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On Wasting Money On Defence, And Melanie, RIP

On the weekend, the government signalled once again that “ bold” and “brave” decisions were looming on Defence. That’s political code for lavish spending on weapons systems while essential social services are being cut. The rationale for spending on armaments is to combat a phantom threat from China. Yet the available evidence shows that the West already enjoys crushing military superiority over China. Moreover, the evidence from war gaming to economic modelling shows that China would lose more than it could possibly gain from any military conflict in the region.

These realities do not stop the constant drum roll – from Labour and National governments alike – for more, more military spending. Nearly two years ago Christopher Luxon had signalled that a National government would be keen to increase Defence spending. ACT’s David Seymour has called for Defence spending to be increased to 2% of GDP. It would cost billions to do so – and Seymour normally likes to paint himself as the sworn enemy of wasteful government spending. In recent weeks, there has been another round of scare talk about the alleged need to counter the emergence of “competition” (i.e. China) in the Pacific region.

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In reality... So long as the US stays engaged in the Asia-Pacific region, the military power balance remains strongly in the West’s favour. And if the US under Donald Trump withdraws into isolation and leaves Taiwan to fend for itself, no amount of military spending by Australia and New Zealand would make the slightest bit of difference to the outcome.

In the meantime, there are other good reasons to challenge the logic of China posing an imminent threat to other Asia Pacific nations either now, or in the foreseeable future. For the past year, Chairman Xi Jinping has been enacting a comprehensive purge of China’s top military commanders. Some of those purged have been officers that he originally appointed. Dismissals have spread from the top echelons of the Peoples Liberation Army to the PLA’s high tech rocketry divisions:

China has abruptly unseated at least 15 senior military figures — including the highest-level defense leader ousted since 2017 — in the past six months. Their removal has been left unexplained by Beijing, but comes amid reports of graft probes roiling the upper echelons of the People’s Liberation Army.

Crucially, here’s the fallout from all of that for the wider world:

US intelligence indicates that President Xi Jinping’s sweeping military purge came after it emerged that widespread corruption undermined his efforts to modernize the armed forces and raised questions about China’s ability to fight a war, according to people familiar with the assessments.

The corruption inside China’s Rocket Force and throughout the nation’s defense industrial base is so extensive that US officials now believe Xi is less likely to contemplate major military action in the coming years than would otherwise have been the case...

On top of all this, China’s lumbering command and control systems look a lot like those of the old Soviet Union. In addition, none of China’s military leadership has had any experience whatsoever of fighting a war. The Pentagon by contrast, has been fighting wars continually for decades, in Afghanistan, Iraq and Vietnam. Even then, the current turmoil, the clunky lines of authority and the inexperience at the top of China’s military machine are still not Beijing’s main tactical problems.

As this column set out in detail several months ago, the US and its allies enjoy overwhelming military superiority over China, on land, sea and in the air. China has been trying to improve and increase its very small fleet of amphibious landing craft – but regardless, China’s forces have very limited capacity for force projection beyond China’s shores. That’s an obvious problem for any territorial ambitions China has regarding Taiwan. It will be 2029 at least and more likely well into the 2030s before China can hope to significantly improve this situation.

Even then, Beijing will face inherent disadvantages. China lacks energy independence, is surrounded by unfriendly neighbours and is chronically vulnerable to the huge US bases that ring its borders. In addition, the Chinese economy is highly dependent on the same trade routes in the South China Sea that it allegedly threatens. It would make no sense at all for China to suddenly choke off the trade routes that it desperately needs to get its exports to market and its oil supplies into the country.

It's the Economy

So far, almost all the heavy breathing about China has been limited to the military and diplomatic spheres of its presence in the Pacific. Lip service is occasionally paid to the fact that yes, China is now a superpower that has legitimate interests everywhere on the planet. Yet - simultaneously - any hint of a Chinese presence in those areas of the globe where the US has enjoyed overwhelming dominance for decades is treated as an existential threat that must be countered, no matter what the socio-economic cost may be of doing so.

The economic prosperity on which China’s internal cohesion depends would be put in jeopardy by any major foreign military adventure. That’s why China is such a poor excuse for countries like New Zealand to throw more and more scarce money away on weapons platforms - e.g. new frigates - that largely have only symbolic meaning. (We are not facing a military threat, and frigates would be next to useless if we were.)

War over Taiwan would be economically ruinous... Especially for China.

A few weeks ago Bloomberg Economics published a detailed economic analysis of the likely economic cost to all participants - and to the global economy - of a Chinese invasion of Taiwan.

Bloomberg Economics estimate the price tag at around $10 trillion, equal to about 10% of global GDP — dwarfing the blow from the war in Ukraine, Covid pandemic and Global Financial Crisis.

How come this impact would be so severe? As Bloomberg explains, Taiwan makes most of the world’s advanced logic semiconductors, and a lot of lagging edge chips as well. An estimated 5.6% of the total value in the global economy - almost $6 trillion - is created by sectors that use chips as direct inputs.

Bloomberg modelled two scenarios: A Chinese invasion drawing the US into a local conflict, and a yearlong blockade that would cut Taiwan off from trade with the rest of the world. A suite of models estimated the impacts on GDP, taking account of the blow to semiconductor supply, the disruption to shipping in the region, trade sanctions and tariffs imposed on China for its actions, and the overall impact on financial markets.

The biggest impact, the modellers found, came from the missing semiconductors. “Factory lines producing laptops, tablets and smartphones - where Taiwan’s high-end chips are the irreplaceable “golden screw” - would stall. Autos and other sectors that use lower-end chips would also take a significant hit.”

OK... Now for the particular impacts. Under the full scale invasion/war scenario: Taiwan’s economy would be decimated, suffering a 40% loss. But - crucially - the impact on China’s economy would be considerably greater than on the global economy as a whole, and on the US in particular:

  • With relations to major trade partners turned off and no access to advanced semiconductors, China’s GDP would suffer a 16.7% blow.
  • For the US, further from the centre of the action but still with a lot at stake — through the reliance of Apple on the Asian electronics supply chain, for example — GDP would be down 6.7%.
  • For the world as a whole, GDP would be down 10.2%, with South Korea, Japan and other East Asian economies most impacted.

Keep in mind throughout these calculations that impacts of this size on the Chinese economy would significantly weaken the party’s grip on its own domestic populations. (The current scale of its youth unemployment is already a security concern). Now, here are the likely effects under the alternative scenario, of a year-long maritime blockade of Taiwan by China. China’s actions would probably include military incursions, economic sanctions and grey zone cyber-attacks.

  • Bloomberg estimates that under this scenario the impact for China, the US, and the world as a whole, GDP in the first year would be down 8.9%, 3.3% and 5% respectively.

So... Again, the economic impact on China would be nearly three times greater than on the US. As part of its response, the US would be enlisting its allies into enforcing concerted economic sanctions against China. The impact on New Zealand of us joining our traditional allies in such a boycott would be catastrophic. We keep on being told that we’re a small trading nation. Almost overnight, though, we would be cutting off our access to our biggest trading partner. Surely that suggests that instead of pouring billions into weaponry, we would be far better advised - if we really do believe conflict with China is inevitable - to be putting that money right now into diversifying our export markets.

The Trump Factor

Almost all of the above assumes that there would be a US military response if China invaded Taiwan. Last year, the war-gaming outcomes tended to be premised on the US defending Taiwan (as US President Joe Biden has promised to do.) In which case, the outcome has China losing that conflict.

Factoring in Donald Trump though, makes a huge difference. Trump, as we all know, is a Russian asset who can be relied on to sell out the West’s interests for personal gain. If Trump is President again, the war-gaming suggests that China would prevail. In one scenario, Taiwan would be “toast” without a shot being fired – if, say, Taiwan refused to accept a timeline for re-unification concocted by Trump and Xi, working in unison. Clearly, a second Trump presidency is the key variable here.

The chief danger to New Zealand’s interests in the Pacific then is not China per se, but a second Trump presidency. And as mentioned, if Trump withdraws the US to the sidelines and allows his friends in Beijing and Moscow to prevail, it should be obvious that we, even together with our Australian and British allies, couldn’t make up the difference.

In sum, if the return of Trump means that our “traditional team” loses its MVP, the United States, then the power balance in our region will shift dramatically. If so, no amount of New Zealand military spending in tandem with our traditional allies will affect the outcome over Taiwan and in the rest of the Pacific.

Melanie, Goodbye

Melanie Safka died last week at the age of 75. Known mainly for her pop hits, she was also a terrific improviser. I’d first heard her in the late 1960s, on an all night radio show in San Francisco. She was sharing anecdotes with the DJ about her experience of singing in bars in Europe in her late teens as a Jacques Brel-type chanteuse. In between, she would improvise versions of the random songs that listeners would phone in as requests. She made it sound easy to improvise arrangements off the top of her head, with barely a minute’s warning.

Here’s a 23 year old Melanie on Dutch TV in 1970, doing an impassioned version of “Lay Down” with the Edwin Hawkins Singers. “We bled inside each other’s wounds/we had all caught the same disease...” are not typical flower power concepts. Check out the reactions from the stolid Dutch burghers in the audience....

Here, from a 1968 demo, is her take on Tim Hardin’s “If I Were a Carpenter.” Because of the prettiness of the melody, it's easy to miss that this is a song about anxiety and compromise, and the fear that one’s concessions will not be seen, let alone reciprocated. Hardin wrote it as a love letter to Susan Morss, the love of Hardin’s brief life. She came from a very wealthy family. His version is devotedly passive-aggressive. What I love about Melanie’s version is that she tapped straight into the song’s underlying desperation.

From the mid 1970s, here’s Melanie with the great jazz saxophonist Art Pepper. Her mother had been a professional jazz singer. Both mother and daughter must have loved this track:

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