The ten rules governing how our new world really works (Rule 10: The Butterfly effect in political risk; or Deng Xiaoping and the perils of a drunken sea captain
Introduction: Mastering Real-World Bolts from the Blue
Political risk analysis is only as good as the the unplanned-for real-world events that it rubs up against. However elegant the assessment, however spot-on the analysis, it must survive contact with the random. Or, as John Kennedy asked British Prime Minister Harold Macmillan what worried him, the sage old premier supposedly responded, ‘Events, dear boy, events.’
While by definition such random events are beyond human control, that does not mean they cannot be analytically managed. It is the job of the political risk analyst to identify weak spots in today’s political constellations, links that could be broken when an unforeseen event blows up, where a single spark can start a prairie fire, such as occurred following the assassination of Archduke Franz Ferdinand in Sarajevo in 1914, precipitating the calamity of the Great War. Dealing with the ‘butterfly effect’ in foreign relations—wherein small random events have outsized consequences—is a major element necessary for mastering political risk analysis.
Chinese paramount leader Deng Xiaoping is the most important great man of the twentieth century whom the average Westerner has no real idea about. Following the lunacy of Mao’s Cultural Revolution, Deng almost single-handedly changed the course of Chinese and world history by rationally and methodically opening up the Chinese system, thereby laying the groundwork for Beijing’s astonishing rise.
Further, Deng propagated a foreign policy expertly and rationally calibrated to limit Chinese geopolitical risk at the very time when the country was precariously beginning to economically take wing. Yet for all his work, China’s future stability and prosperity hangs by a thread. For his thoughtful, subtle, intelligent foreign policy has been supplanted by his bellicose predecessor Xi Jinping, and lies in thrall to Macmillan’s ‘events.’
For Beijing, the unforeseen event is the problem its undoubted rise has caused for both its nervous, immediate neighbours and the United States, the greatest power in the world as well as in East Asia. The countervailing strategic pressures that have naturally been brought to bear to contest China’s ascension to superpower status make the region as a whole susceptible to the butterfly effect, whereby a single drunk sea captain could usher in a time of war and chaos in East Asia, presently the economic powerhouse for future growth in the world.
Preparing for the unplanned is a last and vital weapon in a first-rate political risk analyst’s armoury. No analytical structure, no understanding of grand geopolitical systems, no incisive political or economic assessment, is worth the paper it is printed on if it cannot survive contact with the unforeseen circumstances that make up so much of real life. Supplely adapting to the unknowable—along with possessing the humility to know that the unforeseen is sure to happen along the way, jarring the best of analysis—is an absolutely essential quality for a world-class analyst to make their own.
Deng Xiaoping Crafts China’s Successful Mercantilist Foreign Policy
China has been blessed in that its stratospheric rise to global economic and political prominence was guided by Deng Xiaoping, one of the most important and underrated statesmen of the twentieth century. In contrast to his colleague (and often rival) Mao Zedong, Deng understood that foreign and domestic policy are about limits, and that China’s foreign policy strategy must be indelibly tied to its specific domestic circumstances.
For Deng, this meant that just as China was economically taking off—albeit from a very low base—Beijing’s foreign policy had to be characterised by caution, almost quietism; nothing could be allowed to get in the way of economic growth, which Deng knew would bring China at last back to the top table of great powers within a generation. As he put it in the 1990s, ‘Keep a cool head and maintain a low profile. Never take the lead—but aim to do something big.’
It is not that Deng did not ultimately share the far more aggressive foreign policy goals of today’s Chinese leadership. Rather, he knew that achieving them would take time and was entirely predicated on Beijing continuing to grow at an astronomical rate, without external forces threatening that growth.
In fact, the genius of Deng—following the calamity of the Cultural Revolution—was to re-harness the Communist Party’s legitimacy (its ‘Mandate of Heaven’) to two forces that were both organically and indelibly a long-standing part of China’s political culture: Capitalism and nationalism.
With Hong Kong and Macau reverting to China as a result of his initiatives, and with the Party retaining a firm grip on both Tibet and Xinjiang provinces, Deng’s generation fulfilled its nationalist goal: Providing China—with the glaring exception of the Tiananmen Square massacre—with the magic elixir of stability. In turn, Deng’s market opening made China the unquestioned great economic success story of the latter part of the twentieth century. This is why, despite its recent (and economically inevitable) slowdown, China’s ruling elite is in no immediate danger.
It is perhaps unsurprising that since China’s rise in the late 1970s, it has broadly followed the foreign policy contours of another ascending power that burst upon the international stage two centuries before—the United States of America. Under the dominating genius of Alexander Hamilton, America perfected a mercantilist international stance, desperately trying to avoid political fights with the great powers of the day, France and England. Trading with everyone, the US kept the lowest of international profiles, all in an effort to secure its tremendous economic potential.
During the days of the equally impressive Deng, Beijing has allowed a similar strategy throughout the world. Even as Paramount Leader Xi Jinping has decisively altered the terms of Deng’s engagement with China’s nearby Asian neighbours, opting for a far more aggressive and interventionist approach, Beijing continues to hew to its old mercantilist foreign policy the further from China one gets. That the policy remained largely unaltered for over thirty years is evidence of its tremendous success.
In late 1978, as Deng rose to ultimate power, China found itself a poor, isolated country, just getting back onto its feet following the ravages of the Cultural Revolution of the 1960s and the 1970s. While the internal Chinese market was even then a source of great hope for China’s future, economic success—after all of the Maoist failures—seems an implausibly distant dream. This was the domestic context in which Deng’s foreign policy was born.
China’s stupendous economic growth has been significantly bolstered by its low-key foreign policy, which has placed the avoidance of disputes and war—never beneficial for a country enjoying rapid catch-up growth—at its core. China’s mercantilist strategy was further reinforced as securing long-term supplies of raw materials to feed its ravenous manufacturing industries became a centrepiece of both Chinese economic and foreign policy thinking.
However, if the mercantilist strategy is simple enough, the tactics to achieve its ends are daunting. Looking at China’s regional policy in the Middle East provides a fine illustration of how Deng’s foreign policy worked in practice.
First, China talks to absolutely everyone in the region—with the exception of Isis—playing no favourites whatsoever with the five great regional powers: Turkey, Iran, Saudi Arabia, Egypt, and Israel. It is one of the only countries in the world to truly get on with all of them. Above all else, and ruefully noting the catastrophic American example, Beijing wants to avoid becoming militarily entangled in the cesspool of Middle Eastern regional politics.
The second rule of China’s mercantilist strategy was that its foreign policy was like water: It flowed along the path of least resistance—in this case, away from its established and still stronger American rival. This is the reason China has made such a big push for raw materials into Africa and other emerging market countries; precisely because the Americans have fewer interests there. In this conflict-free zone, Beijing can quietly secure its economic goals away from the limelight.
Third, China’s policy in the Middle East is heavy on economics and very light on politics. For example, during the nuclear crisis with Iran, Beijing largely accommodated but also restrained the United States and Europe over confronting Tehran, just as it largely accommodated but also restrained Russia over its support for the murderous Assad regime in Syria. In both cases, China managed to successfully walk a very fine tactical line, remaining a valued part of outside great power coalitions, all the while being seen inside the Middle East as a necessary force for moderation.
Deng’s masterful foreign policy fulfilled its overall strategic purpose. Two generations of tranquility allowed China’s astounding rates of growth to continue, without the outside world imperilling its takeoff, and propelled the country to superpower status. But even so rational, so calibrated, and such well-crafted analysis as Deng’s is at the very real mercy of both his predecessors and outside events that simply cannot be controlled.
China is haunted by the spectre of calamity in the seas surrounding it, finding itself subject to a mythical figure who can at a stroke undo all of Deng’s genius: The drunken Chinese sea captain. So finely balanced and on edge are the South China and East China Seas—hauntingly like Europe in 1914—that a very plausible and utterly uncontrollable series of events could in an instant destroy decades of Chinese subtlety, plunging the whole world into calamity.
Deng Survives Mao and Transforms China
Deng Xiaoping, the Paramount Leader of the People’s Republic of China, was born in Sichuan province on August 22, 1904. Encouraged by his relatively prosperous land-owning father to live abroad, Deg spent much of his youth in the 1920s studying and working in France, where he met fellow expatriate Zhou Enlai, who became a lifelong political ally. Deng joined the Chinese Communist Party in 1923.
During the 1930s Chinese civil war between the Communists and the nationalists under Chiang Kai-Shek, Deng served as a political commissar in the rural hinterlands of the country. A veteran of the fabled ‘Long March’ of 1934-35—the iconic strategic retreat that saved the Red Army from total defeat at the hands of the nationalist Kuomintang (KMT) forces—Deng endured the epic 5600-mile trek in just 370 days as the Communist armies in the south of China managed to re-locate to the country’s vast northern and western provinces. Deng became part of the Party’s great survival myth; to some extent his later power emanated from having participated in this seminal event.
It was on the Long March that Mao became the preeminent leader of the movement, at the time having Deng’s unstinting support. In fact, from the mid-1930s onwards, despite the many dramatic political twists and turns in store for the Chinese Communist Party (CCP), Mao and Zhou Enlai (who was also in a key command position during the Long March) would de facto retain the two top positions in the Party until their deaths in 1976.
Following World War II, the final defeat of the KMT, and the founding of the People’s Republic of China (PRC) in 1949, Deng served in Tibet and other southwestern provinces, consolidating fledgling Communist control over this vast region.
From 1958-1962, Mao put in place his disastrous Great Leap Forward, the economic and social campaign designed to vault China almost overnight to the first rank of powers. Almost instantaneously, the impatient revolutionary attempted to transform China from its traditional agrarian base into a modern socialist country, through breakneck industrialisation and collectivisation.
Such horribly misplaced revolutionary fervour was directly responsible for the Great Chinese Famine that ensued, the deadliest such catastrophe in the history of the world: An unfathomable 23-46 million people (at least) were killed. For a time following this unmitigated disaster, Mao’s power waned.
In 1960, with the cataclysmic failure of Mao’s Great Leap Forward more moderate forces such as Deng, now in charge of the Party’s Secretariat, along with Premier Zhou and President (and head of state) Liu Shaoqi, set about reconstructing the Chinese economy from the ashes.
Deng’s pragmatic economic policies were for the first time in direct opposition to Mao’s far more doctrinaire political ideology. As he put it famously in July 1962, ‘It doesn't matter whether a cat is black or white, as long as it catches mice.’ From this point onwards, Deng and Mao were in almost constant opposition to one another in terms of both policy and ideology.
But the master revolutionary was just biding his time. Mao’s startling comeback came with the unleashing of the Cultural Revolution in 1966—a populist, radical leftist reassertion of the CCP’s revolutionary roots—which was to last the better part of a decade and throw China into chaos again, even as it elevated Mao to semi-divine status in his country.
Insinuating to the fanatical students who comprised his personal Red Guards militia and to the army that hidden rightist, bourgeois elements in the CCP itself had perverted his revolutionary vision, Mao called on his allies to set things back onto their proper revolutionary path.
In theory, the Cultural Revolution set out to purge China once and for all of any lingering capitalist and traditionalist elements, replacing them with Mao’s ideological disciples. In practice, it marked the return of Mao to a supreme position in the CCP, allowing him to settle scores with the moderates who had sidelined him following the catastrophe of the Great Leap Froward.
In October 1966, both Liu and Deng were branded as leaders of these hidden bourgeois, reactionary forces. Both were purged, with an ailing Liu first being placed under house arrest, then denied medical treatment; he died in 1969. Deng was forced by the Red Guards to confess to his capitalist ways of thinking. He was then sent away from Beijing to be ‘re-educated:’ In his mid-sixties he worked for four years at the Jiangxi tractor factory.
Tragically for his family, Deng’s first son, Deng Pufang, in 1968 jumped out a window at Peking University while being interrogated and tortured by the Red Guards. His back broken, he was rushed to a hospital but was denied admission. By the time he reached a clinic that would accept him weeks later, he was paralysed.
But the chaos of the Cultural Revolution could not continue forever. By 1974, with the economy once again in dire straits and Zhou (the last moderate standing) falling ill to the cancer that would eventually kill him, Deng was rehabilitated at Zhou’s urging to manage the country. Deng was simply too able to be squandered by a hard-pressed China.
After Zhou completely withdrew from politics in January 1975, Deng was placed in charge by a wary Mao of the government, party, and military, serving as chief of staff of the People’s Liberation Army (PLA). True to form, Deng immediately initiated far more pragmatic economic policies, much as he had done after the Great Leap Forward.
But the dysfunctional cycle of Deng’s personal relations with Mao continued. In late 1975, Mao came to fear and resent Deng again, calling him China’s foremost ‘rightist’ and directing Deng to write a self-criticism of his own views in December. Deng was formally purged again and on April 7, 1976, stripped of all his positions.
But while Deng was awaiting his uncertain fate, Mao finally died, on September 9, 1976. Shortly thereafter, the Gang of Four—Mao’s most radical supporters, including his ferocious wife, Jiang Qing—were arrested, and the fevered horror of the Cultural Revolution at last passed from the Chinese scene. By July 1977, Deng was back again as Vice Premier, in essence becoming China’s second-most-powerful figure.
Hua Guofeng, Mao’s lacklustre chosen heir, wanted to reverse the social damage caused by the Cultural Revolution, but also ruinously wanted to keep the Chinese economic system firmly wedded to Soviet-style central planning. Unlike Hua, Deng felt that no policy should be rejected outright merely because it was not associated with the thoughts of Mao. He would usher in a new and necessary age of pragmatism that dramatically bettered China’s fortunes.
Deng spent the next few years outmanoeuvring the hapless Hua. On December 18, 1978, at the pivotal Third Plenum of the Eleventh Central Committee, Deng called for ‘a liberation of thoughts’ and urged the CCP to abandon rigid ideological dogma and ‘seek truth through facts.’ Hua was sidelined (he was allowed to quietly resign in September 1980), and the definitive break with Maoism was made. The economic reform era of Deng Xiaoping had begun.
While named the core leader of the second generation of the CCP, Deng set about governing in a very different style from his long-time rival. Adopting a far more collegial approach than the dictatorial Mao, Deng never held office as president, premier, or general-secretary of the Party and instead shared power with a group of his senior Party cadres called the Eight Elders, appointing allies to the key formal governmental positions.
Deng’s only senior position was to serve as Chairman of the Central Military Commission, seeing to it that both internal and external security matters were under his direct control. In this hidden-hand form of collegial government, important decisions of the Eight Elders were often informally made in Deng’s private residence.
For all this, Deng was undoubtedly paramount leader of China from December 1978 until 1992. With the Eight Elders, Deng was able on three occasions to displace Party leaders he felt were imperilling his reforms: Hua in 1980-81, Hu Yaobang in 1987, and Zhao Ziyang over the Tiananmen crisis in 1989. Without a significant rival blocking his path, Deng initiated the most successful and far-reaching market economy reforms of the latter half of the twentieth century, catapulting China in a historical instant back to great power status.
Abandoning Mao’s ruinous policies, Deng initiated an economic plan that called for ‘Socialism with Chinese Characteristics,’ a form of state-directed market economics light years away from Mao’s desire for complete control of the forces of production in that it allowed for significant economic liberalisation, all the while retaining complete political control. Encouraging private competition, Deng opened China to foreign investment and the global marketplace.
The new regime’s priorities were blessedly clear after all the years of chaos caused by the Cultural Revolution. Deng’s ‘Four Modernisations’ focused on the economy, agriculture, science and technological development, and national defence. His pragmatic reforms dramatically shifted China’s overall development to a strong emphasis on export-led growth.
Most importantly, Deng provided a new ideological template and political support, allowing bottom-up economic reform to take place. He was recognised officially and correctly as ‘the chief architect of China’s economic reforms and China’s socialist modernisation.’ Boldly, Deng provided ideological cover for the first generation of Chinese businessmen, saying, ‘There are no fundamental contradictions between a socialist system and a market system.’
Typically, and in complete contrast to the top-down policies of Mao, Deng would allow local, bottom-up reforms to proceed, then adopting the successful efforts at the regional or national level. For example, in a practise a universe away from the Great Leap Forward’s forced collectivisation, Deng’s regime allowed peasants to earn extra income by having private plots of land. Deng also established Special Economic Zones, where foreign investment and market liberalisation were actively encouraged and growth boomed.
But for all his many successes, the widespread dissatisfaction with corruption, the Party’s stranglehold on political power, and the increased inequality that China’s economic success brought in its wake led to the Tiananmen Square crisis (April 15-June 4, 1989), the most serious threat to the Party during Deng’s administration.
Sparked by the mourning at the death of the reformist Hu Yaobang, a Deng associate who had been sidelined by the Eight Elders earlier in the decade, the daily protests in the centre of Beijing led to an ominous split within the Party itself: General Secretary Zhao Ziyang, Deng’s pro-market ally, actively sided with the student and worker protesters against the hard-liners in the Party, who were clustered around Premier Li Peng.
After hesitating, the Eight Elders, at last convinced that the survival of the Party was at stake, and having just seen revolutions threaten socialism in much of Eastern Europe, declared martial law, sending more than 200,000 troops into Beijing to quell the protests, by force if necessary. On the night of June 3-4, 1989, hundreds, if not thousands, of protestors were killed. Zhao was placed under house arrest for the rest of his life. It was the darkest event of Deng’s life, one which temporarily led to a real diminution in his power.
With hard-liners in the ascendant in the immediate aftermath of the Tiananmen crisis, Deng saw the impetus for his economic reforms falter as an increasingly powerful faction in the Party opposed them. In his last contribution to the life of his country, Deng jump-started the reform process, following the publicity of his 1992 southern tour.
Deng had officially retired in 1989, stepping down as head of the Central Military Commission. However, even without holding office of any sort, he was still widely viewed as remaining the paramount leader of China, wielding power behind the scenes. In the Spring of 1992, using his latent grip on the CCP to reinvigorate the economic reform process, Deng set out on his southern tour of the country.
Visting Guangzhou, Shenzhen, Zhuhai, and Shanghai, Deng made a number of speeches generating local support for his economic agenda and criticising those in the Party who were against further opening of the country. Strongly backing the rise of Chinese entrepreneurs, Deng bluntly said that leftist elements in the country were more dangerous than rightist ones. He insisted that Maoism must not be allowed to undo the economic reform programme that was remaking China.
At first, the national media, which was under the sway of his political enemies, ignored Deng’s tour. However, Jiang Zemin, since 1989 the general-secretary of the Party, eventually sided with Deng, and the national media belatedly but lavishly reported on the importance of Deng’s tour, now several months after it had taken place. With Jiang’s support, Deng’s southern tour enshrined his economic reforms as a permanent feature of Chinese life, safeguarding the country’s astounding economic rise.
Having personally lived through every major event in the Party’s history throughout the tumultuous twentieth century, Deng died on February 19, 1997, at the advanced age of 92. Since his death, the CCP has broadly maintained his policy of strict political control coupled with economic openness, though under Xi state direction of the economy has been ominously on the rise.
Deng’s remarkable life left China with one other enduring legacy: A quietist, mercantilist, foreign policy. Such a calibration makes entire sense, as China needed peace and stability in order for Deng’s audacious economic reforms to take root and grow.
But for all Deng’s undoubted genius in bequeathing to China a rational, joined-up, and coherent foreign and domestic policy, like all man-made constructions, the continued success of such a strategy rests on the slender reeds of random events not being allowed to undo Deng’s work of a lifetime. His inspired analysis, like the best work of political risk analysts, must survive the chaos of unforeseen events that can—at a stroke and out of nowhere—destroy the most inspired insights.
The Present Tinderbox in the Waters Surrounding China
Given China’s obvious preoccupation with sustaining economic growth and social stability, Chinese foreign policy was long guided by Deng’s basic precept that it is best to defer major conflicts with outside powers for at least another generation so that China can grow ever relatively stronger compared with its rivals.
But this is not the course that Xi Jinping—an impatient revolutionary cast more in the disastrous mould of Mao—has hewed to. China is currently involved in territorial disputes in the South China Sea with nearly all of its neighbours and has recently been growing ever more bellicose in staking out its expansionistic claims. As far back as 2010, China reportedly conveyed to the US that the South China Sea now constituted a ‘core interest,’ implying that Beijing’s stance there was non-negotiable.
Secretary of State Hillary Clinton replied that the United States had ‘a national interest in freedom of navigation, open access to Asia’s maritime commons and respect for international law in the South China Sea.’ She called for a multilateral mechanism to resolve disputes there, a stance warmly welcomed by the states of the Association of South East Asian Nations (ASEAN).
Unimpressed by the usual Chinese claims of dominance, in March 2013 Vietnam accused Beijing of firing on one of its fishing vessels in the waters around the Chinese-occupied Parcel Islands, over which the two countries went to war in January 1979.
Beijing is creating muscle to match its aggressive diplomacy. It increased its defence spending by 10.7 percent in 2013, to $121 billion, and now has what amounts to the second-largest military budget in the world after the United States.
But the problem with Xi’s newly aggressive strategy is that it has almost entirely backfired, driving many of China’s neighbours into America’s waiting arms. In the wake of these maritime disputes and other provocations, ties between Vietnam and America have become almost unimaginably close. Long-time ally Australia has allowed the actual stationing of US Marines in its country for the first time. Habitual South Korean protests about American basing have given way to an eloquent silence. Increasingly riled by escalating disputes over the Senkaku-Diaoyu Islands in the East China Sea, the government of Japan is increasing defence spending for the first time in years, all the while further enmeshing itself in Japan’s long-standing alliance with America.
To the other major players in the region, especially rising great power India, Washington as a far-away off-shore balancer looks eminently preferable as the dominant power in the Indo-Pacific to being pushed around by an all-too-close Chinese neighbour.
The more assertive foreign policy presently being pursued by Xi is conditioned entirely on the great success of Deng’s generation. From 1991-2013, China’s share of global exports of manufactured goods increased from a minuscule 2.3 percent to 18.8 percent. Average real income over that time rose from 4 percent of the American level to fully 25 percent. Almost overnight, China is a superpower once more.
Now that China is domestically secure and economically powerful, Xi has the luxury to cast his eyes to China’s near abroad in the South China and the East China Seas. But this move away from Deng’s methodical, considered foreign policy carries with it the seeds of great danger.
Deng’s views on foreign policy can be summed up in the aphorism: ‘Hide your strength, bide your time.’ China has financed deep-water Indian Ocean Rim (IOR) ports in Myanmar, Sir Lanka and Pakistan and has been displaying an interest in port projects in Kenya, Tanzania, and Bangladesh, emulating the ‘string of pearls’ naval strategy of nineteenth-century Britain.
Quietly, China has been establishing a resource-extraction empire throughout sub-Saharan Africa to link up with these ports. At present, China is constructing a two-ocean commercial strategy in the IOR and the South China Sea, a key step on its road to becoming a dominant power in the world.
China’s more bellicose foreign policy amounts to doing what many emerging great powers—such as the United States in the late nineteenth century—end up doing. With endemic internal chaos no longer weakening China, the next logical step is to dominate its near abroad.
While this may be the almost inevitable consequence of China’s rise, it does create two major problems for the present leadership. First, an utterly unresolvable structural tension lies at the heart of the increasing controversies in the waters surrounding China: The United States is the dominant power in East Asia, and China wants to be the dominant power in East Asia. Nothing can wish this strategic friction away.
The Chinese themselves have happened upon a better historical metric for judging how their country’s amazing strategic rise should be viewed. Speaking on a visit to Washington on September 20, 2013, Wang Yi, China’s Foreign Minister, referred to a Chinese study of 15 different countries that were geopolitically rising in various eras throughout recorded history.
In 11 cases, confrontation and war broke out between emerging and established superpowers. The Chinese leadership are right to point to the Thucydides study—so named for an early case study in political risk analysis, of an emerging Athens fighting an established Sparta in the Peloponnesian War—as confirmation of history’s gloomy reality: That quite often established and emerging superpowers go to war.
Beijing’s second headache is that East Asia itself has grown used to—and been comforted by—Deng’s ‘softly, softly’ approach to foreign policy. Xi Jinping’s much more aggressive stance—creating facts on the ground through land reclamation projects on islands in the South China and East China Seas, which China then militarises—has backfired badly. Suddenly, America has found itself in a much stronger strategic position in East Asia simply because of China’s increased aggressiveness.
Today’s Asia As 1914
Perhaps most hauntingly for political risk analysts, the structural outline of the present order in Asia resembles nothing so much as the ‘unsinkable’ pre-1914 world. Both eras are characterised by a particularly peculiar form of power relationships, in which the most powerful country in the world (Britain then, the United States now), though in relative decline, remains chairman of the global board by a long way.
For alone amongst the great powers, Britain and America have been omnipresent—both financially and in terms of their first-class navies—if not omnipotent. Playing a key role in every region in the world, these two countries have been the only true global players on the international scene in the last two centuries. As distant observers of the pivotal Eurasian landmass, in a sense both follow a similar, simple geo-strategic imperative: Let no competitor dominate either Europe or Asia and all will be well.
Carrying on with the distressingly apt analogy, China fits the bill as the new version of Kaiser Wilhelm’s Germany: A rising economic and military superpower bristling with nationalist indignation at perceived slights—both real and imagined—and increasingly believing that its rise cannot be accommodated by the present international order. Such a point of view leads to countries becoming revolutionary superpowers that are determined to unseat the status quo superpower holding them down over the long-term in order to ensure ‘their place in the sun.’
If Beijing makes for a worrying effective Kaiserreich, Japan is Third Republic France to a tee. As obviously declining regional powers—beset by economic torpor and falling ever further strategically behind—they are both directly threatened by scary, aggressive next-door neighbours. Both countries placed their strategic hopes in alliances with declining hegemons, Great Britain (in France’s case) and the United States (in Japan’s).
India is also a convincing stand-in for Czarist Russia—powerful, slightly geographically removed from the situation, yet capable of playing a pivotal role. The aptness of the analogy leaves little room for strategic comfort.
Even the milieu in which the Great War analogy operates is hauntingly familiar. Currently, China is exploiting incidents—particularly in the East China and South China Seas—to test the willingness of the US to stand behind its treaty commitments to Japan, just as in the 10 years before 1914 the kaiser provoked a series of international crises to see if Britain would really come to the defence of France under the gun. Ironically in both cases, the rising superpower miscalculated, making a general war far more likely.
Then as now, there are almost no significant multilateral security organisations in the region to cushion the normal geo-strategic blows. So Asia today, as Europe then, is about nationalist states, with armies and navies determined to throw their weight around. The leaders of the three major regional powers—Prime Minister Suga of Japan, Prime Minister Modi of India, and Chinese President Xi Jinping—are all strong nationalists.
As was true in 1914, it is easy to see that, with nationalism in all three countries rising to a fever pitch, fundamental issues of strategic credibility would rather quickly be on the line for everyone; turning back (as was true in 1914) would be almost impossible, despite the fact that no one really wants the calamitous war that would ensue.
Like pre-1914 Wilhelmine Germany, China is on the strategic march, especially throwing its weight around the South China Sea, where more than $5 trillion in trade passes through its waters every year. The problem is that Vietnam. Brunei, Malaysia, and Taiwan also have competing claims and increasingly chafe at China’s high-handed behaviour there, where Beijing is constructing military bases.
At last bearing it no longer, in the summer of 2016 the Philippines took Beijing to court; The Hague ruled that China’s preposterous claims to seven-eighths of the South China Sea (based on the so-called nine-dash line) has no basis in international law. However, China, to the horror of its neighbours, simply ignored the court’s decision. The mask has well and truly slipped, revealing China’s naked power grab in this most dangerous region in the world.
As was also true in 1914, major powers find themselves locked into treaty commitments, severely hampering their strategic flexibility. Over the disputed Senkaku-Diaoyu Islands in the East China Sea, former US Secretary of Defence James Mattis made it clear that, while the United States takes no ultimate position over ownership, it regards Japan’s present control of the islands as covered by the mutual defence treaty between the two allies. Its obligations to Tokyo would compel America to go to war with China if Beijing forced a change in the islands’ status.
As such, this central hot spot in Asia—perhaps the most dangerous real estate in today’s world—could easily lead to a general war. In essence, Deng’s thoughtful foreign policy is at the daily mercy of a drunken Chinese sea captain.
Consider the plausible scenario. A drunken, nationalist Chinese commercial sea captain plants a flag on one of the disputed islands in the East China or South China Seas and is shot by over-zealous government forces from one of the neighbouring countries with conflicting claims. China, in turn, demands that the aggressors be handed over to Beijing for justice, based on its ownership of the island. Tokyo refuses, calling on the United States for support. Washington would find itself under almost unendurable pressure to respond. And we are very close to World War III. As happened with the assassination of Archduke Franz Ferdinand in Sarajevo, such an incident alone might be enough to light the fire.
Deng’s laudable, rational foreign policy system—and perhaps world peace itself—is precariously balanced at the edge of the precipice, dependent on the gods and fate—in other words, ‘events’—to avert catastrophe in Asia every single day.
History Is Never Finished
None of this means that political risk analysts should give up their day jobs. Sound, creative, systemic analysis of the world they see before them remains the name of the game. However, the telling example of Deng Xiaoping—that even the most rational, reasonable, effective foreign policy analysis is at the mercy of events beyond human control—should give them pause in two basic ways.
First, however good any of us are, humility—a central realist virtue—is in order. The unforeseen can always radically alter even the best analysis. Second, suppleness, the ability to revisit and revise political risk calculations again and again in light of new (and perhaps jarring) events, is the final hallmark of any first-rate analyst or policy-maker. History, the recording of human events as they occur, is never finished. Neither is the job of the political risk analyst.