When I began this series a month ago, I pointed out that the most significant feature of the global system currently is the ongoing destabilization of the Eurasian land mass, from the Atlantic to the Pacific, from the Arctic to the Arabian Sea. One important aspect of this is that the destabilization isn’t, at this point, a single systemic crisis, but a series of relatively self-contained disorders. Thus the European, Russian and Middle Eastern systems have different dynamics, and while they touch on each other, they have not yet reached the point of having merged into a single crisis.
It is in this context that I turn to the question of East Asia. Asia is so vast and diverse and geographically fragmented that it is impossible to speak of Asia as a whole. East Asia is that part of Asia east of the Central Asian deserts that extend deep into China, and north of the Himalayas and hilly jungles east of the Himalayas. It consists of two main parts: One is the mainland, the region between the southern barriers and Siberia, which is Han China and its subordinate states, Tibet, Xinjiang, Inner Mongolia and Manchuria. The other is the East Asian archipelago, a string of islands and peninsulas stretching from the Aleutians to the Malay Peninsula-Java interface. Of particular importance to an East Asian net assessment are Taiwan, the Philippines and Japan. One additional feature is noteworthy: the Korean Peninsula, wedged between China and the archipelago. In the simplest terms, at this moment, the critical question is the dynamic in the northeast, involving China, Japan, the Koreas and, of course, the global power, the United States.
East Asia shares one major feature with the rest of Eurasia. It was part of World War II, which both transformed the region and defined it. In East Asia, World War II involved two issues: The first was Japan’s ability to access raw materials and manpower from the Asian mainland and the rest of the archipelago. The second was the military balance between the two major Pacific powers, Japan and the United States. The two issues became intertwined.
Economic Development in Japan and Korea
Japan is an island group almost completely bereft of raw materials. When European and American imperialism goaded it into becoming an industrial power, Japan immediately developed dependence on sources of raw materials (and on manpower to support its industrial expansion without immigration). Japan’s enormous success at industrializing in the early 20th century made Tokyo insecure about access to these resources and therefore aggressive in trying to secure them. The United States, historically concerned about maritime defense of its coasts, saw Japan’s increasing power and insecurity as a threat to U.S. control of the Pacific, which Washington saw as essential to protection of the West Coast.
The United States sought to limit Japan’s control and even access to necessary resources in order to control its behavior. The Japanese saw this as an American plan to permanently subordinate Japan to the United States. When the Germans overran France and the Netherlands, the status of Indochina and today’s Indonesia became murky, and Japan’s ability to secure the resources it historically obtained from these places was uncertain. Japan moved to secure these areas, but doing so required securing the Philippines lest the sea-lanes from the south remain insecure. The Philippines was an American protectorate, so securing it meant war with the United States. This dynamic led to Pearl Harbor, which ultimately led to the catastrophic defeat of Japan.
Two dimensions of this defeat were interesting: The first was that the Japanese industrial plant, and therefore the Japanese economy, was wrecked. The second was that in spite of defeat and disaster, Japanese society maintained its cohesion. In addition, the Americans needed Japan to revive its industry and use its social cohesion and human capital to produce equipment that the United States needed for the Korean War. The destruction of Japan’s industrial base, the maintenance of social cohesion, and the American need for Japanese production created a dynamic that has been crucial in shaping East Asia since 1945.
Historically, global capitalism has relied on certain regions providing inexpensive manufacturing. This produced low-wage, high-growth countries like the United States at the end of the 19th century. World War II reset the Japanese and German economies so that they could become low-wage, high-growth engines that were particularly efficient because of the social discipline in these countries.
Japan’s postwar recovery depended on the country playing this role, which it did for four decades. Such economies can both build an economic infrastructure and foster rising standards of living. However, a focus on growth rather than on rates of return on capital inevitably undermines profitability. In the end, growth can be maintained only by repressing wages or, when that is no longer viable, by slashing profit margins in order to compete with other low-wage countries. In due course, the country reaches a climax that results in a financial crisis, built around the fact that profitability has been sacrificed for growth. In Japan, this climax occurred between 1989 and 1991, between the last surge of Japanese exports, a crisis with the United States over Japanese export policy, and a banking crisis.
In the wake of its financial crisis, Japan became a much lower-growth country, less dependent on exports and more on domestic consumption. Moreover, to maintain social stability, Japan focused on maintaining full employment, not only by sacrificing profits but also by increasing debt. But another way to put this is that Japan managed the transition from a low-wage, high-growth country to a more stable economic platform without social unrest. Given their imperative, the Japanese did well.
South Korea also went through this process, reaching its climax in the 1997 East Asian financial crisis. Unlike Japan, it did experience social unrest, and unlike Japan it never managed a dramatic reduction of dependence on exports. It has straddled contradictions, but it has managed to maintain a relatively coherent social-economic policy that is still heavily export-oriented but less dependent on low wages.
China Enters the Next Economic Phase
China is the third wave of this process in East Asia. During World War II, China was both a victim and a battleground. In large part this was because of China’s fragmentation before the war. This fragmentation was caused by China’s forced integration into the international economic system. The vast majority of China’s population lives in the interior, where transport is difficult. Western interaction with the Chinese economy tended to focus on relations with coastal Chinese. This created a fundamental schism. The coastal cities were oriented toward the Western powers. Their economic interests aligned more with the Europeans’ and the Americans’ than with those of the Chinese central government. Thus, when the communists tried to spark an uprising in Shanghai in the 1920s, Mao Zedong failed and took the “Long March” into the interior, where he raised a peasant army. The split between coast and interior was institutionalized, and splits between coastal interests emerged as well. The result was a highly fragmented society at first exploited by Japanese interests, then caught between Japan and the United States.
After the war, Mao defeated the pro-Western factions, closed off China to most international trade, and sought to create national