Nikkei: Drying up, flaming out

Japan’s population is just over 127 million at present, about 1.04 million less than its historical peak in 2008. But this decline masks drastic shifts in the country’s demography. The number of people between the ages of 15 and 64 has declined by nearly 4 million, while the 65 and older cohort has shot up by more than 4 million.

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5 Character Strengths

A few days ago I took an online survey on character, and these were my top 5 (of 24) strengths. Give it to me straight, is this really me?

1. Judgment

Thinking things through and examining them from all sides are important aspects of who you are. You do not jump to conclusions, and you rely only on solid evidence to make your decisions. You are able to change your mind.

2. Fairness

Treating all people fairly is one of your abiding principles. You do not let your personal feelings bias your decisions about other people. You give everyone a chance.

3. Prudence

You are a careful person, and your choices are consistently prudent ones. You do not say or do things that you might later regret. (I have made too many stupid mistakes to call prudence a strength.)

4. Love of learning

You love learning new things, whether in a class or on your own. You have always loved school, reading, and museums-anywhere and everywhere there is an opportunity to learn.

5. Curiosity

You are curious about everything. You are always asking questions, and you find all subjects and topics fascinating. You like exploration and discovery.

Will China officially declare an Air-Defense Identification Zone (ADIZ) over the South China Sea before 1 June 2015?

South China Sea is as important to China as the Caribbean is to the United States, or the Mediterranean to Europe and Africa. The ADIZ mechanism is not all that unusual. The United States, Canada, Japan, and South Korea each maintain an ADIZ.

I suspect China will have to in order to further discourage the United States from conducting surveillance flights near the submarine base in Hainan. It is more likely China will announce a smaller ADIZ that it can enforce with fighter jets, but even this will antagonize Philippines and Vietnam, at a minimum.

China announced their ADIZ in East China Sea unilaterally, without consulting with the United States or Japan. The question is whether China will consult with United States or neighboring countries.

Estimate: 70%

Will the New Development Bank officially announce that a loan will be made to a country before 1 June 2015?

On July 15, 2014 the leaders of the BRICS countries announced the New Development Bank to rival the World Bank and IMF. Its initial capitalization is $50B with equal contributions and voting rights from the five members.

China, however, is the largest contributor to the Contingency Reserve Arrangement (CRA), and the new bank will be headquartered in China. There is geopolitical dissent within the BRICS countries, and some fear China will dominate this new endeavor. In addition the organization must overcome hurdles of monitoring and compliance.

Notwithstanding the doubts, there is strong political support within each of the member countries. Moreover, south-south trade now exceeds north-south trade by $2.2 trillion (one-quarter of global trade).

The question is really whether the new bank will become a real developmental bank. I think the probability is very high that it will, and that it will become a significant factor in global development in another decade.

Estimate: 90%

Will Kim Jong Un meet a head of state from one of the G7 countries, South Korea, China, or Russia before 1 June 2015?

Anything is possible. There’s a joke in China. Kim Jong Un calls up Xi Jinping and says “How’s it going Xi. Guess what? We are going to launch another missile.” Xi Jinping asks “Oh really. When?”. Kim answers “in 10, 9, 8, 7…”

Kim Jong Un wants to visit China, possibly within this year. Xi Jinping did visit South Korea earlier this year, breaking with tradition. China’s concern is NK test a nuclear device shortly after a visit, implying it was given a green light by China. Therefore a meeting is unlikely this year, or until NK does test a nuclear device.

Is a high-level meeting with Japan, US, or SK going to happen? A meeting is unlikely, even as relations with Japan is warming on progress over the abduction issue. These parties prefer to negotiate multilateral talks, and we are not likely to see any within this time frame.

That leaves only Putin. I’m really not sure what is the prognosis there, but it doesn’t seem likely unless he can use it to snub China and gain some leverage, somehow…

Estimate: 20% probability.

On China, On America

Rob England, under the name “IT Skeptic” has posted an important reminder on how much progress China has made in the last few decades.

  • China used more cement in 2011-2013 than did the United States in the entire 20th century.
  • China will have more skyscrapers than the United States by 2017.
  • China has seven of the 10 longest bridges and seven of the 10 busiest container ports.

You owe it to yourself to review his article. China’s economy overtook Japan’s in 2010. It will  overtake the the US economy in the early 2020’s and double that of the US a decade later, by the early 2030’s. The timing of these trends depends on how consistently China maintains economic growth. Arguably China will continue to grow, but not without pains. A large build-up of infrastructure cannot take place without some over-investment and hence the need for recessions to reallocate resources. The arguments begets wrangling over dates,  but not over the underlying trends.

Outwardly a rising China is worrying, particularly for its neighbors with whom they share overlapping territorial claims. For the United States such worries are more abstract, but may include:

  • Attacks against nations with whom the United States maintains security treaties (Japan, South Korea, Philippines).
  • Denial of access to shipping lanes in the East China or South China Seas.
  • Creation of global financial and economic institutions, such as the Shanghai-based New Development Bank, of which the BRICs are members, and the Asian Infrastructure Investment Bank, to replace the IMF or Asian Development Bank.
  • Replacing the US Dollar end the Euro with the RMB in international trade settlements, which would raise transaction costs and interest rates for the United States (and countries with pegs).

Nevertheless, China’s rise does not worry me, for several reasons:

  • China is a civilization pretending to be a nation, in an era of nation states. (How much longer will this era last?) As a civilization, China doesn’t seek to dominate beyond it’s immediate vicinity.
  • China has never intervened in the sovereignty of its neighbors, nor seeks to do so now. In the worst case, China will seek to restore the “tributary system”, but this is unlikely to come to pass.
  • China’s foreign policy does not seek to impose hypocritical “Chinese values” in the same ways as colonial Europe of Japan, or as modern United States. China’s culture is not a missionary one.
  • For all it’s resistance to international institutions, China’s rise is highly dependent on them. The Chinese just wants (and deserves) respect within the frameworks of those institutions, and control within them as befits its stature and contributions.
  • China’s population will peak in 2026 at 1.45 billion and will decline after 2030. The demographic decline will nearly rival that of Japan’s, as a result of it’s one child policy. China’s demographic challenge is exacerbated by the gender imbalance, given the preference for male children. (More United Nations data here.)
  • China is highly dependent on oil from the Middle East through shipping lanes to which the United States can still deny access, should China’s threats become too literal.

All told China will settle down after 2030 as respected power in an  multipolar world. China will have as much responsibility in maintaining a peaceful international system after 2030 as it does in challenging those that desire to constrain it today.  Ironically, the greatest obstacle to the peaceful rise of China won’t be its growth, but the questioned legitimacy of the Communist Party if it fails to deliver growth.

What concerns me more is how poorly the United States has invested it’s own capital over the last decade. Since 2001 the United States has committed $4.4 trillion to wars in Iraq, Afghanistan, and Pakistan which have provided zero benefit to the United States, it’s business interests, it’s citizens, or their security. In fact, the primary beneficiaries have been Iran, China, and the ISIS.

Sometimes I dream of what we could have achieved with more wise and inspired investments over the last decade and a half. Would we have landed Americans on Mars? Would we have revitalized our decaying infrastructure, built new infrastructure within Mexico and around the border in order to support expanded trade? Would we have invested in Mexico’s institutions and people in order to end illegal migration once and for all?

Maybe not. The hawks are now calling the ISIS the most imminent national security threat  without offering a shred of evidence. The list includes Congressman Michael McCaul, chair of the Homeland Security Committee, Sen. Marco Rubio, Sen. John McCain and Defense Secretary Chuck Hagel. (Presumably, if pressed their answer would be “if you knew what we know, but can’t tell you for reasons of national security, you would agree with us”. We heard this in Vietnam, and it wasn’t true then, and it isn’t any more true now.) Now they want to trap United States into spending several more years and $100’s of billions directly countering the ISIS in Iraq with American boots on the ground, using classical chains of escalation that are well rehearsed. And in two years they may control all three branches of government again. A few trillion here, a few trillion there…

I suggest that we let China deal with ISIS. Chinese companies will be the primary beneficiaries, due to their investments in Iraq and Iran. I also suggest we open direct dialog with Iran towards a acoordinated solution.

The political establishment of the United States needs to realize that the world is becoming multipolar and there are limits to the its reach and power. The sooner we do this, the sooner we can move forward with a consensus that makes sense in the world we now live in. It is the world we made, after all.

Japan Salaries Extend Slide as Inflation Begins to Take Root – Bloomberg

http://mobile.bloomberg.com/news/2013-12-03/japan-salaries-extend-tumble-as-inflation-begins-to-take-root.html

Stagflation seems to be the inevitable result of Abe’s attempts to restart the economy. Moreover this is apparent even ahead of the economic cliff in April.

Abe needs to press forward with economic reforms and participation in the TPP talks. Raising the sales tax needs to be scrapped in favor of taxes that encourage more investments, i.e., energy efficiency and carbon reduction. Finally Abe needs to take steps to encourage innovation and startups.

Sober Look: 3 key facts about Japan’s deteriorating demographics

http://soberlook.com/2013/11/3-key-facts-about-japans-deteriorating.html

There is an old story about boiling frogs: if you throw one in hot water, he will just jump out. Throw him in cold water instead and turn up the heat gradually. So it is with Japan’s demographic crisis, one that is slowly boiling, and whose impacts weren’t clear until I saw these charts.

Japan has lost 10% of its productive capacity in the last two decades. Nobody should now wonder the cause of the nation’s lost decade, which began in the 90’s is now stretching into its third decade. Even worse, the nation’s younger workforce are underdeveloped in professional roles and are scarcely capable of replacing those lost through retirement.

Moreover it is clear that economic growth can only be maintained through expanding the workforce, or through a drastic increase in productivity, or both. The former can be achieved by expanding participation of women (the world’s most talented), delaying retirement, expanding flexible post-retirement opportunities, and encouraging immigration. Immigration will not happen for a variety of reasons.

There isn’t much evidence that productivity will make the necessary leaps. Reform, the third leg of Abenomics appears to be stalled. The expanded use of robotics will progress but only in fits and starts and will not progress in the neat linear fashion played out by its demographics.

Therefore Abenomics is predicated on stealing from its savers in favor of incumbent business interests. Technically this is achieved by buying JGB’s in order to drive down their value, encourage speculation in equities and reduce the buying power of JPY currently held. The former President of the Bank of Japan saw and said so much.

Where does that leave Japan? In the long term the outlook is good that the nation will retain its unique identity while reducing its population density, currently 2nd behind Bengladesh. In the short term the the nation must brace for reducing its credibility and prestige throughout the world, and for scandalous maltreatment of its retired generation.

If Not Progress, What? If Not Mars, Where?

Last month two events led me to do some thinking about manned exploration of Mars.

Billionaire investor Dennis Tito, under the Inspiration Mars Foundation umbrella, announced plans to launch a 1.4 year manned circumnavigation of Mars in 2018. I had the enviable assignment of writing our official position for The Mars Initiative, a fundraising organization I helped found in 2012. (If you marsglobe1x200haven’t had the chance yet, please review the rest of the website, as well as my post.)

The IMF announcement catalyzed some necessary discussions within TMI that will remain ongoing for several months. IMF’s agenda is ambitious, particularly the timeline and the margin for safety and testing. In the broader community most people are skeptical about whether the mission can be achieved, and a few are adamant that it cannot be achieved. I think it is achievable, and failure of one attempt will not prove this assertion false (n=1 is not a sufficient sample). This mission could not have been conceived two years ago because the necessary commercial developments had not yet occurred. The project operates under a tight schedule constraint, and execution risks abound.

In 2003 I was one of the original founding members of the Dallas Chapter of The Mars Society, which last year successfully hosted their national convention. I continue to host and update their website. Then and now, getting involved in Mars-related organizations seemed like something interesting to do that not many other people were doing. It wasn’t until I wrote the following words that the magnitude started to sink in:

IMF is inspiring multiple generations to prepare immediately for humanity’s genesis as a multi-planetary species.

I feel I have to put that into context.

  • 2 million years ago: The Homo genus first used stone tools.
  • 1.8 million years ago: Homo erectus first left Africa, probably used more complex tools and fire.
  • 75,000 to 125,000 years ago: Modern humans migrated once again from Africa and replaced the indigenous Homo populations. 1
  • 5,000 years ago: Humans first harvested energy for transportation–via the wind sail.
  • 200 years ago: Humans began systematically converting chemical energy into locomotion.
  • 1961: The first human left the atmosphere (and returned safely), using chemical energy.

In addition to energy, the organizational systems and technological environment (i.e. Kevin Kelly’s technium) enabled such accomplishments.

On a planet that is 4.5 billion years old in a galaxy that is 13 billion years old, the recent rapid pace of social and technological development is remarkable. There are 200 to 400 billion stars in our galaxy. We are rapidly discovering planets around many of them. In the end there may be at least as many planets in our galaxy, and tens or hundreds of millions that are approximately like Earth. I think it is safe to conclude that life exists all throughout our galaxy.

The existence of complex life like that found on Earth is more dubious. The existence of complex social and technological systems like that of modern homo sapiens is even more in doubt. Amid vast numbers, and vast timescales, the current progress of our species is truly remarkable.

In the first paragraph I mentioned there were two events. The second of was the opportunity to complete the reading of Robert Zubrin’s new mini-book, Mars Direct. Much like his earlier books, it outlined a plan to put humans on Mars in one decade. MarsDirectIn addition it echoed the criticisms made in his previous books of the the political and administrative dysfunctions that have stifled the plan over the last thirty years.

The next step for homo sapiens is to become a multi-planetary species. Indeed the entire progress of humanity almost seems to have led us to this goal, if such a thing would be possible accidentally. The necessary social and technological prerequisites have already been developed. The flame and passion for exploration thrives, as does our ability to engage in collective action for group benefit. For the last 5 decades, humanity has been one to two decades away from achieving its first steps towards that goal of putting its first representatives on another planet.

It is frustrating, therefore, to witness that ways and means that we have convinced ourselves that squandering progress was in our collective best interests.

There is nothing magical about Mars. It is simply a rocky body with 40% the mass of Earth and an atmosphere that provides some protection from and redistribution of solar radiation at the surface. Unlike the Moon, Mars contains the requisite atmosphere and resources to sustain an self-sufficient and permanent human civilization. The technologies will take longer than one to two decades, but their development will inevitably provide benefits back on Earth. It is important to note that humanity faces time pressures that are similar to those Inspiration Mars faces–expanded from years into decades or centuries. I won’t turn this into a tract on the dangers of nuclear weapons, global climate instability, or accidentally misplaced asteroids. These dangers are all real enough.

The remarkable achievements of humanity are a but the smallest spark, and they are not guaranteed to endure. Making sure they endure, and building on them is our responsibility.

1 DNA evidence now suggests some modern non-African humans in Europe and Asia contain DNA not found in our more immediate African progenitors, as a result of interbreeding with these earlier Homo populations.