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Sol Sanders Archive
Friday, August 17, 2007

Japan, India and the new Asian balance of power

Back in The Good Old Days when the American overseas aid program was riding the high tide of rebuilding Western Europe… Back in The Good Old Days when the aid bureaucracy was not a retirement program for Peace Corpsnicks…. Back in The Good Old Days when the State Department had a serious economic staff to counter the weight of the Wall Street lobby at the Treasury…Well, you get the picture.

Back then the U.S. Agency for Development .[AID], on the aftermath of the Communist victory in China’s civil war, tried to tie a renascent Japanese industrial strength [after Washington had made a 180 degree turn in Occupation policy with the outbreak of the Korean War] to the raw materials of India. A regional fund was set up to fund “the technical assistance” and capital for programs in the mutual interest of both countries.

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Alas! Here as in so many logical and intuitively simple and beneficial proposals, it came a cropper. On the Indian side, the ear of Prime Minister Jawaharlal Nehru was caught by the Soviet-style planners to hold that vast country hostage for 35 years in economic stagnation. P.C. Mahalanobis, a spinmeister as only Bengalis can be, persuaded the Bloomsbury alumnus. “Panditji, we have the people and we have the resources; all we have to do is put them together,” was the siren song. The American aid program gave Mahalanobis an early computer and he was off, grinding out statistics from which plans tumbled from the top down. Never mind that no one really had more than a notional idea what happened economically in India’s then 650 thousand [another number picked from the blue] villages, whether they were even monetized. Classic “Garbage in, garbage out” before that slogan was even formulated. Through the help of the Soviets, every Communist and socialist humbug willing to make the pilgrimage was recruited to put together The Plan. [Some were cynics; Oskar Ryszard Lange, a Warsaw economist, exiled to the University of Chicago during the Nazi-Soviet Occupations, but back in Communist Poland was quoted saying that the Communists had wiped out capitalism, but now had to get rid of feudalism; Gunnar Myrdahl, when I teased him for opposing Indian “socialism” – privately, he was not to do so publicly for another couple of decades – and advocating “free enterprise, told me: “Brother, I am in favor all kinds of enterprise as long as it is enterprising”, and Charles Betellheim, a French econometrician could turn out statistics as bogus as Malahalanobis’ computer, etc., etc., ad nauseuam]

Meanwhile, the Japanese political clerks who had been handmaidens to the military during The China Incident and The Great Pacific War, back in charge, picked up their economy where Japan had left off before the 1936 coup. They found the Indians just too difficult to deal with, and, besides, there was the pull to Southeast Asia which haunts the Japanese political soul like the drang nacht osten does for Germans with their [often fatal] fascination for Russia. Indonesia got more than half of all the Japanese Official Development Aid [ODA] through the 33 years of the Soeharto dictatorship; Mrs. Soeharto’s deals were made in heaven for the corrupt Japanese trading companies and their henchmen in the international aid operations. Then with the opening of China to Deng Xiaoping’s four modernizations, Japan lunged for its old dream on the China Mainland.

But history is filled with unforeseen events – and consequences!.

Bang! came the implosion of the Soviet Union in the early 1990s and as devout a soldier of the Indian planning church as the present Indian Prime Minister Manmohan Singh suddenly discovered markets. [Even the pro-Chinese Bengali wing [Communsit Party-Marxist] supports the Singh’s central government liberalization strategy if yapping at his heels on tactics. At the same time they try to seduce foreign investors to come to Kolkata [Calcutta] and Bengal; Mahalanobis’ ashes must be caught in a whirlwind at the thought! Significantly, Abe is scheduled to go to Bengal as he leaves the country, the old home of pro-Japanese Indian nationalism.]

Bang! came the collapse of The Japanese Bubble Economy. For more than a decade, the crème de la crème of Japanese universities in the finance ministry knew that as large [second in the world] and as complex [largest number of patents in 2006] as Japan’s could not be masterminded, even by geniuses. But how to give up their role as the most powerful bureaucracy in the world [even including the Enarchs in France]? The 1997-98 East Asia Financial Crisis decided it for them, introducing a decade of stagnation while Japan began to try to make a second Meiji Revolution and join the real world of globalization. [The extent of which, for example, permits a French Brazilian Lebanese to take over and salvage a bankrupt industrial crown jewel, Nissan.].

So, that is where we are now.

Washington, again, would like nothing better than to see its keystone of Asian security, Japan, rapidly becoming one of the world’s most important military powers, join with “the world’s largest democracy” to form an economic, political and strategic alliance. Both are increasingly meshed into American dynamics: Japan’s security arrangements dating back to the Korean War are now refitted into a genuinely mutually beneficial defense treaty, whatever the ghost of Japan’s profound pacifism after its World War II catastrophe. Prime Minister Shinto Abe, in some difficulty and perhaps on his way out, has endorsed if not speeded up that integration accelerated by his predecessor, Junichiro Koizumi. It seems highly unlikely given the growing threat of Chinese military expansion and the still unresolved North Korean nuclear weapons imbroglio that a Japanese prime minister in the near future would take a different course.

And in New Delhi’s West Bloc, while the nostalgia for the Soviet/Russian alliance lingers like the smell of expectorated pan in Ministry of External Affairs, the Indian defense establishment is facing up to the growing inability of the Russians to supply state of the art weapons. Thus Israel is rapidly becoming a major Indian weapons and military technology partner. The 123 Proposal – to grant open sesame to U.S. nuclear power technology and greater access to other now restricted tech transfers – is awaiting final approval. That, of course, still hangs in the balance with even the elliptical language which attempted to defuse the basic issues – Indian diversion of spent nuclear fuel to its weapons program, continued nuclear bomb testing, and the possibility of transfers of technology to third parties, notably, Iran – awaiting further scrutiny of the U.S. Congress, and attacks from the Indian Communists. The latter’s dog in the manger tactics include supporting the present Indian coalition outside the government for its parliamentary majority and pursuing “capitalist” policies in Bengal which it rejects at the Center.

On the Japanese side, Japan, Inc. [or what is left of it in the new post-Bubble world] is making a big India push. Abe, accompanied by a hundred executives of Japan’s most important companies, will try to reinforce the long delayed Japanese-Indian economic partnership during a visit in late August. The Japanese are promising to back a new Delhi-Mumbai industrial corridor [DMIC] with a $250 million contribution to the infrastructure of the 800-mile-long route and industrial zone. All Nippon Airways has a finger to the wind with a new daily all business class flight from Tokyo to Mumbai [Bombay].

Japan-India economic relations have a long way to go, of course. Japan's trade with India came to $6.7 billion [0.6% of total trade] in 2005 - - $3.5 billion in exports and $3.2 billion in imports, one-thirtieth of its trade with China. Meanwhile, Japanese investment in China in 2005 came to $6.58 billion [14.5% of total outward direct investment]. The reasons, of course, are not just economic but cultural – Japan shares a long and very close history with China – and, despite Beijing propaganda, China looks to the Japanese model and of modernization first when it considers its growing problems.

But things are changing and rapidly: Japan's foreign direct investment to India will amount to more than $1.8 billion over 3 years from 2005 to 2007. With growing problems in China – not the least the memory of anti-Japanese riots only two years ago and a Beijing always ready to wave the bloody flag over Tokyo’s World War II atroicities as a diversion in economic negotiations – the Japanese obviously need to cover their bets in their search for new markets and cheap overseas outsourcing. Indian labor costs could be a crucial differentiator with unskilled labor costing 20 cents an hour in India as against 40 cents in China, even lower than Thailand and other ASEAN countries where the Japanese are heavy investors. The English-speaking Indian information software industry has flesh and bone links to Silicon Valley, in a whole field where the Japanese are still playing catch-up.

The Japanese with the Indians’ help are attempting, too, a political and cultural offensive. Abe has repeatedly called for a “strategic dialogue with U.S., India, Australia and EU countries” – in that order -- that “share common values”. He will have with him 12 vice-chancellors of top Japanese universities to set up links with Indian institutions. In a move perhaps only historians with long memories can appreciate, Abe intends to visit with Radhabinod Pal, whose father was one of the 11-judges of the postwar Tokyo Allied War Crimes Tribunal but the only dissent at the court’s verdict. The elder Pal joined a distinguished if small group of world jurists at the time who charged the tribunal was judgment of the vanquished by the victors even though there was overwhelming evidence of atrocities. He is revered by Japanese nationalists, of whom Abe must be counted along with his grandfather and granduncle, Prime Minister Nobusuke Kish and Eisaku Sato.

Meanwhile, a lobby has been formed in the Japanese Diet of some 20 of Abe’s ruling Liberal Democratic Party lawmakers who see China as a threat to push closer ties with India [as well as Taiwan]. Abe will be asked to speak to the Indian parliament, an honor not accorded either the President George W. Bush nor Chinese President Hu Jintao on their visits to the country last year.

Everyone all around will proclaim, of course, that the new effort to tie the Japanese and Indians together, reinforcing their links with the Americans at the same time, is not directed at anyone, certainly not the Chinese still looking down on the Indians from an increasingly militarized Tibet.

But The Hindustan Times, often a spokesman for India’s hawks, admits the not very secret agenda:

“In this distinct strategic triangle, if China were A, and India and Japan were B and C, the sum of B plus C will always be greater than A. That is why India and Japan are bound to become close strategic buddies, even as they attempt to ensure that their relations with Beijing do not sour. But while Japan seeks more space on the world stage, only to be hemmed in by its security dependency on Washington, India fancies closer ties with the US as a way to playing a bigger global role.”

All the three Japanese service chiefs visited India last year. With Japan dispatching more naval ships to the Indian Ocean in support of the U.S.’ “Operation Enduring Freedom’, India and Japan are now able to conduct naval exercises on short notice. After last year’s joint exercises, Indian naval ships visited Japan’s Yokosuka base, the all-important pivot for U.S. operations in the Western Pacific, less than four months ago holding trilateral maneuvers with Japanese and U.S. forces.

Abe is, of course, balancing off his meetings in New Delhi at the same time: while he is in New Delhi, Defense Minister Yuriko Koike will fly to Pakistan as "a special envoy of the prime minister," then go to New Delhi in Abe’s wake. That, as much as it is possible, is keeping in mind the fact that troubled Pakistan, India’s nemesis, is key to the war on Islamofascists, not a direct threat to Japan for the most part, but certainly of deep concern to the U.S.

In a world of instantaneous communication, ICBM missiles, and one superpower, the old balance of power thesis with which Britain attempted to maintain it security and the world order in the 19th century may appear outdated. And, of course, that strategy ended in the disaster of two civil wars almost destroying European civilization. Yet, with the increasing power and unpredictability of a rising China with its ally, the relatively minor but dangerous rogue state, North Korea, Washington has little choice in view of the enormous demands of the Mideast crisis on its resources but to play the game. And Tokyo and New Delhi seem willing – at least up to a point.


Sol W. Sanders, (solsanders@cox.net), is an Asian specialist with more than 25 years in the region, and a former correspondent for Business Week, U.S. News & World Report and United Press International. He writes weekly for World Tribune.com and East-Asia-Intel.com.


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