Mon, Aug 15, 2011 page8

• Taiwan must find political space

  • By Ian Inkster
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  Where is the global gridlock? In Chinese politics or in US society? What is most essential right now, a major political change toward liberalism within China led by the rising middle class, or a social revolution led by the public sector in the US?

  While people in the US continue to ignore China whenever they can, they also carp continuously about the inability of weak governance in Europe to prevent anything but the hardest of immediate landings across the Atlantic, while providing a misleading chorus that drowns out the major threnody of the US’ own economic mismanagement and hesitancy of governance.

  In contrast, Chinese economic growth at the time of writing leads the world and unlike rapid growth in other developing countries, such as those of its fellow BRIC nations (Brazil, Russia, India and China) or more developed economies such as France, Britain or even Germany, remains overwhelmingly a result of very fast growth in real industrial production.

  At present, the impact of US debt dominates the global scene. If we agree that the current federal debt of US$10 trillion held by the US public accounts for a mere slice of a much larger structural problem that has generated the entire fiscal gap, amounting perhaps to 20 times that figure, then it appears that the long-term future of the international political economy hangs on political decisions (the debt ceiling) and public sector expenditure and revenue structure (the total liabilities of the entire economy) within the US system. If the worker-beneficiary transition is the real driver of the US economy, then it might be argued that political economy in East Asia over the long-term is being determined by social policy (or lack of it) in the US.

  Yet the more common assumption among Western commentators, economists and historians is that the political machinations of communism in China is the limiting factor in the global political economy, as in the major contribution of Will Hutton in 2007, The Writing on the Wall. In that work Hutton called for a “Chinese enlightenment,” a sweeping combination of cultural and political change in China that must be supported in the West for the good of all.

  Clearly, commentators such as Hutton were somewhat premature in their forecast of the imminent collapse of the Chinese economy as the principal cause of general global economic downturn. As we have seen with the prolonged financial recession and as we now see with the US debt crisis, the danger comes from the West not from the East.

  For Taiwanese, perhaps an even more interesting feature is the absence of debate on defense expenditure. Whether Republicans who advocate spending cuts arguing with Democrats who support tax increases, or those who argue with neo--Keynesian advocates about the more risky tactic of expanding public expenditure as a means of creating growth and employment and thus the size of the tax base, few influential Americans are seriously advocating cuts in defense expenditure. Many more are considering innovative ways of saving or diffusing expenditures on social security, Medicare and other health or welfare provisions. Most of the US and European journals and magazines are not indexing or listing China or defense as significant issues.

  In many ways this is good news for Taiwan. At present, a low profile might be best. Is there any evidence of severe downward pressure on US defense spending as a result of the crisis? For the next financial year, total direct defense spending in the US is budgeted at US$881 billion and US President Barack Obama’s economic stimulus plans have not so far threatened military expenditure. In fact, federal spending is even greater than this if we take into full account the continual servicing of past military spending.

  Even at the height the -recession in 2009, total military and nuclear weapon expenditure remained at more than 50 percent of all US federal spending and was about equal to the total military expenditure of the next 15 nations combined, including the BRIC group, Britain and Germany. Recessions do not destroy the military.

  China, ranked No. 2 in world military expenditure in 2008, and both China and the US increased expenditure in 2009 and continue to do so despite low growth (now known to be lower than previously calculated) and real pressure on public funds in the US, but complementary to high growth, a large investment ratio, and a great demand for imported natural resources in China.

  There may be some element of “military Keynesianism” in the US pattern, but it is much more likely that military expenditure reflects global strategic choices that are entrenched within US political culture.

  In other words, the US — despite potentially destabilizing financial crises — is set on an economic trajectory carved out of a deep-seated populism that will not be easily shifted, whichever party is in power or whatever president sits in Washington.

  The US is simply unique in its conjunction — low growth and productivity, high unemployment and political distress on one hand; massive hard and soft power, huge social expenditures, growing military commitments and strategies on the other.

  However, we should also note that China benefits economically and commercially from this, with huge opportunities for outward investment, not only in the US, but in a great range of global resources — China is natural resource greedy and financial resource rich. Last year the US invested only 16 percent of its national income, the figure for China was 49 percent. So we might reasonably argue that just as the US remains committed to large defense expenditures so China becomes more involved in the complexities of financial diplomacy and raw materials security issues.

  So, back to the beginning — where is the gridlock and why does it matter in Taiwan? The gridlock lies in both of the great systems that dominate the world. Chinese political ideology certainly holds back more innovative economic growth trajectories, and this could reach a crisis point for China and global political economy over the next 10 years. More imminently, US society, one of extreme and increasing entitlement economics embedded in an aging population, inhibits the widespread applications of its own fantastic creativity and energy.

  It is exactly that sluggishness and conservatism that means that no political party or presidential candidate in the US can gainsay the armed forces and the role they play as big brother to Taiwan’s global status — since the turn of this century US military expenditure has grown by well over US$300 billion and Chinese military expenditure by about US$82 billion despite the contrasting economic growth rates. The US recession saw an increase in military sales deals with other countries, including Taiwan. At the same time, and into the future, China’s enormous gains from the financial murk of the US and Europe is likely to mean that Taiwan will move increasingly away from its center-of-stage position in Chinese foreign affairs.

  As men and women who never knew Mao Zedong (毛澤東) take charge in Beijing they will find themselves increasingly embroiled in managing the new diplomacy of soft power and commercial connectivity. Who knows, in China flexibility might even become contagious. This may not be an optimal or proper equilibrium for Taiwan, but it is one that provides a window of opportunity through which the nation’s own political democracy could yet mature and broaden in scope.

  Ian Inkster is a professor of international history at the UK’s Nottingham Trent University, a professor of global history at Wenzao Ursuline College in Kaohsiung and editor of History of Technology.
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