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1.New US security strategy (Business standard)

2.Rethinking Strategy to development (Live Mint)

3.Japanese model for Industries (Live Mint)

1.New US security strategy (Business standard)

Synoptic line: It throws light on how USA It veers away sharply from old priorities such as democracy promotion to focus on great power competition and economic rivalry. (GS paper III)

Overview

  • The new National Security Strategy (NSS) document unveiled by US President Donald Trump earlier this week showcases a world locked in unceasing economic competition. In this world, Washington is not preoccupied with promoting democracy abroad and will focus instead on great power competition, economic rivalry and homeland security.

New strategy unveiled by US

  • The Trump administration has defined the new strategy as one based on “principled realism” in an ever-competitive world. Focusing frontally on great power politics, the new document calls Russia and China “revisionist powers” seeking to change the global status quo, and paints a stark picture of the world, rejecting cooperation in favour of competition. The US president made it clear that China and Russia challenge American power, influence and interests, attempting to erode American security and prosperity.
  • The US, therefore, has to “rethink the policies of the past two decades policies based on the assumption that engagement with rivals and their inclusion in international institutions and global commerce would turn them into benign actors and trustworthy partners the document says. “For the most part, this premise turned out to be false.

Attacks by USA

  • It is an extraordinarily blunt attack on the two powers as Trump underlined that Russia and China are determined to make economies less free and less fair, to grow their militaries, and to control information and data to repress their societies and expand their influence.
  • The US president also claimed China and Russia are developing “advanced weapons and capabilities which could threaten the US’ “critical infrastructure and our command and control architecture.
  • The US is openly acknowledging that “vigorous military, economic and political contests are now playing out all around the world” and the Trump administration intends to “raise our competitive game to meet that challenge, to protect American interests, and to advance our values”

New approach

  • The idea of democracy promotion, traditionally a cornerstone of US foreign policy, is now being given a go-by. As per Trump’s ‘America First’ approach, the US is more likely to demand fair and reciprocal economic relationships around the world. The economic piece gets much more attention. Tough action against China is expected in the coming week, with suggestions that the Trump administration could apply new punitive tariffs on goods from the country, even as an investigation into China’s intellectual property theft and forced technology transfer policies is nearing completion.
  • There is a new-found emphasis on the importance of US intellectual property and the NSS introduces the idea of a “national security innovation base” comprising everything from academia to tech companies. It declares, The genius of creative Americans, and the free system that enables them, is critical to American security and prosperity.
  • Climate change too has been jettisoned as a national security priority, something which was expected after Trump pulled the US out of the Paris climate accord in June. This despite the fact that Trump has signed off on the 2018 defence spending Bill that states, Climate change is a direct threat to the national security of the United States.
  • Yet, the global multilateral order has not been completely ignored as the “economic system continues to serve our interests”, according to the NSS, though “it must be reformed to help American workers prosper, protect our innovation, and reflect the principles upon which that system was founded”. There is still an expectation that “trading partners and international institutions can do more to address trade imbalances and adhere to and enforce the rules of the order.
  • The need for greater cooperation with allies and partners in tackling China on the economic front has been articulated. The isolationist sentiment engendered by the campaign rhetoric of Trump has given way to a more nuanced understanding of the reality confronting a major power in the 21st century.
  • Even in a document that is cast in such stark terms, the treatment of India stands out. Seeking to support “India’s emergence as a leading global power”, the NSS calls for increasing “quadrilateral cooperation with Japan, Australia, and India”. It is tough on Pakistan, calling on it to desist from engaging in “destabilizing behavior” in Afghanistan as well as to end its “support for militants and terrorists” targeting American interests in the region. Once again, the Trump administration is signalling to Pakistan that Rawalpindi is on notice as “no partnership can survive a country’s support for militants and terrorists who target a partner’s own service members and officials

Way ahead

  • In his speech unveiling the new NSS, Trump underlined that “America is in the game and America is going to win”. But it will be some time before the implications of this new strategy are clear.
  • Despite the ambitious rhetoric of the new strategy, there is a stark imbalance between the ends, ways and means in the document. And soon, the new document will have to come to terms with the real world where many of the ideas articulated may be found wanting. The world, therefore, will be watching the Trump administration’s actions more closely than it will read the new NSS.

Question USA had changed its approach towards international relations? What will be new approach of USA will mean for India?

2.Rethinking Strategy to development (Live Mint)

Synoptic line: It throws light on why the private sector cannot replace the state when it comes to human development, which boosts growth and prosperity. (GS paper I)

Overview

  • There are no shortcuts to development. Nevertheless, Indian policymakers may now be tempted to attempt two more shortcuts, the first two having landed the economy in swamps from which further progress was difficult.

Approaching shortcuts for development

  • The first shortcut, along which policies began to move in the 1990s, was to shoot for GDP (gross domestic product) growth before making progress in human development through public health and primary education. The argument of GDP cheerleaders was that the state needs resources to invest in human development. Therefore, the growth of the economy must precede improvements in human development.
  • Amartya Sen and other economists who pointed out that it must be the other way around, and indeed has been the other way around for the Asian miracle economies and China too, were dismissed as socialist, anti-capitalist, and anti-growth by those on the GDP bandwagon. Now, the hurdles for productivity of enterprises, and for GDP growth, owing to poor levels of education and skills in the country have become evident.
  • Moreover, since the purpose of development must be to enable people to live longer and better lives, India’s lack of attention to public healthcare is anti-development.
  • The second shortcut emerged accidentally. The Y2K crisis at the turn of the century fuelled a surge in demand in the West for low-cost engineers who could write computer code. Indian information technology (IT) companies, with the large pool of engineers they could tap into in India, thanks to the Nehruvian thrust to build high-class engineering institutions in the country, and thanks to the English language, were the only ones able to respond. India’s IT sector grew remarkably.
  • Many speculated that India had found a shortcut to development and growth, avoiding the traditional route via high-employment manufacturing that the Asian miracle economies had followed.
  • The threat of job losses to automation is tempting Indian policy-makers into the third shortcut, to prepare for ‘Industry 4.0’. Consultants in the ‘future of work’ and manufacturers of robots and automation equipment are busy organizing seminars in India and advising India’s policymakers on how to prepare for a future of automated work. However, the World Bank’s recent report, Trouble In The Making? The Future Of Manufacturing-Led Development, estimates that up to only 8% of present jobs will be eliminated by automation in the next few years.
  • The problem of jobless growth that India is suffering from now is in the present configuration of the economy, caused by shortcuts India has tried to take in the past. It has little to do with Industry 4.0, which is yet to spread.
  • Economies industrialize and grow when enterprises in the economy, and people within them, learn to do what they could not do before, thus advancing up an escalator of capabilities. Escalators that can lift large numbers of people out of poverty must reach down to the present levels of knowledge and skills of people, and to the present levels of competencies of potential entrepreneurs, and from there lift them.
  • Most Industry 4.0 solutions that consultants are proposing are based on the situations of countries, the majorities of whose populations are on higher rungs of the development escalator. What is missing in India are steps at the lower rungs of the escalator. We must build these quickly to enable people to earn more income in enterprises and jobs that may not yet have taken the shape of the jobs of the future that Industry 4.0 consultants are forecasting. In enterprises at these lower rungs, people can also learn the soft skills of interacting with others, in addition to technical task skills, that employers say people need to become fully productive.
  • The fourth, big shortcut that some economists and industrialists suggest India take is to cut the government out of the picture and leave growth to private enterprises. They say the Indian economy only grows at night when the government is asleep. They offer the example of the Indian software industry, which they say grew only because the government stayed out of its way. They conveniently brush aside the huge role that public investment in institutes of technology played in providing the industry with a huge pool of well-trained and low-cost workers that it could use in wage-arbitrage strategies from which it benefited enormously.
  • Moreover, the government made a huge contribution with the tax concessions that the industry was given, and continues to enjoy. These concessions have deprived the state of resources to invest in human development, the tardy progress in which is now hurting all industries, including those that have so far enjoyed low taxes.

Way ahead

  • There can be no shortcut to improving the capacity of the state for building the steps at the bottom of the capabilities escalator. Nowhere in the world is primary education and public health privatized. Small enterprises must grow in both rural and urban India to support the large factories that will themselves become more automated and employ less people.
  • Moreover, such small enterprises will provide the steps needed for people to earn and learn. India’s hundreds of millions aspiring citizens need world-class governance, not world-class tertiary hospitals and world-class automated factories.

Question:  The hurdles for productivity of enterprises, and for GDP growth, owing to poor levels of education and skills in the country have become evident which had led India to take various shortcuts. Comment.

3.Japanese model for Industries (Live Mint) 

Synoptic line: It throws light on how recently, Japan’s factories have come to life again. (GS paper II)

Overview

  • Reviving manufacturing has become a prime policy objective for national leaders from Washington to Beijing to New Delhi. We can debate whether chasing factories is worth the effort in the 21st century, but not the difficulty of building and maintaining a robust industrial sector in the face of relentless global competition and technological change.
  • At least one country seems to have figured out how to do just that, however, and a highly unexpected one: Japan.

Revival of Japan’s industries

  • Factories churning out cars, chips and Walkmans were the engines of Japan’s storied growth miracle back in the 1970s and 1980s. But like most other advanced economies, the importance of manufacturing in Japan’s economy has declined sharply over the past two decades. Shunning their ageing, expensive home country, Japanese firms invested in new plants in China, the US and elsewhere in search of lower costs or new consumers.
  • Recently, Japan’s factories have come to life again. Manufacturing as a percentage of gross domestic product has stabilized in recent years it’s even ticked up a bit. Employment in the sector looks to be rising as well.
  • Though wage stagnation continues to plague Japan’s households, workers engaged in manufacturing are better off than most. While total compensation in October for all workers rose 0.6% from the year before, manufacturing employees enjoyed a more respectable 1% bump.
  • The resurgence is part of Japan’s overall strengthened economic performance in recent quarters. And a cheap yen, depressed by the Bank of Japan’s radical monetary policies, has also given the sector a perhaps temporary boost.
  • But that’s far from the whole story. Japan has gained a tremendous amount of manufacturing competitiveness. A 2016 study by consulting firm Deloitte ranked Japan the fourth-most competitive country for manufacturing, a huge leap from the No.10 position it held three years earlier.
  • Deloitte credits Japan’s traditional strengths as a manufacturer for bolstering its standing today. Low-cost emerging countries such as China have had an edge over high-wage advanced economies in manufacturing for several decades, allowing them to vacuum up assembly lines from Japan, the US and Europe.

Lessons from Japan?

  • There are many lessons here for the rest of the world. For the US, Japan offers a warning to focus more on upgrading education and worker skills and less on restoring assembly-based supply chains, like iPhone factories.
  • For China and other emerging economies that have risen to manufacturing prominence mainly due to low wages, Japan stresses how imperative it is to improve factory technology and worker productivity. Chinese planners are trying to do just that through industrial policies such as Made in China 2025, though it is far from certain that such state-led initiatives can produce the real innovation China requires.
  • Of course, Japan’s success can’t be separated from the revived global economy overall. Exports are revving up Japan’s factories, just as they always have. In October, exports, by value, jumped 14% from the year before.
  • At the same time, Japan has wisely moved away from its usual semi-protectionist tactics to embrace more open trade. On 8 December, Japanese negotiators finalized the terms of a sweeping free-trade agreement with the European Union, while Tokyo has also led efforts to complete the Trans-Pacific Partnership after the US withdrew. A US administration that’s been quick to deride free-trade agreements should take note.

Way ahead

  • A potential threat to Japan’s rebound is instructive as well. With unemployment now down to a miraculously low 2.8%, and companies screaming for staff, it’s very likely that the ageing Japanese population simply can’t offer the resources needed to keep factories expanding. Here’s where Tokyo’s persistent resistance to wider immigration really costs the country. That’s another lesson policymaker in the US and Europe should take to heart.

Question: How The recent resurgence of Japan’s manufacturing sector highlights the importance of factory technology and worker productivity?