George Friedman, who founded the well-known geopolitical strategy firm Stratfor and now runs a group called Geopolitical Futures, recently wrote that one of his most controversial calls is that Japan will rise as East Asia’s leading power by 2040.
It certainly is a contrarian forecast. How could Japan, with massive government debt and an aging, shrinking population, rise above mighty China, with its apparent economic dynamism and the largest population in the world? We won’t know how things turn out for more than two decades.
China and Japan now have the second and third largest economies in the world respectively. China has 1.3 billion people, while Japan has 127 million. China has the fourth largest land area in the world, while Japan’s land size ranks 62nd. Still, says Friedman, Japan’s smaller size doesn’t preclude it from becoming a regional power. After all, the UK once ruled the world as a nation slightly smaller than Japan.
Friedman’s forecast hinges on his bearish view on China. While he acknowledges that China is immensely powerful today, he also thinks economic stresses will create serious political challenges. The largest problem is income inequality – both generally and regionally. Most wealth is concentrated in China’s east coast, while poverty persists in the central, western, and northeastern regions. Combined with the massive scale of China’s population and geographic area, regional economic disparities make it a challenge to maintain internal stability. Friedman says:
“. . . China often spends more on internal security than it does on the much vaunted People’s Liberation Army. It also rules over many regions that are not ethnically Han Chinese and that want greater autonomy (if not independence). And China must maintain a robust capability to guard its borders . . .China is a formidable land-based power, but China has never been a global maritime power in its long history. It has always been susceptible to internal revolution, and at times external conquest.”
Japan, in contrast, has wealth that is more evenly spread across its population and geography. It does not have as serious a poverty issue. While it is challenged demographically, Friedman sees the dwindling population as less of a problem than Japan’s lack of raw materials and dependence on imports for food and energy. Demographic issues can be mitigated by Japan’s investment in automation, robotics, and artificial intelligence, and if necessary, by a change in immigration policy. In addition, Japan has a strong navy and an important alliance with the U.S. Friedman concludes:
“Unlike China, Japan has no land-based enemies – it is an island nation. Unlike China, the Japanese government has no concern about its ability to impose its writ throughout the entire country. Nor does it have to contend with a huge gulf in wealth disparity between different parts of the country. Japan has already managed a transition from a high-growth economy to a low-growth economy without revolution . . . One man’s stagnation is another man’s stability. One man’s ‘Lost Decade’ is another man’s ‘Stable Decade.’ ”