National defense and economics are closely related, both historically and currently.
Dec. 7 is the anniversary of the surprise attack on Pearl Harbor by Japanese carrier aircraft. The battleships that formed the backbone of the U.S, Navy’s surface fleet were sunk, and the Navy and Army bases on the Hawaiian island of Oahu were bombed and strafed. The destruction was widespread, and the loss of life was tragic.
For Japan, it turned out to be a tactical victory and a strategic defeat; its planes had failed to destroy the American aircraft carriers or the submarine repair facilities; both of which would turn out to be critical as the ensuring war in the Pacific developed. After the attack, it was engaged in a long war with the U.S. that its cooler-headed strategic planners knew it couldn’t win.
The situation in the Pacific that led up to the attack on Hawaii was a nation, Japan, in an expansionary mood exerting its influence in greater and greater circles. At the same time Japan was engaged in a trade war with the U.S. involving strategic materials, notably oil.
In today’s world we have China expanding its military presence to existing and newly constructed islands in the Pacific. It is also flexing its economic muscle throughout southeast Asia and as far south as Australia. And now China is engaged in a sort of trade war with the United States.
In this worrisome set of parallels, what is the correct way to assess China’s recent move to change its energy picture? The 1,865-mile Northern Siberian Gas Pipeline recently began delivering natural gas to China. It is the beginning of a 30-year, $400 billion contract with Russia to deliver 14 billion cubic meters a year of the fuel.
The pipeline eventually will decrease Chinese imports of liquid natural gas from the U.S., at a time when the two nations are engaged in a trade war. And Russia gains as well. It will make Beijing dependent on Russia for its energy supply and less likely to adopt an aggressive stance toward Moscow in border disputes or other differences. Russia will also benefit from a flow of hard currency from China, which will help it to withstand the financial pressures from the current sanctions levied on it by the U.S. and Western European countries.
The pipeline will reduce China’s dependence on imported coal, a critical energy source of which it has inadequate domestic supply, and it will have a positive effect on its unhealthy air pollution
The moves by Russia and China are more strategic than economic at this point. Even the natural gas pipeline deal would not ever been constructed solely on its economics merits. It is simply too uncertain when, if ever, the demand for natural gas in that area of China will match the pipeline capacity.
Both Russia and China are attempting to expand their political and economic influence, and to a certain extent the parallels to Japan and Germany in the 1930s and ’40s are worrisome. Before we afflict ourselves with sleepless nights, though, we should recognize that things have changed a lot since then.
For one thing, what 1940s strategic thinkers in Japan realized when it attacked the U.S. was that the industrial power of our country would overwhelm their efforts eventually, which was what happened — along with a lot of personal bravery and tragic loss.
The situation today, though is very different. The U.S., for example, has an economy that is largely made up of services, not industrial enterprises. Additionally, we are far more dependent on imports than we were in the 1940s, or even in the height of the later Cold War.
This shift away from industry to services, and from domestic production to imports, has generally been good for our economy but imposes some severe constraints on national defense.
The net effect is that if we are forced to defend ourselves with military force, the conflict will be decided by the armed forces that we have in place at the time. Maintaining that force level forces and keeping it up to date is expensive and often unpopular. And if we cannot count on our NATO allies to pull their weight of the economic and military load, our preparedness is going to get a lot more expensive and unpopular.
Is it worth it? The Cold War ended non-violently when the U.S. won the expensive military buildup competition with the Soviet Union. Could we, should we, attempt to duplicate that success with China or pursue another strategy? Do we really have a choice? The answers to these questions will shape our economy more than any other policy decisions we will make over the next decade.