Beyond pandemic, act resolutely on security, economic challenges / Stand with international community to protect peace

Editorial

5:30 JST, January 1, 2022

The era of finance capitalism is upon us as industries have matured, engendering a variety of distortions because the main axis of economic activity has apparently been the excessive drive to maximize the acquisition of money.

This has also been an era in which China’s rise as a military power has shaken the international order and threatened national security.

Undesirable abnormalities in the economic system and the rise of military threats are two major changes occurring at the same time.

This nation must face the dual challenge of revitalizing the market economy by restoring it to a robust track and constructing a peaceful, stable life for its people. New ideas and persistent efforts are needed. This is the year to take that step forward.

Without question, suppressing the spread of infections with the novel coronavirus remains the top priority. The new virus variant omicron is continuing to spread. The urgent task is to make every effort to enhance the medical system.

Infection control measures, however, are not the only ones that need to be taken. It is crucial to get through the winter without a surge in infection cases, then launch programs to normalize social activities to repair the damage from the COVID-19 pandemic.

From aid to employment

Employment is most important to sustain the life of the people. Earn money by working, then spend it. The economy grows through the stimulation of production in response to that demand. The fruits of that growth raise incomes further and again stimulate growth.

The problem is that these cycles of growth and distribution have seen undesirable abnormalities in recent years. Globalization has led many companies in advanced industrial nations to shift their production bases to developing nations where wages are lower to maximize their profits.

Low interest rate policies around the world have boosted financial activities, with digitization in society bringing unprecedented wealth to entities such as tech companies. The expansion of the service sector has also brought about changes in the way people work, leading to an increase in diversified forms of employment.

The pandemic struck society in the process of these changes. Although 4 million jobs have been added over the past 10 years, many of these have been low-income work on a part-time or non-regular basis. Especially, workers in industries such as food service have suffered from unemployment or sharp drops in income.

Although it was a matter of course for the government to provide benefits as a necessary relief measure, repeatedly providing such aid will destroy the nation’s finances and will normalize neither the economy nor social activities.

It seems clear that the government is at a stage where it needs to shift from providing relief benefits to investing in the creation of a new society.

The Organization for Economic Cooperation and Development has also warned that economic activities under finance capitalism are causing social instability as the income growth of the middle class shrinks.

Prime Minister Fumio Kishida’s initiative for a “new form of capitalism” seems to reflect his concern over this current state of the economy.

There are many areas to invest in to stimulate production: development of technologies to preserve the global environment, national land conservation such as disaster prevention, education for human resources development, advanced research in medicine and engineering.

Japan should take the lead in transforming economic activities from speculation with the objective of making money to investment for industrial development, and from seeking short-term profits to long-term perspectives. Japan should encourage the creation of a mechanism for such international cooperation on this transformation.

The nation’s fiscal deficit is huge, but many privately held funds such as companies’ internal reserves have been lying dormant. These funds should be used to invest in research institutions such as those of companies or universities to create jobs through the development of new technologies.

Innovation is key

The key lies in innovation. Innovation is usually viewed as “creative destruction,” but the term’s advocate, Joseph Schumpeter, emphasized “new combinations” in his “The Theory of Economic Development.”

Through new combinations of means of production, new production methods are created. Innovative entrepreneurs establish new industries through these efforts, bringing about economic development.

Following the success of the Hayabusa2 asteroid probe supported by the advanced technology of local workshops, there are firms currently working on creating successful businesses out of collecting scattered space debris to keep outer space safe.

It is important to make efforts to utilize Japan’s strengths and to foster human resources to become successors who can further develop these strengths.

At the same time, it is also important not to overlook the fact that the global struggle for hegemony is being contested in the arena of technological development. The outflow of Japanese technology and researchers to China has become a major issue.

In addition, there are concerns that this outflow is being used to develop China’s military technology and strengthen its military capabilities, threatening Japan’s security.

Communications technology has been abused in cyber-attacks, causing disruption after disruption to corporate and social activities. There have been many cases causing turmoil in hospitals, in which patients’ medical records and image data were stolen and ransom was demanded, including a case at a town hospital in Tokushima Prefecture.

It is unclear whether these acts have been carried out by state actors or criminal groups. However, since there is a connection between economic activities and acts of threatening the safety of the nation and society, taking measures from the perspective of economic security is an urgent matter.

Clearly, the biggest factor in the changes to the international order is China’s rise. With the world’s second largest economy, China during the emergence of the administration of President Xi Jinping is accelerating its moves toward becoming a military power.

In addition to building artificial islands in the South China Sea, Beijing is stepping up military pressure, including intrusions into Japanese territorial waters around the Senkaku Islands in the East China Sea. Its naval, air and missile capabilities have surpassed those of the forward-deployed U.S. forces in Asia.

Tense situation in Asia

Xi has furthermore declared the “great rejuvenation of the Chinese nation” and has suppressed pro-democracy movements in Hong Kong, decisively carrying out the Chinafication of the region with an iron fist.

This is a clear violation of the joint declaration signed by Britain and China that paved the way for the handover of Hong Kong to China in 1997. The declaration states that the principle of “one country, two systems” will remain unchanged for 50 years.

Unilateral military pressure on the high seas and in the territories of other countries undermine the stability of the international order. This is unacceptable. It is only natural that Japan, the United States, Australia and India have been united under a “free and open Indo-Pacific” vision and European countries have also expressed their support of the initiative.

A high-ranking Chinese naval officer once told a U.S. military official that the United States and China would manage the Pacific Ocean, dividing it into east and west, with Hawaii as the border. China’s military buildup policy shows it was no joke.

Japan stands at front line

If China controls the skies and has command of the sea in the western Pacific Ocean, dominating sea-lanes, Japan will be among the countries that would have their existential foundations affected by China.

Japan is placed at the front line of international tensions in the area covering the Indian Ocean and the Asia-Pacific region.

China also faces many domestic challenges. For Japan, maintaining friendly relations with China is essential for the stability of Japan and the region. Japan is in a difficult period in which countermeasures to deal with military tensions and efforts to reduce such tensions are simultaneously required.

The notion that peace will be maintained if nothing is done is a dangerous illusion. It is important to think about what is necessary to preserve peace, and then think concretely about the ways to bring about peace and act upon that.

“Wars happen because the ones who start them think they can win.” This passage appears in Lawrence Freedman’s book “The Future of War” and careful attention should be paid to it. The best defense is to not let the opponent make the mistake of thinking that it can win.

To this end, through Japan’s own defense efforts and the strengthening of the Japan-U.S. alliance, it is important to make the other side fully aware that any action that threatens the security of the region, including toward Japan or Taiwan, would mean the opponent suffers grave losses.

Starting with neighboring countries, Japan must make diplomatic efforts to increase the number of friendly nations around the world. To secure the understanding and trust of the international community, Japan is required to have the ability to convey its determination to uphold the international order and preserve peace.

In diplomacy, it is of course important for a country to say what it must, but if it doesn’t say it when it must, it is the same as being silent. Diplomacy requires proper timing and the sense to judge when that is.

In the international community, national strength is more important than anything else. Only a well-reasoned claim by a major country with economic power and political stability can have influence.

Crucial upper house election

Revitalization of the economy and political stability, which can be the foundations of national strength, are the tasks that the Kishida Cabinet should tackle. The shift to the “new form of capitalism” and Kishida’s emphasis on his ability to listen are gaining support from the public, but it is only from now that their true worth will be scrutinized.

If Kishida fails to make honest appeals to the public about what needs to be changed and how, the public’s assessment could reverse, with prudence becoming seen as indecision and economic policy regarded as a mere facade with nothing behind it.

If Kishida thinks he can blandly get by until the House of Councillors election this summer, it will have the opposite effect. Unlike the House of Representatives, the upper house has a narrow margin in the seats between the ruling and opposition blocs. Depending on the results of the 32 single-seat constituencies up for election this time, the ruling and opposition blocs could be deadlocked or their positions could reverse. This would make it difficult for bills to be passed into law and there would be a reemergence of politics in which important issues are put off.

To prevent this, a new coalition or political realignment may occur. The upper house election is the seed of storms that will determine the course of Japanese politics. The next six months are crucial for the Kishida administration.

It is necessary to find a way out of this difficult situation by setting firm goals and concrete measures to achieve them and being proactive.

— The original Japanese article appeared in The Yomiuri Shimbun on Jan. 1, 2022.