in 1989, students were demonstrating in hope of creating something new: novel democratic concessions from the Communist Party. Yet in Hong Kong in 2014, people are demonstrating to defend rights they have already enjoyed for decades, namely the right to peaceful protest and free expression, as well to protest the withdrawal of a promise they believed China had made to allow local elections with full and free suffrage in 2017.  Also, today’s protestors in Hong Kong have been able to learn from decades of practice and international teaching in tactics of non-violent protest, including coordination via social media and cell phones to fuel “flash-mob” demonstrations in different places to evade police; use of vehicles (again coordinated by social media) to form “flash” barricades; and how to cope with tear gas and pepper spray while maintaining peaceful civil disobedience.   Today’s Hong Kong protests are better organized, more dispersed, more skilled, and far better justified and clear on their demands than their predecessors at Tiananmen.

All of these factors make it almost impossible for police using ordinary crowd-control methods to disperse the protests. That would take a greater degree of military, perhaps lethal, force; yet the prospect of a massacre of thousands of peaceful protestors in Hong Kong by Chinese military forces is a nightmare that Chinese leaders will try to avoid.  Such a massacre would have a much larger impact today on China’s economy should it result in sanctions affecting China’s enormous imports and exports.  It would also undermine China’s efforts to position itself in organizations such as the Shanghai Cooperation Organization and ASEAN as the harmonious alternative to the United States as the hegemon of East Asia, and weaken its efforts to appeal to Taiwan.

In fact, even in mainland China, where hundreds of protests take place every year over environmental concerns and land seizures for property development, China’s government has sought to avoid use of lethal force in dealing with angry crowds. Instead, China uses non-lethal force to contain the protests; places leaders under arrest or in detention; makes some kind of deal or concession to the crowd; and disciplines local party leaders for failure to anticipate and meet popular demands.  These tactics have kept protests small and contained, and allowed China’s leaders to present themselves as responsible rulers, not tyrants.

So if massacres in Hong Kong are unacceptable, what will China’s government do?

The mandarins in Beijing have two alternatives. One is to do nothing, and try to kill the protest with inaction and disinterest:  they may simply say they have made their decisions and the people of Hong Kong are free to express their opinion, letting students occupy the streets until the Hong Kong business community itself tires of the disruption and asks for the demonstrations to end.   That is risky, however:  even peaceful demonstrations may grow into verbal attacks on the Communist Party and on party leader Xi Jinping; these would be even more dangerous than current demands for the resignation of Hong Kong’s leader Leung Chun-ying, and for open voting in 2017 for his successor.   Moreover, as shown in Kiev, modern protests have remarkable staying power and can go on for months, including “pop-up” demonstrations in different locations that surprise police and create economic disruption.

The second alternative is more likely, and more consistent with China’s approach to handling smaller protests on the mainland. That would be to make some concessions, arrest protest leaders, but also discipline local authorities.  The leadership in Beijing could ask for Leung’s resignation, blaming him for protests getting out of hand.  They could then offer a compromise for the 2017 election, in which a committee picked by Beijing would select one or more candidates, but in which other candidates could emerge from primaries.  Beijing could then use its financial muscle to back its preferred candidate, and count on the popularly-selected candidates to split the opposition vote, making it very likely that Beijing’s preferred choice for Hong Kong’s leadership would prevail, while still honoring the principle of open and free elections.

The real risk is if Xi views the Hong Kong protests as a test of his authority, and deems any concession to be weakness. If Xi takes that course, and confronts the demonstrations head-on, he risks a situation spinning out of control, in which his hand is forced and violence results.  Such an outcome would be terrible for Hong Kong, undermining its role as an international financial center within China boasting English-style security of law and civil rights.  But it would also be terrible for China, undoing decades of efforts to present China as a beneficent, moral, Confucian authoritarian regime capable of raising its people in a peaceful and stable fashion.

Let us hope Xi and China’s leadership choose the path of mixed concessions and responses that avoid a violent clash. With so many violent fault-lines already in the world, and the global economy already weak, we can ill afford another.


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Words from God, Lessons for Man

This past week, I was visiting the United Kingdom (still United, thank goodness), to attend a conference at Cambridge University.

While there, I also took a trip north to York University to do some historical study.

While there, I stayed in the old walled city of York.  One evening, I attended an Evensong choir service at the magnificent York minster Cathedral.  There, dwarfed beneath the tallest tower and the widest nave of any medieval church in Europe, I listened to two very apt readings from scripture.

The first was from the book of Job, in which Job wails about the misery he is experiencing without reason.  Job tells us that God brings misery to the just and terrible losses to good men and women, because He can do so.  The second was from the gospels, detailing the crucifixion of Christ and his suffering — again the suffering of a good man who had done nothing to deserve such a fate.

So the world is full of suffering, even among good people, and God will do nothing to prevent it.  A horrible, depressing pair of readings, really.  And with the four horseman of the apocalypse loose in the world – Ebola (pestilence) in Africa, war in the Middle East, famine (from drought) again in the Sahel, and death visible as never before (live on YouTube–beheadings!) – they seemed all too apt.

Yet the message of these texts really is that it is up to us to deal with the terrible turns of fate that inevitably arise, and try to make something out of the challenge and suffering that redeems them.  Whether you believe that Christ actually came back, or that Job’s life really had a happy ending (some scholars believe that was tacked on like a change in editing in a Hollywood movie), what is clear is that we have to continue to make our own efforts to bring closer a world where suffering by good people will be rare or not occur.

In that context, President Obama’s speech today at the UN was extraordinary.  He did not shy away from calling to account all those who contribute to suffering by good people — whether a faceless virus that the US will try to fight, or radical clerics encouraging people to hate and kill, or states that invade their neighbors.  He didn’t sell the task short:  He took on the big historical issue, pointing out that only resolving Sunni-Shi’a conflicts, even if that takes a decade, is the only way to “stop the madness” of continued cycles of violence.

At the same time, Obama didn’t exaggerate the ability, role, or purity of the US.  He pointed to our own racial conflicts, and rightly said the only thing that separates us is that we have transparent media, laws that work, and hold leaders accountable in ways that allow us to gradually move closer to our ideals.

This is potentially a turning point for the Middle East and North Africa. If the various religious conflicts in the region can be diminished, it could be comparable to the ending of the Wars of Religion in Europe in the 17th century — which by the way kicked off the Enlightenment, scientific advance, religious pluralism and eventually the birth of the United States.  So this is a big, big goal, worth all the time and effort it will take to pursue.

Obama ended his speech by saying that peace begins close to home, in people’s neighborhoods, schools, and work.  This morning, driving to my Metro stop in suburban Virginia, I passed a school bus picking up children.  There was a tall blond mother waving to her daughter; alongside her were women in headscarves and robes waving to their sons and daughters — all of them wanted only one thing at that moment: for their children to have a good day.   America is a place where most children can go to school, and most of the time hope for a good day, regardless of their religion (to be sure, and sadly, for different racial and ethnic groups we can’t say that so often).  That should be the goal — a world where in all regions all mothers can send their children off to school, believing they will be safe, get a good education, and be able to plan for a better future.  When we get there, we should also have a lot less needless suffering by good people.


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More on who can or will fight ISIS

I weighed in this week on the need to have a truly broad coalition to fight ISIS in Politico.

The problem ahead is to build that coalition – and it won’t be quick or easy.

If we are going to war — and it seems we are, and I think we should — then building the right coalition is a major strategic prerequisite.  It may take time to win over recalcitrant countries, or convince them to see this is in their own interests.

And you can expect both Saudi Arabia and Iran to refuse to work on the same side of anything, and for everyone to accuse everyone else publicly of terrible things.

But in private, the danger should concentrate the minds of leaders in the middle East.  ISIS has now grown into an army of tens of thousands of fighters controlling millions of people.  This is a worse nightmare of regimes seeking to avoid Islamic extremist terrorists — including Egypt, Saudi Arabia, and Iran — than they could have imagined just six months ago.

So take some time President Obama, and work on convincing nations in the region to join against the common threat.  Racing to do something — bombing, arming Syrian forces — before you have in place a coalition to support what you do may risk defeat.  And that WOULD be worse than doing nothing at all




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Three cheers (almost) for Obama vs. ISIS

President Obama’s speech touched on all the right and necessary notes — as good a speech as he has given.

Obama clearly separated the terrorists behind ISIS from both the Muslim faith and the broader Muslim populations that it has attacked.  He laid out the threat and provided a plausible and multi-pronged strategy to defeat it.   Each prong of that strategy — Increased air attacks; a broad coalition with the local countries; starving ISIS of finances; and political solutions for Syria and Iraq — is sound and necessary.

But some things were definitely missing:  Who is our coalition partner for fighting in Syria?  Russia and Iran support Assad.  Turkey is conflicted because of its Kurdish problem — the non-radical opposition in Syria has a large Kurdish component that Turkey is reluctant to build up; will anyone else send troops into Syria to support the Syrian Free Army?   The SFA has shown it cannot compete with ISIS — giving it more weapons is just an indirect way of giving more weapons to ISIS (in the last week ISIS has been using US-built weapons that were earlier given to the SFA).  I think it will take NATO special forces to reinforce the SFA to make them effective.

And will we rely on Assad’s restraint to allow us to fly missions against ISIS within Syria?  Or will we degrade Assad’s air defenses?   Assad has every reason to stop the US, because he has been using ISIS to displace the moderate opposition.  Sooner or later we will have to deal with the Assad regime, and Obama’s mention of a “political solution” for Syria is distressingly vague.

One last thought; I sure hope we get a DIFFERENT campaign than we had in Yemen and Somalia.  Those countries are still total wrecks, half-overrun by terrorists and rebels after years of air attacks.  The attack against ISIS needs to be more successful than our campaigns against the Houthis or al-Shabab; otherwise we will be fighting an endless war with little progress.  In those countries the problem is precisely that we have not had reliable allies on the ground (except when Ethiopia fought  with us in Somalia, and that did bring a major success).  So we need to find or create them in Iraq and Syria, and fast.

But the good news is that the US has committed itself to fight ISIS, and has the reasonable beginnings of a strategy to pursue.  That is a lot for one night.

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The world spins on….

There is good news today on several fronts.  The Arab League, meeting in Cairo, has stated its intention to stop aid to extremists and cooperate in efforts to fight the Islamic State (ISIS).

Also this week, the European Central Bank borrowed a page from the Fed’s playbook, starting the mass buying of securities to fight deflation in the Eurozone.

Obama is set to announce a comprehensive strategy on ISIS — much better than “no strategy,” we hope.

And in the Ukraine, Russia’s President Putin and Ukraine’s President Poroshenko announced a cease-fire and potential peace agreement.

But at the end of the day, these kinds of good news are of the type “The roof is leaking, but the repairman says he is on the way…”    We don’t really know what the repairman will show up with, or if his efforts will do the job, or at what price.

In the Middle east, we are far from knowing whether Arab states will actively join the West in a coalition against ISIS, or what they will contribute.  Especially  critical is their following through on efforts to stop their private citizens from funding ISIS and other extremists; without starving the radicals of funds they will continue to fight on.

It also is not clear how deep the rot is in the Eurozone.  It was depressing that BOTH Italy and Germany had negative economic growth in the most recent quarter, and that France remains flat.  With the largest economies slowing or in reverse, how can the smaller ones hope to recover?  Draghi’s new playbook is an admission that the old one failed to do the job of reviving Europe’s economy.  A sick Europe doesn’t look particularly frightening to Putin or ISIS.

And for both ISIS and the Ukraine, we are a long way from saying the threat of violence and instability is over.  The war against ISIS is just beginning; and the evolution of Ukraine as a newly democratic state has just started.

So let’s hope the repairs on the world’s problems go well; right now we are waiting to see any hopeful results — and worried about the bill!

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