High Hopes—and High Anxiety

Sunday, October 30, 2005

For Americans, the Pacific Triangle of Korea, China, and Japan poses a striking paradox: arguably no region in the world excites more optimism and more anxiety. I’ll start with the anxiety, especially in the area of security.

Yes, we are militarily engaged in the Middle East, which has been the focus of our immediate worries since 9/11. We worry about the Islamist terrorists attacking us again, perhaps by smuggling weapons of mass destruction across our largely open borders. We worry about the Iranian nuclear program and whether it would supply arms for such an attack. We worry, of course, about our ongoing engagement in Iraq—and about peacefully helping other countries in the region undergo democratic transformation.

We worry about all this, and yet few Americans anticipate another state-to-state military confrontation between ourselves and any of the remaining states of the Middle East, much less elsewhere. One was enough. The circumstances were extraordinary.

Does this mean that North Korea gets a free pass? With its now-acknowledged nuclear devices and its medium- to long-range missiles developed, or under development, North Korea is a small-time version of the kind of threat that the United States and our friends have faced almost continually for the past 65 years: a totalitarian regime guilty of horrific atrocities against its own people, and a garrison state bent on aggression as a substitute for the legitimacy that it entirely lacks.

Some say North Korea’s purpose in developing nuclear weapons and long-range delivery systems is to compromise the credibility of the American nuclear umbrella protecting South Korea and Japan. Would the United States respond to an attack from the North on the South knowing—or believing—that its erratic ruler controls nuclear-tipped missiles that could hit California? Would having this capacity make it easier for North Korea to extort Japan?

Others fear North Korea’s apparent willingness to sell arms to any and all buyers—the more anti-American the better. Will a North Korean nuclear device find its way onto an Al Qaeda–chartered ship bound for Los Angeles harbor? But missiles can be re-targeted with a few keystrokes and rogue ships can dock in any port—which is why Americans believe that North Korea is not just our problem but one on which many nations must work together to solve.

China’s role in regional security is obviously disquieting for many Americans. Not long ago, U.S. Defense Secretary Donald Rumsfeld expressed concerns about China’s defense spending, and he is not alone.

In recent months one prominent U.S. magazine ran a cover story warning that China is building a blue water navy specifically to challenge the U.S. Navy in the western Pacific. Other writers have suggested that North Korea is actually acting in accord with China’s wishes. They say North Korea is China’s surrogate in confronting the United States in the region. Still others see Chinese demands that Japan issue yet more apologies for the crimes of a regime driven to extinction six decades ago. Others consider officially inspired riots against Japanese interests in China as further signs of an unsettling side to China’s spectacular development.

How do we quell the anxiety? I believe it is in the interest of all our countries to forge ahead in a positive spirit of relationship building, both bilaterally and communally. We must identify continually what makes the community of our nations—and therefore each country individually—better off. Our individual well-being needs to be more interdependent, and incentives to build interdependencies and better relations need to be stressed. Can one ever imagine the United States going to war with Great Britain?

My sense is that Americans feel that if China were to step forward with clear, assertive, and effective diplomacy, including bringing to bear its considerable economic leverage to put the North Korean nuclear issue to rest, it would be seen in Washington, Tokyo, Seoul, and throughout the world in the same way that China’s petition to join the World Trade Organization was seen. It would be taken as a clear sign that China is determined to become a constructive player with respect to matters of international security, just as its joining the WTO was seen on matters of international trade. It would lead to a new birth of trust and confidence.

In a recent article, Richard Haass, president of the New York–based Council on Foreign Relations, noted that a strong China could well prove a good thing for the United States and the region: “America needs other countries to be strong if it is to have the partners it needs to meet the many challenges posed by globalization.” Among the challenges he listed were the spread of nuclear weapons, terrorism, infectious diseases, and drugs.

If only this comes to pass. We Americans may worry that China sees itself as a rival, but we hope that China will instead prove a partner for a prosperous, peaceful, and increasingly free and democratic region.

China today is not itself free and democratic. But its evolution is fluid. Americans look at China and see increasingly competitive local elections—in 300,000 villages this year, according to a recent New York Times report. We read about increasing respect for contracts, rights of property, and other economic rights. We see members of once-oppressed sectors of society inducted into the ruling party, and we note talk of the ruling party ceding more authority to elected bodies at the provincial and national levels. We see that, years after the handover, a large measure of political freedom has been conserved in Hong Kong.

We see all this, and despite significant areas of concern, particularly regarding security issues, we wonder if we are witnessing a democratic transformation similar to that which we saw (under, admittedly, very different circumstances) in the late 1940s and early 1950s in Japan and (under more nearly analogous conditions) in the late 1980s and early 1990s in South Korea. In those cases, from supposedly inhospitable soil, societies have emerged that are at least as democratic and free as the nations of contemporary Europe, where there is now talk of a democracy deficit, and of persistent economic stagnation caused by the growth of government and declining economic freedom and burdensome regulation.

I believe the paradox of high hopes and high anxiety is rooted in prosperity, namely, economic development and growth. Confusion and conflict are portrayed and emphasized by our press; we hear little about the positive developments happening in Asia. In all the economies of this region, and in their interactions with the U.S. economy, Americans have considerable cause not just for hope but also for celebration.

China’s stupendous economic emergence (unlike anything the world has seen since the arrival of the United States on the world’s commercial and industrial stage more than a century ago), Japan’s reviving growth and fundamental economic strength, South Korea’s ongoing prosperity and vigor—these triumphs are a product of the rise of economic and, yes, political freedom over the past five decades and should be celebrated in every American discussion of Asia and the Asian economies.

Yet many are not celebrating. For example, many of my fellow Americans bemoan the U.S. trade deficit—particularly the deficit with China, South Korea, and Japan. We are told of the impending gloom and doom that will soon result from the “zero savings rate” of American households. This lament reflects, I believe, confusion about what is actually happening in the U.S. economy. Steve Forbes spelled this out in a recent column: “Take [America’s] financial household assets (not counting houses and other tangible assets such as automobiles and jewelry), and subtract liabilities such as mortgages and credit card debt, and American consumers’ total financial net worth comes to an eye popping $26.1 trillion.” Forbes added, “[America’s] per capita liquidity exceeds that of Japan,” clearly intended as a compliment to Japan. Forbes’s point is that our official savings rate statistics badly distort reality, an observation with which I concur. Further, the fact that our trading partners choose to hold American assets rather than to consume goods and services should not be of concern to Americans.

If we adopt a goal to seek widespread economic growth involving partnerships that mutually benefit from such prescient policies, we should endorse less protection and freer trade. We should model international trade after intranational trade: for example, America’s interstate trade, where hardly any barriers are present and the whole nation benefits. No one cares if New York runs a “trade deficit” with California, and no one should care if the United States runs one with China, South Korea, or Japan. No one cares if New Yorkers own property in California, and no one should care if such ownership is exercised by the Japanese.

The ironclad lesson to be drawn from three centuries of robust and growing global trade is that free and open trade is better for everyone, strengthens international partnerships, and intertwines political relationships while widely increasing prosperity—particularly for everyone who is prepared to adapt to its comparative advantage.

Entrepreneurship is both an indicator and driver of adaptation, and entrepreneurship runs much stronger and deeper in our countries than in most others, particularly more than in the countries of Europe. All three nations of the Pacific Triangle share a fundamental quality with the United States: an innovative, entrepreneurial imagination. In Japan, for example, the entrepreneurs of high-tech “Bit Valley” are representative of a strong strain of venturing innovation that runs through Japanese history: from the Tokugawa period—during which commodity exchanges and retail, textile, and financial services were created—to the Meiji Restoration, to the post–World War II rise of such companies as Matsushita, Honda, and many others.

With broadband capacity becoming a new indicator of economic adaptability, Japan, South Korea, and China are global leaders by all measures. South Korea has emerged as the world’s most wired nation, with 40 times more broadband capacity per capita than the United States! Japan is another leader, with 20 times U.S. per capita bandwidth. And for its sheer number of Internet connections, China also leads America.

As the globe moves from the industrial age to the information age, the greatest economic resource any country can have is an educated citizenry that has the freedom to pursue and achieve its dreams. It beckons for free markets, unburdened with excessive regulation. It means limited government, rule by consent of the governed, and a reasonable rule of law. It means an international order of peaceful cooperation. It means open international markets. And hopefully it means interdependent relationships that reduce the probability of conflict.

If our countries are true to this spirit of free and open inquiry with the purpose of mutual improvement, the century ahead holds enormous promise, for ourselves, for our children, for our countries—and indeed, through our example and our contribution, for all of humanity.