Thursday, 4 August 2011

China must shun high military spending

Those who forget history are doomed to repeat it, warned the Spanish philosopher, George Santayana, and China looks perilously close to falling into that vipers' pit. China's rapid economic development over the last 15 years has been phenomenal, based on growing global trade and the abandonment of business based on collectivist lines in favour of capitalism. It has made many Chinese millionaires and raised the living standards of millions. All that, however, could be jeopardised if China pursues a policy of penal military spending when pressing issues at home demand addressing.

The latest example of China's military ambitions is the finishing touches being put to its first aircraft carrier, a 60,000 tonne unfinished vessel bought from Russia ostensibly to be used as a casino at Macao. This may have proved a cheap buy but analysts believe China has ambitions for building four more, which would burden hard-working Chinese taxpayers with a multi-billion pound price tag. Much money has already been spent on submarines and much more will be spent on stealth aircraft and developing a long-range aircraft carrier killer missile.

Given China's interests in energy supplies and trade that now span the globe is it unreasonable for China to have a much larger naval presence? Retired general Xu Guangju, of the People's Liberation Army, thinks not. "An aircraft carrier is the symbol of the power of your navy," he says, and "China should at least be on the same level as other permanent members of the UN Security Council who have carriers." He adds: "the development of our armed forces is connected with the development of our economy."

In an earlier age this would have been an understandable sentiment. The British Empire, for example, grew rich on overseas trade but it was trade with a military fist ready for use if need be. This was tenable so long as Britain could exact cheap victories with superior weapons like the maxim gun against spear-equipped natives, and stay ahead with a science-based industrial military complex. China itself was a victim of this mismatch during the Opium Wars of the mid 19th century. Britain's steam-powered gunboats annihilated China's sail-based war junks and so imposed its will to dope millions of Chinese in the pursuit of trade, one of the darkest episodes in British imperial history. But when Britain came up against a modern, industrial-based economy like Germany, the cost of two world wars bankrupted the country, saddling it with debt that took about 50 years to repay.

Military ambitions lack merit

History is littered with examples of how high military spending brings nations low. The fall of the Roman Empire is a prime example. There were many reasons behind Rome's fall but perhaps top of the list was inflation connected with huge military spending. This led to frequent debasing of the silver denarius from over 95% pure to 0.2% silver by the reign of Claudius 2 in 268-278 AD. During the reign of Augustus the army's strength was put at 250,000 troops. By the time of Diocletian it had reached 600,000 and often they had to be paid in gold. Numerous wars simply added significantly to inflation, and as one of the Christian Fathers, St Gregory Naziamuz, said: "War is the mother of taxes." He could also have added that war was the mother of inflation.

For another example China need look no further than how it came to acquire the rusting hulk of a Russian aircraft carrier. Russia, quite simply, was busted by huge military spending. America, too, is groaning under the burden of a huge military budget at a time when the country's grey population are fearful of cuts to social spending and medicare. The Pentagon's budget for 2012 is $553 billion and US military spending has doubled in real terms since 2001. The Obama administration has vowed to cut military spending over the next five years but it may be too little, too late to avoid social tensions erupting at home when the middle class and the poor view with rising hostility the tax breaks for millionaires and billionaires and oil companies making record profits. Selfishness is a great disturber of the peace.

China's defence spending will rise 12.7% this year to £56 billion but many analysts believe the country spends more than it states publicly. This spending binge is having deleterious effects elsewhere as India, for example, has recently announced an 11.6% rise in military spending to £22.4 billion, apparently to counter China's growing strength.

History and more recent economic and scientific developments suggest that China's military ambitions lack merit and are fraught with economic and social risks at home. China has nothing to fear abroad, militarily speaking, for the world needs China as China needs the world but it has much to fear from Nature's fury and so should be conserving its hard-earned revenues to cope with the inevitable natural calamities to come, rather than squander them on vainglorious military designs which can only alarm their neighbours.

At home, China has more to worry about on the economic front. Chinese state-owned banks' loans to local governments may be under estimated by $0.5 trillion and one ratings agency, Fitch, believes the country's total non-performing loans portfolio could reach 30%, while a Credit Suisse analyst thinks many local governments will have to default.

China's inflation, currently at 6.4%, is also rising, despite various interest rate hikes, a trend that will be worsened by high military spending. That can only undermine China's competitive abilities. Further economic pressures will be added by demographic changes as China's one-child family policy starts to unravel.

If all this is not enough to convince the Chinese Government of its folly in pursuing high military spending then perhaps the words from one of the country's own sages will convince them from across the centuries. Sun Tzu warned in 400 BC: "Where the army is, prices are high, when prices rise the wealth of the people is exhausted." Hard-working Chinese people deserve better than that.

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