Barnaby welcomes his new Chinese overlords

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Good on Barnaby Joyce for debating the implications of Hong Kong for Australia at Domain:

In its entire post-First Fleet history, Australia has not had to contend with the larger intercontinental political issues in isolation from its cultural and philosophical alliances. We’ve always had a larger, stronger partner. In the future we may have our own unique dilemmas as we deal with our response alone.

…empires collapse as the Roman Empire did. Large empires are not able to maintain large and disparate borders.

…China has taken the South China Sea without firing a shot. Now the expansion of Chinese control is forcing full legislative absorption of Hong Kong. A million people in Hong Kong may take to the streets but unless the course of events takes a dramatic change from the path determined by Beijing it will merely be a funeral march for a disappearing democratic philosophical foothold on a Chinese continent.

Questions have to be asked as to how countries adjacent to what will be the largest economy and largest population, supported by the largest and most sophisticated military, will exist apart from being supplicant states living next to a superpower with autocratic rule. What will be the limit of sovereignty on nations in our region?

Will the press be able to say what it wishes? Freedom of the press will mean little when it’s corralled by the edicts of a new superpower. Will other nations be able to invite to their country whom they wish and publicly vent issues as they wish? Will they act as determined by the aspirations of their own people or will it be within the confines of what will be accepted by the master of their new regional order.

…Being a world leader in virtuous causes may come at a price which we can no longer afford. Our industry must grow. If you do not want wage cuts then the advantage must be in the cheapest power prices in the OECD. Our defence force must be formidable, our nation-building infrastructure must be able to take a major leap foreword through a hoop currently barnacled with caveats to environmental green tape. Our students must compete and win in the global academic test.

Sensible questions all. Where I take issue with Barnaby is the false binary posed by a bogus assumption: that the rise of China is inevitable and we are doomed to be a Chinese satellite or stand alone military power.

First, China’s rise is not inevitable at all. Its demographics are terrible and will drag down growth ahead. As things stand today, the Chinese economy has begun to exit the global economy. The Trump trade war is already shifting global supply chains out of China. This will accelerate if the Chinese do not do a deal with the US which, frankly, will result in the same. China’s fall back position of stimulating domestic growth leads not to rising but declining power as it slumps into the middle income trap of excessive debt, misallocated credit and class divisions that require nationalist campaigns to hold the populace together in lieu of rising living standards.

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Surplus nations do not win trade wars and if current trends continue then China will devolve into a half-baked great power trading in a limited block of poor “stans” across the Silk Road.

Second, this makes the Hong Kong push a signal of weakness not strength. It is one of several options that the Communist Party of China (CPC) can pursue to galvanise populist support as its economy slows and slumps in the decade ahead. The other obvious one is to destabilise Taiwan. But it is vital to note that these moves are a substitute for the failing economic legitimacy of the CPC, not its crowning achievement. And they are all issues of internal cogency.

Third, the US has been in relative decline as the globalists allowed it. But it is not in absolute decline. It is still the global centre of liberal capitalism which resonates outwards to most of the global economy including Europe. The Trump Administration may be a Jacksonian regime, suspicious of alliances and foreign entanglements, but it will not be in power for very much longer. And even it has stated openly that the Pacific theatre is its backyard and central to its national interest, though I doubt that this will extend to any defense of Hong Kong. As well, unlike China, US debt burdens can be managed into the future via the use of its reserve currency.

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It is certainly sensible for Australia to plan to stand alone. To plan for war while aiming for peace. But there is no scenario in which the US departs the Pacific and Australia can make its own decisions regarding China. It is doubtful even if we are nuclear. It’s one hegemon or another.

Thus, while we plan for the worst, we should also be working towards the best possible outcome, which is sustained US power and a China that loses its catch-up growth and strategic impulse.

The question before Australia is not whether we need to be China’s supplicant or stand alone as a pretend power, it is what sacrifices need to be made to bolster a US liberal empire so that we do not become China’s plaything to do as it wishes.

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I mean, seriously, where’s our faith in our own system?

About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.