Until the global financial crisis hit in September 2008, the US’ allies were worried, but essentially okay with the pace of change in the region. It was happening at a rate they could understand and to which they could adapt. Thirty years of double-digit growth in China’s economy and 20 years of similar growth in its military spending was only gradually transforming China into a major power.
The financial crisis turbocharged this change. The US was seen struggling with its own economy, racking up massive debt with no plan or concern for righting it. The other side of this picture highlighted Chinese economic strengths and influence. Massive US dollar reserves have come to symbolize Chinese strength instead of the massive waste of resources that they truly are.
That the crisis was largely the fault of the US did not help matters. Never mind that it was not “excesses” of economic freedom, banking or otherwise, but politically selective regulation, excessively loose monetary policy and government intervention in the market’s mechanism for shaking out failure that brought about the crisis; it is the US “neo-liberal” economic model that has come under assault. The “Beijing Consensus,” an authoritarian manipulation of markets in furtherance of state mercantile interests, is now presented as the safe alternative.
Most of what people know about China, they read in the papers, and the newspapers are deceptively clear — China’s model survived the crisis; the US’ is shaken. Headlines for years now have been foreshadowing the arrival of Chinese predominance, and here it is, much sooner than anyone in the region was expecting.
The Obama administration seems to have overlooked the enormity of this change in perception. Unfortunately for the new team, what might have (barely) passed for prudent indulgence of China two years ago looks like obeisance today.
Indecision on desperately needed F-16s for Taiwan is a perfect case in point. Of course, the Bush administration was no more eager than the Obama administration to fill this critical part of what the Taiwan Relations Act calls Taiwan’s “sufficient self-defense capability.” Then, it looked like a matter of setting priorities (and deep presidential-level displeasure with Taiwan’s leadership); today, it looks like an unwillingness to offend “America’s banker.” Deference to the UN Security Council on North Korea and Iran, then seen in the region as a welcome resort to traditional multilateralism, today is seen as seeking China’s blessing. Even something as minor as the bare flagpole in the courtyard of the American Institute in Taiwan (the de facto US embassy), once just simple over-reach by State Department lawyers, today could be construed as a bow to Chinese sovereignty.
This new context is what makes the impasse over US bases in Okinawa so unsettling. This conflict has been percolating since the administration of former US president Bill Clinton. Today, it is cast as a crisis in the US-Japan alliance and a harbinger of regional realignment.
The new context has made indirection look less like prudence and more like a changing of the guard in Asia.
What can the US administration do to reassure its allies?
First, they must get their finances in order. US public debt amounted to 53 percent of GDP last year and is on track to practically double over the next 10 years. That will put the US halfway to Japan’s level of debt and somewhere between the levels currently carried by Sudan and Greece. To economy-focused Asia, this screams weakness.