Implications of the Financial Crisis for Soft Power in East Asia

FOREWORD

The international financial crisis of 2008 shook the foundations of the global economy to their very core. It originated in New York but some of the strongest tremors were felt in Asia where trade plummeted and economic growth ground to a halt, or reversed, in many countries. This was no ordinary crisis. The fallout has the potential to shift the tectonic plates of international politics in one of the most strategically important regions of the world.

In early 2008, before the crisis hit full force, The Chicago Council on Global Affairs and the East Asia Institute conducted an unprecedented multi‐national survey of soft power in Asia that was generously supported by the Korea Foundation. By soft power, we mean the ability of a state to achieve its goals through attraction rather than coercion. The project’s findings showed that the United States enjoyed greater levels of soft power than China in the eyes of several Asian publics. Now, twenty months after that survey was put in the field, the foundations of the regional order in East Asia have been shaken. A key question is thus how the international financial crisis has affected American, Chinese, South Korean, and Japanese soft power and influence in Asia.

These recent developments inspired a workshop in Chicago co‐hosted by The Chicago Council on Global Affairs and the East Asia Institute, Seoul, and generously sponsored by the Korea Foundation and the Korean Consulate, Chicago. The workshop brought together thirty experts drawn from current and former foreign policy and national security officials, academics, and policy experts to discuss the implications of the current crisis for the soft power of these four countries. Over a day and a half, participants engaged in discussion on what the financial crisis will mean for the future of each country.

The discussions motivated this summary report authored by Dr. Thomas J. Wright, Executive Director for Studies at The Chicago Council. The findings presented in the report emerged from the discussion, but do not necessarily reflect a consensus opinion amongst the workshop participants or the views of any single participant.

EXECUTIVE SUMMARY

Dennis Blair, the Director of National Intelligence, told the U.S. Senate in February 2009 that the “primary near term security concern of the United States is the global economic crisis and its geopolitical implications.” The crisis, he said, “has increased criticism about free market policies, which may make it difficult to achieve long‐time U.S. objectives…It already has increased questioning of U.S. stewardship of the global economy and the international financial structure…China has an opportunity to increase its prestige.” Admiral Blair’s concerns include America’s soft power, i.e. the attractiveness of U.S. policies so that other countries want what the United States wants.

The Chicago Council on Global Affairs and the East Asia Institute of Seoul, South Korea organized a two day workshop to study the broader implications of the financial crisis for the soft power and influence of the United States, China, South Korea, and Japan in East Asia. The overarching questions addressed in the workshop included:

1. Has the crisis put at risk the postwar security regime in the Asia‐Pacific?

2. Has the “American model” been irreparably damaged and has the financial crisis provided a boost to philosophies that challenge Western orthodoxies of governance and international order?

3. How has the crisis affected the relative influence of the United States, China, Japan, and South Korea?

This report, inspired by the workshop discussions, offers eleven analytical points:

• In terms of regional order, the 2008 crisis is seen through the prism of the 1997 Asian Financial Crisis;

• Economically, China has emerged stronger from the crisis while Japan is weaker;

• The soft power, or attractiveness, of multilateralism has increased although if the G‐20 or regional initiatives cannot deliver, it could be fleeting;

• The crisis places pressure on China to play a more active part regionally;

• But Japan and Korea will also continue to be key players because they are indispensable for pan‐Asian multilateral initiatives;

• The dichotomous distinction between the U.S. and Chinese economic models is a false one so it is inaccurate to say that the U.S. model is weaker relative to a Chinese alternative;

• The Chinese government is not taking advantage of the financial crisis to criticize the U.S. model domestically;

• The hit to U.S. soft power is in competence—militarily bogged down and economically inept—not a desertion of the U.S. worldview;

• There is an increasing interest internationally in wanting to understand China but this is not the same thing as wanting what China wants. Countries also make a distinction between wanting what China wants economically and wanting what China wants politically and diplomatically;

• China is often clumsy in its use of soft power because it lacks a thick skin to accept international criticism as a normal part of the political discourse;

• America’s allies continue to want what the United States wants but they worry about U.S. capabilities to realize its goals...

SUMMARY

In February 2009, U.S. Director of National Intelligence Dennis Blair stated before the U.S. Senate that "the primary near-term security concern of the United States is the global economic crisis and its geopolitical implications." He added, "The crisis has increased criticism of free market policies, which may make it difficult to achieve long-term U.S. objectives... It has already increased questioning of the U.S. role in leading the global economy and international financial structure... China has an opportunity to enhance its global standing." Admiral Blair's concerns also encompass U.S. soft power, meaning the attractiveness of U.S. policies such that other countries desire what the United States desires.

The East Asia Institute (EAI) and The Chicago Council on Global Affairs (CCGA) organized a two-day workshop to discuss the implications of the financial crisis on the soft power and national influence of South Korea, the United States, China, and Japan. The main questions addressed in the workshop were as follows:

1. Is the financial crisis threatening the post-war security regime in the Asia-Pacific region?

2. Has the "American model" suffered irreparable damage, and has the financial crisis boosted philosophies that challenge Western orthodoxies of governance and international order?

3. How has the financial crisis affected the relative influence of South Korea, the United States, China, and Japan?

Based on the discussions from the workshop, this report presents the following 11 analytical points:

• In terms of regional order, the 2008 global financial crisis is being understood through the prism of the 1997 Asian Financial Crisis.

• Economically, China has emerged stronger from the financial crisis, while Japan has weakened.

• Interest in multilateralism continues to grow. Despite the possibility that the G20 or regional initiatives may not yield clear results, the soft power or attractiveness of multilateralism is continuously increasing.

• The financial crisis has acted as pressure for China to play a more active role regionally.

• However, South Korea and Japan will also continue to be key actors. Amidst growing interest and demand for multilateralism, both South Korea and Japan are indispensable for pan-Asian multilateral initiatives.

• The dichotomous distinction between American and Chinese economic models is flawed. Therefore, the assertion that the strengths of the American economic model are relatively weakening compared to a Chinese alternative is inaccurate.

• The Chinese government is not utilizing the financial crisis to criticize the American model domestically.

• The damage to U.S. soft power stems from its perceived lack of competence—military entanglements and economic ineptitude—rather than an abandonment of the U.S. worldview.

• There is increasing international interest in understanding China, but this does not equate to wanting what China wants. Other countries clearly distinguish between what they desire from China economically and what they desire from China politically and diplomatically. Similarly, they recognize a distinction between what China wants economically from other countries and what it wants politically and diplomatically.

• China tends to be ineffective in utilizing its soft power because it is not accustomed to accepting international criticism as a normal part of political discourse.

• U.S. allies continue to pursue the same goals as the United States, but they are concerned about the U.S.'s capability to achieve these goals.■

The East Asia Institute (EAI) and The Chicago Council on Global Affairs (CCGA) jointly held a conference in October 2009 on the topic "Implications of the Financial Crisis on American, Chinese, South Korea, and Japanese Soft Power in East Asia."