Why Nobody Invests in Japan
Tokyo’s Failure to Welcome Foreign Capital Is Hobbling Its Economy
The world seems to be in a state of permanent crisis. The liberal international order is besieged from within and without. Democracy is in decline. A lackluster economic recovery has failed to significantly raise incomes for most people in the West. A rising China is threatening U.S. dominance, and resurgent international tensions are increasing the risk of a catastrophic war.
Yet there is one threat that is as likely as any of these to define this century: climate change. The disruption to the earth’s climate will ultimately command more attention and resources and have a greater influence on the global economy and international relations than other forces visible in the world today. Climate change will cease to be a faraway threat and become one whose effects require immediate action.
The atmospheric concentration of carbon dioxide, the main greenhouse gas, now exceeds 410 parts per million, the highest level in 800,000 years. Global average surface temperatures are 1.2 degrees Celsius higher than they were before the Industrial Revolution. The consensus scientific estimate is that the maximum temperature increase that will avoid dangerous climate change is two degrees Celsius. Humanity still has around 20 years before stopping short of that threshold will become essentially impossible, but most plausible projections show that the world will exceed it.
Two degrees of warming is still something of an arbitrary level; there is no guarantee of the precise effects of any temperature change. But there is a huge difference between two degrees of warming and two and a half, three, or four degrees. Failing to rein in global emissions will lead to unpleasant surprises. As temperatures rise, the distribution of climate phenomena will shift. Floods that used to happen once in a 100 years will occur every 50 or every 20. The tail risks will become more extreme, making events such as the 50 inches of rain that fell in 24 hours in Hawaii earlier this year more common.
Making climate change all the more frightening are its effects on geopolitics. New weather patterns will trigger social and economic upheaval. Rising seas, dying farmlands, and ever more powerful storms and floods will render some countries uninhabitable. These changes will test the international system in new and unpredictable ways.
World-historical threats call for world-historical levels of cooperation. If humanity successfully confronts this problem, it will be because leaders infused the global order with a sense of common purpose and recognized profound changes in the distribution of power. China and the United States will have to work closely together, and other actors, such as subnational governments, private companies, and nongovernmental organizations, will all have to play their part.
Of the 17 warmest years on record, 16 have occurred since 2001.
The effects of climate change are starting to make themselves apparent. Of the 17 warmest years on record, 16 have occurred since 2001. This past winter, temperatures in parts of the Arctic jumped to 25 degrees Celsius above normal. And climate change means far more than a warming planet. The world is entering a period that the climate scientist Katharine Hayhoe has called “global weirding.” Strange weather patterns are cropping up everywhere. Scientists have linked some of them to climate change; for others, whether there is a connection is not yet clear.
The seasons are changing. Dry spells are occurring when meteorologists would normally expect rain. Lack of rain increases the risk of forest fires, such as those that occurred in California last year. When it does rain, too often it is all at once, as happened in Houston during Hurricane Harvey. As sea levels rise and storm surges get stronger, what were once normal high-tide events will flood coastal infrastructure, as has already happened in Miami in recent years, necessitating the installation of storm water pumping systems at the cost of hundreds of millions of dollars.
By the middle of the century, the oceans may well have risen enough that salt water will destroy farmland and contaminate drinking water in many low-lying island nations, making them uninhabitable long before they are actually submerged. The evidence on the effects of climate change on tropical cyclones and hurricanes is murkier, but it suggests that although there may be fewer such storms, those that do occur are likely to be worse.
These developments will fundamentally transform global politics. Several major countries, including China and the United States, have large populations and valuable infrastructure that are vulnerable to climate change. Their governments will find themselves diverting military resources to carry out rescue operations and rebuild devastated towns and cities. That will take large numbers of soldiers and military hardware away from preparing for conflicts with foreign adversaries.
In 2017, when three huge storms battered the United States in quick succession, civilian disaster authorities had to be backstopped by the military to prevent huge losses of life. Tens of thousands of members of the National Guard were mobilized to rescue people, provide relief supplies, and restore essential services and the rule of law. The third storm, Hurricane Maria, caused some 1,000 deaths and left the entire island of Puerto Rico without power. It took months for the government to restore electricity to the 3.5 million Americans who live there. Even now, some remain without power. In the wake of the storm, over 100,000 Puerto Ricans left for the continental United States. The total cost to the United States of these storms and other weather-related emergencies in 2017 was $300 billion.
The total cost to the United States of these storms and other weather-related emergencies in 2017 was $300 billion.
China has its own set of problems. On its southern coast, several huge cities, such as Guangzhou and Shanghai, are vulnerable to flooding. In the north, in the country’s industrial heartland, whole regions are running out of water, affecting more than 500 million people. Over the past 25 years, some 28,000 Chinese rivers have disappeared. Solving these problems will not be cheap. A single ambitious infrastructure project to transport water from the south to the north has already cost the Chinese government at least $48 billion. The project is not yet complete, but China claims that it has improved Beijing’s water security and benefited 50 million people. To deal with flooding in places such as Shanghai, China has embarked on a “sponge cities” initiative to boost natural drainage. Since 2015, China has invested $12 billion in this effort, and the price tag will ultimately run into the hundreds of billions of dollars.
Both China and the United States are rich enough that they will likely be able to cope with these costs. But the effects of climate change in poorer countries will create global problems. Each year, the monsoon brings floods to the Indus River in Pakistan. But in 2010, the flooding took on epic proportions, displacing as many as 20 million people and killing nearly 2,000. The United States provided $390 million in immediate relief funding, and the U.S. military delivered some 20 million pounds of supplies. In 2013, over 13,000 U.S. troops were deployed for disaster relief after Typhoon Haiyan buffeted the Philippines.
Individual storms do tremendous damage, but communities usually bounce back. Climate change, however, will cause more permanent problems. Rising sea levels, the storm surges they exacerbate, and the intrusion of salt water pose existential threats to some island countries. In 2017, after Hurricane Irma hit Barbuda, the entire population of the Caribbean island—some 1,800 people—had to be evacuated. Kiribati, a collection of Pacific islands, most of which rise only a few meters above sea level, has purchased land in neighboring Fiji as a last resort in the face of rising seas.
Even as some countries are inundated by water, others are suffering from a lack of it. In recent years, droughts in both the Horn of Africa and the continent’s southern countries have put millions at risk of thirst or famine. In 2011, Somalia, already riven by decades of war, experienced a drought and subsequent famine that led to as many as 260,000 deaths. Earlier this year, Cape Town, South Africa, a city of nearly four million people, was able to avoid running out of water only through heroic conservation measures. Climate change, through rising temperatures and shifting rainfall patterns, will subject some regions to inadequate and irregular rains, leading to harvest failures and insufficient water for human needs.
Since 1945, although some states have split or otherwise failed, very few have disappeared. In the coming century, climate change may make state deaths a familiar phenomenon as salt-water intrusion and storm surges render a number of island countries uninhabitable. Although most of the islands threatened by climate change have small populations, the disorder will not be contained. Even in other countries, declining agricultural productivity and other climate risks will compel people to move from the countryside to the cities or even across borders. Tens of thousands of people will have to be relocated. For those that cross borders, will they stay permanently, and will they become citizens of the countries that take them in? Will governments that acquire territory inside other countries gain sovereignty over that land? New Zealand has taken tentative steps toward creating a new visa category for small numbers of climate refugees from Pacific island states, but there are no international rules governing those forced to leave home by climate change. The urgency of these questions will only grow in the coming years.
As well as creating new crises, climate factors will exacerbate existing ones. Some 800,000 of Myanmar’s Rohingya minority group have fled to Bangladesh, driven out by ethnic cleansing. Many of the refugee camps they now occupy are in areas prone to flash floods during the monsoon. To make matters worse, much of the land surrounding the camps has been stripped of its forest cover, leaving tents and huts vulnerable to being washed away. Although the world has gotten much better at preventing loss of life from weather emergencies, climate change will test humanitarian- and disaster-response systems that are already stretched thin by the seemingly endless conflicts in Somalia, South Sudan, Syria, and Yemen.
Climate change will also make international tensions more severe. Analysts have periodically warned of impending water wars, but thus far, countries have been able to work out most disputes peacefully. India and Pakistan, for example, both draw a great deal of water from the Indus River, which crosses disputed territory. But although the two countries have fought several wars with each other, they have never come to blows over water sharing, thanks to the 1960 Indus Waters Treaty, which provides a mechanism for them to manage the river together. Yet higher demand and increasing scarcity have raised tensions over the Indus. India’s efforts to build dams upstream have been challenged by Pakistan, and in 2016, amid political tensions, Indian Prime Minister Narendra Modi temporarily suspended India’s participation in joint meetings to manage the river. Peaceful cooperation will be harder in the future.
Partnerships among other countries that share river basins are even more fragile. Several Southeast Asian countries cooperate over the Mekong River through the Mekong River Commission, but China, the largest of the six countries through which the river flows and where the river originates, is not a member. The Chinese government and other upstream countries have built dams on the Mekong that threaten to deprive fishing and agricultural communities in Vietnam and other downstream countries of their livelihoods. Competition over the river’s flow has only gotten worse as droughts in the region have become more frequent.
Similar dynamics are at play on the Nile. Ethiopia is building a vast dam on the river for irrigation and to generate power, a move that will reduce the river’s flow in Egypt and Sudan. Until now, Egypt has enjoyed disproportionate rights to the Nile (a colonial-era legacy), but that is set to end, requiring delicate negotiations over water sharing and how quickly Ethiopia will fill the reservoir behind the dam.
Violence is far from inevitable, but tensions over water within and between countries will create new flash points in regions where other resources are scarce and institutional guardrails are weak or missing.
The ways countries respond to the effects of climate change may sometimes prove more consequential than the effects themselves. In 2010, for example, after a drought destroyed about one-fifth of Russia’s wheat harvest, the Russian government banned grain exports. That move, along with production declines in Argentina and Australia, which were also affected by drought, caused global grain prices to spike. Those price rises may have helped destabilize some already fragile countries. In Egypt, for example, annual food-price inflation hit 19 percent in early 2011, fueling the protests that toppled President Hosni Mubarak.
State responses to other climate phenomena have also heightened tensions. Melting sea ice in the Arctic has opened up new lanes for shipping and fields for oil and gas exploration, leading Canada, Russia, the United States, and other Arctic nations to bicker over the rights to control these new resources.
Moreover, the push to reduce carbon emissions, although welcome, could also drive competition. As demand for clean energy grows, countries will spar over subsidies and tariffs as each tries to shore up its position in the new green economy. China’s aggressive subsidies for its solar power industry have triggered a backlash from the makers of solar panels in other countries, with the United States imposing tariffs in 2017 and India considering doing something similar.
As climate fears intensify, debates between countries will become sharper and more explicit. Since manufacturing the batteries used in electric cars requires rare minerals, such as cobalt, lithium, and nickel, which are found largely in conflict-ridden places such as the Democratic Republic of the Congo, the rise of battery-powered vehicles could prompt a dangerous new scramble for resources. Although manufacturers will innovate to reduce their dependence on these minerals, such pressures will become more common as the clean energy transition progresses. Companies and countries that depend heavily on fossil fuels, for example, will resist pressure to keep them in the ground.
There are myriad potentially contentious policies governments might enact in response to changing climate conditions. Banning exports of newly scarce resources, acquiring land overseas, mandating the use of biofuels, enacting rules to conserve forests, and a thousand other choices will all create winners and losers and inflame domestic and international tensions. As fears grow of runaway climate change, governments will be increasingly tempted to take drastic unilateral steps, such as geoengineering, which would prove immensely destabilizing.
These scary scenarios are not inevitable, but much depends on whether and how countries come together to curb carbon emissions and stave off the worst effects of climate change.
Last year, when U.S. President Donald Trump announced his intention to withdraw the United States from the Paris climate agreement, many other countries, including China, France, Germany, India, and the United Kingdom, responded by doubling down on their support for the deal. French President Emmanuel Macron hosted an international meeting on climate change last December and even set up a fund to attract leading climate scientists, especially those from the United States, to France.
Climate change will remain a salient issue for politicians in most countries as people around the world expect action from their leaders. Even the United States is formally still in the Paris agreement; its withdrawal only takes effect the day after the next presidential election, in 2020. Should Trump not be reelected, the next president could have the country jump right back in.
Moreover, even as the U.S. federal government has stepped away from international climate leadership and begun to roll back Obama-era domestic climate policies, U.S. governors, mayors, and chief executives have remained committed to climate action. Last year, former New York Mayor Michael Bloomberg formed the We Are Still In coalition, which now includes some 2,700 leaders across the country who have pledged action on climate change that would, if fulfilled, meet 60 percent of the original U.S. emission-reduction target under the Paris agreement.
The coalition includes California Governor Jerry Brown, whose state boasts the world’s fifth-largest economy. In September, to create momentum for action before next winter’s climate negotiations in Poland, Brown is scheduled to host the Global Climate Action Summit in San Francisco. That will be a remarkable spectacle: a sitting governor carrying out his own global diplomacy independent from the federal government. California’s contribution does not end there. Leading technology companies based in California, such as Google, are also part of the coalition. They have set ambitious internal renewable energy targets covering their entire operations. Given their vast size and global supply chains, these companies have enormous potential reach.
Even as leaders have invested time and energy in international agreements between countries, they have built parallel, less showy, but no less important processes to encourage action. Because climate change encompasses a constellation of problems in transportation, energy, construction, agriculture, and other sectors, experimentation allows different venues to tackle different problems at the same time—the security implications in the UN Security Council, fossil fuel subsidies in the G-20, short-lived gases such as hydrofluorocarbons through the Montreal Protocol, and deforestation through efforts such as the New York Declaration on Forests, for example. This collection of efforts may be messier than centralizing everything through one global agreement, but avoiding a single point of failure and letting different groups and deals tackle the problems they are best suited to fix may produce more durable results.
Humans have proved highly adaptable, but the collective effects of climate change on cities, food production, and water supplies present an enormous challenge for the planet.
Humans have proved highly adaptable, but the collective effects of climate change on cities, food production, and water supplies present an enormous challenge for the planet. China and the United States will be central to the global response. Together, the two countries are responsible for more than 40 percent of global emissions; China alone accounts for 28 percent.
In the lead-up to the Paris negotiations, U.S. President Barack Obama invested enormous political capital to come to a bilateral understanding with China. The Trump administration’s backsliding on climate action elevates the pressure on China to both address its emissions at home and consider the environmental effects of its actions abroad through the Belt and Road Initiative and the Asian Infrastructure Investment Bank.
Relations between China and the United States have soured recently, but the countries need to work together, as the world will be ill served by an all-encompassing rivalry between them. They will have to build a system that allows issues to be compartmentalized, in which they can jockey over regional security in Asia, for instance, but still cooperate on issues on which their fates are linked, such as climate change and pandemics.
The only way of achieving that is through a system that recognizes the diffusion of power. To some extent, that diffusion is already under way, as the United States is ceding hegemonic control in an increasingly multipolar world, in which more is expected of a rising China. But the process will have to go much further. Governments will need to coordinate with subnational units, private corporations, nongovernmental organizations, and very rich individuals. On climate change and many other problems, these actors are much better able than governments to change things at the local level. Creating an order fit for purpose will not be easy. But the nascent combination of international agreements and networks of organizations and people dedicated to solving specific problems offers the best chance to avoid cataclysmic climate change.