Weekend nuggets from Peter Tasker

In order to tell my friend Gulzar Natarajan about ‘Peter Tasker’ (who has made Japan his home), I began searching for him on the internet (and among my old saved bookmarks). I have forgotten his name except that I remembered that it began with P and the last name began with T. These days, I don’t check the bookmarks at all. I just search for what I want. So, there is the useful old treasure out there in the ‘Bookmarks’ folder. Thankfully, I had saved his URL and I recognised the name.

I read two of his recent posts on Rash Behari Bose, his Indian curry adapted to Japan, his Japanese wife and how the Quad – esp. India and Japan – could do a lot better than now. These sentences stood out for me, in the context of the times we live in:

The pan-Asianists may have been right about the western colonizers, but they were woefully naïve in assuming that the natural state of Asia was one of peace and harmony between different peoples. There was nothing in pre-colonial history to support such a belief, nor does contemporary reality correspond with it.

Also, the comment about the ‘Right’ and the ‘Left’ was revealing of the times then and the times now:

In the crude ideological categories of today’s world, Mitsuru Toyama carries the label of “right-wing nationalist.”  He was a major figure in two semi-clandestine organizations, the Black Dragon Society and the Dark Ocean Society, and through mysterious means rose from poverty to riches while remaining a private citizen all his life.

Yet he was on good terms with the bohemian Nakamuraya crowd, to the extent that examples of his calligraphy remain in the Nakamuraya art collection to this day.

Historian Ian Rapley of Cardiff University says this about the Nakamuraya circle. “There were undoubtedly strong socialist and in particular anarchist connections but, whilst we might characterize them broadly as ‘progressive’ or some similarly loose term, it is important to recognize that many associations crossed what seem, to contemporary eyes, to be intellectual boundaries.”

What gave the Taisho era its freewheeling dynamism – so different to what came before and after – was this willingness to cross boundaries and the intellectual ferment that was thereby generated.

You can read the two-part fascinating historical article here and here.

Then, I also came across his review article of Daniel Yergin’s new book, ‘The new map’. I had not heard about it. Well, to me, it appears to have been a silent release. The article is from January 2021. The book, its subject and the conclusions resonate with me. I will get hold of it.

Over 80% of the world’s people have never been in an airplane. ‘Flight shaming’ may be a social mode in Sweden, population 10 million, but China, population 1.5 billion, is building eight new airports a year.”

Yergin’s main scenario is that the global fleet of planes will double over the next thirty years; that oil consumption will hardly fall at all in absolute terms, although its share of total energy consumption will decline significantly; that the number of ICE-powered vehicles will be more or less unchanged, although over half of the new cars sold in the world will be EVs.

“Oil will maintain a pre-eminent position as a global commodity, still the primary fuel that makes the world go around,” he declares. “Some will simply not want to hear that. But it is based on the reality of all the investment already made, lead times for new investment and innovation, supply chains, its central role in transportation, the need for plastics from the building blocks of the modern world to hospital waiting rooms, and the way the physical world is organized.” [Link]

Lurid Orientalism

Brahma Chellaney’s piece is worth reading:

In the coverage of the 2011 Fukushima disaster, the victims were treated as a secondary issue to the more lurid story of radiation leaks. Western reporting was also rife with cultural and racial stereotypes: the workers who stayed behind to deal with the accident-hit nuclear reactors were dubbed “nuclear samurai,” “human sacrifices,” and “nuclear ninjas on a suicide mission.”

In reality, no radiation casualties occurred at Fukushima, owing to the preventive evacuation of the area’s 100,000 residents. But that didn’t stop Western media outlets from feeding the hysteria with false and inflammatory comparisons to Chernobyl. As a result of this sensational coverage, cargo ships started avoiding Japanese ports – even those far from Fukushima – and several countries evacuated their citizens from Tokyo and elsewhere….

…. True, Western media should not be regarded as monolithic – indeed, Anglo-American outlets dominate. Nor are Western media averse to offering sensational coverage of bad news when it happens at home. But the overall pattern is clear: Western media coverage of tragedies elsewhere tends to traffic in cultural stereotypes and violations of privacy and dignity that would not be accepted at home.

This double standard has important implications. International perceptions are shaped by how the dominant Western media organizations present the news. As the Ebola epidemic showed, sensational images and stories make us think that a dreadful tragedy is even worse or more widespread than it actually is. The Ebola cases and deaths were almost all confined to three West African countries, yet the virus became associated with Africa as a whole. [Link]

Brahma is very correct about the uneven-handedness of the western media. Well, that is not news. It will not be, in my life time. I made the same point about Indian commentators writing for western media in my draft column for Mint on Tuesday. The sentence that I had sent was this:

“The media has been strongly and continuously critical of the Government on Covid. This is not a sign of a society where free speech is throttled notwithstanding the unceasing attempts of many Indian commentators to paint India in such a light to foreign audiences.”

The final version that was printed was this:

“The media has been strongly and continuously critical of the Government on Covid. This is not a sign of a society where free speech is throttled notwithstanding the unceasing attempts of many Indian commentators to paint India in such a light.”

I was exchanging mails with Prof. Ram Mohan today after his insightful article in ‘Business Standard’. He noted that one did not have to pander to the prejudices of the western media. Fair point. Sometimes, commentators respond to a op.ed. piece as they see it. But, the writer sees it as offering a counter-perspective to the dominant prevailing narrative in the language in which he/she is writing.  That is fair. I do that many a time.

Second, I tell my students that one does not have to read a piece with a view to agreeing or disagreeing. Neither is warranted. If it expands our knowledge and understanding, it was worthwhile. If not, a waste of time. If a writer consistently makes the reader feel that he/she wasted her time, it is time they stop reading that writer. It is quite as simple as that.

In that light, this piece by young Nayantara Dutta offers a useful perspective on living in India during the second wave.

Be careful what you wish for

Came across an article by Mr. William Pesek in ‘Nikkei Asia’ on the Federal Reserve joining the Bank of Japan (BoJ) in the ‘liquidity trap’. He is right that the Fed might be stuck in this place until 2033.

While he has given ideas to the BoJ as to how to put its ‘war chest’ of profits from stock market investing to work, I do not know if the central bank can take over executive functions. That is what his suggestions would mean, in practice. In other words, not only will the central bank have already become a stock market investor, government bond investor but will also conduct public policy. Then, BoJ will become the government. There is no need for an elected government.

This could become the backdoor unintended takeover of governance by unelected experts. Paul Tucker’s book, ‘Unelected power’ will be a lot closer to becoming the reality.

William Pesek’s suggestions come as answers to this unintended consequence of BoJ’s asset purchases:

If you are a top Japan Inc. executive enjoying the Nikkei Stock Average’s surge toward 30-year highs, why bother investing in innovation? Why enact painful restructuring or staff changes when Kuroda & Co. has your back?

But, he will be replacing one unintended consequence with another, far more serious.

That is the problem with trying to find technocratic solutions to complex public policy problems. In a way, QE too has been a simplistic, technocratic, theoretical answer to a complex problem of rejuvenating the economy after a financial and economic crisis, caused by a burst bubble that was big.

Solutions have to recognise human asymmetry, the law of unintended consequences and that ‘ceteris is never paribus’.

Insulating supply chains

The U.S. has seen its share of global semiconductor manufacturing capacity plummet in recent decades, according to Boston Consulting Group. What was 37% in 1990 is now down to 12%. 

While it has asked Taiwan — which tops the list at 22% — to ramp up output, plants there are already operating at full blast, and there are few options for boosting supply in the short term.

Meanwhile, Boston Consulting forecasts that China, helped by an estimated $100 billion in government subsidies, will lead the world with a 24% share in 2030. ….

…. The U.S. imports about 80% of its rare earths from China, and relies on the country for as much as 90% of some medical products…

… Nikkei learned this month that TSMC is making plans to build a 20 billion yen research and development center in Japan.

In rare earths, the U.S. is teaming with Australia to work around China’s dominance. Australian rare-earth miner Lynas is building a processing facility in Texas with financial support from the U.S. Department of Defense. [Link]

Dani Rodrik on China and left-wing populism

I had seen the interview with Professor Dani Rodrik (DR) in FT on the rise of technology and the impact on jobs, his take on far-right populism vs. left-wing populism. But, I had not planned on reading it. However, my friend Gulzar Natarajan urged me to read it. So, I did. Here are my thoughts.

These were the four key points DR made:

We can do much better on our active labour market policies, in terms of linking them up with employers to ensure that training programmes are . . . supplying the hard and soft skills that employers need. 
Second, [in] industrial and regional policies, we must target the creation of good jobs and maybe de-emphasise a little the traditional focus on capital investment, global competitiveness, innovation and so forth. Because even when those work they don’t necessarily create good jobs. 
Third, we need to rethink our innovation policies. We’re doing nothing right now to invest in technologies that augment rather than replace labour. 
Fourth, our international economic policies have to be those that enable countries to carry out these policies without them being overwhelmed by forces of international arbitrage.  [Link]

The first three of these four are more in the realm of ideas. Implementation is difficult and involves political economy. The current political arrangement – even with or because of the Democrats in office – is actually hardly conducive for the shift in the balance of power that would make them more likely. There is more scope for the last one to happen if developing countries pick up the courage. Towards that end, the idea of the club of ‘2T economies’ proposed by Shankkar Aiyar sounds interesting. But, there are a few developed countries there and how they would respond, I don’t know. 

In a way, I am encouraged by the situation in Australia where, thanks to the threat that media groups face, the Australian government is taking on Google and FB. Let us see.

In the meantime, it is interesting to see a column in VoxEU (ht: Amol Agrawal) which documents the positive impact of new technology on jobs in Japan. Well, Japan is a special case. But, we shall remain open to evidence.

Let’s take stock of where ideas have really changed. For example, the sanctity of free capital flows. That is gone, intellectually. It has not disappeared as a matter of policy practice but the argument has been lost. 

I wish it were true. The power of Wall Street is so entrenched and it is so massively augmented by the massive amount of liquidity that central banks are creating that global capital flows are distorting valuations everywhere and decoupling economies from markets. It is all pervasive and powerful. That the intellectual centre has moved on this matter has not made one bit of a change in practice.

Unfortunately, one of the Trumpist ideas that the Biden administration is likely to continue is a very hard line against China. And I think there are certainly some areas where we need to take a hardline attitude, particularly with respect to human rights issues. But we need to realise that it’s impossible to disentangle the Chinese economy from the economies of the west without paying a very large economic cost.  

He has gotten himself into quite a tangle here. Partially, he is right, however. The decoupling from China will not happen without pain. But, ‘pain’ for whom? But, it has to happen. Else, the consequences for global balance of power could be far-reaching and for certain values that Dani Rodrik and others hold dear (such as civil liberties and human rights).

Elsewhere, he has held that far-right populism is anti-democratic whereas left-wing populism is not. That is an interesting hypothesis. The evidence based on what has been on offer since the summer of 2020 is not quite consistent with this view. He must also ponder about the question of why a left-wing populist has not been able to claim the Democratic Presidential ticket, in the Eighties and now. That dims the prospects of his first three of the four prescriptions/suggestions.

Sri Lanka scrapping Japan-funded projects

Recent research by Verite, a Colombo-based think tank, revealed that between 2005 and 2019, Sri Lanka secured 313 foreign loans worth $27.5 billion, most of it for infrastructure development.

China was the largest lender during that period, accounting for 33% of the loans, followed by the multilateral Asian Development Bank with 18%, and Japan 17%. But Japanese loans provided the most favorable terms, noted Verite.

The average loan bore an interest rate of 0.7%, with a grace period of 10 years, and maturity at 34 years. China’s loan terms, by contrast, bore an average interest rate of 3.3% and maturity in just 18 years.

The terms offered by the Japan International Cooperation Agency for the LRT were even more favorable: a $1.8 billion concessional loan at 0.1% interest with a 12-year grace period and maturity in 40 years.

“It’s a concessional loan on favorable international terms so rejecting it raises questions about the intent of the rejection,” an Asian diplomat said. [Link]

Few things going on in China

The story is out that Jack Ma is either not visible in public or has been put under some sort of restricted movement; some China outlets say that he has ’embraced restriction’. Check out the links here and here.

Hong Kong has arrested more pro-democracy activists in China. [Link]. This article, written by a pro-democracy activist in Hong Kong, correctly notes that Europe is feeding the crocodile.

China blocks WHO team from entering China that is meant to investigate the origins of Covid-19 aka ‘Wuhan virus’.

Therefore, beats me as to why NYSE had to reverse its decision to delist China telcos from its exchange. Oh, wait, the reversal may be reversed.

Japan State Minister for Defence has urged Biden administration to make its stance on Taiwan clear. Quite.

China hands death sentence to a former head of an asset management company.

China is considering draft legislation to ban food waste, even in restaurants. [Link]

Tailpiece from James Freeman’s ‘Best of the web’ in WSJ:

CNN’s Fareed Zakaria recently acknowledged “the dirty little secret” that the Trump administration “was pretty tough on the Russians. They armed Ukraine, they armed the Poles. They extended NATO operations and exercises in ways that even the Obama Administration had not done. They maintained the sanctions.”

In other words, much of the network’s programming since 2016 has been false and misleading. Now they tell us! [Link]

Lessons from Japan

I read two of the four or five part series in FT on Japan and its lessons for the rest of the world. The two that I read were superficial. You can find them here and here. Adam Posen’s article takes the case, however.

No one uses real GDP per capita to show that Japan has done as well as other countries have done since deflation boosted Japan’s real GDP. Look at nominal GDP per capita or plain average nominal GDP growth (per annum) in the last two decades across countries. Japan’s underperformance will come through.

Notwithstanding that, I would agree that Japan has managed its situation well. That does not mean that it offers any template for western nations. Japan does not have an asset bubble to deal with because its assets remain deflated in comparison to other nations or in relation to its past. US’ stock market bubble is all set to eclipse the biggest bubble seen in March 2000.

Japan’s households have savings more than debt. That may not be the situation with other nations. Japan has a net international investment position that is around 60% of GDP.

Not to mention Japan’s culture. It is homogeneous and it is not open to immigration. That has its negative and positive sides. But, in these times, the positives appear to be eclipsing negatives. There is internal cohesion and no fissiparous tendencies to fight off.

Is it ‘bye, bye’ for Indo-Pacific?

Barely had the ink dried on news reports of the Malabar naval exercises with all the four Quad countries participating, we get an inkling of the shape of things to come from a possible Democratic administration in America. Oh, well.

Brahma Chellaney, writing for Nikkei Asia, makes an important observations that Indians, rooting for a possible Biden administration should not miss:

…the momentum toward deeper collaboration could slow if Biden’s foreign policy downgrades India’s importance in regional strategy and returns — as Biden has signaled….

…. In calls last week with the leaders of Japan, South Korea and Australia (but not India), Biden emphasized a “secure and prosperous Indo-Pacific” instead of a free and open Indo-Pacific. And, in apparent deference to Beijing, the Biden office readout left out the assurance Japanese Prime Minister Yoshihide Suga said he received from the president-elect that U.S. security guarantees apply to Japan’s administration of the disputed Senkaku Islands…..

… The loss of the expression “free and open Indo-Pacific” will likely be seen in India as a diminution of its future role in American strategy. [Link]

But, then, the best insurance against China’s aggressive tendencies is China’s aggressive tendencies, as I have argued here. That will make it difficult for a possible Biden administration to pursue any appeasement (soft or light) policy with China without suffering embarrassment. That is the best hope for other nations.

Those who are in doubt can read these two stories here and here, from Australia.

It is better to hurt than help and other links

I had finished reading Dr. S. Jaishankar’s ‘The India Way’ and have now embarked on ‘The Hidden Hand’. It has gotten off to a very good start. The world simply cannot fathom the determination and the ruthlessness of the CCP. It will always end up underestimating them.

Some developments across India’s border:

QUETTA, Pakistan — Pakistan’s federal government has triggered a political uproar after taking direct control of two islands previously under the regional government of Sindh province. There was a stronger reaction from Sindhi ethnic nationalist politicians who oppose PIDA because they believe the islands could be handed to China as another CPEC component. [Link]

Minxin Pei writes about the four albatrosses around the neck of the Chinese President: OBOR, Islands off South China Sea, Xinjiang and Hong Kong Security Law. [Link]

Sweden decides to ban Huawei from its 5-G networks:

Sweden’s ban on Tuesday of Huawei Technologies and ZTE Corp from its 5G networks – which has already drawn a strong rebuke from Beijing – did not surprise observers. It is the blunt reference to China as a threat to national security that did.

According to the Swedish government, the nation’s telecoms regulator, PTS, gave companies taking part in the spectrum auction next month a deadline of January 1, 2025, to remove Huawei and ZTE equipment from their existing infrastructure.

PTS added that its decision followed advice from the country’s armed forces and security services, which described China as “one of the biggest threats against Sweden”. [Link]

It is all about appearances and symbolism in foreign policy:

A particular moment on Sept. 25, during his initial round of calls with fellow leaders, was especially enlightening. That day, a call with Indian Prime Minister Narendra Modi was slipped into the schedule before Suga was set to speak with Chinese President Xi Jinping. The talk with Xi started at 9 p.m., while the Modi call began just after 4:30 p.m.

Diplomacy is all about timing, with more important players positioned first. The earlier time slot signaled that Tokyo was making New Delhi a priority. [Link]

Prof. Edward Luttwak too tweeted on the possibility that America cannot count on South Korea:

Take South Korea, whose foreign minister, Kang Kyung-wha, said Sept. 25 that the Quad is not “a good idea.” That Suga’s conversation with President Moon Jae-in did not touch on the “free and open Indo-Pacific” concept also seems to indicate an understanding that Seoul is on Beijing’s side. [Link]

That is why this becomes all the more important:

As for the U.S. itself, Trump’s re-election looks far from certain, and presidential candidate Joe Biden’s Asia policy is somewhat fraught. That makes Japan’s bonds with Australia and India — as well as with the U.K., which is tilting more toward Asia — all the more important. [Link]

The article is an important read even though it is from the 6th of October.

This is quite surprising. China is looking to build its dominance only through corruption, fear and force, it appears:

Lending by the China Development Bank is closely tied to Beijing’s Belt and Road infrastructure-building initiative. The Chinese government has been criticized in recent years for drowning developing countries in debt, then taking control of assets like natural resources or ports when they fail to repay. For example, there is concern Kenya will be forced to hand over control of its Mombasa port, the largest in East Africa, if it falls behind Chinese loan payments for a railroad.

Chinese financing also carries an interest rate of over 3%, compared with the roughly 1% for World Bank and IMF loans.

The G-20 is requiring countries to disclose information on their external debt in exchange for the six-month freeze. But Chinese lending “comes with a lot of confidentiality requirements, so recipients can’t make details about rates or collateral public,” said a source at the World Bank. [Link]

I am trying to figure out the underlying motives behind China buying more Japanese Government Bonds (JGB) while dumping US Treasuries. A bit concerning, I must admit.

One should not be surprised by this:

New Zealand’s top dairy producer, Fonterra Co-operative Group, said Monday it agreed to sell off farms in China for a total of 555 million New Zealand dollars ($368 million). For months, Fonterra has considered a sale of its Chinese farms, which have been losing money. The company looks to divest its two remaining Chinese farms, operated jointly with a U.S. partner. [Link]

This too should not be surprising at all:

Canada’s foreign minister started last week by hailing the 50th anniversary of diplomatic ties with China, and the importance of dialogue.

But by Thursday, Francois-Philippe Champagne was delivering a dressing down to Beijing’s ambassador, Cong Peiwu, for “unacceptable and disturbing” remarks about Canadians in Hong Kong, in which Cong accused Canada of encouraging “violent criminals” by reportedly granting refugee status to Hong Kong pro-democracy protesters.

Cong also suggested that “the good health and safety” of Canadians in Hong Kong might be at risk if Ottawa did not toe Beijing’s line. Asked to clarify if this was a threat, he said “that is your interpretation”. [Link]

Eventually, in the lives of ordinary individuals or leaders (that of corporations or sovereigns), over-reach and excesses are the best and eventual antidotes and answers to excesses and over-reach.

If you needed an immediate proof of it, here is a prediction by Prof. Edward Luttwak:

The decapitation of Samuel Paty, dedicated teacher by an Islamist fanatic harbored in France egged on by his pupil’s kin (now detained) has triggered 2 reactions: more Macron-led Gov act viz Islamic extremists & the self-secularization of yet more Muslim-born French citizens. [Link]

Prof. Luttwak again on CCP’s priorities:

The CCP does not prioritize its economy. If it did, there would have been no incidents with India, Japan, Malaysia , Philippines .. if the Party needs to attack Taiwan it will , brushing off world condemnation. [Link]

I did not know this about China’s President Xi Jinping’s family:

He had a father who abruptly lost v high party rank XJP was 10, then publicly humiliated, beaten & imprisoned; a mother forced to denounce his father as she was pummeled alongside him who soon died; a half-sister killed herself, a sister almost starved..XJP’s GREAT 中国共产党 [Link]

The mandarin characters stand for ‘Communist Party of China’.

This is priceless:

“Great indebtedness does not make men grateful, but vengeful; and if a little charity is not forgotten, it turns into a gnawing worm.” Nietzsche

Edward Luttwak had tweeted the above and added this:

Sir Ronald Storrs in his priceless Memoirs cited a Cairo magnate: “that fellow goes around casting vile aspersions about me, and yet I do not recall giving him any help.” When I first arrived I was amazed by the intense Jewish effort for Black Civil Rights. It is payback time. [Link]

Visiting Edward Luttwak’s twitter handle is precious and invaluable education.