Asia Policy Journal No. 11 (January 2011)

asia policy number 11 • january 2011 Contents u special essay u rethinking the beijing consensus. . . . . . . . . ...

Author: National Bureau of Asian Research

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asia policy number 11 • january 2011

Contents u

special essay

u

rethinking the beijing consensus. . . . . . . . . . . . . . . . . . . . 1 Yasheng Huang This essay examines whether or not there is a policy shift underway in China from free markets toward state capitalism. u

articles

u

complex patchworks: u.s. alliances as part of asia’s regional architecture . . . . . . . . . . . .

27

Victor D. Cha This article examines the significant role of existing U.S. bilateral alliances in the complex interplay of emerging regional security architectures in Asia.

asia’s complex strategic environment: nuclear multipolarity and other dangers . . . . . . . . . . 51 Christopher P. Twomey This article evaluates the implications of nuclear multipolarity and strategic complexity in Asia.

the asian monetary fund reborn? implications of chiang mai initiative multilateralization . . . . . . . . . . . 79 William W. Grimes This article analyzes the current implications and likely future course of Chiang Mai Initiative Multilateralization, which some observers have argued is a major step toward the creation of an Asian monetary fund that would be fully autonomous from the IMF.

the militant challenge in pakistan . . . . . . . . . . . . . . . 105 C. Christine Fair This article examines Pakistan’s use of asymmetric warfare as an instrument of foreign policy toward India since 1947 and in Afghanistan since the 1960s. u

book review section

u

review essay when sleeping giants awaken: china and india in the new world order. . . . . . . . . . . . 139 Sourabh Gupta A review of • Pranab Bardhan, Awakening Giants, Feet of Clay: Assessing the Economic Rise of China and India

• Wendy Dobson, Gravity Shift: How Asia’s New Economic Powerhouses Will Shape the 21st Century

• Prem Shankar Jha, Crouching Dragon, Hidden Tiger: Can China and India Dominate the West?

• Shalendra D. Sharma, China and India in the Age of Globalization

reviews how development economics can become 70% more effective . . . . . . . . . . . . . . . . . . . 148 Robert H. Wade A review of • Terutomo Ozawa, The Rise of Asia: The “Flying-Geese” Theory of Tandem Growth and Regional Agglomeration

frictions and outcomes between the state and civil society in locating “public bads” . . . . . . . . . . . . . . . . . 152 Mike Danaher A review of • Daniel P. Aldrich, Site Fights: Divisive Facilities and Civil Society in Japan and the West

rethinking china’s strategy in asia and beyond: can we all get it right? . . . . . . . . . . . . . . . . . . . . . . . . . 156 Andrew Scobell A review of • Gilbert Rozman, Chinese Strategic Thought toward Asia

will china eat our lunch? . . . . . . . . . . . . . . . . . . . . . . . 160 Richard P. Appelbaum A review of • Denis Fred Simon and Cong Cao, China’s Emerging Technological Edge: Assessing the Role of High-End Talent

university autonomy and the state: the official story . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165 Yi Shang A review of • Su-Yan Pan, University Autonomy, the State, and Social Change in China

crossing the international relations–comparative politics divide in analyzing cross-strait relations. . .169 Douglas Fuller A review of • Scott L. Kastner, Political Conflict and Economic Interdependence Across the Taiwan Strait and Beyond

comparative study of politics in pakistan and bangladesh: an insightful analysis . . . . . . . . . . . . . . . 174 Nadeem Malik A review of • William B. Milam, Bangladesh and Pakistan: Flirting with Failure in South Asia

why the next asian tiger remains a cub . . . . . . . . . . . . 178 Alexander L. Vuving A review of • Lan Nguyen, Guerilla Capitalism: The State in the Market in Vietnam

asia policy

• http://asiapolicy.nbr.org •

a peer-reviewed journal devoted to bridging the gap between academic research and policymaking on issues related to the Asia-Pacific

guidelines for submission Asia Policy is a peer-reviewed journal devoted to bridging the gap between academic research and policymaking on issues related to the Asia-Pacific. The journal publishes, in descending order of emphasis, three types of peer-review articles: •

social scientific research that both use social science theories, concepts, and approaches and draw clear and concise policy implications on issues of import to the region

•

research notes that present, in a well-organized format, new, important, and even exploratory conceptual frameworks or descriptive information of use to policymakers, especially on topics that have traditionally been underrepresented in the literature

•

policy analyses that present original, persuasive, analytically rigorous, and clear and concise research-based argumentation on crucial policy matters

I. General Requirements Asia Policy welcomes the submission of policy-related research on important issues in the AsiaPacific. Authors or editors interested in having a book considered for review should submit a copy of the book to the editor. Submissions may be sent to <[email protected]>. Asia Policy requires that all submitted manuscripts have not been previously published in any form, either in part or in whole, and are not currently being considered for use by any other organization. All prior use of arguments found in the manuscript—whether for publication in English or any other language—must be properly footnoted at the time of submission. The author should also spell out the background of the manuscript upon submission of the first draft, including if the paper or any component parts have been presented at any conferences or have appeared online in any form.

II. Manuscript Format • The manuscript should be in Times New Roman 12-point font and 1.5 spacing and should not exceed 12,000 words (including Title Page, Executive Summary, notes, tables, and text).

• In order to be easily accessible to policymakers, each manuscript must include 1) a Title Page, 2) a one-page Executive Summary, and 3) a one- to two-page Introduction according to the requirements listed below. 1) The Title Page should include only the article title, author’s name, a list of five keywords, and a biographical statement (of 50 words or less) that can include such information as current institutional affiliation, positions held, area of specialization, major publications, and research in-progress, and should end with the author’s e-mail address. 2) In order to help bridge the policy and academic communities, research published by NBR must include a standardized one-page Executive Summary of approximately 350 words that lists: - Article Topic [preferably no longer than 1–2 lines] - Main Argument - Policy Implications [preferably in the form of bulleted “if … then …” statements that spell out the benefits or problems associated with specific policy options] A sample Executive Summary is provided in Section III below.

3) The Introduction section of all NBR publications should not exceed two pages in length and should spell out in plain as language as possible: - the specific research question that the paper seeks to answer - the policy importance of the research question - the main argument/findings of the paper

In addition, the concluding paragraph of the introduction must include a “road map” that highlights the organization of the paper via the following format: This essay is divided into four sections: pp. 6–7 outline the domestic energy roots of China’s go-out strategy • pp. 7–12 examine the “mercantilist” character of the go-out strategy and suggests that it is much less state-directed than generally assumed by U.S. policymakers • pp. 12–18 assess the validity of the concerns that have emerged among U.S. policymakers regarding the impact of China’s global energy search on vital U.S. interests • pp. 18–20 propose specific U.S. policy initiatives that could facilitate more constructive dialogue between the United States and China on energy security issues •

• Do not include tables and figures in the introduction. • Tables and figures should be typed on separate sheets (preferably placed one per page at the end of the document), with “[Insert Table X about here]” inserted in the text at the appropriate locations. All figures and maps should be provided in electronic form. • Notes should be placed at the bottom of the page (footnotes) or at the end of the document (endnotes); parenthetical notation is not accepted. Examples of proper note form are provided in Section IV. • For matters of style (including footnotes), NBR largely follows the 15th edition of The Chicago Manual of Style (Chicago: University of Chicago Press, 2003). • For spelling, NBR mainly follows Webster’s Third New International Dictionary. • For spelling of computer-related terms not available in Webster’s, a good reference source is the Free Online Dictionary of Computing (FOLDOC), http://foldoc.doc.ic.ac.uk/foldoc/index.html. • A good supplemental style guide is Bryan A. Garner, Garner’s Modern American Usage (New York and Oxford: Oxford University Press, 2003).

III. Executive Summary Sample

Executive Summary [total length not to exceed 350 words]

executive summary This study presents a new framework to exposit the connections between Pakistan’s religious schools (madaris) and militancy in Pakistan and beyond.

main argument

Article Topic [preferably

longer than 1–2 Contrary to popular belief, madrasah students are not allno poor and madaris are lines] not categorically tied to militancy. Madaris—along with mosques and public Main Argument [preferably proselytizing events (tabligh)—are, however, “gathering” places where militant no longer than 6–10 lines] groups, religious ideologues, and potential recruits can interact. Religious leaders of some madaris issue edicts (fatwas) that justify the use of violence, and a small number of madaris are used for militant training. Limited evidence suggests that madrasah students more strongly support jihad than those of public or private schools—but public school students, who comprise 70% of Pakistan’s enrolled students, also have high levels of support for violence.

policy implications • With respect to intelligence collection and analysis, asking whether or not madaris produce militants is the wrong question. Querying the educational and other characteristics of key tanzeem (militant group) operatives, while keeping in mind the impacts of group efforts to select for desired skills and capabilities, will inform counterterrorism efforts more effectively. • A number of implications are pertinent to U.S. policy toward Pakistan and the threat posed by Pakistan-based terrorism to U.S. interests: Policy Implications [preferably in the - The U.S. can act unilaterally against known militant madaris only at great form of bulleted “if … then …” statements cost to other objectives (e.g., Musharraf ’s safety); Pakistan will cooperate that spell out the benefits or problems in this regard only with varying degrees of commitment, limited capability, associated with specific policy options and diminished respect for rule of law and human rights. rather than stating that the government - Pakistan’s entire education system requires comprehensive reform; “should” take a certain action] such reform may be beyond Pakistan’s capability and there may be only limited scope for the United States to help. Increased participation by multinational organizations and demand for accountability by all partners are required to complete this daunting task. The costs of failure are too high to countenance. - Because efforts to restrict the supply of terrorism have rapidly diminishing margins of return, interventions to reduce demand for terrorism are needed. - Madaris merit continual observation as they may contribute both to the demand for terrorism and to the limited supply of militants. For the same reasons, Pakistan’s public school sector deserves much more attention than it currently enjoys.

IV. Note Format and Examples

part 1: english language sources • Book (with ISBN #): Author[s]’ first and last name, Title (City of publication: publisher, year), page number[s]. Michael D. Swaine and Ashley J. Tellis, Interpreting China’s Grand Strategy (Santa Monica: RAND, 2000), 123–34. H.P. Wilmot, Empires in the Balance: Japanese and Allied Pacific Strategies to April 1942 (Annapolis: U.S. Naval Institute Press, 1982), 146–48.

Editions other than the first: William Strunk Jr. and E.B. White, The Elements of Style, 4th ed. (New York: Allyn and Bacon, 2000).

• Edited volume (with ISBN #): Editor[s]’ first and last name, ed[s]., Title (City of publication: publisher, year), page number[s]. Ashley J. Tellis and Michael Wills, eds., Strategic Asia 2004–05: Confronting Terrorism in the Pursuit of Power (Seattle: The National Bureau of Asian Research, 2004). David Shambaugh, ed., Power Shift: China and Asia’s New Dynamics (Berkeley and Los Angeles: University of California Press, 2006), 323.

• Chapter in an edited volume (with ISBN #): Author[s]’ first and last name, “Title of Article,” in Title of Edited Volume, ed. Editor[s]’ first and last name (City of publication: publisher, year), page number[s]. Graeme Cheeseman, “Facing an Uncertain Future: Defence and Security under the Howard Government,” in The National Interest in the Global Era: Australia in World Affairs 1996–2000, ed. James Cotton and John Ravenhill (Melbourne: Oxford University Press, 2001), 207. Jonathan D. Pollack and Mitchell B. Reiss, “South Korea: The Tyranny of Geography and the Vexations of History,” in The Nuclear Tipping Point: Why States Reconsider Their Nuclear Choices, ed. Kurt M. Campbell, Robert J. Einhorn, and Mitchell B. Reiss (Washington, D.C.: Brookings Institution Press, 2004), 274–77.

• Journal article (in journal with ISSN #): Author[s]’ first and last name, “Title of Article,” Title of Journal [vol. #], no. [#] (Month/Season/Year of Publication): page number[s]. Richard Pipes, “Flight from Freedom: What Russians Think and Want,” Foreign Affairs 83, no. 3 (May–June 2004): 383–88. Jingdong Yuan, “The Bush Doctrine: Chinese Perspectives and Responses,” Asian Perspective 27, no. 4 (December 2003): 134–37.

Special issue of a journal with ISSN#: Helen N. Boyle, “Memorization and Learning in Islamic Schools,” in “Islam and Education—Myths and Truths,” ed. Wadad Kadi and Victor Billeh, special issue, Comparative Education Review 50, no. 3, (August 2006).

• Newspaper report or magazine article: Author’s first and last name, “Title of Article,” Name of Newspaper/Magazine, Date of publication, page number[s]. Zhiming Zheng, “Tokyo’s Surprise at E-World’s UK Deal,” People’s Daily, December 1, 2005. Keith Bradsher, “U.S. Seeks Cooperation with China,” New York Times, July 24, 2003, A14.

• News agency report: Author’s first and last name, “Title of Report,” Name of News Agency, Date of publication, page number[s]. Richard Moore, “Beijing Indignant at U.S. Rebuff,” Associated Press, February 22, 2003. Associated Press, “Bush Seeks Chinese Concessions at Summit,” October 7, 2005.

• Public documents: House Committee on Interior and Insular Affairs, Subcommittee on Energy and the Environment, International Proliferation of Nuclear Technology, report prepared by Warren H. Donnelly and Barbara Rather, 94th Cong., 2d sess., 1976, Committee Print 15, 5–6.

U.S. Department of the Treasury, Report of the Secretary of the Treasury Transmitting a Report from the Register of the Treasury of the Commerce and Navigation of the United States for the Year Ending the 30th of June, 1850, 31st Cong., 2d sess., House Executive Document 8 (Washington, D.C., 1850–51).

• Surveys and polls (when not included within a publication): “Title of Poll,” [survey/poll] conducted by [surveying agency] for [commissioning agency], date, page number and/ or URL. “Household Integrated Economic Survey Round 4: 2001–02,” Pakistan Federal Bureau of Statistics, April 2003, 1, http://www.statpak.gov.pk/depts/fbs/statistics/hies0102/hies0102t11.pdf.

• Various (non-ISBN/ISSN) reports: Warwick J. McKibbon and A.A. Sidorenko, “Global Macroeconomic Consequences of Pandemic Influenza,” Lowy Institute for International Policy, February 2006, http://www.brookings.edu/views/papers/mckibbin/200602.htm. Joshua Kurlantzick, “China’s Charm: Implications of Chinese Soft Power,” Carnegie Endowment for International Peace, Policy Brief, no. 47, June 2006. Gautam Adhikari, “U.S.-India Relations: Report on AEI’s Roundtable Discussions,” AEI Working Paper, no. 112, June 22, 2005.

• Testimony, presentations, etc. before a government body: Author[s]’ given name and surname, [presentation/testimony/etc.] to [name of organization or government body], Date of event, [URL]. Marcus Noland, “How North Korea Funds Its Regime,” testimony before the Senate Subcommittee on Federal Financial Management, Government Information, and International Security, Washington, D.C., April 25, 2006. Hon. C. Richard D’Amato, “National Security Dimensions of the Possible Acquisition of UNOCAL by CNOOC and the Role of CFIUS,” statement presented before the House Committee on Armed Services, July 13, 2005.

• Public lecture, conference, etc.: Author[s]’ first and last name, “Title of Paper” (paper/ lecture/presentation [presented] at the [name of conference], [location of conference], [date of conference]). Gerald L. Houseman, “Facing Terrorism: Indonesia and Southeast Asia in an Era of New Dangers” (paper presented at the annual meeting of the Western Political Science Association, Portland, Oregon, June 19–22, 1995). Hisahiko Ikazaki, “The Strategic Value of Taiwan” (paper presented at the U.S.-Japan-Taiwan Trilateral Strategic Dialogue, Tokyo, March 2, 2003).

• Electronic document: [Footnote citation], URL. Footnote citation should emulate the corresponding print-source category. If the electronic document does not fall into one of the printed document categories above, use the “Various (non-ISBN/ISSN) reports” format. Information Office of the State Council of the People’s Republic of China, China’s National Defense in 2004 (Beijing, December 29, 2004), http://www.fas.org/nuke/guide/china/doctrine/natdef2004.html. Steven R. Weisman, “U.S. Close to Deal to Release Frozen North Korean Funds,” New York Times, June 10, 2007, http://www.nytimes.com/2007/06/12/washington/12bank.html. “Year 2020 to See One Billion Mobile Subscribers in China,” RNCOS web log, November 22, 2006, http://www. rncos.com/Blog/2006/11/year-2020-to-see-one-billion-mobile.html.

Note: Unless the information cited derives from a time-sensitive statistical database, the inclusion of “access dates” [e.g. “(accessed January 9, 2006)”] is discouraged. If a link is likely to become obsolete before the date of publication, include only the URL for the general entrance to the website (e.g. “http://www.peaceforum. org.tw”), not the long-form URL. Do not provide links to websites that require paid subscriptions or otherwise restrict access if there is a publicly available version elsewhere. For “clicking” once you get to a website: See Bank of Korea, http://www.bok.or.kr/index.jsp (FX & Int’l Relations/Payments and Transactions/Safeguard Measures).

• Personal communication and interview: Author’s [personal communication/e-mail/telephone conversation/interview] with [first and last name], place, date. Author’s interview with Hamit Zakir, Los Angeles, July 17, 2003. Author’s e-mail with Lu Jiawen, Beijing, May 17, 2006. Author’s interview with a former National Security Council member, Bangkok, January 21, 2005.

• Unpublished or forthcoming work: Author[s]’ first and last name, “Title of Paper” Title of Book [(place: publisher, forthcoming, date) or (unpublished manuscript, date)]. (Provide whatever information is available.) Derek Balkman, “East Asian Security: A Paradigm Shift?” (unpublished manuscript, 1995). David Lampton, Three Faces of Chinese Power: Might, Money, and Minds (forthcoming, 2007).

part 2: foreign language sources Note: When writing the foreign-language title of a language that uses a non-Roman script, please adhere to one of the standard Romanization formats. NBR prefers Pinyin for Chinese, Hepburn for Japanese, and McCuneReischauer for Korean.

• Book: Author[s]’ name, Foreign Language Title [English Translation of Title] (City of publication: publisher, year), page number[s]. Sotōka Hidetoshi, Nichi-Bei dōmei hanseiki: Anpo to mitsuyaku [Half-Century of the Japan-U.S. Alliance: Security Treaty and Secret Agreements] (Tokyo: Asahi Shimbunsha, 2001), 409–35. Li Zhisui, Mao Zedong siren yisheng huiyilu [The Private Life of Chairman Mao: The Memoirs of Mao’s Personal Physician] (Beijing: Sibao wenhua chubanshe, 1994), 235–38.

Note: When the work is written in a foreign language, no part of a foreign publisher’s name should be translated, although the city should be given in its English form.

• Journal article: Author[s]’ name, “Foreign Language Article Title” [English Translation of Article Title], Foreign Language Journal Title [vol. #], no. [#] (Date of publication): page number[s]. Liu Jianfei, “Gouzhu chengshu de zhongmei guanxi” [Developing a Mature Sino-U.S. Relationship], Zhongguo kexue xuebao 78, no. 2 (June 2003): 73–87. Yi Hyo-bŏm and Ch’oe Hyŏn-ho, “Pukhan kyokwasŏ-rŭl t’onghan ch’ŏngsonyŏn kach’igwan yŏngu: Kodŭng chunghakkyo kongsanjujŭi todok 3, 4 haknyŏn chungsim-ŭro” [A Study of the Youth Value System through North Korean Textbooks: Centered Around the Textbooks for “Communist Morality” for Years 3 and 4 in High School], Pukhan yŏngu hakhoebo 4, no. 2 (2000): 250.

• Online Source: Author[s]’ name, “Foreign Language Article Title” [English Translation of Article Title], Name of Publisher or Website in English or Romanized Foreign Language, Date updated, URL. Note: When footnoting an English language publication, Chinese names should be written as “Given name Surname” (i.e., “Zedong Mao,” NOT “Mao Zedong”). When footnoting a Chinese language publication or a publication that was originally written in Chinese and later translated into English, Chinese names should be written as “Surname Given name” (i.e., “Mao Zedong,” NOT “Zedong Mao”).

• Sources translated into English from a foreign language: Credit the translator by inserting “trans. [translator’s first and last name]” after the title of the publication. Fritzsch, Harald, An Equation that Changed the World, trans. Karin Heusch (Chicago: University of Chicago Press, 1994), 21. Xu Feng, “US Factor in Japan Becoming a Military Power,” Liaowang, trans. World News Connection (WNC), August 13, 2005.

If there is a need to specify both the original and a published translation, then use the following format: Ke Yan, Zhongguo keji: Gaige yu fazhan (Beijing: Wuzhou chuanbo chubanshe, 2004). Translated by Chen Ru as Chinese Science and Technology: Reform and Development (Beijing: China Intercontinental Press, 2004).

part 3: subsequent citation Use shortened titles (four words or less) for previously cited sources. “Op. cit.” and “loc. cit.” should not be used. • Book: 1. Author[s]’ first and last name, Title (City of publication: publisher, year), page number[s]. 2. Author[s]’ last name, Abbreviated Title, page number[s]. 1. Samuel P. Huntington, The Clash of Civilizations and the Remaking of World Order (New York: Touchstone, 1996), 136–37. 2. Huntington, Clash of Civilizations, 136–37.

• Journal article: 1. Author[s]’ first and last name, “Title of Article,” Title of Journal [vol. #], no. [#] (Date/Month/Year of Publication): page number[s]. 2. Author[s]’ last name, “Abbreviated Title,” page number[s]. 1. Chack-Kie Wong and Peter Nan-Shong Lee, “Economic Reform and Social Welfare: The Chinese Perspective Portrayed through a Social Survey in Shanghai,” Journal of Contemporary China 10, no. 28 (August 2001): 517–32. 2. Wong and Lee, “Economic Reform and Social Welfare,” 525.

• Chapter in an edited volume: 1. Author[s]’ first and last name, “Title of Article,” in Title of Edited Volume, ed[s]. Editor[s]’ first and last name (City of publication: publisher, year), page number[s]. 2. Author[s]’ last name, “Abbreviated Title of Article,” page number[s]. 1. Barry Naughton and Adam Segal, “China in Search of a Workable Model: Technology Development in the New Millennium,” in Crisis and Innovation: Asian Technology after the Millennium, ed. William Keller and Richard Samuels (New York: Cambridge University Press, 2003), 362–70. 2. Naughton and Segal, “Technology Development,” 373–74.

Note: The shortened version of the title should contain the key word or words from the main title. An initial A or The is omitted. The order of the words should not be changed (for example “A Long-term Strategic Assessment of China’s Military Modernization” should not be shortened to “China Strategic Assessment” but to “Long-term Strategic Assessment” or “China’s Military Modernization”). Titles of four words or fewer are seldom shortened.

asia policy, number 11 ( january 2011 ) , 1–26 • http://asiapolicy.nbr.org •

special essay

Rethinking the Beijing Consensus Yasheng Huang

yasheng huang is a Professor in the MIT Sloan School of Management at the Massachusetts Institute of Technology, and a Research Associate of the National Asia Research Program. He can be reached at .

note u This essay builds on the author’s previous research and argumentation presented in Capitalism with Chinese Characteristics: Entrepreneurship and the State (New York: Cambridge University Press, 2008). An earlier version of this essay was presented at the Asia Policy Assembly in Washington, D.C., on June 17–18, 2010.

keywords: china; economic models; economic development policy © The National Bureau of Asian Research, Seattle, Washington

asia policy

executive summary This essay examines whether or not there is a policy shift underway in China from free markets toward state capitalism.

main argument In the wake of the deepest recession in the West since 1929, many Western as well as Chinese analysts have been quick to pronounce the death of free markets and the triumph of the so-called Beijing Consensus. Not only has economic power gravitated toward the East, they argue, but the shift to state capitalism, Chinese-style, is burying market economics. Based on a careful analysis of data going beyond GDP performance, this essay shows that when measured by factors that directly track the living standards of the average Chinese person, China has performed the best when it pursued liberalizing, market-oriented economic reforms, as well as conducted modest political reform, and moved away from statist policies. In addition, using measures other than GDP, this essay shows that China’s performance metrics are in fact highly heterogeneous, which contrasts with the view implied by the Beijing Consensus that China is a homogenous country.

policy implications • For China, the essay shows the danger of embracing and accentuating economic statism. China needs to rethink its economic development strategy, which has so far suppressed the country’s vast potential of internal final consumption while rapidly ramping up production capacity. That combination is increasingly untenable. To rebalance, China must revert back to a more liberal package of economic and political reforms characteristic of the 1980s and move away from the statist model admired by many Western observers. • For the United States, the essay underscores the importance of understanding the root cause of underconsumption in China—the falling growth rates of personal income since the early 1990s associated with a development strategy based on economic statism.

huang u rethinking the beijing consensus

I

n the wake of the deepest recession in the West since 1929, many Western as well as Chinese analysts have been quick to pronounce the death of free markets and the triumph of the so-called Beijing Consensus. Not only has economic power gravitated toward the East, these analysts argue, but state capitalism, Chinese-style, is burying market economics. The term “Beijing Consensus” was coined by Joshua Cooper Ramos in 2004. Ramo, a young analyst at the Foreign Policy Centre in the United Kingdom, in his book The Beijing Consensus sets the ambitious objective to debunk the famous doctrine of the “Washington Consensus” and provide an alternative intellectual framework.1 The Washington Consensus, so named to underscore its American origin, espoused private property rights, economic opening, financial reforms, macroeconomic stability, and political liberalization to promote economic growth. For much of the 1990s and at the turn of the 21st century the centrally planned economies of Russia and Eastern Europe collapsed, while India and much of Latin America and Africa moved away from the commanding heights of economic statism. The free market principles so succinctly enshrined in the Washington Consensus had reigned confident, triumphant, and even hegemonic. One political scientist famously proclaimed the end of history— “the end point of mankind’s ideological evolution and the universalization of Western liberal democracy as the final form of human government.”2 By 2004, the year in which China’s GDP broke a new record by incrementally contributing more to world GDP growth than the United States and by accelerating into a double-digit range, the Washington Consensus started to be rivaled by a set of policies and values that Ramo labeled as the Beijing Consensus. Ramo argues that the success of China contradicts every single principle formulated in the Washington Consensus. According to him, the key ingredient of the China model is its ideological and operating dexterity. China has not bothered to follow any set economic and political prescriptions but has experimented boldly and innovatively. The eclectic approach purportedly used by China encompasses a variety of institutional forms. If state ownership promotes growth, why privatize? If a one-party system works wonders in generating GDP growth, why democratize? If state financial controls are effective in resource mobilization, why liberalize?

1 See Joshua Cooper Ramo, The Beijing Consensus (London: Foreign Policy Centre, 2004), available

at http://fpc.org.uk/publications/TheBeijingConsensus.

2 Francis Fukuyama, The End of History and the Last Man (New York: Avon Books, 1992).

[3]

asia policy

Ramo stated in 2004, “What is happening in China at the moment is not only a model for China, but has begun to remake the whole landscape of international development, economics, society and, by extension, politics.”3 Today, after the financial implosion on Wall Street and during the double-digit unemployment in the United States, many influential analysts have reached the same conclusion as Ramo did six years ago—that the battle has been won, decidedly, by the Beijing Consensus. Washington Post columnist David Ignatius, paraphrasing Richard Nixon’s backhand tribute to John Maynard Keynes, declared, “We are all Chinese now.”4 Before the 2008 financial crisis, the Beijing Consensus was an interesting idea that animated discussions at academic seminars and conferences, mostly in Western countries. This is no longer the case. Chinese government officials and academics themselves have embraced some of the main claims in the Beijing Consensus. In particular, they have embraced the idea that Chinese growth is driven by economic statism—that is, the state exerting extensive control over the economy—rather than by the vibrancy of the market and influential private entrepreneurship. China is now in the midst of one of the most statist periods in its reform era with the massive stimulus package that has poured a huge portion of the country’s GDP in financial resources into the state sector. One estimate, as I learned during my trip to China in May 2010, is that 90% of the stimulus funds have gone to state-owned enterprises (SOE). The term guojin mintui (or “the state advances as the private sector retreats”) suggests that China’s current policy differs significantly from that in the 1980s and 1990s, when Beijing achieved economic take-off by relaxing state controls over economic life, decentralizing and extending profit incentives to private enterprise and the local government level, and opening up domestic and international markets. Many policy and institutional innovations that proponents of the Beijing Consensus associate with China hold normative implications for other countries—for example, for India, which some have urged to learn from the proactive and pro-business approaches pursued by the Chinese government in the 1980s and 1990s. Influential economists invoke China in their advocacy for a “heterodox” growth strategy—a strategy that emphasizes the role of the government rather than the primacy of the market. China’s size and rapid rate of growth make it extremely important to get the China story right in order to conduct research on the country’s growth and draw the right policy lessons.

3 Ramo, The Beijing Consensus, 3. 4 David Ignatius, “A Bailout Beijing Would Cheer,” Washington Post, October 16, 2008 u http://www.

washingtonpost.com/wp-dyn/content/article/2008/10/15/AR2008101503163.html.

[4]


Given the theoretical and policy stakes involved, it is surprising that the debates and discussions on how well China has actually performed have occurred at a very high level of aggregation and have focused on a very narrow set of economic data (mainly GDP). This essay will attempt to provide empirical grounding to assess the relevance and the wisdom of the Beijing Consensus. These empirical details are listed and previewed here. First, how has China performed economically in the 30 years between 1978 and 2008? One would have thought that this issue had been settled a long time ago. Apart from some quibbles about Chinese GDP data,5 most economists converge on the view that China’s growth has been superb. I offer no contrarian evidence on Chinese GDP growth in this essay. The wrinkle to this consensus view—and it is a fairly large one, as I will show—is that once we move away from the GDP-based metrics, Chinese performance begins to look less stellar, especially since the first decade of reforms in the 1980s. The biggest divergence between the GDP measure and those measures based on personal income—the income that accrues to Chinese households—occurred in the 1990s. During that period from 1989 to 2002, the per capita GDP grew at a real rate of 8.1% a year. This is the performance that has so impressed economists everywhere and that is the miracle growth believed to rival that of other East Asian success stories. During the same period, however, Chinese personal income per capita averaged only 5.4% a year in growth. The gap is thus huge between GDP growth and the performance of a metric that directly tracks the actual living standards of the average Chinese person. More important and relevant for this essay, however, is the variance of personalincome growth rates across different time periods. Chinese personal income grew fastest during the 1980s and then slowed down dramatically during the 1990s, whereas GDP growth remained unaffected. As it turns out, these trends in Chinese personal-income growth correlate closely with different types of economic and political policies. When China was moving in a more liberal political and policy direction, personal income grew very fast. When market reforms slowed and China was pursuing more statist policies, the growth of personal income slowed down. The pattern of this correction, at least on the surface, directly contradicts some of the major claims made by the Beijing Consensus. The other takeaway is that once we move beyond the readily available data on GDP, the picture of China’s economic performance becomes murkier and more nuanced.

5 See Thomas G. Rawski, “What Is Happening to China’s GDP Statistics,” China Economic Review

12, no. 4 (2001): 347–54; and Alwyn Young, “Gold into Base Metals: Productivity Growth in the People’s Republic of China During the Reform Period,” Journal of Political Economy 111, no. 6 (December 2003): 1220–61.

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The second detail is related to the evolution of Chinese politics and economic policies over time. The Beijing Consensus implies that China’s performance has been consistent over the last three decades and has been almost immune from politics. A more nuanced examination of household income data shows that this is simply not true. The golden era of household income growth was in the 1980s when China was ruled by leaders such as Deng Xiaoping, Hu Yaobang, and Zhao Ziyang, who launched the reform drive. The worst performance was during the reign of Jiang Zemin and Zhu Rongji. Politics matters enormously. Under the leadership of Hu Jintao and Wen Jiabao, China’s overall household income growth has picked up somewhat but is still slow relative to GDP growth, and as a result, there is no increase in the Chinese household saving rate in the past decade. The third detail on which this essay will focus concerns some of the institutional features of the Chinese economy. It is here that much of the empirical basis on which the Beijing Consensus is built is simply wrong. One example is private entrepreneurship. Many proponents of the Beijing Consensus hold the view that the most important policy innovation coming out of China is that firms of mixed ownership can be and are efficient. They point to township and village enterprises (TVE), which many believe to be businesses under the control of local governments, as an example of such mixed ownership. Purely private entrepreneurship is believed to have played a minor role in China’s economic take-off. Through detailed archival research and by digging into the original database maintained by the Ministry of Agriculture, I have found that TVEs are probably historically the singlelargest private-sector phenomenon. There is nothing innovatively Chinese about TVEs; rather, they are conventional private businesses.

heterogeneous performance Chinese performance has been heterogeneous rather than consistently robust when performance is measured by the growth of personal income. This seemingly factual statement affords an opportunity to assess some of the major claims of the Beijing Consensus, such as that China’s state-ownership, partystate system, and economic experiment together contribute to the country’s economic boom. There is now some variance in the dependent variable, so to speak, which makes it possible to match this variance in economic outcomes with variance in policy and political developments. A good, parsimonious account of China’s economy has to be minimally consistent with and hopefully explanatory of both the real successes of the country and its failings. As far as I know, the [6]


exercise that comes closest to tackling issues similar to those raised in this essay involves microeconomic research—linking firm performance with the degree of private ownership, for example. But research at this level of disaggregation does not quite get to the broad policy questions that this essay tries to address. For example, while firm performance has been linked positively with private ownership, one may very well argue that broad growth—and, therefore, market opportunities for firms—is created by China’s statist policies. The analytical task here is to get the facts right as well as to focus on the right facts. For the 1990s, there is a substantial discrepancy between the GDP measure and the personal-income measure of performance. Thus, the question is which measure we should trust. There is both a technical and a substantive response to this question. Chinese GDP data is often criticized for its inconsistencies, lack of definitional clarity, and the inadequate explanations of and disclosures about reporting norms and procedures. (In the most recent controversy, local governments reported a GDP figure between 10% to 15% larger than what the national government reported, and China’s GDP purportedly grew at a rapid rate despite a sharp slowdown in electricity usage.)6 In contrast, the personalincome data was obtained through household surveys. Although involving their own problems, these surveys are regarded by outside analysts as relatively well-designed and professionally executed.7 The presupposition, thus, would favor the findings based on household surveys over those based on national income accounting data. The substantive reason is that the personal-income measure better tracks what is happening to the welfare of Chinese people than does the national income accounting data. Personal-income data measures the actual take-home pay of Chinese households. The normative justifications for the China model are also offered on welfare grounds. According to a famous formulation in economics literature, Chinese reform has been Pareto optimal in that it has created winners without creating losers.8 Assessing Chinese growth on welfare grounds is only fair. Though there is no perfect measure of “welfare,” there are measures closer to the concept than GDP. This essay will single out rural population for emphasis and will pay particular attention to developments in this group’s actual income

6 Richard McGregor, “Economists Cast Doubt on China’s GDP Data,” Financial Times,

October 24, 2005 u http://www.ft.com/cms/s/0/758de3e2-442a-11da-b752-00000e2511c8. html?nclick_check=1.

7 Aart Kraay, “Household Saving in China,” World Bank Economic Review, September 2000. 8 Laurence J. Lau, Yingi Qian, and Gérard Roland, “Reform without Losers: An Interpretation of China’s

Dual-Track Approach to Transition,” Journal of Political Economy 108, no. 1 (October 2000): 32.

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and consumption. As of 2008, there were 720 million Chinese residing in rural areas on a long-term basis (defined as more than six months). In addition, there were 230 million rural migrant workers who resided in cities but lacked the rights and benefits associated with urban citizenship. The importance of the rural sector cannot be overstated, but the aggregate GDP data does not break down economic performance among different groups of Chinese. The rural sector also matters on the supply side. Rural residents, especially those migrant workers who have moved to the coastal regions of the country, have played a vital role in the success of China’s coastal export industries and in boosting the country’s manufacturing productivity. There is a related supply-side issue. In the 1980s and the early part of the 1990s, rural entrepreneurs created the miracle growth of what came to be known as TVEs. TVEs, unlike the coastal export industries that have taken off since the mid-1990s, were mainly domestically oriented. Herein lies the connection between financial reversals and the current global imbalances: China’s TVEs began to atrophy in the mid-1990s due, among other reasons, to increasing financing constraints.9 The rural financial policy reversals played a role, if not a central role, in the increasing financing constraints facing TVEs in the 1990s. Shifting the economic gravity from TVEs to the export-oriented industries in the coastal regions of the country may have contributed to a production shift from a domestic to a foreign orientation of the Chinese economy. The following paragraphs begin by presenting data on household income development in comparison with data on GDP. This is followed by data on rural household consumption. The presentation of the data decomposes China’s reform era on political grounds rather than strictly adhering to a calendric periodization. The data is shown in the graph in Figure 1. Two issues should be noted here. First, the growth of personal income has accelerated since 2003 compared with the preceding period. This development has coincided with renewed emphasis by the leadership of Hu Jintao and Wen Jiabao on rural issues. The Hu-Wen leadership has enacted a number of policy measures—including a reduction/abolition of individual rural taxation, price subsidies, and limited financial reforms—to counteract the accumulative effects of the previous leadership’s rural policy biases. By the measure of income development, this policy change has been a success. The harder questions are whether the income improvement is as substantial as reported in the official statistics and whether the improvement 9 Wing Thye Woo, “China’s Rural Enterprises in Crisis: The Role of Inadequate Financial

Intermediation,” in Financial Sector Reform in China, ed. Yasheng Huang, Tony Saich, and Edward Steinfeld (Cambridge: Harvard University Asia Center, 2005), 67–91.

[8]


Figure 1 GDP and Personal-Income Growth during the Three Policy Decades (Values in 1978 Prices and in Per Capita Terms) 1979−88

14

1989−2002 12

2003−08

Percent

10 8 6 4 2 0

Urban income

Rural income

Hukou-weighted household income

GDP

Source: Personal income data is based on annual National Bureau of Statistics (NBS) household surveys, and GDP data is from NBS, China Statistical Yearbook, multiple years. Note: Both GDP and household income data are deflated to their 1978 values.

is sustainable. One problem with the rural household income data reported for the period since 2003 is that the National Bureau of Statistics (NBS) household surveys seem to have heavily sampled the highest-income groups. (As expected, there is no explanation for this huge change in the sampling frame.) The other problem is that the income improvement seems to be a result of mainly social policy adjustments rather than economic policy adjustments. These adjustments are not sustainable. The second issue is that all the findings are based on average personal income of Chinese households, which the Chinese government discloses. When income distribution is highly unequal, as is the case in China, the more appropriate measure is median income. It is probable, although not certain, that median-income growth can be stagnant or less modest compared with average-income growth.10 One may wish to argue that a growth rate in the neighborhood of 5.4% is still solid and would put China in the “growth league 10 Analyzing median-income development requires data at the household level, which the NBS does

not provide. Preliminary research on rural household data from six provinces shows that, at least for a number of years during the late 1990s, rural median income did not grow at all.

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of nations.” In this essay, I will refrain from comparing Chinese growth with the growth rates of other countries, except to note that a mechanical comparison is not the right approach. There are many country-fixed effects masked by a mechanical cross-country comparison of growth statistics. More important and relevant for this essay is the variance of the personal-income growth rates across different time periods. Chinese personal income grew fastest during the 1980s and then slowed down dramatically during the 1990s, whereas GDP growth remained unaffected. This is the second detail that this essay will focus on. As it turns out, this performance in Chinese personal income correlates closely with different types of economic and political policies. To put it briefly, when China was trending in a more liberal direction—moving toward the Washington Consensus, so to speak—personal income grew very fast. When China was trending in the opposite direction, growth in personal income slowed down. Personal consumption data, which will also be analyzed in this essay, shows exactly the same pattern. This heterogeneity in the Chinese performance record suggests that there is no consistent Beijing model, and that in fact China was more effective at enhancing welfare during the decade when it followed more liberal policies, some of which are commonly associated with the Washington Consensus. I reported these findings about the divergence of GDP and personal income in my 2008 book Capitalism with Chinese Characteristics: Entrepreneurship and the State.11 One criticism of my findings is that they do not reflect income development on the part of rural migrant workers. This is a legitimate criticism. NBS household surveys do not directly sample rural migrant workers. This omission, according to some critics, understates the income growth of the Chinese population. This criticism, however, is less sensible than it seems. Rural migrant income is unlikely to have grown at a substantially faster rate than either urban household income or rural household income. Rural household income, after all, is the income forgone by rural migrant workers who went to work in industries. If one income series grew fast, the other income series would have grown fast by definition. Nevertheless, because I did not have the data at the time the book was written, I could not address this issue directly. Since then, I have gathered the relevant data. Figure 2 shows the rural migrant income data along with per capita GDP data for Guangdong Province.

11 See Yasheng Huang, Capitalism with Chinese Characteristics: Entrepreneurship and the State (New

York: Cambridge University Press, 2008).

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Figure 2 Real Per Capita GDP and Real Starting Wage of Rural Migrant Workers in Guangdong (Values in 1978 Prices) 40,000 35,000 Real GDP per capita

Yuan (in 1978 prices)

30,000

Real annual starting wage

25,000 20,000 15,000 10,000 5,000

8 200

6

7 200

5 200

200

3

4 200

200

1

0

2 200

200

200

8

9 199

7 199

199

5

6 199

199

3

2

4 199

199

199

0 199

199

1

0

Year

Source: “Rural Migration Survey,” provided by Department of Sociology, Zhongshan University, Guangzhou.

As can be seen very easily, the gap between rural migrant income per capita and GDP per capita is huge and continues to grow even wider. For many years, rural migrant income was flat, and for some years it was actually declining. Some in the media have questioned the sanity of those workers at the electronics company Foxconn who committed suicide. But maybe these workers knew far more about the divergence between GDP and personal income than the media commentators. The huge divergence basically means that China’s rapid GDP growth has primarily benefited government and capital providers.

which china model? An implicit assumption in the Beijing Consensus view of China is the existence of a single model that explains or is at least descriptively consistent with the performance record of the country during the entire history of reforms. This view completely ignores the fact that Chinese performance has been heterogeneous rather than homogenous. In assessing Chinese [ 11 ]

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performance, it is important to focus on the right metrics. China’s GDP performance has been consistently robust in the last three decades, which could be attributed to the existence of a single distinct China model. But the country’s record on personal income and consumption growth, which are more accurate measures of Chinese welfare, implies the existence of at least two models—one that is conducive to welfare improvement and another that is less conducive to it (all holding GDP growth constant). In assessing the notion of the Beijing Consensus, the real question is, “Which performance record?” Should one look to the record that shows rapid GDP growth but also equally impressive gains in personal income and consumption? Or is the record that shows rapid GDP growth but without similar gains in personal income and consumption more accurate? As emphasized throughout this essay, using the right metrics is important for assessing Chinese performance. Once the question is framed this way, the debate between the Beijing and Washington Consensus becomes more tractable. The debate is not about a steady state of where Chinese economic policies and institutions are but instead is about their movement over time. The right question is the following: “Was China closer to the Washington end or to the Beijing end of the consensus spectrum when personal income and consumption grew rapidly along with GDP?” This essay shows that there is no consistent Beijing Consensus and that welfare increased most during the period when marketoriented reforms were pursued.

Policy and Political Developments China’s performance record, as it turns out, correlates closely with the twists and turns of the country’s economic policies. This part of the essay considers the evolution of economic policies in the 1980s and 1990s. I focus on these two decades rather than on the period since 2003 because these two decades provide the sharpest contrast in policy orientations. I will show that the decade of the 1980s is associated with those policies that in general moved China in the liberal direction of the Washington Consensus—private entrepreneurship, financial reforms, and some political opening. The decade of the 1990s is associated with a policy orientation that moved China in the opposite direction, such as toward state control and economic intervention— the so-called Beijing Consensus. The first policy period, from 1979 to 1988 (referred to as the “1980s” in this essay), is the era of Hu Yaobang and Zhao Ziyang, at least in economic [ 12 ]


policymaking. (Deng Xiaoping was more powerful politically.) Hu and Zhao are widely regarded as the most liberal Chinese leaders during the reform era, and the account of this period in the second part of this essay largely confirms this perspective. From 1989 to 2002 (referred to as the “1990s”), Jiang Zemin and Zhu Rongji governed the country and managed the economy. Both leaders came from Shanghai, a city that has the most stringent restrictions on the indigenous private sector in the country.12 The third policy period, the period since 2003, is the era of Hu Jintao and Wen Jiabao. To some extent, this is the hardest policy period to analyze because the policy directions are least clear. In some areas, such as rural policy, the current leadership has substantially reversed the policy legacies of the 1990s, including a reduction or abolition of individual rural taxation, price subsidies, and limited financial reforms. But in other areas, such as state monopolies and investments in SOEs, there has been a substantial exacerbation of the statist biases from the 1990s. While the developments during the third period provide important—though conflicting—clues about China’s economic future, the decades of the 1980s and 1990s provide the cleanest way to test some of the claims that the Beijing Consensus made about Chinese growth. Much of this analysis will thus focus on these two policy periods. Compared with its economic reforms, China has never significantly liberalized its political system. This piece of conventional wisdom on China is correct. What is insufficiently appreciated is that to the extent that China has implemented some political reforms, every single political reform that it did undertake occurred during the 1980s. This section will first briefly summarize research on political reforms in China and then will follow up by presenting data that, though imperfect, is consistent with the view that China also retrenched politically in the 1990s. As noted by Minxin Pei, every important political reform, such as the mandatory retirement of government officials, the strengthening of the National People’s Congress (NPC, China’s national legislature), legal reforms, experiments in rural self-government, and the loosening of control on civil society groups, was instituted in the 1980s.13 In the 1990s, the state reversed

12 This portrayal of Shanghai will be unfamiliar to many analysts of China. Contrary to the popular

image, Shanghai for many years repressed private-sector development to support large-scale SOEs. Statistical analysis of a large-scale dataset of Chinese firms shows that Shanghai significantly underperformed compared to the rest of the country in terms of private sector and entrepreneurial development. See Yasheng Huang and Yi Qian, “Is Entrepreneurship Missing in Shanghai?” in International Differences in Entrepreneurship, ed. Joshua Lerner and Antionette Shoar (Chicago: University of Chicago Press, 2010), 321–46.

13 Minxin Pei, China’s Trapped Transition: The Limits of Developmental Advocacy (Cambridge:

Harvard University Press, 2006), 11.

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these reforms. This assessment comes from a well-placed insider, Wu Min, a professor at the Party School under the Shanxi Provincial Party Committee.14 In a 2007 article, Wu reveals that the political reform program adopted at the Thirteenth Party Congress in 1987 made substantial headway in terms of implementation during the one-year period after its adoption. According to Wu, there were significant efforts to redefine and reduce the functions of the Chinese Communist Party (CCP). Party committees were abolished in many government agencies, and the functions of the party and the state were explicitly delineated. The political reforms of the 1980s were designed to enhance the accountability of the government by creating checks and balances on the power of the CCP and by fostering intra-party democracy. Wu cites one specific measure in the 1990s to derail the reforms of the 1980s. According to Wu, in the 1990s China instituted explicit provisions prohibiting the NPC from conducting evaluations of officials in the executive branch, the courts, and the procuratorate, a power that was given to the NPC in the 1980s. Are there more systematic indicators of the political reversal than these anecdotal accounts? One metric is the size of the state (measured in manpower). In the 1990s the Chinese state did reduce its ownership of businesses, but the size of the government itself expanded enormously. According to one account, the number of officials on the government payroll was 46 million in 2004 (or 1 out of every 28 Chinese). In the early 1990s, the number was around 20 million.15 Another measure, which I have calculated in great detail elsewhere, is that fixed-asset investments in government buildings and properties tripled from 2.3% of total fixed asset investments in 1990 to 7.1% in 2002.16 In addition, some of the previous policies designed to separate the CCP from the government, such as those abolishing party groups within ministries, were reversed. The political analysis provided here can be characterized as a version of the correspondence principle. When China was trending in a politically liberal direction in the 1980s, its GDP growth was more welfare-enhancing. On the other hand, when the politics of the country were trending in the opposite direction in the 1990s, China’s GDP growth became less welfare-

14 Min Wu, “The Blueprint and Practices of Political Reform under Deng Xiaoping,” in “Spring

and Autumn of Yan and Huang Emperors,” Yanhuang Chunqiu 7 (2007), available at u http:// www.21ccom.net/articles/lsjd/lsjj/article_2010082216366.html.

15 Zhao Shukai, “Xiangzhen gaige zhilu” [Reforms of Townships], State Council Investigation and

Research Report 138 (Beijing, 2004).

16 Yasheng Huang, “The Next Asian Miracle,” Foreign Policy, June 16, 2008.

[ 14 ]


enhancing. To illustrate this point further, consider India, a country whose growth is mainly driven by domestic consumption rather than by investments and exports. India is less statist in its basic economic orientation. As this essay has shown, the linkages between economic statism and restriction of consumption—via suppressing household income growth—are more than coincidental. It is fine for India to aspire to be politically authoritarian like China, but it is important for New Delhi to know the trade-offs.17

The Role of Private Entrepreneurship An important plank of the Beijing Consensus is its strong rejection of the central role of private entrepreneurship in economic growth. Most China scholars believe that private entrepreneurship was endogenous of growth rather than contributing to growth. This gradualist view holds that China had a very small private sector at the start of reforms but that the private sector then expanded over time because of the acceleration of economic liberalization. A close reading of historical data, however, shows that private entrepreneurship played a central role in China’s initial take-off. Rural China again holds the key in this rendition of history. The reason why private entrepreneurship is often under-weighted in explaining Chinese growth is because of confusion about the identity of rural entrepreneurship. Many China scholars mistake rural private entrepreneurship as government-sponsored. This mistake is not the fault of China being purposely evasive and opaque (although there is some of that) but a failure on the part of many scholars to simply look into crucial empirical details. A standard perspective on the question of how the private sector has or has not contributed to China’s success is that growth happened in China despite the absence of sizable private ownership. Advocates of this view point to TVEs—the growth engines in the 1980s and the first half of the 1990s— as an illustration. Economists and other social scientists believe that TVEs have a distinct ownership structure. This consensus view is summarized by Barry Naughton in his textbook on the Chinese economy: “TVEs had a special distinction during this period [1978–1996] because of their unusual ownership and corporate governance setup. Originating under the rural communes, most TVEs were collectively-owned.”18 17 I coined the term “directional liberalism” to describe the political reforms in China in the 1980s.

Incidentally, one can make the same argument about India—that its growth acceleration in the 1990s also coincided with a directional movement toward greater democracy during that decade. See Huang, “The Next Asian Miracle.”

18 Barry Naughton, The Chinese Economy: Transitions and Growth (Cambridge: MIT Press, 2007), 271.

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This view is widely accepted by mainstream economists who are extremely influential in the field of development economics. For example, Dani Rodrik observes that “China did not simply liberalize and open up; it did so by grafting a market track on top of a plan track, by relying on TVEs rather than private enterprise.”19 Joseph Stiglitz believes that the rise of TVEs challenges the standard claims of economics. He explains: “Many of the new enterprises were created in the 1980s and early 1990s by township and village enterprises (TVEs). These were public enterprises and the standard ideology would have said that you cannot succeed with public enterprises; but they were enormously successful.”20 This special feature of TVEs, according to Gérard Roland, poses a challenge to researchers because such enterprises are not supposed to perform well, given that they are publically owned.21 The strong theoretical presupposition of mainstream economists is that private ownership rights motivate entrepreneurs to invest and take risks. The lack of this incentive in a public ownership structure is why the success of the TVE phenomenon was so puzzling. Elaborate theories—some backed up by formal mathematical proofs— have been proposed to explain the performance of TVEs as public-sector businesses. One prominent theoretical strand models TVEs as an efficient substitute in a weak environment.22 In particular, the public ownership of TVEs is supposed to perform two economically useful functions. The first is aligning the interests of the central government with those of the local governments.23 The second function of TVEs, supposedly, is to serve as an effective mechanism to prevent the private theft of public assets.24 Roland hails this explanation of TVEs as an important application of the path-breaking work in economics on the incomplete contracting framework.25 This is high

19 Dani Rodrik, One Economics, Many Recipes: Globalization, Institutions, and Economic Growth

(Princeton: Princeton University Press, 2007), 87.

20 Joseph Stiglitz, “The Transition from Communism to Market: A Reappraisal after 15 Years” (paper

presented at the annual meeting of the European Bank for Reconstruction and Development, London, May 21–22, 2006).

21 Gérard Roland, Transition and Economics: Politics, Markets, and Firms (Cambridge: MIT Press, 2000). 22 This theory was first proposed by Jiahua Che and Yingyui Qian in “Insecure Property Rights and

Government Ownership of Firms,” Quarterly Journal of Economics 113, no. 2 (1998): 467–96. See also ibid.

23 TVEs have the advantage of political protection provided by the local government, and in a

biased financial system they have access to capital because their loans are guaranteed by the state. See Chun Chang and Yijang Wang, “The Nature of the Township-Village Enterprise,” Journal of Comparative Economics 19, no. 3 (December 1994): 434–52; and David D. Li, “A Theory of Ambiguous Property Rights in Transition Economies,” Journal of Comparative Economics 23, no. 1 (August 1996): 1–19.

24 Stiglitz, “The Transition from Communism to Market.” 25 Roland, Transition and Economics, 282.

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praise indeed. Research on TVEs not only enhances the understanding of China but also represents an advance in economic theory. All these theoretical conceptualizations about TVEs are predicated on one empirical detail—that TVEs are public. Let me step back and ask a question that economists should have asked before they began to model: Are TVEs really public? The TVE label owes its origins to the commune and brigade enterprises created during the Great Leap Forward. In part because of this lineage, some Western scholars came to believe that the Great Leap Forward laid the foundation for TVEs in the 1980s.26 This is not the case. In 1978, there were only about 1.5 million commune and brigade enterprises,27 but by 1985 there were already 12 million businesses labeled as TVEs.28 The vast majority of TVEs clearly had nothing to do with the Great Leap Forward. As a product of the reforms, they were completely new entrants during the first half of the 1980s. This is an important observation because the supposed Great Leap Forward lineage implicitly reinforced the view that the TVE was a collective institution. The term TVE first appeared in a policy document issued by the State Council on March 1, 1984, entitled “Report on Creating a New Situation for Commune and Brigade Enterprises.” This important document laid down the definitional and statistical coverage of TVEs. The second paragraph of the document—known famously in China as “Document No. 4”—defined TVEs as follows: “TVEs include enterprises sponsored by townships and villages, the alliance enterprises formed by peasants, other alliance enterprises and individual enterprises.”29 Thus, enterprises sponsored by townships and villages are the collective TVEs, and so TVEs do include collective firms. The Beijing Consensus is right on this point; the issue, however, is whether collective TVEs constitute the entire universe of the TVE phenomenon. In Document No. 4, all other firms under the TVE label are private businesses or entities. Individual enterprises

26 For a historical account of TVEs, see Susan H. Whiting, Power and Wealth in Rural China: The

Political Economy of Institutional Change (Cambridge: Cambridge University Press, 2001).

27 Zhang Yi, Zhongguo xiangzhen qiye jianxin de licheng [Chinese Township and Village Enterprises:

A History of Hardship] (Beijing: Falu chubanshe, 1990), 25.

28 Ministry of Agriculture of the People’s Republic of China, Zhongguo xiangzhen qiye tongji ziliao

(1978–2002) [Statistical Materials of Township and Village Enterprises in China 1978–2002] (Beijing: Zhongguo Nongye Chubanshe, 2003).

29 Ministry of Agriculture of the People’s Republic of China, Zhongguo nongye nianjian (1985) [China

Agricultural Statistical Yearbook (1985)] (Beijing, Nongye chubanshe, 1985), 450. A Chinese academic also notes this definitional change provided in Document No. 4. See Yi, Zhongguo xiangzhen qiye jianxin de licheng.

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refer to household businesses that typically have fewer than seven employees. The alliance enterprise (in Chinese, lianying) is a 1980s euphemism referring to larger private-sector enterprises. These are private-sector firms with multiple investors and more than seven employees. It is important to stress that the private TVEs discussed here are not “red hat firms”—private firms that are registered as public-sector firms in disguise. Red hat firms are typically very large private-sector firms that are registered falsely as collective firms. The private TVEs in the data used in this analysis were fully private, and their private ownership identity was known to the government. The issue here is one of definition: the official definition and the official data include both TVEs controlled by townships and villages and TVEs controlled by private entrepreneurs. The term TVE, as used by the Chinese, is a geographic concept referring to enterprises located in townships and villages. Western economists, on the other hand, understand the term from an ownership perspective as referring to an enterprise owned by townships and villages. This huge gulf between the two understandings of TVEs has contributed to massive confusion in the literature on the subject. In terms of establishment, the overwhelming majority of TVEs, even at the early stage of the reforms, were actually private TVEs. In 1985, according to Ministry of Agriculture data, of the 12 million TVEs, 10.5 million were private. In addition, a huge portion of collective TVEs were concentrated in a few rich, coastal provinces. In many other provinces, private TVEs completely dominated the pool of TVEs. One effect of Document No. 4 is that it changed the statistical reporting procedure of the Ministry of Agriculture, the agency in charge of collecting and reporting on TVE data. The Ministry of Agriculture began to consolidate all rural firms under the category of TVEs in its statistical reports starting in 1985. This data provides a detailed ownership breakdown of the TVEs: collective TVEs, privately run TVEs (larger private firms), and selfemployment household businesses. Data on the ownership composition of TVEs in terms of establishment and employment from 1985 to 2002 is presented in Table 1. Even a casual glance at Table 1 reveals that private TVEs absolutely dominated the total pool of TVEs. The highest number of collective TVEs in 1986 is 1.73 million. In contrast, the lowest number of household TVEs in 1985 is 10.1 million. It is true that before the mid-1990s there were more collective TVEs than private-run TVEs. In the four years between 1985 and 1988, the number of private-run TVEs more than doubled, rising from 530,000 in 1985 to 1.2 million in 1988, whereas there was almost no change [ 18 ]

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15.2

17.5

18.9

18.7

18.7

19.1

20.9

24.5

24.9

22.0

23.4

20.1

20.0

20.7

20.9

21.2

21.3

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

0.73

0.67

0.80

0.94

1.07

1.29

1.55

1.62

1.64

1.69

1.53

1.44

1.45

1.53

1.59

1.58

1.73

1.57

2.30

2.01

2.06

2.08

2.22

2.33

2.26

0.96

0.79

1.04

0.90

0.85

0.98

1.07

1.20

1.19

1.09

0.53

Private-run

130.9 132.9

18.3

128.2

127.1

125.4

130.5

135.1

128.6

120.2

123.5

106.3

96.1

92.7

93.7

95.5

88.1

79.4

69.8

Total

18.5

18.0

17.7

16.8

16.5

19.6

19.4

22.5

21.8

18.5

16.8

16.3

16.1

16.1

14.7

12.3

10.1

Household businesses

Private TVEs

Number of TVEs (million units)

Collective TVEs

Source: Ministry of Agriculture of the People’s Republic of China, 2003.

12.2

1986

Total

1985

Year

38.0

33.7

38.3

43.7

48.3

53.2

59.5

60.6

58.9

57.7

51.8

47.7

45.9

47.2

48.9

47.2

45.4

41.5

Collective TVEs

35.00

36.90

32.50

28.50

26.20

26.30

24.60

8.74

7.30

9.14

7.71

7.27

8.14

8.84

9.77

9.23

8.34

4.75

Private-run

59.8

60.2

57.3

54.8

50.9

51.0

50.9

59.3

53.9

56.6

46.8

41.2

38.6

37.6

36.8

31.6

25.6

23.5

Household businesses

Private TVEs

Employment in TVEs (million persons)

Ownership Composition of TVEs, 1985–2002

Table 1


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in the number of collective TVEs (from 1.57 million in 1985 to 1.59 million in 1988). In 1988, collective TVEs outnumbered private-run TVEs by only 300,000. In subsequent years, the number of private-run TVEs declined, due to the Tiananmen effect. Without the 1989 Tiananmen interlude, private-run TVEs would have surpassed collective TVEs within three to four years. However, as both Jean Oi and Barry Naughton stress, private TVEs were individually smaller than collective TVEs, so their employment and output shares were smaller as well.30 Household businesses are single proprietorships, with a very small number of employees. Although some private-run TVEs were large, they were fewer in number. Table 1 illustrates this point. Employment in collective TVEs was larger than employment in private TVEs. In 1985, collective TVEs employed 41.5 million people, compared with the 4.75 million employed in private-run TVEs and 23.5 million in household businesses. There is nothing surprising or unusual about the statically large collective sector. Collective TVEs were founded in the late 1950s and had developed for over twenty years. Private TVEs were a result of rural reforms and began only in the early 1980s. Despite the statically small size of private TVEs, dynamism was on their side rather than on the side of the collective TVEs. Private TVEs were growing rapidly to claim an ever-larger share of employment, accounting for 49% of employment in 1989 and 50% in 1990. In 1989, private TVEs claimed 58% of the after-tax profits and 45% of the total wage bill of all TVEs. By the end of the 1980s, and just within a single decade of reform, private TVEs were on the verge of overtaking collective TVEs across a number of dimensions. The static advantage of collective TVEs quickly eroded as private TVEs accumulated growth momentum. From a dynamic perspective, the TVE miracle took place entirely within the private sector rather than in the collective sector. Some scholars cite the smaller share of private TVEs in industrial output value to support their view that collective TVEs were the main source of growth. Apart from the static and dynamic issues discussed above, there is an inherent data bias in this view. In the 1980s, private businesses first ventured into the service sector rather than into industry. By definition, the industry data understates the importance of private TVEs. By 1987, private TVEs already accounted for 32.1% of the gross output value in the entire TVE sector (encompassing both industry and service), compared with

30 Jean C. Oi, Rural China Takes Off (Berkeley: University of California Press, 1999); and Naughton,

The Chinese Economy.

[ 20 ]


23% of the industrial output value.31 Private TVEs were still smaller than collective TVEs by the output measure, but their share was by no means insignificant by the mid-1980s. In fact, even this finding that private TVEs accounted for 32% of the output value of the TVE sector understates their economic importance. The 32% figure is the average of the private shares of TVEs in all provinces implicitly weighted by the economic size of the provinces. This introduces a subtle bias. Private entrepreneurship and private TVEs first started in the poorer provinces. Poorer provinces have smaller GDPs, and therefore their economic weight is small in the calculation of national means. The weighted average shares of private TVEs in output value reflect not only the size of private TVEs but also the size of provincial economies. Private TVEs would thus necessarily appear small simply because they were clustered in the poorer provinces. Although the weighted average figure is the correct statistical measure of private TVEs, it may not be the correct economic measure. Because poor provinces lacked many alternatives compared with rich provinces, it is important to examine the role of private TVEs in those provinces. The unweighted average of the private TVEs’ share of gross output value in 1987 is 40%, which is 8% higher than the weighted average. This is because the poorer and smaller provinces in the 1980s had a larger private sector. Table 2 presents the percentage of private TVEs in the gross output value of the entire TVE sector across all 29 provinces and municipalities in China based on data from 1987. In addition, the table presents provincial data on per capita GDP, provincial shares of China’s GDP, and percentage shares of agricultural population in the provincial population. The table arrays the provinces from high to low according to their share of private TVEs in the provincial gross output value. The highest share is Hebei (70.4%), while the lowest share is Shanghai (6%). This is an extraordinary range. As shown in the table, private TVEs were the most vibrant in the poorest provinces. Three of the five provinces with the lowest TVE output shares are the richest regions in China (the cities of Shanghai, Beijing, and Tianjin). By contrast, the poorest provinces in China had the highest TVE output share. This is a pattern that holds enormous policy significance for poverty reduction. On the basis of the Chinese official poverty line, in 1978 the number of poor

31 The TVE data used in this section is from the Editorial Committee of the TVE Yearbook. See

Editorial Committee, Zhongguo xiangzhen qiye nianjian (1978–1987) [China TVE Yearbook (1978–1987)] (Beijing: Zhongguo nongye chubanshe, 1989). The TVE output data is broken down by economic sector as well as by TVE ownership.

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Table 2 Geographic and Economic Distribution of Private TVEs, 1987 % of private TVEs in gross output value

Per capita GDP (yuan)

Provincial share of China’s GDP (%)

% of agricultural population

Hebei

70.4

921

4.56

85.8

Guizhou

63.9

546

1.45

87.8

Henan

61.3

756

5.32

88.2

Guangxi

57.7

607

2.11

87.3

Ningxia

56.3

922

0.35

77.7

Neimenggu

55.9

1,025

1.85

70.5

Jilin

52.8

1,269

2.60

62.2

Anhui

51.9

842

3.86

85.2

Shaanxi

49.3

796

2.09

81.9

Xizang

48.0

863

0.15

86.1

Heilongjiang

47.3

1,335

3.97

58.6

Qinghai

46.9

1,018

0.38

70.9

Xinjiang

45.1

1,053

1.30

55.2

Sichuan

43.0

721

6.52

85.5

Fujian

41.5

1,004

2.44

83.3

Gansu

41.4

764

1.39

84.0

Jiangxi

40.7

729

2.30

81.9

Shanxi

37.8

962

2.25

78.7

Hunan

36.2

818

4.10

85.4

Liaoning

36.0

1,917

6.28

58.9

Hubei

34.0

1,031

4.52

78.0

Guangdong

33.0

1,383

7.05

77.5

Yunnan

31.1

653

2.00

88.1

Shandong

23.2

1,131

7.79

86.0

Zhejiang

16.3

1,470

5.27

83.8

Tianjin

12.2

2,682

1.92

45.1

Beijing

10.9

3,338

2.85

39.2

Jiangsu

10.7

1,462

8.05

81.5

6.0

4,396

4.76

34.2

Average of all provinces

40.0

1,256

3.40

74.8

Average of top 10

56.8

855

2.40

81.3

Average of bottom 10

21.4

1,946

5.10

67.2

Two-way correlation with private TVE shares

n/a

-0.71

-0.39

0.49

Province

Shanghai

Source: Author’s calculations based on data from the Ministry of Agriculture of the People’s Republic of China, 2003.

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rural Chinese stood at 250 million. Within ten years, this number had fallen to 96 million, a reduction of 154 million in the poverty headcount. (By contrast, from 1989 to 1999 the poverty headcount declined by only 62 million even though GDP growth rates were broadly similar in the two decades.)32 Poverty reduction occurred, of course, in places where poverty was most serious, and it was these poor provinces that showed the most vibrant private entrepreneurship. One would be hard pressed to argue that China’s success in poverty reduction was not a result of private entrepreneurship. As of 1987, private TVEs already contributed more than 50% of the TVE output in eight provinces. In another fifteen provinces, private TVEs accounted for between 30% and 50% of the output value. Although we do not have data, in the late 1970s the private share would have been close to zero. This is indicative of the rapid private-sector development in the 1980s. Within only eight years of the beginning of the reform era, private TVEs already produced most rural output in one-third of Chinese provinces and accounted for a sizeable share of rural output in another half of the provinces. It is difficult to reconcile this finding with the Beijing Consensus view that innovations in the public sector, rather than in the private sector, contributed to China’s initial take-off.

conclusion Chinese leaders, many of whom had no exposure to Western economics, did not design reforms according to free-market economic theory. A gradualist strategy makes a lot of sense in this context. The notion that countries should experiment rather than rigidly enforce a fixed ideology is indeed borne out by China’s growth experience. But, as my exposition shows, Chinese experimentation in the 1980s actually led to an explosion of private entrepreneurship in the form of TVEs rather than state ownership. What the Chinese experience shows is that the emergence of a market and of market order is somewhat spontaneous, being conditional on policy liberalization. My disagreement with the Beijing Consensus interpretation is not with its reasoning but rather with its characterization of facts.

32 Martin Ravallion and Shaohua Chen present some of the best estimates of China’s progress on

poverty reduction. They devised their own poverty lines, which show a different rate of poverty reduction. However, the finding that the early period witnessed the sharpest poverty reduction is supported by their research. Martin Ravallion and Shaohua Chen, “China’s (Uneven) Progress Against Poverty,” Journal of Development Economics 82, no. 1 (2006): 1–42.

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This essay has examined rural household income and consumption trends and the changes over time. In Capitalism with Chinese Characteristics, I provided additional details about the decade of the 1990s, including deteriorating social performance, rising illiteracy, and slower progress in public health. One significant puzzle revolves around the question of politics, but as this essay shows, the politics in the 1980s were also trending in a liberal direction compared with the politics of the 1990s. Some analysts, especially those from India, have equated China’s one-party system with public-sector efficacy and advocated the adoption of the China model by India, arguing that India could build more infrastructure and attract greater FDI if the country were more like China politically. This view that Chinese growth derives from the country’s authoritarianism is probably one of the most misleading—but also one of the most enduring—ideas associated with the Beijing Consensus. This analysis raises both normative and policy implications. At the normative level, the larger significance of the Beijing Consensus is whether it holds valuable lessons for other poor countries struggling to grow. Should they embrace statism or economic and political liberalism? My own interpretation of the Chinese growth experience in the last 30 years is that the movement toward economic and political liberalism contributed to the true China miracle. This by no means validates the market fundamentalism view that all the principles and policies of liberalization should be adopted and implemented simultaneously and rapidly. The analysis identifies the broad direction for economic policies, not the specific tactics on how to implement those policies. On tactics, much of the Beijing Consensus’s emphasis on gradualism and experimentalism is eminently sensible. Nonetheless, though Chinese reforms were experimental, contrary to the claim made by the Beijing Consensus proponents, those experiments resulted in financial liberalization and private entrepreneurship. The debate about the Beijing Consensus is ultimately about theory—what are the right economic principles? The meaningful lesson for other developing countries is whether China has the right economic principles in place. Other than the adage that policy tactics should be grounded in local conditions, the Beijing Consensus’s emphasis on experimentalism has limited normative value for other countries wishing to grow. Local conditions, by definition, are country-specific, and one cannot specify in advance what they are. A number of economists who view China’s success from the perspective of the Beijing Consensus are actively advising poor countries on development policies. One country’s experiment is another country’s theory after all. So it is critical to get the theory right. [ 24 ]


Does this analysis yield insights on China’s own future? Yes, it does. One fallout from the global economic slowdown is that in the past two years the Chinese government has become more economically statist, offsetting, in my view, the gains made in the improvement of the rural economy. It is ironic that the financial crisis on Wall Street should be interpreted as a resounding confirmation of the Beijing Consensus. The depression of rural income, and therefore of domestic consumption, is a direct product of the economic statism so celebrated by the Beijing Consensus. To compensate for declining domestic consumption, in the 1990s the Chinese state increasingly resorted to investments to drive up GDP growth (in addition to subsidizing U.S. consumers through an undervalued exchange rate). Since the mid-1990s, investment share of GDP has risen steadily. There is emerging evidence that this rising ratio of investment to GDP is creating unsustainable imbalances in the Chinese economy. This divergence between GDP growth and personal-income performance requires a rethinking of the China model. As of this writing, there is increasing evidence that social tensions in China are intensifying and that the roots of these social tensions can be plausibly linked to the poor performance of personal income. There is also evidence that the marginal returns from the huge investment programs may be decreasing (or even be negative). One telltale sign of the substantial fragilities in the Chinese economy is that authorities have so far refused to raise interest rates, despite 8% growth in 2009 and double-digit growth in the first three months of 2010. The signs of rising inflation are also abundantly evident. Economists in the private sector have estimated that the true Chinese inflation rate could be double the official statistic. A plausible explanation of China’s accommodating monetary policy stance is that Chinese growth depends overwhelmingly on cheap capital and capital subsidies (as implied by negative interest rates) rather than on the underlying dynamism of the economy. There are also some substantial and long-run microeconomic distortions that were introduced by the 2009 stimulus program, including the crowdingout effect on China’s private sector (as well as on the foreign sector). These more efficient private-sector firms—foreign and domestic—are the source of the job creation and income growth that are required for China to successfully navigate away from its excessive export dependency. All things considered, the stimulus program might have moved China further away from rebalancing. The macro and international environment has become far less accommodating to the statist China model. One reason this model worked despite its detrimental effect on personal income is the strong final [ 25 ]

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consumption demand from the United States fueled by, as is now known, the unsustainable flow of subprime credit. As the personal saving rate is rising in the United States, and as Europe is experiencing a period of economic instability, China needs to rethink its economic development strategy, which has so far suppressed the country’s vast potential for internal final consumption while rapidly ramping up production capacity. That combination is increasingly untenable. To rebalance, China must revert back to the more liberal package of economic and political reforms characteristic of the 1980s and move away from the statist model so admired by many Western observers. 

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Complex Patchworks: U.S. Alliances as Part of Asia’s Regional Architecture Victor D. Cha

victor d. cha is D.S. Song–Korea Foundation Chair in Asian Studies

and Government and the Director of Asian Studies at Georgetown University. He is also Senior Adviser and Korea Chair at the Center for Strategic and International Studies (CSIS) in Washington, D.C., and a Research Associate of the National Asia Research Program. Dr. Cha previously served as a Director for Asian Affairs at the National Security Council from 2004 to 2007. He can be reached at .

note u The author thanks Kat Harrington, Jenny D. Jun, and Jeonghoon Ha for research assistance. An earlier version of this article was presented at the Asia Policy Assembly in Washington, D.C., on June 17–18, 2010.

keywords: united states; alliances; security architecture; china © The National Bureau of Asian Research, Seattle, Washington

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executive summary This article examines the significant role of existing U.S. bilateral alliances in the complex interplay of emerging regional security architectures in Asia.

main argument The continued relevance of the U.S. bilateral alliance system in Asia appears most tested by questions of regional architecture. International relations and areas studies scholars have rushed to a judgment that the alliance system is failing both to think creatively about regional architecture and to integrate China’s rise in Asia. The future of security cooperation in the region, however, may not be as dim as people surmise. This article argues that a definite architecture is emerging and evolving in Asia that the U.S. and its allies support. This architecture is not dominated by China, nor is it characterized by U.S. diminution; rather, it is inclusive of the major powers in the region. Nonetheless, this regional architecture must overcome a clear security dilemma to realize its positive potential. The dilemma is that U.S. alliance–initiated regional efforts are seen as latent efforts to contain China, while regional- or China-initiated proposals are seen as attempts to exclude the U.S. By encouraging a fluid network of security architecture, however, this problem can be mitigated to avoid zero-sum solutions. The picture of the institutions that connect the U.S., its allies, and China in the region is much more complex than bilateral vs. multilateral. Instead, this architecture is a “complex patchwork” of bilaterals, trilaterals, and other plurilateral configurations. The complexity of this geometry is a useful tool for muting regional security dilemmas.

policy implications • The U.S. bilateral alliance architecture is an integral component of Asia’s emerging regional architecture. • The emerging Asian architecture, composed of bilateral, trilateral, and other multilateral relations, is fluid and results-based; it is not a single overarching institution like that found in Europe. • The U.S. and China are both able to operate within this architecture to achieve positive-sum gains.

cha u complex patchworks

W

hat is the future of the U.S. alliances in Asia in a post–Cold War security environment? The bilateral hub-and-spoke system, which served the United States and its allies so well during the Cold War, appears less suited to deal with the complex constellation of problems today, including global financial turmoil, growing skepticism about free trade, and wars in Iraq and Afghanistan. In Asia the alliance system’s relevance appears most tested by questions of regional architecture. International relations and area studies scholars have rushed to a judgment that the U.S. alliance system is failing both to think creatively about regional architecture and to integrate China’s rise in Asia. The future of security cooperation in Asia, however, may not be as dim as people surmise. There is a definite architecture emerging and evolving that the United States and its allies support. This architecture is not dominated by China, nor is it characterized by U.S. diminution; on the contrary, it is inclusive of the major powers. Nonetheless, this regional architecture must overcome a clear security dilemma to realize its positive potential. The dilemma is that U.S. alliance–initiated regional efforts are seen as latent efforts to contain China, while regional- or China-initiated proposals are seen as attempts to exclude the United States. This problem, however, can be mitigated to avoid zero-sum solutions by having a fluid network of security architecture. The picture of the institutions that connect the United States, its allies, and China in the region is much more complex than bilateral vs. multilateral. Instead, this architecture is a “complex patchwork” of bilaterals, trilaterals, and other plurilateral configurations. The complexity of this geometry is a useful tool for muting regional security dilemmas.

“if it ain’t broke, don’t fix it”: asian security architecture during the cold war Previous U.S. disinterest in regional architecture at the end of the Cold War stemmed from an “if it ain’t broke, don’t fix it” mentality. Initially, there were concerns that regional initiatives were meant to undermine U.S. leadership. The United States was decidedly ambivalent when the Malaysian prime minister Mahathir Mohamad proposed the East Asia Economic Caucus (EAEC) in 1990 because the EAEC clearly aimed at undermining U.S. influence in Asia. In November 1990, Secretary of State James Baker criticized as inappropriate the notion of regional security dialogues replacing the U.S. hub-and-spoke network of bilateral alliances, which had been at the center of

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Asian security and prosperity for four decades.1 This later gave way after 1991 to grudging acceptance that multilateral security dialogues could complement (but not replace) the U.S.-based bilateral architecture.2 The George H.W. Bush administration did not see the need for an East Asian security initiative when U.S. bilateral alliances were already present. The Clinton administration spoke of multilateralism but did not actually invest much in institutions other than the Asia-Pacific Economic Cooperation (APEC), to which the United States belonged. The recent Bush administration concentrated on strengthening bilateral alliances with Japan and South Korea, following a report on Asia policy by former deputy secretary of state Richard L. Armitage and former Clinton administration official Joseph S. Nye. However, the administration later came to accept the need for the six-party talks as a complementary framework to tackle crises on the Korean Peninsula. The Obama administration, though more openly supporting multilateralism in Asia, has still deviated little regarding security commitments to key allies.3 At the same time that U.S. acceptance of a role for regional security grew, the rhetoric remained somewhat ambivalent for another reason: if the United States were too enthusiastic about multilateral security, this enthusiasm might be interpreted in the region as a pretext for U.S. withdrawal. Abandonment fears have been especially high in several Asian states after the Cold War, given that the United States actually reduced its forces in East Asia from roughly 100,000 to 64,500 in 2010.4 Many Asians see the United States as a capricious power driven by domestic interests and ideology whose relative priorities lie in the Middle East instead of in Asia.5 U.S. officials believed that too much enthusiasm for multilateral security institutions could fuel abandonment fears that the United States is trying to “pass the buck” on its security commitments to regional powers.

1 See Australian Financial Review, “Security, in Letter and Spirit,” May 2, 1991. Statements by then

assistant secretary for East Asia Richard Solomon in October 1990 typified the attitude: “The nature of the security challenges we anticipate in the years ahead—do not easily lend themselves to region-wide solutions. When we look at the key determinants of stability in Asia...it is difficult to see how a Helsinki-type institution would be an appropriate forum for enhancing security or promoting conflict resolution.” Cited in Paul Midford, “Japan’s Leadership Role in East Asian Security Multilateralism: The Nakayama Proposal and the Logic of Reassurance,” Pacific Review 13, no. 3 (August 2000): 372.

2 See James Baker, “America in Asia: Emerging Architecture for a Pacific Community,” Foreign Affairs

70, no. 5 (Winter 1991/92): 1–18. See also remarks by Baker in Philip Shenon, “Baker Asks Asians to Move Warily on New Pacts,” New York Times, July 25, 1991.

3 See Susan Shirk, “American Hopes: An Agenda for Cooperation That Serves U.S. Interests,” Global

Asia 5, no. 1 (Spring 2010): 27.

4 Ibid. 5 See Richard L. Armitage and Joseph S. Nye, “The U.S.-Japan Alliance: Getting Asia Right through

2020,” Center for Strategic and International Studies (CSIS), CSIS Report, February 2007, 20.

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Key U.S. bilateral allies in Asia, including Japan and the Republic of Korea (ROK), were also somewhat ambivalent about multilateralism. These allies desired to participate in multilateral institutions yet recognized the importance of bilateral alliances with the United States for their national security. In addition, Cold War attempts at constructing institutions were largely subregional—for example, the Australia, New Zealand, United States Security (ANZUS) Treaty in 1951, the Southeast Asia Treaty Organization (SEATO) in 1954, and the Five Power Defence Arrangements (FPDA) in 1971.6 The ROK did express an interest in regional security arrangements during the Cold War, alongside Taiwan and the Philippines. During the Korean War, for example, Syngman Rhee, Chiang Kai-shek, and Elpidio Quirino pushed for a Pacific Treaty Organization (PATO) arrangement similar to NATO. But the United States largely judged these entreaties to be both dangerous and self-serving attempts by anti-Communist dictators to drag the United States into another war on the Asian mainland against China.7 Japan’s ambivalence in multilateral security was both structural and historical. Structurally, the bilateral alliance provided all the private goods that Japan and other U.S. partners needed, thereby obviating any pressing need for alternative multilateral or bilateral partners. The cost of this dependence was persistent Japanese and Korean fears of becoming entrapped in military contingencies or political situations in which Seoul or Tokyo did not share, or shared only partially, U.S. interests. This cost of dependence, however, was generally accepted by South Korea and Japan as needed for the stability of the region.8 The ambivalence for regional integration also stemmed from an acute sensitivity to lingering historical suspicion of Japan. Any multilateral security architecture would by definition require a larger Japanese leadership role

6 SEATO was established at the Manila Conference of 1954, largely on the model of NATO, but failed

because members’ primary security concerns were internal subversion rather than compelling external threats. The ANZUS Treaty formed in 1951 as an extension of the U.S.-Australia treaty (the U.S.-New Zealand axis dissolved in 1986). The FPDA was established in 1971 among Britain, Australia, New Zealand, Malaysia, and Singapore. This arrangement fulfilled a consultative function based on historical legacies of the commonwealth rather than any overt security purpose. See Leszek Buszynski, SEATO: The Failure of an Alliance Strategy (Singapore: Singapore University Press, 1983); Chin Kin Wah, “The Five Power Defence Arrangements: Twenty Years After,” Pacific Review 4, no. 3 (1991): 193–203; and Michael Yahuda, International Politics in the Asia-Pacific (London: Routledge, 1996).

7 Victor Cha, “Powerplay: Origins of the American Alliance System in Asia,” International Security

34, no. 3 (Winter 2009/10): 158–96.

8 See John Welfield, An Empire in Eclipse (London: Athlone Press, 1988).

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than would be deemed acceptable by many in the region.9 The United States historically bears partial responsibility for the gap between Japan’s enthusiasm for regional integration and the region’s lack of trust of it.10 Thus, there is a perception that the enduring Cold War legacy of the huband-spoke system promoted by John Foster Dulles and others in the Truman and Eisenhower administrations has inhibited, and will continue to inhibit, regional interaction. Scholars are quick to blame the United States and its bilateral alliances for the underwhelming record of multilateralism in Asia. Critics argue that regional allies see little need for additional multilateral or bilateral arrangements, while further U.S. commitment to multilateralism could be perceived by allies as undermining existing bilateral alliances. However, such bilateral alliances are actually compatible with multilateralism in Asia; in fact, the existing system of U.S. alliances reinforces a distinct form of regional cooperation emerging in Asia.

the security dilemma in asian architecture There is a distinct architecture emerging and evolving in the region that is supported by the United States and its Asian allies and that is inclusive of China. Contrary to popular judgments of U.S. disinterest in Asia, the United States is neither leaving the region nor ceding leadership to China; rather, it has every intention to remain an Asia-Pacific power. This continuing U.S. presence is grounded in deepening and robust U.S.-Japan and U.S-ROK alliances as well as an active interest by all three countries in building substantive and innovative regional groupings that incorporate China as a critical player. However, a conceptual security dilemma may still emerge in the region due to diverging preferences of key powers over the architectural design.

9 For example, discussions of a Northeast Asian equivalent to NATO (PATO, or the Pacific Treaty

Organization) in the 1960s could not advance past popular opposition and suspicion that this might spark a renewal of Japanese dominance in the region. Part of the problem in this regard stemmed from the perceived zero-sum trade-offs of U.S. and Japanese leadership roles. In other words, from the perspective of potential participants in regional architecture, any enhancement of Japan’s role by definition would reduce the United States’ regional presence and, therefore, looked like the United States was “handing off ” the region to Japan. Japanese disinterest also traditionally stemmed from the implications that multilateral participation would have on outstanding territorial disputes. Japan was concerned that certain proposals for multilateralism would entail a de facto ratification of the territorial status quo and thus undermine Japanese interests. For this reason, Tokyo opposed Soviet proposals in 1986 for a region-wide grouping in Asia similar to the Commission on Security and Cooperation in Europe (CSCE) because this might reinforce the status quo and Moscow’s possession of the northern territories.

10 See Cha, “Powerplay”; and Victor D. Cha, “Currents of Power: U.S. Alliances with Taiwan and

Japan during the Cold War,” in The Uses of Institutions: The U.S., Japan, and Governance in East Asia, ed. John Ikenberry and Takashi Inoguchi (New York: Palgrave, 2007), 103–29.

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While Asian regional architecture is moving in a positive direction in general, there is potential that any multilateral initiative by the great powers will lead to a set of mutually reinforcing insecurity spirals. Such insecurity could occur, albeit unintentionally, if institution-building in Asia were seen from a zero-sum perspective—in other words, if the great powers have diverging preferences on how they best want to organize the regional order, yet believe there are few structures on which to impose these preferences. From this perspective, any U.S. alliance–initiated proposals for regional organizations could be perceived as an attempt to latently contain or encircle China.11 Likewise, any China-supported efforts at regional institution-building could be seen as attempts to exclude the United States.12 Without caution, this diverging perception of intentions could heighten tensions in the region. However, regional cooperation in Asia need not be perceived as zero sum. At a time when multilateral security cooperation has begun to thrive in Asia, it is important that positive-sum alternatives are created so that cooperative efforts contribute to stability in Asia, not vice versa. Such non-zero sum solutions that help circumvent security dilemmas can be fostered if states adhere to three core assumptions about what regional architecture will work best for the United States, its allies, and China.

Assumption 1: No Single Institution Should Define the Region The first assumption that countries need to internalize—particularly the United States, Japan, and China—in thinking about regional architecture is that no single umbrella institution can best define the region. When compared to Europe, Asia is often seen as under-regionalized because there is no single region-wide equivalent to NATO or the European Union. However, considering that every region has its own history and identity, what best serves

11 For example, when Prime Minister Shinzo Abe proposed the “quadrilateral initiative” in his

summit with Indian prime minister Manmohan Singh in August 2007 that involved the United States, Japan, India, and Australia, many viewed this as an attempt to contain China. See Brahma Chellaney, “New Great Game: The U.S.-India-Japan-Australia Quadrilateral Initiative,” Asian Age, June 2, 2007 u available at http://chellaney.spaces.live.com/blog/cns!4913C7C8A2EA4A30!351; and Praful Bidwai, “Abe’s Visit Underlines New Strategic Alliance,” Inter Press Service, August 24, 2007 u http://ipsnews.net/news.asp?idnews=39009. Similarly, Hatoyama’s proposals for an East Asia community without the United States at the 2009 APEC summit in Singapore could be seen as an effort to circumvent this security dilemma, albeit at the expense of the United States. See Toru Higashioka, “Hatoyama Talks Up East Asia Community,” Asahi Shimbun, November 16, 2009.

12 For example, in the 1990s the United States criticized regional security dialogues such as the

East Asian Economic Caucus as inadequate efforts to replace the U.S. hub-and-spoke network of bilateral alliances, which had been at the center of the region’s security and prosperity for four decades. Washington’s early resistance gave way to a grudging acceptance of regional institutions on the condition that they complement, but not replace, the U.S.-based bilateral architecture. See Australian Financial Review, “Security, in Letter and Spirit”; and Baker, “America in Asia.”

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the political, security, and economic interests of one region may not be optimal in another. Asia is less suited to a single region-wide grouping than Europe primarily because of geography, growth of post-colonialist identities, lack of intraregional trade, and divergent regime types and threat perceptions.13 Geography. Asia has geostrategic features different from regions such as Europe that make it less suited to a region-wide grouping. East Asia was unlike Europe during the Cold War in that it did not consist of a contiguous ground theater opposed by two hundred Soviet divisions with a clear dividing line between East and West. The Asian theater was both land and maritime; there was no “goal line stand” in the heartland of the continent for which to prepare.14 Coupling geostrategic facts with the absence of true wartime allies in Asia during the Pacific War like those in Western Europe, the conditions for the creation of a single region-wide multilateral security coalition in Asia were far from ideal. Growth of post-colonialist identities. The absence of a region-wide security institution was also a function of the region’s deep distrust of Japan—part of Asia’s postwar, postcolonial, and nationalist identities—which trumped any arguments for regional security.15 Thus, any military build-up or security cooperation effort initiated by Japan faced skepticism across the region. Furthermore, historical animosities toward Japan’s colonialism during World War II persist in China and South Korea. Such continuing animosities are highlighted by China’s and South Korea’s harsh reactions to former Japanese prime minister Junichiro Koizumi’s visits to Yasukuni Shrine, where Japanese soldiers who fought in World War II are honored as war heroes. These unresolved animosities constrain the development of a region-wide security institution by hindering meaningful cooperation among countries in Northeast Asia. Lack of intraregional trade. In Asia, furthermore, the level of postwar intraregional trade was low and insufficient to spur economic regionalization compared to what occurred in Europe.16 Low levels of economic development 13 Paul Bracken, Fire in the East: The Rise of Asian Military Power and the Second Nuclear Age (New

York: HarperCollins, 1999), 26; Gerrit W. Gong, ed., Memory and History in East and Southeast Asia: Issues of Identity in International Relations (Washington, D.C.: CSIS, 2001); Nicholas Kristof, “The Problem of Memory,” Foreign Affairs 77, no. 6 (November/December 1998): 37–49; Christopher Hemmer and Peter Katzenstein, “Why Is There No NATO in Asia? Collective Identity, Regionalism, and the Origins of Multilateralism,” International Organization 56, no. 3 (Summer 2002): 58; Anthony McGrew and Christopher Brook, eds., Asia-Pacific in the New World Order (London: Routledge, 1998), 57; and Aaron Friedberg, “Ripe for Rivalry: Prospects for Peace in a Multipolar Asia,” International Security 18, no. 3 (Winter 1993/94): 13–14.

14 Bracken, Fire in the East, 26. 15 Gong, Memory and History; and Kristof, “The Problem of Memory,” 37–49. 16 McGrew and Brook, Asia-Pacific in the New World Order, 57.

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reduced the incentive for regional economic integration because there was no incentive for states to venture outside their relationship with Washington to secure material needs. Until the rapid economic growth of China averted some aspects of this trend, major economic powers in Northeast Asia depended heavily on trade with the United States. Lack of intraregional trade and the low level of economic interdependence hindered the development of a single region-wide security institution in Asia because Asian countries simply had less economic incentive to cooperate on such effort. Divergent regime types and threat perceptions. Another factor that makes Asia less suited for a region-wide security institution is the divergence of regime types and threat perceptions. Unlike in Europe, Asian politics range from authoritarian to democratic, making it more difficult to organize governments under a single umbrella political institution based on common values.17 Likewise, Asia’s threat matrix during the Cold War was not nearly as binary as that of Europe, where a singular threat called for a collective response. In Asia, some viewed the Soviet threat as paramount (e.g., Japan), others viewed the Chinese threat as compelling (e.g., Taiwan), others viewed Japan as the main security threat (e.g., Korea), and yet others were focused on internal threats. Because Asian countries lacked common values derived from the homogeneity of regime types and threat perceptions, no single umbrella institution could best define the region. The prescriptive point to be made here is not that policymakers should oppose region-wide groupings in Asia but merely that the expectation that a single institution can anchor regional architecture is misplaced. Heaping such expectations on efforts such as the East Asia Summit (EAS) is unfair. It not only creates a standard that is impossible to meet given the history and diversity of the region but also encourages competition among regional institutions that can only exacerbate security dilemmas. Moreover, it leads to false judgments regarding the failure of the U.S. alliance system to help create regional architecture in Asia.

Assumption 2: Ad Hoc Institutions Work Better than Formal Ones The second assumption is that the history of institution-building in Asia generally shows that informal institutions work better than formal ones. Some organizational literature asserts that the creation of formal structures can produce a self-reinforcing dynamic where institutional purpose and growth

17 Friedberg, “Ripe for Rivalry,” 13–14.

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occur in a symbiotic manner. In Asia, however, the few attempts at formal security institutions aimed at collective defense have been spectacularly unsuccessful (success being defined as tangible and coordinated steps by multilateral partners that advance solutions to substantive problems). In the early 1950s, PATO failed to gain support, and SEATO, a collective defense institution founded in 1954 that was initially created to block further Communist gains in Southeast Asia, also failed miserably. There were no joint commands with standing forces, and an attack on one member was not automatically considered an attack on all. Without a firm security commitment by major powers, SEATO was unable to intervene in conflicts in Cambodia, Laos, and Vietnam and hence had lost the complete trust of its members by the time of the organization’s dissolution in 1977. John Foster Dulles’s attempt to create a Pacific Ocean Pact between the United States, Indonesia, Australia, New Zealand, the Philippines, and Japan also failed.18 During the Vietnam War, South Korea sought to create a multilateral grouping of war allies, but this initiative failed as well. The key similarity among these cases was the relative priority placed on the formality of the institution over the functional purpose or task at hand. Like many institution-building ventures that emphasize structure over purpose, a great deal of attention and energy is wasted on defining the criteria for membership and the rules of the organization (such as in what country the secretariat should be located or how the chairmanship should rotate). Though there has been relative success in Southeast Asia in creating formal dialogue-oriented institutions with established secretariats, regular meetings, and packed agendas, such initiatives are often criticized for having few substantive outcomes.19 The primary criticism of formal institutions such as the ASEAN Regional Forum (ARF) and EAS is that they end up being “talk shops” in which opinions are discussed, only to be re-discussed at the next meeting with no real substantive progress. The harshest critics ridicule the “talent show” performances at the ARF as an example of the non-substantive nature of the meetings, in which diplomats are reduced to giving amateur performances that may build some goodwill (and lasting memories) but that do not advance solutions to bilateral or multilateral problems. Much of this lack of substance comes from the ARF’s rigid grouping consisting of 27 member states, some of whom have had a long tradition of the “ASEAN

18 Cha, “Powerplay,” 158–96. 19 Amitav Acharya, Constructing a Security Community in Southeast Asia: ASEAN and the Problem of

Regional Order (London: Routledge, 2000), especially chap. 6.

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way” of nonintervention and non-legalism, while some non-ASEAN states want more concrete mechanisms to be developed.20 Many criticize the newest regional initiative, the East Asia Summit, in this fashion. The first meeting of the EAS in December 2005—involving the ten ASEAN members, the “plus three” members (China, Japan, and South Korea), Australia, New Zealand, and India—was accompanied with much fanfare. Kishore Mahbubani, the former Singaporean foreign ministry official and opinion leader, declared the meeting as marking the official start of the long-touted “Pacific century.”21 Yet arguably more energy was expended on the criteria for membership than on substantive issues. Both the George W. Bush and Obama administrations have been cautious in their support of this new institution in part because it has added little value and might detract from what Americans perceive to be the more substantive work done in APEC.22 Though such institutions focused on security dialogue can certainly coexist with other ad hoc groupings in Asia, the rigid nature of these institutions limits their functional effectiveness. Instead of these formal institutions, ad hoc institutions appear to have been more successful than formal institutions at taking tangible, coordinated steps to solve a substantive problem. In December 2004, for example, when a tsunami killed over 300,000 people in South Asia, there was no formal regional or multilateral institution to respond. Once the scale of the disaster became clear (initial reports from the most devastated areas, such as remote Banda Aceh, Indonesia, were delayed), international actors scrambled to find an appropriate response. None of the existing institutions, however, such as the ARF and APEC, were capable of responding to the devastation in Indonesia, Sri Lanka, and India. Instead, a makeshift coalition of the United States, Japan, Australia, and India—known as the Tsunami Core Group—formed within the initial 48 hours of the crisis to bring relief supplies to the area.23

20 Michael Leifer, The ASEAN Regional Forum: Extending ASEAN’s Model of Regional Security,

Adelphi Papers 302 (London: Oxford University Press, 1996), 41.

21 “Rising Unity in East Test for Global Trade,” New Zealand Herald, November 19, 2005, cited in

Bruce Vaughn, “East Asia Summit (EAS): Issues for Congress,” Congressional Research Service, CRS Report for Congress, RL33242, January 11, 2006, 4.

22 Ibid. 23 The coalition countries together provided more than 40,000 troops and humanitarian first-

responders, helicopters, cargo ships, and transport planes within a nine-day period. The Tsunami Core Group set up the basing arrangements; provided financial resources, military assets, and personnel; and constituted the primary global response to the tsunami until other international relief agencies could mobilize on the ground. See Daniel Twining, “America’s Grand Design in Asia,” Washington Quarterly 30, no. 3 (July 2007): 79–94; and Ralph Cossa, “South Asian Tsunami: U.S. Military Provides Logistical Backbone for Relief Operation,” Foreign Policy Agenda, March 4, 2005 u http://www.america.gov/st/washfile-3english/2005/March/20050304112100dmslahrellek0. 5331537.html#ixzz0a5F8S6oo.

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If institutions are defined by their capability to address a problem successfully, then the Core Group met that mark. However, if the measure of success for Asian institutions is the permanence of extant structures, rules, and procedures and the number of joint statements issued, then the Core Group was not successful. There were never any “G-4 type” summits, joint communiqués, or secretariats. Consultation initially consisted of phone calls between the U.S. president and leaders in Tokyo, Canberra, and New Delhi, and then involved daily conference calls at 22:00 (EST) and emails at the deputy foreign minister levels. The “structure,” as one State Department official recounted, was a set of 40 minute conference calls.24 Moreover, as soon as its mission was accomplished, the Tsunami Core Group disbanded itself, deferring to the broader international disaster response effort. Then U.S. undersecretary of state Marc Grossman put it best: “The Tsunami Core Group was an organization that never met in one of diplomacy’s storied cities, never issued a communiqué, never created a secretariat, and took as one of its successes its own demise.”25 The most striking aspect of Asian security architecture is the absence of a multilateral security institution for Northeast Asia. The one institution that has evolved, the six-party talks, was formed initially in an ad hoc fashion in 2003. After North Korea violated the denuclearization agreement with the United States under the 1994 Geneva Agreed Framework, the five regional powers—the United States, Japan, South Korea, Russia, and China—agreed to come together in a multilateral negotiation to solve the nuclear problem. The six-party talks were never conceived as a formal security institution for Northeast Asia but, instead, were an ad hoc reaction to the second North Korean nuclear crisis. The organization reached interim agreements on denuclearization and in the process created habits of consultation, heightened familiarity, and increased interaction among the five regional powers.26

Ad Hoc Institutions Help to Circumvent Collective Action Problems The experiences of these informal groups are significant for institutionbuilding in Asia. One of the primary impediments to institution-building in Northeast Asia is a problem of collective action. That is, states generally harbor 24 “Bush Announces Tsunami Aid Coalition,” CNN, December 29, 2004, http://www.cnn.com/2004/

US/12/29/bush.quake/index.html.

25 Marc Grossman, “The Tsunami Core Group: A Step toward a Transformed Diplomacy in Asia and

Beyond,” Security Challenges 1, no. 1 (November 2005): 11.

26 The Joint Statement is available from the U.S. Department of State website u http://www.state.

gov/p/eap/regional/c15455.htm.

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relatively stronger inclinations to secure private goods from multilateral efforts than to provide public goods. Naturally, this makes it harder to incentivize states to invest in formal institutions without a specific near-term payoff. Ad hoc groupings in response to an immediate problem help to solve the collective action problem. First, those players with a proximate interest in the issue will step forward (thereby solving the membership problem). In the past, diverse interests have presented a major constraint on bringing nations under a region-wide security institution. For example, when then prime minister Mahathir proposed the EAEC in 1990, Japan refused to participate because of U.S. pressure not to join the institution. Ad hoc groupings solve the membership problem because the event that incentivizes states to participate usually provides ample justification to fully cooperate. Countries will also be more willing to participate because facilitating the efficacy of the institution will be in their proximate interest. Second, the task-oriented nature of the grouping leaves no time for long drawn-out procedural discussions, rulemaking, and other material and opportunity costs associated with formal institution-building.27 Function is more important than form and process. Parties are forced to work together on the spur of the moment, yet the urgency of the task creates efficient coordination and effective solutions. As Undersecretary of State Grossman noted, “[the Core Group] was an ad hoc coalition that ignored traditional groupings. We pulled these specific countries together simply because they were the ones with the resources and the desire to act effectively and quickly.”28 Third, through this ad hoc coordination, the parties develop habits of consultation, greater transparency, and a degree of familiarity and trust. Asian countries lack the experience of working in groups with other nations. Thus, when coordinating in a regional architecture framework, states do not possess the mechanisms and mentality to produce meaningful dialogue and cooperation. This shortcoming may help to explain the absence of a successful region-wide institution in Asia. Ad hoc groupings help overcome this problem by providing platforms for Asian nations to develop habits and mechanisms of consultation and to build familiarity and trust. Fourth, these ad hoc institutions can foster institutional growth as well. In the case of the Tsunami Core Group, even though the institution disbanded after the crisis, the experience spurred the growth of other related institutions

27 In the case of the six-party talks, the costs associated with the grouping were eventually borne by

China as the host, which at one point Beijing disdained, requesting that such costs be more evenly divided among the six parties.

28 Grossman, “The Tsunami Core Group,” 12.

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in Asia including the regional tsunami early warning system (U.S.-Japan); the Trilateral Strategic Dialogue (TSD) involving the United States, Japan, and Australia; and the proposal for a quadrilateral (U.S.-Japan-Australia-India) based on the original “core group” concept. 29 In the case of the six-party talks, though the grouping has not solved the North Korean nuclear problem, the regularized sessions, sometimes lasting over two weeks at a time, have provided the parties with opportunities to use the institution to accomplish other business. In the course of the talks, two parties might hold side discussions on preparing for an upcoming bilateral summit; or in the case of the United States during the Bush administration, the six-party venue became a useful place to hold additional discussions about creating a new grouping to address climate change (the Asia-Pacific Partnership on Clean Development and Climate).30 In addition, as part of the effort to explain six-party diplomacy to other countries in the region, Secretary of State Condoleezza Rice created another ad hoc “add-on” institution, the “five plus five,” which comprises five of the six-party countries (without North Korea) plus Indonesia, Australia, Canada, Malaysia, and New Zealand. These meetings took place at the ARF or UN General Assembly. Again, though a purely functional group with no grand designs, this was still a very effective institution.31 For the above reasons, ad hoc responses can work better than permanent institutions in overcoming the collective action problem among Asian countries. Ad hoc institutions are flexible in membership, attract countries with the greatest stake in solving a problem, and are free from the inefficiency of formal rules and procedures. Such groupings create an environment that allows states to have a smaller stake in joining and leaving a group and incentivizes them to participate more readily in addressing a given problem.

29 The TSD was not a direct result of the Core Group experience but was a central element of the

TSD agenda (i.e., to continue the cooperation experienced among the three). See William Tow, “Assessing the Trilateral Strategic Dialogue,” East Asia Forum, February 12, 2009 u http://www. eastasiaforum.org/2009/02/12/assessing-the-trilateral-strategic-dialogue. The “quad” concept was pushed by the Abe government in Japan. See Brahma Chellaney, “ ‘Quad Initiative’: An Inharmonious Concert of Democracies,” Japan Times, July 19, 2007 u http://search.japantimes. co.jp/cgi-bin/eo20070719bc.html.

30 The “AP-6” (comprising the United States, Japan, South Korea, China, India, and Australia) was

officially inaugurated in January 2006 in Sydney, Australia, but key discussions on the concept and membership occurred on the sidelines of the six-party talks. See “U.S. Agrees Climate Deal with Asia,” BBC, July 28, 2005 u http://news.bbc.co.uk/2/hi/science/nature/4723305.stm.

31 “Asia, U.S. Hold Talks without Defiant North Korea,” Agence France Presse, July 28, 2006 u

available at http://www.aseanregionalforum.org/News/tabid/59/newsid399/36/Default.aspx.

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Assumption 3: Bilateral and Multilateral Institutions Are Mutually Reinforcing The third concept critical to overcoming the security dilemma concerns the place of U.S. alliances in the region. It is important to bear in mind that the existing system of bilateral alliances and the emerging multilateral initiatives are not mutually exclusive but rather mutually reinforcing. The postwar huband-spoke system of bilateral alliances created by the United States in East Asia had been, for some five decades, the only successful regional architecture. It provided private goods to alliance partners, and the aggregation of these individual alliances provided public goods to the region in terms of security, freedom of navigation, and political stability. However, the later growth of regional initiatives led many to perceive the two institutions as potentially contradictory. Americans viewed regional initiatives like Mahathir’s EAEC as deliberately intended to undermine the alliance network. Others blamed the inability to form effective “truly Asian” regional institutions directly on the U.S. alliance system. Thus, the development of both bilateral and multilateral institutions was seen as zero-sum, with U.S. bilateral alliances at odds with multilateral institutions in Asia. China made this clear when it once referred to the bilateral alliance system as “Cold War anachronisms” that no longer fit with the region’s architectural needs. A closer analysis of the region’s recent successes, however, suggests that effective multilateral efforts have often been built on preexisting bilateral relationships. Conceptually, this appears to make sense. Any collective effort to address a problem or advance a policy agenda among several players may work best when the players already have preexisting patterns of cooperation, consultation, and trust. In the case of bilateral relationships, whether this pattern takes the form of the U.S.-Japan alliance or ROK-China relations, the history of transparency, working together, and joint capabilities can be very useful, if not indispensible, assets for any collective effort. The 2004 tsunami is already being remembered as a classic example of how multilateralism and bilateralism are tightly intertwined. The coalition of the United States, Japan, India, and Australia provided more than 40,000 personnel in a little over nine days. Over 4,000 Indian first-responders arrived in Sri Lanka. The United States provided over 12,600 personnel, 21 ships, the USS Mercy hospital ship (with 1,000 beds), 14 cargo planes, and more than 90 helicopters to deliver relief supplies to the most inaccessible damaged areas in Indonesia. Australia and Japan provided over 1,000 personnel, medical teams,

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and other material and financial assistance.32 A multilateral, regional effort of this magnitude would have been inconceivable if not built on the existing bilateral relationships shared among the Tsunami Core Group members. Many U.S. ships were diverted to the area from bases in Japan, for example. The need for logistical support from Singapore and Thailand in order to move relief supplies into the hardest hit and least accessible areas in northwest Indonesia could not have happened at the speed it did without preexisting channels of bilateral communication between Washington and these countries. Australia’s immediate action and willingness to jump into the fray was in part due to the close bilateral relations between the Bush and Howard governments. The Tsunami Core Group showed how a successful multilateral institution in Asia effectively grew out of the existing network of bilateral U.S. alliances and other bilateral relationships in the region. A similar level of cooperation among countries would have been hard to imagine without such ties. The six-party talks, as well as emerging trilateral consultations such as the TSD, also benefited largely from existing bilateral relations. In the case of the six-party talks, although they were built as an ad hoc coalition to deal with the North Korean nuclear crisis, Obama administration officials informally have already recognized the talks as the first and only multilateral institution comprising the five major powers of East Asia (the United States, Japan, South Korea, China, and Russia). The institution has been far from successful in denuclearizing North Korea given Pyongyang’s intransigence, but few observers would deny its utility as a negotiation process that has worked tirelessly over the past seven years and thus created new habits of consultation and transparency among the parties involved. The success of the six-party talks derives from the strong bilateral relationships that constitute the multilateral body. Washington, in the initial planning of the group, relied on its alliances with Seoul and Tokyo, as well as on trilateral coordination, to spur cooperation within the group. Both Seoul and Tokyo saw the six-party talks as a way to improve and grow their bilateral relations with Beijing. In addition, President Bush was fond of challenging his Chinese counterpart to view the six-party process as an important test of the strength of U.S.-China relations. Similarly, the TSD constitutes another useful new multilateral institution dedicated to dealing with a wide range of items including climate change, counterterrorism, counterproliferation,

32 Grossman, “The Tsunami Core Group”; and Cossa, “South Asian Tsunami.”

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UN reform, and disaster relief.33 By way of comparison, other multilateral groupings that are not grounded in tight bilateral relationships, such as the Shanghai Cooperation Organisation, have been far less active or successful. Recently, there have been several other noteworthy examples of multilateral institutions based on core bilateral relationships. The Proliferation Security Initiative (PSI) deserves mention. Created in May 2003, the PSI is now an international coalition of more than 90 countries dedicated to stopping the trafficking of WMDs and related delivery systems and materials to terrorists and countries of proliferation concern. The PSI is a functionally based institution that relies on the voluntary joint use by member states of existing national and international authorities in joint cooperation to interdict illicit movement of WMDs by sea, air, or land. Member states endorse a set of principles to stop illicit WMD transfers,34 and by most accounts this multilateral effort has been successful.35 There have been over 37 interdiction exercises involving PSI countries.36 Although specifics have not been publicly released, in 2006 then undersecretary of state Robert Joseph asserted that there had been “roughly two dozen” cases of successful PSI cooperation to prevent WMD transfer. Ulrik Federspiel, Denmark’s ambassador to the United States, likewise asserted at a May 2005 event that “the shipment of missiles has fallen significantly in the lifetime of PSI.”37 Given this success, Obama in his April 2009 speech in Prague declared his intention to strengthen and expand the PSI.38

33 For a good study of the TSD, see “Assessing the Trilateral Strategic Dialogue,” National Bureau

of Asian Research, Special Report, no. 16, December 2008 u http://www.nbr.org/publications/ specialreport/pdf/SR16.pdf.

34 These principles call on PSI participants, as well as other countries, to not engage in WMD-

related trade with countries posing a proliferation threat and to permit their own vessels and aircraft to be searched if suspected of transporting such goods. The principles further urge that information on suspicious activities be shared quickly to enable possible interdictions and that all vessels “reasonably suspected” of carrying dangerous cargo be inspected when passing through national airports, ports, and other transshipment points. See “Proliferation Security Initiative,” U.S. Department of State u http://www.state.gov/t/isn/c10390.htm.

35 China, Indonesia, Malaysia, and Iran oppose the PSI and dispute the legality of its efforts. 36 See Tony Foley, “Opening Remarks by Acting, Deputy Assistant Secretary of State Tony Foley” (PSI

Regional Operational Experts Group Meeting. Sopot, Poland, June 22, 2009), 5 u http://dtirp.dtra. mil/pdfs/psi_remarks.pdf.

37 U.S. officials also point to an October 2003 operation to seize centrifuge components aboard the

German-owned BBC China destined for Libya as a successful PSI operation. See Arms Control Association, “Proliferation Security Initiative (PSI) at a Glance” u http://www.armscontrol.org/ factsheets/PSI. See also Wade Boese, “Interdiction Initiative Successes Assessed,” Arms Control Today 38, no. 6 (July/August 2008) u http://www.armscontrol.org/act/2008_07-08/Interdiction. For other cited successes, see Foley, “Opening Remarks,” 7.

38 Barack Obama, “Remarks by President Barack Obama” (Prague, April 5, 2009) u http://www.

whitehouse.gov/the_press_office/Remarks-By-President-Barack-Obama-In-Prague-As-Delivered/.

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The effectiveness of this multilateral institution, however, rests on strong bilateral relationships. Though the U.S.-led PSI eventually grew to 95 countries, its initial formation depended on eleven countries (Australia, France, Germany, Italy, Japan, the Netherlands, Poland, Portugal, Spain, and the United Kingdom), all of which already had close bilateral relations with the United States. Because of preexisting ties and a common nonproliferation agenda, this group speedily devised a set of core principles in September 2003. Some of the early flagship exercises that cemented the PSI as a real entity were hosted by countries with which the United States already had strong bilateral security relationships: Poland, Singapore, and Australia. These countries also played key roles in the PSI’s growth, chairing subgroups such as the Operational Experts Group and other PSI outreach activities. Finally, consistent with the principles of functionalism and informality, the PSI is meant to be ad hoc and informal. There is no secretariat or formal organization that serves as a coordinating body. Information regarding potentially dangerous WMD transfers is shared on an ad hoc basis and with appropriate parties to ensure that counterproliferation efforts are effective. U.S. officials, in fact, have discouraged the view of the PSI as an organization, instead describing the initiative as a series of common practices among likeminded states regardless of political orientation.

the patchwork architecture of asia Business, Not Civilization If we accept the three assumptions laid out in this article, then the emerging architecture is constituted by a series of bilateral and multilateral groupings organized on a functional basis to solve a particular problem. Some of these groupings stay together and take on a more formal institutional structure, but others do not. The model for this sort of regional community is not civilizational, where a particular “Asia-ness” defines the group (e.g., Hatoyama’s concept of an East Asia community), nor is it based on postwar Western Europe. Instead, it is more akin to a business model, where coalitions form among entities with the most direct interests in solving a problem. Entities participate because they seek to secure private goods (i.e., either profits or avoidance of losses), but the aggregation of their atomistic efforts precipitate collective benefits for the region (market). Asian states gather on a need-basis to combat piracy in the Malacca Strait, coordinate antiterrorism measures, respond to natural disasters, and prevent further destabilization in [ 44 ]


the Asian financial market. These meetings are seldom based on putting forth ideology or designed as part of a linear path to formal integration. Instead, these coalitions are primarily motivated by functional needs and seldom have implications beyond that. The emphasis on function rather than ideology in regional cooperation is crucial for Asia in that it lowers barriers for cooperation for states with a deep history of animosity and differences in regime type. States in this region, unlike those in Europe, do not share similar ideas regarding rule of law, human rights, and legal norms. Many states have been colonized by neighbors, have territorial disputes, and have a history of unequal power relations that make nationalism still a salient part of domestic politics. With this in mind, efforts to define norms of interaction through formalization, or efforts to incorporate an ideational dimension into institution-building, may discourage cooperation among states. Imagine having the equivalent of a “Copenhagen criteria” for joining institutions in the Asia-Pacific region. A patchwork of institutions focused on solving specific substantive issues may mitigate the barrier that exists between states in the Asia-Pacific.

Overlapping and Interlinked Membership The membership of these informal institutions is more often than not overlapping and interlinked. The United States, Japan, and Australia, for example, may discuss UN reform in the TSD, while Japan, China, and Korea discuss currency swaps at the Chiang Mai Initiative, and the United States, Japan, and China discuss counterproliferation in the context of the six-party talks. Even the membership of ASEAN, one of the most formal institutions in Asia, is fluid. Depending on the agenda, there will be meetings of just the ten ASEAN member states, ASEAN +3, the EAS, or the ARF. Track II security forums such as the Council and Security Cooperation in the Asia-Pacific (CSCAP) will exist alongside Track I security dialogues. What emerges is not a hub-and-spoke system, nor an integrated East Asian community, but networks and patchworks of differently configured and overlapping bilaterals, trilaterals, quadrilaterals, and other multilateral groupings that stitched together define the regional architecture. This unique feature of Asian security architecture is also crucial for promoting healthy interstate cooperation. Although one institution that meets on a set periodic schedule may seem preferable at first, multiple institutions with distinct agendas that meet fluidly may be more suitable for the AsiaPacific region. Most importantly, such groupings allow states to involve [ 45 ]

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themselves in the agendas that most interest them, without conflating their position on one agenda with another. This feature is most crucial in getting China to be a more inclusive member of the Asian security architecture. Currently, China can address issues regarding North Korea’s denuclearization within the six-party framework, negotiate a free trade agreement with ASEAN, and participate in an APEC summit held in South Korea all with separate agendas. If all these agendas were held successively under one institution, a state’s position on one issue would likely spill over into another issue area, making negotiations more complicated. A patchwork architecture also enables a state to use its position on one agenda as leverage to push another agenda in a more favorable direction. Likewise, fluid networks and patchworks of institutions are helpful in attracting the most willing and capable states to solve a particular problem. Imagine the challenge of a single organization with an all-inclusive membership of Asia-Pacific states trying to hash out a credit swap agreement akin to the Chiang Mai Initiative. Having a multitude of smaller, issue-specific forums may actually increase the willingness of states to participate in regional efforts. Some may argue that the geometry of regional groupings this article describes for Asia is too complex a vision for regional architecture because it has no core, no metrics for coherence, and no single superstructure. The common view is that complexity is suboptimal for multilateral institutions because it decreases efficiency, shortens time horizons, and lacks a preventive capacity. For example, the hyperactivity of multiple groupings can be inefficient. At one point during the 2004 tsunami relief efforts, there were some 180 international NGOs and 430 national NGOs registered and operating at once. Efforts were often redundant, and therefore the assistance provided by some 99 countries to these groups may not have been the most efficient use of funds. Such duplication also means that many groups could work superficially in similar areas; the cost of this is a void in deeper substantive capabilities. Moreover, the proliferation of such groups creates demands that can severely tax the resources of governments and regional organizations, possibly reducing rather than increasing overall capacity to respond effectively to a crisis. When groupings are formed in an immediate fashion, this also means that the time horizons of these groups are likely to be short. Often, relief organizations are driven by the bottom line rather than by some broader

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strategic vision.39 The “on-the-go” nature of patchworks also means that the groupings come together only under a confluence of two conditions: there must be a crisis and a collective goods provider willing to lead the response effort. This is a core problem if such groupings are meant not only to respond to crises but also to prevent them. Slow-onset disasters highlight the nature of the problem. There is no immediate crisis that spurs action, and while there is clearly a collective good provided by a solution to the problem, there is no country or entity willing to assume a leadership role. The Mekong River Basin is the quintessential example. The Mekong River Commission (MRC) was created in 1995 to coordinate the actions of upstream and downstream countries. But China chose not to join because it wanted to maintain the freedom to secure its own private goods from the river. The result is that the MRC is ineffective as an institution. Perhaps there will be opportunities for more informal cooperation among an ad hoc group of countries once a near-term crisis materializes, but this would be a suboptimal outcome compared with a longer-term preventive strategy. Given the underlying historical animosities, the diversity of regime types, and the shifting balance of power, a complex architecture offers distinct benefits. Conceptually, it creates opportunities and does not constrict space for the formation of bilaterals and multilaterals. Materially, complexity helps to mute security dilemmas between countries distrustful of one another. It allows states to operate in multiple groupings—sometimes with each other and sometimes exclusively—which helps to circumvent zero-sum competition. The U.S.-Japan-Australia-India quadrilateral proposed in 2006 by then Japanese prime minister Abe, for example, might incite insecurities in China if it were the only regional grouping available. Yet Beijing would be engaged with Japan in the context of the ASEAN +3, with the United States and Japan in the context of a U.S.-Japan-China trilateral, and with India in the context of the EAS. The point here is not that insecurities disappear merely with membership in these various groupings, but that the complexity and

39 “The business reality of the humanitarian endeavor is this: organizations are obliged to fulfill the

requirements of the donor grants that fuel them, most of which are no longer than eighteen months old, as a means to survive. As such, institutions become focused on bankrolling their efforts with short-term outputs and are, hence, inherently discouraged from developing a coordinated longerterms strategic vision.” As noted by Stacey White, “Disaster Management in Asia: The Promise of Regional Architecture,” in Asia’s Response to Climate Change and Natural Disasters: Implications for an Evolving Regional Architecture, ed. Robert S. Wang and Jeffrey D. Bean (Washington, D.C.: CSIS, 2010), 61.

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density of these many groupings readily create channels to reduce anxieties associated with exclusion.40

Bilateral Alliances as Thread for Patchworks Finally, the U.S. bilateral alliance system works as a crucial basis for such a patchwork architecture to flourish. Many of the multilateral groupings in Asia spin off of existing bilateral alliances. Institutions such as the U.S.-Japan-ROK Trilateral Coordination and Oversight Group (TCOG), U.S.-Japan-India Strategic Dialogue, or the U.S.-Japan-Australia TSD have all focused on making new links out of existing bilateral alliances. Some of the larger groupings (e.g., the Tsunami Core Group, six-party talks, or PSI) are also grounded in key U.S. alliances. Far from being a “Cold War dinosaur,” the U.S. hub-and-spoke system remains a critical component of Asia’s future architecture by promoting the broader mission of regional cooperation. This system of bilateral alliances works as a “thread” that keeps the patchwork architecture together. U.S. presence in Asia has acted as a stabilizing force by helping to lower barriers for interaction between states with deep historical animosities. A quintessential example is Japan–South Korea relations after World War II.41 Despite a history of colonial oppression and existing territorial disputes, Tokyo and Seoul have engaged in a surprisingly high level of security dialogue in recent years. When the first U.S.-Japan-ROK TCOG meeting was held in the 1990s on William Perry’s suggestion, deep mistrust between the ROK and Japan pervaded the sessions. Moreover, the three countries all had different preexisting bilateral agendas vis-à-vis North Korea.42 Both Japan and South Korea were skeptical of each other when discussing their own bilateral security agendas with the United States in the presence of the other. However, after several meetings led by U.S. efforts, in June 2003 the three countries

40 In this context, the most potentially troublesome groupings may be ones of more than three

members that exclude China. From a policy-prescription perspective, it might be best to avoid these, or at least to ensure that there are comparable groupings in which China can participate in order to mute security dilemmas.

41 Victor D. Cha, Alignment Despite Antagonism: The United States-Korea-Japan Security Triangle

(Stanford: Stanford University Press, 1999).

42 “Perry’s review team consulted often with representative from the ROK and Japan, but they were

eager to create opportunities for all three countries to sit down together at one meeting. When the U.S. team raised the idea of a more formal and regular trilateral meeting format, the Japanese and ROK representatives were initially cautious. They agreed that it could be a useful forum, but they insisted that each be allowed to hold bilateral meetings first with [the] U.S. prior to any trilateral gathering.” As noted by James L. Schoff, Tools for Trilateralism: Improving U.S.-Japan-Korea Cooperation to Manage Complex Contingencies (Dulles: Potomac Books, 2005), 24.

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successfully produced a joint statement outlining a coordinated policy toward North Korea. This joint statement was a key step toward aligning the three countries’ security policies for the six-party talks. Had South Korea and Japan not had existing alliance partnerships with the United States, policy coordination could have been a much more painstaking effort. The fact that U.S. bilateral alliances persist along with emerging multilateral efforts in Asia is a huge stabilizing force. The United States is already providing many of the public goods in the Asia-Pacific regarding security, as well as an open market. This creates an environment for states to adjust and coordinate remaining divergences without worrying about upsetting existing regional dynamics. By expanding consultation procedures or through combining two separate channels of dialogue, the United States has been creating new partnerships among Asian states after the Cold War. Washington should take pride in avoiding a zero-sum approach to its bilateral alliances and support for multilateralism in Asia. The U.S. bilateral alliance system, while certainly not wholly constitutive of the security architecture, still plays a very important role. Many plurilateral groupings in Asia spin off from bilateral alliances (e.g., trilaterals constituted of two bilateral alliances) and some of the larger groupings (e.g., the Tsunami Core Group and six-party talks) are grounded in key U.S. alliances. Therefore, bilateralism and multilateralism in Asia present non–zero sum games where the U.S. huband-spoke alliance system reinforces multilateral institutions. Because U.S. alliances remain a critical component of Asia’s future architecture to the extent that they have evolved to reinforce the broader mission of promoting regional cooperation, the United States must uphold both bilateral and multilateral institutions simultaneously.

Final Thoughts The complex patchwork of Asia’s architecture is neither anchored in a single umbrella institution such as the EAS nor based solely on the U.S. huband-spoke alliance system. Instead, it is a collection of different shapes— such as triangles, quadrilaterals, and hexagons—that are all functional, ad hoc, and overlapping. Each of these shapes serves a distinct purpose contributing to a more cooperative, transparent, and peaceful Asia-Pacific region. This patchwork architecture is a culmination of positive-sum efforts of existing U.S. bilateral alliances and multilateralism among Asian states. Despite the negative view held by some scholars that Asia has failed to achieve regional security cooperation, there is ample evidence that security [ 49 ]

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cooperation is in fact thriving in Asia, albeit in nontraditional structures. The role of U.S. bilateral alliances in maintaining this cooperative structure is crucial, helping to create new linkages and maintain the salience of many emerging groups. 

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Asia’s Complex Strategic Environment: Nuclear Multipolarity and Other Dangers Christopher P. Twomey

christopher p. twomey is Assistant Professor of National Security Affairs at the Naval Postgraduate School in Monterey, California, and a Research Fellow of the National Asia Research Program. He can be reached at .

note u The author would like to thank three anonymous reviewers for their

exceptionally helpful comments and critiques. He would also like to recognize Chris Siegel’s able research assistance. This article expresses the views of the author only. An earlier version of this article was presented at the Asia Policy Assembly in Washington, D.C., on June 17–18, 2010.

keywords: asia; nuclear weapons; security; balance of power © The National Bureau of Asian Research, Seattle, Washington

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executive summary This article evaluates the implications of nuclear multipolarity and strategic complexity in Asia.

main argument Ongoing changes in traditional state-to-state nuclear dynamics are reshaping international security in Asia. Today, Asia is a multipolar nuclear environment in which long-range nuclear weapons are joined by other systems with strategic effect, and in which countries hold different views about the role and utility of nuclear weapons. This article discusses the implications of these shifts from the Cold War to the present for several guises of stability, on the one hand, and for competition and conflict, on the other. Though each of these considerations leads to dangerous outcomes in isolation, their combined effect is even more deleterious. The implications of this analysis are deeply pessimistic, both for peace in general and for U.S. national security interests in particular.

policy implications • Asia is likely to see vigorous competition in the strategic arena, ranging from increased offensive nuclear weapons to the development of advanced conventional offensive munitions and missile defenses. These technologies will likely continue to spread. • Competition between Asian states is likely to lead to increased reliance on nuclear threats, bluster, and statecraft. This will erode any “nuclear taboo” and will increase the chance of nuclear weapons detonation. • Arms control is unlikely to substantially mitigate any of these concerns in the current environment. • Given the pessimistic factors outlined above, increased understanding across states of how each sees the utility of nuclear weapons will be extremely beneficial. • Missile defenses systems make, on balance, a positive contribution to regional security; nevertheless, their negative implications should be addressed through judicious use of transparency about nontechnical aspects of the systems. • Expansive national security goals such as regime change should be abandoned, given the potential for catastrophic nuclear escalation.

twomey u nuclear multipolarity and other dangers

T

he Cold War continues to constrain thinking about nuclear issues. In the first 20 years of the Cold War, a dynamic nuclear environment posed great risks of truly catastrophic war. Yet by the end of the 50 years of bipolar rivalry, many argued that nuclear weapons had stabilized Soviet-U.S. relations. Traditional deterrence theory, with its emphasis on calculating rationality, seemed to contribute to Americans’ understanding of world events. Certainly the latter years of the rivalry saw the rise of arms control efforts within and beyond the nuclear arena that facilitated the end of the Cold War. Throughout that period, the two primary nuclear powers developed sophisticated national security apparatuses with an increasingly deep understanding of the efficacies and dangers of nuclear weapons. Few of these factors speak to the nuclear environment in Asia today. It is increasingly clear that the second nuclear age is upon us.1 Much work on this epochal shift focuses both on the role of asymmetry in nuclear balances and on the role of nonstate actors.2 Indeed, some analysts characterize this situation in pejorative terms: an advanced set of nuclear “haves” declaring less developed latecomers to be the primary source of danger in the nuclear order smacks of hypocrisy and Orientalism.3 This article argues that these elements of the second nuclear age, while important, are complemented by three ongoing changes in traditional state-to-state nuclear dynamics that are even more important: the nuclear environment is multipolar, long-range nuclear weapons are joined by other systems with strategic effect, and many countries hold different views about the role and utility of nuclear weapons. These three changes are manifest most clearly in Asia since the Cold War. While each change leads to dangerous outcomes in isolation, their combined effects are even more deleterious. Consideration of these three factors challenges the more positive conclusions that currently dominate analysis of Asian nuclear affairs.4 The implications of

1 Colin S. Gray, The Second Nuclear Age (Boulder: Lynne Rienner Publishers, 1999); and Paul

Bracken, “The Second Nuclear Age,” Foreign Affairs 79, no. 1 (January/February 2000): 146–56.

2 For a good summary, see Jeffrey W. Knopf, “The Fourth Wave in Deterrence Research,”

Contemporary Security Policy 31, no. 1 (April 2010): 1–33.

3 Hugh Gusterson, “The Second Nuclear Age,” in Anthropology and Science: Epistemologies in

Practice, ed. Jeanette Edwards, Penny Harvey, and Peter Wade (Oxford: Berg, 2007). That said, there has always been a degree of hypocrisy in the nuclear order. In fact, such hypocrisy is foundational to the Nuclear Non-Proliferation Treaty (NPT) regime. See, for example, William Walker, “Nuclear Enlightenment and Counter-Enlightenment,” International Affairs 83, no. 3 (May 2007): 431–53.

4 The best study is the comprehensive volume edited by Muthiah Alagappa. See Muthiah Alagappa,

ed., The Long Shadow: Nuclear Weapons and Security in 21st Century Asia (Stanford: Stanford University Press, 2008). For a forceful defense of optimistic conclusions regarding the region, see Muthiah Alagappa, “Reinforcing National Security and Regional Stability: The Implications of Nuclear Weapons and Strategies,” in Alagappa, The Long Shadow, 508–44.

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this analysis are thus deeply pessimistic, both for peace in general and for U.S. national security interests in particular. This article proceeds as follows: u

u

u

u

pp. 54–56 lay out the baseline for a comparison of the present environment in Asia with the Cold War pp. 56–67 characterize the nature of the “three dimensions of complexity” in Asia empirically: nuclear multipolarity, multidimensionality, and the different utilities of nuclear weapons in various countries pp. 67–75 assess the analytic implications of these issues, first in isolation and then the more problematic interactions across the three areas pp. 75–78 draw conclusions and implications

the dangerous baseline of the cold war In contrasting the contemporary dangers in Asia with those of the Cold War, it is important not to understate the grave risks that were confronted in that period. Though these risks were navigated successfully, past performance would have been no guarantee of future outcomes had the Cold War continued, nor if similar situations had characterized other periods and dyads. Through at least the Cuban Missile Crisis, there was great flux in attitudes toward nuclear weapons. One study of a cross-national set of senior leaders highlights this: “All the statesmen treated in this book displayed ambivalence with regard to nuclear weapons and nuclear war. At one time or another, each spoke or wrote of nuclear weapons as weapons that might actually be used, and yet, at some other time, spoke of nuclear war as impossible or unthinkable.”5 Beyond the question of basic utility, the range of roles conceived for weapons, if they were used, varied widely in those early years of experience with the bomb. In part because of this, and in part because of the intense rivalry between the Soviet Union and the United States, crises in Berlin, Korea, and Cuba all raised the prospect of large-scale nuclear conflict.6 The rapid growth of the superpowers’ arsenals through the 1960s increased the scale of devastation

5 Ernest May, “Introduction,” in Cold War Statesmen Confront the Bomb: Nuclear Diplomacy since

1945, ed. John Lewis Gaddis et al. (New York: Oxford University Press, 1999), 5.

6 On early Cold War crises, see Melvyn P. Leffler, A Preponderance of Power: National Security, the

Truman Administration, and the Cold War (Stanford: Stanford University Press, 1992); Matt Jones, After Hiroshima: The United States, Race and Nuclear Weapons in Asia, 1945–1965 (Cambridge: Cambridge University Press, 2010); and John Lewis Gaddis, We Now Know: Rethinking Cold War History (New York: Oxford University Press, 1997). For the mid–Cold War crises, see Richard Ned Lebow and Janice Gross Stein, We All Lost the Cold War (Princeton: Princeton University Press, 1993).

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that any conflict would wreck as well as engendered its own set of dangers. Simple mistakes might easily have caused catastrophic consequences. Indeed, a cottage industry of research on accidents and mishaps involving weapons and their support systems showed the pervasive nature of such dangers.7 Thus, this article does not contrast Asia’s present with a Panglossian stable and secure Cold War. The point of this analysis is to note that, as bad as the Cold War was, the fundamental dangers it posed are only the baseline from which today’s Asia adds several layers of exacerbating factors.

Nuclear “Optimists” and the Long Peace? While the Cold War legacy emphasizes the risks of crisis instability, eventually nuclear weapons also brought a degree of clarity to the strategic rivalry in Europe. Because of the dangers of a crisis escalating to the nuclear level, both sides at times exercised more restraint than they might have otherwise.8 One multinational study emphasizes this “positive” contribution to the Cold War: The question…is whether evidence regarding ten key statesmen of the first decade or two of that era seems to match …the more conventional reasoning captured in the phrase “nuclear revolution”—that dread of nuclear war, not of war per se, transformed the calculus that had governed interstate or international relations ever since states and nations came into being.…[T]hese Cold War statesmen appeared to think that nuclear weapons were revolutionary in character. They invoked the awful power of these weapons as a reason either for caution on their own part or for expecting caution on the part of others.9

Similarly, China’s development of a nuclear arsenal in the 1960s was not perceived as entirely negative; rather, “most American analysts saw the acquisition of nuclear status as inducing a great caution in the Chinese leadership.”10

7 Scott Douglas Sagan, The Limits of Safety: Organizations, Accidents, and Nuclear Weapons

(Princeton: Princeton University Press, 1993). For a recent combing of declassified literature by two retired airmen who specialized in handling nuclear warheads, see Michael H. Maggelet and James C. Oskins, Broken Arrow: The Declassified History of U.S. Nuclear Weapons Accidents, vols. I and II (Raleigh: Lulu.com, 2008).

8 For the most famous advocacy of this argument, see John Lewis Gaddis, The Long Peace: Inquiries

into the History of the Cold War (New York: Oxford University Press, 1987).

9 May, “Introduction,” 3–4. 10 Jones, After Hiroshima, 462. This positive attribute was coupled with other negative aspects,

of course: “There was however a widespread belief that Chinese stature would be raised quite dramatically by its entrance into the occidental nuclear club. This might then both increase its attractiveness to revolutionary groups and generate political problems, as China’s neighbors came to feel intimidated and even coerced by the new strategic environment.”

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The central purpose of this article is not to resolve the debate between “nuclear optimists” and “nuclear pessimists.”11 Instead, this article shows that the optimist case is less positive in the contemporary Asian context than it was in the Cold War, while the pessimist case ignores some important elements applicable to Asia today. The optimist-pessimist debate, which is exemplified by the debate between Kenneth Waltz and Scott Sagan, is one in which the two lines of reasoning do not directly contradict each other; rather, the negatives of proliferation must be weighed against the positives. This article points out that both positions understate the dangers now confronting Asia. New changes in the strategic realm undermine the applicability of the so-called optimistic lessons drawn from nuclear affairs in the Cold War.

three dimensions of complexity Three distinct changes characterize Asia today: the nuclear environment is multipolar, strategic competition is multidimensional, and countries hold diverging views about the utility of nuclear weapons. This section outlines these causes of nuclear complexity through a descriptive discussion of ongoing empirical change. The effects of these changes, both individual and joint, will be discussed later in the article.

Nuclear Multipolarity in Asia During the Cold War, the two superpowers dominated the nuclear arena. French and British arsenals, whatever their rhetoric might have implied, primarily served to enhance the credibility of U.S. extended nuclear deterrence by lowering the nuclear threshold in any conventional Soviet invasion.12 China’s arsenal played a different role but was often viewed as a “lesser-included case” (and therefore was encompassed within any strategy to deter the Soviet Union) by the United States prior to normalization in the 1970s and tacit alignment in the 1980s.13 Only in the 1980s did China begin 11 That said, key sources on the South Asian rivalry explicitly engage this debate. See Scott Douglas

Sagan and Kenneth N. Waltz. The Spread of Nuclear Weapons: A Debate Renewed, 2nd ed. (New York: W.W. Norton & Company, 2003); Robert Jervis, The Meaning of the Nuclear Revolution: Statecraft and the Prospect of Armageddon (Ithaca: Cornell University Press, 1989); and Alagappa, The Long Shadow.

12 Good sources still primarily emphasizing the Cold War legacies of these forces can be found in

John C. Hopkins and Weixing Hu, Strategic Views from the Second Tier: The Nuclear Weapons Policies of France, Britain, and China (New Brunswick: Transaction Publishers, 1995).

13 On the evolution of this relationship, see James Mann, About Face: A History of America’s Curious

Relationship with China, from Nixon to Clinton (New York: Alfred A. Knopf, 1998).

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to have anything approaching a deliverable force against distant strategic targets, and even then China’s nuclear ratio with the Soviet Union was extremely lopsided. Asia today is clearly not characterized by nuclear bipolarity between a privileged two states and the vastly asymmetric holdings of others. As Muthiah Alagappa notes, “there is no comparable overarching global security dynamic in the present period.”14 Table 1 highlights the flattening and broadening of the distribution of nuclear capabilities over the past dozen years. A series of strategic arms control agreements has structured reductions in arsenals for Russia and the United States. An economic impetus for the former overlaid a shift in threat perceptions for both that greatly reduced the potential contributions of nuclear weapons to security for the two Cold War adversaries. These trends will continue as the New START Treaty, the recently ratified successor to the Cold War agreements, is phased in over five years. There is also an expressed desire by the United States to draw down nuclear forces beyond those levels, although domestic politics will complicate the process of achieving that goal.15 Elsewhere in the region, the nascent program in North Korea increasingly looks like a permanent fixture of the Asian security environment. The largest changes, of course, have come in South Asia. Following the 1998 nuclear tests by both India and Pakistan, each of the two states has moved to develop a more advanced civilian energy program that will also provide added potential for arsenal expansion. Finally, China is engaged in a substantial modernization program of its historically backward and modest arsenal. The recent growth in warhead numbers in China is significant. In sum, these changes do not lead to parity among the key players but have attenuated the skewed distribution of past decades.16 The numbers listed in Table 1, particularly for countries other than the United States, are highly suspect, and all depend critically on different definitions of what makes a warhead “operational.” Nevertheless, three conclusions are clear even from these rough estimates. First, the number of nuclear powers has doubled (if a bit of ambiguity is tolerated about what exactly that means). 14 Muthiah Alagappa, “Nuclear Weapons and National Security: Far-Reaching Influence and

Deterrence Dominance,” in Alagappa, The Long Shadow, 495.

15 For discussions of both the future direction and the political challenges beyond New START, see

George Perkovich, “The Obama Nuclear Agenda One Year after Prague,” Carnegie Endowment for International Peace, Policy Outlook, March 31, 2010; and Joachim Krause and Benjamin Schreer, “Salvaging Global Zero,” RUSI Journal 155, no. 3 (June/July 2010): 42–46.

16 For an optimistic view about the future proliferation across the region, focusing on the domestic

determinants of security identities, see Etel Solingen, Nuclear Logics: Contrasting Paths in East Asia and the Middle East (Princeton: Princeton University Press, 2007).

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Table 1 Nuclear Weapons in Asia Warheads (1997)

Warheads (2010)

Delivery systems

10,240

4,600

Missile, bomber, and submarine

8,425

2,468

Missile, bomber, and submarine

170 (400?)*

~193

Missile, bomber (?), and submarine (in development)

Pakistan

None?

70–90

Missile and fighter

India

None?

60–80

Missile and fighter

North Korea

None

Several?

Missile (?)

Country Russia United States China

Source: The data for the present number of warheads is drawn from Bulletin of Scientists, “Nuclear Notebooks,” 2009 and 2010. Data for the 1997 arsenal is from the Natural Resources Defense Council (NRDC), “Nuclear Notebook,” 1998. Note: The table refers to estimates of operational warheads and thus excludes stockpiles. Bombers in the U.S., Chinese, and Russian forces refer to heavy, long-range bombers; fighters in the Pakistani and Indian forces refer to shorter-range tactical strike aircraft. Asterisk indicates that the Chinese figure of 400 for 1998 from the NRDC Nuclear Notebook includes significant tactical warheads and bomber-delivered warheads. More recent estimates have concluded that these estimates are inaccurate; thus, an estimate of 170 might be more appropriate for comparison. That said, the author knows of no source that directly suggests China has reduced its overall arsenal size.

Second, the disparity between the arsenals of the superpowers and those of the rest of the region has narrowed: the ratio between Russian and Chinese nuclear arsenal sizes has dropped from 50:1 to 20:1; the disparity between the U.S. and Chinese arsenals has dropped from 40:1 to 10:1; and China holds a 4:1 advantage over the South Asian countries. Although these ratios remain lopsided, given that nuclear weapons do not create power through a linear assessment of force ratios, this narrowing of ratios is significant. Some political effects are gained from “minimal deterrence” postures—for example, the existence of more small-but-secure nuclear arsenals will increase the number of countries that can rely on them for existential threats. However, for most of the relevant countries—North Korea, Pakistan, and India—the security of their nuclear forces from attack by several potential adversaries is questionable. Furthermore, this flattening of force ratios increases the potential for biased analysis to emerge. When a ratio is characterized by massive disparity, the two sides are likely to share an understanding of its broad [ 58 ]


parameters, even if national bias affects analysis at the margins. Less lopsided balances are harder for each side to evaluate without bias. When China had a dozen or two warheads that could reach the United States and faced tens of thousands of U.S. weapons, the only credible use for Beijing’s weapons would have been as an ultimate retaliatory response. As the gaps narrow, however, China is likely to find new options for engaging in nuclear swagger.17 Third, the trend lines suggest a further flattening of arms distribution; it is unlikely for domestic budgetary reasons that either the United States or Russia will avoid further cuts in nuclear weapons. Yet all the other powers in Table 1 are increasing their arsenals. Continued rapid growth in the arsenals of all the nuclear-armed countries is possible; North Korea is likely the only country significantly constrained by quantity of fissile material.18 Trends have effects over time, of course, but even today, they convey political and perceptual power beyond the existing stockpiles. Concerns in the United States about the potential for China to race to parity emphasize this reality, and related questions from U.S. allies in the region have spawned extensive and unprecedented efforts to bolster extended deterrence with South Korea and Japan. Additionally, it is important to highlight that Asian states are modernizing weapon delivery systems across the board. Some modernizations will likely stabilize power dyads, but most will not (as discussed in the next section). China has begun to develop a secure second-strike force. The People’s Liberation Army (PLA) already has fielded long-range solid fueled missiles that can be launched in minutes rather than hours. These DF-31A systems are also deployed on mobile launchers, further enhancing their immunity from a potential first strike to disarm them by Russia, the United States, or, potentially, India.19 The PLA Navy is also in the process of deploying new ballistic missile–launching submarines (China’s “boomers” are the Type-94 Jin-class boats).20 At some point, these will be equipped with a modern missile, the JL-2, which has long been in development.21

17 There is clearly an element of this in the PLA Second Artillery Force, Science of Second Artillery

Campaigns (Beijing: PLA Press, 2004).

18 Jeffrey Lewis argues that a technical ceiling based on fissile material stockpiles does exist for China,

although this level is much higher than current estimates of China’s arsenal. See Jeffrey G. Lewis, The Minimum Means of Reprisal: China’s Search for Security in the Nuclear Age (Cambridge: MIT Press, 2006).

19 Office of the Secretary of Defense, Military and Security Developments Involving the People’s

Republic of China: Annual Report to Congress (Washington, D.C., August 16, 2010).

20 Office of Naval Intelligence, China’s Navy 2007 (Washington, D.C., 2007). 21 See the shift in language in the 2010 Pentagon report emphasizing challenges in the development of

the JL-2 system. Office of the Secretary of Defense, Military and Security Developments.

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India and Pakistan are both improving their delivery systems, in the former case against multiple targets. For some time India has possessed various short-range systems in the Privthi missile family that are capable of hitting Pakistani targets. More recently, New Delhi has successfully tested the longer-range Agni-III, capable of hitting Beijing and Shanghai, three times over the past three years, following an earlier failure in 2006. This missile system is a mobile, solid-fueled system, one that had long been under development. In August 2010, the Indian minister of defense A.K. Antony stated that the “AgniIII with a range of 3000 km is ready for induction” into the Indian military.22 Pakistan’s Shaheen-II, capable of reaching all of India as well as much of the Middle East, completed its first successful test launch in 2004. Its shorterrange predecessor, the Shaheen-I, is undergoing guidance improvements to increase its accuracy and was most recently tested in 2010.23 North Korea, beginning from the lowest base, has also improved its capabilities. In 1998, 2006, and again in 2009, Pyongyang tested its longestrange system, the Taepodong family (TD-1 in the first test, TD-2 in the subsequent tests), which is assessed to be capable of reaching Alaska. While none of the tests suggested that the system is operational at the moment, North Korean scientists acquired important knowledge about multiple-stage, long-range systems. Furthermore, the 2009 test seemed more promising than the previous attempts. Beyond the long-range programs, there are also developments primarily relevant to regional actors: in July 2006 and again at several points in the summer of 2009, Pyongyang launched multiple missiles from short-range systems that could be used to threaten South Korea, Japan, or hypothetically China.24 Thus, across the region proliferation of weapons and delivery systems has accelerated in the post–Cold War era. Without even considering potential future players in the strategic competition—Japan, South Korea, Vietnam, Taiwan, and Indonesia, to name a few serious candidates25—the basic situation is vastly changed from two decades ago. 22 “Agni-III Ready for Induction: Antony,” Times of India, August 9, 2010. 23 “Pakistan Successfully Test-Fires Two Ballistic Missiles,” Associated Press, May 8, 2010; and

“Pakistan Tests Long-Range Missile,” BBC News, March 9, 2004.

24 See Daniel A. Pinkston, The North Korean Ballistic Missile Program (Carlisle: Strategic Studies

Institute, 2008).

25 For discussion of several of these cases, see Llewelyn Hughes, “Why Japan Will Not Go Nuclear

(Yet): International and Domestic Constraints on the Nuclearization of Japan,” International Security 31, no. 4 (Spring 2007): 67–96; and Michael S. Malley and Tanya Ogilvie-White, “Nuclear Capabilities in Southeast Asia: Building a Preventive Proliferation Firewall,” Nonproliferation Review 16, no. 1 (2009): 25–45. On space capabilities and potential delivery system capabilities developed therein, see James Clay Moltz, Asia’s Space Race: National Motivations, Regional Dynamics, and Global Implications (New York: Columbia University Press, forthcoming 2011).

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The Multidimensionality of Strategic Competition in Asia Defining strategic weapons is tricky. Atomic and nuclear weapons were originally recognized as having a strategic effect; that is, they could directly serve strategic rather than tactical or operational aims. Over time, a distinction emerged between strategic nuclear weapons—to be used against an opponent’s homeland—and tactical weapons that might be used on the battlefield. Yet deterrence theorists, policymakers, and arms control proponents remained disproportionately focused on strategic nuclear weapons.26 Even after the advent of precision-guided munitions in the Vietnam War and the conceptual development of AirLand Battle in the 1980s—a framework emphasizing deep strikes by conventional forces on the rear areas of the battlefield—conventional weapons did not play a strategic role.27 Today, such a narrow focus is unwarranted. Not only do long-range nuclear weapons have strategic effect, but advanced conventional weapons might as well. Furthermore, in the strategic geography of Asia, distinguishing between non-strategic and strategic nuclear weapons is problematic (a concern similar to that raised by German critics during the Cold War). Missile defenses opposing nuclear weapons clearly have the ability to mitigate the latter’s strategic effect. Biological and chemical weapons have also complicated strategic analysis, leading to the awkward term “weapons of mass destruction.” The more recent and more cumbersome term “weapons of mass effect” conveys an even broader range of capabilities. Space and cyber attacks can directly target objects valued by an opponent without first achieving a battlefield victory.28 Thus, in addition to the modernization and proliferation of offensive systems in Asia, a range of other systems must be considered in assessing today’s strategic environment. Most significant and prevalent among these are the effective defensive systems deployed throughout the region. It is important to differentiate between large area defenses that intercept the missile in the exo-atmospheric mid-course phase from point defenses that intercept closer to the intended

26 For a good overview of this evolution during the Cold War, see Lawrence Freedman, The Evolution

of Nuclear Strategy, 3rd ed. (New York: Palgrave Macmillan, 2003).

27 William W. Momyer, Airpower in Three Wars: World War II, Korea and Vietnam (Washington, D.C.:

U.S. Government Printing Office, 1985).

28 On space security, see James Clay Moltz, The Politics of Space Security: Strategic Restraint and the

Pursuit of National Interests (Stanford: Stanford University Press, 2008).

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target.29 Both categories of systems have enjoyed rapid development and deployment throughout the region. The United States and Japan deploy the most successful area defense program, the Aegis SM-3 missile, which is capable of intercepting targets mid-course. To date, the current variant has succeeded in thirteen out of fifteen U.S. tests and is effective at ranges up to a thousand miles. Although the two countries are engaged in joint research to substantially increase the interceptor’s capabilities,30 the existing system already enables Japan to protect its home islands against a North Korean threat with only one or two Kongoclass ships “on station.” Japan’s current fleet of six ships allows for adequate coverage and continual time on station if Tokyo chooses.31 China also recently tested an indigenous mid-course interceptor that would boast a large theateror nation-sized defensive footprint, potentially paralleling the United States’ own national missile defense system.32 Shorter-range systems are widely deployed throughout the region. The United States, Japan, and Taiwan deploy advanced point defense systems in the Patriot PAC-3 system. (South Korea has imported earlier Patriot models from Germany.) These provide a narrower footprint of defensive coverage but have dramatically increased in capability over the past twenty years. India has begun technical consultations with the United States regarding purchasing Patriot or other systems and continues to develop indigenous systems as well.33 Russia fields an advanced Patriot-like system, the S-300 family of mobile missile defense batteries, which also has been purchased by China. In the near future, viable boost phase interceptors are likely to be fielded (SM-3, block IIB), and airborne lasers will continue to be tested. These will provide additional defensive capabilities, particularly facilitating additional “shoot-look-shoot” tactics that will dramatically increase the effectiveness of

29 A third category, also capable of defending large areas, contains those systems that intercept a

missile while it is still in its ascent phase. These remain nascent technologies at present, although promising in the longer term.

30 Ronald O’Rourke, “Sea-Based Ballistic Missile Defense—Background and Issues for Congress,”

Congressional Research Service, CRS Report for Congress, RL33745, July 20, 2009.

31 See data contained in Dean Wilkening, “European Ballistic Missile Defense Options” (paper

presented at the Tenth RUSI Missile Defence Conference of the Royal United Services Institute, London, May 27–29, 2009).

32 Russell Hsiao, “Aims and Motives of China’s Recent Missile Defense Test,” Jamestown Foundation,

China Brief, January 21, 2010.

33 The short-range system has been tested successfully and the exo-atmospheric system is undergoing

development with potential initial operational capability in 2012. See “PAD/AAD (India), Selfpropelled Surface-to-Air Missiles,” Jane’s Information Group, Jane’s Land Based Air Defense, July 26, 2010 u http://www.janes.com/articles/Janes-Land-Based-Air-Defence/PAD-AAD-India.html.

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defenses. Japan and the United States are likely to be the earliest adaptors of such technologies, but these too are likely to spread. Conventional offensive capabilities are also entering the strategic competition in ways that make it more difficult to differentiate between conventional and nuclear conflict than was the case during the Cold War. The advent of precision-guided munitions (PGM) in the 1970s laid the foundation for mature short-range systems in the 1990s. Today, the range of such munitions is increasing; stand-off air strike, penetrating aircraft (stealthy or conventional), or long-range missiles can deliver them. The United States, China, and Taiwan all now have missiles with conventional, longrange precision attack capabilities.34 The United States is actively pursuing a conventional prompt global strike capability to give the military the ability to attack targets anywhere on Earth within little over an hour.35 To do so, the United States may expand its ballistic missile force to include a conventional role for either the land-based Minuteman III or the submarine-launched Trident. China has deployed a significant conventional arsenal near the Taiwan Strait that provides political coercive options that transcend traditional conventional campaigns.36 Beyond that, the PLA possesses intermediaterange systems that can target Japan and U.S. bases in Guam. In the near term it might also have the ability to target U.S. carriers, which would escalate any conflict dramatically. Both missile defenses and accurate, powerful conventional weapons complicate matters because each can serve roles that previously only nuclear weapons could handle. Both capabilities could be used to destroy an opponent’s offensive nuclear arsenal, whereas previously this was only achievable by a first strike with nuclear weapons. PGMs can also be used to destroy command, control, communications, and intelligence (C3I) systems in rear areas. This, too, was generally a mission for nuclear weapons in the Cold War. (Although conventional weapons were used in wars in Korea, Vietnam, and the Middle East to modest effect, against a great power, capable air defenses would have rendered such attacks very costly.) Unquestionably, such systems are a less escalatory option than using nuclear weapons to achieve the same goal. At the same time, that benefit comes with a cost: the clarity of the nuclear threshold

34 The United States has the most options, with the Tomahawk being the most prominent. China

fields both the DH-10 cruise missile and the DF-21 (among other shorter-range systems). Taiwan’s Hsiung Feng IIE has recently entered service. All possess precision targeting.

35 Bruce M. Sugden, “Speed Kills: Analyzing the Deployment of Conventional Ballistic Missiles,”

International Security 34, no. 1 (2009): 113–46.

36 Christopher P. Twomey, “Limits of Coercion: Compellence, Deterrence, and Cross-Strait Political

Military Affairs” (forthcoming, 2011).

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is obscured. Thresholds serve an important purpose in war, limiting escalation in some cases.37 Without a clear and mutually understood threshold, the question of when a war has gone nuclear will be more complex: certainly, after a nuclear warhead has exploded through atomic fission, but would a conventional attack on a nuclear missile count?38 If a North Korean missile is intercepted over the Pacific, does the United States assume that the missile was armed with a nuclear warhead? Beyond these concerns, in many cases conventional systems rely on command and control systems that also perform a role in nuclear operations. U.S. satellites that replaced the Defense Support Program (DSP) early warning constellation from the Cold War now provide preliminary telemetry to missile defense systems. Chinese long-range over-the-horizon radars used to find U.S. carriers for attack by conventional ballistic missiles might also provide early warning capabilities. China’s Second Artillery Force is responsible for both conventional and nuclear-armed missiles. The separation of command and control links between the two sides of the force is unclear. The point here is not to naively call for restraint in any such crisis but rather to highlight that new interactions between conventional and nuclear forces are now likely to pervade the battlefield in any high intensity war in Asia. The nature of these interactions will be discussed further in the section on implications.

Divergence on the Utility of Nuclear Weapons A final source of complexity in Asian strategic affairs is the wide range of views held regarding the role that nuclear weapons can and should serve in national security policy. The issue is not whether nuclear weapons are useful39 but rather how the countries that have chosen to develop such expensive weapons perceive their utility. What role do nations in the region see their nuclear arsenals serving in the context of national security? There is quite a bit of divergence on this issue.

37 On the importance of thresholds, see the discussion of focal points in Thomas C. Schelling, The

Strategy of Conflict (Cambridge: Harvard University Press, 1960), 57.

38 During the Cold War, some scholars grappled with a similar issue. See Barry R. Posen, Inadvertent

Escalation: Conventional War and Nuclear Risks (Ithaca: Cornell University Press, 1992).

39 For one side in this debate, see Nina Tannenwald, “The Nuclear Taboo: The United States and

the Normative Basis of Nuclear Non-Use,” International Organization 53, no. 3 (Summer 1999): 433–68; and T.V. Paul, The Tradition of Non-Use of Nuclear Weapons (Stanford: Stanford University Press, 2009). For an earlier and related view, see John Mueller, “The Essential Irrelevance of Nuclear Weapons,” International Security 13, no. 2 (Fall 1988): 55–79. For an argument that nuclear weapons cast a “long shadow” over regional security affairs, see Alagappa, The Long Shadow.

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It should be noted that views about nuclear weapons have varied over time and space. For instance, during the Cold War there was a range of views on precisely this question between the United States and Soviet Union. David Yost observes: It is inaccurate to attribute “the development of strategic doctrines to ensure mutual vulnerability and restraint” to both the United States and the Soviet Union, especially if this is taken to imply a similarity in doctrine. It is certainly true that devising doctrines of “strategic stability” through mutual vulnerability was a major preoccupation of American strategic thinkers in the 1960s and 1970s. However, Soviet political and military leaders did not accept such doctrines as guidance for their own force development and strategic planning.40

Furthermore, during the Cold War, U.S. planning differed for the use of weapons in Europe and Asia: The [Eisenhower] administration had tried to present the specific actions suggested by the blunt term massive retaliation in a slightly different form from that offered in Europe, where since 1954 NATO’s shield forces had acted as a kind of tripwire which, in the event of a large-scale Soviet offensive, would trigger the retaliatory nuclear response that was designed to deter aggression in the first place. Over the chance of a revival of a Communist aggression in Korea, a direct move into Indochina, or any attempt to seize the offshore islands and Taiwan, the administration had been ready to assert it was prepared to use nuclear weapons, but that this would be in a selected and controlled manner and directed at military targets which were believed to be supporting the Communist forces engaged in the attack.41

Finally, the United States’ own position on the role of nuclear weapons has shifted over time.42 Nevertheless, as the Cold War carried on, this variation was reduced. While many “forms of deterrence…existed during the Cold War,” Muthiah Alagappa writes, “these however remained on the periphery because the Soviet-American confrontation dominated international security.”43 For the United States, views refined for the European context began to permeate

40 David S. Yost, “Analysing International Nuclear Order,” International Affairs 83, no. 3

(May 2007): 549–74.

41 Jones, After Hiroshima, 454. 42 For a charting of these shifts during the Cold War, see Lawrence Freedman, “The First Two

Generations of Nuclear Strategists,” in Makers of Modern Strategy: From Machiavelli to the Nuclear Age, ed. Peter Paret (Princeton: Princeton University Press, 1986). On more recent changes, see Jeffrey W. Knopf, “The Fourth Wave in Deterrence Research,” Contemporary Security Policy 31, no. 1 (April 2010): 1–33.

43 Alagappa, “Nuclear Weapons and National Security,” 495. See also Muthiah Alagappa, “Exploring

Roles, Strategies, and Implications: Historical and Conceptual Perspectives,” in Alagappa, The Long Shadow, 1–36.

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strategy toward Asia.44 However, the range of views in Asia today on the role of nuclear weapons is worse than the highpoints of variation along any of the above dimensions during the Cold War. Several different purposes for nuclear weapons can be posited. Vipin Narang identifies “three distinct types of regional power nuclear postures: a catalytic posture, an assured retaliation posture, and an asymmetric escalation posture.”45 Building on this, at one end, nuclear weapons can deter the use of nuclear weapons against cities in a fight for national annihilation. Beyond that, in the context of a limited nuclear war, they might deter escalation to more complete nuclear war. Additionally, some view nuclear weapons as being able to deter large-scale conventional attacks on a state. On something of a separable dimension, nuclear weapons are central to most attempts to exert extended deterrence. Extended deterrence attempts to prevent attacks on a security partner, whether such attacks might be conventional or nuclear. For instance, a recent Russian statement not only makes clear Moscow’s doctrine of using nuclear weapons to deter major conventional wars short of global wars that involve Russia directly, but also hints at extended nuclear deterrence of conventional conflict involving others.46 Earlier statements from senior Russian officials were even more assertive.47 Given the country’s arsenal of some 5,400 operational tactical warheads (far dwarfing U.S. holdings of about 200), these statements would carry great weight even if they were not reflected in official Russian policy.48 At the other end of the spectrum, North Korea sees some utility in possessing a rudimentary arsenal that is not “weaponized” in the sense that the United States would use the term (operational and capable of being ordered into service in hours or days). Not only does Pyongyang expect its arsenal to have some deterrent effect against conventional forces, but it also clearly tries to use its nuclear program for compellent power. This might be termed “existential coercive power.”

44 See Jones, After Hiroshima. 45 Vipin Narang, “Posturing for Peace? Pakistan’s Nuclear Postures and South Asian Stability,”

International Security 34, no. 3 (Winter 2009/10): 38–78. For other typologies, see Alagappa, “Nuclear Weapons and National Security,” 483.

46 Nikolai Sokov, “The New, 2010 Russian Military Doctrine: The Nuclear Angle,” James Martin

Center for Nonproliferation Studies (CNS), CNS Feature Stories, February 2010 u http://cns.miis. edu/stories/100205_russian_nuclear_doctrine.htm.

47 Luke Champlin and Volha Charnysh, “Russia Plans Changes to Military Doctrine,” Arms Control

Today, December 2009.

48 Kori Schake, “Tactical Nuclear Weapons: Time to Reaffirm NATO Solidarity,” Central Europe

Digest, August 2, 2010.

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Also related to the utility of nuclear weapons is the size and nature of the arsenal required for a state’s given purposes. Again, here some variation is possible, ranging from a virtual arsenal (for example, Japan today and perhaps South Korea and Vietnam tomorrow), to the barest existing arsenal (North Korea), to a weaponized force (possibly Pakistan), to a secure secondstrike capability (China), to a force able to engage at multiple levels of warfare (the United States and Russia). It is important not to neglect views on the utility of the least robust of these nuclear powers. States such as India and Pakistan before 1998, Israel for approximately the last three decades, North Korea over the past several years, and arguably Japan today have found value in possessing a vague yet not fully weaponized nuclear arsenal. In most cases, political dynamics have highlighted the costs of moving toward weaponization and deployed forces. However, these states, even those with serious security threats, were willing to tolerate such nuclear ambiguity. Table 2 attempts to capture this range of views on the utility of weapons and pair those views with countries in the region. Readers can certainly call into question the coding of this table. Nevertheless, this author would argue that the overall conclusion holds true that there are substantial differences across the region. The point here is not to affirm any of these beliefs but rather to note the wide variation in Asia today. As is discussed below, this wide variation raises a number of problems.

implications Each element of complexity raises its own problems, which are summarized in this section. In general, most of these effects increase the challenges facing national security elites throughout the region, increase the prospect for dangerous security competition, heighten potential for miscalculation, and destabilize the region. Beyond that, the implications of these three individual elements will tend to interact, as discussed in a later section.

The First-Order Effects of Proliferation The simple quantitative increase in the number of nuclear arsenals has several effects. The most obvious effect is the increase in the number of potentially unstable dyads. Perhaps historically rare reasons restrained the intense rivalry of the Cold War, preventing it from degenerating into an intense nuclear war. Those factors, however, may not hold in other cases. For instance, there is strong evidence that some dyads in Asia do not share the [ 67 ]

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Table 2 Perceptions on the Utility of Nuclear Weapons in Asia Russia

United States

China

Pakistan

India

North Korea

Deter nuclear threat to cities

X

X

X

X

X

X

Deter nuclear escalation

X

X

?

Deter major conventional defeat

X

Japan

Expected role

?

X

X

Extended deterrence of nuclear threat

X

X

Extended deterrence of conventional threat

X

X

Compellent power

X

X

Arsenal needs Existential

X

Robust second strike

Advanced

X

?

Virtual?

X

X

X

Source: For useful sources on the individual countries, see the country chapters in Alagappa, The Long Shadow; Narang, “Posturing for Peace?”; Kapur, “India and Pakistan’s Unstable Peace”; Lewis, The Minimum Means of Reprisal; and Terence Roehrig, “North Korea’s Nuclear Weapons Program: Motivations, Strategy, and Doctrine,” in Nuclear Strategy in the Second Nuclear Age, ed. Toshi Yoshihara and James Holmes (Washington, D.C.: Georgetown University Press, 2011). It is from these sources that the above codings are generally drawn. Note: As the United States foresees no major conventional threat to its homeland, it does not currently focus on the utility of nuclear weapons against such a threat outside the context of extended deterrence.

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same characteristics as the U.S.-Soviet rivalry. Paul Kapur argues that the stability-instability paradox that may have held during the Cold War in Europe does not hold in South Asia today. Instead, Pakistan views instability at the nuclear level as beneficial to its bargaining leverage.49 The Cold War did not center on territory claimed as sovereign homeland, whereas the Taiwan issue serves to complicate Sino-U.S. relations. The Sino-Russian border is long, and the two sides’ strategic arsenals are located more closely to each other than the U.S. and Soviet arsenals were in the Cold War. Additionally, no Soviet leader was ever as novice to international politics as Kim Jong-un in North Korea is, and the domestic legitimacy of the Soviet Union was never under as much stress as that of the Communist Party in China or the North Korean regime today. These and dozens of other issues highlight potentially salient points of contrast with the Cold War. Some scholars highlight the difficulties in attribution, not only in substate terrorism cases but also in multipolar rivalries.50 Yet the attribution of stateled attacks, though technically challenging, seems less likely to be a concern in reality, given that most surprise attacks occur at times of heightened tension. Still, the difficulty in identifying attackers might complicate issues in some circumstances. More problematic is the inherent instability of rivalries among three or more players, a point not systematically evaluated in the existing literature on Asia.51 Game theorists characterize a “truel” as a duel to the death between three actors. These theorists have reached several conclusions about the likely outcomes of such contests. First and foremost, in contrast to stylized duels, truels are highly vulnerable to the specific assumptions about the sequence of shooting, quality of weapons, size of arsenals, knowledge, and range of strategies chosen.52 This makes generalizing hard for mathematicians but has a very clear implication for policy analysts: the simplicity of a bilateral world is gone. Slight changes in weapons or strategy can have large effects on the perceived—and actual—balance.53

49 Samir Paul Kapur, “India and Pakistan’s Unstable Peace: Why Nuclear South Asia Is Not Like Cold

War Europe,” International Security 30, no. 2 (2005): 127–52;

50 Stephen P. Rosen, “After Proliferation: What to Do If More States Go Nuclear,” Foreign Affairs 85,

no. 5 (September/October 2006): 9.

51 By design, for instance, Alagappa’s volume focuses on country specific perspectives, and the bulk

of the introductory and analytic work that frames those chapters focuses on dyads per se (albeit including some discussion of extended deterrence). Alagappa, The Long Shadow.

52 D.M. Kilgour and Steven J. Brams, “The Truel,” Mathematics Magazine 70, no. 5 (December 1997):

315–26.

53 One other finding is that partnerships in the context of the three-way game are not robust.

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One manifestation of this is heightened competition due to uncertainty about potential adversary coalitions. In a series of studies, Stephen Cimbala used straightforward modeling to emphasize that states in Asia will be pressured to choose risky alert statuses and force postures out of such defensive concerns.54 More relaxed postures, such as launch after attack, could leave countries with greatly reduced arsenals. Of course, riding out a first strike is always dangerous. But in a multipolar context, states must be concerned about deterring, or retaliating against, multiple adversaries after an attack. The number of adversaries a state might face is also uncertain. In a crisis, the existence of multiple potential enemies will heighten a state’s incentive to not absorb a first strike because doing so will reduce an arsenal that would need to deter not only its primary, current adversary but also any other adversaries who might be tempted to enter the conflict soon thereafter. Both these scenarios are worse than the bilateral rivalry in the Cold War and will tend to catalyze more dangerous force postures. Thus, even if the optimists are right about their characterization of the Cold War, these dynamics are new and negative in the post–Cold War environment. Modernization across the board paints something of a mixed picture. The development of a secure second-strike capability for any nation would reduce dangerous mobilization spirals. Thus, such a capability is likely to be stabilizing in some contexts involving the United States and China. However, a secondstrike capability gives China substantial advantages in competition with India, which previously might have been characterized by a two-sided minimal deterrent posture. Russia had hoped to balance conventional difficulties with nuclear preeminence in its relationship with China and others, but will be less able to do so the more secure and robust China’s second-strike capability is. Furthermore, in other contexts the development of secure second-strike capabilities makes coercive strategies much riskier: consider, for example, the United States and North Korea or China and India. In many cases modernization of delivery systems is progressing ahead of the associated command and control systems. Thus, surface-to-surface ballistic missiles (SSBM), when armed, might under certain conditions enhance the security of China’s second-strike force. However, several factors suggest this will not be the case. First, China has not developed detailed procedures

54 See, for example, Stephen J. Cimbala, “Nuclear Arms in Asia: Theory and Policy Issues,”

Comparative Strategy 26, no. 2 (March 2007): 127–40; Stephen J. Cimbala, “Anticipatory Attacks: Nuclear Crisis Stability in Future Asia,” Comparative Strategy 27, no. 2 (March 2008): 113–32; and Stephen J. Cimbala, “North Korea and Nuclear Danger: Context and Policy Options,” Defense & Security Analysis 25, no. 4 (December 2009): 393–412.

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for the security (from unauthorized launch) and safety (from accidental launch) of its launch forces. On land the PLA has addressed these dangers through maintaining the separation of warhead and launch platform. Yet that approach will not be viable at sea, and so positive control of the warheads will need to rely on other approaches. The U.S. and Soviet experience was that this strategy is challenging. Second, based on hints from the U.S. Office of Naval Intelligence, the Jin-class submarine is not likely to be particularly quiet.55 Rather than presenting the United States with an invisible retaliatory force, the submarine may instead be an easy target for early attack before it eludes any pursuing attack vessel or launches its missiles.

The First-Order Effects of Increased Complexity of Strategic Forces The increasing complexity of the nature of strategic forces leads to a different set of concerns. First, it greatly complicates assessments of the strategic balance in any dyad. With missile defenses, a calculation of what constitutes an effective second strike for India against China must consider that some of India’s likely depleted retaliatory forces may be intercepted. Even if China’s system is expected to be only minimally capable, India should also recognize that its offensive forces will have already been worn down by a Chinese first strike. Precisely the same calculation has to be made by China with regard to the United States. Russia may not be overly concerned about Chinese missile defenses, but a larger-scale attack could achieve the same effect. Similarly, when assessing its ability to coerce South Korea and Japan, China now needs to consider these states’ missile defense capabilities.56 India’s missile defense, if technically effective, would also raise the costs for China of any coercive strategies. Taiwan, as often is the case, is in its own class. The island faces a much larger number of missiles (up to 1,150, according to the Pentagon), which are more limited in utility against other neighbors (Japan and South Korea are out of range; India and Russia have much more territory to disperse

55 See the chart in Office of Naval Intelligence, The People’s Liberation Army Navy: A Modern Navy

with Chinese Characteristics (Suitland, August 2009), 22 u http://www.fas.org/irp/agency/oni/planavy.pdf.

56 While it is true that Japanese—as well as South Korean—systems could be easily saturated, two

complications arise for Beijing. First, its holdings of intermediate-range ballistic missiles (IRBM) are limited, consisting of 80 DF-21 variants and a declining number of older CSS-2 liquid fueled missiles (declining from 15–20 today). Furthermore, such weapons also serve deterrent roles against India and U.S. regional bases. Thus, not all weapons can be used to saturate Northeast Asian missile defense systems. For missile arsenal quantities, see Office of the Secretary of Defense, Military and Security Developments, 66.

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military targets across and their population centers are out of range). Thus, Taiwan would likely face the full scale of China’s short-range M-9/11 missile capabilities. Still, Taiwan’s advanced missile defenses do force Beijing to rely on a large offensive to achieve any given level of desired political effect. Small demonstrative attacks that are intercepted may well backfire on China, forcing Beijing to incur the political cost of being perceived as a violent aggressor without any associated benefit of signaling in blood to Taiwan’s leaders the costs of a particular course of action. Still, it is certainly the case that Beijing’s conventional coercive options against Taiwan are substantial. There are, of course, potential responses to missile defense. At least part of China’s response in these cases is likely to be a quantitative build-up that would increase the potential devastation should violence break out. For China and others, qualitative improvements, both penetration aids and maneuvering warheads, are also possible.57 These may restore the “balance” in actual fact, but they are likely to create a gap in perceptions. For instance, both the defending nation and China would likely be overconfident in their own capabilities since the precise capabilities of these systems would remain highly classified on all sides.58 This dynamic also exists between the United States and China (and perhaps North Korea). It is furthermore worth noting that nuclear optimists regarding the Cold War generally opposed missile defense as destabilizing such balances during the twentieth century. The same logic would make the contemporary era in Asia worse as well. In other areas, non-strategic nuclear weapons developed by Russia to ensure that its depleted conventional forces can withstand an advanced foe could also serve strategic purposes against some Chinese targets. The same case could be made for Pakistan’s non-strategic nuclear forces. In both cases, missile defense systems in China and India, respectively, would further complicate Russian and Pakistani calculations by requiring a larger nuclear offensive to achieve the same degradation of opposing conventional forces. PGMs complicate the math of net assessments in some dyads even further. This is playing out in current U.S.-Russia arms control negotiations, and, indeed, may even stymie future progress in that relationship. PGMs have also complicated Sino-U.S. relations. Despite China’s nascent move

57 For an optimistic view on the efficacy of such weapons, see the recent report from two long-time

missile defense critics: George N. Lewis and Theodore A. Postol, “A Flawed and Dangerous U.S. Missile Defense Plan,” Arms Control Today, May 2010.

58 On a related form of overconfidence, misperception, and associated deterrence failure, see

Christopher P. Twomey, The Military Lens: Doctrinal Differences and Deterrence Failure in SinoAmerican Relations (Ithaca: Cornell University Press, 2010).

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to mobile intercontinental ballistic missiles (ICBM),59 Beijing increasingly envisages use of “strategic” PGMs both against lesser potential opponents, such as Japan and Taiwan, and also against the United States. As the technology for such systems spreads, it may serve strategic needs for Russia and India, in particular. Again, there is no analogue to this in the Cold War, thus undermining any grounds for optimism from the peaceful navigation of that conflict. In all these areas uncertainties abound, and each side in any dyad will be predisposed to make conservative estimates, leading to wide perceptual gaps. These uncertainties will be exacerbated when they span categories of weapons systems because making such comparisons is cognitively more challenging than simply comparing numbers of deliverable warheads.60 Such perceptual gaps are dangerous and can lead to overly expansionist foreign policy aims or insufficiently robust deterrence attempts.61 Arms control will be less likely to materially reduce threats in an environment of multidimensional strategic forces. In the Cold War the AntiBallistic Missile Treaty served as an important cornerstone of subsequent restrictions on offensive nuclear weapons. However, the quality of missile defenses has risen dramatically, so states will be loath to negotiate them away. The differentiation between strategic and non-strategic weapons was maintained in the U.S.-Russia New START treaty. Nonetheless, the U.S. side has made clear that subsequent negotiations, if they occur, will need to incorporate non-strategic systems. Similarly, regional players from India to Japan and South Korea view China’s non-strategic systems as quite strategic.62 To the United States, however, these same systems would present an operational threat, but not a strategic one, in any hypothetical conflict. Thus, differing threat perceptions makes common negotiating positions challenging.

59 This has been a frequent topic in recent Track II dialogues between the two nations and clearly

represents a genuine concern of China. For one discussion of the potential role of PGMs in a SinoU.S. conflict, see Keir A. Lieber and Daryl G. Press, “The End of MAD? The Nuclear Dimension of U.S. Primacy,” International Security 30, no. 4 (Spring 2006): 7–44; and Keir A. Lieber and Daryl G. Press, “U.S. Nuclear Primacy and the Future of the Chinese Deterrent,” China Security 3, no. 5 (2007): 66–89.

60 These complexities, particularly those other than missile defense, are not considered extensively in

the existing literature on Asia. See Alagappa, The Long Shadow.

61 Robert Jervis, Perception and Misperception in International Politics (Princeton: Princeton

University Press, 1976); and Twomey, The Military Lens.

62 While this is not a new problem in the post–Cold War era for China’s neighbors, it does complicate

consideration of any arms control efforts that simply were not under consideration prior to the last decade.

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The First-Order Effect of Divergent Beliefs of Utility When two states understand the utility of nuclear weapons similarly, oblique threats are often sufficient. This helps to ensure nuclear weapons stay out of the center of any relationship.63 However, when there are wildly different perspectives on the role of nuclear weapons, states will also disagree about what utility such weapons confer in a crisis-bargaining situation. One way for states to express this will be to engage in more explicit nuclear bluster. Again, such activities were common in the early Cold War but waned later. A return to such behavior is likely in Asia. Indeed, there is already evidence of exactly that in North Korean and Pakistani behavior. This trend threatens to erode norms that denigrate the utility of nuclear weapons. Explicit in the literature on nuclear taboos are policy prescriptions for the United States to avoid nuclear threats and, in general, to reduce reliance on nuclear deterrence. As Nina Tannenwald notes, “changing the discourse could also change the taboo.”64 Increased public nuclear bluster in times of crises pushes in exactly the opposite direction. Whatever one thinks of the durability of the nuclear taboo today, this will reduce its efficacy tomorrow.

The Interactive Effects of Multiple Changes Beyond the direct effects of different individual elements of the three changes, those changes interact, greatly complicating the strategic environment. The logic for restricting offensive and defensive systems in tandem for dyads that see stability stemming from mutual vulnerability is clear: if mutual vulnerability is an accepted goal of both sides, defensive weapons certainly can affect that objective.65 However, that logic no longer applies to many dyads. Arms control or even confidence-building measures in Asia need to deal not only with the challenges of multiple players but also with the inherent interconnectedness of offensive and defensive systems. Advanced offensive conventional weapons may soon join this mix, as the United States’ global precision-strike systems could become capable of effectively attacking nuclear forces. 63 Muthiah Alagappa, “Introduction: Investigating Nuclear Weapons in a New Era,” in Alagappa, The

Long Shadow, 23.

64 Nina Tannenwald, The Nuclear Taboo: The United States and the Non-Use of Nuclear Weapons since

1945 (New York: Cambridge University Press, 2007), 386. See also the discussion of strains on the taboo in Paul, The Tradition of Non-Use of Nuclear Weapons, chap. 9.

65 Yost, however, notes that the Soviet Union had other rationales in mind as well. See Yost,

“Analysing International Nuclear Order,” 554.

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Arms races are also affected by both the numeric and qualitative changes described here. Arms races can spiral. For example, India could build up its arsenal in response to Pakistan’s modernization. China, in turn, might respond to India,66 raising concerns for either Russia or the United States (or both). Alternatively, a U.S. missile defense system aimed at reducing threats from North Korea is provocative to China and has shaped the country’s modernization plans. Adding consideration of the final source of complexity, that of varying perceptions on the role of nuclear weapons, only worsens the picture. “Stability” in the nuclear balance during the Cold War had a few meanings, but to the United States such stability was the recognition that neither side had the means or intent to create the capability for a disarming first strike. This balance is impossible to achieve when different countries conceive of different roles for their nuclear arsenals. Because some nations such as Russia and Pakistan have more substantial expectations about the role of nuclear weapons, as discussed in the previous section, they will rely on more advanced and larger arsenals. This will pose threats to the more modestly geared forces. While the usual example offered here is the threat posed to China by U.S. forces, China threatens India in an analogous fashion. Finding a stable balance of nuclear capabilities is hard with two actors. It is harder still with multiple players because of uncertainty about coalitions and the need to deter multiple actors. When there are different conceptions of the appropriate role of nuclear weapons, and therefore different implications for sizing and posture, these problems are greatly exacerbated.

conclusion A productive debate began in 1995 between Kenneth Waltz and Scott Sagan weighing the dangers of nuclear proliferation.67 What this article argues is that even if we limit our analysis to essentially realist factors such as balancing power, first-strike advantages, and interstate coercion, among other factors, the outlook for avoiding nuclear conflict is deeply pessimistic. When coupled with the dangers surrounding misperception and command and control difficulties emphasized by Sagan, that pessimism is only deepened.

66 The barest inkling of Chinese concern over Indian strategic forces is now apparent at various Track

II meetings in which the author has participated.

67 Sagan and Waltz, The Spread of Nuclear Weapons.

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“Expect things to get worse” is not a policy prescription per se, but this view does have several implications. First, whatever the role of the nuclear taboo in recent times, it is likely to decline as the dynamics outlined above encourage greater nuclear posturing and a more intense nuclear environment. As noted by Paul J. Bracken, nuclear weapons can be used without being detonated; the story of early Cold War diplomacy is riddled with examples of nuclear threats being used to serve coercive purposes.68 As states that have a more expansive view of the utility of nuclear weapons interact with those with a narrower view, such nuclear “use” will become more common, undermining one of the foundations of the nuclear taboo. Second, in such a security environment the United States should recognize that far-reaching and expansive goals are likely to be costly. Regime change, rollback of an adversary’s gains, and even active promotion of human rights will all be riskier than in the past. There may be times when pursuit of such goals is warranted, but in general the high costs should be recognized. Third, the implications for force posture are ambiguous and highly contingent on individual dyads. Clearly, different strategies can rely on different offensive weapons. Similarly, though missile defenses hold the potential— under some narrow circumstances—to reduce the destabilizing dynamics, even they exacerbate some of the problems listed above. While modest missile defense is not particularly destabilizing in a “mutually assured destruction” dyad with large arsenals on both sides (and indeed may encourage stability by reducing concerns over unauthorized launches that would lead to total war), for states with existential views about deterrence, any missile defense system may be threatening. On the other hand, increased sensor technology available to all players reduces one set of inadvertent dangers (although at a cost to some strategies). Finally, multilateral arms control agreements will not reduce these threats in the near term. Potential costs in terms of instability in peace and war have clearly remained high in the second nuclear age in Asia, but, as pointed out above, the challenges facing traditional arms control have risen substantially.69 Without a shared view of the role of nuclear weapons, cooperative steps to reduce their role will appear disproportionate to one side or the other. Of course, it is often the case that various parties view arms control agreements differently—for example, the value of the Nuclear

68 Paul J. Bracken, Fire in the East: The Rise of Asian Military Power and the Second Nuclear Age (New

York: HarperCollins, 1999).

69 This view is shared by Brad Roberts, “‘All the King’s Men’? Refashioning Global Nuclear Order,”

International Affairs 83, no. 3 (May 2007): 523–30.

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Non-Proliferation Treaty (NPT) regime when it was initially constructed was different for the nuclear “haves” than for the “have-nots.”70 But there must be recognized, overlapping interests and available compromises for all sides. Given the wide range of perspectives about the utility of nuclear weapons, even that understanding is absent. Furthermore, traditionally U.S.-Soviet arms control was remarkably onedimensional: quantitative reductions in offensive systems. Because of the diversification of systems with strategic effect in Asia, that approach is simply not viable. Different states will be threatened by different forces and will find maintaining a range of forces to be reassuring for their own defense. The scope of offensive strategic nuclear weapons, non-strategic nuclear weapons, missile defenses, and conventional precision-strike systems each perform different roles for different players. Reaching common agreements about the appropriate restrictions for each seems to be an impossible task. That concern has already arisen in U.S.-Russia negotiations, and the minor nonbinding reference toward broader issues (such as missile defense and conventional strike capabilities) almost provoked enough opposition to prevent Senate ratification of the New START Treaty in December 2010. Add to this complication of multidimensionality the issue of multipolarity, and the challenges traditional arms control faces seem simply insurmountable. If two states—with somewhat similar experience with nuclear weapons—struggle to come to a common understanding of the role of other strategic systems, how much harder will it be for countries with different strategic cultures? When states face multiple potential adversaries, will they be willing to negotiate with only one? Chinese experts have alluded to exactly this concern, voicing reservations about restricting their arsenal in any negotiation with the United States and other NPT nuclear-weapons states while India remains outside this regime and is free to expand at will. Until there is a deeper understanding of the logic of different countries’ nuclear strategies and their interaction, such compromises will be hard to come by in Asia. Increased discussions by all parties regarding the role of nuclear weapons and the means by which nuclear weapons serve this role will be a critical positive step. At the same time, the challenges posed by an increasingly multilateral and complex Asia are so high that it is imperative for the United States both to be restrained in its goals in the region and to recognize the paramount 70 Illustrating this “haves” perspective vividly is Michael Rühle, “Enlightenment in the Second

Nuclear Age,” International Affairs 83, no. 3 (May 2007): 511–22. Analysts from the Non-Aligned Movement, for instance, would express quite a different view.

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importance of nonproliferation strategies, whether they come in multilateral or unilateral guises. It is important to note that the proliferation of technology— ranging from nuclear energy to more conventional weapons systems—lies at the heart of this deterioration of stability in the region, both in general and in the nuclear arena. Policymakers should utilize a broad set of tools and give high-level attention to what has at times been regarded as mundane regulatory structures in the sphere of export controls. The risks from nuclear weapons are simply higher in the world described in this article. All statecraft balances costs and benefits. Goals that might have been achievable a decade ago will not be achievable a decade in the future because of these dynamics. It is important to recognize that shift. 

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The Asian Monetary Fund Reborn? Implications of Chiang Mai Initiative Multilateralization William W. Grimes

william w. grimes is Professor and Department Chair of International

Relations at Boston University, and a Research Associate of the National Asia Research Program. He is the author of Currency and Contest in East Asia: The Power Politics of Financial Regionalism (2009) and Unmaking the Japanese Miracle: Macroeconomic Politics, 1985–2000 (2001). He can be reached at <[email protected]>.

keywords: chiang mai initiative; asean +3; asian monetary fund; imf © The National Bureau of Asian Research, Seattle, Washington

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executive summary This article analyzes the current implications and likely future course of Chiang Mai Initiative Multilateralization (CMIM), which some observers have argued is a major step toward the creation of an Asian monetary fund (AMF) that would be fully autonomous from the IMF.

main argument Like the previous version of the Chiang Mai Initiative (CMI), CMIM seeks to provide an efficient and credible mechanism for offering emergency liquidity to ASEAN +3 economies in currency crises. “Multilateralization” in this case means the creation of formal reserve pooling arrangements, a weighted voting system for disbursement of funds, and enhancement of surveillance capabilities. CMIM differs in fundamental ways from the AMF concept. Much attention has been given to the establishment of weighted voting for disbursement of funds, but in fact CMIM maintains the CMI’s existing “IMF link,” whereby crisis countries are able to access the bulk of their line of emergency credit only after having already entered into negotiations with the IMF for a standby agreement. Technocratic advocates of delinking CMIM from the IMF have looked to surveillance measures within ASEAN +3 to replace IMF surveillance and conditionality. In contrast, this article argues that the need for third-party enforcement through the IMF link arises from the politics of Sino-Japanese rivalry and therefore cannot be eliminated through institutional measures.

policy implications • Though East Asian economies avoided currency crises during the 2008–10 global financial crisis, the crisis offers many lessons. The nearcrisis in South Korea, which was managed mainly through a temporary swap agreement with the U.S. Federal Reserve, revealed gaps in CMI and CMIM coverage. The 2010 Greek crisis demonstrated anew the dangers of depending on regional surveillance and enforcement mechanisms for financial and currency stability. • U.S. interests are not threatened by CMIM, even though the process specifically excludes the U.S. from direct involvement, because the institutional need for the IMF link ensures for the time being that CMIM will remain nested within global institutions. • The U.S. should engage ASEAN +3 governments in ongoing regional and global discussions of how currency crises can best be prevented and managed.

grimes u implications of chiang mai initiative multilateralization

S

ince 2000, East Asia has seen an efflorescence of regionally based economic initiatives touching on trade, investment, financial regulation, and prevention of currency crises. The growing literature on these developments no longer asks whether regionalism is happening or whether it will be consequential. Rather, the debate has shifted to trying to understand the nature of regional cooperation and its political and economic causes and consequences.1 There is considerable variation across issue areas with regard to the shape and membership of regional initiatives. Trade cooperation, with the notable exception of the ASEAN Free Trade Area (AFTA) and assorted AFTA +1 agreements, has been primarily bilateral in nature, leading to a bewildering “noodle bowl” of cross-cutting free trade agreements (FTA) with varied rules of origin.2 Cooperation on cross-border investment, likewise, has been primarily bilateral through investment treaties and frameworks for agreement, many of them attached to FTAs. Limited subregional agreements such as within the Association of Southeast Asian Nations (ASEAN) and the new trilateral investment treaty among Japan, China, and South Korea tend only to confirm the fragmented and competitive nature of “regional” investment cooperation. Only in finance and currency-related issue areas has cooperation among East Asian economies actually developed on a regional basis, with ASEAN +3 as the main arena.3 The Chiang Mai Initiative (CMI), which was designed to provide dollar liquidity for countries experiencing currency crises, is by far the most advanced component of East Asian financial regionalism. The CMI is the only ASEAN +3 initiative that commits participating states to significant and reciprocal financial obligations. Although CMI lending is formally supplemental to International Monetary Fund (IMF) funds, the

1 See, for example, Michael J. Green and Bates Gill, Asia’s New Multilateralism: Cooperation,

Competition, and the Search for Community (New York: Columbia University Press, 2009); Ellen Frost, Asia’s New Regionalism (Boulder: Lynne Reinner, 2008); Kent Calder and Francis Fukuyama, eds., East Asian Multilateralism: Prospects for Regional Stability (Baltimore: Johns Hopkins University Press, 2008); and Christopher M. Dent, East Asian Multilateralism (London: Routledge, 2008).

2 Richard Baldwin, “Managing the Noodle Bowl: The Fragility of East Asian Regionalism,” Asian

Development Bank Institute (ADBI), ADBI Working Paper Series on Regional Economic Integration, no. 7, February 2007; Thomas G. Moore, “China’s International Relations: The Economic Dimension,” in International Relations of Northeast Asia, ed. Samuel S. Kim (Lanham: Rowman and Littlefield, 2004), 101–34; Mireya Solís and Saori N. Katada, “Understanding East Asian Cross-Regionalism: An Analytical Framework,” Pacific Affairs 80, no. 2 (Summer 2007): 229–57; and John Ravenhill, “The ‘New East Asian Regionalism’: A Political Domino Effect,” Review of International Political Economy 17, no. 2 (May 2010): 178–208.

3 ASEAN +3 includes the members of ASEAN plus China, Japan, and the Republic of Korea.

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initiative’s origins in debates over the role of the United States and IMF in crisis management during the 1997–98 Asian financial crisis have led to an active debate among scholars, policymakers, and opinion leaders over whether the CMI will eventually stand on its own as a regional alternative to the IMF. On March 23, 2010, financial cooperation among ASEAN +3 countries moved to a new stage when ASEAN +3 officially implemented Chiang Mai Initiative Multilateralization (CMIM), which replaced the existing network of bilateral agreements with a reserve pooling arrangement totaling $120 billion. While the official press release was a terse four paragraphs, many observers saw the move as a major step toward the inevitable fulfillment of the 1997 proposal to create an Asian monetary fund (AMF) that would be independent from the IMF and U.S. influence. Since first being proposed, the AMF concept has excited advocates of Asian regionalism and caused U.S. Treasury officials concern. This article addresses the questions of what CMIM is, where it is going, and what implications the process has for the United States and the ASEAN +3 economies. It argues that CMIM will not transform the CMI into a de facto AMF (throughout this article “AMF” is used as short-hand for a regional facility that is fully independent of the IMF) but that CMIM is an important milestone signaling a maturing of ASEAN +3 cooperation. Although for the moment there are no negative implications for U.S. economic or political interests in Asia, policymakers should stay closely engaged in the process. The article is organized as follows: u

u

u

u

pp. 83–86 lay out the contrasting forces of economic integration and Sino-Japanese rivalries that have combined to shape East Asia’s distinctive approach to regional bailouts pp. 86–89 describe the evolution of the CMI from its origins in the 1997–98 Asian financial crisis and summarize how the initiative was structured from its establishment in 2000 until multilateralization in 2010 pp. 89–92 consider the impact of the 2008–10 global financial crisis on East Asian economies, focusing particularly on the Korean near-crisis in fall 2008 and on national responses to large-scale drops in external demand and shifts in the flow of funds pp. 92–103 describe the details of CMIM and analyze the implications of the changes that multilateralization entails in light of both the Korean experience and the 2010 Greek crisis, demonstrating that CMIM is closely entwined with global standards and institutions such as the IMF and that the politics and economics of regional cooperation will likely ensure that CMIM stays nested in the global architecture [ 82 ]

grimes u implications of chiang mai initiative multilateralization u

pp. 103–4 conclude the article by highlighting both the limits to regional bailout cooperation and the benefits that the current approach provides to CMIM members

regionalism, leadership, and rivalry There are many issues driving economic regionalism in East Asia. It is impossible to ignore the growth of cross-border regional trade and investment and the creation of regional production networks, which local economies have an interest in facilitating.4 Some authors also point to the emergence of a pan-Asian identity, developed either as a recognition of commonalities or as a defensive reaction against a U.S.-dominated global economic architecture.5 Behind the analysis of the rise of East Asian regionalism (whether implicitly or explicitly) is the assumption that such regionalism is made possible—and indeed necessary—by the rise of East Asia politically and economically. East Asian political and economic elites are seeking to structure future interactions so as to take advantage of that rise. Regionalism is one manifestation of those efforts, and rules and institutions created regionally will no doubt be highly relevant to global governance. There is considerable evidence of greater economic cooperation among East Asian economies, but the accomplishments of economic regionalism are as yet less impressive than the hopes and predictions of its strongest proponents. A variety of explanations have been put forward for the weakness of regional economic institutions, including economic diversity, cultural unease with legalistic arrangements, the nascent state of a regional identity, and enduring political conflicts.6 My own work, in contrast, has focused on issues of power, particularly with regard to the general problem of leadership—a focus that leads inevitably to the problem of Sino-Japanese rivalry. That

4 See, for example, Naoko Munakata, Transforming East Asia: The Evolution of Regional Economic

Integration (Washington, D.C.: Brookings Institution, 2006). For a somewhat different take, see Ravenhill, “The ‘New East Asian Regionalism.’ ”

5 Paul Evans, “Between Regionalism and Regionalization: Policy Networks and the Nascent East

Asian Institutional Identity,” in Remapping East Asia: The Construction of a Region, ed. T.J. Pempel (Ithaca: Cornell University Press, 2005), 195–215; Yong Wook Lee, “Japan and the Asian Monetary Fund: An Identity–Intention Approach,” International Studies Quarterly 50, no. 2 (June 2006): 339–66; and Yong Wook Lee, The Japanese Challenge to the American Neoliberal World Order: Identity, Meaning, and Foreign Policy (Stanford: Stanford University Press, 2008).

6 Gilbert Rozman, Northeast Asia’s Stunted Regionalism: Bilateral Distrust in the Shadow of

Globalization (Cambridge: Cambridge University Press, 2005); Shaun Narine, “The Idea of an ‘Asian Monetary Fund’: The Problems of Financial Institutionalism in the Asia-Pacific,” Asian Perspective 27, no. 2 (Summer 2003): 65–103; and Peter Katzenstein, A World of Regions: Asia and Europe in the American Imperium (Ithaca: Cornell University Press, 2005).

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perspective is skeptical of the ability of ASEAN +3 to create an institutional solution to what is essentially a political problem. A central problem of understanding what is happening in ASEAN +3 is that observers and participants look at regionalism through a variety of prisms. Many advocates of the AMF idea, and of financial regionalism in general, have a tendency to lament the interference of politics in the regionalism project. But political rivalry is a central factor in the process of regionalism. The effects of political rivalry on regionalism are particularly interesting when looking at regional liquidity arrangements where Japan’s and China’s economic interests are essentially identical.7 Reflecting the pervasiveness of regional production networks and the growth of regional trade and investment, both countries have a deep interest in supporting the financial stability of their East Asian economic partners. Moreover, Japan and China are the financial titans of the region—either one could rescue one or more neighboring economies from a currency crisis with cash on hand. (Analysts often invoke the vast foreign exchange reserves of China, but Japan has even greater wherewithal, given that the yen is itself a major international reserve currency.) The sheer fact of having such capabilities means that Tokyo and Beijing are likely to be approached in the case of a crisis, thus compounding their stake in preventing balance of payments crises. At the same time, as likely creditors, they have a strong interest both in ensuring repayment of loans and in avoiding the moral hazard that is created when bailouts are certain and come without conditions. Despite the commonality of Chinese and Japanese economic interests, however, emergency liquidity provision is also an arena in which the two states compete for regional leadership and in which the basic problem of mistrust has limited the scope and effectiveness of regional cooperation. As is demonstrated below, the challenges arising from competition and mistrust cannot be resolved through institutional means, despite the best efforts of AMF advocates. My book Currency and Contest in East Asia develops at length the concept of the great-power politics of financial regionalism.8 This article will not recapitulate the theoretical background and logic of the argument but instead will argue that financial regionalism in East Asia is heavily influenced by relative power games among China, Japan, and the United States. There 7 This argument is fully developed in William W. Grimes, “East Asian Financial Regionalism in

Support of the Global Financial Architecture? The Political Economy of Regional Nesting,” Journal of East Asian Studies 6, no. 3 (September 2006): 353–80; and William W. Grimes, Currency and Contest in East Asia: The Great Power Politics of Financial Regionalism (Ithaca: Cornell University Press, 2009).

8 See Grimes, Currency and Contest, especially chap. 1.

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are two overlapping games in this story: East Asia vs. the United States and Japan vs. China. Competition between East Asia and the United States should sound familiar to anyone who observed the Asian financial crisis and the deep anger that was directed at the IMF. Scholars and other observers of East Asian regionalism have long recognized the role of the “politics of resentment”9 in East Asian attempts to reduce dependence on (and thus vulnerability to) U.S. macroeconomic and financial events and policies. Although this is a useful starting point for thinking about the East Asia–U.S. game, it is also important to consider that the notion of resentment, accurate though it may be in an emotional and even motivational sense, can blind observers to the rational nature of that resentment and its uses. In reality, policymakers are considering actual trade-offs in a rational manner. In my version of the story, financial regionalism combines pure insurance against contagion with defense against what Benjamin J. Cohen calls the U.S. “power to deflect.”10 Cohen argues that the preponderance of the U.S. dollar and the dependence of producers around the world on U.S. markets have allowed the United States to shift some costs of excessive borrowing to current account surplus countries that have little choice but to hold onto depreciating dollars. Japan and China, as major holders of dollars, both have good reason to try to reduce the U.S. power to deflect. The story of the Japan-China rivalry is also a familiar one. With respect to regional liquidity arrangements, where the two countries’ economic interests are essentially identical, there are two relevant aspects of the game: the contest for regional leadership and uncertainty about each other’s intentions and likely behavior. Uncertainty is a particular challenge. Because the nature of crisis management is that decisions are one-shot and must be made quickly, classic enforcement strategies, such as “tit for tat,” do not necessarily apply. Thus, both China and Japan are playing dual hedging games, against the United States and against each other. Both countries also face practical economic issues. With regard to the provision of emergency liquidity, creditor states seek to ensure credibility that funds not only will be made available to deserving partners but also will not be made freely available when irresponsible policies have led to a crisis. In other words, such states must confront the problem of moral hazard. Japan and China together could make

9 Richard Higgott, “The Asian Economic Crisis: A Study in the Politics of Resentment,” New Political

Economy 3, no. 3 (November 1998): 333–56.

10 Benjamin J. Cohen, “The Macrofoundations of Monetary Power,” in International Monetary Power,

ed. David Andrews (Ithaca: Cornell University Press, 2006), 31–50.

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such a credible guarantee and threat if only both countries could trust that the other would behave as promised. But they cannot. This sets up a dynamic by which there are two other conceivable options—nesting within the global regime in order to borrow credibility from the IMF or creating some sort of institutionalized guarantees regarding how each will act in preventing and managing regional crises. To date, the CMI has followed the nesting strategy, but given the unpopularity of the IMF in the emerging market economies of ASEAN +3, there has been much discussion of purely regional arrangements. However, institutional means of overcoming the China-Japan game are not feasible in the foreseeable future. That is why, despite the hype of a new dawn in financial regionalism, CMIM still relies fundamentally on the IMF to play the enforcer. It is also why this author predicts that an AMF is not in the cards any time soon, unless there is a serious miscalculation by a major actor or until China’s regional dominance is more clearly established.

the road to cmi multilateralization The Asian financial crisis of 1997–98 was a critical juncture in the development of East Asian regional cooperation.11 While many questions remain contested concerning the genesis of the crisis and the response of the international community, the crisis clearly laid bare the vulnerability of East Asian economies to the negative effects of globalization and demonstrated the inadequacy of existing global institutions for dealing with traumatic currency and financial crises. In the midst of the crisis, the Japanese government proposed the formation of an Asian monetary fund; in the face of opposition from the IMF, United States, and China, the proposal was withdrawn. Details of the proposal (if indeed they even existed beyond a broad outline) have never been released, but the general contours are known: a regional fund of approximately $100 billion (half provided by Japan) that would provide large-scale liquidity rapidly and without conditions to economies suffering from currency crises. At the time, the IMF and U.S. Treasury criticized the proposal as one that would increase moral hazard among East Asian economies; it was also widely suspected among both scholars and pundits that the IMF was concerned with

11 Higgott, “The Asian Economic Crisis”; Kent Calder and Min Ye, “Critical Juncture and

Comparative Regionalism,” Journal of East Asian Studies 4, no. 2 (2004): 1–43; and Lee, The Japanese Challenge; and Grimes, Currency and Contest.

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protecting its turf and that the United States and China were concerned about the prospect of Japanese regional leadership.12 The CMI, which was announced in May 2000, resurrected the idea of a regional emergency liquidity facility, but the initiative differed in fundamental ways from the AMF proposal. First, the CMI was constructed as a network of bilateral swap agreements (BSA) among the ASEAN +3 economies, eventually totaling over $80 billion, rather than as a single pool of funds. Second, the bulk of the funds (90% initially and 80% after 2005) were to be released only to states that had initiated negotiations with the IMF for a standby agreement. This “IMF link” was criticized by potential borrower countries in Southeast Asia as perpetuating the role of the IMF, which they saw as having exacerbated the 1997–98 crisis. Further, the link appeared to many observers to subvert the idea of a regional solution to the vulnerabilities created by financial globalization. The CMI and other elements of East Asian financial regionalism did indeed support the global financial architecture rather than rival it.13 In practice, the CMI was very clearly designed to supplement IMF resources and to provide bridge financing between the onset of negotiations with the IMF and the final standby agreement. However, it is also important to note that the CMI by its very existence constituted a credible threat of exit from the IMF on the part of ASEAN +3 countries, which could be used as leverage to ensure favorable treatment by the IMF if a CMI member were in need of a bailout.14 Three contending explanations have emerged for the differences between the AMF proposal and the CMI reality. The first, which posits an anti-U.S. or anti-globalist impetus for the project and which I term the “regionalist” explanation, is that the CMI is a stepping stone toward the re-emergence of the AMF.15 Proponents of this position advocate regional arrangements that are independent of the IMF, and argue that in the CMI the ASEAN +3 countries maintained the broader political purpose of promoting an East Asia–only organization that would exclude the United States and IMF from crisis decisionmaking for the region. However, participants also understood 12 Higgott, “The Asian Economic Crisis”; Eisuke Sakakibara, Keizai no sekai seiryokuzu [Map of

World Economic Power] (Tokyo: Bungei Shunju, 2005); and Lee, The Japanese Challenge.

13 Grimes, “East Asian Financial Regionalism”; and Grimes, Currency and Contest. 14 Saori Katada, “Japan’s Counterweight Strategy: U.S.-Japan Cooperation and Competition in

International Finance,” in Beyond Bilateralism: U.S.-Japan Relations in the New Asia-Pacific, ed. Ellis Krauss and T.J. Pempel (Stanford: Stanford University Press, 2004), 176–97.

15 See, for example, Masahiro Kawai, “From the Chiang Mai Initiative to an Asian Monetary Fund”

(paper presented at the “Future Global Reserve System” conference, Tokyo, March 17–18, 2010); Lee, “Japan and the Asian Monetary Fund”; Lee, The Japanese Challenge; and Oh Yong-hyup, “Asian Monetary Fund Is on the Horizon,” Korea Herald, May 25, 2009.

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that opposition by the United States and IMF would be difficult to overcome and thus chose to proceed in a deliberate and incremental fashion. The second explanation, which I term the “functionalist” explanation, emphasizes the practical difficulties of creating effective surveillance measures to prevent moral hazard and seeks to address them through institutional means.16 While there is some overlap between regionalists and functionalists, the regionalists are generally motivated more by a political vision of an East Asian community than by the technocratic allure of collective goods. The third explanation, which I term the “realist” explanation and which I have advocated, is that the reliance of the CMI on the IMF reflects not just temporary constraints such as external politics or underdeveloped regional institutions but rather intra–ASEAN +3 political challenges that are inherent to the project of regional cooperation.17 Fundamentally, the problem of emergency liquidity provision is that avoiding moral hazard is impossible unless there is a credible threat of attaching strict conditions to assistance or even outright denying requests for help from states that have brought crises on themselves through their own macroeconomic or other policies. In order to create such credibility, leading states (i.e., likely lenders) must either be willing to reject requests from regional partners in the midst of crisis or be able to delegate to an independent body the determination of whether a given crisis was caused by contagion or by irresponsible policies. In East Asia, Japan and China are the primary potential lenders and thus are the states with both the most to lose from moral hazard and the greatest ability to shape the decisionmaking structure. Neither Japan nor China is willing to pay the political price of refusing a neighbor in need (especially given that neither can rely on the other for support in a crisis), nor is either country willing to pay the potential price of throwing good money after bad or of making future crises more likely. AMF advocates often look to the European Union as an inspiration, but regional institutions in Europe were built on the cooperation of Germany and France under the security and economic umbrellas sponsored by the United States. Japan and China have fundamentally differing relationships with the United States and also

16 This is essentially the official approach and is represented by various CMI planning documents. See

Chaipravat Olarn, “Reserve Pooling in East Asia: Beyond the Chiang Mai Initiative,” in Monetary and Financial Integration in East Asia: The Way Ahead, vol. 1, ed. Asian Development Bank (New York: Palgrave Macmillan, 2004), 97–142; Eric Girardin, “Information Exchange, Surveillance Systems, and Regional Institutions in East Asia,” in Asian Development Bank, Monetary and Financial Integration, 53–96; and Kawai, “From the Chiang Mai Initiative.”

17 Yeongseop Rhee, “East Asian Monetary Integration: Destined to Fail?” Social Science Japan Journal

7, no. 1 (April 2004): 83–102; and Grimes, Currency and Contest.

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are strategic rivals. Thus, unlike in Europe, a Sino-Japanese condominium is not feasible. Meanwhile, given the small number and often illiberal nature of East Asian governments, delegation to a truly independent regional organization is also not feasible. Thus, the IMF link became—and has remained—an indispensible component of the CMI for both Japan and China, despite a 2005 agreement that created a roadmap calling for greater regional decisionmaking and capabilities through multilateralization of the BSA network and enhanced surveillance.

east asian financial regionalism and the global crisis From the beginning, East Asian financial regionalism was meant to protect participating economies from vulnerability to global financial and currency market volatility so as to prevent a recurrence of the painful economic and political turmoil of 1997–98. Former Japanese vice-minister of finance for international affairs Sakakibara Eisuke, for example, described the Asian financial crisis as the first “crisis of global capitalism”;18 the CMI and other aspects of financial regionalism were meant to act as a bulwark against the next such crisis. The year 2008 delivered just such a crisis, and with a far greater magnitude and global reach than the crisis in 1997. It is thus important to step back and take a look at what the ASEAN +3 economies did to address it. While there is a great deal to say about how the global crisis played out in East Asia, for the purposes of this article, three facts are essential. First, no East Asian economy was devastated by a financial or currency crisis, although all were injured to some degree by the drop in U.S. and European demand for exports. Second, no economy had to draw on its CMI swap lines or go to the IMF for assistance; nonetheless, the ASEAN +3 finance ministers responded to the crisis by accelerating their plans to significantly enhance regional financial cooperation through CMIM as well as by strengthening surveillance. Third, East Asian economies were protected from the crisis largely by their own individual policies, including massive accumulation of foreign exchange reserves (which gave ammunition to prevent currency runs), conservative fiscal policies (which provided enough fiscal slack to implement massive stimulus programs), and, in most cases, flexible exchange

18 Eisuke Sakakibara, Kokusai kinyu no genba: Shihonshugi no kiki o koete [The Arena of International

Finance: Moving Beyond the Crisis of Capitalism] (Tokyo: PHP Shinsho, 1998).

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rates.19 Yet, although regional arrangements were not directly tested, the crisis still exposed cracks in the capabilities of regional institutions. These cracks have yet to be effectively fixed, if indeed it is possible to do so.

Backstopping Regional Liquidity: The Case of South Korea The only East Asian economy that had a truly close brush with crisis in this period was South Korea in the fall of 2008. Despite accumulated foreign exchange reserves of approximately $200 billion at the time,20 the Bank of Korea (BOK) became concerned about dollar liquidity in the banking system. The BOK acted swiftly to head off this threat by concluding a $30 billion swap agreement with the U.S. Federal Reserve, which was announced on October 30. (The Fed simultaneously announced the conclusion of identical swap lines with Singapore, Brazil, and Mexico; a swap agreement with New Zealand was announced the previous day.)21 The actions of the BOK (and the Monetary Authority of Singapore) speak volumes about the capacity of the CMI to prevent and address currency crises.22 Several points stand out. First, the fact that the CMI requires the initiation of negotiations with the IMF makes the initiative virtually unusable for an advanced economy with open financial markets, such as South Korea; it would also be highly disruptive for regional trade and investment. For this reason, the +3 economies of China, Japan, and South Korea have maintained “peacetime” BSAs between their central banks in parallel with their formal CMI swap obligations in order to address yen, won, and renminbi liquidity needs in the absence of a financial crisis. Second, while the peacetime BSAs with Japan and China were expanded to $20 billion and 180 billion renminbi (approximately $26 billion), respectively, a month and a half after the Fed swap line was agreed to, the BSAs were not utilized. In contrast, the BOK drew on the Fed swap line five times in December 2008 and January 2009 for a total of $16.3 billion, which constituted about 60% of the BOK’s emergency provision of foreign exchange to domestic financial institutions.23 In other

19 William W. Grimes, “The Global Financial Crisis and East Asia: Testing the Regional Financial

Architecture,” EAI Working Paper Series, no. 20, June 2009.

20 Bank of Korea, “Official Foreign Reserves,” Press Release, December 3, 2008. 21 Bank of Korea, “Stabilization of Foreign Exchange and Foreign Currency Funding Markets,”

undated web document u http://www.bok.or.kr/broadcast.action?menuNaviId=1664.

22 This has been noted ruefully by the distinguished Japanese economist and advocate of regionalism

Masahiro Kawai. See Masahiro Kawai, “Reform of the International Financial Architecture: An Asian Perspective,” ADBI, ADBI Working Paper, no. 167, November 2009.

23 Bank of Korea, “Stabilization of Foreign Exchange.”

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words, not only was the CMI itself irrelevant to the prevention of currency crisis, but Korea and Singapore chose to insure the stability of their financial systems with the United States (which had been explicitly excluded from regional financial cooperation) rather than with their ASEAN +3 partners. Both operational and practical factors compelled Korea to turn first to the United States rather than to its ASEAN +3 partners. Some Japanese and Korean officials argue that the decision to turn to the Fed was purely operational: the Korean banking system required dollar liquidity, and the peacetime BSAs between the +3 central banks are denominated in their own currencies (i.e., yen-won, renminbi-won, renminbi-yen), which are not supposed to be converted to dollars to supplement foreign exchange reserves. But this apparently purely technical reasoning obscures two larger issues regarding the role of the U.S. dollar in East Asia (and indeed the world). First, the dollar remains so dominant as a vehicle currency and store of value in trade and finance in the region that the need even for yen (an important international currency, unlike the inconvertible renminbi) is minimal. More broadly, the move—not only by Korea but also by a host of other systemically important emerging economies—to establish temporary swap lines with the Fed as a means of preventing speculative attacks on their currencies in the fall of 2008 reflects the enduring structural power of the United States in the international monetary system and financial markets. The timing was particularly striking—at a point at which the stability of U.S. financial markets and the solvency of many U.S. financial institutions stood in the balance due to a global crisis of the United States’ own making, the Fed and the dollar remained the final backstop of monetary credibility in East Asia and around the globe. Although China and other states have railed against the dollarbased system and called for multilateral alternatives, the effects have been purely rhetorical.24

The Response of East Asian Economies to the Global Financial Crisis East Asian macroeconomic authorities responded effectively to the global financial crisis with massive fiscal and monetary stimulus plans,25 as well as with stepped-up monitoring of domestic financial institutions. This was not done in a coordinated manner, although countries communicated with each

24 Zhou Xiaochuan, “Reform the International Monetary System,” Bank for International Settlements

(BIS), BIS Review, no. 41, March 23, 2009.

25 Fitch Ratings, “Bank-Support and Fiscal Measures Being Implemented in Asia-Pacific,” Asia-Pacific

Special Report, March 4, 2009.

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other, the IMF, ADB, and other international interlocutors. Exchange rates adjusted, some dramatically (e.g., the Korean won), but without creating currency crises. With regard to exchange rates, there was no evidence of a coordinated response, although governments stood ready to honor their CMI commitments if necessary. Though it is important not to minimize the challenges that East Asian countries faced in terms of declines in export demand, manufacturing production, and GDP, even the worst-hit among East Asia’s emerging economies (e.g., Malaysia) made it through the crisis much less scathed than economies elsewhere.26 Moreover, East Asian financial systems were never seriously threatened. These were remarkable accomplishments, indeed, in the face of the global financial crisis. Nonetheless, it is striking that the success of East Asia as a region in riding out the global financial crisis was based not on coordinated action or regional institutions but rather on the actions of individual governments and central banks (even if there was spillover from the stimulus plans of other regional economies). Moreover, their ability to carry out those actions was based on a decade’s worth of conservative macroeconomic policies and financial supervision that were also uncoordinated—not to mention on the massive accumulation of foreign exchange reserves and the establishment of more or less flexible exchange rates. ASEAN +3 financial regionalism was not relevant to the story, even though regional cooperation had been developed precisely to prevent and manage financial and currency crises in the region. Indeed, the very fact that emerging economies had insured themselves by building up massive foreign exchange reserves over the previous decade suggests a lack of confidence in regional solutions such as the CMI.

cmi multilateralization and its implications Despite the apparent irrelevance of regional arrangements such as the CMI to East Asian economies’ handling of the crisis, the primary response of ASEAN +3 as a group was to accelerate efforts to expand and enhance regional cooperation, most notably through CMIM and the establishment of the ASEAN +3 Macroeconomic Research Office (AMRO) to improve surveillance. These efforts culminated in an agreement at the end of 2009

26 Unlike East Asia’s emerging markets, the region’s most developed economy, Japan, took a hit to its

real economy that exceeded even that of the United States and Western Europe.

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that represented the concrete realization of goals of the 2005 CMI roadmap.27 The agreement standardized countries’ agreements around a single contract, superseded the bilateral swap network with a reserve pooling agreement in which funds would be disbursed based on committed reserves and a “purchasing multiple,” and set up a mechanism to improve surveillance in order to reduce reliance on outside help for that function.28 CMIM seems to call for a reconsideration of how the development of regional liquidity facilities is understood. Advocates of the regionalist and functionalist explanations see the changes as confirmation that the CMI is moving away from being simply a regional adjunct of the IMF to being a distinct regional alternative, and characterize CMIM as a major step toward the achievement of the AMF dream.29 (Functionalists have tended to be more cautious than triumphal compared to regionalists, however, emphasizing the steps that are still necessary to ensure effective surveillance and fund provision.) Other observers have been more measured in their appraisals, though acknowledging that the changes have been significant.30 It would indeed be difficult to avoid the conclusion that CMIM was equivalent to an AMF if one were to focus simply on the initial press reports in spring and summer 2009. A careful reading of the actual ASEAN +3 statements, however, suggests that greater caution is in order. Although it is frustrating that the actual agreement has not been made public,31 this author’s discussions with various participants in the process confirm that CMIM is not the AMF. Nor is it at all inevitable that something like an AMF is the endpoint of the process.

27 Ministry of Finance of Japan, “Enhancement of Chiang Mai Initiative (CMI)—2nd Stage,” undated,

received by the author in May 2005.

28 “The Joint Media Statement of the 12th ASEAN Plus Three Finance Ministers’ Meeting,” ASEAN,

May 3, 2009 u http://www.aseansec.org/22536.htm.

29 See, for example, Kawai, “From the Chiang Mai Initiative”; Oh, “Asian Monetary Fund”; Joel

Rathus, “The Chiang Mai Initiative’s Multilateralisation: A Good Start,” East Asia Forum, March 23, 2009 u http://www.eastasiaforum.org/2010/03/23/the-chiang-mai-initiatives-multilateralisation-agood-start; and Joel Rathus, “The Chiang Mai Initiative: China, Japan and Financial Regionalism,” East Asia Forum, May 11, 2009 u http://www.eastasiaforum.org/2009/05/11/the-chiang-maiinitiative-china-japan-and-financial-regionalism.

30 C. Randall Henning, “The Future of the Chiang Mai Initiative: An Asian Monetary Fund?”

Peterson Institute for International Economics, Policy Brief, no. 09-5, February 2009; and Grimes, “The Global Financial Crisis and East Asia.”

31 Indeed, this author has been told by officials at the Japanese Ministry of Finance that the text would

not be released in order to reduce the likelihood that speculators will seek to find loopholes to exploit. Yet, to the extent that the key to CMIM’s effectiveness will be market credibility, the lack of clarity about who is committed to what and under what circumstances would seem to reduce the initiative’s credibility.

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The official press statements, though not exactly a model of clarity, contain seven main points:32 1. The overall size of the pool of reserves is increased from approximately $80 billion to $120 billion. 2. The core objectives are “(i) to address balance of payment and shortterm liquidity difficulties in the region, and (ii) to supplement the existing international financial arrangements.” 3. CMIM replaces the existing network of bilateral swap agreements with “a common decision making mechanism under a single contract.”33 4. The agreement establishes country-specific “financial contributions,” which also translate into voting shares. The ASEAN economies collectively contribute 20% of the total funds, while the +3 economies contribute the remaining 80% (Japan 32%; China 32%, of which 28.5% is from mainland China and 3.5% is from Hong Kong; and South Korea 16%). According to the May 2009 agreement to establish CMIM, “on decision-making mechanism of the CMIM, the fundamental issues will be decided through consensus of members of ASEAN+3, while the lending issues will be decided through majority [sic].”34 5. Countries are able to borrow a “purchasing multiple” of their financial contributions, ranging from 0.5 for Japan and China to 2.5 for ASEAN-5 economies (Indonesia, Malaysia, Philippines, Thailand, and Singapore) and 5.0 for Brunei, Cambodia, Laos, Myanmar, and Vietnam. 6. The reserve pool operates under the principle of national “selfmanagement.” In other words, states maintain their own reserves but pledge an amount up to their CMI financial contribution in the event of a crisis. Although procedures and conditions for releasing funds have been standardized and streamlined, each participating government or central bank is still responsible for releasing funds from its own reserves. 7. The agreement provides for the creation of the ASEAN +3 Macroeconomic Research Office as an independent regional surveillance unit. Essentially, the agreement creates a three-tiered surveillance system. Regional think tanks will generate and test ideas for how to monitor regional economic performance, AMRO will

32 “Joint Press Release: Chiang Mai Initiative Multilateralization (CMIM) Comes into Effect on the

24th of March 2010,” Monetary Authority of Singapore, March 24, 2010 u http://www.mas.gov.sg/ news_room/press_releases/2010/Joint_Press_Release_CMIM_Comes_Into_Effect.html.

33 As noted, the “single contract” is not publicly available. The same was true of the BSAs under the

previous arrangements.

34 “The Joint Media Statement of the 12th ASEAN Plus Three Finance Ministers’ Meeting.”

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monitor actual performance, and the ASEAN +3 finance ministers and their subordinates will discuss performance in the context of economic review and policy dialogue (ERPD). ERPD will remain the locus of state-to-state communication regarding policies, including criticisms and warnings as appropriate. The fourth and seventh points in particular appear to support the idea that CMIM is a major step toward an AMF-style regional organization that effectively delinks from the IMF. But there is significantly less here than meets the eye. Although CMIM clarifies and standardizes commitments, the initiative is essentially just a more elegant version of the ungainly CMI swap mechanism. That these conditions may be transitional in nature is, of course, debatable. However, this author’s discussions with participants and close observers make clear that the likely lender governments (especially China and Japan) strongly subscribe to the principle that the regional liquidity organization must not create moral hazard. Despite the formal changes, institutional guarantees remain unfeasible. Thus, while one can look forward to the continued development of CMIM, the primary shifts will likely be incremental functional improvements such as greater clarity about how and when funds are to be released as well as greater uniformity of action among the participating governments.

Weighted Voting One of the most striking innovations of CMIM is the introduction of weighted voting for lending decisions. This development has been exciting for AMF proponents, who have long assumed that a voting procedure would be a necessary element of an autonomous regional funding mechanism. That disbursement and renewal of CMIM funds are to be decided on the basis of a two-thirds majority of voting shares does appear consequential at first glance. However, what is more important is that the IMF link remains in place—in other words, appealing to the IMF remains an essential precondition for even triggering the vote to release the bulk of CMIM funds. The stipulation that CMIM will “supplement the existing international financial arrangements” is not just a rhetorical sop to the IMF and United States but an accurate reflection of reality. There are a number of additional red herrings in discussions of voting weights. For example, Korean analysts with whom I spoke in 2009 were quite pleased about the fact that Korea ended up with half the voting share of [ 95 ]

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Japan and China. This percentage proves to be numerically inconsequential, however, because funding approval requires a two-thirds majority rather than a simply majority. The face-saving compromise between Japan and China—i.e., creating equal shares but assigning a share of China’s commitment to Hong Kong in order to allow Japan to retain its nominal role as the largest contributor—is also irrelevant to the functioning of any weighted voting regime. A more important factor is that both Japan and China are one ASEAN-5 country vote short of veto power. Although for the time being a veto would still likely require cooperation between Japan and China (or perhaps China and Korea or Japan and Korea), in the future one can imagine China working with a combination of ASEAN client states to threaten a crisis economy with non-disbursement of funds. This threat could in theory be very powerful, indeed, even if never invoked. However, the financial capacity of Japan to provide liquidity support on its own if necessary reduces the potential use of such a threat. For the moment, any such exertion of power seems unlikely, both because of China’s continuing desire to act as a benevolent regional leader (and to keep Japan from acting as the good guy) and because of the IMF link. Any state requesting CMIM funds must already be in negotiations with the IMF, which significantly reduces the financial risk for CMI lenders. Practically speaking, the fact that voting only occurs after the IMF has intervened means that the vote itself provides no added value; in fact, voting actually adds a modicum of uncertainty to the process at a time when a borrower would most crave certainty. Nonetheless, the structure of CMIM does provide China with a potentially important future power resource. If ASEAN unity were to fracture (perhaps in response to China-Japan rivalry), China (or Japan for that matter) could use its near-veto power to punish a rival’s client-state or to force a rival to bail out the client-state.

Surveillance and Enforcement The fundamental challenge for any crisis lender is how to prevent moral hazard among likely borrowers. This is essentially an issue of enforcement, which can be achieved either through imposing strict conditions when a loan is made (ex post conditionality) or refusing to bail out an economy that has not met accepted standards of economic management (ex ante conditionality). The problem is that enforcement can be politically costly. The coordination problem for ASEAN +3 is that China is not a hegemon and a [ 96 ]


Sino-Japanese political condominium is not a near-term possibility given that neither China nor Japan can absolutely rely on the other to stick to a politically costly agreement to enforce conditionality. In the absence of a clear leader, enforcement in the form of either ex ante or ex post conditionality requires effective delegation of decisionmaking based on clear criteria. That is why the process of financial regionalism in East Asia has paid so much attention to institutional mechanisms to ensure coordinated action. Functionalists have pushed the agenda based on their belief that an effective surveillance mechanism can be used to enforce ex ante conditionality.35 Practically speaking, however, institutional mechanisms cannot simultaneously address the three essential challenges of credibility, effectiveness, and moral hazard in the absence of a link to the IMF. Creating effective institutions to which authority could be delegated is no easy task, and this author is skeptical that making surveillance apolitical and objective in the ASEAN +3 context is even possible. Although such delegation is not unheard of among international organizations, such as the IMF, World Bank, and EU bureaucracy,36 ASEAN +3 differs in size, character, and history from those examples. In the absence of hegemonic leadership or dependable cooperation between Japan and China, AMRO and ERPD represent an effort by the two states to rely on delegated authority as a means of putting distance between themselves and difficult decisions. ERPD does not, however, provide a viable way for governments to distance themselves from decisions on ex ante or ex post conditionality inasmuch as their official representatives are direct participants in the process. The IMF link, on the other hand, serves up conditionality on behalf of the lenders, but without forcing them to take responsibility, which is why the IMF has been attractive to Japan and China. With regard to AMRO, it is hard to imagine that a unit of the proposed size and composition (a total staff of perhaps 50 or so, consisting of academic and government economists from the participating economies) would constitute

35 Haruhiko Kuroda and Masahiro Kawai, “Strengthening Regional Financial Cooperation in East

Asia,” Pacific Research Institute, PRI Discussion Paper Series, no. 03A-10, May 2003; Girardin, “Information Exchange”; Olarn, “Reserve Pooling in East Asia”; Masahiro Kawai, “East Asian Economic Regionalism: Progress and Challenges,” Journal of Asian Economics 16, no. 1 (2005): 29–55; Kawai, “Reform of the International Financial Architecture”; Kawai, “From the Chiang Mai Initiative”; and Shinji Takagi, “Designing a Regional Surveillance Mechanism for East Asia: Lessons from IMF Surveillance,” ADB, Asia Regional Integration Center, Report, June 2010 u http://aric. adb.org/grs/papers/Takagi.pdf.

36 Michael Barnett and Martha Finnemore, Rules for the World: International Organizations in Global

Politics (Ithaca: Cornell University Press, 2004); Ngaire Woods, The Globalizers: The IMF, the World Bank and Their Borrowers (Ithaca: Cornell University Press, 2006); and Kenneth Abbott and Duncan Snidal, “Why States Act through Formal International Organizations,” Journal of Conflict Resolution 42, no. 1 (February 1998): 3–32.

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an effective and independent monitoring unit. Is it, for example, reasonable to expect that government-affiliated economists from Vietnam, China, or even Malaysia would be operating—or be perceived as operating—as individuals, unconnected to the policy preferences of their home countries? If not, the unit would offer Japan and China none of the political benefits of true delegation. Another, more practical, consideration will erode the likely credibility of ASEAN +3 surveillance: what will be the standards by which AMRO will monitor regional economies? In theory, it may be possible to come up with regionally appropriate standards that work better than the standardized IMF criteria.37 Indeed, there have been some efforts to do just that,38 but without any proven utility and thus no market credibility. Of course, AMRO could simply do what the IMF already does, albeit without the IMF’s track record or budget, but that would seem to add little utility. Such an outcome might be better than the alternative, however, in which markets and states are unsure whether IMF or AMRO standards will be applied. Indeed, one senior Japanese financial policymaker told me unequivocally in 2009 that “there cannot be two different standards.”

Limits of CMIM as a Crisis Manager The Korean near-crisis in 2008 demonstrates an additional limitation of the CMI mechanism, which has not changed in any meaningful way with CMIM. CMIM itself is set up to deal with severe crises, hence the attention to conditionality (both ex ante conditionality and the IMF link). For an advanced and highly open economy such as South Korea, however, IMF involvement is something to be avoided at all costs because disruption and capital flight would be enormously costly. The same would be true of the uncertain and likely clumsy process of a bailout by a fledgling AMF. An economy such as South Korea’s must have access to dollars rapidly and without ambiguity of commitment if the regional process is to be at all meaningful. ASEAN +3 policymakers are aware of this issue, which is why the +3 central banks established peacetime BSAs in 2005. These swap lines (totaling a paltry $7 billion) were set up in 2005 to address short-term liquidity

37 Masaru Yoshitomi and Kenichi Ohno, “Capital-Account Crisis and Credit Contraction,” ADBI,

ADBI Working Paper, no. 2, 1999.

38 ADB, Early Warning Systems for Financial Crises: Applications to East Asia (New York: Palgrave

Macmillan, 2005); ADB, “Technical Assistance: Strengthening Economic and Financial Monitoring in Selected ASEAN+3 Countries,” Technical Assistance Report, no. 39579, December 2005; and ADB, “Enhancing the Capacity of Selected ASEAN+3 Countries for Assessing Financial Vulnerabilities,” Technical Assistance Report, no. 40565, March 2007.

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needs unrelated to fundamental economic problems, and they work outside the CMI process. This sort of swap line can be extremely helpful in stabilizing global financial flows and preventing crises. A lender central bank, however, must ensure that the borrower will be able to redeem the swaps in full, so that the bank does not become just one more creditor needing to cut a deal in the case of an actual bailout. The swaps are, therefore, not applicable in the face of major currency shifts and are subject to significant ex ante conditionality and lender discretion. This leads to a yawning gap between central bank swaps and CMIM funding. Perhaps a fully realized AMF would provide a solution, but no one has yet made clear what this solution would be.39 The 2008 Korean experience demonstrated the inadequacy of the existing +3 peacetime BSAs in another way. The peacetime BSAs between the Bank of Japan (BOJ) and Bank of Korea (BOK) and between the People’s Bank of China (PBOC) and the BOK were own-currency swap lines. Korean banks, however, needed dollars rather than yen or inconvertible renminbi. In theory, the BOK could have changed yen or renminbi into dollars and then provided dollars as needed to Korean banks. In practice, the BSAs did not allow for such operations, which could increase the exchange-rate risk of the transaction (and, technically speaking, would constitute a foreign exchange market intervention in yen-dollar or renminbi-dollar markets, albeit one carried out by the BOK). The peacetime BSAs could certainly be amended to allow exchange into dollars, but that would introduce practical or legal complications for the BOJ and PBOC. In any event, such amended BSAs would still lack the credibility of a Fed swap line. Indeed, financial markets would likely see the use of BOJ or PBOC swap lines to obtain dollars as an implicit acknowledgement that the BOK could not borrow from the Fed, which could prompt further attacks. Greater emphasis on swap lines among China, Japan, and Korea would also leave open the question of how to deal with similar crises in ASEAN if they were to arise. Despite the desirable increase in flexibility, potential creditors would be back in the position of making fateful judgments about their partners’ policies. Creating consistency across ASEAN +3 in this regard would reopen the very problems that the IMF link and surveillance are meant to eliminate.

39 Kawai does suggest some solutions, which presume that the borrower country will be a deserving

one as Korea was in 2008.Yet how to create effective mechanisms to deal with more ambiguous cases is not clear. See Kawai, “From the Chiang Mai Initiative.”

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Lessons of the Greek Crisis As if the logical challenges to the ability of ASEAN +3 to enforce ex ante conditionality based on delegated surveillance were not sufficiently daunting, 2010 brought concrete evidence from Europe about the difficulties of such enforcement. Early that year, the EU was rocked by the sovereign debt crisis of Greece, one of the euro zone’s most peripheral members, which in turn led to the biggest crisis in the euro’s short history. This was not the way the EU— let alone the euro zone—was supposed to work. The Stability and Growth Pact was meant to prevent solvency crises by restricting deficits and debts to sustainable levels. Admittedly, there had been some breaches in the past (especially by leading countries), and the financial crisis had necessitated new breaches. But the scale of Greece’s problem (deficits of approximately 13% of GDP and debt levels well above 100% of GDP), combined with the flagrant deception perpetrated by the Greek government in concealing it, went far beyond minor or justifiable violations of the pact. With no means of devaluing its currency or of managing its solvency problem in the short-term, the Greek government turned to its EU neighbors for help. Four months and a trillion dollars later, leading EU economies had managed the crisis for the time being, albeit with the help of the IMF, which was a reputational blow to the European Central Bank, and the near eruption of crises in several other euro zone members. The Greek crisis offered some sobering lessons for East Asia. Two particularly striking features of the crisis were the failures of ex ante conditionality in the form of the Stability and Growth Pact and of surveillance mechanisms to provide prior warning. Surveillance failed not just at the EU level but globally. Although the IMF evaluation of Article IV on May 25, 2009, was certainly correct in warning about Greece’s fiscal challenges, the report’s estimates of the country’s fiscal deficits were only roughly half as high as the reality.40 As for the effectiveness of ex ante conditionality in changing behavior, Greece’s fiscal problems were not new, despite its commitments as a euro zone member. Even without the impact of its finance ministry’s extraordinary deception, Greece’s fiscal picture had been bad for years and was growing predictably worse. Indeed, even before the global crisis the Greek government had blithely expanded spending every year (except for 2005–06) since its entry into the euro zone in 2001. Euro zone membership

40 IMF, “Greece: 2009 Article IV Consultation—Staff Report; Staff Supplement; Public Information

Notice on the Executive Board Discussion; and Statement by the Executive Director for Greece,” IMF Country Report, no. 09/244, August 2009.

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involved significant ex ante conditionality in the form of commitments regarding fiscal deficits and debt, the inability to devalue relative to EU trading partners, and the European Central Bank’s supposedly ironclad promise that it would not bail out member governments. The crisis in Greece demonstrated that governments’ commitment to responsible economic policies cannot be guaranteed even by treaty commitments, extensive institutionalization of monitoring and enforcement, and issue linkages in the most developed and highly articulated system of interstate cooperation that has ever existed. For East Asia, the Greek crisis was an unpleasant reminder of the importance of ex post conditionality and the continued relevance of the IMF in managing crises.

Beyond CMIM: How East Asian Financial Regionalism Contributes to Global Stability Despite the confluence of the global crisis initiated in the United States and the political will to multilateralize the CMI, the ASEAN +3 process does not appear likely to lead to the regionalists’ dream of an autonomous AMF. Nonetheless, the crisis has revealed opportunities for East Asian financial regionalism to improve crisis management for local economies. Such opportunities could be as important moving forward as CMIM and the establishment of AMRO. One key global development that should not be minimized is the changed behavior of the IMF. Unlike in the Asian financial crisis, IMF bailouts in 2008–10 were massive and did not impose unduly harsh conditions on economies affected by contagion. This approach reflects a change in how crises are understood, as well as a new sense of urgency regarding contagion. Emblematic of the IMF’s new approach was the creation of the flexible credit line, which has essentially eliminated quota-based limits and punitive interest rates for economies that have become embroiled in crisis despite responsible fiscal, monetary, and financial policies. This is arguably a success of the CMI, as some observers predicted years ago.41 It also means that ASEAN +3 will probably not have to go it alone or cross swords with the IMF in the next East Asian crisis. Also on the global level, one of the interesting side effects of the financial crisis was the acceleration of efforts to fully involve East Asia in global financial and monetary governance. The solidity of the East Asian financial

41 Katada, “Japan’s Counterweight Strategy.”

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systems, the locomotive power of the Chinese economy, and Japan’s decisive move in fall 2008 to expand resources available to the IMF contributed to preventing the global crisis from becoming a global depression. The increasingly prominent role of East Asian governments in global governance in the IMF (partly through quota reallocations), group of twenty (G-20), Financial Stability Board, Basel Committee, and other institutions reflects a recognition of their growing importance in the global economy. This means that ASEAN +3 is not the only (and indeed probably not even the most important) venue in which East Asian economies can work to stabilize their external financial environment. Due to the types of issues addressed in the G-20 processes and the varying interests and levels of financial development of East Asian participants, however, there is no particular reason to expect them to cooperate with each other in those venues. The global crisis also highlighted the gap in ASEAN +3 arrangements between “peacetime” liquidity support and crisis management. However, the success of the Fed-BOK swap line, ad hoc though it was, gives hope that episodic cooperation among the leading global central banks can address potential crises in systemically important, well-managed economies. There may well be room for the expansion and revision of the +3 peacetime BSAs to make the agreements more useful in this regard. The question remains, however, of how to assure that economies continue to be “well-managed” when they have reason to expect assistance. Finally, East Asian economies have demonstrated in the face of the global crisis that prudent macroeconomic and financial policies can help countries weather even the strongest of storms. Unfortunately, these economies have also demonstrated that having massive foreign exchange reserves is the ultimate insurance policy in a world where institutions and commitments are not trustworthy. East Asia’s developing economies will likely continue to remember this lesson no matter what institutional arrangements ASEAN +3 devises and implements. Overall, the lessons that the ASEAN +3 economies drew from the Asian financial crisis have served members countries well. While the key policy choices of the last decade have been made by individual governments, the development of the CMI has also proceeded in a way that has not caused harm to East Asia or the global economy. Indeed, the exercise of trying to institutionalize surveillance and effective crisis management has probably contributed to a better understanding of the dynamics of crisis propagation, prevention, and management than have previous debt crises. This is something for which to be grateful, even for those regionalists whose dream of an AMF [ 102 ]


cut loose from the dominance of both the United States and the IMF is unlikely to come to fruition.

conclusion While this article rejects the idea that CMIM constitutes the realization of the AMF concept, the initiative is undeniably an important step in the creation and definition of regional cooperation in East Asia. CMIM is the largest and most concrete commitment of the ASEAN +3 states to each other, and it has the potential to positively transform the course of a currency crisis involving one or more of the smaller economies so as to make recovery more rapid and less painful. CMIM is also a major step in the legalization and institutionalization of cooperative ventures in East Asia; only trade agreements approximate the same level of legal reciprocal obligation, but there is as yet no ASEAN +3 free trade agreement, nor does one seem imminent. As ASEAN and ASEAN +3 begin to move away from generalized principles of consultation and cooperative spirit toward clearer institutional commitments, some of the uncertainties of economic life in East Asian emerging markets will subside. Although this is not likely to lead to the realization of the more grandiose conceptions of an East Asian community or to the creation of a single currency, over time this dynamic will be consequential and will support the ongoing economic integration of the region. Nonetheless, regional cooperation will continue to be limited by two enduring political realities that will be difficult to overcome. The first is ongoing Sino-Japanese competition and distrust. The second is the global financial power of the United States, as seen both in the key currency role of the dollar and in U.S. dominance in international financial institutions and regimes. Political scientists are notoriously bad at making long-term predictions, but it seems fair to say that any institution that is predicated on a Chinese-Japanese political condominium will not be a highly credible one for years to come, if ever. That is indeed why advocates of financial regionalism in East Asia have paid so much attention to institutional mechanisms to ensure coordinated action. As we have seen, however, the institutional mechanisms cannot simultaneously address all the issues of credibility, effectiveness, and moral hazard in the absence of a link to the IMF. For now, the multilateralized Chiang Mai Initiative aligns the common interests of China and Japan in regional financial stability and effectively addresses the need to provide emergency liquidity support to East Asian economies experiencing currency crises, without relying on Sino-Japanese [ 103 ]

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cooperation. The initiative does so at minimal political cost to the two countries and without disrupting regional relations. CMIM is, therefore, a very attractive arrangement for both states. It is possible, however, that this will change as the balance of economic and political power shifts toward China. At some point, China may be willing to take on the rights and responsibilities of regional enforcement. For now, however, CMIM and the IMF are likely to reinforce each other in supporting regional financial stability. 

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policy analysis

The Militant Challenge in Pakistan C. Christine Fair

c. christine fairis an Assistant Professor in the Edmund A. Walsh School of Foreign Service at Georgetown University, and a Research Fellow of the National Asia Research Program. She can be reached at .

u The author would like to thank the external reviewers whose extremely thorough review of the preliminary draft helped significantly improve the article. The author is also thankful to Professor Barry Posen for inviting her to present this work at MIT’s Security Studies Program Seminar Series during the fall 2010 semester. The comments and questions posed by Professor Posen and the attendees also provided input that motivated important revisions.

note

keywords: pakistan; afghanistan; terrorism; militancy; islam © The National Bureau of Asian Research, Seattle, Washington

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executive summary This article examines Pakistan’s use of asymmetric warfare as an instrument of foreign policy toward India since 1947 and in Afghanistan since the 1960s.

main argument Pakistan’s use of asymmetric warfare, although dating back to 1947, did not aggressively expand beyond Kashmir until Islamabad acquired first a covert “existential” nuclear capability in the 1980s and later an overt nuclear capability in 1998. After describing the complex contemporary landscape of Islamist militancy in Pakistan and the relationship between these groups and the state, as well as between religious and political organizations, this article contends that jihad is sustained by important segments of Pakistani society that endorse “militant jihad” in general and specific militant groups and operations in particular. Given Pakistan’s enduring security concerns about India’s ascent, Islamabad is unlikely to abandon militancy as a tool of policy, even while the government battles former proxies who have turned their guns—and suicide vests—on the Pakistani state and their former patrons.

policy implications • Pakistan’s skill in recasting the historical record in its favor enables the country to extract benefits from the U.S., which seeks to prove that it is a reliable ally. • Given the varying levels of support for militancy within both the Pakistani public and the military and intelligence agencies, Islamabad likely will be unwilling to abandon militancy as a tool of foreign policy and contend with the emergent militant threat ravaging Pakistan and the region. • Washington and its partners have been unable to either fundamentally change the way Pakistan assesses its cost-benefit calculus toward India or find some means of ameliorating Pakistan’s neuralgic fears of India. Years of U.S. policies toward Pakistan based on financial allurements and conventional weaponry have done little to induce change. • Given Pakistan’s regional equities and the changing regional dynamics, the international community should abandon optimism that Pakistan can or will change course and should prepare for increasing Islamist violence in the region and beyond.

fair u the militant challenge in pakistan

T

his article seeks to put in historical perspective Pakistan’s long-standing use of asymmetric warfare as an instrument to prosecute its foreign and even domestic policy objectives. Although contemporary narratives suggest that Pakistan began using militants and Islamists as a tool of foreign policy after the Soviet invasion of Afghanistan in 1979, its first dalliance with irregular warfare actually took place in 1947, soon after the country became independent. In prosecuting such conflicts, Islamabad has relied on irregular fighters and razakars (volunteers), as well as on regular fighters drawn from the military, paramilitary, and intelligence agencies. These regular fighters usually were dressed in mufti (civilian clothes) or disguised as irregular fighters. The first such asymmetric venture in 1947 initially involved support for mid-level officers in the army corps, but later, as the conflict expanded into a full-fledged war, the entirety of the army became engaged. The employment of mujahideen (Muslim guerilla fighters), or regular troops disguised as such, has been the basis of Pakistan’s efforts to convince domestic and international audiences that these asymmetric operations were conducted by nonstate actors, thereby conferring plausible deniability to shield the state from retribution. The problem is that this strategy has resulted in three wars (in 1947–48, 1965, and 1999) as well as in several “crisis slides” that have brought India and Pakistan to the brink of conflict. This article contends that while Pakistan’s use of asymmetric warfare began in 1947, the country was limited in its ability to expand the jihad beyond Kashmir with impunity until acquiring first a covert “existential” nuclear capability by 1990 and later an overt nuclear capability in 1998. This argument both advances and complements the work of S. Paul Kapur,1 who focuses on the Indo-Pakistani conventional crises that Pakistan’s creeping nuclear umbrella has enabled. The article does so in part by focusing on the antecedent conditions of the country’s ability to expand the number, operational scope, and geographic area of militant groups as well as the contemporary landscape of Islamist militancy in Pakistan and the relationship that the state enjoys with these various actors. The remainder of the article is organized as follows: u

u

pp. 108–118 put Pakistan’s use of proxy elements since 1947 in historical perspective. pp. 118–21 consider the various ways in which nuclearization enabled Pakistan to dramatically expand jihad deep into India beyond Kashmir, with increasingly bold and lethal attacks.

1 S. Paul Kapur, “Ten Years of Instability in a Nuclear South Asia,” International Security 33, no. 2

(Fall 2008): 71–94.

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u

pp. 121–36 describe the landscape of contemporary militancy in Pakistan and the connections that exist among militant groups and other supporting religious and political organizations. Drawing nearly exclusively on field research, this section also considers the relationship that the army and intelligence agencies may have with these various groups. pp. 136–37 conclude with a brief discussion of the likelihood that Pakistan will ever develop the political will—much less the capability— to strategically abandon militancy as a tool of foreign policy. The prognosis is gloomy. Given its enduring security concerns about India’s ascent, Pakistan is likely to rely more intently on Islamist militant groups, even while continuing to battle those erstwhile proxies that are now turning their guns—and their suicide vests—on the state and their former patrons.

pakistan’s historical use of proxy warfare Most contemporary media and academic accounts assert that Pakistan first began using militants as a tool to prosecute its foreign policy objectives during the anti-Soviet jihad. Pakistan, the United States, Saudi Arabia, and others built a massive Pakistan-based infrastructure to produce Islamist insurgents generally known as the mujahideen. In most accounts, Pakistan subsequently redeployed these battle-hardened operatives to Kashmir in 1990 when the Soviets formally withdrew from Afghanistan.2 In fact, Islamabad has relied on nonstate actors to prosecute foreign policy objectives in Kashmir since Pakistan’s inception in 1947. In that year, the nascent state mobilized numerous lashkars, or tribal militias, from the tribal areas to invade and seize Kashmir, while the maharaja of Jammu and Kashmir, Hari Singh, dithered on whether the region would join India or Pakistan. These lashkars were supported by the Pakistan Army. Had they not been sidetracked by rapine violence and pillaging, the lashkars might have successfully seized Srinagar. Worried about being overtaken by the tribal marauders, the maharaja asked New Delhi for military support. Delhi’s price was accession to India, and Singh readily signed the instrument committing Kashmir to India. By October 1947, Pakistan’s first foray into asymmetric warfare had precipitated the first Indo-Pakistan conventional military crisis (the 1947–48 War) in the early months of the two states’ existence. The war ended on January 1, 1949, with the establishment of a ceasefire line (CFL)

2 Alexander Evans, “The Kashmir Insurgency: As Bad as It Gets,” Small Wars and Insurgencies 11,

no. 1 (Spring 2000): 69–81.

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sponsored by the United Nations, which demarcated the areas under Pakistani and Indian control. The CFL was converted to the Line of Control (LOC) during the Simla Accords, which concluded the 1971 War.3 Following the failed effort to seize Kashmir in 1947, Pakistan supported numerous covert cells within Indian-administered Kashmir, often using operatives based in the embassy in New Delhi. In 1965 a number of events transpired in Kashmir that persuaded Islamabad’s covert operatives that a wider indigenous insurgency could be fomented.4 Pakistan’s interest in using proxy war may have been piqued during insurgency-specific instruction from the U.S. military in the 1950s when Pakistan and the United States were formally allied against the Soviet threat.5 While the United States was an important supplier of military equipment, Pakistan’s military also undertook an important doctrinal shift under U.S. influence and tutelage. As Stephen Cohen has noted, Pakistan began intensively studying guerilla warfare through its engagement with the U.S. military. Although the U.S. objective in providing this instruction was to suppress such conflict, Pakistan was keen to understand how to engage in guerilla warfare against India or even to develop its own “people’s army” as a second defense. Thus, while pledging support to U.S. objectives, Pakistan used its alliance with the United States to build up the country’s armed forces to contend with its rising eastern adversary. With U.S. assistance, Pakistan established a special forces unit in 1959. Pakistani professional military journals also began exploring “low intensity conflict,” a concept and vernacular that Pakistan still employs rather than 3 For accounts of this first war over Kashmir, see Shuja Nawaz, Crossed Swords: Pakistan, Its Army,

and the Wars Within (New York: Oxford University Press, 2008), especially 42–92; and Shuja Nawaz, “The First Kashmir War Revisited,” India Review 7, no. 2 (April 2008): 115–54.

4 On the 1965 War (also known as the Second Kashmir War), see Nawaz, Crossed Swords, especially

192–218; and Sumit Ganguly, Conflict Unending: India-Pakistan Tensions Since 1947 (New Delhi: Oxford University Press, 2001), 30–50.

5 As numerous writers have detailed, Pakistan agreed to the terms of the anti-Soviet alliance out of a

dire need to rebuild the armed forces because the country did not receive its fair share of moveable assets in the partition. Moreover, most of the fixed assets remained with India, where they were located. Although India was supposed to compensate Pakistan monetarily for these lost assets and provide other financial resources, New Delhi soon reneged on this agreement. The few trainloads of supplies that India did dispatch were full of obsolete equipment and other materials deemed undesirable by Pakistan. Because of British recruitment policies after the 1857 mutiny, there were no all-Muslim military units. Given the logic of partition and the distribution of the armed forces, Pakistan received no unit in full strength and suffered a severe shortage of officers. Thus, the haphazard process of partition gave rise to the intractable security competition that persists. Because Pakistan and India came into being as adversaries, Islamabad felt an urgent need to build its weaker armed forces and concluded that a formal military alliance with Washington was an expeditious means of doing so, in light of India’s alliance with Russia. See Pervaiz Iqbal Cheema, The Armed Forces of Pakistan (Karachi: Oxford University Press, 2002), 25–29; Stephen P. Cohen, The Pakistan Army (Berkeley: University of California Press, 1984), 5–12; and Hasan Askari Rizvi, The Military and Politics in Pakistan: 1947–1997 (Lahore: Sang-e-Meel, 2000), 35–81, 136.

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counterinsurgency. Several case studies on Yugoslavia, North Vietnam, Algeria, and China concluded that guerilla warfare could be a “strategic weapon,” a “slow but sure and relatively inexpensive” strategy that was “fast, overshadowing regular warfare.”6 Maoist doctrine in particular was appealing because of Pakistan’s close ties to China and because that doctrine seemed most appropriate for Kashmir. The Pakistan government concluded that the prerequisite conditions existed for waging a successful guerilla war in Kashmir: a worthy cause; challenging terrain; a resolute and warlike people (referring to Pakistanis rather than Kashmiris, who were not considered warlike); a sympathetic local population; the ready availability of weapons and equipment; and a “high degree of leadership and discipline to prevent (the guerillas) from degenerating into banditry,” as occurred in 1947.7 Likely inspired by case studies of asymmetric warfare and rendered more desperate by U.S. military assistance to India during the 1962 War with China, Pakistan launched Operation Gibraltar in 1965, named after one of the most valorized battles in Islam’s history.8 Pakistani planners sought to ensure plausible deniability in order to claim that regular forces were not involved in the conflict. The majority of the 120 men in each company were razakars and so-called mujahideen who were deliberately drawn from Pakistan-administered Jammu and Kashmir and given special training. Officers and a component of men from two paramilitary organizations, the Northern Light Infantry and the Azad Kashmir Rifles, accompanied the irregulars along with a small number of the elite Special Services Group commandos.9 Groups of four to six companies were combined into units commanded by an officer with the rank of major. Pakistan later used many locations where it had trained the irregular fighters to train mujahideen for the Kashmir jihad launched in 1989.10 6 Stephen P. Cohen, The Idea of Pakistan (Washington, D.C.: Brookings Institution Press, 2004 ), 342.

Cohen cites a few illustrative examples of these Pakistan military studies of low-intensity conflict, including S.A. El-Edroos, “A Plea for a People’s Army,” Pakistan Army Journal 4 (June 1962): 19–25; and S.A. El-Edroos, “Afro Asian Revolutionary Warfare and Our Military Thought,” Pakistan Army Journal 4 (December 1962): 35–41.

7 Mohammed Shafi, “The Effectiveness of Guerilla War,” Pakistan Army Journal 5 (June 1963): 11,

cited in Cohen, The Idea of Pakistan, 105.

8 Other motivations likely include the belief that India was weak following its defeat by China in the

1962 War and Pakistani confidence following a victory against India in the Rann of Kachchh conflict.

9 The Northern Light Infantry was inducted into the regular army in 1999 in part to reward the

regiment’s participation in the 1999 Kargil War and in part to compensate families for their losses in that conflict. See Ashley J. Tellis, C. Christine Fair, and Jamison Jo Medby, Limited Conflicts Under the Nuclear Umbrella—Indian and Pakistani Lessons from the Kargil Crisis (Santa Monica: RAND, 2001), 21.

10 For the most detailed account of this initiative, see Praveen Swami, India, Pakistan and the Secret

Jihad: The Covert War in Kashmir, 1947–2004 (London: Routledge, 2007), 49–75. Swami relies on a number of classified Indian documents (which were subsequently declassified) that he obtained in his capacity as a journalist.

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According to Praveen Swami, during Operation Gibraltar, Pakistan dispatched roughly 30,000 infiltrators into Indian-administered Kashmir to set up bases, carry out sabotage, and create conditions that would both foment a wider indigenous insurrection and facilitate the induction of regular troops into the conflict. Unfortunately, few reliable accounts exist regarding the actual number of infiltrators used during Operation Gibraltar. Shuja Nawaz cites one report that Pakistan used 15,000 irregular combatants in one engagement.11 Even though Operation Gibraltar failed to ignite the desired indigenous rebellion against India, it did succeed in precipitating the second conventional Indo-Pakistan conflict: the 1965 War. While Pakistan engaged in prolonged covert warfare in Kashmir, by the early 1970s Islamabad had also begun to covertly support Islamist Pashtun militant groups in Afghanistan. Likewise, in the 1980s, Pakistan provided extensive assistance to the Sikh ethno-nationalist insurgency in the Punjab. Contrary to conventional wisdom, this policy did not commence with the Soviet invasion of Afghanistan on December 25, 1979; rather, Pakistan began employing dissident religious leaders who fled Afghanistan during President Daoud Kahn’s tenure. Admittedly, Pakistan supported the mujahideen opposition on a modest scale, taking care not to provoke punitive action from the Afghan government’s protector, the Soviet Union. From at least 1973 onward, Islamabad adopted a policy of instrumentalizing Islamist Pashtun militias to prosecute its foreign policy objectives in Afghanistan, with varying intensity of involvement.12 It is also important to note that this policy was preceded by Pakistan’s introduction of the Jamaat-e-Islami (JI) to Afghanistan in the early 1960s, again in an effort both to influence Afghanistan’s domestic affairs and to spawn an Islamic awakening throughout Soviet Central Asia. Important militant commanders in the subsequent anti-Soviet jihad, such as Burhanuddin Rabbani, came from this Afghan branch of the JI movement. Thus, in some sense, Pakistan’s active efforts to manage Afghanistan can be dated to the early 1960s.13 The lineaments of Pakistan’s Afghanistan policy thus long predate the Soviet intervention and massive infusion of U.S. and Saudi funds. This point is important because Islamabad often opines that Pakistan was exploited

11 Nawaz, “The First Kashmir War Revisited,” 130. Nawaz notes that this figure cannot be confirmed. 12 See Hussain Haqqani, Pakistan: Between Mosque and Military (Washington, D.C.: Carnegie

Endowment for International Peace, 2005), 103–5, 167–68; Barnett R. Rubin, The Fragmentation of Afghanistan (New Haven: Yale University Press, 2002), 83–84; and Rizwan Hussain, Pakistan and the Emergence of Islamic Militancy in Afghanistan (Burlington: Ashgate, 2005), 79–81.

13 Haqqani, Pakistan: Between Mosque and Military, 171–75.

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by U.S. interests during the Soviet occupation and then abandoned by the United States once Soviet forces withdrew. Regrettably, many U.S. policymakers and military personnel who engage with Pakistan are unaware of the historical facts.14 Following the Soviet invasion, Pakistan intensified activities already underway in Afghanistan with active support from the United States, Saudi Arabia, and others. The country argued for considerable U.S. military assistance by claiming that large-scale support of the anti-Soviet effort would render it vulnerable to military threats. During this period, U.S. funding, weapons transfers, and training enabled Pakistan to dramatically expand its military as well as the capabilities of its premier intelligence agency, the Directorate for Inter-Services Intelligence (ISI). Pakistan continued receiving U.S. support throughout the 1980s even though the country had crossed red lines with its nuclear program—an action that would have cut off arms transfers had the Pressler Amendment not been passed. Additionally, in the service of the jihad, Pakistan employed religious institutions and parties, such as JI and the Jamiat-e-Ulema-e-Islam (JUI), to groom Pakistan-based militant groups for operations in Afghanistan and to train Afghan militants who had sought refuge in Pakistan. Islamabad preferred to support Afghan militant factions that were Sunni (rather than Shia or secular) and Pashtun in ethnicity as part of a deliberate effort to ensure that any Pashtun political aspirations would be channeled through religious— rather than ethnic—groups. This preference was motivated by Islamabad’s long-standing discomfiture with Kabul’s irredentist claims to Pashtun areas in Pakistan and by the activities of Pashtun nationalists in Afghanistan and Pakistan, who have episodically demanded a separate Pashtun state (often referred to as Pashtunistan). With massive international support, the mujahideen prevailed in ousting the Soviet Union from Afghanistan. This was an important lesson for Pakistan: if mujahideen in Afghanistan could defeat a nuclear-armed superpower, could not a similar force succeed in Indianadministered Kashmir? Though Pakistan became interested in launching and sustaining a guerilla war with India as early as the 1950s, the success of the

14 This deeply flawed narrative is examined in considerable detail in C. Christine Fair, “Time for

Sober Realism: Renegotiating U.S. Relations with Pakistan,” Washington Quarterly 32, no. 2 (April 2009): 149–72. Although academic audiences may know this history, this author’s experience during years of interacting with U.S. government personnel—whether civilians or military—is that they are often unaware of these facts. This lack of familiarity creates space for Pakistani interlocutors to argue that Americans have been perfidious and unreliable partners. This author contends, though others may disagree, that this is an important part of Pakistan’s rent-seeking strategy toward the United States.

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mujahideen in Afghanistan in the 1980s buoyed Islamabad’s confidence in the utility of such war in Kashmir. Pakistan’s conclusion that it could launch a more sustained proxy campaign in Kashmir, as opposed to episodic operations, was enabled by another important factor. By the mid-1980s, the United States had determined that Pakistan had developed a nuclear weapons capability. Military aid to the country could thus only be supplied through a presidential certification in the latter years of the anti-Soviet jihad. In 1990, President George H.W. Bush declined to certify that Pakistan had not passed a nuclear threshold, thereby subjecting the country to restrictions on military aid.15 From that point onward, Pakistan assumed the status of a covert nuclear power, which would render any retaliatory conventional response to its jihad ever-more costly. A third factor that permitted Pakistan to expand the scale and scope of the war in Kashmir was the surplus of battle-hardened jihadis from the Afghan conflict and the sprawling infrastructure to produce and train them. With the withdrawal of the Soviet Union from Afghanistan, Pakistan redeployed many mujahideen to the Kashmir front and established militant training camps in Pakistan and Afghanistan.16 Initially, the insurgency in Kashmir developed indigenously in response to India’s mismanagement of the province. Several genuinely Kashmiri militant groups emerged, some of which enjoyed Pakistani support. Yet when some indigenous groups began espousing independence rather than union with Pakistan, and when several turned from violence toward political activism, the new coterie of Pakistan- and Afghanistan-based groups directly competed with older, more ethnically Kashmiri groups. After the introduction of these fighters under Pakistan’s expanding nuclear umbrella, many indigenous, proindependence insurgents were eliminated by Pakistan-based groups such as Lashkar-e-Taiba (LeT) and Deobandi groups such as Harkat-ul-Mujahideen and Harkat-ul-Jihad Islami. By the mid-1990s, the conflict in Kashmir had been overrun by several Pakistan-based militant groups who were prosecuting Islamabad’s agenda of wresting Kashmir from India. At present, only one set 15 In 1985 the U.S. Congress added Section 620E(e) to the Foreign Assistance Act. This provision

is widely known as the Pressler Amendment. It required the U.S. president to certify to the U.S. Congress that Pakistan did not possess a nuclear explosive device for each fiscal year during which the administration wanted to provide assistance to Pakistan. In October 1990, Bush suspended U.S. military assistance to Pakistan when he declined to make this certification. For further explanation, see C. Christine Fair, “Time for Sober Realism.” Also see Richard P. Cronin, Alan Kronstadt, and Sharon Squassoni, “Pakistan’s Nuclear Proliferation Activities and the Recommendations of the 9/11 Commission: U.S. Policy Constraints and Options,” Congressional Research Service (CRS), CRS Report for Congress, RL32745, January 25, 2005 u http://www.iranwatch.org/government/ US/Congress/CRS/congress-crs-khannetwork-012505.pdf.

16 Evans, “The Kashmir Insurgency,” 69–81.

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of militant groups is largely Kashmiri in ethnicity, Hizbol-Mujahideen and related factions such as al Badr. All other groups are dominated by Punjabis and Pashtuns from Pakistan.17 The most lethal of these militant groups are adherents to the Deobandi and Ahl-e-Hadith interpretative traditions. Being hostile to the heterodox, syncretic, Sufistic form of Islam practiced by Kashmiris in the valley, these groups have sought not only to fight Indian forces on behalf of Islamabad but also to convert Kashmiris to more orthodox interpretative religious traditions. Whereas indigenous militant groups were loathe to destroy their sacred shrines, these foreign militants show little compunction about doing so.18 Moreover, the proselytization efforts these groups have employed involve extreme tactics such as attacking newspapers that declined to publish their propaganda or that employed women, throwing acid on women’s faces, discouraging families from sending girls to school, and insisting that females abandon traditional Kashmiri veiling practices in favor of burqas and nikab (outerwear and face coverings).19 The extent of the dissatisfaction with Pakistan is evidenced by a 2002 Nielsen poll conducted in the urban areas of Srinagar and Anantnag (in the Muslim-dominated district of Kashmir) and in the cities of Jammu and Udhampur (in the Hindu-dominated district of Jammu). That poll found almost no support in Kashmir, much less in Jammu, for unification with Pakistan.20 Recent polling suggests that this continues to be the case. In May 2009, Robert Bradock, with Indian and Pakistani collaborators, conducted a survey both in Indian-administered Jammu and Kashmir (J&K) and in Pakistanadministered Jammu Kashmir (also known as “Azad (free) Jammu and Kashmir,” or AJK) with sample sizes of 1,400 and 2,374, respectively. The survey was fielded with as much methodological rigor as possible, permitting disaggregated analysis in the individual districts of both J&K and AJK. Whereas roughly 50% of respondents in AJK supported bringing the entire

17 See C. Christine Fair, “Who Are Pakistan’s Militants and Their Families?” Terrorism and Political

Violence 20, no. 1 (January 2008): 49–65; and C. Christine Fair, “Militant Recruitment in Pakistan: Implications for Al-Qaeda and Other Organizations,” Studies in Conflict and Terrorism 27, no. 6 (November/December 2004): 489–504.

18 See Evans, “The Kashmir Insurgency,” 69–81; Sumit Ganguly, “A Mosque, A Shrine, and Two

Sieges,” in Treading on Hallowed Ground: Counterinsurgency in Sacred Spaces, ed. C. Christine Fair and Sumit Ganguly (New York: Oxford, 2008), 66–88.

19 This information was obtained during fieldwork in Kashmir in fall 2002. See also “Everyone Lives

in Fear: Patterns of Impunity in Jammu and Kashmir,” Human Rights Watch, September 2006 u http://www.hrw.org/sites/default/files/reports/india0906web.pdf. That report details the atrocities of both the Indian security forces and the militant groups.

20 “Kashmiris Don’t Want to Join Pak: Survey,” Times of India, September 27, 2002 u http://

timesofindia.indiatimes.com/cms.dll/articleshow?artid=23409600.

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area into Pakistan’s dominion, a mere 2% of respondents from J&K supported this option. There was tremendous variation across J&K. In six districts no one supported joining Pakistan, while support was the highest in the districts of Srinagar and Budgam in the Muslim-majority Vale of Kashmir, where a meager 6% and 7%, respectively, approved of unification.21

pakistan in afghanistan Even while becoming increasingly embroiled in its proxy war in Kashmir, Pakistan maintained its focus on an array of Pashtun Islamist groups in Afghanistan well after the disappearance of direct Soviet and U.S. intervention. Following the withdrawal of Soviet troops, Afghanistan was engulfed by a sanguinary civil war in which warlords fought for control over the country. To achieve a reasonably stable Afghanistan whose leadership was positively disposed toward Islamabad, Pakistan concentrated attention and patronage on the Pashtun militant faction Hizb-e-Islami, led by Gulbuddin Hekmatyar. Pakistan hoped that Hekmatyar would secure a corridor to Central Asia, beginning in Peshawar, continuing through Jalalabad and Kabul, stretching onward to Mazar-i-Sharif, and finally reaching Tashkent. Kabul remained the chokepoint in this passageway. Islamabad also hoped that Hekmatyar would recognize the Durand Line as the international border.22 Later, under Prime Minister Benazir Bhutto and with the guidance of the interior minister General Nasrullah Babar, Pakistan concluded that Hekmatyar could not deliver a stable Afghanistan that would be friendly to Islamabad, much less a corridor to Central Asia and formal recognition of the Durand Line as the de jure border. Islamabad thus shifted its patronage to the newly emergent Pashtun Taliban movement, to which it provided military, diplomatic, and financial assistance from 1994 to 2001.23 The Taliban also failed to deliver much of what Islamabad had hoped to accomplish. Though able to provide a highly contested form of security, the Taliban government lacked international legitimacy and increasingly became an international pariah due to its embarrassing activities. Examples of such activities included destroying the Bamiyan Buddhas, aligning with al Qaeda, and drawing international attention for the mistreatment of women. 21 Robert W. Bradnock, Kashmir: Paths to Peace (London: Chatham House, 2010) u http://www.

chathamhouse.org.uk/files/16664_0510pp_kashmir.pdf.

22 C. Christine Fair, “Pakistan’s Relations with Central Asia: Is Past Prologue?” Journal of Strategic

Studies 31, no. 2 (April 2008): 201–27.

23 Ibid.

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Moreover, despite repeated requests for remandment, the Taliban continued to harbor sectarian terrorists and criminals that Pakistani authorities wanted to prosecute.24 Over time, Pakistan’s security elite began to see the Taliban more as a liability than an asset, especially after al Qaeda organized simultaneous attacks in 1998 on U.S. embassies in Kenya and Tanzania—purportedly from Afghanistan. The United States retaliated by showering Afghanistan with cruise missiles, targeting al Qaeda facilities near Khost (as well as mistakenly a suspect pharmaceutical factory in Sudan). The strikes helped consolidate Mullah Mohammed Omar’s commitment to Osama Bin Laden, despite earlier reservations. During that strike, the Pakistani militant group Harkatul Mujahideen claimed that five members who were training in Afghanistan had been killed. While differences of opinion emerged between the Taliban and elite Pakistani strategists, the September 11 terrorist attacks on the United States rendered Islamabad’s residual support for the Taliban untenable. Pakistan was faced with the stark option of abandoning the Taliban and joining the war on terrorism or becoming a target of the war. As is well-known, Pakistan’s reversal on the Taliban appears to have been short-lived. Some analysts, such as Ahmed Rashid, postulate that Pakistan recommitted itself to the Taliban in light of perilous U.S. decisions in Afghanistan, such as permitting the Northern Alliance to take Kabul despite assurances to the contrary; relying on Northern Alliance warlords to provide security while the United States maintained a light footprint; failing to secure desirable levels of Pashtun representation in the new interim government; and under-representing Pashtuns in the ranks and officer corps of the police and army. Importantly, Pakistan claims that these conditions still hold despite massive improvements. Other factors that motivate Pakistan’s policies toward the Afghan Taliban include U.S. assertions in 2005 that the United States should step down as NATO steps up. Pakistan understood this to mean that the entire international community would withdraw from military efforts after

24 See discussion in C. Christine Fair, The Counterterror Coalitions: Cooperation with Pakistan and

India (Santa Monica: RAND, 2004).

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the U.S. departure. As is well-known, the United States actually increased its military forces in the wake of that statement.25 Pakistan was particularly concerned about the expanded presence of India throughout Afghanistan. Pakistan determined that soon Afghanistan would again be abandoned by the international community, but this time rendered pro-India and anti-Pakistan. Such thinking justifies Pakistan’s sustained commitment to the Afghan Taliban even while Islamabad struggles with an insurgency of its own by forces that are self-described as “Pakistani Taliban.” The latter are organizationally distinct from their Afghan namesakes and espouse goals that are nearly entirely focused on the Pakistan government. This is true even if some commanders operating under that umbrella for convenience (e.g., Mullah Nazir and Gul Bahadur, who will be discussed below) have made deals with the state and refocused exclusively against Afghanistan. Islamabad continually expresses concerns that the United States and the international community will again abandon the region. Its fear is that if this were to occur, the Afghan Taliban would grow in strength from successfully vanquishing international forces, enter Pakistan, and pose a threat to the state. This narrative, however, should be approached with a measure of skepticism. First, the Afghan Taliban does not pose a direct threat to Pakistan at this point, even though elements of the Afghan Taliban have grown somewhat independent of Islamabad, as demonstrated by the February 2010 arrest of Mullah Baradur in Pakistan. Second, it is the view of this author that contrary to public statements by the chief of army staff, the Pakistan Army prefers that the international military forces leave Afghanistan. During numerous interviews in summer 2010, most Pakistani army and intelligence officers who spoke with this author explained that the U.S. occupation of Afghanistan was directly responsible for their country’s internal security challenges as typified by the Pakistan Taliban. Moreover, these officers were nearly unanimous in believing that when the United States departs Afghanistan, Pakistani militant groups will cease targeting Pakistan because the state will no longer be allied militarily with the United States in prosecuting the war in Afghanistan. These officers 25 Ahmed Rashid, Descent into Chaos: The United States and the Failure of Nation Building in Pakistan,

Afghanistan, and Central Asia (New York: Viking, 2008), 86–91, 240–61; and David W. Barno, “Fighting ‘the Other War’: Counterinsurgency Strategy in Afghanistan, 2003–2005,” Military Review (September–October 2007) u http://usacac.army.mil/CAC2/MilitaryReview/Archives/English/ MilitaryReview_20071031_art006.pdf. This analysis also draws from numerous author discussions with U.S. ambassadors to Afghanistan, Robert Finn (March 22, 2002–November 27, 2003) and Ronald E. Neumann (July 27, 2005–April 16, 2007), and with Lt. Gen. David Barno, who served as the commander of U.S. forces in Afghanistan between 2003 and 2005.

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further noted that after a withdrawal of U.S. forces, India will have less freedom of movement and Islamabad will be able to re-exert control over Afghanistan, which the army still sees as a potential client rather than as a neighbor.26 Based on interviews with Indian interlocutors in summer 2009 and spring 2010, this author believes that India indeed is contemplating withdrawing when and if international forces begin leaving Afghanistan. New Delhi’s contingency planning has been further catalyzed by Obama’s pronouncement that the United States will begin transferring security and governance responsibility to the Afghan government in August 2011, as long as conditions on the ground permit a safe transfer of power.27 Whether the public views of the current chief of army staff General Kayani or the private views of the officers who spoke with this author are more reflective of Pakistan’s strategic assessment, the country reaps tremendous financial, political, and diplomatic benefits from being a frontline state in advancing U.S. and international security objectives. Islamabad thus has a serious incentive for wanting the United States and its partners to remain engaged in the region. Whether the United States continues to have a heavy footprint in Afghanistan or scales back its military mission, Pakistan is wellpositioned to gain from either outcome.

asymmetric conflict under the nuclear umbrella Although Pakistan has a long history of using Islamist militants as proxies, Washington’s determination that the country had crossed nuclear red lines in the late 1980s enabled Islamabad to expand the jihad in scale, scope, territorial range, and ferocity.28 Recognition as an overt nuclear power allowed Pakistan to support militant groups with increasing impunity, confident that conventional punitive measures would be too risky for New Delhi. Thus, it is not a coincidence that Pakistani jihad groups spread in larger numbers to Kashmir in the immediate aftermath of Pakistan being

26 Author interviews with Pakistan army officers in the Makin Valley in South Waziristan,

Razmak in North Waziristan, 11th Corps Headquarters in Peshawar, and at the Anti-Terrorism Training Center near Mangla Dam in July 2010. The author was also briefed in July 2010 by various ISI analysts.

27 Author interviews with analysts and retired Indian officials in April 2010 and August 2009.

For a more extensive exposition, see C. Christine Fair, “India in Afghanistan and Beyond: Opportunities and Constraints,” Century Foundation, Report, September 2010 u http://tcf.org/ publications/2010/9/india-in-afghanistan-and-beyond-opportunities-and-constraints/pdf.

28 This section reworks and updates parts of an earlier RAND publication. See Tellis et al., Limited

Conflicts Under the Nuclear Umbrella.

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proscribed for having acquired extra-legal nuclear weapons. Since India essentially became an overt nuclear power following its first nuclear tests in 1974, Pakistan’s development of a nuclear capability meant that any conflict between the two states risked nuclear war. Pakistan became even more aggressive, however, following reciprocal nuclear tests by the two countries in 1998. Islamabad pushed the envelope of its asymmetric strategy by launching a limited incursion in Indian-administered Kashmir in May 1999 to seize a small amount of territory in the Kargil-Dras sectors. Many analysts have argued that such a brazen incursion would have been unlikely before Pakistan’s attainment of overt nuclear weapons status in the 1ate 1980s and the reciprocal nuclear tests in 1998.29 In that limited conflict, often referred to as the “Kargil conflict,” Pakistan employed the Northern Light Infantry disguised as irregular civilian fighters. The chief of army staff at the time, General Pervez Musharraf, likely began planning for this operation in fall 1998 when Pakistan’s then prime minister Nawaz Sharif and India’s then prime minister Atal Bihari Vajpayee undertook the historical Lahore peace process. In February 1999 that process culminated in a historic visit to Lahore by Vajpayee, who was widely considered within and outside India as a Hindu nationalist. Vajpayee surprised the public in both countries by finally accepting the legitimacy of the Pakistani state at an important landmark commemorating national independence, the Minar-e-Pakistan in Lahore.30 Though its territorial aims in the Kargil conflict were limited, Pakistan used the mujahideen cover story to obscure the fact that Pakistani regular and irregular military forces intruded well into Indian territory. Kargil caused some analysts to reconsider their evaluation that nuclearization of the subcontinent would have a stabilizing impact.31 The conflict instead exemplified what has been called the “stability-instability paradox.”32 The notion turns on the dual assertion that nuclear weapons can stabilize security competition between two

29 See Tellis et al., Limited Conflicts Under the Nuclear Umbrella; and S. Paul Kapur, Dangerous

Deterrent: Nuclear Weapons Proliferation and Conflict in South Asia (Stanford: Stanford University Press, 2007), 115–40.

30 Owen Bennett Jones, Pakistan: Eye of the Storm (New Haven: Yale University Press, 2002), xxiv; and

Dennis Kux, India-Pakistan Negotiations: Is Past Still Prologue? (Washington, D.C.: United States Institute of Peace, 2006), 41–42.

31 For a discussion of proponents of this view, see Neil Joeck, Maintaining Nuclear Stability in South

Asia, Adelphi Paper 312 (New York: Oxford University Press, 1997).

32 See Glenn Snyder, “The Balance of Power and the Balance of Terror,” in The Balance of Power, ed.

Paul Seaburry (San Francisco: Chandler, 1965), 185–201; and Robert Jervis, The Meaning of the Nuclear Revolution: Statecraft and the Prospect of Armageddon (Ithaca: Cornell University Press, 1989), 19–22.

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adversaries and foreclose a major war while at the same time enabling, if not provoking, lower-level conflict by conferring immunity against escalation.33 The Kargil conflict underscored the importance of nuclear weapons to Pakistan’s strategy in Kashmir and India, while amply illustrating the destabilizing aspects of the nuclearization of the subcontinent. In particular, Pakistan’s possession of such weapons was a critical precondition that enabled the planning and execution of Kargil because nuclear weapons ostensibly provided security against a full-scale Indian retaliation.34 This immunity had two dimensions. First, Pakistan’s nuclear assets deterred both conventional and nuclear threats from India. Second, they were instruments by which Pakistan could galvanize international intervention on its behalf in the event that the political-military crisis spun out of control. India understood and publicly acknowledged the value of Pakistan’s strategic assets for enabling low-intensity conflict.35 Pakistan also conceded this understanding publicly: in April 1999, then chief of army staff General Musharraf announced that even though nuclearization rendered large-scale conventional wars obsolete, proxy wars were likely.36 While Kargil may have been the first conventional conflict under the nuclear umbrella, the most brazen use of asymmetric and proxy warfare happened after 1998, consistent with the notion that nuclearization has enabled, if not emboldened, Pakistan’s use of militancy. Attacks since 1998 include, among others, the 1999 LeT attack on a security forces establishment collocated in a New Delhi tourist attraction, the Red Fort; the 2001 JM attack on the Indian Parliament; the LeT massacre of army wives and children in Kaluchak; and various bombings by LeT and affiliated groups throughout India, including the 2006 and 2008 attacks in Mumbai.37 It would appear that with the development of first a covert and then an overt nuclear capability

33 Michael Krepon and Chris Gagne, “Introduction,” in The Stability-Instability Paradox: Nuclear

Weapons and Brinkmanship in South Asia, ed. Michael Krepon and Chris Gagne (Washington, D.C.: Stimson Center, 2001).

34 Tellis et al., Limited Conflicts Under the Nuclear Umbrella. 35 Timothy D. Hoyt, “Kargil: The Nuclear Dimension” (paper presented for the Kargil Book Project

Conference, Monterey, May 30–31, 2002), draft cited with permission.

36 “Pak Defence Strong, Says Army Chief,” Independent, April 19,1999, cited in Timothy D. Hoyt,

“Politics, Proximity and Paranoia: The Evolution of Kashmir as a Nuclear Flashpoint,” India Review 2, no. 3 (July 2003): 117–44. See also the statement of Musharraf from April 1999 that is cited in Kargil Review Committee, From Surprise to Reckoning: The Kargil Review Committee Report (New Delhi: SAGE, 1999), 77.

37 The author advanced this argument in 2009. See Angel Rabasa et al., “The Lessons of

Mumbai,” RAND, Occasional Paper, no. 249, 2009 u http://rand.org/pubs/occasional_papers/ OP249/; and C. Christine Fair, “Leader-Led Jihad in Pakistan: The Case of Lashkar-e-Taiba,” in Leader-Led Jihad, ed. Bruce Hoffman and Fernando Reinares (New York: Columbia University Press, forthcoming).

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(and concomitant delivery means), Pakistan has been able to prosecute the most brazen aspects of its proxy strategy with near confidence that doing so will have few, if any, important consequences.

pakistan’s contemporary militant landscape Prior to Musharraf ’s acceptance of Washington’s ultimatum to join the U.S.-led global war on terrorism after September 2001, Pakistan’s militant landscape could be meaningfully parsed by sectarian orientation, theater of operation, and ethnic constitution.38 For example, there were militant groups (askari tanzeems) that traditionally focused on Kashmir, including the Deobandi groups of JM and Harkat-ul-Ansar/Harkat-ul-Mujahideen (HuA/HuM), and Ahl-e-Hadith organizations such as the Punjab-based LeT.39 While these groups are often referred to as “Kashmiri groups,” this is a misnomer because they include few ethnic Kashmiris among their ranks and most do not operate exclusively in Kashmir. Indeed, LeT and JM have long operated throughout India, and in recent years Deobandi groups have begun operating in Pakistan. LeT and several Deobandi militant groups have also been operating in Afghanistan against U.S., NATO, and Afghan forces.40 In contrast, some Kashmiri groups are operating under the influence of the Islamist political party JI, such as al-Badr and Hizbul Mujahideen, which tend to be composed of ethnic Kashmiris and have retained a focus on Kashmir. Other askari tanzeems have been traditionally sectarian in nature and include the anti-Shia Lashkar-e-Jhangvi (LeJ) and Sipah-e-Sahaba Pakistan (SSP).41 Both these groups are under the sway of the Deobandi organization Jamiat-e-Ulema Islami (JUI) and are funded by wealthy Arab individuals and organizations. Notably, these sectarian tanzeems have overlapping membership with other Deobandi militant groups, including the Afghan

38 This section is drawn from Fair, “Who Are Pakistan’s Militants and Their Families?”; and Fair,

“Militant Recruitment in Pakistan.”

39 Deoband and Ahl-e-Hadith are two Sunni schools of thought. An exposition of the differences

between these and other groups is beyond the scope of this essay. See Husain Haqqani, “The Ideologies of South Asian Jihadi Groups,” in Current Trends in Islamist Ideology, vol. 1, ed. Eric Brown, Hillel Fradkin, and Husain Haqqani (Washington, D.C.: Hudson Institute 2005), 12–26.

40 See C. Christine Fair, “Antecedents and Implications of the November 2008 Lashkar-e-Taiba

Attack Upon Mumbai,” testimony presented before the House Homeland Security Committee, Subcommittee on Transportation Security and Infrastructure Protection, Washington, D.C., March 11, 2009.

41 Many of these groups have been proscribed numerous times only to re-emerge and operate under

new names. This essay uses the names that are likely to be most familiar to readers.

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and Pakistani Taliban, all of which have strong connections to the JUI.42 In the past, Shia sectarian groups were also lethally active. These groups, though having largely disappeared, targeted Sunni Muslims and obtained funding from Iran. Since 2004 and possibly earlier, Pakistan has witnessed the development of a cluster of militant groups whose activists describe themselves as “Pakistani Taliban” and who have successfully established an archipelago of sharia (Islamic law) within large swathes of the Pashtun belt. Despite the recent and popular characterization of the Tehreek-e-Taliban-e-Pakistan (TTP) in monolithic terms, analysts are not in agreement that the TTP has the coherent command and control that the media ascribes to it.43 Indeed, the media often describes the TTP as an umbrella organization for nearly all anti-Pakistan Islamist militants in the Federal Administered Tribal Areas (FATA) as well as in key settled Pashtun areas such as Swat, Upper and Lower Dir, Buner, and Peshawar. The FATA includes the seven tribal agencies of South and North Waziristan, Orakzai, Kurram, Khyber, Mohmand, and Bajaur, as well as several so-called frontier regions that sit astride the agencies of the FATA and the settled areas. These include the frontier regions of Bannu, Dera Ismail Khan (Darazinda), Kohat (Darra Adam Khel), Lakki Marwat, Peshawar, and Tank (Jandola). Militants from Swat and Bajaur also claim to be affiliated with the TTP. However, Rahimullah Yusufzai, a leading Pakistani journalist and expert on the TTP, dismisses these assertions and contends that the organization is hardly coherent, much less disciplined.44 This author reached the same conclusion in a book she coauthored with Seth Jones. Drawing on the work of John Arquilla and David Ronfeldt, the book describes the TTP’s constituent groups as forming a system of loose networks.45 These networks tend to be dispersed and varying in size; however,

42 Mariam Abou Zahab and Olivier Roy, Islamist Networks: The Afghan-Pakistan Connection (London:

C. Hurst and Co., 2004); and Fair, “Militant Recruitment in Pakistan,” 489–504.

43 One long-time observer of militancy in Pakistan, Mariam Abou-Zahab, strongly discounts the

claim that the TTP is a coherent alliance. She argues that the constituent parts of this inchoate alliance are driven by local factors and constrained, in good measure, by tribal boundaries that circumscribe the leadership. Thus, she discounts claims that the TTP is a coherent organization running the length and width of the Pashtun belt. This view has been buttressed by the author’s field interviews in Pakistan in February and April 2009.

44 Rahimullah Yusufzai, “A Who’s Who of the Insurgency in Pakistan’s North-West

Frontier Province: Part One—North and South Waziristan,” Jamestown Foundation, Terrorism Monitor, September 22, 2008 u http://www.jamestown.org/programs/gta/ single/?tx_ttnews[tt_news]=5169&tx_ttnews[backPid]=167&no_cache=1.

45 John Arquilla and David Ronfeldt, eds., In Athena’s Camp: Preparing for Conflict in the Information

Age (Santa Monica: RAND, 1997), 280; and Seth G. Jones and C. Christine Fair, Counterinsurgency in Pakistan (Santa Monica: RAND, 2010), 24.

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the various nodes can communicate with each other and, to some degree, coordinate their campaigns. Officially the TTP came into being in late 2007, when several Pakistani militant commanders announced that they were operating under the banner of the Tehreek-e-Taliban-e-Pakistan (Pakistani Taliban Movement) led by Baitullah Mehsud (who subsequently was killed by a U.S. drone strike in August 2009). Mehsud claimed many allies, most of whom sought to establish various degrees of sharia within their personal areas of operations across the Pashtun belt. In late February 2008, two dissident commanders, Mullah Nazir and Hafiz Gul Bahadur, appeared to temporarily set aside their differences with Mehsud and forged the Shura Ittehad-ul-Mujahiden. The alliance was short-lived, however, and collapsed nearly as soon as it was announced.46 Following Mehsud’s death, TTP leadership announced amid discord that Hakimullah Mehsud would succeed him.47 Under the leadership of Hakimullah, the TTP has been surprisingly coherent and has actually intensified its suicide campaign against Pakistani security and intelligence agencies.48 Likewise, TTP campaigns against civilian targets have become more vicious, singling out Shia and Ahmedis, who are considered munafiqueen (Muslims who spread discord in the community) and murtad (liable to be killed), respectively. Important Sufi shrines have not been spared either.49 This focus no doubt reflects Hakimullah’s long-time association with the sectarian terrorist group SSP. 46 See Hassan Abbas, “Increasing Talibanization in Pakistan’s Seven Tribal Agencies,” Jamestown

Foundation, Terrorism Monitor, September 27, 2007, 1–5; Hassan Abbas, “A Profile of Tehriki-Taliban Pakistan” CTC Sentinel, January 2008, 1–4; and Syed Shoaib Hasan, “Profile: Baitullah Mehsud,” BBC News, December 28, 2007. Pakistan has considered Maulvi Nazir an ally because he helped oust or kill numerous Uzbeks in South Waziristan. He is considered to be a dedicated foe of U.S. and NATO forces because he dispatches fighters to Afghanistan. Gul Bahadar has had a number of differences with Baitullah Mehsud. It is not clear what this alliance means for Pakistan or for the United States and its allies in Afghanistan. See Saeed Shah, “Taliban Rivals Unite to Fight U.S. Troop Surge,” Guardian, March 3, 2009 u http://www.guardian.co.uk/world/2009/mar/03/ taliban-pakistan-afghanistan-us-surge.

47 Zahid Hussein, “Hakimullah Mehsud Named as New Pakistan Taleban Leader,” Times (London),

August 23, 2009 u http://www.timesonline.co.uk/tol/news/world/asia/article6806809.ece.

48 Pak Institute for Peace Studies, “PIPS Security Report 2009,” January 2009 u http://san-pips.com/

index.php?action=ra&id=psr_list_1; “Hakimullah Mehsud,” New York Times, April 29, 2010 u http://topics.nytimes.com/topics/reference/timestopics/people/m/hakimullah_mehsud/index.html; and “Pakistan Blast Sharpens Concern on Taliban,” PBS NewsHour, April 1, 2010 u http://www. pbs.org/newshour/bb/military/jan-june10/pakistan_01-01.html.

49 Since 2005, Pakistani militants have launched more than 70 suicide attacks against Sufi shrines,

killing hundreds, and attacks have intensified in recent years. For example, Lahore’s prominent Datta Ganj Bakhsh—perhaps the most important Sufi shrine in the Punjab—was attacked in late June 2010. See Owais Tohid, “In Pakistan, Militant Attacks on Sufi Shrines on the Rise,” Christian Science Monitor, November 5, 2010 u http://www.csmonitor.com/World/Asia-SouthCentral/2010/1105/In-Pakistan-militant-attacks-on-Sufi-shrines-on-the-rise; and Sabrina Tavernise, “Suicide Bombers Strike Sufi Shrine in Pakistan,” New York Times, July 1, 2010 u http:// www.nytimes.com/2010/07/02/world/asia/02pstan.html.

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Prior to the official consolidation of the TTP, however, several militant commanders rose to prominence, thereby providing the necessary conditions for the formalization of the TTP network. Nek Mohammad Wazir (from the Ahmadzai Wazir tribe in Wana, South Waziritsan) was perhaps the first Pakistani militant to assume some degree of distinction. Following the Pakistan Army’s spring 2004 offensive in South Waziristan, Nek Mohammad fought the army to a standstill, compelling it to ratify its own defeat with a peace deal known as the Shakai Accord on terms that were entirely set by Nek Mohammad. For example, the signing ceremony was held in Shakai, his own stronghold, and during the event he was publicly garlanded by the 11th Corps Commander, Lieutenant General Safdar Hussain. This event was heavily covered by Pakistan’s media and thus conferred on Nek Mohammad widespread legitimacy that he had not enjoyed before the accord.50 Baitullah Mehsud rose to prominence after his death by similarly forcing the Pakistan Army to concede and ratify defeat in the Sararogha Agreement in February 2005.51 In North Waziristan, Hafiz Gul Bahadur became the amir (commander) of the Pakistani militancy. However, Bahadur is now a pro-Pakistan militant commander opposed to Hakimullah and his predecessor and focusing exclusively on U.S. and NATO forces in Afghanistan. In fact, during winter 2007–08, Bahadur refused to cooperate with Baitullah when the latter was under attack by the Pakistan Army and warned Baitullah against fighting the Pakistan security forces in Razmak, North Waziristan. Subsequently, Bahadur signed a peace accord with the Pakistan security forces. He remains opposed to Hakimullah and his organization’s targeting of Pakistani civilians as well as defense and intelligence personnel.52 As the above discussion suggests, several militant groups emerged well before the Pakistan Taliban formally announced its existence under Baitullah Mehsud’s leadership. The various militant movements in Pakistan arguably began to gain prominence coincident with—or even as a result of—the Pakistani military operations in the FATA, which were undertaken at the urging of the United States. Several Pakistani analysts contend that the onset of U.S. strikes in the FATA—first by conventional air platforms and later by unmanned aerial vehicles, or drones—catalyzed the insurgency. Specifically, these analysts pinpoint the U.S. drone strikes in October 2006 against an al

50 For an interview with Rahimullah Yusufzai about this incident, see “Return of the Taliban,”

Frontline, October 3, 2006 u http://www.pbs.org/wgbh/pages/frontline/taliban/militants/ mohammed.html.

51 Ismael Khan, “Baitullah Mehsud, Pakistan’s Biggest Dilemma,” Dawn, December 31, 2007. 52 Yusufzai, “A Who’s Who of the Insurgency.”

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Qaeda–affiliated madrasah in a Chingai village, Bajaur, that targeted Ayman al-Zawahiri as the most important catalyst of suicide attacks against security forces in the FATA and North-West Frontier Province (NWFP).53 This madrasah in Chingai was run by the Tehreek-e-Nafaz-e-Shariat-eMohammadi (TNSM), a Sunni militant group founded by Sufi Mohammad. Mohammad dispatched eight thousand volunteers into Afghanistan to support the Taliban by fighting against the United States and Northern Alliance during Operation Enduring Freedom. When Sufi Muhammad was jailed, his militant son-in-law Mullah Fazlullah took over the organization. Sufi Mohammad’s deputy, Maulvi Liaquat, was killed in the Chingai attack. Following that attack, Inayatur Rahman, a local pro-Taliban elder, pronounced that he had prepared a “squad of suicide bombers” to target Pakistani security through tactics akin to those that militants were employing against Americans in Afghanistan and Iraq. He further explained that the squad “will carry out these suicide attacks soon.”54 Although the so-called Talibanization of the tribal areas was initially limited to North and South Waziristan, the phenomenon next spread to Bajaur. Pakistani Taliban surfaced in areas that had previously been free of such activity, including Mohmand, Orakzai, and Kurram agencies.55 The Pakistan Taliban also emerged in the frontier areas of Bannu, Tank, Kohat, Lakki Marwat, Dera Ismail Khan, and Swat. Throughout summer 2007, the Frontier Corps and the Frontier Constabulary battled Pakistani militants associated with the TNSM, which seized the Swat Valley in late October.56 Militant groups under various local leaders have effectively exploited socioeconomic grievances (such as failures of the state to provide services, including access to rule of law and justice) and frustration with the corrupt colonial-era governance structures in place in the FATA. The Pakistani Taliban in Swat

53 Imtiaz Gul, The Al Qaeda Connection: The Taliban and Terror in Pakistan’s Tribal Areas (London:

Penguin, 2009), 95–96; “Islamabad Links Suicide Bomber to Madrasah Attack,” Radio Free Europe, November 8, 2006 u http://www.globalsecurity.org/wmd/library/news/pakistan/2006/pakistan-061108rferl01.htm; and K. Alan Kronstadt, “Pakistan: A Chronology of Recent Affairs,” CRS, CRS Report for Congress, RS21584, December 18, 2006 u http://www.au.af.mil/au/awc/awcgate/crs/rs21584.pdf, 2.

54 See Bill Roggio, “Aftermath of the Bajaur Airstrike,” Long War Journal, October 31, 2006 u

http://www.longwarjournal.org/archives/2006/10/aftermath_of_the_baj.php. See also Massoud Ansari and Behroz Khan, “Air Force Officers Held for Attempt to Murder Musharraf with Rockets,” PakistanDefense.com, May 11, 2006 u http://www.defence.pk/forums/strategic-geopoliticalissues/2745-paf-personnel-busted-assasination-attempt.html.

55 It should be noted, however, that Kurram has long been the site of sectarian violence due to the

large Shia population in that agency. See Mariam Abou Zahab, “The Regional Dimension of Sectarian Conflicts in Pakistan,” in Pakistan: Nationalism without a Nation? ed. Christophe Jaffrelot (London: Zed Books, 2002), 115–28.

56 C. Christine Fair, “Pakistan Loses Swat to Local Taliban,” Jamestown Foundation, Terrorism Focus,

November 14, 2007.

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reportedly pursued a system of redistributive justice wherein they seized the land of wealthy landowners and rewarded landless peasants who signed up to support the group.57 Similarly, militant commanders in the FATA have pressured political agents to provide services without requisite payment of bribes. They have established a functional—albeit draconian—police system and process of dispute resolution. The much-maligned qazi courts (courts run by qazis, or Islamist jurists) that were to be established in Swat required the addition of new qazis should their case load exceed 150 cases. No such provision exists in the mainstream courts. The Pakistan Taliban also established bureaus to solemnize love marriages. This measure appeals to youth who resent forced marriages and ameliorates the economic requirement of young men to pay high bride prices.58 In April 2009, news reports asserted the arrival of the “Punjabi Taliban,” referencing the various militant groups ensconced in the Punjab, the most populated province in Pakistan.59 Despite its ostensibly recent coinage, the term “Punjabi Taliban” has a long and complex history. Since 2009, however, it has acquired significant political importance.60 Many Pashtuns support the use of the term to underscore that Pakistan’s insurgency is not “Pashtun” in essence. However, many Punjabis reject the term and prefer to attribute the threat against Pakistan to the “Pashtun other,” who is often characterized in stereotypical terms such as “uncivilized,” “warlike,” and “violent,” among others.61 In reality, the movement is composed of Pashtuns and Punjabis, among other Pakistani and even foreign elements.

57 See Jane Perlez, “Landowners Still in Exile from Unstable Pakistan Area,” New York Times,

July 27, 2009 u http://www.nytimes.com/2009/07/28/world/asia/28swat.html; and Sartaj Khan,” Imperialism, Religion and Class in Swat,” International Socialism, no. 123 (June 24, 2009). Khan’s article expands on an earlier piece, “Behind the Crisis in Swat,” News, November 27, 2008 u available at http://www.khyberwatch.com/forums/showthread.php?2295-Update-on-Swat!/page48. For a countervailing view, see Farhat Taj, “No Class War in Swat,” News, December 18, 2008 u http://www.khyberwatch.com/forums/showthread.php?2295-Update-on-Swat!/page49.

58 This information was obtained by the author during fieldwork in February and April 2009 in

Peshawar, Islamabad, Karachi, and Lahore, and in August 2010 in Peshawar, Mingora, Islamabad, and Lahore.

59 See Sabrina Tavernise, Richard A. Oppel Jr., and Eric Schmitt, “United Militants Threaten Pakistan’s

Populous Heart,” New York Times, April 13, 2009 u http://www.nytimes.com/2009/04/14/world/ asia/14punjab.html; and Hassan Abbas, “Defining the Punjabi Taliban Network,” CTC Sentinel 2, no. 4 (April 2009): 1–4.

60 Rahimullah Yusufzai, “The Discourse on Punjabi Taliban,” News, July 6, 2009 u http://www.cssforum.

com.pk/general/news-articles/36007-discourse-punjabi-taliban-rahimullah-yusufzai.html.

61 Author fieldwork in Peshawar, Mingora, Islamabad, and Lahore in June and July 2010. For a sample

of the controversial coverage of the group and the term, see “Rehman Malik Asserts He Used No Term Like ‘Punjabi Taliban,’ ” South Asian News Agency, June 4, 2010 u http://www.sananews. net/english/2010/06/04/rehman-malik-asserts-he-used-no-term-like-%E2%80%98punjabitaliban%E2%80%99/.

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Pakistan’s political leaders have also sought to exploit the controversy surrounding the term for political gain. Leaders of the Pakistan Muslim League-Nawaz (PML-N) object to the term likely in part because of the PML-N’s ongoing support for groups such as SSP and LeJ, which is driven by electoral considerations. The Punjab chief minister of the PML-N, Shahbaz Sharif, accused Interior Minister Rahman Malik of using the terms “Punjabi Taliban” and “Punjabi terrorist” to foment conflict between provinces—a tactic he argued was tantamount to a condemnation of the people of the Punjab.62 While it is tempting to view the Punjab as a new theater or even as a future locus of Talibanization, sites of militancy across Pakistan are inter-related. Punjab-based groups such as the Deobandi LeJ and JM are components of the TTP and conduct attacks on behalf of it. In fact, the so-called Punjabi Taliban groups form the backbone of the TTP and have played an important role in attacking Sufi, Shia, Ahmedi, and other civilian targets in the Punjab.63 In addition to the above Pakistani groups, Pakistan also hosts elements of the Afghan Taliban, with shuras (leadership councils) in Quetta, Peshawar, and Karachi.64 The Afghan Taliban remain focused on ousting foreign forces in Afghanistan, overthrowing the Karzai regime, and reclaiming a role in governing Afghanistan. Pakistani territory is also used by al Qaeda, whose operatives are known to reside in North and South Waziristan and Bajaur, among other areas in the Pashtun belt. Moreover, many al Qaeda operatives (such as Abu Zubaidah and Khalid Sheikh Mohammed) have been arrested in Pakistani cities.65 Since late 2001 and 2002, many of Pakistan’s militant groups—particularly those of Deobandi background—have either splintered or changed their targets and tactics. Many Deobandi groups are tightly allied to the Afghan and Pakistani Talibans and are increasingly aiming their resources at the Pakistani state, even though some elements within these groups continue

62 Yusufzai, “The Discourse on Punjabi Taliban.” 63 Bill Roggio, “Suicide Bomber Kills 60 at Mosque in Pakistan’s Northwest,” Long War Journal,

November 5, 2010 u http://www.longwarjournal.org/archives/2010/11/suicide_bomber_kills_40.php.

64 See, for instance, Carl Levin, “Opening Statement of Senator Carl Levin, Senate Armed Services

Committee Hearing on Afghanistan and Pakistan,” Press Release, February 26, 2009 u http:// levin.senate.gov/newsroom/release.cfm?id=308740; Ian Katz, “Gates Says Militant Sanctuaries Pose Biggest Afghanistan Threat,” Bloomberg, March 1, 2009 u http://www.bloomberg.com/ apps/news?pid=20601087&sid=aehmlRXgKi2o&refer=home; and Barnett R. Rubin. “Saving Afghanistan,” Foreign Affairs 86, no. 1 (January/February 2007): 57–78 u http://www.foreignaffairs. org/20070101faessay86105-p0/barnett-r-rubin/saving-afghanistan.html.

65 See comments made by National Intelligence Director John Negroponte, cited in “Al-Qaeda

‘Rebuilding’ in Pakistan,” BBC, January 12, 2007 u http://news.bbc.co.uk/2/hi/south_asia/6254375. stm; and K. Alan Kronstadt, “U.S.-Pakistan Relations,” CRS, CRS Report for Congress, RL33498 u http://fpc.state.gov/documents/organization/115888.pdf.

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to enjoy various levels of formal and informal state support. The targets of these groups have included President Musharraf as well as other highvalue military and civilian leaders. Al Qaeda leaders, including Ayman alZawahiri and Abu al-Yazid, also continue to operate and plan attacks from the tribal areas. Recently executed and preempted attacks attest to these linkages—for example, the foiled 2010 attack on Europe planned in North Waziristan, the disrupted plan to attack U.S. and German targets in 2007, and the preempted trans-Atlantic plot in 2006, as well as the successful July 2005 attack in London. All these conspiracies had connections to Pakistan’s tribal areas and sponsoring militant networks.66 Pakistanis were late to embrace the government’s counterterrorism and counterinsurgency efforts. Public opinion surveys in Pakistan conducted in 2007 and later demonstrate that, in general, Pakistanis overwhelmingly supported peace deals with militants and believed that such efforts would secure peace, despite consistent evidence to the contrary. Equally important, Pakistanis remained opposed to the army undertaking offensives against Pakistan’s own militants. These trends remained more or less constant until April 2009, when public opinion dramatically changed course after the Taliban broke their “sharia-for-peace” deal in Swat and overran Buner. Survey results in May and July 2009 suggest that the public has become opposed to peace deals and is increasingly supportive of military action.67 Polling by the Pew Research Center in April 2010, however, found that some of these gains may be eroding, although most Pakistanis remain worried about Islamist extremism.68

pakistani support for the militants? Implicit in the various U.S. policies that seek to compel Pakistan to cease support for militant groups is the assumption that the country could do so

66 Jones and Fair, Counterinsurgency in Pakistan, 31. 67 C. Christine Fair, “Pakistan’s Own War on Terror: What the Pakistani Public Thinks,” Journal of

International Affairs 63, no. 1 (Fall/Winter 2009): 39–55.

68 Because the Pew Research Center’s questions and sampling approach differed from those

used by the other polls cited here, the results are not strictly comparable. See Pew Research Center, “America’s Image Remains Poor: Concern about Extremist Threat Slips in Pakistan,” July 29, 2010 u http://pewglobal.org/2010/07/29/concern-about-extremist-threat-slipsin-pakistan/2/#chapter%C2%A01-the-battle-against-extremism. Unlike the International Republican Institute (IRI) polls, the 2009 poll conducted by Fair, Malhotra, and Shapiro, or the 2009 WorldPublicOpinion.org poll (in which Fair was a collaborator), the Pew survey sample is overwhelmingly drawn from urban residents (55%). Only one in three Pakistanis, however, live in urban areas.

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if it mustered the requisite will. There is also the assumption that Pakistan could do more to counter the various groups it currently supports. That these assumptions could be realized is far from obvious. Islamabad’s ability to fight militant groups, or the lack of ability thereof, arguably will condition its readiness to cease active and passive support, much less take aggressive action to eliminate these groups. This section advances several propositions about the degree of state support for various groups and assesses the state’s ability to control or counter them. This assessment draws overwhelmingly from the author’s fieldwork in Pakistan (including discussions with military, intelligence, and civilian officials as well as with journalists and analysts) over several visits since 2000, fieldwork across Afghanistan since 2007, and extensive interactions with U.S. officials about Pakistan and Afghanistan over the same period. Readers alone can judge whether to accept or reject these various conjectures. Pakistan’s intelligence agencies and army tend to segment the country’s militants into a range of groups over which the state exercises varying degrees of control. Pakistan is widely assumed to wield significant influence over the Afghan Taliban, including the network of Jalaludin Haqqani based in North Waziristan, by holding Taliban families hostage in Pakistan to ensure compliance. Since 2001, however, the Afghan Taliban have changed with the consistent turnover of mid-level commanders.69 New commanders are less beholden to Pakistan in part because of their age: they were children when the ISI was nurturing the Taliban in the mid-1990s. Moreover, the tribal base and moorings of the Afghan Taliban are also changing. Thus, Pakistan is struggling to cultivate influence among the evolving Afghan Taliban elements, even while seeking to control elements of Mullah Omar’s Quetta Shura, the top leadership council of the organization.70 Islamabad worries that members of the Quetta Shura may seek a separate dispensation with Afghan president Karzai that does not recognize Pakistan’s interests. Exemplifying its efforts to counter such moves, Pakistan arrested Mullah

69 For an excellent exposition of how the Afghan Taliban have evolved, see Antonio Giustozzi,

Koran, Kalashnikov, and Laptop: The Neo-Taliban Insurgency in Afghanistan 2002–2007 (New York: Columbia University Press, 2008), 81–96.

70 Although the Afghan leadership council retains this moniker, its key leaders have long taken

up residence elsewhere, such as in Karachi, under the ISI’s protection and monitoring. Ali K. Chishti, “The Karachi Project,” Foreign Policy, November 3, 2010 u http://www.foreignpolicy.com/ articles/2010/11/03/is_pakistan_finally_cracking_down_on_al_qaeda.

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Baradar in February 2010 in Karachi because he was negotiating with Karzai independently of Islamabad.71 U.S. analysts tend to believe that Pakistani agencies also maintained reasonably tight control over LeT. That said, LeT has developed proxies in India (principally through the Indian Mujahedeen) and logistical bases in Bangladesh, Sri Lanka, the Maldives, and Nepal, among other countries. Some LeT cells within India are to a degree independent of LeT’s headquarters in Muridke, according to U.S. and Indian officials.72 One important piece of evidence that is highly suggestive of the ties between the ISI and LeT is the fact that after JM attacked the Indian parliament in 2001, significant signals traffic was detected that indicated anger in the ISI with JM for launching that attack. In contrast, after the November 2008 terrorist attacks on Mumbai, significantly less traffic was detected. Such traffic could have been an information strategy used by Pakistan to diffuse the former crisis. It is puzzling, however, that such a strategy was not used in 2008 if it is an instrument of perception management.73 After the 2008 Mumbai attacks, Indian officials were given access to David Headley, the American involved, following his indictment. According to Indian officials, Headley conceded ISI involvement.74 Although U.S. officials have demurred from endorsing this claim, Bob Woodward has reported that the current director general of the ISI, Shuja Pasha, acknowledged that persons connected to the ISI were involved in the attacks but insisted that the operation was rogue.75 It should be noted that LeT has never attacked foreign or domestic targets within Pakistan and that the literature of the organization remains vehemently pro-state.76 At the other extreme is the aforementioned milieu of Deobandi groups. Pakistan’s ability to control these groups appears variable and tentative at best. The Bahawalpur-based network of Masood Azhar’s JM is perhaps 71 Dean Nelson and Ben Farmer, “Hamid Karzai Held Secret Talks with Mullah Baradar in

Afghanistan,” Telegraph, March 16, 2010 u http://www.telegraph.co.uk/news/worldnews/asia/ afghanistan/7457861/Hamid-Karzai-held-secret-talks-with-Mullah-Baradar-in-Afghanistan.html.

72 C. Christine Fair, “Students Islamic Movement of India and the Indian Mujahideen: An

Assessment,” Asia Policy, no. 9 (January 2010): 101–19; and Animesh Roul, “Lashkar-e-Taiba and the Strategy of ‘Encircling’ India,” Jamestown Foundation, Terrorism Monitor, October 21, 2010 u http://www.jamestown.org/programs/gta/single/?tx_ttnews[tt_news]=37056&cHash=b2f2164427.

73 Author discussions with U.S. military, state, and intelligence officials throughout 2010 and earlier,

as well as with Indian intelligence officials in April 2010.

74 Jason Burke, “ISI Chiefs Aided Mumbai Terror Attacks: Headley,” Hindu, October 19, 2010, http://www.

thehindu.com/news/national/article837735.ece; and Jane Perlez, Eric Schmitt, and Ginger Thompson, “U.S. Had Warnings on Plotter of Mumbai Attack,” New York Times, October 17, 2010 u http:// www.nytimes.com/2010/10/17/world/asia/17headley.html?_r=1&ref=david_c_headley.

75 Bob Woodward, Obama’s Wars (New York: Simon and Schuster, 2010), 46–47. 76 This discussion draws from ongoing research by the author exploring published LeT texts.

Exposition of these texts will be the subject of a forthcoming work by the author.

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the most tightly controlled of all the Deobandi groups. Pakistani analysts explained to this author in July 2010 that the army is keen to continue supporting Azhar because he has remained adamantly pro-Pakistan and has refrained from attacking the state. Azhar demonstrated his pro-state bona fides as early as late 2001 when he opposed calls from within his organization to attack Western targets in Pakistan as well the Pakistani government77 and informed the ISI of these conspiracies. Pakistani analysts argue that as long as Azhar can maintain the coherence of his following in the Punjab, members of his group are less likely to join the TTP. However, as is wellknown, elements of JM have split from Azhar and launched attacks against foreign and domestic targets in Pakistan. Other, albeit intimately interrelated, Deobandi groups, such as the network of commanders under the umbrella of the TTP and its various constituent parts, are beyond the grasp of the state, as evidenced by their sustained attacks within Pakistan. The military and the ISI have tried to manage this complex web of allied foes by cultivating or aggravating disagreements among commanders. For example, Pakistan cultivated Mullah Bahadur and Maulvi Nazir to counter the anti-state elements of the TTP generally and Baitullah Mehsud and Hakimullah Mehsud in particular.78 Pakistan has also tried engaging and placating the militants through various peace deals, while at other times it has sought to defeat them militarily with varying degrees of determination and success.79 Unfortunately, it is unlikely that Islamabad will have the ability— much less political will—to degrade these groups in any significant way. Despite a seeming dedication to combating some elements of the TTP that target the state, Pakistan will likely remain unable to eliminate even those groups. Accounting for this are both overlapping membership between the vehemently anti-state components of the TTP and the other Deobandi groups that Pakistan still views as assets—JM, the Haqqani network, and the Afghan Taliban, among others—and anticipation of a future battle against India,

77 Nicholas Howenstein, “The Jihadi Terrain in Pakistan: An Introduction to the Sunni Jihadi Groups

in Pakistan and Kashmir,” Pakistan Security Research Unit (PSRU), Research Report, no. 1, February 5, 2008, 28–31 u http://spaces.brad.ac.uk:8080/download/attachments/748/resrep1.pdf.

78 See Rahimullah Yusufzai, “The Emergence of the Pakistani Taliban,” Jane’s Information Group,

December 11, 2007; and Yusufzai, “A Who’s Who of the Insurgency.” For details about the various commanders, see Caroline Wadhams and Colin Cookman, “Faces of Pakistan’s Militant Leaders: In-Depth Profiles of Major Militant Commanders,” Center for New American Progress, July 22, 2009 u http://www.americanprogress.org/issues/2009/07/talibanleaders.html.

79 These deals and military efforts are detailed extensively in Jones and Fair, Counterinsurgency in

Pakistan, 33–84.

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whether in India or Afghanistan, which makes Islamabad reluctant to fully cut ties to proxy insurgents.

sustaining jihad and the jihadis Given that Pakistan has been able to sustain numerous militant groups in the service of covert campaigns, there must be some degree of public support, however small, for these activities.80 One possible reason for Pakistan’s ability to maintain this level of support for militant campaigns over six decades is the fact that the concept of jihad is old and enduring in South Asia, specifically in the areas that are now Pakistan and Afghanistan. The scholar Ayesha Jalal contends that Balakot, located in the district of Mansehra in Pakistan’s NWFP, is the “epicenter of jihad” in South Asia. It was there that Sayyid Ahmad of Rai Bereilly (1786–1831) and Shah Ismail (1779–1831), both “quintessential Islamic warriors in South Asian Muslim consciousness,” were slain fighting the Sikhs in May of 1831.81 Scholars consider this the only genuine jihad to establish Muslim supremacy in South Asia. Their gravesites have since become sacred places that are intertwined with both jihad and colonial resistance. Jalal writes of these gravesites: “To this day Balakot where the Sayyid lies buried is a spot that has been greatly revered, not only by militants in contemporary Pakistan, some of whom have set up training camps near Balakot, but also by anti-colonial nationalists who interpreted the movement as a prelude to a jihad against the British in India.”82 This association of Balakot with jihad in the 1990s was mobilized when Pakistan established militant training camps there for groups raised to operate in Kashmir and the rest of India.83 More generally, popular consciousness in Pakistan is strewn with “collective myths and legends of jihad based on selective representation of history.”84 The state itself has nurtured a public discourse that is anti-India,

80 This section draws heavily from C. Christine Fair, Neil Malhotra, and Jacob N. Shapiro, “Islam,

Militancy, and Politics in Pakistan: Insights from a National Sample,” Terrorism and Political Violence 22, no. 4 (October 2010): 495–521. There are few robust studies of the public’s support for militancy, and none that track it over time. For some preliminary findings, see C. Christine Fair, Clay Ramsay, and Steve Kull, “Pakistani Public Opinion on Democracy, Islamist Militancy, and Relations with the U.S.,” United States Institute of Peace, Working Paper, February 2008 u http:// www.usip.org/resources/pakistani-public-opinion-democracy-islamist-militancy-and-relations-us.

81 Ayesha Jalal, Partisans of Allah: Jihad in South Asia (Lahore: Sang-e-Meel, 2008), 1. 82 Ibid., 61. 83 Ibid., 1–2. 84 Ibid., 20.

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anti-Hindu, and pro-jihad using public and military schools, a variety of media, and public celebrations of national events.85 Thus, it seems likely that one of the reasons why Pakistan has been able to successfully sustain proxy wars is that Islamabad has marketed them to the public as jihad, which is perceived as legitimate in Pakistan and elsewhere in South Asia. Indeed, polls have demonstrated that Pakistanis to some degree support different kinds of militancy. In conjunction with Jacob Shapiro and Neil Malhotra, the author surveyed a national sample of Pakistan’s four provinces using face-to-face interviews of 6,000 persons in 2009. The survey found that militarized jihad enjoys considerable support among Pakistanis. Respondents were asked the following question: “Some people say jihad is a personal struggle for righteousness. Others say jihad is protecting the Muslim ummah through war. What do you think?” A plurality (44.6%) answered that “jihad is both a personal struggle for righteousness and protecting the Muslim ummah through war.” A similar fraction of respondents indicated either that “jihad is solely a personal struggle for righteousness” or that “jihad is solely for protecting the Muslim ummah through war.” (Some 6% indicated that they did not know, and another 1% declined to answer.) As Figure 1 shows, a large majority of Pakistanis thus clearly embrace militant dimensions of jihad in principle.86 Even among Muslims who embrace militant notions of jihad, scholars of Islam debate whether it is the exclusive purview of a Muslim government to declare jihad or whether nonstate actors can do so. (On this basis, some Muslims reject Osama Bin Ladin’s arrogated right to declare jihad.) When respondents were asked whether they believe a Muslim state/government, nonstate actors, or both can employ military force to protect a Muslim country or the Muslim ummah in the name of jihad, a plurality (43%) said that this is a prerogative of the state alone. The second largest group (35%) indicated that both government and non-government actors can do so, whereas only 7% believed that nonstate actors can wage jihad on their own. Taken together, 42% of respondents affirmed that nonstate actors can legitimately invoke jihad to protect Muslims, while another 16% either did not know (14%) or did not answer (2%).87 Figure 2 shows the results of the survey question.

85 K.K. Aziz, Murder of History: A Critique of History Textbooks Used in Pakistan (Lahore: Vanguard

Books, 1998); A.H. Nayyar and Ahmed Salim, eds., “The Subtle Subversion: The State of Curricula and Textbooks in Pakistan-Urdu, English, Social Studies and Civics,” Sustainable Development Policy Institute, Report, 2003; and Iftikhar Ahmed, “Islam, Democracy and Citizenship Education: An Examination of the Social Studies Curriculum in Pakistan,” Current Issues in Comparative Education 7, no. 1 (Fall 2004): 39–49.

86 See Fair, Malhotra, and Shapiro, “Islam, Militancy, and Politics in Pakistan.” 87 Ibid.

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figure 1 Opinion of Jihad Question: Some say jihad is a personal struggle for righteousness. Others say jihad is protecting the Muslim ummah through war. What do you think? Do not know/did not respond 8%

Personal struggle only 23%

Personal struggle and war to protect Muslims 44%

War to protect Muslims 25%

Source: Fair, Malhotra, and Shapiro, “Islam, Militancy, and Politics in Pakistan.”

figure 2 Opinion on the Use of Force Question: Who can use military force to protect a Muslim country or ummah?

Do not know/did not respond 16%

Only nonstate actors 7%

Only government 42% Both government and nonstate actors 35%

Source: Fair, Malhotra, and Shapiro, “Islam, Militancy, and Politics in Pakistan.”

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It is possible that variation in views about the nature of jihad (personal, military, or both) may be explained by variation in views about who has the right to wage jihad (states, nonstate actors, or both). To explore this possibility, the surveyors cross-tabulated the variables about the nature of jihad and the authority to wage jihad. To much surprise, respondents’ beliefs about jihad do not predict beliefs about who has the authority to declare jihad. Both respondents who believe jihad is a strictly personal or strictly military struggle were more likely to believe that only governments can wage jihad. Those who believe in the dual nature of jihad were most likely to believe that jihad can be waged by both state and nonstate actors. When examining levels of support for the Kashmiri groups, the Afghan Taliban, al Qaeda, and the sectarian groups, the team found that the Kashmiri groups consistently enjoyed the highest level of backing among Pakistanis. This is consistent with decades of state-promoted narratives that proclaim Kashmir to be a “legitimate jihad.” The Afghan Taliban closely followed in public support, which also is consistent with state-sponsored narratives about the positive role of the Taliban in Afghanistan since the mid-1990s, as well as with the state’s current position that the Afghan Taliban should enjoy greater legitimacy to govern Afghanistan than the U.S.-backed Karzai government. Pakistan continues to assert the largely inaccurate claim that Kabul is dominated by the former Northern Alliance, which Pakistan views as an Indian proxy. While this was true during the interim government, with the subsequent elections, this claim is now simply false. Finally, the sectarian groups and al Qaeda enjoyed considerably less support, reflecting a lack of state-promoted narratives about the positive contributions of these organizations. In 2007 the author, in conjunction with the Program on International Policy Attitudes (PIPA), surveyed nearly one thousand urban Pakistanis in face-to-face interviews. Data from this survey suggests that support for militant groups was overall very low, with a majority of respondents indicating that the groups operating in Pakistan posed a large and important threat to Pakistan’s interests. Substantial majorities repudiated the tactic of attacks on civilians in general, including those directed against India by Pakistani extremist groups. Indeed, 66% of respondents said that such attacks were either never or “rarely justified, and only 15% called such attacks sometimes or often justified.88 While 64% said “attacks conducted against government institutions (like the national parliament in Delhi and state assemblies)” were never justified, 15% believed that such attacks were sometimes justified. Whereas 67% indicated

88 See Fair, Ramsay, and Kull, “Pakistani Public Opinion.”

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that “attacks in India on families of Indian military personnel” were never justified, 13% said they were sometimes justified. Similarly, although 68% condemned “attacks conducted against Indian targets like subways, stock exchanges, and tourist sites,” 12% said that these attacks were sometimes justified. On balance, this survey found that more than one in ten respondents believed that these various attacks were justified in some measure.89 While support for specific groups operating against specific targets was low among respondents, many Pakistanis believe that their country has an obligation to protect Muslims in Kashmir and elsewhere, consistent with Pakistan’s national narrative as being the home of South Asia’s Muslims and having an explicit goal of “liberating occupied Kashmir” from India. Asked whether they agreed or disagreed with the statement that “Pakistan has a moral obligation to protect Muslims anywhere in South Asia,” 66% of respondents agreed (36% strongly) and only 21% disagreed (13% strongly).90 The survey next asked those who agreed with the previous assertion the question, “To protect Muslims in South Asia, do you think Pakistan should use any means, including force, or do you think Pakistan should only use peaceful means?” Use of any means was endorsed by 12% of respondents, whereas 72% rejected the idea that Pakistan should use force beyond its own territory in defense of Muslims.91

conclusions and implications This article has argued that Pakistan’s use of Islamist militancy as a tool of foreign policy is not new and in fact dates back to the early beginning of statehood. Pakistan’s ability to field sustained militant campaigns with significant degrees of public support is likely tied to the historical and social milieus of jihad, which has long been understood as a legitimate mode of militarized conflict in the areas that now make up Pakistan. Thus, Husain Haqqani, Pakistan’s ambassador to the United States, has cogently argued that the reliance on militancy “is not just the inadvertent outcome of decisions by some governments (beginning with that of General Muhammad Zia ul-Haq in 1977), as is widely believed.”92 While Pakistan instrumentalized Islam in order to strengthen national identity by building an ideological state and by

89 See Fair, Ramsay, and Kull, “Pakistani Public Opinion.” 90 Ibid. 91 Ibid. 92 Haqqani, Pakistan: Between Mosque and Military, 2.

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pursuing Islamization, the state gradually made a “strategic commitment to jihadi ideology.”93 The acquisition of nuclear capabilities has critically both enabled and emboldened Islamabad to pursue strategies such as support for insurgents and proxy warfare with increasing confidence that doing so will be cost-free or that, in the event of Indian retaliation, the international community will readily mobilize to diffuse the conflict. Pakistani security elites, therefore, appreciate that nuclearization is an important enabling condition for Pakistan’s continued reliance on jihad throughout India even as New Delhi continues to expand its conventional—and strategic—capabilities. Given the varying levels of support for militant groups within Pakistan’s public, military, and intelligence agencies, it is doubtful that Islamabad will be willing to abandon the strategic use of militancy as a tool of foreign policy and contend with the emergent militant threat ravaging the country and the region. Unless the United States and its partners can fundamentally change the way that Pakistan assesses its cost-benefit calculus toward India or find some means of ameliorating Pakistan’s neuralgic fears of India, the international community has few choices but to prepare for the worst. 

93 Haqqani, Pakistan: Between Mosque and Military, 3.

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strategic asia 2010–11

asia’s rising power

and America’s Continued Purpose Edited by Ashley J. Tellis, Andrew Marble, and Travis Tanner The National Bureau of Asian Research • September 2010 •356 pp Paper • 6x9 • ISBN 978-0-9818904-1-8 • $34.95 (paperback) • $19.95 (PDF)

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review essay

When Sleeping Giants Awaken: China and India in the New World Order Sourabh Gupta

Pranab Bardhan Awakening Giants, Feet of Clay: Assessing the Economic Rise of China and India Princeton: PrincetonUniversity Press, 2010 u 192 pp.

Wendy Dobson Gravity Shift: How Asia’s New Economic Powerhouses Will Shape the 21st Century Toronto: UTP Publishing, 2010 u 254 pp.

Prem Shankar Jha Crouching Dragon, Hidden Tiger: Can China and India Dominate the West? New York: Soft Skull Press, 2009 u 256 pp.

Shalendra D. Sharma China and India in the Age of Globalization

Cambridge: Cambridge University Press, 2009 u 336 pp. © The National Bureau of Asian Research, Seattle, Washington

asia policy

When Sleeping Giants Awaken: China and India in the New World Order Sourabh Gupta

D

id Asia, with China and India in the lead, account for more than half of world output for most of the past two millennia, as conjectured by the economic historian Angus Maddison? Looking forward, will the GDPs of the BRIC economies (Brazil, Russia, India, and China) exceed the combined GDPs of the United States, Japan, Britain, France, and Germany before mid-century? As the two great Asian civilizational epicenters harness the irresistible impulses of contemporary globalization, will they translate their socio-economic, political, and cultural prowess into instruments of durable “hard” power? Above all, can China and India wrest the West’s hegemony in the Asian region and beyond and close a chapter in world history that Maddison had deemed to be but a brief interregnum? Wading into this provocative debate are three stimulating books that aim to chronicle the recent rise of these hitherto sleeping Asian giants and the world-historical consequences thereof: Gravity Shift: How Asia’s New Economic Powerhouses Will Shape the 21st Century, written by Wendy Dobson; China and India in the Age of Globalization, by Shalendra D. Sharma; and Crouching Dragon, Hidden Tiger: Can China and India Dominate the West? by Prem Shankar Jha. Considering this avowed aim, it is disappointing that none of the books manage to map out or grapple in a systematic fashion with the medium-term geoeconomic and geopolitical consequences of China’s and India’s rise. Yet each of the books in its own variegated narrative provides a skillful—and at times counterintuitive—account of the two countries’ immense ongoing socio-economic transitions: from village to city, from plan to market, from doctrine to pragmatism, from autarchy to interdependence, and from isolation to global engagement. Along the way, common themes abound, as do stark differences. Perhaps no difference is more compelling than the Chinese state’s trust in bottom-up, economic enfranchisement of its otherwise politically neutered subjects, even as the Indian state has limited that trust in citizenry mostly to the realm of elective politics. Considering then the importance of China and India to the region and beyond, this review essay covers a fourth volume, Awakening Giants,

sourabh gupta is a Senior Research Associate at Samuels International Associates,

Inc., an international trade and political risk assessment firm. He can be reached at <sgupta@ samuelsinternational.com>.

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review essay • when sleeping giants awaken

Feet of Clay: Assessing the Economic Rise of China and India, written by Pranab Bardhan, a development economist at the University of California, Berkeley. Bardhan explicitly eschews the grander themes; instead, he focuses more narrowly on a comparative analysis of the strengths and weaknesses of China and India. His is also the book that most revels in its zest for the counterintuitive. Assailing the received wisdom that globally integrative pro-market and pro-business policies were the linchpin of the Chinese and Indian success stories, Awakening Giants provides a sophisticated exposition of the importance of state-endowed “initial conditions”: egalitarian land distribution; a solid base of minimum social infrastructure, including primary education; accelerated rural electrification; investment in basic heavy industries; and a national system of basic scientific research. Together, these investments in physical and human capital provided ballast for growth much before either country’s tryst with globalization. China’s and India’s unsuccessful experiments with socialism and bureaucratic statism were anything but failures. Indeed, the fact that China’s growth has raced ahead of India’s in present times can be chalked up, in part, to the Chinese state’s enlightened commitment to taking advantage of a deeper set of initial conditions. However, in conflating, as an argumentative tool, the socialist—and early reform—period with the duration of initial conditions, Bardhan leaves himself exposed to the charge that endowing initial conditions was not an exclusively socialist-era handiwork. In fact, China’s remarkable regional experiments in industrial-sector privatization in the mid-to-late 1990s attest to the creation of a whole new set of initial conditions as a consequence of structural reform. Indeed, owing to such privatization, today Beijing’s primary policy dilemma across vast swathes of industry is fragmentation of the production structure, not market concentration and state capitalism, as is voguishly held by outsiders. Bardhan’s nuanced treatment of the debate over democracy vs. authoritarianism, captured by way of the two country’s contrasting approaches to federalism, is enlightening. By this account, a key factor in the Chinese state’s superior performance has been its economically inclined “market-preserving federalism,” which emphasizes fiscal, financial, and managerial decentralization. India’s more politicized “holding-together federalism,” conversely, has tended to focus on a center-dictated model of redistributive transfers. What additionally appears to tip the debate in authoritarianism’s favor is the inherent embeddedness of China’s “regionally decentralized authoritarian system” within historical patterns of growth and development—imperial China also [ 141 ]

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being a regionally segmented economic entity held together by the center’s iron control over personnel transfers and promotions. The modern Indian state, by contrast, appears to be the product of a less-organic “constructed centralism.” Small irony, then, that Bardhan nevertheless persists in lauding Indian democracy, given the litany of ills that he traces to the system’s design flaws that lead in turn to its politicization and capture. If Bardhan’s gifted analysis tends to drift at times into academic minutiae, Wendy Dobson’s erudite yet lively narrative provides a refreshing alternative. In Gravity Shift: How Asia’s New Economic Powerhouses Will Shape the 21st Century, Dobson uses her decades-long familiarity and attachment to China and India to dissect both country’s growth models under the lens of institutionalism. She asserts that what drives or inhibits growth is institutions—the set of formal norms and informal conventions that provide a framework for societal interactions and shape society’s incentive structures. By this measure, and notwithstanding the considerable socio-economic distance travelled, both Asian giants still must attend to a trail of unfinished business. Notable, mutually in this instance, is the imperative for the state to cede its vice-like grip over the commanding heights of the economy—utilities, energy, banking, etc.—and revert to a more arm’s-length regulatory role that fairly polices competitive markets and leaves small and medium enterprises (SME) as the incubators of entrepreneurship and growth. Neither country remains anywhere close to the point of being able to do so, nor is it by any means assured that either will reach this point down the line. The Chinese Communist Party has veritably morphed, as Dobson recounts, into a “Chinese Bureaucratic Capitalist Party”; India’s state-sector enterprises remain hostage to graft, rent-seeking, and a host of non-economic considerations. That said, Dobson supplies an elegant observation on the reason for the differential pace of the Sino-Indian growth trajectories: because Communist China’s reform process has been embedded within a deeper political calculus of basic legitimacy of the party’s incumbency, consensus has been that much broader, deeper, and more durable. By contrast, the relative shallowness of India’s structural reform program can be ascribed to its narrower, crisis-driven character, which has on occasion forced the country’s political classes to suspend their scorn for market forces and partiality for direct intervention. Gravity Shift leaves the reader unsatisfied, however, in two respects. First, despite the insightful window the book opens up into the growth and development models of China and India, the shift in gravity from West to East is documented too briskly. This lends an anti-climactic air to the book. More [ 142 ]


pointedly, the book does not develop larger themes of globalization-induced collapse, chaos, or growth-stop scenarios that might stall either country’s economic locomotive in its tracks. Owing to her voluminous experience both at the frontlines of international financial diplomacy and in academia, Dobson, more than most of her peers, is ideally placed to analyze the perilous intersection of financial globalization with domestic financial liberalization in emerging markets. She is well-placed to analyze how asset bubbles and mispriced collateral at every level of the economy, public and private, could crash China’s financial edifice when growth expectations disappoint, as well as how New Delhi’s perennially deficit-heavy structure of public finance could lead to a repeat of mini–1991-style crises—particularly as progressively shorter-term lending borne of financial globalization invites periodic panics and races to the financial exits. Regrettably, Gravity Shift passes up the opportunity to delve into these issues. In China and India in the Age of Globalization, Shalendra Sharma provides a concise yet panoramic survey of China’s and India’s socioeconomic paths and processes, not just since the inception of their reform programs but since their liberation as modern nation-states in the late 1940s. Sharma’s relatively slim format manages, quite laudably, to provide a concise yet discerning survey of both countries’ long economic journeys over multiple decades, including the varying degrees to which they have embraced globalization. This is also the lone book among the four that ventures beyond the theme of comparative economics and assesses the role of China and India as rising strategic actors. The discussion of the SinoIndian boundary dispute in this context is remarkably succinct. Sharma, though, tends to lose his admirable bird’s-eye view as he gets bogged down in details when recounting nearer-term events. Sharma’s contribution to the larger economic debate is his insight that the key ingredient to both countries’ recent successes has been their deliberate eschewal of the “big bang” approach to structural reform. Indeed, limited reform—of incentives, competition, price-flexibility, mobility, and openness—is what created constituencies for reform that were capable of overcoming a host of lesser inefficiencies associated with imperfect markets, price distortions, and institutional deficiencies. The finer points of reform and pro-business opening were not determined ex ante; rather, they evolved over a process of experimentation and adjustment as incentive problems were resolved along the way. Given such familiarity with the past, the book’s observations of what the future holds in store strike one as rather perfunctory. In fact, on occasion the book reads more like a review of the expert literature [ 143 ]

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on this topic. This reviewer would have loved to see Sharma lay out his opinions more deliberatively. The last of the four books—Crouching Dragon, Hidden Tiger: Can China and India Dominate the West?—is also the idiosyncratic one of the pack. Prem Shankar Jha, a long-respected journalist and commentator, packs a heavily contrarian punch here. At the heart of Crouching Dragon, Hidden Tiger, and its relatively dismal interpretation of what reform has wrought on the poorer masses in both China and India, is a class-based theory of “intermediate regimes.” This stratum of intermediate party or petty bourgeois socio-economic forces—local party cadres in the case of China; petty traders along with rural moneylenders and moderately affluent farmers in the case of India—has abused its effective bureaucratic control or electoral influence, respectively, to transfigure market opening and reform into an exercise of “robber baron” capitalism. In China, local party cadres, operating between the central leadership and the populace, converted their control over property into ownership, in turn becoming investors gambling away the state’s assets. In India, this intermediate petty class, entrenching itself between big business and the vast majority of India’s small farmers and the self-employed, used political influence to sabotage reform, thereby perpetuating a black-market economy that protected its narrow commercial interests. As such, highly predatory or graft-ridden systems of government have emerged along the way, with the poor excluded as stakeholders in the development process. Either country’s hope of catching up with Western standards by mid-century is likely to remain effectively that—just a hope. The theory may indeed be internally consistent as well as unconventional in accounting for the differential Sino-Indian pace of growth; but does it bear resemblance to reality? National household surveys show a staggering decline in the poverty headcount in China and a somewhat less dramatic decline in India. China’s central government, time and again, has imposed industrial, financial, and revenue prerogatives on subnational branches of government and bureaucracy. Broad consensus for shallow reform, in the meantime, is a result more of the post-colonial character of India’s subcontinent-sized democracy than of imposition by particular social strata. Let the reader be the judge. Unorthodoxy notwithstanding, Jha and his fellow authors are spot-on to detect in both countries an undertow of the same structural hubris that felled and has now permanently grounded Asia’s original economic Icarus, Japan. A Chinese growth model built on excess liquidity, mispriced over-investment, and structurally feeble consumption demand risks economic arrest as aging demographics—and dissavings—catch up with the model’s contradictions. [ 144 ]


A dualistic Indian economy where 94% of the labor force works outside the dynamic corporate sector and barely 1% within its nformation technology segment risks a future fate far worse than Japan’s sheltered and stagnant domestic economy, in contrast to the dynamism of the much narrower and hyper-competitive export segment. Yet as noted in the introductory part of this review, the key shortcoming across the books is their lack of systematic treatment of the consequences of the “gravity shift” eastward. How will the greater competition for scarce resources and the delinkage of the global commodity cycle from the West’s business cycle affect the latter’s growth prospects? With globalizationinduced wage competition negatively affecting the share of income accruing to an increasingly wider swathe of labor in advanced economies, will the existing pro-trade sentiment evaporate to the West’s own detriment? As the dollar gradually cedes its preeminent status, will the United States’ elevated borrowing costs further erode the country’s long-term growth potential? And in the process, will China’s and India’s international economic, and increasingly financial, strength further blunt that habitual tool of recourse of U.S. statecraft—sanctions policy? As China, India, and rising Asia gradually emerge as drivers of regional consumption-led growth, will Asia and its incipient regionalism decouple economically from the West? Worse, will this decoupling invite thereafter a decoupling of trans-Pacific strategic destinies, calling into question the presence of the U.S. forward-deployed military in Asia’s waters? The consequences of contestation for power and influence—or alternatively cooperation—are numerous and of world-historical magnitude, regardless of the precise trajectories of China’s and India’s rise. The world is destined, indeed, to live in interesting times. 

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How Development Economics Can Become 70% More Effective Robert H. Wade A review of Terutomo Ozawa The Rise of Asia: The “Flying-Geese” Theory of Tandem Growth and Regional Agglomeration Cheltenham: Edward Elgar, 2009 u 256 pp.

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or the past two decades the mainstream of the subfield of development economics in the West has been dominated by micro studies in the belief that the top priority is to achieve “rigorous” knowledge about whatever lends itself to being rigorously studied. Before that, from the 1940s through the 1970s, development economists debated big issues of development strategy under headings such as “big push industrialization,” “import substitution,” “balanced growth,” “agriculture versus industry,” and “urban bias.” Nowadays, in contrast, journals are full of partial equilibrium studies of data sets but are thin on studies of big macro questions, especially of long-run development. The situation is reminiscent of economics before 1936, when economists had elaborate theories for explaining the price of a cup of tea but next to nothing plausible for explaining persistent mass unemployment, and could explain why the bishop was paid more than the garbage collector only in terms of “labour market distortions.” When development economists today do tackle big issues of strategy, they tend to prescribe free markets, capital accumulation, and a policy tilt toward export promotion as the keys to rapid economic growth—with an implicit assumption that developing and transitional states are all in the mould of Nigeria and not to be trusted to do virtually anything right. Beyond the distinction between “developing and transitional” and “developed,” there is scarcely any analysis of stages of economic transformation. In this context Terutomo Ozawa’s new book, The Rise of Asia, is a blast of fresh air. Ozawa starts with the pioneering work of Kaname Akamatsu in the 1930s, who coined the term the “flying-geese” pattern of industrial development. Akamatsu used the metaphor of overlapping V formations of geese to refer to the pattern of quantities of imports, production, and exports

robert h. wade is Professor of Political Economy at the London School of Economics, author of Governing the Market, and winner of the 2008 Leontief Prize in Economics. He can be reached at .

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(MPX) in the building of any one industry over time (such as spinning and weaving machinery, electrical machinery, bicycles, and ethylene). This is the intra-industry flying-geese pattern within any one country. Akamatsu also identified an inter-country flying geese pattern between countries in a regional hierarchy, such that as any one industry becomes uncompetitive in one country (perhaps due to rising wages) it moves down the V formation of countries to follower countries with lower wages. Ozawa builds on these ideas and applies them to the period since World War II. Whereas Akamatsu (and just about all of those who used his ideas) pictured Japan as the leader of an Asian hierarchy, Ozawa says this is deeply misleading: the United States was the lead goose and Japan was the lead follower in the 1950s. Without the United States in front, importing huge volumes of consumer goods and then capital goods (and able to run increasing current account deficits thanks to the United States’ ability to export its own currency in order to finance imports), there would have been no flying-geese formation in East Asia. From the 1940s to the 1980s and 1990s a fairly linear process of “comparative advantage recycling” operated, in which lower valueadded industries moved from one tier of economies to the next (and the leading economies then imported from the newer sites, adding a new imports curve at the end of the standard intra-industry MPX formation). Hence, there existed the following hierarchy: United States > Japan > South Korea/Taiwan/ Singapore > ASEAN-4 > China and Vietnam. Since the 1990s, however, the simple flying-geese model has broken down as China has surpassed the ASEAN countries in many industries. Also, since the 1980s and 1990s the value chain for many types of products has become geographically dispersed. Instead of whole industries moving down the country hierarchy to lower wage sites, only the low valueadded parts of the value chain move down (such as the production of certain components), while the high value-added parts (such as R&D and marketing) stay at home. Thus, any one middle-wage economy might be moving its center of gravity in a staged sequence across industrial sectors, while at the same time moving niches within increasingly vertically disintegrated production chains, jumping far ahead in the sectoral stages or sometimes jumping backward in the sectoral stages but to higher value-added niches. Ozawa is emphatic about the advantages of a flying-geese regional formation, or what he calls “tandem growth.” The importance of regions is caught in econometric studies of national economic growth, which typically show that “regional dummies” pertaining to characteristics of the region in which the national economy is located provide a sizable part of the total [ 149 ]

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explanation. This point is made metaphorically by the finding that a gaggle of 25 geese flying in V formation achieves a 70% energy savings over a solo bird thanks to the aerodynamic effects of flying together. The advantages of the flying-geese formation were brought home to me in tangible form during my field work in Taiwan in 1982 and 1988. I met several Japanese qualitycontrol experts who became freelance consultants on weekends and advised Taiwanese firms (some competing with the same Japanese firms for whom the consultants worked) on how to improve the quality of their products. Turning from the production or real economy to the financial or money economy (or from the current account to the financial account), Ozawa proposes an innovative stages theory of the balance of payments, linked to the stages of the production economy. He then proceeds to analyze the pros and cons of “borrowed growth” (that is, growth financed by foreign borrowing), and from there to an analysis of “global imbalances.” The book, moreover, not only analyzes big trends and big policy issues but does so in remarkably lucid and graceful prose, accessible to undergraduates and the general reader. For the future, the demand side needs more attention. In many economies, rich and poor, we see a tendency for wages to increase more slowly than productivity growth. This trend limits domestic demand and concentrates income and wealth at the top, distorting the economy by the efforts of the wealth-holders to find ways to store their wealth (in natural resources, complex financial products, overseas bank accounts, political patronage). Offsetting this tendency provides a rationale for a Rooseveltian (not a Washington) Consensus for measures such as a legal minimum wage, cash transfers to the poor, and guaranteed public sector employment at the minimum wage. The second big hole is the implications of the stages argument for international regimes in trade and finance. For example, the intense investments needed to build up the heavy and chemical industries stage are likely to require heavy external borrowing. But borrowing on the relatively short terms obtainable from private capital markets is dangerous (Exhibit A: the East Asian/Brazilian/Russian crisis of 1997–98). This provides a rationale for an expansion of long-term (twenty years or more) lenders such as the World Bank and regional development banks by ten times their current rates of lending and for a relative fall in private capital flows. How would the group of seven (G-7) states like that idea? How would the BRIC countries (Brazil, Russia, India, and China) like it? Two other recent books or papers can be cited alongside Ozawa’s as expanding the frontiers of development economics in a broadly similar direction. First, there is Justin Lin’s recent paper, “New Structural Economics: [ 150 ]

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A Framework for Rethinking Development.”1 The particular significance of this paper is that Lin is not just a marginal academic; he is chief economist of the World Bank, the first non–G-7 national to hold this key ideas-controlling position in the World Bank. The second example is the distinguished Brazilian economist Luiz Carlos Bresser Pereira’s book Globalization and Competition: Why Some Emerging Countries Succeed While Others Fall Behind.2 Add in work by Yilmaz Akyuz, Alice Amsden, Nancy Birdsall, Ha-Joon Chang, Heiner Flassbeck, Michael Lipton, Gabriel Palma, Carlota Perez, Erik Reinert, Dani Rodrik, and Beverley Silver, among others, and one has an early-stage real ferment in development economics—which should make for at least a 70% energy savings of those taking part. 

1 Justin Yifu Lin, “New Structural Economics: A Framework for Rethinking Development,” World

Bank, Policy Research Working Paper, no. 5197, World Bank, February 2010.

2 Luiz Carlos Bresser Pereira, Globalization and Competition: Why Some Emerging Countries Succeed

While Others Fall Behind (Cambridge: Cambridge University Press, 2010).

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Frictions and Outcomes between the State and Civil Society in Locating “Public Bads” Mike Danaher A review of Daniel P. Aldrich Site Fights: Divisive Facilities and Civil Society in Japan and the West Ithaca: Cornell University Press, 2008 u 254 pp.

I

n Site Fights, Daniel Aldrich investigates how the governments of Japan, France, and the United States decide where to locate the necessary evils of airports, dams, and nuclear power plants as well as how leaders respond to an increasingly more questionable public opposition to these sitings. The focus is mainly on Japan, with selective comparisons with France and the United States. The time period is the 1950s onward. Aldrich argues that state agencies initially manage potential conflicts by avoiding contestation wherever possible. He states that authorities place facilities where organized resistance from groups is judged to be lowest. This book charts the decisionmaking processes from a historical perspective and finds that authorities are facing rising opposition from citizens, who are more educated and environmentally and globally conscious. The research uncovered in this book is a culmination of Aldrich’s scholarship on Japan, France, and political science. Japanese and French language sources make up a substantial part of his research and add to the depth of analysis. General findings across the three countries reveal that a strong civil society pushes states to develop more sustainable strategies for handling divisive problems, whereas a weak civil society allows states to continue using hard social control methods and coercion, such as land expropriation and making NGO registration difficult. In other words, the characteristics of civil society, whether strong or weak, play a highly significant role in the choice of government strategies and where projects are ultimately located. Aldrich drills down among the toolkits that governments use in order to find out what determines their choice of tools from a considerable number of variations in types of government responses, the choice of which is not

mike danaher is Senior Lecturer in History at CQUniversity in Australia and is the author of Environmental Politics in Japan: The Case of Wildlife Preservation (2008). He can be reached at <[email protected]>.

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easy to explain. He claims tool choices, more than anything else, depend on the strength of contentious political opponents within civil society over time. Governments have at their disposal many and varied tools that can be broadly divided into hard forms of social control, such as expropriation and police suppression, and soft forms, such as grants and educational programs. Aldrich has compiled a comprehensive data set to test his arguments. His research is carefully designed to compare apples with apples by selecting hundreds of cases. The focus of analysis is the interaction between government and citizenry, which essentially is where this study differs from others. His methodology, which addresses a large number of cases across three countries, is refreshing and opens up the topic to greater scrutiny while providing interesting insight into many conflicts. The book examines a range of variations in government responses to citizen opposition cross-nationally, cross-temporally, and across same-nation cases. These cases inform Aldrich’s hypothesis that the strength of civil society to oppose controversial sitings determines how states will react. The historical context provided offers insights into the various levels and motivations of civil protests, as well as focusing on more determined government authorities. For example, the Narita airport extensions during the late 1960s corresponded with Vietnam War dissent and left-wing student activities. Yet protests, though highly militant and violent, remained unsuccessful. Protestors thought Narita would be used by U.S. combat and troop planes fighting in Vietnam in the same way that the Haneda airport was being used. Learning from the Narita case, the state has employed soft social control methods for future airport sitings. Moreover, in recent times airports were built on man-made islands in Japan in order to minimize public backlash. Similarly, the oil shocks of 1973–74 made governments more determined to shield their nations from future global events by speeding up construction of nuclear power plants, and therefore energy independence, if possible. This certainly applied to Japan and France, which have low reserves of oil and coal. The book shows that ordinary Japanese people are concerned about the environmental and personal health risks of these facilities but that this varies depending on the type of “public bad.” Japanese and U.S. opposition to dams has only been low to moderate. In Japan, where dams are used to produce hydropower and for flood mitigation, the general population has been convinced of the need for them, with opposition remaining mainly localized to the towns that are flooded. In contrast, French opposition to dams has been much stronger. Anti-dam opponents in France were able to ally with [ 153 ]

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the Greens and Socialists and force the French state into adopting soft social control tools and incentives. Over time, however, Japanese opposition to dams has grown, forcing the state to also implement new soft social-control strategies such as dam tours and educational programs aimed at making children and women more accepting of dams. Aldrich found that in the case of siting dams in Japan, the size of the locality and the time period in which the dam is proposed best explain which locality will be chosen. Larger towns with more unused land, smaller population density, and lower land prices are more likely to be selected than smaller towns. Japanese civil society has been most opposed to the siting of nuclear power plants in the earthquake-prone country. Despite the public’s distaste for nuclear weapons after Hiroshima and Nagasaki, Japanese governments have proceeded to build many nuclear power plants. In order to do so, however, they have needed to implement many social control instruments and build plants mostly in remote coastal towns away from strong opposition. The practice of expelling wastewater at higher temperatures into the ocean has also alarmed fishermen, while Japanese farmers have objected to nuclear power plants encroaching on their farmland. It is these two citizen groups (fishermen and farmers) who most oppose nuclear power plant sitings. Likewise, in the United States, opposition to nuclear power plants is currently strong. The chapter on French nuclear power plant siting is titled “David versus Goliath,” which alludes to the generally weak and marginalized groups (David) within French civil society. Though there was localized opposition to nuclear power plants in the 1970s when the government announced that France would go “all nuclear,” public opinion generally favored nuclear energy. Consequently, the French state has continued relying on coercion to achieve further nuclear power plant sitings and at the same time encountered antinuclear groups tending toward violence and sabotage. In terms of my own field of Japanese environmental politics, I find this book useful in regard to the conceptual frameworks that Aldrich has put forward to explain the strengths of opponents vis-à-vis state responses. For example, he concludes that the larger the social capital in a community and the better its networks, the greater the chance of a strong citizen opposition. This framework can be applied to the study of environmental NGOs working in Japan that have for a long time faced stiff bureaucratic barriers. The book would have benefited from the inclusion of maps highlighting the location of the more controversial sitings of major dams and nuclear power plants. In summary, however, this is a well-argued book that provides interesting detail on the siting of public bads in Japan, France, and the United [ 154 ]

States. Aldrich concludes with an important recommendation: rather than focus on strategies of social control, government agencies should involve citizens directly in the decisionmaking process, and thus improve policies for siting controversial facilities. In this way, governments may avoid negative feedback later on that could hurt them in elections. This is a good book for the professional library of any Japan specialist. 

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Rethinking China’s Strategy in Asia and Beyond: Can We All Get It Right? Andrew Scobell A review of Gilbert Rozman Chinese Strategic Thought toward Asia New York: Palgrave Macmillan, 2010 u 272 pp.

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s Steven Levine astutely observed back in 1984, the People’s Republic of China (PRC) was “a regional power without a regional policy.”1 Indeed, China was without an Asia strategy until the end of the Cold War. While a number of books have examined the rise of China in the Asian context or looked at Beijing’s relations with its neighbors, until now there has not been a study focused on how China thinks about Asia. Gilbert Rozman’s book Chinese Strategic Thought toward Asia is, therefore, an important book. Strategy is probably the most overused and least defined word in the lexicon of the U.S. national security community. The closest Rozman comes to clarifying what he means by the term “strategic thought” appears well into the volume when he says he is referring to “ideas…[about the] means to realize ends” (p. 68). What Rozman seems to mean by the term is what is widely known as “grand strategy” (pp. 2, 3). In essence, the book is a thoughtful and comprehensive overview of big-picture thinking about Asia in post-Mao China. There is probably no scholar better equipped to tackle this topic. Rozman has written extensively on Chinese analyses of the countries on China’s periphery and those states’ analyses of China. The result is a tour de force treatment organized chronologically and geographically with a stand-alone overview introductory chapter. The first part consists of four chapters that divide Chinese thinking into four periods. Chapter 2 examines the decade of the 1980s, chapters 3 and 4 survey the 1990s, and chapter 5 explores the 2000s. The latter part of the book examines Chinese thinking toward Asian countries or subregions. There are separate chapters on Japan and Korea, Russia shares

andrew scobell is a Senior Political Scientist at the RAND Corporation. He can be reached at <[email protected]>.

1 Steven I. Levine, “China in Asia: The PRC as a Regional Power,” in China’s Foreign Relations in the

1980s, ed. Harry Harding (Yale University Press, 1984), 107.

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a chapter with Central Asia, and South Asia is included in a chapter with Southeast Asia. What is China’s strategy? According to Rozman, it is “establishing itself, in stages, as the ‘central state’ of Asia” (p. 5). How is Beijing seeking to achieve this objective? According to Rozman, Beijing is pursuing this by “boosting comprehensive national power” and “limiting the influence of rival contenders” (p. 5). In pursuing the latter goal, the United States of course looms largest for China. But other powers also figure in China’s geostrategic calculus: Russia, Japan, and India, to name the most prominent. Most analysts conclude that reform-era China is extremely pragmatic, having thrown off its Maoist-era ideological shackles. Moreover, it is widely assumed that China has strategic thinking down to a fine art—after all, the country has a grand tradition of strategic thinkers dating back thousands of years to Sun Zi. More recent luminaries include Mao Zedong and Deng Xiaoping. Rozman challenges these conventional wisdoms and argues that, in fact, many contemporary Chinese thinkers tend to be ideologically hidebound. He identifies two main schools of thought—a “peace and development” school and a “reunification and anti-hegemony” school. Rozman attributes the persistence of ideology to the enduring strength of the latter school, and sees many of the inconsistencies and contradictions in Beijing’s strategies and policies as the result of an ongoing “clash between the two schools” (p. 28). Despite China’s insistence that the country has adopted a “new security concept” that seeks “win-win” solutions with other countries, many in Beijing continue to view the world from a realpolitik perspective. Contrary to the “harmonious world” mantra, most Chinese elites view the globe as a very dangerous and threatening place. They perceive other capitals as threats to Beijing, and if other states are seen as winning, China is considered to be losing. As Rozman observes, one cannot simply take the rhetoric of official Chinese pronouncements at face value. For example, China’s repeated condemnations of a lingering U.S. “Cold War mentality” and a Washington that engages in “hegemony and power politics” may reveal more about Beijing’s strategic mind-set than about Washington’s world-view—what Rozman labels the “remnants of ideological fetters and oversensitivity to foreign behavior” (p. 42). Indeed, he views China as “the most ideological of the East Asian states apart from North Korea” (p. 39). Rozman perceptively observes that China “stridently faults others for persistent Cold War logic when it is one of the most guilty for sustained balance-of-power reasoning and opposition to universal values” (p. 223). [ 157 ]

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Moreover, the author contends that China is not flawless when it comes to formulating and implementing grand strategy and is not terribly good at matching rhetoric with reality. Chinese elites have demonstrated at least three deficiencies: an incomplete strategic vision, rigid systems and processes, and a reactive tendency. First, according to Rozman, there is “no apparent, overall Chinese strategic vision” and “no clear blueprint for a new regional order” (pp. 34, 5). Although Chinese leaders have been quite skillful at managing their country’s “reform and opening” policy, the general guidelines have tended to be extremely vague with no clear endpoint specified. A popular metaphor used to characterize the country’s reform roadmap seems to underscore this point: “crossing the river by feeling the stones.” Second, the Chinese political system, strategic thinking, and policy process all exhibit considerable “rigidity” (p. 42). This characteristic—which includes the “ideological fetters” noted above—is self-limiting and produces a Beijing that is slow to act. Third, and relatedly, Chinese elites demonstrate a reluctance to take initiative and are largely reactive when formulating and implementing grand strategy. Indeed, according to Rozman, it is “U.S. global leadership that drives China’s response” (p. 36). Rozman urges us to “peer behind the set expressions, making sense of the inconsistencies in Chinese writings and statements for difference audiences” (p. 40). Great attention to details and nuances allows Rozman to identify and explain the “duality that frequently exists between the upbeat assessments of China’s continuous gains in the international system and the harsh warnings about the negative designs of other states” (p. 4). Take, for example, Chinese rhetoric about multipolarity and multilateralism. While Beijing has for many years proclaimed its desire for a multipolar world, the PRC’s actions and reactions to the turbulence of the post–Cold War era have demonstrated a profound reluctance and even resistance to initiatives in the direction of multipolarity. For example, China is unwilling to champion reform of the UN Security Council. When Brazil, Germany, India, and Japan banded together to lobby for permanent seats, China only provided tepid rhetorical support. While the world may have remained unipolar since the collapse of the Soviet Union, during the past two decades Asia has witnessed the rise of multipolarity. Chinese recognition of the importance of Asia has translated into a significant expansion of bilateral relations and a branching out into multilateral activism. And yet while China now vigorously engages with every country in Asia, it does so as the dominant player because of its massive size and vast economic clout rather than on the basis of any abiding commitment to multipolarity or multilateralism. [ 158 ]

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What would be incontrovertible evidence of a wholehearted Chinese embrace of multipolarity and regionalism? As Rozman notes, indicators would include “doing away with the term ‘hegemonism’ [as a euphemism for U.S. policy]....acknowledging the rise of Japan as a great power…[and] upgrading India’s status as a rising power” (p. 239). China has been thinking strategically about Asia for the past two decades, and scholars, analysts, and decisionmakers ignore the discourse in China over its neighborhood at their peril. Rozman’s book fills a serious void. This volume should be required reading for anyone interested in understanding how Beijing sees its home region and China’s place in it. 

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Will China Eat Our Lunch? Richard P. Appelbaum A review of

Denis Fred Simon and Cong Cao China’s Emerging Technological Edge: Assessing the Role of High-End Talent New York: Cambridge University Press, 2009 u 434 pp.

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ill China eat our lunch? Short answer: probably yes, but possibly no. China is moving in the right direction, but before betting the house that China will be the world’s next technology superpower, it might be wise to hedge a little—just in case. China’s Emerging Technological Edge is an impressive book, authored by two leading experts on the subject. Denis Fred Simon, director of Penn State’s Program in U.S.-China Technology, Economic, and Business Relations, has been studying China’s transition to capitalism since Mao Zedong’s denunciation of Deng Xiaoping and his capitalist roaders. Simon is fluent in Mandarin, and for the past quarter-century has been a matchmaker between foreign investors and Chinese officials. Cong Cao, Simon’s long-time collaborator, is senior research associate at the State University of New York’s Neil D. Levin Graduate Institute of International Relations and Commerce and the author of China’s Scientific Elite, a study of the membership of the Chinese Academy of Sciences. In 2006, China launched its fifteen-year “Medium- and Long-Term Plan for the Development of Science and Technology” (MLP), officially seeking to “leapfrog development” by investing heavily in research and development, higher education, science parks, and supportive infrastructure.1 With the MLP—and related policies, including the eleventh and twelfth fiveyear plans—China has sought to move away “from foreign ‘show-how’… to capturing foreign know-how to advance its economy and technological capabilities” (p. 20). This is far easier said than done. The book’s generally optimistic prognosis regarding China’s high tech future is balanced by its hard-nosed historical analysis, which acknowledges the numerous challenges

richard p. appelbaum is Professor of Sociology and Global and International Studies at the University of California–Santa Barbara. He can be reached at .

1 See, for example, Richard P. Appelbaum and Rachel A. Parker, “China’s Bid to Become a Global

Nanotech Leader: Advancing Nanotechnology through State-Led Programs and International Collaborations,” Science and Public Policy 35, no. 5 (June 2008): 320.

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posed by China’s past, particularly the “ten lost years” (1966–76) of the Cultural Revolution that resulted in the virtual elimination of the generation that would comprise China’s senior innovators today. Yet, as the book documents—through a detailed analysis of Chinese government statistics (summarized in more than 70 tables and figures),2 interviews, and secondary sources—China is moving mountains to compensate for past sins. Deng reasserted the importance of education, and under Hu Jintao and Wen Jiabao, merit-based higher education has now assumed center stage. China’s overarching goal today is to redirect its science and technology policy from merely being “master imitator” to becoming an indigenous innovator (zizhu chuangxin), backed up with substantial public investment aimed at “rejuvenating the nation with science” (kejiao) and “empowering the nation through talent” (rencai qianqquo) (pp. 42, 333). Yet beyond the promise and the hype,3 as Simon and Cao show, there are many obstacles for China to overcome. China’s Emerging Technological Edge begins by laying out a theoretical foundation for its basic assumption: that investment in human resources in science and technology can pay economic dividends since science and technology talent “can effectively raise the growth rate in leaders as well as followers in economic development by way of technological innovation” (p. 9). Simon and Cao argue that this is especially important for countries such as China that hope to play catch-up by drawing on a “global talent pool” of “trans-border innovation networks” (p. 15). Much of the book is devoted to elaborating on the promises of that emerging talent pool, as well as its many limitations. In 2006 (the most recent year for which most statistics were available when the book went to press) China turned out some 3.7 million undergraduates, of which half specialized in science, engineering, agriculture, and medicine. China also produced 256,000 graduate degrees, including roughly 36,000 at

2 The authors are well aware of the limitations of official Chinese statistics and devote a lengthy,

detailed appendix to the topic.

3 Hype surrounding China abounds. As early as 2006, Demos—a British think-tank that monitors

China—declared that “China in 2007 is the world’s largest technocracy: a country ruled by scientists and engineers who believe in the power of new technologies to deliver social and economic progress.” Forbes Magazine in 2009 announced that “China has fully arrived as a superpower,” while Nobel Prize–winning economist Robert Fogel predicted in a 2010 Foreign Policy article “that the Chinese economy will reach US$120 trillion by 2040, accounting for 40% of the world’s GDP, with a per capita income of $85,000—more than double that predicted for the EU.” See James Wilson and James Keeley, China: The Next Science Superpower? (London: Demos, 2007), 6; Shaun Rein, “Yes, China Has Fully Arrived as a Superpower,” Forbes, December 15, 2009; and Robert Fogel, “$123,000,000,000,000: China’s Estimated Economy by the Year 2040. Be Warned,” Foreign Policy (January/February 2010).

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the doctoral level, more than half of which were in engineering and science (p. 157). Yet despite its expanded investment in higher education and the resulting “marked improvements, especially at key institutions…there is no doubt that the quantitative increase in China’s higher education system in recent years has occurred at the expense of necessary quality improvements” (pp. 158–59). Even though China graduated an increasing number of students, there remained a quantity-quality gap resulting from weak faculty, poor curricula, lack of flexibility, and inadequate attention to problem-solving (p. 164). The Chinese government currently spends less than 3% on higher education, “among the lowest in the world” (p. 36). Higher education is no longer free, which has limited access, while recent reforms have stratified the higher education system. “Key” (zhongdian) institutions receive the lion’s share of public support, “thus ignoring the need for broader-quality improvements throughout Chinese universities as a whole” (p. 36). The net result is that while a select number of Chinese scientists at leading institutions have done cutting-edge work at the frontiers of international research, much of the work coming out of Chinese laboratories and research institutes still tends to be not yet close to the cutting edge or to be derivative of what has been done elsewhere, with minor new contributions. (p. 103)

Thus, despite recent efforts to upgrade education and training, China continues to face a “talent challenge,” a shortage in the science and technology pipeline that could prove to be a significant damper on further economic growth. The Cultural Revolution decimated a generation of talent, effectively restricting higher education to poorly qualified “worker-peasantsoldier students” (gongnongbing xueyuan) admitted on the basis of class background rather than academic qualifications.4 China’s aging population (the unintended consequence of its one-child policy) has also contributed to the problem, given that fewer young people will be entering college in the coming years (p. 339). One of the big question marks about the future of Chinese science and technology thus concerns “brain drain, brain gain, and brain circulation”— the title of chapter 6 and a principle preoccupation of much of the book. According to Chinese government statistics, 1.2 million Chinese left the country to study or conduct research abroad (“brain drain”) between 1978

4 A small number of talented individuals did manage to leave China and obtain a foreign education,

to later return as leaders in science technology. One example mentioned, Bai Chunli, left China for a postdoctoral fellowship at the California Institute of Technology, subsequently worked at the Jet Propulsion Laboratory (JPL), and eventually returned to China to lead the country’s current nanotechnology efforts (p. 30).

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and 2007, of which only a quarter have returned (“brain gain”). While China’s economic resurgence has attracted a growing number of returnees, the number remains small and generally fails to include the best and the brightest, many of whom have secure positions abroad and are waiting to see whether China’s recently adopted reforms in education and intellectual property (IP) protection will result in significant changes in practice. China’s leadership is well aware of these problems; it is attempting to lure the best back with pricey start-up packages, has strengthened IP and patent protections, and has created a number of government programs that nurture talent with fellowships. Additionally, the large number of Chinese living and doing research abroad (“brain circulation”) are “a significant asset both strategically and practically, especially in terms of transfer of knowledge, the attraction of foreign capital for high-technology endeavors, and local entrepreneurship” (p. 244). Some are “migratory birds” (houniao) who have summer positions in China, some are “amphibians” (liangqi) who have appointments in both Chinese and foreign institutions, and some merely collaborate with Chinese colleagues on specific research projects. Importantly, an increasing (although frequently exaggerated) number of foreign multinationals have also relocated their R&D operations to China, not for low wages or access to Chinese markets as in the past, but rather for access to Chinese brain power.5 Simon and Cao’s conclusions are cautiously hopeful regarding China’s ability to achieve its high-tech ambitions. Although “China is poised to become a significant contender, and an important contributor, to the frontiers of international research activity and high technology development…the reality is that the Chinese situation is still a work in progress in terms of overall output and innovative potential” (pp. 108–9).6 Yet “the present set of shortcomings, which frequently have made talent issues into a serious liability, are now being addressed in a concerted, coherent fashion…the issue is not if talent will become a source of competitive advantage, but only when 5 One recent well-publicized example is Applied Materials—the world’s largest supplier of solar-

manufacturing equipment—which in December 2009 announced plans to open an R&D center in Xian. Mark Pinto, the company’s chief technology officer, will relocate from Silicon Valley to China. As Pinto explained, “We’re doing R&D in China because they’re becoming a big market whose needs are different from those in the U.S…energy will become the biggest business for the company…[China] will be the biggest solar market in the world.” See Katherine Bourzak, “Applied Materials Moves Solar Expertise to China,” Technology Review, December 22, 2009.

6 As Xie Sishen, head of China’s National Center for Nanoscience and Technology, stated in 2007

with respect to nanotechnology, “as a whole, China is in the rear of the first echelon or the front of the second echelon, ranking 5th or 6th in the world in nanotech. More but few: more SCI papers but few higher-citation papers; more original ideas but few original achievements; more patents but less tech transfer; more purchased advanced instruments, few indigenously made.” Richard P. Appelbaum and Rachel A. Parker, “China’s Developmental State,” in Global Network, ed. Khalid Nadvi (forthcoming 2011).

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and under what conditions it will reach this stage” (p. 345). With regard to the latter, China primarily needs to complete its science and technology reforms, developing a truly achievement-based system that rewards scientific excellence rather than personal connections. Or, stated more bluntly, “there is still too much ‘socialism’ left in the Chinese research system” (p. 346). On balance, despite all the caveats that would seem to work against its “emerging technological edge,” China appears to be advancing fairly well in its journey down the capitalist road. Perhaps all hedging of bets should be off. 

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University Autonomy and the State: The Official Story

Yi Shang A review of Su-Yan Pan University Autonomy, the State, and Social Change in China Hong Kong: Hong Kong University Press, 2009 u 264 pp.

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u-Yan Pan’s University Autonomy, the State, and Social Change in China offers a historical analysis of power relations between institutions of higher education and the government in China through a case study. Case studies can be extremely illuminating for complex and multifaceted issues, provided that they are approached meticulously. While Pan’s book is ambitious in its scope, many relevant details are left unexplored and its methodology suffers from a serious flaw. The third chapter of the book gives a historical overview of the social changes and changes in higher education in China from the 1840s to the early 21st century. The entire time period is divided into four parts, each one with a clear theme. For example, the Mao period (1949–76) is marked by tight governmental control of the universities, and, as a result, Pan argues that “Chinese higher education emphasized scientific, technical and intellectual competence and gave priority to the ‘correctness’ of political ideology” (p. 54). The later age of reform and opening-up (after 1977) saw “a gradual liberalization in state-university relations” (p. 63). History, however, often defies attempts at such neat classification. The Mao period of rigid control of higher education was punctuated by consequential episodes of total anarchy. A well-known example is the “one-hundred-day militant struggle” on the campus of Tsinghua University starting in May 1968, when two factions of students used explosives, hand grenades, and other selfengineered weapons to attack each other without any intervention from the school administration or the government.1 The reform period after 1977 has not been one of continuous liberalization either. As early as 1980, university students in several big cities in China had waged independent campaigns for seats as deputies in local congresses, thus testing the limits of the government. yi shang is an Assistant Professor in the Department of Education and Allied Studies at John Carroll University. She can be reached at .

1 Ruhuai Shen, Qing-hua da-xue wen-ge ji-shi [A Narrative of the Cultural Revolution at Tsinghua

University] (Hong Kong: Shi-dai Yi-shu Press, 2004).

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Such bold attempts were not possible in the 1990s and later. Throughout the 1980s, students held massive rallies across the country demanding democracy and better living conditions for intellectuals. The last such rally, the 1989 prodemocracy movement, ended abruptly with the June 4 massacre.2 By the early 21st century, state control of higher education remained decisive, as exemplified by the radical expansion of admission in nearly all colleges and universities across the country. This policy has been enforced by the state since 1998 and has seriously strained instructional resources at many schools. None of these events is mentioned in Pan’s study, except for the 1989 pro-democracy movement, which is mentioned only briefly without any discussion. These events, besides being important historically, are not at all marginal to the titular theme of the book: university autonomy and the relation of the university with the state. For example, the contrast between the vibrant scene of student- and professorled organizations and rallies in the 1980s and the tightly controlled campus atmosphere of the 1990s may be symptomatic of a tightening of government control over university life and administration, an aberrant current in the general trend of social liberalization. Similarly, the bargaining, or lack of it, between universities and the government concerning such a vital problem as expansion of admission could be very illuminating for the issue of university autonomy. Unfortunately, the omission of these events from the historical overview foreshadow the more serious lapses later in the book. Chapters 4–8 study the evolution of a particular institution, Tsinghua University (TU), focusing on the ever-changing relationship between the school and the state. It is an excellent pick considering that TU has undergone an intriguing metamorphosis in the past century—from a school originally funded and influenced by the U.S. government to one of the Chinese universities that is most closely intertwined with the technocratic upper echelon of the Chinese Communist Party (CCP). In fact, three of the nine members of the current standing committee of the politburo are TU alumni. Yet again, however, some of the most important issues concerning this transition are not addressed by Pan’s research. The 1952 reorganization of higher education under the CCP’s leadership was perhaps one of the most profound events in the history of Chinese higher education. Universities were chopped up and merged according to the government’s plan of creating more specialized technical colleges and reducing the number of comprehensive universities. TU lost its colleges of

2 Jonathan D. Spence, The Search for Modern China (New York: W. W. Norton & Company, 1999),

682–704.

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arts, sciences, and law, as well as most of its research institutes, and absorbed the engineering departments from other prestigious schools. The product of this transformation has since become the “cradle of red engineers.” In addition to the reorganization, the school’s governing regime was put under thorough Communist control and the old professor-dominated system of committees was abolished. It is hard to imagine that such a process could go smoothly without huge external pressure. How exactly did TU, a proud institution that had managed to remain relatively autonomous through colonization, war, and previous dictatorship, lose its battle this time? And what impact does this event have on TU’s later development and current relationship with the government? The book does not pursue these questions. It is simply stated that faculties showed disapproval, but the reorganization went ahead because it was against the law to disobey the government and also because TU had a “sense of responsibility for serving national development” (p. 105). Such a discussion of this important topic is neither informative nor convincing. The reorganization of the university and the establishment of party committee rule of the university administration were not only pivotal events in TU history but also effected dramatic reconfiguration of the relations between the university and the state. The rather cursory treatment of these events, which have left such a profound imprint on the institution, character, and autonomy of TU, is unfortunately symptomatic of a deeper methodological problem with the book. The 1952 reorganization is one of the many significant historical events at TU that are not explored seriously or even mentioned in the book, which to a large degree conforms to the school’s “official” history. These omissions are a direct consequence of the book’s methodology, which is described in the appendix. The author’s field work, combining observations and interviews, lasted two months altogether. A total of 40 people were interviewed including 31 staff members and 9 students. Most of the staff members interviewed were senior administrators, such as vice presidents, deans, and department chairs. For example, the interviewee who said that TU accepted reorganization in 1952 due to its sense of responsibility in serving the nation was the director of the Office of History. This official is the only interviewee cited in Pan’s discussion of the event. Pan emphasizes that she intentionally approached high officials for interviews because she believed that their positions reflect their seniority in and knowledge of the institution. This assumption shows a curious naiveté concerning the standards according to which the CCP promotes its officials within any institution. Moreover, the author seems to be unconcerned with the possibility that the positions of the interviewees [ 167 ]

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are strongly correlated with their levels of self-censorship when talking to an outside researcher about TU and the government. One inevitably must rely heavily on documents published within China when researching a topic like TU. Nevertheless, the researcher must be aware that academic freedom has not exactly flourished in the country and that literature reviews, therefore, need to be supplemented with solid field work that includes a balanced sample, which is missing in Pan’s book. It is especially important to interview people who no longer hold a stake in the institution, such as alumni, retired teachers, and retired staff members, because they may provide a different and perhaps more objective perspective on the university’s autonomy, the relationship between the university administration and the government, and the relationship between the university administration and the students. The book’s most informative and interesting discussion occurs in chapter 8. Pan charts the development of political education at TU after 1977 and touches on the dilemma of the school’s attempt to balance one government demand, acquiring international status, with another demand, tightening conrol over students and staff. The difference between the Chinese and English content of TU’s website is one of the most interesting observations made by the author. The book ends with a discussion of the theoretical implications of this case study. Pan uses the case of TU to refute the theories of modernization and dependency and to supplement theories of globalization. Her analysis of the interactions between forces of globalization, domestic control, and the university’s autonomy is thought-provoking. At the end of the day, all the discussions about the administrative autonomy of the university only touch the surface of a deeper question. Does not the vast body of students and faculty members, rather than administrators, constitute the functional core of a vibrant university? If so, what autonomy and restrictions do they have in their own studies and research? How does the government’s interaction with university administrators, the focus of the book, trickle down and affect the daily lives of students and faculty, and what have they done, and what do they hope to do, in response? These fundamental questions lie beyond the scope of Pan’s ambitious attempt to study the administrative autonomy of universities in China. One can hope that a future study, with more care in methodology, will begin to address these questions. 

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Crossing the International Relations–Comparative Politics Divide in Analyzing Cross-Strait Relations Douglas Fuller A review of Scott L. Kastner Political Conflict and Economic Interdependence Across the Taiwan Strait and Beyond Palo Alto: Stanford University Press, 2009 u 256 pp.

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cott Kastner’s book Political Conflict and Economic Interdependence Across the Taiwan Strait and Beyond flips on its head the question of whether international economic integration restrains conflict by asking whether conflict will restrain economic integration. The book proceeds to unpack the issue by focusing on the factors that will lessen the negative effects of political conflict on economic integration. Kastner argues cogently that the Taiwan-China case is worthwhile to study in-depth not only because it is geopolitically important but also because the severe political conflict across the Taiwan Strait makes economic integration especially unlikely. Economic integration across the strait should be low and yet it has flourished. Through a detailed account of the politics of cross-strait economic integration as well as an examination of other dyadic conflicts, the book examines the hypothesis that leaders’ accountability to internationally oriented economic interests will mitigate the negative effects of international conflict on economic integration. This approach combines new theoretical insights with a careful inspection of the evolution of the cross-strait political and economic relationship. In short, this is an excellent piece of scholarship. This work offers several important theoretical insights. First, international economic interests tend to weaken the negative effects of conflict in the Taiwan Strait and other dyadic conflicts. However, the Taiwan-China relationship also critically depends on the positive security externalities for China—in other words, trade with China arguably helps with China’s political goal of reunification. In China, there is a political coalition of internationalist economic interests and nationalist statist interests. Second, the book revisits the debate about whether economic integration leads to peace and argues that the assertion that economic interdependence makes democracies more

douglas fuller is Lecturer of International Business and Comparative Management at King’s College in London. He can be reached at <[email protected]>.

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peaceful because the political influence of economic interests is magnified in these states may need to be qualified. Harkening back to Edward Mansfield and Jack Snyder,1 Kastner proposes that the newness of Taiwan’s democracy may make it more susceptible to nationalist appeals. However, he also suggests that the very nature of the bilateral dispute is important. If the disputed issue is one about which the citizens of a democracy care deeply, then they will be more willing to ignore the restraining effects of economic ties. Indeed, they may push their leaders to take a very hard political stand on the bilateral issue. The Taiwanese do not pay as much attention to their deep economic integration as one might expect precisely because they care deeply about Taiwan’s territorial sovereignty—that is, for Taiwanese voters, China’s threat to Taiwan’s sovereignty may trump its allure as a big market for Taiwanese goods. Of course, the relatively weak institutions of Taiwan’s new democracy may combine with the importance that Taiwanese place on de facto independence to bolster the anti-China nationalist position in Taiwan, as perhaps has been the case under the presidencies of Lee Teng-hui and Chen Shui-bian. Several of the book’s strengths merit discussion in some detail. For scholarship addressing issues in international political economy, the book paid very close attention to the domestic politics of interest articulation. For example, Kastner did not stop at delineating Taiwan’s parties and their evolving stances toward economic integration with China. He burrowed into the intra-party factional politics of the Democratic Progressive Party (DPP) to pinpoint how evolving positions, particularly for the highly ideological New Tide faction, influenced the decisionmaking of President Chen. Another strength is the author’s extremely careful and judicious weighing of the theoretical implications of the empirical evidence. Kastner’s analysis of the treatment of pro-independence “green” Taiwanese businesses in China in order to try to distinguish between internationalist economic and nationalist revanchist interests as the driver of China’s policy toward Taiwan is excellent. The more negative treatment of these green businesses suggests nationalism as the motivating factor; at the same time, the fact that the negative treatment was limited to a few firms, mainly Hsu Wen-Lung’s Chi Mei Group, suggests that the nature of security externalities plays a role as well. China reaps positive security externalities from most Taiwanese business activity in China but not from committed green businesses. From these observations, Kastner concludes that the internationalist interests in China do not have to be the

1 Edward D. Mansfield and Jack Snyder, “Democratization and the Danger of War,” International

Security 20, no.1 (Summer 1995): 5–38.

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strongest among contending domestic political forces. They simply must forge an alliance with nationalists instead of the more commonly seen alliance between nationalist and protectionist forces. Despite this book’s superb analysis, its account of the influence of Taiwan’s domestic politics on the island’s economic policies toward China could be challenged. Although the book presents a plausible case for the evolution of policy under Presidents Lee and Chen due to evolving domestic pressures on these two presidents, an equally plausible argument is that their policies, particularly Chen’s, were generally quite consistent. There are several reasons to question Kastner’s narrative of bouts of business interestdriven liberalization. First, what appears to be liberalization is perhaps better conceived as greater nominal openness while Taiwan adjusts its investment bans to the ever-advancing technological frontier. For example, Taiwan’s openness to investing in 200-millimeter (mm) wafer production semiconductors in China under Chen early in his administration was in reality not much liberalization at all, given that the cutting edge of competition had moved from 200-mm wafer production to 300-mm wafer production. By foot-dragging for so long, the Taiwanese government made sure that cuttingedge technology remained on the banned investment list. Today, Taiwan’s government appears to be doing the same thing in negotiating the details of its economic cooperation framework agreement with China by promising to “liberalize” investment in older-generation liquid crystal display (LCD) production. The other reason for questioning Kastner’s narrative of business-driven liberalization is the exaggeration of the powers of business interests generally and at certain key junctures. On the general increase of business interests in Taiwan during democratization, Kastner relies heavily on the analysis of Tse-Kang Leng. Whereas Leng’s work captures the methods used by business interests to infiltrate the electoral process, particularly for winning seats in the Legislative Yuan, Kastner’s analysis ignores the state bureaucracy. This omission is highly problematic, given that the Legislative Yuan has never been very effective or active in monitoring and managing the economic bureaucracy. Most of the “black gold” political activity in Taiwan has focused on profiting from local procurement and regulatory opportunities rather than on international economic issues. Furthermore, the state bureaucracy’s power and legitimacy in economic policymaking is formidable, if somewhat diminished, from past decades. Even today, the Legislative Yuan tends to intervene only at the highest level to approve or block large-budget items— witness, for example, the recent haggling over the ill-fated Taiwan Memory [ 171 ]

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Company venture. As Kastner mentions, the 2003 economic summit was composed of two-thirds state bureaucrats and administration officials and only one-third business people. A third reason for questioning the book’s narrative is Kastner’s broader conception of interest groups. Building on the vast international political economy literature, Kastner looks to see which interests will win as a result of further economic integration with China and labels these internationalist economic interests. This category seems to lump together many different actors with different motivations. Kastner’s assumption that various business interests fall into this camp thus may obscure as much as it clarifies. First, many businesses are not interested in China for the Chinese marketplace but as an export platform. This distinction is critical because it suggests that there are alternative strategies to investing in China that could be acceptable both to businesses worried about profits and to politicians and bureaucrats worried about negative security externalities. For example, IT exporters focused on global markets are only committed to pushing for liberalization in China when China is the most competitive export platform for their products, and they would lose their competitive advantage if unable to base production there. IT exporters that can use alternative markets or even remain in Taiwan, by contrast, have a low interest in lobbying the government for further liberalization. Computer assemblers from Taiwan are dependent on China as the best export platform for their products, whereas China has been relatively unappealing and unimportant for semiconductor manufacturers. Thus, semiconductor manufacturers have expended more energy in lobbying to secure government loans for production in Taiwan over the last decade than in pushing for further liberalization. Even during the early Chen administration, manufacturers were internally divided on liberalization. Another facet of economic interests in Taiwan is the financial ties between big business, which Kastner rightly argues is more likely to lobby effectively, and the state. Taiwan’s various state policy banks and funds are still active. Through equity stakes and loans, the state is able to influence certain big businesses. Morris Chang might not have been close to either political party, but he toed the government line on liberalization more so than other CEOs because the Executive Yuan fund held a major stake in his firm. Having spent too much space critiquing some aspects of Kastner’s conceptualization of Taiwan’s domestic politics, this reviewer must reiterate the overall excellence of this book. The book bridges the gap between domestic and international politics in theoretically interesting and empirically wellgrounded ways. Kastner’s ambitious overview of the domestic politics of cross[ 172 ]

strait relations in both China and Taiwan is impressive and informative. The account of China’s domestic politics of cross-strait economic integration was particularly persuasive. In sum, this book sets the standard for future work on the critical issue of the politics of cross-strait economic integration. 

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Comparative Study of Politics in Pakistan and Bangladesh: An Insightful Analysis Nadeem Malik A review of William B. Milam Bangladesh and Pakistan: Flirting with Failure in South Asia New York: Columbia University Press, 2009 u 256 pp.

M

ore often than not, the study of South Asia has been compartmentalized into the study of individual countries such as Pakistan, Bangladesh, India, and Sri Lanka. A comparative study of these countries is rare. Also rare is analysis of the future of Muslim-majority countries, such as Bangladesh and Pakistan, that are facing the critical problems of poverty, deteriorating law and order, and security. The latter omission is especially striking in contemporary times given the importance of the spread of Islam in South Asia and its effect throughout the world. This book fills the gap. Issues such as nationalism, military domination, the politics of language, the nature of civil-military relations, and religious extremism are addressed with considerable care and sophistication, particularly with reference to Pakistan and Bangladesh. The book is the outcome of a laborious comparative study of the history and evolution of both countries. One of the book’s major strengths is that it offers an enormous amount of secondary data that should prove fruitful for researchers conducting further analysis. Being a seasoned diplomat, William Milam’s analysis is based on his personal experience as well as on his observations and deep understanding of historical developments in South Asia. The book is accessible and presents a lively portrait of the structure and agency of politics in Pakistan and Bangladesh. Various interesting observations are scattered through the book. For example, both countries had initially attempted to establish a government based on democratic principles that upheld the secular approach of their founding father Mohammad Ali Jinnah, and yet later they seemed to adopt the politics of religion based on undemocratic norms. Religion could not hold the two countries together and proved to be the biggest evidence of the weakness of the “two nation” theory, according to which Muslims in the Indian subcontinent demanded a separate homeland on the basis of their nadeem malik is a Senior Lecturer and the Coordinator of the Development Studies Program in the Faculty of Arts at the University of Melbourne. He can be reached at <[email protected]>.

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religion. Also, despite the differences between Pakistan and Bangladesh—the former being a multi-ethnic society and the latter being among the most homogenous developing countries—the feeling of national identity has always been very strong within each. In the case of Pakistan, communalism has been the defining feature of such an identity, whereas in Bangladesh the Awami League upheld a secular view of national identity. Milam links political Islam with military hegemony in Pakistan and concludes that the character of such hegemony makes prospects for change in the dynamics of political and economic development remote. Moreover, because the nature of the nexus between jihadis and the military is still ambiguous, it is not clear whether the military is truly willing to purge Pakistan of extremist forces. Pakistan’s future, therefore, might be dominated by chaos and the further deterioration of law and order. On the contrary, in Bangladesh, where jihadis have yet to find ways to become prominent and the military is relatively less inclined to hang on to power forever, the country’s future might be a little different with regard to democratic development. Though the book provides a comparative history of endogenous factors that led to military domination in Pakistan and Bangladesh, it shies away from analyzing the exogenous factors. Any examination of political developments in South Asia without an adequate study of the role of the international community in shaping the region’s political situation remains incomplete. For example, several scholars have noted that in the Cold War period, military build-up in several states in the developing world was an outcome of the U.S. attempt to contain Communism. The United States entered into military alliances with these countries and transferred massive amounts of military hardware to shore up their defense capabilities. Despite major human rights violations in these countries, the United States and its Western allies continued to support military regimes in Asia, Africa, and Latin America. Due to its geopolitical situation vis-à-vis West Asia, Pakistan was considered to be a front-line state in the Cold War. During the Afghan war, Islamic fundamentalism was used as a tool by the Pakistani military elite and its international allies, notably the United States, to fight Soviet intervention and Communism. Before the Afghan war and General Muhammad Zia-ul-Haq’s regime in Pakistan, not a single jihadi organization existed in the country.1 Another important exogenous factor responsible for poor economic performance and military hegemony in countries such as Pakistan and Bangladesh has been international arms transfers. The total volume of

1 Jalalzai Musa Khan, The Sunni-Shia Conflict in Pakistan (Lahore: Book Traders, 1998).

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arms transfers to developing countries from 1961 to 1980 was alarming. It amounted to $134.3 billion (in constant yearly U.S. dollars), whereas during the same period the total volume of economic aid to these countries totaled $47.8 billion.2 During 1981 and 1991, roughly three-quarters of all global arms transfers went to developing countries,3 thereby exacerbating internal political violence. In the case of Pakistan, from 1954 to 1965 the United States gave Pakistan military hardware worth $1.2 to $1.5 billion.4 In addition, as noted by the Agency of International Development, a large number of officers in the Pakistani armed forces were trained in the United States under the International Military Education and Training (IMET) program with a grant of $12.2 million during the period from 1953 to 1961.5 This further strengthened Pakistan’s military. Furthermore, the Muslim League, the leading political party, was already weak, having no roots in the Muslim-majority areas that became Pakistan. The dominance of the military was therefore virtually inevitable. During the 1980s, Pakistan was the third largest recipient of U.S. aid, which was largely military-oriented, and during 1982–90 the Pakistan military received military hardware worth about $2 billion.6 Military aid and arms transfers to Pakistan were thus significantly responsible for the military hegemony that systematically eroded democratic political culture in favor of extremist elements in the country. In the case of Bangladesh, Talukder Maniruzzaman has eloquently analyzed how arms transfers could lead to military takeover.7 According to him, Bangladesh had a small army, which, as rightly mentioned by Milam, was divided between “freedom fighters” and “repatriates” who were stranded in Pakistan and later became part of the Bangladeshi army. Moreover, to harness the influence of armed forces, Sheikh Mujib organized a special security force, the Jatio Rakkhi Bahini (JRB, or National Security Force). The army and the JRB were equipped with ordinary weapons.8 The balance between them eventually tilted in favor of the JRB when in 1974, Egyptian president

2 Talukder Maniruzzaman, “Arms Transfers, Military Coups, and Military Rule in Developing States,”

Journal of Conflict Resolution 36, no. 4 (December 1992): 733–55.

3 Shannon Lindsey Blanton, “Instruments of Security or Tools of Repression? Arms Imports and

Human Rights Conditions in Developing Countries,” Journal of Peace Research 36, no. 2 (March 1999): 233–44.

4 Blanton, “Instruments of Security or Tools of Repression?” 5 Maniruzzaman, “Arms Transfers, Military Coups, and Military Rule,” 742. 6 Ayesha Siddiqa Agha, “Political Economy of National Security,” Economic and Political Weekly 37,

no. 44/45 (November 2002): 4,545–49.

7 Maniruzzaman, “Arms Transfers, Military Coups, and Military Rule,” 745. 8 Ibid., 746.

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Anwar Sadat offered 30 T-54 Russian tanks to the Bangladeshi army.9 Some officers dismissed by Mujib planned a conspiracy and, in connivance with their friends from two battalions (tank and artillery) of the army, carried out a bloody coup and killed Mujib and most members of his family.10 The two generals, Zia-ur-Rahman and Hossain Mohammad Ershad, who ruled Bangladesh successively during the periods 1975–81 and 1982–90 with an interval of about nine months of civilian rule, endeavored to professionalize the armed forces and increased military budgets. The military eliminated the freedom fighters and eventually emerged as a united force of repatriate officers under the leadership of General Ershad.11 As noted by Maniruzzaman, the expenditure on arms imports by Bangladesh averaged $18 million per year from 1972 to 1974, and $30 million per year from 1976 to 1986. Thus, the dominance of the army as a consequence of international arms transfers became significant in years to come, and its legacy is still visible. Aside from the book’s inadequate analysis of exogenous factors shaping the political life of Pakistan and Bangladesh, it is difficult to find fault with Milam’s thorough historical analysis. It is unlikely that Bangladesh and Pakistan: Flirting with Failure in South Asia will go unnoticed by a wide readership in South Asia, in particular, and in the world in general. 

9 Maniruzzaman, “Arms Transfers, Military Coups, and Military Rule,” 746. 10 Ibid. 11 Ibid.

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Why the Next Asian Tiger Remains a Cub Alexander L. Vuving A review of Lan Nguyen Guerilla Capitalism: The State in the Market in Vietnam Oxford: Chandos Publishing, 2009 u 250 pp.

F

or nearly two decades, Vietnam has been seen as a likely successor to the “Asian tigers,” a handful of countries including South Korea, Taiwan, Hong Kong, and Singapore that successfully and spectacularly industrialized during the late twentieth century. In the 1990s, it was widely thought that the Asian tigers’ success was due to their Confucianism—and since Vietnam was as Confucian as the four Asian tigers, the country was fully prepared for an economic take-off. Although today belief in the Confucianism thesis has faded and Vietnam has yet to tell a success story, the country stays high on the radar screen of international investors. Vietnam is now given the respected title of an “emerging market” and, according to a study by Goldman Sachs, exhibits “both the potential and the conditions” to rival some of the current major economies.1 This new expectation is based on an analysis of benchmarks that growth literature has identified as determinants of economic growth. These benchmarks, collectively termed by Goldman Sachs as the “growth environment score,” range from macroeconomic health to technological capabilities, human capital, and political conditions.2 Although the intuition that supports this expectation may prove right, the Goldman Sachs projections, which also underlie the now popular concept of the BRIC countries (Brazil, Russia, India, and China), suffer from an analytic weakness—this analysis relies too much on short- and medium-term variables to forecast long-term trajectories. The indices of Vietnam’s macroeconomic stability, for example, have deteriorated

alexander l. vuving is an Associate Professor at the Asia-Pacific Center for Security Studies in Honolulu. He can be reached at .

1 Goldman Sachs Global Economics Group, “BRICs and Beyond,” Goldman Sachs Global Economics

Group, 2007, 131, 134, 136, 141.

2 Jim O’Neill, Dominic Wilson, Roopa Purushothaman, and Anna Stupnytska, “How Solid Are the

BRICs,” Goldman Sachs, Global Economics Paper, no. 134, December 1, 2005, 10. Much of the business community adopts similar assumptions about the drivers of growth and reaches similar conclusions about Vietnam. See, for example, John Hawksworth and Gordon Cookson, “The World in 2050—Beyond the BRICs: A Broader Look at Emerging Market Growth Prospects,” PricewaterhouseCoopers, March 2008.

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sharply since the release of the 2007 study. Behind the façade of Vietnam’s high-growth rates, there lurk dismal inefficiencies.3 Can Vietnam still join the top twenty economies in the coming decades? Can it write a success story similar to those of the Asian tigers? To answer these questions, a study of the institutional, cultural, historical, and political aspects of the country’s business environment may be better than a quantitative study that relies on indicators of Vietnam’s macroeconomic and technological situation. Lan Nguyen’s Guerilla Capitalism provides such qualitative research. It is a magisterial study of both the rules of the business game and the behavior of state-owned enterprises (SOE), which are the dominant economic players in Vietnam. For Nguyen, the business environment is a socially constructed reality that is weaved by habits and beliefs, ideas and values, practices and norms, institutions and ideologies, and laws and policies. Some parts of this reality can be changed overnight (for example, laws and policies), but the bulk of it can only be changed incrementally. Some parts (for example, ideology) are embedded in other parts (for example, policies and practices); and what people are doing today depends much on what was done in the past. This conception of the business environment, even though not comprehensive, allows Guerilla Capitalism to give deep insights into the economic potential and conditions of Vietnam. Although Nguyen does not make predictions, his book provides a good starting point for long-term forecasts about Vietnam’s economic performance. Guerilla Capitalism is both solid and theoretically innovative. Nguyen took on the tough task of integrating insights from different theories into a coherent framework of analysis, and he succeeded. The insights range from János Kornai’s soft budget constraint to Richard Cyert and James March’s principal-agent problems and Max Boisot and John Child’s transactiongovernance structures, Geert Hofstede’s cultural dimensions, and institutional theory, just to name a few examples. These insights are not adopted at face value but rather are carefully evaluated and then selectively integrated into a comprehensive theory of organization. The analytical pivot of this theory is Douglass North’s institutional matrix. Shaped by culture, politics, and history, this matrix includes formal and informal rules of the game, which in turn shape the pattern and internal structure of the firms. With this approach, Nguyen is able to show how ideas and values work in institutions and rules without reifying the former.

3 Alexander L. Vuving, “Vietnam: A Tale of Four Players,” in Southeast Asian Affairs 2010, ed. Daljit

Singh (Singapore: Institute of Southeast Asian Studies, 2010), 372–75.

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Nguyen also refuses simple thinking about culture and ideology in Vietnam. In his story, Marxism still permeates the economic environment in Vietnam not so much because people dutifully apply it but because it lives in the concepts they employ to think about problems and find solutions—for instance, in the guiding ideas that shape the payment practice in Vietnam’s state sector (chap. 10).4 With regard to culture, Nguyen refutes a popular view that in Vietnam subordinates tend to respect their boss by showing that “subordinates respect their boss only if the boss is charismatic and ethical.” In fact, they listen to and follow their boss because the latter is powerful (pp. 152–53). In Guerilla Capitalism, there are interesting solutions to several puzzles. For example, why has socialism never been successful economically in Vietnam despite the fact that its ideals and outlooks are compatible with Vietnamese culture? The answer is that the Vietnamese do not usually extend their trust beyond a small circle of family members and close friends. In socialism the owner is the ambiguous entity called “the state,” which is represented by the government. But in Vietnam, the government does not trust its officials and these officials do not trust each other, unless they are family members or close friends. As a result, Vietnam’s SOEs suffer from a lack of cooperation among firm managers, over-centralization, and government policies that discourage risk-taking and entrepreneurial behavior. This situation is self-perpetuating inasmuch as lack of cooperation justifies the need for more centralization. Yet why do some of Vietnam’s SOEs still perform very well given how extremely inefficient they are? The reason is likely that the real power in the firm is shared by a small group of family members or close friends who thus trust each other and cooperate well. These people run the enterprise as if it were a family business and practice a form of corruption by which their real income is paid as a certain percentage of the output rather than as a salary (see chap. 9). Nguyen argues that the “ideal type” of the Vietnamese firm is a smallscale, family-controlled enterprise that operates with short time horizons and little fixed capital. This guerilla form of capitalism results from an institutional matrix that is characterized by high transaction costs, insecure property rights, and a family-based, rural way of life (see chap. 6). Under these conditions, “informal networking, personal trust, flexibility, and self-financing should be the order of the day” (p. 163).

4 Nguyen describes this practice as “embedded materialism,” but I think “embedded Marxism” would

be a better term.

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Nguyen offers “a unique approach to SOEs, reading SOEs through the language of the ideal type” (p. 185). The “ideal type” is a model of firm that is constructed to “capture the essential features of the Vietnamese institutional matrix” (pp. 187–88). Nguyen argues that “the institutional matrix in Vietnam is more likely to produce, or be most ‘suitable’ or ideal for, a special form of capitalism, guerilla capitalism” (p. 111, emphasis in original). If this is the case, multiple ideal types are possible. The Vietnamese institutional matrix may be equally suitable for several types of firms. The ideal type of firm constructed by Nguyen is clearly a product more of traditional Vietnamese culture than of contemporary Vietnamese politics. While Guerilla Capitalism addresses many features of Vietnamese politics, its institutional matrix emphasizes culture at the expense of politics. This leads the book to neglect an additional ideal type that gains its distinctive features from its perfect adaptation to the mixture of communism and capitalism that Vietnam has been experimenting with for more than two decades. Imagine an SOE whose director has secured his job by sharing a part of his unofficial income with all his bosses. This director then runs the firm as his own business, sharing a part of the firm’s profits with the boss of a state-owned bank in order to secure easy loans from the latter. He also shares a part of his money with the chief of the local government, who then extends to the firm the right to use large pieces of land at insignificant prices. This model applies to private firms and foreign investors as well.5 Under such conditions, can Vietnam sustain high-growth rates in the long run? The answer is “no, but yes if…” This “if ” includes, but is not limited to, a radical restructuring of the state sector. Parts of this reform must include, according to Nguyen, giving families ownership of firms and giving firms autonomy in choosing who to employ and how to pay those employees. Guerilla Capitalism is an inspiring book that can be read from many angles. It provides a solid theory to explain firm behavior, a concise survey of the Vietnamese cultural matrix, and an in-depth analysis of Vietnamese SOEs. It is a must-read for anyone who is either curious or serious about business in Vietnam. 

5 For further discussions of this form, see Vuving, “Vietnam: A Tale of Four Players,” 369–72; and

Bill Hayton, “Vietnam’s New Money,” Foreign Policy, January 21, 2010 u http://www.foreignpolicy. com/articles/2010/01/21/vietnams_new_money.

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