Economic Security: From Technology Policy Perspectives

Moderator's introduction

Upon graduating from the economics faculty of Doshisha University, Yuzo Murayama studied at Washington University and received a doctorate in American economic history. Then, after entering the Nomura Research Institute, he took up teaching positions at Kansai Gaidai University and the Osaka University of Foreign Studies, before reaching his present position. From April of this year, Dr. Murayama will take up the post of professor at the newly-opening Doshisha Business School. His book, Considerations on Economic Security - connected with the theme of today's discussion - is currently being published by NHK Books.

Speech delivered by Yuzo Murayama

What is economic security?

Today, I would like to speak about economic security by linking it to technology policy.
Firstly, what is economic security? It is quite a broad concept and is treated by people in a number of different ways, but in my case I view it with extreme simplicity and would like to define the fields in which economics and security overlap. In the world of academia, different fields are completely separated from one another, although in reality there are quite a few areas where they overlap. The most archetypal of these is technology, and taking semi-conductors as an example, they are used in both domestic electronic appliances and also in hi-tech weaponry. There are also Global Positioning Systems (GPS) and car navigation systems, which determine the location of vehicles using signals received from U.S. military satellites. At the same time, GPS are used by American soldiers to check their locations. My stance is that it would be good if one could accumulate these sorts of case studies without worrying about complicated methodology and come to see the bigger picture.

I began research into this field while in the United States when under the Clinton administration there was a shift in emphasis from security to economic affairs, which was called economic security. It was a field that attracted a lot of attention and was a pillar of U.S. foreign policy. So, catalyzed by what was happening in the United States, I wrote a book on the subject because I felt that this field was even more important to Japan. Why? Because Japan is a trading nation which has restricted military power. What this means is that whereas other countries can handle matters with military capability, Japan can only do so with its economic and technological ability. Thus, I began thinking what meaning do economics and technology hold as regards security.

It was at the start of the 1980s that economic security was taken up extensively in Japan, under the concept of "comprehensive security." The late Prof. Masataka Kosaka of Kyoto University proposed the theory that security in Japan was different from that in other countries, moreover that economic security was important, and that the idea of "security" incorporated the meanings of military security in a narrow sense, and economic security in a broad sense. This was after the oil shocks of the 1970s, and so "economic security" meant security for protecting Japan's economy.

My way of thinking runs opposite to this - can technology and the economy do anything for security? I think this connects to Japan's international presence and the improvement of its global positioning. In the era of high economic growth, Japan's identity was formed by its economy. However, this has not been very well recently. Japan's identity seems to be wavering. And in terms of Japan's identity as regards security, there is much argument that Japan is only being subservient to the United States. Thus, I would like to consider economic security from the perspective of what sort of country Japan is.

In what ways are other countries trying to respond?

Before we consider Japan, let us first take a look at how other countries are responding.
During the cold war era, the U.S. Department of National Defense spent a massive amount of money on research and development of arms. The military led the development of civilian technology. As a result, dozens of Nobel Prize winners came from the United States, and various technology was born thereof. The Internet is the most obvious example. However, the 1980s brought change and following the IT revolution of the 1990s there was a reversal which saw civilian technology begin leading military technology. In the past, civilian technology would first have to pass military specifications before it could be used by the military, but recently civilian technology has been surpassing that of the military and such specifications are almost extinct. Take, for example, liquid-crystal displays - they can also be used by the military. Indeed, a lot of space can be saved by using liquid-crystal devices for cockpit displays in fighter planes.

I would like to speak about the state of economic security country-by-country.

[United States]
It was the United States which led the movement of employing civilian technology in the military. It began to promote the Revolution in Military Affairs (RMA) in the 1980s. High technology is changing the way in which wars are fought and this is being driven by the development of information and communications technology. The United States was quick off the mark to respond to this and it has been quite successful. The first time this was witnessed was the famous pinpoint air strike of the Gulf War. In the Iraq War too, guidance systems employing GPS were used. Such guidance systems were also used in the Gulf War, but the proportion of GPS being used now is far greater. In the Gulf War, GPS-led air strikes accounted for around7% of all air strikes, but in the Iraq War the figure was 70%. Another incident that made the guidance system even more well-known was the American air strikes targeting Saddam Hussein in a residential neighborhood of Baghdad. Special Forces that had already infiltrated the neighborhood acquired solid information regarding Hussein's whereabouts and relayed that back to their headquarters in real time. This information was then communicated to a fighter plane that was already in the air, and the location was bombed. This was carried out in a matter of minutes. Through the incorporation of developments in communications technology the speed of attacks has improved dramatically.
There are two reasons for the United States to be called the world's only super military power: the first is the overwhelming strength of civilian information technology, and the nation established a system for absorbing this IT into the military. That is the reason why other countries could not catch up even if they tried.

The second is that, as a result of the 9.11 terrorist attacks, the Department of Homeland Security was formed and technological developments were driven forward as a measure against terrorism.

[EU]
The European Union began integrating their defense industries in the 1980s. First of all, the domestic defense industries were amalgamated into one and then collected together in the EU, utilizing civilian technology, with a view to strengthening the European defense industry as a unit. The EU is conscious of the role it can play in preventing the complete concentration of the defense industry in the United States. For example, in the case of aircraft, the EU managed to establish Airbus so that only two U.S.-based companies, Boeing and McDonnell-Douglas, would not dominate the aircraft market. Now Airbus rivals Boeing.

[China]
China has a great interest in economic security, and since the 1980s transformations in the military and civilian sectors have been driven forward. At first, due to sluggish military spending, military technology started appearing in commercial sectors, but they could not beat private enterprises with foreign partnerships. Consequently, they started to tie up with overseas firms, and they are now able to make products of a good quality. This new technology has then been incorporated into the military, and with the wall between civilian and military lowered both sides are now aiming to improve their competitiveness.

As a result of a sense of rivalry with the U.S., China is also pushing forward its own RMA, termed a "Distinctively Chinese military revolution," although it barely differs from RMA in the U.S.

[Korea]
Korea is setting a national goal to realize its "advanced information technology army of the 21st century" using a "dual technology strategy" of utilizing civilian technology in the military. In particular, Korea aims to possess the same level of defense technology as developed countries by 2015, and enter the world top ten in terms of military digitization. The backdrop for Korea starting this was - different from Japan - that it has no restrictions on its weapons exports, which is often said to be an important industry for acquiring foreign currency. Korea began actively exporting arms in the 1970s and it became the major weapons exporter of the third world from the end of the 70's to the start of the 1980s. These Korean weapons were originally designed in the U.S., but Korea achieved competitiveness by producing arms cheaper with better quality and delivered them on time. However, the United States took countermeasures against this by ruling that weapons designed in U.S. could not be exported without U.S. permission, and so Korean arms exports plummeted. Consequently, Korea started to employ the "dual technology strategy" so that Korea became independent from the U.S. binding and able to produce its own weapons.

What path should Japan take?

So, what should Japan do?

Firstly, Japan should move forward from the mindset of using technology only for the economy. There is a consciousness in Japan that superb technology pulled up its economy, or that technology raises economic competitiveness, but behind that technology is its invention by individuals, and also questions remain as to how this technology can be used in international relations if one looks at the bigger picture At present, Japan's strategy lacks this perspective and if this continues there is the danger that Japan's technology will just drift along aimlessly. What I am saying is that, despite the fact that the international reputation of Japan's economy has fallen these past 10 years, the reputation of its technology has not. It is a shame for Japan to possess such good technology but not decide on a direction for it, and this is what I mean by "technological drift."

While saying that, Japan cannot take the U.S. course of strengthening military technology. After all, there are numerous restrictions and such action would not gain the consent of the people. So, I suggest taking a different path from the United States and other countries.

As the diagram labeled "The positioning of science and technology policy in non-economic fields" (see diagram) shows, until now, in the United States and other countries (A-type) the emphasis of security has been placed on defense and attack. Under the field of security also come anti-terrorist measures. In Japan's case (B-type), I do not think the field of offensive security should be pursued. I think that defense should be pursued, but I feel it would be better to use technology in an area at a slightly lower level of what I call "assurance and safety." A-type is the global standard set by the United States, which everyone else is following. But it would be good for Japan not pursue this but aim for B-type as a global standard.

This is not just my own assertion, but also included in the Basic Program for Science and Technology. The second term of the Basic Program for Science and Technology was created by the Council for Science and Technology Policy in 2001 and its three pillars are: (1) creation of knowledge; (2) technological development to improve economic competitiveness; (3) technological development for "assurance and safety." Up until now not much attention had been placed on (3), but following the rise in terrorist attacks and crime, the issue has begun to be taken up by study groups. This specifically includes defensive technology to protect against natural disasters, contagious diseases (SARS, bioterror), counterterrorism (renewed security), cyber attacks and so forth. If common technology crops up in these fields, I think it should be possible for Japan to create a global standard.

Japan's potential

I believe that Japan has great potential for developing technology for ensuring "assurance and safety." There are three reasons why.

The first reason is that, politically speaking, only Japan is capable of doing this. This is because each of the other countries I mentioned previously is in a state of having to catch up with the United States. However, as a result of Japan's alliance with the United States, the two countries have a good relationship and there is no need for Japan to try and rival the United States. There are certainly many who argue that it is not good to go along with the "American Empire," but I believe it is more productive to consider strategies for using the United States to Japan's advantage. It is because of the alliance with the United States that Japan can take the B-type strategy.

The second reason is that Japan has technological strength in these fields. For example, in Tokyo's Ota-ward there is a small enterprise called Geo Search which produces an "Underpavement Sinkhole Detection Survey System" for checking if there are holes underneath roads and preventing them from caving in. The machine achieved fame after it discovered a hole in the road before the Emperor's parade. There was even talk of this technology being used by the U.N. to help clear landmines. This is because although metal detectors are normally used in clearing landmines, they cannot detect plastic mines. The president of the company, Mr. Tomita, consequently launched a nonprofit organization and is currently developing a machine for detecting landmines.

Also, Nobel Prize-winning Koichi Tanaka's mass spectroscopy technology, which enables the analysis of protein substances at a molecular level, can determine exactly what something is composed of and can be used in counterterrorism, because it can determine the molecular structure of bombs. Mr. Tanaka recently developed a smaller model of his spectroscopy machine and has said that it can also be used in measures to combat crime. And then there are sensors - a technology in which Japan excels. A current issue is how to prevent sensors from malfunctioning, and Japan is good at refining technology in pursuit of clearly-defined goals such as this one. Japan does manufacture reliable sensors, but they cannot at present be used in the field of counterterrorism. The reason why is that these firms manufacturing sensors are not allowed to handle bacteria and chemical agents. However, the problem can be solved with a little alteration to the current institution. Next, ubiquitous technologies can also be used in counterterrorism. Wireless integrated circuit (IC) tags are being attached to boarding passes and check-in baggage. A passenger's baggage can be placed on the plane only once their boarding has been confirmed. And because the whereabouts of a passenger carrying a boarding pass can be instantly located, this system should to some extent help in counterterrorism if not completely prevent suicide bombings.
In this way, if one basic Japanese technology can be turned into a global standard, it will surely have the knock-on effect of raising Japan's international technological competitiveness.

The third reason is that technology that provides "assurance and safety" is technology that ensures the smooth flow of people, things and information. Technology which in a manner of speaking lowers transaction costs. I believe that this sort of technology suits the way that Japan works as a country. Japan is a trading nation and a seafaring nation with limitations imposed on its military power. It is the mission of maritime nation to create links between countries that would lower transaction costs and make the relationships between states go smoothly. If Japan can play this role, then its international presence will increase. If the present dispatch of the Self Defense Force could bring technology for detecting landmines, for building peace, reconstruction, and for implementing "assurance and safety," Japan's image would improve a great deal.
I can see this helping strengthen Japan's competitiveness as well as improving its standing in the international arena.

Challenges for realizing this

Finally, I would like to mention three challenges for realizing all this.
First of all, it is essential to integrate "security" and "economics," which have hitherto been separated from one another. The concept for realizing this is "economic security." The first step toward this is the consideration of technologies that can straddle "security" and "economics."

Next - a more realistic issue - is the connecting of the government's "needs in the area of assurance and safety" with the "technological capabilities" of enterprises. However, it is a shame that firms' development of technology has not yet progressed that far. The reason why enterprises vacillate over development is because the scale of the market is not clear, and one does not know if something will sell or not. Of course, in execution of this the support and policies of the government are needed.

Thirdly, I think measures must be developed for Management of Technology (MOT) between the government and the industrial sector. MOT has become a keyword and is even being researched into at universities; however, it is for the most part only MOT within companies and within industry. What is now needed is MOT between industry and the government. Because the government conducts so many projects, management of them is essential. For example, implementing the principles of competition is one way of administering management.
In some respects the former Ministry of International Trade and Industry (MITI) did a very good job of MOT between industry and government. Industrial policy is so to speak MOT. MITI had the clear goal of improving Japan's economic competitiveness by identifying promising technology and raising its technological capability. It did this by writing industrial policy, concentrating strong enterprises together and establishing technology under a "family"-style of development; and I think it worked really well. However, the prerequisites for this have now fallen apart. We are no longer playing catch-up, and what is more the family-style of development no longer exists. But I believe that MOT between the industrial sector and the government, and the field of "assurance and safety" can take their place as potential new industrial policy.

From April I want to try and put this industry-government MOT into action at Doshisha Business School. There are not many places exploring this area in Japan, so I am considering asking for collaboration with overseas institutions. Maryland University's Jack Gansler, who was undersecretary for Acquisition and Technology in the Department of Defense under the Clinton administration, is a specialist that transformed the Department of Defense by introducing practices from the private sector. There are also academics conducting research into technology policy at Sussex University. I hope to begin my studies by collaborating with such experts.

Q: How should Japan go about establishing a system for drawing civilian technology into the military, like is in place in the United States?

A: The system established in the United States is called a "spiral method" or "merit-based," while military development had been previously "demands-based," and because only after certain requirements had been cleared first did things move on, by the time weapons had been constructed the technology employed in them was already outdated. In contrast, under the merit-based system, even though technology is incomplete, if it is the best of the latest then it is implemented; technology such as missile defense is archetypal of this. If you think about it, Japanese companies have already been behaving like this for ages, for example, as can be seen by the development of liquid-crystal displays. What I am saying is that we need a system that takes up and implements the latest technology. The United States cast aside military specifications and adopted the integrated manufacturing techniques and technology of the military and the private sector. This change caused quite a stir; leadership at the top is required and educational seminars are held to gain the understanding of those it affects. If one looks at the example of the United States, the problem is not so much regulations but rather institutional barriers.

Q: In considering economic security, I think there are areas which conflict with the three principles regarding the import and export of arms; but should these principles be reconsidered? Also, the United States is extremely active in developing technology for countering terrorism, but how do you think Japan should promote this with regard to the rest of the world?

A: I think that the three principles on import and export of weapons should be relaxed. Even if one takes the path of being a B-type of country, if these principles are not relaxed, defense will be impossible. At present, Japan has absolutely no competitive power in this area owing to the fact that the private sector has not entered into this area. Unless it is clarified how far development should be taken and whether or not what is created as a result should be exported, the private sector cannot set up a technological standard. Regarding the counterterrorist technology, the problem is that the global standards are the American standard. And so, I think it would be a good idea to consider collaborating with Europe or form an organization with a number of other countries in establishing a global standard. If we do not do this, the United States will start the development first and what it develops will become the international standard.

Q: Do budgetary restrictions have the influence of stopping civilian technology from being used for security in Japan?

A: Rather than budgetary restrictions, I think the problem is more as a result of the adverse effects of compartmentalization. For example, if the Defense Agency and the Ministry of Economics, Trade and Industry were to develop the same technology, depending on whether it would be used in the field of defense or economics a budget that straddled both agencies would be very difficult to distribute. For this reason, we need a system for joint-agency development of technology.

Q: You said that the government needs greater MOT, but would it not be better if this was lead by the private sector?

A: If matters fell within the field of economics then I would recommend centering on the private sector, but what I have been discussing today are non-economic fields, and I mean an MOT that is employed when the government wants a certain kind of technology. Previously, when it was possible to predict technological trends, the government was good at leading the way, but following the rise of the Internet it has become difficult to read the future, and so from now on venture-capital businesses are the way forward, with the government supporting university-industry cooperation. However, is now really the age of the venture business? Present university-industry cooperation is following behind the United States, and so I think a time-lag will emerge. Also, it is a problem that Japan has not clearly defined the goal of regional development and small businesses.