Tom Arms’ World Review

While a Chinese balloon floated through American skies President Joe Biden stepped up to the podium to deliver his annual State of the Union Address to a joint session of Congress.

The events were notable for two reasons: They exposed an irrational Yellow Peril fear that more than matches the Red Scare of Cold War years and pointed to a possible new era of American isolationism.

Conspicuous by its absence from Biden’s address to the Joint Session of Congress was any mention of foreign policy. With war raging in Ukraine, Turkey and Syria devastated by earthquakes, South America in political turmoil and China expanding, spying and rattling sabres over Taiwan. one would have thought Biden would have focused more on the world situation.

Instead he spoke about domestic concerns. Biden’s success in creating jobs; protecting American industry and controlling inflation. With at least one eye focused on next year’s elections, he is stealing Republican clothes by shifting to a more isolationist stand.

In this respect, the president appears to be following rather than leading US public opinion. The latest polls show a significant drop in American support for the war in Ukraine. China, however, is a different matter. The Chinese spy/weather balloon (probably a bit of both) did secure a passing reference in the president’s speech; probably because of the hysteria it generated among the American public. The fact is that countries spy on each other. The US spies on China. China spies on the US. Russia spies on….

Most of the spying is unseen. Intelligence operatives skulking in the corridors of power or satellites in space. The balloon, however, could be seen as it floated from Alaska, over missile silos in Montana and North Dakota and then finally to the Atlantic where it was shot down by US fighter planes.

The much discussed Asian Pivot was this week back in the news. For a start, American troops are returning in big numbers to the Philippines. The reason? The threat of China and the need to maintain international access to the South China Sea and protect Taiwan.

With a brief wartime interregnum, the US had a major military presence in the Philippines from 1898 until 1992. Subic Bay and Clark Air Base were for many years America’s biggest overseas bases. The naval facilities at Subic covered as much land as Singapore and at the height of the Vietnam War 47 ships were based there. The neighbouring city of Olongapo was one big red light district.

For a long time, the US bases were sovereign American territory, a holdover from the days when the Philippines was an American colony. But in 1979, the US acceded to nationalist aspirations, ceded the land to the Manila and became rent-paying tenants. When the Filipinos increased the rent, they left. Vietnam and the Cold War was over. Relations with China were stable. Subic Bay was expensive and redundant.

The Americans are now returning, but not on the same terms as before. Since they left in 1992 the Filipino constitution has been rewritten to ban the permanent basing of foreign troops in the Philippines. So the new agreement means that US troops will be stationed on a “rotational basis.” This is probably legal semantics to circumvent the nationalists. American construction companies are already on site building new barracks, air strips and port facilities.

Further north, in Japan, the government of Fumio Kishido has decided to beef up national defences. The plan is to increase military spending over the next five years by 60 percent to the NATO target of two percent of GDP. Japan would then be the world’s third largest military.

The new Japanese military would assume responsibility for many of the regional Western defense duties. This delights Washington. America has 50,000-plus troops based in Japan. They are expensive to keep there and can be usefully deployed elsewhere.

It will, however, take at least ten years for the increased defense spending to have any real impact. Much of the money will need to be spent on military infrastructure including a bigger arms industry, new bases, roads, ships, recruitment and training and missile systems. These take time to build and so in the short and medium term, Japan will continue to be dependent on the US.

There is also the question of whether or not Kishida can push his defense spending programme through the Japanese Diet (parliament). There is fierce opposition from both the pacifist lobby and the fiscal conservatives. The pacifists are probably the lesser problem. Memories of World War Two and Japanese militarism are fading. Of greater concern are the fiscal conservatives. With public spending at 235 percent of GDP there is little room for borrowing to pay for more weaponry. So the plan is to raise the money with a wide range of tax increases. Unsurprisingly, this is proving unpopular, and a threat to Kishido’s premiership and his defense programme.

India too is increasing its defenses. The sub-continent nation this week announced it is putting a refitted Soviet-era aircraft carrier in the Indian Ocean. The INS Vikramaditya will soon be joined by a second aircraft carrier which means that the Indian navy will have two full battle groups in the Indian Ocean.

The Chinese have also been increasing their naval presence in the region. They will soon be deploying an aircraft carrier in the Indian Ocean and have naval facilities in Djibouti. They also have commercial port facilities in Pakistan, Sri Lanka, Bangladesh and Myanmar. All these countries have severe political and/or economic problems which China could use to convert the co mmercial facilities into military.

Military analysts are certain that any Sino-Indian war would be dominated by clashes on the land with Chinese troops attacking over the Himalayas. But the sub-continent’s communications with the rest of the world—especially Europe and America—are via the oceans and so its navy would play a vital role in keeping the sea lanes open.

India and Japan are China’s historic rivals in the region, and the countries are two of the four legs of the anti-Chinese Quad Alliance (the US and Australia are the other two). India is also this year set to overtake China a s the world ’s most populous country and its economy is growing . It should be helped by t his week’s budget which announced increased government spending on business-friendly infrastructure projects.

India, however, does not have the same historic and military ties to the US as the other members of the Quad. During the Cold War years it was the leader of the Non-Aligned Movement , but with a decided bent towards Moscow. The Soviets became India’s main weapons supplier and strong links were forged which continue to this day. Russia and India recently agreed a joint project to manufacture Kalashnikov rifles in India and Delhi has refused to join Western sanctions against Putin.

Pakistan was America’s major South Asian ally during the Cold War years. It countered the Soviet links to India; provided a diplomatic conduit to China and was the base of operations against the Soviet occupation of Afghanistan.

But relations soured when the Soviets left and the Taliban took over. Pakistan was a major supporter of the Islamic fundamentalists whose primary target shifted from Moscow to Washington. But Pakistan still needed American military and economic aid to counterbalance the threat from their traditional enemy India. So the Pakistani’s walked a swaying political tightrope.

Few were more adept at this then Pervez Musharraf who died this week. The army chief of staff turned president was expert at balancing between the demands of the Washington and the fundamentalist mullahs churning out West-hating jihadists from the madrassa of Pakistan. During the Clinton Administration, Musharraf persuaded the US President that he was the man to stand up to the Islamic fundamentalists– with American weapons if need be. Clinton agreed, provided the weapons and Musharraf gave them to the Taliban.

Musharraf ruled as a military dictator from 1998 to 2007. Among other actions, he repeatedly arrested Pakistan’s Supreme Court, suspended the constitution and declared a state of emergency. After finally agreeing to elections, he fled to London to avoid impeachment. He briefly returned but then fled again after being arrested for treason. He was tried in absentia and sentenced to death. The sentence was largely symbolic as by this time he was in Dubai dying of the rare disease of Amyloidosis. When Musharraf passed away aged 79, the Pakistani Parliament refused to say prayers on his behalf.

Musharraf’s foreign policy legacy is one of distrust and duplicitousness. Western countries are now worried about the close Afghan-Pakistani ties, Islamic fundamentalism in Pakistan and the links with Beijing. China has a commercial port at Gwadar on the Arabian Sea and holds an estimated 50 percent of Pakistan’s foreign debt. Recent floods have destroyed Pakistan’s agricultural industry and increased the likelihood of increased Chinese influence.

* Tom Arms is foreign editor of Liberal Democrat Voice and author of “The Encyclopaedia of the Cold War” and “America Made in Britain". To subscribe to his email alerts on world affairs click here.

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8 Comments

  • Steve Trevethan 11th Feb '23 - 4:43pm

    Might it be interesting to juxtapose the Japanese public spending of 235% of GDP with their inflation, apparently, of 4%?

  • Steve, Yes, inflation is low, but that is only part of a gloomy picture. It is generally accepted that the Japanese economy is not doing very well. It is very highly leveraged. There is little scope for borrowing to fund anything other than capex projects so the only alternative for the government to raise additional money for defense is through higher taxes, which– surprise, surprise– is what they are planning to do.

  • Steve Trevethan 12th Feb '23 - 8:49am

    Does Japan have a sovereign currency?

  • Peter Martin 12th Feb '23 - 10:36am

    @ Tom, @ Steve

    The conventional wisdom is that Japan’s National Debt level is less serious because it is largely owned by Japanese residents. The problem with this view is that Japanese people have votes and, theoretically, they could cash in their savings, which is essentially what the ND is, and spend them too quickly. Trying to stop them doing this could be politically difficult. Whereas if the holders of the debt were based overseas the Japanese government could negotiate with other governments and implement the necessary trade measures to slow down the spending to acceptable levels.

    This assumes there is actually a real danger of the holders of the debt wanting to do this. If there isn’t it doesn’t really matter how much they acquire. It doesn’t make the Japanese economy “overleveraged” or limit the scope for further “borrowing”. It’s not really “borrowing” in the sense that the Japanese government are actively going out to seek new loans from the IMF.

    In a free and democratic society, any government has to accommodate the saving desires of, primarily, its own population and others too if they wish to save in the currency of issue. When people want to save for whatever reason, they will want to accumulate financial assets which of course counts as government debt.

    What’s the alternative? Make everyone so poor that they cannot afford to save so much? That’s the only way austerity economics can “work” – if work is actually the right word in this context..

  • Monetary policy reacts to and is driven by the path of inflation/deflation. In a deflationary economic environment, utilising quantitative easing and/or monetising debt is an appropriate measure. Japan will end up having monetized, post facto, the large public deficits that it ran after the end of 1980s credit boom, and which usefully offset the impact of sustained private deleveraging in the 1990s and 2000s.
    In an inflationary economic environment the opposite holds. Quantitative tightening and increased interest rates to both dampen credit growth and encourage savings are the measures required to be employed initially to stabilise accelerating inflation.
    Japan’s long period of sustained deflation came in the wake of the bursting of the credit, real estate and stock market bubble at the end of the 1980s that has been working its way through the economy ever since.
    The UK could face a similar situation in the future, but at present our problem is stagflation – a combination of high inflation and low growth. That requires counter-inflationary monetary policy combined with targeted public and private investment in productivity enhancing infrastructure and renewable energy sources, coupled with tax and benefit driven stimulus at the lower-end of the income scale e.g a minimum income guarantee.

  • Steve Trevethan 12th Feb '23 - 2:30pm

    Might a most relevant factor in considerations of government debt be whether a government has a sovereign currency?
    Might it make national economic statements and thinking more accurate if rates of child hunger were included?
    It seems that child hunger in Japan is about the same or slightly better than ours.
    How can a nation’s economy be sound when about 30% of its children are permanently hungry?

  • Peter Martin 12th Feb '23 - 2:56pm

    @ Steve,

    Having its own currency is obviously gives any government increased economic scope in its macro economic policy. Supporters of the euro, which is not the currency of any one individual country, would probably question whether this was a good thing and suggest that a government with its own currency has too much ability to stuff things up completely.

    The probably have a point, but, we need to answer the question of whether we want a democratic government to be in charge or some unaccountable technocrat making arbitrary rules over what we can and cannot do.

    PS Can I humbly suggest that you don’t start every comment with the word ‘might’ ? 🙂

  • Peter Martin 12th Feb '23 - 3:18pm

    “The UK could face a similar situation in the future, but at present our problem is stagflation – a combination of high inflation and low growth. That requires counter-inflationary monetary policy…….”

    To some extent we are back to the 1970s when we also had an imported supply shock type of inflation problem. You’ve been very keen to quote Jim Callaghan who used the crisis to cast doubt on the previously dominant Keynesian thinking of the time. It led to the rise of so-called monetarism which has dictated that interest rates should be used to regulate the economy rather than fiscal measures.

    The present crisis shows that monetarism is not the solution. If there is a supply shock, prices will rise irrespectively of anyone’s economic preferences. Sure, any government can create mass unemployment using monetary measures, to make the working class bear the brunt of any counter-inflation policy, just as they can create mass unemployment using fiscal measures.

    Monetarism is simply getting the central bank to do government’s dirty work! So, not surprisingly, politicians do like the idea. We should, perhaps have another think about it all.

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