Australia’s China choice is not between security and prosperity

November 15, 2016

Australia’s China choice is not between security and prosperity–Why not both?

by Paul Hubbard, Australian National University @Canberra
Image result for Australia Between US and China

If strategic rivalry between China and the United States escalates, Australia will face uncomfortable choices that could leave one or both partners unsatisfied. But it is wrong to frame this as a trade-off between national security and economic prosperity, as if strategic strength were born from economic pain. National security and economic prosperity are both vital national interests and deeply symbiotic. A stable international order underwrites economic prosperity; international economic engagement supports a stable order.

Foreign Affairs Minister Julie Bishop in her office at Parliament House.

Australia’s Foreign Affairs Minister Julie Bishop in her office at Parliament House. Photo: Alex Ellinghausen

Unfortunately, economists and strategists have trouble talking on the same terms. The starting point for economists is usually an abstract model that assumes the security infrastructure and norms needed for markets to thrive. If economists think about armed conflict it is usually as a ‘tail risk’ — potentially catastrophic, but highly unlikely. But take away a stable national, regional or global order and the business and commerce that generate material prosperity will evaporate.

Security thinkers don’t sit around and assume thriving societies. Instead they are paid to detect threats and contemplate worst-case scenarios. Mitigating these requires clear thinking, well-resourced diplomacy and defence capability. This, in turn, depends on a prosperous economy.

Image result for Australia and China

Chairman Mao Zedong meeting with the Hon. Gough Whitlam QC, Prime Minister of Australia during the historic Prime Ministerial visit to the People’s Republic of China, 31 October – 4 November 1973. Photo courtesy the Hon Tom Burns AO, Chair of the Queensland China Council, personal collection.

Australia can afford multi-billion dollar submarines and joint strike fighters because it has a US$1.2 trillion economy. The Defence White Paper’s US$32 billion funding target for 2020–2021 assumes that the Australian economy will continue growing faster than the United States, the Euro Area or Japan. Achieving this requires deeper economic engagement with a fast growing Asia.

The complementarity of security and prosperity is not a new discovery. Former US president Lyndon Johnson’s 1965 Peace Without Conquest speech recognised that popular support for communism in Southeast Asia came not from the peasant’s fascination with Marxism, but rather from a desire for basic life necessities and an ‘end to material misery’. He proposed the creation of the Asian Development Bank to show that these needs could be met through markets and capitalism, without resorting to radical communism and violent conquest.

While the United States lost the battle against communism in Vietnam, it won the war for open markets and prosperity in Asia. The examples of Japan, Hong Kong, Taiwan, South Korea and Singapore convinced China’s leaders in 1978 to put aside the horrors of Maoism and adopt not just ‘reform’ but crucially, ‘opening up’.

Unbridled ideology was exchanged for market pragmatism. The result was the largest and most rapid movement of humanity from poverty in history. China stopped exporting international revolution and instead now exports 18 per cent of the world’s manufactured goods, in accordance with the rules-based order of the World Trade Organization. Foreign investment in and out of China puts assets at risk on both sides, giving owners a strong material interest in preserving peace.

Of course national interests go beyond the economy. Providing for the material welfare of citizens is only one of the legs of political legitimacy. States sometimes adopt goals that cut across the material welfare of their citizens. The first era of globalisation did not stop the imperial follies of the First World War. The following wave of fascism and totalitarianism subordinated individual welfare to the strategic interests of the state.

China’s policies after 1978 were calibrated to reassure the international community that its re-emergence would not follow this menacing route. Deng Xiaoping’s foreign policy mantra was to hide China’s strength and bide its time. Hu Jintao promoted China’s ‘peaceful rise’. Which is why strategists have reacted with alarm to a more assertive foreign policy under Xi Jinping.

Image result for Xi and Australia

What should economists make of this? Is China’s increasing assertiveness ‘a reality that seems to have bypassed many of Australia’s economic commentators’ as one strategic commentator suggests?

The new direction is worrying. Perhaps the risk of conflict is slightly less remote. But there’s not enough to overthrow the central scenario under which China continues to prioritise domestic and international stability. Just as regional stability serve Australian prosperity, so too does it serve China’s own vital economic interests.

The economist would also distinguish threats to international stability from more common but less catastrophic risks that hide among the cross-border movements of people, goods and capital. As Deng Xiaoping famously observed, opening the window invariably involves letting in a few flies.

The best line of defence against economic harm is competition in a well-regulated domestic market. Unlike Mao’s China, which hoped that correct behaviour would flow from correct ideology, the market system does not depend on the goodwill or benevolence of market participants. Where threats appear to specific security interests, the solution is not to shut the window on prosperity, but rather to use some of the proceeds to buy more and better fly-swats.

This approach allows Australia to choose both security and prosperity, putting the country in a more comfortable position to deal with both the United States and China.

Paul Hubbard is a doctoral candidate at the Crawford School of Public Policy, The Australian National University. He is currently on leave from the Australian Treasury as a Sir Roland Wilson Scholar, and is a former Fulbright Scholar in international relations. The views in this paper do not reflect those of the Australian Treasury.

The economics of Australia’s security in Asia

11 thoughts on “Australia’s China choice is not between security and prosperity

  1. If we stop seeing China as a threat that can only be contained by surrounding it with all manner of treaties, bases and strategies perhaps we shall all be better off.

    Present-day politicians have difficulty with this…

  2. This piece is what i would call a Null Hypothesis – a default position that there is no relationship between two factors of security and prosperity. Both are crucial, but more subservient to the former in any independent nation.

    To steer between competing ideologies and lumping them as purely mechanistic ‘market pragmatism’, fails to recognize cultural affinities/differences and the innate moral-ethical mores of the Occidental viz-a-viz Oriental identity.

    That is why the Aussies, like most Western nations become protectionist as soon as the cash rich PRC SOEs try to bludgeon their way into their perceived strategic assets. Fair Trade is fine, as long as it doesn’t undercut a sense of ownership.

    The world is much more complicated than a mere Dualistic framework of Haves-Havenots and Wants.

    No amount of reductionism can obviate the need for discerning leadership in the Complexities of long term goals and stability in any nation state. The Aussies will never be ‘Neutral’ in a Bipolar world.

  3. Australia is an exceptionality lucky country in almost every aspect.
    Geographically Asian. Politically and Culturally, Brits and Western,becoming substantially mixed Eastern European and Asian.

    Australia should decidedly adopt a neutral position, acting as a bridge for building peace and stability among conflicting countries. It is because through out history,it never had gone to war with any country on its own but as obligations largely to others. It practically has no enemy but friends all over the world.

    Such is natural and inert potential so uniquely invaluable in its possession. It will be stupid for Australia not to make full use of it in playing the crucial role in helping to secure and maintain peace and prosperity, stability and security, growing the economy of this region and world over…and in doing so is helping themselves in sharing benefits, responsibilities and of resources (SaBoR).

    (I hope the Aussies and their leaders are or have been reading this blog)

    Australia would be gravely disadvantaged if it continues to take side with one rival country against the other, China and USA , which in fact with the Australia playing its role, should instead, work together to grow the economy globally.

    The choice is yours to make….my Aussie friends, gratitude remains for the generous and quality education provided-Kllau.

  4. But doggie Lupus…..and I quote from that doggie

    “That is why the Aussies, like most Western nations become protectionist as soon as the cash rich PRC SOEs try to bludgeon their way into their perceived strategic assets. Fair Trade is fine, as long as it doesn’t undercut a sense of ownership.”

    Chinamen too have that sense of ownership during the 19th century. China was definitely very protectionist

    What happened next hah? Hahahaahahaha. What goes up must come down? Accept the inevitable la

  5. Australia sees itself as a white man living in a black / brown neighborhood.

    Things get a little complicated when the blacks / browns start to get rich and worse still powerful militarily.

    In a Trump isolationist presidency, the kangaroos are fair game now when they wander onto golf courses where the blacks / browns are playing.

  6. Any of you guys – especially Loosebrain, ever have a conversation with a ‘Bogan’ before in Oz and NZ? Yup, it’s a redneck subculture – which has often times been used as cannon fodder. They’ll also eat yellow, brown and blacks for breakfast, lunch and perhaps dinner. Not that, they are cannibals per se.

    Go visit Oz more often – wonderful place, even if Woomera Test area might have a couple of spare nukes in store.

    And i believe in the Arrow of Time not the Wheel of Time, unlike most folks with Oriental Bogan education, who refuse to believe that China is it’s own worst enemy. Can’t get rid of the Karmic cycle due to historical hubris and baggage, yet adopting a thoroughly Western Idea of Corrupted Communism.

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