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.

39 comments:

  1. The Chinese calculation of a war with Japan probably looks like this:
    1) if we bluff and get the Japanese to abandon the Senkaku Islands we win
    2) if we start a small shooting war and it is limited to a Naval action around the Senkaku Islands and the Japanese then back down we win.
    3) if we start a naval war and the Americans give the Japanese the means to sweep our Navy from the sea and our air force from the sky we lose and our government falls.
    4) if we start a naval war we run the risk that the Japanese already secretly have the means to sweep our Navy from the sea and our air force from the sky in which case we lose and the government falls
    5) if we start any sort of war and the developed world imposes a trade imbargo on us our government falls
    6) If we escalate a war by attacking the Japanese mainland, the world will impose trade embargoes and the Americans will give the Japanese everything short of nuclear weapons (and may even give the Japanese nukes), our air force will be swept from the sky and our Navy will be swept from the sea and our government will fall.

    Bottom line: If the Chinese can succeed by bluff and bluster they will try but they will not start a shooting war, no matter how small, because it would probably result in their Navy, Air Force and government all being swept away in a matter of days. The Chinese Army is irrelevant because it can't march to Tokyo.

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    1. I can't imagine them actually starting a shooting war, either. It would be a huge gamble for them, and the Chinese government has not been reckless so far in its decision-making on the international level.

      I don't know if the Chinese government would fall in the wake of the humiliation of a loss to Japan or the US, but I could see Xi Jiaoping being forced out of the top office by his enemies over it.

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    2. Absalon, I smiled a rueful smile when I noticed that you left out all the possibilities where China simply defeats U.S. forces.

      Oh, my child, you sleep the sleep of pleasant dreams... :-)

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    3. Anonymous6:31 AM

      How would they accomplish that Noah? The Americans would just park a dozen attack submarines in the Indian ocean and no more oil flows to China.

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    4. It's a test. They're trying to see how strong the US east asian alliance really is. I say this because Korea is involved as well. I suspect the next few decades will be more "toe in the water" approaches to strategy with it's neighbors. The only way they the gain strategic upper-hand is with a fractured alliance.

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    5. Noah - for the record, I am old enough to be your father.

      I did not intend to suggest direct conflict between the United States and China in any of my scenarios. I had in mind scenarios where the US airlifts munitions to the Japanese and the Japanese use the munitions to destroy Chinese airplanes and ships engaged in aggressive moves towards Japanese assets.

      If US forces did engage it would probably be attack submarines sinking Chinese naval vessels. One of the things the Chinese need to worry about is how many U.S. attack submarines are in the South China Sea and how good are they? The Chinese really have no way of knowing the answer to either question. I expect that right now there is an American attack submarine a few kilometers behind and a few hundred meters below that aircraft carrier the Chinese are so proud of. :-)

      Daniel - it sure seems like the Chinese are doing their best to drive all of their neighbors into an alliance against the Chinese to contain Chinese imperial ambitions. Right now the Chinese should be a lot more concerned about the pending implosion of the North Korean regime than about a few islands in the South China Sea.

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    6. Absalon, don't you know I'm a post human demigod? All of you humans are my beloved children.

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    7. You and Calvin

      http://10000birds.com/one-of-the-old-gods.htm

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  2. This reminds me of the Falklands war.

    Every dumb small-time-border dispute war is started/escalated by a crazy leader with a ego to boost.

    Does the new Chinese guy - Xi Jinping aspire to be a Thatcher-like figure and would like to do a Falklands-type war? Doesn't he fear becoming Leopoldo Galtieri? Even if he does I think he has to talk it over with the Politburo or its ruling-cabal subset (the Soviet union was in effect ruled jointly by a military commission of the politburo of around 5 members).

    I think a war like that would be more likely to start if there was a single leader with the authority and personal motives to do it. When there is pluralism (and Hu Jintao did retire willfuly, hinting there is), there is always this one guy who will prevent a war.

    Nationalistic sentiment isn't everything - the tensions never stopped between Greece and Turkey and they haven't been at war for almost a 100 years!

    They had crazy dictators, but there never wasn't a single crazy guy with enough authority to start something; they were ruled by the military, by a junta of several people. The Argentinians had Leopoldo Galtieri who had personal control of death squads and had no challenge to his rule, until.. he decided to get the Malvinas back. And then for a war we need a Thatcher to care about the moldy islands.

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    1. Source about the USSR committee: http://militera.lib.ru/research/suvorov12/01.html Chapter "Why is the make-up of the Defence Council kept secret?"

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  3. I'd have to think the odds of WW3 are virtually zero in the nuclear age, especially over something as tiny as this. We do have a 70 year history of showing that insane stupidity like that is not that common and dominant in major countries. Some naval exchanges might be possible.

    On a brighter note, here's an amazing, and profoundly important and consequential chart I'll put forth:

    http://cleantechnica.com/2013/05/24/solar-powers-massive-price-drop-graph/

    And on top, what amazes me is how many different incredible and realistic looking breakthrough technologies I've run across, like at least five very different ones being worked on.

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    1. A quicky calculation from the recent price of solar cells suggests a cost of $0.50 to $1.00 per kilowatt hour (allowing for amortization of the capital cost) at the solar panel for intermittent power. I do not think we are going to run a modern society on that basis.

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    2. A key thing here is what Brynjolfsson and McAfee refer to as the second half of the chess board. When you have exponential growth (or in this case exponential shrinkage), initially each doubling (or halving), may not help you that much, but by the time you get to the second half of the chess board, the next doubling, or square, really does a lot, maybe revolutionizes things.

      Two or three more squares, and everything changes for solar. It beats anything in electricity – even not counting the gigantic externalities. From what I've seen in the technology pipeline, two more squares should not be a problem in the not too far future, and at that point, at least one more square will result just from giant economies of scale and experience in mass production.

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    3. I should note, too, that figuring out the actual cost per Kw to a solar purchaser is complicated. The install cost can be big, but if solar is installed en masse in new housing developments, it could probably get much cheaper, and of course it depends how sunny it is. For big parts of the country it may take perhaps just one or two squares to beat other power sources, even not counting the giant externalities, which should, of course, be counted.

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    4. That 'per installed kilowatt' is the joker in the deck; so-called alternative energy is amazingly labor-intensive. But more to the point, cost for solar has not fallen exponentially for the good and simple reason that the costs of its various components have not fallen exponentially. Stored power is the big kicker, imho. Come back when you have a battery that can store hundreds or thousands of megajoules for a few pennies per kWh. I won't go into the physics of the situation, but the limitations are pretty fundamental.

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    5. scentofviolents - I agree. I think the goal should be reliable power delivered to the end user at an all found cost of $0.10 per kilowatt hour. That goal is probably not achievable.

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    6. Solar doesn't have to do everything to really change the world. In my home state of Arizona, already for many homes with the tax spiffs these systems can cut your utility bill by 90 to over 100 percent, and pay for themselves in less than seven years. And as far as storage, what about in the battery of your electric car, plummeting oil usage. And most of the world is very poor and living in sunny places like Africa, India, and the Middle East. Cheap mass produced panels providing all the power you need during the day would be a game changer, and there's plenty of cheap labor there to install them. Here, the robots may be the cheap labor with solar providing plenty of power for them to work.

      And there's work on integrating the solar panels into roofing materials, making the install vastly cheaper, put up when the home is built. And generally, even without cheap storage, having free power during the day in the sunny part of the world, at least, would be profound. But anyway, there are promising ideas for inexpensive storage that don't involve just batteries. One of the many examples is solar can make hydrogen during peak sun hours to store the excess power, and hydrogen is a clean fuel.

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    7. Makes most sense to charge electric cars overnight in your driveway, precisely the time solar is not available. Works for wind power though.

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    8. The panels at work can charge your electric car, and computer driven cars coordinated with supercomputers changes everything. Cars from the fleet can park in front of your house, hook up to a plug ran to the street, and charge from your panels.

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    9. solar can make hydrogen during peak sun hours to store the excess power, and hydrogen is a clean fuel.

      Hydrogen is difficult to handle. If there was excess electrical power in the system it would probably be better spent converting bio-mass to diesel since diesel has high energy density, is easy to handle, can go through existing distribution infrastructure and can be used by existing engines.

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  4. what about a war with india? it has an ongoing border dispute.

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    1. The West does not care if China goes to war with Russia, India or Vietnam just as it does not care what China does in Tibet. Attacking Japan, a major Western state, is a whole different game.

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    2. China already whipped India in a border clash back in the 1960s. Beating them in a border clash again over it wouldn't mean much - everyone thinks the Chinese could probably whip the Indians anyways in a conflict.

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    3. i think Brett is right.

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  5. Anonymous6:33 PM

    I am very ignorant of the topic but, my little pea brain suspects domestic (party) politics may be behind the kerfuffle. My small contact with the Chinese/Japanese relations is the same as the Jews vs Hitler's Germany: "Never Forgive, Never Forget".

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  6. There is intense power struggle inside china, rumor has it that China's No.3 most powerful person is under house arrest for attempted coup against Xi Jinping

    http://www.theepochtimes.com/n3/393118-reporting-zhou-yongkang-s-arrest-a-primer-on-the-power-struggle-in-beijing/

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  7. Okinawa is about the same distance from the disputed islands as the Chinese mainland, and Okinawa is covered with multiple Marine and Air Force bases, tens of thousands of troops, and aircraft.

    The US probably has the most formidable military presence of any nation in the area, particularly with carrier strike groups roaming around. Each carrier is valuable and vulnerable, but each of the 10 carrier strike groups holds more lethal power than China's entire military. Even the mothballed US fleets in Bremerton and Philly easily best any other nation's active navy.

    I'm sure China hates the US presence. Okinawa makes it hard for China and the US to ignore each other. Though I won't pretend to know what the future will bring. Hopefully peace and prosperity.

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  8. Anonymous8:21 AM

    More than likely China is trying to claim rights to ocean resources and it is a sea grab. China could not afford to go to war with any reasonable power and risk heavy toll on the infrastructure. It will break up China.

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  9. Doc at the Radar Station10:00 AM

    What about the potential disruption of global supply chains for manufactured products? This seems to me where the real powder keg lies.

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  10. What will happen to all the new Apple products?

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  11. Slightly off topic, but I'm trying to learn more about international relations and what-not. Can anyone recommend a good blog that focuses on that topic? Also maybe a good textbook to get me started?

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  12. It is pretty hard to underestimate human folly. From the U.S. Navy strategic perspective I would expect the U.S. to deploy its Attack Submarines to destroy the Chinese surface navy, and deploy Air Force bombers (the U.S. sent B-52s into the zone and that was no accident) and U.S. Navy Air carriers might be kept behind Guam and deployed through refueling and the use the unsinkable aircraft carrier of Okinawa as a their base. Then we will see if the Chinese escalate with nuclear strikes on Okinawa and Guam. Then things would get interesting.

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  13. Anonymous12:46 AM

    Why in your understanging/premise it is always China who is playing the “evil” role? Does US or Japan have the justice on their hands automatically on any issue?

    China is not a democracy in "western"(I hate the west-east thing, it is an old aged, cold war thinking) countries, for sure. But it's no longer a "communist country" anymore,and this does not mean all its actions are wrongful, and even evil, it does not mean people in China can be brainwashed like a dumb by a small group of commies. There are way a lot of complexity here between those conflicts.

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    1. If China starts a shooting war over some tiny uninhabited islands, then they are the bad guys in that scenario. It's that simple.

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  14. Why in your understanging/premise it is always China who is playing the “evil” role?

    China has had border disputes with most of its neighbors including North Korea. It has gotten into shooting wars with Russia, India and Vietnam over borders. It has threatened repeatedly to invade Taiwan and denies Taiwan's right of self-determination. Given that history, it is pretty reasonable to suggest that the problem is China's imperial ambitions.

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    1. Anonymous12:59 AM

      And Japan has also had its fair share of disputes over islands with China and South Korea (i.e. Senkakus and Dokdo). Japan's ADIZ was drawn by the Americans and EXTENDED TWICE without consulting the Chinese. Why should the Chinese consult the Japanese or even the Americans? Let's not pretend that the Chinese ADIZ is the trigger event here. More than a year ago, the Japanese government broke its promise with China to end the Senkaku dispute peacefully by unilaterally agreeing to "purchase" and "nationalize" the Senkaku islands from an alleged 'private' owner.

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  15. Most new Great Powers "announce" their arrival with a decisive military victory...For Japan it was the victory over China in the Sino-Japanese War of 1894.

    I think the Russo-Japanese War of 1904/05 was equally or perhaps more important than the Sino-Japanese War. The question is whether one proves oneself a great power" by beating up a non-great power, or by beating up another great power. I'd argue the latter is more consequential. I also remember at the war museum at Yasukuni there was a great amount of emphasis placed on the R-J war.

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  16. The worst part is, Japan would probably win a shooting match. That would trigger a massive military build-up in China. Maybe that's the whole idea?

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