Saturday, December 14, 2013
The real most important chart of 2013?
This week The Atlantic published its list of the most important graphs and charts of 2013. Notice that they're almost all macroeconomic stuff - QE, inequality, debt health costs, etc. Macro is eating the world. I tried to do something different, claiming that the Tea Party Republicans' near-success in causing a U.S. sovereign default was the most significant economic story of the year.
But actually, I think there might be another even more important chart, and I didn't pick it because I'm not sure yet how important it's going to be. It definitely has the potential to be much more important than any of the stories listed in The Atlantic. Here it is:
This is a picture of China's new "air defense zone", which is part of China's attempt to claim the Senkaku (Diaoyu) Islands currently held by Japan.
Why is China engaged in this effort? The dominant theory seems to be that this is part of China's ongoing attempt to push American power out of East Asia. That's unsettling, but not necessarily of world-shattering importance, since it seem unlikely that superpowers would go to war over this kind of slow shifting of spheres of influence. The biggest danger would be an accidental confrontation in the South or East China Sea that would lead to a diplomatic crisis. China is most certainly not our friend, and under its current regime is never going to become our friend, but that does not mean we're headed for war.
But there's a second, scarier possibility: China may be trying to provoke a limited war with Japan. China is keenly aware of its status as a rising superpower, and some Western observers have noted the parallel between China and Wilhelmine Germany 100 years ago.
Most new Great Powers "announce" their arrival with a decisive military victory. For Germany it was the victory over France in the Franco-Prussian War of 1870. For the U.S. it was the Spanish-American War, which John Hay called a "splendid little war". For Japan it was the victory over China in the Sino-Japanese War of 1894. These wars are often, though not always, fought against an old enemy.
It has looked for the past few years that China has been casting about for an enemy against which to fight a "splendid little war". In 2011 China confronted Vietnam; in 2012, China confronted the Philippines. But for whatever reason, it decided not to go to war. Perhaps these small, weak countries weren't strong enough to provide a convincing opponent against whom to prove China's new strength, or perhaps the threat of U.S. intervention was a deterrent.
But Japan is a different story.
For China, the most hated old enemy is Japan. China won WW2, but only with American help, and the Communist side took a back seat in the fighting. To say that many in China are still mad about WW2 would be an understatement. Anti-Japan sentiment is far, far higher in China than anti-Philippines or anti-Vietnam sentiment - or any sentiment at all, for that matter. For China's government to show that it can now defeat Japan would cement its legitimacy like nothing else. And with economic growth slowing, China's leaders may soon need all the legitimacy they can get.
Of course, the U.S. also backs Japan. For China to tangle with Japan over the Senkakus means a large chance of provoking a war with the U.S. But China may calculate that either A) it can win a brief limited shooting war with the Japanese navy and air force before American power can be brought to bear, or B) America would limit its support for Japan to diplomatic protests, holding back its aircraft carriers out of fear of China's anti-ship missile arsenal.
Of course, either of those conclusions might be a disastrous miscalculation. A U.S.-China war - or even a brief China-Japan shooting match - would at minimum be a huge shock to global commerce, and at worst would mean World War 3. The typical American's response to this possibility seems to be to ignore it, laugh it off, or just resolve not to think about it. But that doesn't make it any less real.
So China's Air Defense Zone might turn out to be by far the most important chart of 2013. It's just a little too early to tell.