America defeats itself

There will be fewer takers for US promises in Asia now

As promised, Donald Trump has pulled the United States out of the Trans-Pacific Partnership (TPP), a regional preferential trade agreement that his predecessor put together to secure American primacy in East Asia against a rising China. It does not matter that the TPP had not yet been tabled for Congressional approval. It does not matter that the TPP might not have yielded the outcomes its proponents claimed it would.

What matters is that in one stroke of a pen, President Trump has confirmed the lingering fears among East Asian countries that the United States is unreliable as a partner in their attempts to manage an aggressively rising China. Barack Obama’s ‘pivot’ to Asia–of which TPP was an important plank–was itself a response to similar fears during his first term. That pivot was at best a promise that the United States will remain engaged in the region, realists in East Asia tended to suspect that it was reassurance without adequate credibility.

The thinking within the Trump establishment appears to be that the United States can take on China on world trade and militarily in the waters of East Asia. Rex Tillerson, who will head the State Department, took a hawkish line on the latter, suggesting that the United States might deny China access to the islands it claims. Mr Trump and his colleagues seem to believe they can confront China in trade and in East Asian waters while eschewing economic engagement with the countries of the region. They will soon find out how mistaken they are.

Economics is the bloodstream of East Asian geopolitics. China is a major actor in the region not because it has gunboats and missiles, but because it has deep and growing economic relationships with almost all countries of the region. The economies of East Asia, South East Asia and Australia depend on China for their prosperity to various extents. Whatever disputes they might have with Beijing, if they do not see an alternative to China-driven growth, they are unlikely to support President Trump’s moves against China. The United States is likely to find itself isolated if it contemplates escalating conflict levels in the region.

It is likely that the powers in the region will seek protection by increasing their military capacity, and the bigger ones might even contemplate nuclearisation. Most will try to make their peace with China—to the extent possible, as long as it is possible. They will look towards India as a potential actor that can help balance China: to what extent this will work depends on how much and how fast New Delhi liberalises the Indian economy. Unfortunately, there is no indication that the Modi government is prepared to accelerate domestic liberalisation at a pace that can reassure its Asian neighbours.

India is in the geography, and over the long term will remain a potential hedge against China. The United States, though, has just about defeated itself.

“If at the end of it all you let [Abe] down, which next Japanese prime minister is going to count on you — not just on trade but on security?…If you are not prepared to deal when it comes to cars and services and agriculture, can we depend on you when it comes to security and military arrangements?”

— Lee Hsien Loong, Singapore’s prime minister, WSJ

How social change happens?

The speed and legitimacy of social change

Here’s a chart that compares various ways social change can be attempted. In the light of contemporary public debates on a number of issues — most of which land up in the Supreme Court — it is appropriate to examine the menu of options and the trade-offs in using them.

Being credible

New Delhi must not buckle to Chinese pressure in its engagement of Indo-Pacific countries.

After hiatus of over a year, I resume my monthly column in the Business Standard on the geopolitics and geoeconomics of the Indo-Pacific region. As the edit page is behind a paywall, I will put up unedited drafts, excerpts or the published column a day or two after it is published.


The central argument of the first innings of this column (September 2010-October 2015) was a simple one: that India should recognise that East Asia is a part of its extended neighbourhood and that it is in our national interest to invest in the stability and security of the Indo-Pacific region.

Why? Because by the mid-2000s, China under Hu Jintao was shedding the facade of ‘peaceful rise’ and beginning to take assertive positions on its territorial disputes and claims in the waters off East and South-East Asia, causing the countries of the region to look towards India for support. In their strategic calculus, if they fail to bring the United States, China and India into a balance, they had little choice but to hop onto the Beijing bandwagon. Month after month, your columnist exhorted New Delhi to exploit the geopolitical and geoeconomic opportunities that Beijing had unintentionally created.

That prescription is just as valid today as it was seven years ago. Chinese foreign policy under Xi Jinping has moved from assertive to aggressive, always arrogant and increasingly adventurous. The men in black suits and hair dye in Beijing have not only completely blown the cover story of ‘peaceful rise’ but have managed to antagonise the regional powers in the Indo-Pacific.

Even as Beijing pushes Chinese hegemony under clever phrases such as “One Belt, One Road” (OBOR), Maritime Silk Road and “China Pakistan Economic Corridor” (CPEC), it does so in the absence of the regional goodwill that enabled its entry into the ASEAN-centred economic and security architectures in the early-2000s. South East Asian countries watch with increasing anxiety as their more of their ASEAN counterparts are attracted or coerced onto China’s camp. The divide that your columnist had predicted within ASEAN is now gaping wide.

President Xi appears to have moved beyond merely maintaining China’s claim in a dispute to pressing it. He might have calculated that Beijing is now strong enough to negotiate where it cannot just coerce the other side into caving in. In November last year, Hong Kong authorities seized military vehicles belonging to the Singapore Armed Forces on their way back from routine exercises in Taiwan. Given that the Singaporean armed forces have been training in Taiwan since the 1970s with China’s tacit non-disapproval, it is clear that Mr Xi deliberately upped the ante. Similarly, Beijing coerced Mongolia into submission after the latter allowed the Dalai Lama to visit the Gandan Monastery in Ulaanbaatar the same month. Since the Dalai Lama had visited Mongolia at least eight times earlier, Beijing’s reaction this time stands out as extraordinary.

This week, China sent its aircraft carrier through the Taiwan straits quite likely signalling a more aggressive stance on that issue. This comes a few weeks after it challenged the US Navy in the region by stealing an underwater drone from under its noses. It is uncertain how the incoming administration of Donald Trump will handle the military dimension of its relations with China, but Mr Xi is not done with testing the nerve of Washington’s new establishment.

As much as there is a regional demand for India to play a stronger role in regional security, it has become harder and riskier for New Delhi to do so. The Modi government is reportedly considering selling medium-range surface-to-air missiles to Viet Nam. Both New Delhi and Hanoi will come under Chinese pressure and possible retaliation if the deal goes through. It would be imprudent for New Delhi or Hanoi to back down under pressure. It is in Beijing’s interest to create a perception that India is unreliable as a partner, whose promise falls short of delivery. Chinese commentators suggested as much after Beijing arm-twisted Mongolia over the Dalai Lama’s visit, drawing attention to the fact that New Delhi’s promised $1 billion line of credit failed to save Ulaanbaatar from China’s economic coercion.

New Delhi should thus be scrupulously careful about the commitments that it makes, implies, or might be construed. Once made, it should not hesitate to keep them in the face of China’s opposition. With rising risks and emerging uncertainties, credibility is the new currency in the Indo-Pacific.

This is by no means an argument to deliberately antagonise China: it is in India’s interests to nurture a close relationship with its northern neighbour. To be an effective swing power, we must enjoy better relations with China and the United States than they have with each other.

This will not come by wishing for it, especially if the wishing is one-sided. Nor will it come by succumbing to Chinese hegemony. To the extent New Delhi accumulates economic strength and demonstrates foreign policy credibility, Beijing is likely to reciprocate India’s desire for amicable bilateral relations.

Copyright: Business Standard

Geopolitics in Trump’s age

Perhaps it’s time for new champions of democracy, liberty and open economies

I was in a panel discussion with Steve Coll, dean of the Columbia Journalism School and T K Arun, senior editor of the Deccan Herald at the Deccan Herald Spotlight, Taj West End, Bangalore on 9th January 2017. The topic of discussion was Trump and geopolitics. The following is an outline of my initial remarks. (Read the newspaper report here)

  1. The bases for US global leadership have become uncertain
    • Resilience of its democracy is uncertain (more than merely risky)
    • Its status as a magnet for the world’s most talented people is also uncertain
  2. Trump’s rhetoric and posturing will cause others to adopt protectionist policies and withdraw behind walls and fences, at least in the short term.
    • This might reverse in the longer term but we can’t be sure how long that will take and what we’ll have to endure in the meantime
  3. For the first time, the factors that propelled India’s & China’s unprecedented growth will come under a cloud. China is luckier because it started earlier and was most focused.
    • For India the challenge will be to generate 8% growth without a benign external environment
    • How fast can India integrate domestically and iron out the kinks regarding movement of people, goods and capital across state boundaries
    • How fast can India create external relationships that will allow growth to take place?
  4. In geopolitics, it all the more clear that India will have to become a swing power. This means selective alignment with the US and China where interests coincide, without joining any one camp.
    • Better relations with US and China than they have with each other
    • Ability and willingness to inflict pain and give pleasure
  5. Finally, a more mischievous point: if the West is ceding leadership of values of democracy, liberty and free markets, then India should stake its claim to that leadership.
    • Do we really need so many illiberal democracies and authoritarian states in the permanent membership of the UNSC?
    • Do we need four or five Putins in the UN Security Council

Trump is not Putin’s puppet

Stop worrying about Trump being in Putin’s pocket. Start thinking of how to deal with him.

Donald Trump’s attitude and statements both during the election campaign and after his victory have led many analysts to conclude that the new president of the United States will share an unprecedented cosy relationship with Vladimir Putin, the long-time president of Russia. The uncharitable view is that Mr Trump is in Mr Putin’s pocket. The charitable view is that Mr Trump’s affinity for Mr Putin will cause US foreign policy to be less antagonistic to Russia.

Here’s the thing though: for all his statements, posturing and actions, it is unlikely that Mr Trump is a sellout. Why so? First, his populist credentials will not survive a concession to Russia that hurts the United States’ interests or prestige. Second, the Republican party might have changed over the past few years, but cannot condone a pro-Russia policy where that is against the party’s institutional interests. Third, there are strong bureaucratic bases for foreign policy that cannot simply change because a new president is in power. Like every new head of government, Mr Trump will discover that once he occupies the office. Finally, for all appearances and commentary there is the possibility that Mr Trump is not Putin’s puppet at all.

Some of the more astute analysts I have discussed the issue with think that Mr Trump will be the dealmaking, transactional president. What this means is allies, partners, neutrals and adversaries will need to figure out what they are prepared to concede to the United States obtain what they wish to procure. A deal is a deal only when there is mutual agreement on the give and the take. Mr Trump’s prejudices, campaign rhetoric and political interests will both determine his administration’s priorities and constrain his dealmaking. With Russia as with Japan. With China as with India. On climate change as with nuclear weapons, trade and so on.

Seen from this perspective, Mr Trump might well have — intentionally or willy nilly — created favourable negotiating conditions with respect to Mr Putin. Consider. Will Mr Putin be willing to risk jeopardising a friendly relationship with Mr Trump should the United States push Russia to yield a little more on some issue? With Mr Trump in the White House, the Russian president will have to choose between a hard line on a specific issue and the long term advantage of having a friendly relationship with his US counterpart. He is unlikely to want to throw away his advantage quickly or cheaply.

And if Mr Trump is the dealmaker that he believes he is, he won’t pass up this chance to secure an advantage.

Medalless army

The defence ministry must quickly resume issuing official medals.

Last week, a colleague and I were struck by what we saw at a new military supplies store that had opened in our neighbourhood. Among the usual uniforms, shoes, hats, bags and kit, we were surprised to see medals. Not just the ribbons, but the entire suites of medals ready to be stuck on to uniforms. This struck us strange and dubious.

Dinakar Peri’s report in The Hindu tells us why. It turns out that the defence ministry department in charge of issuing medals has not been doing so. Since 2008. So for eight years, the defence ministry has been awarding medals but not issuing them to officers. That’s so long that many younger officers do not even know that they ought to receive the medals from the defence ministry, and not have to buy them from military stores.

It’s not only sad, but undermines the purpose of medals by devaluing them. The economic reasoning behind issuing medals for service and gallantry is to create a “honour incentive” which can both be stronger and more effective than monetary incentives. If you undermine the honour attached to a medal, you weaken the incentive that encourages the behaviour that the medal recognises. If devalued to the point of become a routine, the incentive fails. The fact that the defence ministry hasn’t bothered to issue medals for eight years is therefore disturbing.

It should be the easiest of things for Defence Minister Manohar Parrikar to do to order the Department of Medals in his ministry to resume issuing medals prospectively, and clear the backlog over time. It’s not merely what society owes to its soldiers. It’s an important step in arresting a drift in professional standards.

Why parking needs more than proof of space

The big idea in urban transport is to get users to pay for parking and suchlike. Not another piece of paper.

The Union government is considering a proposal to make car ownership contingent on the prospective buyer producing an “adequate parking space available certificate.” M Venkaiah Naidu, Union urban development minister stated that he was keen on this and promised to persuade the Union surface transport minister and the state governments on the need to do this. A recent magazine article claims that this is an “absolutely sensible move” as it has been implemented in Sikkim and Mizoram, and has is compulsory in Japan and in one place in South Korea.

Mr Naidu means well, but by itself, the requirement of a parking space certificate will open another source of corruption without doing much to reduce traffic congestion. Anyone who’s visited a local road transport office (RTO) or obtained a pollution under control certificate will know how this works.

But let’s spell it out nevertheless: it is easy to ‘show’ you have adequate parking space because spaces do not have unique identities that are in a common database. It may be necessary to pay someone — a petty official or a person with space — to ‘show’ that you have parking space. Actually, few will take the trouble to do this. It’s more likely that the licencepreneur who owns the photocopying shop next to the RTO will arrange for the parking space available certificate for a small fee. Neither the RTO, nor the traffic police, nor the Union development ministry have the resources to check whether the certified parking space exists in reality or merely in-between folds of red tape.

Needless to say this won’t make a dent in the number of vehicles being purchased. Sikkim and Mizoram are small states with populations and geographies that might even make such a policy workable. In most other places in India, especially in places where traffic congestion is a massive problem, we will just have one more layer of regulation, one more piece of paper to be procured, some more money for petty officials an licencepreneurs.

That said, Mr Naidu is nearly on the mark. The way to reduces incentives for people to purchase and use cars is to charge for parking. Every car parked on public roads not only creates road cholesterol, but also is an implicit, undeserved subsidy to a car owner. The more cars you park on public roads, the greater the subsidy you get from the government. This creates positive incentives for vehicle ownership and use. If we stop rewarding vehicle users for parking on public roads and charge them the market price of the real estate they temporarily occupy, then we will see vehicle use coming down. That, by the way, is what they do not only in Japan, but in almost in every country and city that has sensible urban traffic. It’s not unusual for parking fees to be exhorbitant in central business districts of the world’s cities. In fact, when governments charge market prices for parking in public spaces, more parking space is created as private owners realise there’s good money to be made by creating private parking lots. [Parking availability certificates have reduced car ownership in Japan because parking spaces are available at market prices. See Paul Barter’s blog post.]

The Union and state governments must come to an arrangement on pricing vehicle parking. As Donald Shoup’s research shows, the best way to make the policy work, and get public acceptance, is to ensure that the parking fees collected go to the localities from where it is collected. People are less likely to oppose paid parking if they are convinced that the proceeds from their locality will largely be used to improve that very locality. Funds can be used to finance public transport: from bus services to bus stops, to metro and commuter rail. My colleagues at Takshashila estimate, conservatively, that implementing paid parking on fewer than 10% of Bangalore’s roads can add more than 20% additional revenue to the municipal corporation’s annual budget.

A national policy to make road users pay for parking (or dumping construction material, or hawking) would be a GST-scale reform that Mr Naidu has the opportunity to be the author of. He shouldn’t settle for that red herring called the parking space proof certificate.

Related Post: Eight ways to improve traffic flows in our cities quickly and without spending a lot of money.

Tailpiece: Donald Shoup’s insight:

Drivers want to park free, and that will never change. What can change, however, is that people can want to charge for curb parking. The simplest way to convince people to charge for curb parking in their neighborhood is to dedicate the resulting revenue to paying for added public services in the neighborhood, such as repairing sidewalks, planting street trees, and putting utility wires underground. That is, the city can offer each neighborhood a package that includes both performance-priced curb parking and the added public services financed by the meters. Performance pricing will improve the parking and the revenue will improve the neighborhood. The people who live and work and own property in the neighborhood will see the meter money at work, and the package will be much more popular than meters alone. [Cato Unbound]

A better way of selecting the top brass – 2

Politicisation will limit politicisation

Two of the more thoughtful critiques of the Modi government’s decision to jettison the principle of seniority in appointing India’s next army chief appear in the Indian Express and Business Standard today. Sushant Singh and Ajai Shukla are among the most astute commentators on the subject so it is important to read their arguments with care.*

Sushant’s main argument is that the principle of seniority in choosing the chief must be replaced by an institutionalised due process, and not arbitrary selection by the political leadership. Ajai, though primarily concerned about the politicisation of the army, also criticises the rationale provided by the Modi government in the specific case of Gen Rawat.

A reasonable person will tend to agree with Sushant and Ajai, for after all, it is a good idea to ensure that the selection process is transparently objective. However, the reasonable view in this case might be both unsatisfactory and impractical. It might be a better to allow the political executive the complete discretion to pick from among the available pool of three star officers. If the Cabinet prefers non-military criteria like partisanship, ideology or ethnicity, so be it, as the Cabinet is accountable for outcomes. The lessons of 1962 are not lost on India’s politicians. As I wrote in my first post on this topic, if we can trust the prime minister with a nuclear button, we shouldn’t worry about a much lesser risk as the selection of army chief.

Won’t this politicise the army? Well, the trajectory is unlikely to be much different from what it is now. Moreover, even as Sushant, Ajai and I are concerned about the politicisation of the armed forces at politician-general level, we are also concerned about the politicisation within the army. As Ajai brings out in his article, factional politics among the branches of the army are intense and have ended up in the Supreme Court. It is naive to believe that this intramural politics has been untouched by the country’s partisan politics. I’ve covered this objection in my earlier post.

(*As the two are both friends and sparring partners, this blog refers to them by their first names, instead of formally by their honorifics and last names.)

Time for a stiff drink

Satyagraha, Neoliberalism, CIA…we’re running out of ideas

It is perhaps a good time for newspaper editors to stop publishing any more polemical opinion pieces on the great currency transfusion (‘demonetisation’). When someone argues that people standing in lines to deposit and withdraw their own money after being compelled to do so by the government, are actually engaged in “the first economic satyagraha [using] their wisdom to articulate opposition to neoliberalism”, it is time to get off the computer and go get a really stiff drink.

It is abominable and grossly insensitive to suggest that people trying to cope with the currency shock are somehow engaged in a satyagraha. A satyagraha is above all a voluntary exercise. There is absolutely nothing voluntary about people standing outside banks and ATMs.

The subtitle of the article proclaims that “the demonetisation drive aims to cleanse the ills of neoliberalism”. That needs a sharp intake of breath and another stiff drink. Or two. The reason why there is a shadow economy is because of the absence of liberalism, neo- or paleo-. Corruption exists because of regulation, because economic freedom and liberty are stifled. If the demonetisation drive can claim to cleanse anything, it is the ills of statism, bureaucratism and the still-extant licence-permit raj. Demonetisation is a bad way to cleanse that, but that’s a different argument.

Last week The Quint had a report blaming a US aid agency and the CIA for demonetisation. Now that neoliberalism has been ritually savaged, the debate is truly over. Head to the bar, folks! They take cards.

A better way of selecting the top brass

Nothing is lost by abandoning the principle of seniority, but the armed forces need restructuring

Yesterday, the Modi government decided to supersede two general officers and appoint Lt Gen Bipin Rawat as the next chief of army staff. In a system where seniority has risen from a criterion to the criterion, and where “lines of succession” are drawn in a manner to mirror royal succession in monarchies, the move has shocked many. After all, the last time such a thing happened was in 1981 when the Indira Gandhi government appointed Gen A S Vaidya over Gen S K Sinha’s head.

Here’s the thing: the Modi government has done well to break a norm that had so become an entitlement that it had begun damaging the incentive structures of the the military leadership. The sordid saga of Gen V K Singh five years ago revealed that the army’s leadership was spending undue energy on manipulating promotions and appointments to ensure desired lines of succession. Any organisation whose leadership is engaged in such machinations is likely to suffer loss of professionalism. By elevating seniority to a sacrosanct principle, we might well have depoliticised appointments at the level of the political leaders picking the military leadership. However, it does not mean we have depoliticised appointments within the military establishment. Because of secrecy and respect that the armed forces enjoy, the ‘politics’ within the armed forces is generally invisible to the public. That doesn’t mean it doesn’t exist. Just go back and look at the reports that emerged five years ago during the Gen V K Singh’s controversy.

If the Indian armed forces had the luxury of being a showpiece, where they did more ceremonial parades than combat, it might have been acceptable to go by seniority. But India’s armed forces have been fighting wars, proxy wars and insurgencies for ever, and the future presents ever greater risks. In such a context, it is downright absurd to argue the the senior-most officer should become the commander. Furthermore, it is downright absurd to accept that the service chiefs should be both excellent commanders and excellent staff officers: a great military leader need not necessarily be the best military manager. To roll the two roles into the same office is to get a little bit of both, and the best of neither. Jettisoning the primacy of seniority is the first step: the Modi government must use the opportunity to implement structural reforms to India’s military structure. (It’s clear what such reform should entail: see this article)

There are two important objections to non-seniority based appointments. First, that it would upset the army’s internal appointments and promotions structure. Second, that it would allow the political leadership to appoint military leaders based on partisan, ideological, religious, caste or other criteria unrelated to military merit. Let’s consider each of them in turn.

Yes, superseding officers will cause genuine heartburn, embarrassment and grievances among those adversely affected by the move. The retirement or resignation of those who have been passed over for promotion count as a loss to India’s military capital. That, however, is the price we must pay for a competitive military establishment. Much of this cost is one off, representing what behavioural economists call the “endowment effect”. Because officers expect to be promoted on the basis of seniority, they feel what is rightfully theirs has been taken away. If, from now on, officers no longer expect the seniority norm to hold, they will feel less cheated. That said, it is incumbent on the Ministry of Defence and the services headquarters to ensure that the superseded officers are treated with respect and decorum; and if they have years of service left, are re-employed in government positions commensurate with their seniority.

The second objection is more serious: what is to stop the political leadership from appointing military chiefs on dubious, non-military criteria? Well, for one, it is not as if lobbying on such grounds has not been taking place. However, the argument that the prime minister cannot be trusted to properly appoint a service chief sounds pretty unserious when the office of the prime minister has everything from the nuclear button to the validity of all legal tender in his hand. If the citizens of India vote in a government in a constitutional manner, and the ruling party constitutionally appoints the prime minister, who selects his cabinet, then that is that.

Now it is not as if the Cabinet can appoint an army chief without being bound by any constraints: they will be limited to a small number of officers to choose from, and any ideological, partisan or communal preference will be constrained by the fact that the armed forces are engaged in active duty. No Cabinet would want to lose battles or wars, or found wanting in the face of external threats. Parliament must do its job and keep the government in tether: so rather than defend the principle of seniority, concerned citizens must demand the amendment of the anti-defection law that has converted MPs into robots under the control of the party leaders.

The Modi government would do well to follow up its departure from orthodoxy with a sincere commitment to restructure the armed forces. Early in his tenure, PM Modi was reluctant to risk this reform. He should not shy away from it now. The K Subrahmanyam report was almost two decades ago; there have been a few subsequent initiatives to study the matter further. It’s well past decision time.

Tailpiece: My comments on an NDTV show on this subject in February 2012.

Update: Read the second post on this topic here.