June 17th 2017

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Articles from this issue:

COVER STORY The Great Barrier Reef is dying? ... Again?

CANBERRA OBSERVED McCain, Keating wade into South China Sea

EDITORIAL No heads roll despite quarantine foul-ups

EDUCATION FUNDING With Gonski reboot, Turnbull taps in to way to lose Catholic vote

INDIGENOUS AFFAIRS Aboriginal recognition in the constitution?

NATIONAL AFFAIRS Low job prospects keep a generation at home

INTERNATIONAL AFFAIRS Donald Trump has the world in a spin

EDUCATION FUNDING Gonski numbers shrink in the light of day

SAME-SEX MARRIAGE Qantas bans pensioner: an abuse of process

MUSIC Jim Black: accent on rhythm

CINEMA King Arthur: Legend of the Sword: The East End treatment

BOOK REVIEW Apocalypse and redemption

BOOK REVIEW Poems exhibit delicate strength


ELECTRICITY Bad science + bad economics = bad policy

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Donald Trump has the world in a spin

by Colin Teese

News Weekly, June 17, 2017

U.S. President Bill Clinton is said to have coined the phrase, “it’s the economy, stupid”. It was assumed that he had just discovered the importance of economics.

Before we rush to judge Donald, don't forget
that the world through a crystal ball
is seen upside down.

The same President succumbed to the persuasion of neo-liberal advisers (Alan Greenspan and Larry Summers, then respectively chairman of the U.S. Federal Reserve and Secretary of the Treasury) to repeal the Glass-Steagall Act – legislation that had protected the United States from a banking crisis since the 1940s.

The abandonment of that act helped project the U.S. and the world into the financial crisis in 2008 from which it is yet to recover.

Against that background, and 17 years into the 21st century, the appropriate phrase is “it’s more than the economy, stupid”.

Why the change? Because, paraphrasing Paul Keating, “every pet shop galah is now shouting, ‘neo-liberal economics’ is dead”.

Ordinary Australians don’t necessarily understand neo-liberal economics, any more than they did “micro-economic reform” when Keating’s galah was shrieking it. What they understand is that the globalisation package – free trade, financial and other deregulation along with privatisation of government services, of which micro-economic reform is part – has done much to undermine middle-class job security and wellbeing.

Ordinary Australians may not know the terms, but they do understand what has happened to them. It seems that much the same view has also taken hold among ordinary people throughout the Western world.

Despite this, policy power elites prefer not to accept the reality that their favoured model of economic organisation no longer enjoys universal acceptance. Interestingly, in all the calls for change, the emphasis is on political – that is to say, government – rather than economic adjustments.

Neo-liberalism asserts that only unimpeded market economics, free of government interference, will deliver the best economic and social outcomes to all. Consciously or otherwise, the wider community rejects that view, in favour of the idea that governments must be involved if the benefits of economic advances are not to bypass much of the community.

The fall of neo-liberalism has played out differently in different countries. The election of Donald Trump in the United States is the most striking example of the rejection of the power of elites and the doctrines they have endorsed. Brexit, and what that implies for the future of Europe, is held up as another example of the waning influence of elite opinion.

Nor are these changes confined to the northern hemisphere, they are also influencing developments in Asia. And in both hemispheres the consequences of the changes are playing out in geopolitical as much as economic terms.

Donald Trump’s worldview is shaped by what he wants to achieve in the U.S. He is crystal clear about that. Advancing the cause of U.S. big business comes first. The question remains whether his other domestic ambitions conflict with this primary aim.

His approach to foreign relations is more difficult to read, at least for some. Existing elites don’t want to understand it, and others may be genuinely puzzled. In part that is because his attitude to foreign policy is tied up with his underlying aim captured in the phrase “making America great again”.

It is the possible consequences of this concept that make Washington insiders and some U.S. allies uncomfortable. And for good reason. In my view the new President believes that the cost to the U.S. of being “leader of the free world” is too great, to the extent that the consequences of the role mean that the U.S. bears too much of the cost. He is not so much concerned with direct financial outlays on defence. It is the other outlays, say, for NATO and possibly foreign bases, that bug him. Others, he insists, have to pay their share rather than lean on the U.S.

He recently made this clear in Europe.

He also has economic concerns. He opposes free-trade arrangements because he believes they harm U.S. industries and workers. Many Americans agree with him and applauded when one of his first acts as President was to destroy the Trans-Pacific Partnership – a kind of super trade agreement – which he believed did not serve US interests. He has used the same justification in withdrawing from the Paris accord on climate change.

If one takes account of these realities, it becomes easier to make sense of how Trump approaches foreign policy. Because he appears to be turning his back on “world leadership”, he seems less interested in maintaining Cold War politics. Getting along with Russia seems part of that, and while initially being hostile with China on trade policy, he apparently has come to see what perhaps none of his predecessors identified, that the problem with North Korea depends on Chinese cooperation.

Don’t let us kid ourselves. Trump is rewriting the rules. In doing so he won’t necessarily support what most in Washington, and some in Asia, like to call the “rules-based order”. He’s a very active cat among some very unhappy Washington pigeons, including in his own party.

If I’m right, he is turning his back on the U.S. position in the world that has dominated U.S. thinking since it was first put in place by Franklin D. Roosevelt in the dying days of World War II: an economic and political structure guided by American values about how a post-war world might look. A World Bank, an International Monetary Fund and a General Agreement on Tariffs and Trade (now the WTO) to look after financial and trade affairs fashioned in the U.S. image, and backed by a United Nations dominated by the war-winning powers and charged, among other things, with keeping world peace.

This was the dream Roosevelt did not live long enough to see come apart with the onset of the Cold War. As a result, instead of delivering world security, the UN became a battleground of post-war ideologies. In its place a U.S.-funded and dominated NATO emerged as the security blanket for what was to become known as the West. In Asia, something called SEATO (South East Asia Treaty Organisation) was established, but it never really took off.

This infrastructure of the post-war world continued even after the Soviet Union disintegrated in the last decade of the 20th century. We can assume that under any other possible president except Trump it would still be in place today.

From that perspective alone Trump can be seen as turning the world on its head. His presidency seems to be making enemies, on both sides of the Washington political divide, and beyond, into the northern hemisphere. Asia seems to be taking the Trump presidency more calmly. There are reasons for the difference.

In Europe, Trump stirred up the European Union when he said they were not paying enough for NATO. German Chancellor Angela Merkel took offence. She speculated about the end of the West – the U.S. and Britain turning their backs on Europe. (British Prime Minister Theresa May and Trump seem to get on quite well.)

Perhaps the Merkel attitude should be excused. The EU is not travelling well and perhaps she fears the Brexit negotiations. Getting a good exit deal for Germany is in conflict with the EU’s determination to punish Britain.

Washington is also more than a bit flighty about Trump. How else do we explain a visit to Australia from U.S. Republican Senator John McCain. Some years back McCain was an unsuccessful candidate for the presidency, now he’s just an ordinary senator. But for some reason his visit took on something of the character of a visit by a U.S. Secretary of State. He seemed to be everywhere.

John McCain: Donald Trump
never really happened.

His main purpose seemed to be to tell us that Donald Trump and his policies did not really exist. It was business as usual. The Alliance was fine (did Trump ever say it wasn‘t?). China, he said, was a “bully”. Unfortunate term really, somewhat over-used these days, especially by identity politics pushers. When someone does something we don’t like, that’s bullying.

The media loved what McCain said – extraordinary, they commented. Which was true, but not for the reasons they thought.

Asia seems to be taking the Trump presidency in its stride. Perhaps that’s the way it should be. He has had talks with major parties China and Japan, both of which proceeded smoothly. He made his points about trade with China and did not get the same offended reaction as when he mentioned German car exports to Mrs Merkel.

Asians tend to have less detailed public discussion about the outcome of heads of state meetings. So we may not know as much of what has been said as we do with Europe.

What we do know is that China’s ambitious foreign and trade initiative called OBOR (one belt/one road – a plan for infrastructure spending on a grand scale linking Asia with Europe and Africa) is raising eyebrows not merely in the West, but also in India and Japan.

All these developments suggest big changes in geopolitical relationships, from which Trump’s view of how the U.S. relates to the world will emerge.

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April 4, 2018, 6:45 pm