April 4th 2020

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Articles from this issue:

COVER STORY The world has changed: Now for the new order

FAMILY AND SOCIETY Move to curtail underage online porn epidemic

CANBERRA OBSERVED ScoMo's delicate balancing act in extraordinary times

NATIONAL AFFAIRS Time and timing are crucial to Cardinal Pell's appeal by Peter Westmore

NEW ZEALAND Political divisions polarise across the Ditch

NEW ZEALAND Victorian Road Map smooths way of NZ anti-life clique to abortion 'reform'

FREE SPEECH Intolerance brigade at UQ attacks professor of Law

NATIONAL AFFAIRS Victoria lifts moratorium of gas exploration

CHINESE HISTORY The Soong Dynasty: Three sisters who rules China

LAW AND SOCIETY Guilt by accusation: The kangaroos are roaming freely through Australia's legal system

GENDER POLITICS Dr Quentin Van Meter's Australian talk is opening eyes in the U.S.

INTERNATIONAL AFFAIRS Australia is not safe in the borderless globalised world

SHOPPING AND SOCIETY The Ubermensch in the aisles

MUSIC We seem to have lost the point of counterpoint

CINEMA The Current War: Industrial miracle workers

BOOK REVIEW A dark trade that continues unabated worldwide

EBOOK READ THIS Both sides to this old story



NATIONAL AFFAIRS Use detention centres to help deal with covid19 epidemic

NATIONAL AFFAIRS Justice at last: Cardinal Pell set free

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Australia is not safe in the borderless globalised world

by Colin Teese

News Weekly, April 4, 2020

An early postwar British Prime Minister, Harold McMillan, was perhaps the canniest of his age. An enthusiastic journalist once asked him what were the greatest problems facing a prime minister.

Quick as a flash, McMillan came back: “Events, dear boy, events.”

As one might expect, McMillan dealt pretty well with “events”.

The die has been cast. But what
prevents us from catching
it up and casting it again?

More than ever “events” are crying out for policy responses and political leaderships are struggling to keep up. Perhaps the policy problems (“events”) are more complex and more widespread than in McMillan’s day. Or, more likely, because “interdependence”, the “borderless-world” mantra of both right wing and left-wing ideologues, has become the dominant paradigm. This paradigm is demonstrably no longer working and must be abandoned.

We could be facing a crisis not unlike the global financial crisis (GFC) of 2008. Australia stands on the brink of a recession, and we are being swept up into a global health crisis. The opposition party is weak and indecisive.

Remember, back in 2008, we were lucky. Chinese spending restarted the world economy, while the United States bailed out the West’s entire banking and financial sectors. Without those interventions, the global economy could have disintegrated.

Of course, it all came at a cost, especially for the West, organised under U.S. leadership. China emerged as a power of matching strength with the U.S.; this development had profound implications, not merely for what previously had been stable strategic alignments, but also for the future of globalisation, which had become the guiding force of international economics over the preceding two decades.

It was part of what is called “neo-liberalism”: the free movement of people, money and goods, without any interference from government, around the world.

Free trade was an essential part of it.

We all know that it has not quite worked out as planned, though many Western economies, including ours, continue to deny this fact.

Throughout the West, the measure of wealth and growth came to be determined by the expansion of world trade. Lost sight of was the fact that low-income workers in Western countries lost their jobs, and were no longer able to sustain consumption at previous levels.

In a modern capitalist economy, consumer spending is the main driving force. Put simply, low-skilled workers in rich countries gave jobs and incomes to Chinese workers.

The emergence of Donald Trump brought all of this into clear focus, perhaps for the first time. What he recognised was that the GFC and the rise of China were changing everything for the West. We can now add to that an unanticipated Covid19.

In a world that the West regards as economically, strategically and, now, possibly medically unstable, global supply chains are an unaffordable luxury. In a globalised world, national sovereignty is constrained. No country, even the very powerful, can expect to produce even the most important goods entirely within its own borders. To some extent at least, they must rely on imports.

U.S. President Trump’s effort to reset the trade balance with China, imperfect though it might be, is a response to this reality. It should have been a wake-up call to all of us. Yet many Western countries, including ours, firmly believe globalisation will survive Trump. They are fantasising. Whoever emerges as his Democratic challenger for the presidency in November will certainly continue Trump’s policies on tariffs, and probably on foreign policy as well.

As to Australia, many of us are perhaps unaware of the extent to which our country depends on imports. Successive governments, dating back to Hawke and Keating, have so enthusiastically embraced the free trade/globalisation mantra that they have put at risk important agricultural industries.

Orange growers, for example, selling their product to local juice makers, are under indirect pressure from supermarket chains to reduce prices for fruit – otherwise, the chains will source juice offshore, leaving our oranges to rot and driving our juice makers into bankruptcy. Imported pig meat is not required to meet the same rigorous health standards as our regulations impose on local pork producers. And these are not the only local producers compelled to meet unfair international competition.

It is worse in manufacturing. We have gone from having 12.9 per cent of GDP in manufacturing in 1979 to 5.8 per cent in 2018, with all that means for the economy, for jobs, for families and overall wellbeing.

The writing is on the wall. With the rise of China we are no longer operating in a stable world system anchored by the U.S. We need to recognise, as a Trump-led U.S. certainly does, that everything has changed. It is unsafe to rely on global supply chains.

Australia is particularly at risk, given our proximity to, and our heavy dependence on trade flows with, China. Now is the time for us to recognise globalisation’s internal contradictions. As a business model, it is no longer appropriate to our needs.

Strategic issues are fundamental, as is a capacity to supply domestically as much as possible of what we need even if this means surrendering a cost advantage. With China as a strategic competitor, the risks to national security of relying on cheaper global supply chains are fully exposed. The U.S. defence industry has already recognised this. But, as is becoming increasingly obvious, health and welfare issues are no less important.

The more goods and people are moving around the world, the more difficult it is to contain outbreaks of disease – not only for humans, but also for animals and plants.

Let there be no mistake. Globalisation has encouraged countries to be less conscientious about these matters than they once were. Stringent regulations relating to animal and plant health issues have been relaxed in order to facilitate free trade.

We know that from Australia’s relaxation of its previously strict measures over imports of infected plants and animals. Disturbingly, our trade minister, at the time we were negotiating the U.S.-Australia trade agreement, felt able to boast: “Everything is on the table, including quarantine.”

Human health, all will agree, is more important than economics. What is also true is that plant and animal health issues are not unrelated to human health.

It is comforting to know that the present Government, in the face of the spread of Covid19, moved quickly to put safeguards in place. We now need our political leaders to take a closer look at the new situation with regard to economics and to acknowledge that it is not something to be considered separately from national security – it is part of it.

It is clear that our closest strategic ally is moving away from reliance on global supply chains. To the extent possible, the U.S. is looking to make as much as possible of its essential needs at home. It is true that switching from offshore sources of production is more expensive. Less efficient, too, free market economists and those who benefit financially from such views will insist. But, in today’s world, that is beside the point. Security is more important than price.

Also, in a security context, is a recognition of the need to maintain and improve the worker skills base at home.

What all of this suggests is that our Government needs to rethink how we organise our economic life in light of these realities. Trying to make a virtue out of creating a budget surplus is trying to prop up a world we cannot any longer afford.

Our Government should think about how to establish – or re-establish – the industries that we need to replace imports that we may not be able to get or do not want to get from China.

The same is true for labour. It is foolish to say we must import labour to cover skills we don’t have. We have unemployed workers in profusion. We should be training them here in whatever skills we need. And if we don’t have the training facilities to do so, these, too, should be created.

It will be said that none of this can be done. So far as the structure of our economy is concerned, it will be said that the die is cast. Not so. We changed from what we had, to what we have now as a result of deliberate policy decisions of Hawke and Keating. Necessity means we can change again.

As to creating new industries that, too, has been done before. In the run-up to World War II, business and government cooperated to establish industries because we could not import what we needed. The government went into business in partnerships to create new industries, including building military equipment and building aeroplanes.

But, if we do it again, we should learn the lessons of the past. We must not, nor do we need to, rely on foreign investment. We must find ways to draw Australian-owned investment into partnerships.

Foreign-based investment, such as we had in the car industry, will not necessarily have business plans focused on our needs. Such investors will often make important decisions based on the needs of the parent company.

Some foreign investment would be fine, so long as control is kept here. That is why government investment will be so important.

It is a challenge our political leaders should take up.

Colin Teese is a former deputy secretary of the Department of Trade.

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