Economic Experiments and the Battle for East Asia

Why the race for dominance in East Asia is about economic strength, not military power.

After a last minute budget deal on Wednesday, Oct. 16, the United States government is back in business. Among the casualties of the 16-day shutdown, which resulted in at least $24 billion in U.S. economic losses, was a presidential trip to Southeast Asia.

Stuck in Washington in early October, media coverage, and even President Barack Obama himself, described how presidential absence from Asia benefited Beijing. Adding insult to injury, a group photo from a regional forum that Obama was supposed to have attended showed Chinese President Xi Jinping smiling front and center, while protocol banished Secretary of State John Kerry -- filling in for Obama -- to a back corner. "Obama cancels Asia trip. Is the US 'pivot' in jeopardy?" ran a headline from The Christian Science Monitor.

While China emerged victorious from this latest round of diplo-drama, the handwringing in Washington misses the point: The contest for influence in Asia will not be settled in multilateral meetings. Instead, the region will be shaped by whichever major powers have the best prospects for long-term sustainable growth.

Simply put, power costs money. As the economic heavyweight of the 20th century, the United States has had the resources to build a system of military alliances in Asia and to advance U.S. interests in democracy and free markets. But today, the region is up for grabs. Over the next four months, the United States, China, and Japan -- the world's three largest economies -- are all potentially instituting game-changing economic reforms, whose outcomes could determine who leads Asia.

China's economy could become roughly the same size as the United States in purchasing power parity (PPP) terms as early as 2016, according to the Organization for Economic Co-operation and Development (OECD). And the National Intelligence Council, the U.S. intelligence community's center for long-term analysis, has estimated that China's economy will be the world's largest in aggregate terms before 2030. Already the second largest or largest trading partner to every major country in Asia, China uses its economic leverage to garner support on issues like Taiwan while muting international criticism over continued human rights abuses. And in March, China announced its military budget would expand by 10.7 percent in 2013, continuing two decades of double-digit growth and buying increasing capability to contest disputed territories in the South and East China Seas. 

But China is simultaneously in the midst of its longest economic slowdown since the introduction of market reforms in the late 1970s. After enjoying double-digit growth for much of the past three decades, its gross domestic product (GDP) is expected to expand at roughly 7.5 percent in 2013. With China facing rising labor costs, an aging population, endemic corruption, pollution, and the consequences of transitioning from a low- to middle-income country, Peking University professor Michael Pettis believes its annual GDP growth could drop as low as 3 percent over the next decade. The 2009 financial crisis further exacerbated these vulnerabilities by decreasing overseas demand and spooking Beijing into enacting a $570 billion stimulus. While that program temporarily propped up the economy, it also contributed to a serious local debt problem, now estimated at $3.28 trillion, nearly 39 percent of GDP.

Communist Party leaders, aware that China's current growth model is unsustainable, have been unequivocal about their desire to replace overreliance on debt and investment with greater household consumption. With that in mind, China's official news agency Xinhua billed the Third Plenum, a major party conference in November, as "a springboard for major national reform." But it remains to be seen whether the Party has the will or the wherewithal to take on the vested interests that profit so handsomely from the existing system. It is looking increasingly likely, for example, that the Party will defer reform of state-owned enterprises, seen by many as the linchpin to revitalizing China's economy. If China gets bogged down in domestic economic problems, it will be less able to project power overseas.

Meanwhile, across the Pacific, Japan has been plagued by two decades of abysmal economic growth.

In January, a month after taking office, Japanese Prime Minister Shinzo Abe announced "three arrows" of monetary, fiscal, and structural reform. The first two are already underway: In February, Abe launched an unprecedented program of monetary easing by the central bank, which quickly resulted in a doubling of the monetary base. This was accompanied by the second arrow, a massive $116 billion fiscal stimulus program to drive demand.

Early results have been promising -- the economy grew at 3.8 percent in the second quarter of 2013 -- but the long-term success of Abenomics lies with the third arrow, structural reform. Japan's economy remains over-regulated, inflexible, and unfriendly to foreign firms. (The tariff on imported rice, for example, is a whopping 778 percent.) And the reforms may not be able to overcome the extraordinary weight of Japan's increasingly aged population and debilitating debt-- expected to hit 230 percent by 2014 (the highest debt-to-GDP ratio in the world).

Abe has already visited Southeast Asia, where Japan is a leading donor and investor, four times since December. But visits alone will not suffice. The more Abe is able to put Japan on a solid economic footing, the more the country will be able to play a decisive role in the region. If Abe's reforms succeed, he may accrue enough economic and political capital to beef up Japan's military and amend its pacifist constitution. This could become increasingly important to supplement reductions in U.S. defense budgets.

 Obama faces the daunting task of jumpstarting the U.S. economy while addressing the longer-term challenge of curbing the federal debt, which exploded from 32 percent of GDP in 2001 to 72 percent in 2012. Over the next decade, the United States faces a total projected deficit of $6.3 trillion as the spending pressures associated with an aging population, rising health care costs and growing interest payments continue to outpace revenue.

 A United States suffering prolonged economic woes will find it increasingly difficult to maintain the diplomatic, economic and military power it has sustained in Asia since the end of World War II. Smaller defense budgets will corrode the U.S. military presence in the region. Despite sound fundamentals for growth, the failure to break the gridlock in Washington and put the United States on a sustainable fiscal footing could imperil its ability to patrol and pacify East Asia. The isolationism that often accompanies tough economic times would further reinforce the erosion of American influence.  

Kicking off the U.S. pivot to Asia in November 2011, President Obama told the Australian Parliament that, "let there be no doubt: In the Asia Pacific in the 21st century, the United States of America is all in." Maybe so, but current reform efforts in Beijing, Tokyo, and Washington will help to determine who's playing the strongest hand. 

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Yad Vashem's Arab Blinders

Why won't Israel's Holocaust memorial recognize the righteous Arabs that saved Jews from the Nazis?

Let's give two cheers to Yad Vashem, Israel's respected Holocaust memorial, for recently bestowing its "Righteous among the Nations" award on the late Egyptian physician Mohamed Helmy. With the honor, the organization for the first time recognized an Arab for saving Jews from the Nazis. Despite the sad but predictable rejection of the award by Helmy's relatives in Egypt, news of his heroics will be a powerful tool in the battle against Holocaust ignorance and denial in Arab and Muslim societies.

Why only two cheers? Because in making the announcement about Helmy, who courageously saved Jews in Germany, Yad Vashem director Avner Shalev also explained why his institution had rejected well-documented cases of Arabs who protected Jews in the Arab world itself.

Shalev said Arabs from Tunisia -- the only Arab country occupied by the Nazis -- were nixed for the righteous honor because the Nazi occupation there was brief (only six months) and that local Arabs helping Jews faced little physical threat. In other words, instead of judging individual cases on their merits, he suggested that circumstances in Tunisia made it impossible for anyone there ever to meet the test of "righteousness." Given the real-life stories of Tunisians who put their lives on the line to protect Jews from the Nazis, this is not just some esoteric, theoretical issue.

I have spent more than a decade researching the history of the Holocaust in Arab lands, unearthing depressing stories of Arab connivance with the Nazis as well as life-affirming stories of Arabs selflessly protecting Jews. My 2006 book, Among the Righteous, and a 2010 documentary film of the same name broadcast nationally by PBS, detail not only the torture, deportations, executions, and personal agony of Jews dispatched to more than 100 sites of forced or slave labor in Arab lands, but also tell the stories of Arabs who -- like the more celebrated "righteous" of Europe -- took great risk to aid Jews in distress.

In this context, the first part of Shalev's statement -- about the brevity of the occupation -- is profoundly sad. Any amount of time under the thumb of Nazi rule resulted in unspeakable tragedy, and this is the first time Yad Vashem appears to have made the duration of occupation a condition for "righteousness." This is especially odd given that Yad Vashem has previously recognized rescuers of Jews in areas of the Soviet Union, such as the Caucasus region, where the German military presence was even shorter than the occupation of Tunisia.

If such standards hold, Yad Vashem would automatically rule out recognizing the brave exploits of someone like Hamza Abdul Jalil, an Arab who owned a bathhouse in a mixed, working-class neighborhood in Tunis. During my research, Joseph Naccache -- now an octogenarian in Paris but in late 1942 a young Jew on the run from Hitler's notorious SS -- told me that Abdul Jalil hid him for two weeks in the bowels of his bathhouse. Evidently, Yad Vashem's leadership believes Abdul Jalil didn't risk his life long enough.

The second part of Shalev's statement, that Arabs who helped Jews did not face a threat, also does not hold up to scrutiny. The Nazis aggressively pursued their campaign against the Jews in Tunisia: Jews there were subjected to mass arrest, hostage taking, torture, slave labor, deportations, and executions. If Jews faced such threats, how could Yad Vashem reach the conclusion that their protectors had no legitimate fear of retribution should they be caught?

In adopting this dismissive approach, Yad Vashem brushes aside not just the bravery of Arabs who protected Jews. It also implicitly demeans the Holocaust-era suffering of those persecuted Jews themselves. Survivors and rescuers are fundamentally linked: If, as Yad Vashem argues, there could be no "righteous" in Tunisia, then it only stands to reason that there were also no survivors in Tunisia. After all, one of basic characteristics of a "survivor" is someone who could have been rescued by a "righteous."

This is the argument made by three cousins who grew up together in the small Tunisian town of Mahdia -- the late Anny Boukhris, Eva Weisel of Los Angeles, and Edmee Masliah of France. These three women presented testimony to Yad Vashem that Tunisian farm owner Khalid Abdul Wahab saved their lives by protecting them and their family from violent attack by German officers. Despite this, Yad Vashem twice rejected Abdul Wahab for the righteous designation. The only plausible explanation for dismissing these claims -- and the claims of other Jews who have praised Arabs for saving their lives -- is that Yad Vashem doesn't really believe Tunisia's Jews were under threat. 

If true, this would be scandalous. It would mean that Yad Vashem made a terrible blunder by chiseling the names of Tunisian cities and towns into the granite of its gut-wrenching Valley of Lost Communities. It would mean that Yad Vashem has been duped into convening an annual memorial ceremony to commemorate the Nazis' December 1942 roundup of the Jews of Tunis. 

Of course, none of that is the case. Yad Vashem's recognition of the Holocaust-era suffering of Tunisia's Jews is entirely appropriate, because it is a historical fact. Indeed, in 2010, Yad Vashem even published a book that chronicled in great detail what happened to the Jews of Arab lands during the Holocaust; I should know, I wrote the Hebrew edition. If the Tunisian Jews who lived through the camps, raids, arrests, beatings, and hardships are legitimately termed "survivors," how could Yad Vashem rule out the idea that some Arabs were also rescuers?

I remain hopeful that Yad Vashem will right this wrong. As an ever-optimistic Mrs. Weisel wrote in the New York Times in December 2011: "Sixty-nine years after pinning a yellow star to my chest in my native land, I know that I was able to enjoy a long, full life because Abdul Wahab confronted evil and saved me, as he saved other fortunate members of my family. I hope that Yad Vashem reconsiders his case before no one is left to tell his story."