Japan and Britain in the Contemporary World: Responses to Common Issues (Nissan Institute Routledge Japanese Studies Series)

Japan and Britain in the Contemporary World

Japan and Britain in the Contemporary World provides up-to-date analyses of these two countries in terms of economics, politics, security and identity on the global, regional, subnational and civic levels. The book moves beyond an analysis of state-to-state relations between Japan and Britain by examining the role of civil society in the relationship and analysing the way the two countries deal with common issues, such as the ‘special relationship’ both maintain with the US; the relationships with the continents that both of these island nations border; the question of the degree of decentralization to allow within their contested borders. Both countries also face the pressures of globalization, as seen by the responses of the global cities of London and Tokyo. The editors have brought together a selection of top scholars in a collection of chapters aimed at examining the similarities and differences in the way Japan and Britain respond to issues of common concern on these different levels. Hugo Dobson is Lecturer in the International Relations of Japan in the School of East Asian Studies at the University of Sheffield. Glenn D. Hook is Professor of Japanese Studies and Director of the Graduate School of East Asian Studies at the University of Sheffield.

Sheffield Centre for Japanese Studies/ RoutledgeCurzon series Series Editor: Glenn D. Hook Professor of Japanese Studies, University of Sheffield

This series, published by RoutledgeCurzon in association with the Centre for Japanese Studies at the University of Sheffield, both makes available original research on a wide range of subjects dealing with Japan and provides introductory overviews of key topics in Japanese Studies. The Internationalization of Japan Edited by Glenn D. Hook and Michael Weiner Race and Migration in Imperial Japan Michael Weiner Japan and the Pacific Free Trade Area Pekka Korhonen Greater China and Japan Prospects for an economic partnership? Robert Taylor The Steel Industry in Japan A comparison with the UK Hasegawa Harukiyo Race, Resistance and the Ainu of Japan Richard Siddle Japan’s Minorities The illusion of homogeneity Edited by Michael Weiner Japanese Business Management Restructuring for low growth and globalization Edited by Hasegawa Harukiyo and Glenn D. Hook

Japan and Asia Pacific Integration Pacific romances 1968–1996 Pekka Korhonen Japan’s Economic Power and Security Japan and North Korea Christopher W. Hughes Japan’s Contested Constitution Documents and analysis Glenn D. Hook and Gavan McCormack Japan’s International Relations Politics, economics and security Glenn D. Hook, Julie Gilson, Christopher W. Hughes and Hugo Dobson Japanese Education Reform Nakasone’s legacy Christopher P. Hood The Political Economy of Japanese Globalization Edited by Glenn D. Hook and Hasegawa Harukiyo Japan and Okinawa Structure and subjectivity Edited by Glenn D. Hook and Richard Siddle Japan and Britain in the Contemporary World Responses to common issues Edited by Hugo Dobson and Glenn D. Hook

Japan and Britain in the Contemporary World Responses to common issues

Edited by Hugo Dobson and Glenn D. Hook

First published 2003 by RoutledgeCurzon 11 New Fetter Lane, London EC4P 4EE Simultaneously published in the USA and Canada by RoutledgeCurzon 29 West 35th Street, New York, NY 10001 RoutledgeCurzon is an imprint of the Taylor & Francis Group This edition published in the Taylor & Francis e-Library, 2003. © 2003 Hugo Dobson and Glenn D. Hook for selection and editorial matter; individual contributors for their contributions All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging in Publishing Data A catalog record for this book has been requested ISBN 0-203-40354-1 Master e-book ISBN

ISBN 0-203-34575-4 (Adobe eReader Format) ISBN 0–415–30414–8 (Print Edition)

To past, present and future generations of Japanese and British scholars

Contents

Illustrations Notes on contributors Preface List of abbreviations 1 Introduction: Japan and Britain – similarities, differences, and the future

xi xii xv xvii

1

H U G O D O B S O N AND G L E N N D. H O O K

2 Japan and Britain in a historical–future perspective

18

S A K A M OTO YO S H I K A Z U

3 The future of Anglo-America: the changing relationship between the United Kingdom and the United States

40

ANDREW GAMBLE

4 Japan–United States relations in the postwar years: the dilemma and problems of postwar Japanese diplomacy and their implications for the East Asian order

53

KAN HIDEKI

5 Britain and Germany: defining the European order in the contemporary era

82

C H R I S TO P H B LU T H

6 Japan and China: new regionalism and the emerging East Asian order

96

TA K A H A R A A K I O

7 The United Kingdom and the euro: exchange rate stability but at what price? B R I A N A R DY

113

x Contents 8 The East Asian economies after the financial crisis: a role for the Japanese yen?

131

TA K A H A S H I WATA RU

9 A Braveheart renaissance? Scottish identity and politics at the beginning of the twenty-first century

150

E B E R H A R D B O RT

10 Beyond hondo: devolution and Okinawa

169

¯ TA M A S A H I D E O

11 London as a global financial centre: problems and prospects in the new era

186

R A N DA L L D. G E R M A I N

12 Narrating a ‘global city’ for ‘new Tokyoites’: economic crisis and urban ‘boosterism’ in Tokyo

196

M AC H I M U R A TA K A S H I

13 Conclusion: Japan and Britain – a common agenda for the twenty-first century?

213

H U G O D O B S O N AND G L E N N D. H O O K

Glossary Index

224 226

Illustrations

Figures 7.1 Sterling exchange rates 7.2 GDP growth 1990–2001: UK, Germany, Euro Zone, USA 10.1 Main forms of control exercised by central government over local government

117 120 171

Tables 7.1 8.1 8.2 8.3 8.4 8.5 8.6 8.7 8.8 8.9 8.10 8.11 8.12 8.13 8.14 8.15 8.16 8.17 9.1 9.2 9.3 9.4

Direct inward investment GDP growth rate GDP at current prices Ratio to US GDP Share of world trade Per capita GDP Barro’s result Investment and saving ratio Rate of export dependence Direction of trade for ASEAN countries Direction of IT goods trade Industrial production by goods Channels of technology leverage in South Korea Capital inflows to the East Asian economies Internal and external trade of South Korea and Thailand Loans outstanding to Asian countries by BIS reporting banks Size of government The market shares of Chinese and Japanese products in the world market The Scotland Act and the division of powers Scottish election results, 6 May 1999 Proportional representation? Votes and seats Scottish election and referendum turnouts compared

124 132 133 133 134 135 136 137 138 138 139 139 140 140 141 142 143 144 152 159 160 160

Contributors

Brian Ardy is Research Fellow at the European Institute, South Bank University, where he is working on an ESRC project on adaptation to EMU. Other research interests include the EU budget and EU enlargement. Publications include: ‘Economic and monetary union: a review article’, Journal of Common Market Studies (2000); and ‘British membership of EMU’, New Economy (2001). Eberhard Bort is the Co-ordinator of the Governance of Scotland Forum and Lecturer in Politics at the University of Edinburgh. He teaches Scottish society and culture, contemporary Irish politics and British studies. Publications include: The Frontiers of Europe (edited with Malcolm Anderson, 1998); The Irish Border: History, Politics, Culture (1999); Networking Europe: Essays on Regionalism and Social Democracy (2000); and The Frontiers of the European Union (with Malcolm Anderson, 2001). Christoph Bluth is Professor of International Studies and Director of the Centre for Science and International Affairs at the University of Leeds. He has written widely on international security, especially Soviet/Russian nuclear weapons policy, the non-proliferation of weapons of mass destruction, European security and Cold War history. Publications include: Germany and the Future of European Security (2000); and The Nuclear Challenge (2000). Hugo Dobson is Lecturer in the International Relations of Japan in the School of East Asian Studies at the University of Sheffield. In addition to a number of articles and book chapters, his publications include: Japan’s International Relations: Politics, Economics and Security (co-author, 2001); and Japan and United Nations Peacekeeping: Pressures and Responses (2003). Andrew Gamble is Professor of Politics and Director of the Political Economy Research Centre at the University of Sheffield. His research interests are in comparative political economy, public policy and political theory. Publications include: Politics and Fate (2000); and The Political Economy of the Company (co-edited with John Parkinson and Gavin Kelly, 2001). He is currently completing a book entitled The World Island: Narratives of British Politics.

Contributors xiii Randall D. Germain is Senior Lecturer in International Politics at the University of Wales, Aberystwyth. Publications include: The International Organization of Credit: States and Global Finance in the World Economy (1997); and Globalization and its Critics: Perspectives from Political Economy (editor, 2000). Glenn D. Hook is Professor of Japanese Studies and Director of the Graduate School of East Asian Studies at the University of Sheffield. His publications include: Militarization and Demilitarization in Contemporary Japan (1996); Japan’s Contested Constitution: Documents and Analysis (co-author, 2001); Japan’s International Relations: Politics, Economics, and Security (co-author, 2001); and The Political Economy of Japanese Globalization (co-editor, 2001). Kan Hideki is Professor of International Politics in the Graduate School of Social and Cultural Studies at Kyu¯shu¯ University. His research interests include US–Japan relations, US relations with East Asia, regionalism, ordermaking and security in the Asia-Pacific. Publications in Japanese include: The Cold War and US Policy towards East Asia (1992); Regionalism and Security in the AsiaPacific (co-editor, 1999); From Hatred to Conciliation: Thinking about Regional Conflicts (co-author, 2000); and ‘The end of the Cold War and world politics in the 1960s’, Journal of International Relations (editor, 2001). Machimura Takashi is Professor of Social Studies at Hitotsubashi University. His research interests include urban sociology, globalization and its urban impacts, mega-events and cities, and the historical sociology of development. Publications in Japanese include: The Structural Change of a Global City: Urban Restructuring in Tokyo (1994); and Sociology of Cities (co-author, 2000). ¯ ta Masahide is a member of the Upper House of the Japanese Diet and O former governor of Okinawa (1990–8). His publications include over sixty books, amongst them The Battle of Okinawa: The Typhoon of Steel and Bombs (1984). Sakamoto Yoshikazu is Emeritus Professor of the University of Tokyo. Research interests include international politics, peace and world order studies. Publications in English include: Strategic Doctrines and their Alternatives (editor, 1987); Democratizing Japan: the Allied Occupation (co-editor, 1987); Asia: Militarization and Regional Conflict (editor, 1988); The Emperor System as a Japan Problem (editor, 1989); Global Transformation: Challenges to the State System (editor, 1994); and The International System After the Collapse of East–West Order (co-editor, 1994). Takahara Akio is Professor in the Department of Politics in the Faculty of Law and Politics at Rikkyo¯ University. His research interests include socialism and marketization, one party rule in China, urban community construction in China, and security in East Asia. Publications in Japanese include: The Era of ‘China’ (co-author, 1995); Mao Zedong, Deng Xiaoping and Jiang Zemin (co-author, 1999); and in English: The Politics of Wage Policy in Post-Revolutionary China (1992).

xiv

Contributors

Takahashi Wataru joined the Bank of Japan in 1978 and is now Associate Director of the International Department. He was Professor of Economics at Keio University from 2000 to 2002. His research interests include financial theory, marketing analysis and economic reform. Publications in Japanese include: Rational Expectations and a Policy of Monetary Supply (co-author, 1982); and in English: Suggestions for Financial Reform in China (1988); and ‘Consumer Behaviour in Japan under Financial Liberalization and Demographic Change’, in The Structure of the Japanese Economy (co-author, 1995).

Preface

At the start of the twenty-first century, and a century since the signing of the Anglo-Japanese Alliance in 1902, Japan and Britain face a range of common issues, whether in terms of the nature of the relationship to maintain with the United States, how to interact with their continental neighbours, what degree of decentralization to promote, and the role of their capital cities in an era of globalization. The chapters in this volume, which take up the above themes, are revised versions of papers first presented at the inaugural meeting of the AngloJapanese Academy (AJA), which was held at the University of Sheffield and at Shrigley Hall, Pott Shrigley, near Manchester, 4–9 September 2001. Breaking away from the traditional usage of the term, the AJA is a ‘virtual’ academy with no permanent, physical presence. It was inaugurated to promote scholarly activities and mutual understanding through ‘Japan 2001’, a year-long, nationwide celebration of Japanese life and culture held in Britain from April 2001 to March 2002. It brought together specialists in the broadly defined areas of politics, law, economics and society for an intensive workshop and an international conference entitled National, Regional and Global Transition: A Common Agenda for Anglo-Japanese Relations in the Twenty-first Century. The workshop and conference provided the venues for a small group of competitively chosen British and Japanese scholars at the beginning of their careers to be tutored by and interact with senior, established figures in the field. The underlying motivation for bringing these different nationalities and generations together through the AJA was to foster academic communication and the development of networks, both horizontally and vertically, between the workshop and conference participants, with the aim of enhancing scholarship. It is to be hoped that, with the publication of this volume, the AJA has made a small step towards reaching this goal. The AJA was organized through a steering committee co-chaired by Takahashi Susumu and Glenn Hook. The editors would like to thank all members of the committee for their assistance, Paul Chen, Kashiwagi Noboru, Michael Reddish, Takeda Hiroko, Tsukimura Taro¯, and especially Wada Keiko, whose unstinting work on both sides of the world made the events a success. For financial assistance, special thanks are due to the Daiwa Anglo-Japanese Foundation, especially the Director General, Marie Conte-Helm; the Japan Society for the Promotion of Science, especially the then Director of the London Liaison Office, Sato¯ Kunio;

xvi

Preface

the Japan Foundation; the Nomura Foundation; the Egusa Foundation, and the Chubu Electric Power Company. We also wish to express our gratitude to all of the participants, especially to the authors of the chapters in this volume for revising their papers in the light of the comments made by the participants, anony¯ ta Masahide and mous referees, and ourselves. Special thanks are also due to O RoutledgeCurzon for agreeing to the inclusion of his chapter, which first appeared in Glenn D. Hook and Richard Siddle (eds) (2002) Okinawa and Japan: Structure and Subjectivity, London: RoutledgeCurzon, even though he was unable to attend the conference. Finally, following Japanese convention, the Japanese names in the text and notes are given with the family name followed by the given name. In writings in English, however, the personal name is followed by the family name. Except for place names commonly encountered in the West and the names of institutions translated into English, all long vowels are indicated by a macron. Hugo Dobson and Glenn D. Hook July 2002

Abbreviations

ABMT ADB AJA AMF AMS ANZUS APEC ARF ASEAN ASEAN⫹3 ASEM BNP BOJ CEE CEO CFSP CLDRC CND CPD CSCE CTBT DPJ DPL EAEC EC ECB ECSC EEC EEMU EMS EMU END

Anti-Ballistic Missile Treaty Asian Development Bank Anglo-Japanese Academy Asian Monetary Fund Additional Member System Australia, New Zealand and the United States (treaty) Asia Pacific Economic Cooperation (forum) ASEAN Regional Forum Association of Southeast Asian Nations Association of Southeast Asian Nations, plus China, Japan and South Korea Asia-Europe Meeting British Nationalist Party Bank of Japan Central and Eastern Europe chief executive officer common foreign and security policy Central–Local Dispute Resolution Committee Campaign for Nuclear Disarmament Committee for the Promotion of Decentralization Conference on Security and Cooperation in Europe Comprehensive Test Ban Treaty Democratic Party of Japan Decentralization Promotion Law East Asian Economic Caucus European Community European Central Bank European Coal and Steel Community European Economic Community European Economic and Monetary Union European Monetary System European Monetary Union European Nuclear Disarmament

xviii

Abbreviations

EPA ERM EU FATF FDI FRG FSA GATT GDP HICP IC ICBM ICT IMF IPA IR IT JCP JDA JSP LDP LIFFE MERCOSUR MOF MOFA MP MSDF MSP NAFTA NAIRU NASDAQ NATO NGO NHK NHS NIEs NMD NPT ODA OECD OSCE PECC PKO PLA

Economic Planning Agency Exchange Rate Mechanism European Union Financial Action Task Force foreign direct investment Federal Republic of Germany Financial Services Authority General Agreement on Tariffs and Trade gross domestic product harmonized index of consumer prices integrated circuit inter-continental ballistic missile information and communication technology International Monetary Fund Institute of Public Administration international relations information technology Japan Communist Party Japan Defence Agency Japan Socialist Party Liberal-Democratic Party London Financial Futures and Options Exchange Common Market of the South (el Mercado Comun del Sur) Ministry of Finance Ministry of Foreign Affairs Member of Parliament Maritime Self-Defence Force Member of the Scottish Parliament North American Free Trade Agreement non-accelerating inflation rate of unemployment National Association of Securities Dealers Automated Quotation System North Atlantic Treaty Organization non-governmental organization Nihon Ho¯so¯ Kyo¯kai (the Japanese national broadcaster) National Health Service newly industrialized economies National Missile Defence Non-Proliferation Treaty Official Development Assistance Organization for Economic Cooperation and Development Organization for Security and Cooperation in Europe Pacific Economic Cooperation Council peacekeeping operations People’s Liberation Army

Abbreviations xix PLEC POW RMB RPIX SACO SDF SMLEUL SNP SPD START-II TARGET TEU TMD TMG UK UN UNPKO UNSC US USSR VHS WEF WEU WTO

Prefectural Land Expropriation Committee prisoner of war renminbi (China’s currency) retail price index excluding mortgage interest payments Special Action Committee on Okinawa Self-Defence Force Special Measures Law for the Expropriation and Use of Land Scottish National Party Sozialdemokratische Partei Deutschlands (Social Democratic Party of Germany) Strategic Arms Reduction Talks II Trans-European Automated Real-time Gross Settlement Express Transfer Treaty on European Union theatre missile defence Tokyo Metropolitan Government United Kingdom (of Great Britain and Northern Ireland) United Nations United Nations Peacekeeping Operations United Nations Security Council United States Union of Soviet Socialist Republics video home system World Economic Forum West European Union World Trade Organization

1

Introduction Japan and Britain – similarities, differences, and the future Hugo Dobson and Glenn D. Hook

Stereotypical characterizations of Japan and Britain divide essentially into two camps. On the one hand, the complexities of these two nations have been overlooked and oversimplified in favour of neatly packaged clichés or resonant sound bites that emphasize their congruity – both are island nations with extended histories rooted in antiquity and mysticism; both possess royal or imperial families occupying a central role in the identities of the two nations and their historical development; both express misgivings towards the continents they border and in reaction have at various times proclaimed policies of isolation or dominance. It would appear from this perspective that no two nations in the world were more alike. On the other hand, another strand of the extant literature tends to regard them as two countries separated by a vast geographical distance, clearly divergent historical paths of development, and a yawning cultural divide. The perception of Japan in the global order is confirmed from a British perspective by Japan’s location in the ‘Far East’, a geographical reference point placing Britain at the centre of the global political economy and Japan at its fringes. Culturally, of course, Japan and Britain are seen again to be quite distinct, with Britain part of Christendom and Japan boasting its own civilization, replete with cultural artifacts and practices quite alien to the West (Huntington 1996). And, in terms of the paths of development chartered, Britain stepped onto the world stage as an imperial power well before Commodore Mathew Perry’s ‘black ships’ first arrived in Edo Bay in 1853 in order to open Japan to the West. In the wake of their arrival, the modern history of Japan can be said to represent an attempt by a peripheral Asian nation to catch up with and overtake Britain (oitsuke oikose) and more broadly the West, moving in the process towards the centre of the global political economy, importing culture from Britain and the West, and following Britain on the path of imperialism as a latecomer to the ‘age of empires’ (Hobsbawm 1994). In terms of their respective places in the world, then, Japan started as a follower nation to the early-starter European power, learned from it the importance and techniques of building an empire rather than becoming a colony, and in the process became the first Asian nation to sit down at the negotiating table with the other great powers of the age (Shimazu 1998). From this perspective, Britain is at the centre of the world, Japan at the periphery; Britain is an early-starter,

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Japan a latecomer; and British culture connotes universalism, Japanese culture particularism. For Britain, depending on the specific historical juncture, Japan has at times been ignored altogether; at other times, it has appeared as exotic, feminine, and alluring; on still other occasions, especially those fraught with conflict, it has been witheringly caricatured as a simian threat with barbarous moral standards (Dower 1996: 292); and finally, as in the postwar rise of the economic phoenix, it has been viewed at one level as a challenger and at another level as even a partner in the G7/G8 summit of the world’s leading economic nations charged with managing the global economy (Bergsten and Henning 1996). Whichever may be current at the time, however, Japan is clearly seen as different, not only in terms of what is accepted in Britain, but more broadly in terms of the norms and patterns of behaviour established in the West. Similarly, in Japan, Britain has chronologically provided a model to be emulated, an imperial outsider to the region to be ejected, the sick man of Europe to be pitied, or a model for pushing forward with restructuring, whether in politics, economy, education, or even further afield. Again, the emphasis rests upon the differences between the two, but with a sense that, out of all of this, Japan might learn from Britain, in either a positive or negative sense. So, in such a world of stereotypes, what room exists for meaningful interaction and exchange? Before highlighting and examining possible areas and fora for cooperation that exist in the liminal regions between these two extreme poles, it is first necessary to identify and map in more detail the generalizations outlined above.

Similarities Shared political characteristics First of all, the similarities are numerous and, in terms of the domestic political make up of these two island nations, they appear to be more salient than the differences. To start with, the territorial borders of the two states reflect the process of integration around a central core – England and Japan respectively – of geographically proximate territory. Whilst the integration of Wales with England in the fifteenth century and the 1707 union with Scotland has left clearly differentiated parts to Great Britain, resistance to British rule in Ireland and the compromise struck in 1921 that created an Irish Free State but retained British rule in the six counties of Northern Ireland have been the historical factors that have shaped the present borders of ‘the United Kingdom of Great Britain and Northern Ireland’. In addition, a string of imperial outlying territories, such as Gibraltar and the Falklands, and the unresolved status of their sovereignty, give a certain inchoate form to the borders of the kingdom, as does the existence of the Isle of Man and the Channel Islands. In the case of Japan, both the quasi-colonization of the Kingdom of the Ryu¯kyu¯s by the Satsuma clan in 1609 and the subsequent formal integration of Okinawa as a prefecture from 1879 onwards in the south, and the integration of the Ainu people through the expansion of the Meiji state

Introduction

3

and the formal integration of Ezochi as Hokkaido¯ prefecture from 1869 onwards in the north, completed a more centralized process of state building in Japan based on the assimilation of the northern and southern wings of the archipelago. Similarly, the postwar Soviet occupation of the so-called ‘Northern Territories’ off the coast of Hokkaido¯ and a number of other territorial disputes with its East Asian neighbours have left the borders of the Japanese state in a similarly disputed state as the British. Thus, the two states share a similar, though historically divergent, path to their present shape. Whilst their form differs, moreover, both Japan and Britain are monarchies, rather than republics, with the royal households of each country continuing to play a constitutionally limited but vital role in the lives of the two nations. Compared to the customs and traditions of Britain’s ‘living constitution’ that have developed over centuries, Article 1 of the 1947 Constitution of Japan states quite explicitly that ‘[t]he emperor shall be the symbol of the State and of the unity of the people …’. Whilst their respective roles may appear more ceremonial than political, their function in knitting together the communities they symbolize is evidence of the political role the monarchs and the institution of monarchy continue to play in the two countries (see, for instance, Nairn 1994; Bix 2000). Their roots in the nation become evident precisely at times of monarchial transition. In recent days, the death of the Sho¯wa emperor (Hirohito) in Japan in 1989, and the deaths of Diana, Princess of Wales in 1997 and the Queen Mother in 2002 in Britain, have demonstrated an ability to stir feelings of a shared nationhood amongst many sections of the population. Whilst the postwar years have served to narrow the divide between the monarchies and the people, more so in Britain than in Japan, the institution remains as a powerful reminder of the continuing political role of traditionally privileged élites in both countries. Certainly, the question of whether the monarchy fully represents multicultural Britain, on the one hand, and the question of the Sho¯wa emperor’s war responsibility, on the other, mean that the two monarchies and their trappings do not go unquestioned and are not without controversy. Nevertheless, regardless of vocal minorities, neither in Britain nor in Japan does the republican cause seem likely in the near future to garner the kind of political support needed in order to banish the unelected from their current position and role in either state. Nevertheless, despite their monarchical traditions, both countries are quite clearly parliamentary democracies although the route they charted to this type of political system differs markedly. Certainly, Japanese democracy can be traced back to earlier eras and it would be wrong, especially given the era of so-called ‘Taisho¯ democracy’ from 1912 to 1926, to simply regard democracy in Japan as an American invention. It was without doubt, however, predominantly the postwar Occupation of Japan by the Allied forces and consequent reforms that gave shape to Japan’s present-day parliamentary system. Given that the Magna Carta of 1215 contains a number of clauses of importance as the roots of modern British (and even global) democracy, Britain is usually viewed as being a more ‘mature’ or ‘advanced’ democracy than Japan, and as playing host to the ‘mother of all parliaments’. Yet, as the British House of Lords remains as an unelected

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Hugo Dobson and Glenn D. Hook

upper house of parliament, despite the modicum of reform under Prime Minister Tony Blair’s Labour government, the present-day political system of Japan appears in a structural sense to be more democratic than Britain, as the aristocratic upper house of the Diet was abolished in favour of an elected house during the Occupation. Similarly, the rise to power of the militarists in 1930s Japan can be seen as an aberration or as the natural outcome of the country’s historical development from the late nineteenth century onwards, but it is again frequently viewed as symbolic of the different route to democracy taken by the two countries. Here again, though, whilst the Japanese military’s control of the political life of the nation combined both internal repression and external aggression, the experience of military rule is not totally alien to Britain. Thus, the beheading of Charles I in 1649 and the rise to power of Oliver Cromwell (king in all but name), whose well-trained ‘Ironsides’ had been at the heart of the Parliamentary army that defeated the Royalists in 1644 and subjugated the Irish, symbolizes Britain’s own short period of military rule. Whilst Charles II’s first Parliament of 1661 brought an end to the republic of the English Commonwealth, the beheading of a king by the Parliamentarians in the name of the people no doubt helps to explain why, despite their shared similarities in terms of democratic institutions, the functioning of democracy in the two countries does differ in fundamental respects. Although the era is quite different, then, both countries have experienced a period of military rule in the history of their political development. Today, the two nations function as democracies with a separation of powers, sovereignty residing in the people, albeit with the British remaining as ‘subjects’ of their monarch, regularly held elections to gauge the will of the people, a universal franchise and a free press. Equal treatment for all? Within these two democratic political systems, however, there remain subnational areas of both Japan and Britain that are viewed at various times in their histories as failing to enjoy the full benefits of these democratic institutions, at least by many of their residents. If the sign of a mature democracy is not how the majority but how the minority is treated, then Scotland and Okinawa illustrate the similar problems faced by these and other minorities in both Japan and Britain. Of course, this is not to deny the sense of minority status held by the Catholics in Northern Ireland or the Ainu in Hokkaido¯, but the cases of Scotland and Okinawa highlight the problems faced by subnational parts of these two countries where the boundaries of a sense of ethnic identity mirror closely their territorial location within the state. In the case of Scotland, on the one hand, a vibrant culture, rich history, and clearly defined ethnic identity set the Scots apart as distinct and separate from the rest of Britain. The English, for their part, have over time recognized the different needs of Scotland, and consequently divergent legal and educational systems have been maintained, and yet possibly as a result of a crisis of confidence and identity, have at the same time appropriated Scottish cultural artifacts and heritage. All things Scottish have come to epitomize all things

Introduction

5

British – tartan, whisky, shortbread, New Year festivities, to mention but a few. However, on the other hand, the government in London has regarded Scotland in turn as a host for British and United States military bases, nuclear power stations, and oil and natural gas production whilst denying it the right to an elected assembly for centuries up until 1999. The devolution of power to the Scottish Parliament has confirmed both political and legally the move to a more decentralized form of governance in the United Kingdom. For all that, London has benefited and continues to benefit economically whilst relegating these troublesome issues and electoral liabilities away from the southeast of England to the periphery of the UK. In this sense, it is Scotland, more than the wealthy southeast of England, that has had to shoulder the associated social and environmental ills of the policies decided in Westminster. Insofar as Okinawa is concerned, the sense of being treated differently arises from a range of issues within a centralized state that has not gone nearly so far as Britain in the direction of decentralization (Barrett 2000). Whether we take the prefecture’s position in the body politic, the location of US military bases, the constitutional rights enjoyed, the lower standards of living compared with mainland Japanese, or their expression of a sense of ethnic identity, the people of Okinawa are in many ways clearly a minority in Japan today. To start with, it is difficult to imagine that, in the wake of defeat, the emperor would willingly accept the continued occupation of a sovereign part of Japanese territory, but Okinawa was viewed as a clear exception. Despite being a ‘symbol’ under the new postwar constitution, the emperor in both 1947 and 1948 acted politically by backing the US’s continued military presence in Okinawa under a leasing agreement, with up to fifty years proposed as the period (Hook and McCormack 2001: 23). Whilst the prefecture remained under American military occupation until its return to Japan in 1972, and hence can be seen to represent the division of Japan in the south that the Soviet occupation of Japanese territory represented in the north, with the nowar clause, democratic principles, and the human rights of the constitution inspiring the desire amongst many Okinawans to revert to Japan rather than seek political if not economic independence, the years following reversion have not led to a significant reduction in the US military presence on the islands. Thus, despite making up only 0.6 per cent of the total landmass of Japan, nearly 75 per cent of US bases are located in Okinawa prefecture, particularly on the main island of Okinawa. Whilst employment opportunities are provided by the bases and a popular feeling exists that the US presence leads the national government to treat the prefecture favourably in terms of public works, even those who support the continued location of the bases share the same concerns as the opponents over the crimes committed by US military personnel, including murder and rape, and the unequal burden shouldered by the prefecture in comparison with elsewhere in Japan. Whilst the government’s commitment to improving the lot of Okinawans is not to be doubted, and major improvements have indeed been made in the wake of reversion, especially the provision of social infrastructure, the per capita Gross Domestic Product (GDP) of Okinawa remains the lowest of all prefectures, and the rate of unemployment in February 2002 stood at 8.5 per cent compared

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to 5.3 per cent for the national average (Okinawa Taimusu, 29 March 2002 and 8 April 2002). Finally, whilst an Okinawan ethnic identity, as manifest in different cultural praxis, including music and dance, generates pride, mainlanders are not all free from prejudicial attitudes and discriminatory behaviour towards Okinawans, as in the case of other minorities in Japan such as the Ainu (Siddle 1996). In this sense, Okinawa and the Okinawans have been structurally integrated into Japan as a subordinate as well as a subnational part of the democratic state.

Love thy neighbour? Regionally, Japan and Britain are separated by sea yet located on the edge of a continent towards which they feel both affinity and alienation. Both countries owe a cultural and historical debt to their continental neighbours. On the one hand, British identity and the English language are products of numerous invasions from the continent from Roman to Saxon to Norman. On the other hand, Japan once recognized China as the regional hegemon and as a vassal state paid tribute to the middle kingdom. In return, Japan received guidance in best practice from China in the fields of politics, language, and architecture, to mention but a few. However, at the same time that the two nations have been constituted by the continents they border, both have sought to either distance themselves from or enforce their dominance upon the troublesome continentals. For Britain, this involved a period of ‘splendid isolation’ during which attention could be paid to the creation of an empire founded on naval prowess free from European intervention as long as a balance of power prevailed on the continent and no Napoleon or, in a later era, Hitler, sought to dominate Europe. For Japan, its policy of isolation was much more institutionalized as an attempt to resist the influence of Christianity in the seventeenth century. The relationships the two countries built with their respective regions were strongly influenced by the structure of the international system. In the postwar era, for instance, the bipolar Cold War confrontation between capitalism and communism, which saw both Japan and Britain integrated into the capitalist camp, meant ‘Europe’ for Britain was the Western Europe of the European Community. Relations with the remainder of Europe were constrained by the dictates of the Cold War confrontation. Similarly, Japan’s Cold War relations with East Asia were forged overwhelmingly within the template provided by the US–Japan Security Treaty of 1951 and the ‘hub and spokes’ security system of bilateral relationships with the US occupying the core position. With the end of the Cold War and the disappearance of a clearly discernible threat, both countries have been forced into debates on the utility and relevance of these traditional postwar policies of alignment with the US, their ‘special relationships’, as opposed to the opportunities presented by regional integration. The discourses at the centre of these debates in both countries strike at the heart not only of the national polity but also the national identity.

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Players on the world stage? Globally, both nations have followed the path of imperialism, with the UK providing a model for Japan; close relations with the postwar hegemon, the US, with both claiming a ‘special relationship’ in their respective parts of the world. Despite some degree of antagonism and anti-American sentiment within domestic society, and at times at the level of the political élite, since 1945 both nations have developed ‘special’ (at least in their own eyes) relationships with the dominant hegemon in the global political economy – Britain and the US are portrayed as fellow Anglo-Saxon powers separated by an ocean proverbially reduced to a pond; the relationship between Japan and the US has been regularly touted as the most important bilateral relationship in the world. Within the constraints of US dominance, a leadership role of sorts in international organizations has been carved out by both countries, as witnessed in Britain’s role in the Commonwealth, as a permanent member of the United Nations Security Council (UNSC) and as a member of the G7/G8; and Japan’s membership of the G7/G8, regular election to non-permanent member of the UNSC and contributions to the UN’s budget. Whilst, as noted above, state building involved both countries in territorial expansion near to home, their present-day global presence has been achieved in the wake of earlier imperialist expansion. Given the hegemonic or at least dominant status of the US, particularly in the military dimension of international affairs, both Japan and Britain appear content to play a follower role under the leadership of this former British colony. Since the terrorist attacks of 11 September 2001 in New York and Washington these already close relationships have been strengthened by declarations and feelings of fraternity – Britain has been willing, with few qualms, to support loyally and militarily the US war against terrorism in Afghanistan; Japan has introduced new and revised legislation so that it can be seen to be supporting its long-term ally to the best of its ability. Whether it is Tony Blair or Koizumi Junichiro¯, both prime ministers have played the role of loyal retainer to President George W. Bush in his global strategy against the ‘axis of evil’.

Differences Changing of the guards? Whilst the above draws attention to the similarities, differences are also instructive. As Virginia Woolf wrote, ‘[o]ught not education to bring out and fortify the differences rather than the similarities?’ (Woolf 1992: 114). Beyond the racially motivated characterizations of the Japanese as the ‘little people’ and the West as the parent in the relationship, which serve only to impede common understanding (Dower 1996: 288–9), much more concrete differences remain salient. At the other end of the spectrum divergences and dissimilarities in the domestic political make up of the two countries in terms of territorial expansion, the monarchy, parliamentary democracy, and the existence of minorities, are equally in evidence.

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In the postwar era, the actual functioning of democracy perhaps provides the sharpest perception of difference between Japan and Britain. The historical development of a two-party system in Britain has much to do with the first-pastthe-post electoral system, but a political system based on a change of governing parties, with at least a modicum of choice in party policies, highlights a particular point of difference between Japan and Britain. Of course, in the postwar period the stand-off between the Labour and Conservative parties has not necessarily meant regular changes in the governing party, as illustrated by the Conservative Party’s long periods of government – a combined total of eighteen years in office by prime ministers Margaret Thatcher (1979–90) and John Major (1990–7). Nevertheless, the function of the party system in Britain still contrasts sharply with the governing role of Japan’s centre-right Liberal-Democratic Party (LDP), which has remained in power from 1955 onwards, albeit as the dominant party in coalition governments after the breakdown of the ‘1955 system’ in 1993 rather than the almost sole ruling party until that time (Stockwin 1999: 70–92). Whereas Britain has experienced a regular exchange of power within a two-party system, the Japanese political system has been dubbed the one-and-a-half party system: the ‘half party’ having referred once upon a time to the Japan Socialist Party ( JSP), but now being more appropriately applied to the Democratic Party of Japan (DPJ). What is more, whilst interest groups and the voice of civil society are reflected in the policy-making processes of both countries, without doubt the process is in most cases more narrowly controlled in Japan by a so-called ‘iron triangle’ of the LDP, the bureaucracy and big business (Colignon and Usui 2001). Although the embryonic growth of a mature civil society in Japan has recently become a topic of research amongst academics and practitioners, the realization of a vibrant civil society is still regarded as a distant prospect by some commentators (Sternau 1999). Thus, the policy-making processes of each country differ sharply in the degree of pluralism. When policy-making is in the field of security, moreover, the contrast between the two polities remains sharp, with public opinion in the UK tending to support, or at least condone, the use of the military in the realization of state interests, whereas public opinion in Japan continues to be influenced by anti-militarist norms leading it to question the legitimacy of the military as an instrument of state power, although in the 1990s and early twenty-first century it is willing to accept more readily the deployment of the Self-Defence Force (SDF), especially as part of United Nations Peacekeeping Operations (UNPKO) (Hook et al. 2001). Indeed, given the different experiences of war, especially defeat compared to victory in the Second World War, even Japanese policy-making élites, not only the public, are more reluctant to seek military answers to global human problems than are their counterparts in the UK. The political moods of the two nations at the turn of the new century also stand in contrast to each other. Over recent years Britain has embarked upon a multi-cultural identity shift, which stresses the strengths that lie in difference and, to this end, in the contribution of its former empire and mixed ethnic British nationals. Despite an ongoing debate about asylum-seekers, front-page headlines

Introduction

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targeting of minority groups by mass-circulation dailies, and sporadic attention paid to the right-wing British Nationalist Party (BNP), Britain is essentially a nation learning to become at ease with itself. This shift is epitomized by former Foreign Minister Robin Cook’s ‘chicken tikka masala speech’ of April 2001 on contemporary Britain that emphasized and embraced these differences. Japan, however, has traditionally tried to play down the ethnic and social divisions that exist within its population, despite the existence and vocal opposition of the Ainu, Okinawans, buraku minority, second-generation Japanese nationals of Korean origin, migrant workers or short-term resident foreign population. In addition to this, in the last half of the 1990s, Japan began to undergo a nationalist revival as characterized by the adoption of hi no maru and kimi ga yo as respectively the official flag and national anthem of Japan despite their imperialist overtones, and the introduction of an increasingly conservative range of legislation. In the face of globalization, whereas Britain has accepted difference and sought to reconceptualize what it means to be British, in Japan tension has emerged between cosmopolitanism and ethnic and national exclusivity, with the latter garnering the strongest support in the conservative mainstream of politics (Hatsuse 2001). Imperial legacies and regional projects Regionally, Britain may well exhibit doubts towards its European partners, whether in historical terms of imperialist competition or in contemporary terms of differing views on the European project, but in bold contrast to Japan it has never sought to dominate the continent militarily. What is more, although Britain may have come into competition and conflict with its European counterparts throughout their long and shared history, it has never regarded them as politically, economically, or culturally inferior and in need of ‘education’ or ‘civilizing’, whereas Japan’s embrace of its ‘Asian brothers’ in the era of imperialist expansion and war was not based on their equality but on their inferiority. Throughout its diplomatic history, Britain recognized and upheld the sovereignty and equal status of its fellow European powers of the day. The sentiments encapsulated in Rudyard Kipling’s phrase ‘the white man’s burden’ was one very much shared with its European partners and directed towards Africa. Britain consequently does not suffer from the weight of colonial history when dealing with its European neighbours. The decolonization process it faced, whilst not bloodless, was an experience shared with its European partners and did not leave the same degree of antagonism in the former colonies as in the case of Japan, which was freed from addressing the problem as a result of losing the war. As mentioned above, the multicultural nature of contemporary British society, on the one hand, and the existence of the Commonwealth, on the other, point to the dual legacy of Britain’s imperial era distinct from Japan’s legacy. What is more, Britain’s experience of carving out colonies and then dealing with the decolonization process was an experience it shared with its European counterparts, in marked contrast to the experience of Japan.

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Indeed, for Japan the East Asian region was the very object of its imperial expansion, whether in Taiwan in the late nineteenth century, Korea in the early twentieth century, or Manchuria and elsewhere later in the same century. The legacy of Japan’s latecomer imperialism, which meant its role as colonizer was played out close to the imperial heartland, has left both the state and society with a number of obstacles to overcome in developing postwar relations with the other states and societies of the East Asian region. Given this legacy, borne partly as a result of never having had to face head on the decolonization process, a range of issues have provided a particularly painful thorn in the side of relations between Japan and East Asia, especially the two Koreas and China. Whether remilitarization, the representation of the war in school textbooks, the commemoration of the war dead, compensation for atrocities committed during the war, and even the very existence of the atrocities in question, Japan has been stung with criticism from East Asia. For these very reasons, the development of any form of regionalist project, embracing Japan and other members of the region, has only started to get fully underway following the ending of the Cold War and on an incremental and chiefly economic basis. Even today, Japan’s handling of bilateral and multilateral security issues remains a cause for concern amongst its East Asian neighbours. Thus, Japan has been constrained from playing an active role in the region by both internal and external structures, actors and norms. In contrast, and although at times it may have been frustrated by European nationalists like France’s General Charles de Gaulle, Britain has enjoyed the opportunity to participate actively in the European project. The British decision not to immediately participate in the 1951 European Coal and Steel Community (ECSC), the same decision not to join the 1957 European Economic Community (EEC), and the continuing tension over what relationship to maintain with Europe, as illustrated most recently by the decision not to become part of the eurozone, highlights the tension in Britain’s relationship with the continent. However, this is more in terms of Britain’s imperial legacy of playing a global role, albeit this time as a partner of the US, rather than the imperial legacy of dealing with former colonial peoples, as in the case of Japan. In regional terms, then, the legacy of their imperial histories mean a number of key differences are salient in the relationship Japan and Britain maintain with their continental neighbours. From centre to periphery, periphery to centre? Globally, the overwhelming sense of difference starts with their role as imperialist powers. Whilst Japan and Britain are similar in that, despite epitomizing earlystarter and latecomer imperialism, both trod the path of imperialism, with the terrible suffering for the colonized people this implied, a key difference remains in the sense that the earlier expansion of Britain as an imperial power provided opportunities for the country to exploit and extract resources far from the imperial heartland. Whether in Africa, Asia, or the Americas, Britain as an imperial power viewed itself as quintessentially superior in the face of these vastly different

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cultures. As mentioned above, the ideological tool for this superiority complex is encapsulated in the idea of ‘the white man’s burden’. In the case of Japan, however, the expansion abroad took place close to the Japanese heartland, with the colonization of Taiwan and Korea and the invasion of China taking place in a cultural sphere of great similarity. The historical position of Japan as a tributary state in the Chinese World Order, with Chinese civilization regarded as superior, meant the Japanese sense of superiority needed to be engendered by the state élite. Yet whilst elements of British imperialism can be seen to have contained the seeds of its own destruction, as in the divergence between democratic rhetoric and imperial practices, Japanese imperialism, whilst aimed at the ousting of Western imperial powers to create an Asia for Asians, seems not to have extolled the sort of universalistic principles ironically inhered in British imperialism, but rather constituted a particularistic attempt to bring all the colonial peoples under the empire’s one roof (hakko¯ ichiu). Finally, the difference in disengagement from empire between the two is marked. For Britain, the retreat was relatively peaceful and managed in a way that ensured generally good relations with the former colonies and newly independent states. For Japan, this retreat was inextricably and painfully linked with the violence and suffering of defeat in war. In the post-Second World War period, although both nations have fostered a ‘special’ relationship with the hegemon of the international system, the US, the relationship has differed in fundamental ways. Britain and America constitute a community of shared norms and practices in terms of identity and ethnicity – political élites share an Anglo-Saxon community with a deeply entwined sense of history entered into, out of choice. The relationship between the Japan and US was one borne of defeat in the Second World War and developed based on this traumatic experience: victor and vanquished, occupier and occupied, leader and led. It can be characterized more as a marriage of convenience than a marriage of choice. Since that time the US–UK relationship, although recognizing and celebrating its shared history and identity, gains concrete sustenance from the close economic, political, and military ties existing between the two sides. Indeed, as a number of prime ministers have demonstrated, whether Margaret Thatcher’s decision to allow the use of US bases in Britain for the bombing of Libya in 1986 or Tony Blair’s decision to deploy troops alongside the US in the fight against Al Qaeda in 2001–2, Britain can be relied upon in rough times as well as smooth. The Japan–US relationship, although lacking a comparably deep cultural taproot, has come to be one of the most important bilateral economic relationships in the global political economy, despite a range of trade conflicts, but the rough times for the Japanese have often engendered a political crisis over the degree of security cooperation to carry out with the US. Both the Japan and UK are important to the US but for very differing reasons. A broad view of the experiences of Japan and Britain in the twentieth century confirms the differences. For Britain the century represented steady decline (Gamble 1994). It began the century at the apex of its influence upon the world but thereafter fought two world wars that bankrupted the British Empire and led to disengagement in the latter half of the century, epitomized for many by the

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British withdrawal from Suez and the ensuing crisis of 1956. Concomitantly Britain began to search for a role in the world but found itself torn between cooperation with the European project and supporting the new global hegemon of the US – a debate that has yet to be resolved at the beginning of the current century. Domestically, the sense of what it is to be British is becoming increasingly contested as Scottish, Welsh and regional movements for autonomy strike at the heart of the union. In contrast, Japan’s experience of the twentieth century has been much more erratic in contrast to the steady trajectory of British decline. Japan emerged at the turn of the last century as an imperial parvenu aspiring to acceptance by the West. Ultimately frustrated in this project, Japan turned to alliance with the revisionist and totalitarian states of Germany and Italy in seeking a reorganization of the world order and ultimately conflict with the nations whose recognition it had once sought. Enduring defeat and occupation, the Japanese state and its people began a renewed developmentalist project in the postwar period that marked up remarkable achievements and provided a model for East Asia. By the end of the century, although the integrity of this project has experienced problems and been questioned, the Japanese state continues to exert a regional and global influence (although this influence is at times difficult to discern), despite the economic downturn experienced for more than a decade. Moreover, unlike Britain, the Japanese nation and sense of identity remain firmly intact.

The future: outline of the book The chapters making up this volume touch on a number of the issues outlined above. However, it is not the purpose of this book to provide a series of case studies illustrating and examining the direct interaction between the two island nations during their long history – this gargantuan task has already been masterfully undertaken by the Anglo-Japanese History Project and the five-volume series it has produced (Nish and Kibata 2000a,b; Hunter and Sugiyama 2001; Daniels and Chushichi 2002; Gow et al. 2002). The purpose of the chapters that constitute this book is rather to provide a comparative understanding of Japan and Britain in especially the contemporary era, and to do so from the perspectives of a number of the social sciences – politics, international relations, economics, and sociology. In particular, the chapters seek to deepen our understanding of both countries, acting as ‘mirrors’ on each other. The book examines their historical and contemporary role in the globe, especially their ‘special’ relationship with the US. An analysis of their role in the region follows, with the chapters seeking to shed light on the complex relationship Britain maintains with continental Europe and Japan maintains with East Asia. These chapters on the outward-oriented role of the two countries are followed by chapters on subnational parts of Japan and Britain, with a focus on how Okinawa and Scotland have sought to shape their own destiny, bound by the constraints of their position within the national polity. The final chapters examine the two capitals, Tokyo and London, and their responses to globalization.

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More specifically, Chapter 2 by Sakamoto Yoshikazu sets the scene for the chapters that follow by examining the relationship between Japan and Britain not only in terms of interstate relations, the usual way to approach the relationship between the two countries, but also in terms of how the British political system, in particular, served as a model for Japan, and how the two are involved in the contemporary world order. Moving from nineteenth-century Japan’s imperial emulation of Britain, to the imperial clash of the early twentieth century, to the early Cold War years of distant interaction, the interstate relations of these two countries are seen to have brought an overwhelmingly negative impact on the people of East Asia, first through colonization and war, and then in support of the US’s Cold War strategy. Domestically, Britain served not only as a model for Japan, in terms of a modern monarchy as well as a modern party system, but offered support to civil society in struggling to promote peace. In the contemporary era of globalization and regionalization, Sakamoto sees that Japanese and British responses to global problems are required at both the level of the state and at the level of civil society. Chapters 3 and 4 examine respectively Japan and Britain’s ‘special’ relationship with the US. Chapter 3 by Andrew Gamble traces the roots, development, and strength of Britain’s relationship with the US from the nineteenth century to the present day via Britain’s relations with Europe, American isolationism and unilateralism, and the effects of the events of September 11. He argues that relations are based upon a community of ideals and a community of interests as epitomized by the concept and political space he dubs ‘Anglo-America’, which encompasses the practical everyday maintenance of relations, in addition to a shared political and cultural heritage. Chapter 4 by Kan Hideki examines the reasons why Japan has not been able to develop a more independent foreign policy from the US, despite the passage of over a decade since the end of the Cold War. He pays particular attention to the negative, rather than the positive, legacy of the so-called ‘Yoshida Doctrine’, highlighting how the signing of the US–Japan Security Treaty, and the continued centrality of the alliance with the US, has limited and indeed skewed Japan’s relations with the world. Without a thorough rethinking of the relationship and the Yoshida Doctrine at its core, Kan believes it will continue to be difficult for Japan to make its own distinctive contribution to the world. Chapters 5 and 6 place the focus on Japan and Britain’s relations with Europe and East Asia, respectively. In Chapter 5 Christoph Bluth demonstrates how relations between Britain and Germany in the post-Cold War period have to a degree shaped the process of European integration and vice versa. Since the end of the Cold War both countries have sought to shape both the regional and by extension the international order with varying degrees of success. Ultimately Britain’s position of remaining aloof from European affairs has proven to be less and less tenable faced with the steady progress made in the creation of the European Union (EU), in contrast to the success of Germany’s central role as the locomotive of European integration. Only since 1997 with the election of a more pro-European Labour government have British and German interests begun to converge.

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Of course, the influence exerted by the US is a factor that is never far away. Both countries, but especially Britain, have traditionally placed great emphasis upon the bilateral relationship with the US (in the case of Britain to the detriment of its relationship with Europe) and thus want to keep the hegemonic power in the international system engaged in Europe. Especially with the terrorist attacks of September 11, it appears that predictions of US isolationism are premature and European governments will have to continue to take into account the US in their policy-making decisions. In Chapter 6 Takahara Akio explores Japan’s relations with its giant neighbour, China, in the context of the larger East Asian region. Since the end of the Cold War there has been increased interest in and calls for regional projects and East Asia is no exception. However, the likelihood of a regional project succeeding is highly dependent upon the relationship between the two East Asian superpowers – Japan and China – in addition to the attitude taken by the US. Takahara charts and explains Japan and China’s recent and common interest in regionalism in the fields of economics and security. His forecast is that each government will continue to place the onus on these multilateral, regional projects and that bilateral Sino-Japanese relations will continue to improve as a result. Equally, both governments will have to take account of the US. Japan has been unequivocal in its desire to avoid closed regional projects and has sought to include the US in any regional project; for China, this is also a troublesome issue but despite some antagonism towards the US, the need to recognize the importance of its role in the region is accepted. Chapters 7 and 8 highlight the economic relations each country enjoys with the region it borders and the role of currencies – the euro and the yen – in these interactions. In Chapter 7 Brian Ardy discusses Britain’s relationship with the euro and the likelihood of Britain joining the European Monetary Union (EMU) in light of a number of economic conditions that have recently placed Britain in a preferable position. However, Ardy concludes ultimately that Britain’s decision to join will be a political one despite the repeated references made in government circles to EU convergence requirements and the so-called five economic tests. In Chapter 8 Takahashi Wataru examines East Asia from the perspective of the real, rather than the financial, sector of the economy, and takes the rapid recovery of these economies following the Asian economic and financial crisis of 1997–8 as an indication of the tendency of commentators to place too much emphasis on the importance of the financial rather than the real sector in analysing economic performance. Both Japan, along with the US, remain crucially important for the health of the East Asian economies, particular as investors and absorbers of manufactured goods. Unlike in Europe, however, Takahashi does not see the launch of a common currency in East Asia as likely in the future, and regards the revitalization of the Japanese economy as of far greater importance than talk of the internationalization of the yen. Chapters 9 and 10 look inside the nation-state and address the position of minority groups within the larger nation-state, namely Scotland and Okinawa. In Chapter 9 Eberhard Bort uses the impact of the Hollywood film Braveheart (1995) as a lens in order to trace the growing interest in all things Scottish – both

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political and cultural – over recent years. He then catalogues the achievements of and the problems faced by the Scottish parliament since its inception in 1999 and concludes that the cultural renaissance Scotland experienced, epitomized by Braveheart, rather than constituting a cause behind the creation of the Scottish parliament, was instrumentalized for its symbolic resonance in the drawn-out drive ¯ ta Masahide highfor devolution. In contrast to the Scottish case, in Chapter 10 O ¯ ta is in lights the recent impact of decentralization and devolution in Okinawa. O a key position to discuss these issues, as he was governor of Okinawa for eight years in the 1990s. Despite a flurry of legislation and debate over recent years, ¯ ta is ultimately pessimistic about the prospects for a devolution of powers as O long as the government in Tokyo privileges the security treaty with the US and continues to force Okinawans to shoulder a disproportionate security burden in contrast to the rest of Japan. Thus, decentralization and devolution are hollow terms and Okinawa’s status as a political pawn remains. In Chapters 11 and 12 the role of each capital city – London and Tokyo – as a global city is explored. In Chapter 11 Randall Germain traces the emergence of London as the world’s pre-eminent financial centre during the nineteenth century and the subsequent renaissance of London during the 1980s along three trajectories – an ideolological/cultural trajectory, a political trajectory, and an economic trajectory – each in turn influenced by national, regional, and global dynamics. He concludes that London’s financial future is more open and fluid now than at any time in the past twenty-five years. In this sense London both mirror’s wider developments within the global political economy and constitutes one of the principal terrains on which the battles of the contemporary global economy are being fought. In Chapter 12 Machimura Takashi highlights Tokyo’s position and identity as a ‘global city’ in the context of globalization by tracing its rise to international prominence in the 1980s and how its leaders have grappled with the economic decline of the 1990s in order to reinvigorate the capital and, by association, Japan. The discourses which have evolved on globalization or re-globalization illustrate the different responses to the process in terms of a crisis, happy endings, and lessons for survival. Ironically, the current project of ensuring Tokyo’s role as a global city within an ever-globalizing international economy is being driven forward by the anti-globalist and nationalist sentiments of current Governor Ishihara Shintaro¯.

Summary The purpose of this book, then, is to deepen our understanding of both Japan and Britain by viewing them from a multidisciplinary perspective, but at the same levels of analysis – global, regional, subnational, and civic. These common levels of analysis were adopted in order to demonstrate and illustrate the diverse ways in which these two countries have responded to a range of issues, whether in terms of learning from each other, nurturing the ‘special relationship’ with the US, interacting with the continent, maintaining a balance between centralization and decentralization, or responding to the pressures of globalization as global

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cities. Each chapter, as with this Introduction, draws attention to both the similarities and differences between Japan and Britain. So, do our endeavours highlight the similarities or differences? It is often the case with clichés and generalizations that true understanding is sacrificed in favour of the security of reassurance and pigeonholing what is difficult to comprehend. As Vaclav Havel, playwright and president of the Czech Republic, has written, ‘the cliché organizes life; it expropriates people’s identities; it become ruler, defense lawyer, judge and the law’ (Havel 1996: 193). The ethos behind this edited volume, and the conference that gave rise to it, is to create an intellectual space to identity and explore the points of similarities and differences between both nations and provide an arena for the balanced and informed discussion of what the two nations can learn from each other. At the time of writing, 100 years have passed since Japan and Britain came together to sign the Anglo-Japanese Alliance of 1902. With this timely opportunity in mind, this book seeks to contribute to an intellectual project for the twenty-first century. As nations attempting to combat and channel the forces of globalization, there are numerous areas and similar concerns that should facilitate cooperation between Japan and Britain. Within both nations, pressures are being exerted on the centralized state apparatus as well as on capital cities. On the regional level, the promotion of economic well-being and the resolution of conflict continue to occupy the efforts and imaginations of governmental and non-governmental actors in both nations. On the global level, how both nations handle the US hegemon – whether it is making a concerted effort to prosecute a war on terrorism through a concert of powers, or withdraws into an oft-threatened period of isolation – is of central concern to both. Whichever level of concern, opportunities for cooperation continue to exist. It is to be hoped that, through the following chapters, new intellectual projects will emerge for scholars in both Japan and Britain.

References Barrett, B. (2000) ‘Decentralization in Japan: negotiating the transfer of authority’, Japanese Studies, 20(1): 33–48. Bergsten, C. F. and Henning, C. R. (1996) Global Economic Leadership and the Group of Seven, Washington: Institute for International Economics. Bix, H. (2000) Hirohito and the Making of Modern Japan, New York: HarperCollins. Colignon, R. and Usui, C. (2001) ‘The resilience of Japan’s iron triangle: amakudari’, Asian Survey, 41 (5) 865–95. Daniels, G. and Chushichi, T. (eds) (2002) The History of Anglo-Japanese Relations 1600–2000, Vol. V: The Cultural and Social Perspectives, Basingstoke: Palgrave Macmillan. Dower, J. (1996) Japan in War and Peace: Essays on History, Culture and Race, London: Fontana Press. Gamble, A. (1994) Britain in Decline: Economic Policy, Political Strategy, and the British State, Basingstoke: Macmillan. Gow, I., Hirama, Y., and Chapman, J. (eds) (2002) The History of Anglo-Japanese Relations 1600–2000, Vol. IV: The Military Dimension 1800–2000, Basingstoke: Palgrave Macmillan.

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Hatsuse, R. (2001) ‘Japanese responses to globalization: nationalism and transnationalism’, in G. D. Hook and H. Hasegawa (eds), The Political Economy of Japanese Globalization, London: Routledge. Havel, V. (1990) Disturbing the Peace: A Conversation with Karel Hvízdala (translated by P. Wilson), London: Faber. Hobsbawm, E. J. (1994) The Age of Empire, London: Abacus. Hook, G. D., Gilson, J., Hughes, C. W., and Dobson, H. (2001) The International Relations of Japan: Politics, Economics and Security, London: Routledge. Hook, G. D. and McCormack, G. (2001) Japan’s Contested Constitution: Documents and Analysis, London: Routledge. Hunter, J. and Sugiyama, S. (eds) (2002) The History of Anglo-Japanese Relations 1600–2000, Vol. IV: Economic and Business Relations, Basingstoke: Palgrave Macmillan. Huntington, S. P. (1996) The Clash of Civilizations and the Remaking of World Order, New York: Simon & Schuster. Nairn, T. (1994) The Enchanted Glass: Britain and its Monarchy, London: Vintage. Nish, I. and Kibata, Y. (eds) (2000a) The History of Anglo-Japanese Relations 1600–2000, Vol. I: The Political Dimension 1600–1930, Basingstoke: Macmillan. —— (eds) (2000b) The History of Anglo-Japanese Relations 1600–2000, Vol. II: The Political–Diplomatic Dimension 1931–2000, Basingstoke: Macmillan. Shimazu, N. (1998) Japan, Race and Equality: The Racial Equality Proposal of 1919, London: Routledge. Siddle, R. (1996) Race, Resistance and the Ainu of Japan, London: Routledge. Sternau, C. (ed.) (1999) Civil Society: Japanese Experiment and American Experience, New York: Japan Society. Stockwin, J. A. A. (1999) Governing Japan, 3rd edn, Oxford: Blackwell. Woolf, V. (1992) A Room of One’s Own and Three Guineas, Oxford: Oxford University Press.

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Japan and Britain in a historical–future perspective Sakamoto Yoshikazu

Today the world is witnessing the extraordinary globalized advancement of science/technology and the market economy. This global change tends to go beyond any political and ethical control, which is lagging behind. Since the end of the Second World War, humankind has been exposed to the danger of extinction by nuclear war. Yet, despite a number of potentially fatal incidents and accidents, the state system, particularly that of the bipolar superpowers, coupled with transnational antinuclear movements, managed to put the Doomsday military technology under control. Since the end of the Cold War, however, science/ technology has been increasingly relegated to the logic of the market economy, with an accompanying diminution in the power of the state to exercise control over it. Yet, the crucial problem is that, whilst the power of the state has been subject to subnational devolution and international integration, neither the subnational nor the supranational political structure is sufficiently empowered to replace the state. The purpose of this chapter is to examine the changing role of the state since the ‘opening’ of Japan in the latter half of the nineteenth century, with the focus of analysis placed on two countries – Japan and Great Britain. The relationships between these two countries can be examined on three levels: (1) the interstate geopolitical relationship; (2) the impact of the British domestic system on Japanese political discourse in comparative terms; and (3) the role and the locus of the two countries in the structural configurations of the contemporary world order. In regard to (1) and (2), Britain served as a model for Japan, in a positive or negative sense of the term, or both, at the same time. (3) is dealt with in detail below.

Anglo-Japanese interstate relations The first British impact in modern history that was taken seriously by the Japanese shogunate and other observers of external affairs came in the form of news reports on the Opium War, 1840–2. It was the beginning of the military invasion and virtual partition of China – the Middle Kingdom which had long commanded respect in Japanese Confucian scholarship – by the most ‘advanced’, Western empire which did not shrink from employing a means so debasing as

A historical–future perspective 19 opium. Eleven years later, the fear of Western imperialism turned into visible reality when US Commodore Perry’s squadron appeared in Tokyo bay. Two points may be noted. First, Perry, a latecomer American to East Asia, was consciously intent on competition with early-comer Britain – a pattern that would be repeated for nearly the next 100 years until Britain was overtaken by the United States. Second, Japan’s ‘opening’ since the 1850s, that is, Japan’s entry into the process of internationalization, was initiated by its response to the impact of Great Britain, which was the model empire for the Japanese élite. It was the model empire that, unlike Russia, possessed industrial and military power combined. It was not only a source of strategic threat but also an industrial model to emulate. This would be mirrored by Japan’s basic policy of ‘enrich the state and strengthen the army’. The phase of imperial emulation The significant weight carried by this model empire was illustrated by the AngloJapanese Alliance of 1902, which was the first alliance Japan entered into with a Western Power, by which Japan was recognized by ‘international society’ as a qualified player of the imperialist geopolitical game and the only modernized empire in the non-Western world. The alliance, which lasted for two decades as the cornerstone of Japan’s diplomacy, was intended to serve two purposes. First, it aimed to contain Russian imperialist expansion in Northeast Asia; and, for this purpose, Britain acquiesced in Japan’s mounting influence over Korea after the Sino-Japanese War of 1894–5, and its ultimate colonization of Korea after the Russo-Japanese War of 1904 –5, followed by the expansion of Japan’s sphere of influence to Manchuria and Inner Mongolia. Second, as demonstrated by Britain’s reliance on Japan in suppressing the Boxer Rebellion in 1900, which coincided with the Boer War, Britain began to concede to Japan the power to play the role of the gendarme of the Far East. Thus, the alliance served to subdue Chinese nationalist forces that, nonetheless, would increasingly gain strength in opposition to the imperialist Japanese and British special interests in China (Nish 1985: 80–95; Murashima 2000: 159–96). There are two problems inherent in this imperialist quid pro quo. On the one hand, by emulating the behaviour of Britain and other empires in order to enhance Japan’s security and independence, Japan began to look down upon the victimized Asian peoples in the name of defending a nation self-portrayed as the forerunner of modern state-building in Asia. In other words, unlike British imperialism, which was often legitimated in terms of the ‘white man’s burden’ characterized by civilizational universalism, Japan’s imperialism was always defined by the Japanese as a counter-West, particularistic ‘nationalist’ empire-building. This anti-imperial, nationalist imperialism was a salient feature of Japan as the latecomer, non-Western empire. The nationalist false consciousness involved in this posture has continued up to the present, hindering Japan’s reconciliation with its Asian neighbours, as illustrated by the recent history textbook issue.1 On the other hand, it is precisely due to this policy of ‘dissociating from Asia, associating with

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European Powers’, that the expansion of Japan’s sphere of influence over China began to come into conflict with imperial Britain’s vested interests. To the extent that the British Empire had been overextended in East Asia – the very reason for which Britain needed the alliance with Japan – and to the extent this was particularly true in the post-First World War phase, it was natural that the latecomer Western empire, the US, should have entered the picture under the banner of an ‘open door’ policy to curb Japan’s expansion, to exclude Soviet Russia (as well as Germany), and to maintain the collective Western vested interests in China by working out a more multilateral ‘Washington settlement’ in 1922, in place of the Anglo-Japanese Alliance. This was the Asia-Pacific counterpart of the Versailles settlement, which jointly constituted the two pillars of the post-First World War ‘new world order’. This relative retreat of Britain posed two questions for Japan that are of longterm relevance. First, as Japan felt ‘betrayed’ and abandoned by Britain as a country with no ally, should Japan regard Britain and the US as allied adversaries or treat them as separate, imperial actors who would generate tensions that could be exploited by Japan for its own advantage? (Thorne 1978: 17 passim). Second, whilst Britain continued to support Japan as long as it served as a bulwark against Soviet Russia, as illustrated by Britain’s lukewarm response to the Manchurian incident in 1931, which took place in remote northern China posing little direct threat to Britain’s vital interests, should Japan be able to count on Britain in defending their respective vested interests in China in the face of the common threat of Chinese nationalism and communism that often reinforced each other? (Thorne 1973: 131–368; Kibata 2000: 3–25).2 These ambiguities reflecting the imperialist power game arose, indicating the beginning of the end of the AngloJapanese imperial entente and collaboration. Thus, by emulating the empire model of Great Britain, Japan learned how to act on its own, playing the imperialist realpolitik, and its position gradually shifted from collusion to collision with the British Empire’s presence in East Asia. The phase of imperial clash In the second phase of the Anglo-Japanese relationship, this change became unmistakably evident since Japan, along with Nazi Germany and Italy, began to act as an openly anti-status quo power in the 1930s, as illustrated by Japan’s secession from the League of Nations and also the intensified textile trade frictions with Britain, of which the status quo stance was crystallized into the formation of the sterling bloc in 1932. The crucial threat to Britain was Japan’s challenge to its vested interests in China along and south of the Yangtze River, and further south to Southeast Asia, particularly Singapore. As Hosoya Chihiro aptly observed, the ‘Pacific War’, as far as its origins are concerned, was essentially a war between Japan and Britain borne of the direct conflict of economic interests: ‘[i]n terms of actual American interests in China, there was hardly any need for a military clash with Japan; it was only that America’s global interests would not permit her [sic] to sit by idly while the British

A historical–future perspective 21 Empire in Asia collapsed’ (Hosoya 1982: 74). In this sense, Britain and the US did not necessarily share common interests in East Asia, sometimes making the Japanese hardliners hopeful that the two would not act as allies against Japan. This was particularly true of the disagreement between the two on the need to resort to war against Japan, even as late as August 1941, when the Atlantic Charter was proclaimed. It was precisely a series of aggressive actions by Japan, mainly directed against Britain, that made the Anglo-American common front against Japan inevitable as a ‘blessing’ for the British Empire (Thorne 1978: 75).3 So far, we have dealt with the Anglo-Japanese interstate geopolitical relations in which Japan’s emulation of the British Empire model brought about destabilizing effects, namely, war and colonial domination. What is conspicuous by its absence is Japan’s policy of cooperating with its Asian neighbours by encouraging their nationalist aspiration for independence in order to jointly counteract the impact of external imperialist Powers. For instance, instead of colonizing Korea for the professed purpose of defending Japan’s security, Japan could have relied on the endogenous growth of Korean nationalism as a bulwark against Chinese and Russian expansion. In the 1880s Japan was confronted with the massive Tonghak peasant rebellion, which was the beginning of Korean nationalism against the Japanese invasion (Cumings 1997: 115–20). It was not difficult to detect towards the turn of the century that the days of the two empires under the rule of the declining Ch’in and Romanov dynasties were numbered. In 1919, anti-imperialist popular movements swept many colonies, including Korea, where the Japanese government faced a still largerscale nationalist uprising. Japan could have been in a position to learn how deepseated Korean nationalism was and to rely on it as an ally against imperialist Powers. But Japan’s deep-rooted inclination towards emulating the Western imperialist model represented by Britain led to a total dismissal of this option, dissociating itself from its Asian neighbours and confronting other empires as the Asian colonial empire. The phase of distant interaction By the end of the Asia-Pacific war came the third phase, namely, the almost complete retreat of the British Empire from East Asia (which includes Northeast and Southeast Asia). But, ironically, this was the time when Japan followed suit in the sense that the Japanese Empire was also forced to retreat from ‘Greater East Asia’ as a result of the loss of the Asia-Pacific War. With the demise of the Japanese bulwark against the Soviet Union, the communized Russian Empire reinforced its presence in the region. Further, when the Japanese occupation and the British imperialist presence came to an end, China’s nationalism, given voice to through social revolution, increasingly transformed itself into national communism. The original twin purposes of the Anglo-Japanese Alliance – to curb Russian imperialism and Chinese nationalism – led to completely opposite, unintended consequences. It was clear that the days of ‘old diplomacy’ in which Japan and Britain had engaged were over.

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The anti-status quo movements of Russia and China in their new phase were now countered by the US, in the form of the US–Japan Security Treaty of 1951, as had been done by the Anglo-Japanese Alliance up to the 1920s. Both of Japan’s two alliances with the West were antithetical to a change of the status quo in East Asia, as defined by the Western hegemonic Powers. The power shift to the US in the Asia-Pacific also took the form of the ANZUS Treaty of 1952, which Australia and New Zealand opted for as an alternative to their old security ties with Britain, with a view to maintaining the twofold status quo against the expansion of the communist bloc and the reemergence of the Japanese Empire. During the Cold War period, both Japan and Britain played inactive roles in East Asia. Two British actions had a significant, direct bearing on postwar Japan in terms of Cold War geopolitics: (1) the British intervention to halt the US move to use atomic weapons at the critical phase of the Korean war in late 1950; and (2) support of Japan’s reluctance to sign the peace treaty with the Republic of China (Taiwan) as the sole representative of the whole of China (Buckley 1982: 174–7; Hosoya 1984: 139–43, 279–308). On the whole, however, the British role in the East Asian Cold War was: (1) no more than to avoid the worst case in favour of a lesser evil, for example, an American limited war by conventional weapons in Korea, on the one hand, and the limited armed tension over the Taiwan straits, on the other hand. A more active role as an intermediary between the East and West in those days was played by former British colonies in Asia, particularly India; and (2) the apparent support for Japan’s potential peace with mainland China was essentially based on the British interest in diverting, despite US opposition, Japan’s export pressure to mainland China, in defence of the sterling bloc as the British market (Borden 1984: 204–19). In this context, Japan and Britain, the two former empires in this region, became rather remote from each other in three dimensions. First, in the Cold War period, Britain, whilst favouring Japan’s friendly economic relations with China for its own interest, was on guard against Sino-Japanese political rapprochement lest Japan should lean towards neutralism. Although sometimes critical of the US anti-communist crusade, which tended to disregard the potential of Asian nationalism, Britain took that position precisely for the purpose of consolidating Western alliances in East Asia, with Japan playing a subsidiary role in relation to the US. For the same reason, Britain did not hesitate to conduct nuclear tests on Pacific islands, despite the popular opposition in Japan. Second, in the dimension of the legacy of the British Empire, the post-Second World War, Anglo-Japanese relationship was predominantly characterized by economic competition, for which Britain took measures to arrest the rapidly growing penetration of Japan’s export goods not only into the sterling bloc in Asia but also into the home country itself. Japan took advantage of the Cold War in East Asia, particularly in the form of the US special procurements at the time of the Korean War and, to a lesser extent, the Vietnam War. Japan’s ‘reparations’ and tied ‘aid’ to Southeast Asian countries paved the way for the expansion of its trade to the former British colonies. Japan successfully utilized non-economic strategic

A historical–future perspective 23 factors for economic purposes beyond the control of Britain until bilateral frictions were mitigated by Japan’s self-regulation of export to, promotion of import from, and increasing direct investment in, the United Kingdom since the late 1970s (Kuroiwa 2000: 245–56). Third, underlying the Anglo-Japanese political and economic alienation was the lingering historical distrust on the part of Britain rooted in the memory of the last war. Although the memory was particularly bitter amongst those British who had suffered from maltreatment as prisoners of war (POWs), it was probably more than that. In the words of Christopher Thorne, ‘she [Britain] herself was now, after the fall of Singapore and Southeast Asia as a whole, additionally burdened by the legacies of sudden and humiliating defeat, and defeat at Asian hands at that’ (Thorne 1982: 207). Furthermore, the wounds left in the minds of British soldiers were a consequence of the deadly encounter of two empires representing different political, social, and cultural systems. The brutalities shown by the Japanese army were manifestations of: (1) the lack of knowledge and sense of international law, which led to the failure to internationalize its code of behaviour; (2) the externalization of the inhumane, oppressive internal structure of Japan’s political regime, particularly that of the military; and (3) the displacement of oppression to POWs by the Korean and Taiwanese recruits of the Japanese army who were the underclass under the Japanese colonial rule and were ordered to do the worst jobs in dealing with POWs (Flower 2000: 149–73). On the whole, the Anglo-Japanese interstate geopolitical relations since the nineteenth century brought about detrimental consequences in East Asia, that is, a series of wars and colonial rules up to 1945, and then the Cold War and a set of bilateral dependent alliances with the US.

The Anglo-Japanese relationship as system comparison Another dimension of the relationships between early developed Britain and latecomer Japan is the transfer of values and institutions through the emulation of the former by the latter. In this respect, Britain was frequently a system model for Japan almost from the beginning of its modern state-building. What happened in this process of system transfer through ostensible emulation was a subtle ambivalence to, and distortion of, the original model of the ‘advanced’ country on the part of Japan (and many other non-Western latecomers for that matter). In his speech, ‘My individualism’ (1914), Natsume So¯seki, the well-known novelist, wrote, ‘England is a country where liberty is highly valued. While liberty is so much treasured there, no other country maintains order so regularly as England does. To tell the truth, I do not like England. Although I dislike England, I must say so because it is a reality. There seems to be no other country in the world which is so free and so orderly. Japan is absolutely no comparison’ (Miyoshi 1986: 127). This image of England as a system model where liberty and order, rights and duties, are remarkably harmonized is recurrent in the discourse on socialization

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and education in modern Japan. Similarly recurrent, however, is the problem as to whether emphasis is to be put on liberty or order without making this manipulative representation explicit. Two important examples may be examined which refer to an institutional equivalent that is not a functional equivalent. The model monarchy First, monarchy. The Iwakura Mission, which made an around-the-world ‘grand tour’ in 1871–2 to learn from the US and Europe, found an enormous gap in industrial power between Japan and Britain. The members of the mission thought it would take thirty years for Japan to bridge the gulf, but harboured a strong sense of affinity towards the British monarchy, especially after their first-hand observa¯ kubo Toshimichi, one of tion of the American republic.4 After returning home, O the key figures of the new Meiji regime, prepared a ‘proposal on constitutional polity’ in favour of a ‘joint rule by the monarch and the people’ (kunmin kyo¯ chi), professedly based on the British model. In contrast, Kido Takayoshi, another key political leader and a member of the mission, presented a ‘recommendation on the constitution-making’, in support of a ‘unified rule of the monarch and the people’ (kunmin do¯chi ), modelled on the Prussian Constitution. What is noteworthy, however, is the fact that, despite the apparent difference between the two constitutional representations, they were very similar in reality because both supported a system where power was concentrated in the Emperor (Tanaka 2000: 131–3). ¯ kubo’s model was not ‘King in Parliament’ but ‘Emperor above Parliament’. Even O In fact, the Meiji Constitution provided that ‘the Emperor is sacred and inviolable’. Despite its resemblance to the ‘Divine Rights of Kings’ in English royal history, the source of legitimacy was not transcendental divinity (the Chinese character ten meaning Heaven, not God) but blood, namely, lineage, which was supposed to be uninterrupted and, therefore, eternal. Despite the repeated expression of a sense of affinity with the English monarchy, as was done by Emperor Hirohito (Bix 2000: annotated illustration),5 the legitimation in terms of the uninterrupted lineage unaffected by regicide was quite alien to the English counterpart. This myth of perpetual continuity transcending political vicissitudes served to exempt the Emperor from political accountability. It was used by General MacArthur to de-emphasize the element of discontinuity intrinsic in the occupation by foreign powers and the possible prosecution of Emperor Hirohito for war crimes, which could amount to ‘regicide’. It was used by Hirohito himself to refuse to step down from the throne throughout his long lifetime that was full of political discontinuities deserving of abdication (Dower 1999: 277–345). It is no accident that, amongst those who were called the ‘Anglo-American school’ (eibeiha) in prewar Japan, ‘it was on the whole the social elite which tended to adopt an Anglophile attitude, while those drawn from the middle or lowermiddle classes favoured the egalitarian society of the United States’ (Hagiwara 1982: 97). Yoshida Shigeru, for example, was a prewar imperialist of aristocratic life-style and a postwar ‘loyal subject’ (shin Shigeru) to the Emperor, in his words, and he gave priority to order, not freedom, calling labour movements ‘recalcitrant

A historical–future perspective 25 elements’ ( futei no yakara). The postwar accession to power of the Anglophile élite also contributed to the whitewashing of the Emperor’s war responsibility, perpetuating the political culture where the locus of ultimate political responsibility remained vague. After the collapse of a range of monarchies in the wake of the First World War, the English monarchy stood out as the prominent worldwide pillar of this archaic system, presenting a sort of ‘ideal model’ of monarchy, which served as a norm for Japan. It is an irony, however, that, whilst it was Emperor Hirohito of militarist Japan who portrayed himself as akin to the British monarchy, his son and present Emperor, Akihito, who was exposed to postwar American influence, has been playing the role of a more authentic constitutional monarch. Thus, the British model provided a false rationale for the persistence of monarchy in its distorted form in a number of other countries, including Japan. In this way, the institutional equivalent is clearly not a functional equivalent. The model party system Second, the two-party system. The British parliamentary government based on the two-party system was considered the model since the early Meiji era by some influential opinion leaders, as exemplified by Fukuzawa Yukichi, the prominent thinker, in his writings in 1879. He referred to the rotating party government of the British Conservatives and Liberals of those days. Then, the idea of the twoparty system at a new phase of historical development was advanced by Yoshino Sakuzo¯, the intellectual leader of the democracy movement, in the 1920s, who referred to the British party system as a model where the Labour Party began to come to the fore as a new alternative. Despite the arguments made by publicists in favour of the two-party system, however, it did not come into being except for a short period, 1928–32 (Banno 2001: 10–53). Unlike the British two-party system, which reflected class distinction, this short-lived, two-party system of pre-militarist Japan was based on a high degree of sociological homogeneity amongst the agents of party politics who were ‘notables’, whilst the Japanese counterpart of the Labour Party was consistently marginalized. A drastic change took place in the post-Second World War period. Socialist and Communist forces played a crucial role in bringing about modern mass parties.6 Whilst Socialists generally began to represent big unions, Communists came to mobilize smaller unions as well as active student and women movements. In 1955, the conservative parties set up a unified Liberal-Democratic Party (LDP) and the left and right socialists merged into the Japan Socialist Party ( JSP). Two points may be noted in this connection. First, in postwar Japan, whilst conservative Liberal Democrats were inseparably associated with the ‘economistic’, if not authoritarian, bureaucratic state, it was left-wing counter-forces, socialist and communist, that significantly contributed, regardless of their party programmes, to building and consolidating an anti-militarist, liberal democratic system. In this respect, Japanese left-wing forces

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were politically, if not ideologically, a functional equivalent of the British Liberal and Labour parties put together. Further, it may also be noted that the only modernized political party in Japan up to the 1960s was the Communist Party, of which the finances relied upon the dues paid by its individual members in proportion to their income and on the sale of the party publications. Second, although left-wing forces served as an effective opposition in the parliamentary political process, they, for various reasons, failed to bring about a working, two-party rotating system. One notable consequence of this standstill was widespread structural corruption caused by the virtual one-party rule of conservative forces, which continued for almost half a century. In view of this political stagnation, voices have often been raised in favour of the emulation of the two-party system represented by the British model, which would supposedly ensure clean government based on a clean election in a single constituency. It is not clear whether the British model, praised as the ‘advanced’ system for political participation and accountability, will continue to be cited by the concerned Japanese as the future for Japan, or it will hamper the creative envisioning of an alternative future of democratic party politics more relevant to the Japanese political culture. In fact, tribute to the British two-party model has at times been paid by the ruling LDP in order to emphasize that, in the absence of a competitive alternative party, their near-monopoly of governmental power is legitimate. But in the wake of the demise of the Prussian/German authoritarian party model and in the light of Japan’s vast difference from the unique US republican model, the British model is no doubt here to stay with its twisted, equivocal impact on Japan as elsewhere. In short, it is uncertain to what extent the British system model, with particular reference to monarchy and the two-party system, has served to promote democratic accountability and participation in the context of Japanese politics and society.

Japan and Britain in the global context Britain as a model for Japan was not confined to the structure of the internal political system. Whilst in the empire model the internal, which was ‘civilized’, was separated from the external, which was in the Hobbesian ‘state of nature’, in contemporary world politics, particularly since the 1930s, when the contest over universalistic ideologies gained weight, the intertwined relationship became pronounced between the domestic structure, on the one hand, and foreign policy which dealt with global issues, on the other. Britain, which often went in search of the ‘third way’ in the post-Second World War world, is a case in point. The third way model In the early phase of the intensifying bipolar, US–Soviet conflict, the British Labour government under Clement Attlee groped, though not with much success, for a less confrontational policy towards the Soviet Union. This was particularly

A historical–future perspective 27 clear in the case of left-wing Labour MPs, such as Richard Crossman and Michael Foot who, in the pamphlet Keep Left (March 1947) put forward the idea of ‘Socialist Europe’ consisting of democratic socialist forces, which were prominent in Western European countries in those days. It implied democratic socialism at home as the basis of a democratic socialist Europe, acting as an intermediary third force abroad, in the context of the East–West conflict (Iwanaga 1955: 59–92). Although this idea did not prevail in the Labour Party due to Britain’s inevitable economic and financial dependence on the US, it attracted the attention of some vocal Japanese independent intellectuals and labour leaders who had social democratic orientations. The domestic ‘third way’ of non-communist, non-capitalist British democratic socialism was taken as a model for right-wing socialists such as Katayama Tetsu, the prime minister of the short-lived socialist coalition cabinet, May 1947 to February 1948. The international ‘third way’ of the leftist Labour Party inspired the Japanese leftist Socialists and radical liberal intellectuals who were committed to the pacifistic, anti-militarist consensus of postwar Japan, in search of a position unaffected by the intensifying East–West bipolarization. In their view, it was imperative for a demilitarized nation to strengthen global ‘collective security’ represented by the United Nations (UN) system, no longer confined to national or collective defence. And the ‘neutralist’ view held by people such as G. D. H. Cole, key member of the Fabian Society, after the outbreak of the Korean war, left an imprint on the Japanese pacifistic forces, which then acted as the leading voice in 1950–2 in favour of the ‘overall’ peace-making with both East and West, in opposition to the ‘one-sided peace’ pursued by the Yoshida cabinet (Watanabe 1982: 241–5).7 Thus, Britain in the early phase of the Cold War served, in the eyes of Japanese socialist and independent opinion makers, as a source of alternative political designs, which was based on the linkage of the domestic and the international in the global context. Further, this had timely political implications as Japan was under Allied Occupation, with the preponderant presence of the US, and this British model provided an alternative that could be used to express criticism of the overwhelming influence of the American model, without running the risk of being labelled ‘pro-communist’. Transnational citizens’ movements It is true that with the intensification of the Cold War, Britain joined the North Atlantic Treaty Organization (NATO) in 1949, and Japan concluded the security treaty with the US in 1951; and by becoming close Atlantic and Pacific allies of the US, Britain and Japan, unlike De Gaulle’s France, largely lost independent initiatives for an alternative global strategy in the area of diplomacy. But what is noteworthy is the fact that the design of a global role envisaged those days from a critical viewpoint was already grounded in the linkage of the internal, the international, and the global, thus providing a new perspective which prefigured the world of globalization. This was clearly demonstrated by the

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anti-nuclear citizens’ movements that were particularly prominent in Japan and Britain in the 1950s and 1960s. The massive anti-nuclear movement in Japan emerged in 1954 in response to the US thermonuclear test conducted on the Bikini atoll, and was reinforced by the Russell–Einstein Manifesto of 1955. But, for the citizens in the movement, the manifesto, which served to legitimate the protest movement, was essentially an appeal issued by a group of prestigious scientists. In contrast, the anti-nuclear Easter March organized in Britain in 1958 was the first instance where the Japanese citizens’ movement found its counterpart abroad. Up to that point, practically all large-scale ‘peace movements’ collecting hundreds of millions of signatures in opposition to nuclear weapons, whether in Europe or Japan, were staged as a means of promoting Soviet foreign policy. Accordingly, the Japan Communist Party ( JCP) had acted as the core of the movement until the spontaneous participation of hundreds of thousands of citizens went far beyond the partisan framework after 1954. The encounter of this movement with its counterpart in Britain had important implications. First, the anti-nuclear movement, reflecting the natural feelings of the Japanese people against the atomic bombings of Hiroshima and Nagasaki, constituted the nucleus of broader peace movements that were against the resurgence of Japanese militarism, particularly Japan’s rearmament. And to the extent that, under Japanese militarism, internal oppression and external aggression had been structurally intertwined, anti-militarism strove not only for peace abroad but also for democracy at home. Characteristically, postwar Japan’s peace movement was, wittingly or unwittingly, a movement for democratization in two crucial respects: (1) it was against oppressive militarism; and (2) it enhanced people’s control over foreign policy-making which was considered a matter of life and death in the nuclear age. Second, besides this awareness of the linkage between peace and democracy in Japan, the rise of the anti-nuclear movement in Britain, which was considered by the Japanese citizenry as a model democratic country, exposed them to a new experience of a significant transnational citizens’ movement based on the transborder solidarity of active civil society in opposition to the policy common to their respective governments. This transnational symmetric structure of the democratic peace movement was an unprecedented experience for the Japanese, pointing to a departure from the communist model of monolithic ‘internationalism’. This communist model had predominated in Japanese social movements up to that point, and continued to generate conflict with the non-partisan citizens’ movements. It was natural that the transnational perspective, which emerged in Japan as a result of the impact of the British anti-nuclear movement on its Japanese functional counterpart, should no longer be confined to Anglo-Japanese relations in the conventional sense of the term. Thus, the Japanese anti-war citizens’ movements underwent a similar experience during the Vietnam War when they found and worked with their counterpart in the US in defence of the universal, democratic right to dissent to war policy. Paradoxically, the transnational solidarity with

A historical–future perspective 29 the anti-war movement in the US contributed to preventing the Japanese dissenters from becoming ‘anti-American’, ensuring their confidence in American democracy. Then in the 1980s, the Japanese anti-nuclear movement acted in cooperation with their European counterparts, which now went beyond the British Campaign for Nuclear Disarmament (CND) onto the European Nuclear Disarmament (END), as well as the movements in other countries. These movements contributed to bringing about the end of the Cold War in three respects: (1) they gave a warning to the Reagan administration that its confrontational policy of giving priority to the nuclear arms race vis-à-vis the Soviet Union could be politically counterproductive, giving rise to a cleavage between the US and Western European peoples; (2) they encouraged the emerging civic movements in Poland, Hungary, Czechoslovakia, and East Germany, to increasingly call for democratization as the prerequisite for the East-West peace – the movements which apparently made Mikhail Gorbachev refrain from military intervention in Eastern Europe; and (3) the Intermediary Nuclear Force controversy contributed to raising the citizens’ consciousness of ‘one Europe’ exposed to the danger of nuclear extermination ‘limited’ to the European battlefield (Thompson 1991: 7–23; Cortright 1993: 90–132; Kaldor 1999: 339–79). In short, these citizens’ movements laid the groundwork for the transnational democratic network in which internal activation of democracy and international peace and unity have been linked in order to go ‘beyond the Cold War’ and cope with the pressing issues of global concern. Obviously, this was a reflection of growing globalization. Since the threat to survival was first globalized in the postSecond World War nuclear age, preceding globalization on other dimensions, and since the state-system alone was not capable of overcoming this threat, it was natural that citizens whose survival was at stake had to take the lead in pushing forward with transnational counter-globalization from below. Post-Cold War globalization With the end of the Cold War, the danger of global genocide receded and the war/peace issue seems to have diminished in importance as the global problem deserving highest priority. Even though the nuclear capability of global overkill remains, the danger of nuclear war has been reduced. Accordingly, the urgent problems that arose as the result of globalization have shifted to other domains. These include, amongst others: (1) the globalized market economy; (2) global environmental degradation; and (3) the global effects of the advancement of science and technology. It is clear that these problems cannot be adequately dealt with within the framework of Anglo-Japanese relations, not only because the problems transcend bilateral interstate relations in general but also because both Japan and Britain are bound to reflect the perspective of the ‘North’. For instance, whilst Japan and Britain as nation-states are rather remote from each other, the stock and foreign exchange markets in northern world cities such as Tokyo, London, and New York are linked together around the clock. It is, therefore, necessary to shed light on

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globalized problems even if the Anglo-Japanese, bilateral relationship is of only indirect relevance. In fact, the Cold War itself was a manifestation of globalization in the form of conflict between the ‘two worlds’ and two universal ideologies, referring to a global division of the world. The end of the Cold War was, therefore, expected to bring about a unitary ‘New World Order’, which would treat the world as a single unit without fundamental global cleavages. But the very dynamics that work to build ‘one world’ in that sense also work to give birth to divisions and fragmentation globally, cutting across national boundaries. For this reason, we can critically examine global divisions and fragmentation in three dimensions: (1) disparity and inequity that affect the disadvantaged; (2) dehumanization and alienation that affect the advantaged as well; and (3) changes necessary to control and overcome these detrimental tendencies. The next section will shed light on the three global problems from the angles of (1) and (2) and proceed to (3) later. The problematic of globalization First, it goes without saying that the dynamics of global marketization, whilst enhancing unprecedented global productivity, has been widening the gap between the advantaged and the less- or non-competitive disadvantaged, not only between the developed and developing countries but also within each of them. This is particularly true of the rapidly growing, global labour marketization by which unskilled immigrants and refugees, especially ‘illegal’ workers, male and female, from less developed countries have come to constitute underclasses in the more developed countries. Furthermore, the mega-competition of transnational corporations prompted by states’ deregulation is exposing even the advantaged to the constant instability manifested in merger, takeover and restructuring, which treat chief executive officers (CEOs) as replaceable human commodities. Competition drives the advantaged as well as the disadvantaged into competition as if competition is an end in itself. The dehumanized insecurity of a Bill Gates who must be ‘on the go’ in the face of the challenge of potential rivals can hardly be concealed. Second, the global environmental decay caused by competitive industrial development has given rise to unequally distributed adverse effects. Global warming, for instance, which appears to be a worldwide problem, will constrain the right to development of the developing countries much more than the already developed, and poor mini-island states much more than wealthy continental states. Whilst the US has the luxury of acting as a giant free-rider regarding the Kyoto Protocol, the developing countries have to run the risk of generating the ecological boomerang effects of their economic growth at a much lower level of development than the developed. Whilst the Chinese are aware that there are more effective emission control devices than what they have, they can hardly afford to install them. In spite of the uneven distribution of developmental advantages and disadvantages, it is clear that even the advantaged, as long as they pursue individual national interests and short-term interests, cannot escape the global ecological crisis that will irretrievably affect their own future generations. The term ‘endangered species’ expressing concern about the diminishing bio-diversity will not apply to non-humans alone.

A historical–future perspective 31 Third, science and technology, whilst bringing about and spreading their immense benefits widely, have promoted industrial development and concomitant environmental degradation, both grounded in the decomposition of nature, and have also contributed to the disparity between the advantaged and the disadvantaged. For instance, nuclear weapons and missiles that are capable of global annihilation have paradoxically contributed to the emergence of a sense of identity as humankind confronting a common species crisis. That military technology, however, also brought about a critical disparity between nuclear and non-nuclear states, which led to the attempt on the part of some of the nuclear have-nots to proliferate their deadly weapons, giving rise to a fragmentation of the world order. Aggravating this destabilizing disparity, the present administration of President George W. Bush has embarked on missile defence programmes in order to maintain the US’s strategic and technological superiority. Physics, including nuclear physics, was the leading science in the twentieth century. Its counterpart in the twenty-first century seems to be information science and life science. Evidently, although information science and technology have dramatically accelerated the globalization of communication, they have concomitantly brought about a global digital divide. Whilst life science and genetic engineering will serve to improve the technology of medical care and agricultural and stock farming, they are clearly widening the gap between those who can afford to take advantage of them and those who cannot. Furthermore, unlike physics, both information technology and biotechnology focus on humans – the former on the brain and the latter on life. And, since both of these technological developments are intermeshed with the market economy, fierce competition is being fought out globally over how to manipulate people’s minds, how to manipulate people’s physical lives, and how to commercialize for profit-making the manipulative technology which deals with information and human lives. Being inundated with the flood of information and the mass production and consumption of virtual reality, the inner world of a person is becoming the object of manipulation through information technology. In the same vein, life and death, which should give the most fundamental meaning to human’s being, are becoming the target of engineering, such as artificial fertilization, cloning, euthanasia, suicide at the terminal stage of disease, and so forth. Herein lies the danger that under the shadow of science and technology, which are infinitely turning human beings into objects, identity as human beings becomes decomposed and fragmented and the internal and social norms lose certitude. Thus, the apparently advantaged as well as the clearly disadvantaged fall victim to the dehumanizing global ‘advancement’ of science and technology. What are the implications of these problems for Japan and Britain? Ambivalence towards regionalization The challenges of a globalized market economy, global environmental degradation, and the dehumanizing global competition for scientific and technological achievements all call for humane responses which should be ‘civilizing and democratizing’ (Held et al. 1999: 444). As space limitations preclude a discussion of the wide range of policy programmes that will serve as appropriate responses, the

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following sections will identify relevant responses in two other dimensions – institutional changes and the reconstruction of identity. The former refers to the restructuring of institutional power configurations encompassing the global, regional, national, subnational, and local community levels. Replacing the classical sovereign nation-state system which was, in the final analysis, a perceived ‘state of war’, it aims to ensure a high degree of empowerment and participation by the people in regard to decision-making at these various levels of the global system. The remainder of this chapter will touch on one level, namely, the regional, as there seems to be an institutional question of global implications that is common to both Japan and Britain – the ambivalence and ambiguity involved in their respective relations with regionalization. Within historical contexts that are quite obviously different, one can raise the question, ‘Is Britain part of Europe?’ just as one can ask, ‘Is Japan part of Asia?’ Donald C. Watt once made an interesting remark, ‘While it is true that the disappearance of Britain’s position as a superpower [as defined by William T. Fox] may have concentrated contemporary British historiography of the twentieth century on the course of its disappearance almost to the point of obsession, it has meant that British historians start from a global, rather than a regional, view of the causes of that decline. They start too from a concept of Britain, not as the super-imperial power that she so often appeared to foreign observers and to foreign historians, but as one among a grouping of continental powers, strong only in her possession of an uncrossable moat’ (Watt 1982: 286). Indeed, at the beginning of the twentieth century Britain appeared as the ‘super-imperial power’ to Japanese observers, as stated above. But post-Second World War Japanese observers had little interest in looking at the causes of the demise of Japanese imperial power from a global perspective; on the contrary, its disappearance was accounted for almost exclusively in terms of the bilateral relationship with the US, namely, Japan’s defeat by overwhelming US power. Much less inclination was shown by the Japanese to identify Japan as one among a group of Asian nations, Japan being the power which had crossed the moat to invade the continent. Thus, there are important differences. Yet the two countries have similar problems. Britain seems to face tensions between two souls – Atlanticism and Europeanism. Postwar Japan has been predominantly Americanist, and a new Asianist regionalism has yet to come forth, with a sign of emergent tension between the two. An apparent resurgence of antiAmericanism remains non-Asianist or even anti-Asianist, as exemplified by Tokyo Governor Ishihara Shintaro¯. It has no feasible vision of the future of Japan in Asia and remains, for all practical purposes, a ‘parasite nationalism’ under US hegemony (Ishida et al. 2000: 189–208). It is reminiscent of the mentality of the ambivalent anti-Western nationalist imperialism of the past, which is anachronistic but resilient. The ambiguity and ambivalence are more conspicuous in the case of Japan if only because, whilst Britain has the option to pursue a ‘regional third way’ that can be worked out in cooperation with the European liberal–social democracies, East Asia has a long way to go to establish a functional equivalent. But precisely because Japan cannot afford to enjoy ‘splendid isolation’ in East Asia, it will have

A historical–future perspective 33 to avoid becoming involved in the division of this region under the US–China asymmetric bipolarity, with a view to seeking an ‘Asian third way’. What this will be like remains nebulous. But, no doubt, there are many areas for regional cooperation: economic, monetary, financial, technical, and so forth, especially in the light of the enormous potential of China. And, unlike the initial priority of the European Economic Community (EEC), cooperation for environmental protection will go hand in hand with economic cooperation from the early stages of development. Probably, moreover, unlike Western international organizations, which generally make a clear distinction between ins and outs, the East Asian regional framework will allow pragmatic flexibility encompassing a varying degree of commitments and diverse overlapping memberships which stand between full members and non-members, as illustrated by the range Association of Southeast Asian Nations (ASEAN) regional fora. This will be particularly true of a multilateral security framework where a cumulative process of fostering political mutual trust and strategic transparency in the subregions of conflict (e.g. the Korean peninsula, the Taiwan straits, and so on) must precede the establishment of a formal regional institution. In East Asia, there has been no counterpart of NATO, let alone the enlarged NATO. But the need for the acceleration of regional institutionalization will be felt more strongly than before in the near future. In brief, besides the possible specific arrangements to be made for the common interests of the region, the role Japan and Britain should seek to play, respectively, in the contemporary global structural context will be to promote a ‘civilizing and democratic’ regionalization to create a more pluralistic world order, particularly to counter the destabilizing unilateralist globalism of the US. Reconstructing identity for democratic global change The ambivalence and ambiguity which characterize the definition of the locus of Japan and Britain in relation to their respective regions are a manifestation of the more fundamental challenge confronting today’s world – that is, how we can transform the system of national identity which has served so long as the primary political and social framework for the definition of who we are. It is true that, in the context of the multi-layer restructuring of the global system now underway, one’s identity will have to be redefined in terms of loyalty to ‘overlapping communities of fate’ (Held 1998: 24; Held et al. 1999: 81 passim). It is also true that the ‘fate’ that makes a community a ‘community of fate’ (Schicksalsgemeinschaft ) is not something given but a social construct that will become a ‘fate’ only when it is perceived by the people concerned as a given that transcends human free will and choice. What is called for today is to reconstruct this social construct, which is essentially a matter of subjective transformation for making identity explicitly multiple and overlapping in the age of globalization. This is as true for Japan as it is for Britain. But the question remains as to which ‘community of fate’ should and can command the loyalty of highest priority? This is probably best illustrated by the

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dilemmas confronting the UN. One of the almost insurmountable problems for the UN today is how to enforce peace against the acts of massive violation of peace and human rights by establishing a UN force that is not constrained by the national sovereignty of the Member States. The response of the five permanent members of the Security Council has been in a number of cases to organize a multinational force, conventionally called an ‘allied force’ by major participating states (e.g. the Gulf War) or more usually to retain independent command, refusing to be subject to a UN command (e.g. US contingents in Somalia and the US expeditionary force in Afghanistan). In either case, soldiers recruited for combatready operations act for the interest and security of their own respective countries, retaining the right to withdraw if the interest of the international community (‘of fate’) defined by the UN, usually the Security Council or the Secretary General, does not coincide with the national interest. Just because they retain the right to withdraw does not necessarily mean that soldiers recruited to peacekeeping operations act only in the interest of their own countries. Paradoxically, the dilemma of the UN in this respect worsened in the post-Cold War world. Whilst the war/peace issues during the Cold War affected the global fate and interest of humankind, post-Cold War wars have been localized, and so has been the peace of the remaining states. The people in a ‘peace zone’ do not have to be concerned with the war/peace issues that do not appear high on the political agenda nor in election campaign platforms. Hence, people’s tendency to become inward-looking and the growing difficulty for the government to send troops when the threat to national interest and security is not tangible. The underlying question is, ‘Why does one have to sacrifice one’s life for a cause that has little to do with one’s interest or the interest of one’s country?’ In reality, over one thousand soldiers and personnel have died in UN peacekeeping and peace enforcement operations.8 They may include those who did so in compliance with the orders of their own government, which indicates the persistence of national sovereignty. But quite a few soldiers, particularly those from the Nordic countries, joined the UN operations of their own free will as individual volunteers. Many of them did so not for their own interests or that of their country, but for a more universal, principled concern with humanity and human rights. In other words, to adapt oneself to the world of ‘overlapping communities of fate’ would not be enough to cope with the problems of global concern unless people are willing to give highest priority, if necessary, to loyalty to and identification with the supra-national, global community of fate. The order of priority is crucial. No doubt, it is no easy task to reconstruct the system of identities along these lines, especially in the days when people tend to be inward-looking as a result of global dehumanization and fragmentation. This would imply that there are two channels for transcending national sovereignty to tackle global problems from a supra-national point of view. One is to build an interstate consensus through governmental coordination of national interests with a view to creating a supra-national world organization. The other is to activate civil society in support of transnational cooperation and solidarity. This is to foster a new human identity which dictates, as non-governmental

A historical–future perspective 35 organizations (NGOs) such as Médecins sans Frontières espouse, that citizens have not only the right but the duty to go across national borders in order to extend humanitarian assistance, interfering with the domestic affairs of a state that commits a massive violation of the human rights of its people. This would also apply to the poverty and hunger that are localized but call for the universal, principled concern of those whose interests and lives are not directly affected by these problems. In short, one way is to transcend the national loyalty and identity at the top of the sovereign states, and the other is to transcend the national identity at the bottom of sovereign states through the transnationalization of civil society. To resolve global problems through the reinforcement of democratic governance, regional or global, it is imperative to transform the system of identity from below. It is no wonder that, in the last decade, the UN, which used to be jealous of its character as an ‘intergovernmental organization’ consisting of sovereign states, has been increasingly emphasizing and relying on the role played by civil society and NGOs.

Conclusion It may well be that the British, as mentioned by Donald C. Watt, acquired a global view not only when their empire was at its height but also in the course of its decline, probably as a paradoxical result of the growing self-awareness of their imperial insularity, namely, the insularity of their imperial, global perspective. Another insular empire, Japan, had never acquired a global perspective, reflecting the paucity of the ideas and values of universal validity rooted in its soil. It may not be too much to say that the first global perspective based on a universal human identity which was shared by a large number of citizens in post-Second World War Japan was, as suggested above, developed by the anti-nuclear citizens’ movement, committed to peace and democracy as universal principles. Yet, this sense of human species identity representing the voice of the victims of the atomic bombings has been subject to criticism in recent years, namely, that it is a peculiarly Japanese perspective focused on the experience of Hiroshima and Nagasaki, which fails to squarely face the history of Japan as the perpetrator of a war of aggression and colonial domination. The voices of criticism raised by former ‘comfort women’, deported forced labourers, and other victims of Japan’s war and colonialism have compelled the Japanese people to make a painful reappraisal of their postwar anti-war stand centred on the universalistic, anti-nuclear movement and to search for a critical reconstruction of what they thought to be human species identity to make it more transnational and universal, learning from the perspective of the marginalized victims. It must be noted that this historical revisionism undertaken from a global point of view and the recognition of the legitimate demands of the victims for apologies and compensation are not confined to the Japanese case alone. Significant developments at the turn of the new century along these lines include, besides the long-standing German efforts for atonement, the Pope’s apology for the tacit collaboration of the Roman Catholic Church with the Nazis, the French official

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apology for the Vichy regime’s collaboration with the Nazis, President Bill Clinton’s apology for slavery, Prime Minister Tony Blair’s apology for the long colonial rule over the Irish people, and so forth. Why do we see this series of apologies, unprecedented in history, that have been made in the Western democracies? It would appear that underlying these new developments is the fundamental acknowledgment that the enemies and the colonized are human beings equal in their rights to one’s kin or compatriots, and that this identity as equal humans takes precedence over the logic of the ‘reason of state’ (or ‘reason of empire’). This is an indication of the enlargement of the concept of transnational humanity and the growing sense of global identity, both of which are the manifestations of the dynamics of the deepening of global democratization from below that is under way. The admission of and the atonement for the guilt of war and colonial domination have often called for an agonizing selfreappraisal. It is for this reason that the postwar and post-colonial generations in Japan (and probably elsewhere) who have no direct responsibility for the wrongdoings of the past sometimes raise the question why they have to inherit the guilt: ‘is it because we belong to the same nation as Japanese or Germans? If so, is it not nationalism in reverse, asserting the primacy of national identity which should prevail over identity at other levels of society?’ Recognizing this hidden nationalism in reverse, some of Japan’s youth have aggressively opted for overt nationalism and, reflecting their ‘so what’ attitude, refuse to admit their guilt by resorting to ethnocentric historical revisionism. In reality, they are the nationalist victims of dehumanizing globalization. In sum, under the mounting impact of globalization, a bitter contest will continue in many societies, including Japan and Britain, over changing identities, between humane, democratic global identity, on the one hand, and autistic, exclusionary ethno-national identity, on the other. This tension will persist not only between different ethno-national and social groups within and amongst states but also within the minds of individuals. The fear of terrorism evoked by the ‘September 11 attacks’ has exacerbated the inveterate suspicion of the ‘other’, particularly in the North. This is also a manifestation of the global problematic not confined to Japan or Britain, individually, nor to bilateral Anglo-Japanese relations. More specifically, however, it may be noted that, against the background of the history of ambivalence towards universalistic Western values – the antiWestern emulation of the West in the Asian context – a schizophrenic Japan will continue to reappear in the foreseeable future, making the reconstruction of identity in a globalizing world more urgent and more difficult.9

Notes 1 Some of the history textbooks for compulsory education approved by the Ministry of Education (renamed and reorganized as the Ministry of Education, Culture, Sports, Science and Technology in January 2001) provoked indignation on the part of Asian nations in the 1980s because they revealed signs of Japan’s resurgent nationalism. In response to the international criticism generated, the nationalist overtone had been gradually muted until 2001, when a group of right-wing nationalists compiled a junior

A historical–future perspective 37

2

3 4 5

6

7 8 9

high school history textbook that the ministry approved. It was intended to whitewash the wrongdoings committed by pre-1945 Japan. As a result of the voices of anger raised abroad, particularly on the Korean peninsula and in China, and the active citizens’ movements at home against its adoption by the boards of education, it gained only 0.04 per cent share of the textbook market. For a detailed critical review of the rightist interpretation of history, see Komori et al. 2001. When Sir John Smith, the British foreign secretary, was about to leave for Geneva to discuss the Manchurian incident at the League of Nations, the prevailing view in Whitehall was the following: ‘There is evidence to show that Japan is beginning to realize that she has bitten off more than she can digest and what is needed is more time for this feeling to mature – for ways and means to be found to enable her to climb down without loss of face. … Any delay is worth playing for if thereby the Japanese can be got to retreat gracefully’ (Nish 1993: 188–9). As Thorne emphasized, the ambiguous British response was also a reflection, not only of the imperialist ‘rules of the game’ extended to Japan, but of the confusion of the Western powers ‘concerning the nature, goals and methods of conducting international relations’, namely, the balance of power system versus the League system, and the incipient transition from the multipolar to bipolar system (Thorne 1973: 125–6). Winston Churchill wrote in 1943, ‘It was [in fact] a blessing that Japan attacked the United States and thus brought America wholeheartedly into the war. Greater good fortune has rarely happened to the British Empire than this event …’ (Thorne 1978: 75). A summary of the Iwakura Mission’s report, which manifests the extraordinary interest and curiosity harboured by the young élite of early modern Japan, is presented in Nish (1998), and a more analytical account in Tanaka (1994). In his seminal work on Emperor Hirohito, Herbert Bix added an interesting caption to the picture of Crown Prince Hirohito and King George V, taken on 9 May 1921, when Hirohito was on his visit to England: ‘The real “lessons” George taught Hirohito had nothing to do with constitutional monarchy. The King exercised political judgments behind the scenes, used ceremonies to strengthen Britain’s wartime nationalism, and in various other ways perpetuated the influence of the monarchy in a postmonarchical age’ (Bix 2000: caption to photograph of 9 May 1921, ‘Crown Prince Hirohito with Britain’s King George V’). At the early stage of the Allied Occupation, ‘British diplomats on the spot warned that few Japanese “have even the vaguest idea of what Western democracy is” and were largely “unmoved by the manifestos of the various political parties” … The one political party to receive a modicum of praise was the Japan Communist Party’ (Buckley 1982: 67). In 1949 ‘the Foreign Office found such reports of “irresponsible factional squabbles” common to all parties except the Japan Communist Party, and feared for the future of democracy once the occupation had ended’ (Buckley 1982: 70). Watanabe also points in this section to the fact that some of those pacifistic opinion leaders were critical of the Labour government’s policy in Asia, which remained colonialist, maintaining control over, for instance, Hong Kong. According to the UN Department of Public Information, from 1991 to 2000, there were a total of 814 fatalities. From 1948 to 1990, there were 844 fatalities. In their response to the terrorist attacks on the US, Britain and Japan showed an unusual similarity in offering military support to the American war in Afghanistan. But, reflecting the political remoteness between the two, the similarity was a manifestation, not of mutual collaboration, but of parallel actions based on their respective security ties with the US. Further, unlike Tony Blair’s government, the Japanese government was not motivated by a deep-seated sense of Atlanticist cultural, if no longer racial, affinity with America, but by a complex mentality. On the one hand, the Japanese government has a haunting memory of the humiliating experience it underwent at the time of the Gulf War, when Japan’s contribution of US$13 billion was not appreciated by the US and Kuwait because Japan did not send troops due to constitutional constraints.

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On the other hand, Japan wants this time to show its ‘visible presence before the international community’ so that it may be recognized as a member of the club of big powers. International status consciousness as a defining factor of its identity has been a persistent legacy of modern Japan since the Meiji era.

References Banno, J. (2001) Nihon Seiji no ‘Shippai’ no Kenkyu¯ (Studies in the ‘Failures’ of Japanese Politics), Tokyo: Ko¯bo¯sha. Bix, H. (2000) Hirohito and the Making of Modern Japan, New York: HarperCollins. Borden, W. S. (1984) The Pacific Alliance: United States Foreign Economic Policy and Japanese Trade Recovery, 1947–1955, Madison: University of Wisconsin Press. Buckley, R. (1982) Occupation Diplomacy: Britain, the United States and Japan 1945–1952, Cambridge: Cambridge University Press. Cortright, D. (1993) Peace Works: The Citizen’s Role in Ending the Cold War, Boulder: Westview Press. Cumings, B. (1997) Korea’s Place in the Sun: A Modern History, New York: W. W. Norton. Dower, J. W. (1999) Embracing Defeat: Japan in the Wake of World War II, New York: W. W. Norton/The New Press. Flower, S. J. (2000) ‘British prisoners of war of the Japanese, 1941–45’, in I. Nish and Y. Kibata (eds), The History of Anglo-Japanese Relations, Vol. I: The Political-Diplomatic Dimension, 1600–1930, Basingstoke: Macmillan. Hagiwara, N. (1982) ‘Anglo-Japanese attitudes, 1940–1’, in I. Nish (ed.), Anglo-Japanese Alienation, 1919–1952, Cambridge: Cambridge University Press. Held, D. (1998) ‘Democracy and globalization’, in D. Archibugi, D. Held, and M. Köhler (eds), Re-imagining Political Community, Cambridge: Polity Press. ——, McGrew, A., Goldblatt, D., and Perraton, J. (eds) (1999) Global Transformations: Politics, Economics and Culture, Cambridge: Polity Press. Hosoya, C. (1982) ‘Britain and the United States in Japan’s view of the international system, 1937–41’, in I. Nish (ed.), Anglo-Japanese Alienation, 1919–1952, Cambridge: Cambridge University Press. —— (1984) San Francisco Ko¯ wa e no Michi (The Road to the San Francisco Peace Treaty), Tokyo: Chu¯o¯ Ko¯ronsha. Ishida, H., Ukai, S., Komori, Y., and Takahashi, T. (2000) ‘Datsu “parasaito nashonarizumu” ’ (Beyond ‘parasite nationalism’), Sekai (August): 189–208. Iwanaga, K. (1955) ‘Gendai Eikoku gaiko¯ no shiza to ko¯zo¯’ (The perspective and structure of modern British diplomacy), Report of the Political Studies Group of the University of Tokyo, Kokka Gakkai Zasshi, 69(5–6): 59–92. Kaldor, M. (1999) ‘Anti-nuclear movements: power, politics and people’, translated in Y. Sakamoto (ed.), Kaku to Ningen (Nuclearism and Humanity, Vol. I), Tokyo: Iwanami Shoten. Kibata, Y. (2000) ‘Anglo-Japanese relations from the Manchurian incident to Pearl Harbor’, in I. Nish and Y. Kibata (eds), The History of Anglo-Japanese Relations, Vol. II: The Political-Diplomatic Dimension, 1931–2000, Basingstoke: Macmillan. Komori, Y., Sakamoto, Y., and Yasumaru, Y. (eds) (2001) Rekishi Kyo¯ kasho nani ga Mondai ka ( What are the Problems with History Textbooks?), Tokyo: Iwanami Shoten. Kuroiwa, T. (2000) ‘Anglo-Japanese relations since the 1960s’, in I. Nish and Y. Kibata (eds), The History of Anglo-Japanese Relations, Vol. II: The Political-Diplomatic Dimension, 1931–2000, Basingstoke: Macmillan.

A historical–future perspective 39 Miyoshi, Y. (ed.) (1986) So¯ seki Bunmei Ronshu¯ (Selected Essays of So¯seki on Civilization), Tokyo: Iwanami Bunko. Murashima, S. (2000) ‘The opening of the twentieth century and the Anglo-Japanese Alliance, 1895–1923’, in I. Nish and Y. Kibata (eds), The History of Anglo-Japanese Relations, Vol. I: The Political-Diplomatic Dimension, 1600–1930, Basingstoke: Macmillan. Nish, I. (1985) The Anglo-Japanese Alliance, 2nd edn, London: Athlone. —— (1993) Japan’s Struggle with Internationalism: Japan, China, and the League of Nations, 1931–1933, London: Kegan Paul International. —— (ed.) (1998) The Iwakura Mission in America and Europe, Richmond, Surrey: Japan Library. Tanaka, A. (1994) Iwakura Shisetsudan ‘Beio¯ Kairan Jikki’ (An Account of the Iwakura Mission’s Visit to the United States and Europe), Tokyo: Iwanami Shoten. —— (2000) Meiji Ishin (The Meiji Restoration), Tokyo: Iwanami Shoten. Thompson, E. P. (1991) ‘Ends and histories’, in M. Kaldor (ed.), Europe from Below, London: Verso. Thorne, C. (1973) The Limits of Foreign Policy: The West, The League and the Far Eastern Crisis of 1931–1933, New York: Putnam’s Sons. —— (1978) Allies of a Kind: The United States, Britain and the War Against Japan, 1941–1945, New York: Oxford University Press. —— (1982) ‘Wartime British planning for the postwar Far East’, in I. Nish (ed.), AngloJapanese Alienation, Cambridge: Cambridge University Press. Watanabe, A. (1982) ‘From bitter enmity to cold partnership: Japanese views of the United Kingdom, 1945–52’, in I. Nish (ed.), Anglo-Japanese Alienation, 1919–1952, Cambridge: Cambridge University Press. Watt, D. C. (1982) ‘Work completed and work as yet unborn: some reflections on the conference from the British side’, in I. Nish (ed.), Anglo-Japanese Alienation, 1919–1952, Cambridge: Cambridge University Press.

3

The future of Anglo-America The changing relationship between the United Kingdom and the United States Andrew Gamble

This chapter explores the nature of the relationship between Britain and the United States, partly with reference to the historical roots of this relationship and to the way in which it developed in the twentieth century, and partly to its development in the ten years since the end of communism in Europe. The traditional approach in international relations literature to the relationship between Britain and the US is to explore the claim, made originally by Winston Churchill, that the two countries enjoyed a special relationship that grew out of their wartime alliance and was cemented in the postwar world. By the term ‘special relationship’ Churchill meant more than just a close military alliance. The two countries also shared common ideals, common language and common racial stock. Churchill was echoing those apostles of Anglo-Saxondom who had long looked forward to the day when the two nations would be reunited as one. Critics of the idea of a special relationship, however, have always argued that there was far more rhetoric involved than substance, and that in any case it was always given much greater importance on the British side than on the American (Watt 1984; Louis and Bull 1986; Dumbrell 2001). Whilst many of the specific criticisms of the special relationship are valid, this chapter will argue that the relationship between Britain and the US can only be fully understood if it is treated as more than the relationship between two independent and powerful nation-states. To grasp the broader context of this relationship between states we need to understand how it fits within the much larger idea of Anglo-America. The term, Anglo-America, as used in this chapter signifies a transnational political space, an ‘imagined community’ (Anderson 1991) encompassing both ideals and interests, which is constructed through various narratives and embodied in particular institutions. Such transnational political spaces are a key feature of our world, although less studied than either nation-states or the global economy. Such spaces arise particularly around powerful states, but they exist to some extent for all states, since no state is entirely self-contained. Some states because of their history (Britain is an obvious example) are involved in many such transnational spaces, some of them overlapping. For Britain the three most important have been the Empire (with its many subdivisions), Europe and Anglo-America. Such spaces and the communities of interest and ideals to which they give rise can be a potent source of political identity and political projects.

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Historical background This wider notion of a transnational political space is particularly important for understanding the relationship between Britain and the US. They constitute two of the most important states within Anglo-America and their relationship has been pivotal to its development, ever since the thirteen colonies successfully threw off British rule at the end of the eighteenth century. The Declaration of Independence in 1776 plunged Britain into a second civil war, which rehearsed many of the arguments of the first civil war, 140 years earlier. The ideological debate was about the rights of free born Englishmen against the authority of the Crown, and the struggle over these principles was as fierce within England as it was in the American colonies. The programme of the rebel colonists was much influenced by John Locke and Tom Paine and drew on the main themes of English radicalism (Keane 1995). The inability of the British state to accommodate those demands made compromise impossible, and following the intervention of the French on the side of the rebels, led to the loss of a large part of Britain’s Empire in North America. During the nineteenth century relationships between the two states gradually improved, particularly as there were such common economic interests. British capital poured into the US to fund the development of its agriculture and its infrastructure, especially its railways. The cultural ties between the two states remained very close, but the growing power of the US alarmed British governments. During the American civil war the British political class predominantly favoured the Confederacy, partly because it was landowning and aristocratic, and partly because a break-up of the Union was considered in Britain’s strategic interest. The consolidation of a more centralized federal union across the whole of the North American landmass was opposed, and this partly explains why Britain maintained a policy of neutrality in the conflict, and was prepared to supply arms to the Confederacy. British radicals, notably Richard Cobden and sections of the working class, gave strong support to the Federal Government because of its stance against slavery. In the nineteenth century nobody would have spoken of a special relationship between Britain and the US. That was only to develop after 1880 and particularly in the twentieth century with the emergence of the US as the world’s leading economic, financial and subsequently military power. Britain’s position of hegemony in the global order was challenged by the rise of Germany and the US and forced a major strategic readjustment (Friedberg 1988). The story of the special relationship in the twentieth century is about how that readjustment was made and its consequences. Britain concluded that it could not fight both Germany and America, and also that it could not defeat Germany without the help of the US. In the course of defeating Germany, however, it became apparent that the British Empire was no longer sustainable on the old basis and also that Britain’s position of hegemony had been fatally undermined (Barnett 1972). Harold Macmillan famously remarked during the Second World War that Britain was increasingly compelled to play Greece to America’s Rome, but as Christopher Hitchens has pointed out, the real relationship was between two

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Romes – a declining Rome, and a rising Rome (Hitchens 1991). The accommodation that was reached between them and which the special relationship expressed was that Britain would acquiesce in the rise to world power of the US and would seek to transfer its hegemonic role to the US in order to preserve the liberal global order which remained a fundamental British interest. This peaceful replacement of one hegemonic power by another was unprecedented, and was not accomplished without considerable friction and misunderstandings, but there was no war. Instead Britain became the foremost ally of the US (Watt 1984). The process by which Britain surrendered hegemony and the US assumed it was far from smooth, and was enormously aided by the circumstances of the two world wars, which forced Britain to become financially dependent upon the US. Following the Venezuela incident in 1898 when the US invoked the Monroe Doctrine to claim that Venezuela lay within its sphere of influence, the British chiefs of staff concluded that Britain did not have the capacity to wage a war simultaneously on the eastern seaboard of the US and in Europe. The inevitable conclusion was that American power had to be appeased, and if possible co-opted. Although both nations drew up contingency plans for war with the other, they were never tested. A variety of factors ensured that when the US became involved as a great power it would be in alliance with Britain rather than opposed to it. One important factor in this outcome was that it had long been the settled purpose of influential sections of the political élites in both Britain and the US to ensure that it came about. The idea of a Greater Britain, of uniting all the disparate sections of English-speaking peoples into a grand confederation, had become popular in the late nineteenth century. Anglo-America was an imagined community with both cultural and racial roots, and cooperation between its leading states was promoted as a matter of prudence in an increasingly threatening and hostile world. There were many dissenters to this vision of Anglo-America. Many British Conservatives wanted above all to sustain the British Empire and feared that alliance with the US would require the dismantling of that empire, whilst many Americans were totally opposed to the maintenance of the British Empire and resolutely opposed their government becoming a support for it. The strength of feeling in the US against being drawn into the quarrels and wars of the old world was responsible for the reluctance of US governments to become involved in the world wars. America’s entry in each case proved decisive to the eventual outcome of both wars, but after the First World War the US was not yet ready to undertake world leadership by organizing its own hegemony. In the intervening period Britain, the former hegemon, attempted to reassemble the elements of its former economic, financial and naval supremacy. It failed. Naval supremacy was given up following American insistence at the Washington Naval Conference that Britain should accept parity of its fleet with that of the US. Financial supremacy was lost following the restoration then final collapse of the gold standard in 1931. Industrial supremacy had been severely eroded before 1914, and vanished completely after 1918. Britain retained control of its empire, but by 1939 it was ill prepared for another major military struggle, and in the early years of the war was close to being overwhelmed.

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The entry of the US into the war in 1941 transformed the prospects for the survival not just of Britain but also of the British Empire. However, it was clear from the outset that this survival was to be on American terms. The close alliance that was forged after 1941 between Britain and the US saw close collaboration particularly between the military and intelligence establishments of both states, and this continued into the postwar period, and is still in important respects intact today. But the US fiercely resisted moves by Britain that it judged to be aimed mainly at restoring its imperial power, and it also exerted severe financial pressure on Britain, which limited its capacity to preserve its imperial position after 1945 even had it had the political will to do so. The withdrawal from empire might have been even speedier than it was had it not been for the advent of the Cold War, which persuaded the Americans, now ready and eager to exercise a global hegemonic role, that there should not be a too precipitate withdrawal by Britain from areas that were vulnerable to communism (Gamble 1994). Nevertheless it was clear that after 1945 Britain could no longer claim to be the equal of the US, although it remained the most important military power in the Western alliance, and until the 1950s the most important economic power as well. The new relationship was symbolically illustrated by the ill-fated Suez invasion of 1956, when the Anglo-French invasion force was first halted, and then withdrawn, having achieved its military objectives, by the use of American financial pressure. Britain never acted independently in a military enterprise again. The Falklands War of 1982 was highly exceptional and heavily dependent on American logistical support. Everywhere else British forces were withdrawn and colonies given their independence. By the time of the return of Hong Kong to China in 1997 the British Empire had been reduced to a few isolated far-flung islands like the Falklands and old fortress colonies like Gibraltar. Through this period from 1945 to 1990 the special relationship waned, especially after 1956, but it still possessed a reality through the extensive defence and intelligence collaboration between the two states. These were two extremely well-developed Anglo-American communities. It could also be revived from time to time as in the 1980s when Britain under Margaret Thatcher proved the most reliable of all the North Atlantic Treaty Organization (NATO) allies for the US during the Second Cold War. But Britain’s overall importance as a global power was much less in 1980 than it had been in 1950. It was only one of many allies of the US, and ties of culture and race were not sufficient to outweigh hard-headed calculations of national interest. Many concluded as a result that the special relationship was now a fiction, perhaps had always been a fiction, a rhetorical device invented by Churchill and used by his successors to disguise the fact of Britain’s displacement as a great power.

Britain and the US in the 1990s The collapse of communism in the Soviet Union and Eastern Europe and the reunification of Germany opened a new period in world affairs and in the relationship between Britain and the US. The changes will be considered under

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four headings: the new world order, European integration, globalization and models of capitalism, and American unilateralism. The new world order After the fall of communism there was much talk of a new world order, brought about by the disappearance of the bipolar world that had hitherto existed. The undisputed military predominance of the US now seemed to make irrelevant any further talk of a special relationship between Britain and the US, and even inspired speculation that NATO itself might no longer be needed. Both the Bush (senior) and Clinton administrations regarded NATO as playing an important role in maintaining world order, as was shown in both the war against Iraq and the intervention in the Balkans. The close understanding between the British and the Americans was an important factor in both interventions, and Britain demonstrated once again that it was prepared to commit its forces to American missions to an extent that was either not true or not possible for the other allies of the US. In that sense very little appeared to have changed. British governments in the 1990s remained strongly committed to NATO and therefore to the US continuing to be the heart of security arrangements in Europe. A senior Labour cabinet minister, George Robertson, Secretary of State for Defence in the Labour Government elected in 1997, moved to become NATO Secretary General, which was a sign of the continuing importance of NATO for Britain. The bipartisan support for NATO and the US as the cornerstone of Britain’s defence had been a fixed point of British politics since the 1940s, when the Labour Government of Clement Attlee had helped establish NATO. The commitment was briefly called into question, first in 1960 when the Labour conference passed a unilateralist motion and then again in the 1980s when Labour moved closer to a unilateralist position in its 1983 manifesto. The 1960 vote was reversed the following year, and after 1983, under first Neil Kinnock (a member of the Campaign for Nuclear Disarmament) and then John Smith and Tony Blair, the Labour Party moved back firmly to its traditional position on the Atlantic Alliance. The support of John Major for the action against Iraq in 1991 and of Tony Blair for the intervention in Kosovo in 1999 was unconditional. Indeed in both cases the British tended to be the hawks in the coalition, pressing for tougher action than many in the US administration wanted. The same pattern was evident in the war in Afghanistan in 2001–2. Underpinning this position has been the fact that ever since the arrival of the wartime US armies in Britain to prepare for the opening of the second front against Hitler, Britain has been willing to provide military bases for the Americans. This has been characteristic of how the US has deployed its forces around the world in the last sixty years. It has not annexed territory as Britain did in building its empire; instead it has established military bases on the sovereign territory of other countries. The novelty of this procedure, particularly so far as leading military powers such as Britain are concerned, is one of the most striking aspects of US hegemony in the postwar period. There have been occasional

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frictions in many countries at times over the existence of these bases, but only very rarely have the Americans been obliged to give up a base, or found that their operational freedom has been affected by the existence of these bases in territory over which they do not enjoy formal sovereignty. It has provided them with a number of ‘unsinkable aircraft carriers’ around the world (Campbell 1984). A number of recent examples from British experience illustrate this. The siting of Cruise and Pershing missiles in American bases such as Greenham Common in Britain was carried through in the 1980s despite a major political campaign against them. Margaret Thatcher gave permission for the bombing raids against Libya in 1986 to be launched from American bases in Britain. The proposed missile defence system of President George W. Bush requires the use and upgrading of communications facilities at US bases in Britain. The refusal of such a request would be unprecedented in the history of the special relationship, and there is every sign, especially after the terrorist attacks of 11 September 2001 (hereafter referred to as September 11) that if the request is made it will not be refused. The Conservative opposition under first William Hague and then Iain Duncan Smith wished to go further and declare unconditional support for the US whatever defence programme it proposed. In certain respects, therefore, little appears to have changed in the last ten years as far as the special relationship between Britain and the US is concerned. The military and intelligence establishments are still very close, there is routine exchange of information, and there have been some notable military collaborations, most recently in Kosovo and Afghanistan. It remains true that this is not a relationship of equals, since by far the greater part of the equipment and the personnel in both conflicts was provided by the US. Nevertheless the British contribution was of particular symbolic importance as far as the Americans were concerned. As a result, to many outsiders Britain and the US are so closely identified in security matters that they seem almost always to be following the same policy. Anglo-America here appears indivisible. European integration Rather greater fissures open up over Europe. For Britain its response to the process of European integration, which has now been steadily proceeding for fifty years, has become the most important question of its postwar politics, and one that has proved extremely divisive for both its main political parties and for the business community, trade unions and the media. Although Britain did enter the European Community in 1973, the decision was bitterly contested, had to be confirmed in a referendum in 1975, and had still not been definitely settled twenty-seven years later. The reason why the issue has been so hard to resolve is because Europe offers Britain an alternative transnational space to that of Anglo-America. The long political and cultural isolation of Britain from Europe which began with the Reformation in 1532 and was consolidated in the eighteenth and nineteenth centuries by Britain’s successful career of overseas imperial expansion has meant that

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Britain has seen Europe (or at least various manifestations of Europe, such as Catholic Spain, Bourbon and Napoleonic France and Imperial and Nazi Germany) as a hostile ‘other’, against which British identity has been defined. The transnational spaces of empire and of Anglo-America have been the imagined communities that have furnished the most potent identities in British politics. But the loss of power in the postwar world has made a rapprochement with Europe not only possible but also necessary and desirable. The majority of Britain’s political élite has come to see this and embrace it, but not with any great enthusiasm, and they have tended to disguise the real choice that has to be made, by claiming as Churchill did in 1946 and Tony Blair more recently, that no choice between Europe and America is necessary. Britain can belong equally to both, and act as a bridge between the two. The minority position in the political class is that of Euro-scepticism. It has largely disappeared from the Labour Party, but thanks to Margaret Thatcher it has obtained a strong position in the Conservative Party, and after its 1997 defeat Euro-sceptics came to dominate the party. Nobody who supported the euro was allowed to be a member of the shadow cabinets of either William Hague or Iain Duncan Smith. This Euro-scepticism, however, is not isolationist or protectionist. On the contrary it is globalist – its allegiance is to the liberal world order dominated by the US, and one of its main complaints about the European Union (EU) is that it is too interventionist, too statist, too protectionist. Rejecting a European future for Britain means endorsing an Anglo-American one. Some conservative Euro-sceptics have even advocated that Britain should leave the EU and join the North American Free Trade Agreement instead. Throughout the long European debate the opponents of Europe have always been prepared to argue their case in terms of identity, which turns out to be an Anglo-American identity regarded as far superior to the European identity represented by Brussels and the institutions of the EU. The supporters of Europe, by contrast, are most reluctant ever to engage at the level of the politics of identity because they understand the strength of the identities that they are contesting. The US has often played an important role in the European debate. It has always seen great advantages to itself in Britain being a full participating member. United States’ administrations became impatient with residual British hankering after an independent world role, and strongly urged British governments to join the European Community. They thought that if Britain did so the Community would be stronger and more viable, whilst at the same time if Britain was at the heart of Europe yet still a loyal ally of the US this would have advantages in inhibiting moves to which the US was opposed. A recent example of this has been the proposals for a European rapid reaction force. British insistence that such a force must be compatible with NATO serves the purpose from the American standpoint of curtailing the ambitions of the French to create a European defence capability that is completely independent of the Americans. In pursuing these objectives the US rationale is similar to that of British policy in the nineteenth century towards the US. It is not in America’s interest to see a weak and fragmented Europe always prone to the kind of instability and conflict that afflicts the Balkans. But it is also not in America’s interest to see Europe

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develop as a rival superpower that begins to contest American hegemony. If Britain’s membership of the EU helps slow down the movement towards the creation of such a superpower, then it is a bonus as far as the US is concerned. Apart from some very strong Anglophiles, however, there is very little support in the US for Britain detaching itself from the EU, as many Euro-sceptics including Margaret Thatcher now advocate, and integrating more closely with the US. This would have few advantages for the US and would leave behind an EU that was potentially harder to control. Globalization and models of capitalism The concept of Anglo-America helps illuminate the question of globalization and how British policy-makers and the wider political class have responded to it. The discourse of globalization from the standpoint of Anglo-America is merely the latest dominant discourse employed to promote the concept of a liberal economic order. Globalization from its inception has been predominantly an Anglo-American discourse and an Anglo-American project. It originated in the 1970s following the collapse of the Bretton Woods system. Monetarism emerged as the preferred solution to the problems of accelerating inflation and deepening recession, and was enforced through the international agencies of the global order, particularly the International Monetary Fund, and backed by the financial markets (Clarke 1987). It is a mistake to think of monetarism as a policy solution that was home-grown in particular countries. It was adopted first by the international agencies and became the new consensus for the governance of the global economy. As a result, in the 1980s the new doctrine became known as the Washington consensus. More recently it has been referred to as disciplinary neo-liberalism (Gill 1998) – an international framework of rules and institutions beyond the reach of democratic accountability, accepted and adopted by national governments with varying degrees of ideological enthusiasm. The Reagan/Thatcher partnership consolidated the hold of the new consensus and made it the new common sense throughout Anglo-America. It drew further strength with the collapse of communism in Europe at the end of the 1980s and the vogue for the end of history (Fukuyama 1992; Gamble 2000), with its suggestion that there were no longer any viable alternatives to the liberal capitalist model, and that ideological contestation was therefore at an end. The discourse of globalization has enlarged this idea, implying in some of its more extreme formulations that cosmopolitan order in the shape of transnational financial and trade flows has completely overwhelmed all forms of regulation based on territorial order, and that as a result all national governments are obliged to adjust their institutions and policies to those prescribed by the international norm. There has been resistance to these ideas within Anglo-America itself as well as from many states outside it, but it has not prevented the consolidation of neoliberalism as the dominant framework for the discussion of global governance. It is not a monolithic doctrine, and there are important variations within it, as there were with earlier dominant discourses; these included the rather ill-named

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‘post-Washington consensus’ of the 1990s and the Third Way pursued by Bill Clinton and Tony Blair. But underpinning all such variations has been an acceptance of the necessity and inevitability of globalization, and the need for appropriate forms of national and international governance to ensure that globalization is allowed to develop to its maximum. Despite the ideological certainties of Thatcher and Reagan, the 1980s were a difficult time for Anglo-America because of the continuing weakness of Britain and the challenges to US hegemony. One particular form this took was the elaboration of arguments about the developmental state and models of capitalism that pointed to deep-rooted problems in the organization of the Anglo-American model of capitalism and argued that it was being out-competed by other models, particularly those of Germany, Sweden and Japan (Coates 2000). The key features of this Anglo-American model are traced back to the common ideals on liberty of the individual within a framework of the rule of law, which encouraged the development of capitalist enterprise that was fundamentally individualist and at arms-length from government. Although many historical details of this characterization have been challenged, the dominant Anglo-American understanding of the primacy of the market and civil society over the state has been sustained. The state played a much more powerful role than in some of the myths of the spontaneous efflorescence of capitalism, but it was essentially an enabling role – removing the barriers to free market exchange and sustaining the institutions which could define and defend individual property rights. Many of the characteristics of the Anglo-American model have stemmed from this approach, in particular its voluntarism and short-termism, as well as the character of its welfare system (Esping-Andersen 1990) and corporate governance (Parkinson et al. 2000), and the relative importance of its financial institutions, particularly its stock markets. During the years of the long boom in the 1950s and 1960s it became evident that there were several varieties of capitalism, and different ways of involving the state in the economy, although even then there were arguments that in practice there was considerable convergence towards a norm (Shonfield 1965). The models of capitalism that appeared to perform best were those of Germany, France, Scandinavia and Japan, all of which had markedly different institutions than those of Britain and America, and all involved a very different role for the state in defining and promoting the public interest as far as the economy was concerned. Criticism of the Anglo-American model and its shortcomings reached a crescendo in the 1970s and 1980s with the well-publicized difficulties of the British economy in comparison to its main competitors and with the apparent strains within the US, which led many observers to predict that the US was in irreversible decline, and that it was being overtaken by the economies of East Asia. The hegemony of Anglo-America might still be pre-eminent in the security field, but it appeared to be under considerable challenge in the economic. Its model was regarded as obsolescent and in danger of being out-competed (Kennedy 1986). As the debate on globalization has gathered pace in the 1990s many of these conclusions can be seen to have been premature. The resurgence of the American economy and to a lesser extent of the British economy has been proclaimed as

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vindication of the Anglo-American model, and of its particular suitability to the conditions of globalization. The economies that have done relatively less well in the last ten years – in Europe and East Asia – have been described as sclerotic and inflexible, unable and unwilling to restructure themselves to meet the challenges of the new global economy. This turn of events has made Britain and America the leading proselytizers for globalization, and has delayed British adjustment to the requirements of European integration. The renewed success of the AngloSaxon model of capitalism has been a vivid reminder to the British of their links to Anglo-America, and how these could be imperilled by absorption into Europe. The globalization discourse in the 1990s became very much an Anglo-Saxon discourse, which was consciously used as a weapon against the opponents of Anglo-America as well as a means of enforcing order through the global economy. It became the new means of hegemonic control. It took some time to emerge and be effective, but the foundations were already laid by the mid-1970s following the collapse of the Bretton Woods system. The new doctrines that emerged to guide the practices of the international institutions, such as monetarism, were designed to re-establish the conditions of international financial stability at whatever cost to domestic spending programmes and domestic employment. The development of neo-liberalism as a set of doctrines and discourses took place first of all in the US and was then imposed or accepted throughout the global economy (Gray 1998). Sometimes the adjustments were painful, as in Britain, France, Sweden and most recently in East Asia. What was striking, however, was that having once succumbed to the medicine that was prescribed, the British political class, first Conservative and latterly Labour, became enthusiasts and proselytizers for the new dispensation. Denis Healey, Labour Chancellor in the 1970s, was described as an unbelieving monetarist when he took the first decisive steps to create a monetarist policy regime in Britain, imposing cash limits on public spending and monetary targets. There was nothing unbelieving, however, about the regime that followed. The Thatcher Government was committed from the beginning to a tough monetarist approach. British politicians became evangelists for neo-liberal economic policies and for the superiority of the Anglo-American model. The belief in flexible labour markets, deregulation of business, privatization, low taxes and minimal state involvement became articles of faith that were pressed on Britain’s European partners as offering the best way to create a prosperous and competitive economy. Globalization became an unreflective mantra that was used to argue that there was no alternative to the adoption of neo-liberal economic policies and the Anglo-American model. Resistance to globalization was futile because national governments no longer had the power to control global economic forces. States had to either work with globalization or be overwhelmed by it (Hay 1999). American unilateralism The close ties between British and US politicians and the main think tanks in the two countries has facilitated the development of this discourse and its expression

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in the Washington consensus of the 1980s. The set of doctrines associated with it has dominated global policy ever since, despite the slight modifications and mild questionings introduced in the 1990s. At the core of this discourse and this consensus is therefore the question of US hegemony over the international order. By 2000 and the election of George W. Bush this hegemony appeared to have been largely restored, and many of its former attributes, including Britain’s supportive role of the US, still intact. The closeness of the relationship between Bill Clinton and Tony Blair and their ideological empathy paralleled that of Reagan and Thatcher. It was notable that as far as British prime ministers were concerned there were no ties as close with European leaders. Nevertheless the election of George W. Bush did at first introduce a new note into the relationship with Britain. The close ideological rapport disappeared, and the US under Bush’s leadership appeared determined to pursue a unilateral course in pursuit of US interests, whatever the cost to multilateral treaties and arrangements. This American desire to be much more assertive in imposing solutions, and much less ready to accept concessions in order to obtain agreement, risked a sharp deterioration in relations not only with Russia and China, but also with the EU and Japan. Ideologues of the new path justified it in terms of the superiority of the US system and its model of capitalism, and were critical of the shortcomings of all other states. The new aggressive tone of US diplomacy posed difficult problems for Britain, because it raised once more in acute form the strategic dilemma of whether Britain should make Europe or Anglo-America its priority. Opinion was divided within the two major parties. In the Conservative Party the strategic choices were embodied in the two candidates who contested the final ballot for the party leadership. On one side Iain Duncan Smith, a former soldier, urged complete acceptance and support for the new US view of the world, and advocated an extreme Euro-scepticism, which not only ruled out joining the euro on principle, but also logically appeared to envisage the possibility of outright withdrawal from the EU. On the other side the much reduced but still significant pro-European wing of the party, led by Kenneth Clarke, was much more critical of the Bush Administration, particularly the abandonment of the Kyoto Protocol on Climate Change, and the plans for missile defence. In this it chimed much more with the opinion of other European governments. The Labour Government was non-committal in its attitude towards the Bush Government, waiting to see how its policies developed. The bulk of the Labour Party was strongly opposed to any cooperation with missile defence, and was also very critical of other unilateral decisions announced by the Bush Administration. The government, however, did not voice any open dissent, and instead offered to liase between the Bush Administration and the rest of the EU.

The impact of September 11 All this has been transformed by the events of September 11 and their aftermath. The pull of Anglo-America was once again amply confirmed, with Britain once more emerging as the US’s most reliable ally. Tony Blair in particular played a leading role in helping to organize the international coalition for action against

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terrorism. The renewed closeness between Britain and the US was affirmed in many different ways – Tony Blair acquiring a stature and recognition in the US that only Thatcher and Churchill had enjoyed before him. The crowning symbol of this was the invitation he received to address a joint session of Congress, a sign of the unique status he had achieved for Americans. September 11 showed not only that the heart of the old special relationship in the military and intelligence fields was still intact, but also that Anglo-America remained a key point of reference and determinant of identity for a large section of the political class, not only in Britain but also in the US, to an extent which is not matched by any other country. Many critics continue to deny that AngloAmerica has any substance, and it is certainly true that the military response to September 11 was almost entirely American. But that misses the ideological and political significance of the reactions to September 11. The degree of cooperation and common purpose achieved between a Republican President and a Labour prime minister was remarkable, and testified to the deep currents of identity and interest which still bind the two countries. Anglo-America will not lose its attraction so long as the US is still the world’s leading power and at the centre of its governance. Nevertheless, the counter-pull of Europe for Britain is proving strong, and few in the political class now think that Anglo-America can provide a serious long-term alternative to Europe. Many observers assume that Britain will at some point embrace fully the logic of European integration, including joining the euro, even if at the same time it seeks constitutional guarantees to limit the powers of the European executive. Any full acceptance of Europe would have to involve Britain disengaging itself from the US, and allowing security issues to become Europeanized. There is no inevitability that Britain will develop in this direction. A part of the British political class and the media remains viscerally attached to Anglo-America and does not hide its distaste for the EU. The government has yet to decide whether to hold a referendum on the euro in this Parliament and there are still deep British reservations regarding the creation of a European army and a common European security policy. Such scepticism makes the British government cling to its relationship with the US, by supporting its continuing hegemony, and proposing that Britain remain a bridge between the two worlds of Anglo-America and Europe. It may be that in the future the US will once again lose interest in Europe now that there is no longer an overriding strategic imperative for it to be involved, and this will make Britain’s stance harder to sustain, and the attractions of being a central part of an increasingly powerful and integrated EU will loom larger. Yet despite it being predicted many times during the past fifty years that point has still to arrive. September 11 has not brought it any closer.

References Anderson, B. (1991) Imagined Communities, London: Verso. Barnett, C. (1972) The Collapse of British Power, London: Eyre Methuen. Campbell, D. (1984) The Unsinkable Aircraft Carrier: American Military Power in Britain, London: Michael Joseph. Clarke, S. (1987) Keynesianism, Monetarism and the Crisis of the State, Aldershot: Edward Elgar.

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Coates, D. (2000) Models of Capitalism, Cambridge: Polity. Dumbrell, J. (2001) A Special Relationship: Anglo-American Relations in the Cold War and After, London: Macmillan. Esping-Andersen, G. (1990) The Three Worlds of Welfare Capitalism, Cambridge: Polity. Friedberg, A. (1988) The Weary Titan: Britain and the Experience of Relative Decline, 1895–1905, Princeton: Princeton University Press. Fukuyama, F. (1992) The End of History and the Last Man, London: Hamish Hamilton. Gamble, A. (1994) Britain in Decline, London: Macmillan. —— (2000) Politics and Fate, Cambridge: Polity. Gill, S. (1998) ‘European governance and new constitutionalism: economic and monetary union and alternatives to disciplinary neoliberalism in Europe’, New Political Economy, 3(1): 5–26. Gray, J. (1998) False Dawn: The Delusions of Global Capitalism, London: Granta. Hay, C. (1999) The Political Economy of New Labour, Manchester: Manchester University Press. Hitchens, C. (1991) Blood, Class, and Nostalgia, London: Vintage. Keane, J. (1995) Tom Paine: A Political Life, London: Bloomsbury. Kennedy, P. (1986) The Rise and Fall of the Great Powers, London: Unwin Hyman. Louis, R. and Bull, H. (eds) (1986) The Special Relationship: Anglo-American Relations Since 1945, Oxford: Oxford University Press. Parkinson, J., Gamble, A. and Kelly, G. (eds) (2000) The Political Economy of the Company, London: Hart. Shonfield, A. (1965) Modern Capitalism, Oxford: Oxford University Press. Watt, D. C. (1984) Succeeding John Bull: America in Britain’s Place, 1900–1975, Cambridge: Cambridge University Press.

4

Japan–United States relations in the postwar years The dilemma and problems of postwar Japanese diplomacy and their implications for the East Asian order Kan Hideki

It might have been expected that Japanese foreign policy after the end of the Cold War would become more flexible and independent of the United States because, at least theoretically speaking, the disappearance of the ‘Soviet threat’ has made Japan less dependent on US security protection than it had been in the Cold War years. Contrary to such expectations, however, not only Japanese defence policy but also its foreign policy in general has still not evinced any initiative and independence vis-à-vis Washington, making Japan look all the more dependent on the US. Reflecting this lack of independence, Zbigniew Brzezinski, former National Security Advisor to President Jimmy Carter’s administration, had earlier gone so far as to refer to Japan as America’s ‘protectorate’ in his 1997 book (Brzezinski 1997: 45, 152).1 How can we explain the present stalemate and predicament of post-Cold War Japanese defence and foreign policies? Why is Japan unable to pursue a more independent foreign policy vis-à-vis Washington, even ten years after the end of the Cold War? One way to answer these questions is to examine critically the origin and development of the Yoshida Doctrine associated with former Prime Minister Yoshida Shigeru who was responsible for negotiating and signing the US–Japan Security Treaty. It has been widely regarded in Japan that the basis for postwar Japanese diplomacy was laid down by the foreign policy initiated and formulated by Yoshida. In recent years, however, there is a growing recognition in academic quarters that Yoshida’s diplomacy and the doctrine associated with it needs to be reconsidered in view of the existing poor performance of Japanese diplomacy. How successful were Yoshida’s foreign and defence policies? Was the high evaluation of Yoshida’s diplomacy by realist scholars in Japan in any sense either realistic or valid? Most importantly, what were the problems associated with Yoshida’s diplomacy that these realists neglected to take into due consideration in their evaluation of his diplomacy? This chapter attempts to examine the dilemma and problems of postwar Japanese diplomacy under the shadow of the US–Japan Security Treaty and to highlight the agenda and issues that Japanese diplomacy should have addressed but neglected to deal with in the postwar years. These neglected and unresolved

54 Kan Hideki issues largely explain the present predicament and stalemate of Japanese diplomacy. This chapter will, therefore, attempt to relate the legacies of Yoshida’s diplomacy to an analysis of Japan–US relations in the post-Cold War context and draw some implications for order-making in East Asia.

The need for an altered framework By signing the US–Japan Security Treaty on 8 September 1951, Japan chose to join the Western bloc in the Soviet–American confrontation and depended on the US for its defence against the Soviet Union. The choice that Prime Minister Yoshida had made placed postwar Japanese diplomacy in a serious dilemma: Japan became dependent upon the US for its defence, and the search for independence in Japanese foreign policy became a nagging question for subsequent Japanese policy-makers in the postwar era. Naturally, then, the search for more autonomy in postwar Japanese foreign policy became a central issue in the postwar debates between the ‘conservatives’ (hoshu) and the ‘progressives’ (kakushin). The conservatives led by the Liberal-Democratic Party (LDP) and its supporters upheld the US–Japan Security Treaty system. They also regarded the maintenance of a close relationship with the US as the keystone in Japanese foreign policy. The advocates of this line of foreign policy placed almost exclusive priority on the Japanese–American political space in the postwar years. On the other hand, the progressive forces which gathered around the early postwar progressive intellectuals, the Japan Socialist Party ( JSP) and the Japan Communist Party ( JCP), opposed the US–Japan Security Treaty and advocated a more ‘neutralist’, and, for that matter, independent, foreign policy, especially in regard to Japan’s relations with the US. Their line of policy, therefore, suggested that Japan should adopt a foreign policy designed to create a wider politico-economic space than the Japanese–American space. The need for a more independent foreign policy was debated not only between the conservatives and the progressives, but also amongst the conservatives within the LDP. One group, represented by Yoshida, advocated the primacy of the US–Japan Security Treaty. Hatoyama Ichiro¯, who was later to become prime minister, led the other group, advocating more autonomous defence and foreign policies. Hatoyama and his followers in the conservative, nationalist tradition attempted to expand the bilateral political space into a more multilateral one by pursuing normalization of relations with the Soviet Union as well as increasing contacts with Communist China through the separation of politics and economics (seikei bunri ). However, none of these efforts proved successful. Three interrelated reasons for this can be mentioned. First, the inability of the Japanese government, within the bilateral political space defined by the US–Japan Security Treaty, to persuade Washington to accept the Japanese position that, in so far as Japan was concerned, its own security contribution to the mutual defence of the two countries matched the US contribution. Second, they neglected to build a regional political space in East Asia. Third, they failed to develop what can be called ‘soft power’,

Japan–US relations in the postwar years 55 the key component of Japanese diplomacy, such as foreign policy ideals and goals as well as the strategy and human resources to realize them. As for the first point, the Japanese government brought up the logic of ‘fifty-fifty’ during the bilateral negotiations over the security treaty. Nishimura Kumao, who attended the treaty negotiations as Director of the Treaty Bureau of the Ministry of Foreign Affairs (MOFA), argued that Japan provide the US with military bases whilst the US provide Japan with its troops. The deal was asymmetrical but fair enough. Japan’s contribution to Western defence matched the American contribution. Hence, it amounted to a fifty-fifty contribution, Nishimura argued (Nishimura 1960: 40–1, 58, 141). Unfortunately for Japan, however, Nishimura’s logic and rationale did not convince the US government, notwithstanding the fact that the provisions of the 1951 US–Japan Security Treaty were disproportionately in favour of the US. In fact, John F. Dulles, chief of the US delegation, and John M. Allison of the US Embassy in Tokyo, were aware of the unequal nature of the provisions contained in the treaty and confirmed it during the Shigemitsu–Dulles meetings held in Washington in late August 1955. Moreover, the US government, in the subsequent negotiations leading up to the revision of the treaty in 1960, again confirmed that the free use of bases in Japan was essential for US regional defence in East Asia.2 In spite of their initial resistance, Yoshida and his successors eventually gave way to the US demands for rearmament and the subsequent increase in Japan’s defence capability. More seriously, they accepted the US logic that unless Japan was able to come to the defence of the US and/or the territories under US jurisdiction, the treaty relationship would not be considered mutual (Toyoshita 1999: 5–41; Toyoshita 1996: passim).3 The negotiating process clearly indicates the lack of tenacity or skill of Japanese negotiators to pursue the national interest. Japanese negotiators have betrayed their weakness in terms of information-gathering, accurate analysis of the changing bilateral relationship in the volatile international environment and the necessary adjustments of internal governmental and bureaucratic interests. In other words, Japan has failed to develop and strengthen both the human resources and the institutional apparatus to promote its national interest. Another reason for Japan’s past failure to pursue a more independent foreign policy can be found in its neglect to build a regional base in East Asia. Unlike the United Kingdom, which could depend on the regional politico-economic space formed in Europe, such as the European Economic Community (EEC) and the European Union (EU), Japan’s lack of a reliable political space in East Asia meant that Japanese politicians and diplomats had no counterweight to rely upon in negotiations with Washington. Japan’s failure to build a regional base in East Asia was due to the fact that the Japanese government has not made serious enough efforts in the past to solve the question of war guilt and the Asia-Pacific postwar settlement. As a result, Japan failed to gain the respect and confidence of neighbouring East Asian countries. In this context, Yoshida’s diplomacy was no exception. The first test for postwar Japanese diplomacy in East Asia was the question of payment of reparations

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to Southeast Asian countries beginning with Burma (Myanmar), the Philippines and Indonesia in the 1950s. The fundamental problem with Yoshida’s policy vis-à-vis reparations was that the reparations to the war-damaged countries of Southeast Asia were regarded as no more than ‘economic cooperation’, rather than compensation for the victims of the war and the damage caused by Japanese military invasions during the Second World War. In essence, Prime Minister Yoshida hoped that the reparation payments would be a means to expand markets for Japanese products. Yoshida’s reminiscences clearly show how he viewed the question of reparations in Southeast Asia: The recently concluded Burmese reparations agreements [of 1954] are investments from our point of view. We used the term reparations because the Burmese did not want to use the term investments. The reparations investments will contribute to the development of Burma, which in turn will develop markets for Japan. Afterwards, the investments will be recovered. Now Japan has lost the China market, it is important to find markets in Southeast Asia. By taking advantage of the reparations payments, we will begin first with Burma, then move on to the Philippines and Indonesia. (Mainichi Shinbun, 11 August 1955) From the above remarks, it is hard to see that Yoshida felt any sense of remorse or apology for Japan’s wartime activities. For Yoshida, Southeast Asia was important as a market for Japan. In other words, the postwar realist school certainly had an investment policy, but not a foreign policy towards Southeast Asia ‘Japan is not trusted’, wrote Harvard University political scientist Samuel Huntington, ‘by many East Asian countries and is feared by some, including China, which is one reason China up to now has been willing to accept the US–Japan alliance in its current form’ (Huntington 2001: 140–1). This means that Japanese diplomacy has failed to create a politico-economic space in East Asia that would allow Japan to take diplomatic initiatives not only in East Asia but also in its relations with the US. It also suggests that Japan has failed to develop the human resources and institutions, the critically needed component of Japanese diplomacy. Given the dilemma and problems associated with the security treaty as well as the poor performance of Japanese diplomacy, we need an altered framework. The necessary corrective to Japan’s postwar dilemma is to develop a transnational political space within which to counter the US logic of mutual defence and assistance. Otherwise, Japan will not be able to move out of the postwar dilemma and the problems that were created by signing the US–Japan Security Treaty.

The lack of vision, planning and strategy in postwar Japanese diplomacy The main features of the ‘merchant state’ as represented by Yoshida and his followers The failure to develop some other aspects of Japan’s soft power, or the lack of vision, planning and strategy in postwar Japanese diplomacy, is the third reason

Japan–US relations in the postwar years 57 for Japan’s inability to conduct independent foreign policy vis-à-vis Washington. US foreign policy can be placed in sharp contrast to postwar Japanese foreign policy in several important respects. To start with, the US is a mission-oriented country with its own foreign policy style and clearly articulated foreign policy goals. Moreover, it carries a clear message or a vision in regard to the shape of international society. It has often expressed a strong will not only to lead the world but also to mould it along the lines of liberal norms and principles. It has developed its own institutional apparatus to mobilize US human and material resources to put the foreign policy agenda on the table and to realize the goals set in order to promote the national interest. On the other hand, postwar Japanese foreign policy has been no more than reactive and adaptive. Rather than articulating a clear vision to the world and formulating its own strategy to work towards explicit goals, Japanese policy-makers have responded to the initiatives taken by the US and tried to gain as much as possible from the agenda laid down and the actions taken by Washington policy-makers. As a result, postwar Japanese diplomacy can be said to have been generally conducted within the boundaries set by US goals and strategy during the Cold War period. The origin of Japan’s reactive diplomacy can be traced back to Yoshida’s diplomacy. The main features of Japanese foreign policy as represented by Yoshida and his conservative followers can be encapsulated in one word: pragmatism. The ‘merchant state’, to use Ko¯saka’s term, is by nature a pragmatic state (Ko¯saka 1968: 64–71). It is characterized by a lack of vision, planning and strategy. Yoshida’s diplomacy reflected such features. First, the Japanese people at large were provided with the ideational basis for developing Japan’s own vision of international society, as they could draw on the principles and ideals embodied in the postwar constitution for Japanese foreign policy. Japan as a ‘peaceful nation’ was the vision expressed in the constitution. More concretely, the idea of the ‘peaceful nation’ was based on such constitutional values and ideals as pacifism, the renunciation of war as a means of settling international disputes, international cooperation and respect for human rights, equality and justice. Unfortunately, the LDP leaders turned their back on some of these high ideals that might have developed into the ideational framework for a Japan as a ‘peaceful nation’, particularly those expressed in the war-renunciation clause of Article 9 of the constitution. Notwithstanding the fact that the Japanese people generally supported these ideals and purposes of the constitution,4 such LDP politicians made a strenuous effort to revise Article 9 of the constitution by expanding its interpretation so as to allow for the strengthening of Japanese armed forces, the euphemistically named ‘Self-Defence Force’ (SDF). This kind of devious practice has significantly and steadily eroded the political basis for the constitution.5 W. MacMahon Ball, who was the British Commonwealth representative on the Allied Council for Japan from April 1946 to August 1947, observed in 1947 that ‘no major groups representing political views gave any serious consideration to the new constitution’ (Koseki 1989: 142). The declassified documents relating to the negotiations over the San Francisco Peace Treaty and the US–Japan Security Treaty not only confirm that Yoshida intended to forge ahead and create Japanese

58 Kan Hideki armed forces, despite the peace constitution, but also clearly show that his view of the constitution reflected his pragmatism. In anticipation of Dulles’s demand for Japanese rearmament, for instance, Yoshida instructed MOFA to prepare a document to counter the US arguments. The completed document envisaged an alternative scheme for Japan’s security in which a vast area covering Siberia, the eastern part of mainland China, the Korean peninsula and Taiwan would be demilitarized and neutralized. The alternative security scheme reflected most closely the ideals and principles embodied in the constitution. However, he had absolutely no intention of developing this scheme to reinforce the ideational basis of postwar Japanese foreign policy. Rather, he intended to use it as a card to play during his negotiations with Dulles (Gaimusho¯ Jo¯yakukyoku Ho¯kika 1968: 209–11). During the Dulles–Yoshida negotiations, he brought up Japan’s constitutional restrictions as a means to resist Dulles’s demands for rearmament. Curiously enough, however, he did so not out of any conviction that the constitution had to be defended as the foundation for postwar Japanese identity. It was simply that, for Yoshida, the constitutional restriction imposed by Article 9 was regarded as a convenient rhetorical device to resist Dulles’s demand; it was not seen in any way as the ideational basis upon which Japan’s postwar vision and foreign policy goals were to be constructed (Ko¯saka 1968: 66). For Yoshida, indeed, Article 9 of the constitution was not necessarily something to uphold and defend as the ideal and principle for a new Japan, but rather a card to play against the unreasonable demands made by Dulles. Neither did Yoshida seem to have his own strategy to realize foreign policy goals based upon a clear vision of Japan’s place in the world. A good example of this is his strident opposition to the Hatoyama administration’s policy of normalizing diplomatic relations between Japan and the Soviet Union. Hatoyama, who replaced Yoshida as prime minister in December 1954, worked towards the normalization of relations between the two countries from 1955 to 1956. This was the prime minister who was known as an advocate of so-called ‘autonomous defence’ for Japan, a nationalist in favour of a more independent foreign policy. His strategy of normalizing relations would have allowed Japan to pursue a more independent policy vis-à-vis Washington. Ideally, such a policy would have helped develop a wider political space within a multilateral framework. Yoshida, however, obstructed Hatoyama’s effort by mobilizing his supporters in the foreign policy bureaucracy and his followers in the party. He himself sent an open letter to Foreign Minister Shigemitsu Mamoru, urging the latter to take a tougher stance towards the Soviet Union. What Yoshida’s obstructionist moves and attitude show, clearly, is his lack of understanding that what was at stake here was the national interest of Japan and the strategy to promote it by increasing more room for diplomatic manoeuvres (Tanaka 1993: 58–9, 78, 176, 229). Similarly, even out of office, his lack of diplomatic vision was confirmed in 1963, when Yoshida criticized those working for the normalization of relations with the People’s Republic of China. He said that Japan should not make the mistake of disturbing the balance of power in international politics through the recognition of the Beijing government. He argued, rather, that Japan should firmly and single-mindedly

Japan–US relations in the postwar years 59 adhere to its pro-US policy and that such a whole-hearted policy must not be regarded as subservient to Washington (Yoshida 1963: 139–47). It is hard to see from the above analyses that Yoshida had any vision, scheme, or strategy for Japanese diplomacy. His LDP successors elevated Yoshida’s diplomacy to a doctrine and conducted Japanese diplomacy in what can only be called a ‘complacent manner’, and did so within the boundaries set by the US goals and strategy during the Cold War period. The paradoxical consequences of the controversy over the course for postwar Japanese diplomacy US foreign policy-makers have traditionally been sensitive to public opinion in general and Congressional critics in particular. They have often turned this domestic context to their advantage in negotiating with Japan. In other words, Congressional critics often worked as a lever for US negotiators to extract more concessions from Japan. When Dulles pressured Yoshida to sign the ‘Yoshida letter’, for instance, he warned that the ratification of the peace treaty with Japan would be endangered if Congressional supporters of Taiwan were alienated.6 Dulles’s caveat prodded Yoshida into recognizing Taiwan, effectively closing whatever opportunity there was for Yoshida to open diplomatic relations with communist China. On the other hand, the postwar controversy between the conservatives and the progressives over the course that Japanese diplomacy should follow led to two paradoxical consequences. First, it deprived Japanese policy-makers of an important domestic lever to use in negotiations with Washington. Second, the way the controversy evolved contributed to the erosion of whatever viable vision and schemes associated with the idealism of the progressives remained available. On their part, the progressives advocated total peace, opposition to the US–Japan Security Treaty, no involvement or participation in the Cold War confrontation, unarmed neutrality and adherence to Article 9 of the constitution and the principles and ideals represented by the constitution.7 The conservatives, in contrast, advocated partial peace, support for the US–Japan Security Treaty, alliance with the US and the Western bloc, maintenance of Japan–US relations as the key component of Japanese diplomacy and revision of Article 9 of the constitution. In the midst of these two opposing courses for Japanese diplomacy, both the hard realities created by the Cold War tensions and Japan’s rapid economic growth in the 1960s favoured the realists’ arguments. The so-called realists in Japanese academic circles argued that the course of diplomacy pursued by the Yoshida government was ‘realistic’ and sound. They asserted that the US–Japan Security Treaty guaranteed Japanese security through the presence of US bases in Japan. At the same time, they devoted their energy to trashing the progressives’ alternative course as too ‘idealistic’ and lacking in ‘realism’ (Toyoshita 1999: 28). The realists’ high praise of Yoshida’s diplomacy, however, obscures the problems and negative legacies of his Asian diplomacy discussed above. Moreover, the

60 Kan Hideki two opposing sides pursued their debates in such a way that the course of action advocated by the progressives appeared too idealistic. One of the serious consequences was that the realism of idealism was brushed aside, depriving Japanese diplomacy not only of its flexibility and manoeuvreability but also of its ideational basis. The result can be seen in public opinion polls, which show that those who opposed the US–Japan Security Treaty steadily declined in number.8 The decline in the influence of those opposed to the US–Japan Security Treaty meant that Japanese policy-makers lost an important domestic lever (an important diplomatic card to play) to use in negotiations with the US when the latter kept up constant pressures on Japan to increase its defence capability as well as to expand Japan’s security role in East Asia. What is more significant, the popular acceptance of the Yoshida Doctrine paved the way for the gradual erosion of the ideational basis that had been associated with the idealism of the progressives. These paradoxical consequences of the postwar security discourse between the conservatives and the progressives also militated against Japan’s search for a more independent foreign policy vis-à-vis Washington in the post-Cold War world.

The redefinition of the US–Japan Security Treaty: Japan’s lost opportunity and the US’s global and regional hegemony The process of redefining the US–Japan Security Treaty presented opportunities for both Japan and the US. For Japan it was an opportunity to restore more independence in foreign policy whereas, for the US, it was a chance to make the security treaty more effective from the US point of view. The process that began in November 1994 was necessary in order to meet the changing international security environment. One of the most important reasons for the US government to initiate this process was in order to integrate Japan more firmly into the US’s postCold War East Asian security strategy at a time when the Japan–US relationship seemed to be drifting under the impact of the ending of the Cold War. The Clinton administration’s thinking and rationale behind this redefinition process ran something like this: the Pacific Rim was the key to America’s domestic economic renewal that President Clinton had set as his administration’s top policy priority. The continued economic growth of East Asia depended on the region’s peace and stability, but the post-Cold War security environment was perceived to be unstable. Security challenges came from two directions. First, the region’s peace and stability were likely to be threatened by internal disorder and armed conflicts caused by ethnic, religious, or historical rivalries. Second, how to deal with the rising power of China, including the Taiwan question, would also seriously affect the peace and stability of the region. Under such circumstances, the US–Japan Security Treaty was still viewed as the linchpin for US hegemony in East Asia, and Japan would have to play a larger security role in the existing Japan–US security framework in order to make the alliance more effective. The redefinition of the security relationship also reflected both the declining economic position of the US at that time and an attempt by Washington to use more and

Japan–US relations in the postwar years 61 more of the resources of other countries to make up for the US’s own shrinking sources of military expenditures to maintain its hegemony in world affairs (Kan 1999: 50–82). The pattern of behaviour that had characterized the postwar Japan–US relationship was repeated here. Washington initiated this process and succeeded in integrating Japan into its Asian strategy. The Administration’s goals were clearly articulated in terms of the ‘Washington consensus’ based on a neo-liberal ideology. The first component of the new national strategy was prosperity, or more concretely the opening of East Asia’s markets for US goods and services under the banner of market efficiency, and trade and investment liberalization. The second component was the US’s continued security engagement with Asia, which was provided by the US military presence and bilateral alliances, and new regional security consultation and cooperation. The third component was the support for democracy and human rights. These goals in turn clearly reflected the kind of international order that the US governments had continued to pursue since the turn of the twentieth century, namely, the construction of a liberal international order now referred to as disciplinary neo-liberalism. Japan was expected to promote these goals through the newly defined US–Japan Security Treaty commitments. Once again, Japanese government officials largely reacted to these US initiatives without delineating Japan’s own vision of a future East Asian international order and without delineating a strategy to pursue based on its own vision. On the US side, the Clinton administration first completed ‘A National Security Strategy of Engagement and Enlargement’ in February 1995 in which it outlined the US’s global strategy. In the same month, the Office of International Security Affairs (Department of Defense) completed ‘United States Security Strategy for the East Asia-Pacific Region’, the so-called third East Asian Strategy Report (the Nye report). Following the announcement of US goals and strategy, the Japanese government set out to prepare for the new ‘Outline of National Defense Programme’, which was approved by the Hashimoto cabinet in November 1995. The new outline made it clear that it would place more stress on ‘regional contingencies’ rather than the defence of Japan proper. In April 1996, the US–Japan Joint Declaration on Security was issued during President Clinton’s visit to Japan. In the Joint Declaration, both Hashimoto and Clinton agreed to conduct a review of the 1978 Guidelines for US–Japan Defence Cooperation in order to update the alliance and enhance bilateral defence cooperation. The September 1997 release of the revised Defence Guidelines marked a new era in Japan–US relations and regional security because it provided the basis for more effective bilateral cooperation during a regional crisis. Japan has decided on a more definitive role (rear area support for US forces at times of a regional contingency) in responding to ‘situations in areas surrounding Japan’ that affects Japan’s peace and security. The expression ‘situations in areas surrounding Japan’ embodied in the revised Guidelines is explained as ‘not geographical but situational’ so that the Japanese government can avoid the complications arising from answering the question of whether or not the concept includes the Taiwan straits.

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Throughout this whole process of defining ‘situations in areas surrounding Japan’ Japanese officials and politicians willingly responded to the US initiatives for their own purpose. That being said, they nevertheless defined Japan’s national interest in a purely reactive and restricted way. They did not necessarily have their own stated goals and the strategy to pursue them in the face of those of the US government. What they did was to simply gain as much as possible out of the various demands that the US made in terms of its own goals and strategy. One of the important consequences of the redefinition process has been the change in Chinese perception of the US–Japan Security Treaty. Until the end of the Cold War, China valued its role as a counter to Soviet influence in East Asia. It also appreciated the alliance’s role in capping Japanese military options and ambitions. Faced with the stronger, more effective alliance envisioned in the 1997 Defence Guidelines, China has now become more suspicious of the bilateral alliance and has made it clear that Taiwan should be explicitly excluded from the definition of the expression ‘situations in areas surrounding Japan’. Washington and Tokyo were deliberately ambiguous regarding Taiwan coverage in this definition. The guidelines mention ‘situations’, not geographic areas. With China remaining unconvinced, this issue continues as a thorn in the side of US–Japan–China relations. Furthermore, from the US point of view, the bilateral security treaty is an important leverage to manage and control China so that it respects and follows the rules of the game laid down by the US. The issue of Japan’s role in Theatre Missile Defence (TMD) has further complicated the situation, adding to the difficulties faced by the Japanese government. It has increased Chinese fears that their joint role in TMD would further strengthen bilateral collaborative efforts against China. Situations may arise where simply following such a US strategy will not serve Japan’s own interests. Hence, Japanese diplomacy now faces a particularly complicated task – how to adjust to potential conflicts of interest between US expectations and China’s reactions.

Globalization and the second US postwar reconstruction of liberal international relations Since the beginning of the twentieth century, the US has attempted to lead the world in order to organize international relations along the lines of liberal norms and principles. At the core of this reformist impulse or America’s mission in the world has been the persistent belief amongst the American people that their struggle for liberty and progress depended on whether the ideals expressed in the American Revolution would be accepted by the outside world. Gardner, for instance, has noted that the characteristic pattern of thinking amongst Americans is one where domestic order is inseparably linked to international order and that the latter must be reformed within the framework of liberal international relations. President Woodrow Wilson believed that the survival of democratic institutions and values at home would depend upon their adoption abroad. Wilson’s conviction was also shared by his successors. Franklin Roosevelt, for example, decided to fight the Axis powers out of fear that the US might become the lone

Japan–US relations in the postwar years 63 liberal capitalist nation in a world dominated by Nazism and Communism (Gardner 1984: 27; Gardner 1993: 63, 74 –5). His decision to aid the Soviet Union in 1941 as well as to work with Joseph Stalin explains his vision of the postwar world in which the Soviet Union would play a supporting role in America’s quest for a new international order. Likewise, the Cold War can be explained as the struggle between Moscow and Washington to create two different international orders. From the American point of view, the Soviet Union’s domination of Eastern Europe was perceived as a challenge to the US’s vision of a postwar world that was to be built on the liberal principles and norms as expressed in the Atlantic Charter. In a fundamental sense, the US is now engaged in the second reconstruction after the first postwar reconstruction ended up in the Soviet– American confrontation. It is important to note, in this context, that democracy is not an inherent feature of the liberal state. In other words, states can be liberal but not democratic. The insight that democratic practice is not an inherent feature of the liberal state indicates that the postwar liberal order in which the US played a decisive role in its creation incorporated illiberal elements such as Rafael Trujillo’s Dominican Republic, Park Chung Hee’s South Korea and Ferdinand E. Marcos’s Philippines. Also, during much of the postwar era, Latin American states governed by authoritarian regimes have had market economies and have participated in international economic exchange. On the death of Trujillo, long-time dictator of the Dominican Republic, President John F. Kennedy is reported to have admitted: ‘There are three possibilities in descending order of preference: a decent democratic regime, a continuation of the Trujillo regime, or a Castro regime. We ought to aim at the first, but we really can’t renounce the second until we are sure we can avoid the third’ (cited in Smith 1994: 226). Kennedy’s remark goes to the very heart of the nature of the postwar liberal international order under American hegemony. More recently, the Clinton administration’s policy of integrating China into the network of liberal economic exchange illustrates the US effort to redefine the boundaries of liberal international relations. On 10 July 2001 both Washington and Beijing agreed on the terms of China’s entry into the World Trade Organization (WTO). This fact points to the clear possibility that the American-organized liberal international order may be able to accommodate even the authoritarian system of China through the liberal domain of international economic exchange. Such a strategy is based upon the assumption that the integration of China into liberal economic relations would help to make more viable other domains of liberalism, especially individual and group rights, self-determination and liberal governance. One may recall that the US attempted to incorporate the Soviet Union into liberal international relations in the immediate postwar years. However, when Moscow eventually rejected the offer of loans as well as Marshall Plan aid, Washington decided to keep the Soviet Union out of the orbit of liberal relations. In this sense, Washington’s China policy as part of the post-Cold War liberal project is an attempt at a second postwar reconstruction after the first experiment to integrate the Soviet Union into the network of liberal international relations failed in the postwar reconstruction process (Kan 2002: 25–34). This US project

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to integrate China into liberal international relations continues under the new Bush administration. So the next question is how well these three countries will manage their relations with one another. The dynamism of trilateral relations will influence the nature of international order-making in an important way. Thus, in the following section, we will examine the post-Cold War trends in Sino-Japan relations as well as the impact of changes in US–China relations on Japan.

Bilateralism, trilateralism and the need for multilateralism One of the important new trends between Japan and China is that Chinese and Japanese competitive impulses are looming again as an important factor in their relationship. The notable change in Sino-Japanese relations occurred in the mid1990s. Beijing’s refusal in 1994 and 1995 to heed requests by three successive Japanese prime ministers to halt nuclear testing before the conclusion of the Comprehensive Test Ban Treaty (CTBT), China’s firing of missiles near Taiwan in 1995 and 1996, and China’s growing reassertion of sovereign rights over the Senkaku islands following the establishment of China’s 1992 territorial law – all of these events either disillusioned or alarmed a substantial segment of the Japanese population and policy-making élites. A growing number of Japanese are now less certain about China’s intentions in world affairs. Japan’s attitude towards China, in response, turned tougher, and as a sanction for China’s nuclear tests, the small grant-aid portion of Japan’s Official Development Assistance (ODA) was cut for one year, whilst negotiations on the larger loan package were postponed temporarily. President Jiang Zemin’s poor handling of the wartime history issue and the Taiwan problem during his November 1998 visit to Japan also alienated a broad spectrum of the Japanese public. The Japanese media focused on Jiang’s jawboning and the difficulties with the wartime apology and the Taiwan problem. In stark contrast with the success of South Korean President Kim Dae Jung’s visit, Jiang could not elicit either official remorse or an apology for the Second World War from the Japanese government. Neither did Prime Minister Obuchi Keizo¯ echo the three Taiwan ‘noes’ that President Clinton articulated during his June 1998 visit to Shanghai.9 In the course of the complicated interaction of events affecting Sino-Japanese relations in the mid-1990s and after, the prospect that China would become a real power was registered in the minds of Japanese government officials. This growing concern within Japanese government quarters that China would become more competitive and intractable in the bilateral relationship prompted foreign and defence policy-makers to ask for US reassurances regarding the reliability of the security treaty. It is in this context that we should understand the Nye initiative and the redefinition of the security treaty that finally led to the new guidelines. In essence, Japanese policy-makers were willing to go along with the redefinition of the security treaty as a result of their growing anxiety about China’s intentions as the rising power in East Asia.

Japan–US relations in the postwar years 65 Such Japanese perceptions of China, in turn, tend to reverberate with Chinese views of Japan. On the one hand, Chinese strategic analysts tend to view only the US as China’s peer competitor, with Japan following as a second tier power in the global strategic hierarchy. They also suspect that Japan is opposed to China’s emergence as a great power. Japanese policy-makers and other opinion leaders, on the other hand, believe that Japan’s most difficult foreign affairs challenge is ‘to engage China as an equal on security issues’. It has been reported that during the six rounds of ‘two-plus-two’ security dialogue amongst high-level officials from both the Japanese and Chinese foreign ministries, the Japan Defence Agency ( JDA) and the People’s Liberation Army (PLA) held between 1994 and 1998, the Japanese participants were frustrated with Chinese interest in nothing more than symbolic security dialogue with Japan. Such frustrations were also experienced during the unofficial trilateral dialogue between Japan, the US and China. In these unofficial channels, Chinese participants, all from government-sponsored think tanks, are reported to have shown their lack of eagerness to treat the Japanese as equals (Silver n.d.: 30–1, 49–51; Kunihiro 2000: 48–52).10 The mutual suspicion of the other’s motives and goals have been compounded by China’s wartime experience with Japan, namely, Japan’s nineteenth- and twentieth-century invasions of China, its war crimes and its inability to offer what the Chinese consider a clear apology and a ‘correct’ view of history. As a result, the gap in the mutual perceptions held by both Chinese and Japanese seems to be growing rather than diminishing. According to polls conducted in September 1997, for example, Chinese displayed strongly negative views of the wartime history issue and the compensations for Japan’s wartime atrocities and damages. Eighty-six per cent of Chinese said that wartime compensation was unsatisfactory and only 4 per cent said it was satisfactory. Their historically rooted and visceral distrust of Japan also reflects on their negative assessment of Japanese pacifist sentiment. Indeed, many Chinese think that Japan may soon expand its defensive forces into offensive capabilities. The same poll shows that, when asked to list the country that they regarded as militarily threatening, the US was ranked first at 54 per cent, followed by Japan at 21 per cent and Russia at 3 per cent. The public opinion poll conducted during October and November 2000 also registered a similar trend with the US ranked first (registering 63 per cent of respondents), followed by Japan at 12 per cent (Asahi Shinbun, 22 September 1997; Asahi So¯ ken Repo¯to, 148, February 2001: 164).11 Absent the Japanese government’s sincere effort to overcome the wartime history issue, it will be extremely difficult for Japan to play a larger political and security role in East Asia for a number of reasons. First, the issue involves one of the key elements of power, soft power. Already burdened with the constitutional restraints upon the exercise of military means, the low credibility and prestige of Japan in Asia deprives Japanese diplomacy of its most needed instrument defined as soft power. Second, without coming to terms with East Asian countries over the wartime history issue, Japan will not be able to play an important role in establishing a workable multilateral political space in the region. This is the challenge Japan faces today and one of the main reasons for its inability to be more independent of the US.

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Turning to US–China relations, there are issues that affect East Asia ordermaking in an important way: non-proliferation, TMD, human rights, economic frictions and the Taiwan question. Of these, Taiwan is the most difficult and sensitive issue between the US and China. Washington has demanded a pledge of ‘no use of force’ from Beijing whilst China has demanded ‘non-interference’ assurances from the US. The modus operandi solution worked out between the two countries is that the Taiwan issue would be settled peacefully between China and Taiwan, whilst both sides keep their strategic options open. Japan has so far taken the position of non-involvement in this complicated, contentious issue and should continue to do so. Instead, Japan should work harder to make the existing Sino-Japanese security dialogue more substantial through finding common ground on such issues as wartime history, energy and the environment. Moreover, the bilateral security dialogue could be further promoted if Japan took a more independent policy vis-à-vis Washington on a case-by-case basis. There are signs of policy divergence between the two countries under the impact of the Bush administration’s unilateralism. In early November 2001, the United Nations (UN) General Assembly’s Disarmament and International Security Committee adopted a resolution proposed by Japan to eliminate nuclear weapons. The Japanese proposal stressed the importance of signing and ratifying the CTBT without delay or conditions so that it can soon take effect but deleted the 2003 target date for the CTBT to take effect as a concession to the Bush administration. Nevertheless, the Bush administration, which wants to kill off CTBT negotiations, for the first time since 1994, opposed Japan’s stand. President Bush also unilaterally decided to withdraw from the Kyoto Protocol. The Japanese government, in contrast, has not only signed it but also made clear its intentions to ratify it soon. Likewise, Japanese diplomacy could pursue a more independent course in the face of the Bush administration’s unilateral actions, such as the decision to temporarily back off from confidence-building talks with North Korea; withhold support on efforts to complete a limitation treaty on biological weapons, an international ban on land mines and a small-arms control pact; repudiate the Clinton administration’s decision to sign an accord to establish an international criminal court; and withdraw in December 2001 from the 1972 Anti-Ballistic Missile Treaty (ABMT) to which both Russia and China are opposed.12 So far, the trilateral dialogue between Washington, Tokyo and Beijing has been unofficial. It is said that the dialogue tends to be Americans and Japanese versus Chinese. From a US perspective, Japan is an ally and a country sharing common interests and values, whilst China is neither. This is more or less true from a Japanese perspective. From a Chinese perspective, however, this is enough reason to be reluctant to treat the Japanese participants as equal or to exclude Japan from strategic talks. Given the past experiences with the complicated dynamism produced by such trilateral interaction, the search for more independence in Japanese foreign policy vis-à-vis Washington is desirable but it also poses a particularly difficult dilemma for Japanese policy-makers. On the one hand, the maintenance of close relations and cooperation between the Japan and US is justifiably the foundation for

Japan–US relations in the postwar years 67 Japan’s diplomacy. On the other hand, however, the strengthening of the Japan–US alliance as embodied in the process of redefining the security treaty reminds the Chinese leadership of the old spectre of the Soviet–American superpower condominium in the détente years. The present international context is different from that of the 1970s, of course, but they remain suspicious that both Japan and the US are collaborating with each other in order to contain or control the rising power of China, whilst at the same time making efforts to integrate China into a predominantly liberal international order. It should be recalled here that China’s vision of an emerging East Asian international order is that of the US being the only superpower with four other centres of power ( Japan, China, Russia and the EU) on a second-tier competing with each other (Takagi 2000: 4 –21).13 Hopefully and ideally, the Chinese leadership wants to change the existing configuration of power into a more multipolar world. China’s talk of a strategic partnership with Washington or Moscow is just such an expression of Chinese expectations that the US should be treated in East Asia as an equal strategic partner like the other powers. The problem with such a world view presumably predominant today amongst the political leaders and strategic thinkers in China is that it is hard to predict at this stage what kind of power China is going to be or what kind of role China is going to play in the future. A public opinion poll of late 2000 showed a growing wariness of China in both the Japan and US. When asked which country would be most influential in Asia in the next ten years, 47 per cent of Japanese picked China, far ahead of the US at 14 per cent or Japan at 8 per cent. Asked which country would be militarily most threatening, 38 per cent of Americans picked China, ahead of Russia at 21 per cent, whilst 63 per cent of Chinese picked the US, ahead of Japan at 12 per cent. On the other hand, Japanese opinion was more ambiguous over whether China would or would not be a threat. Not quite half, at 44 per cent, picked North Korea, far ahead of the US at 13 per cent and both China and Russia at 9 per cent. In an earlier poll taken in 1998, however, Japanese opinion was divided on this question, with 41 per cent of Japanese regarding China as a peaceful country interested primarily in economic growth, and 38 per cent viewing China as an expansionist military power (Asahi So¯ ken Repo¯ to, 148, February 2001: 164, 179).14 Reflecting a growing wariness of China, especially in the US, Washington policymakers have made it clear that the Japan–US security alliance is the linchpin of the US’s presence in East Asia in the post-Cold War years. The Defense Department’s November 1998 strategy report reiterated this position. What is notable about this report is that no mention was made of the new goal of a ‘constructive strategic partnership’ with China that was announced during President Clinton’s June 1998 visit to China. The report instead referred only to the government’s policy of ‘long-term and comprehensive engagement’ with China. Moreover, the same report referred to the US desire for a ‘stable, secure, open, prosperous and peaceful’ China that replaced the previous iterations seeking a ‘stable, prosperous’ China (US Department of Defense 1998: 11, 17; White House 1997: 23). The subtle change in the language of the recent reports stressing ‘peaceful’ China indicates

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the anxiety policy-makers feel over China’s future orientation and shows that the US government is uncertain about how a ‘strategic partnership’ between the two countries can fit into the overall US strategy in East Asia. At least before the terrorist attacks of September 11, President Bush preferred to call the relationship with China a ‘competitive partnership’ rather than his predecessor’s ‘strategic partnership’. Successive Japanese governments have gone along with the US strategy in East Asia by strengthening the alliance. However, it is important to bear in mind the ambiguity of Washington’s ‘engagement’ strategy with China as well as the growing popular wariness of China amongst the American public. Japan should also factor in Chinese concerns about America’s hegemonic ambitions in this region as well as their worst nightmare that the strengthening of the alliance and other defence ties, such as joint research activities on TMD, will lead to bilateral collaboration to contain or control the rising power of China in this region. On various occasions, the Chinese leadership has expressed or hinted at such concerns during the redefinition process. In addition, the TMD issue is even more serious from a Chinese perspective in its implications for China’s security and its relations with Taiwan (Perry 2000: 16–17; Manning 2000: 44 –5; Asahi Shinbun, 27 October 2000 and 24 March 2001). What makes the matter more complicated for Japanese diplomacy is China’s own strategic calculations. That is to say, Chinese policy-makers seem to think that China can gain strategically by pitting the US against Japan whenever such opportunities arise. The Chinese understanding of the concept of ‘strategic partnership’ with the US can be seen in this light. So can China’s effort to forge a strategic partnership with Russia. In this sense, the Chinese government’s strategic calculation is that the more independent foreign policy Japan pursues vis-à-vis the US, the better. Japan’s search for a more independent foreign policy is indeed not without problems and pitfalls. Japan is required to steer between Scylla and Charybdis in the delicate situation created by the trilateral relationship. Japan has to pursue a more independent policy without being trapped into China’s strategic manipulations of benefiting from any divisions between Japan and the US. Notwithstanding the difficulties, Japan’s search for a more independent foreign policy vis-à-vis the US is necessary and justified. Public opinion polls conducted in the spring of 1999 substantiate this. When asked whether or not the Japanese government fully explained Japan’s position or thinking to the US government, 59 per cent of the pollees replied in the negative. Only 3 per cent thought the Japanese government fully conveyed its position to the US side (Asahi Shinbun, 13 April 1999). The above analysis of the trilateral relationship and the past experience of unofficial trilateral dialogues, however useful they may be, show that there are limits to trilateral efforts in promoting stability and peace in East Asia. Hence, the need for more multilateral efforts such as strengthening confidence-building measures through the existing multilateral arrangements and institutions. Not only should Washington and Tokyo think more trilaterally in their approaches to China, but also they should promote and reinforce multilateral confidence-building

Japan–US relations in the postwar years 69 measures and preventive diplomacy through the Association of Southeast Asian Nations (ASEAN), the ASEAN Regional Forum (ARF) and the Asia Pacific Economic Cooperation (APEC) forum. Multilateralism is also a key to opening the door for a more successful independent foreign policy for Japan, without which it cannot be expected to make its own distinct contribution to order-making in the region.

American unilateralism and the September 11 attacks There were signs before the September 11 terrorist attacks that the new Republican administration under President Bush was shifting its foreign policy from multilateralism to more independence or unilateralism. Administration officials in charge of foreign and defence policies emphasized the need to pursue the US national interest rather than balance between the national interest and the interest of the international community. Writing in a recent issue of Foreign Affairs, Condoleezza Rice, National Security Advisor, clearly rejected the Wilsonian tradition of American foreign policy. She argued that humanitarian interests or the interests of the international community could not serve as the criteria for US foreign policy. Instead, she stressed, the criterion must be the promotion of the national interest. Moreover, the Bush administration’s view of international relations is strongly geo-political. Its approach reflects the diplomacy of Theodore Roosevelt as opposed to that of Woodrow Wilson. From the perspective of most of the officials in the Bush administration, China is regarded as a possible future rival for the US, and the emergence of any hostile hegemon in the region must be forestalled, most effectively through closer alliance ties with Japan (Rice 2000). The Bush administration has also made it clear that it would shift the focus of its Asian diplomacy from the ambiguous stance towards Japan and China, as seen during the Clinton administration, towards Japan. A bipartisan study group criticized President Clinton’s ‘principal’ focus on ‘the bilateral relationship with China’, arguing instead that ‘the US–Japan bilateral relationship was more important than ever’ and that Japan ‘remains the keystone of the US involvement in Asia’. Richard L. Armitage, Deputy Secretary of State, James A. Kelley, Assistant Secretary of State for Asia-Pacific Affairs and Paul D. Wolfowitz, Deputy Secretary of Defense, each played a major role in drafting the report (the so-called Armitage Report) of the bipartisan study group (INSS Special Report 2000: 1). President Bush himself has reiterated this shift in his remarks and speeches. In this context, the Bush administration’s Asian policy was expected to get tougher towards China and more demanding towards Japan. Indeed, President Bush’s foreign policy advisors and high-ranking officials can be expected to more frequently prod Japan to increase its burden-sharing and coordination of strategies, though this can be expected to be done more quietly and behind the scenes rather than in a theatrical manner. Most importantly, lifting Japan’s prohibition on collective self-defence would be one of the most important agenda for the Bush administration. Wolfowitz later confirmed this in an interview with a Japanese reporter (INSS Special Report 2000: 2–4).15

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Many argue that the terrorist attacks will sooner or later force the Bush administration to shift its foreign policy approach from unilateralism to multilateralism. However, it is premature to claim that such a change is taking place in the Bush administration’s foreign policy. His basic policy stance towards many important issues remains unaffected: the Kyoto Protocol, the CTBT, TMD and an inspection system concerning the treaty on biological and chemical weapons. In December 2001 and again in February 2002, he went ahead with sub-critical testing for nuclear weapons development, thus continuing to undermine the CTBT. Later that month, he unilaterally announced the decision to withdraw from the ABMT against the protests not only of Russia and China but also of EU members. Nowhere was such unilateralism more vividly demonstrated than by the president’s decision to base the US ‘war on terrorism’ on the right of self-defence and not to seek a UN Security Council Resolution specifically approving the military actions against Afghanistan. In essence, the Bush administration is simply mobilizing other governments to support the decisions unilaterally made by the US. Thus, it is more accurate to say that the administration’s search for unilateralism in US foreign policy still continues. The Japanese government, on the other hand, keenly felt the need to prove itself a loyal ally of Washington. Okamoto Yukio, a former MOFA bureaucrat, now serving as the head of the diplomatic policy team set up under Prime Minister Koizumi Junichiro¯, explained what motivated Prime Minister Koizumi to move quickly to support the US efforts to fight terrorism: ‘For Americans who remembered the Japanese response at the time of the Persian Gulf War, even a simple cautious statement by Japan will lead them to think “not again?” ’ He further noted that ‘the déjà vu being felt by Americans was even more severe’ (International Herald Tribune and Asahi Shinbun, 19 September 2001). The Japanese experience in the Gulf War also left bitter memories amongst Japanese politicians and bureaucrats. Although the government provided US$ 13 billion to American and allied operations against Iraq the US did not think much of the Japanese contribution. Since that time ‘never again’ has become a buzzword for them. In order to provide logistical support for the US campaign against Afghanistan, therefore, the Koizumi cabinet rushed to push through the Anti-Terrorism Special Measures Bill in the Diet. The bill passed the Diet on 30 November after only ten hours of deliberations. It allows the SDF to operate in non-combat areas, provide fuel and supplies, transport weapons and ammunition by sea (but not over land), provide medical care to wounded soldiers and help refugees. It also liberalized the guidelines on the use of weapons by SDF troops. Hitherto, because Article 9 of the constitution prohibited the use of weapons as means of settling international disputes, the use of weapons was strictly limited, only being allowed for self-preservation. According to the new law, the protection of all individuals who come under the control of the SDF is regarded as an exercise of the right of self-preservation. The bill’s passage marks a turning point in Japan’s national security policy as, for first time since the peace constitution came into effect in 1947, the way is now open for the deployment of SDF personnel overseas during active hostilities.

Japan–US relations in the postwar years 71 The existing legislation, including the law for military emergencies in areas surrounding Japan that was passed in November 2000, had a geographical restriction, limiting the activities of the SDF to military emergencies in the area surrounding Japan. But the Anti-Terrorism Special Measures Law allows the SDF to go farther to the Indian Ocean. As Article 9 does not recognize the use of force other than to defend Japan itself, the only rationale short of violating Article 9 is that any SDF activities listed in the law will have to be conducted in a non-combat zone and that the law is restricted to the measures related to fighting terrorism. However, making a clear distinction between a combat zone and a non-combat zone can be often impossible in practice. The same holds for the distinction between what constitutes terrorism and what does not. This law, therefore, seriously weakens the traditional interpretation of Article 9 that the use of force is prohibited other than to defend Japan itself. The Koizumi government’s challenge to Article 9 has become even clearer in the wake of the reform of the UN Peacekeeping Cooperation Law on 7 December 2001. The reformed law not only liberalized the guidelines on the use of weapons by SDF troops but also ‘unfroze’ the SDF’s peacekeeping force activities (as opposed to the non-military activities of peacekeeping operations) that had been suspended. In order to counter the criticism that the activities of SDF troops in a foreign country were unconstitutional, the government explained that the AntiTerrorism Special Measures Law was to fight terrorism and was entirely different in purpose to the US–Japan Security Treaty. It argued that, therefore, the new law had nothing to do with Article 9 or Japan’s right to participate in collective selfdefence. But the likes of SDF activities, it should be noted, were included in the amended UN Peacekeeping Cooperation Law, which is also entirely different in purpose from the anti-terrorism law. The government’s intention is apparently to make both the anti-terrorism law and the amended peacekeeping law a steppingstone to make way for the revision of Article 9 or to change the whole interpretation of Article 9 so as to allow Japan’s participation in collective self-defence. It clearly reflects the US’s keen interest in Japan participating in such arrangements. The government’s intention was also revealed when law-makers and government officials debated whether to deploy the Aegis guided-missile destroyer to escort refueling ships to be dispatched to the Indian Ocean. The Maritime SelfDefence Forces (MSDF) Aegis destroyers could not only perform the refueling role but also provide US forces with information gathered with highly advanced on-board radar systems. Provision of information to US forces fighting the Taliban in Afghanistan could result in the use of force (an exercise of Japan’s collective self-defence) that is prohibited by the constitution. In order to avoid the complications arising from the despatch of Aegis destroyers, the government finally stopped short of their despatch. As Yanai Shunji, the Japanese Ambassador to the US, said, Japan was ‘being asked to give a sign that we stand with the United States as a trustworthy ally at this time’ (International Herald Tribune and Asahi Shinbun, 20 September 2001). The Koizumi administration did choose to provide tangible assistance to the US campaign against the Taliban rather than the intended despatch of Aegis destroyers. But the fact that certain elements in and outside of

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the government sought to despatch Aegis destroyers shows that they attempted to use their despatch as a lever to revise Article 9 or change its interpretation to allow Japan’s exercise of collective self-defence. ‘Either you are with us’, President Bush said in his 20 September 2001 speech to Congress, ‘or you are with the terrorists’. Asked to define his meaning further, a senior White House official said: ‘We need not only to eliminate the terrorists and their networks, but also those who harbor them’ (International Herald Tribune and Asahi Shinbun, 17 October 2001). This is the essence of what President Bush himself calls the ‘Bush Doctrine’. His description of the world as divided between good and evil as well as his intention that the US will act as the unilateral judge of whether a country is supporting terrorism is typical of this administration’s foreign policy behaviour, namely, unilateralism. Based upon this new doctrine, Washington expected Japan to ‘show the flag’. Once again, Japanese officials and policy-makers placed priority on living up to Washington’s expectations. Prime Minister Koizumi pledged during his visit to Washington that Japan would ‘stand by the United States to fight terrorists’. He also told President Bush that he would help try to choke financial channels used by the terrorist groups. In response, President Bush praised Tokyo’s decision to offer US$ 40 million in emergency economic assistance to Pakistan. In addition, the three MSDF ships were hurriedly sent off to the Indian Ocean on the questionable legal grounds of their engaging in ‘investigation and research’ under the provisions of the JDA Establishment Law, even before the approval of a basic plan for deployment that the proposed anti-terrorism law postulated. Throughout the months that followed the September 11 attacks, however, the Japanese government, especially under initiatives from MOFA and JDA, attempted to do more than what Washington had meant by ‘showing the flag’. Bush administration’s officials, including the president, indicated that the US did not need any military assistance from Japan in the campaign against Afghanistan. President Bush, for example, told Prime Minister Koizumi on his visit to Washington that Japan’s value as an ally would not be diminished because of constitutional limits on the use of force by the SDF (International Herald Tribune and Asahi Shinbun, 27 September 2001). Nevertheless, the Japanese government made strenuous efforts to despatch SDF troops and ships, including the abortive attempt to despatch the Aegis destroyers to the Indian Ocean.

Implications for an East Asian order The concept of ‘just war’ has begun to reappear as a major political discourse in the US in the wake of the Gulf War. Washington’s renewed interest in the concept at that time reflected the US search for a ‘new world order’ after the end of the Cold War. Even though former President George W. Bush failed to give substance to his vision, the US search for a new world order has continued since then, out of which a new form of order-making has emerged. Hardt and Negri noted that ‘war is reduced to the status of police action’ (Hardt and Negri 2000: 12). Not only is military intervention often dictated unilaterally by the US but also the

Japan–US relations in the postwar years 73 enemies are often called ‘terrorists’. In this US project of order-making, the enemy is reduced to an object of routine police action, whilst, at the same time, it is characterized as evil and morally condemned as a serious threat to the world order. The US not only leads this police action with its allies and coalition partners but also justifies it as being in the service of justice and peace. In other words, US policy-makers have attempted to legitimize the right of this police action by an appeal to universal values, and through the manipulation of the mass media. However, it is open to question whether the kind of world order that the Bush administration would like to maintain is legitimate in the eyes of non-Americans. First, it is widely viewed that the Bush administration’s foreign policy is unilateral and does not take into account the interests of other nations. Asked whether the US is taking into account the interests of its partners in the fight against terrorism, 62 per cent of non-Americans thought the US was acting mainly based on its own interests, with Western Europe, Asia and the Middle East registering 66, 65 and 71 per cent respectively. Moreover, a poll of 275 opinion leaders conducted between mid-November and mid-December 2001 by the IHT/Pew Research Center Poll highlights a large gap between the way Americans believe they are seen abroad and the way others see the US. Asked if most ordinary people considered US policies to be a major cause of the September 11 attacks, fewer than one in five Americans said they did. But in the rest of the world, nearly three in five agreed with the statement. Moreover, two-thirds or the majority of the respondents in every region outside of the US said it was ‘good that Americans now know what it is like to be vulnerable’. The polling data concerning US policies which may have contributed to the growing gap between rich and poor indicates that the US effort to create a world order is not viewed favourably by many people in the world. Indeed, 52 per cent of non-Americans mentioned US-led globalization policies as the main reason for their dislike of the US. On the other hand, whilst 43 per cent of Americans shared their view, 40 per cent regarded them as a minor reason for their dislike of the US. Second, in contrast with Americans, non-Americans did not necessarily agree to the method of intervention. Public opinion in Japan was split over the methods of fighting terrorism, with 46 per cent supporting Washington’s action and 43 per cent opposing it. A near majority of 49 per cent of the respondents said the retaliatory strikes would not be effective in eradicating terrorism, compared to 36 per cent who said the attacks would be effective. Although the world community unanimously condemned the September 11 terrorist attacks, it was divided over how to deal with the al Qaeda networks and the Taliban regime. Whilst not a single American respondent believed that the US attacks on Afghanistan would be widely considered as an overreaction, about four in ten non-Americans saw them as such, including six in ten in Islamic countries (International Herald Tribune, 20 December 2001). It is also important to note that there is a tug of war within the Bush administration as to how the US should approach order-making. ‘The liberation of Kuwait wouldn’t have been possible’, wrote Brent Scowcroft, National Security Advisor to former President George Bush, ‘without the development of a strong

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coalition of countries that provided military forces, bases, staging areas, intelligence, isolation of Iraq and strong moral and political support. We are more dependent on friends and allies now than we were in the Gulf crisis’ (International Herald Tribune, 17 October 2001). This view represents that of more moderate, conservative, Republican internationalists who regard international cooperation and multilateralism as important to the US project of order-making. Secretary of State Colin Powell and most of the State Department officials, for example, fear that any move beyond Afghanistan would fracture the international coalition. It is not at all clear, however, that the Bush administration is heeding Scowcroft’s warning against US unilateralism in the anti-terrorist campaign. As shown by President Bush’s State of the Union Address of 29 January 2002, which referred to Iran, Iraq and North Korea as ‘an axis of evil’, the Republican right and hawks remain influential within the administration. The allies and coalition partners of the US are worried about the ongoing debate inside the administration between those led by Deputy Defence Secretary Paul Wolfowitz, reported to be a hawk on the issue of moving the military campaign beyond Afghanistan, and those who agree with Powell, who is more cautious about carrying the campaign to the likes of Iraq, Syria or Ethiopia. President Bush’s ‘an axis of evil’ speech has only increased their worries. The Japanese government is worried, too. There is no indication, however, that the Koizumi government responded to the events after the September 11 attacks with due consideration to these findings and observation. Despite the observation made by the bipartisan report that ‘the search for an independent Japanese identity in foreign affairs is not in conflict with American diplomacy’ (INSS Special Report 2000: 12), the Japanese response to September 11 was characterized by the Gulf War syndrome, prompting the Koizumi cabinet to closely follow the rationale of the Bush Doctrine and provide support for the US anti-terrorism campaign against Afghanistan. The Koizumi government did not question whether the US-led bombing campaign of Afghanistan was appropriate or not. The Koizumi government also moved further away from the postwar Japanese identity as a ‘peaceful nation’, showing more interest in despatching MSDF ships and men beyond Japan’s postwar traditional defence perimeter north of Southeast Asia. Policy-makers and officials seem to entertain the illusion that the Japanese military presence, including that of the US, would enhance Japan’s status and prestige in international society. They seem to be completely oblivious to the fact that the key component of effective Japanese diplomacy remains soft power. Japan is an exceptional country in the sense that the constitution does not recognize the use of force other than to defend Japan itself. It stipulates that the nation will never maintain military forces and denies the right of the belligerency of the state. From such a perspective, Japan’s contribution to order-building in East Asia could best be made through non-military means. But the Koizumi cabinet made the way for further militarization of Japan by liberalizing the guidelines on the use of weapons and enabling the SDF to be dispatched to such a distant country through the passage of the anti-terrorism law and the reformed peacekeeping cooperation law.

Japan–US relations in the postwar years 75 But the Bush Doctrine simplifies the reality so much that it tends to magnify the gap between America’s perception of the world and that of the rest of the world. Japan as an ally can give advice to the Americans when they fall into such a myopic, ethnocentric view of the world. On the other hand, the growing identification of Japanese diplomacy under Koizumi with America’s global policy only erodes the ideational basis for Japan’s role in international society. The more closely Koizumi follows the Bush Doctrine, the more damage Japan’s prestige and position are likely to suffer. Therefore, it is important to recall in discussing the question of order in East Asia that the US–Japan Security Treaty presupposed Japan’s rearmament and was diametrically opposed to the ideals and values expressed in the constitution, particularly Article 9. The Yoshida and subsequent LDP, conservative governments attempted to adjust the contradictions by changing interpretations of the peace provision in order to meet the persistent demands of US Cold War strategy. As a result, postwar Japanese diplomacy vacillated between the dictates of Article 9 and the pressures of US containment policy. Accordingly, Japan’s identity as a ‘peaceful nation’ has become more and more ambiguous, making it difficult for its East Asian neighbours to see clearly in which direction Japan is going to move – a global civilian power or a military power. It should also be recalled that Japanese diplomacy failed to develop fully its soft power, including vision, planning and strategy. Finally, it neglected to create a transnational political space rooted in East Asia as a counterbalance to the Japanese–American space.16 With the Cold War over, the conditions are ripe for working towards becoming a global civilian power that seeks to promote both international and transnational cooperation amongst state and non-state actors in East Asia. From the perspective of a global civilian power, Japan should focus on non-military contributions to world order by pursuing non-military, cooperative, comprehensive security in multilateral frameworks. To that end, Japan should remain militarily nonthreatening to other countries, adhering to the defence policy of senshu¯ bo¯ ei (minimum defence). The idea of ‘minimum defence’ is a strategy to develop a military force structure for the SDF to repel ‘limited and small-scale aggression’ against Japan. It is considered as non-provocative and non-offensive defence. In addition, what Japanese diplomacy needs as a global civilian power is the development of soft power. In this sense, the bottom line is for Japan to come to terms with its East Asian neighbours over the wartime history issue and all the related unresolved problems. The resolution of the issue is the basic requirement of reconciliation between Japan and other East Asian peoples as well as the first step for Japan to acquire trust amongst them. Only then will Japan be able to begin building confidence amongst East Asian countries and will its diplomacy be able to take the initiative towards more multilateral security frameworks in the region. When such efforts towards multilateralism begin to stick, the excessive weight that has been hitherto accorded to the US–Japan Security Treaty will be calibrated down to a more balanced measure, making it one of the important instruments, not the exclusive instrument as it appears to have been so far, for Japanese diplomacy.

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Conclusion The signing of the US–Japan Security Treaty laid the foundation for a skewed relationship between the two countries. Ever since, the search for more autonomy vis-à-vis Washington, though largely unsuccessful so far, has become a central problem for Japanese diplomacy. As has been discussed above, Japan is still searching for an alternative to the dilemma and problems that Yoshida’s choice left for postwar Japan. For those conservative LDP politicians, the security treaty symbolizes the ‘special relationship’ between Japan and the US and they have placed top priority on maintaining the treaty relationship ever since its signing. As a result, they have neglected to create a transnational political space in East Asia. During the Cold War period, they behaved as if they did not have to address the wartime history issue. Moreover, they did not think seriously about the consequences that the contradiction between the requirements of the security treaty and those of Article 9 of the constitution would bring about, thus eroding the domestic political basis for maintaining Japan’s identity as a ‘peaceful nation’. Dependent on the US for national security, they have also neglected to develop Japan’s soft power. The Armitage Report states, ‘we see the special relationship between the United States and Great Britain as a model for the alliance’ (INSS Special Report 2000: 11). Contrary to the expectation of the Japanese people, the Japanese version of the special relationship functioned differently from the British version. Britain had the diplomatic skills and resources to turn the special relationship to its advantage. Above all, it had the ties of the British Commonwealth in dealing with the US. Britain’s position in Europe, where the European countries laboured to create multilateral institutions, such as the EEC, the EU and NATO, also favoured the British government in negotiations with Washington. Japan has had none of those, almost exclusively relying on the Japanese–American political and security space. The fact that postwar Japanese diplomacy was over-reliant on the US reflected Japan’s low visibility in order-making in East Asia. Ironically, the increasing clamour for Japan to make an ‘international contribution’ (kokusai ko¯ken), particularly beginning in the early 1980s and thereafter, is a clear testimony to its lack. For Japan to be able to make a more distinct contribution to order-making in the region, policy-makers need to define its national interest increasingly in terms of human interests and/or international public goods. During the Cold War years, the Japanese national interest tended to be defined largely in terms of the requirements of the US Cold War strategy of containing Moscow, Beijing and international communism. To the extent that Japanese diplomacy followed the US leadership, whatever contribution Japan wanted to make to order-making in East Asia was viewed by other East Asian nations as substantially embodying the collective interest of the US and its allies, rather than as representing a conscious Japanese effort to adjust its own national interest with what could be regarded as international public goods. Thus, if Japan is going to make a more distinct and positive contribution to the East Asian order, it needs to have its own vision and plans as the basis for working out its own international strategy.

Japan–US relations in the postwar years 77 Japanese politics and diplomacy are at a crossroads today. The new defence guidelines have been laid down, paving the way for the SDF to provide rear area support to US forces responding to a regional contingency. This support includes not only providing access to airfields, ports, transportation, logistics and medical support, but also may include cooperating and coordinating with US forces to conduct such missions and functions as minesweeping, search and rescue, surveillance, and inspection of ships to enforce UN sanctions. With the Anti-Terrorism Special Measures Law and the reformed UN Peacekeeping Cooperation Law passed, debate is underway with renewed vigour over constitutional revision targeting Article 9. Voices in favour of allowing Japan to exercise collective self-defence are increasingly assertive within Japan and such voices are also being heard from US quarters.17 Japanese diplomacy has not yet found a way out of the dilemma as well as the problems Yoshida created in the early 1950s. Japanese policy-makers should recall a caveat in an influential report of an independent study group sponsored by the Council on Foreign Relations: the Japan–US alliance ‘should be treated as a means to a security end, not an end in itself ’. Indeed, as the report emphasizes, ‘means and ends should not be confused in the security debate’ (Study Group Report 1998: 6). Postwar Japanese diplomacy generally associated with the Yoshida Doctrine has tended to regard the US–Japan Security Treaty as an end in itself and still does so. Policy-makers should bear in mind that neither will Japan be able to restore independence in its foreign policy nor will Japan–US relations be those of an equal partnership by merely revising Article 9 to allow for the exercise of collective self-defence.

Notes 1 More recently, a strong appeal for a more independent foreign policy for Japan has been made by a group of scholars and journalists in Okinawa. For their arguments, (see Okinawa Mondai Kenkyu¯kai 2001). 2 Shigemitsu-Dulles Talks, second meeting, 30 August 1955. Fujiyama-Dulles Talks, 11 September 1958, Nichibei Gaiko¯ Kankei Zasshu¯n (Miscellaneous papers on US–Japan diplomatic relations), Fujiyama Gaimudaijin Zaikyo¯ Bei Taishi Kaidanroku (Foreign Minister Fujiyama, ambassador’s record of talks in Washington), A’ 11-1-3, Gaiko¯ Shiryo¯kan (Diplomatic Record Office, Japanese Foreign Ministry). 3 Professor Toyoshita Naruhiro has recently challenged the Japanese realists’ high praise of Yoshida’s diplomacy and the Yoshida Doctrine, casting doubt on the achievements and performances of Yoshida’s diplomacy (Toyoshita 1999). 4 Postwar public opinion polls confirm this. Those who supported a policy of ‘unarmed neutrality’ were a minority in postwar Japan, but majorities consistently opposed the revision of Article 9 of the constitution for the sake of rearmament. Those who opposed constitutional amendments for rearmament purposes constituted 42 per cent as opposed to 31 per cent in favour of the revision in January 1953. This trend continued at 52 per cent as opposed to 32 per cent in November 1957 and 61 per cent as opposed to 26 per cent in August 1962. As for the issue of constitutional amendment itself, those who were opposed comprised 31 per cent as opposed to 2 per cent in favour. The ratio widened registering 38 per cent versus 27 per cent in August 1962 and 64 per cent versus 19 per cent in December 1968 (Asahi Shinbun Yoron Cho¯sa Shitsu 1976: 15, 20, 48, 49, 92, 99).

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5 According to the most recent polling data, 74 per cent of pollees were opposed to the amendment of Article 9, compared with 17 per cent who supported its amendment (Asahi So¯ ken Report, 150, 2001: 142). 6 Great Britain recognized Communist China on 6 January 1950 whilst the US refused to recognize it. In the midst of the haggling over the recognition issue between London and Washington, Dulles negotiated a compromise with British Foreign Minister Herbert Morrison on 9 June 1951. According to the Dulles–Morrison understanding, Japan was to determine its own China policy. However, Dulles, to make sure that Japan would recognize Taiwan instead of mainland China, had also drafted the ‘Yoshida letter’ that would commit Yoshida to normalizing relations with Taiwan. Yoshida signed it under a veiled threat from Dulles implying that the pending ratification by the US senate of the peace treaty would be jeopardized without an explicit commitment to recognize Taiwan. 7 One of the most influential proposals for a postwar Japan identified with a ‘peaceful nation’ (heiwa kokka) was offered by the Heiwa Mondai Danwakai (The Peace Issues Discussion Group), a group of influential intellectuals who provided a basis for a critical discourse on the military, security policy and Japan’s postwar identity as a ‘peaceful nation’ in international society. For a discussion of the Group’s activities and its influence on the security discourse in Japan, see Hook 1996: 26–41. For an alternative proposal to the US–Japan Security Treaty, see Sakamoto 1967. Particularly suggestive for this chapter is his proposal for UN police forces composed of non-aligned countries as well as his argument that Japan must be non-threatening to other countries (Sakamoto 1967: 20–3, 27). 8 According to the opinion polls of September 1950, the Japanese respondents in favour of rearmament and those who were opposed to it occupied 54 per cent and 28 per cent respectively. This trend continued during the 1950s but was reversed during the 1960s. Also, those who opposed the strengthening of the SDF began to exceed those who favoured it during the 1960s (Asahi Shinbun Yoron Cho¯sa Shitsu 1976: 21, 25, 62, 92, 97, 99, 110, 117). 9 During his June 1998 visit to China, President Bill Clinton stated, after delivering a speech in Shanghai, that ‘I had a chance to reiterate our Taiwan policy, which is that we don’t support independence for Taiwan, or two Chinas, or one Taiwan – one China. And we don’t believe that Taiwan should be a member in any organization for which statehood is a requirement’ (Clinton 1999: 1095). 10 For his observations based on personal experience, see interview with Kunihiro Michihiko, former Japanese Ambassador to China who was a participant in the trilateral dialogue (Kunihiro 2000: 48–52). 11 On the other hand, China has taken advantage of the wartime history issue for its own purposes. Chinese leaders use the history issue to gain economic concessions from Japan. They were also able to bolster the legitimacy of the Chinese Communist rule by glorifying the party’s role during the anti-Japanese war of the 1930s and 1940s. However, the Japanese reactions to President Jiang’s criticism of Japan over the wartime history issue indicated that the utility of the history tool was diminishing. This was in sharp contrast with the October 1998 visit to Japan of South Korean President Kim Dae Jung who succeeded in issuing a joint statement in which the Japanese government expressed sincere remorse and apology for the wartime and colonial rule in exchange for President Kim’s pledge not to bring up the wartime history issue on a governmental level. 12 According to the most recent multi-country opinion survey of reaction to President Bush’s foreign policy, overwhelming majorities of Europeans described him as a unilateralist, concerned only with US interests (Britain 79 per cent, Italy 74 per cent, Germany 73 per cent and France 85 per cent as opposed to 14, 15, 18 and 8 per cent respectively). Their disapproval rate was especially high on the decisions Bush made on the Kyoto Protocol to reduce greenhouse gas emissions and the missile defence system (International Herald Tribune, 16 August 2001).

Japan–US relations in the postwar years 79 13 For Chinese views of international affairs after the end of the Cold War, see Takagi 2000. Huntington argues that international politics today is ‘uni-multipolar’, with one superpower (the US) and several major powers, which is similar to the Chinese views except that Huntington grouped China as a ‘major regional powers’ at the second level, whilst Japan and Britain are grouped as the ‘secondary regional powers’ at the third level (Huntington 2001: 136–7). 14 The poll data of 1998 are drawn from Silver undated: 21. The poll data printed in Asahi So¯ ken Report, 151, August 2001 show that 85 per cent of Americans felt China was a threat strongly or considerably, with 35 per cent of them listing a military threat, ahead of that of the social system at 22 per cent and an economic threat at 20 per cent. On the other hand, 57 per cent of Chinese felt strongly or considerably that the US was a threat, with 30 per cent believing the US to be a military threat, ahead of an economic threat at 17 per cent and the threat of the social system at 7 per cent (Asahi So¯ ken Report, 151, August 2001: 142, 161). 15 According to the report, the revised Guidelines for US–Japan Defence Cooperation, the basis for joint defence planning, ‘should be regarded as the floor – not the ceiling – for an expanded Japanese role in the transpacific alliance’ (INSS Special Report 2000: 6). 16 The intellectual genealogy of the ideals and values of a ‘peaceful nation’ can be traced up to the present. For this, see Sakamoto 1997, as well as Igarashi 1999: 152–80, 251–68. 17 Robert A. Manning has analysed Japan’s new nationalism and concluded that Japan is ‘more assertive in redefining its role within the alliance, is building an independent defense industrial base and is positioning itself for potential future shocks that could render the US force presence in Japan more problematic, if not the alliance itself ’. In short, ‘Japan is becoming a more normal nation’ (Manning 2001: 81, 83). For views in the US advocating Japan’s need to revise Article 9 see, for example, those of Dr Kim R. Holmes, Vice-President and Director of the Kathryn and Shelby Cullom Davis Institute for International Studies at the Heritage Foundation and Professor Marvin C. Ott of the National War College at the National Defense University (Asahi Shinbun, 27 and 30 August 2001).

References Asahi Shinbun Yoron Cho¯sa Shitsu (1976) Asahi Shinbun Cho¯ sa 30-nen Shi (Thirty-year History of Asahi Shinbun Surveys), Tokyo: Asahi Shinbun Yoron Cho¯sa Shitsu. Brzezinski, Z. (1997) The Grand Chessboard: American Primacy and its Geostrategic Imperatives, New York: Basic Books. Clinton, W. J. (1999) Public Papers of the US Presidents, W. J. Clinton, 1998, I, Washington: US Government Printing Office. Gaimusho¯ Jo¯yakukyoku Ho¯kika (1968) Heiwa Jo¯ yaku no Teiketsu ni kansuru Cho¯ sho III (Documents relating to the Conclusion of the Peace Treaty III), Tokyo: Nihon Gaiko¯ Shiryo¯kan. Gardner, L. (1984) A Covenant with Power: America and World Order from Wilson to Reagan, London: Macmillan. —— (1993) Spheres of Influence: The Great Powers Partition Europe from Munich to Yalta, Chicago: Ivan R. Dee. Hardt, M. and Negri, A. (2000) Empire, Cambridge: Harvard University Press. Hook, G. D. (1996) Militarization and Demilitarization in Contemporary Japan, London: Routledge. Huntington, S. (2001) ‘Japan’s role in global politics’, International Relations of the Asia-Pacific, 1(1): 131–42.

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Igarashi, T. (1999) Nichibei Kankei to Higashi Ajia (US–Japan relations and East Asia), Tokyo: Tokyo University Press. INSS Special Report (2000) The United States and Japan: Advancing Towards a Mature Partnership, 11 October, Institute for National Strategic Studies, Washington: National Defense University. Kan, H. (1999) ‘Nihon no yakuwari ni kansuru Beikoku no kenkai to Ajia-Taiheiyo¯ no chiikishugi’ (The US view regarding Japan’s role and Asia-Pacific regionalism), in H. Kan, G. Hook and S. Weston (eds), Ajia Taiheiyo¯ no Chiiki Chitsujo to Anzenhosho¯ (Regional Order in Asia-Pacific and Security), Tokyo: Minerva Shobo¯. —— (2002) ‘Liberal nationalism, state sovereignty and the problems of constructing liberal international relations’, comments on Professor Gardner’s paper, ‘Angel in the Whirlwind: the search for independence in American foreign policy’, Proceedings of the Kyoto American Studies Summer Seminar, 26–8 July 2001: 25–34. Ko¯saka, M. (1968) Saisho¯ Yoshida Shigeru (Prime Minister Yoshida Shigeru), Tokyo: Chu¯o¯ Ko¯ronsha. Koseki, S. (1989) Shin Kenpo¯ no Tanjo¯ (The Birth of the New Constitution), Tokyo: Chu¯o¯ Ko¯ronsha. Kunihiro, M. (2000) ‘Nichi-Bei-Chu¯ sangoku kankei wa torakku 2 kara’ (Trilateral relations amongst Japan, US and China: start from track 2), Gaiko¯ F ¯o ramu, 148 (November): 48–52. Manning, R. (2000) ‘Nikyokuka o sakeru tame ni’ (To avoid bipolarization), Gaiko¯ F ¯o ramu, 148 (November): 39–47. —— (2001) ‘The Perils of being number 1: East Asian trends and US policies to 2025’, 16 April. Available on-line at: ⬍http://www.odci.gov/nic/pubs/conference_reports/ ea_current_status.htm#link08⬎, visited on 24 June 2002. Nishimura, K. (1960) Kaitei Shinpan Anzenhosho¯ Ron (Theories on a Newly Revised Edition of the Security [Treaty]), Tokyo: Jiji Tsu¯shinsha. Okinawa Mondai Kenkyu¯kai (2001) ‘21-seiki no Nichibei kankei to Okinawa’ (US–Japan relations in the twenty-first century and Okinawa), Sekai (April): 209–17. Perry, W. J. (2000) ‘Amerika no gunji senryaku no daisho¯’ (A quid pro quo for America’s military strategy), Gaiko¯ F ¯o ramu, 148 (November): 12–18. Rice, C. (2000) ‘Promoting the national interest’, Foreign Affairs, 79(1): 45–62. Sakamoto, Y. (1967) ‘Chu¯ritsu Nippon no bo¯ei ko¯so¯’ (Blueprint for the defence of a neutral Japan), in Y. Sakamoto (ed.), Kaku Jidai no Kokusai Seiji (International Politics in the Nuclear Era), Tokyo: Iwanami Shoten. —— (1997) So¯ taika no Jidai (An Age of Relativity), Tokyo: Iwanami Shoten. Silver, N. (undated) ‘The United States, Japan, and China: setting the course’, Council on Foreign Relations Paper: 1–51. Smith, T. (1994) America’s Mission: The United States and the Worldwide Struggle for Democracy in the Twentieth Century, Princeton, New Jersey: Princeton University Press. Study Group Report (1998) The Tests of War and the Strains of Peace: the US–Japan Security Relationship, Washington: Council on Foreign Relations. Takagi, S. (2000) ‘Datsu reisenki ni okeru Chu¯goku no taigai ninshiki’ (China’s foreign perceptions in the post-Cold War era), in S. Takagi (ed.), Datsu Reisenki no Chu¯goku Gaiko¯ to Ajia-Taiheiyo¯ (China’s Diplomacy and the Asia-Pacific in the post-Cold War Era), Tokyo: Kokusai Mondai Kenkyu¯jo. Tanaka, T. (1993) Nisso Kokko¯ Kaifuku no Shiteki Kenkyu¯ (Historical Research on the Restoration of Diplomatic Relations between Japan and Russia), Tokyo: Yu¯hikaku.

Japan–US relations in the postwar years 81 Toyoshita, N. (1996) Anpo Jo¯ yaku no Seiritsu (Conclusion of the [US–Japan] Security Treaty), Tokyo: Iwanami Shoten. —— (ed.) (1999) Anpo Jo¯ yaku no Ronri (The Logic of the [US-Japan] Security Treaty), Tokyo: Kashiwa Shobo¯. US Department of Defense (1998) The United States Security Strategy for the East Asia-Pacific Region, 23 November. White House (1997) A National Security Strategy for a New Century, May, Washington: US Government Printing Office. Yoshida, S. (1963) Sekai to Nippon (The World and Japan), Tokyo: Bancho Shobo¯.

5

Britain and Germany Defining the European order in the contemporary era Christoph Bluth

Britain and Europe Britain was less prepared for the end of the Cold War than any other member of the Western Alliance. This can be explained partly by the culture of realpolitik in the British approach to foreign policy (Sanders 1990; Clarke 1992). The British government had two central interests. One was the continued stability of Europe. It was understood that a modus vivendi had been achieved on the basis of the territorial status quo backed up by nuclear deterrence, which it would be dangerous to allow to unravel. A collapse of Soviet power could allow all kinds of social and ethnic conflicts to emerge and would render developments in Europe unpredictable. Thus, even after the fall of the Berlin Wall, when the Cold War was effectively over, Prime Minister Margaret Thatcher advocated the continued maintenance of the North Atlantic Treaty Organization (NATO) and the Warsaw Pact. The second British interest was its continuing role in world affairs. As one of the four allied powers from the Second World War responsible for the postwar settlement and with its special relationship with the United States, the Cold War allowed Britain to play a unique role in global politics, or at least appear to do so. German unification and the end of East–West confrontation clearly threatened to assign Britain to a more marginal role in the international system. This explains Britain’s initially ambivalent attitude towards German unification, although the British government soon bowed to the inevitable. The controversy about the future role of Germany must be understood in the context of the political debate about British relations with the European Community (EC) and its attitude to the process of European integration. Former Conservative Prime Minister Edward Heath supported full integration within the framework of the EC. There were, however, many in the British political élite who strictly opposed a federal Europe (or a united Europe) and the associated loss of British sovereignty. Amongst the adherents of this viewpoint were some prominent Conservatives, led by Thatcher, as well as a number of Labour Members of Parliament (MPs). The symbolic battleground was the controversy surrounding the European Monetary System (EMS) and, following on from that, European Economic and Monetary Union (EEMU). The ‘traditionalists’, who seek to restrain the process of European integration, see the special relationship with the US as a counter to the influence

Britain and Germany defining the European order 83 of continental Europe. British relations with Europe were such a contentious issue in the Conservative governments, that it resulted in the resignation of four of the most important cabinet ministers and finally precipitated the fall of Margaret Thatcher herself. Dissension over Europe continued to plague the government of Thatcher’s successor, Prime Minister John Major. Despite its endeavour to project a positive image in its relations with Europe, and Germany in particular, the Major government took an ambivalent position with regard to central issues such as EEMU. Although Major signed the Maastricht Treaty on European Union in December 1991, he negotiated for Britain the option to stay outside some of the central provisions, such as the social charter and monetary union. British policy towards Europe is closely linked to relations with Germany, because the economic power of the Federal Republic of Germany (FRG) gives the latter a particularly significant influence on the economic relations within the European Union (EU). In the event of monetary union this would, in the view of some Conservative politicians, give the FRG an unacceptable influence on the domestic economic policy of Great Britain. The ratification process of the Maastricht Treaty, whilst ultimately successful, was politically extremely bruising for Major. Like other European governments, the British government had to re-evaluate the international situation and its national interests after the collapse of the Cold War system and determine the most appropriate political and military instruments to safeguard national security. This process of adaptation to the new international environment took a long time and remains incomplete. This is partly due to the fact that the new order of the European system of states took some time to emerge after the fall of Communism. In the early years after the collapse of the Soviet Union, the international security environment in Europe remained too unstable to allow for the long-range planning of security policy. The definition of a new grand strategy turned out to be very difficult. This applied in particular to defence policy, resulting in a spectacular decline in defence spending (articulated as Options for Change) without a clear conception of which defence capabilities needed to be preserved and developed. With the end of the fundamental conflict of interests and values between East and West, the future security environment was not defined by a highly militarized confrontation, but by bilateral, subregional and intra-state conflicts of interest. The central task of foreign and security policy was seen to be to construct a panEuropean security system that included Russia and that would be suited to the new international situation. The cautious realism that had always informed British foreign policy meant that the United Kingdom held back from supporting collective security regimes based on the Organization for Security and Cooperation in Europe (OSCE) or the EU. The core of European security in the British view had to remain the transatlantic relationship and the NATO alliance. The Eurocorps created by Germany and France was viewed as a distraction. The UK was firmly committed to the intergovernmental approach to a common foreign and security policy (CFSP) in the EU. It was primarily British opposition that prevented the adoption of a common defence policy whereby defence would

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become the fourth pillar of the EU. It supported the widening of the EU partly in order to prevent the further deepening of European integration. When the Labour Party came to power in 1997, it conducted a strategic review in order to define Britain’s strategic priorities. It concluded that Russia would no longer present a threat to European security. However, it was likely that Britain would continue to be involved in peacekeeping operations. Furthermore, the UK would be involved in joint operations with other allies in other parts of the world. Defence Secretary George Robertson mentioned Europe, North Africa and the Middle East (especially the Persian Gulf region) as areas in which Britain would play a role. Whilst it remained unclear how this new global vision of international security was to be resourced, it signalled a fundamental shift in the conceptual approach. It could best be described as a cautious departure from the realpolitik of the past towards an acceptance of the need for collective security. Essentially, the government led by Prime Minister Tony Blair adopted a cautiously institutionalist approach which it justified in public as the best way of defending the national interest. It was successful in restoring Britain’s role in Europe to a significant extent by playing an important leadership role in developing the CFSP through the Amsterdam Treaty. An even more radical shift occurred in October 1998 when Blair signalled that Britain would no longer oppose military cooperation within the EU provided it took place on an intergovernmental level, was militarily sound and had no negative impact on relations with the US. The events in Kosovo gave further impetus to a British–French initiative announced at Saint Malo in December 1998. The new policy announced at the European Council summit in Cologne on 3 June 1999 amounted to implementing some of the basic elements of a CFSP outlined in the Amsterdam Treaty (Article J7). A new decisionmaking structure was put in place which involves EU defence ministers meeting in the General Affairs Council, a Political and Security Committee and a Military Committee and Staff. Policy is to be concerned with the so-called Petersberg tasks of peacekeeping, peace-enforcement and humanitarian tasks (as agreed at the Petersberg conference in 1992). Military resources are to come from NATO or other European military capabilities. The mutual security guarantee, which is part of the West European Union (WEU) Treaty, is not to be extended to nonWEU members. The Cologne summit of 1999 also agreed to appoint the current NATO Secretary-General, Javier Solana, as Secretary-General of the Council High Representative for the CFSP. None of this means that Britain has fully adopted the communautaire vision of the future of Europe or the European systems of states, as promoted by the FRG. Nevertheless, in the context of a new world order, German and British interests have converged significantly.

Germany and Europe The changes in the international system at the end of the 1980s and the unification of Germany obviously had an even more profound effect upon German thinking on European security. Some scholars and politicians expressed the expectation that, with the restraints of the postwar settlements having been removed,

Britain and Germany defining the European order 85 Germany would now develop a foreign and security policy in keeping with its position in the international system. As the country with the largest economy in Europe, the central position between East and West and the largest population in Western Europe, playing a leading role in Europe not least by virtue of the largest net contribution to the budget of the EU, it was thought it would assume a leadership role in Western and Central Europe. It would overcome its Machtvergessenheit (obliviousness to power), in the words of Hans-Peter Schwarz, and assert its national interests. Christian Hacke thus declared the national interest as the guiding principle for Germany’s future foreign policy and sought to develop some principles for the global power against its will (Weltmacht wider Willen) (Hacke 1997a,b, original emphasis). Most analysts agree that the manner in which Germany would pursue its national interest and exercise its influence would not be through a re-nationalization of foreign and security policy, but through multilateral institutions. The further deepening of European integration and, paradoxically, the transfer of national sovereignty to multilateral institutions, would be necessary for Germany to maximize its influence (Gutjahr 1994; Katzenstein 1997). This alleged shift in Germany’s relations with the outside world is also described as ‘normalization’. This is generally taken to mean that Germany would no longer eschew the explicit assertion of its national interests and the use of the political, diplomatic, economic and military means at its disposal (Le Rider 1991; Kamp 1993; Gerster and Scholz 1994). This perspective runs completely counter to the explicit elements of institutionalism and constructivism that permeate the political discourse of German policy-makers. It must be assumed therefore that the very explicit institutionalist agenda of the federal government must conceal deeper purposes reflecting the national interest. Some scholars have taken quite a different view. Andrei Markovits and Simon Reich assert the essential continuity of German postwar foreign policy in their book on what they call ‘the German predicament’ (Markovits and Reich 1997). In their analysis the burdens and trauma of collective memories result in a continuing renunciation of a responsible exercise of power. This causes considerable problems in the international system as Western Europe experiences a lack of leadership. It should be said that the empirical evidence does render neo-realist approaches to understanding German foreign policy, which see the relations of states based solely on national interest and the distribution of military and economic power, highly implausible (for more detailed discussion see Rittberger 2001). At the root of the argument is the observation that, whatever the explanation, German foreign policy is based upon an explicit agenda that international relations (IR) theorists would describe as characterized by institutionalist and constructivist elements, and the conduct of policy appears to fit this agenda. Moreover, there is very substantial evidence that the norms and values embodied in this agenda are shared throughout Germany’s political élite. The research group at Trier University under the direction of Hanns Maull has advanced a third approach to the study of German foreign policy. Maull denies the basic premise of the other two approaches, namely that in an objective sense

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the shift in the European system of states as a result of the ending of the Cold War has substantially increased Germany’s weight and its potential for exercising power in the international arena. For one thing, Germany’s economic resources are largely in private hands and not under the control of the state. In a globalized economy, there is little reason to believe that private resources will be influenced by the priorities of any individual state. Whilst obviously a prosperous state has more economic and financial resources at its disposal than a poor one, the enormous burden of debt created by unification and the strict rules for fiscal deficits imposed by EEMU means that Berlin has very severe financial constraints. Moreover, crucial elements of economic decision-making have now been transferred to a supranational agency, the European Central Bank (ECB), thereby further reducing the capacity of the state to even formulate its own economic policy, never mind operationalizing it in order to conduct foreign policy and exercise influence. But more important is that for liberal democracies globalization, European integration and other transnational relations have created an international system in which there is no well-defined locus of power. Although Maull does not use this term, one could describe this as a form of transnationalization of bureaucratic politics. Foreign policy is not only under the constraints of domestic politics, but under the constraints of European politics and regulations, international treaties and conventions, that render the consistent pursuit of specific national priorities and policies quite problematic. In this view then, the real problem of German foreign policy is the loss of ability to influence events. Amongst recent examples Maull cites the decision by the newly elected German government in 1998 to abandon civil nuclear power, which immediately resulted in steps that put Germany in violation of international obligations. In this context Maull is scathing about the concept of the ‘national interest’. Beyond very general notions, such as countering threats to the integrity of the state and the life and well-being of the population (whatever that may be), and the well-established principles of European integration, maintaining the transatlantic relationship with the US and cooperative security in Europe, it is impossible to define more specifically what Germany’s national interests are. As a consequence, Maull describes German foreign policy as a result of ‘searching and learning’ rather than the consistent implementation of national priorities (Maull 1999). In the bureaucratic politics model, states cannot be considered to be rational actors because policy is not designed to achieve specific objectives, but is the outcome of competing domestic interests and bureaucratic processes. It therefore denies the most fundamental assumption of neo-realism and institutionalism. Whilst there is much to be said for the observation that there has been much exaggeration about ‘German power’ after the Cold War and although it is important to emphasize the influence of both bureaucratic politics and institutional constraints, there is also evidence that the approach of the Trier group underestimates both German influence and the ability of the government to shape events. The most convincing example, apart from German unification, is the development of the EU. It is fair to say that the development of the EU in its broad strokes conforms to the German vision of the future of Europe more than that of

Britain and Germany defining the European order 87 any other of the principal member states. It is certainly the case that Germany has not achieved everything it set out to achieve: for example, the inclusion of defence policy as the fourth pillar of the EU or the congruence of EU and WEU membership, and so on. It is also true that the EU in its current shape was not just created by Germany. But nevertheless its development so far is not purely accidental; it was to an appreciable extent the result of deliberate policy on the part of the government of the FRG. It is an interesting exercise to compare the grand strategy of the UK and France with that of the FRG over the last forty years. For the UK the main objective was the stability of the geo-political status quo in Europe and the preservation of a residual global role for the UK through its special relationship with the US. It saw the EC as a partnership of nations with the main emphasis placed on the benefits of economic cooperation and free trade. France was interested in the creation of a Europe des nations that would contain Germany and in which France would assume the leadership role. Although the British strategy was initially quite successful, it gradually fell victim to the shifts in the international system and became totally unsustainable after German unification. The French vision was fanciful from the start and could only be maintained for so long because it was sustained by the Franco-German relationship, but the Europe that emerged was far removed from its ambitious grand design. Germany, on the other hand, whilst initially preferring stability over unification, was nevertheless committed to overcoming the division of Europe and thus bringing about a major change in the European status quo. Its vision of Europe was one of a supranational union of states in which the divisions between the nations of Europe would be eradicated. The first of these aims was achieved in a manner that most Germans could not have imagined. With regard to the second of these aims, the EU is now a reality. What has been achieved so far may not go nearly as far as some of the visions that were entertained at earlier times, but conceptually and politically, it is closer to the German vision than to either that of Britain or France. The point to be made here is not that Germany is single-handedly responsible for creating the European system of states that exists today. It is rather that through the deliberate and persistent pursuit of its foreign policy objectives, the FRG has had a definitive influence in shaping its international environment, and it continues to do so today. For example, the policies to stabilize the democracies in Central Europe and draw them into Western institutions through NATO and EU membership have proven remarkably successful. Of course, it would be incorrect to say that this success would have been possible without the contribution of other major international actors. But nevertheless Germany had very specific policies on this issues that were considered central to Germany’s national security, and they were pursued successfully in the sense that German influence in NATO, the EU and in bilateral relationships with the countries of Central and Eastern Europe (CEE) was an important factor and the main objectives were achieved. There are some definite conclusions that emerge from the evidence. Germany is not engaged in the practice of power politics in the traditional sense. There remains a firm commitment to multilateralism, to an institutionalist approach to

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international politics. Germany intends to be a ‘civilian power’ so that, in future, the world will be populated by ‘civilian powers’ only. Of course, Germany also has had to learn that collective security demands the use of force, and has finally come to a point where it can play a full part in the Western Alliance. It is true that Germany has become more aware of its national interests and of it stature in the world, but this has not displaced the values and priorities that underpin its foreign and security policy. To the contrary, it has strengthened it, since more than before the political success and economic well-being of all European states is crucial to Germany. In the language of IR theory, it is the absolute gains that matter, not the relative gains. Germany has not assumed the mantle of a superpower in Europe. Its ambitions and expectations are more modest. Its vision for the future of Europe remains firm, but tempered by the experience of the last nine years, which have shown the limits of what is possible (Maull 2000).

Redefining European security During the Cold War period, overcoming the division of Europe through international regimes (détente and arms control) and institutions (Conference on Security and Cooperation in Europe (CSCE), NATO and the EC) had become central to the foreign policy of the FRG. The end of the Cold War served to strengthen this consensus in a number of ways. In the first place, the strategic changes in Europe and the peaceful manner in which they came about could easily be interpreted as the success of this approach. If the strategic confrontation with the Soviet Union could be resolved in this way, then anything seemed possible. The successful integration of Western Europe through the EC pointed in the same direction. There was also the perception that the end of the military confrontation in Europe marked a deeper shift in the international system, from competing ideologies to a shared sense of values, and from military force to the international economy as the determinant of international relations. It is fair to say that this assessment was shared by policy élites in Britain and Germany. Nevertheless, as we have seen, at least until the change of government in 1997, Britain continued to approach European security from the perspective of pragmatic realpolitik without any faith in a new, grand design. In contrast, for Germany a new Gesamtkonzept (holistic concept) of European security assumed great importance. It was to be based on the preservation of stability through collective security in Europe. Another element of the German foreign policy consensus was the commitment to democratic values, self-determination, non-violence and human rights. International organizations were considered as an important instrument for pursuing this commitment on a pan-European or even global scale. It was a high priority for Germany at the end of the Cold War to develop a relationship of strategic cooperation. The more Russia and other states from Eastern Europe could be locked into a system of collective security involving international institutions, the more norms and instruments for the enforcement of human rights and international law could prevent the resurgence of fundamentally antagonistic relations based on military confrontation. The danger was the

Britain and Germany defining the European order 89 resurgence of authoritarian and nationalist regimes leading to a descent into chaos. A political and economic partnership was seen as the best means of preventing such developments and, thus, Germany sought to provide economic support in order to achieve a peaceful transition to a new European order and address the new security risks it perceived. This can be described as the use of economic instruments of power in support of national and regional security. Clearly the economic stability of Eastern Europe and the former Soviet Union is of fundamental significance to German security. The Gulf War of 1990–1, which proved stubbornly and dangerously insusceptible to political instruments alone, raised serious questions about the nature of the ‘new world order’. Even more problematic were the conflicts in the former Yugoslavia (Croatia, Bosnia and Kosovo) and the newly independent states (Nagorno-Karabakh, Chechnya and Abkhazia) which exposed the inadequacies of European collective security arrangements. The attempt to develop a regime of collective security in Europe failed as the main players proved unwilling to invest the most obvious available institutional framework, the Organization for Security and Cooperation in Europe (OSCE), with the appropriate powers. Neither Russia, nor the US, nor the main European states were willing to take on this responsibility and subordinate their security interests to a collective security regime. This meant, however, that when a crisis came there was no prescription for a clear response and no adequate instruments to deal with it. The result was a major tragedy that Europe will have to live with. These were particularly troublesome for Germany since they raised the other part of the collective security equation that could be ignored during the Cold War, namely the use of force as part of a range of measures to deal with instability and armed conflicts in Europe and beyond. Britain, in contrast, had no difficulty in providing troops for contingencies outside the traditional NATO area. However, it had to learn that pragmatic realpolitik was no longer adequate to the requirements of international security. The leading West European states could not ignore conflicts in Europe even if their own national interests were not directly affected. This is true despite the fact that proper arrangements for collective security in Europe have not yet been created. The diplomatic and political instruments of collective security are based on ad hoc arrangement through the United Nations (UN), the EU, the OSCE and more informal contacts, whilst NATO provides the military support for peace enforcement. This is unsatisfactory for a whole range of reasons, both in terms of operational efficiency and political legitimacy, but this is the current situation.

Back to the future: the Bush administration and international security dilemmas During the Clinton administration, the US broadly supported many of the British and German perspectives on European and international security. The advent of the Bush administration, however, marked a decisive shift. Essentially, the Bush administration did not share any of the assumptions underlying German foreign

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and security policy. The same applies to a large extent to British foreign policy. The new US approach was overtly realist, denying that the end of the Cold War constituted a paradigmatic shift in international politics. The administration rejected approaches based on mutual security, international regimes and arms control, and shifted towards unilateral approaches based on its perception of US national interests. The first manifestation of this new approach was the outright rejection by the US government of the Kyoto Protocol as being contrary to American interests. It indicated not only a rejection of international regimes as a means of regulating international affairs, but more fundamentally the values of environmentalism and good citizenship. Even though under the Clinton administration the US Senate had already rejected the Kyoto Protocol, the blatant and overt rejection by President Bush sent a shock wave through the international community (Kamp 2001). In international security, the first indications were that the administration wanted to move away from the more traditional emphasis in national security policy on Europe and Russia. Instead it wants to focus on what it perceives as the new security challenges the US has to contend with. These are located in the Asia Pacific region, notably China and North Korea, and so-called ‘rogue’ states in the third world (Iran, Iraq and Libya). But this ‘new approach’ to international security is not based on any assumption that the nature of international relations has changed. The only thing that has changed is the identity of the players in the game of international security and the distribution of capabilities, which now hugely favours the US. The most controversial feature of the new approach to international security is the commitment to National Missile Defence (NMD). Responding to the future possibility that states hostile to the US will develop long-range missiles capable of striking the continental US, this system is supposed to provide the means to intercept missiles or warheads before they can reach their target. In this way the US will deprive ‘rogue’ or ‘terrorist’ states of the means to threaten, blackmail or terrorize the US (Utgoff 2002). This proposal is controversial because it requires the abandonment of the regime of arms control that continues to underpin international security. The Anti-Ballistic Missile Treaty (ABMT) was signed in 1972 between the US and the Soviet Union. It permitted each side to deploy a maximum of 200 launchers as part of a ballistic missile defence system to defend either the national capital or a missile launch site. The ABMT, which was part of the Strategic Arms Limitation process, was predicated on the assumption that defences against missile were unreliable and would destabilize the strategic balance. Mutual vulnerability was recognized as the key to stable deterrence and war prevention. The US has now withdrawn from the treaty, which is therefore no longer in force. The Strategic Arms Reduction Talks (START)-II Treaty, which had been ratified by Russia and the US, never entered into force and has now been replaced by a general agreement on strategic arms reductions without transparency or verification. With it the Bush administration believes it has written the final chapter in US–Russian strategic arms control (Bluth 2002).

Britain and Germany defining the European order 91 It is paradoxical that, although the Bush administration has characterized the proliferation of weapons of mass destruction as the principal issue in international security of our time, it is not moving ahead to strengthen international treaty regimes. The US and Russia had become the leading forces of preserving and extending the nuclear non-proliferation regime. A network of agreements, including the Non-Proliferation Treaty (NPT), the Comprehensive Test Ban Treaty (CTBT) and the fissile materials production ban was constructed to take nuclear weapons to all intents and purposes out of international politics (Bluth 2000). This process, already in trouble because of the US failure to ratify the CTBT, may now come to a halt entirely. For example, the Bush administration has withdrawn US support for the biological weapons convention. National Missile Defence has important implications for relations with China, even though, for the present, US policy does not claim that NMD will be able to defend against Chinese intercontinental ballistic missiles (ICBMs). From the very beginning, the Bush administration has pursued quite an aggressive policy towards China, effectively declaring China to be an adversary, rather than a potential partner. Relations were exacerbated by the tense confrontation in 2001 over a spy plane that was forced to land on Chinese territory. The major point of confrontation between China and the US is the future of Taiwan. China believes that its very limited nuclear arsenal has an inhibiting effect on US policies vis-à-vis Taiwan. China has at most twenty-five ICBMs capable of reaching targets in the continental US. Any defensive system designed to cope with small arsenals (consisting of five to ten long-range missiles) including countermeasures (decoys) must be robust enough to have a serious capability to intercept most, if not all, of China’s ICBMs. This implies that missile defences effective against ‘rogue states’ will also seriously degrade the Chinese arsenal. For China, therefore, US efforts to develop and deploy missile defences are seen as a dangerous step towards achieving strategic invulnerability, which may result in a real military confrontation in the future (Miller 2001). What about Europe? European allies of the US generally reject the thinking behind missile defence (despite Blair’s efforts to maintain the special relationship with the US, this is true even for Britain). They remain committed to existing arms control regimes and fear any deterioration in relations with Russia and China. They also believe US policies towards the ‘rogue states’ is misguided. European states would prefer diplomatic solutions rather than confrontation to integrate the ‘rogue states’ gradually into the international system. NMD may therefore result in significant tensions within the Western Alliance. One compromise that has been mooted is that, in return for accepting NMD, the US would accept the European Army. Despite efforts to smooth over the disagreements, NMD will prove very divisive in NATO (Gordon 2001). Although the foreign and security policy of the Bush administration strikes at the heart of German thinking about international relations and security, the response of the FRG has been rather muted. Foreign Minister Joschka Fischer, after visiting the US in March 2001, emphasized the importance of arms control regimes, including the ABMT, for international security, but refused to oppose

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directly NMD (Schmidt 2001; Bluth 2001a). Chancellor Schröder himself opened up the possibility of cooperating with the US in its technological development of NMD in order to benefit from potential spin-offs, an argument that was severely criticized as misguided in the press. The Bush administration has presented the German political élite with a very sharp dilemma. From the moment of its election, the federal government led by the Sozialdemokratische Partei Deutschlands (SPD, Social Democratic Party of Germany) in coalition with the Greens has been eager to demonstrate its reliability as a partner in the Western Alliance. The burden on Joschka Fischer, the Green Foreign Minister, to be accepted into the community of statesmen was especially great. Partly as a result of German participation in the NATO action in Kosovo, this was extraordinarily successful, despite some initial missteps. Whilst the Clinton administration was in power, this priority was compatible with the core values of the German political élite, especially as represented by the SPD and the Greens. But now this is no longer the case. The terrorist attacks of September 11 had the effect of strengthening solidarity in the Western Alliance. For the first time Article 5 of the NATO Treaty was invoked. It had the remarkable effect of changing the orientation of US foreign policy with a return to internationalism as the Bush administration realized it had to build a solid international coalition to sustain its war against terror. At the same time, the reality of the threat emanating from terrorist organizations and ‘rogue states’ was brought home. Disagreements over NMD were put on the backburner. Germany was involved in the war against terror from the outset since the terrorists responsible for the attacks on September 11 had lived for some time in Germany where they conducted much of their planning (Bluth 2001b). Not only were German law enforcement agencies centrally involved in counter terrorist operations in Europe, but the German armed forces took part in the later phase of military operations. The UK faces similar dilemmas, albeit from a different perspective. The UK has always seen itself as a special ally and the bridge between Europe and the US. Britain’s ability and willingness to contribute substantially to NATO and out-ofarea missions was an important means of demonstrating and substantiating this role. Whilst Britain does not fully share Germany’s institutionalist/constructivist approach to international politics, it has moved somewhat from the more realist positions of the past to embrace a modern approach to a globalizing economy and a post-Cold War international security environment that requires international regimes and collective security. Thus, the UN is recognized as having a central legitimizing role in international relations. Britain’s commitment to arms control regimes, especially non-proliferation and strategic arms control, remains strong. As the Bush administration stands all the assumptions of international security on their head, this presents a perplexing dilemma for the Blair government. Close cooperation between the two governments becomes more difficult as the British government seeks to reconcile the basic incompatibility of US policy with the fundamental directions of British and European security policy. For the

Britain and Germany defining the European order 93 time being, as Britain is the closest ally of the US in the war against terror, such divergences in interests can largely be ignored. They are likely to surface later, however, especially if the war against terror is widened to other theatres. The notion of the ‘axis of evil’, namely a number of ‘rogue states’ which actively conspire to threaten the West, has been generally derided in Western Europe. The idea that the US should be able to use force to meet threats before they have materialized stands in such profound contradiction to accepted international norms that any such actions would destroy the international consensus that currently prevails amongst Western states (Cronin 2002). Despite their differences in outlook, the tactics employed by the German and British governments are similar. First of all, in view of the continuing conflicts on the southeastern flank of NATO, continuing US commitment to European security is seen to be of fundamental importance. Neither Britain nor Germany can contemplate a major breach with the US. Policy is therefore designed to postpone confrontation, whilst seeking to reap the benefits of cooperation with the US in other areas, such as technical defence cooperation and US acquiescence in the development of the European Army. The deployment of NMD is still some years off and in fact fundamental technical problems still remain to be solved. So whilst Europe can benefit from some of the more basic elements of the infrastructure for air defence, the serious decisions may not even have to be made in the lives of present administrations. The international system in the early post-Cold War era therefore faces an enormous paradox. On the one hand, the confrontation between the major powers has disappeared. This means that the West European states, including Germany, no longer face any military threat. Moreover, virtually all the states in the region either have, or want to, become part of international and Western institutions, and have abandoned any form of international conduct in which military force played a dominant role. At the same time, there are many actual and potential conflicts in Europe. This means that a system of collective security is required with effective military instruments to enforce and keep the peace. This is the central dilemma of European security. As long as it persists, the countries of Europe are without clear guidance and procedures as new conflicts erupt, and may be unable to take the necessary steps to ensure effective conflict prevention and management. Here lies the real challenge for European security policy after the Cold War. The European security dilemma therefore has been further exacerbated by the fact that the government of the militarily dominant power in the world pursues anachronistic policies that are not appropriate for the contemporary international system. There are signs that the shift towards internationalism by the Bush administration in the wake of the terror attacks will prove to be temporary and the current transatlantic solidarity will weaken again. Moreover, the second phase of the war against terror, which may involve conflict with Iraq, may also result in severe transatlantic tensions and substantially raise the political costs for European governments of supporting the US. The dilemmas of European security are likely to become more acute in future years.

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References Bluth, C. (2000) The Nuclear Challenge: US–Russian Strategic Relations after the Cold War, Aldershot: Ashgate. —— (2001a) ‘Germany and missile defence: the dilemmas facing an ally’, Jane’s Intelligence Review, 13(10): 50–1. —— (2001b) ‘War against terrorism: the Hamburg connection’, Jane’s Intelligence Review, 13(11): 15–17. —— (2002) ‘Warming words but chill is still in the air’, Times Higher Educational Supplement, 31 May. Clarke, M. (1992) British External Policy-making in the 1990s, London: Macmillan. Cronin, A. K. (2002), ‘Rethinking sovereignty: American strategy in the age of terrorism’, Survival, 44(2): 119–39. Gerster, F. and Scholz, R. (1994) ‘Deutschland auf dem Weg zur internationalen Normalität’ (Germany on the path to international normality), Der Mittler-Brief, 9(1). Gordon, P. H. (2001) ‘Bush, missile defence and the Atlantic alliance’, Survival, 43(1): 17–36. Gutjahr, L. (1994) German Foreign and Defence Policy after Unification, London: Pinter. Hacke, C. (1997a) ‘Die Bedeutung des nationalen Interesses für die Außenpolitik der Bundesrepublik’ (The meaning of national interest for the foreign policy of the Federal Republic), in G. Niedhart, D. Junker and M. W. Richter (eds), Deutschland in Europa: nationale Interessen und internationale Ordnung im 20. Jahrhundert (Germany in Europe: national interests and international order in the 20th century), Mannheim: Palatium Verlag. —— (1997b) Weltmacht wider Willen: die Außenpolitik der Bundesrepublik Deutschland (Global Power against its Will: the foreign policy of the Federal Republic of Germany), Berlin: Ullstein TB Verlag. Kamp, K. (1993) ‘German armed forces and international military action: step by step toward normalization’, Enjeux Atlantiques, 7: 28–31. —— (2001) Transatlantische Dissonanzen in der Außen-und Sicherheitspolitik (Transatlantic dissonances in foreign and security policy), Sankt-Augustin: Konrad-Adenauer Stiftung. Katzenstein, P. (ed.) (1997) Tamed Power, Germany in Europe, Ithaca: Cornell University Press. Le Rider, J. (1991) ‘Un an après l’unification: retour à la normalité de la nation allemande’ (A year after unification: the German nation returns to normality), Politique Étrangère, 56 (Winter): 913–27. Markovits, A. S. and Reich, S. (1997) The German Predicament: Memory and Power in the New Europe, Ithaca: Cornell University Press. Maull, H. W. (1999) ‘Rot-grüne Außenpolitik: von den Höhen guter Absichten in die Niederungen globalisierter Politik’ (Red-green foreign policy: from the heights of good intentions to the depths of globalized politics), in H. W. Maull, C. Neßhöver and B. Stahl (eds), Lehrgeld: vier Monate rot-grüne Außenpolitik (Lessons of four months of red-green foreign policy), Trierer Arbeitspapier zur Internationalen Politik 1 (March): 1–12. —— (2000) ‘Germany and the use of force: still a “civilian power”?’, Survival, 42(2): 56–80. Miller, S. E. (2001) ‘The flawed case for missile defence’, Survival, 43(3): 95–110. Rittberger, V. (ed.) (2001) German Foreign Policy since Unification: Theories and Case Studies, Manchester: Manchester University Press.

Britain and Germany defining the European order 95 Sanders, D. (1990) Losing an Empire, Finding a Role: British Foreign Policy since 1945, London: Macmillan. Schmidt, C. (2001) ‘Joschka in den USA – samtpfötig wie ein Hauskater’ ( Joschka in the USA – treading softly like a domestic cat), Der Spiegel, 5 March. Utgoff, V. A. (2002) ‘Proliferation, missile defence and American ambitions’, Survival, 44(2): 85–102.

6

Japan and China New regionalism and the emerging East Asian order Takahara Akio

Introduction There has been a rising tide of regionalism in the post-Cold War world, and East Asia has not been an exception. Regionalism is defined here as a movement or thought that identifies a regional level between the global and the state and seeks to provide it with a specific role to play in economic, political, security or cultural affairs (Yamamoto 2000: 721). It is true that even now Northeast Asia is the only region in the world without any regional framework for economic or military cooperation, or even a free trade agreement between nations. The progress in regional integration is much slower in East Asia than in Europe, where the euro has appeared in tangible notes and coins, or in North and South America where the North American Free Trade Agreement (NAFTA) and the Common Market of the South (MERCOSUR) have been established. Nevertheless, considering the conditions adverse to regional integration in East Asia, such as the existence of different state systems, divided nations and economies at different stages of development, we should say that there has recently been a significant development particularly since the latter half of the 1990s. A salient example is the 1997 establishment of the annual Association of Southeast Asian Nations (ASEAN) ⫹ 3 ( Japan, China and South Korea) summit meeting, which virtually actualized the unsuccessful 1990 initiative by Prime Minister Mahatir bin Mohamad of Malaysia to form an East Asian Economic Caucus (EAEC). It is noteworthy that a lot of the developing regional frameworks for East Asia as a whole are based on the experience and activities of ASEAN in Southeast Asia. At the same time, it is also important to note that the pace of cooperation was increased as a result of the change in China’s attitude towards regionalism. China, which had been rather hesitant in its participation in regional multilateral forums, shifted its policy in the latter half of the 1990s and particularly after the Asian economic and financial crisis of 1997–8. Significantly, this greatly broadened the horizons of the bilateral relationship between Japan and China, and encouraged the Chinese to view the Sino-Japanese relationship in the context of regional and global cooperation. Despite the perennial bickering over a variety of problems in the areas of history, economy and security, Japan and China are beginning to acknowledge that furthering regional cooperation could become a common goal that would overcome the differences and conflicts that exist and emerge between the two nations.

Japan and China 97 The aim of this chapter is to analyse the development of the regional policies in Japan and China and discuss the potential of these for improving the SinoJapanese relationship and in creating a new regional order. First, the chapter investigates the shift in China’s policy towards regional cooperation. What were the reasons for its initial reluctance, and what caused the change in attitude? What was the significance of Japan in this change? The second aim is to examine the development of Japan’s regional policies. What prompted Japanese policy-makers to promote regional cooperation, and what posed the limits to their efforts? The prevalent view amongst Chinese experts on regional affairs is that improving Sino-Japanese relations is an indispensable factor in the promotion of regional cooperation in East Asia, but how are the Japanese going to respond when there is a gradual rise in the perception of a ‘China threat’? Based on these analyses, the chapter then proceeds to discuss the prospect of a new regional order. A key factor here will be the evaluation of the presence of the United States in the region, and the varying role it plays.

China’s initial reluctance China used to be known as one of those powers dubious about regional, multilateral approaches to solving international problems. Certainly, General Secretary of the Chinese Communist Party, Jiang Zemin, took a personal interest in the Asia-Pacific Economic Cooperation (APEC), partly because the advent of the unofficial summit meeting in 1993 at Seattle coincided with his appointment as State President that year, and he apparently considered the APEC summit as the right stage for him to enhance his prestige and authority at home and abroad.1 In the wake of the 4 June 1989 (Tiananmen Square) incident, China worked hard on improving its relations with the Southeast Asian countries, which were far less critical of China’s brutal suppression of the student/citizen movement than the Western countries and Japan. China normalized ties with Indonesia (1990), Singapore (1990) and Vietnam (1991), and attended the South China Sea Workshop from its second meeting in 1991. Nevertheless, in the ASEAN Regional Forum (ARF) that was established in 1994, China proved to be a reserved participant rather reluctant to discuss specific issues such as the territorial disputes in the South China Sea (Soeya 2000: 62–5). Even in the realm of economics, when Japan proposed the establishment of the Asian Monetary Fund (AMF) in September 1997, Japan was not only opposed squarely by the US but also snubbed by China. Regionalism or regional approaches are not traditional jargon in China’s diplomacy. In a university textbook on contemporary Chinese diplomacy published in 1999, there is no reference to regionalism at all (Li 1999). The same applies to the textbook of the Central Party School, where the top élite attends refresher courses on theories, policies and domestic and world affairs (Editing Group of Some Strategic Questions for China Facing the Twenty-first Century 2000). China sees international politics as basically a power game amongst great powers competing for hegemony. In the remarks of Jiang Zemin on world affairs, it is said that there is a daily enhancement in the competition of comprehensive state power, which consists of the economy, military, science and technology and national integrity

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( Jiang 2001: 28, 182). Diplomacy for China is a struggle for survival and development in this game. It is true that China treasures and makes good use of its status as a permanent member of the United Nations Security Council (UNSC), and that Third World diplomacy has been an integral part of Chinese diplomacy. But based on such understanding of the world, China has attached greatest importance to the bilateral relationship with the big powers. China realizes that it is still way behind the US, Europe, Japan and Russia in terms of economic, military and science and technological strength, and thus considers itself to be a regional developing power in the transitional process of becoming a global power (Editing Group of Some Strategic Questions for China Facing the Twenty-first Century 2000: 186). China’s cautiousness about multilateralism stems partly from this complex self-perception. That is China, on the one hand, prefers bilateral approaches since it has an upper hand over most of the states in the region, and fears that once it is co-opted into a multilateral framework, it will lose this advantage. This type of concern is reflected in its passive approach to the ARF. On the other hand, China is afraid that the initiative and leadership of such multilateral frameworks will be taken by the powers stronger than itself. This seems to have been a concern behind China’s giving the cold shoulder to Japan upon the latter’s initial proposal to establish the AMF. Thus, China essentially sees the development of multilateral frameworks from the standpoint of state interests. Against the recent idea in the West that the concept of sovereignty is in the process of change and that some part of sovereignty has to be ‘given up’, one Chinese scholar has argued that, ‘We must stress that giving up sovereignty essentially has to be spontaneous, and that the purpose of giving up sovereignty is to exchange it for an even larger state interest’.2 In the latter half of the 1990s and particularly after 1997, however, China seemed to shift its approach to regional frameworks as if it had discovered their use. This appeared first in the realm of security. At the ARF meeting in August 1995, China agreed for the first time to negotiate the South China Sea territorial issue with the concerned countries according to international law. In the following year, China became a co-chair of the ARF Intersessional Support Group on Confidence Building Measures together with the Philippines, its immediate adversary at the time. In 1997, when China hosted the meeting of this Group, Chinese officials stressed that the ARF should play a central role in maintaining the stability of the region (Soeya 2000: 65). In the economic area, it was at the second ASEAN ⫹ 3 summit meeting in December 1998 that Hu Jintao, the newly appointed vice-president, proposed a meeting of deputy finance ministers and deputy presidents of central banks to be held within the framework of the ASEAN ⫹ 3.3 In November 1999, China agreed for the first time to hold a Japan– China–South Korea trilateral summit meeting on the occasion of the ASEAN ⫹ 3 summit meeting. At the ASEAN ⫹ 3 meeting the following year, China agreed to regularize the trilateral summit and, in addition, surprised others by proposing a free trade agreement with ASEAN. Then in February 2001, China hosted the Preparatory Meeting of the Boao Asian Forum at Boao, Hainan Island, which was the Asian version of the World Economic Forum in Davos. Finally, in November

Japan and China 99 2001, China and ASEAN agreed to start negotiating for a free trade area to be established within the following ten years. Thus, it is safe to say that by the late 1990s China had dramatically shifted its policy towards regionalism. The initial shyness at multilateral forums receded rapidly, and regionalism was beginning to serve as a framework or a guideline for designing China’s bilateral relations with the neighbouring countries.

The reasons for China’s new preference for regionalism What, then, galvanized China into taking positive steps towards multilateral, regional frameworks in the latter half of the 1990s? There were several factors involved. In the realm of security, China feared isolation as tension mounted in the South China Sea and Japan and the US reinforced their alliance. In February 1995 the Philippines announced that a building had been constructed by the Chinese on Mischief Reef, which the Philippines had claimed to be its territory. In the following month, the foreign ministers of ASEAN issued a joint statement urging the countries concerned to halt any action that would threaten the peace and security of the South China Sea. China could not afford the isolation, particularly when Japan and the US started to adjust and reinforce their alliance in the post-Cold War era, and some ASEAN countries started to welcome the enhancement of the American military presence in the region (Cheng 2001: 428). In addition, the US came up with the idea in November 1995 to utilize APEC as a forum for security dialogue. Since Taiwan was a member of APEC, this was unacceptable to the Chinese who realized they had to cooperate in developing the ARF into a more effective mechanism (Takagi 2001: 88). On the economic front, the turnabout stemmed first from the understanding that globalization is the new trend in world history.4 China regards globalization as a historic opportunity for development, but also, and even more, as an enormous challenge. Many Chinese see that globalization is led and dominated by the developed nations, amongst others the US, which will increase their intervention in the internal affairs of others, in one way or the other, and that globalization is spearheaded by the multinational corporations that could control and monopolize the benefits. In this context, Chinese scholars regard regionalization as conducive to neutralizing somewhat the negative impact of globalization.5 Bluntly put, they hold that regionalization is conducive to protecting China’s state interest. Obviously, this argument is related to the adoption of the concept of economic security, which took place in the midst of the Asian economic and financial crisis. The outbreak of the chain of currency and financial crises in Southeast Asian countries and South Korea from July 1997 deeply shocked the Chinese leaders. This was not only because it seemed to shatter the Asian model of development that they had toiled and emulated, but even more so because China itself had a very serious problem of non-performing loans.6 The term ‘economic security’ had been introduced into the Chinese lexicon first as one of the three pillars of

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the foreign policy of the Clinton administration, and later it was used in the context of protecting local industries against challenges from foreign firms and products in the opening-up of the Chinese economy. But a new meaning was given when Vice-Premier and Foreign Minister, Qian Qichen, spoke at the ceremony to celebrate the Thirtieth Anniversary of ASEAN in December 1997. Qian said: The storm of the Southeast Asian Financial Crisis made it clear that economic security is an important element in stability and development. In order to maintain a regular, well-performing economy and financial order, we must … reinforce financial cooperation with the region and the world … and create a stable, safe external economic environment. (People’s Daily, 16 December 1997) The official People’s Daily viewed this as a move to a ‘new concept of security’. According to a number of Chinese analyses, the Asian financial crisis was conducive to strengthening greatly East Asian identity and integrity, as the crisis made the policy-makers of East Asia fully realize that their fates were interwoven and interdependent (Hu 2000: 51; Sun 2001: 25; Zhao 2001: 32).7 Undoubtedly China was a typical case. The experience of the Asian economic and financial crisis actually strengthened another factor for China’s turnabout, that is self-confidence in participating in a regional multilateral arena. In the face of large declines in the currencies of many Asian nations, China steadfastly refrained from devaluing its currency, the renminbi (RMB). In fact, considering the frail financial situation at the time, the Chinese authorities feared that even a hint of devaluation could trigger a collapse in the local people’s confidence in the RMB and in the Chinese economy. However, they sold this policy rather dearly in a most skilful way by declaring that China would sacrifice its own interest and not devalue the RMB in support of the Southeast Asian countries in trouble (Takahara 1999). At the same time the Chinese media sharply criticized Japan for exacerbating the crisis by allowing the yen to fall. Whatever the reasons were, the outcome was that the Asian countries deeply appreciated and praised the Chinese for not devaluing. This, as well as the fact that China managed to hold the impact of the crisis at bay, added on to the staggering economic growth that it had achieved since 1992, boosted its confidence in participating in a regional, multilateral framework. It seems this was particularly the case because Japan continued to suffer from a prolonged recession and the US proved to be rather ineffective in assisting a recovery in the region. That Japan changed its policy in 1999 and seriously endeavoured to pursue free trade agreements with South Korea and Singapore also urged the Chinese to change their minds and agree on the trilateral summit with Japan and ¯ tsuji and South Korea and to propose a free trade agreement with ASEAN (O Shiraishi 2002: 75). That China felt more comfortable in a multilateral setting was important in advancing Chinese thinking about the solution to the ‘Chinese dilemma’ (Takahara 2001: 11). The Chinese dilemma refers to the situation in which China

Japan and China 101 seeks for a peaceful international environment for the sake of its economic development, but as it actually develops it cannot but raise the sense of a ‘China threat’ amongst neighbouring nations. That is, peace and stability in the region promotes China’s development, but China’s development does not necessarily promote peace and stability in the region. This ironical situation stems from such factors as the outstanding size of China’s area and population, the long history of China’s dominance in the region, and the unhidden pursuit of power politics and the military build-up of China. The Chinese have realized, however, that one solution to dispelling the worries amongst the neighbouring nations is to promote regionalization and create a mechanism by which they contribute to the regional economy by further opening-up their economy and providing more opportunities for others to make use of China’s outstanding economic growth (Hu 2000: 53). Their specific proposal was to establish a free trade area in East Asia. Thus, we can see that China changed its attitude towards regionalism because of its own strengths and weaknesses. Territorial disputes with some ASEAN countries and the reinforcement of the US–Japan alliance urged China to avoid isolation in the region. China also felt threatened by the rising tide of globalization and sought for a shield to protect its state interest. The Asian economic and financial crisis, however, actually provided an opportunity in which China was able to show off its capacity and be appreciated by the neighbouring nations. The crisis was also an opportunity in which the East Asian nations, including China, deepened their understanding of regional interdependence and of the need to promote regional cooperation. Because of its staggering economic growth in the 1990s China was more confident in regional, multilateral arenas, and that confidence seemed to be supported by the relative decline in the Japanese economy and by the disappointment amongst the East Asian countries in the US, which provided little help when needed. Through constructing and developing multilateral frameworks for regional cooperation, China saw a potential for creating an ‘all-win’ mechanism, which should allay the neighbouring countries’ fear of a growing giant. It is clear from the above analysis that the Japan factor loomed large in the shift in China’s regional policy. The strengthening of the US–Japan alliance, the relative decline in Japan’s economic might, and Japan’s change in its policy about the free trade agreement, all contributed to China’s new preference for regionalism. How this fitted in with the Japanese policy, is the question we need to ask next.

Japan’s active posture on regional cooperation There is small doubt that, apart from ASEAN, Japan has been one of the most active countries in promoting regional cooperation in East Asia and the AsiaPacific. Why was this the case, and how did Japan’s regional policies develop? Japan’s unique regional cooperation policy initially took the shape of the Southeast Asian Development Ministers’ Meeting, which met for the first time in Tokyo in 1966 (Hatano 1997: 183). In the mid-1960s, Japanese scholars and politicians were already proposing the formation of the Pacific Free Trade Area

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and the Asia-Pacific Community, which were inspired partly by the development ¯ ba 2001: 266). It was also in the of the European Economic Community (EEC) (O 1960s that Japan played a major role in the establishment of the Asian Development Bank (ADB). These initiatives matched the regional approach adopted by the Kennedy and the Johnson Administrations of the US to support the development of the anti-communist regimes in Southeast Asia. Thus, the Southeast Asian Development Ministers’ Meeting did not meet after its last meeting in 1974, that is two years after President Richard Nixon’s visit to China and a year after the retreat of the US military from Vietnam. For the Japanese government, however, regional cooperation had other aims than just containment of the communist bloc. Through the promotion of regional cooperation, particularly that in the Asia-Pacific, it intended to combine two of the major pillars of its foreign policy, namely, conciliation with the Western industrialized countries and collaboration ¯ ba 2001: 267). with the Asian nations (Hatano 1997: 185; O In the wake of the Vietnam War, Japan realized that it was necessary to pay more attention to ASEAN, which had been established in 1967, and develop a new relationship with it. In 1977, Prime Minister Fukuda Takeo announced the so-called Fukuda Doctrine, in which Japan pledged to contribute to ASEAN’s effort in enhancing its solidarity and resilience and to promoting reconciliation between ASEAN and the socialist countries in Indochina. It was also in 1977 that the Japan–ASEAN Forum was established. Although this initiative was partly frustrated by Vietnam’s invasion of Cambodia and the Sino-Vietnamese War, Japan’s relationship with ASEAN thereafter strengthened without disruption. This was partly because economic ties were growing rapidly, and partly because the victory of the communists and the withdrawal of the US from Indochina made Japan more acceptable to the ASEAN countries, which had experienced Japanese rule during the Second World War as part of the East Asian Co-prosperity Sphere. ¯ hira Masayoshi, however, Japan’s In the next cabinet under Prime Minister O regional policy was orientated towards the Asia-Pacific rather than East Asia. In the late 1970s, Ohira presented the Pacific-Rim Cooperation Initiative, which led to the establishment of the Pacific Economic Cooperation Council (PECC) in 1980. A major factor in this shift of focus was the idea of advocating ‘open regionalism’ across the Pacific in order to prevent the rise of protectionism. It was also not unrelated to the wish to secure the commitment and the presence of the US in East Asia, particularly after the Carter Administration announced its intention to withdraw from South Korea. As trade friction increased in the 1980s between Japan and the US, which did not hesitate to resort to protectionist policies, and in the wake of the conclusion of the US–Canada Free Trade Treaty in 1986, Japan initiated the establishment of APEC, which held its first ministerial meeting in 1989.8 This did not mean, however, that Japan’s ties with East Asia were unimportant. The 1980 report of the Japanese Economy Research Committee, comprised of business leaders, stated that the special partnership with ASEAN ‘did not contradict globalism and would rather contribute in the long run to the advancement of multilateral, worldwide trading’ (Hatano 1997: 193). It was also during the time

Japan and China 103 ¯ hira Cabinet that Japan started to provide Official Development Assistance of the O (ODA) to China. China quickly became one of the largest recipients of Japanese ODA, next only to Indonesia. The main idea behind Japan’s ODA policy towards China was to support its reform and opening-up policies and its stable development, which Japanese policy-makers considered vital to the peace and stability of the region. Therefore, although there was a valid argument that the assistance to China was against the ODA Charter, which stipulated that Japan should refrain from assisting those countries producing weapons of mass destruction and exporting arms, the Japanese government regarded China as an exception. Japan was also the first country to cancel the economic sanction against China after the 4 June Incident, and Prime Minister Kaifu Toshiki was the first leader amongst the G7 nations to visit Beijing in August 1991. There he stated that: Since China adopted the reform and opening-up policies in 1978, cooperation between Japan and China has had a more positive meaning to the AsiaPacific region. This is because the Chinese economy has been linked with the economy of the Asia-Pacific, which is the most dynamic in the world. Through supporting the Chinese economy, Japan can contribute not only to the stability and development of China, but also to the stability and prosperity of the region as a whole.9 ¯ hira, referred to the Asia-Pacific, which It is noteworthy that Kaifu, like O included the US. By emphasizing the economic linkage between China and the other parts of the region, he was trying to convince the US that Japan’s assistance in China’s development was actually beneficial to the US. The engagement policy towards China became famous later as a policy of the Clinton Administration, but it had been pre-empted by the Japanese government much earlier. Japan found it most important to engage China and consistently supported China’s admission to the General Agreement on Tariffs and Trade (GATT) and later the World Trade Organization (WTO). The engagement policy was also applied in the area of security. Along with Australia and ASEAN, Japan was a strong promoter for establishing a multilateral security forum in postCold War East Asia (Takagi 1999: 25–6). In the end, the ARF met for the first time in 1994. One important purpose of establishing such a forum was to engage China. Co-opting a giant in this manner was called the Gulliver approach since, like the Lilliputians in Swift’s Gulliver’s Travels, smaller countries coexisted peacefully and constructively with a huge neighbour by co-opting it into a community (Okabe 1996: 155–6). Such an approach had been adopted earlier by the smaller Southeast Asian nations when they established ASEAN to engage Indonesia. The fact that this multilateral institution for security dialogue took the shape of a forum of ASEAN suited the willingness of the Japanese to remain in the background, because of the possible suspicion amongst those Asian nations that had suffered from Japanese aggression in the Second World War. Whilst Prime Minister Hashimoto Ryu¯taro¯ agreed to reinforce the US–Japan alliance in the mid-1990s he did not abandon the traditional Japanese policy to

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engage China in regional affairs. The April 1996 US–Japan Joint Declaration on Security referred to China in the following way: They [Hashimoto and Clinton] emphasized that it is extremely important for the stability and prosperity of the region that China play a positive and constructive role, and, in this context, stressed the interest of both countries in furthering cooperation with China.10 Hashimoto’s uniqueness existed in his advocacy of the ‘Eurasian Diplomacy’, in which China was regarded as the linchpin of the Asia-Pacific and the Eurasian continent. In his view it was pivotal to engage Russia in handling the triangle with China and the US. Just before and during his trip to China in September 1997, Hashimoto proposed that Asian countries, particularly Japan and China, should do four things: to understand the variety of polity, economy, history, religion and culture that exist in Asia; to increase the opportunities for dialogue; to promote cooperation and mutual learning; and to create a common order. It was within this framework that he proposed a regular annual summit meeting and the strengthening of the security dialogue between Japan and China. An important point he made was that the two countries should not only discuss bilateral issues but also regional and global issues and tackle them jointly and constructively (Kazankai 1998: 837–48, 851–60). Thus, even before the outbreak of the Asian economic and financial crisis, Japan’s basic attitude towards regional cooperation was rather positive. The following factors seem to have contributed to this policy tendency. First, there was the economic factor. Besides the provision of bilateral assistance, it was considered that regional cooperation through the establishment of regional forums was an effective means to support the growth of the regional market. Japan was also concerned about the protectionist policies of Europe and the US, and promoted ‘open regionalism’ in the Asia-Pacific as a countermeasure. The second factor was political. Particularly in its policy towards Southeast Asia, Japan aimed to supplement the leading role of the US, which was less active in the region after the Vietnam War. A notable fact was that Japan was unique in its preference for engaging the socialist countries in East Asia.11 Ideologically, socialism was less of an anathema to the Japanese, who also understood that socialism in East Asia was largely a means to achieve nationalism, and that a conciliatory policy that would bring about tangible benefits should be promoted to support the pragmatic forces within the socialist governments. Finally, there was the concern about regional security after the end of the Cold War. Japan shared this concern with the middleand small-sized neighbouring countries, and whilst strengthening the bilateral alliance with the US, facilitated the Gulliver approach in which a giant, China, was co-opted into the ARF. Nevertheless, there were other factors that imposed limits on Japan’s pursuit of regional frameworks. First, Japanese trading policies were based on the reflection that the formation of trading blocs led to the Second World War. Therefore, Japan always emphasized that regionalism had to be an open type and, until the

Japan and China 105 end of the 1990s, it had been reluctant to discuss exclusive free trade arrangements with other countries. Second, the negative image of the East Asian Co-prosperity Sphere still lingered amongst the East Asian nations, although it had by now faded in the eyes of most of the Southeast Asians. Some members of the Japanese government maintained that Japan should not play a conspicuous role in initiating the formation of the regional security framework since it could arouse the suspicions of some countries. Third, Japan could not ignore the attempt by the US to check any move that could lead to the independence of East Asia from its control. Mainly due to American opposition, Japan did not agree with Prime Minister Mahatir bin Mohamad on his 1990 proposal to form the EAEC, and abandoned its own idea to establish the AMF despite support from the ASEAN countries. It is necessary, therefore, to investigate not only the interrelationship between the regional policies of Japan and China, but also their respective relationship with the US in discussing the future regional order.

Japan and China’s regional policies and the Japan–US–China triangle The shift in China’s regional policy has had a significant impact on its bilateral policy towards Japan. Now the dominant view is that joining forces with Japan is essential if Chinese leaders wish to implement effective regional cooperation. This thinking constitutes the basis of China’s conciliatory approach towards Japan despite the occasional disruption caused by such issues as history, territory, economic frictions over trade and investment, finance and intellectual rights and Taiwan. When Jiang Zemin visited Tokyo in November 1998, he sharply and repeatedly reminded the Japanese of their wartime deeds and the need to contain militarism, which was regarded by many Japanese to be unnecessary, impolite and irritating (Kokubun 2001: 43). He was angry especially because Prime Minister Obuchi Keizo¯ had apologized to the Koreans in writing when President Kim Dae Jung visited Japan a month earlier, but Obuchi refused to do so to the Chinese, and only apologized orally. From the viewpoint of the Japanese, they had apologized to the Chinese on many occasions, including the Emperor’s visit to Beijing in 1992, whilst they had not done so to the Koreans. Even when the word, ‘apology’, was not uttered, the spirit had been unequivocal and was accepted by the Chinese leadership at the time.12 Obuchi was also under pressure from within the LiberalDemocratic Party (LDP) not to give in to China this time. As China accelerated its economic development and grew stronger in the 1990s, an increasing number of Japanese could imagine further political pressure and economic competition from China, and doubted the wisdom of a continued low posture towards the Chinese. In the wake of the Jiang visit, Chinese policy-makers apparently adjusted their tactics in their policy towards Japan. The Obuchi visit to China in July 1999 went smoothly, during which China did not take up the history issue but chose Japan as the first country to conclude the bilateral negotiation for China’s entry to the WTO. In November 1999, China agreed for the first time to hold

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a Japan–China–South Korea trilateral summit meeting on the occasion of the ASEAN ⫹ 3 summit meeting. In May 2000, Jiang personally entertained 5,000 members of the Japan–China Tourism Exchange Mission, and spoke of his belief in the development of the Sino-Japanese relationship in the twenty-first century. Whenever the historical issues emerged, such as the textbook drafted by some chauvinists or the visit to the Yasukuni Shrine by Prime Minister Koizumi Junichiro, China did respond strongly but not as aggressively as it did in the past. The shift in China’s approach towards Japan took place partly in relation to the deterioration in its relationship with the US in 1999. This was caused by the increase in the membership of the North Atlantic Treaty Organization (NATO) and NATO’s military intervention in Yugoslavia, which was justified by the April 1999 adoption of the alliance’s Strategic Concept that expanded its concerns to protecting humanitarian values in out of area operations. This, and the bombing of the Chinese embassy in Belgrade, was unacceptable to China because the new Strategic Concept theoretically could be applied to it for the so-called violation of human rights in its ethnic conflicts and the confrontation with a democratic Taiwan. However, there also seems to have been a strategic consideration behind the new policy towards Japan. That is, China started to see the bilateral relationship in the wider context of globalization and regionalization. This apparently happened earlier and almost simultaneously with the shift in China’s policy towards regional cooperation. That is why, despite the bickering over historical issues, the 1998 Jiang visit produced the epoch-making Sino-Japanese joint press announcement on strengthening cooperation towards the twenty-first century, which included cooperation on international issues such as the Korean Peninsula problem, multilateral trade systems and the East Asian economy. It was probably the case that the swift readjustment in China’s tactical approach after the Jiang visit was possible because of this earlier strategic decision. This became even clearer when Jiang told Prime Minister Mori Yoshiro¯ at the United Nations Millennium Summit in September 2000 that the rise of Asia was only possible with the friendship and cooperation between Japan and China, and that the leaders of the two countries must take a long and broad view of the bilateral relations. When Prime Minister Zhu Rongji visited Japan in the following month, he raised regional economic cooperation as one of the three target areas of joint cooperation, and stressed that he looked forward to strengthening the coordination with the Japanese side within the framework of cooperation in East Asia.13 It has become a dominant view amongst Chinese scholars that cooperation between Japan and China is the necessary condition for successful regional cooperation in East Asia (Sun 2001: 27; Zhang 2001; Pang 2002). This is precisely what the Japanese had been advocating, and Koizumi has highly praised the Chinese for the active role they are willing to play in regional cooperation (Koizumi 2002a). The two sides have started to agree on some specific measures. For instance, Jiang Zemin expressed strong support for the East Asia Monetary Fund when Mahatir proposed it to him in August 1999. In March 2002, Japan and China signed the Yen-RMB swap treaty based on the ASEAN ⫹ 3 Chiang Mai Initiative that started in May 2000. This currency swap treaty

Japan and China 107 between the two countries with the largest foreign exchange reserves in the world symbolized their willingness to nurture the Yen and the RMB as Asian currencies. In April 2002, Koizumi made a special trip to the First Annual Meeting of the Boao Asia Forum and stated that the strategic task for all was to combine the individual efforts into a broader regional economic integration (Koizumi 2002b). Even in the area of security, China agreed during the 2000 Zhu visit to Japan on the friendly exchange of naval vessels, which Japan had been proposing for some time. However, we must say that there has not yet been a full synchronization of the efforts of the two sides. There seem to be two major reasons for this. First, despite Koizumi’s statement about the general target of economic integration, economic and political conditions have not matured for the establishment of a free trade area in East Asia in the near future. As for Japan, there is a powerful lobby to protect the interests of the farmers, who have strongly argued against the liberalization of trade in agricultural products. When the meeting between Japanese citizens and Zhu was televised in October 2000, a shiitake mushroom producer asked Zhu to do something about the rapid increase in China’s exporting of shiitake to Japan. In the following year, quite ignorant of China’s tenacious attempt at talking ASEAN into negotiating a free trade area, Japan introduced tentative safeguard measures on three agricultural items including fresh shiitake, against which China retaliated by lifting the tariffs for Japanese industrial products such as cars and mobile phones. During his visit to Singapore in January 2002, Koizumi proposed what he called an initiative for a Japan–ASEAN comprehensive economic partnership, to which he said the Japan–Singapore economic agreement just signed would be an example. It was not so difficult with Singapore since it hardly has any agriculture, and the path to an agreement with ASEAN as a whole will be tough and winding. Thus, objection from the agricultural sector has now become the strongest constraint on Japan’s pursuit of regional integration. This is not the case with China, since the political system is such that the authorities need not pay too much attention to the farmers, whose interests are in fact seriously underrepresented. China, as an initial step, agreed to lower the tariffs for timber, tropical fruits and palm oil from ASEAN to facilitate the negotiation process. Second, there is a need to sort out what regional cooperation in East Asia means to the relationship with the US. Koizumi has proposed to include Australia and New Zealand in the East Asian community, perhaps partly in order to allay the fear that regional cooperation in East Asia is exclusively for the Asians. He has also stressed that the close partnership with the US, which plays a large role in terms of regional security and economy, is indispensable. In Koizumi’s words, however, APEC and the Asia–Europe Meeting (ASEM) are important tools to link the East Asian region to other regions (Koizumi 2002a). This implies that the core of Japan’s regional identity lies in East Asia and not in the Asia-Pacific. The question of the relationship with the US is as real a problem for China as it is for Japan. Amongst the Chinese policy-makers and scholars in favour of promoting regional cooperation, we can identify two lines of thought as ideal types.

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On the one hand, there is an idea to unite amongst the East Asian nations and confront the US. There is an impression that such thinking exists especially amongst the Chinese engaged in security affairs. In the realm of the economy, such thinking pays attention to the rise of East Asian regionalism vis-à-vis the mounting risks of American-led globalism. On the other hand, there is an idea to accept the US as an important participant in regional cooperation. No one can deny the fact that all the East Asian economies, including China, are largely dependent on the American market. According to US statistics, Sino-US trade in 2000 amounted to US$116.3 billion. Even in the area of security, pragmatic leaders such as Vice-Premier Qian Qichen have acknowledged the positive role of the US. In December 1999, Qian stated that: The US has maintained close ties with the Asia-Pacific region in terms of politics and economy and has made an important impact on the peace and prosperity of this region. China pays great attention to the positive role played by the US in resolving regional problems. I hope that, together with the Asia-Pacific nations, the US would establish a new concept of security centring on mutual trust, mutual benefit, equality and cooperation, and uphold the peace and stability of the region. (Asahi Shinbun Asia Network 2000: 72) The view that regional cooperation should be extended to the area of security is increasingly strong in China. According to Zhan Yunling, perhaps the most influential academic in the making of China’s regional policy, the defence ministers’ meeting and the East Asian security cooperation council are amongst the objectives of ASEAN ⫹ 3 as envisaged by the Chinese authorities (Cheng 2001: 432). Prime Minister Zhu officially stated at the ASEAN ⫹ 3 summit in November 2001 that efforts should be made gradually to carry out dialogue and cooperation in the political and security fields, consistent with the principles of consensus and incremental progress (Zhu 2001). It is obvious that any effective progress in regional security cooperation would involve the participation of the US. It is notable that, at this juncture, the Director of the Japanese Defence Agency ( JDA), Nakatani Gen, presented a personal proposal for a multilateral security framework in East Asia (Nakatani 2002). He maintained that an unstable security environment in Asia would negatively affect economic cooperation and integration, and that Japan should initiate a new security framework in the Asia-Pacific including Southeast Asia, China, the two Koreas, Russia and the US. As a first step, Nakatani proposed joint research for a regional framework for cooperative security when he visited South Korea in April 2002, and was to do the same in China later that month, but the latter visit was postponed in the wake of Koizumi’s second visit to Yasukuni Shrine on 21 April. Thus, in security as well as in economy, it is likely that regionalism will serve as a promoter of reconciliation and cooperation across the Pacific Ocean. The difficulties are obvious, but the trend is positive, well-founded and promising.

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Conclusion The tide of regionalism that originated in Europe and covered the Americas finally reached East Asia in the latter half of the 1990s. The causes were various, including the search for a new order in the post-Cold War era, the rise in regional economic interdependence as a corollary of the advancement of globalization, the fear of exclusive bloc formation and the need for an ‘open regionalism’ in the case of APEC, the outbreak of the Asian economic and financial crisis which gave birth to the ASEAN ⫹ 3 by enhancing the sense of a common interest and destiny amongst the East Asian nations, and the rise of China, which increased the confidence of the Chinese in participating in multilateral forums and stimulated the other countries to engage and co-opt China into the regional framework. Three major layers of regional networks are now in existence: first, there is APEC, which covers the Asia-Pacific and links East Asia with North and South America, and the ARF, which excludes South America but includes such countries as India, Mongolia, North Korea and the EU; second, there is the ASEAN ⫹ 3, which links Southeast and Northeast Asia; and third, there is ASEAN in Southeast Asia and the Japan–China–South Korea triangle in Northeast Asia. Although the latter triangle remains underdeveloped compared to the other networks, the leaders of the three countries have made it a rule to hold a summit meeting annually, and designated 2002 as the exchange year amongst the three nations. At the time of writing in 2002, this three-layered structure is rather new and all the countries are in the process of contemplating how they should combine these frameworks in their regional policy to obtain the best advantage. A most intriguing question that has a strong implication for the future development of this three-layered structure is the role that the US will play. Japan has, for better or for worse, paid much attention to involve the US in the regional framework of the Asia-Pacific which it found as an effective means to unite its ties with Asia and North America. The focus of the emerging East Asian order, China, is becoming increasingly pragmatic and agreeable to a US role in regional affairs as it gains power and confidence as a result of deepening economic integration with the region and the world. It is most likely that China as well as Japan will choose the layers of regional frameworks to the best of their interests depending on the issue at stake. Compared to its active participation in regional economic forums, China is still relatively hesitant about multilateral security forums since the Chinese policy-makers feel inferior and insecure in the face of the US–Japan alliance. However, the evidence suggests that a positive interaction is emerging between the areas of economy and security in East Asia. It is surprising how much potential people find in the tide of East Asian regionalism to overcome the differences and suspicions that remain in the region, especially between Japan and China. Perhaps this is partly because the East Asian nations, in the wake of the Asian economic and financial crisis, strongly sense the

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need for unity in confronting the threat of globalization, and partly because East Asian regionalism is largely based on economic realism and not on academic idealism. Although it has to be said that there is a long way to go until economic and political integration à la EU is envisaged, if Japan and China can continue to cooperate under the banner of East Asian regionalism, which the leaders have vowed to do, there is little reason to doubt its future potential however much time it may take.

Notes 1 Also note that the memory of the 4 June Incident (Tiananmen Square) in 1989 was still fresh in people’s minds at that time, and for China the meeting was important in its attempt to mark a complete comeback onto the international stage. 2 Remark by Zhang Baijia, researcher at the Central Party History Research Centre, at a group discussion held at the Institute of International Studies, Tsinghua University, reported in Huanqiu Shibao, 22 September 2000. The other participants were, Wang Yizhou, Institute of World Economics and Politics, Chinese Academy of Social Sciences, Zhu Chenghu, Strategic Institute at the National Defence University, Qu Xing, Foreign Affairs College, Jin Dexiang, Tsinghua University, and Yan Xuetong, Tsinghua University. 3 The first meeting took place in March 1999. 4 The rest of this paragraph relies on the report of the group discussion of scholars, Huanqiu Shibao, 22 September 2000, and Editing Group of Some Strategic Questions for China Facing the Twenty-first Century 2000: 184 –5. 5 In the group discussion mentioned in endnotes 2 and 4, Zhu Chenghu stressed this point and cited the example of Mexico, which, thanks to NAFTA, replaced China as the number one textile exporter to the US. Note that, on the relationship between regionalization and globalization, there are different views. Some think regionalization is one step in globalization, whilst others view them as taking place simultaneously and that China should promote the former. I personally tend to think that regionalization is one result of globalization. 6 According to the most reliable source, the percentage of non-performing loans of the four major state-owned commercial banks was 24.4 per cent as of the end of 1996, but rose to 29.2 per cent as at the end of June 1997. According to the same source, the rate was 7.9 per cent in Thailand and 17 per cent in Indonesia (Li 1998: 31–2). 7 A common argument was that the East Asian countries had also realized that the US was unhelpful and APEC was useless in such a crisis. 8 Australia also advocated a regional framework to promote free trade, but its initial plan ¯ ba 2001: 269). had excluded the US (O 9 A policy speech by Premier Kaifu Toshiki at the Sino-Japanese Youth Exchange Centre, 11 August 1991 (Kazankai 1998: 770). 10 Available on-line at: ⬍http://www.mofa.go.jp/region/n-america/us/security/ security.html⬎, visited on 24 June 2002. 11 An exception was North Korea, with which Japan has not yet normalized its diplomatic relations. 12 Otherwise it would not have been possible to normalize relations in 1972 and sign the Peace and Friendship Treaty in 1978. For instance, the 1972 Japan–China Joint Communiqué reads: ‘The Japanese side realizes keenly its responsibility as to the serious damage it inflicted on the Chinese people through the war, and feels deep remorse’ (Kazankai 1998: 428). 13 The remarks by Jiang and Zhu are available on-line at: ⬍http://www. china-embassy.or.jp⬎, visited on 5 May 2002.

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References Asahi Shinbun Asia Network (2000) Asahi Shinbun Ajia Network Repo¯ to 2000 (Asahi Shinbun Asia Network Report 2000), Tokyo: Asahi Shinbun Asia Network. Cheng, J. Y. S. (2001) ‘Sino-ASEAN relations in the early twenty-first century’, Contemporary Southeast Asia, 23(3) (December): 420–51. Editing Group of Some Strategic Questions for China Facing the Twenty-first Century (ed.) (2000) Zhongguo Mianxiang Ershiyi Shiji de Ruogan Zhanlüe Wenti (Some Strategic Questions for China facing the Twenty-first Century) Beijing: Chinese Communist Party Central Party School Press. Hatano, S. (1997) ‘Ajia taiheiyo¯ no “chiikishugi” to Nihon’ (‘Regionalism’ in the AsiaPacific and Japan), in H. Kleinschmidt and S. Hatano (eds), Kokusai Chiiki To¯ go¯ no Furontia (The Frontier of Regional Integration in the World), Tokyo: Sairyu¯sha. Hu, S. (2000) ‘Dongya hezuo de jinzhan ji fazhan qianjing’ (The progress and prospects for cooperation in East Asia), International Studies, 5 (September): 51–3. Jiang, Z. (2001) Lun ‘San ge Daibiao’ (On the ‘Three Represents’), Beijing: Central Documents Publishers. Kazankai (ed.) (1998) Nicchu¯ Kankei Kihon Shiryo¯ shu¯ 1949-nen–1997-nen (Basic Materials on Sino-Japanese Relations, 1949–97), Tokyo: Kazankai. Koizumi, J. (2002a) Japan and ASEAN in East Asia – A Sincere and Open Partnership, speech in Singapore, 14 January 2002. Available online at: ⬍http://www.kantei.go.jp/foreign/ koizumispeech/2002/01/14speech_e.html⬎, visited on 15 April 2002. —— (2002b) Ajia no Shin Seiki – cho¯ sen to kikai (Asia’s New Century – challenges and opportunities), speech at the Boao Asia Forum, 12 April 2002. Available online at: ⬍http://www.kantei.go.jp/jp/koizumispeech/2002/04/12boao.html⬎, visited on 15 April 2002. Kokubun, R. (2001) ‘Reisen shu¯ketsugo no Nicchu¯ kankei: “1972-nen taisei” no tenkan’ ( Japan–China relations after the Cold War: the transformation of the ‘1972 regime’), International Affairs, 490 ( January): 42–56. Li, B. (1999) Dangdai Zhongguo Waijiao Gailun (An Introduction to Contemporary Chinese Diplomacy), Beijing: Chinese People’s University Press. Li, X. (1998) ‘Cong Dongya jinrong weiji kan woguo de jinrong yinhuan’ (Viewing the hidden financial peril of our country from the viewpoint of the East Asian financial crisis), Reform, 3(20 May): 31–9, 86. Nakatani, G. (2002) Establish a Security Framework in the Asia-Pacific, a comment on his personal home page, 20 February 2002. Available online at: ⬍http://www.nakatanigen. com/g _cont.htm⬎, visited on 23 April 2002. Okabe, T. (1996) ‘Learning to survive with “Gulliver” ’, The World Today, 52(6) ( June): 155–6. ¯ ba, M. (2001) ‘Chiikishugi to Nihon no sentaku’ (Regionalism and Japan’s options), in O S. Suehiro and S. Yamakage (eds), Ajia Seijikeizai Ron – Ajia no naka no Nihon o mezashite (On Asian Political Economy: towards a Japan in Asia), Tokyo: NTT Publishers. ¯ tsuji, Y. and Shiraishi, T. (2002) ‘Nihon-ASEAN no kakudai FTA jiyu¯ bo¯eki kyo¯tei o O teisho¯ suru’ (We advocate an enlarged FTA between Japan and ASEAN), Chu¯¯o Ko¯ ron (February): 68–76. Pang, Z. (2002) ‘Zhong Ri zhijian de “zhanlüe jinzhang” yu Meiguo yinsu’ (The ‘strategic tension’ between China and Japan and the US factor), Lianhe Zaobao, 19 February 2002. Available online at: ⬍http://www.zaobao.com.sg/special/china/sino_ jp/pages/ sino_ jp190202.html⬎, visited on 6 May 2002.

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Soeya, Y. (2000) ‘ASEAN chiiki fo¯ ramu to Chu¯goku’ (ASEAN Regional Forum and China), in S. Takagi (ed.), Datsu Reisenki no Chu¯goku Gaiko¯ to Ajia-Taiheiyo¯ (China’s Diplomacy and the Asia-Pacific in the post-Cold War Era), Tokyo: Kokusai Mondai Kenkyu¯jo. Sun, C. (2001) ‘Daguo guanxi yu Dongya hezuo’ (Relations between powers and cooperation in East Asia), International Studies, 4 ( July): 24 –9. Takagi, S. (1999) ‘In search of a sustainable equal partnership: Japan–China relations in the post-Cold War era’, Japan Review of International Affairs, 13(1) (Spring): 17–38. —— (2001) ‘Chu¯goku to Ajia-Taiheiyo¯ no takokukan kyo¯ryoku’ (China and multilateral cooperation in the Asia-Pacific region), in K. Tanaka (ed.), Gendai Chu¯goku no Ko¯ zo¯ Hendo¯ 8 Kokusai Kankei ( The Structural Change of Modern China 8 International Relations: the regional order of the Asia-Pacific), Tokyo: Tokyo University Press. Takahara, A. (1999) ‘Ajia kinyu¯ kiki no seijikeizai gaku – Chu¯goku no baai’ (The political economy of the Asian financial crisis: the case of China), Asian Studies, 45(2) (August): 53–79. —— (2001) ‘Busshu shin seiken to Beichu¯ kankei’ ( The new Bush administration and US–China relations), East Asia, 407 (May): 6–12. Yamamoto, Y. (2000) ‘Chiikishugi’ (Regionalism), in T. Inoguchi, M. Osawa, N. Okazawa, Y. Yamamoto and S. Reed (eds), Seijigaku Jiten (Encyclopaedia of Political Science), Tokyo: Ko¯ bundo¯. Zhang, X. (2001) ‘Zhongguo rushi he Zhongguo-Yaxian ziyou maoyi qu’ (China’s joining the WTO and the China-ASEAN free trade area), Lianhe Zaobao, 26 November 2001. Available online at: ⬍http://www.zaobao.com/special/wto/pages/wto261101.html⬎, visited on 6 May 2002. Zhao, J. (2001) ‘Goujian Dongya ziyou maoyi qu’ (Constructing a free trade area in East Asia), World Affairs, 8: 32–3. Zhu, R. (2001) Strengthening East Asian Cooperation and Promoting Common Development – Statement by Premier Zhu Rongji of China at the 5th 10 ⫹ 3 Summit, 5 November 2001. Available online at: ⬍http://www.fmprc.gov.cn/eng/21861.html⬎, visited on 6 May 2002.

7

The United Kingdom and the euro Exchange rate stability but at what price? Brian Ardy

The decision on United Kingdom membership of the European Monetary Union (EMU)1 will define its economic relations with the European Union (EU) and the world economy, and will impact upon the UK’s national and regional economic performance. Ultimately this is a political issue, but the economics weigh heavily in the UK debate. The economic desirability of EMU membership depends upon the economic structures and the relative performance of the UK and the EU economies. Paradoxically, the recent good performance of the UK economy has hardened opinion against membership. Why change a successful system? This question is seen as especially pertinent as, for most of the postwar period, the UK’s relative economic performance has been poor. Since 1992, however, the UK has enjoyed a growth of output and employment, combined with low inflation, superior to most other European economies. This provides a complete contrast with Japan, which for most of the postwar period enjoyed outstanding economic performance but has more recently suffered from stagnant growth and rising unemployment. Whilst this chapter focuses on the UK’s economic performance in relation to EMU membership, the issues considered relate to economic policy and performance more generally. The turnaround in UK economic fortunes dates from the ejection of sterling from the Exchange Rate Mechanism (ERM) of the European Monetary System (EMS). The subsequent substantial depreciation of sterling boosted UK output by increasing competitiveness but, unlike past devaluations, this improvement in competitiveness, was not eroded by subsequent inflation. This can be attributed to: (1) the depressed state of the economy in 1992; (2) fierce import competition because of recession across the EU; and (3) a regime change in the way the UK labour markets in particular responded to increased demand. A rise in the value of sterling from Autumn 1996 put further downward pressure on prices. The change of government from Conservative to Labour in 1997 did not result in a change in economic policy, but did result in the locking in of the improved inflation performance with the independent monetary policy-making of the Bank of England. Whilst the rising value of sterling, and more recently the bursting of the dotcom bubble and slower United States growth, have taken their toll on the manufacturing sector, output and employment growth have continued as a result of buoyant housing and consumer markets fuelled by increasing debt.

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Given the UK’s euro-sceptic public attitudes and unfortunate experiences with European monetary integration, it was no surprise in 1997 that the newly elected Labour government finessed a decision on EMU membership. The reason given for the delay was that the UK was not ready for membership but that when ‘the economic case for doing so is clear and unambiguous’ (HM Treasury 1997a), a decision would be taken to join.2 The means to judge the economic case for membership are the five economic tests specified by the Chancellor, Gordon Brown. The government has indicated that an assessment will be made within two years of its June 2001 election victory. In the often heated debate over UK membership of the EMU the fact that there is another set of requirements, the Maastricht Treaty convergence requirements for EMU membership, tends to be overlooked. Both the EMU convergence requirements and the Chancellor’s five economic tests are meant to assess a country’s suitability for EMU membership. So, this chapter will begin with a brief examination of the theoretical considerations bearing on this assessment. Then the extent to which the UK satisfies the EU convergence requirements will be examined. Next the consistency of the UK’s economic performance with the five economic tests will be considered. This will provide an overall assessment both of UK economic performance relative to the rest of the EU and of its readiness for membership of the EMU.

Theoretical considerations Joining a monetary union involves foregoing the use of the exchange rate and money supply/interest rates as independent instruments of economic policy. This will not be a problem if two conditions are met. First, that the economic performance of the country joining is sufficiently similar to the average of the monetary union, so that the overall economic policy will be suitable for its needs. Second, that other instruments of adjustment are available to ensure that any required economic adjustment is possible. This is the basis of the Optimum Currency Area approach (Mundell 1961), which suggests that the cost of monetary union membership is the loss of independent adjustment to shocks. There are two problems with this approach: the Lucas critique (1976) and the issue of how much regional variability can exist within a monetary union. The Lucas critique suggests that the assumption that the characteristics of the economy do not change as a result of joining a monetary union is dubious (Frankel and Rose 1997). After all, the whole point of joining a monetary union is to change the economy. Some changes contingent upon joining a monetary union should increase convergence, such as increasing levels of trade (Frankel and Rose 2000)3 and price transparency. Vulnerability to shocks will, however, depend upon the extent of diversification and specialization of regional economies. EU member states showed more overlap and diversification in their output than US states (Helg et al. 1995). The monetary union could, however, lead to increasing national specialization lowering diversification and increasing vulnerability to asymmetric shocks (Krugman 1993). The empirical evidence does not, however, show increasing national specialization in the EU despite diminishing trade costs,

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including considerable periods of exchange rate stability for some countries (Braunerhjelm et al. 2000). The role that trade intensity plays in fostering cross-country correlations of the business cycle is demonstrated by Frankel and Rose (1997). Trade flows will be enhanced by a common currency and the increased linkage between national economies will lead to a greater correlation of fluctuations in output, employment and inflation. This of course contradicts Krugman’s hypothesis of increasing trade intensity leading to specialization and vulnerability to asymmetric shocks. Regressions of output co-movements on proxies of trade intensity by Frankel and Rose (1997) suggest that the more closely trade is linked between countries the more tightly correlated economic activity becomes. Cyclical fluctuations are not just caused by random factors impacting upon national economies; the policies of national government have an important effect on these fluctuations, too. Appropriate policy accurately timed will reduce fluctuations, but inappropriate or incorrectly timed policy can change the timing or the magnitude of fluctuations. In a monetary union economic policies will be coordinated, monetary policy will be common and fiscal policy will be limited by formal measures and by the constraints of monetary union. The fixing of exchange rates in the EMS required coordination of economic policies and could be regarded as a loose approximation of a monetary union in this respect. The findings by Artis and Zhang (1999) that business cycles amongst ERM members have become correlated with Germany rather than the US provides evidence of the effect of economic policy coordination. The experience of national monetary unions indicates tat there will still be a considerable variation in economic conditions within a monetary union. Current thinking on optimal currency areas also indicates that the act of joining a monetary union is likely of itself to lead to a greater convergence of economic conditions. Thus, a country joining a customs union should not be expected to have exactly average conditions for the union. What is required is a reasonable similarity of economic performance and economic structures plus sufficient flexibility to adjust to a common monetary policy and a permanently locked exchange rate.

EU convergence criteria The convergence criteria included in the Maastricht Treaty seek to ensure sufficient correspondence of economic performance so that the adjustment to a single monetary policy and a permanently fixed exchange rate is relatively smooth. Convergence is also necessary to ensure that the credibility of the European Central Bank (ECB) is not undermined by member states in economic difficulties. Since these criteria were required to give a precise assessment at a particular time, they have numerical values for past economic performance. It is thus possible to manipulate a country’s situation so as to meet the criteria at the time of assessment, and this indeed happened. There is also flexibility in the criteria that were exploited by some countries to qualify for EMU membership. So far this does not

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seem to have been a problem – for example, Belgium and Italy have been able to make substantial strides in reducing their excessive levels of public debt within the EMU. Whether this will continue to be the case in potentially more testing economic circumstances in the future is an open question. More serious is the fact that real variables are notable by their absence, so there is no assessment of relative levels or rates of change of output and employment/unemployment. So the EMU has commenced operation across a very disparate economic area in terms of income, productivity, economic growth, employment and unemployment. With the exception of the exchange rate, the UK comfortably satisfies the Maastricht convergence criteria. The criterion for inflation is a rate for one year before the examination that does not exceed the average of the three best performing member states by more than 1.5 per cent in terms of price stability. Since 1999 the UK has had the lowest rate of inflation in the EU measured by the Harmonized Index of Consumer Prices (HICP), so the inflation criterion is clearly satisfied. At present UK inflation is constrained by the overvalued pound sterling, which reduces import prices and increases competition. Even a substantial fall in sterling is, however, unlikely to affect the UK’s ability to meet the inflation criterion. There seems to have been a reduction in the extent to which companies pass through increases in costs in general, and exchange rate depreciation in particular, to consumer prices (Taylor 2000). This change is probably related to economic reforms, such as the granting of independence to the Bank of England in monetary policy decisions. Any fall in the value of sterling is moreover likely to be partially offset by a fall in the value of the overvalued US dollar. Thus, even quite a substantial devaluation is unlikely to pose a problem in meeting the EMU convergence requirement for inflation. The two criteria for a sustainable fiscal position – a budget deficit of less than 3 per cent and gross government debt of less than 60 per cent of Gross Domestic Product (GDP) – are easily met by the UK. The UK is predicted to remain well within the deficit limit for the next five years (HM Treasury 2001), despite the expansion of government expenditure and the slowdown in the economy. There seems no reason to doubt the UK’s continuing ability to sustain its fiscal position. The UK’s strong situation is the result of one of the lowest levels of debt in the EU, now less than 40 per cent of GDP, low unemployment, low benefit levels and continued growth in the economy. The long-term interest rate on government bonds provides a forward looking assessment of inflation, as bond holders will require compensation for expected price increases. As UK inflation rates have fallen so have interest rates, and since 1998 the UK has comfortably satisfied the criterion that the nominal long-term interest rate does not exceed by more than 2 per cent that of the three best performing member states in terms of price stability. Currently the UK has longterm interest rates less than 1 per cent above those of the euro zone; with inflation predicted to remain low, UK compliance with this criterion should continue. The UK, except for a very brief flirtation with the Snake4 and a slightly longer acquaintance with the ERM, has maintained a floating exchange rate since 1973. The rate has not been stable and has fluctuated considerably around an overall downward trend (see Figure 7.1). After the UK’s traumatic exit from the ERM in

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150 140 Index January 1990 = 100

DM/Euros per £ 130 120 110 100 Effective exchange rate index 90 80 1975 Jan

1980 Jan

1985 Jan

1990 Jan

1995 Jan

2000 Jan

Figure 7.1 Sterling exchange rates. Source: ONS (2001).

October 1992, sterling weakened until 1996, since when it has rebounded strongly. Values that were unsustainable in the ERM have been achieved and maintained since the end of 1999. Unit labour costs have increased even more rapidly because wages have risen more rapidly in the UK (IMF 2001: 28). That sterling is overvalued is demonstrated not only by measures such as the real effective exchange rates but also by the trend of the balance of payments. Thus, the Balance of Payments Current Account has moved from a situation of balance in 1997, to a deficit of 1.7 per cent of GDP in 2000. To avoid severe adjustment problems in the EMU it would, therefore, be necessary to fix the exchange rate to the euro below its current level. The fact that this adjustment is necessary, and that sterling does not have a fixed exchange rate in the ERM, means that the UK does not meet the exchange rate criterion and faces problems for entry to the EMU. Although there is general agreement that sterling is overvalued, measuring its extent is extremely difficult due to the large fluctuations in the sterling–euro exchange rates. Bearing this qualification in mind, recent estimates suggest that sterling is 10–20 per cent overvalued (Alberola et al. 1999; Hansen and Roeger 2000). To an extent UK companies have learned to live with a higher exchange rate so that the current market opinion suggests a rate of around 68 pence per euro, a devaluation of around 9 per cent. This seems rather optimistic given the problems of UK manufacturing, the large and growing balance of payments deficit and the fact that UK economic growth is dependent upon consumer spending funded by increasing borrowing. Entering a monetary union with an overvalued currency means that price competitiveness can only be restored by years of below average inflation. So a significant devaluation of sterling is an essential prerequisite of successful membership. Achieving it is, however, a different matter. Ten of the twelve current EMU member states satisfied the Maastricht Treaty exchange rate requirement by maintaining fixed exchange rates in the ERM for

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the two-year period of examination. The two exceptions were Finland and Italy, which had been in the system for sixteen and fifteen months respectively before the examination in March 1998. These fixed rates were then maintained until 31 December 1998 when exchange rates were irrevocably fixed to the euro. There is some ambiguity in the exchange rate criterion because the normal fluctuation margins were changed from the ⫾2.25 per cent to ⫾15 per cent in August 1993. The criterion that was actually employed was a flexible ⫾2.25 per cent around the median currency. That Italy and Finland were permitted to join means that the criterion was not applied strictly, although over two years membership was completed before the third stage of the EMU began. When Greece joined the EMU in 2001 it fulfilled the two-year requirement and was assessed for the subsequent part of this period against the euro. The replication of these procedures would cause considerable problems for the UK. Fixed exchange rates in the ERM were required for a minimum of fifteen months before examination and two years before entry. Only relatively minor fluctuations in exchange rates occurred during this period. Thus, a potential scenario for entry would be: 1 2 3 4

Agreement in the Council on an appropriate (devalued) sterling exchange rate in the ERM. A period of at least one year with the pound maintaining a fixed exchange rate against the euro in ERM2, with no significant problems.5 Agreement that the UK satisfied the exchange rate criterion. UK entry to the EMU and the irrevocable fixing of exchange rates when the two years ERM membership is satisfied.

There are several problems with this scenario: (1) deciding the correct value of sterling; (2) obtaining Council agreement to the devaluation of sterling; and (3) goodwill from the existing member states to interpret the two-year period flexibly.6 With this one exception, therefore, the UK currently satisfies and is likely to continue to satisfy the Treaty on European Union (TEU) requirements for EMU entry in the medium term. The level at which the exchange rate is locked is an important issue since it will have significant effects on UK economic performance. The absence of a period of ERM membership with an appropriate exchange rate makes it extremely difficult to establish the right rate for EMU entry, and to obtain the agreement of other member states to the devaluation of sterling. This is the one major problem to resolve before the UK can satisfy the TEU convergence requirements.

The UK’s five economic tests Chancellor Gordon Brown’s five economic tests are concerned with real convergence of economic performance. There are several possible explanations for this. Since the real economy effects of the EMU are difficult to measure and assess, their use generated imprecision in the tests so that the decision on membership

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could be fudged. The attitude of the UK public makes it essential that it be convinced of the economic benefits of UK membership of the EMU, so meeting these tests is a useful first step in seeking to ensure public support in a referendum. The Chancellor was also concerned that the UK economy was different and this made EMU membership more problematic. This was partly the result of structural factors such as the UK being a net oil exporter7 and sensitivity to interest rates due to the high levels of variable interest rate for private sector debt.8 The UK was also seen as being less integrated into the EU with its business cycle more closely related to the US than the EU. These concerns are reflected directly in the tests: sustainable convergence, flexibility to deal with problems, conditions for long-term investment in Britain, impact on the City and the overall effect on growth, stability and employment. Sustainable convergence This test is the most wide-ranging, as the Treasury’s definition indicates: ‘are business cycles and economic structures compatible so that we and others could live comfortably with euro interest rates on a permanent basis?’ (HM Treasury 1997b: 9). Given the ambiguity of the term economic structures, and since the UK is comfortably within the admittedly wide range that exists in the euro area,9 the analysis will concentrate upon business cycle convergence. The most obvious measure of business cycle convergence is the growth rate of GDP. A substantial body of studies have analysed shocks in the EU (OECD 1999: 93–7). One of the chief questions considered by this literature is the extent to which there is a core group of countries with a high degree of commonality in their economic cycles. Structural vector auto regressive models have been used to make this assessment. Bayoumi and Eichengreen (1993) in a notable paper established that there was a core of European countries with closely related economic cycles and that the UK was not part of this core. These results have largely been confirmed by other studies (Helg et al. 1995; Artis and Zhang 1999; Kontolemis and Samiei 2000). That the UK business cycle did not coincide with that of Europe is not surprising; economic policy was very different because sterling was only part of the ERM for a comparatively brief period. Artis and Zhang show that ‘a higher degree of synchronization of business cycles is indeed associated with a lower volatility of exchange rates’ (1999: 130). It is not only the exchange rate but also monetary policy (Kontolemis and Samiei 2000) that are important in explaining the UK’s economic cycle. Even now the UK has not stabilized the value of sterling against the euro, but two factors may have increased the correlation of UK and euro zone economic cycles. First, the greater stability of UK macroeconomic policy-making formalized in the independence of monetary policy under the Bank of England since June 1998. Second, the increasing integration of the UK economy into the EU. There does seem to have been a change in the orientation of the UK’s business cycle after the mid-1990s. Over the period 1970–96 there was a correlation of

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Germany UK USA EMU

7 6

Annual GDP growth

5 4 3 2 1 0 –1 –2 –3 1990Q1

1992Q1

1994Q1

1996Q1

1998Q1

2000Q1

Figure 7.2 GDP growth 1990–2001: UK, Germany, Euro Zone, USA. Source: OECD (various).

0.60 between the annual rate of growth of GDP in the UK and US, but only 0.35 between that of the UK and Germany. Since 1996 the UK seems to have diverged from the US and has become more aligned with euro area fluctuations (see Figure 7.2).10 This seems to be continuing, with the euro area, like the UK, avoiding the recession the US is currently suffering, but the short period of observations and the regime change in Europe suggest caution in interpreting this potential change. If the UK joined the EMU the lower exchange rate and lower euro area interest rates in the UK would boost economic activity in the UK, increasing demand, output and putting pressure on inflation. However, the UK’s low rate of inflation means that there is some room for manoeuvre. The crucial test of the degree of synchronicity established by the UK is likely to come in the current downturn. At the moment the UK’s economy is growing faster than the euro zone so an easing of policy would increase the divergence. If, however, the UK economy slows relative to the euro zone then exchange rate depreciation and interest rate reductions could be appropriate to the needs of the UK whilst maintaining the correlation of business cycles. Flexibility Flexibility in product and labour markets is necessary for an economy to adjust to national problems in a situation where the exchange rate is fixed and interest rate determined for the area as a whole. Thus, whilst the exchange provides nominal international price flexibility, product and labour market flexibility could provide real international price flexibility. The UK has achieved a high degree of liberalization of product markets and retains a relatively low level of product market regulation. The UK economy is very open in terms of the extent of foreign direct

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investment (FDI) and the level of import penetration in intermediate and final products. These characteristics make the UK product markets very competitive. The UK is the European economy that has moved closest to the US in terms of flexible employment – hiring and firing costs are very limited, replacement rates in the social security system are low, and the rules of eligibility for unemployment benefit have been tightened. The Treasury highlighted three crucial measures of the effectiveness of labour markets: 1 2 3

Wage flexibility – the extent to which wages are able to shift to eliminate mismatches between labour supply and labour demand. Employment flexibility – sufficient labour mobility so that structural change does not lead to unemployment/labour shortages. Employability and lifelong learning – is the economy producing sufficient jobs for those who want to work and are the workers equipped to undertake those jobs?

The UK economy was traditionally faced with real wage rigidity in the face of high unemployment combined with rapidly accelerating wage inflation as unemployment fell. Prime Minister Margaret Thatcher’s governments in the 1980s fundamentally changed the UK labour market in a series of reforms. For example, reducing employment protection, allowing employment on flexible terms, reducing social security benefit levels and reducing the power of trade unions. Thus, since the late 1980s the UK has been assessed as having much lower levels of employment protection legislation than the rest of Europe (Nicoletti et al. 2000: 51) and higher levels of flexibility (Fabiani and Rodriguez-Palenzuela 2001). Recent economic performance supports the view that the flexibility of the UK economy has been enhanced. Since 1993 the UK has achieved stable growth, falling unemployment and rising employment with low wage and price inflation. This seems to represent a decisive break with the past. In the 1980s high unemployment was necessary to contain inflation – unemployment of 10 per cent was needed to keep inflation below 5 per cent. Since 1992 inflation has fallen despite rapidly decreasing unemployment – in 2001 inflation was 1.7 per cent and unemployment only 4.9 per cent.11 This improvement in the UK’s performance in relation to inflation and unemployment suggest that the UK non-accelerating inflation rate of unemployment (NAIRU) has been substantially reduced (Wadhwani 1999). Thus, there is a downward trend of estimates of the NAIRU in the 1990s from 9.3 per cent in 1990 to 6.8 per cent in 1999 (McMorrow and Roeger 2000: 14). This is in contrast to most other EU member states (except Ireland and the Netherlands) where the NAIRU has risen or been subject to only a small fall. A further indicator of increased labour market flexibility is an increase in the employment intensity of growth. In the 1980s even high rates of growth led to only a moderate growth of employment. From 1992 onwards even modest rates of growth of GDP were associated with employment growth, which was maintained despite shrinking unemployment. In the 1980s 3 per cent GDP growth

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would have been associated with 0.8 per cent employment growth, but in the 1990s with 1.1 per cent employment growth. Part of this change in the employment intensity of growth can be attributed to the fact that, despite the tight labour market conditions, total hours and overtime have declined moderately since 1995 (IMF 2001: 11), again indicative of a change in the behaviour of the labour market. The combination of the improved employment intensity of growth and the long period of positive GDP growth have added up to an impressive level of employment creation. Between 1993 and the end of 2001 nearly 2.4 million jobs were created in the UK. The UK has one of the highest employment rates in the EU and it has been one of the few countries to raise employment rates since the 1970s. All regions in the UK have benefited from the reduction in unemployment. Substantial inroads have also been made into the problem of long-term unemployment, and the proportion of the unemployed that has been out of work for more than a year has fallen from 44.3 per cent in October of 1994 to 24.0 per cent in October 2001. There is, however, one intractable problem that remains, that of inactivity, especially amongst older, unskilled workers in higher unemployment regions. The expansion of employment has taken place amongst women and the registered unemployed, so a large number of older male workers are no longer active in the labour market (Nickell and Quintini 2001). Despite this blemish there is clear evidence of a shift in the employment performance of the UK economy. A crucial test of structural reform is now being faced with the slow down in the world economy. The flexibility of the UK economy should enable it to respond to the changes in economic circumstances reducing their overall impact on the economy. Whilst the UK economy has become much more flexible, in the euro area change has been slow and patchy and unemployment in most countries remains high. It is not clear that centre-left governments, which predominate in the EU, are wedded to the flexibility agenda. Some policies such as the 35-hour working week in France seem to be moving in the opposite direction.12 The lack of flexibility in the euro area might suggest potential problems for the future, with some countries suffering economic problems as their economies slowly adjust to adverse developments. The excellent employment creation record of the Netherlands despite its relatively inflexible labour market illustrates that means of adjustment other than flexibility may be effective. The improved flexibility of the UK economy has succeeded in delivering the best performance in the EU in terms of job creation. But the limits of flexibility may be indicated by the less successful UK performance in growth and productivity. Investment The government sees investment as essential to raise productivity in the UK, so investment is one of the UK tests: ‘would joining the EMU create better conditions for firms making long-term decisions to invest in Britain?’ (HM Treasury 1997a). The level of investment in the UK has been lower than in other EU countries

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contributing to its lacklustre rate of economic growth over the long run. One factor that may help explain the lower rate of investment in the UK is its greater macroeconomic instability: ‘the variance of the UK’s GDP growth (over the period 1960–97) is significantly higher than in France, Germany and Italy’ (Kontolemis and Samiei 2000: 7). This instability may have contributed to lower investment in various ways. Large variability in output makes it more difficult to plan and generally reduces confidence and hence investment. Volatility may lead to higher interest rates and hence require greater returns on investment. The UK has had more unstable nominal and real exchange rates than countries in the euro area (Gros and Thygesen 1998: 115). Figure 7.1 demonstrates this to be a continuing trend. Exchange rate uncertainty can be characterized as consisting of volatility and misalignments. Volatility is random fluctuations around the long-run trend. Misalignments, by contrast, are large movements away from long-run trends with real exchange rates becoming over- or under-valued for extended periods. The effect of both exchange volatility and misalignments on UK investment is, however, estimated to be small (Darby et al. 1999).13 There may, however, be an aggregation problem here because not all investment is sensitive to the effect of the exchange rate and the assumption of exogeneity of investment is questionable. Thus, in disaggregated studies the real exchange rate is shown to have an important impact on export performance in contrast to the results of aggregate studies (Carlin et al. 2001: 140). Exchange rate misalignment has contributed to the two-speed economy characteristic of recent UK economic performance with recession in the exchange rate-sensitive manufacturing sector but a booming service sector. Manufacturing investment is thus probably too low and service investment too high. Whilst this may have contributed to job creation, it may also have been a limiting factor in productivity growth and pose problems for UK trade performance. Recent changes in UK economic policy-making have led to increased macroeconomic stability and the external environment has been generally supportive. Membership of the EMU would ensure stability of exchange rates between the UK and the euro zone; this is important because it accounts for a large proportion of UK trade.14 There may be some offsetting increase in instability against other currencies but overall exchange rate stability should be enhanced. Given the current success of UK macroeconomic policy, it could be argued that the stability gain from the EMU is slight. Economic policy will also be based on the conditions of the euro zone not on those of the UK and this could potentially undermine gains in exchange rate stability.15 Other aspects of EMU membership may have an impact on investment. UK-based firms will become a more integral part of the single market if the UK adopts the euro. This could provide additional opportunities for investment as transactions costs are reduced and price transparency is increased, investment could also move to other EU countries but the effect overall is likely to be positive. FDI by multinationals in the UK may be adversely affected by continued exclusion from the EMU. Although the UK has held on to its share of inward investment (see Table 7.1), the proportion of manufacturing projects is declining

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Table 7.1 Direct inward investment

Billion of US$ UK France EU % of EU total UK France

1985–94

1995

1996

1997

1998

1999

2000

19.2 12.4 76.6

23.7 20.0 113.5

24.4 22.0 109.6

33.2 23.2 127.6

70.6 31.0 281.1

82.9 55.9 467.2

130.4 176.1 617.3

25.1 16.1

20.9 17.6

22.3 20.0

26.0 18.2

25.1 11.0

17.8 12.0

21.1 28.5

Source: UNCTAD (2001).

(Ernst and Young 2001). With most investors anticipating UK membership, prolonged delay could adversely affect inward FDI if investors thought this increased the riskiness of the UK as a base to supply the single market. Financial services As discussed in more detail in Chapter 11, the City of London is the financial centre of Europe and a vital industry for the UK, producing 5.8 per cent of GDP and employing around one million people.16 With its international orientation it is also important to the Balance of Payments accounting for 4.4 per cent of total exports in 2000 (IFSL 2001). The importance of the sector and the fact that it is subject to rapid change means that the impact of the EMU on UK financial services is a legitimate cause for concern. Hence the test: ‘what impact would entry into the EMU have on the competitive position of the UK’s financial services industry, particularly the City’s wholesale markets?’ (HM Treasury 1997b: 32). Financial services are potentially sensitive to the effects of the EMU because exchange rate uncertainty is a profound barrier to trade. Thus, the EMU will significantly enhance cross-border competition and this is already to be seen in wholesale banking and securities markets. There has been a substantial growth of stock and euro bond issues as sources of European company finance. Investment policies have become more diversified with a shift from national to euro-wide investment, as shown by the increasing use of European rather than national benchmark indices. Financial institutions are also the subject of mergers although this has been in investment banking and insurance rather than retail banking (IFSL 2001). Intra-euro area foreign exchange dealing has disappeared but this has had a limited impact on London whose business is concentrated on international foreign exchange. London’s competitive advantage in financial services is based upon a combination of factors favouring agglomeration – externalities in the pooling of information across the markets for financial products. The volume of transactions in the City’s large market provides liquidity ensuring that prices more appropriately value assets, that the market is deep and wide – a critical mass of financial

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markets, related business and support services. The size of London’s financial services industry in addition provides a large and skilled workforce, with flexible employment conditions together with the use of the English language. London also has a system of regulation that ensures a reputation for probity whilst not stifling activity or innovation. The levels of taxation and the system’s treatment of financial transactions are also supportive. These factors have enabled London to compete effectively, even with the UK outside the euro area. London is the world’s largest centre for cross-border bank lending, equities trading, foreign exchange dealing, marine and aviation insurance, as well as having an important role in fund management and corporate finance (IFSL 2001: 2). There is no convincing evidence that remaining outside the euro zone has harmed the financial services industry in the UK. This is partly because some of the problems raised by the Treasury (1997b) have not arisen. UK-based banks have had access to the euro payment system, the TransEuropean Automated Real-time Gross Settlement Express Transfer (TARGET); indeed, recently London has accounted for 19 per cent of cross border payments, up from 15 per cent at the launch of the euro (Clementi 2001). Loopholes in single market legislation have not been used to block UK access to euro markets. In the longer term the location of the central bank could encourage a gravitation of markets to the city with the best local information, Frankfurt. The US example indicates the contrary, however. New York remains the financial centre despite the Federal Reserve being in Washington. Most US money market operations are, however, carried out in New York by the local Federal Reserve Bank. What is unusual is the location of the main financial market outside the monetary union, so there is concern over the sustainability of the current situation. UK membership of the EMU besides avoiding this problem should help London consolidate its position as the EU’s financial centre. It would be the natural location for the ECB to carry out most of its open market operations. With monetary union there would be strong incentives to concentrate financial services in one centre both for ‘domestic’ and international operations. The takeover of the London Financial Futures and Options Exchange (LIFFE) by Euronext, the pan-European stock exchange based in Brussels, indicates growing strength in European financial services based on the development of a single financial market. So the UK joining the EMU would potentially avoid risks for financial services and provide important advantages for the industry.17 Employment and growth This is really a general evaluation: ‘in summary, will joining the EMU promote higher growth, stability and a lasting increase in jobs?’ (HM Treasury 1997b: 36). If the other tests are satisfied then the answer to this question will be ‘yes’. The policies adopted by the ECB should be appropriate for the UK if it is cyclically convergent with the euro zone. If there is sufficient flexibility in the UK and the euro zone economies generally then national adjustment will be possible in response to shocks and other factors causing divergent economic trends. The success

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of the City in the euro zone will ensure that an important sector of the economy sensitive to the EMU is able to continue to contribute to growth, employment and exports. The maintenance and hopefully the augmentation of investment will be crucial to the growth of productivity, the improvement of competitiveness and the continued prosperity of the UK in the euro zone. It is not just these benefits individually that are important but their interaction. Thus, price transparency and its effect on competition in the single market will enhance the efficiency of product markets and potentially price flexibility. Locking the exchange rate will eliminate one source of volatility in the UK economy, which has impacted particularly on manufacturing industry slowing growth and discouraging investment. This could well have contributed to the very low rate of growth of manufacturing in the UK from 1970 to 1999 – only 0.6 per cent per year compared with 2.5 per cent for services. This growth of manufacturing compares very unfavourably with that achieved by other countries: 1.5 per cent in France and 3.1 per cent in the US. Whilst manufacturing is a much-reduced sector of the economy, it is still dominant in the balance of payments and important in overall productivity growth. In 2000 manufacturing still accounted for 61.4 per cent of UK exports and 66.7 per cent of UK imports despite the fact that the sector only accounted for just over 20 per cent of GDP. Employment reveals similar but perhaps even more dramatic trends: it is only in the service sector that employment has increased, by nearly 4.8 million between 1980 and 2001, a 31 per cent increase. In manufacturing, employment has declined by 2.9 million – a 43 per cent decrease – so now even financial services employ more workers than manufacturing. The decline in employment in manufacturing has not been uniform, with two large reductions at the beginning of the 1980s and the 1990s and again today. These correspond to periods of serious overvaluation of sterling; for the rest of the period employment was stable. This evidence suggests that the operation of an independent macroeconomic policy by the UK has not proved advantageous in the floating exchange rate era. This is because of periodic severe misalignments of sterling, which have had severe impacts on employment and output, particularly of manufacturing industry. Potentially they have also harmed the long-run growth potential of the economy because of their impact on investment and capacity. Economists argue about the impact on growth of recessions because costs of lost investment and destruction of human capital may be offset from restructuring, reorganizing, the opportunity for training and implementation of new technology (Gilles 1997). There can be little doubt that very large recessions leading to the destruction of normally viable capacity will harm growth. Whilst it could be argued that the recessions associated with sterling’s overvaluation of the early 1980s and 1990s were the result of errors in government economic policy, the current problems with the exchange rate co-exist with what is generally regarded as an effective economic policy mix. So, far from causing problems for growth and employment, fixed exchange rates in the EMU could enhance growth and employment in the UK. That the UK like all euro area economies differs from the average but common monetary and

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co-ordinated fiscal policy within the EMU should ensure similarity of economic fluctuations. So overall full membership of the EMU should be good for growth and employment.

Conclusion Given the ambiguity of the government’s economic tests a definitive answer of the UK’s readiness for EMU membership is not possible. This analysis suggests that arguably the UK does satisfy these criteria given the regime change effects that membership will bring. The stumbling block is a difficult to engineer depreciation/ devaluation in the exchange rate of sterling – joining at the wrong rate would risk repeating the mistakes of the UK’s membership of the EMS. Whether the economic test is the crucial one is arguable. Membership of the EMU is a fundamental political step to greater engagement with the EU and with an agenda of increasing integration. ‘Selling’ monetary union as an economic issue places undue emphasis on economic benefits, which are likely to be limited and difficult to untangle in the public’s mind from the ordinary vagaries of economic fluctuations. The UK would be repeating the mistakes of the past, storing up problems for future relations with the EU, by failing to make clear the full ramifications of membership of the EMU. Thus, although the economics suggest that the UK could successfully join the EMU, ultimately the decision to adopt the euro is political not economic.

Notes 1 Strictly speaking, all member states are participants of the first and second stages of the EMU. It is membership of the third stage, with the irrevocable fixing of exchange rates and the adoption of the euro, that is crucial. In this chapter membership of the EMU is used as shorthand for participation in the third stage and adoption of the euro. 2 This government decision in principle would need to be affirmed by a positive vote in a referendum. 3 The effect of currency stability on trade is disputed as the Frankel and Rose results are mainly for very small economies in monetary unions. (Thom and Walsh 2002) find that the ending of the currency union between the UK and Ireland in 1979 had no statistically discernible impact on the trade between the countries. 4 The Snake was a fixed exchange rate system amongst EC currencies similar to the EMU, launched in 1972. It was called the snake because when plotted together the currencies snaked across a time series graph. 5 ERM2 is the new version of the exchange rate mechanism launched on 1 January 1999. The major change is that the exchange rate is fixed against the euro. 6 UK entry to the EMU would, therefore, be considerably eased by a sufficient prior depreciation in sterling. This would not only make the negotiation of the entry rate more straightforward, it would also obviate the need for a potentially politically damaging devaluation, which could make it more difficult to win the referendum. 7 This is a problem of fading importance. Since 1996 the UK has again become a net oil importer, as oil production diminishes net oil imports will rise.

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8 Lower and more stable interest rates and increased use of fixed interest mortgages will diminish the UK’s difference in this respect. 9 For a dissenting view see Bush (2001). 10 The UK EMU and UK US correlations are similar: 0.51 and 0.45. However, this was a period of transition and establishment of the EMU so there is no stable European comparator. 11 Inflation Retail Price Index excluding mortgage interest payments (RPIX), figures to third quarter 2001, from OECD (various). 12 All may not be as it seems because the introduction of the 35-hour week has been used to encourage workers to agree deals on more flexible working arrangements. 13 The infrequency of misalignments makes it difficult to estimate their effect statistically. 14 The euro zone accounts for 50.8 per cent of UK trade (imports and exports) in goods and 47.5 per cent of UK trade in goods and services. 15 Simulation with macroeconomic models tends to suggest increased volatility in the EMU (see Bush 2001: 67–78). 16 Associated professional and support services, such as legal services, accounting and management consultancy, account for another 3 per cent of exports, and employ a further 600,000 people. 17 For a dissenting view see Bush (2001: 85–96).

References Alberola, E., Cervero, S., Lopez, H. and Ubide, A. (1999) ‘Global equilibrium exchange rates: euro, dollar, “ins”, “outs”, and other major currencies in a panel co-integration framework’, IMF Working Paper, WP/99/175. Artis, M. and Zhang, W. (1999) ‘Further evidence on the international business cycle and the ERM: is there a European business cycle?’, Oxford Economic Papers, 51: 120–32. Bayoumi, T. and Eichengreen, B. (1993) ‘Shocking aspects of European monetary unification’, in F. Torres and F. Giavazzi (eds), Adjustment and Growth in European Monetary Union, Cambridge: Cambridge University Press. Braunerhjelm, P., Faini, R., Norman, V., Ruane, F. and Seabright, P. (2000) Integration and the Regions of Europe: How the Right Policies can Prevent Polarization, London: Centre for Economic Policy Research. Bush, J. (ed.) (2001) The Economic Case Against the Euro, London: New Europe. Available on-line at: ⬍http://www.no-euro.com⬎, visited on 19 November 2001. Carlin, W., Glyn, A. and Van Reenen, J. (2001) ‘Export market performance of OECD countries: an empirical examination of the role of cost competitiveness’, Economic Journal, 111 ( January): 128–62. Clementi, D. (2001) City Seminar on London into the 21st Century at the Palace Hotel Tokyo, 13 February. Available on-line at: ⬍http://www.bankofengland.co.uk/speeches/ speech112.htm⬎, visited on 1 September 2001. Darby, J., Hughes-Hallett, A., Ireland, J. and Piscitelli, L. (1999) ‘The impact of the exchange rate on the level of investment’, Economic Journal, 109(454) (March): 55–67. Ernst and Young (2001) Ernst and Young’s Investment Monitor – A Six-Month View, October, Available on-line at: ⬍http://www.ey.com⬎, visited on 20 December 2001. Fabiani, S. and Rodriguez-Palenzuela, D. (2001) ‘Model-based indicators of labour market rigidity’, European Central Bank Working Paper No. 57. Frankel, J. and Rose, A. (1997) ‘The endogeneity of the optimum currency area criteria’, NBER Working Paper No. 5700.

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Frankel, J. and Rose, A. (2000) ‘An estimate of the effect of currency unions on trade and output’, CEPR Discussion Paper No. 2631. Gilles, S. (1997) ‘Business cycles and long-run growth’, Oxford Review of Economic Policy, 13(3): 145–53. Gros, D. and Thygesen, N. (1998) European Monetary Integration, 2nd edn, Harlow: Longman. Hansen, J. and Roeger, W. (2000) ‘Estimation of real equilibrium exchange rates’, DG Economic and Financial Affairs, Economic Papers No. 144, ECFIN/534/00. Helg, R., Manasse, P., Monacelli, T. and Rovelli, R. (1995) ‘How much (a)symmetry in Europe? Evidence from industrial sectors’, European Economic Review, 39: 1017–41. HM Treasury (Her Majesty’s Treasury) (1997a) ‘Chancellor’s Statement on EMU: Monday 27 October 1997’, HM Treasury News Release 126/97. Available on-line at: ⬍http://www.treasury.gov.uk⬎, visited on 19 December 2001. —— (1997b) UK Membership of the Single Currency: An Assessment of the Five Economic Tests, London: HMSO. Available on-line at: ⬍http://www.treasury.gov.uk⬎, visited on 19 December 2001. —— (2001) Maintaining Economic Stability: Convergence Programme Submitted in Line with the Stability and Growth Pact, December, London: HMSO. IFSL (International Financial Services London) (2001) International Financial Markets in the UK, November. Available on-line at: ⬍http://www.bi.org.uk⬎, visited on 30 November 2001. IMF (International Monetary Fund) (2001) ‘United Kingdom: selected issues’, IMF Country Report No. 01/124, August. Kontolemis, Z. and Samiei, H. (2000) ‘The UK business cycle, monetary policy, and EMU entry’, IMF Working Paper WP/00/210. Krugman, P. (1993) ‘Lessons of Massachusetts for EMU’, in F. Giavazzi and F. Torres (eds), The Transition to Economic and Monetary Union in Europe, Cambridge: Cambridge University Press. Lucas, R. (1976) ‘Econometric policy evaluation: a critique’, reprinted in R. Lucas (1981) Studies in Business Cycle Theory, Oxford: Basil Blackwell. McMorrow, K. and Roeger, W. (2000) ‘Time-varying Nairu/Nawru estimates for the EU’s member states’, DG Economic and Financial Affairs, Economic Paper No. 145. Mundell, R. (1961) ‘A theory of optimum currency areas’, American Economic Review, 51: 657–65. Nickell, S. and Quintini, G. (2001) ‘The Recent Performance of the UK Labour Market’, Bank of England. Available online at: ⬍http://www.bankofengland.co.uk⬎, visited on 19 December 2001. Nicoletti, G., Scarpetta, S. and Boylaud, O. (2000) ‘Summary indicators of product market regulation with an extension to employment protection legislation’, OECD Economic Department Working Paper No. 226. OECD (Organization of Economic Cooperation and Development) (1999) EMU: Facts, Challenges and Policies, Paris: OECD. —— (various) OECD Main Economic Indicators, Paris: OECD. Office of National Statistics (ONS), on-line data base available at: ⬍http:// www.mimas.ac.uk/macor_econ/⬎, visited on 19 December 2001. Taylor, J. (2000) ‘Low inflation, pass-through and the pricing power of firms’, European Economic Review, 44: 1389–408.

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Thom, R. and Walsh, B. (2002) ‘The effects of a currency union on trade: lessons from the Irish experience’, European Economic Review, 46(6): 1111–23. UNCTAD (United Nations Conference on Trade and Development) (2001) World Investment Report 2001, Geneva: UNCTAD. Wadhwani, S. (1999) ‘British unemployment and monetary policy’, Speech delivered to the Society of Business Economists, 2 December. Available on-line at: ⬍www.bankofengland.co.uk⬎, visited on 2 September 2001.

8

The East Asian economies after the financial crisis A role for the Japanese yen? Takahashi Wataru

In 1988 the Bank of Japan (BOJ) published a paper focusing on the rapidly growing economies of East Asia. It presented some new data, namely, that the increase in East Asian exports to Japan exceeded the increase in exports to the United States from the middle of the 1980s onwards. Moreover, whereas until that time the main exports from East Asia were raw materials, now industrial products were increasingly moving to the forefront. In this process, the trade between Japan and East Asia had changed from vertical to horizontal at the same time as the East Asian economies had been industrialized. The paper also included a prediction, namely, that foreign direct investment (FDI) from the US, Japan and neighbouring countries would continue to create favourable conditions for the sustainable development of the East Asian economies. This prediction still holds true today, despite the impact of the Asian economic and financial crisis of 1997–8. Certainly, finance is important in any discussion of the economic development of East Asia. But, as argued in detail elsewhere, finance is not necessarily the crucial variable when the long-term problem of economic growth is under scrutiny (Takahashi and Taguchi 1994). Thus, whilst at the end of the 1980s the Tokyo financial market was trumpeted as a possible competitor to New York or London, the market was not at the core of the efficient operation of the Japanese economy. True, it was large in terms of volume, but it can be said that this was mainly thanks to the appetite for funds generated by efficient firms in the manufacturing sector of the Japanese economy. Their increasing demand for funds simply enlarged the size of the financial market. In other words, the size of the market was not specifically related to the financial sector of the economy, which is well known for its lack of innovation, but to the needs of the real sector – manufacturing, and so on – of the economy. It is this real side of the economy, not the strictly regulated financial sector of the economy, which is efficient in Japan. From a similar point of view, the main bank system has often been touted as one of the unique advantages of the Japanese system of financing, contributing to Japan’s economic success, but it is precisely the main bank system which is at the heart of Japan’s present economic difficulties. Similarly, when the Asian economic and financial crisis occurred, many economists from both inside and outside of Japan were pessimistic about East Asia’s economic future, giving weight precisely to the financial sector, not the real sector,

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of the economy in seeking the causes for the crisis. Of course, when measured in terms of the fall in exchange rates and the growth in the amount of bad debt, the crisis was obviously serious. But the strength of the East Asian economies does not lie in the financial sector, but in the real sector. Financial meltdown does cause damage to the real side of the economy but, as far as can be judged from the rapid economic recovery of the region (see Table 8.1), the financial disarray arising from the crisis does not seem to have exerted any decisive impact. This proves that the real economy was much more robust than the short-sighted forecasts made by economists at the time of the crisis would have led us to believe. In other words, as long as we are able to maintain the potential strength of the real economy, problems generated in the financial sector can be overcome – an important lesson for recession-prone Japan. The purpose of this chapter is not to deny the importance of finance to the real economy, but to warn against an overemphasis on the positive role it plays in the economic development of East Asia. A tendency to focus on the financial sector can often be found amongst mainstream economists as data are abundant and easy to analyse. Thus, whilst an overflow of financial data is generated on a daily basis, data in the real sector are only available on a monthly or quarterly basis and attract far less attention from economists. Another reason for their tendency to downplay the importance of the real economy is the rapid growth of the financial sector in comparison with the real sector of the economy. Whilst not denying the importance of this growth, we should nevertheless exercise caution in assuming that the main causality of an economic problem is always from the financial to the real sector of the economy. On the contrary, some financial problems reflect the latent problems of the real economy. This is one of the main differences between Japan and its East Asian neighbours, as it now faces serious difficulties in the real sector as well as in the financial sector. Thus, although many believe that the Japanese economy will revive once the bad loan problem has been solved, the economy in fact confronts more fundamental difficulties derived from the weakness of the real sector.

Table 8.1 GDP growth rate (%) 1996

South Korea Thailand Malaysia Japan

6.8 5.9 10.0 3.4

1997

5.0 ⫺1.7 7.7 0.2

1998

⫺6.7 ⫺10.2 ⫺7.4 ⫺0.8

1999 Apr.

Sep.

Nov.

Actual

2.0 0 0.7

8.0 3.0 2.0

9.0 4.0 2.0

10.9 4.4 6.1 1.9

2000

2001

9.3 4.6 8.3 3.2

3.0 1.8 0.4 ⫺1.4

Source: Economic Planning Agency (2000) and new GDP data figures. Note: In the column for 1999, forecasts in April, September, November and actual results are listed.

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The growing importance of East Asia in the world economy Before turning to the potential role for the Japanese yen in East Asia, it is natural to ask why this particular region of the world attracts so much attention today. The reason is the rapid growth of these economies and their relative presence in the global economy. If the East Asian economies had not enjoyed such success, less attention would no doubt be paid to them, even if they suffered a currency crisis. Tables 8.2 and 8.3 present the dollar-based Gross Domestic Product (GDP) data for the East Asian economies and show their expanding role in the world economy. As a ratio of US GDP, the size of the GDPs of the newly industrialized

Table 8.2 GDP at current prices (in US$ million)

US EU UK Japan South Korea Thailand Malaysia Indonesia China Asian NIEs ASEAN

1970

1980

1990

1996

1,035,625 762,400 124,248 203,736 8,771 7,087 3,971 9,205 n/a 20,121 27,444

2,784,225 2,415,600 539,167 1,059,257 62,626 32,354 24,488 72,483 301,602 144,201 161,769

5,522,200 3,727,430 982,704 2,932,089 244,043 80,172 42,373 106,859 369,752 511,818 273,454

7,636,000 7,977,100 1,158,952 4,595,155 484,571 181,445 99,281 227,397 815,432 1,005,129 591,910

Table 8.3 Ratio to US GDP ( US ⫽ 100)

US EU UK Japan South Korea Thailand Malaysia Indonesia China Asian NIEs ASEAN ASEAN ⫹ NIEs

1970

1980

1990

1996

100 73.6 16.3 19.7 0.8 0.7 0.4 0.9 n/a 1.9 2.6 4.5

100 86.8 19.4 38 2.2 1.2 0.9 2.6 12.5 5.2 5.8 11.0

100 67.5 17.8 53.1 4.4 1.5 0.8 1.9 9.9 9.3 5.0 14.3

100 104.5 15.2 60.2 6.3 2.4 1.3 3.0 10.2 13.2 7.8 21.0

Source: Bank of Japan, Kokusai Hikaku To¯ kei.

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Table 8.4 Share of world trade (%) Exports

US Euro zone Japan East Asia World total

Imports

1985–7 Average

1995–6 Average

1985–7 Average

1995–8 Average

11 33 10 10 100

13 29 9 17 100

18 32 6 10 100

15 28 6 18 100

Source: Bank of Japan (2000). Note: East Asia is the East Asia 9 of the NIEs 4, the ASEAN 4 and China.

economies (NIEs) of South Korea, Taiwan, Hong Kong and Singapore (the NIEs 4), and the Association of Southeast Asian Nations (ASEAN) members Thailand, Malaysia, Philippines and Indonesia (the ASEAN 4) grew from 4.5 per cent in 1970 to 21.0 per cent in 1996. This latter figure approximates the Japanese data for 1970, when 19.7 per cent of Japanese exports were destined for the US. It was at this time, it should be noted, that trade conflicts started to appear on the political agenda of Japan–US summits, as in the textile conflict addressed by President Richard Nixon and Prime Minister Sato¯ Eisaku (Destler et al. 1979). It can be taken as proof that, from that time on, Japan was treated as a responsible trade partner. Table 8.4 shows East Asia’s share of world trade in the middle of the 1980s and 1990s. Whilst Europe maintained the top position, and Japan suffered some decline in exports, the position of East Asia, understood as the NIEs 3 of South Korea, Taiwan and Singapore and the ASEAN 4, has shown a marked increase in terms of exports and imports. A positive correlation exists between the two tables, namely, trade has led to an expansion of the East Asian economies. This is the main background for the rapid economic development of the region, in marked contrast to other regions of the world, such as Latin America in the 1970s, where domestic demand led economic growth. In essence, the follower economies of East Asia are on the same track as Japan in the earlier postwar years.

Background to high economic growth A range of factors has been seen to lie behind the high growth of the East Asian economies. In a provocative paper, Krugman (1994) points out that the high growth of East Asia can be simply attributed to the increases in capital and labour and is not attributable to productivity. In other words, for Krugman, there was no East Asian ‘economic miracle’. Productivity, by its very nature, is difficult to measure, and no final conclusion seems to have been reached on the question of

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East Asian productivity, though various estimations have been made (Page 1994; Young 1995). What does seem more certain, however, is in terms of conventional factors, namely, that a high investment ratio has contributed to East Asia’s high growth. Similarly, the efficiency and the flexibility of the economies help to account for growth. This is partly due to active investment, as new investments promote innovation in the economy. Finally, the openness to the global market needs to be taken into account, as this promotes efficiency, as competition in the export market stimulates more efficient productive activities in the domestic economy. In this way, high investment, openness and flexibility can be seen as key factors in accounting for the economic development of East Asia. What other background factors can help to explain East Asia’s growth? Convergence In the field of economic growth theory, ‘convergence’ is a popular hypothesis, suggesting that an initial low level of per capita income stimulates high growth in an economy. The transfer of technology from a developed economy to a developing economy is at the base of this hypothesis. Thus, at times when Japan has recorded higher growth rates than the US and South Korea has recorded higher growth rates than Japan, support can be said to exist for this hypothesis. As Table 8.5 shows, however, East Asia demonstrates a much higher growth rate than the global average. Indeed, using data from over seventy countries, the Economic Planning Agency (EPA) has estimated the relationship between per capita nominal GDP in 1960 and the real growth rate of GDP from 1960–96 (Economic Planning Agency 1999). What these data show are that the actual figures for the East Asian economies in 1996 are far beyond the average. Following the average growth path, South Korea would be expected to reach a per capita nominal GDP of US$ 476, whereas the actual figure for 1996 is far beyond this at US$ 10,641 (Table 8.5). Clearly, ‘convergence’ is not a sufficient explanation for East Asia’s high level of growth.

Table 8.5 Per capita GDP (US$)

1970 1980 1990 1996 Annual growth rate (%) 1970–96 1990–96

US

Japan

South Korea

Thailand

China

5,051 12,224 22,096 28,646

1,953 9,068 23,734 36,539

272 1,643 5,693 10,641

195 693 1,430 3,024

n/a 303 325 662

6.9 4.4

11.9 7.5

15.2 11.0

11.1 13.3

n/a 12.6

Source: Bank of Japan, Kokusai Hikaku To¯ kei.

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Endogenous growth factors In order to explain the difference in the rates of economic growth amongst countries, Barro (1997, 2001) presents a sophisticated model based on a new economic growth theory called the endogenous growth model. In addition to convergence factors and other conventional economic variables, the model includes supplementary variables like education, the legal framework and political factors. These added variables are deemed to explain the total factor productivity. As seen in Table 8.6, this approach enables Barro to identify regional difference in economic growth rates. Indeed, the specific variables he uses can be said to identify the reasons for high productivity in East Asia. However, as Barro himself admits, it is difficult to interpret the role of democracy in economic growth, even though scholars such as Sen (1999) emphasize its necessity (for instance, he lambastes Singapore’s former President Lee Kuan Yew for not recognizing democracy as a condition for sustained economic development).1 Finally, Barro suggests that autarchies can take two forms: pro-growth and anti-growth. East Asia is a typical case of pro-growth autarchies with Japan sometime taken as an example of an economy that has achieved high growth without full democracy. High investments and high savings Although Barro (2001) regards high investments and high savings as a result, not a cause, of high rates of economic growth, the conventional view, as adopted

Table 8.6 Barro’s result: panel regressions for growth rate Explanatory variables, co-efficient (s.e.) 1 Log ( per capita GDP) 0.0281 (0.0032) 2 Male upper-level schooling 0.0026 (0.0016) 3 Log ( life expectancy) 0.0485 (0.0125) 4 Log (total fertility rate) ⫺0.0198 (0.0049) 5 Government consumption/GDP ⫺0.090 (0.021) 6 Rule-of-law index 0.0144 (0.0055) 7 Openness measure 0.0138 (0.0044) 8 Inflation rate ⫺0.0208 (0.0072) 9 Investment/GDP 0.075 (0.022) 10 Growth rate of terms of trade 0.062 (0.020) Dummy variables Group of 5 Asian economic and financial crisis countries – Indonesia, Malaysia, South Korea, Philippines, Thailand (dummy for 95–00). Group of 9 East Asian economies – that is, Hong Kong, Indonesia, Japan, South Korea, Malaysia, Philippines, Singapore, Taiwan, Thailand (China is omitted because of lack of data) (dummy for 95–00). Source: Barro (2001). Note: The panel data are constructed as the seven five-year periods from 1965–70 to 1995–2000.

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Table 8.7 Investment and saving ratio (% of GDP) South Korea

1970 1980 1990

Thailand

Japan

Saving ratio

Investment ratio

Saving ratio

Investment ratio

Saving ratio

Investment ratio

20.9 32.7 36.0

26.8 30.3 35.3

21.8 26.5 35.1

24.7 29.4 37.3

35.3 31.5 31.0

34.5 29.5 29.4

Source: Economic Planning Agency (2000).

here, is to view investment rather as a driving force of economic growth. As seen in Table 8.7, the high saving rate has sustained a high rate of investment in East Asia, but this is based on a fragile kind of cycle: at times of rapid growth in incomes, increases in consumption remain relatively modest, which induces a rise in the rate of saving. High savings provide cheap funds for investors, which in turn provide the funds to boost investment, and, following that, high growth in incomes. Thus, the next turn in the cycle begins. What this means is that, as a result of a sharp decline in growth rates in the wake of the economic and financial crisis, this cycle could have been broken. Indeed, if the depression in East Asia had lasted for several years, this would no doubt have occurred. In this sense, an earlier than expected recovery after the crisis dispelled fears the cycle would be broken. As discussed below, the so-called National Association of Securities Dealers Automated Quotation System (NASDAQ ) depression in late 2000 triggered another recessionary trend in East Asia, leading to a slump in 2001. Despite this, East Asia can be expected to demonstrate a moderate recovery in 2002, thanks to exports to the Japan and US.

Openness Openness also helps to account for the strength of an economy. Frank (1998) suggests that East Asia has been historically open to global markets, as illustrated by the prospering shipping trade with Europe in the fifteenth and sixteenth centuries. Moreover, BOJ sees the economic success of East Asia as being due to their policy of export promotion (Bank of Japan 1988). What is clear is that openness brings efficiency as a result of competition from the global market. Indeed, foreign trade is the most competitive field of the economy. Export industries must necessarily become innovative. Thus, a high dependence on exports, which means their acceptance in world markets, stimulates efficiency in the economy. As is clear from Table 8.8, South Korea has maintained a high dependence on exports for the last few decades. A rising dependency on exports can be observed in Thailand, too. Japan’s economic success until the 1980s can also be explained by the growth in exports.

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Takahashi Wataru Table 8.8 Rate of export dependence (% of GDP )

South Korea Thailand Japan UK US

1970

1980

1990

1996

1999

13.8 15.0 10.8 22.5 5.5

n/a 24.1 13.7 27.2 10.0

29.1 34.1 10.7 24.1 9.6

29.5 39.2 9.9 29.2 11.2

42.1 54.3 10.4 25.7 10.8

Source: International Monetary Fund (2001).

Table 8.9 Direction of trade for ASEAN countries (share of country’s exports in %) To Japan

Indonesia Malaysia Philippines Thailand

To US

1985

1999

1985

1999

46.2 24.6 19.0 13.4

20.0 11.6 13.1 14.5

21.7 12.8 35.9 19.7

16.1 21.9 29.6 21.5

Source: Asian Development Bank (2001).

Switching trade partners As can be typically observed in the area of trade, another prominent feature of the East Asian economies is the flexible structure of their economies. As Table 8.9 makes clear, East Asia has maintained a high rate of growth in exports by switching trade partners, as in the 1990s, when the move was from Japan to the US. As is illustrated by the case of Malaysia, the share of exports to Japan declined from 1985 to 1999, whereas that to the US increased. Japan has also been flexible, switching to a greater emphasis on exports to Europe, though the economy remains dependent on the US. Changing industrial structure The East Asian economies are also flexible in another area – adjustment of the industrial structure. It is the export of information technology (IT or information and communication technology, ICT) products, which led the recovery after the crisis. As shown in Table 8.10, these exports mainly went to the US, with exports to Japan being only approximately one half of the US total. Industrial production reflects this change. Table 8.11, which compares the industrial production index for South Korea and Japan, shows a much bigger increase in IT products in the case of South Korea. South Korean production leapt 32 per cent between 1994 and 1999, whereas Japanese remained almost

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Table 8.10 Direction of IT goods trade Export ( from) Asia Average of 1992–5 (US$ billion) Import (to) Asia Japan US Euro zone Average of 1996–8 (US$ billion) Import (to) Asia Japan US Euro zone

11.4 51.9 29.3

Japan

US

Euro zone

32.7

29.8 7.7

12.1 1.3 8.7

32.7 19.9 36.8

22.4 82.2 50.0

30.7 18.9

19.7 46.1 11.7

19.7 3.3 12.9

25.6

Source: Bank of Japan (2000). Note: Asia is the East Asia 9 and other Asian countries as defined by WTO.

Table 8.11 Industrial production by goods (1999 levels) 1994 ⫽ 100 South Korea Japan South Korea Japan

South Korea Japan

Manufacturing 132.1 99.3 Basic metals 112.7 88.7 Computing machinery 317.0 129.5

Textiles 82.8 79.6 Machinery 89.8 89.1 Electrical machinery 100.2 116.6

Clothes 62.6 73.2 Motor vehicles 113.3 108.7 Communication equipment 300.9 157.1

Source: Korea National Statistical Office (2001).

stagnant. Whilst production was boosted in the new sectors of the economy, such as computing and information equipment, particularly in South Korea, both economies suffered a slump in the old economic sectors, such as textiles and machinery. Technology transfer Finally, openness brings about technology transfer. In East Asia, this resulted from the importation of capital goods and the acceptance of FDI. As can be seen in Table 8.12, the Asian Development Bank (ADB) presents the route for technology transfer in the case of South Korea. It can be expected that a steady inflow of

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Takahashi Wataru Table 8.12 Channels of technology leverage in South Korea, 1962–91 (US$ billion)

Total share (%) FDI Licensing Technology consultants Capital goods imports

1962–6

1972–6

1982–6

1987–91

364 13 0 0 87

9,835 9 1 0 90

47,990 4 2 1 93

63,498 9 7 2 82

Source: Asian Development Bank (2001).

Table 8.13 Capital inflows to the East Asian economies (US$ billion)

Capital inflow Private FDI Bank Loan Public

1996

1997

1998

1999 estimated

2000 forecast

1,827

1,086

325

428

688

1,764 454 801 63

668 519 ⫺145 419

42 552 ⫺596 283

402 540 ⫺318 26

593 536 ⫺176 95

Source: Economic Planning Agency (2000). Note: Data for 1999 are estimated. Data for 2000 are forecast.

FDI, which stimulates the importation of capital goods, will continue to bring the transfer of technology.

Recovering from the East Asian crisis As seen in the previous section, the East Asian economies were potentially sound. Then, why did they suffer from a financial crisis? The financial crisis If we take a national economy to be a commercial firm, then finance can be seen to be very important for the management of the firm. In the case of the East Asian economies, they enjoyed an ample supply of internal funds as a result of the high rate of savings. Due to high growth, however, East Asia came to rely on external funds from foreign countries. Table 8.13 on the balance of payments on the capital accounts of the East Asian economies clearly shows the dramatic drop in capital inflows after the financial crisis. The point to note, however, is the decrease in bank loans; in contrast, FDI remains at around the same level.

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Generally speaking, a long-term relationship can exist between banks and firms, but as suggested by the term ‘hot money’, bank loans to East Asia at the time of the crisis were more reflective of short-term speculative activities than a long-standing customer relationship. Banks expected higher returns on their investment in East Asia through speculative activities. What was particularly important in forcing a reassessment of these activities was the end of the high yen in 1995. Whereas until this time East Asian exports had enjoyed a competitive advantage due to the continuously strong yen, the weakening of the yen meant the simultaneous weakening of this competitive edge. It is no wonder that after 1995 even speculators began to withdraw their funds from East Asia. Between 1995 and 1997, when the currency crisis occurred, East Asian exports decreased due to their weakening international competitiveness. Table 8.14 shows the fall in exports from South Korea and Thailand in 1996. Despite the fall in exports, their currencies remain at the same level, supported by speculative inflow of funds from overseas. Table 8.15 shows the source of these speculative funds during this period. As can be seen, whilst the Japanese and US banks withdrew their funds, the European banks continued to invest. Whilst FDI went into manufacturing, the real sector of the economy, a lot of speculative money was targeted at the non-manufacturing sector, especially construction and real estate. This is the reason why risk was rather confined to the non-manufacturing sector. To date, no conclusion has been reached on whether the regulation of short-term speculative capital flows is effective or not. What is clear from the crisis, however, is the need to acquire reliable information in order for investors to make informed judgments about the health of an economy. Table 8.14 Internal and external trade of South Korea and Thailand

South Korea ( year by year growth %) 1993 1994 1995 1996 1997 1998 1999 Thailand ( year by year growth %) 1993 1994 1995 1996 1997 1998 1999

Total

For developed countries

For developing Asian countries

11.0 12.3 30.3 4.3 4.1 ⫺2.6 8.2

⫺0.4 12.5 26.6 ⫺8.3 3.5 10.5 13.6

26.1 14.2 42.5 12.0 7.0 ⫺14.4 10.6

14.4 22.7 25.5 ⫺2.4 3.3 ⫺5.2 13.4

6.5 16.3 15.5 0.9 3.0 1.3 12.0

36.0 46.8 36.5 ⫺3.2 5.6 ⫺16.1 20.6

Source: International Monetary Fund (2001).

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Table 8.15 Loans outstanding to Asian countries by BIS reporting banks (US$ billion)

South Korea

Indonesia

Thailand

Malaysia

Total

Japanese Banks US Banks European Banks Total Japanese Banks US Banks European Banks Total Japanese Banks US Banks European Banks Total Japanese Banks US Banks European Banks Total Japanese Banks US Banks European Banks Total

June 1994

June 1997

December 2000

14.0 4.8 12.1 47.8 16.7 2.4 6.4 30.9 20.7 2.6 7.4 36.5 5.6 1.6 4.3 13.9 57.0 11.4 30.2 129.1

23.7 10.0 26.9 103.4 23.2 4.6 14.7 58.7 37.7 4.0 15.5 69.4 10.5 2.4 10.7 28.8 95.1 21.0 67.8 260.3

10.3 6.2 17.8 58.8 10.2 3.2 13.2 40.3 9.8 0.9 6.8 26.7 5.6 1.1 7.0 20.9 35.9 11.4 44.8 146.7

Source: Bank for International Settlements (2001).

Heavy dependence on the US economy Whilst the East Asian economies seem to have overcome the difficulties posed by the Asian economic and financial crisis, further difficulties now loom: most importantly, over-dependence on the US economy. As is shown in Table 8.9 as a result of boosting exports, the East Asian economies have become even more heavily dependent on the US. In the 1990s the East Asian economies made up for the decline in exports to Japan by increasing exports to the US. In the current situation, however, Japan is highly unlikely to be able to make up the shortfall caused by the so-called NASDAQ slump in the US. In this sense, East Asia now faces new economic difficulties. It is reported that the US economy is expected to bottom out in 2002. If so, the East Asian economies might also experience a modest recovery in the same year. In other words, the East Asian economies can be expected to remain overly dependent on the US for the foreseeable future; Japan, for the time being, cannot play the role of saviour. The Japan problem Needless to say, the depression of the Japanese economy overshadows the East Asian economies. As discussed above, however, whilst financial problems can

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Table 8.16 Size of government 1970

1980

1990

1993

1999

Ratio to GDP of the government expenditure (%) Japan 11.4 18.4 15.7 South Korea 16.3 17.4 16.2 Thailand 16.5 18.3 14.0 UK 31.9 38.5 37.6 US 19.4 21.5 22.2

15.4* 16.2 16.3 42.7 21.1

17.4* 20.6 16.8 36.7 19.3

Source: International Monetary Fund (2001). * Estimation.

bring about difficulties for an economy, their resolution will not solve the difficulties being experienced in the real economy. Of course, financial problems can be the result of the poor performance of the real economy. At one time, the real economy of Japan was renowned worldwide for efficiency and flexibility. The adjustments made at the time of the two oil shocks in the 1970s, for instance, illustrate the relatively good performance of the Japanese economy in times of difficulty. What, then, made the Japanese economy less efficient? My tentative conclusion is the expansion of the government and the increased regulation of the economy (Table 8.16). Shinpo (2001) and Henderson (1998), for instance, have shown how tightly regulated the Japanese economy remains. Despite starting in 1975, deregulation at 33 per cent remains behind South Korea’s level of 45 per cent, achieved since 1980.2 An increase in tax revenues, moreover, which resulted from high economic growth, stimulated an expansion in the scale of government. This increase in the size of the government made the economy, which was dependent upon the government, expand, too. Ultimately, this led to a loss of economic vitality. Japan’s highly acclaimed industrial policies may also be inappropriate ( Johnson 1986). The inefficient non-manufacturing sector of the economy, such as agriculture and construction, coexists with the efficient manufacturing sector. In essence, industrial policy meant that the government carried out income transfer from the efficient manufacturers to the inefficient non-manufacturing sector through the implementation of regulations and protective measures. It politically meant the transfer from the rich to the poor and from the urban to the rural. This egalitarianism was a clear political success. But, at the same time, this put the manufacturing sector of the Japanese economy, which faces stiff competition from East Asia, in a disadvantageous position. East Asia is catching up, and moving ahead of Japan. As can be seen from Table 8.17, China already has a greater market share in some high-tech products than Japan. Innovation is not born through protection and regulation. What is called for is not simply the structural reform of the Japanese economy, but first and foremost the reform of inefficient government.

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Takahashi Wataru Table 8.17 The market shares of Chinese and Japanese products in the world market Japan

Cellular phone DVD player VTR Desktop computer Colour TV Automobile Machine tools Ethylene Steel Auto bicycles Air conditioner HDD

China

1999

2000

1999

2000

13.7 26.1 4.8 3.5 1.8 17.7 21.0 8.1 11.9 10.0 20.2 7.7

12.5 18.5 2.5 3.4 1.3 17.6 23.6 7.6 12.6 10.0 18.5 6.7

9.8 35.3 21.7 10.9 24.1 3.2 5.1 6.0 15.7 47.7 38.9 7.4

12.9 38.3 23.2 11.9 24.6 3.6 5.6 6.0 14.9 46.1 38.7 6.9

Source: Nihon Keizai Shinbun, 27 July 2001. Note: Quantity base. All calculations are based upon 1999 figures for air conditioners, and 2000 figures for automobiles, auto bicycles machine tools and steel. All others are estimated for 2001.

Regional economic bloc and currency union The role of trade As seen earlier, a distinctive feature of the East Asian economies is their dependence on foreign trade for growth. Whilst this brings efficiency to the economy as a positive outcome, it also means East Asia remains vulnerable to the ups and downs of foreign politics and economics, over which it has little control. Faced with a decrease in exports, an argument often heard is that Japan should play an increasingly important role as an absorber of East Asian exports, thereby making East Asia more dependent on trade within the region. As with the 2002 conclusion of an agreement between Japan and Singapore, attempts to promote free trade agreements are being carried out in the region. As Table 8.14 shows, however, internal trade within the region and external trade outside of the region move in the same direction. In other words, the East Asian economies are still at a stage where they still need to depend on exports outside of the region. It is therefore necessary that the East Asian economies remain open and that neither Japan nor the other economies work towards the development of a trading bloc within the East Asian region. Currency union The other argument often heard as a way to help achieve the stability of the regional economy is to reform an international currency system in the region,

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perhaps moving towards the development of the yen as a third currency to match the dollar and the euro. There are several reasons why this issue has emerged in recent years. To start with, as mentioned earlier, East Asia has developed as the third biggest economic region in the world, and this means that some commentators argue that the region should have its own international currency. The second is the bitter experience of the Asian economic and financial crisis. It is argued that the financial crisis was partly caused by the inappropriate currency system – namely, a de facto peg to the dollar. Actually, after the system collapsed in 1997, currencies were devalued and capital controls were introduced by Malaysia. These were, in essence, stopgap measures, and there remains the fundamental problem of creating a future currency system in the region. Third is the appearance of the euro. This stimulated policy-makers to think about developing a common currency in East Asia. Those who support this idea expect the use of a common currency will help to promote regional economic integration and this will contribute to the development of East Asia in the same way as Europe. The role of the yen is here seen to be crucial. It should be noted in this context that the de facto peg to the dollar strengthened the competitiveness of the East Asian economies in the wake of the emergence of the strong yen following the 1986 Plaza Accord. On the other hand, however, their international competitiveness was severely weakened, and the East Asian economies fell into serious international imbalance, following the emergence of the weak yen in the latter half of the 1990s. There were two policy options then: first, monetary and fiscal tightening; second, abandon the dollar peg. Needless to say, both were difficult choices. In the end, an expansionary policy was adopted, and the adjustment of the currencies was postponed until the bitter end. Meanwhile, hedge funds foresaw the inevitable adjustment that would be needed to the exchange rates, and attacked. Proposals for reform Besides the devaluation of the currency, some proposals were made for the reform of the currency system. One option put forward was to move to a floating system. Since such a system would bring the volatility of the currencies into the real economy, however, many balk at the idea. Another was for the East Asian currencies to become part of a basket of currencies along with the dollar and the yen. This has both the benefits of a floating and fixed exchange rate system. The former has benefits for adjustment and the latter has benefits for stability. The one shortfall seems to be practicality: the calculation of the rates is rather complex for business use. A further proposal was to set up a safety mechanism to prevent the reoccurrence of a financial crisis. An important step in this direction was the strengthening of the East Asian swap agreement amongst the major East Asian countries at the 2001 Chiang Mai meeting of the ASEAN ⫹ 3. This guarantees the provision of urgent liquidity. The most controversial idea was the Japanese government’s proposal shortly after the outbreak of the crisis to establish the Asian Monetary Fund (AMF).

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Whilst the swap agreement is a practical framework amongst the currency authorities, the AMF is more of a political step to set up a new regional organization with a central role for Japan. Whilst the former is essentially a countermeasure, the latter can be seen as a more comprehensive step at coordination amongst East Asian governments, including some intervention in the fiscal and monetary policies of each country. Whilst countries such as South Korea and Malaysia were supportive of the idea, the opposition of the US, along with China, prevented the AMF’s implementation. A common currency The ultimate idea behind many of these proposals is the establishment of a common East Asian currency. This highly ambitious political proposal is greatly influenced by the introduction of the euro. What needs to be taken note of in this regard, however, is the enormous difference between East Asia and Europe, on the one hand, and Japan and Germany, on the other hand. The first point is a difference in the structure of trade. Though the importance of international trade has been increasing, the structure of trade in East Asia is much more dependent on countries outside of the region than is Europe. Although some regional trade agreements have been concluded in East Asia, their importance pales in comparison with the agreements concluded in other regions of the world. Indeed, given the region’s close connection with the US economy, the dollar rather than the yen has greater appeal as an international currency. The second is a difference in history. The launch of the common European currency took place after a long history of trial and error in the development of the European Union (EU). It was not necessarily a total success story, but European countries share many experiences, which are useful for the future operation of the euro. The situation is completely different in East Asia, where the legacy of the war still continues to limit cooperation between Japan and its neighbours, unlike Germany and its neighbours. The third is a difference in identifying the key currency. In Europe, the German mark had played the role of key currency over the past few decades. Some point out that the euro can be seen as a political trial to control the German mark through cooperation with EU member states. Generally speaking, democratic agreement to control one strong entity by others is easy to achieve. By comparison, in East Asia, no currency plays the role of the mark. Given the political rivalry between Japan and China, the difficulty of the yen playing the role of the euro is plain to see. Indeed, it would take a very long time for the yen to emerge as a key currency and for the region to manage it like the euro. Moreover, the question of a future currency regime would pit the yen against the renminbi (RMB). For it would be natural to ask whether the Japanese yen or the Chinese RMB is the currency of the future: is the Japanese yen and a sluggish economy or the RMB and a rapidly growing economy the best choice? The fourth is a difference in political systems. In the case of Europe, before the introduction of the common currency, the basic common constitutional structure

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was already in place. The parliament (the European parliament), the executive branch (the European Commission) and the court (the European Court of Justice) were already carrying out their tasks. In Europe, economic integration has been carried out in line with political integration. In contrast, only nascent political dialogue, and fledgling regional institutions, exist in East Asia. Certainly, with the globalization of the economy, the role of the state has been changing from that of the regulator of the market to the promoter of the market. As Takahashi points out, this is particularly evident in Europe (Nihon Keizai Shinbun, 12 December 2001). But it is not evident in East Asia. As Kaji (2001) argues, the basic difference between East Asia and Europe is that there is ‘internal orientation for economic and political integration in Europe. But this orientation is outward in Asia’. Thus, the European experience seems to suggest that political integration is necessary in order to promote economic and eventual currency integration. But that is an extremely difficult process when we consider the political diversity of the various countries of East Asia, with the two main powers, Japan and China, maintaining different economic as well as political systems.

Conclusion In order to examine the question of a potential role of Japan in East Asia, this chapter first explored the strengths of the East Asian economies by examining the non-financial sector – namely, the real sector of the economy, suggesting that high investment, openness and flexibility are key to the region’s economic success. Openness is especially important for the region. What this discussion highlighted is the region’s ability to generate growth based on a two-pronged strategy: exports directed at outside of the region, on the one hand, and a welcoming environment for long-term investments in the region, on the other hand. Whilst it is clear that excessive dependence on short-term capital brought financial instability to East Asia, the financial crisis failed to seriously damage the fundamentals of the real sector of the economy over the longer term, as the rapid recovery testifies. This suggests that, rather than the policy-makers of East Asia pushing for regional integration, with Japan as a possible leader of such a regionalist project, it is of more vital importance for East Asia to maintain strong, vibrant and close ties with markets outside of the region, especially markets in North America and Europe. The discussion comparing the recently launched euro and the potential for a common currency in East Asia clearly identified the enormous problems faced by the yen or any other currency. The introduction of a common currency in East Asia remains at too early a stage at the moment, not much more than the dreams of a few policy-makers. For any progress to be made in this regard, a degree of political integration as well as economic convergence are required. Whereas Japanese multinationals have been at the forefront in promoting economic convergence, although there is still a long way to go compared to Europe, who would take such political leadership? The historical legacy of the war shouldered by Japan still precludes the government taking on such a proactive role. Whilst leadership in East Asia is thus difficult, what is more clear-cut is the need for

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leadership at home in order to revitalize the Japanese economy. For the sound development of the economy will be most welcome not only at home but also throughout East Asia. In other words, dragging Japan out of the current economic slump is not only good for Japan, but good for the region, too. Certainly, the present difficulties are not easily overcome as Japan is now facing strong international competition from the follower economies of East Asia. The ‘structural reform’ of the Japanese political and economic system, whilst gaining much support in both political and economic circles, lacks a clear blueprint. If Japan turns to its neighbours, however, one clear blueprint does exist: the revitalization of the real sector of the economy. This is the most important task for Japan. Nevertheless, without the government’s promotion, not regulation, of industry the Japanese economy cannot be expected to recover its former glory and the potential for the yen to play a regional role will end as nothing more than the dreams of policy-makers. Thus, placing priority on revitalizing the domestic economy is the most realistic option for Japan today.

Notes 1 Sen (1999) also argues that the immature democracy of East Asia made the financial crisis serious. In this regard, I still remember an altercation between representatives of the former Soviet Union and China at a conference sponsored by the Chinese government held in Shinzhen in 1988. The Soviet delegation asserted that economic reform should be led by political reform, whereas the Chinese delegation took the opposite stance, arguing that the other East Asian economies, including Japan, did not have perfect democracy. 2 For reference, the level of deregulation in New Zealand and the UK, both of which started in 1980, is respectively 66 and 50 per cent.

References Asian Development Bank (2001) Asia Development Outlook 2001, Hong Kong: Oxford University Press. Bank for International Settlements (2001) ‘Press release: upturn in banks’ consolidated claims on Europe in the fourth quarter of 2000’, 7 May, Basel: Bank for International Settlements. Available on-line at: ⬍http://www.bis.org/press/p010507.htm#pgtop⬎, visited on 19 June 2002. Bank of Japan (1988) ‘Greater role of Asian economies in the world and growing independence amongst Asia, the United States and Japan’, Research and Statistics Department Special Paper, 166, Tokyo: Bank of Japan. —— (2000) ‘Higashi Ajia no ikinaigai keizai to no musubitsuki ni kansuru de¯ta bunseki’ (A data analysis of trade relations inside and outside of East Asia), Nippon Ginko¯ Cho¯ sa Geppo¯, 7: 27–54. —— (various years) Kokusai Hikaku To¯ kei (International Comparative Statistics), Tokyo: Bank of Japan. Barro, R. (1997) Determinants of Economic Growth, Cambridge: MIT Press. —— (2001) ‘Economic growth in East Asia before and after the financial crisis’, NBER Working Paper, 8330.

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Destler, I. M., Fukui, H. and Sato, H. (1979) The Textile Wrangle: Conflict in Japanese–American Relations, 1969–71, Ithaca: Cornell University Press. Economic Planning Agency (1999) Ajia Keizai 1999 (Asian Economies 1999), Tokyo: ¯ kurasho¯ Insatsu Kyoku. O ¯ kurasho¯ Insatsu Kyoku. —— (2000) Ajia Keizai 2000 (Asian Economies 2000), Tokyo: O Frank, A. G. (1998) ReORIENT: Global Economy in the Asian Age, Berkeley: University of California Press. International Monetary Fund (2001) Direction of Trade Statistics Yearbook 2000, Washington: IMF. Henderson, D. (1998) The Changing Fortunes of Economic Liberalism, London: Institute of Economic Affairs. Johnson, C. (1986) MITI and the Japanese Miracle: The Growth of Industrial Policy, Tokyo: Charles E. Tuttle. Kaji, S. (2001) Speech at the annual colloquium of the Japanese Economic Society. Korea National Statistical Office (2001) Korea Statistical Yearbook 2000, Seoul: National Statistical Office. Krugman, P. (1994) ‘The myth of Asia’s miracle’, Foreign Affairs, 73(6): 62–78. Page, J. (1994) ‘The East Asian miracle: four lessons for development policy’, NBER Macroeconomic Annual, 9, 219–81. Sen, A. (1999) ‘Democracy and social justice’, lecture delivered at the Seoul Conference on Democracy, Market Economy and Development organized by the government of South Korea and the World Bank, 26–27 February. Shinpo, S. (2001) Nihon Keizai Shippai no Honshitsu ( Japan’s Economy: the essence of failure), Tokyo: Nihon Keizai Shinbunsha. Takahashi, W. and Taguchi, H. (1994) ‘Japan’s financial markets: their competitiveness and internationalization’, paper presented at the Annual Colloquium of the Société Universitaire Européenne de Recherches Financières, March. Young, A. (1995) ‘The tyranny of numbers: confronting the statistical realities of the East Asian growth experience’, Quarterly Journal of Economics, 110: 641–80.

9

A Braveheart renaissance? Scottish identity and politics at the beginning of the twenty-first century Eberhard Bort

Introduction The long campaign for a Scottish Parliament, its establishment in 1999 and the ‘evolution of devolution’ since have highlighted, in the United Kingdom and internationally, the awareness of a multi-national Britain and the resilience of Scottish identity. Most people in Scotland define themselves as Scottish, but differences exist between national (Scottish) and state (British) identities. Scottish national identity ‘has a pervasive effect, colouring virtually all aspects of social and political life (Paterson et al. 2001: 120). Is the Scottish Parliament the product of anti-English ‘Braveheartery’, an expression and achievement of mobilized national identity? Or is national identity becoming less ‘forefront’ thanks to constitutional change, allowing increased attention to the diverse internal identities (regional, class, ethnicity and so on) in Scotland, but also a less strained relationship with other, complementary (British and European) identities? There has been a flurry of publications, trying to explain, or search for, Scotland’s identity and culture, ranging from academic identity studies (Ferguson 1998; McCrone 2001; Pittock 2001) to massive history tomes (Devine 1999; Fry 2001; Houston and Knox 2001; Lynch M. 2001; Menzies 2001). In a lighter vein, Carl MacDougall (2001) takes a meandering look at contemporary Scotland, Jan-Andrew Henderson (2000) gleefully debunks Scottish myths, and Charles Jennings (2001) adds an Englishman’s perspective. The American scholar Arthur Herman (2001) tries to prove how the Scots invented the modern world. In all its facets, ‘Scottish-ness’ as a subject seems en vogue, which is undoubtedly linked to the experience of devolution and the re-establishment of a Scottish parliament. The process of devolution itself has sparked a veritable crop of books. There are two bearing the title The Scottish Parliament (Taylor 1999; Lazarowicz and McFadden 2000). Peter Lynch (2001) has produced a timely and useful textbook on contemporary Scottish politics and government; he also compiled, with Gerry Hassan, a substantial almanac of the Scottish political scene (Lynch and Hassan 2001). Academics involved in the Electoral Survey and the Social Attitudes Survey have issued their findings and analyses (Brown et al. 1998; Brown and Surridge 1999; Paterson et al. 2001; Curtice et al. 2002). Mike Watson, Member of the Scottish Parliament (MSP) has given us an insider’s view of the first year

Scottish identity and politics 151 of the Parliament’s operation (Watson 2001). Jonathan Hearn (2000) traced the contractual nature of Scottish politics, and The Herald’s Scottish political editor Murray Ritchie (2000) charted the first election of a democratic Scottish Parliament. Hassan and Warhurst (1999) edited a pragmatic compendium looking at the policy issues for the new institution, and followed that up with an assessment one year later (Hassan and Warhurst 2000). Hassan (1999) provided a short and helpful guide to the new parliament. Chris Harvie and Peter Jones (2000) put together the illustrated story of ‘the road to home rule’; and I. G. C. Hutchison (2001) contributed a short history of twentieth-century Scotland. This rise of interest in Scottish identity, history and politics towards the turn of the twenty-first century has, in turn, provoked a series of volumes on ‘the end of Britain’, from all quarters of the political spectrum (Bort 2001). Nairn (2000) rubs shoulders with Redwood (1999), Marr (2000) with Hitchens (2000) and Heffer (1999). Devolution of power to Wales, Northern Ireland and Scotland, an elected assembly and mayor for London, reluctant reform of the House of Lords, new electoral systems, the changing role of the monarchy, the future of English regionalism and European integration are recurrent themes in this particular discourse (Dickinson and Lynch 2000; Hazell 2000; Wright 2000; Trench 2001). Indeed, it is the observation – fearful or hopeful, as the case may be – of political developments in Scotland and in Anglo-Scottish relations that provides the main focus for the ‘end of Union’ debate. A simple pattern seems to suggest itself. A rise in identity politics towards the end of the twentieth century, culminating in the popular Hollywood film Braveheart (1995) put an extra edge on Scottish nationality, which led to the demand and the achievement of having a devolved parliament. But this came too late, and is perhaps now too little, so the death knell for the UK is ringing – the Union is dissolving before our eyes, creating, particularly for outside observers, an apparent paradox of a disintegrating UK in a uniting Europe. This chapter will challenge such simplistic assumptions. It will show that Scottish identity – in its diversity – has not been the prime motor behind constitutional change, and that constitutional change – more precisely, the process of devolution – neither necessarily nor inevitably has to result in ‘the end of Britain’. It will try to show what has happened and what have been the factors and forces behind the struggle for constitutional change in Scotland; after bringing us up-todate with nearly three years of devolved government, the final section will speculate as to where the process may lead for Scotland and the UK in a European context.

Devolution and the UK: the case of Scotland On 6 May 1999 the Scots elected their first parliament in Edinburgh since the Act of Union of 1707; Queen Elizabeth officially opened the Scottish Parliament on 1 July 1999. The devolved government of Scotland, the Scottish Executive, is led by a Labour/Liberal Democrat coalition, initially under Donald Dewar (Labour) as First Minister and Jim Wallace (Liberal Democrat) as Deputy First Minister.

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After Dewar’s untimely death in October 2000, Henry McLeish was elected First Minister. He in turn was replaced by Jack McConnell in November 2001, after McLeish’s resignation due to allegations of ‘sleaze’ (The Herald, 9 November 2001; The Sunday Herald, 11 November 2001). The strongest opposition party (thirty-five seats in the 129-seat Parliament) is the Scottish National Party (SNP), which advocates ‘Independence in Europe’ for Scotland. There are also the Scottish Conservatives (who, at least in their majority within the parliamentary party, now support devolution). The Scottish Socialist Party and the Green Party (both in favour of Scottish independence) have one MSP each, and there is one independent MSP. The Scottish Parliament has powers as laid down in the Scotland Act of 1998 (see Table 9.1). Defining the reserved powers of Westminster in the Scotland Bill rather than those of the Scottish Parliament, and thus reversing the approach of the Scottish Constitutional Convention, which had been less daring and had wanted the powers of the new Parliament defined, can be seen as having moved the goal posts slightly in the direction of home rule rather than devolution.1 All areas not reserved, as shown in Table 9.1, fall thus under the remit of the Scottish

Table 9.1 The Scotland Act and the division of powers (a) Reserved Powers ● The Constitution of the UK ● UK Foreign Policy including relations with Europe ● UK Defence and National Security ● The Protection of Borders ● The UK’s Fiscal, Economic and Monetary System ● Common Markets for UK Goods and Services ● Employment Legislation ● Social Security ● Regulation of Certain Professions ● Transport Safety and Regulation ● Aspects of Health and Medicine, Media and Culture (b) Powers of the Scottish Parliament All areas not reserved including: ● Health ● Education (from pre-five education to higher education) ● Training ● Local Government ● Social Work ● Housing ● Economic Development ● Transport ● Law and Home Affairs ● Environment ● Agriculture, Fisheries and Forestry ● Sport and the Arts ● Research and Statistics

Scottish identity and politics 153 Parliament. Still, ultimate sovereignty rests with Westminster or – despite the denial of Eurosceptics – with Europe.

Union and home rule In 1979, the Scottish Referendum on Devolution failed on a technical obstacle (the 40 per cent threshold). The 1997 referendum saw an overwhelming majority (74 per cent) voting in favour of home rule. The changes since 1979 are significant, but they are embedded in long-term changes the roots of which are to be found in the very arrangements of the 1707 Union. Whilst the Parliament was dissolved and merged with the British government located in Westminster, Scotland retained the institutional framework of its civil society. In the compromise of a ‘negotiated autonomy’ of the Union (Paterson 1994: 27–45; 1998: 7–9), the Scots seemed less concerned with keeping their corrupt Parliament than with retaining their institutions of civil society. The Kirk,2 education, the independent Scottish legal system, and local administration remained under the control of the Scots, with little interference from south of the border, namely Westminster. What Lindsay Paterson calls the ‘autonomy of Scotland’ was not challenged by the Union until the nineteenth, arguably the twentieth century, when Britain developed from a pre-modern ‘ancien régime’ into a modern state (Brown et al. 1998: 40–6). David Marquand (1988), Tom Nairn (1977) and Neal Ascherson (1988), amongst others, have even contended that the UK state of the twentieth century was still an ‘ancien régime’, a state of ‘arrested political development’, which only in the latter part of the twentieth century embarked on a modernizing programme of constitutional reform – too late perhaps to stop the break-up of Britain. Whilst the Union was, initially, unpopular amongst both Presbyterians and Jacobites (Whatley 2000), this changed after the Jacobite rebellion of 1745 was defeated and, by the middle of the eighteenth century, the economic benefits of the Union began to be felt in Scotland. The Union had been, in the words of David McCrone, ‘a marriage of convenience’ (Brown and McCrone 1998: 1) for both partners: England gained loyalty from a former enemy who had consorted with France (in the ‘Auld Alliance’), and Scotland gained access to the rising empire and its colonial markets – of particular importance after the disastrous failure of the Darien scheme, the Scottish attempt in the late seventeenth century to establish a colony on the isthmus between North and South America (Scotland on Sunday, 16 May 1999; The Sunday Herald, 23 May 1999). The rise of the role of the state, signified by the extending franchise in the nineteenth century, was reflected in steps towards administrative devolution. Whilst Ireland campaigned fiercely for home rule and the re-establishment of a Parliament in Dublin, the office of Secretary for Scotland was created in 1885 to stave off efforts in this direction in Scotland. This became, in 1926, the post of Secretary of State; and in 1939 the Scottish Office and its staff were moved from London to St Andrew’s House in Edinburgh. The nineteenth century had witnessed what Walter Scott called the ‘silent union’ – a state of affairs where the Scots enjoyed the autonomous institutions

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running their everyday lives, whilst participating as, in Nairn’s terms, ‘junior partners’ in the British imperial enterprise in a period described by Graeme Morton as ‘Unionist-Nationalism’ (Morton 1999). However, the situation changed towards the end of the nineteenth century. Hard on the heels of the (re-)establishment of a Scottish secretary, the first Scottish Home Rule Association was founded. From the start, Irish nationalism acted both as a catalyst and an uneasy, at times even frightening, fellow-traveller to its Scottish relative: envious admiration for the mass-based Irish Home Rule movement, culminating in Charles Stewart Parnell (‘the uncrowned King of Ireland’) and his Irish Parliamentary Party holding the balance of power in Westminster, and Gladstone’s introduction of the first Home Rule Bill in 1886; unease at the ambiguous relationship of Irish nationalism with violence, as exemplified by the Fenian Rebellion of 1867, the Easter Rising of 1916 and the Irish Civil War of 1922. Although the Scottish nationalist movement also reflected a range of sentiments, from gradualist, moderate home rule within the Union to the more radical options of republicanism and Scottish independence, violence has never been an option. The utmost that the writer and nationalist Compton Mackenzie advised in terms of ‘effective action’ would, as he put it, ‘involve at the worst a fine in the police court’ (Drost-Hüttl 1995: 237). That was in 1933. Slightly more than half a century later, the most ‘revolutionary’ protest against Prime Minister Margaret Thatcher’s Poll Tax was boycotting it. The historian Christopher Harvie once labelled Scottish nationalism ‘Europe’s most boring liberation movement’ (Harvie 1999: 57). The First World War produced an expansion of state functions, particularly in the economic field, which, in turn, raised the demand for greater autonomy for Scotland. This increased when, after the Second World War, the welfare state was introduced, based on central institutions like the National Health System (NHS), and administered centrally from London. The Union by now was no longer ‘silent’. Scottish autonomy saw its status increasingly threatened by state centralization. The demand for an Assembly or a Parliament grew. In 1934, the SNP had been formed; in the late 1940s, over two million signatures were collected in favour of home rule. But it was the discovery of offshore oil that fuelled the debate in the 1970s so that Prime Minister James Callaghan’s Labour government was compelled to introduce a devolution bill, which had to be tested in a referendum. This was held on 1 March 1979, with the well-known result: a majority of those who voted were in favour of an assembly in Edinburgh, but as about a third of the Scottish electorate did not bother to vote at all, the quorum of 40 per cent of the electorate, as stipulated in the bill, was not reached, and the bill was repealed by July 1979. The Labour government had fallen over the devolution issue, and Margaret Thatcher had come to power.

Administrative devolution without home rule Contrary to developments in most of Europe, the British state centralized power under the Conservative Thatcher and John Major governments (1979–97), eroding

Scottish identity and politics 155 local government responsibility (e.g. abolishing metropolitan councils) and denying any move towards regionalization. Increasingly, the regions/nations in the UK, particularly Scotland, Wales and Northern England, became aware of structural deficiencies in dealing with a Europe where the regional level of governance was steadily gaining in salience (Osmond 2000). Administrative devolution without home rule became problematic. ‘The more a Scottish semi-state was created with devolved bureaucratic powers, the more obvious the democratic deficit became’ (McCrone 1998: 132). Other anomalies included a devolved administration in Scotland not matched by parliamentary control in Scotland, and an independent Scottish legal system but no matching Scottish legislature (MacCormick 1998). The Scots became agonizingly aware of this ‘democratic deficit’ as a party ruled Scotland from London that suffered a steady, then dramatic, decrease in electoral support in Scotland (Brown 1999: 176–7). Voting patterns between Scotland and England, which had begun to diverge after the 1950s, were now becoming diametrically opposed: voters in Scotland and England took entirely different views in the 1987 and 1992 general elections. Whilst the Conservatives – who, incidentally, had been the only party to gain an absolute majority in Scotland (1955) in postwar history – were returned to power on the strength of their southern English vote, support for the Conservative Party in Scotland dwindled. The Conservative Party returned, between 1987 and 1997, an average of ten out of seventy-two Scottish Westminster MPs. Thus, a party not backed in Scotland governed Scotland through the Secretary of State and the Scottish Office, directly controlled from London. Having once been regarded as Scotland’s representative in London, the Secretary of State now came to be seen increasingly as London’s representative in Scotland: The Secretary of State may be either Scotland’s man in the Cabinet or the Cabinet’s man in Scotland, but in the last resort he is invariably the latter. Today, he can be little else, since he must impose on Scotland policies against which an overwhelming majority of Scots have voted. (Paterson 1998: 162) Successive Conservative governments resisted growing demands by Scottish parties and movements to devolve/decentralize power to Scotland. Moreover, the Scots perceived policies implemented in Scotland by the London government as hostile and alien, as going against the Scottish political grain (e.g. Poll Tax, local government reform). Thus, in Kenyon Wright’s words, Margaret Thatcher became the ‘unwilling and unwitting midwife of Scotland’s new-found community of purpose’ (Wright 1997: 140).

Industrial decline The Thatcher years were also seen as years of industrial disintegration in Scotland. Most symbolic was the closure of the Ravenscraig steel works near

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Motherwell in 1993. The fight for the survival of Ravenscraig had assumed, as Tom Devine noted, ‘a totemic significance as the symbol of Scotland’s historic status as a great industrial nation’ (Devine 1999: 593). Manufacturing reached an all-time low since Victorian times in the 1990s. Between 1979 and the mid-1990s, the number of workers employed in manufacturing, fisheries and agriculture was nearly halved. Unemployment rose to levels reminiscent of the days of the hunger marches in the 1930s. Ship-building and the textile industry had been in decline before Thatcher, but her government, perceived as favouring the southeast of England, and ignoring the consequences of unemployment in Scotland, was held responsible for this ‘seemingly inexorable process of national economic decline’ (Devine 1999: 594). The bleakness of economic perspectives added to the gloom over the referendum defeat of 1979. But it also fuelled the electoral decline of the Conservative Party in Scotland. Both the failure of achieving a measure of home rule and the demise of the industrial nation of Scotland metamorphosed into the project of redefining the Scottish polity. Historians, cultural commentators and artists took up the challenge.

Scotland’s cultural renaissance Underpinning the political renaissance, rebuilding confidence and purpose after 1979, a cultural renaissance developed, involving writers like Alasdair Gray (Lanark 1991), James Kelman (How Late, How Late It Was 1994), Liz Lochhead, Agnes Owens, A. L. Kennedy, Iain Banks, Irvine Welsh (Trainspotting 1994), Janice Galloway, playwrights like David Greig, Liz Lochhead, Stephen Greenhorn and John Byrne; visual artists like Peter Howson and John Bellany; or the composer James Macmillan. Academic study was, as Lindsay Anderson once put it, another ‘fall-back option’ as the prospect for a Scottish Parliament faded in the late 1970s. The last two decades of the twentieth century saw a dramatic increase of interest in Scottish Studies and the rise of academics in Scotland addressing aspects of Scottish life, society, politics and history: T. C. Smout’s A Century of the Scottish People, 1830–1950 (1987), Michael Lynch’s Scotland: A New History (1992), Chris Harvie’s No Gods and Precious Few Heroes (1987), Tom Devine’s The Scottish Nation, 1700–2000 (1999), James Kellas’s The Scottish Political System (1989), the political and sociological analyses of Alice Brown and David McCrone, James Kellas and James Mitchell, Tom Nairn’s studies on nationalism, and Anthony Cohen’s anthropological investigations into ‘personal nationalism’. Tom Devine received funding for a Research Institute of Irish and Scottish Studies at the University of Aberdeen. Scottish academics and intellectuals positioned themselves at the forefront of international discourse on civil society, nationalism or concepts of reconciling free markets with a substantial welfare state. In the arts, groundbreaking new studies emerged: Cairns Craig’s magisterially edited four-volume History of Scottish Literature (1987), Roderick Watson’s The Literature of Scotland (1984), Duncan Macmillan’s Scottish Art, 1460–2000 (2000) and John Purser’s Scotland’s Music (1992).

Scottish identity and politics 157 Scotland’s universities became an integral part of Scotland’s cultural renaissance. The University in Scotland, an Edinburgh University report published in 1996, cites Professor Sutherland on the ‘University in Scotland Initiative’: By promoting the study of Scotland within the University, and promoting the University externally as a centre of excellence in the study of Scotland, we shall continue to serve the community from which we draw our strength, while enriching our own reputation and that of Scottish education internationally. (University of Edinburgh 1996: 3)

Beyond the ‘Caledonian antisyzygy’ Highland and Lowland, native and immigrant, Protestant and Catholic, rural idyll and industrial waste land, Jekyll and Hyde. For the best part of the nineteenth and twentieth centuries, this Scottish dualism sailed under the flag of the ‘Caledonian antisyzygy’, a phrase coined by G. Gregory Smith in his history of Scottish literature of 1919. This term, loved and embraced by Hugh MacDiarmid – Scotland’s greatest poet and intellectual troublemaker of the twentieth century – meant a combination of opposites, but was used by Smith, in an apologetic fashion, in an attempt to explain why Scottish literature did not confirm to the (accepted) model of English literature – due to Scotland’s fragmentation as a stateless nation, its linguistic divisions and its ‘racial’ mix, generated by waves of immigration. Scotland’s culture and literature was neither homogeneous nor whole (like the English).3 Gregory Smith drew on passages like the one in Stevenson’s ‘The Scot Abroad’ in The Silverado Squatters (1883): Scotland is indefinable; it has no unity except upon the map. Two languages, many dialects, innumerable forms of piety, and countless local patriotisms and prejudices, part us among ourselves more widely than the extreme east and west of that great continent of America. (Letley 1987: xvii) Whilst this is not necessarily seen as negative by Stevenson, Edwin Muir took up the ‘Caledonian antisyzygy’ as the prevailing Scottish disease in his Scott and Scotland: The Predicament of the Scottish Writer (1936), arguing that any aspiration to a homogeneous culture, reflected in a homogeneous literature, was made impossible for Scotland by its fragmented cultural inheritance that had produced a nation subject to a ‘divided consciousness’. Regaining its statehood would not alter this one iota. Consequently, Muir rejected ‘the whole nationalist literary project’ (Harvie 1993: 191), led by Hugh MacDiarmid, the other pole in the antisyzygy debate. MacDiarmid had started from more or less the same premises as Muir, trying early in his career to see Scotland whole.4 For him the remedy lay in an embrace of Gaelic culture, rather than in English assimilation. Yet, Ursula Kimpel has noted that as time progressed, MacDiarmid tended increasingly to replace

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notions of ‘fragmentation’ with ‘diversity’, ‘a term with much more positive connotations’ (Kimpel 1995: 143). His ‘case for small nations and for the value of supposedly “minority” or “marginal” cultures rested’, as Roderick Watson has argued, ‘on the possibility that they could contribute elements of unique and radical value to the world at large’ (Watson 1996: 294). His stance just about falls short of celebrating diversity, and of shedding the assumption that wholeness of nation and identity are a prerequisite for a necessary reconciliation of opposites. Muir’s and MacDiarmid’s attempts at reconciling the opposites by either taking the option of joining the ‘main’ English culture, or by establishing a Gaelic (or Scots) homogeneous culture, were, ultimately, culs-de-sac. Taking the route via the Scottish philosopher John Macmurray’s notion of ‘heterocentricity’ in The Self as Agent (1995) and of R. D. Laing’s The Divided Self (1965), Cairns Craig arrives at a reconciliation, which in fact emphasizes the divisions as necessary constituents of a dialogue: … the significant issue is that the ‘divided self ’ is not opposed to the ‘unified’ self in Macmurray’s thought: the ‘divided self ’ is the self which has taken itself out of dialogue, out of dialectic. The divided self is a self which refuses to acknowledge its dependence on the other, whereas a ‘healthy’ self, a ‘person’, is always an interaction with the other. (Craig 1999: 112) This is the idea that identity is not a singular; rather, it is ‘necessarily relational’ and ‘lack of unity of the self ’ is no longer to be taken as ‘the symptom of a failed identity’ (Craig 1999: 113). Old-fashioned ideas about wholeness and homogeneity have much less validity at the turn of the millennium than in pre-postmodern times. English literature, that great standard model of Muir’s, has been subverted by formerly marginalized voices, from Scotland, Ireland, the Caribbean, India and Africa (Crawford 1992). ‘The standards of English literature have become obsolete even in England. Consequently, there is no longer any reason why Scottish writers should apologize for not conforming to these standards’ (Kimpel 1995: 153). As Craig noted in an earlier work, ‘fragmentation and division which made Scotland seem abnormal to an earlier part of the twentieth century came to be the norm for much of the world’s population’ (Craig 1987: 7): The inner otherness of Scottish culture – Highland and lowland, Calvinist and Catholic – thus becomes the very model of the complexity of the self rather than examples of its failure. […] A Scottish culture which has regularly been described as ‘schizophrenic’ because of its inner divisions is not necessarily sick: it is engaged in the dialogue with the other, a conversation in different dialects, a dialectic which is the foundation not only of persons but of nations. (Craig 1999: 114 –5)

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The new Scottish Parliament The diverse actors on the Scottish scene became increasingly politicized, particularly after the election defeat of the Labour Party in the General Election of 1987. A broadly based Scottish Constitutional Convention was formed with the remit of formulating a consensual blueprint for a Scottish Parliament. The Conservatives and the SNP abstained. The Convention, after an arduous consultation and negotiation process, published Scotland’s Parliament. Scotland’s Right on St Andrew’s Day (30 November) 1995. With the Labour general election victory of 1 May 1997, the new Labour government under Tony Blair set about translating this document into legislation. A referendum, held on 11 September 1997, returned an overwhelming Yes/Yes vote: 74 per cent in favour of a Parliament, 63 per cent in favour of tax-varying powers for this Parliament. Predictably, in the first elections to the Scottish Parliament (Table 9.2), the Labour Party lost its absolute majority under the new Additional Member System (AMS) of proportional representation, according to which seventy-three constituency MSPs, elected by the first-past-the-post system, were topped-up with fifty-six list MSPs, seven from each of the eight former European parliamentary constituencies. For the Liberal Democrats the result was disappointing. As the champions of the new proportional voting system they would have expected to make substantial gains, which they did not. The SNP also did not reach the target it had set itself of surpassing its peak result of 1974 (30.4 per cent); and the Conservatives have to live with the irony that they were resurrected by an electoral system they still oppose – they gained all their seats through the dreaded second-vote list system, and in a Parliament they had done their utmost to prevent from being set up in the first place. Only as a result of the Ayr by-election in March 2000 did the Conservative Party gain, in their first byelection victory in Scotland for over thirty years, their first directly elected MSP. As Table 9.3 shows, the AMS does not provide full proportionality, but an approximation towards proportional representation. It still favours the large parties, but the sheer fact that the newly elected Parliament includes a Green, a Socialist and an Independent, indicates the increased fairness of representation

Table 9.2 Scottish election results, 6 May 1999 (in %) Party

1st Vote

Change since 1997*

2nd Vote

Change since 1997

Labour SNP Lib Dems Cons Others

38.8 28.7 14.2 15.6 2.7

⫺6.8 ⫹6.7 ⫹1.3 ⫺1.9 ⫹0.8

33.8 27.0 12.5 15.4 11.4

⫺11.8 ⫹4.9 ⫺0.5 ⫺2.1 ⫹9.5

* As these were the first Scottish elections under a new electoral system, comparisons with the 1997 General Election results should be viewed cautiously.

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Labour SNP Lib Dems Conservatives Others

1st Vote Seats

38.8 (53) 28.7 (7) 14.2 (12) 15.6 (0) 2.7 (1)

2nd Vote Seats

33.8 (3) 27.0 (28) 12.5 (5) 15.4 (18) 11.4 (2)

Seats %

Number

43 27 13 14 2

56* 35 17 18* 3

* Labour lost one seat to the Conservatives in the Ayr by-election of March 2000. The by-elections following Donald Dewar’s death and the resignation of Alex Salmond’s MSP seat did not change the composition of the Parliament.

Table 9.4 Scottish election and referendum turnouts compared (in %) Devolution Referendum 1979 European Elections 1994 Scottish Local Elections 1996 General Election 1997 Referendum 1997 Scottish Elections 1999 European Election 1999 Ayr By-election March 2000 General Election June 2001

63.6 37.9 44.9 71.3 60 58.2 24.8 59 59

achieved by the new system. Surveys have shown that over 20 per cent of the electorate split their votes (roughly the same percentage as elsewhere in Europe where similar electoral systems operate). This would mean that the Scots had very little difficulty adopting the new system. It is expected that voters might be even more diligent at using their two votes in the next election – which could mean an increase of small parties and, perhaps, representation for ethnic groups and minorities not yet represented in the Scottish Parliament. The turnout was lower than expected, but it was still considerably higher than for local, or European, elections (see Table 9.4), which indicates clearly that the Parliament is accepted in its own right. (The turnout of 59 per cent in the Ayr byelection is a further indication that the Parliament has already achieved considerable recognition amongst the electorate.) This is supported by the fact that voting behaviour differed clearly from polls asking what the voting intentions would have been had there been a UK General Election on 6 May (Table 9.4). A pattern has already seemed to evolve, which can also be observed in Spain or Germany where results for regional parties, and the performance of national parties on the ‘national’ versus regional level, can differ substantially.

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The Scottish Parliament – three years on Expectations were very high that the Scottish Parliament would make a difference. After just one year, a good deal of disillusionment had set in – perhaps inevitably, as parliaments cannot change political, social or economic structures overnight. The Labour/Liberal Democrat coalition had a rough ride in its first year, permanently under fire for its handling of such issues as Section 285 and tuition fees for university and other higher educational institutions. After two years, the record looked more stable. In abolishing up-front tuition fees, Clause 2a (Section 28), and in accepting the McCrone recommendations on schools and teachers’ pay as well as agreeing to implement the findings of the Sutherland Report6 on free personal care for the elderly, the Scottish Parliament had clearly made a difference as all these measures are not matched south of the border. This has confirmed the distinct sense of regarding the new institutions as, essentially, a good thing. Even otherwise harsh critics concede that, for example, the committee structure of the Parliament has already made a positive difference – cutting across party boundaries, and giving an inkling of the much-vented ‘new politics’. With the completion of its third year, the Parliament has passed nearly forty bills. Current debates, apart from the issues mentioned above, concentrate on land reform (Scotland’s feudal land laws are outdated in comparison with elsewhere in Europe), public transport, education, the health service, housing and electoral reform for local government – also highlighting the need for devolution/decentralization not to stop at Edinburgh, in order to address the regional differences inside Scotland. Conflicts are looming about proportional representation in local government elections, about the reduction of the number of MSPs, to coincide with a reduced number of Scottish Westminster MPS. Nuclear power – replacing old, or building new, power stations – in Scotland could become a controversial issue between London and Edinburgh. And, of course, there are the ever-spiraling costs of the new Parliament building at Hollyrood. The general election of 2001, the first in a generation not to be dominated by the constitutional issue, nevertheless produced a vigorous debate on ‘fiscal autonomy’, which would redress the last of the remaining obvious anomalies: that Scotland receives and spends a block grant according to the ‘Barnett formula’7, but bears little responsibility (apart from its tax-varying power of 3 per cent of income tax) for raising its own revenue. For the SNP, this is part of its strategy aimed at ‘completing the powers of the Scottish Parliament’. This debate will not go away, and in the mid-term it is more than likely that the Scottish Parliament will assume at least part-responsibility for revenue raised in Scotland. Scotland is forging new relationships with other regions of Europe, particularly Catalonia and Bavaria. Scotland also takes an active interest in the applicant states of Central and Eastern Europe which are on the threshold of becoming members of the European Union (EU) – a close relationship with the Czech Republic has been established. On 28 May 2001, First Minister Henry McLeish signed an agreement – the so-called Flanders Declaration – with seven other

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European ‘constitutional regions’ in view of the 2004 Intergovernmental Conference and the Berlin Summit and its envisaged discussions on subsidiarity and the constitutional role of sub-state regions and nations in European governance. Clearly, devolution has put Scotland on the map. Interest in the Scottish Parliament, and in the way constitutional change is engineered in the UK, transcends the confines of Europe, from Central Asia to Okinawa and Hokkaido¯. According to the findings of the Scottish Social Attitudes Survey of 2000, devolution seems to be ‘bedding down’. In the absence of a written constitution, many commentators had predicted conflict and friction between Edinburgh and London right from the start. The first three years have brought their conflictual themes – tuition fees, Section 28, Act of Settlement8 – but interference from London has been very limited (although it is rumoured that it is much more noticeable behind the scenes, at civil service level).9 Yet, political parties have only begun to adapt to the new situation, Parliament and Executive are still on a steep learning curve. Large parts of the media have not yet found the ‘median’ distance in their coverage of devolution. The sometimes-acerbic criticism of the Parliament, especially in the print media (and here in particular The Scotsman and Scotland on Sunday, under the general editorship of the unreconstructed Thatcherite, Andrew Neill and the populist Daily Record ), has provoked terms like ‘corrosive’ (Tony Blair) or ‘bitch journalism’ (David Steel). Yet, in his book on the initial phase of the Parliament’s performance, the Scottish political editor of The Herald, Murray Ritchie, came to the reassuring conclusion that ‘our new Parliament is behaving just as we would expect any other Parliament to behave’ (Ritchie 2000: 219).

Was it Braveheart that did it? So, was it a surge of Scottishness that pushed through the programme for constitutional change? Should the new Parliament building be adorned not just with a bust of Margaret Thatcher as its ‘midwife’, but also with a statue of Mel Gibson as the begetter of the new institution? Certainly, Braveheart played its part as a catalyst and symbol, but we should not exaggerate its impact. Tim Edensor summed it up succinctly: Braveheart, as a contested cultural form, reveals many of the complexities in the sustenance of contemporary national identities in general, and Scottish identity in particular. Nations are continually in the process of construction. The imperative to gather together a set of symbols and histories that inscribe the nation as an ‘imagined community’ is an ongoing and competitive process. Old symbols fade into disuse, are reinvigorated, are appropriated by different causes and reinterpreted, and new symbols are invented, claimed and circulated. (Edensor 1997: 154) Rather than ‘having done it’, Braveheart happened to come at the right moment – to be instrumentalized in the final push towards devolution.

Scottish identity and politics 163 As the historical context has shown, devolution was not a sudden outburst – it is, as Jonathan Hearn put it, ‘a coherent, comprehensible outgrowth of Scotland’s modern history’ (2000: 117). It is also noteworthy that the decision to vote positively in the 1997 referendum was not driven by feelings of ethnicity. The Scots voted for their own parliament not primarily as an expression of their Scottishness or, worse, as an expression of their anti-Englishness; rather, a detailed analysis of the Devolution Referendum found that ‘intentions for the referendum were not shaped by social structure or by identity, but by issues of welfare’ (Brown and Surridge 1999: 137). Aspiring to a Parliament, in the words of David McCrone, had much more to do with policy expectations than as an expression of nationhood: Being Scottish is certainly important, but it does not determine whether Scots are in favour of a parliament or not. Those who thought themselves as English or British were also in favour of a parliament. (McCrone 2001: 165) Yet, undoubtedly the campaign for devolution and the achievement of the new parliament have gone hand in hand with a strengthening of national identity. ‘It is likely,’ McCrone argues, ‘that having a parliament will reinforce national identity, for “standing up for Scotland’s interests” seems to be the touchstone of political success’ (2001: 165).

Perspectives: asymmetrical quasi-federalism, or the break-up of Britain? So, where will the process lead? It is interesting to note that constitutional change in the UK is paramount, but not following any apparent grand design. It is pragmatic on a ‘give the people what they want’ basis: a ‘con-societal’ Assembly for Northern Ireland (O’Leary 1998), a Parliament for Scotland, a National Assembly for Wales, an elected mayor for London and optional devolution for the English regions. In addition: reform of the House of Lords (with a still remote perspective of providing regional representation in a second chamber); and electoral reform, which has turned the UK into a laboratory, experimenting with a variety of electoral systems (first-past-the-post still for Westminster; Additional Member/Proportional Representation-System for Scotland and Wales; Single Transferable Vote for the Northern Ireland Assembly; and a pure Proportional Representation List System for the European Parliament elections). The key to understanding this process is that devolution is not a settlement. It is, in the well-known phrase of former Welsh Secretary of State Ron Davies, ‘a process not an event’ (1999). Surveys have shown that a majority of Scots want the powers of the Scottish Parliament extended (Surridge 2002: 136). Whether or not devolution will eventually lead to some form of independence is hotly debated. We are back to that whole spate of books – from left to right wing – that have appeared recently, all commenting on the alleged demise of the UK: Heffer (1999), Redwood (1999), Hitchens (2000), Marr (2000), Nairn (2000).

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The SNP’s position is that an election victory of the party would trigger a referendum on ‘independence in Europe’. An independent Scotland would then seek a close association with the other parts of the UK and Ireland, but be a ‘sovereign’ EU member state. Apart from the language question, the existence of the EU as an integrated network is perhaps the decisive difference between the situation of Scotland and Quebec. Yet, the danger of a ‘neverendum’ is taken seriously in Scotland. Allan Massie, the ‘literary face of Scottish Toryism’ and an ardent combatant in the anti-devolution campaign, contended: ‘If Scotland has the choice between Catalonia and Quebec, the Scots will choose Catalonia’.10 Indeed, independence for the constituent parts of the UK would be the only clear-cut, ‘neat’ solution – a straightforward federal structure is hardly imaginable, considering the disproportionate size of England (48 million people), compared with the relatively small populations of Wales (2.8 million), Scotland (5 million) and Northern Ireland (1.6 million), let alone the unequal distribution of economic power. Any federal structure involving England would be asymmetrical for that reason. Yet, a federal structure involving the English regions, rather than England, would also be asymmetrical because it would mix regions with nations.11 Brian Taylor concludes: The federal solution which works in the United States and Germany – where no single state is completely dominant – would not easily translate to the UK, where one constituent nation has the vast majority of the population and the firmly established UK capital. (Taylor 1999: 257) Anyway, without a written constitution, guaranteeing federal rights, any ‘federal’ rearrangement would remain quasi-federalist. The establishment of new institutions, triggered by the Northern Irish Peace Process, and based on the Belfast (Good Friday) Agreement of 1998, further complicates the constitutional picture. North-South institutions mean that a devolved part of the UK (namely Northern Ireland) shares institutional responsibilities with a sovereign state (namely the Republic of Ireland). The British–Irish Intergovernmental Conference exercises joint authority over a devolved part of the UK (Northern Island); and the British–Irish Council (of the Isles) brings together devolved territories of the UK (Northern Ireland, Scotland, Wales), the sovereign governments of the UK and of the Republic of Ireland, as well as the Crown Dependencies of the Isle of Man and the Channel Islands (which are neither part of the UK nor the EU).12 It is interesting to study these emerging, new and complex structures of governance in ‘these isles’ in the context of changing patterns of European governance, but also in a wider context of federal and quasi-federal states in the world. Future perspectives in and for the UK depend very much on the evolving structures of governance in the UK and how they work or, respectively, are perceived to be working. But they also depend on varying scenarios of developments in European governance, particularly in regard to the role of regions and small nations in EU

Scottish identity and politics 165 decision-making institutions – the theme of the next Intergovernmental Conference and the Berlin Summit of 2004. For Scotland, the only thing that can be predicted with any certainty is that there is no way back to the previously centralized, unitary status quo. The genie, it has been said, is out of the bottle and home rule, in one form or another, is here to stay. And Braveheart might, at best, qualify for a ‘best supporting actor’ trophy in Scotland’s political renaissance.

Notes 1 In the words of the right-wing politician, Enoch Powell, power devolved is power retained. The term ‘home rule’ is more ambiguous – it may mean devolution, or selfgovernment, or even independence; yet the emphasis is clearly on self-government (see Brown and McCrone 1998: 17). Plaid Cymru in Wales, according to its President Dafydd Wigley, has chosen to replace ‘independence’ with ‘self-government’ in its discourse. 2 The (Presbyterian) Church of Scotland that dominated Scottish social life until its split in the ‘Disruption’ of 1843. 3 For an illuminating discussion of the debate see Kimpel 1995: 135–56. 4 ‘Seeing Scotland Whole’ is the title of one of the chapters in his autobiography, Lucky Poet (1943). 5 A discriminatory local government law introduced by the Thatcher government, prohibiting the ‘promotion of homosexuality’ in schools, and in fact forbidding its mention in the classroom. 6 The Royal Commission on Long Term Care, chaired by Professor Sir Stewart Sutherland, presented its final report With Respect to Old Age: Long Term Care: Rights and Responsibilities to the UK Parliament in March 1999, one year after it was established. 7 The Barnett formula was introduced in 1978 and is a mechanism to determine the annual increase in the block grant from Westminster to Scotland (see Lynch 2001: 23–4). 8 Act of Settlement (1701) bars Catholics from succession to the British throne. 9 The latest topic posing a clash between the UK and Scottish governments is nuclear power, energy being a reserved power, yet planning permission being devolved. 10 In conversation with the author, May 1999. 11 See Brown 1998: 215–23 and Keating 1998: 195–218. 12 See Bort 2000: 429–61; Hassan and Wilson 1999 and O’Leary 1998: 14–35.

References Ascherson, N. (1988) Games With Shadows, London: Hutchinson Radius. Bort, E. (2000) ‘The Belfast Agreement: peace for a “troubled” region?’, in E. Bort and N. Evans (eds), Networking Europe: Essays on Regionalism and Social Democracy, Liverpool: Liverpool University Press. —— (2001) ‘Devolution and the end of Britain’, Politics Review, 10(3): 29–31. Brown, A. (1998) ‘Asymmetrical devolution: the Scottish case’, Political Quarterly, 69(3): 215–23. —— (1999) ‘There shall be a Scottish parliament’, in E. Bort and R. Keat (eds), The Boundaries of Understanding: Essays in Honour of Malcolm Anderson, Edinburgh: ISSI. Brown, A. and McCrone, D. (1998) A New Parliament and Scotland’s Future: Questions and Answers on a Scottish Parliament, Edinburgh: Governance of Scotland Forum.

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Brown, A., McCrone, D. and Paterson, L. (1998) Politics and Society in Scotland, 2nd edn, Basingstoke: Palgrave/Macmillan. —— and Surridge, P. (1999) The Scottish Electorate: The 1997 General Election and beyond, Basingstoke: Macmillan. Craig, C. (ed.) (1987) The History of Scottish Literature, Vol. IV, Aberdeen: Aberdeen University Press. —— (1999) The Modern Scottish Novel: Narrative and the National Imagination, Edinburgh: Edinburgh University Press. Crawford, R. (1992) Devolving English Literature, Oxford: Clarendon Press. Curtice, J., McCrone, D., Park, A. and Paterson, L. (eds) (2002) New Scotland, New Society? Edinburgh: Polygon. Davies, R. (1999) Devolution: A Process not an Event, Cardiff: Institute of Welsh Affairs. Dickinson, H. T. and Lynch, M. (eds) (2000) The Challenge to Westminster: Sovereignty, Devolution and Independence, Phantassie: Tuckwell Press. Devine, T. M. (1999) The Scottish Nation, 1700–2000, London: Penguin. Drost-Hüttl, R. (1995) Die Schottische Nationalbewegung zwischen 1886 und 1934: nationalistische Ziele und Strategien im Wandel (The Scottish Nationalist Movement between 1886 and 1934: Changing Nationalist Goals and Strategies), Bochum: Brockmeyer. Edensor, T. (1997) ‘Reading Braveheart: representing and contesting Scottish identity’, Scottish Affairs, 21: 135–58. Ferguson, W. (1998) The Identity of the Scottish Nation: A Historical Quest, Edinburgh: Edinburgh University Press. Fry, M. (2001) The Scottish Empire, Edinburgh and East Linton: Birlinn and Tuckwell Press. Gray, A. (1991) [1981] Lanark: A Life in Four Books, London: Picador. Harvie, C. (1987) [1981] No Gods and Precious Few Heroes: Scotland since 1914, London: Edward Arnold. —— (1993) ‘Gnawing the mammoth: history, class and politics in the modern Scottish and Welsh novel’, in G. Wallace and R. Stevenson (eds), The Scottish Novel since the Seventies, Edinburgh: Edinburgh University Press. —— (1999) Travelling Scot: Essays on the History, Politics and Future of the Scots, Glendaruel: Argyll Publishing. Harvie, C. and Jones, P. (2000) The Road to Home Rule: Images of Scotland’s Cause, Edinburgh: Polygon. Hassan, G. (ed.) (1999) The Shape of Things to Come: A Guide to the Scottish Parliament, Edinburgh: The Stationery Office. Hassan, G. and Warhurst, C. (eds) (1999) A Different Future: A Moderniser’s Guide to Scotland, Glasgow: The Big Issue/Centre for Scottish Public Policy. —— (2000) The New Politics, Edinburgh: The Stationery Office. Hassan, G. and Wilson, R. (1999) The British–Irish Council as a Multi-Form Organisation, Edinburgh: Centre for Scottish Public Policy. Hazell, R. (ed.) (2000) The State and the Nations: The First Year of Devolution in the United Kingdom, London: Constitution Unit/Academic Imprint. Hearn, J. (2000) Claiming Scotland: National Identity and Liberal Culture, Edinburgh: Polygon. Heffer, S. (1999) Nor Shall My Sword: The Reinvention of England, London: Weidenfeld & Nicolson. Henderson, J. A. (2000) The Emperor’s New Kilt: The Two Secret Histories of Scotland, Edinburgh: Mainstream. Herman, A. (2001) The Scottish Enlightenment: The Scots’ Invention of the Modern World, London: Fourth Estate.

Scottish identity and politics 167 Hitchens, P. (2000) [1999] The Abolition of Britain, London: Quartet. Houston, R. A. and Knox, W. W. J. (eds) (2001) The New Penguin History of Scotland, London: Penguin/Allen Lane. Hutchison, I. G. C. (2001) Scottish Politics in the Twentieth Century, Basingstoke: Palgrave. Jennings, C. (2001) Faintheart: An Englishman Ventures North of the Border, London: Abacus. Keating, M. (1998) ‘What’s wrong with asymmetrical government?’, Regional and Federal Studies, 8(1): 195–218. Kellas, J. (1989) [1973] The Scottish Political System, 4th edn, Cambridge: Cambridge University Press. Kelman, J. (1994) How Late It Was, How Late, London: Secker & Warburg. Kimpel, U. (1995) ‘Beyond the Caledonian antisyzygy: contemporary Scottish poetry in between cultures’, in H. W. Ludwig and L. Fietz (eds), Poetry in the British Isles: Nonmetropolitan Perspectives, Cardiff: University of Wales Press. Laing, R. D. (1965) [1960] The Divided Self, Harmondsworth: Penguin. Lazarowicz, M. and McFadden, J. (2000) The Scottish Parliament: An Introduction, Edinburgh: T. and T. Clark. Letley, E. (1987) ‘Introduction’, in R. L. Stevenson, The Strange Case of Dr Jekyll and Mr Hyde and Weir of Hermiston, Oxford: Oxford University Press. Lynch, M. (1992) Scotland: A New History, London: Pimlico. —— (ed.) (2001) The Oxford Companion to Scottish History, Oxford: Oxford University Press. Lynch, P. (2001) Government and Politics in Scotland: An Introduction, Edinburgh: Edinburgh University Press. —— and Hassan, G. (2001) The Almanac of Scottish Politics, London: Politicos. MacCormick, N. (1998) ‘The English constitution, the British state and the Scottish anomaly’, Scottish Affairs (Special Issue: Understanding Constitutional Change): 129–45. McCrone, D. (1998) The Sociology of Nationalism: Tomorrow’s Ancestors, London: Routledge. —— (2001) Understanding Scotland: The Sociology of a Nation, 2nd edn, London: Routledge. MacDiarmid, H. (1943) Lucky Poet: A Self-study in Literature and Political Ideas, London: Methuen. MacDougall, C. (2001) Painting the Forth Bridge: A Search for Scottish Identity, London: Aurum Press. Macmillan, D. (2000) Scottish Art, 1460–2000, Edinburgh: Mainstream Publishing. Macmurray, J. (1995) [1957] The Self as Agent, London: Faber and Faber. Marquand, D. (1988) The Unprincipled Society: New Demands and Old Politics, London: Fontana. Marr, A. (2000) The Day Britain Died, London: Profile Books. Menzies, G. (ed.) (2001) In Search of Scotland, Edinburgh: Polygon/BBC Scotland. Morton, G. (1999) Unionist–Nationalism: Governing Urban Scotland, 1830–1860, East Linton: Tuckwell Press. Muir, E. (1936) Scott and Scotland: The Predicament of the Scottish Writer, London: Routledge. Nairn, T. (1977) The Break-up of Britain, London: Verso. —— (2000) After Britain: New Labour and the Return of Scotland, London: Granta. O’Leary, B. (1998) ‘The 1998 British-Irish Agreement: power-sharing plus’, Scottish Affairs, 26: 14 –35. Osmond, J. (2000) ‘Unitary Britain and regional Europe’, in E. Bort and N. Evans (eds), Networking Europe: Essays on Regionalism and Social Democracy, Liverpool: Liverpool University Press. Paterson, L. (1994) The Autonomy of Scotland, Edinburgh: Edinburgh University Press. —— (1998) A Diverse Assembly: The Debate on a Scottish Parliament, Edinburgh: Edinburgh University Press.

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Paterson, L., Brown, A., Curtice, J., Hinds, K., McCrone, D., Park, A., Sproston, K. and Surridge, P. (2001) New Scotland, New Politics? Edinburgh: Polygon. Pittock, M. H. (2001) Scottish Nationality, Basingstoke: Palgrave. Purser, J. (1992) Scotland’s Music, Edinburgh: Mainstream. Redwood, J. (1999) The Death of Britain? Basingstoke: Palgrave. Ritchie, M. (2000) Scotland Reclaimed: The Inside Story of Scotland’s First Democratic Parliamentary Election, Edinburgh: Saltire Society. Smith, G. G. (1919) Scottish Literature: Character and Influence, London: Macmillan. Smout, T. C. (1987) A Century of the Scottish People, 1830–1950, London: Fontana. Surridge, P. (2002) ‘Society and democracy: the new Scotland’, in L. Anderson, A. Brown, J. Curtice, K. Hinds, D. McCrone, A. Park, K. Sproston and P. Surridge (eds), New Scotland, New Society?, Edinburgh: Polygon. Taylor, B. (1999) The Scottish Parliament, Edinburgh: Polygon. Trench, A. (ed.) (2001) The State of the Nations 2001: The Second Year of Devolution in the United Kingdom, London: Constitution Unit/Imprint Academic. University of Edinburgh (1996) The University in Scotland, Edinburgh: Edinburgh University. Available on-line at: ⬍http://www.cpa.ed.ac.uk/leafbroch/scotbroch/⬎, visited on 9 April 2002. Watson, M. (2001) Year Zero: An Inside View of the Scottish Parliament, Edinburgh: Polygon. Watson, R. (1984) The Literature of Scotland, Basingstoke: Macmillan. —— (1996) ‘Maps of desire: Scottish literature in the twentieth century’, in T. M. Devine and R. J. Finlay (eds), Scotland in the Twentieth Century, Edinburgh: Edinburgh University Press. Welsh, I. (1994) Trainspotting, London: Minerva. Whatley, C. (2000) Scottish Society, 1707–1830: Beyond Jacobitism, Towards Industrialisation, Manchester: Manchester University Press. Wright, A. (ed.) (2000) Scotland: The Challenge of Devolution, Aldershot: Ashgate. Wright, K. (1997) The People Say Yes: The Making of Scotland’s Parliament, Glendaruel: Argyll Publishing.

10 Beyond hondo Devolution and Okinawa ¯ ta Masahide O

With the passage of the Chiho¯ Bunken Suishin Ho¯ or the Decentralization Promotion Law (DPL) in 1995, decentralization has gone forward to different degrees throughout Japan, thereby moving from the debate stage to the implementation stage. The central government has since then entrusted some measure of authority to local governments in an attempt to respond to increasing demands for local autonomy in the changing times of a globalized world. Yet decentralization in Japan is still in its nascent stage, with a strong bureaucratic inclination on the part of the national government to inhibit the process of decentralization. The people, so long used to a highly centralized state and its efficient, yet arrogant, bureaucrats, are now groping for ways to make their government work for their own benefits. On 20 December 1996, the Committee for the Promotion of Decentralization (CPD) submitted its first report to then Prime Minister Hashimoto Ryu¯taro, followed by the second (8 July 1997), third (2 September 1997) and fourth (9 October 1997) reports. Thereafter, the government worked out a comprehensive plan, incorporating a range of opinions concerning decentralization, and submitted it to the regular session of the Diet in 1998. As stated by Barrett: On 8 July 1999, the Japanese Diet passed amendments to 475 existing laws in order to implement a set of measures designed to promote the decentralization of power from central to local government. Decentralization (chiho¯ bunken) is viewed as a prescription for the ills facing contemporary Japanese governance. The degree of decentralization that actually takes place will be a key indicator by which to measure the relative success of the 1990s reform agenda. (Barrett 2000: 33) The Ministry of Home Affairs (from January 2001 part of the Ministry of Public Management, Home Affairs, Posts and Telecommunications) issued a statement explaining the reasons why decentralization was needed: 1

Over-concentration of power, money, people and information in the central government has stripped local regions of resources and vitality.

170 2 3

O¯ta Masahide Overemphasis on nationwide uniformity and fairness ignores local conditions and diversity. Therefore, promotion of decentralization is needed in order to respond to the circumstances and challenges of a new age.

With regard to the challenges of a new age, Prime Minister Hashimoto said in his policy speech to the 140th Diet on 20 January 1995: ‘We are now in an era when the world is rapidly becoming integrated and when people, products, capital and information flow freely and it is clear that the current framework is an obstacle to the vigorous development of our country. Therefore, we must immediately create an economic and social system that can lead the global trend.’ His successor, Obuchi Keizo¯, in his policy speech to the 143rd Diet, also said that current administrative reforms would result in a reduction in the number and size of central government ministries and agencies (thus, twenty-three ministries and agencies were reduced to one Cabinet Office and twelve ministries and agencies in January 2001), and would further promote decentralization, deregulation, freedom of information, political reform and improved ethics for the civil service. The DPL set out three key aims for the implementation of decentralization: First, the roles of central and local government need to be better clarified and responsibilities divided accordingly. Second, measures should be developed to promote revitalization of regional communities throughout Japan. Third, effective measures should be developed to increase the independence and self-reliance of local authorities. Under the DPL, central government was given responsibility to comprehensively review the institutional changes required to promote decentralization. (Barrett 2000: 33–4) In the meantime, local governments have been required to improve their operational efficiency and make preparations to deal effectively with the new responsibilities that they are supposed to shoulder in the course of the decentralization process (Barrett 2000: 34). This chapter seeks to analyse what has been taking place under the guise of decentralization in Okinawa. Drawing on my experience in dealing with the national government during eight years as governor of Okinawa, I would like to follow the process of devolution in Japan, a unitary state where the highly efficient bureaucracy fortifies itself against change, and to analyse the historical relationship between Tokyo and Okinawa. In addition, the chapter examines the specific ways in which the central government limits the independent role of the Okinawa prefectural government and how the new law will affect the prefecture’s future role. The problems faced in attempting to gain autonomy in Okinawa are a useful touchstone by which to measure the present state of decentralization in Japan.

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Definition of decentralization According to Barrett, decentralization has two basic features: 1

2

administrative decentralization – responsibility is transferred from central to lower levels of government, thereby giving them more managerial discretion, but not necessarily financial independence. Local government remains subordinate to central authority; and political decentralization – authority transferred to democratically elected lower levels of government. Local government is placed on an equal footing with central government and financial autonomy is increased. Devolution and localization: local government is given the power to independently develop projects and programmes. Local control over revenue and capital expenditure is increased. Restrictive rules governing organizational structures, staffing, budget utilization, revenue raising and contracting-out are removed. Deconcentration/delegation: transfer of responsibilities from central ministries to field offices and autonomous agencies. Consequently, service provision is brought closer to citizens while remaining part of central government. The heads of these field offices/agencies are generally unelected and are given a certain amount of discretionary power. (Barrett 2000: 35)

Delegated functions Authority

Mandatory regulations

Judicial review of local ordinances Financial resources

Subsidy system Local reallocation tax Regulation of bond issuance

Local government

Central government

National government participation

Taxation regulation Human resources

Descent from Heaven (amakudan) Transfer/dispatch of central officials

Figure 10.1 Main forms of control exercised by central government over local government. Source: Diagram made by Barrett (2000: 37) based on Zukai Gyo¯ sei Kaikaku no Shikumi by Namikawa Shino.

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Figure 10.1 shows the main forms of control exercised by the central government over local government. Barrett presents examples of increased central government control as follows: delegated functions (or more specifically ‘agency-assigned functions’ – kikan inin jimu) are particularly controversial since central government can assign them to local government, which then acts as an agent of central government. The local assembly has limited influence over the implementation of these functions. A total of 128 assigned functions were originally set out in the Local Autonomy Act. This had risen to 327 by 1980 and 561 by 1995. Local government can enact ordinances within the limits of national law. However, each time a local authority attempts to enact an innovative policy, the concerned ministry can argue that the ordinance conflicts with national law and is therefore illegal. It has been common practice for local government to confirm with the relevant ministry that any ordinance enacted is intra vires. In cases where central and local government are in dispute regarding the legal ramifications of an ordinance the affair is normally settled through the courts. The dominant legal interpretation in these cases has been to allow ordinances in areas not covered by national law when (a) they regulate the same activity covered by the law but for different purposes and (b) when they regulate different activities for similar purposes. In the face of these centralizing tendencies, it is easy to understand why administrative reform, including the decentralization of greater powers to local government, has been high on the Japanese political agenda for decades. (Barrett 2000: 37–8) No one doubts that the central government maintains considerable influence in a wide range of ‘disputed’ areas, such as social security and environmental conservation. According to Barrett, [The] CPD’s interim Report recommended abolition of agency-assigned functions. However, resistance from central ministries and agencies resulted in CPD stepping back in the Second Recommendation Report to a more conservative proposal that involved abolition of around 60 per cent of assigned functions. The remainder of these functions would be retained under the condition that the rules underpinning central control are clearly specified in national legislation. (Barrett 2000: 42, original emphasis) In the meantime, the ‘legislative advantage of central government has been maintained. If local governments do not act in accordance with ministerial decisions, then they are in effect acting illegally. In cases of conflict between the two tiers, the central ministries have decided that they will not refer to the newly established “Central–Local Dispute Resolution Committee” ’ (CLDRC) (Barrett 2000: 42). ‘[F]or some ministries, the reform process is a battle for survival likely to be characterized by inter-ministerial fighting with losers and winners. Consequently, this central resistance to decentralization essentially redirected the implementation of the reform proposals to an anti-local-autonomy (han chiho¯ jichi teki ) stance’ (Barrett 2000: 44).

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‘[I]t is particularly significant’, according to Barrett, that ‘central government relinquished the right of referral to the Committee [CLDRC], while at the same time reserving its right to take legal action against local government and, in extreme cases, to take over an administrative function should local government fail in its duties’ (Barrett 2000: 46). Accordingly, ‘[a]t face value, the current decentralization reforms appear to do little to change the power relationship between central and local government. While some administrative powers have been transferred, the political decision-making structures remain untouched’ (Barrett 2000: 47). For instance, public works projects, social security and environmental conservation, to name a few, have been areas where central and local government disputes have arisen, but central control has always been maintained in those areas. Moreover, ‘public works projects play a significant role in both local politics and economic development’ in Japan, making it an effective tool for central control of local affairs through subsidies (Barrett 2000: 47). ‘The decentralization reforms to date leave the public sector financial system virtually untouched, with the First DPP only proposing a 0.7 per cent cut in the national subsidies to local government’ (Barrett 2000: 47). Another example concerns the expropriation and the use of land owned by anti-US military base landowners. The central government agencies, Defence Agency and the Prime Minister’s Office (from January 2001 part of the Cabinet Office), have been accorded exclusive powers through recent amendment to the Special Measures Law for the Expropriation and Use of Land used by the US military in Japan (SMLEUL), that enabled them to expedite the deliberation of the Prefectural Land Expropriation Committee (PLEC) if it ‘threatens to impede the expropriation and use of the land in question’. This made it possible for the government to continue to use the land in question even after leases expired, foregoing the judgement by the PLEC. In this way, the power of the national government has in fact been increased, rather than decreased, under the banner of promoting decentralization. This is the real situation vis-à-vis decentralization in Japan. However, Barrett is right in pointing out that ‘[i]t is all too easy to argue that decentralization is meaningless without the transfer of financial autonomy and that the ongoing administrative reforms in Japan could actually result in the creation of stronger central government ministries as well as the continuation of special interest politics closely tied to the subsidy system’ (Barrett 2000: 48).

Role of the national government Let us consider the role of the national government. Zaimusho¯ or the Ministry of Finance (MOF) speaks of the role of the national government as follows: Historically, the role of government was viewed at the dawn of capitalism in the late seventeenth century as being a ‘night-watchman state’, that is, government should operate on the smallest scale possible, providing such

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O¯ta Masahide minimal services as national defense, and domestic law and order. Later, however, as the government, economy, and society matured, the needs of the people expanded and became more varied, and the role expected of the government also expanded. (Zaimusho¯ 1998: 8)

The central government of today provides, in addition to defence, diplomacy, judiciary, police, fire-fighting services and so on. It also plays the central role in the collection of taxes. According to MOF, taxation has an extremely long history, with a system set up by the Taika Reforms of AD 645, which was later refined in the eighth century by the Taiho¯ Ritsuryo¯ edict to establish the ‘So-Yo¯-Cho¯ system’ of levies in the form of crop, labour and textiles. More than a millennium later, the basis for the present tax system was laid out in the postwar recommendations of the 1949 mission to Japan of US tax specialists led by Professor Carl S. Shoup of Columbia University (Zaimusho¯ 1998: 8). The Shoup report gave detailed recommendations necessary for the decentralization and democratization of Japan. With regard to the problems that local government are subject to in Japan, the recommendations noted that ‘the division of tax sources among the three levels of government is in some respects inappropriate, and the control of local tax sources by the central government is excessive’ (The Shoup Mission 1949: A1). The subsidies and grants from the national government ‘are often determined arbitrarily; they are unpredictable in amount; they are set without due regard for differences among local areas in need of money; they sometimes place a strain on local resources by requiring that national payments be matched locally; and taken together, they involve excessive control in detail by central government over local authorities’ (The Shoup Mission 1949: A1). The Shoup recommendations further stated, ‘because the national government participates in so many activities of municipal government, local autonomy is impaired’ (The Shoup Mission 1949: A2). For instance, primary education, police and fire protection, and elections have been transferred as independent functions of local government, yet the attitude prevails that these are national functions being carried on by local government and therefore requiring direct subsidy and national control. The Shoup group recommended finally: ‘Local government must be strengthened because of its potential contributions to the democratic ways of life. With strong, independent and effective local governing bodies, political power is diffused and placed close to the people rather than centralized in a distant and impersonal national government’ (The Shoup Mission 1949: A2).

Role of local government Now let us address the role of local government. As a means of strengthening local government finances in order to promote the local share of authority and improve local welfare, a system of local consumption taxes was instituted in 1997. In the past, the issuance of local government bonds was subject to various

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limitations imposed by the central government, including the need for formal permission to be granted by the Minister of Home Affairs. Under the DPL, however, this system was revised in favour of a ‘consultation system’. Generally speaking, local governments in Japan possess provisions for the exercise of direct democracy, which are not seen at the national level. For instance, after collecting signatures from 2 per cent of the registered voters in a given locality, residents may request the governor, mayor or other head of the local government to establish, change or abolish ordinances. By collecting the signatures of one-third or more of the voters, moreover, petitions can be made to local election administration commissions to dissolve local assemblies or to dismiss the head or key local officials (Zaimusho¯ 1998: 4). As a result of changes in the political awareness of the citizens, a growing number of local governments have begun to establish voting ordinances which allow citizens to vote on important local issues. It must be pointed out that this trend is not based on the Local Autonomy Law, but on the constitutional right to establish local ordinances (Article 94). At present, local ordinances have been used in this way with respect to such issues as the building of nuclear power plants, reclamation of seaside marsh areas, the continued presence of US military bases and the building of waste disposal facilities. In the case of Okinawa, reflecting the need to respond to complaints about local government functions and activities raised by prefectural residents, the Okinawa prefectural government in 1994 established a local ombudsman system. This was the first time for such a system to be established at the prefectural level in Japan. The ombudsman was charged with investigating various aspects of local administration. In cases where it is judged that the reason for complaints results from shortcomings on the part of the prefectural government, the ombudsman is required to make his or her views public and advise the local government to resolve the problem in question. In this way, the ombudsman system can serve to remedy and improve the operation of local government.

Okinawa, devolution and US military bases Having discussed the roles of both central and local governments, next let us proceed to examine the Okinawa prefectural government in relation to devolution. The unhappy relationship between the national and the Okinawan local government during the 1950s was pointed out by George H. Kerr, author of Okinawa: The History of an Island People: Fundamental ‘Japanese polity’ does not hold Okinawa to be a vital part of the nation’s body; it is expendable, under duress, if thereby the interests of the home islands can be served advantageously. The mystical Japanese sense of national identity centers in the home provinces, imperial domain (in theory, at least) since the dawn of history. (Kerr 1958: 10)

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Kerr also states that Okinawa has shared: the fate of many frontier territories too small and too poor to attract attention in times of peace but doomed to rise to international prominence during crises among the world powers … It cannot escape the consequences of wars and revolutions in larger states nearby; the postwar ‘Okinawa Problem’ was produced by events set in train long ago by accidents of geography and history. (Kerr 1958: 3) While such sentiments are understandable, it would not be correct to attribute the Okinawa problem entirely to geography and history. For, after all, in many cases problems arose due to human mistakes, political or otherwise. Former president ¯ hama Nobumoto, who hails from Okinawa, made simiof Waseda University, O lar remarks saying, the ‘Okinawa problem’ was partly due to political errors. Chalmers Johnson, Chairman, Japan Policy Research Institute, claims that the Okinawan situation is a result of bunichi, or a contempt for Japan ( Johnson 1997: 2). Likewise, George Feifer, author of Tennozan, mounts the criticism that the Meiji government seized Okinawa and offered to divide its archipelago and give half to China. He goes on to say that ‘[t]he motive in 1945 remained the same: benefit to the Japanese mainland’ (Feifer 2000). Referring to the issue stemming from the American occupation of Okinawa since 1945 and the postwar development of the ‘Okinawa problem’ in international affairs, Kerr points out: At the very heart of these two subjects [the American occupation and the postwar development of the ‘Okinawa Problem’ in international affairs] lies the story of Okinawa’s traditional relationship with Japan, for it is difficult to believe that the Japanese government would have signed a treaty of peace which permitted unlimited, exclusive alien military occupation of any other prefecture in the country. Why, then, Okinawa province? (Kerr 1958: 10) One partial answer is related to Article 3 of the Peace Treaty signed in 1951, which states, ‘Japan will concur in any proposal of the United States to the United Nations to place under its trusteeship system, with the United Sates as the sole administering authority, Nansei Shoto south of 29 north latitude (including the Ryukyu Islands and the Daito Islands) … Pending the making of such a proposal and affirmative action thereon the United States will have the right to exercise all and any powers of administration, legislation and jurisdiction over the territory and inhabitants of these islands, including their territorial waters’. But as Kerr further states: Neither the formal documentation which underlies the postwar occupation nor the treaty anywhere recognizes and defines precisely the traditional or

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legal relationship of the Ryukyus to Japan. Left thus in a diplomatic twilight zone, uncommitted by the victors or the vanquished, this frontier territory became the diplomat’s delight and essential tool, the quid pro quo. (Kerr 1958: 10) Okinawa was often described as the ‘tail of the lizard’ (expendable) or the pawn of the Pacific, and it is a well-known fact that Okinawa’s reversion to Japan was accomplished as a quid pro quo for the virtual free use of Okinawan bases by the US military. Feifer comments on the fact that ‘[i]t is supported by the historical evidence that foreign planning for Okinawa has always been for foreign interest, at the island’s certain expense’ (Feifer 1992: 562). Okinawans sought to accomplish three objectives by reversion: first, to restore national identity under the Japanese constitution; second, to close the economic and social gaps between Okinawa and the mainland; and third, to reduce in size and number the US military bases. The first objective was achieved upon reversion (1972); the second has been achieved to a considerable extent so far, but the third one remains unsolved. Even today, 75 per cent of all the US military ‘facilities and areas’ in Japan are concentrated in the limited land area of Okinawa. Besides, during the twenty-five years since reversion, the US military facilities in mainland Japan were reduced by 60 per cent, whereas the reduction rate in Okinawa during the same period amounted only to 16 per cent, although the Diet passed a resolution at the time of reversion to continue to review the base situation on Okinawa with the aim of gradual reduction. This situation has not been much rectified to date, but it has been complicated by ‘other issues that are poisoning Japan–American relations and that constitute particular grievances for the Okinawans’ ( Johnson 2001: 27). To prevent Okinawan resentment from boiling over, the Japanese government has been using a ‘carrot-and-stick’ policy toward Okinawa, by promising economic development projects, on the one hand, and by forcing Okinawans, on the other hand, to accept the government’s plan to relocate, not reduce, military bases within Okinawa and by expropriating private land for military use through stop-gap legislative measures, which threatened to infringe upon private land ownership. The property rights and the principles of local self-government were my main points of contention at the hearings of the Japanese Supreme Court in 1996 against the Japanese government’s charge that I had neglected my duties when I refused to sign authorizations to allow it to expropriate private land for military use. During the years of American occupation, Okinawans were subject to a number of measures established by US military government authorities that were questionable if judged by the standard of the human and civil rights guaranteed under the Japanese constitution. Prominent among those injustices were cases of forceful expropriation of privately-owned land by the US military in total disregard of the property rights of Okinawans. The situation, in essence, has not changed today, some thirty years after reversion, except that the Japanese government now takes land under the façade of legality. The revision to the SMLEUL was passed by an overwhelming majority (Lower House by about 90 per cent, Upper House by about 80 per cent) in April 1997.

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The bill was to revise the existing laws so that even if the leases expired before the PLEC had finished surveying procedures, the US military could legally occupy the land under Japanese law. This near unanimous vote by the Diet surprised and angered many Okinawans, who interpreted it as a serious assault by the Japanese government on the property rights of Okinawans. Moreover, the law transferred to the national government the final authority to decide on the use of land for military bases as a national government function, almost reducing the deliberative procedures of the PLEC to a mere formality, and stripped the governor of his power to refuse to sign the documents necessary to authorize the land use. And the law, it has been pointed out, is intended to apply only to Okinawa, in violation of Article 14 of the constitution – equality under the law. Article 29 of the Japanese constitution guarantees private ownership of property, but this right is denied to those landowners whose land was confiscated forcibly by the American authorities during the occupation days and who therefore want their land returned to use it for their own purposes. Aside from the land issue, another major point of concern is the relocation of military bases and subsidies for economic development from the national government. An article in the Mainichi Daily News on 7 September 1997 stated: ‘The central government officially denies a direct connection between the transfer of Futenma Air Station and the G-8 summit but there is no doubt that the government hopes to use the summit as a lever to facilitate a solution to the Futenma problem.’ But the link between ‘the base problem’ and economic development is obvious. The political role played by the governing party in Tokyo in exploiting Okinawa’s dependence on central government funding can be illustrated concretely by the economic benefits Okinawa received following the November 1998 prefectural election. Shortly after the conservative candidate Inamine Keiichi defeated me in the election, the Tokyo government immediately decided to appropriate a special fund of 10 billion yen for the new governor to explore possibilities for further development. This grant, a one-time payment, was double the amount made available to my administration. At the same time, the government resumed its Okinawa Development Programme, which had been suspended since I declared my opposition to the construction of the marine air facility in the Henoko area of Nago City, northern Okinawa, in February 1998. The programme was designed to help Okinawa stand on its own feet through economic and social development. The government also ear-marked a special appropriation of 100 billion yen to be used in ten years for public works and non-public works projects in twelve municipalities in northern Okinawa. Out of this fund, some 2.4 billion yen covering twenty-six projects has already been requested for the fiscal year 2001. In addition, the government by Cabinet decision has established four councils to deliberate on Okinawa’s military base-related problems. The council members include ministers, the governor of Okinawa, the mayor of Nago and the heads of the municipalities where the military bases are already located. The establishment of the councils, all set up to facilitate the solution of problems faced by these municipalities of the use of land when or if the facilities are relocated, set in motion preparations for the plan to construct the marine facility. Also, the

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Special Action Committee on Okinawa (SACO), which announced in December 1996 the relocation of eleven US ‘facilities and areas’ (most of them, including Futenma airbase and Naha military port, are to be relocated within Okinawa), doles out special subsidies to the municipalities which have agreed to accept the SACO accord. Likewise, the Round Table for Consultation on the (problems of) the Municipalities with Military Bases (also called the ‘Shimada Discussion Group’ after the Chairman, Professor Shimada Haruo of Keio University) which was established as a private advisory organ of the Chief Cabinet Secretary, makes recommendations for grants on social and economic revitalization projects for those municipalities. Special Action Committee on Okinawa, whose members include high-ranking US and Japanese military and civilian officials, was established on 19 November 1995 to study the feasibility of the withdrawal and relocation of military facilities in Okinawa after the huge 21 October 1995 protest rally over the rape of a 12-year-old school girl by three Marines (4 September). The committee issued its final report on 2 December 1996, proposing the relocation and withdrawal of eleven facilities and areas. Seven of them were to be relocated within Okinawa, and the others, just unnecessary parts of existing bases, were to be returned. The trouble is that while the Okinawan side demanded the unconditional return of these facilities, the SACO report recommended ‘relocation within Okinawa’. This poses serious problems for land-scarce Okinawa, where the majority of all US installations are already concentrated. This, together with fifteen air spaces and twenty-nine sea zones exclusively used by the US forces, ‘hampers the expansion of transportation networks, the systematic development of cities, reclamation of sea areas and the procurement of land for industrial use; in effect, the overall industrial promotion of Okinawa is affected’ (Okinawa Prefectural Government 1994: 1). On 8 June 2001, the government proposed three construction methods and eight possible sites for an alternate facility for Futenma in Henoko presenting the proposed cost for each method depending on whether the facility would be built inside, outside or on top of the coral reef off Henoko. Estimated costs for the 2,600-metre long air station vary from 140 billion yen to 1 trillion yen, depending on the location, and it would take six to eighteen and a-half years to build. The Ryu¯kyu¯ Shimpo¯, an Okinawan daily with a prefecture-wide circulation, stated in its 4 June 2001 editorial that the crux of the military base problem lies in the fact that relocation plans are progressing concurrently with economic development projects. It further argues that people in northern Okinawa, especially Nago citizens, feel that the situation has reached the point of no return and it seems no longer a choice between relocation and development. In other words, residents think that although the base relocation and economic development are separate issues as the government has repeatedly emphasized, the two issues have been actually linked before they knew it, because the government is proceeding with its plan for relocation as if it were a quid pro quo for economic development. People object to the link because it is tantamount to imposing the central government’s will (plans) on the prefectural people under the pretext of economic development, and is detrimental to local autonomy.

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Economic dependence Okinawa, struggling to build a viable, self-sustainable economy, which is essential for the autonomy of the prefecture, is handicapped by the obstacles mentioned above. But to make the matter worse, there are those in Okinawa as well as in Japan who welcome as much subsidy as possible for public works projects being carried out or planned for Okinawa. In her working paper, Aurelia George Mulgan severely criticizes the government for seeking to manipulate the economic self-interest of local businesses hoping for greater patronage, but particularly local construction contractors dependent on government-subsidized public works for a living. ‘The decision to host the G-8 summit in Nago in July 2000 is yet another gesture to shore up the prefectural economy and to appease Okinawan sentiment over the Futenma relocation issue,’ wrote Mulgan (Mulgan 2000: 21). The issue has sharply divided public opinion in Okinawa because it means the construction of a new military base in a sea area which is abundant in marine life and is an important feeding ground for an endangered species of dugongs. Yet there is no denying the fact that, as many observers point out, subsidies and other material incentives are a very blunt instrument for dealing with local protest over base issues, and such subsidy politics exploits the economic weakness and dependence of Okinawa on the central government because government subsidies and handouts have become such a necessary prop to the prefectural economy. This economic dependence works as a strong and effective tool by which to force Okinawa to accede to the policy of the central government. According to the home page of the Finance Section of the Okinawa prefectural government, the ratio of the prefectural tax revenue in the fiscal year 2000 budget amounts to only 13.0 per cent, compared with the average of 19.5 per cent for the seven prefectures of the Kyushu area (Okinawa included), whereas the tax allocated to Okinawa prefecture (from the central government) plus the national treasury disbursements add up to 67.9 per cent of the budget in contrast to the 50.3 per cent average for the seven prefectures (http://www.pref.okinawa.jp/bubetu.html).

Emerging movements for independence Given the current situation in Okinawa, it is no surprise to find a number of observers who link the resentment in the prefecture regarding the bases to the government’s attempt to appease Okinawans with money. During talks with highranking Japanese government officials, Governor Inamine Keiichi often points to ‘the magma underground’, referring to the pent-up feeling of prefectural people ready to erupt whenever serious crimes or incidents involving Americans occur. The officials, feeling guilty about consigning so many military bases to Okinawa, usually refrain from responding to the governor’s comment, but the governor’s message seems to get through. ‘In the past five years, the method has become increasingly conspicuous to use this “military base card” to make the government set up various economic development projects for Okinawa’, stated the Okinawa

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Taimusu, the other leading paper in the prefecture, in its 21 October 2000 editorial, and continued, ‘not that it is totally a bad idea, but the method has extremely dangerous aspects’. The editorial warned that benefits so earned are like camphor injections or temporary stimulants and eventually develop over-dependence on national government subsidies at the expense of self-reliance. Chikushi Tetsuya, a well-known Japanese TV newscaster and commentator, said in his newspaper column in November 2000 that while the abnormal situation in which a vast alien military presence continues to remain unchanged over the past five years, the prefectural government and its supporters have shown an increasing tendency to yield to the central government’s coaxing in what is termed as a ‘pragmatic approach’ to the situation. ‘The iron principle the government employs here is divide and rule’, Chikushi states, ‘the leaders who sat side by side on the podium at the 1995 protest rally are now politically divided’ (Okinawa Taimusu, 5 November 2000). The national government, by promising various economic development projects for the underdeveloped northern areas of Okinawa, on the one hand, indirectly forces Okinawans, on the other hand, to accept government proposals for constructing or relocating military bases. This puts Okinawans in an inextricable bind and the only way out may be independence. Similarly, Ko¯ji Taira states: ‘Okinawans’ desire for independence seems always to be latent in their minds, becoming visible from time to time in various forms, and asserts in the end that instead of accepting external decisions, Okinawans might consider taking the matter in to their own hands and settle their international status once and for all on their own initiative’ (Taira 1999: 172). The year 1997 saw a significant rise in debates over independence. In Naha, small groups of intellectuals were involved in heated discussions on the subject in informal gatherings, at extempore symposiums, and so on. In February of that year, a member of the House of Representatives from Okinawa asked the government what it would do if Okinawa wanted independence. It was a question ¯ yama Cho¯jo¯, former mayor of Koza too moot to elicit an answer. In March, O City (now Okinawa City) and a fervent reversionist, published an instant bestseller ¯ yama entitled Okinawa Dokuritsu Sengen (A Declaration of Okinawan Independence). O stirred passions when he stated ‘Japan is not the fatherland of Okinawans’ ¯ yama 1997: 6). (O In the meantime, the Okinawa Jichiro¯ or Municipal Workers Union, with support from the All-Japan Prefectural and Municipal Workers Union, prepared an ‘Okinawa Project Report’ concerning Okinawa’s measures for self-government. The report states: Autonomy ( jiritsu) is to break away from the cycle of dependence. There must be a consensus which recognizes the difficulties faced along the hard road towards this ‘autonomy’. [It continues to argue, that] while the legislation of decentralization did include some devolution measures through the abolishment of the ‘legally entrusted functions’ system, the amendments did not include the transferal of financial or diplomatic powers exclusively held by the national government. We see the necessity to enact further devolutionary

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In essence, this proposal for a ‘Special System of Autonomy within the Ryukyu Islands’ calls for legislation in order to implement a system aimed at solving the problems faced by Okinawa, both economically and in terms of the issue of US military bases, and to foster respect for historical, cultural and social pluralism ( Jichiro¯ 1998: 3). In other words, the proposal posits ‘one country, two systems’ for the benefit of Okinawa. Certainly, observers such as Taira are no doubt right in saying that Okinawa’s independence from Japan in the context of its continuing dependence on the national government may sound utopian (Taira 1999). Nevertheless, it remains a reasonable topic for discussion, at least on a hypothetical level.

Conclusion After the above examination of devolution in Japan through the case of Okinawa, the conclusion must surely be that, while 475 pieces of legislation were enacted in support of ‘devolution’, the end result does not live up to such a term. This is especially so in the case of Okinawa, for the US–Japan Security Treaty poses a serious problem for the island. The Japanese government has always claimed that the security treaty is a mainstay in the Japan–US relationship because it guarantees the peace and security of the nation and justifies the presence of the US forces in Japan. If such is the case, then the government should divide the responsibility and burden stemming from the security treaty as evenly as possible among the prefectures and municipalities throughout all of Japan. But the government has failed in this respect, placing an excessive burden on Okinawa alone, as evidenced by the location of three-quarters of all US installations in Okinawa. This situation clearly belies the nature of devolution because the peace and security of the Okinawan people in their daily lives is imperiled as a result. In particular, the act of imposing a ‘carrot-and-stick’ policy toward Okinawa, with the maintenance of the US–Japan security system prioritized above all else, constitutes the exact opposite of devolution. It is this point, above all others, that needs to be taken cognizance of in examining the meaning of decentralization in Japan. If the government continues to sacrifice the daily safety of about 1.32 million inhabitants of Okinawa prefecture on the pretext of protecting the peace and livelihood of all its people, then Okinawa remains a political pawn to be used in trade-offs with the United States. Under such circumstances, local government and national government cannot stand on an equal footing in the face of the DPL. Far from enjoying the benefits of self-government based on the DPL, the

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existence of local government itself is being threatened. As a result, local government amounts to no more than a servant of the national government. The nature of devolution in Japan thus poses many problems. Various reasons may be cited for this, but of particular importance is the fact that the bureaucratic mentality prevalent in the centralized government of prewar Japan has not significantly changed. This bureaucratic attitude is more or less the norm in mainland Japan, but Okinawans take it as a great affront. Okinawan people, whose human relationship is traditionally more horizontal than vertical (bureaucratic), and who came into daily contact with Japanese bureaucrats only after reversion in 1972, find it difficult to understand the overbearing attitudes displayed by lower-level bureaucrats, who condescend to listen to their petitions and have been known to throw their legs over the table and ask what they had come such a long way for. Those directors and deputy-directors of the branch officers of the national government in Okinawa or those bureaucrats who visit Okinawa on duty continue to wear their bureaucratic suits even after dark – in bars and cabarets where the bureaucratic hierarchy is strictly maintained. This mentality, formed in more than a century of governing a people subservient to authority, shows itself in the arrogant attitude of central government officials toward prefectural and municipal officials who go to Tokyo with petitions and requests. This is borne out by complaints local officials divulge privately. As an illustration of this pervasive attitude, one bureaucrat of ministerial rank who was posted to Okinawa as a special envoy of the national government recently flared up in anger before a group of municipal officials who came to his office in order to request him to convey their complaints to the Ministry of Foreign Affairs (MOFA) about the US air force training over their town. ‘I don’t have to listen to complaints like this’, he reportedly burst out when the head of the group mentioned that Japan hardly merits the name of a sovereign state if it lets the US air force conduct its training anywhere it likes without government consent. A few days later he issued an official apology for his outburst. No matter what great laws are enacted, if the mentality of those who apply these laws does not change, not only will these laws not function, but the intention in enacting the laws in the first place may come under question. According to the DPL, the relationship between central and local governments is not hierarchical but equal and cooperative in nature. Yet, among bureaucrats within the national government, some act as if the heads of local authorities were in fact their subordinates. Furthermore, when the head of a local authority requests something of the national government, these bureaucrats do not respond in the spirit of devolution, but merely display their own power and arrogant disdain. One reason legal guarantees have failed to ensure decentralization in Japan is the lack of democratization in Japan’s administrative and political system. Democratic systems tend to lose their substance in a country such as Japan, which has been completely centralized under the ‘Emperor System’ for a long period of time, and which claims cultural, linguistic and ethnic homogeneity disregarding the fact that Okinawans, Ainu and Japanese Koreans clearly have cultural differences from the mainstream culture of Japan. So while the claim of such homogeneity

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is unwarranted, the idea of mythical uniformity is still maintained in Japan by excluding or ignoring these differences as if they did not actually exist. Democracy is supposed to protect the rights and liberties of minority groups, but minorities in Japan are structurally discriminated against, and Okinawa is merely one such example. The over-concentration of military bases in Okinawa is a case in point; the expropriation and use of land for the US military is another. This goes against the spirit of devolution. Taira fears that Okinawa may emerge from the current process of decentralization with less power to govern itself. ‘Chiho¯ jichi no honshi, or the principles of local self-government, referred to in the constitution and paid lip service to in the DPL, should empower local governments by disemboweling the central government, whose power is excessively concentrated today’ (Taira 1999: 180). At present, he writes, ‘Japan’s national regulations reach down to the most minute aspects of everyday life. The example popularized by former Prime Minister Hosokawa Morihiro is that a town remote from Tokyo has to apply and secure approval from the Ministry of Transportation before it can move a bus stop even one yard from the previously approved spot’ (Taira 1999: 180). On the other hand, many exist within local governments who not only contribute to the central government’s mistaken policies, but derive benefits for themselves. Such ‘structural corruption’ contradicts the principles of devolution. Consequently, the conclusion must be that decentralization in Japan has no substance. The call for autonomy and independence in Okinawa is but a reaction to this state of affairs. In this situation it is essential that the principles laid down in the constitution be taken to heart by each and every person before devolution can sink firm roots. In spite of this, the current state of affairs seems to be moving in the opposite direction. Needless to say, this is due to the increasingly vociferous calls for constitutional revision among not only bureaucrats and politicians but also financial and media circles. If this is any indication of the future, the realization of devolution will reflect the situation in an ancient Chinese proverb, ‘waiting one hundred years for the waters of the Yellow River to clear’.

References Barrett, Brendan F. D. (2000) ‘Decentralization in Japan: negotiating the transfer of authority’, Japanese Studies, 20(1): 33–48. Feifer, George (1992) Tennozan: The Battle of Okinawa and the Atomic Bomb, New York: Ticknor and Fields. —— (2000) ‘The rape of Okinawa’, World Policy Journal (http://www.worldpolicy.org/ journal/feifer.html), New York: World Policy Institute. Jichiro¯ [Zen-Nihon Jichidantai Ro¯do¯ Kumiai] Okinawa Project (ed.) (1998) Niju¯isseiki ni Muketa Okinawa Seisaku Teigen Pashiffiku Kurosuro¯ do (Okinawa as a Pacific Crossroads: A Policy Proposal for the Twenty-first Century), Tokyo: Jichiro¯. Johnson, Chalmers (1997) ‘Justice For Okinawa’, a copy of a speech made at The Japan National Press Club. —— (2001) Okinawa Between the United States and Japan, Cardiff, CA: Japan Policy Research Institute.

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Kerr, George H. (1958) Okinawa: The History of an Island People, New York: Tuttle. Mulgan, Aurelia George (2000) ‘Managing the US base issue in Okinawa: a test for Japanese democracy’, Working Paper 2000, 1, Canberra: Australian National University. Okinawan Prefectural Government, Chiji Ko¯shitsu Ko¯ho¯ Ka (1994) A Message from ¯ kinawan Prefectural Government. Okinawa, Naha: O ¯ Oyama, Cho¯jo¯ (1997) Okinawa Dokuritsu Sengen (A Declaration of Okinawan Independence), Okinawa: Gendai Shoin. Taira, Ko¯ji (1999) ‘Okinawa’s choice: independence or subordination’, in Chalmers Johnson (ed.), Okinawa: Cold War Island, Cardiff, CA: Japan Policy Research Institute. The Shoup Mission (1949) Report on Japanese Taxation Volume III, Tokyo: General Headquarters. Zaimusho¯ [ Ministry of Finance, Japan] (1998) Fiscal Investment and Loan Program Report, ¯ kurasho¯ Insatsukyoku. Tokyo: O

11 London as a global financial centre Problems and prospects in the new era Randall D. Germain

The City of London occupies a unique and in some ways paradoxical position within the contemporary global political economy.1 It is by many measures – although not all – the largest financial centre in the world, yet it is separated from the largest two economies in the world by thousands of miles of ocean. By some estimates as many as one in six jobs in the United Kingdom are directly or indirectly linked to financial transactions in London, yet the connections between London’s financial community and the broader UK economy are by no means clear and mutually advantageous. London bills itself as Europe’s premiere financial centre, yet it neither resides within the parameters of the euro area nor is it likely to be included within the foreseeable future. Nevertheless, London has been, and continues to be, what can be called a ‘principal financial centre’, and as such it is a key foundational support for the global financial system (Germain 1997). But to inquire into London’s role as a global financial centre is to confront a contradictory and often unclear mix of factors, few of which have the signal presence to determine London’s future of its own accord. Those responsible for London’s upkeep and governance, who range from local authorities to central government ministers to associations and companies representing wealth-generating activities (manufacturing, services and above all financial services), are primarily concerned about what should be identified as internal or domestic factors: information technology (IT) infrastructure, skills provision, transport, levels of taxation, and the services and amenities which make London’s quality of life attractive to employers and employees alike. If London is badly governed, wealthproducing activities will either move elsewhere or not come at all. Adopting a wider angle of vision, however, is necessary because many of the factors that enable London to play a role as a global financial centre are beyond the immediate control of those responsible for its governance and upkeep. Such factors include the balance of power within the international political system, the dominant ideological predispositions of major economic powers, the robustness of rules and practices guiding the mobility of capital and financial governance more generally and the centrality of the British state within the architecture of global finance. And of course we should not forget that the overall state of the global economy has a crucial bearing on the ability of any financial centre to

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operate: it was the advent of the First World War in 1914 that ended the nineteenth-century gold standard – itself based on the operation of the London financial markets – whilst the onset of depression in 1931 ended the interwar attempt to recreate this monetary system. All of these factors are beyond the scope of local authorities to shape, let alone control. What, then, is London’s future as one of the two principal financial centres of the global economy? The argument of this chapter is that London’s current prospects are very promising. It is likely to retain its current place as the premier global financial centre – alongside New York – with few genuinely competitive threats from rival financial centres such as Tokyo, Paris, Hong Kong or Frankfurt. There are, however, two caveats to this prediction. One caveat concerns the domestic factors that make London an attractive place to conduct financial transactions. Simply put, they cannot be allowed to become seriously out of line with those factors provided elsewhere. The second caveat pertains to external problems on the horizon that might possibly jeopardize London’s position. Three are identified here: a severe global economic downturn; the collapse of the euro and/or European monetary union; or a retreat in support for capital account liberalization. On balance, it is external problems that today pose a greater threat to London’s continued role as a global financial centre, rather than anything that those responsible for governing London actually say or do. The main reason for this conclusion lies in assessing the interplay of different external trajectories which together enable London to play a central role in the global financial system. At the moment three trajectories are important to mark out. First, Britain’s central role in the G7 means that it retains a crucial leading role in establishing the rules under which global financial transactions are carried out. The UK Treasury, the Bank of the England and the newly established Financial Services Authority (FSA), each play a key role in international policy coordination, and they do this with one eye on how such international developments affect City institutions.2 Britain has won a valuable seat at the international political table, and this political fact will continue to promote the centrality of London’s future. Second, the normative consensus most often identified as neo-liberalism – in other words, a broad belief in the sanctity of market-based activity organized through private property and contract, together with a restricted view of public oversight and welfare functions – appears to be under only limited threat from social groups opposed to the deleterious social consequences of globalization. With the belief in the appropriateness of full capital mobility (and capital account liberalization) more or less intact despite the ravages of the Asian economic and financial crisis of 1997–8, one of the principal enabling frameworks for the existence of ‘global’ financial centres remains in place. Without full capital mobility, financial centres cannot function on a global scale, and the strength of the current consensus in favour of financial liberalization is a strong bulwark supporting the future of all ‘global’ financial centres (but especially London, which is more reliant on maintaining access to ‘global’ pools of capital than its major rivals).

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Third, the broader economic environment remains generally favourable to the continuing prominence of London as a global financial centre. The fallout from the Asian economic and financial crisis actually served to intensify financial activity in the City, as many fund managers and investors fled emerging markets in favour of more mature and liquid financial markets – many of which are based in London. This is not unusual. Past economic slowdowns – with the significant exception of the Great Depression – have on the whole tended to strengthen rather than undermine the leading role of principal financial centres, thereby helping to preserve the existing global financial hierarchy. Nevertheless, a sustained economic slowdown, especially if coupled with deflation, might intensify support for a retreat from financial liberalization. It could fuel anti-globalization activists and re-ignite support for increased insulation from the global economy (namely, protectionism). A sustained economic slowdown might prompt a renewed impetus towards regional economic arrangements, which could in turn constrict the operation of liberalized financial markets. More worryingly, from the perspective of the City, a sustained economic slowdown may well place in jeopardy monetary union in Europe. Budgetary pressures could place sustained pressure on the stability pact, which could then have knock-on effects in financial markets leading to a plunge in the value of the euro and calls to redraft the basis of monetary union. Such a scenario would plunge global currency and financial markets into chaos, and imperil London’s future role. At the time of writing ( January 2002), fears about the knock-on effects of a global economic slowdown have also been amplified in light of the attacks on the World Trade Centre and Pentagon on September 11 and the American-led offensive against terrorism that followed. This attack ensured that the recession in America would spread globally, and increased the sense of uncertainty over the future pace of economic activity. It also heightened awareness of the vulnerability of high-profile financial institutions, and refocused attention on the basic but necessary security role that states still possess in a globalized and interdependent world. Nevertheless, the particular way in which all three of these ‘external’ factors are interacting seems more likely to reinforce rather than undermine London’s central role as one of the world’s two key global financial centres. Continued G7 support for a global economy organized broadly along neo-liberal lines will reinforce London’s global role, whilst the continued restructuring of Asian (and eastern European) economies in a liberalizing manner will help to cement the global framework within which financial centres such as London will thrive. Even the post-September 11 recognition that states are crucial foundations of the global economy (and its financial system) will reinforce London’s central role, since the British government will continue to play a key role in both the global antiterrorist campaign and the concerted efforts to tighten up selected aspects of the regulatory framework of the global financial system. The only real question mark over London’s future role is the future of monetary union in Europe. Paradoxically, despite Britain’s continued absence from monetary union, the future of London is inextricably tied to the continued

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success of this project. Were it to collapse, the turmoil in currency and financial markets would necessarily interrupt cross-border financial transactions. It is also possible that under such conditions governments might be forced to renationalize significant elements of finance in order to re-open stable and orderly markets, as occurred in the aftermath of the Second World War (Helleiner 1994; Eichengreen 1996). However, on the whole this is a remote scenario, even if it cannot be completely eliminated.

The political economy of global financial centres Financial centres do not arise spontaneously. They are created and maintained, often at great cost. To begin with, they are almost exclusively associated with large urban environments, where capital has accumulated for various (often accidental) reasons, and a sufficient degree of capital liquidity (or volume) has been achieved, to the extent that an expertise in deploying such capital constitutes itself as an outward-looking credit network. In other words, financial centres must be at the epicentre of economic activity, whether that be trading routes, national economies or increasingly regional economic areas. Being at the centre of economic activity, however, does not guarantee that an urban area or city will become a financial centre of any significance. Birmingham and Seville have in the past been at the centre of industrial production and overseas trade, yet neither developed into financial centres of major importance. We must therefore look beyond purely internal factors to account for the rise (and decline) of major financial centres. Three external factors stand out as critical to the rise of global or principal financial centres. They comprise a political factor, a cultural or almost ideological factor, and an economic factor, and together they account for the political economy of financial centres. The political factor works at two levels. At one level is the state of great power relations prevailing at any one point in time. This determines the geographical range available to credit institutions from a particular financial centre. One of the reasons why Paris and Berlin failed to challenge London as a global financial centre prior to 1914 was their more limited geographical scope, which was in turn determined by the state of great power relations between 1890 and 1914. New York’s prominence after 1945 was due in no small part to the unparalleled rise of the US as the postwar world’s pre-eminent superpower. At another level, the particular way in which dominant states relate to the market, and especially to financial markets, provides a key to the kinds of activities in which credit institutions can engage. If there is a predisposition on the part of the leading state or states to maintain a laissez-faire attitude towards financial markets, then that will both enable financial centres within those states to engage in certain kinds of activities as well as incline other states to treat their financial markets in a similar vein (or forgo the opportunity of nurturing potential global financial centres within their countries). States also adopt very specific attitudes towards financial markets, which is where the second external factor becomes significant. This is a cultural or perhaps

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ideological predisposition towards risk, private property and the role of the state in economic affairs more generally. This predisposition is itself shaped by historical developments, class relations, institutional trajectories and a host of ideational attributes. The cumulative result is a set of social expectations concerning relations between government and finance that varies across countries but is highly susceptible to the norms and mores of the most powerful state or states and their societies. As Karl Polanyi identified more than fifty years ago, the nineteenthcentury gold standard was supported by an ideological/cultural predisposition towards laissez-faire liberalism amongst its dominant élites (Polanyi 1957). In a similar vein John Ruggie identified ‘embedded liberalism’ as the characteristic predisposition at work in the Bretton Woods financial system (Ruggie 1982). Today the dominant predisposition is strongly associated with full capital mobility, and has been variously described as ‘competitive liberalism’ (McNamara 1998) or ‘disciplinary neoliberalism’ (Gill 1995). The final factor is economic in the sense that financial centres reflect the particular kinds of economies within which they are embedded. The earliest principal financial centres stood at the crossroads of economic activity organized around cities, such as Antwerp in the sixteenth century and Amsterdam in the seventeenth and eighteenth centuries. With the gradual formation of national economies over the course of the late eighteenth and early nineteenth centuries, more powerful financial centres emerged, led by London. Yet they were circumscribed by their national economic hinterlands until the late nineteenth century, when a truly international economy came into being organized around the trading and financial activities of London-based merchants and bankers (Braudel 1984; Germain 1997). The global reach of these financial centres declined during the 1930s, in line with the disintegration of the international economy itself. It was the reconstitution of an international economy after 1945 on the back of American hegemony that re-established the space for some financial centres to once again reclaim internationally oriented roles. And over the past twenty years this space has become progressively transformed into an economy that is genuinely global in scope, and which now actually requires a global financial centre for its operation, much in the manner that national and regional economies require national and regional financial centres. By paying attention to the interplay of these three factors we can understand how a global infrastructure arises that enables individual financial centres to establish a global reach. Where there is a stable international power structure that supports a liberal (or neo-liberal) ideological predisposition amongst dominant élites, maintains a favourable regulatory stance towards financial activity, and nourishes capital mobility across borders, global financial centres will flourish. Internal factors are then able to help explain why one financial centre outstrips others. Alternatively, where there is an unstable international structure of power, a mercantilist or nationalist ideological predisposition amongst dominant élites, and no clear norms and rules safeguarding capital mobility, financial centres will be national in scope rather than globally oriented. Currently there is in place a very favourable enabling framework within the global political economy to

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nourish the existence of global financial centres, which means that London will continue at the very least to be a principal or world financial centre.

London’s past, present and future London has an extremely rich history in terms of acting as a global financial centre. Its rise to preeminence in the nineteenth century was enabled by six key developments (Germain 1997): 1 2 3 4 5 6

the accumulation of capital on a massive scale (arising out of the industrial revolution); the emergence of a dense and sophisticated banking network able to recycle capital abroad; the establishment of a conducive balance of power amongst the major states at the time; the formation of a British Empire hungry for capital; the articulation of a laissez-faire policy to the City by government; the consolidation of an efficient information-exchange system.

Over time, these factors enabled a globally oriented financial centre to come into being that recycled capital from areas of surplus to areas in demand. London’s financial markets dominated all rivals, and buttressed by Britain’s leading political position, remained the world’s pre-eminent financial centre until well into the 1920s. The 1931 sterling devaluation disabled London as a global financial centre, however, and the ensuing economic turmoil and war blocked all efforts to resuscitate this role. International activities were not revived in the City on a sustained basis until the late 1950s.3 By then New York had established itself as the principal financial centre of the postwar world, and it remained largely unchallenged except for the growth of the euro-currency markets in London during the 1960s. It was not until the Thatcher government abolished capital account controls in 1979, and further liberalized the London Stock Exchange with the 1986 ‘Big Bang’, that London began to compete with New York in a serious way. These developments were reinforced by a tremendous upsurge in capital exports out of Britain in the early 1980s, and served to re-launch London’s role as a genuine global financial centre on a par with New York (Reed 1981; Hamilton 1986; Germain 1997). Crucially, London’s global role was underpinned by several factors: the international role of the English language (English is the lingua franca of finance), London’s position as the financial entry-point to Europe, its skill base in high value-added services, its time zone (intermediate between Asia and North America), and its historical concentration of international financial institutions. By 1985 it had become one of three principal financial centres in the world, alongside New York and Tokyo. Today, however, after more than a decade of deflation and recession in Japan, it is not at all clear that Tokyo retains the position it achieved in the late 1980s. London, in contrast, remains clearly at the epicentre of global finance.

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Amongst London’s key strengths today include several domestic factors such as a high-quality IT infrastructure, cultural amenities on a par with all major international cities, and a strong skills base for employers. In short, London attracts financial institutions because it has an up-to-date information infrastructure and it is an attractive place to live for the kinds of highly skilled professionals they must attract. It also of course has high living costs, but for the people who add value to the financial services industry this is not a barrier due to the very high wage structure at the top end of this industry. The main black spot for London is transport, especially as the City is geographically expanding to incorporate Canary Wharf and other areas outside of its traditional boundaries. Additionally, London’s regulatory environment is highly attractive to financial institutions for two reasons. First, it has a first-class reputation – despite several financial catastrophes during the 1970s and 1980s (Moran 1986) – for regulating financial institutions in a fair, transparent and appropriate manner. It compares well against its rivals in terms of the balance between excessive oversight and undue laxity, and in fact endows the institutions regulated there with a certain amount of international credibility simply by virtue of coming under a British regulatory regime. In the end, financial regulation in the City allows the kind of entrepreneurial activity to flourish for which the City has become famous. Beyond these internal strengths, however, lie two key reasons why the prospects for London are so bright. First, it appears that the political power structure at the global level will be stable at least into the medium term. This power structure has weathered the worst economic crisis of the post-Cold War period – the Asian economic and financial crisis – without seriously undermining either Britain’s role in the G7 or the consensus behind the full extension of capital mobility. Even though some debate has occurred regarding the timing of capital account liberalization, and the unique needs of emerging market economies has been acknowledged, overall support remains undiminished (Eichengreen 1999). Thus one of the key enabling frameworks for London’s global role remains intact. Second, the smooth introduction of the euro has ensured relatively stable currency markets for the major international currencies (the dollar, euro and yen). The process of introducing the euro could have seriously destabilized global currency markets, especially since it began hard on the heels of the Asian economic and financial crisis. Yet careful planning, steadfast nerves and a little bit of luck have helped markets to remain stable and (until early 2001 at least) even thrive. Furthermore, the fillip that monetary union was supposed to give to Frankfurt as a global financial centre has not materialized: Frankfurt is today no more of a challenge to London than prior to 1 January 1999. In the end, London has remained at the centre of many global currency and financial markets despite the introduction of the euro, proving that it need not be a part of the euro to prosper. At the same time, were monetary union to founder, London would be severely affected. Not only would financial markets plunge if the euro were to collapse, but London’s role as the financial gateway to Europe would be compromised, both because inward investment in Europe would suffer and because the EU countries

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with a direct vested interest in monetary union might well reconsider the role of EU monetary outsiders such as Britain. This is why London’s future is inextricably linked to monetary union despite the UK’s absence: with a successful monetary union, London is the de facto financial centre of Europe. But if monetary union fails, then the governments of the euro-12 would be in a stronger position to bolster continental European financial centres at the expense of London. However, such a scenario, it must be emphasized, is quite remote. Despite all of the technical glitches and doomsday laments, monetary union has arrived on schedule and in full, and is strengthening month by month. In fact monetary union is the only game the EU is willing to play, and by virtue of this ‘political’ fact it will be made to work. The only other possible cloud on London’s horizon is the depth of the current economic slowdown. However, it is not the direct results of slower growth, or even recession, that must be the main worries for the guardians of London’s status as a principal financial centre. The City will continue to hire and fire its best and brightest in cycles, much as it has always done. Where a threat to London’s role as a global financial centre is possible is if the slowdown spawns the growth of protectionist policies amongst the world’s major economic powers. This would be especially problematic if these pressures became translated into a reversal of capital account liberalization, as for example occurred in Malaysia after the Asian crisis. A sustained reversal of the past two decades of liberalization would erode the key enabling frameworks for global financial centres, namely adequate levels of capital mobility. However, as with the possibility of a euro catastrophe, this appears at the moment to be an unlikely development.

London and September 11 If the global economy was heading for economic slowdown prior to September 11, the consequences of that tragic event have certainly reinforced that trajectory. At the time of writing, the depth or breadth of the impending global slowdown is unclear. Yet however far-reaching it may be, it is unlikely to undermine London’s global role. On the contrary, London’s position as a principal financial centre is more than likely to be reinforced by these events, for two general reasons. First, one of the chief political consequences of September 11 is the reaffirmation of the existing international power structure, with the US at the apex of the international system and the G7 as the key institutional mechanism through which American leadership is exercised. Britain’s continued influential presence in the G7 means that the internationalized economic power of the UK – as exercised through the Treasury, Bank of England and FSA – will continue undiminished; it might even be embellished marginally as a result of Britain’s bridge-building diplomacy within the global anti-terrorist coalition. In either case the political infrastructure that supports London’s current status as a principal financial centre will be reinforced by the events of September 11. Second, London’s global role post-September 11 is unlikely to be diminished because of the increased attention that these events have focused on select

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regulatory weaknesses of the global financial system, especially with regard to money laundering (a key plank in the anti-terrorist campaign). As the regulatory screws are tightened for monitoring and otherwise making financial systems more amenable to tracing criminal activities, London’s advanced standing in these matters will enable it to provide international leadership. London will benefit in two ways by being at the forefront of the kinds of initiatives arising out of September 11. At a general level, such international leadership reinforces Britain’s existing influence on financial issues as reflected in its highprofile role in the debate over reforming the international financial architecture (and particularly in the formation of the G20 and the Financial Stability Forum).4 But at a more direct and instrumental level, British leadership in these initiatives will help to fashion a financial world in the interest of internationally active, Britishbased financial institutions. British and American authorities have long been working together to combat fraudulent and illicit financial activities: they have taken the lead in forming the Financial Action Task Force (FATF) under the auspices of the Organization for Economic Cooperation and Development (OECD), and they are spearheading the fight to upgrade the way in which so-called ‘off-shore’ financial centres are regulated (Palan 1998; Helleiner 1999; Sica 2000). As a result, the norms and principles that are emerging to guide regulation reflects British and American practices, thereby providing a competitive playing field geared in the first instance towards financial firms active in New York and London.

Conclusion This cursory inventory of the prospects and problems facing London’s role as a global financial centre has stressed external factors in its assessment. It has argued that when viewed through the prism of political economy, the prospects for London’s future as a global financial centre – indeed, as one of two principal financial centres within the global economy – are very robust. All of the external factors seem broadly favourable: the international political structure appears to be stable into the medium term; there seems to be no serious challenge to the consensus which currently supports relatively full capital mobility; and the threat of a catastrophic failure of European monetary union appears remote. There are problems on the horizon of course – generally consequences of an impending economic slowdown exacerbated by September 11 – but for London’s future role as a principal financial centre these are no more than small white clouds in a tranquil sky. Provided London does not allow its infrastructure and quality of life attributes to be degraded beyond recognition, its future as one of the great global financial centres of the contemporary global economy appears certain to continue.

Notes 1 Many of the ideas behind this chapter have been partially developed in Germain (1997). 2 In this they are maintaining a long-standing tradition – dating back at least to the nineteenth century – in which the interests of the City, the Treasury and the Bank of England blur together (Ingham 1984; Cassis 1985).

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3 The disastrous 1947 experience with devaluation ensured that subsequent attempts to reopen the City – which began in 1951 – would be cautious (Strange 1986). 4 For discussion of the issues regarding the international financial architecture, see Eichengreen (1999) and Germain (2001).

References Braudel, F. (1984) Civilization and Capitalism, 15th to 18th Centuries, Vol. III: The Perspective of the World (translated by Sian Reynolds), New York: Harper & Row. Cassis, Y. (1985) ‘Bankers in English society in the late nineteenth century’, Economic History Review, 2nd series, 38(2): 210–29. Eichengreen, B. (1996) Globalizing Capital, Princeton: Princeton University Press. —— (1999) Toward a New International Financial Architecture: A Practical Post-Asia Agenda, Washington: Institute for International Economics. Germain, R. (1997) The International Organization of Credit, Cambridge: Cambridge University Press. —— (2001) ‘Global financial governance and the problem of inclusion’, Global Governance, 7(4): 411–26. Gill, S. (1995) ‘Globalisation, market civilization and disciplinary neoliberalism’, Millennium, 23(3): 399–423. Hamilton, A. (1986) The Financial Revolution, Harmondsworth: Penguin Books. Helleiner, E. (1994) States and the Reemergence of Global Finance, Ithaca: Cornell University Press. —— (1999) ‘State power and the regulation of illicit activity in global finance’, in H. R. Friman and P. Andreas (eds), The Illicit Global Economy and State Power, Lanham: Rowman and Littlefield Publishers Inc. Ingham, G. (1984) Capitalism Divided? The City and Industry in British Social Development, London: Macmillan. McNamara, K. (1998) The Currency of Ideas: Monetary Politics in the European Union, Ithaca: Cornell University Press. Moran, M. (1986) The Politics of Banking, 2nd edition, London: Macmillan. Palan, R. (1998) ‘Trying to have your cake and eating it: how and why the state system has created offshore’, International Studies Quarterly, 42(4): 625–44. Polanyi, K. (1957) [1944], The Great Transformation, Boston: Beacon Press. Reed, H. (1981) The Preeminence of International Financial Centers, New York: Praeger Publishers. Ruggie, J. (1982) ‘International regimes, transactions and change: embedded liberalism in the postwar order’, International Organization, 36(2): 379–405. Sica, V. (2000) ‘Cleaning the laundry: states and the monitoring of the financial system’, Millennium, 29(1): 47–72. Strange, S. (1986) Casino Capitalism, Oxford: Basil Blackwell.

12 Narrating a ‘global city’ for ‘new Tokyoites’ Economic crisis and urban ‘boosterism’ in Tokyo Machimura Takashi An internationally insignificant country with a reasonably high standard of living but with no driving force. This is my image of Japan in the midst of the twenty-first century. (Morishima 2000: 245)

Introduction: Tokyo, a global city on the decline During the past two decades, many cities and regions around the world have experienced drastic changes in urban politics and planning. Both political scientists and urban scholars have suggested a major transformation in urban politics is underway, such as ‘from regulating urban growth to encouraging it’ (Hall 1996: 343), or ‘from local government organized around Keynesian welfare state functions to local governance organized around a Schumpetarian workfare role’ ( Jessop 1997: 68). As current local politics can be said to be situated more directly in the global economy, however, such political changes can be explained to a greater degree in terms of globalization. For instance, as Friedmann (1986) pointed out in his famous world city hypothesis, global factors are often seen as ‘decisive for any structural changes occurring within’ a city. Still, as Hill and Kim (2000) critically summarize, a simple globalist view can lead to an erroneous belief that globalization produces a world city system that transcends national institutions, politics and culture. In addition, such a view often tends to assume a convergence in economic, spatial and social structures amongst major global cities such as New York, London and Tokyo. Globalization is, however, a very complicated process, particularly in a local context. Indeed, the actual impact of globalization on each locality is shaped and materialized through a complex global–regional–national–local nexus. Thus, a simple top-down approach does not provide a sufficient basis for the study of global cities. Tokyo was once seen as a global city competing with New York and London, but at present it is declining in terms of the global hierarchy of cities, even if its scale of economic activity still remains significant. Since the early 1990s, it has faced a long economic recession, severe fiscal crisis of both central and local governments, a high rate of unemployment, and a sharp increase in homelessness

Economic crisis and urban ‘boosterism’ in Tokyo 197 and suicide. As many researchers have pointed out (White 1998; Kamo 2000; Hill and Kim 2000), Tokyo and New York/London belong to different types of global cities, responding to their national and local situations. More importantly, the world city hypothesis itself has been criticized for its Anglo-American bias. This chapter seeks to take a step forward to a more comprehensive analysis of a global city re-formation within a globalizing economy. The task here is twofold. The first task is to investigate global city formation not only in its rising phase but also in its declining phase. Since the 1980s, a rosy tale of ‘world city/global city’ has prevailed in major cities throughout the world. In reality, however, the globalizing economy results in not only a glorious success story, but also a story of cities and regions collapsing. The Asian economic and financial crisis of 1997–8 represents an instance of the latter. However, the collapse of a city’s globalization policy does not mean the end of globalization. On the contrary, it heralds the beginning of further globalization or re-globalization. The case of Tokyo will be used in order to elucidate this point. The second task is to examine the city’s reglobalization process in its declining phase, with a particular focus on culture. At present Tokyo is facing a neo-liberal type of argument in favour of economic competitiveness and social adjustment to ‘global standards’, on the one hand, and a creeping atmosphere of social uncertainty regarding the future, on the other hand. The term ‘globalization’ has become a buzzword, often seen in government documents, newspapers and even popular magazines. Once ‘internationalization’ (kokusaika) meant a bright future for the still-developing Japan, whereas now globalization seems to symbolize an unavoidable and possibly cruel fate for both the state and its people. In terms of its driving force, the process of globalization is apparently a politico-economic phenomenon. But it is also constructed as a new cultural reality, in which people inevitably consider themselves more closely connected to the emerging global space. The process of globalization is always accompanied by a subjective process of re/interpretation and narration of the changing situation. Again, Tokyo will be the focus of attention in analyzing this cultural aspect of the current re-globalization of politics. The chapter starts with a brief history of Tokyo as an emergent world city, particularly by focusing on trends in the ‘world city’ discourse. It then considers a cultural framework of globalization politics at the local level from a theoretical standpoint. The section on ‘Constructing multiple narratives of globalization’ examines the development of current reglobalization politics as a process of constructing multiple narratives of ‘globalization’.

‘Global city’ discourse in Tokyo: the 1980s to the 2000s Dreaming a global city: the bubble-era discourse of globalization In the late 1980s, Tokyo was proud of its powerful economic influence in the global economy. Thanks to a huge amount of money accumulated through competitive manufacturing industries, and later, a bubble economy caused by the

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skyrocketing rise in land and stock prices, Tokyo became, unexpectedly, a moneysupplier type of global city (Kamo 2000). Japan’s foreign direct investment (FDI) surpassed that of the United States (US) in 1988. As Sassen puts it: ‘[a]t the beginning of the decade, it [ Tokyo] was small compared to New York and basically followed New York. In the second half of the 1980s, Tokyo became the largest stock market in the world and responded less sharply to fluctuations elsewhere’ (1991: 172). Soon Tokyo was counted as one of the world’s primary cities, along with New York and London. The concept of a ‘global city’ or ‘world city’ has a long history, with major thinkers such as Goethe, Spengler and Mumford referring to this term in their writings (Kamo 1993). However, recent usage originates in the urban growth strategy adopted by New York and London in the late 1970s and early 1980s, when both cities faced fiscal crisis and economic decline caused by deindustrialization (NIRA 1989). This strategy placed special emphasis on international finance and its related producer services as a new economic basis for the two cities. By the early 1980s the phrase ‘world city/global city’ had entered into the academic world and soon became one of the most important subjects of concern in both urban studies and globalization studies: Cities concentrate control over vast resources, while finance and specialized service industries have restructured the urban social and economic order. Thus a new type of city has appeared, the global city, as represented by New York, London, and Tokyo. (Sassen 1991: 4) The concept of the global city arose in the Anglo-American economic world. But soon the position of Tokyo became crucial in the theory building of world city/global city, because Tokyo is not located at the traditional core of the capitalist world economy, either economically or politically. Once located at the Asian semi-periphery of the world economy, Tokyo was at this time competing with the hegemonic mega-cities of New York and London. This fact itself seemed to provide evidence of an emerging, more unified global economy. Therefore, Sassen challengingly put emphasis on ‘parallel changes in their economic base, spatial organization, and social structure’ amongst these three cities, in spite of the huge diversity in their history, culture, politics and economy (1991: 4, original emphasis). By the mid-1980s, the term ‘world city’ (sekai toshi) was imported into Japan. In the midst of the bubble economy, policy-makers in both national and local governments soon adopted ‘world city’ as a term conjuring up a new rosy image of Tokyo in the age of globalization. The negative side of the world city phenomenon, such as growing social polarization, was often ignored. In contrast, the parallels between Tokyo and New York–London were overemphasized, and then regarded as evidence that Tokyo had finally caught up with the leading metropolises of the Western world. By the late 1980s, indeed, ‘world city/global city’ had become a positive political symbol, which was frequently cited in documents

Economic crisis and urban ‘boosterism’ in Tokyo 199 compiled by both national and local governments, as well as quasi-governmental urban development institutions and think tanks. Despite the rosy narrative of the world city/global city, it was never persuasive enough for the general public to share such a dream. As the Institute of Public Administration (IPA), a New York-based non-profit organization, revealed in its research report on Tokyo, ‘the phrase world city means many things: an ideal image of the future of Tokyo, an advertizing gimmick and a campaign slogan’ (NIRA 1989: 18). IPA’s interviews show that ‘even though the phrase world city is often used in Tokyo, few of the conceptual issues about it have been elaborated. Even as policy-makers use the term, many seem perplexed by its meaning and by its practical implications’ (NIRA 1989: 18). In spite of such vagueness, the narrative of internationalization, and its corollary, ‘world city’, functioned as an urban ideology to propagate the idea of Tokyo’s leading position in the world economy to a wide audience (Machimura 1998). Disappearance and reappearance of the global city discourse: Tokyo in the lost decade and after The dream of Tokyo becoming a world city was soon shattered, however, as the economic bubble burst in the early 1990s. Indeed, by the middle of the decade, Tokyo had begun to veer off the course that the world city hypothesis assumed the city would have taken. For instance, Japan’s FDI decreased dramatically and, as a result, Japan’s global ranking fell from first in 1991 to ninth in 1999. The Tokyo Stock Exchange, once touted as a competitor to New York and London, continued to shrink in terms of relative market size. Added to this, the number of foreign companies listed on the Exchange dropped precipitously from 127 in 1991 to only 38 in 2001. In 1995, Aoshima Yukio was elected as the new governor of the Tokyo Metropolitan Government (TMG). Under his administration, the TMG stopped using the concept of Tokyo as a ‘world city’, as such a development strategy was seen to cause an overconcentration of economic functions in the capital, worsening the living conditions of Tokyoites, and exacerbating the negative effects arising from the bursting of the economic bubble (Kamo 2000). Reflecting the new government’s changed priorities, a huge mega-event, the ‘World City Exposition’, originally expected to be held in 1994, was finally cancelled in 1995 by Governor Aoshima because of the city government’s huge fiscal deficit. By the late 1990s, ‘world city’ had become an outdated phrase, which reminded most people in Tokyo of the bitter memories of the ‘crazy’ bubble economy and society. Nevertheless, at the beginning of the twenty-first century, the phrase ‘world city/global city’ has reappeared in Tokyo’s urban policy. The new governor, Ishihara Shintaro¯, adopted the phrase as the future image of the ideal Tokyo. Since then it has reappeared in a large number of the major plans and programmes published by TMG. For instance, TMG’s new long-term general plan, published at the end of 2000, was entitled Tokyo Ko¯ so¯ 2000: Senkyaku Banrai no Sekai Toshi o Mezashite (The Tokyo Plan 2000: Toward a Global City that Attracts a Great Number

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of Residents and Visitors) (Tokyo-to 2000). The final report of the Special Research Commission on City Building, established by the Tokyo Metropolitan Urban Planning Commission (2001), emphasized that Tokyo’s international economic competitiveness as a global city should be the main idea for revitalizing the city. Such a strategy is supported partly by a new national policy package, ‘The Urban Rejuvenation Project’, which is being advanced by the administration of Prime Minister Koizumi Junichiro¯. Why was the phrase ‘world city/global city’ adopted in Tokyo’s politics once again, in spite of its outdated and even negative connotation? What does the phrase really mean in the process of reglobalization? And behind such a decision, what kind of structural changes and cultural settings can be identified? The decision to bring ‘globalization’ discourse back into urban policy is no accident. Currently Tokyo, as well as Japan, is said to stand at a crossroads. By the early 1990s, traditional knowledge, which had given legitimacy to industrial development in postwar Japan, had seemingly almost lost its effectiveness (Gluck 1997). In a vacuum of beliefs about a positive future, people are uncertain whether they can overcome the current crisis or not. Such a sense of uncertainty makes people feel it is inevitable to accept any strong narrative that can drive them ahead. Thus, recently, government commissions, the mass media and religious groups have boldly attempted to create a new discourse for the nation in an era of globalization, in place of the narrative of postwar economic growth. This is one of the reasons why a cultural or narrative approach is important for understanding urban politics in Japan today. The possible way forward might be limited, that is, either further decline or urban and national regeneration based on re-globalization. Apparently globalization or reglobalization is located at the centre of such storytelling, although its exact meaning is still in dispute. Before moving on to analyse the reglobalization of Tokyo, however, let me first present a theoretical framework for the study of globalization at the local level.

A cultural framework of globalization politics at the local level To start with, what is globalization? More specifically, what does ‘globalization’ really mean and how is it understood within the context of local and urban politics and society? Two different views can be discerned here. One is the structural aspect of globalization; the other is the cultural aspect of globalization. Economists and political scientists tend to describe globalization as a structural process, which contemporary economy and society are inevitably going through. From this standpoint, globalization is a hard fact, or at least it is seen to exist in the same way as transnational corporations, global media or world markets. In contrast, anthropologists and cultural theorists often regard globalization as a public discourse or a product of our imagination. From this standpoint, globalization remains a cultural construct, even if it becomes more real like the links amongst nation-states or an internet community.

Economic crisis and urban ‘boosterism’ in Tokyo 201 Here emphasis is placed on the importance of the latter view, that is, globalization as a construct of the imagination (Machimura 2000a). The concept of globalization cannot make sense without a common perception that those who have been previously separated in the world are now more closely connected to each other and belong to a common transnational space. Recently this kind of global imagination has gained a special kind of power in people’s everyday lives. As Appadurai has pointed out: No longer mere fantasy, no longer simple escape, no longer elite pastime, and no longer mere contemplation, the imagination has become an organized field of social practices, a form of work, and a form of negotiation between sites of agency (individuals) and globally defined fields of possibility. (Appadurai 1996: 31) Such a global perception, at the same time, is never possible without the structural conditions that support and materialize it. Apparently the global imagination is still much less effective in reality construction than the national imagination, if the former is compared to the latter. Yet, without doubt, we have watched a massive explosion of literature and information on globalization since the early 1990s. As can be observed, one of the dominant driving forces of current globalization is global capitalism and its agents such as transnational corporations, international organizations like the World Trade Organization (WTO) and the International Monetary Fund (IMF), and the internet. The formation and the diffusion of a global imagination take place predominantly through the production and circulation of both materialized and financialized dreams, personalized global media, and a ‘global standard’ way of life, which may connect everyday lives more firmly to an expanding horizon of imagination. To summarize, the process of globalization can be understood as follows: 1

2

The realization of structural globalization always needs special cultural settings, in which more people in more parts of the world can consider a greater range of connections as real and possible. The emergence of cultural globalization is always conditioned by structural factors, particularly in the economic sphere, without which people’s imagination cannot be integrated and materialized.

Such an understanding has a number of implications for local politics. First, globalization is not just a set of forces or pressures that come from the outside of a community, bringing about a more homogenized or unified society and economy as a result. In fact, the process of globalization, whether viewed from the standpoint of its structural or cultural aspects, is situated and grounded deeply within each local and national setting. People often regard globalization as ‘global’ by definition, but actually globalization as a process cannot take shape without a local, national and regional basis, as well as a global expansion of the imaginative horizon.

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Second, globalization policy at the local level is always accompanied by the politics of the mobilization of the global imagination (Machimura 2000b). As mentioned above, globalization is never made real without a subjective process of imagining. Yet, this does not necessarily mean that whole populations belong to a single, imaginary globalized space. Those who feel seriously connected to global issues are still not a majority in each community. Only specific groups, such as globalist economic and political élites or anti-globalist activists, see the impact of globalizing forces as real and serious, whilst many others rarely manifest a keen interest in globalizing processes. What appears as globalization for some means just localization for many others. A huge gap in terms of global imagination often exists amongst the population. Globalization divides as much as it unites (Bauman 1998: 2). Therefore, the pursuit of globalization is inevitably accompanied by a kind of political mobilization. For this purpose, globalist policy-makers often try to construct a narrative of globalization, and thereby embrace local residents more deeply in this imaginary global space. Third, globalization should be seen as a kind of collective social process. This means that an explanation of the emergence and development of globalization needs to fill the gap between the objective and subjective aspects of globalization processes (Maines 1993; Fine 1995; Melucci 1995; Czarniawska 1997). Like other collective social practices, globalization takes place only through accumulated relationships between its structural conditions and the orientation and actions of agents. This problematic leads us to a series of questions: 1 2 3

4

How are globalization processes interpreted and narrated by members of communities; What kind of social integration is created, expressed and made real in terms of a discourse for the purpose of policy formation and implementation; Under what kind of structural conditions are residents’ personal interests and commitments positively or negatively associated with the globalization project; What happens when a dominant discourse on globalization meets alternative or counter discourses against globalization?

The remainder of the chapter will investigate the current re-globalization politics in Tokyo as an attempt at constructing multiple narratives of ‘globalization’.

Constructing multiple narratives of globalization In the politics of re-globalization in Tokyo, specific events and thoughts are selected, plotted and narrated by a number of actors, in effect to make up a story. What needs to be emphasized at the outset is that such a process creates not a single story but multiple stories representing different ideas and images. If one story could successfully create an imaginary space in which more agents are encouraged to identify their own interests with those of the storytellers, it might become a powerful force for promoting effective mobilization and strengthening social

Economic crisis and urban ‘boosterism’ in Tokyo 203 integration. But in the real world this is not possible. There are always a lot of stories, which are often competing, conflicting or cooperating with each other. The following sections reconstruct the dominant stories of reglobalization in Tokyo, which are told mainly by hegemonic policy-makers and the popular media, by selecting and rearranging various elements of their narratives. As described later, however, even such a story of reglobalization always includes disagreement, inconsistency and contradiction. Thus, local and/or national politics are always brought back in via this reglobalization policy. Three basic motifs can be discerned within the dominant stories of reglobalization politics in Tokyo, namely, a crisis, happy endings and lessons for survival. A clear and present crisis: after the end of postwar ‘growth’ As mentioned above, since the early 1990s, Tokyo has faced a long economic recession, the severe fiscal crisis of both central and local governments, a record rate of unemployment, and a sharp increase in homelessness and suicides. The post-bubble recession threatened seriously the perception of the bubble-era tale of Tokyo as a world city, as well as the story of postwar ‘growth’. Now people share a dawning sense that the earlier growth rates are never to return. A ‘reglobalization’ story starts from these collective narratives of mounting crisis (crisis story). For instance, TMG’s first major policy package under Governor Ishihara was entitled The Strategic Plan to Overcome Crises (Kiki Toppa Senryaku Puran, Tokyo-to 1999). Crisis is narrated at the national level, too. The Prime Minister’s Commission on Japan’s Goals in the Twenty-First Century, established by the Obuchi administration, was famous for its final report, The Frontier Within, which strongly insisted on the necessity of a positive response to globalization. This report warned of the present crisis: We share a sense of urgency. We fear that as things stand Japan is heading towards decline. That is how harsh the environment both surrounding Japan and within Japan itself has become. In the 1990s many Japanese had an uneasy sense that something about their nation had undergone a major shift. (The Prime Minister’s Commission on Japan’s Goals in the Twenty-First Century 2000: 24 –5) In the postwar period, Japan has experienced a number of economic recessions. But the recession of the 1990s is seen as totally different from the others, partly because of its length. Currently the 1990s is often referred as ‘the lost decade’. The more serious reason comes from the idea that the current crisis is not only economic but also social and cultural: Core beliefs and values are crumbling. Japanese fear that the foundations of the nation and of the Japanese people are being destroyed. (Hakuhodo Institute of Life and Living 2000: 86)

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According to public opinion surveys, urban Japanese gradually lost pride in Japan and being Japanese during the 1990s. In 1992, for instance, 78 per cent of the respondents answered that Japan could take pride in ‘peace and order in society’, but this rate has consistently decreased over the years, dropping to 54 per cent in 2000. Pride in ‘the industriousness and ability of the people’ also showed a consistent decline, from 57 per cent in 1992 to 36 per cent in 2000 (Hakuhodo Institute of Life and Living 2000: 86): They [the Japanese] feared that the economic bubble of the late 1980s and then the bursting of the bubble early in the 1990s had undermined not only the economy but also the political order and society – even the value system and ethical norms at the very core of the nation … And in the 1990s, before a national consensus on the ethical framework appropriate to an affluent society could be reached, Japan experienced a major setback and slid into the age of globalization’. (The Prime Minister’s Commission on Japan’s Goals in the Twenty-First Century 2000: 25) This sense of crisis is strengthened by the perceived sharp contrast with the myth of the glorious days of the past. The crisis story often consists of two subsets: a myth of the glorious days, and a clear and present crisis. Each city and region usually has a collective memory of its golden age, whether it is real or imaginary. Policy-makers often evoke such a collective memory amongst the people and try to invent an official myth of these glorious days. When such an official memory of ‘paradise lost’ is contrasted with current unfavourable circumstances, subjective perceptions of the crisis are likely to be mobilized more forcefully and, consequently, new projects for globalization can more easily establish legitimacy amongst local actors. Happy ending for whom?: a techno-national dream or ‘power people’s’ materialized utopia A ‘globalization’ story needs happy endings like a fairy tale. In this sub-theme of the story, policy-makers talk about the benefits that the globalization project will bring to each individual, as well as the city or region as a whole. For instance, when TMG’s Urban Planning Commission made a bold attempt to summarize its goals, it adopted a scenario approach in order to present a visual image of the idealized Tokyo in 2050. This impressive scenario begins with the following scene, in which the main character, a Tokyo-based businesswoman, flies back to the city from the US after a two-day business trip: I came back to Tokyo after a two-day trip. After a smooth supersonic flight from Washington D.C. for a couple of hours, the green Bo¯ so¯ peninsula is already in sight. I travelled overseas on business seven times this year, and this trip was for an important contract with customers … Entering the lobby of the airport, I was somewhat impressed by the scene. People from almost all countries of the world are walking around there.

Economic crisis and urban ‘boosterism’ in Tokyo 205 Recently Tokyo has attracted not only business travellers and tourists but also more persons who intend to buy Tokyo mode of fashion and ceramic manufactures. It is because Tokyo has been evaluated worldwide as a more attractive city in both its business and lifestyle for a couple of decades. (Tokyo-to, Toshi Keikaku Shingikai, Toshizukuri Tokubetsu Cho¯sa Iinkai 2001) Amongst various stories with happy endings, two relatively different types can be distinguished: that is, success within reach and success beyond reach. Stories with happy endings are expected to offer a successful representation of a future city or region to its stakeholders, and to make it as extensive as possible. Yet such a representation is mostly impossible to materialize; therefore, it is usually called a ‘dream’. However, even such an authorized visionary dream of future Tokyo is ambivalently mixed up with the present political ideology of exclusiveness, or Japan as a strictly ‘gated’ nation. The scenario continues: Following a line of people, I soon arrived at an immigration gate. The opposite side of the gate is Japan. I always doubt if an automatic inspection system based on retina and IC card can really identify the person who goes through the gate. Yet, it must be true because, people say, the illegal entry and exit of foreigners is almost totally controlled after the introduction of this system. (Tokyo-to, Toshi Keikaku Shingikai, Toshizukuri Tokubetsu Cho¯sa Iinkai 2001) A dream might come true under certain specific conditions, but it is usually beyond reach. Thus, a ‘reglobalization’ story must represent not only a ‘dream’ but also a more feasible and realistic project. That is, success within reach. In the postwar story of economic growth, what represented a success within reach was provided repeatedly to the masses as various consumer delights, such as the socalled three Cs (colour TV, car and cooler (air conditioner)). But in this affluent age of globalization, it seems difficult to find and present a widely accepted image of success within reach. For instance, ‘living downtown’ (toshin ni sumu) has recently become a kind of instant dream in Tokyo. In the bubble-era, a huge number of residents were pushed out from the traditional downtown and inner areas of Tokyo by brutal land purchases by big business. Now people are buying new, attractive, high-rise condominiums in the downtown parts of Tokyo, partly because land prices are falling to the pre-bubble level. But those who purchase a home are reported to be not former residents but, in many cases, retired middle class families living in the suburbs or the emerging ‘new rich’ in the financial or IT industries. In 2000, one real estate consortium, which planned to sell new condos at a redeveloped site in the city centre, named their target market ‘power people’ in its advertisement: Now we see that the IT revolution is making progress at top speed, which is often seen as the greatest transformation in the last five hundred years. Various systems that have supported Japanese society for a long time, such as

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Machimura Takashi the seniority system, lifetime employment, or joint holding of stocks, are all in a state of collapse. Now it is the age of drastic change. With this new trend towards progress, those who are making a difference have appeared on the scene. They are totally free from the traditional value system based on social status, age, and gender. They simply go beyond longstanding common sense, and make their dream come true by themselves. We should call them the power people, the new prominent figures in this changing global city, Tokyo. (Mitsubishi Jisho et al. 2000)

Yet, of course, people know that such prestigious condominiums are not available for everyone. Even female purchasers are substantially out of the picture in this advertisement. Both policy-makers and real estate companies always tend to portray only the positive side of the city. But actually, as Short and Kim have pointed out, there always is another type of urban representation; that is ‘the identification of the shadow, the dark side that has to be contained, controlled or ignored’ (1999: 97). Lessons for survival: endless self-empowerment, healing story, or self-enlightenment for ‘new Tokyoites’ The ‘reglobalization’ story includes lessons for survival. Currently economic globalization is more often narrated as a kind of unavoidable fate for everyone. As stated before, however, globalization divides as much as it unites. Therefore lessons for survival under globalization are also divided into at least three subsets, responding to the difference in globalization’s impact. The first subset of the story is self-empowerment. For instance, under a formal narrative of neo-liberalism, people are expected to make a decision freely based on their own values and at their own risk. This means that only those who are able to display their own individuality and ability to the fullest extent can win in the competitive age of globalization. People can and should be prepared to meet any challenge in the future. If not, a crisis may occur: The more fundamental problem that we now encounter is found actually in our individual attitude towards the current crisis; that is, although all of us have the responsibility to try to do our own best to overcome the crisis, most people do not consider it seriously as their own problem, and evade responsibility. (Tokyo-to 1999: 11, emphasis added) On the opposite side of self-empowerment, a healing (iyashi ) story is constructed for the ‘losers’ or ‘potential losers’ in the cut-throat competition of the globalized era. Recently ‘survival’ has not just taken on symbolic meaning, but far more seriously a literal meaning as more and more people are forced to struggle with unemployment, homelessness or worst. At over 5 per cent, the rate of unemployment remains at the highest level experienced by Japan after the period of postwar

Economic crisis and urban ‘boosterism’ in Tokyo 207 economic growth started in the late 1950s. What is more, the rate is expected to become much higher in the wake of the structural reforms planned by government and business. The annual cases of suicide indicated a sudden increase in 1998, particularly amongst males in their fifties and sixties, with the rate at 2.5 per ten thousand in 1998, compared with 1.8 per ten thousand in 1997 (Ko¯seiro¯ do¯ sho¯ 2001: 322). A healing story has various frames to the narrative. The following example illustrates how the national broadcaster, NHK, evoked the collective memory of Japan’s glorious days, particularly the days of postwar economic growth. In 2000, it started a TV programme entitled Project X: Challengers, which deals with the success story of the engineers and middle managers who completed the monumental tasks faced by postwar Japan, such as the construction of huge dams, the development of the bullet train, or the invention the VHS type of video tape recorder. Although at times trite and unchallenging, this programme unexpectedly proved a huge success, attracting a wide audience. Soon Project X became a favourite programme for those who had lost pride and were searching for selfconfidence. The programme spawned video tapes, novels for adults and children, and a collection of phrases. Phrases such as ‘challenge from zero’, ‘a hope must come true’, or the ‘original power of the Japanese’ are found repeatedly throughout these texts (Imai 2001). The third subset of ‘lessons for survival’ is self-enlightenment ( jiko keihatsu). This is a kind of in-between type of story; its function seems to be a mix of selfempowerment and healing. In reality, ordinary people know that not everyone can become one of the ‘power people’ in the more competitive society engendered by globalization, yet they at the same time feel it is too early to confine themselves to the comfortable world of the healing stories. Probably they need both power and healing, but prefer not to decide on either yet. The most instant source of such compounded narratives can be found in the range of books on ‘self-enlightenment’ or ‘success philosophy’ (seiko¯ tetsugaku), which now occupy prominent displays at the front of large bookstores in city centres around Japan. The themes that the phrase jiko keihatsu really cover are broad and usually vague. One of its typical themes is about practical knowledge on how to achieve a more competitive way of life, such as Let’s Speed up the Reform of Your Mind by Nakatani Akihiro (2001). More philosophical but readable books are also popular, such as A Book for Those who Dislike to Work by Nakajima Yoshimichi (2001). In the extreme case, such tales of self-enlightenment come close to a mind-control type of ‘success philosophy’; they represent so-called ‘cult capitalism’, that is, a fanatic belief in the supernatural or a special guru who might help the believer to achieve economic success at last (Saito¯ 1997). Rebuilding strong Tokyo and Japan: return to nationalism via reglobalization? In addition to these popular and commercial versions of the lessons for success, Governor Ishihara’s TMG seeks to propagate a moral story about the nature

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of the city’s residents by authorizing the ideal character of the ‘new Tokyoite’. In 1999 the governor announced the organization of a civic movement called ‘Revolution in the Hearts and Minds of Tokyoites’ (Kokoro no To¯kyo¯ Kakumei ). Its main goal is supposed to be to provide a role model for the younger generation, which is responsible for building the future Tokyo. And then, in its new long-term general plan announced in 2000, TMG presented the ideal new Tokyoites (shin To¯kyo¯-jin), who are expected to lead the city of Tokyo in 2015. These new Tokyoites are: Those who have a ‘life vision’ about what kind of life they want to lead and a ‘career vision’ about what kind of work they want to do and to actually lead the life they want. Those who act with a firm sense of mission and who are able to contribute to society in the field they choose. Those who coordinate public welfare and individual interests and act with an awareness of their own obligations and responsibilities. Those who respect the culture and traditions of Japan and of other countries and are able to act from an international viewpoint with pride and identity as a Japanese. (Tokyo-to 2000: 40) According to these views, the new Tokyoites should be liberal but morally conservative, individualist but harmony-oriented and globalist but still nationalist. This hotchpotch list of the attributes of the new Tokyoites is apparently only an amalgamated product of different ideological standpoints and political interests. Yet, it certainly reflects a loss of confidence in Tokyo’s future amongst the city’s leaders. In the current city politics of Tokyo, moreover, crisis consciousness is often deliberately channeled to a more nationalistic discourse, particularly via Governor Ishihara’s conservative political standpoint. As a novelist and former Liberal-Democratic Party (LDP) member of the Diet, Ishihara is well known for his nationalistic and somewhat anti-globalist views: Recently, when talking about civilizations, you [former Prime Minister, Nakasone Yasuhiro] often insist that we must make globalization coexist with regionalism. But I [Ishihara] believe that, however drastically the world might change, an individual cannot live without a nation state which he or she belongs to, a local region cannot remain without a nation state which it belongs to. (Nakasone and Ishihara 2001: 102–3) For Ishihara, Tokyo’s crisis means Japan’s crisis. Therefore, in order to overcome the present crisis of Japan, Tokyo has to launch into action. In a preface to

Economic crisis and urban ‘boosterism’ in Tokyo 209 TMG’s long-term general plan, The Tokyo Plan 2000, Governor Ishihara declared that TMG should rebuild a strong Tokyo and, as a result, a strong Japan: Today, however, Tokyo is facing a turning point. A decline in corporate vitality, increasingly acute environmental problems, and other various phenomena that symbolize the chaos of Japan are present here in Tokyo in the most radical form. Since becoming the governor of Tokyo, I have personally seen Tokyo’s numerous problems on a daily basis. Tokyo’s crises are Japan’s crises and I am of the firm belief that we need to do whatever is necessary in order to overcome the present crises and rebuild a strong Tokyo and Japan. (Tokyo-to 2000: ii) When Governor Ishihara gave a policy speech to the first regular session of the Metropolitan Assembly in 2001, he mentioned ‘world city’ in his own, atypical sense: Tokyo’s duty as a world city is to exercise its strength to the full, making all possible efforts for the nation and for the world. This will also contribute to the survival of Tokyo’s citizens, and even the survival of the human race. (Ishihara 2001) The fact that TMG’s reglobalization policy is now supported partly by an opposing anti-globalist ideology is ironic. Currently various traditional conservative discourses are merged with the reglobalization narrative, which might possibly cause a conflict with the neo-liberal version of the globalist vision. One is a nationalistic discourse; for instance, a reemphasis on establishing the primary role of Japan as a leading state, particularly in the Asian region, as well as a strong national identity as a Japanese. The other is more a moral vision, which emphasizes the importance of obligations and responsibilities as a citizen. Both discourses are brought into reglobalization narratives via a strong crisis consciousness.

Conclusion As demonstrated in this chapter, the failure to create a global city does not mean the end of globalization; rather, as in the case of Tokyo, it can accelerate the trend towards further globalization or reglobalization. More importantly reglobalization at the local level is not a simple process of economic homogenization and unification based on a ‘global (or American) standard’. In fact it should be seen as a conflicting cultural process of defining what is globalization and who represents globalization in each local context. In this sense, globalization is not only global. Globalization is always localized and develops an uneven character, whilst each locality is globalized. Thus, it is not strange that the impact of globalization often seems more real and more coercive in the margins than in the core regions of the world system, or

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in the declining phase than in the developing phase of the economy. Since the early 1990s, Tokyo, once regarded as a ‘primary world city’, has faced a long economic recession and an atmosphere of social uncertainty. Indeed, under such conditions, the narrative of reglobalization strengthened its moral influence, as evidenced above. Neo-liberal arguments stressing economic competitiveness and social adjustment to a ‘global standard’ were very much the order of the day. TMG, headed by Governor Ishihara, sought to revitalize the city and its citizens through entangling them in several strands of urban discourse, often combined with Ishihara’s conservative ideologies. An important goal of this chapter has been to reconstruct the emerging discourses of reglobalization, narrated mostly by government bodies and the popular media, in order to analyse how people inevitably considers themselves closely connected to global space, both real and imaginary and, as a result, are mobilized by the narrative of globalization. But this is just one side of the globalization narrative. There is another side as well. According to a survey taken in twenty-five countries in 2001, which was conducted by the organizers of World Economic Forum (WEF) (Davos, Switzerland), the people of Japan, along with those of Argentina, Russia, Spain and France, hold the most pessimistic views about the impact of globalization. In particular, the Japanese evaluate the impact of globalization on working conditions most negatively (Asahi Shinbun, 3 February 2002). Whether or not the anti-globalization discourse will gain support strong enough to transform the current constellation of globalization discourses is still an open question. Yet, it is true that the social space of global cities does seem to invite claims and demands from totally different directions. In this sense, further research is required in order to determine the relationship between urban dynamics and cultural and economic globalization.

References Appadurai, A. (1996) Modernity at Large: Cultural Dimensions of Globalization, Minneapolis: University of Minneapolis Press. Bauman, Z. (1998) Globalization: The Human Consequences, Cambridge: Polity Press. Czarniawska, B. (1997) Narrating the Organization: Dramas of Institutional Identity, Chicago: University of Chicago Press. Fine, G. A. (1995) ‘Public narration and group culture: discerning discourse in social movements’, in H. Johnston and B. Klandermans (eds), Social Movements and Culture (Social Movements, Protest and Contention Vol. IV), Minneapolis: University of Minnesota Press. Friedmann, J. (1986) ‘The world city hypothesis’, Development and Change, 17(1): 69–83. Gluck, C. (1997) ‘The “end” of the postwar: Japan at the turn of the millennium’, Public Culture, 10(2): 1–23. Hakuhodo Seikatsu So¯go¯ Kenkyu¯jo [Hakuhodo Institute of Life and Living] (2000) The Annual Data Book on the Japanese People 2000, Tokyo: Hakuhodo Institute of Life and Living. Hall, P. (1996) Cities of Tomorrow, updated edition, Oxford: Blackwell. Hill, R. C. and Kim, J. W. (2000) ‘Global cities and developmental states: New York, Tokyo and Seoul’, Urban Studies, 37(12): 2167–96.

Economic crisis and urban ‘boosterism’ in Tokyo 211 Imai, A. (2001) Projekuto X: Riidaatachi no Kotoba (Project X: Leaders’ Words), Tokyo: Bungei Shunju¯sha. Ishihara, S. (2001) Policy Speech by Governor of Tokyo Shintaro¯ Ishihara to the First 2001 Metropolitan Assembly Regular Session. Available online at: , visited on 14 May 2001. Jessop, B. (1997) ‘A neo-Gramscian approach to the regulation of urban regimes: accumulation strategies, hegemonic projects, and governance’, in M. Lauria (ed.), Reconstructing Urban Regime Theory: Regulating Urban Politics in a Global Economy, Thousand Oaks: Sage. Kamo, T. (1993) ‘Sekai toshi keisei no shindankai: gurobarizeshon no iso tenkan no naka de’ (A new stage in the formation of the global city: in the midst of a major transition in globalization), NIRA Seisaku Kenkyu¯, 6(5): 22–33. —— (2000) ‘An aftermath of globalisation? East Asian economic turmoil and Japanese cities adrift’, Urban Studies, 37(12): 2145–66. Ko¯seiro¯do¯sho¯ (2001) Ko¯ seiro¯ do¯ Hakusho (Ministry of Health, Labour and Welfare whitepaper), Tokyo: Gyo¯sei. Machimura, T. (1998) ‘Symbolic use of globalization in urban politics in Tokyo’, International Journal of Urban and Regional Research, 22(2): 183–94. —— (2000a) ‘Guro¯barizeshon no ro¯karu na kiso¯’ (The local basis of globalization), Shakaigaku Hyo¯ ron, 50(4): 124 –39. —— (2000b) ‘Saikanetsu ideorogi toshite no guro¯barizeshon’ (Globalization as an re-overheated ideology) Gendai Shiso¯, 28(11): 62–79. Maines, D. R. (1993) ‘Narrative’s moment and sociology’s phenomena: toward a narrative sociology’, The Sociological Quarterly, 34(1): 17–38. Melucci, A. (1995) ‘The process of collective identity,’ in H. Johnston and B. Klandermans (eds), Social Movements and Culture (Social Movements, Protest, and Contention Vol. IV), Minneapolis: University of Minnesota Press. Mitsubishi Jisho, Mitsui Fudo¯ san, Sumitomo Fudo¯ san, Tokyo Tatemono, ORIX, Sumitomo Sho¯ji, Mitsui Bussan, Heiwa Fudo¯san (2000) For the Power People, advertisement leaflet for Tokyo Twin Parks at Shiodome, Minato Ward. Morishima, M. (2000) Japan at a Deadlock, London: Macmillan. Nakajima, Y. (2001) Hataraku Koto ga Iyana Hito no Tame no Hon (A Handbook for Those who Despise Work), Tokyo: Nihon Keizai Shinbunsha. Nakasone, Y. and Ishihara, S. (2001) Eien nare, Nippon (For Eternity, Japan) Tokyo and Kyoto: PHP Kenkyu¯jo. Nakatani, A. (2001) Supiido Appu Ishiki Kaikaku (Speed up a Reform in Attitudes), Tokyo: Daiyamondosha. NIRA (National Institute for Research Advancement) (1989) Making Tokyo a World City, Tokyo: NIRA. The Prime Minister’s Commission on Japan’s Goals in the Twenty-first Century (21 Seiki Nihon no Ko¯so¯ Kondankai) (2000) Nihon no Furontia wa Nihon no Naka ni Aru ( Japan’s Frontiers are Inside Japan), Tokyo: Ko¯dansha. Saito¯, T. (1997) Karuto Shihonshugi (Cult Capitalism), Tokyo: Bungei Shunju¯sha. Sassen, S. (1991) The Global City: New York, London, Tokyo, Princeton: Princeton University Press. Short, J. R. and Kim, Y. H. (1999) Globalization and the City, Edinburgh: Longman. Tokyo-to (Tokyo Metropolitan Government) (1999) Kiki Toppa Senryaku Plan: 21 seiki e no daiichi steppu (Strategic Plan to Overcome the Crisis: the first step to the twenty-first century), Tokyo: Tokyo-to. —— (2000) Tokyo Ko¯so¯ 2000: senkyaku banrai no sekai toshi o mezashite (Blueprint for Tokyo 2000: aiming at a world city thronged with visitors), Tokyo: Tokyo-to.

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Tokyo-to, Toshi Keikaku Shingikai, Toshizukuri Tokubetsu Cho¯ sa Iinkai (Tokyo Metropolitan Urban Planning Commission, a Special Research Commission on City Building) (2001) Tokyo no Atarashii Toshizukuri no Arikata (Toshin) (The Way for New City Building in Tokyo [downtown]). Available online at: ⬍http://www.metro.tokyo.jp/ INET/KONDAN/2001/03/40B3Q105.HTM⬎, visited on 23 August 2001. White, J. W. (1998) ‘Old wine, cracked bottle? Tokyo, Paris and the global hypothesis’, Urban Affairs Review, 33(4): 451–77.

13 Conclusion Japan and Britain – a common agenda for the twenty-first century? Hugo Dobson and Glenn D. Hook

The Introduction to this volume drew attention to how Japan and Britain are currently confronting a number of political, economic and social issues as a result of the need to respond to the forces engendered by the intertwined and dynamic processes of regionalization and globalization: examining, comparing and contrasting their responses have constituted the motivation for writing this book. These forces, whilst always important, were masked from the late 1940s by the overarching bipolar structure of the international Cold War system of East–West confrontation. Now unleashed by the ending of the Cold War, the forces of globalization and regionalization provide the backdrop for the preceding chapters, which highlight how Japan and Britain have come to grips with a range of issues of common concern. They have examined how the historical relationship between the two countries developed (Sakamoto); how each country has adjusted and managed its global position in relation to the hegemon of the international system, the United States (Gamble and Kan); how both have sought to engage with, and distance themselves from, the bordering continents of Europe and East Asia in political and economic terms (Bluth, Takahara, Ardy and Takahashi); how forces within the nation-state, namely Scottish devolution and Okinawa resistance, pose challenges to, if not threaten to render asunder, the centralized state ¯ ta); and how the growing importance of, and independent role played (Bort and O by, two global cities, London and Tokyo, chip away at the sovereign boundaries of the territorially based nation-state (Germain and Machimura). Thus, the chief objectives of this book have been to bring into relief similarities and differences between Japan and Britain and, with this as a background, to highlight potential areas for cooperation, exchange of best practice and possible projects for further joint research. With this in mind and with reference to the previous chapters, this chapter explores the overriding common concern of the contemporary era, namely the future and role of the nation-state. As with the structure of this book, this question will be pursued at a number of levels: global, regional, sub-state and civic.

Global After Sakamoto’s chapter set the scene for the remainder of the book through a historical and contemporary analysis of the relationship between Japan and

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Britain, which takes account of both state and civil society, Chapters 3 and 4 moved on to focus on their respective relationships with the US. These two chapters by Gamble and Kan demonstrate similarities and differences in the way that Japan and Britain are entrapped in a bilateral, yet ultimately unequal, relationship with the hegemonic power of the contemporary era. Whilst the two are similar in that both are forced by the structure of the international system into playing a subordinate role in the political relationship, the US economy is of great importance for their own wellbeing, and they both provide military bases for the US’s exclusive use, two particular differences stand out. First, despite defeat and occupation, Japan and the US have not developed a political space, ‘JapaneseAmerica’, in a similar way to the political space of ‘Anglo-America’, as taken up in the chapter by Gamble. This no doubt helps to explain the differing ways the two relationships have developed and are continuing to develop in the early twenty-first century under the dual pressures of regionalization and globalization. In essential ways, the Japanese still remain more open to US criticism than Britain, as if the psychological scar of the Occupation years continues to nurture a sense of vulnerability, whether in the political, economic or security dimension of the relationship. This continuing Japanese vulnerability in the face of US pressure has been illustrated time and time again in the years after the 1951 signing of the peace treaty returned formal sovereignty to Japan, most recently by presidential finger-wagging at a politically conservative Japanese leadership under Prime Minister Koizumi Junichiro¯. This American attitude towards Japan stands in sharp contrast to the unexpected blossoming of a close relationship between ‘New Labour’ Prime Minister Tony Blair and a politically conservative President George W. Bush, similar to the relationship Blair developed with the previous, more politically aligned, administration of President Bill Clinton. The second major difference is in the military dimension of the relationship. Whilst the willingness of the Japanese government to pass legislation in the wake of the September 11 terrorist attacks on New York and Washington to enable the Self-Defence Force (SDF) to offer logistical support to US forces in Afghanistan in 2001–2 was clearly welcomed by the Bush administration, its appreciation of Japanese actions pales in comparison with that of Britain’s. By fighting alongside US troops, Britain has sought to bolster the ‘special relationship’, carving out a role for itself as the US’s partner in arms, and on occasions displaying more hawkish and sabre-rattling tendencies than its senior partner. It is not that the British special relationship is starved of its critics, as seen in repeated postwar comments deriding the former mighty empire as nothing more than the American ‘lapdog’ or ‘poodle’, yet all postwar leaders have been willing to court this criticism in exchange for privileged access to US policy-making circles. At the base of this special relationship are the embedded norms of civil society, where contemporary Britons and Americans seem far more to embody a marshal spirit and a greater willingness than the Japanese to accept the use of arms as a legitimate instrument of state policy in international affairs. The strength of the antimilitarist norm in Japanese society and policy-making circles, whilst waning, continues at least for the time being and in the foreseeable future to preclude a partnership in arms

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from developing between the two Pacific allies, despite shrill American calls at the start of the new century for Japan to abandon its peace constitution and become the ‘Great Britain of the Far East’ (INSS 2000; Asher 2001). As Kan’s chapter clearly shows, the role of Japan in American strategy continues to facilitate the hegemon’s pursuit of its global interests. Whether in the field of politics, economics or security, the two nation’s bilateral relationship with the US remains at the heart of their broader international relations, despite the pressures exerted by regionalization and globalization. To this end, an issue of common concern is not only how the relationship with the US is maintained and fostered, but also the direction the bilateral relationship should take in the future. Politically, Japan and Britain continue to support the US’s role at the centre of global politics, with a keen awareness of the perceived dangers of the hegemon opting for unilateralism or isolationism. The political will of the policymaking élites in both countries is occasionally manifest in a modicum of challenge to the US’s preponderance of power, as in the case of their mutual dissatisfaction with the decision made in 2001 by President Bush to reject the Kyoto Protocol on climate change. Yet, despite these occasional challenges to the US’s unilateralist tendencies, neither Blair nor Koizumi in any way poses a direct challenge to the US’s political leadership at the global or even regional levels. Without Blair breaking out of dependence on the special relationship, which Gamble shows is at the heart of British foreign policy, or Koizumi moving away from the ‘Yoshida doctrine’, which as Kan outlines prevents Japan from taking a more independent foreign policy line of its own, neither of the two countries will be able to stand up to the power of the US. Of course, differences between the two do emerge at times, as in the talk of a permanent seat for Japan on the United Nations Security Council (UNSC), which possibly would come, if at all, with the loss of Britain’s own seat, but each acts mainly as a loyal supporter of US policy. Economically, the two governments are similarly supportive of capitalism and the market economy, but the British are far stronger backers of the US’s globalist, free-market project than Japan, which remains ambivalent at best about any capitalist convergence along American lines and the full opening of its economy. Despite pressure from the US, domestic interest groups within Japan remain at odds over opening up the Japanese market, reflecting the lack of consensus within the political establishment over globalization (Takahashi 2001). In the field of security, a number of issues of mutual concern rooted in both traditional definitions of security and recent re-conceptualizations of societal or human security can be clearly identified. The war on terrorism represents one of these issues because of its utilization of traditional security measures embodied in the bombing of Afghanistan, and its concomitant commitment to a humanitarian agenda. The range and intensity of the US’s war on terrorism will provide an issue of common concern for both Japan and Britain, whether it be supporting and extending the American-led war, or reining in and limiting the campaign against the ‘axis of evil’. What is more, whether it is the state that is best placed to play this role is open to question as non-governmental organizations (NGOs) have begun to play a crucial role in the post-conflict state-building process, which

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has become part of the war on terrorism, as seen in the efforts NGOs are now making in the reconstruction of Afghanistan. The way in which both the Japanese and British states choose to interact with these non-state actors within the framework of their bilateral relationship with the US will be of crucial importance for the future.

Regional As Chapters 5–8 highlighted in both the political and economic fields, a number of opportunities and obstacles exist for both Japan and Britain in their dealings with the continents they border. Although the stage of development differs for each country, similar problems of identity and traditional dependence on the US as the chief political and economic point of reference have influenced the extent of cooperation with their respective regions, continental Europe and East Asia. Whilst Japan and Britain both sought to play a role in the regional political economies during the Cold War period, the regionalist project was far more advanced in Europe than in East Asia. Indeed, in contrast to Europe, where Britain has belatedly joined regionalist institutions, Japan was not even part of the main regional framework in East Asia, the Association of Southeast Asian Nations (ASEAN). With the ending of the Cold War Japan has played an active role in the creation of new regional organizations, such as the Asia Pacific Economic Cooperation (APEC), ASEAN⫹3 and the ASEAN Regional Forum (ARF). The existence of the Asia Europe Meeting (ASEM) process also means that the two countries are part of a wider interregional dialogue. But the similarities of their relationship with their neighbours should not be overemphasized. Indeed, given the diverse political and legal systems in East Asia, the possibility of a supranational institution soon emerging to take decisions affecting the life of citizens in separate sovereign states is a distant prospect. With the existence of democratic, socialist and authoritarian regimes, and different legal systems, it is hard to even envisage the day when, as in the UK in April 2002, a supranational body, the European Court of Human Rights, will be able to make a ruling on a UK national’s right to die by assisted suicide (the right was refused) (The Guardian, 30 April 2002). The project of European integration has centred upon the relationship between Britain and Germany in differing ways over the decades. Originally an attempt as part of the post-Second World War settlement to prevent the future rise of Germany, its focus has shifted towards the future creation of a supranational organization and concomitantly Germany’s role has shifted from the object of the project to the chief protagonist. Bluth has adumbrated these developments and focused upon how they have impacted upon British–German relations, their respective positions towards Europe and the very nature of European integration itself. The two countries have up until recently exhibited very different attitudes towards the European project with Britain, on the one hand, favouring the economic over the political aspects whilst maintaining its relationship with the US as the prime focus of its foreign and security policies; Germany, on the other hand,

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has exhibited a greater willingness to promote the social and political aspects of European integration and instrumentalize multilateralism as a tool of its foreign policy whilst acknowledging the continued importance of the US. Clearly for both nations, although their respective foreign policy styles and positions on Europe may have begun to converge recently, bilateralism and the US continue to be chief concerns – an issue amplified by the terrorist attacks of September 11. The thoughts of British and German policy-makers will in the future be occupied not only by determining the future direction of European integration but also confronted with the equally difficult task of anticipating whether the US remains committed to the leadership of international society and a global policy against terrorism or reverts back to isolationism. Thus, rather than a zero-sum game between bilateralism and multilateralism, supplementalism appears to characterize present and future relations. Equally Takahara points to Japan’s relations with its superpower neighbour, China, as the linchpin for the development of future regional projects in East Asia. He is ultimately encouraged by recent events that point to a willingness on the part of both governments to overcome historical problems and a realization of the necessity of bilateral and multilateral cooperation to benefit not only each country, but also the region as a whole. This transition in the Sino-Japanese relationship constitutes an important milestone for not only developing even closer relations between the two key powers of East Asia, but equally encouraging for the provision of regional security and economic development through regional multilateral organizations. A number of obstacles nevertheless stand in the path of this emerging trend within and outside of both countries. In the case of Japan, powerful domestic actors, such as farmers, who tend to support Koizumi’s Liberal-Democratic Party (LDP), act as a pressure group in order to protect Japanese markets against the promotion of free trade and the threat of emerging Chinese markets. This was illustrated in 2001 by the ‘tit-for-tat’ trade row between Japan and China, when the Japanese government imposed curbs and tariffs on the importation of Chinese shiitake mushrooms, leeks and rushes for tatami mats and, in response, the Chinese government imposed punitive tariffs on the importation of Japanese cars, mobile phones and air conditioners. What is more, and as already raised by Kan in Chapter 4, the role played by the US in encouraging regional cooperation will remain a crucial variable in determining the peace and stability of East Asia. In this respect, the US plays a far more important role than in Europe, where the ending of the Cold War brought down the barriers between the two Germanies and the wider European region than in East Asia, where the remaining division of two countries, China and Korea, continues to cast an ominous shadow over the region. The Japanese government’s foreign policy remains centred on the bilateral relationship with the US but, at the regional level, policy-makers are increasingly supplementing the bilateralism at the heart of Japanese foreign policy with multilateral initiatives that are regarded as non-threatening to its traditional partner. This role of Japan impacts upon its identity and location within a strictly defined East Asia, as opposed to a broader Asia-Pacific, region. Although Takahara regards the European model as much

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more advanced in the promotion of regional integration than any comparable movement in East Asia or Asia-Pacific, he is ultimately optimistic about future developments in this divided region of the world as long as Sino-Japanese relations continue to improve now and in the future. In the field of regional economics, the Japanese and British economies are quite different beasts, not only in terms of the historical path of development they followed and the mode of capitalism they pursue but also in terms of their present economic performance. Whereas the one-time ‘sick man’ of Europe enjoyed relatively sustained levels of growth, accompanied by falling unemployment and low inflation, throughout the 1990s and is presently continuing along the same trajectory in the early twenty-first century, the earlier ‘phoenix’ of the East languished during this decade in the worst postwar recession ever experienced and the end is not yet in sight. Whilst the two nations are thus certainly different in terms of their recent economic cycles, the focus of the next two chapters on the role of currencies demonstrates how both Japan and Britain experience similar problems but different approaches to a region-wide currency arrangement. Britain stands on the edge of joining the euro and to this end Blair’s government has produced a set of clear criteria to be fulfilled before Britain joins. However, as Ardy’s chapter elucidates, the five economic tests that have been devised by the mandarins in the treasury are ill-defined and open to a wide degree of interpretation; it will ultimately be a political, not an economic, decision as to whether Britain will follow the other European economies into the euro zone. What is more, Ardy maintains that the government is mistaken in adopting a strategy of selling the policy on the euro to the UK public in economic terms. The reason for the government’s strategy lies in the misgivings expressed by the British public as to the merits of sacrificing sterling on the altar of economic and financial integration with a group of countries with whom many of John Bull’s ‘little islanders’ still feel unease, especially when the British bulldog has been in many cases outperforming the economies of the euro zone. For the UK government this has meant the careful packaging of a quintessentially political issue as an economic one in order to negate these doubts, which are, not unlike Japan’s relations with its regional neighbours, a product of a not wholly cooperative and unblemished past. Japan faces increasing calls for economic integration in East Asia but, as Takahashi demonstrates has, in contrast, remained more committed to the internationalization of the yen than to any possible replacement of the yen by a new currency. As seen at the time of Prime Minister Obuchi Keizo¯’s visit to Europe in January 1999, when he sought to build a new financial architecture based on the dollar, euro and yen, the Japanese government’s aim is for the yen to play the same role as the other two key currencies, not for it to be replaced with an East Asian version of the euro. Whatever the political goal the Obuchi government espoused, the emerging power of China, the recent moves of the ASEAN⫹3 to agree a currency swap arrangement to bolster the power of the regional economies against another financial crisis on the scale of the 1997 devastation, and the sustained recession in Japan, the possibility of the yen in the short-to-medium term coming to play as significant a role as the euro, never mind the dollar, remains a distant possibility.

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Sub-state Chapters 9 and 10 both address the pressures and movements within Japan and Britain for the recognition of autonomy and the devolution of powers from the centre to the periphery of the state. By taking up the case of Scotland and Okinawa, these two chapters are able to illustrate not only the similarities and differences in the nature of these two states, albeit both centralized democracies within a monarchical order, but also in the nature of these subnational parts of the nation in terms of their identity and role within the larger sovereign territory, Japan and Britain. The chapter by Bort outlines in detail the increasingly concrete sense of ‘Scottish-ness’ in this part of the UK, whilst exploring the interactions between Scotland’s cultural renaissance and the campaign for varying degrees of autonomy from the locus of power in Westminster. As is well known, this longstanding goal, borne on the backs of Scottish nationalists for many a decade, ultimately proved to be successful with Blair’s renegotiation of the Union and the establishment of the Scottish parliament in 1999. Although this probably remains the most salient and recognizable manifestation of Scottish identity to emerge out of this process, it would be naive, and indeed demeaning, to regard devolution as nothing more than a recent anti-English, Hollywood-inspired rediscovery of what it means to be Scottish nearly 300 years after the Union brought the English and the Scots together. The campaign in Scotland for devolution has been a long, drawn-out process neatly summed up by the phrase the ‘evolution of devolution’. Bort clearly traces its development by shifting the focus away from the issue of contemporary Scottish identity and towards its historical roots. Quite rightly, he rejects the increasingly common, eschatological predictions for the future of the Kingdom and instead deftly points to the oft-neglected importance of understanding devolution as a process not a settlement. Thus, the chapter demonstrates how, rather than being simply a question of demise or consolidation, the future of the nation-state is much more a nuanced question of an interconnected mesh of governance, which includes the nation-state alongside a plurality of other actors. The case of Scotland points to a renewed vitality at the subnational level in the wake of devolution in Britain. ¯ ta illuminates the continued reluctance of the In contrast, the chapter by O mandarins and politicians in Tokyo to cede power to the regions, especially when in the case of this region, Okinawa, it is host to most of the US’s military forces deployed in Japan. Whilst the Japanese state’s integration of Okinawa in the late nineteenth century is much later than the seventeenth-century union between Scotland and England, the degree of devolved power, both now and before the establishment of the Scottish parliament, was and is far more limited. The sense of being different, of enjoying a separate identity from mainland Japan, of boasting an independent culture, is strong throughout Okinawa prefecture, as in the case of Scotland, but this ‘Okinawa-ness’ has been fatally compromised in the political and economic dimensions of life by the outstretched tentacles of the ¯ ta makes clear, the ‘stick and carrot’ approach of the central Japanese state. As O government in Tokyo is designed to gain the support of the local population for the continuing presence of the US military in exchange for economic development,

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or at least a closing of the economic gap between the mainland and Okinawa. Decentralization, whatever its concrete manifestation in other prefectures, can in no way mean the power of the Okinawans themselves to decide through a democratic referendum whether or not the American bases should continue to divide their towns, pollute their air, or shatter the ecological and environmental balance of their coastline. The frustrations of a former governor in seeking to give life to democracy and decentralization in Japan, whilst constrained by the centralized Japanese state, offer a first-hand account of the limitations of decentralization in this ‘tropical island paradise’. Okinawa is still structurally integrated into the Japanese state in a way that prevents any potential for devolution within, never mind independence from, Japan. In this sense, whilst debates about independence may have grown in salience during the 1990s and at the beginning of the new century, the continuing importance of Okinawa in the US’s global strategy, and the Japanese government’s continuing commitment to supporting that strategy, suggests the dreams of Okinawans for greater independence and the elimination of the bases will continue to be frustrated. The processes of decentralization and devolution in Scotland and Okinawa have been multifaceted campaigns in the fields of politics, economics and culture, mounted against a distant, centralized and sometimes unconcerned state. Clearly, the Scottish campaign has been more successful than the Okinawan. Whether the Scottish drive for greater independence is a sustained effort, or whether the concessions made by Westminster were a short-term palliative, remains to be seen, but the process has undeniably begun. In the case of Okinawa, the central government’s continuing resistance to ‘two systems within one state’ makes it difficult for Okinawa to make the same gains as Scotland. The process in Okinawa has yet ¯ ta. What to build up an effective head of steam, despite the efforts of Governor O is clear, however, is that common concerns with giving political meaning to their sense of Scotland and Okinawa being culturally and ethnically different will continue to exert an influence on the political life of both Japan and Britain.

Civic Chapters 11 and 12 conclude the volume by pointing to the increasingly important role of cities as sites of economic activity and political identity. Although noone would dare to suggest at the cusp of the new century that either Japan or Britain were states with capitals comparable to the city-states of the past, and that we were now moving ‘back to the future’, both Japan and Britain clearly are states with capitals that are recognized as global cities and actively attempt to cultivate and project that image, often through the dynamism of an individual mayor or governor. The role London and Tokyo play in the global political economy is the source of their similarities as well as of their differences, though the whole idea of, and discourse surrounding, either of these cities as ‘global cities’ remains an issue of concern. In Chapter 11 Germain highlights the continued importance of London in the global economy, demonstrating how, despite the advent of the euro, the capital

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seems to enjoy the capacity to maintain its central position as a ‘principal financial centre’. It is clear from the evidence that the chief causes of concern about the city’s continued and future role are both internal and external in nature. They relate to Britain’s standard of living, the potential for global economic recession, the possible failure of the euro, and the fear of a decline in support for the neoliberal normative agenda at the heart of the global and regional political economies. These factors are in turn mediated by a number of actors – state and non-state, domestic and international – with the potential to work against London continuing to enjoy a position of pre-eminence in the financial markets of the world. Despite these provisos, and even the events of September 11, London’s future seems assured, though likely to be mediated within an emerging complex web of governance, as highlighted in other chapters in this volume. In contrast, Machimura’s chapter focuses upon the cultural aspects of globalization and the unsure role of Tokyo in the global political economy. Despite a confidence borne of economic success and epitomized by the rise of Tokyo to international prominence during the bubble period of the 1980s, with visions of Tokyo running neck to neck with New York and London, the Japanese capital has experienced over recent years a decline in international status following the downturn in the national economy. The ‘Heisei’ recession, which has lasted over a decade and now carries the name of the imperial throne coincident with it, has engendered a number of projects for the rejuvenation of Tokyo, and by association Japan. The chapter demonstrates much less confidence in the future of Tokyo than Germain’s ebullience towards London. What is more salient in Machimura’s chapter is the evidence showing how the capital’s present role is not the end-point of globalizing processes, but rather the beginning of new, multiple and inchoate processes of globalization, which can be expected to spawn new problems as well as spark new ideas in carving out a role for the capital in the twenty-first century. The exact direction Tokyo will take remains unclear, but what is clear is that, whatever the role of the governor, he will be joined in determining this direction by a varying number of actors, both state and non-state. In the case of London, the transition to a multiethnic and multicultural environment has already made the capital a byword for global city. Whilst not all Londoners are necessarily supportive of this transition, as witnessed by the increase in the electoral activities and fortunes of the British Nationalist Party (BNP), in racist attacks, and continuing discrimination in housing and employment for minority groups, the contrast with Tokyo remains stark: even today, whatever the newspaper headlines about ‘floods’ of foreign migrant workers and ‘foreign’ crimes, the capital remains first, foremost and firmly the home for Japanese nationals. Whilst long-time foreign residents are now demanding the vote, at least at city level (Seizelet 2001), the attitude of the Tokyo government towards its foreign residents can be seen more in the prejudicial comments by Governor Ishihara about ‘third country nationals’, a term of offence to long-term Korean residents, than in actively promoting the democratic rights of foreign nationals. In terms of their role as global cities, the city of London seems assured of a place in the sun whether or not the government decides to join the European

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Hugo Dobson and Glenn D. Hook

economies in euroland, whereas the downturn in the Japanese economy, the lack of an internationalized currency, the closed nature of Japanese society and the rise of Shanghai as a financial market means the role of Tokyo as an internationalized, financial capital seems far more likely to be a symbol of the setting, rather than rising, sun of the East.

Future research direction In this way, the twelve chapters in this book have sought to contribute to a deeper understanding of how Japan and Britain have expressed similar as well as different responses to issues of common concern on the global, regional, subnational and civic levels. The volume has thereby served to highlight a number of the key findings from the conference on which it is based. By drawing together a range of social scientists from Japan and Britain in order to analyse issues of common concern to the two countries, the conference has hopefully given birth to the first of a number of other research projects. What other tasks remain? To be sure, the tasks faced by future researchers are multiple and not amenable to simply categorization. This is not simply in terms of topics but, more importantly, in terms of approach. Indeed, in order to provide some direction to future research, the approach taken should be of central concern, as rather than adumbrate a multitude of projects to fill the research agendas of this and future generations of researchers, what is called for is to challenge and then break down the barriers encrusting studies of Japan and, to a lesser extent, Britain, as ‘area studies’. There is a need, in other words, to move resolutely away from analyses carried out through the traditional disciplinary tools, largely from a ‘problem solving’ perspective, to interdisciplinary or even transdisciplinary analyses, from a ‘critical’ perspective. A critical approach is grounded in a different epistemology than a problem solving approach. Its interest is ‘How did the present order come about?’ not ‘How do we fix it?’ (Cox 1981). It is concerned with the historically contingent nature of political, economic and social institutions and processes. Thus, in seeking to identify the patterns of response to common issues by Japan and Britain, critical theory is sensitive to how these responses emerge from the social, political and economic institutions of Japan and Britain, and how these responses are conditioned by the wider pressures exerted by the structure of the international system, as epitomized in the contemporary era by the intertwined pressures of globalization and regionalization. Whilst economic globalization has forged ahead, the globalization of scholarship has hardly kept pace, with attachment to both geographic areas and disciplinary tools remaining strong in both Japan and Britain, despite repeated calls over the years for interdisciplinary or even transdisciplinary scholarship. New areas of research have emerged which cut across disciplinary divides, but the attachment to ‘area’, or more precisely, the attachment to the state as the unit of analysis, remains strong. The processes of regionalization and globalization pose a challenge to this way of organizing the scholarly enterprise.

Conclusion

223

Reflecting on the progress made so far, the next stage of Anglo-Japanese scholarly exchange (or any exchange for that matter) needs to strive towards designing a tripodal intellectual architecture. The three pillars need to emphasize a de-statized framework of analysis, the nurturing of critical tools for analyzing the historically contingent nature of the state and its institutions, and an interdisciplinary approach. This will provide a long-term project to be forged and promoted by all generations of researchers in the field. It is to be hoped that, with this volume, we have made a small contribution in moving the study of Japan and Britain in this direction.

References Asher, D. (2001) ‘Could Japan become the “Great Britain of the Far East” ’, Asia-Pacific Review, 8(2): 112–28. Cox, R. (1981) ‘Social forces, states and world orders: beyond international relations theory’, Millennium: Journal of International Studies, 10(2): 126–55. INSS Special Report (2000) ‘The United States and Japan: advancing towards a mature partnership’, 11 October, Institute for National Strategic Studies, Washington: National Defense University. This is usually referred to as the ‘Armitage report’, after the name of the chair of the commission which produced the report, Deputy Secretary of State Richard Armitage. Seizlet, E. (2001) ‘Political integration of foreign communities in Japan’, in G. D. Hook and H. Hasegawa (eds), The Political Economy of Japanese Globalization, London: Routledge. Takahashi, S. (2001) ‘Japanese responses to globalization: nationalism and transnationalism’, in G. D. Hook and H. Hasegawa (eds), The Political Economy of Japanese Globalization, London: Routledge.

Glossary

ASEAN 4 bunichi Bretton Woods system

eibeiha ERM2

euro euro-12

Fukuda Doctrine

guidelines G7 G8 G20

Thailand, Malaysia, Philippines and Indonesia. Contempt for Japan. System based on the Bretton Woods agreement of 1944 that maintained stable exchange rates and promoted free trade through the International Monetary Fund and the World Bank until its collapse in the early 1970s. Anglo-American school. New version of the exchange rate mechanism launched on 1 January 1999 whereby the exchange rate is fixed against the euro. Single European currency, launched on 1 January 1999. The twelve countries that form the euro zone: Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxemburg, Netherlands, Portugal, Spain. Policy announced by Prime Minister Fukuda Takeo in 1977 that reassured neighbouring nations that Japan would not become a military power and promoted a ‘heart-to-heart’ understanding and equal relationship with the nations of Southeast Asia. Guidelines for US–Japan Defence Cooperation 1978, revised in 1999. Group of Seven major industrialized countries: Canada, France, Germany, Italy, Japan, UK and US. Group of Seven major industrialized countries plus Russia. Group of Twenty finance ministers and central bank governors: Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, UK, US and including the European Union, the European Central Bank, the International Monetary Fund and the World Bank.

Glossary 225 hakko¯ ichiu heiwa kokka hi no maru hoshu jiko keihatsu kakushin kikan inin jimu kimi ga yo kokusaika kokusai ko¯ken kunmin do¯chi kunmin kyo¯chi Kyoto Protocol

Monroe Doctrine

NIEs 3 NIEs 4 oitsuke oikose security treaty

seikei bunri seiko¯ tetsugaku sekai toshi senshu¯ bo¯ei the third way

Yoshida Doctrine

1955 system

Eight corners of the world under one roof. Peaceful nation. Japanese national flag. Conservative. Self-enlightenment. Progressive. Agency-assigned functions. Japanese national anthem. Process of internationalization. International contribution. Unified rule of the monarch and the people. Joint rule by the monarch and the people. Commitment by the parties to the United Nations Framework on Climate Change in December 1997 to set and meet targets on emissions. Policy declared by President James Monroe in 1823 to limit European interference in the affairs of the Americas through US protection. Newly industrialized economies of South Korea, Taiwan and Singapore. Newly industrialized economies of South Korea, Taiwan, Hong Kong and Singapore. Catch up and overtake (the West). The US–Japan Security Treaty, which was signed in September 1951, came into force in April 1952 and revised in June1960. Separation of politics from economics. Success philosophy. World city. Minimum defence. Attempt in the 1990s championed by President Bill Clinton in the US and Prime Minister Tony Blair in the UK to create a new political philosophy that reconciled the debate between capitalism and socialism, the traditional roles of the state and the market, and social rights and responsibilities. Doctrine named after Prime Minister Yoshida Shigeru that aimed at Japan’s postwar recovery by privileging economic growth, low military spending and reliance upon the US. The dominant political decision-making system dominated by the Liberal-Democratic Party, bureaucracy and big business that lasted from 1955 to 1993.

Index

1986 ‘Big Bang’ 191 4 June 1989 ( Tiananmen Square) incident 97 11 September 2001 terrorist attacks 7, 36, 45, 68–74, 92, 188, 194, 214, 217; impact of 50–1 2004 Intergovernmental Conference 162 Abkhazia 89 Act of Union of 1707 151 Additional Member System (AMS) 159 Afghanistan 7, 44 –5, 70, 72–4 Ainu people 2, 9; in Hokkaido¯ 4; and Japanese Koreans 183 Akihito, Emperor 25, 105 Allied Occupation of Japan 27 Allison, J.M. 55 Al Qaeda: fight against 11; networks 73 America: bases in Britain 45; civil war 41; colonies 41; global interests 20; hegemony 190; occupation of Okinawa 176; Revolution 62; unilateralism 49–50, 69–72 American-led globalism, risks of 108 Amsterdam 190; Treaty 84 Anglo-America 40, 45, 47; bias 197; common front 21; economic world 198; model of capitalism 48–9 ‘Anglo-American school’ (eibeiha) in prewar Japan 24 Anglo-French invasion force 43 Anglo-Japanese Alliance 16, 19–22 Anglo-Japanese History Project 12 Anglo-Japanese relationship as system, comparison 23–6 Anglo-Japan interstate relations 18–23 Anglo-Saxon model of capitalism 49

Anti-Ballistic Missile Treaty (ABMT) 66, 70, 90–1 anti-nuclear citizens’ movements 28 Anti-Terrorism Special Measures Law 70–2, 74, 77 anti-Western nationalist imperialism 32 Antwerp 190 ANZUS Treaty, 1952 22 Aoshima Yukio 199 Appadurai, A. 201 Ardy, B. 14, 218 Argentina 210 Armitage, R.L. 69; Report 76 Artis, M. 115, 119 Ascherson, N. 153 Asia: countries, loans outstanding 142; crisis 193; economic and financial crisis of 1997–8 14, 96, 100–1, 104, 109, 188, 192; third way 33; version of World Economic Forum in Davos 98 Asia Europe Meeting (ASEM) 107, 216 Asian Development Bank (ADB) 102, 138–40 Asian Monetary Fund (AMF) 97–8, 105, 145 Asia Pacific Economic Cooperation (APEC) 69, 97, 99, 102, 107, 109, 216 Asia-Pacific 101–2; power shift to US in 22; war 21 Association of Southeast Asian Nations (ASEAN) 33, 69, 100–1, 103, 134, 216; countries, direction of trade 138 Association of Southeast Asian Nations (ASEAN ) + 3 109, 216, 218; Chiang Mai Initiative 106, 145; summit meeting 96, 98, 106 Association of Southeast Asian Nations (ASEAN 4) 134

Index Association of Southeast Asian Nations (ASEAN ) Regional Forum (ARF) 69, 97–8, 104, 109, 216; Intersessional Support Group on Confidence Building Measures 98 Atlantic Charter 21, 63 Atlanticism 32 atomic bombings see Hiroshima and Nagasaki Attlee, C. 26, 44 Australia 103, 107 authoritarian and nationalist regimes 89 ‘axis of evil’, notion of 74, 92 Axis powers 62 balance of payments 140; accounting 124; current account 117 Balkans 44, 46 Bank of England 113, 116, 119, 187, 193 Bank for International Settlements 142 Bank of Japan (BOJ ) 131, 133–5, 137, 139 Barrett, B.F.D. 169, 171–2 Barro, R. 136 Bavaria 161 Bayoumi, T. 119 Belgium 116 Berlin 189; Summit 162; Wall, fall of 82 Bikini atoll, US thermonuclear test 28 bilateralism 64 –9 biological and chemical weapons, treaty on 70 biological weapons convention 91 biotechnology 31 bipolar superpowers 18 Birmingham 189 Blair, Prime Minister T. 4, 7, 11, 46, 50–1, 84, 214 –15; apology for colonial rule over Irish people 36; government 92 Bluth, C. 13 Boao Asian Forum 98, 107 Boer War 19 Bort, E. 14, 219 Bosnia 89 Boxer Rebellion 19 Braveheart 15, 150–1, 162 Bretton Woods financial system 47, 49, 190 Britain: capital 41; centralized power in state 154; central role in the G7 187; democratic socialism 27; dual legacy of imperial era 9; economy, difficulties of 48; in global context 26–35; hegemony

227

of 41; ‘living constitution’ 3; monarchy 24; multi-cultural identity shift 8; multi-national 150; relations with the European Community (EC) 82; relationship with the euro 14; role in the Commonwealth 7; role in East Asian Cold War 22; sovereignty, loss of 82; as super-imperial power 32; as system model for Japan 23; two-party system 25–6 Britain and the US: historical background to relationship 41–3; in the 1990s 43–50 British Campaign for Nuclear Disarmament (CND) 29 British Commonwealth 9, 57, 76 British Empire 42–3, 181; model 21 British–French initiative 84 British–German relations 216 British–Irish Intergovernmental Conference 164 British Nationalist Party (BNP) 9 Brown, Chancellor G. 118 Brzezinski, Z. 53 buraku minority 9 Burma (Myanmar) 56 Bush administration 50, 73, 91–2; Asian policy 69; foreign policy 70, 73; and international security dilemmas 89–93; unilateralism 66 Bush, President G.W. 7, 31, 45, 50, 68–9, 72, 214–15; Doctrine 72, 74 –5 Bush (senior) administration 44 business cycles 119 Caledonian antisyzygy 157 Callaghan, Prime Minister J. 154 capital account controls 191 ‘carrot-and-stick’ policy of Japan toward Okinawa 177, 182, 219 Carter, President J. 53; administration 102 Catalonia 161 Catholics in Northern Ireland 4 Channel Islands 2 Chechnya 89 China 14, 20, 22, 33, 43, 50, 58, 60, 64–5, 67, 70, 90, 96, 143; 1992 territorial law 64; approach towards Japan 106; dilemma 100; diplomacy, contemporary 97; economic growth, outstanding 101; invasion of 11, 18, 65; nationalism 19–21; new preference for regionalism 99–101;

228

Index

China (Continued) policy-makers 105; as regional hegemon 6; regional policies 105–9; threat 101 Ch’in dynasty 21 Chinese Communist Party 97 Chinese World Order 11 Christianity, influence of 6 Churchill, W. 40, 43, 46, 51 City of London 124 civil nuclear power 86 civil society: institutions in Scotland 153; in Japan 8 Clarke, K. 50 Clinton, President W. 50; administration 44, 60–1, 63, 66, 89–90, 100, 103; apology for slavery 36 Cobden, R. 41 Cold War 6, 10, 13–14, 18, 22, 27, 29–30, 34, 43, 53, 57, 59, 62, 72, 75–6, 82–3, 86, 88, 90, 104; strategy of US 13 Cole, G.D.H. 27 common foreign and security policy (CFSP) 83–4 Common Market of the South (MERCOSUR) 96 Communism 63; collapse of 43, 47, 83 Communist China 54, 59 Comprehensive Test Ban Treaty (CTBT ) 64, 66, 70, 91 Conference on Security and Cooperation in Europe (CSCE) 88 Conservative Party in Britain 46, 50, 155; governments 154; opposition 45 Cook, R. 9 Croatia 89 Crown Dependencies of the Isle of Man and the Channel Isles 164 currencies: basket of 145; common East Asian 146; role of 218; swap treaty 106; system, proposals for reform 145–6; union 144 –7; see also devaluation and exchange rates Czechoslovakia 29 Czech Republic 16, 161 decentralization, definition of 171–3 Decentralization Promotion Law (DPL) 169, 182 Declaration of Independence 41 decolonization process 9 deconcentration/delegation 171 Defence Guidelines 62 De Gaulle, General C. 10, 27

dehumanization and fragmentation, global 34 democratic global change, reconstructing identity for 33–5 Democratic Party of Japan (DPJ) 8 devaluation: of currency 145; of sterling 117 devolution 162, 171; in Japan 182; process of 150; and UK 151–3 Dewar, D. 151 Diana, Princess of Wales 3 Divine Rights of Kings 24 dollar 145–6, 218 Dominican Republic 63 Doomsday military technology 18 dotcom bubble, bursting of 113 Dublin, parliament in 153 Dulles, J.F. 55, 58–9 Dulles–Yoshida negotiations 58 East Asia 49; bank loans to 141; community 107; countries 65; crisis, recovering from 140; dependence on US economy 142; exports 141, 144; GDP ratio to US GDP 133; identity and integrity 100; importance in world economy 133–4; international order emerging 67; multilateral security framework in 108; order, implications for 72–6; per capita GDP 135; postwar Japanese diplomacy in 55; regional cooperation in 101; regionalism 108, 110; regional political space in 54; share of world trade 134 East Asia Monetary Fund 106 East Asian Co-prosperity Sphere 102, 105 East Asian Economic Caucus (EAEC) 96 East Asian economies: capital inflows to 140; dollar-based GDP data 133; economic growth, high 134 –7; after the financial crisis 131; flexible structure of 138 East Asian Strategy Report 61 Eastern Europe 43; economic stability of 89 Easter Rising of 1916 154 East–West: bipolarization 27; confrontation 82; international Cold War system of 213 economic cycles 218; structural vector auto regressive models 119 economic globalization 222

Index Economic Planning Agency (EPA) 132, 135, 137, 140 economy, openness of 137–40 Edo Bay 1 Eichengreen, B. 119 Emperor System 183 employment: flexible 121; and growth 125–7; opportunities 5 English language 6, 125; international role of 191 Ethiopia 74 Eurasian Diplomacy 104 euro 46, 51, 113, 145, 218; area, lack of flexibility in 122; interest rates 119; introduction of 192 Eurocorps 83 Euronext 125 Europe 49, 98; banks 141; counter-pull for Britain 51; integration 45–7, 51, 82, 86, 216–17; liberal-social democracies 32; model 217; monetary union 194; order 82; parliament 147; project 12; rapid reaction force 46; system of states 83, 86–7 European Army 91, 93 European Central Bank (ECB) 86, 115, 125 European Coal and Steel Community (ECSC) 1951 10 European Commission 147 European Community (EC) 6, 45–6, 87–8 European Court of Human Rights 147, 216 European Economic Community (EEC) 10, 33, 55, 102 European Economic and Monetary Union (EEMU ) 82–3, 86 Europeanism 32 European Monetary System (EMS) 82, 113 European Monetary Union (EMU) 14, 113, 116, 123; effects of 124; membership 114, 117; real economy effects of 118 European Nuclear Disarmament (END) 29 European security: arrangements in 44; central dilemma 93; redefining 88–9 European Union (EU) 46–7, 50, 55, 83, 87, 109, 146, 161, 192; convergence criteria 115–18; creation of 13; development of 86; members 70, 121; shocks in 119 Euro-scepticism 46, 50

229

Euro-sceptics 47, 153 Euro Zone 10, 116, 120, 126, 218 Exchange Rate Mechanism (ERM) 116, 118–19; sterling 113 exchange rates: fall in 132; fixed 118; floating 116, 126; stability 113; uncertainty 123 exports: dependence, rate of 138; from East Asia 131; of information technology products 138; to Japan 138; promotion 137 Ezochi 3 Fabian Society 27 Falklands 2; War 43 Federal Government 41 Federal Republic of Germany (FRG) 83–4; government of 87 Federal Reserve 125 Feifer, G. 176–7 Fenian Rebellion of 1867 154 Financial Action Task Force (FATF) 194 financial services 124 –5 Financial Services Authority (FSA) 187, 193 financial and trade flows, transnational 47 Finland 118 First World War 42, 154, 187 Fischer, J. 92 Flanders Declaration 161 flexibility: in economy 120–2; in product and labour markets 120 foreign direct investment (FDI) 120, 140–1; of Japan 198–9; by multinationals 123; of US 198 foreign policy: British approach to 82, 90; of FRG 88 France 10, 27, 48–9, 83, 87, 122, 126, 210; official apology 36 Franco-German relationship 87 Frank, A.G. 137 Frankel, J. 115 Frankfurt 125, 192 Friedmann, J. 196 Fukuda Doctrine 102 Fukuda Takeo, Prime Minister 102 Futenma relocation issue 179–80 G7 103 G7/G8 7; summit 2 Gamble, A. 13, 214 Gardner, L. 62 General Agreement on Tariffs and Trade (GATT) 103 Germain, R. 15, 220–1

230

Index

Germany 12–13, 41, 48, 82–3, 120, 146, 216; efforts for atonement 35; and Europe 84–8; mark 146; postwar foreign policy 85; unification of 43, 82, 86 Gesamtkonzept (holistic concept) of European security 88 Gibraltar 2, 43 Gladstone, W. 154 global city, concept of 198 global civilian power 75 global environmental degradation 30–1 globalization 9, 12, 27, 30, 62, 99, 101, 106, 196, 200; advancement of science/technology 18; age of 33; bubble-era discourse of 197–9; constructing multiple narratives of 202–9; cultural aspects of 200, 221; debate on 48; impact of 36, 210; and models of capitalism 47–9; policies, US-led 73; politics 200–2; of scholarship 222; structural aspect of 200 global warming 30 gold standard 187; collapse of 42 Gorbachev, M. 29 government bonds, long-term interest rate on 116 Great Britain 2; model empire 19; see also Britain and United Kingdom Great Depression 188 Greater East Asian Co-prosperity Sphere 6 Greece 118 Gross Domestic Product (GDP) 116; growth 119–21, 132; of Okinawa 5 gross government debt 116 Gulf War 72, 89; syndrome 74 Hacke, C. 85 Hardt, M. 72 Harmonized Index of Consumer Prices (HICP) 116 Harvie, C. 151, 154 Hashimoto Ryu¯taro¯, Prime Minister 103–4, 169–70; cabinet 61 Hassan, G. 150–1 Hatoyama Ichiro¯, Prime Minister 54; administration 58 Havel, V. 16 Hearn, J. 151, 163 Heath, E. 82 Heffer, S. 151, 163 ‘Heisei’ recession 221

Henderson, D. 143 Henderson, J.-A. 150 Hill, R.C. 196 Hirohito, Emperor 24 Hiroshima 28, 35 historical revisionism 35 history textbook issue 19 Hitchens, C. 41 Hitchens, P. 151, 163 Hitler, A. 6, 44 Hobbesian ‘state of nature’ 26 Hokkaido¯ 162; prefecture 3 Home Rule Bill 154 hondo 169 Hong Kong 43, 134 Hosoya Chihiro 20 Hungary 29 Huntington, S. 56 Hutchison, I.G.C. 151 identity, reconstruction of 32 IHT/Pew Research Center Poll 73 immigrants and refugees, unskilled 30 imperial expansion, overseas 45 imperial legacy of Japan 9 Inamine Keiichi, Governor 178, 180 India 109 Indonesia 56, 97, 103, 134 industrial production 189; by goods 139 inflation 116, 121 information-exchange system 191 information science 31 information technology (IT) goods, trade direction of 139 Inner Mongolia 19 Institute of Public Administration (IPA) 199 institutionalist approach to international politics 87 intercontinental ballistic missiles ( ICBMs) 91 Intermediary Nuclear Force controversy 29 international currency system 144 international financial institutions, historical concentration of 191 ‘internationalization’ (kokusaika) 197 International Monetary Fund (IMF) 47, 138, 141, 143, 201 internet 201 intra-euro area, foreign exchange dealing 124 investments: direct inward 124; high 136–7; ratio, high 135; and saving ratio 137; in the UK 122–4

Index Iran 90 Iraq 70, 74, 90; war against 44 Ireland 2 Irish Civil War of 1922 154 Ishihara Shintaro¯, Governor 15, 199, 208–10 Isle of Man 2 Italy 12, 20, 116, 118 Iwakura Mission 24 Jacobite rebellion of 1745 153 Japan 48, 50, 75, 146; 1947 Constitution 3; active posture on regional cooperation 101–5; as America’s ‘protectorate’ 53; anti-nuclear movement 29; army brutalities 23; Confucian scholarship 18; contribution to order-building in East Asia 74; cosmopolitanism 9; democracy 3; East Asian order, positive contribution to 76; economy, depression of 101, 142–4; Economy Research Committee 102; emperor 5, 25; ethnic and national exclusivity 9; foreign policy 54; in global context 26–35; global ranking of 199; imperialism 11; industrial policies 143; left-wing forces 25, 27; military 4; Ministry of Finance (MOF) 173; Ministry of Foreign Affairs (MOFA) 55, 58, 183; multinationals 147; national security policy 70; Official Development Assistance (ODA) 64, 103; Policy Research Institute 176; rearmament 58, 75; regional policies 104–9; role in American strategy 215; shogunate 18; soft power 75–6; system of financing 131; trading policies 104; urban politics 200; and the US alliance 99; and US banks 141 Japan–ASEAN comprehensive economic partnership 107 Japan Communist Party ( JCP) 28, 54 Japan–China–South Korea trilateral summit meeting 98, 106, 109 Japan–China tourism Exchange Mission 106 Japan Defence Agency ( JDA) 65, 108; Establishment Law 72 Japan Socialist Party ( JSP) 8, 25, 54 Japan–United States: relationship 11; relations in postwar years 53; security alliance 67 Japan–United States summits 134 Japan–US–China triangle 105–9 Jennings, C. 150

231

Johnson administration 102 Jones, P. 151 Kaifu Toshiki, Prime Minister 103 Kaji, S. 147 Kan Hideki 13, 214 –15, 217 Katayama Tetsu 27 Kelley, J.A. 69 Kennedy, President J.F. 63; administration 102 Kerr, G.H. 175–6 Keynesian welfare state functions 196 Kido Takayoshi 24 Kim Dae Jung, President 64, 105 Kim, J.W. 196 Kim, Y.H. 206 Koizumi Junichiro¯, Prime Minister 7, 70, 72, 75, 106–7, 214–15; government 71, 74 Kokusai Hikaku To¯ kei 133, 135 Korea 10, 19, 21, 217; colonization of 11; nationalism 21; National Statistical Office 139; peninsula 58, 106; war 22 Ko¯saka, M. 57 Kosovo 44–5, 84, 89 Krugman, P. 115, 134 Kuwait 73 Kyoto Protocol on Climate Change 30, 50, 66, 70, 90, 215 labour market flexibility 121 labour marketization, global 30 Labour Party in Britain 8, 25, 44, 46, 84; government 4, 44, 114, 154 laissez-faire policy 181, 189–90 Latin America 134 League of Nations 20 Lee Kuan Yew, President 136 Liberal-Democratic Party (LDP) in Japan 8, 25, 54, 57, 75, 105 liberalization of product markets 120 Libya 45, 90; bombing of 11 Local Autonomy Act 172 Local Autonomy Law 175 local ombudsman system 175 Locke, J. 41 London 12, 15, 29, 131, 193, 196, 198, 221; financial services industry 125; as a global finance centre 186; importance of in the global economy 220; key strengths 192; position as financial entry-point to Europe 191; regulatory environment 192; role of 220; and September 11 193–4; Stock Exchange 191

232

Index

London Financial Futures and Options Exchange (LIFFE) 125 Lucas, R.: critique 114 Lynch, P. 150 Maastricht Treaty 83, 115; convergence criteria 116; exchange rate requirement 117 MacArthur, General D. 24 McConnell, J. 152 McCrone, D. 153; recommendations 161 MacDiarmid, H. 157–8 MacDougall, C. 150 Machimura Takashi 15, 221 Mackenzie, C. 154 McLeish, H. 152, 161 MacMahon Ball, W. 57 Macmillan, Prime Minister H. 41 Magna Carta 3 Mahatir bin Mohamad, Prime Minister 96, 105–6 main bank system 131 Major, Prime Minister J. 8, 44, 83 Malaysia 96, 134, 138, 145–6, 193 Manchuria 10, 19 Manchurian incident in 1931 20 manufacturing in the UK 126 Marcos, F.E. 63 Maritime Self-Defence Forces (MSDF) 71 market economy 18; globalized 31 market shares of Chinese and Japanese products 144 Markovits, A. 85 Marquand, D. 153 Marr, A. 151, 163 Marshall Plan aid 63 Maull, H. 85–6 Meiji: Constitution 24; era 25; state 2 ‘merchant state’ features of 56–9 Middle East 84 military bases 5; for the Americans 44; in Okinawa 184 minorities 7; targeting by mass-circulation dailies 9 Mischief Reef 99 missiles, Cruise and Pershing 45 model monarchy 24 –5 model party system 25–6 monetarism 47 monetarist policy regime in Britain 49 monetary union: in Europe 188; membership 114 Mongolia 109 Monroe Doctrine 42

Mori Yoshiro¯, Prime Minister 106 Morton, G. 154 Muir, E. 157–8 Mulgan, A.G. 180 multilateralism 87; need for 64 –9 Nagasaki 28, 35 Nagorno-Karabakh 89 Nairn, T. 153, 163 Nakasone Yasuhiro, Prime Minister 208 National Association of Securities Dealers Automated Quotation System (NASDAQ): depression 137, 142 national broadcaster 207 national economies 190 national government, role of 173–4 National Health System (NHS) 154 National Missile Defence (NMD) 90–1 national sovereignty, transfer to multilateral institutions 85 Nazi Germany 20 Nazis 35 Nazism 63 Negri, A. 72 neo-liberalism 187; development of 49; disciplinary 47 newly industrialized economies (NIEs) 133–4 New World Order 30, 44 –5 New York 29, 125, 131, 189, 191, 196, 198 New York/London 197 New Zealand 22, 107 Nihon Keizai Shinbun 132, 144 Nixon, President R. 102, 134 non-governmental organizations (NGOs) 34, 215 non-performing loans, problem of 99 Non-Proliferation Treaty (NPT) 91 Nordic countries 34 North Africa 84 North American Free Trade Agreement (NAFTA) 46, 96 North Atlantic Treaty Organization (NATO) 27, 33, 43–4, 82–4, 87–8, 91–3, 106 Northern Ireland 151, 163–4 Northern Territories, postwar Soviet occupation of 3 nuclear war 18 Nye initiative 64 Obuchi Keizo¯, Prime Minister 64, 170; administration 203; China, visit to 105; Europe, visit to 218 ‘off-shore’ financial centres 194

Index ¯ hira Masayoshi, Prime Minister 102; O Cabinet 103 oil: exporter 119; offshore 154; shocks 143 Okinawa 2, 4 –5, 12, 14, 162, 183, 219; decentralization 15, 170; Development Programme 178; devolution and US military bases 175–80; economic dependence 180; emerging movements for independence 180–2; ethnic identity of people 5–6; importance in US global strategy 220; local government 175; measures for self-government 181; military base-related problems 178–9; prefectural government 175 Okinawans 9, 183; property rights of 177–8 ¯ kubo Toshimichi 24 O ‘opening’ of Japan 18 Opium War 18 Optimum Currency Area approach 114 Organization for Economic Cooperation and Development (OECD) 83, 89, 120, 194 ¯ ta Masahide 15, Ota, Governor 220; O 219 overseas trade 189 Pacific Economic Cooperation Council (PECC) 102 Pacific Free Trade Area 101 Pacific Rim 60; Cooperation Initiative 102 Pacific War 20 Paine, T. 41 Pakistan 72 Paris 189 Park Chung Hee 63 parliamentary democracy 7 particularism 2 Paterson, L. 153 Pentagon 188 People’s Liberation Army (PLA) 65 People’s Republic of China 58 Perry, Commodore M. 1, 19 Persian Gulf War 70 Philippines 56, 63, 99, 134 Plaza Accord 1986 145 Poland 29 Polanyi, K. 190 political economy of global financial centres 189–91 Pope 35

233

post-bubble recession 20 post-Cold War period 13, 67, 96, 99, 103, 192; globalization 29–30 post-First World War phase 20 post-Second World War period 11, 25; Anglo-Japanese relationship 22; ‘growth’ end of 203; Japanese diplomacy 53, 56–60; Japan’s peace movement 28; nuclear age 29; Occupation of Japan by Allied forces 3 Powell, G. 74 Prefectural Land Expropriation Committee (PLEC) 173 Presbyterians 153 prisoners of war (POWs), maltreatment of 23 Project X 207 Qian Qichen 100, 108 Queen Elizabeth 151 Queen Mother 3 Ravenscraig steel works 155 reactive diplomacy 57 Reagan, President R. 48, 50; administration 29 Reagan/Thatcher partnership 47 realpolitik 82 real wage rigidity 121 recession 120 Redwood, J. 151, 163 Reformation in 1532 45 regional economic bloc 144 –7 regional economics 218 regionalism 96, 99, 109 regionalist institutions 216 regionalization 106; ambivalence towards 31–3 re-globalization 197, 205 Reich, S. 85 renminbi (RMB) 100, 146; see also China Republic of China (Taiwan) 22 research, future 222–3 Rice, C. 69 Ritchie, M. 151 ‘rogue’ states 90–3 Roman Catholic Church 35 Romanov dynasties 21 Roosevelt, President F.D. 62 Roosevelt, President T. 69 Rose, A. 115 Ruggie, J. 190 Russell–Einstein manifesto 1955 28

234

Index

Russia 22, 50, 65, 67, 70, 88–9, 98, 104, 210; imperialist expansion in Northeast Asia 19 Russo-Japanese War 19 Ryu¯kyu¯s, Kingdom of 2 Saint Malo 84 Sakamoto Yoshikazu 13, 213 San Francisco Peace Treaty 57 Sassen, S. 198 Sato¯ Eisaku, Prime Minister 134 Satsuma clan 2 savings, high 136–7 Scandinavia 48 Schröder, Chancellor G. 92 Schumpetarian workfare role 196 Schwarz, H.P. 85 Scotland 2, 4, 12, 14, 151, 163, 219; Act 152; cultural artifacts and heritages 4; cultural renaissance 156–7; identity and politics 150; industrial decline 155–6; legal system 155; nationalist movement 154; Referendum on Devolution 153; semi-state 155; Union and home rule 153–4; universities 157 Scottish Constitutional Convention 152, 159 Scottish Parliament 150–1, 160–2; devolution of power to 5; new 159–60 Scottish Social Attitudes Survey 150, 162 Scott, W. 153 Scowcroft, B. 73–4 Seattle 97 Second World War 8, 18, 41, 82, 103–4, 154, 189; Japanese military invasions 56 Self-Defence Force (SDF) 8, 57, 70, 71–2, 75, 214 Sen, A. 136 Senkaku islands 64 Seville 189 Shigemitsu–Dulles meetings 55 Shinpo, S. 143 shocks, vulnerability to 114 Short, J.R. 206 Shoup report 174 Sho¯ wa emperor 3 Siberia 58 Singapore 20, 23, 97, 100, 134, 136, 144; rise as financial market 222 Sino-Japanese relations 14, 19, 22, 64, 66, 96, 106, 217 Sino-US trade 108 Sino-Vietnamese War 102 skill base in high value-added services 191

slavery 41 Snake 116 Socialist Europe 27 soft power 54, 56, 65; see also Japan Solana, J. 84 So¯ seki, N. 23 South China Sea 99; Workshop 97 Southeast Asian countries: currency and financial crises in 99; Development Ministers’ Meeting 101–2; ‘reparations’ and tied ‘aid’ from Japan 22 South Korea 63–4, 99–100, 102, 134 –5, 137–9, 141, 143, 146; channels of technology, leverage in 140; internal and external trade of 141 Soviet–American super-power condominium 67 Soviet Union 20–1, 43, 54, 58, 90; collapse of 82; occupation of Japanese territory 5 Spain 210 Special Action Committee on Okinawa 179 Special Measures Law for the Expropriation and Use of Land (SMLEUL) 173, 177 Stalin, J. 63 sterling 126; bloc 20; value of 113, 116 stock and foreign exchange markets 29 Strategic Arms Reduction Talks (START)-II Treaty 90 Suez 12; invasion 43 Sutherland Report 161 Sweden 48–9 Syria 74 Taira Ko¯ji 181, 184 Taisho¯ democracy 3 Taiwan 10, 58–60, 62, 66, 91, 99, 105–6, 134; colonization of 11 Takahara Akio 14, 217 Takahashi Wataru 14, 147, 218 Taliban: regime 73; US campaign against 71 taxation, levels of 125 tax system 174 technology transfer 135, 139 terrorism: fear of 36; organizations 92; war on 215 textiles: conflict 134; trade frictions 20 Thailand 134, 137–8, 141; internal and external trade of 141 Thatcher, Prime Minister M. 8, 11, 43, 45–8, 50–1, 82–3, 154; government 49, 121, 191; Poll Tax 154

Index Theatre Missile Defence (TMD) 68, 70; role of Japan in 62 third way model 26 Third World diplomacy 98 Thorne, C. 23 time zone 191 Tokyo 12, 15, 29, 101, 191, 197; bay 19; city, politics of 208; economic crisis and urban ‘boosterism’ in 196; ‘global city’ discourse in 196–200; government attitude to foreign residents 221; Plan 2000 209; role in global political economy 220–1; Stock Exchange 199; urban policy 199 Tokyo Metropolitan Government (TMG) 199, 207, 210; re-globalization policy 209; Urban Planning commission 204 Tonghak peasant rebellion 21 trade: intensity 115; partners 138; role of 144 Trans-European Automated Real-time Gross Settlement Express Transfer (TARGET) 125 transnational citizens’ movements 27–9 transnational corporations 201; mega-competition of 30 transnational spaces 46 Treaty on European Union (TEU) requirements for EMU entry 118 Trier University 85 trilateral dialogue between Washington, Tokyo and Beijing 66 trilateralism 64 –9 Trujillo, R. 63 two-party system 25; see also Britain unemployment 5, 121; rate 206; in Scotland 156 unilateralism 69; in US foreign policy 70 Unionist-Nationalism 154 United Kingdom 5, 55, 120; business cycle 119; economic policy-making 123; economy, flexibility of 122; eurosceptic public attitudes 114; financial services 124; five economic tests 118; General Election 160; inflation 116; labour markets 113, 121; macroeconomic policy-making 119; non-accelerating inflation rate of unemployment (NAIRU) 121; readiness for EMU membership 127; trade performance 123; Treasury 187, 193; and United States, changing relationship 40 United Kingdom-based banks 125

235

United Nations Assembly, Disarmament and International Security Committee 66 United Nations Conference on Trade and Development (UNCTAD) 124 United Nations Millennium Summit 106 United Nations Peacekeeping Cooperation Law 71, 77 United Nations Peacekeeping Operations (UNPKO) 8 United Nations Security Council (UNSC) 7, 34, 98, 215 United Nations system 27 United States 11, 65, 90, 98, 120, 126, 135; anti-communist crusade 22; Cold War strategy 76; CTBT, failure to ratify 91; dollar, overvalued 116; East Asia 55, 60, 68; entry into war 43; exports to 142; forces in Afghanistan 214; foreign policy 57; foreign policy-makers 59; as giant free-rider 30; hegemony 7, 11–12, 44; installations in Okinawa 182; military bases 5, 55, 175; military forces 219; money market operations 125; national interest 69; political leadership 215; postwar reconstruction of liberal international relations 62–4; project of order-making 72–4; security protection 53; strategic and technological superiority 31; unilateralism 33, 74; war against terrorism 7, 70; world power of 42 United States–Canada Free Trade Treaty 102 United States–China relations 66 United States–Japan: alliance 101, 103, 109; bilateral relationship 69; Defence Cooperation 61; Joint Declaration on Security 104 United States–Japan Security Treaty 6, 13, 22, 53–4, 56–7, 59–60, 71, 75–7, 182; redefinition of 60–2 United States–Russian strategic arms control 90 United States–Soviet conflict 26 United States–United Kingdom relationship 11 unit labour costs 117 Venezuela incident 42 Vichy regime 36 Vietnam 97; War 22, 28, 102, 104 Wales 2, 151, 163 Wallace, J. 151

236

Index

Warhurst, C. 151 Warsaw Pact 82 wartime: atrocities of Japan 65; history, issue 65 Washington 125; China policy 63, 68; consensus 47, 50, 61; Naval Conference 42; settlement 20 Watson, M. 150 Watt, D.C. 32, 35 Western Alliance 82, 91 Western imperialism 6; fear of 19 Western values, universalistic 36 West European Union (WEU) Treaty 84 Westminister 153 white man’s burden 9, 11, 19 Wilson, President W. 62, 69 Wolfowitz, P.D. 69, 74 Woolf, V. 7 workers, unskilled 122 world city hypothesis 197

World Economic Forum (WEF) 210 World Trade Centre 188 World Trade Organization (WTO) 63, 103, 105, 201 Yanai Shunji 71 Yangtze River 20 Yasukuni Shrine 106 yen 100, 131, 141, 146, 148, 218; development as third currency 145; RMB swap treaty 106 Yoshida Doctrine 13, 53 Yoshida Shigeru, Prime Minister 24, 53–4, 56, 59, 75; diplomacy of 57 Yugoslavia 89, 106 Zemin Jiang, President 64, 105 Zhang, W. 115, 119 Zhan Yunling 108 Zhu Rongji, Prime Minister 106, 107–8