CIAO DATE: 3/99

Atlantic and Pacific integration — A comparative study of postwar Western Europe and East Asia _*

Lars Mjøset
Dept. of Sociology and Human Geography
University of Oslo

Kristen Nordhaug
Centre for Development and the Environment
University of Oslo

International Studies Association
40th Annual Convention
Washington, D.C.
February 16–20, 1999

Draft. Do not quote without permission.

1. Introduction

At the end of the 20th century, the Western bloc is the core of the world economy. This bloc is “Western” not due to physical geography, but due to political geography. The bloc has three regions: the U.S., Western Europe, and Pacific Asia. It is thus sometimes also dubbed “the triad”. It has a core within the core, the U.S. The question of U.S. hegemony is above all the question of the extent to which the U.S. has been able to influence, dominate and impose its preferred solutions to its partners in the two other regions of the bloc.

The Western bloc was shaped through the postwar era, but its prehistory lies in a series of important shifts throughout the turbulent first half of the century through : the realisation in two world wars that Britain could not balance the European state system on its own; the emergence of a socialist state (USSR) organized according to principles totally at odds with the Western liberal and democratic ethos; the shift from outwards- to inwards-oriented Europeanisation in response both to decolonisation and to the fact that generalised war haunted the European continent in both world wars. Together, these shifts implied the erosion of an international system based on the European state system.

With the Cold War since 1947, a new international system emerged, with the Western bloc as its core. For the first time in the modern world, the European state system, which had formed the modern international system through shifting economic revolutions and shifts of hegemony since the 13th century, had lost its global dominance.

The shaping of the Western bloc took place through two processes of integration: an Atlantic and a Pacific one. The study of these integration processes is the key to a specification of the range and limitations to U.S. postwar hegemony. In both processes, U.S. objectives — reflecting the Cold War diagnosis — were brought into a context of historical structures that had evolved over a long time. In Europe, the context was the European state system including its external components, especially the former British Empire, now labelled the Commonwealth.

In Pacific Asia, the context was a complicated pattern reflecting the long-time impact three historical processes: First, one basic influence came from the extension of the Chinese empire, as well as from its extension through Chinese family-based trading networks in the region. Another influence was European colonialism (particularly since the 1840s), with Britain, France and Holland controlling some areas, and with the most recent great powers (Russia, U.S., Germany) sharing — in a rather conflictual way — control over China. Japan, however, they never managed to control. Thus, Japan became the third factor, the local modernizer, which since the late 19th century developed through a self imposed process of modernisation, which may be seen as a response to the threat of imperialist penetration by European great powers. Since 1868, Japan emerged as a local imperialist power, entering into the system of great powers.

As of today, the three macroregions of the Western bloc are marked by very different levels of integration. The U.S. is a wholly integrated state in and of itself, its integration being completed in the 19th century. Present day integration processes, especially NAFTA, linking Canada and Mexico closer to the U.S. are quite marginal when compared to the ongoing European process. Western Europe, namely, underwent considerable integration through the postwar period, modifying the earlier state system, and presently, the European Union (EU) is facing difficult challenges as the question of integrating also the Eastern part of the European state system (end of the Cold War) came up just as the process of Western European integration was to be deepened through consolidation of a single market and an economic and monetary union. The Pacific area, finally, seems marked by a lack of comparable integration processes. While Western Europe has long been in the process of tempering and modifying its state system, it might seem as if Pacific Asia is presently consolidating a state system which through the postwar area has been wrought out of the earlier situation marked by overlaps between Chinese, Japanese and European imperial/imperialist structures. In the postwar phase, the U.S. ended up being drawn into the winding up first of Japanese, then of European imperialist influence.

In this essay, we sketch a comparison of the development of the two non-U.S. regions in the postwar era of U.S. hegemony. We hope that such a comparison will help us understand better the present processes of regionalisation in the world economy, and we also provide some comments on the very recent event: the emergence of an Economic and Monetary Union in the EU, and the economic crisis in the Pacific region.

 

2. Cold War and U.S. hegemony

The Western bloc was constituted by the U.S. in conjunction with the 1946/7 Cold War diagnosis. This Western bloc delimited the postwar core of the world economy. ₁

State and civil society

The U.S. had evolved as a union through the frontier period, as part of the process of settlement of virgin areas which had earlier only been inhabited by hunter/gatherer tribes. Throughout its modern development, the U.S. has been marked by a relation between state and civil society different from the European one. ₂

In the classical nation states of the European state system, there was a balance between state and civil society, and the development of this balance was linked to the twin dynamics of warfare and capital accumulation. ₃

The U.S. broke off from this state system in the 18th century. Through its period of isolation from the European state system in the 19th century the U.S. developed a civil society which was stronger and more autonomous vis-à-vis the state than in Europe. Since the revolution of 1789, the “founding fathers” of the U.S. state designed a system of “checks and balances” in order to secure a “non-european” type of state, in other words, a state not marked by the imperatives of a state system in which war was a continuous danger. ₄ That state was to a large extent tied by civil society institutions, “a state of courts and parties” — weak in social policy respects, stronger in policing and justice. That state had an isolationist foreign policy, banning European access to its immediate neighbouring areas. The Monroe doctrine (1823) signalled that the U.S. would dominate whatever there was of a regional state system. The American continents should no longer be considered “subjects for future colonization by any European powers”.

In the immediate aftermaths of World War II, the experience of wartime hardship was not broadly influential in the U.S. Elites were concerned, but most of the population had experienced economic booms during the world wars. It was the experience of economic crisis and the response in terms of the New Deal that led to a moderation of the liberal U.S. state, creating the ideal type “residual” welfare state.

The U.S. was a latecomer in modern social legislation. Its tradition of “innocent liberalism” led to the evolution of a system based on means-testing and modest social benefits. ₅ Before the 1930s New Deal, certain generations enjoyed social policy support by the Veterans administration. The New Deal gave rise to social insurance for the elderly, unemployment insurance and social assistance to families with dependent children. In the Golden age, the unusually long boom from the 1940s to the 1970s, the market seemed to involve few risks: living standards rose, there was extensive compression of incomes, as well as overall income security due to the strength of unions in the booming economy. For those who still fell out of this market based welfare system, the Great Society and the War on Poverty programmes followed after 1965. In the U.S., these programmes were employment-, not transfer-oriented, providing start-up grants, educational grants, job training, public health, community action programmes, as well as civil rights legislation. The system is residual in the sense that benefits accrue only after a means-test, as a last instance help. Most citizens are expected to rely on private, market-based insurance. Equalisation of incomes (life chances) was no objective.

Turning then to state/society-relations in the Pacific area, finally, the picture is more complex. Large parts of the region were colonialized by the West, and the nature of relations between the post-colonial state and the respective (rather embryonic) civil societies evolved into quite different constellations. On the other hand, the two countries that historically have been regional leaders, had strong states. Japan was never colonialized, and is marked by a strong, non-liberal state and a relatively underdeveloped civil society. China was somewhat similar, but more marked by concessions to Western imperialists and Japanese conquests. Both Japan and China had, even earlier than the U.S., pursued strategies of closing off from the European state system.

The Cold War Strategic vision

By World War II, a new strategic situation emerged. Immediately after the war, the dominant fractions of the U.S. elites converged on an interpretation that saw the U.S. as vulnerable in the same sense as European states had been vulnerable to attack by enemies. ₆ The following strategic view emerged as dominant: the world oceans no longer protected the U.S., new weapons- and transport-technologies had put the U.S. in the same position as that of Britain: an “island” off the coast of the Euroasian landmass, its security being threatened if one country gained control over continental Europe.

While the USSR since 1905 had kept out of great power politics, worrying mostly about its Eastern borders, the country had returned to European power politics in World War II. The USSR was basically a land-power, exerting formal, authoritarian control, maintaining a large land-based army. The USSR had lost 15-30 million people due to German aggression in World War II. There was a national understanding that there should be no more defensive wars, war had to be fought on the enemy’s territory. Thus, USSR leaders were convinced that they needed a protective belt as in Eastern Europe. The traditionalist/revisionist debate among historians concerns the question on whether this was the expression of a genuinely expansive thrust, or whether this expansionism was merely a U.S. or Western “construction”, need not bother us here.

In any case, the dominant U.S. view was much in line with earlier British geopolitical visions. In order to “contain” the allegedly expansive communist rulers of the Eurasian heartland (the USSR and from 1949 also China), the U.S. established alliances across the Atlantic (from 1946-7) and the Pacific (from 1949). ₇ The new security diagnosis lead the U.S. to engage in Atlantic integration with Western Europe (thereby containing Soviet communism), as well as in Pacific integration with Japan and its former satellites in East Asia (thereby, from 1949, containing Chinese communism). As we shall specify later, Western Europe and East Asia were the two geographical areas where the powers of the “Eurasian heartland” had direct access to the world oceans.

U.S. postwar hegemony may be compared to 19th century British hegemony. ₈ Later, we shall also see that in the two processes of Atlantic and Pacific integration, the two hegemonic powers in fact interacted, often in conflictual ways. But first, we shall try to analytically distinguish their main structural features, cf. Table 1.

Table 1. British and U.S. hegemony. Points of comparison

	State/civil society relationships	Nature of hegomonic relationship to the rest of the industrialized world (first world)	Nature of hegemonic relationship to the non-industrial world (third world)	Other worlds	Alliance structure (first world)
British hegemony	Non-democratic “gentlemanly capitalism”	Balance of power relation to Continental europe (with their own empires) ween economic and U.S. self-isolated. Convergence between economic and military changes	The British empire, mostly formalized British rule. The European state system in its era of global reach	—	Fluid. Informal
U.S. hegemony	Democratized. Anti-colonial legacy	Military alliance with main competitors. Europe: Nato, Pacific Asia: Japan and Seato. Non-convergence between economic and militar cleavages.	Decolonisation. Developing countries outside the Cold War perimeter	Second world: Communist bloc, main reason for the military alliance uniting the first world.	(Western bloc) Frozen. formalized in Nato, Seato and U.S./Japanese security treaty.

 

In one conception of British hegemony, the Empire is the paradigm. British hegemony is seen as dominance by formal rule. In our view, however, hegemony primarily concerns the relationship between the strongest powers in the international system. After the industrial revolution, the great-powers were all industrialising. Both British and U.S. hegemony must primarily be related to the group of rich “first world” countries. The main difference in this respect lies in the relationship between economic and geopolitical tensions: convergence in the British case, non-convergence in the U.S. case. Britain’s balance of power system related to continental Europe, and it was also a system of economic competition: Britain was the industrial pioneer, while the others were economic challengers, marked by various kinds of catch-up industrialization processes. In the U.S. case — in contrast — catch-up industrialization took place within the first world, in the Pacific and Atlantic areas of the Western bloc, among powers who were pooling their military power in order to supply security against an alleged challenger representing some kind of non-capitalist social structure and ideology. There was a non-convergence of economic and geopolitical concerns.

Turning to the kind of relation between the hegemon and other states, Britain exerted mostly formal, sometimes informal control in her Empire. If we use the postwar term “third world” for these areas, they were probably more important for British hegemony than most of the postwar third world was to U.S. hegemony. The U.S. only related extensively to third world areas on the Cold War perimeter. In the first decade of the Cold War, these were mainly in East Asia (Greece and Turkey in Southern Europe had an intermediary position). Furthermore, the U.S. basically related to these countries as independent sovereign states. This can be linked to the country’s anti-colonial legacy. Although the Cold War implied U.S. naval bases, docking and supply facilities, or more generally military posts along a perimeter dividing the east from the west, this system implied less formal rule than British imperialism. ₉ The main point was to have the world open to U.S. influence. U.S. hegemony was “soft”, it tried to avoid sending in the tanks. This fitted both the European tradition for sovereign states and the concern in many third world states for anti-colonial nationalism. A similarity between the British and American empire was the language community, but to this, the U.S. added the crucial element of mass culture.

The structural comparison indicated in Table 1 can be made independently of the historical disagreements on the origins of the Cold War, presently running between a “post-revisionist” and a “revised revisionist” position. We are, however, convinced by the need for a weberian approach to the questions discussed in this debate: only by accepting the relative independence of geopolitics and economic factors, we shall be able to indicate the importance of each of these factors in the emergence and development of the Cold War. Furthermore, we must discard simple dichotomies such as e.g. the liberalist/mercantilist dualism in international relations theory, and trace the specific state/civil society connections typical of the various great powers involved. ₁₀

It would seem that the post-/revised revisionism discussion is not about deciding in favour of one group of factors: security-related or economic. Rather, it is about the kind of security/economy interaction that prevailed in the early postwar period, and they disagree in the question of which groups should be seen as decisive in the construction of the prevailing security imperative(s). In Cumings’ revised revisionism, certain internationally oriented capital fractions are crucial, and the security concerns are “constructions” related to their interests in global expansion. In Leffler’s post-revisionism, security imperatives are seen as more genuine, but they are not related primarily to a correctly perceived external threat, but rather defined in the interaction between domestic politicians, bureaucrats, and U.S. civil society, the link being the determination to defend the American way of life, thus also pointing to the firms oriented towards the domestic market. ₁₁

British security concerns were linked to the need for a fragmented continental Europe. Its insular position would be threatened if one state ruled continental Europe. But Britain also needed the Continental great powers to mutually balance each other in order to concentrate Britain’s resources on the maintenance of the Empire. British hegemony implied formal dominance of third world states in the empire, and a disunited first world (consisting of economic competitors). U.S. hegemony implied a united first world, and allies in the third world were important only to the extent they were needed to underpin this first world unity. Since in the U.S. case the security cleavage did not converge with cleavages defined by economic competition, the U.S. in its period of dominance was more “tolerant” towards emerging economic challengers (within the Western bloc) than Britain was (to first world challengers) in its period of dominance.

The borders of the Western bloc in East Asia implied that some quited undeveloped units emerged as crucial for its security, this feature became even more pronounced there than in Western Europe. First there was Japan, industrialized, but a latecomer compared to the Western great powers. Security imperatives did not allow the U.S. to force a recalcitrant Japan to get in line (e.g. in trade policies) even if the country in many respects still was dependent on the U.S.

Given the Cold War, the U.S. was in a “community of fate” with its allies: the U.S. authorities tried — of course — to push for their own economic interests, but there are also many examples of allies going their own way, violating the preferences of important U.S. actors, economic or military. ₁₂

This frozen alliance structure contrasts with Britain’s fluid alliance structure in its time. In the British case, there was no objective to keep all in the structure at all the time. In fact, the very strategy of “balance of power” implied that Britain would shift alliances with continental countries in order to be sure that no one continental country came to dominate the Continent fully. ₁₃

Economic Developments

Traditional revisionist history studied U.S. hegemony as functionally related to the dominance of U.S. firms in international capitalism. From the point of view of economic and econometric history, however, the postwar period rather saw the two main regions — Western Europe and East Asia — catching up in economic terms. Let us again start from the difference between British and U.S. hegemony.

Economic developments in 19th century Europe was crucially dependent on British innovations. But only since the mid 19th century, when England lifted its ban on exports of machinery, the technologies of textiles and railways were promoted by British agents, and then mainly private agents. U.S. postwar promotion of economic development via aid and advice to allies differed decisively in this respect. In the U.S. case, the new security construction was in place only a few years after the end of World War II, and the process of technological diffusion to the Western bloc countries followed immediately with strong support from U.S. authorities.

During the first half of the 20th century, wars and protectionist trade policies had prevented the diffusion of state of the art technology, giving the U.S. a superior position. In the context of the Cold War, however, there was a reduction of the productivity gap — a process of catching up — between the U.S. and its Cold War partners to the east and to the west.

According to Maddison, the general productivity miracle of the Golden Age (1945-75) can not be attributed to quicker technological progress, as the productivity pace of the leader country, the U.S., was not faster than earlier. Rather, the follower regions within the Western bloc were catching up, benefitting from transfers of technology, patterns of work organisation and consumption norms. These transfers started already with the Marshall aid, and the willingness on the part of the U.S. state to support such transfers can only be explained by reference to the Cold War.

The U.S. partners in Cold War Western Europe emulated the main elements of the U.S. mass production/mass consumption growth model — often called “Fordism” — which had been pioneered in the U.S. since World War I. ₁₄ The preconditions of this catch up were, according to Maddison, “a favourable concatenation of political and policy circumstance. High levels of demand maintained full employment and encouraged investment to rise rapidly. Capital stocks rose at an unprecedented pace. Labour moved from low productivity activities to more profitable employment. Barriers to international trade were removed, and international specialization improved. The European countries and Japan were able to seize these opportunities because they had high levels of skill and education, and the institutional capacity to raise and allocate large capital resources.” ₁₅

Maddison’s formula mentions Western Europe as a whole, but Japan as a single case. We are, however, interested in comparing the two processes of regional integration. We know that as the Golden Age faded in the West, the East Asian NICs emerged as followers of Japan. Despite this, we shall see that the Pacific area was much less homogenous than the Atlantic area in terms of living standards and economic development.

Atlantic and Pacific integration — basic similarities

Before we turn to a comparative specification of the two processes of regional integration, let us note some basic similarities between them. The Western security consensus of the Cold War implied a new aggressor compared to World War II. The communist danger replaced the facist danger.

We have already mentioned the continuity between British geopolitics and the new U.S. diagnosis. The overarching U.S. “national interest” was military containment of the threat from the Eurasian heartland. Western Europe and East Asia are the two geographical areas in which the populations of the Euroasian landmass (USSR and China) can have easy access to the world oceans (the Atlantic and the Pacific). A specific image of the U.S. was built into this construction: the U.S. had been self contained, isolated, with its own special way of life, inherently stable. Only external pressure — based on an entirely different model of social organization — could destabilize it. In order to contain this external force — this “other” — the U.S. had to establish special ties with sovereign countries on the relevant rimlands of the Euroasian continent.

We find three basic similarities in the ways U.S. authorities related to the Western European and East Asian rimlands.

1. Patterns of economic containment. While the U.S. wanted military security for itself (a substitute for the security earlier provided by the world oceans), the foreign policy decision makers did not want U.S. military presence abroad, they wanted the containment in the Rimland areas to be economic. ₁₆ As a minimum, they would assist in achieving economic stabilisation, preferably they would like to see economic growth and welfare distributed in such ways that civil societies marked by wealth (preferably American style) and stability (preferably democratic) would undermine left-wing social mobilisation that the USSR (and/or China) could exploit. ₁₇

2. Regional integration incorporating the World War II aggressors. The very briefest survey of the Western-European and Pacific regions showed that the West German and Japanese economies were the crucial ones in these regions. In the U.S. strategy of containment, integration of the two main defeated aggressors of World War II was crucial, both due to their geographical location, the size of their populations ₁₈ and level of economic development (manufacturing sectors). Witness N. J. Spykman’s public statement in December 1941, just a week after the Japanese attack on Pearl Harbour: “The rimland axis powers of Japan and Germany would after the end of the war become the new allies of the United States in countering Russian expansionism”. ₁₉ And so it was. As for constitutional politics, this implied that both Germany and Japan were reconstructed — via U.S. influence — as liberal systems. ₂₀ But their postwar political economies inherited a number of institutional peculiarities from earlier. The new models were different from their interwar regimes, but there was certainly no full “americanization”. The fact that both Japan and Germany produced economic miracles was not just due to their need for reconstruction, but also due to the survival of distinct institutional traits.

Japan and Germany became crucial for regional integration. It has been ironically stated that within the Western bloc, the catch up processes resulted in the peaceful establishment of what Germany and Japan earlier had tried to achieve by means of war, that is a “Greater East Asian Coprosperity Sphere” under Japanese leadership in Southeast-Asia, and a “Grossraumwirtschaft” dominated by (Western) Germany in Europe. This parallel, however, is not all that rewarding, since the crucial difference is that both countries became crucially linked to the U.S.

3. Military containment and burden sharing. The U.S. would support independent allies, trying not to establish any kind of formal rule. The U.S. pattern of a liberal state and a strong civil society clearly restrained policy makers: the U.S. should not become a costly, tax-heavy, “garrison” state in peacetime. But due to the needs for postwar reconstruction, the sheer underdevelopment of the relevant regions, or geopolitical emergencies, there was both overseas defence spending and aid, and the difference was often vague. As the situation stabilised, the U.S. was not able to get out of these commitments. The U.S. would, however, pursue its original aims by making claims for burden sharing, with reference to shared conception of security threats.

These three features are interrelated: Economic containment should emerge from economic stability — growth and development. This required regional cooperation. But allies were recognized as independent units involved in difficult relations to regional leader countries which were the earlier aggressors. Given the imperatives of reconstruction, postwar misery and (especially in East Asia) economic underdevelopment, resources did not allow the allies to spend sufficiently on defence to provide the military security corresponding to U.S. norms (however realistic). Thus, the U.S. would continue to finance their military security and burden sharing would be a constant topic.

Consider again the contrast to British 19th century hegemony: In that case, there was no burdensharing between the largest great powers. Economic and geopolitical cleavages coincided and Britain related to continental great powers just completing their most nationalist phases. Britain would try to clear its finances through the empire.

However, as we now specify the comparison of Atlantic and Pacific integration, we shall see that the three basic similarities justquoted are not sufficient to explain the trajectories of integration. We must move beneath the grand similarities them to discover crucial differences: First, the specific nature of economic containment depended on the kind of elites, and their legitimacy, which again depended on the type of political system and the state/civil society-relations prevailing. Second, concerning the integration of the earlier aggressors, we shall see that the Western European regional geopolitical pattern which (West) Germany became a part of was very different from the East Asian pattern which Japan became a part of. Third, patterns of military containment and burden sharing also differed decisively between the two cases.

From this point of departure, we shall first study European/Atlantic integration, then Pacific integration.

 

3. U.S. hegemony and Western European integration

For the study of Western European integration, a distinction between three visions of Cold War Western European integration is useful (cf. Table 2). ₂₁ These visions we link to the new and the old hegemon (U.S. and Britain), as well as the “affected” continental states, the remaining great powers of the old European state system.

Like World War I, World War II also ended in a victory for the alliance led by Britain, but the U.S. had to intervene with assistance much sooner than in World War I. More important, however, this last European World War brought the U.S. into a formal military alliance with most of the western group of the older states in the European state system. But Nato was not a result of purely U.S. objectives. In fact, in the short period of “peace without Cold War” (1945-6), the U.S. wanted to withdraw fully from Europe. As the Cold War emerged to dominate international relations in 1946/7, the U.S. state gained a novel interest in European integration as a way to enable U.S. military withdrawal, but continued U.S. influence.

The vision that the U.S. came up with was that of a “United States of Europe”, a federated, independent Western Europe, allied with the US, able to finance their military spending without assistance from the U.S. ₂₂ The U.S. wanted to see this union established right away. The main objective behind U.S. support for Western Europe was military containment against the USSR/Eastern bloc. A broad European union should produce economic gains (returns to scale in a large borderless economy) and this, the Americans held, would enable the Western Europeans to contribute to defence against the Eastern block, without drawing more on U.S. tax-payers. ₂₃ The two regions bordering on the Atlantic would be brothers in arms, but each would pay for themselves. This was in line with the liberal state/society-relation typical of the U.S.

Given the scope of war damage, however, the U.S. agreed to help out with funds and expertise for reconstruction purposes. Within the Marshall aid institutions, the U.S. continuously pushed for measures that might lead towards stronger regional integration. But Britain continued its line of blocking European unity. The former hegemon challenged the vision of the present hegemon.

The British vision was an updated version of the balance of power model that had dominated under British 19th century hegemony (and even earlier). Britain would be a balancing force, not allowing any of the Continental European great powers to dominate the continent. This would bolster Britain’s world dominance, and allow her to maintain the huge “third world” empire, which (among other things) was crucial to British food supply. Britain wanted to retain the Commonwealth as a British backyard free of U.S. competition. The U.S. on its part eagerly tried to pressure Britain to open up the Commonwealth. ₂₄ The dilemma was, however, that in the postwar period, these objectives could only be reached in a situation where the Anglo-American “special relationship” was very important to Britain.

A broad European union would undermine Britain’s “three circles”: ₂₅ Britain would loose its special relationship to the U.S., a union with continental Europe would most likely lead to customs barriers towards food imports from the empire, and within a union, British dominance would be balanced by the voices of other influential states. British diplomacy in fact had to tackle a major challenge: Undermine the U.S. vision of rapid European unification, while at the same time bolstering the Anglo-American special relationship.

Evidently, the Cold War came as a great help to the British! US strategies in Western Europe first tried to push via the Marshall aid to create a broad federation of industrialised states that could organise their own defence. The British were able to frustrate most of the U.S. integration efforts within the Marshall aid organisations (OEEC, in particular), while British diplomats enthusiastically joined U.S. efforts in the security sphere. A U.S. reconstruction-offensive biased towards federal solutions, cpuntered by a diverging vision, led to a military alliance with Britain as a junior partner to the U.S.: Nato was founded in 1949, and West Germany became a member since 1955. The alliance did not involve economic coordination on any sort, while it made it more likely that the U.S. would retain military presence in Europe. Security concerns now united the Western parts of the European state system, and the U.S. had been brought “back” into European affairs.

The continental countries, however, were frustrated with Britain’s blocking of the U.S. initiative. The Benelux had been established in 1943, and in the late 1940s, a number of schemes for customs unions of varying range were discussed between Benelux, France and Italy. All failed, however. ₂₆ Only when the question of German reindustrialisation came up (as the U.S. and Britain began to relax controls on German producers), the French strategy of trying to control German postwar developments by integration materialised. Soon, the quest for Franco-German consiliation and integration became the core of a project to create economic union between the countries of little Europe. The U.S. supported this gradual integration project as a second best solution, given that its own preferred vision, rapid integration (economic and political union), was blocked by Britain.

The early postwar conjuncture led to the project of regional integration of the core countries of the European state system. The EU (and its predecessor ECSC) was constructed on the basis of little Europe. Its development was closely linked to the Paris/Bonn-axis, and ignored, later actively opposed by Britain until 1961. The EU implied regional integration within a broader Atlantic framework, defined by the Nato alliance in the security field and the dollar system in the monetary field. ₂₇

Table 2. Three visions of Western European postwar integration

	U.S.	British	Continental-European
Goal	U.S. of Europe (immediately)	Britain as Europe’s balancer	U.S. of Europe (in the long run)
Paradigm	U.S. itself	19th century balance of power model (British hegemony)	Transcendance of the decentralized European state system
U.S. position	U.S. to withdraw from Western Europe	Continued U.S. military presence	Continued U.S. military presence
Main emphasis in defence of “national interest”	U.S. security: Military containment vs. Eastern bloc	—Prevent any single power from dominating the Continent —Allow Britain to maintain her empire —Reproduce the Anglo-American special relationship	— Establish conditions for peace in Europe —Provide legitimacy for the state after a devastating war and economic hardship in the 1930s
Economic implications	Single market —> returns to scale —> prosperity —> civilian containment: neutralising the left parties (possible supporters of USSR)	Maintain classical division of labor between Britain and the Empire Maintain Britain’s isolation from the Continent	Deepening towards a single market/full union, starting with political coordination and trade integration
Main force behind vision	US role in OEEC (Marshall-aid and European recovery institutions)	British Cold War diplomacy (Nato!)	Economic diplomacy between Continental states. Franco/German axis. U.S. support
Main obstacle	Britain’s pursuit of a quite different vision	Continental efforts of integration of Western Europe	The reproduction of “national economies” through state interventionism and welfare state institutions

 

The core of what we shall label the Continental-European vision was to ensure at the same time peace between the states of the European state system (Western part) and the social security of the masses. Milward claims that integration only followed in cases when the legitimacy of the state would be strengthened. ₂₈ The ECSC and the EU were parts of a system that provided economic coordination, growth, larger tax revenues and improved social services. This project converged with the U.S. emphasis on economic containment in Western Europe as part of a programme to build welfare states in order to regain legitimacy for the state and ruling elites after years of war and economic crisis. Milward, however, is not specific enough about the context which triggered off this development.

In order to secure the military containment of the U.S., the U.S. foreign policy line was to support economic containment. The first grand effort to assist in the reconstruction of Western Europe, the Marshall aid, clearly implied economic containment: the basic objective was to stabilise the postwar situation in Western Europe in order to avoid that Moscow-oriented left wing parties came into power. But such containment gained autonomy in Western Europe. The welfare state would secure social cohesion in a period of agrarian modernisation, also taking care of the needs of the working masses, the need for social and economic security in a period of strong economic change. Such autonomous civil containment was the core of the Continental-European vision.

The continental-european vision emerged in the cooperation between different states, so it is harder to find explicit statements of it. The vision in fact evolved through interplay between national responses to the process of Western European integration. France and Germany were key players, but also other nation states were influential from time to time. Under de Gaulle, the French line was to push the continental-european vision in a neutral direction, that is, towards relative independence of the U.S. But this very strategy allowed Western Germany to play the role of mediator between the U.S. and France. In that way, Adenauer succeeded in rebuilding German legitimacy in the international system, which had, naturally, been low in the first decade after World War II. ₂₉

In the early 1950s, the Brits rather arrogantly ignored the process of European integration, but in the last half of the 1950s, they launched different proposals aimed at reducing the importance of the emerging EU-system. Facing the success of Western European integration in the 1960s, British political elites realised that not just its days as imperial master, but also as balancer of European great power politics had gone. Not the least due to the need to maintain some sort of Anglo-American special relationship, British foreign policies were oriented towards European integration, and when the French stance on British membership was changed after de Gaulle’s resignation in April 1969, Britain entered as EU-member in 1972. Once Britain began to be active within the EU, elements of the British vision were fed into internal EU controversies from the inside. Further EU-extensions came in tandem with the period of harsher economic adjustments since the mid-70s. The inclusion of Spain, Portugal and Greece implied a first taste of regional disparities, which will be further implied in the question of widening after the end of the Cold War. This radicalized version of Germany’s “Ostpolitik” is on the agenda for the first decade of next century.

The original U.S. vision of rapid reconstruction, economic integration, and a common defence, reflected U.S. history: highly efficient agrarian and industrial sectors, no tradition of state intervention, no international war on its own territory, and a state with few legitimatory challenges. In contrast, Continental Europe had been bombed, was in need of reconstruction, had a state interventionist tradition and week states in need of legitimation. The Western European elites behind the Continental-European vision wanted to achieve in the long run what the U.S. had wanted to achieve quickly: “The United States of Europe”. If one person incarnates this long term convergence between the U.S. and the continental-european visions, it is Jean Monnet.

In sum, there was at least three factors behind the process of European integration, all of which may be related to the quest for security. The U.S. wanted a federal Western Europe as ally in order to bolster U.S. security against the USSR in the Cold War; France wanted security against new German aggression, and European citizens wanted security in their daily life, a claim with strong legitimacy after the wars (also fed by the memory of interwar instability). The last factors led directly to the welfare state: The spoils from economic growth would be used to fulfill the security needs of the population after two world wars and the interwar traumas. ₃₀

In the 1970s and 1980s, a real convergence between the U.S. and the continental-european vision began to emerge (plans for economic and monetary union, single market, etc.) It was, however, perhaps the biggest paradox of postwar Euro-American relations in the postwar period, that these converging visions had incompatible economic implications. In the long run, the Continental-European economies had grown more rapidly than the U.S. economy, and already in the 1960s, economic competition between the two regions became noticeable. This is related to the above mentioned non-convergence of security and economic cleavages in the Cold War: economic competition between the allies of a security alliance.

The process of Western European integration was not equally successful in all fields: Plain trade integration proved quite successful, and a hybrid set of common political institutions was established. Much more demanding, however, are the present challenges of deepening towards monetary union, developing common foreign policies and defence, and harmonization of social security and other welfare state arrangements. We cannot predict the outcome, but the attempt to transcend the state system must be described as a major historical transition.

No wonder that the fear of the nation-state withering away under pressure from globalisation is strongest in Europe. But so far, what we have seen is the transformation of the centuries old state system has been transformed into a system of the strongest, most equality-oriented welfare states history has seen. If there was ever a goal of abolishing the warprone elements of the European state system, that goal had been realised, originally spurred by the U.S. programme of economic containment! But while the militarist and geopolitical tensions seem resolved, the civilian elements of the state system remain: the EU is a state system of welfare states.

 

4. Western European and East Asian integration — comparisons

In this section, we present a number of Western Europe/East Asia comparisons which serve to specify the conditions for integration in East Asia.

Level of economic development

Let us first consider differences in levels of economic development. Table 3 gives a rough typology of the countries we shall refer to, summing up our historical account above. Table 4 compiles a number of simple indicators relating to employment. Selected EU countries are included.

Table 3. A typology of East Asian members of the Western bloc

	Evans’ typology
Regional leader
Japan##	Development state
Northern rim — Countries marked by the Japanese model Influenced by the Chinese empire and by Japanese imperialism
Taiwan#, South Korea#	Development states
Trading cities — with huge service sectors an only a miniscule agrarian sector Influenced by british empire/commonwealth
Singapore, Hong Kong	(Intermediary)
Southern rim — Countries with large agrarian sectors, overseas Chinese influence Influenced by European imperialism. mainly (U.S. in Phillipines), by overseas Chinese, and by Japan during World War II
Thailand, Malaysia, South Vietnam# Indonesia, Phillipines	Intermediary Predatory state

# — indicates great strategic importance in the Cold War. Evans’ typology is discussed in Peter Evans’, Embedded Autonomy, Princeton 1992.

 

Compared to Pacific Asia, Western Europe was the richer, the older dominating centre, the area in which the state system originated. In the European catch up process the countries involved started at roughly the same level of socio-economic development, with rather similar state/civil society-relations. In postwar Western Europe, the U.S. had to relate to the old European great powers, which were all also highly industrialised countries. These great powers had strongly influenced — and still influences — the situation in Asia via their colonialism. ₃₁

Table 4. Structure of employment

	Early Cold War Period					Ca. 1990			1978-9
	Year	Agr.	Ind.	Serv.	Ec. act. popul. (mio)	Agr	Ind	Total population (mio)	Military manpower
Large regional states (potential leaders)
Japan	(1947)	52.6	24.4	23.2	33.9	3	40	124	0.9
China					-	32	46	1114	2.4
Northern rim — Countries marked by the Japanese model
Taiwan	(1956)	55.6	16.7	25.4	3.0	15	38	20	15.4
S-Korea	(1955)	79.7	12.5	2.7	8.1	11	43	42	8.1
Trading cities — with huge service sectors an only a miniscule agrarian sector
Singapore	(1947)	8.1	19.3	69.1*	1	0.4	35	27	-
Hong Kong	(1961)	7.4	49.9	40.6	0.5	1.2	29	6	-
Southern rim — Countries with large agrarian sectors, overseas Chinese influence
Thailand	(1947)	84.8	2.4	3.7	17	-	35	-	2.6
Malaysia	(1947)	64.9	10.5	24.2	22	1.9	12	17	-
Indonesia	(1961)	71.9	8.0	18.3	24	34.6	36	167	1.0
Phillipines	(1948)	71.3	8.8	18.6		7.4		60	1.1
Vietnam		-	-	-	28	-	25	65	6.3
For comparison — the EU periphery
Spain	(1950)	48.8	24.5	10.9	6	10.8	37	40	4.6
Portugal	(1950)	48.4	24.6	26.8*	25	3.3	36	10	-
Greece	(1951)	48.2	20.4	26.3	16	2.8	29	10	-
Ireland	(1951)	39.6	24.4	34.9*	10	1.3	38	3.5	-
For further comparison — the two decisive Continental EU-countries:
France	(1946)	36.0	29.7	30.9	4	20.8	37	56	4.7
Germany	(1946)	29.2	38.5	32.9	1.6	19.2	32.9	79	3.9

Notes: [i] Definitions for the Bairoch data (percentages of economically active population for year indicated): Agriculture: agriculture, forestry, hunting, fishing. Industry: Mining, quarrying, manufacturing, construction, electricity, gas, water, sanitation. Service: Transport, storage, communication, services. Numbers do not add up to 100 due to a residual of activities not adequately described. * Includes armed forced — [ii] 1990-data are agrarian and industrial sectors in percentages of total employment (Germany is united Germany). — [iii] Army personell as a percentage of male population between 18 and 45.

Sources: [i] Paul Bairoch, et. al., La population active et sa structure, Statistiques Internationales Rétrospectives, Vol. 1, Bruxelles & New York 1968. [ii] Der Fischer Weltalmanach ’92, Frankfurt a.M. 1992. [iii] Jacques Soppelsa, Géographie des armements, Paris 1980, p. 52.

 

The area had only one industrialised country. Japan had avoided the influence of Western imperialism by industrialising on its own, emulating — at the regional level — the importance of the western countries. In Asia Pacific, the old aggressor was the only industrialised country. Table 4 brings this out clearly. Since we are so far interested in the early phase of U.S. hegemony, consider the data on the early postwar structure of employment. The two small trading cities Singapore and Hong Kong belonged to a British network and there are indication that they did not play crucial roles in the U.S. alliance network. For the broad picture, the larger states are decisive. We can see that all of them had huge agrarian sectors. Even Japan was at 50 percent in 1947, the other lay 15 to 20 percentage points higher than that. In contrast, the decisive EU economies at that time had 30 to 40 percent of the working population in industry, and only 30 to 36 in agriculture, that is 15 to 20 percentage points below even Japan. The gap between the leading EU countries and what would in the 1970s/80s become the EU periphery (Spain, Portugal, Greece, Ireland) was less than the corresponding differences in the Pacific area (especially with respect to manufacturing employment). Even given that the EU became more heterogenous as it was extended southwards in the 1970s and 1980s, the disparities in terms of development is much greater in Pacific Asia.

Considering another simple measure, even with contemporary data, GDP per capita (in USD, World Bank data) for 1989, we see that the relationship between the richest EU country (FRG 20440) and the poorest ones (Greece 5350, Portugal 4250) is roughly the same as between Japan (23810) and South Korea (4400) and Taiwan (7500). But in the case of Pacific Asia, the region includes also countries such as Malaysia (2160), Thailand (1220), the Phillipines (710) and Indonesia (500). ₃₂

Several alternative and more complex indicators could be employed, the message would be basically the same. Western Europe was an industrialised region, consisting of the countries that industrialised under British 19th century hegemony. These countries were “ready for Fordism”. The Pacific area was a mostly underdeveloped region, with the exception of Japan, ready at the most for industrialisation based on the products of earlier techno-economic paradigms: textiles and steel. Thus, in Pacific Asia, the Cold War alliance involved one semideveloped state with huge, peculiar potentials (Japan) and a number of underdeveloped countries. In both regions, the earlier aggressors — as we already indicated — produced economic miracles. In the Western European case, the whole region was pulled by the (German) miracles. ₃₃

The three regional state systems of the Western bloc

The Western European countries represented the Western parts of the old European state system. Our stylized account of the interplay between the three visions (cf. section above) can be read as a specification of how the cleavages of the pre-World War II system interacted under influence of U.S. hegemony. The result was the state system of welfare states. The level of development in Europe was so high that the connection “economic integration —> returns to scale —> economic growth” could be emphasized.

In Pacific Asia, Japan was the only country there which started out with a strong state, while in Western Europe the state system consisted of several such states. East Asia had so far not developed a “regional” state system. Rather, the region had been a subsystem of the globalized European state system, modified in the first half of the 20th century by the U.S. entry as a new (but hesitant) player in one of that system’s extra-European areas, as well as by Japan’s emergence as a regional great power and imperialist. There had been a rudimentary regional dynamic taking the form of a string of wars between the late 19th century and the late 1930s, involving constellations of the three great powers of Northeast Asia: Japan, China and Russia. Still, we prefer to see these developments as processes of regionalization within the broader, global European state system.

Then, World War II had seen an attempt at forced unification of the region by Japan, moving also into the Southeastern sphere. As indicated in the Table above, even the countries that had been subject to European colonisation, had also been subject to specific regional influences (Japanese colonization and/or Chinese diaspora). In the Cold War, some of these states were in areas of extreme geopolitical importance, thus U.S. support to countries such as Taiwan and South Korea was enormous, ₃₄ and even implied involvement in agrarian reforms. Other areas were still under the British Empire/Commonwealth. Hong Kong and Singapore were city states, without an agrarian problem. These played a lesser role in the Cold War, but later came to belong to the group of NICs. Yet other states had been colonized by other European great powers (Indonesia by Holland, and French Indochina).

We are interested here in the three state systems which make up the postwar Western bloc (Table 5). These state systems actually emerged from the one process of fragmentation of the globalized European state system into three units: First, the core of the earlier global system, the europeanized, gradually uniting Western European state system, the EU “state system of welfare states”. In Europe, the project was integration of states that had roots far back in the history of the state system, which had established their “identity” in the 19th century processes of industrialisation and nationalist mobilisation, in the early 20th century processes of war-related state intervention, and finally in the postwar 20th century process of peace time state interventionism and welfare state extension.

Second, in the Americas, there was a non-state-system of US regional dominance. Here, dominance was by one large federation, a union having been formed with no strong prior state system, having existed for a long time already, and marked by little change. The one major exception has already been mentioned: the Cuba crisis.

Third, there is the genuine regional Pacific state system. This should be seen as a major result of the postwar process of Cold War-based/US-influenced “Pacific integration”. In Pacific Asia, the situation is still one in which no integration process towards a union is on the agenda. (While the U.S. earlier tried to promote regional integration, it now seems they try to counter any such efforts!) There is still a genuine state system of independent units. As for economic integration, however, one should remember the overseas Chinese.

In sum, the postwar pattern then involved the U.S., entirely dominating its own regional state system, engaging in integration towards its Western bloc allies. In Western Europe, U.S. hegemony helped create the EU, in Pacific Asia, U.S. hegemony created the first regional state system.

If there is any point in quickly covering the rest of the world, here is a brief scan: In the Eastern bloc, there was basically a dualist system between China and the USSR, each with respective buffer states, while in the third world, the South Asian, North African/Middle East and African state systems are the most important ones. These have all seen crucial regional conflicts (international, regional wars; cf. India versus Pakistan in South Asia, the Israeli-Arab conflict in the Middle East, and chronical clashes in Africa), but due to their lesser importance in the Cold War, U.S. attention has not led to serious U.S. involvements in their integration. The Middle East is a border case, but the conflicts are not directly Cold War related, but related to Israels peculiar historical relations to the U.S. as well as to the location of huge oil-reserves in some Arab states.

Table 5. The three state systems of the Western bloc

	Western Europe	USA	Pacific Asia
State	System of welfare states	One state	Development states/predatory states
Union	Present grand project of unification (deepening and/or widening)	U.S., union established 18th/19th century	No project of unification
State system	Disappearance of regional Western European state system. Possibly new European state system if widening is unsuccessful	the regional “state system”, unilaterally dominated by the US (since Monrow doctrine).	Full fledged state system, with some traits reminding of the 19th century European state system

 

The different postwar dynamics of the Western European and Pacific state systems is the key to the different postwar integration processes. In Pacific Asia, postwar developments established a state system. There was never a realistic vision of a broad federation: Japan was the old aggressor. In states that had been occupied by Japan during the war, and in the countries with experience of Japanese imperialism, there was resistance to any kind of new integration with Japan.

In the light of this, what should surprise us in the integration process that started in little Europe in the 1950s, is the inclusion of West Germany. One point is that Germany, unlike Japan, was divided. But we also realise the importance of France (and the other non-German EU states) relating to Germany from a position of political strength. The EU-institutions were designed so that West Germany would be controlled, its growing wealth also benefitting the other core countries. Witness the role of the Common Agricultural Policy, with West Germany as the main provider of funds. In the early postwar years, France would have preferred a complete disarmament and deindustrialisation of Germany (the pastoral solution also influential in the Roosevelt-administration). Britain and the U.S., the two other Western occupant countries, insisted that Germany’s economic powers had to be utilized in the project of strengthening Western Europe. It did of course help that in Western Europe, the neighbours were at similar levels of development, and had similar socio-political structures. ₃₅

In Asia, undivided Japan was the only large partner to the U.S. ₃₆ None of the others (even China before 1949 was undeveloped and very fragmented) could relate to Japan from a position of strength. Thus, the U.S. had to play that role, which is the origins of its complicated bilateral postwar relations to Japan. But the U.S. could not play the role of a neighbour with which Japan could integrate. But none of the neighbours symptatic to the U.S. would accept formal integration with Japan.

State/civil society relations

So far, we have emphasized the strong state in Japan’s case. In order to give a more overall impression, we return again to some simple indicators, employing the same selection of countries as above (Tables 6 and 7). The period covered by the political and civil rights indices are 1973-9, but we should be allowed to assume that had such an indicator been constructed for the earlier postwar years, the scores had scarcely been better.

Table 6. Political rights index. Selected countries

1. Most people has both the right and the opportunity to participate in the electoral process. Political parties may be freely formed for the purpose of making the right to compete for public office fairly general. Leaders/party can be voted out of office.	France West Germany Ireland
2. Open political process, which does not always work well, due to extreme poverty, feudal social structure, violence or other limitations on potential participants or results. Leaders/party can be voted out of office	Japan Malaysia
3. People may elect leaders or representatives, but coups d’état, large-scale interference with election results, and often nondemocratic procedures occur often.	Greece Portugal
4. Full democratic elections are blocked constitutionally, or have little significance in determining power distributions	Spain
5. Elections are either closely controlled or limited, or the results have little significance	Phillipines South Korea Indonesia Singapore South Vietnam Thailand Taiwan
6. No elections, or elections involving only a single list of candidates in which voting is largely a matter of demonstrating support for the system. But there is some distribution of political power.	China

Source: Index coded by R. D. Gastil, quoted from Charles L. Taylor & David A. Jodice, World Handbook of Political and Social Indicators, Vol. 1, New Haven & London 1983, Table 2.1.

 

The indicators shows the relative democratic (north) Western European countries, and Japan nearly joining them. The countries of the southern EU-periphery at that time were just breaking with their dictatorship past, and scores were less favourable. The most striking feature, however, is the clustering of all our remaining Pacific cases at the lower end, indicating a situation for civil and political rights nearly as bad as in China.

Table 7. Civil rights index. Selected countries

1. Political systems in which the rule of law is unshaken. Freedom of expression is both possible and evident in a variety of news media	France West Germany Ireland Japan
2. Political systems that aspire to the above level of civil rights, but are unable to achieve it because of violence, ignorance, or unavailability of the media, or because they have restrictive laws that seem to be greater than are needed for maintaining order.
3. Political systems that have trappings of civil liberty and whose governments may be successfully opposed in the courts, although they may be threatened or have unresolveable political deadlocks and may have to rely often upon martial law, jailing for sedition, and suppression of publications.	Greece Portugal Malaysia
4. Political systems in which there are broad arenas of freedom but also broad areas of illegality. States recently emerging from a revolutionary situation or in transition from traditional society may easily fall into this category	Spain Thailand Taiwan
5. Political systems in which no civil rights are thought to take priority over the rights of the state, although criticism is allowed to be stated in limited ways.	Phillipines South Korea Indonesia Singapore South Vietnam
6. Political systems in which no civil rights are thought to take priority over the rights of the state, although criticism is allowed to be stated in limited ways	China

Source:Index coded by R. D. Gastil, quoted from Charles L. Taylor & David A. Jodice, World Handbook of Political and Social Indicators, Vol. 1, New Haven & London 1983, Table 2.2.

 

This squares with more qualitative evidence of extensive patron/client ties and corruption in these countries. ₃₇

In industrialised Western Europe, reformist labour movements were crucial in civil society: The U.S. strategy of economic containment was clearly aimed at integrating these organisations (social or christian democrats), thereby weakening the communist parties/unions. In East Asia there was a variety of nationalist and/or socialist-communist socio-political movements, no social/christian democrats to coopt. These movements were not primarily labour movements, but nationalist, often peasant-based, moulded in the struggle against imperialism (Western and/or Japanese). ₃₈ In Western Europe, the grass roots were always included in the political process. In East Asia, the non-communist elites generally had more partial ties (cf. clientelism) with civil society. ₃₉ As the NICs industrialized, labour was not given the full political and social rights that had evolved in train with Western European industrialization. ₄₀

Let us now look at the interrelationship between the state system and social mobilisation in the Pacific case. There are some striking parallels between the emerging Pacific state system and the 19th century British-based European state system. In both cases the dominant processes were industrialization and nationalist consolidation. The popularity of social Darwinism in late 19th century Europe, signifies the importance of ethnic and racial discourses. ₄₁ Katzenstein emphasizes that the Asians interpret the world in racial terms, although this is never to be heard from their diplomats. The most intense mutual racism is between the Chinese and the Japanese. The Japanese, claims Katzenstein, view the outside world in Hobbesian terms, but domestic relations in Grotian terms: a world of the like-minded. The self in Asia, he claims, can only be understood in relational terms: in contrast to something else. ₄₂ The Germans, at the extreme, view the outside world in Grotian terms, while in domestic politics, the language of community is strictly forbidden. The reference back to nazi type of nationalism blocks this. Germans use community only as a term to be applied to the outside world.

On this basis we can also understand the following institutional difference: in the Pacific area, there were grand controversies on post World War II reparations. This is a clear parallell to the post-Versailles-situation of interwar Europe, but in postwar Western Europe, the problem of reparations was displaced, a solution possibly pushed by the U.S. ₄₃

In Western Europe, economic containment could work. In the East Asia, the consolidation of independent states was not finished in many cases, and the level of development was very low. Although China had retained some sort of independence even through the worst phases of fragmentation due to imperialist offensices, there was first a 1911 revolution, then a warlord period (nearly breaking up the empire), and then mobilisation for reunification, as the concessions were terminated, which gave China greater national sovereignty. But then came Japanese imperialism, weakening the Kuomintang, strengthening the Communists (see below).

The Chinese revolution can be seen as paradigmatic. It probably set an important example for other countries in the region. In Western Europe, the sovereignty of the allies was an easy precondition for Atlantic integration (embedded liberalism). In the Pacific, nationalist liberation movements switched to focus on the U.S. as soon as she took over from the European imperialists (cf. the case of Vietnam in particular).

In Western Europe, welfare states resulted, while in the Pacific, the need to consolidate a nationalist project led to different types of decolonised states, ranging between the two extremes of and developmental and predatory states (Table 3). The countries that became communist at once also developed strong states immediately (China, North Korea, North Vietnam). ₄₄ The states in chich non-communist regimes prevailed experienced different fates. Two of them — South Korea and Taiwan — were hardened by military regimes, and developed effective economic management in their efforts to resist their economically-planned, militarist counterparts. They clearly became developmental states. In Taiwan, Chiang Kai-Shek, originally a military dictator, constructed a strong and stable one-party state without destabilising forces. There were no military coups. In other countries (as some periods in postwar Africa), the post-colonial balance of powers and/or the more remote location with respect to the Cold War perimeter led to more predatory kinds of dictatorships. In Indonesia, Suharto came to power through a military coup which then was consolidated through mass murders of leftwingers and other regime opponents.

Postwar Western Europe actually saw peace: Neither was there international wars in the Pacific region, but there were civil wars often generating external intervention: Korea and Vietnam most typically! (In Europe, Germany had been divided without a war.) This was the distinct Cold War stamp on the emerging Pacific state system: civil wars on the Cold War perimeter gave rise to external intervention from outside the system. Such a period of civil wars could easily have led to a rather chaotic state system. But Cold War imperatives forced the U.S. to intervene and exert hegemony. Although the civil wars were national struggles, the U.S. could not ignore them, because of fear that their outcome might destabilize the Cold War perimeter. The evolving Pacific state system could not be left to itself, while e.g. the emerging African state system largely could in that period. (Cold War attention to the third world more broadly came since the mid-1960s, cf. Rostow’s criticism of the EIsenhower administration, but some attention to the African scene (Angola, etc.) was later.)

The Marshall aid to Western Europe was celebrated for its contribution to reconstruction, which in that region gave rise both to stabilization and economic development (understood as economic growth with returns distributed in ways which increased welfare and living standards broadly.) Again it seems reasonable to attribute this to the relative homogeneity of state/civil society relationships. ₄₅ In Pacific Asia, however, the impact of aid varied more. Most economic aid was used to cover public deficits, food aid (suited to the interests of U.S. farming lobbies) reduced trade deficits, but did little good to farmers who then suffered from depressed prices for their products. Other commodity aid such as cotton (cotton lobby!) and fertilizers were certainly more useful. The main contribution by the Americans to development in East Asia the 1950s was probably infrastructure investment. Yet, in so far as much of the aid covered government deficits (caused by military spending, poor capacity of taxation, public waste, etc.) or came in the form of finished goods, foodstuffs, its developmental orientation was limited. This changed during the Kennedy and Johnson administrations when much more aid came in the form of project aid and the U.S. pressured for balance on public budgets and trade accounts, pursuing economic reforms with carrots and sticks, at least in Northeast Asia. In Vietnam it would seem that much of the economic aid disappeared into waste and corruption.

Table 8. Western Europe and East Asia. Some important contrasts

	Western Europe	East Asia
Level of economic development	high, relatively homogeneous. Ready for Fordism	One semindustrialized country: Japan. Majority of countries not at all ready for Fordism
State System	Original European state system (Western part)	No original state system, rather: emerging nation states following WW II turbulence. Background: * Chinese empire * Overseas Chinese * European imperialism * Japanese imperialism
Dynamics of state system	Transcend the 19th century European state system. Peace to be institutionalised as cooperation (integration). Reparations question quickly solved. No racist discourses.	Racial discourse. Huge controversies on reparations. Civil wars. Emergence of a system akin to the 19th century European state system.
Nature of State	All relative strong	Only Japan really strong. Polarization between development and predatory states
Divided countries	Germany	Korea, China/Taiwan, Vietnam
Security structure	U.S. — Western Europe — USSR	U.S. — Japan — East Asia — China — USSR
Cold war sequence	Starts 1946/7	Tensions before 1949. Chinese revolution 1949. Korean war 1950.
Burden sharing	Aid facilitates economic development. Ambitious welfare states create problems for burden sharing	Aid stabilizes, at the most. Burden sharing hampered by low level of economic development and by pacifist sentiments in Japan
Social mobilization	Social-democratic reformist	Revolutionary-nationalist

 

These distinctions enable us to distinguish the Southern and Northern part of the Asian rim. We shall specify below how the Northern constellation generated development states. In particular, it seems relevant to conclude that economic containment succeeded with respect to Japan, and in a more long term sense with respect to Taiwan and South Korea (although no real democracies were established in these countries). In contrast, the Southern constellations were affected by longer term civil wars and instability, hampering the process of industrialization. These latter cases can certainly not be counted as economic containment. The U.S., as is well known, ended up spending many a U.S. tax payer’s money on the Korean and especially Vietnam wars, and generally on counterinsurgency activities in the region.

Security Patterns

We found that a main characteristic of U.S. hegemony in the Western bloc was the non-convergence of economic and security cleavages. We thus discuss security matters in analytic isolation from economic development. Doing that, we shall provide a critique of James Kurth’s comparison of the Pacific versus the Atlantic paradigm in international relations. ₄₆ This is one of the few systematic comparisons available. Kurth’s aims are quite parallell to ours, as he goes for substantial comparisons rather than abstract theoretical exercises based on rational choice theory or the like. But despite many good points, his analysis is weakened by both unfounded assertions and simplistic use of concepts from international relations.

Kurth’s paradigms combine broad characterizations of approaches to international economic policies and to international security. The Atlantic/European paradigm combines “international liberalism” and “extended deterrence”, while the Pacific basin paradigm combines “international mercantilism” and “finite deterrence”.

Already this definition introduces a basic ambiguity which is of great importance to the understanding of the difference between the integration patterns in the two regions. Consider international security: The notion of extended deterrence is well known, and the Cold War in Europe is clearly paradigmatic for its definition: The U.S. for most of the Cold War had nuclear supremacy, and tried to sustain a nuclear monopoly in the Nato alliance. Still, both France and Britain developed their own nuclear forces, although it has been discussed how independent they (especially the British ones) were, e.g. from U.S. infrastructure and intelligence. With or without such local Western European nuclear forces, however, the main dilemma of the extension of U.S. nuclear deterrence to the defence of the European continent was whether the U.S. would risk retaliation if Western Europe was attacked.

As a very simple model, take the case of a Soviet conventional or nuclear attack on Western Europe: if the U.S. would retaliate, hitting main targets in the USSR, it would risk Soviet strikes against targets in North America. It had been a constitutive view in the Cold War that Western Europe had to be defended to bloc USSR access to the strongest industrial region of Eurasia, with many harbours leading directly into the Atlantic. But the Western Europeans still periodically hesitated to believe that the U.S. would actually risk having nuclear attacks against their own soil only to defend Western Europe. On the other hand, the Western Europeans feared that the superpowers might find nuclear war on European territory.

Kurth argues that with respect to the Pacific area, only finite deterrence was relevant. But what is finite deterrence? This notion is not much mentioned in the (now out of fashion) Cold War literature on deterrence theory. But one must assume that it refers simply to non-extended deterrence, e.g. the U.S. deterring the USSR from attacking U.S. soil. ₄₇ So finite deterrence is simply accumulation of weapons and capabilities, to deter an enemy from attacking the country’s own territory. To say that countries in the Pacific region aimed at finite deterrence then seems self evident, since any sovereign state obviously did so too, and the U.S. especially.

Furthermore, the U.S. relationship to Japan would still be a relationship of extended deterrence. ₄₈ Thus, what Kurth provides is simply a list of features that characterize the Japanese security situation. ₄₉ The first is Japan’s insular geography. The second is Japan’s “enduring nuclear allergy” because of Hiroshima and Nagasaki. The country has no national nuclear force. The third feature is extended deterrence is only related to South-Korea vs. North-Korea. ₅₀

Thus, his dichotomy between finite and extended deterrence is not really helpful. Rather, the comparison of USA’s relations to Japan and Western Europe leads us to emphasize a combination of similarities and differences. The basic similarity is U.S. support in terms of troops and aid. ₅₁ The difference is that in Western Europe, the security constellation was such that nuclear scenarios were considered throughout the Cold War, while in Japan, nuclear scenarios were obviously not considered in any large measure.

Similarly, the notions of international liberalism versus mercantilismen — although well known from international relations literature — are much to crude to be of any help in comparative analysis. Just remember that in Ruggie’s notion of embedded liberalism, we have a notion emphasizing the concern for the national objectives of the postwar Western European liberal model. As for the notion of mercantilism, it taps some characteristics of the Japanese approach to international economic policies (export-promotion, accumulation of surpluses, the peculiar regional division of labour in the East Asian region), ₅₂ but still the notion retains too many allusions to the pre-industrial European system of mercantilistic states, marked by absolutism and operating in a world market restrained by the transport technologies of sailing ships. ₅₃

Instead of Kurth’s rather global notions, our approach is to distinguish specific national political-economic models, and to consider their regional integration together with the regional security constellations. So, the peculiarity with postwar Japan is not some strategy of finite deterrence, but the specific ways in which that country has pursued a low-key strategy of national security.

Minimizing any connotations of their militarist pasts, Japan and West Germany emerged as the genuine trading states of the postwar period. But there are differences: Japan has only limited defensive capability against an attack utilizing conventional weapons: the Self-Defense Forces. West Germany — although not allowed to have its own nuclear forces — has nuclear defence as member of Nato.

In fact, the very notion of national security has been virtually absent from Japanese discussions. Japan established a bilateral security alliance with the U.S. (1951). To accommodate its heavily pacifistic lobbies, Japan has always pursued a policy of scepticism towards nuclear arms and nuclear strategies. Japan has constitutionally renounced war, use of threat of force and the right to belligerence. Japanese diplomacy has worked extensively to outlaw nuclear weapons and testing, this is clearly a point of disagreement with the U.S. This, of course, fundamentally reflects the fact that Japan still is the only country to have suffered from nuclear bombing (Hiroshima and Nagasaki in 1945). West Germany not explicitly critical, never any nuclear bombs thrown over Germany! Furthermore, the Japanese stance also reflects the feature that we found above: in the Pacific region, Japan was the only industrialised ally, the only great power to be allied with the Western bloc after the “loss of China” in 1949. The combination of the memory of U.S. nuclear bombs and regional geopolitical importance (due to both geography, population, and industrialization) made the U.S. uniquely generous to Japan in the first postwar decades.

The Treaty of San Fransisco (September 1951) gave the U.S. the right to administrate Okinawa and Ogasawara (returned 1968), but Japan had “residual sovereignty”. (The US-Japanese Security Treaty is the main basis for US role in Japan’s security matters.) At Okinawa was the main regional U.S. base: facing the Chinese mainland right between Japan and Taiwan. (It served as base for bomber raids on Vietnam in the 1960s.) Since the end of the Korean war, there was in addition the U.S. presence in South Korea, the only Western ally on the northern shore of the Rim, the “dagger” pointed against Japan. Okinawa was returned in May 1972. The U.S. retained military installations, but under the revised mutual security treaty, military forces cannot be sent into combat from Japanese territory without Japanese consent.

The map shows Japan as a stretched out belt of huge islands facing both Mainland China and the most southwards parts of USSR (Siberia), where Vladivostoc is the home port of the Soviet Pacific naval fleet, with an all year harbour thanks to icebreakers in the winter months. Also this geographical reveals differences with the European situation. In East Asia, the Cold War enemies (China and USSR) both had access to the Pacific. In Western Europe, the postwar U.S. allies were the old Western European powers which blocked direct access for the USSR to the Atlantic ocean. ₅₄ In Western Europe, the U.S. geopolitical concern was — like England earlier — to prevent one hostile power from dominating the whole Western part of the Continent. In East Asia, the two Cold War opponents already dominated the Continent as if the USSR had already dominated the Continent as if the USSR had already dominated the German, Dutch and French coasts. Furthermore, in Western Europe, Cold War diplomacy was conducted between the USSR and the various U.S.-allied Nato-members. In East Asia, on the other hand, Japanese diplomacy with its huge neighbours, USSR and China, was mainly low-key, economic diplomacy. ₅₅

The East-Asian continent consisted of two huge great powers with nuclear arms and huge populations. From the point of view of the USSR, this was different from the European situation, where it was not necessary to consider the consequences for another “socialist great power”. The smaller Eastern European countries were firmly linked to the USSR through the Warzaw pact. With Cold War glasses, it was perhaps easy to think of the USSR and China as coordinated promotors of the Communist cause, but this should now be considered an idealist marxist fallacy. These powers were not idealistically internationalist. There is a long history of the regional tensions between them. If any of the two socialist great powers would ever think of invading Japan, they would also have to think the consequences for their relation to the other regional, socialist great powers.

By 1975, the U.S. Nixon-administration’s played its China card. Still, this did not create a situation of extended deterrence. China already had nuclear capabilities, and the U.S. would never extend the nuclear umbrella to China. Constructing a situation akin to the principal external deterrence with respect to Europe.

In the Northeast the structure was insular/peninsular sovereign units (Japan, South Korea, Taiwan), and U.S: support would ensure containment against the USSR and China, the huge mainland powers. This whole context contrasts with Nato: On the European continent itself, far from insular/peninsular, were huge Nato-partners France (despite its withdrawal from the command structure, 1966), West Germany and Italy. West Germany was one out of several countries contributing extensively with the U.S. in an alliance directed against the USSR. And the USSR was the only huge adversary.

Within a revisionist framework, Petras and Morley discuss four cases in which U.S. administrations considered the use of nuclear weapons against Third World revolutionaries. ₅₆ In the Korean War this was publicly considered when China intervened in November 1950. In Fall 1951 simulation experiments were made. In April 1950, there was explicit atomic diplomacy, and in March 1953, the NSC assessed the cost-effectiveness of nuclear strikes compared to conventional weapons was discussed. In spring 1953, threats were made of strikes not only in Korea, but at major Chinese population centres. At that time, nuclear missiles were also placed at Okinawa. The main problem that was voiced in elite links was the danger that a U.S. nuclear strike would drag til USSR into the conflict.

At the same time in Southeast Asia, president Eisenhower approved JCS’s recommendation of striking in China if China intervened in Indochina, where the U.S. conducted large scale support of ailing French imperialism, due to the fear of a domino-effect of the Vietnamese revolution. There was hinted at a possible loan of nuclear bombs to France. Again, a main fear in the Eisenhower administration was that the USSR would enter the war.

In the Vietnam war, use of nuclear bombs was considered in 1969, at a time at which a nuclear attack could possibly have triggered global nuclear confrontation, as the USSR would have aided the Vietnamese allies.

First note that all these three cases are instances of external deterrence where the immediate “Eastern bloc” opponent is China. This leads us to realise a major difference with the European situation: there the structure was a triad: The U-S. — Western Europe — USSR. ₅₇ In East Asia — both south and north — the structure was more complex.. There, the U.S. also related to “allied” countries (Korea and Vietnam), but behind the immediate opponent (China), was the USSR (which was the main nuclear arsenal, China did not possess such weapons in the first two cases). In the Vietnam war, France was an intermediate instance on the Western side. ₅₈ Another point to note here is the absence of Japan in these regional matters.

More generally, Southeast Asia was a region of limited geopolitical importance. (One might think of an analogy with Southern Europe, but we shall not pursue that further here.) It contained no huge industrial resources, and both China and the USSR already had access to the Pacific. If China was seen as the main problem, one might see its quest for buffer states in Southeast Asia similar to that Russian imperative in Eastern-Europe, but Indochina poses no “threat” similar to that of Germany. Furthermore, with respect to Japan, which is insular, no “buffer states” were geographically possible. Only by importing the crudest expansionist motives on China, a U.S. domino-worry could be sustained.

Returning to Kurth’s arguments, these historical and structural factors — rather than some inherent properties of finite deterrence — is what leads to his — well taken — conclusion: “The problem of deterring the Soviets in Asia is more soluble and the solution more stable than in Europe”. And: “Japan, because of its insular geography, and China, because of its massive population and its own nuclear force, are much less likely targets of a Soviet blitzkrieg than Western Europe”, and West Germany. ₅₉

We should allow ourselves one grand counterfactual exercise: what if China by 1949 had not been lost to the Western bloc? What if China had emerged as a state system of three or four or more sovereign states (after all China was quite fragmented in the interwar “warlords”-period)? Then we would have a formal resemblance between the European continent and mainland China, and the only aggressive “other” would be the USSR! However, it would not be enough to simulate a similar structure, we would also need to assume a level of economic development roughly similar to Western Europe before we could begin to explore thought-scenarios of U.S. extended deterrence promising the defence of mainland China!

From his much too stylized comparison, Kurth derives a grand statement, which is actually a claim that in US strategic thinking, the paradigm developed for the Atlantic area was transferred to the Pacific, and that this “projection” had grand consequences. Unfortunately, through his essay he does not at all try to prove this in any detail:

“The greatest disasters in U.S. security policy — toward China in the 1940s and 1950s and toward Indochina in the 1960s and 1970s — resulted from the American effort to interpret the Asian reality through the European prism, to squeeze it into the NATO model. Similarly, the greatest conflicts in U.S. foreign economic policy — toward Japan and the East Asian newly industrializing countries in the 1980s — have resulted from the U.S. effort to squeeze these countries into the GATT model.” ₆₀

We just indicated that Seato was in reality quite different from Nato. In Indochina, the U.S. intervened in a civil war like situation in a developing country, while Nato was an alliance of relatively stable industrial democracies. As for GATT, the U.S. was instrumental in making Japan a member of GATT, but the result must be understood in terms of the interaction between two different economic-political models, rather than as a consequence of U.S. applying an ill-suited paradigm. ₆₁

A crucial point in Kurth’s diagnosis is the following: if the U.S. should “allow” an international system based on international mercantilism and finite deterrence, then the U.S. “would no longer be the core country in the Pacific region.” ₆₂ But this is not the question, the question at the most is what kind of regional state system the U.S. would allow. Kurth reasons as if the U.S. would turn mercantilist i.e. close its open markets, and introduce finite deterrence, that is, claims Kurth, to withdraw its 7th fleet! In that case, the U.S. would be of little importance in Pacific Asia, and Japan and China would become the core countries. ₆₃ This only goes to show that — as we already claimed — the ideal types of international liberalism/mercantilism and finite/extended deterrence are too crude to produce a realistic comparative analysis. Kurth also disregards the main point — made early on by F. List — that liberalism of the strongest may in many respects be seen as mercantilistic.

Back to the Cold War: This can be rephrased as a statement that the 1947-49-experience in Europe influenced the way in which U.S. Cold Warriors interpreted the Asian scene?? However, the differences we have listed are so many that it is highly unlikely that U.S. policy makers would ignore them in practice. However, there may have been cases where the European experience biased their judgments. ₆₄

The experience of Nato was some of the background for Seato: The Southeast Asia Treaty organisation was based on the South East Asian Collective defence treaty, signed Sept. 8, 1954 in Manila, following the withdrawal of France from Indochina. From the region itself, only the Phillipines and Thailand were members, other members were Pakistan (out 1953), Australia, New Zealand, as well as Britain and the U.S. Important regional states as India, Indonesia, Burma, Malaysia pursued non-alignment foreign policies and often critisized Seato. Most crucially, J. F. Dulles failed to include Japan in a regional defence treaty, while Nato, on contrast, absorbed West Germany at the time. The Japanese government also resisted U.S. attempts to increase Japan’s own military capacity quite successfully. ₆₅

The area covered by Seato was only Southeast Asia and parts of the Western Pacific, not including Taiwan and Hong Kong. A protocol under the Treaty brought Cambodia, Laos and South Vietnam under SEATO protection. Unlike Nato, there were no military forces directly assigned to Seato, instead the organization dealt especially with problems of Communist infiltration, subversion and economic penetration. Seato-signatories participated, most even provided forces in the Vietnam war, but Seato could neither prevent nor master the unruliness of the 1960s and 70s. As the U.S. loss in Vietnam was obvious (April 1975), Thailand and the Phillipines proposed phasing out of Seato, which was formally achieved in June 1975.

The difference with Nato is enormous: Nato grew into an integrated command structure as the Cold War became militarized. Nato was a much more successful vehicle for U.S. dominance. Nato was also challenged many a time: even in Western Europe there were non-members (Sweden, Finland, Austria, Switzerland, Ireland), partial defectors (France). U.S. nuclear monopoly was not respected, as both Britain and France developed their own nuclear forces. But even in its period of non-participation in the joint command structure, France benefitted in large measure from its general association with the organisation. Nato included the most crucial states in the region. In contrast to Seato, Nato faced no crisis that lead to its dissolution, and so far, it has even survived the end of the Cold War. Nato existed on the basis of relatively successful economic containment, while in the unruly constellations in Southeast Asia, all that could be done was military containment, and that proved not successful, at least not in Vietnam.

The important point here is that the Cold War first started in Western Europe (1946/7) and then moved to the Pacific 1949. At that time, the situation calmed down in Western Europe: the Berlin blockade was over, uncertainties between the superpowers had been resolved: “what had been primarily a European antagonism now became a global one”, and the first step in that process was extension to Asia. ₆₆ NSC-48/2 (approved by Truman at the end of 1949, as Mao’s victory was obvious) extended the Truman doctrine to Asia: “Now and for the foreseeable future it is the USSR which threatens to dominate Asia through the complementary instruments of communist conspiracy and diplomatic pressure supported by military strength. For the foreseeable future, therefore, our immediate objective must be to contain and where feasible to reduce the power and influence of the USSR in Asia to such a degree that the Soviet Union is not capable of threatening the security of the United States form that area.” Concerning Indochina, U.S. officials seemed aware of the special political challenges, emphasizing the need “to satisfy the fundamental demands of the nationalist movement while at the same time minimizing the strain on the colonial powers who are our Western allies”. ₆₇

 

5. The historical sequence of Pacific East Asian integration

We have been trough a rather extensive comparison, which has served to establish the different contexts of integration in our two areas of the postwar Western bloc. The comparisons just sketched were developed by using a sketch of Western European integration in order to discover the differences — or limits to the analogy — in the East Asian case. In the course of this comparison, we specified several dimensions of the comparison, and a number of concepts turned out to be useful (state system, geopolitical patterns, convergence or nonconvergence of economic and geopolitical competition, economic development discrepancies, South and North East Asian trajectory, etc.). Drawing on these concepts and comparisons, we shall now sketch the sequence of postwar East Asian integration. (Note that for reasons of space, we provide here only the short version of a much lengthy account that we are working on.)

The early postwar period

In the period 1945-49, the situation in the whole region was rather unclear. The fate of China was not decided until 1949, and before that it was impossible to predict whether there would be a “Cold War” in the region and eventually, what the geopolitical structure of that war would be. We thus start in the North: the Americans first concentrated their attention on Japan’s Northeast Asian periphery. Here the colonies of the Japanese colonial empire became independent immediately after Japan’s war defeat, whereas European colonial rule was re-established in the Southeast Asian colonies.

The U.S. stood as the sole occupying power of Japan, and had to launch a policy of reconstruction. We shall not consider the early plans: Visions of “pastoralization” (similar views w.r.t. Germany existed in the Roosevelt-administration) were soon scrapped. In 1947, parallell to the victory of the Cold War views on Europe, it became clear to U.S. authorities that Japan suffered from great economic problems which might strengthen its political Left. ₆₈ We shall not detail the change sin reconstruction policies. The story of the survival of Japan’s zaibatsu industrial combines in a new context in which both the army and navy branches of the military establishment were completely neutralized, is well known.

Some American policy makers were quite reserved about East Asia 1947-9. George Kennan, an influential voice, regarded Asia Pacific as a quagmire and suggested very selective use of resources, with the main aim of securing Japan. As for East Asia, there was never a rhetoric of “the United States of East Asia”. References were made only to a reconstruction of Japan’s regional economic role.

From 1947 such a project of regional integration was presented as a means to strengthen the Japanese economy. As we argued above, restoring the role of the Japanese and (West) German economies in their respective regions became crucial in the Cold War diagnosis. The attempt was to strengthen the very weak Japanese economy by restoring its economic ties with countries in the region. In 1934-36 the region covered 64 per cent of Japan’s exports and 54 per cent of its imports. In 1947, in contrast, these numbers were 4 and 6 per cent respectively. Japan had to import from the U.S. a number of the raw materials that the country had earlier drawn from the region, but lacked the dollar incomes necessary to pay for this. The country thus needed U.S. aid in order to pay for its imports, but suffered from huge trade deficits with the U.S. In order to solve these problems, U.S. authorities on various occasions sought to renew Japan’s trade with South Korea, Taiwan, China and Southeast Asia.

But with the extension of the Cold War to the Pacific, the option of establishing economic ties between Japan and China was closed. A cold war perimeter was established. With the “loss of China”, U.S. attention concentrated on Japan. In 1949 the Americans pressured the Japanese government to undertake a draconian austerity programme which brought inflation and government spending under control, but also led to economic stagnation and massive unemployment. ₆₉ In that context, the U.S. efforts to strengthen ties between Japan and an East Asian periphery intensified. In Western Europe, to the contrary, Marshall aid was already being provided, and the U.S. exerted strong pressure for overall integration. We here discover several features that were already brought out in the comparative analysis: Since Japan was the only industrialized East Asian country, the effort to lift the burden of supporting Japan off the U.S. implied the reconstitution of what the other, less developed countries in the region knew as a bluntly imperialist division of labour. The contrast with Western Europe is clear: the U.S. there opposed the British privileges in the Empire, and suggested an integration of the main highly developed (but war-damaged) economies. The broad solution was barred by Britain, but the little Europe solution was realised, and in the ECSC (European Coal and Steel Community), the very basic coal/steel sectors (at the core of the Fordist industrial structure) were coordinated and restructured across the borders of six states. This was something the Western European did by themselves, wheres in East Asia, it was always the U.S. who pushed the others on Japan’s behalf.

With the Korean war (1950-), the U.S. had to establish an embargo on China. It has been argued that the initial U.S. commitment to these “quagmires” stemmed from the U.S. interest in stabilising the Japanese economy by re-establishing core-periphery relations between an industrialised Japan and an East Asian hinterland of primary producers. ₇₀ There was scant success for this U.S. project, not just because of Japan’s regional stigma, but also because there were few promising economic effects (as China was excluded from the plans, the economic burdens on Japan’s smaller neighbours would be even heavier). Furthermore, even in this region, Britain, with its Commonwealth associates, counteracted some of the U.S. moves. ₇₁

With the Korean war, Japan gained contracts on deliveries connected not only to U.S. regional aid, but also to military activities. Weapons production for the U.S. side in the Korean war was crucial for the reconstruction of Japanese heavy industry and military production, and Japanese exports also benefitted from increasing demand in U.S. and European markets. (During the Vietnam war a number of other allies in the region also benefitted from such contracts under U.S. aid and military budgets.) After the Korean war, however, efforts to restore the regional division of labour were not very successful. Despite the Japanese miracle from the Korea boom, and onwards, the U.S. still had to absorb a huge amount of Japanese exports, while Japanese imports of foodstuffs and raw materials from Asia remained moderate in comparison with the periods before the war. The Americans had promised the Japanese rehabilitation orders in war-torn South Korea to compensate their loss of military procurement, but these attempts to “recycle” aid to South Korea were obstructed by the anti-Japanese sentiments against former Japanese colonisers in South Korea as the South Korean government insisted on using U.S. aid funds for domestic import-substitution rather than procurement from Japan. ₇₂ Huge controversies on reparations (cf. comparative point about this above) also barred progress.

What was created during the 1950s was rather the political foundation for regional economic integration, thanks to U.S. diplomacy which saved the peace settlement with Japan at the San Fransisco peace conference in 1951. The region was marked by economic and geopolitical bilateralism, with the U.S. as the core.

As for security cooperation, that could only be achieved in the southern part of the region (SEATO from 1954; see above on the marked difference with Nato).

In the case of Western Europe, we traced a continental vision, above all related to the Franco-German axis (thus, a process of controlled rearmament in West Germany was achieved, whereas Japan remained more staunchly pacifist, relatively speaking, that is). In the case of East Asia, there was no realistic axis. Had China not been “lost” to the U.S. in 1949, could a Sino-Japanese axis have been expected? Such a difficult counterfactual would at least require that hostilities accumulating in the 1897-1945-period could have been transcended. The comparison here is the extension of peace and cooperation between Germany and France in Western Europe. Here it is interesting that while the Germans — under U.S. influence — were given a constitutional commitment to European integration, and that the German identity was to a large extent “non-nationalistic”. A similar “Copernican turn” cannot be traced in Japan. ₇₃

Japan was in line with the U.S. strategy for regional integration, with one exception. There was a strong wish to establish economic relations with China, so the recognition of Taiwan, at the expense of recognizing PR China, was a bitter decision, and there was a lot of “back door diplomacy” with China following the recognition of Taiwan. Still, there was only low key interaction with China, partly as a result of pressure from the U.S. and Taiwan, partly as a result of Chinese spells of economic and political insulation. In Western Europe, we argued, the U.S. allies procrustinated on burden sharing and built welfare states. Japan hardly had a welfare state programme, ₇₄ but backed by strong pacifist currents in the Japanese population, and with the U.S. vary of the very negative attitudes — throughout the region — towards Japanese rearmament, Japan was able to resist/limit U.S. suggestions of stepped up defence spending.

Taiwan’s problem was the opposite one. Taiwan wished to spend more on their defence than what the U.S. suggested. Generally, the military spending of the main regional allies depended on extensive U.S. subsidies, and the Americans strove to find ways of reducing these huge transfers.

In fact, the most effective policy measure the U.S. could hit upon was agrarian reforms. These reforms did not lead to development of welfare states, but they led to a more equal distribution of the welfare that resulted from economic growth. In particular towards the Northeast Asian allies (Japan as mentioned earlier, South-Korea, Taiwan), the U.S. had obvious geopolitical motives for agrarian reforms. There were also less successful agrarian reforms, spurred by the U.S. in South Vietnam and the Phillipines. Even other elements of rudimentary welfare policies — there are examples in Malaysia — were motivated by security policy objectives, that is, the need to weaken the basis for communist mobilisation. This is the closest we get to economic containment in the Pacific region, and in this respect, U.S. influence has credit for the later NIC-miracle.

Economic independence of East Asian countries which swallowed a growing proportion of U.S. overseas defence expenditure became a concern due to the fiscal concerns of the second Eisenhower administration. That administration started to design plans for reduced military aid and temporary increases of economic aid coupled with various kinds of conditionality demands in order to make its Asian allies more self-reliant in the long run. Let us now consider Japan’s neighbours in Northeast Asia, to see how U.S. policies contributed to the emergence of the famous NIC-economies. After independence these new states were shattered by massive civil wars which left them permanently divided (the People’s Republic of China/the Republic of China on Taiwan, the Republic of Korea/the People’s Republic of Korea) as well as massive migrations related to these civil wars. These processes disturbed the established social order and allowed for the formation of new strong states. ₇₅ With the onset of the Korean War, South Korea and Taiwan became pivotal in the U.S. containment strategy and received large amounts of U.S. military and economic aid. This allowed for the maintenance and modernization of huge military forces. The Americans also co-operated with the authorities in implementing radical land reforms (and used considerable pressure to implement these reforms in the Korean case). These reforms removed the landlord classes of the two countries and further raised the autonomy and centralization of the two states. ₇₆ In Taiwan, U.S. aid was also used to improve the bureaucratic capabilities within economic planning and budgeting and to undertake rural development programmes. ₇₇ U.S. budget support also allowed both states to undertake manufacturing import substitution programmes. Thus, U.S. support contributed to the build-up of strongly militarized and autonomous states with a fairly equal distribution of income and land in Taiwan and South Korea. U.S. assistance also raised the bureaucratic capabilities of these two states as regards economic management.

As the U.S. proceeded to cut down on these supports in the late 1950s and early 1960s, these states began to use their potentials of coordination and production to gain shares of the world market for manufacturing goods. Taiwan changed to export promotion programmes in the late 1950s and early 1960s and South Korea followed in the mid-1960s. In both cases textiles and other labour intensive light manufactures were the main export articles and export promotion went together with considerable state intervention and continuos selective import-substitution. ₇₈

In sum, in the Northern part of the Cold War perimeter, the first postwar decades brought a sequence of civil war, external intervention, stabilization, leading to a platform for export promotion.

Let us now turn to the southern part of the region. There, the dynamic was different in this period. In general, the strength of the state and the level of industrialisation was lower than in Northeast Asia. The Cold War perimeter was less stable, especially in Indochina. Civil wars lingered on. North Vietnam possibly developed a strong state, but no industry, while the more industrialised South Vietnam could not resist the pressure from North Vietnam, thus collapsing.

Yet, there were important differences within the region. These differences can to a large extent be related to geopolitical factors. The early-developers in Southeast Asia were Singapore and Malaya. Malaya prospered from the war-time demand and growing prices of rubber and tin during the Korean War. Growing government revenue allowed the administration in the two colonies to undertake administrative reforms and infrastructure-development programmes. These programmes were in large part directed by counter-insurgency strategies against communist guerillas, but they also established a foundation for subsequent development policies. ₇₉

Otherwise, the Korean War and its aftermath had little impact on the Southeast Asian countries. Another country heavily favoured by geopolitical factors was Thailand. Thailand became an important front-line state in the U.S. containment strategy after the 1954 Geneva Conference which recognized the North Vietnamese Vietminh government. The U.S. containment strategy now centred on sustaining an Asian rimland from Japan down to South Korea, Taiwan, South Vietnam and Thailand. Thus, U.S. aid to Thailand increased from the mid-1950s with particular emphasis on improving the transportation and communication infrastructure as well as improvements of Thailand’s public administration. ₈₀ We mentioned in the comparative section that many of these states are close to the predatory type. But this element may have been mildened by a highly peculiar type of economic integration. It is quite important that the bourgeoisie in this area consisted of Chinese to a much larger degree than in the North. This has given rise to much ethno-political controversy, but also to flourishing capitalist developments during the last decades. While Japan emerged as a model of state policies and formation of institutions, both through colonialism and later by example in the postwar period (Japan was possibly also a model for the organisation of firms, cf. the South-Korean chaebols), a much looser and diffuse type of networking evolved around the South China Sea, based mainly on the Chinese. (Cf. the above discussion of North-South-differences.) The strong Chinese influence in the south is of a diffuse, non-state-based nature. The Chinese traders and manufacturers had prospered from colonialism in Southeast Asia, but they benefited further from decolonization. After de-colonization the Chinese were able to move into economic positions which earlier had been held by the colonizers. Similarly, in independent Thailand the removal of Europeans during World War II allowed Chinese to take over local banking. ₈₁

Throughout the colonial period as well as after independence the Chinese merchants were “pariahs” exposed to the dislike of indigenous underclasses and marginalized indigenous elites and occasionally scapegoated by the rulers. Indigenous nationalist movements had also mobilized against Chinese economic dominance. Nevertheless the new rulers were normally too weak to dispose of the Chinese.

The Chinese developed various kinds of ethnic networks based on speech group and ancestral descent. These networks frequently spanned over several countries in the Southeast Asian region. This allowed for swift dissemination of information, mobilization of cheap credits and movements of capital into new enterprises and geographical areas, access to labour from fellow underclass kinsmen and market outlets. The high mobility of capital within and across borders and the ethnic exclusiveness of economic interaction protected against confiscation by the government. ₈₂

The Chinese business communities had access to “exits options”, a feature which checked discriminatory policies by the new indigenous Southeast Asian governments. A process of slow and painful adaptation and accommodation (with several bloody setbacks) took place after decolonization as the Chinese economic elites were forced to shift from European to indigenous patronage and the local rulers learned to restrain their “squeeze” on Chinese capital.

The Chinese had knowledge of local conditions and markets as well as of modern trade- and manufacturing techniques. This influenced Japanese investors to seek overseas Chinese interlocutors as they re-established their presence in Southeast Asia in the post-war period. ₈₃ This seems to be a rather crucial feature. A main point in the study of East Asia integration must be how despite the failure of the U.S. push to recreate a “mercantilistic” division of labour between Japan and its neighbouring countries, such a division of labour eventually did reemerge, at least between Japan and the Southeast Asian countries (but even with Taiwan and South Korea, the link to Japan was crucial for their rise to industrial strength). It may be hypothesized that a crucial factor here were not U.S. actions, not Japanese actions, but the actions of a third group — the network of foreign Chinese — perhaps less marked by hatered of the Japanese, or cynical enough to value the benefits accruing from reintegration with the regional industrial leader country. Japan had been blocked by the U.S. as far as extensive economic relations with the PRC went, but they could rely on networks of foreign chinese!

The overseas Chinese business community gained further strength at the end of the Chinese civil war when a large number of businessmen from Shanghai and other major Chinese cities relocated to surrounding areas, in particular Hong Kong. ₈₄ Ethnic Chinese control 80 to 90 percent of the property in the area. ₈₅ When the group of NICs rose to fame in the 1980s, Hong Kong and Singapore was classified with Taiwan and South Korea, but we see here that the Northeast and the Southeast cases became NICs on entirely different backgrounds.

Asian regionalism, as pointed out by Katzenstein, is marked by two intersecting developments: “Japanese economic penetration of Asian supplier networks through a system of producer alliances on the one hand and the emergence of a pan-Pacific trading region which includes both Asia and North America on the other.” ₈₆

Integration in the 1960s

The Truman administrations (1945-52) and the first Eisenhower administration (1953-56) were not much concerned about economic development, economic aid should primarily stabilize U.S. allies, as mentioned earlier. “Economic independence” of East Asian countries which swallowed a growing proportion of U.S. overseas defence expenditure became a concern to the fiscal conservative Eisenhower administration from the mid-1950s which tried to reduce military aid and temporary increases of economic aid coupled with various kinds of conditionality demands in order to make its Asian allies more self-reliant in the long run. This trend towards increased emphasis on economic aid was continued by the Kennedy administration. Now economic development was promoted as a weapon in the Cold War by Rostow and others who became influential in the Kennedy and Johnson administrations.

This emphasis on development went together with a renewed effort to accomplish regional integration among allied countries in Pacific Asia by the Kennedy and Johnson administrations. Walt Rostow was a key person in this process. ₈₇ The main motive was the wish to contain communism in Southeast Asia by strengthening integration between the non-communist countries of the region, promoting Japan as the locomotive of the process. Rostow served as the head of the State Department’s Policy Planning Council during 1961-66. His first task was to explore the possibility of intensified economic co-operation in East Asia. This led to a series of piecemeal actions to improve relations between Japan and East Asian nations in the early 1960s. During the second half of the decade the United States co-operated with Japan to launch a more concerted multilateral effort at non-communist East Asian integration through the Asian Development Bank. This institution would later become very crucial. ₈₈

It is here important to note that this is not just a mechanical continuation of the late 1940s U.S. policy of finding an economic hinterland to Japan. Japan could in fact now easily cope on its own. The important thing was to use Japan to pull Southeast Asian countries away from communism, in particular from its Chinese variety, to limit Japan’s interest in increased economic interaction with mainland China, and to redirect Japan towards economic interaction with Southeast Asia. A document to the Policy Planning Council of 1964 imagined a hegemonic division of labour in which Japan increasingly covered development aid, while the U.S. specialized in security assistance. Japanese aid should also improve Japan’s strained relations with East Asian countries. ₈₉

A breakthrough occurred in 1964-65 after strong U.S. pressure in the negotiations between Japan and Taiwan as well as between Japan and South Korea to improve their relationship. The improved relations were solidified by major Japanese low-interest loans and aid to the two countries. ₉₀

Japan’s economic assistance programs were closely linked with her business community’s interests in the region. Japan’s “tied aid” was designed to support Japan’s exports and foreign direct investment. A large share of Japan’s bilateral aid came in the form of loans that were earmarked for specific projects. There were often provisions that the loans should be used to purchase industrial plants and equipment from Japan.

In 1964 the United States sent troops into Vietnam. Just as Japan enjoyed many benefits from the Korean war, South Korea, Taiwan and Thailand prospered during the Vietnam war boom. These countries gained a number of economic benefits related to military procurement and export to Vietnam in return for their support of the war, and South Korea and Thailand also received a very generous economic compensation for their support in the focus of troops in the war. In the case of South Korea these compensations compensated the ongoing U.S. aid reductions. Taiwan also wanted to support troops but they were not allowed to do so by the Americans who feared the consequences of letting Nationalist troops loose near the Chinese border.

South Korea and — especially — Taiwan largely exported semi-finished manufactured goods and capital goods to South Vietnam, but their industrial exports to the industrialised world consisted of labour-intensive light industry products such as textiles. In this way Vietnam served as a protected market which allowed the two countries to gain initial experience in industrial deepening. ₉₁ The amount of U.S. aid to Taiwan now increased along with the construction and operation of a number of U.S. military bases in Thailand, generous compensation for the deployment of Thai troops in Vietnam, increased export from Thailand to Vietnam paid by U.S. funds and “Rest and Recreation” for U.S. personnel. U.S. expenditure contributed strongly to Thailand’s economic boom during the 1960s and the early 1970s. This ability of Thailand to benefit from the Vietnam War and U.S. aid contrasts with the Philippines and South Vietnam where economic aid was spent far more unproductively and did not have the same effects. ₉₂ Singapore was also able to benefit from the Vietnam War through export to Vietnam paid by U.S. funds. Most importantly, Singapore was able to take advantage of the expanding war-fuelled U.S. markets and increase its exports to the United States during the war. ₉₃

In the 1970s the United States started to withdraw from Indochina, and cut its war-related support to surrounding East Asian countries. The “first division” in East Asian development (Singapore, Taiwan and South Korea) along with Thailand had, as we saw, managed to benefit from the Vietnam War in various ways. The Philippines had stagnated and lagged behind. The countries of Indochina which had been regional economic laggards at the outset were lagging further behind as a result of damaging wars while the other countries of the region were relatively unaffected by the war.

Japanese investments in East Asia grew considerably in the late 1960s when the Japanese government lifted its restrictions on foreign investment. The Japanese invested in labour-intensive manufacturing in South Korea, Taiwan, Hong Kong and Singapore, and to a larger extent investments in extractive activities in the rest of Southeast Asia. Japan’s trade with Asian neighbour countries tended to create and reproduce trade imbalances on an increasing scale. Japan exported high value-added manufactures which had high income elasticity, while she only imported primary goods and low value-added manufactures with low income elasticity. The surplus on the trade balance was counterbalanced by a deficit on Japan’s capital account in the form of foreign investment. Japan’s foreign investment in these countries also contributed to preserve their dependency on Japanese capital goods and other input factors so that trade-imbalances were reproduced. ₉₄

The initial Japanese investments in manufacturing in neighbouring Asian countries were within labour-intensive manufactures such as textiles, metal products and electrical machinery. These investments surged in the late 1960s due to a domestic recession. The firms suffered from a shortage of young factory workers, rising prices of land and faced growing competition from other East Asian countries.

Japanese producers responded by moving to more labour abundant, low-wage neighbouring countries, especially the “four dragons”, South Korea, Taiwan, Hong Kong and Singapore. Japanese authorities lifted previous restrictions of capital movements abroad and supported the exodus. The exodus was accelerated by the revaluation of the yen in 1971. Japan’s economic planners now envisaged that Japan should concentrate on hi-tech capital- and knowledge-intensive activities and move her “sunset industries” abroad. ₉₅

Both small and large Japanese companies invested abroad. The small companies were led abroad by the big trading companies which advanced funds needed, arranged joint ventures with local partners and organised imports of inputs as well as exports of the final products. To a greater extent than U.S. and European investments, Japanese foreign investments were based on joint enterprise and minority ownership.

To some extent this pattern reflected that the Japanese investors were “immature”, relatively small firms by Western standards with a weak bargaining position so that they relied on local partners. But the extensive reliance on local partners also duplicated the domestic system of Japanese informal economic concentration. Local majority ownership concealed the power of the Japanese investors and trading companies in terms of control of marketing, supplies of inputs, licensing and upstream flows of finished products. ₉₆

Based on this account, we can specify the mercantilist spects of trade policies in the East Asian region. This is so especially for the most recent member of the group of capitalist great powers, Japan. While clearly hooked on to the first world Fordist growth model, Japan’s integration in the world economy is marked by the absence of intra-industry and intra-firm trade. Japanese exports are highly concentrated in a few advanced manufacturing sectors with a high value added, while 88 percent of the country’s imports consist of raw materials, food and fuels. The pattern of integration in the Pacific area looks more like one of the vertical 19th century zones, with Japan at the apex of the hierarchy, supplying advanced industrial goods, importing mostly raw materials, or semifinished goods (as in the case of Japanese imports from NICs like South Korea and Taiwan). In this Pacific area, only the U.S. plays a dual role, as it exports both raw materials and high tech-products (defense-related in particular) to Japan.

Katzenstein notes that in the 1960s, Japan tried to organise Asian regions. The reason was the Vietnam war, they feared that the U.S. would withdraw (as they could see that the U.S. was loosing). This was quite similar to Brandt in FRG who at that time also emphasized that EU integration should be strengthened, as the U.S. might withdraw (the U.S. notion having been that if Vietnam would be lost then Berlin would also be lost!?). Japan’s new informal empire of the 1960s were crucially dependent on the Keiretsu: consisting of a bank and major manufacturing operations in all sectors of the economy (pushing employees around according to what area is going good, etc.) These complexes also engage in impressive efforts at economic intelligence. So in the 1960s, these complexes go overseas.

The important factors in this integration process were the U.S., Japan, networks of foreign Chinese (in the South especially), the emerging NICs (of the North). The whole process was much less formalised than in Western Europe, in which there was a surge of EU integration in the early 1960s, then a setback in the mid-sixties, but some further elements (based especially on the EU Court of Law, while early plans for economic and monetary union failed in the early 1970s).

There is not much overlap between regional organizations and economic integration in postwar Pacific Asia. There is no significant regional organization which includes both North and Southeast Asia (except APEC which also includes Australia, New Zealand and Pacific countries in the Western hemisphere), and no regional organization whatsoever in Northeast Asia. As for formal institutions, ASEAN (The Association of Southeast Asian Nations) was the first indigenous effort towards regional cooperation in Asia. This association consists of Southeast Asian countries. ASEAN was established in 1967 by Indonesia, Malaysia, the Philippines, Singapore and Thailand (ASEAN-5). ASEAN was later extended to include Brunei (1984), Vietnam (1995), Burma, Cambodia and Laos (1997). During the early years ASEAN-5 was loosely tied together by an anti-communist commitment, countering PRC’s support to Southeast Asian revolutionary groups which was particularly strong during the Cultural Revolution. ASEAN was designed as a regional conflict management regime for negotiating disputes that had flared between the member states during 1965-67, thus promoting greater unity against the threat from the PRC and domestic insurgents. Other features that played a role in the founding of ASEAN was mistrust of external powers, Indonesia’s wish to pursue active independent foreign policies, and the others to restrain Indonesia.

Co-operation within ASEAN was boosted by the collapse of the non-communist governments in South Vietnam and Cambodia in 1975 as the member states then feared that the new socialist People’s Republic of Vietnam would use its surplus of captured arms to support revolutionary groups in Thailand, the Philippines and Malaysia. ASEAN responded with an increased commitment to economic co-operation to counter the social causes of insurgencies, while a proposal from Indonesia for military co-operation was rejected. The end of the Cultural Revolution, and the Sino-American detente improved relations between the PRC and ASEAN. Relations improved further after the Vietnamese occupation of Cambodia in 1978 and the subsequent Sino-Vietnamese conflict. ASEAN and the PRC now co-operated in an alliance against the Vietnamese occupation of Cambodia and establishment of a pro-Vietnamese regime. As a result, relations between ASEAN and the PRC were good throughout the 1980s. ₉₇

It has been claimed that ASEAN did contribute to a stabilization of the region. ₉₈ If we should point to a European parallell, it might be the European council, which has had minor influence compared to the EU, concentrating on diplomacy, work for peace settlements, human rights, etc. (Human rights probably did not play a large role on the ASEAN agenda.) ASEAN did not succeed in stimulating economic cooperation, its work was predominantly at the political and diplomatic level. The EU, in contrast, was able to set up a number of common institutions, with a hybrid mixture of supranational and intergovernmental decision making, an EU court of law, and made considerable progress in “negative integration”, i.e. establishing a customs union in the early 1960s, and a single market since the early 1990s.

The improvement of China’s political relations with the ASEAN countries, along with the Chinese economic reforms allowed for a strengthening of economic ties between Southeast Asia and the PRC. This was facilitated by the Chinese business communities of these countries, communities which remained vital in the 1990s. Despite the commitment to economic growth, economic integration among the ASEAN countries was limited as indicated by a relatively low proportion of intra-ASEAN trade and investment. The binding power of ASEAN over its member states is limited as decisions are based on consensus among member states. Attempts to promote trade liberalization and large-scale industrial co-operation within the ASEAN framework was restricted by policies of national import substitution throughout the 1970s and early 1980s. ₉₉ The ASEAN countries changed to export-oriented industrialization strategies accompanied by various degrees of liberalization of foreign trade and investment during the 1980s. This policy change, however, primarily aimed at attracting foreign investments to export-oriented manufacturing from more industrialized countries outside the ASEAN region, especially Japan, rather than promoting economic integration within ASEAN. Significantly, the main exception to the rule of low economic integration within ASEAN is that of the relationship between Singapore and the other ASEAN countries. Singapore is a centre of trade and finance with a GNP per capita that far exceeds that of the other ASEAN countries. Otherwise, the ASEAN countries’ have stronger economic ties with Japan, and frequently also with Taiwan and South Korea, than they have with one another. ₁₀₀ This is a general feature of post-WWII East Asian economic integration. Foreign trade and investment relations have mainly been established between generations of industrializing countries, rather than within these generations. Thus, trade and investment ties have been stronger among countries with unequal levels of development in terms of GNP, level of industrialization, leading sectors and R&D capabilities. This is a major difference from postwar Western Europe, where economic ties to a greater extent have been based on relatively equal levels of development.

End of Vietnam war and detente in the 1970s

Over the past two decades the Pacific regional economy has expanded to include the People’s Republic of China and Vietnam. In this process the domestic regional forces represented by overseas Chinese and Japanese is the leading force, while the role of the United states has become much more modest. This development was triggered by “the Nixon shock” which shattered the very post-war system in Asia Pacific.

The Nixon strategy was cheap hegemony by “playing the China card”. ₁₀₁ The border war between Soviet and China in 1969, as well as the USSR invasion in Czechoslovakia in 1968 had in fact made the Chinese ready for this offer. Despite their deep-rooted animosity with the United States, China became interested in a Sino-American alliance against the threatening USSR. This was confirmed in official party rhetoric. The Soviet Union was now China’s “main enemy”.

The result of these rapprochements was firstly the reduction of U.S. ground forces in Indochina, although this process was delayed by the U.S. bombing of Laos and Cambodia to destroy base areas and supply lines of the FNL. Secondly, U.S. security support to first line allies, such as South Korea and Taiwan was much reduced. As a response, these countries embarked on heavy industrialisation out of military concerns. Vietnam would sail along as it wished, and local spin-offs from the Vietnam-war would be a thing of the past. Meanwhile, regional integration proceeded further in the non-communist countries of the region. This development is followed by tougher U.S. economic warfare, primarily against Japan, but with implications also for other East-Asian countries which had benefited just as much from expanding markets in the U.S., partly because the Vietnam war had bound up U.S. production capacity, opening up for increased imports. Shifts in U.S. policies towards the PRC also enabled Japan to approach the PRC without being restrained by the United States. Japan gained enormously in the postwar catching up process. By the 1970s and 1980s, Japan was outperforming both its European and U.S. competitors in the Western bloc, and this was not just due to low wages. Japan proved able to emulate U.S. and European features while retaining a deep rooted socio-cultural identity. There was thus a unique Japanese contribution to the organisation of production, which gave both higher quality and productivity. Such process innovations were not easy for the competitors to emulate as they were most likely related to longstanding Japanese traditions.

Taiwan, South Korea, Singapore and Hong Kong were the paradigm NICs (new industrializing countries). These “second generation Japans” entered into a dramatic Pacific Asian catching up process since the 1980s, both due to low wages and a special emulation/rejection relationship to Japan. Other countries — the states in the South that was more close to the predatory type — had less success.

Mainland China, overseas Chinese and Japanese foreign investment in East Asia since the 1980s

Through the reform period since 1979, China is becoming more strongly integrated in the region. Not only Japan, but also other countries in the area expands due to economic ties with China. Towards the end of the 1980s, Taiwan and South Korea became crucial actors in the region, due to their large currency reserves. They invested in Southeast Asia, but increasingly also in China (as for Taiwan, economic interaction with China mainly took place indirectly, via Hong Kong). As for 1996, more than 50 percent of world foreign investments flow into China.

After some hesitation in the 1980s, Japan in 1990 expanded its investment in the Chinese mainland. By then, overseas Chinese investors already had established a strong foothold there and controlled most of the foreign investments (75 percent of total by Hong Kong and Taiwan). Japanese investments have followed, rather than led the boom by these overseas Chinese. These investors had been encouraged as part of the PRC’s One Nation Two Systems unification policies (Strengthening economic ties with Hong Kong before the 1997 take-over. Preparing for a future incorporation of Taiwan.) Thanks to their familarity with local culture, language and manipulation of kinship and community ties these investors were also able to bypass regulations that hampered other foreign investors. ₁₀₂

Katzenstein diagnoses deep commercial rivalry between Japan and the ethnic Chinese trading/production-system. And one can also add the U.S. MITI, strikingly, wants to see the U.S. involved, so they subsidize U.S. capital, they need a third pole in this trading system.

A new surge of Japanese foreign investments took place from the mid-1980s onwards in response to the Plaza agreement of 1985 which among other things led to a considerable appreciation of the yen relative to the dollar. Initially, South Korea and Taiwan were able to capture U.S. markets from Japan as a result of this revaluation, but they were also soon pushed by the United States to appreciate their currencies and open their markets. Furthermore, rising domestic markets undermined their competitiveness. In 1989 the United States also “graduated” Taiwan and South Korea from its general system of preferences. Thus, the Plaza Agreement and its aftermath led to a worsening of the competitive position of the Northeast Asian countries. Simultaneously the Southeast Asian countries and the PRC improved their competitiveness by currency depreciations. These countries also set out to attract foreign investors by various kinds of incentives.

Producers in Japan as well as Taiwan and South Korea responded by relocating their manufacturing to Southeast Asia and to a growing extent also to the PRC. This foreign investment boom from Northeast Asia was dominated by lower end electronics. While producers in the first generation of NIEs now joined Japan in investing in the region, Japan maintained its supremacy within the higher end of the production networks. ₁₀₃

The regional division of labour in East Asia is characterized by a strong degree of dependence on Japan. The various generations of East Asian NIEs depend on Japanese supplies of technology, components and marketing. The exodus of Japanese firms to the region has not led to reexport to Japan. Contrary to the assumptions of various versions of product cycle theory, Japanese producers have not abandoned the production of lower-end manufacturing for the domestic markets, they have rather moved their export production of these products offshore. One reason for this “stretching” of the product cycle is the synergy effects of the microelectronic revolution which offers great technological potentials for all branches of production, including previous “low-tech” branches such as consumer electronics. Thus it is deemed important to maintain domestic know-how within these branches. The result is growing trade imbalances in the region in favour of Japan. The technological dependency of Pacific Asian countries on Japan has actually been increasing over the past decade due to the dissemination of microelectronics into a growing number of manufacturing branches, including traditional ones.

This dependency is most clearly seen in the case of new NIEs such as Thailand, Malaysia and Indonesia, where the process of industrialization has been led by foreign investment without a previous import substitution base. However even Taiwan and South Korea with a strong “domesticized” base of advanced manufacturing based on previous import substitution experience and sizable investments in R&D are heavily dependent on import of Japanese core technologies and components. ₁₀₄

Arrighi argues that there is an important difference between Western Europe and East Asia in terms of access to labour. Western Europe had access to huge reserves of cheap labour from its peripheries (Ireland, Portugal, Southern Italy, the Balkans, Turkey), but these were less competitively priced than East Asian labour from the outset and tended to be exhausted by the late 1960s and early 1970s as Western Europe is exposed to the economic crisis. Japan’s reserves are also exhausted, but Japan can react to the economic crisis by tapping the huge reserves of cheap labour in the surrounding region. ₁₀₅

The extension of the economic networks in the region through successive rounds of foreign investments does not displace, but relies on the business networks created by the previous rounds. As a result the density and cohesiveness of the regional trading and investment system increases. ₁₀₆

In periods of Yen-appreciation, already during Nixon in the 1970s, and with the soft landing of the dollar in the mid-1980s, the Japanese buy up real estate and engage in foreign production throughout the world. Japan was originally a trading state, it did not mean to go abroad (at least not out of its region), but had to do, in order to maintain Japanese economic growth). In 1985-9, there were massive investments in Southeast Asia, as much as in the whole period 1948-84. The Japanese dominate all auto industry in the area. Indonesia tried to go alone, but failed, Japan came in there too. Also India. But Japan then experienced that at least some of their partners were able to catch up. The South Koreans are perhaps the most spectacular case: While Japan had earlier wiped out the U.S. semiconductor industry in five years, the Koreans did the same to Japan since 1983, and now have 60 percent of the world market for cheap semi-conductors.

Unsuccessful integration (1990s) and the crash (1997-8) in Asia

As mentioned earlier, most countries in the Asia Pacific region run huge and growing trade deficits with Japan. The conflicts of interest which result from this situation has been dampened by the regions’ huge trade surplus with the United States and to a lesser extent Western Europe. Bernard & Ravenhill argues that Japan’s unwillingness to “close the product cycle” and increase its imports from Asian neighbours is a major obstacle to the formation of a yen bloc. The Asian NIES are under strong pressure to reduce their trade surplus with the United States. Thus, it will become increasingly difficult to cover the trade deficit with Japan by trade surpluses with the United States. This is likely to lead to increased conflicts between the NIEs and Japan. This conflict of interest in the East Asian political economy may be a strong impediment to regional economic integration. ₁₀₇

The end of Cold War is above all a European phenomenon. In Asia-Pacific, Nixon already pursued detente with China since 1975. While China has not been changed politically, it shows enormous economic dynamics in the late 1980s and 1990s. As with Japan, the problem is rather catch-up industrialisation than nuclear threats.

So, there is an arms race in Pacific Asia. The major countries are purchasing large amounts of advanced weaponry while other parts of the world are slashing their defence budgets. The rising sea and air power of the PRC may be a major destabilizing force. Detente with Moscow during the last 10-15 years, followed by the collapse of the Soviet Union since 1991 has allowed the PRC to move much of its fighting power from North China to South China. There are major investments in air force and navy all over the region, with a number of geopolitical conflict areas; rivalling territorial claims over islands in the South China Sea (which possibly contains valuable oil supplies and are strategically located on the trading routes to Japan, South Korea and Taiwan); as well as unresolved civil wars between the two Koreas and between PRC/Taiwan]

As for burden sharing, by 1995, Japan payed 75 percent of the costs of U.S. troops, and that it will soon be 100 percent. ₁₀₈ The Japanese are threatened by U.S. negotiators arguing that they cannot control Congress, and that Congress will make silly laws unfavourable to the Japanese if they do not adjust. Such threats seems not to work towards the Europeans. Thus, with respect to Japan, the problem has been economic catch-up (and the consequent enormous U.S. payments and trade surpluses), not burden sharing.

Let is now turn to: the unsuccessful Pacific Asian regional integration in the 1990s. The APEC (Asia Pacific Economic Cooperation) was inaugurated in November 1989 with Australia, Brunei, Canada, Indonesia, Japan, Malaysia, New Zealand, the Philippines, South Korea, Singapore, Thailand and the United States as it member states. In 1991 China, Hong Kong and Taiwan were included, in 1993 came Mexico and Papua New Guinea and in 1994 Chile. Thus, this organization transgressed regional boundaries. The Clinton administration was trying to use it to prevent Pacific Asian regionalism and open the Asian markets.

Japan had been the driving force in the establishment of APEC as a region-wide consultative group that would provide technical cooperation on trade and investment matters along the lines of the OECD. Australia suggested the further development of APEC in the early 1990s, when there were indications that the world might break up into regional blocs, the EU in Europe and NAFTA in North America. The Australians pushed for another APEC than conceived by Tokyo’s original thrust. Rather than a loose consultative body, APEC should become a formal free trade area. In 1993 the United States took the lead in turning APEC into a free trade area perceiving it as a bargaining chip that may be deployed against the Europeans in the GATT (WTO) negotiations. APEC now gained momentum as it was seen as a useful institutional framework to dampen the trade frictions between Pacific Asia and the United States. ₁₀₉

However, there was also Asian resistance against the attempts to develop a Pacific Free Trade Area. A division emerged among “Anglo-Saxon free traders” led by the U.S. and Asian governments led by Malaysia’s Prime Minister Mahathir Mohammad. The latter were committed to an activist role of the government in the economy, and preferential trade and investment arrangements for local firms. Mahathir was the most outspoken representative of this group, while Japan supported it more covertly. An agreement was reached on borderless trans-Pacific trade by the year 2020 during the 1994 APEC summit. However, this was nullified during the 1995 summit in Osaka. Prior to the summit Tokyo had managed to mobilize support from most of the Asian countries for a declaration that whatever trade liberalization would take place would be voluntary, flexible, and non-binding. ₁₁₀

Malaysia’s Mahathir was not only opposed to the APEC free trade initiative. Since 1990 he had also been championing his alternative vision of regional co-operation confined to the East and Southeast Asia, the East Asian Economic Caucus (EAEC) as part of his “Asia only” anti-occidental regionalism. However, the reception of this proposal was mixed. Within ASEAN, Indonesia was against the idea and the United States put pressure on Japan and South Korea to reject the idea. Nevertheless, Malaysia continued to forward the EAEC, and in 1993 it was formally established within the APEC framework. ₁₁₁

As conceived by Mahathir the EAEC would require leadership by Japan as the main regional power. However, Tokyo remained ambiguous. It still took an interest in retaining the US security umbrella. Tokyo also knew that a strengthening of the Japanese presence in the region and a continuous build-up of its economic and military power without “supervision” by the United States was unacceptable to many of the governments in the region which unlike Mahathir considered U.S. hegemony a lesser evil compared to that of Japan. Thus, Tokyo carefully avoided to respond to Mahathir’s invitation that it should lead the EAEC and without full backing from Japan the EAEC initiative was stillborn. ₁₁₂

Then the Asian financial crisis hit the region with full force during the autumn of 1997. This crisis triggered a new round of rivalry between the U.S. supported internationalist liberalism this time represented by the IMF — and Pacific Asian regionalism. This crisis and the ensuing structural adjustments provided an opportunity to the United States to promote the liberalization of trade and finance in the area through the IMF, rather than through the unsuccessful APEC. ₁₁₃

Given that the United States is the largest shareholder in the IMF it has a strong influence on the IMF conditionalities. In addition, the United States contributed large funds to the bailouts of Indonesia and South Korea. Particularly in the Korean bailout, the United States had a strong influence on the conditionalities which included an opening of financial institutions and enterprises to foreign take-over as well as various measures of improved corporate governance and transparency which would facilitate this kind of take-over. ₁₁₄ Even countries which managed without bailouts were indirectly affected. For instance, during December 1997, Thailand and Malaysia gave up their previous resistance to the WTO’s agreement on the liberalization of financial agreements. Their reason for signing was that refusal to do so might have complicated negotiations with the IMF. Even Malaysia which so far had avoided IMF bailouts felt that it had to bow in case it would need assistance from the IMF. ₁₁₅

The Asian crisis started with Thailand’s baht crisis during summer 1997. In August a rescue fund was set up financed by the IMF, the World Bank, the Asian Development Bank and countries of the region. The unwillingness of the United States to provide financial support to a regional rescue fund during this stage of the crisis (unlike the financial crisis in Mexico in 1994/95) weakened its standing in the region. It was claimed by regional leaders that the unwillingness of the United States to provide funds to Thailand led to an escalation of the crisis. ₁₁₆

Furthermore, there was dissatisfaction with the strict conditionalities of the IMF and the ensuing negotiations which delayed urgent rescue funding.

In August 1997 the ASEAN countries formally proposed a permanent regional monetary fund (AMF) financed by the Pacific Asian countries. The real initiator of this proposal was Japan’s Vice Finance Minister for International Affairs, Eisuke Sakakibara. The AMF should — at the regional level — operate in the same way as the IMF, aiming to maintain monetary stability. Its total funding would be about US$ 100 billion, and most of this funding should come from Japan. ₁₁₇

Japan had strong self interests in stabilizing the financial system of the region. Its economy was strongly integrated with the countries of the region in terms of trade and foreign investment. In 1996 Japanese banks had US$ 265 billion in outstanding loans to Pacific Asian countries, and US$ 83.9 billion to the three countries which eventually would have to be bailed out (Thailand, Indonesia and South Korea). ₁₁₈ Meanwhile, Japan’s own creeping financial crisis and accumulation of bad loans went on. Japan could not afford a regional financial collapse.

Yet, this does not explain that Japan preferred to establish a regional fund, rather than providing crisis funds through the IMF. The AMF signalled a new Japanese willingness to accept regional leadership. There were also indications that the AMF should defend an “Asian model” against the IMF’s extensive demands for liberal institutional reform. The initiator of the AMF idea, Eisuke Sakakibara, was a spokesman of an “Asian development model” based on a considerable degree of state intervention, bank financing rather than equity financing and tight relations between government, companies and banks. Sakakibara had earlier been arguing that the economic success of East and Southeast Asia demonstrated that the “Asian model” was more favourable to developing countries than the prescriptions of the “Washington consensus” which directed the policy recommendations of the IMF and the World Bank. Thus, the AMF should be more “flexible” than the IMF in providing swift emergency credits without strict demands of policy changes. ₁₁₉

The issue of the AMF was brought up to the international agenda in September 1997 when Japan launched the AMF idea during the G7 meeting in Hong Kong. The proposal was immediately resisted by the EU countries and the IMF. During the Hong Kong annual meeting of the IMF and the World Bank in September/October it was also resisted by the Clinton administration, notably by the Vice Secretary of the Treasury, Lawrence Summers. ₁₂₀ The main argument against the initiative was that a rivalling fund would subvert IMF’s ability to discipline the indebted countries. ₁₂₁

Japan responded by withdrawing from the AMF proposal. As Japan withdrew the other countries in the region gradually followed suit. The AMF initiative was finally given up in a meeting among APEC’s ministers of finance in Manila in November 1997. At APEC’s annual meeting in Vancouver in the U.S. approach triumphed as APEC backed IMF’s leadership in the financial rescue operations. Shortly afterwards Japan announced that its contribution to the regional emergency fund “only” would be about US$ 20 billion. ₁₂₂

Richard Higgot argues that despite the defeat of the AMF proposal there has been some low-key new forms of regional co-operation in 1998, and that frustration in the region of the deepening of the crisis, and a widely perceived failure of the IMF may have weakened the legitimacy of the U.S. dominated APEC. There have also been hints from Japan’s Ministry of Finance that it wants to establish an AMF. ₁₂₃

We have seen that previous attempts at regional integration in the 1990s under the East Asian Economic Caucus and the Asian Monetary Fund failed as a result of resistance from the United States, Japan’s reluctance to take a leading role, and that this may have reflected the unwillingness of several countries in the region to accept a Japanese hegemony. Japan’s unwillingness to pursue regional hegemony may persist as the rising People’s Republic of China hopes to take that place some day. In the meantime she is fighting Japanese leadership. Further impediments to regional integration include a relatively low level of interregional trade (about 40 per cent as compared with more than 60 per cent in Europe) and the corresponding dependence on U.S. export markets which have increased during the current crisis.

Regional economic integration accompanied by some new institutional framework may require an increase of interregional trade and decreased reliance on the United States. A bottleneck here is Japan. Over the past year the United States has been pressuring Japan to clean up its financial problems, pursue an expansionary fiscal policy of deficit spending and tax reduction to boost domestic demand and increase its trade with the East Asian countries. ₁₂₄

In this way the economic locomotive of Japan should pull the region out of the crisis, and at the same time redirect some of the export of the region away from the United States.

U.S. pressure along with enhanced U.S./Asian trade rivalry might have the unintended effect of sustaining the new tendencies of regional economic integration. However, a recovery of Japan’s role as the locomotive of the region may also require an end to the symbiotic economic relationship between Japan and the United States. ₁₂₅ Over the past decades the United States has come to rely on the huge surplus savings of Japan which is financed by Japanese savings and funnelled through Japanese banks to buy U.S. bonds and stocks. The purchases of U.S. treasury bond by the Japanese are particularly important in that respect. In 1995 the ministries of finance of Japan and the United States agreed that Japan would be allowed to devalue the yen relatively to the dollar. The United States also deemphasised its trade disagreements with Japan. Instead the two parties concentrated on their security relationship. In return for these U.S. concessions Japan committed itself to buy a huge amount of U.S. treasury bonds. This agreement was a major contributor to the Asian financial crisis, since many countries in the region had pegged their currency to the US dollar. In result, countries such as South Korea with a very similar export composition to that of Japan was badly affected.

The 1995 agreement also contributed to expand the current structure marked by Japan financing the U.S. saving deficit to maintain the U.S. level of investment. Successful regional integration, especially if it is based on costly arrangements such as the AMF, may require that Japan finds a way end to this relationship with the United States to redirect a greater part of its savings to the region. This would be the nightmare of U.S. financial authorities. U.S. interest rates are likely to skyrocket if the Japanese source of cheap investment funds dry out. ₁₂₆

Despite the defeat of the AMF proposal there were some new low-key efforts at regional integration during autumn 1998. On 3 October 1998 Japan’s authorities launched a plan drawn up by Finance Minister Kiichi Miyazawa for a US$30 billion aid initiative at a G7 meeting of central bankers and finance ministers in Washington. The countries earmarked as recipients were Indonesia, Malaysia, the Philippines, Thailand and South Korea. Tokyo attempted to minimize resistance from Washington and the IMF by carefully couching the idea in the context of a broader aid effort involving the G-7 industrialized countries, as well as the IMF and the World Bank. The timing of the presentation of the initiative may also have been favourable, since the IMF was running out of funds and the U.S. Congress had still not approved the US$ 14.5 billion replenish of the IMF’s funds. The Japanese initiative was even supported by the IMF this time. The U.S. side was less positive, but this time Washington did not attempt to shoot down the proposal. ₁₂₇

The Japanese took a more aggressive stance during the Hanoi summit among Asian leaders in December 1998. On 16 December Japan’s Prime Minister Keizo Obuchi in Hanoi called for greater Asian Cupertino without involving Western powers. Meanwhile, back in Tokyo Miyazawa critiqued IMF’s austerity. ₁₂₈ This may be the beginning of an effort to challenge U.S. monetary dominance in the region and to build up a regional “yen bloc”. Loans made under the plan would be denominated in yen and tied to projects involving Japanese companies. By building up the amount of debt denominated in yen, Japan also hoped to internationalize its currency. ₁₂₉ However, there are many stumbling blocs on the way to such a goal. First, a much greater amount of capital than the USD 30 billion of the Miyazawa plan would be needed in this project, and it is far from certain that Japan is able to muster the funds which are needed. Neither is it clear that a region dominated by strong anti-Japanese sentiments is willing to accept a yen bloc. Japan’s rival for regional hegemony, the People’s Republic of China is probably not very happy about this idea. Tokyo itself may also be ambiguous, as it is concerned about its security relationship with the United States. Another impediment to regional integration is a relatively low level of interregional trade, about 40 per cent as compared with more than 60 per cent in Europe. A yen bloc will require increased interregional trade and decreased reliance on the United States. It may also require that Japan becomes the regional locomotive. The latter is also in the U.S. interest. Over the past year the United States has been pressuring Japan to clean up its financial problems, pursue an expansionary fiscal policy of deficit spending and tax reduction to boost domestic demand and increase its trade with the East Asian countries. ₁₃₀

Japan would then pull the region out of the crisis, and at the same time redirect some of the export of the region away from the United States. A recovery of Japan’s role as the locomotive of the region may also require an end to the symbiotic economic relationship between Japan and the United States. Over the past decades the United States has come to rely on the huge surplus savings of Japan which are funnelled through Japanese banks to buy U.S. bonds and stocks. The purchases of U.S. Treasury bond by the Japanese are particularly important in this respect. In 1995 the ministries of finance of Japan and the United States agreed that Japan would be allowed to devalue the yen relatively to the dollar, in order to help Japan to export its way out of its banking crisis. Between April 1995 and April 1997 the yen fell 60 percent relative to the dollar. The United States also de-emphasised its trade disagreements with Japan. Instead the two parties concentrated on their security relationship. In return for these U.S. concessions Japan committed itself to buy a huge amount of U.S. Treasury Bonds, which kept U.S. interest rates at a desirable low level. ₁₃₁ This agreement contributed to the Asian financial crisis, since many countries in the region had pegged their currency to the US dollar, or maintained a high and relatively stable exchange rate for other reasons. These countries now suffered from declining competitiveness of their export vis-à-vis Japan, and balance-of-payment problems. South Korea in particular, which had an export composition similar to that of Japan, was badly affected by the Japanese devaluation. The 1995 agreement between the United States and Japan sustained the tendency of Japan using its surplus saving (savings which are not invested domestically) to finance the deficit on U.S. savings (relatively to the level of U.S. investments).

Successful regional integration, especially if it is based on costly arrangements such as the AMF, may require that Japan finds a way to end this relationship with the United States to redirect a greater part of its savings to the region. This would be the nightmare of U.S. financial authorities. Japanese purchases of Treasury bonds have provided the United States with cheap investment funds. This has allowed the United States to maintain a level of investment that exceeds its domestic level of saving and sustains the consumption and investment boom of the Clinton era. U.S. interest rates are likely to skyrocket if the Japanese source of cheap investment funds dries out. In 1997 the U.S. Treasury would not run the risk of an AMF which might have led this to happen, and helped the countries in the region to maintain their trade- and investment barriers. ₁₃₂

However, the very U.S. success in stamping out the frail attempt at Pacific economic integration in 1997 may backlash. Economist David Felix argues that the swift establishment of the US$ 100 billion Asian monetary fund in September-October 1997, when regional currencies still were fairly stable, would have prevented or reduced the regional contagion effects of the Thai baht crisis. ₁₃₃ Control by the IMF may have favoured U.S. investors and sustained the financial flow from Japan, while deepening the Asian crisis. In the next round the region responded to shortage of foreign exchange, rising interest rates and contracting regional markets by redirecting exports to other regions and cutting imports. This trend was reinforced by the IMF’s demands for austerity policies and high interest rates. In result, the U.S. trade deficit with the region started to rise sharply. The U.S. trade balance was also adversely affected by the contagion of the financial crisis in Latin-America, and the ensuing cuts in Latin American imports. Thus, the current growing U.S. trade deficit is to a large extent an outcome of the Asian crisis and its spin-offs. ₁₃₄ Simultaneously, the launching of the Euro may increase the difficulties associated with U.S. trade deficits. Since the breakdown of the Bretton-Woods system, central banks around the world have been willing to maintain substantial foreign currency reserves in U.S. dollars as international transactions mainly have been conducted in dollar. This situation allowed the United States to maintain huge current account deficits by borrowing dollars abroad, as its debt ultimately was guaranteed by the government’s money printing press. The Fed did not need to maintain a high interest rate to defend the dollar, since there were no other choice for a world reserve currency. It could therefore manipulate its interest rate more freely than other central banks without having to fear that this would trigger a flight away from the dollar. The 1999 launching of the euro may change this situation. The dollar is now facing a currency of the same magnitude as itself, which is supported by a positive current account balance. Central banks and international economic actors may be less willing to hold dollar reserves and conduct their transactions in dollar if the euro should prove to be a more stable alternative. If a large share of international reserves were converted from dollar to euro, it would become more difficult for the United States to finance its debt by borrowing dollars abroad, just when its foreign account deficit were skyrocketing. The United States may finally become subject to the same pressures as the rest of the world with regard to balance-of-payments and the need to maintain a high interest rate to defend its currency. A loss of freedom of action of the Fed may however be bad news to the international economy. The Fed’s lowering of the U.S. interest rate during autumn 1998 might have prevented (or delayed) a major international recession. After the coming of the euro the Fed may find it difficult to undertake similar counter-cyclical policies. ₁₃₅ In the years to come the U.S. economy, and possibly also the world economy, may be badly affected by strong regional economic integration in Europe as well as weak regional economic integration in East Asia. The final verdict is that of the investors who decide on the economic viability of the three dominant regions of the triad and their interconnection.

 

---

Endnotes

*: Prepared for presentation at the annual meeting of the International Studies Association, Washington, D.C., February 16–20, 1999.  Back.

Note 1: Cf. Lars Mjøset, “Western European integration — an historical perspective extended into the 1990s”, in Jon Bingen & Walter Schütze, editors, Europe in the late 1990s, Oslo 1996.  Back.

Note 2: Specified in Mjøset, “Stat, sivilsamfunn og verdensøkonomi fra renessansen til i dag”.  Back.

Note 3: Charles Tilly, Coercion, Capital and European States AD 990-1990, Oxford 1990.  Back.

Note 4: Aaron L. Friedberg, “Science, the Cold War, and the American State”, Diplomatic History, 20:1, Winter 1996, pp. 107-118.  Back.

Note 5: John Myles, “When markets fail: social welfare in Canada and the United States”, in Esping-Andersen, ed., The welfare state in transition, London 1996.  Back.

Note 6: G. R. Sloan, Geopolitics in United States Strategic Policy, 1890-1987, Brighton 1988; Friedberg, “Science, the Cold War, and the American State”.  Back.

Note 7: Cf. Sloan, Geopolitics in United States Strategic Policy, 1890-1987, Ch. 2.  Back.

Note 8: For this comparison, see Lars Mjøset, “The turn of two centuries”, in David P. Rapkin, ed., World leadership and hegemony, Vol. 5 of International Political Economy Yearbook, Boulder and London: Lynne Rienner Publishers, 1990.  Back.

Note 9: U.S. allies were all sovereign states. In Western Europe, Nato was the main institution, securing bases in formally allied countries. In the Pacific, there was the security treaty between Japan and the U.S., and certain bases with specific privileges, such as Okinawa and on the Phillipines.  Back.

Note 10: Cf. the criticism of James Kurth’s comparison below.  Back.

Note 11: Bruce Cumings, “Revising post-revisionism, or the Poverty of Theory in Diplomatic History”, Diplomatic History, 17: 4, 1993; Melvyn Leffler, “New Approaches, Old Interpretations and Prospective Reconfigurations”, Diplomatic History, 19:2.  Back.

Note 12: Cumings has emphasised that the U.S. had sufficient leverage “to keep countries in the system but not sufficient to maintain effective dependency relationships or a frozen hierarchy. The system permits upward mobility. The United States retrieved South Korea and Taiwan from oblivion in 1950, but invoking the threat of oblivion to keep them in line in later years was unthinkable.” Bruce Cumings, “The origins and development of the Northeast Asian political economy: industrial sectors, product cycles, and political consequences”, in Frederic C. Deyo, The Political Economy of the New Asian Industrialism, Ithaca 1987, p. 63. The relevant comparative cases are the inclusion of Portugal, Greece, Turkey in the political geography of the “North Atlantic” Europe. That comparison (not to be conducted here) would clearly show that the security link is not enough to explain economic miracles: Turkey — for instance — has become nothing like a European South Korea!  Back.

Note 13: The closest we get in U.S. postwar hegemony is the “China card” of the 1970s, seen as a return to the balance of power. Perhaps not by coincidence, Henry Kissinger, famous for his admiration of 19th century European geopolitics, was a main architect.  Back.

Note 14: Michel Aglietta, A Theory of Capitalist Regulation, London 1980; Robert Boyer, La théorie de la régulation. Une analyse critique, Paris 1986. — Robert Brenner’s criticism of Aglietta’s work concerns the projection of a European growth pattern, the change from extensive to intensive accumulation on to the U.S. case. Brenner convincingly throws doubt on the existence of an “extensive” period in the U.S. case. Cf. Robert Brenner & Marc Glick, “The Regulation Approach: Theory and History”, New Left Review, 188, July/August 1991. The notion of Fordism as a specific model of economic growth, which also influenced the Western European economies in the postwar period, should be possible to retain.  Back.

Note 15: Angus Maddison, Dynamic Forces in Capitalist Development, Oxford 1992, p. 131.  Back.

Note 16: D. Yergin, Shattered Peace, Harmonsworth 1977, p. 308: In a speach of April 1947, Dean Acheson argued that the first foreign policy instrument was trust-building with the USSR. That having failed, he concluded that the U.S. “must use to an increasing extent our second instrument of foreign policy, namely, economic power, in order to call an effective halt to the Soviet Union’s expansionism and political infiltration, and to create a basis for political stability and economic wellbeing”. Yergin goes on to call this economic containment, further implying that military containment would be ranking third as a policy instrument. The general definition of containment in George Kennan’s famous Mr. X article (1947) — “the adroit and vigilant application of counterforce at a series of constantly shifting geographical and political points, corresponding to the shifts and maneuvers of Soviet Policy” (cf. e.g. Yergin, p. 323) — could be interpreted both in military and “civilian” terms, but Kennan countered not just the doves, but also the hawks: part of his message was that the conflict need not be seen in military terms.  Back.

Note 17: Here lies the main argument versus revisionist onesidedness: there are enough cases in which U.S. foreign policy elites accepted solutions that seemed in harmony with such a goal, while they were not necessarily beneficial to U.S. internationalised business. Of course, also foreign policy elites like it when various objectives converge, but in principle, it seems better to include the economic dimension they way Leffler does: as a concern for the grand domestic economy of the U.S. (exports are just a small share of total economic activity). That some of the solutions also allowed internationalized business to grow stronger was very well, but also in the long term one could in certain cases see problems on the U.S. side (e.g. the migration of multinational captal into the EU zone in the early 1960s). The attempt to link the whole Cold War institutional complex to the long term interest of internationally oriented U.S. capital (by restoring a liberal world economy) seem too functionalist.  Back.

Note 18: Japan’s economically active population by 1950 was 36.3 million, and total population was 83.3 million. West Germany’s economically active population by 1950 was 25.3 million, and total population was 52.8 million. The U.S. economically active population by 1950 was 60.4 million, and total population was 151.2 million. Source: Paul Bairoch, et. al., La Population active et sa Structure, Statistiques Internationales Rétrospectives, Vol. 1, Bruxelles & New York 1968 .  Back.

Note 19: Quoted from Sloan, Geopolitics in United States Strategic Policy, 1890-1987, Ch. 2. Spykman had to suffer a lot of criticism at the time, but his statement actually turned out to be one of social science’s few accurate predictions (typically stated as a norm!). Spykman argued from a geopolitical framework of reference.  Back.

Note 20: In the first postwar years, China was also considered by the U.S., but since the loss of China in 1949, Japan received full attention.  Back.

Note 21: The following acount is based on Lars Mjøset, “Western European integration — an historical perspective extended into the 1990s”, in Jon Bingen & Walter Schütze, editors, Europe in the late 1990s, Oslo 1996, Lars Mjøset, “Les significations historiques de l’européanisation”, L’Année de la régulation, 1: 85-128. Paris 1997, Lars Mjøset, “Stat, sivilsamfunn og verdensøkonomi fra renessansen til i dag”, i Å. Birkeland (red.) Den moderne staten, Oslo 1997. For the three visions, see Lars Mjøset, “Vesteuropeisk og nordisk integrasjon i etterkrigstiden”, in Johan P. Olsen og Bjørn Otto Sverdrup (eds.), Europa i Norden. Europeisering av Nordisk Samarbeid. Oslo: Tano/Aschehoug 1998.  Back.

Note 22: William Wallace, The Transformation of Western Europe, London 1990.  Back.

Note 23: In terms of regulation theory: spread of the U.S. “Fordist” model of production and consumption to Western Europe.  Back.

Note 24: R. Gardner, Sterling-Dollar Diplomacy in Current Perspective, New York 1980 , W. H. McNeill, America, Britain, and Russia: Their Cooperation and Conflict, 1941-1946, Oxford 1948.  Back.

Note 25: David P. Calleo, Britain’s Future, New York 1968, p. 10 f.  Back.

Note 26: Richard Griffiths, “The European Integration Experience”, in Keith Middlemas, Orchestrating Europe, London 1995, p. 19-21.  Back.

Note 27: Mjøset, “Les significations historiques de l’européanisation”.  Back.

Note 28: Alan Milward, The European Rescue of the Nation State, London 1994.  Back.

Note 29: The role of West Germany in postwar Western Europe implied a strict politics/economics division: in political terms, FRG had very little voice. There is a whole literature on how Adenauer worked to restore the prestige of FRG in that sense, and maybe only today one can talk about a real postwar generation (and unification has been achieved). In economic terms, however, West Germany with its Wirtschaftswunder became the dynamic centre of postwar western Europe (intraindustry trade in the region).  Back.

Note 30: Milward, The European Rescue of the Nation State.  Back.

Note 31: There was the exception of Thailand, which remained independent and allied with Japan in the Pacific wars, but switched to the Allied powers towards the end of the war when the result could be anticipated.  Back.

Note 32: Der Fischer Weltalmanach ’92, p. 199 ff.  Back.

Note 33: There were exceptions, to some extent the countries of Southern Europe, and in addition, the most spectaclar Northern European case of underdevelopment, Ireland. Cf. Lars Mjøset, The Irish Economy in a Comparative Institutional Perspective, Dublin 1992.  Back.

Note 34: Roger Goodman & Ito Peng, “The East Asian Welfare States”, in Gösta Esping-Andersen, ed., Welfare states in transition, London 1996, p. 218: Between 1945 and the 1970s, South Korea received USD 13 billions, Taiwan USD 5.6 billions.  Back.

Note 35: Among the first six EU-members, especially its southern part, were behind in economic development, thus the EU included patterns of Itlian labour migration to the NOrth. taly: importing foreign workers to the North.  Back.

Note 36: Kurth claims that the U.S. pursued liberalism in Europe versus mercantilism, but not so in Japan: “In Europe, the United States had several major allies; it could play them off against each other. In Asia, the United States had only one major ally, and that was Japan; this gave Japan much greater bargaining power than was the case with any one European ally.” Kurth, “The Pacific Basin versus the Atlantic Alliance”, p. 41. Kurth forgets U.S. support for EU-integration. What this contrast helps explain is the different integration experiences of Western Europe and East Asia.  Back.

Note 37: Katzenstein claims that 5 to 10 percent of GDP in Japan and other Asian countries go to corruption, which is more than their own defence budgets. Peter J. Katzenstein & Takashi Shiraishi, Network Power. Japan and Asia, Ithaca 1997. There is a huge literature on clientelism and corruption in this area, the following are just some examples: James C. Scott, Comparative Political Corruption, Englewood Cliffs 1972, Ch. 4 (Thailand), James C. Scott, “Patron-Client Politics and Political Change in Southeast Asia”, in S. W. Scmidt, et. al., editors, Friends, Followers, and Factions, Berkeley 1977, Dennis Duuncanson, “The clientelist regime of Ngo-Dihn-Diem: Vietnam 1954-63”, in C. Clapham, editor, Private Patronage and Public Power, London 1982.  Back.

Note 38: Concerning the victorious alliance in the Vietnam war (1975), Petras and Morley talks about “a massive movement of revolutionary proletarians, uprooted peasants and petty commodity producers”, without specifying the relative weight of each of these three groups. James Petras & Morris Morley, “Nuclear War and US—Third World Relations: The Neglected Dimension”, in James Petras & Morris Morley, US Hegemony Under Siege, London 1990, p. 103.  Back.

Note 39: European border cases: Italy, then later Spain, Portugal and Greece.  Back.

Note 40: For the historical study of the European state system, Stein Rokkan’s work is the decisive point of departure. Coming from development studies, D. Senghaas and U. Menzel in the 1970s and 1980s launched a highly relevant comparison between third world and historical Western European development patterns. An English summary is: Dieter Senghaas, The European Experience, Leamington Spa 1985. For a summary of this research project (which stretched over more than a decade), including a full bibliography, see Lars Mjøset, “Comparative Typologies of Development Patterns: the Menzel/Senghaas Framework”, in Lars Mjøset, editor, Contributions to the Comparative Study of Development, [Proceedings from Vilhelm Aubert Memorial Symposium 1990, Vol. 2.], Oslo: Institute for Social Research, Report 92: 2, 1992, pp. 96-162. Senghaas and Menzel also included the East Asian NICs in their framework, claiming that South Korea and Taiwan could be seen as following in the “wake of Europe”, more precisely that most of the factors that allowed the Nordic countries to modernize successfully were also present in the NIC success story. However they disregarded that the NIC-countries did not have any peasant mobilisation comparable to the Scandinavian one. Menzel’s discussion of South Korea and Taiwan is focused on the pattern of (income and resource) distribution and the effects of this, plus some remarks on state and late development, as well as the need for democracy. Cf. Ulrich Menzel, In der Nachfolge Europas. Autozentrierte Entwicklung in den ostasiatischen Schwellenländern Südkorea und Taiwan, München 1985. Their main explanation is in terms of the idea of an autonomous modernizing state plus U.S. influence through agrarian reform. They disregard the differences from Scandinavian state/civil society relations.  Back.

Note 41: Cf. e.g. Geoffrey Parker, Western geopolitical thought in the twentieth century, London 1985.  Back.

Note 42: Peter Katzenstein, in Katzenstein & Shiraishi, Network Power. Japan and Asia, Ch. 1, notes that in Asia, social norms seems to regulate integration, while in Europe, there is more of legal norms. Of course, even Asia has to relate more to legal norms, since a deal with a U.S. firm requires paperwork, one cannot just do it orally.  Back.

Note 43: References on this to be added!  Back.

Note 44: Senghaas on Socialism: these developing countries (also Cuba) did better than the Eastern European ones?  Back.

Note 45: At a more concrete level of comparison, we might find that Italy deviates in Europe, so this statement is relative.  Back.

Note 46: James Kurth, “The Pacific Basin versus the Atlantic Alliance: Two Paradigms of International relations”, The Annals of the American Academy of Political and Social Science, 505, Sept. 1989.  Back.

Note 47: In his famous study of the Rand Corporation’s work on security strategies in the nuclear age, Fred Kaplan, The Wizards of Armageddon, Stanford 1983, p. 259 f recounts a report by the Kennedy administration’s Weapons Systems Evaluation Group, in which the notion of finite deterrence is traced back to Brodie’s earliest discussion of security in the nuclear age (Bernard Brodie, The Absolute Weapon, New York 1946). In the Evaluation Group report of the early 1960s, the notion of finite deterrence meant that once a country posessed an effective basic force level based on state of the art weapons, it mattered little what kind of additional retaliatory force it posessed. President Kennedy’s defence minister, Robert McNamara, used this notion against the unrestrained hunger of the Joint Chiefs of Staff for ever more nuclear weapons. The debates on this notion were the rather absurd debates of the age of MAD (Mutually Assured Destructions), i.e. the situation in which both superpowers had enough nuclear weapons to destroy each other completely. The experts would make long and costly elaborations of scenarios of the kinds of sequences of nuclear exchange whereby this destruction might be completed.  Back.

Note 48: Kurth holds that the U.S. move of the Pacific fleet from San Diego to Pearl Harbour as the “most dramatic failure of extended deterrence in history”), Kurth, “The Pacific Basin versus the Atlantic Alliance”, p. 39.  Back.

Note 49: In addition, Kurth, “The Pacific Basin versus the Atlantic Alliance”, p. 37 and 42, holds that China’s security situation is marked by mass population and its independent nuclear force (since 1964), which is a parallell account of specific Chinese features.  Back.

Note 50: Kurth, “The Pacific Basin versus the Atlantic Alliance”, p. 37, p. 42 f. South Korea is only target for North Korean blitzkrieg (as in June 1950), not a Soviet, not a Chinese (as happened in November 1950)  Back.

Note 51: Given that Japan was the only country with industrial developments, it would be the only country liable to extensive burden sharing with the US in matters of defence. The development of such deals can surely be studied, but that is a bilateral relationship, and it took a while before Japan had become so rich (and reintegrated in the Western bloc) that the U.S. would launch such discussions.  Back.

Note 52: Kurth includes a brief comparison of the reconstructions of Japan and West Germany. He claims that Germany — due to the links between corporations and banks, and the federal fragmentation of the bureaucracy — was a case of “society leading the state”, also adopting a policy of international liberalism, similar to the U.S. (Kurth, “The Pacific Basin versus the Atlantic Alliance”, p. 36). But Germany had a “social market economy” characterized both by active industrial banking and by state intervention. Its political economy model is highly different from the U.S. one. In international economic policies it was, as in other foreign policies, a “policy taker”, and thus generally supportive of U.S. strategies. But Kurth forgets that in fear of U.S. withdrawal, West Germany since Adenauer also pursued a policy of European integration. As for Japan, Kurth emphasizes its strong state. In line with Gerschenkron, he interprets this as a consequence of late industrialisation. But he also notes that as an island country, Japan is like Britain, committed to foreign markets. However, even Germany was dependent on foreign markets in that period, even though it was inland state.  Back.

Note 53: According to Kurth’s definition, mercantilism: (a) state guides society: effective competitor in world markets, (b) dynamic (vs static) competitive advantage, move up the technological ladder. But all advanced industrial societies are recently pursuing dynamic comopetitive advantage, cf. modern industrial policies.  Back.

Note 54: That access was only in the Far North, the Kola base at Murmansk bordering on Norway, as well as the Königsberg-naval base on the Baltic coast. Kola was however hampered by ice in the winter and quite long distance to the core areas of Western Europe, while the Baltic coast was isolated by Western powers (including Denmark, member of Nato) controlling the straith of Oeresund.  Back.

Note 55: This is so even if Japan still had no peace treaty with its huge two neighbours, it only recognized China diplomatically in 1972, thereby provoking Taiwan; with Russia there is still the problem of the Kurilles islands. (Cf. below for tensions between the U.S. and Britain even in the Far East: there was a British vision there too!)  Back.

Note 56: Petras & Morley, “Nuclear War and US—Third World Relations: The Neglected Dimension”, in James Petras & Morris Morley, US Hegemony Under Siege, London 1990.  Back.

Note 57: The fourth case discussed by Petras & Morley, namely Cuba, has this structure. This was a direct confrontation between the U.S. and the USSR. China was not involed The main difference form the European case, is that Cuba was in the U.S. hemisphere, which of course made the Cuba crisis so extraordinarily urgent to the U.S.  Back.

Note 58: Petras & Morley, “Nuclear War and US—Third World Relations: The Neglected Dimension”, p. 106 provides a conclusion which is not supported by their study: “the hegemonic power does not have to fear nuclear retaliation when it attacks poor Third World countries.” But their whole discussion shows that U.S. authorities were concerned about the danger og a USSR retaliation!  Back.

Note 59: Kurth, “The Pacific Basin versus the Atlantic Alliance”, p. 37, p. 42. Japan has developed its concept of “Comprehensive security” in the 1980s, and China earlier the notion of “people’s war”. Kurth sees this as specifications of finite deterrence, but that notion simply frees him of comparing various national security strategies!  Back.

Note 60: Kurth, “The Pacific Basin versus the Atlantic Alliance”, p. 36.  Back.

Note 61: Kurth, “The Pacific Basin versus the Atlantic Alliance”, claims that comprehensive security is a notion which is similar to complex interdependence (the idea that not only security, but also economic issues, should today be included in the realm of high politics). That notion extends that of international liberalism, being the basis for detente theories. Complex interdependence, claims Kurth is the City of London world view, appeasement toward Germany, and supply of credits to protectionist US in the 19th century. This vision has been shared by New York banks since 1960s: detente towards the USSR, positive appreciation of Japan, since “International mercantilism can create dynamic industries, but it is slower to develop cosmopolitan financial services” (p. 43). Kurth supports the analysis in Robert Gilpin, The Political Economy of International Relations, Princeton 1982, pp. 328-39: there is a coalition financial institutions, multinationals (producing for sale at home) and liberal professions (services that can not be imported). They prosper from the combination of international liberalism and Asian international mercantilism and thus squeezes domestic industry: there is a polarisation between those who benefit and those who are devastated by the international economy. Extending this analogy, Kurth claims that the U.S. military services support “finite deterrence”, which, as shown, should be understood simply as the existing pattern of security integration between the U.S. and Japan. This is because finite deterrence gives a rationale for US Navy in the Western Pacific, U.S. army in South Korea, U.S. marines in Okinawa and U.S. air force all over! Plus a grand bargain: banks in the US and in Japan: Japan have cash, US is good in international lending: US banks recycle Japanese capital to Latin America. “The obvious bargain to be stuck is for the American banks to continue to support American extended deterrence in the Pacific Basin, while the Japanese banks begin to provide capital to the grand projects of the American banks, particularly in Latin America.” [Kurth, “The Pacific Basin versus the Atlantic Alliance”, p. 45. This is simplistic, above all because it completely disregard the whole long story about burden sharing. Finally, Kurth claims that the Atlantic alliance paradigm is waning and the Pacific one is waxing. If conflict Japan/China, then chaos, if Japan and China get closer, cooperating, then Atlantic declines, and we get the Pacific century. Again, that analysis is much too crude!  Back.

Note 62: Kurth, “The Pacific Basin versus the Atlantic Alliance”, p. 37.  Back.

Note 63: Kurth, “The Pacific Basin versus the Atlantic Alliance”, p. 37.  Back.

Note 64: A case study of Walt W. Rostow would be interesting here, he was involved in the Marshall aid administration in the late 1940s, and was in the cricle of economists that developed the original ideas about economic integration. Then in the 1960s, he held high advisory ranks in the Kennedy and Johnson administrations.  Back.

Note 65: Chihiro Hosoya,,“From the Yoshida Letter to the Nixon Doctrine”, pp. 21-35 in Akira Iriye & Warren I. Cohen eds., The United States and Japan in the Postwar World. Lexington 1989, p. 24-25.  Back.

Note 66: Yergin, Shattered Peace, p. 397.  Back.

Note 67: Quoted in Yergin, Shattered Peace, p. 405.  Back.

Note 68: Michael Schaller, The American Occupation of Japan: The Origins of the Cold War in Asia. New York/Oxford 1985, p. 39-41.  Back.

Note 69: William R. Nester, Japan’s Growing Power over East Asia and the World Economy: Ends and Means. London 1990, p. 24-25.  Back.

Note 70: Ronald McGlothlen, Controlling the Waves: Dean Acheson and U.S. Foreign Policy in Asia. New York/London 1993.  Back.

Note 71: In East Asia, Britain was accomodating towards China. They quickly acknowledged the Peoples’ Republic and opposed the tight U.S. embargo towards her, not the least because the embargo affected Hong Kong’s traditional position as an intermediate trading station between China and the West. This may be some of the reason why the earlier British colonies (Hong Kong, Singapore, Malaysia) did not become Cold War allies to the U.S. It seems that the relation of these trading posts to the U.S. during the Cold War was not similar to that of South Korea, Thailand, Taiwan and the Phillipines. (The former Dutch colony, Indonesia, with one of the world’s largest populations, turned from being regarded by the Americans as a “pinko” to becoming a secure ally following Suharto’s coup in 1966 (but there were oil deliveries to Japan, it seems — by the way: “It had been the oil embargo of the United States, the leading oil exporter of 1941 and the Saudi Arabia of the day, that had actually driven the Japanese government to the decision to seize the oil of the Dutch East Indies, the predecessor to Indonesia, and to protect the strategic flank of that lifeline with a preventive strike on the U.S. Pacific Fleet at Pearl Harbor.” Kurth, “The Pacific Basin versus the Atlantic Alliance”, p. 40). Britain was of course an ally, participating in the Korean and in the Vietnam war, but in American eyes, she is not as secure an ally in the East as she was in Western Europe within the Nato-framework. Even in the Nato context, Britain went on to develop her own independent nuclear forces. — The U.S. project of reestablishing Japanese trade with the region was contrary to British interests. Britain wanted to redirect Japan’s trade to China, and tried to insulate the Empire against Japan, among other things by refusing to pay in dollars for Japanese imports into the Commonwealth. Japan developed a trade surplus in pound sterling with these countries, and these “soft” currency funds blocked expansion of Japanese exports to the sterling zone. Britain also opposed Japanese membership in GATT, but as we saw, the U.S. was able to achieve this in 1957.  Back.

Note 72: Jung-en Woo, Race to the Swift: State and Finance in Korean Industrialization. New York 1991, p. 54-57.  Back.

Note 73: We cannot pursue this question further here. It would require a consideration on the literature on nationalism in Japan and a comparison with West Germany. Cf. Delmer M. Brown, Nationalism in Japan. An introductory historical analysis, New York 1971, and particularly the comparative analysis by Katzenstein, “Conclusion”, in Katzenstein & Shiraishi, editors, Network Power. — One feature worth investigating is the role of the Holocaust in forming postwar West German identity, while in Japan, possibly the conscience of its violence against neighbouring races was to a lesser extent “conserved” in Japanese “collective memory”. Rather, what became remembered — and known all over the world in the postwar era — was the mass killings of Japanese by U.S. nuclear bombs. West Germany has been characterized as without a vision on foreign policies (until Ostpolitik) — but Japan probably had a vision, namely cunning submission to the U.S. and an ideology of being a peaceful trading-state, with a strong pacifist orientation. But where these two concerns did not square, Japan voiced criticism against nuclear weapons in general.  Back.

Note 74: Goodman & Peng, “The East Asian Welfare States”, in G. in Esping-Andersen, ed., The welfare state in transition, London 1996.  Back.

Note 75: Joel S. Migdal, Strong Societies and Weak States: State-Society Relations and State Capabilities in the Third World. Princeton N.J. 1988, p. 269-271  Back.

Note 76: Hsin-hua Michael Hsiao, Government and agricultural strategies in Taiwan and South Korea. A macrosociological assessment. Taipei 1981, p. 209-233; Kristen Nordhaug, State and U.S. Hegemony in Taiwan’s Economic Transformation, University of Oslo, Centre for Development and the Environment (SUM), Dissertations & Theses Series, No. 3/1997, Ch. VII.  Back.

Note 77: Nordhaug, State and U.S. Hegemony in Taiwan’s Economic Transformation, Ch. VIII.  Back.

Note 78: Stephen Haggard, Byung-kook Kim & Chung-in Moon, 1991. “The Transition to Export-led Growth in South-Korea: 1954-1966”. The Journal of Asian Studies, 50: 4, 1991, pp. 850-873; Woo, Race to the Swift: State and Finance in Korean Industrialization, p. 75-84.  Back.

Note 79: Richard Stubbs, “Geopolitics and the political economy of Southeast Asia”, International Journal, XLIV, 1989, p. 521-526.  Back.

Note 80: Stubbs, “Geopolitics and the political economy of Southeast Asia”, p. 526-527.  Back.

Note 81: Ruth McVey, “The Materialization of the Southeast Asian Entrepreneur”, pp. 7-33 in Ruth McVey, ed., Southeast Asian Capitalists. Itacha 1992, p. 20.  Back.

Note 82: Linda Y.C. Lim, “Chinese Economic Activity in Southeast Asia: An Introductory Review”, in Linda Y.C. Lim & L.A. Peter Gosling, eds., The Chinese in Southeast Asia, Vol. I: Ethnicity and Economic Activity, 1983, p. 3-4, 6; McVey, “The Materialization of the Southeast Asian Entrepreneur”, p. 20-21.  Back.

Note 83: McVey, “The Materialization of the Southeast Asian Entrepreneur”, p. 21. — Possibly, one could here also emphasize the “familial” nature of the welfare states that developed in the Northern part of the region. The main abckground here is the diffusion of Chinese religions much earlier in history. It has been suggested for the cases of Japan, South Korea and Taiwan, that these have a distinct social welfare system, marked by a particularistic social insurance system, and by a strong reliance on the family as the site of social welfare and service delivery. It developed first in Japan, later in the two others. Goodman & Peng, “The East Asian Welfare States”, p. 193. The three countries are marked by strong traditional forces in the region. They share a “language of Confucianism: (...) respect for seniors, filial piety, paternal benevolence, the group before the individual, conflict avoidance, loyalty, dutifulness, lack of complacency, striving for learning, entrepreneurship and meritocracy”. Goodman & Peng, “The East Asian Welfare States”, p. 195. There are also similarities between the kinship patterns of the three cases. All this has contributed to the development of “family-like” patterns of business organisation in the region.  Back.

Note 84: Giovanni Arrighi, “The Rise of East Asia: World Systemic and Regional Aspects”, International Journal of Sociology and Social Policy, 16:7, 1996, p. 34.  Back.

Note 85: Katzenstein & Shiraishi, editors, Network Power.  Back.

Note 86: Katzenstein, “Introduction”, in Katzenstein & Shiraishi, editors, Network Power.  Back.

Note 87: Rostow also had a background in the Marshall aid administration in the second half of the 1940s.  Back.

Note 88: Woo, Race to the Swift: State and Finance in Korean Industrialization, p. 91.  Back.

Note 89: “Department of State Policy on the Future of Japan”, June 26, 1964, LBJ, NSF, box 250, doc. 70.  Back.

Note 90: Woo, Race to the Swift: State and Finance in Korean Industrialization, p. 86.  Back.

Note 91: Seiji Naya, “The Vietnam War and Some Aspects of Its Economic Impact on Asian Countries”, The Developing Economies, 9:1, 1971.  Back.

Note 92: Stubbs, “Geopolitics and the political economy of Southeast Asia”, p. 527-529.  Back.

Note 93: Stubbs, “Geopolitics and the political economy of Southeast Asia”, p. 529-530.  Back.

Note 94: Terutomo Ozawa, Multinationalism, Japanese Style: The Political Economy of Outward Dependency. Princeton 1979, p. 199-200.  Back.

Note 95: Ozawa, Multinationalism, Japanese Style: The Political Economy of Outward Dependency, p. 35-39, 78-83.  Back.

Note 96: Arrighi; Ikeda & Irwan [Ref. to be added] 1993, p. 58-62; Giovanni Arrighi, The Long Twentieth Century: Money, Power, and the Origins of Our Times, London 1984, p. 345-346; Arrighi, “The Rise of East Asia: World Systemic and Regional Aspects”, p. 25.  Back.

Note 97: Frank Frost, “Introduction: ASEAN since 1967 — Origins, Evolution and Recent Developments”, in Alison Broinowski, ed., ASEAN into the 1990s, London 1990, p. 6-8; Renato CruzDe Castro, “The Controversy in the Spratlys: Exploring the Limits to ASEAN’s Engagement Policy”, Issues & Studies, 34:9, 1998, p. 97-101, Muthiah Alagappa, “International Politics in Asia. The Historical Context”, Ch. 2 in Muthiah Alagappa, editor, Asian Security Practice, Stanford 1998, p. 107-109. Relations between ASEAN and the PRC declined somewhat in the 1990s as a result of the growing territorial disputes in the South China Sea. This induced ASEAN to include Vietnam as a counterweight to the PRC (along with Burma, Cambodia and Laos) and to try to include the PRC in multilateral negotiations, within the ASEAN framework through institutions such as the ASEAN Regional Forum on Security (ARF), so far with limited success.  Back.

Note 98: ASEAN has been regarded as kind of a “security community”. It was not intended as a vehicle for regional integration, but rather to “enhance the members’ respective national interest”. But it has its own dynamic, and it does contribute to transformation of members’ perceptions of their identities (national, regional). For Indonesia, it forms a “shield of friendship” around it. Dewi Fortuna Anwar, “Indonesia”, Ch. 15 in Muthiah Alagappa, editor, Asian Security Practice, Stanford 1998, p. 508-509.  Back.

Note 99: Frost, “Introduction: ASEAN since 1967”, p. 10-13. In the late 1990s, there were plans to create a free trade area by 2003; Alagappa, “International Politics in Asia. The Historical Context”, p. 107-8.  Back.

Note 100: Some statistics are to be added.  Back.

Note 101: The earlier Democratic administrations had largely played the Russian card, cf. for instance a vague offer from the Americans to the Russians suggesting a joint action against Chinese nuclear weapons infrastructure in 1963. Cf. Gordon Chang (1990), [Reference to be added] p. 245-247. See discussion in Nordhaug, State and U.S. Hegemony in Taiwan’s Economic Transformation, p. 233.  Back.

Note 102: Arrighi, “The Rise of East Asia: World Systemic and Regional Aspects”, p. 33-36.  Back.

Note 103: Mitchell Bernard & John Ravenhill, “Beyond Product Cycles and Flying Geese: Regionalization, Hierarchy, and the Industrialization of East Asia”, World Politics, 47, January 1995, pp. 171-209.  Back.

Note 104: Bernhard & Ravenhill, “Beyond Product Cycles and Flying Geese”.  Back.

Note 105: Arrighi, “The Rise of East Asia: World Systemic and Regional Aspects”, p. 30-31.  Back.

Note 106: Arrighi, “The Rise of East Asia: World Systemic and Regional Aspects”, p. 27-28.  Back.

Note 107: Bernhard & Ravenhill, “Beyond Product Cycles and Flying Geese”, p. 200 ff.  Back.

Note 108: Katzenstein & Shiraishi, editors, Network Power.  Back.

Note 109: Walden Bello, “Time to Give APEC a Well-Deserved Burial”, Focus on Trade, no. 31, Nov./Dec., 1998; Richard Higgot & Richard Stubbs, “Competing conceptions of economic regionalism: APEC versus EAEC in the Asia Pacific”, Review of International Political Economy, vol. 2, no. 3, p. 519.  Back.

Note 110: Bello, “Time to Give APEC a Well-Deserved Burial”.  Back.

Note 111: Higgot & Stubbs, “Competing conceptions of economic regionalism”, pp. 522-523.  Back.

Note 112: Higgot & Stubbs, “Competing conceptions of economic regionalism”, pp. 526-527.  Back.

Note 113: Walden Bello, “What is the IMF’s Agenda for Asia?”, Focus on Trade, vol. 22, no. 2, 1998. [online]. - URL: http://www.focusweb.org/focus/pd/apec/fot/fot22.htm  Back.

Note 114: John A. Mathews, “Fashioning a new Korean model out of the crisis: the rebuilding of institutional capabilities, Cambridge Journal of Economics, vol. 22, 1998, p. 752.  Back.

Note 115: Robert Wade & Frank Venoroso, “The Asian Crisis: The High Debt Model Versus the Wall Street&-;Treasury–IMF Complex”, New Left Review, no. 228, 1998, p. 19  Back.

Note 116: Richard Higgot, 1998, “The Asian Economic crisis: A Study in the Politics of Resentment”, New Political Economy, no. 3, vol. 3, 1998.  Back.

Note 117: Anthony Rowley, “The Battle of Hong Kong”, Capital Trends, vol. 2, no. 13, 1997 [online]. - URL: http://www.gwjapan.com/ftp/pub/nrca/ctv2n13b.html; Eric Altback, “The Asian Monetary Fund Proposal: A Case Study of Japanese Regional Leadership”, Japan Economic Institute Report, 47A, 19 Dec., 1997, p. 1.  Back.

Note 118: Altback, “The Asian Monetary Fund Proposal”, p. 5 .  Back.

Note 119: Altback, “The Asian Monetary Fund Proposal”, p. 6.  Back.

Note 120: The Asians were obviously somewhat disturbed by the presence of Summers. During the conference Japan’s Eisuke Sakakibara called a meeting of senior Asian finance officials without informing the Americans. However, Summers came to know about this meeting. He immediately left his meeting, entered the room where the Asian officials were sitting, sat down at the table and said, “Now where were we”. See Robert Wade, “Gestalt Shift: From Miracle to ‘Cronyism’ in the Asian Crisis”, unpublished manuscript, August 1998.  Back.

Note 121: Concerns about the prospects of growing Japanese independence and U.S. economic interests may also have led the United States to go against AMF. The consequences to the U.S. financial system would have been serious if the central bank of Japan had sold out from its huge holdings of U.S. Treasury bonds to finance this costly regional operation. See Chalmers Johnson, “Economic crisis in East Asia: the clash of capitalisms”, Cambridge Journal of Economics, vol. 22, no. 6, p. 658; Robert Wade & Frank Venoroso, “Asian crisis”, p. 20, note 25.  Back.

Note 122: Anthony Rowley, “Asian Fund, R.I.P”, Capital Trends. Capital Trends, vol. 2, no. 14, 1997 [online]. — URL: http://www.gwjapan.com/ftp/pub/nrca/ctv2n14g. html. Ron Bevacqua claims that Japanese authorities knew that the AMF-initiative would be blocked by the United States and that the Japanese intention was to pressure the United States to assume a greater responsibility of the bailouts. The United States had not contributed funds to the Thailand rescue fund, while it became an important contributor to the bailouts in Indonesia and South-Korea. See Ron Bevacqua, “Whither the Japanese model? The Asian economic crisis and the continuation of Cold War politics in the Pacific Rim”, Review of International Political Economy, vol. 5, no. 3, 1998, pp. 422-423.  Back.

Note 123: Higgot, “The Asian Economic crisis: A Study in the Politics of Resentment”, p. 342-343; Gilliam Tett, “Japan to revive controversial Asian monetary fund proposal”, Financial Times, 16 Dec., 1998.  Back.

Note 124: See for instance, David E. Sanger, “U.S. Sees New Villain in Asia Crisis: Japan’s Government”, New York Times, 22.02.1998.  Back.

Note 125: A lter revision of this paper will turn this section in a more comparative direction. Let us here just mention the following contrast: The problem for the U.S. in Western Europe seems to be the increasing independence of the EU, while the problem in East Asia — both to the U.S. and to Japan — may be continued symbiosis of the U.S. and Japan!  Back.

Note 126: Johnson, “Economic crisis in East Asia: the clash of capitalisms”, p. 658, Robert Wade & Frank Venoroso, “The Gathering World Slump and the Battle Over Capital Control”, New Left Review, no. 231, 1998, pp. 35-37.  Back.

Note 127: Michael Vatikiotis with Murray Hiebert, “Help Yourself”, Far Eastern Economic Review, 31 Dec. 1998-7 January 1999; Erik Altback, “Tokyo Pledges New South East Asian Aid, May Revive Regional Fund Plan”, JEI Report, no. 37B, 2 October 1998, p. 7-9.  Back.

Note 128: Vatikiotis with Hiebert, “Help Yourself”; Kiho Yokoyama, “Japan aims to ease capital-flow volatility”, The Nikkei Weekly, 21 Dec., 1998.  Back.

Note 129: Vatikiotis with Hiebert, “Help Yourself”.  Back.

Note 130: See for instance, David E. Sanger, “U.S. Sees New Villain in Asia Crisis: Japan’s Government”, New York Times, 22.02.1998.  Back.

Note 131: Chalmers Johnson, “Economic Crisis in East Asia: the clash of capitalisms”, Cambridge Journal of Economics, 22:6, 1998, p. 658.  Back.

Note 132: Johnson, “Economic Crisis in East Asia: the clash of capitalisms”, p. 658; Robert Wade & Frank Venoroso, 1998b, “The Gathering World Slump and the Battle Over Capital Control”, New Left Review, No. 231, 1998, p. 35-37.  Back.

Note 133: David Felix, “IMF: Still Bungling in Asia”, Journal of Commerce, 9 July, 1998.  Back.

Note 134: Wade & Venoroso, “The Gathering World Slump”, p. 16-17.  Back.

Note 135: Lester Thurow, “The Dollar’s Day of Reckoning”, The Nation, 268:2, 1999, p. 22-24.  Back.