The black fantasies of Hugh White

Hugh White normally writes for the AFR. But last week it fully embraced Morrison China warmongering so on Saturday he took his message to a new audience at The Saturday Paper where he no doubt scared the pants off the armchair left.

There was nothing new in his dark vision for Australia’s future. His argument ran like this:

  • Morrison warmongering over Taiwan is about domestic politics.
  • Any such conflict was would be catastrophic and is certain to end in nuclear catastrophe.
  • China wants a new world order with itself at the top.
  • The US (and Australia) want Chinese containment.
  • But nothing will hold a global coalition together against China, least of all liberal ideas of democracy or rules-based orders.
  • Containment will become impossible because by 2030 the Chinese economy will be twice the size of the US.
  • Asian nations will all want to be friends with China for cash.
  • Any war over Taiwan would be lost and end US primacy in Asia.
  • He did not repeat it but previously Hugh has also said if the US does not protect Taiwan then it will also end US primacy.
  • Australia must kowtow now.

Hugh doesn’t tell us which of the 14 Chinese conditions to end Australian freedom that he endorses.

Not that it matters. What does is how flimsy are White’s arguments for doing so.

I agree completely with White that fighting the Taiwan war is folly. Infinitely more importantly, so does The Pentagon. And the White House. Its Indo-Pacific point man, Kurt Campbell, last week affirmed the US policy of “strategic ambiguity” towards Taiwan, hardly an endorsement of support in imminent war.

The reason is simple. Pretty much all simulations of that war end in a loss for the US, unless it is prepared to nuke China back into the Stone Age, a preposterous notion unless the greatest maniac in history rises in Washington (and no, that is not Donald Trump).

So, the first point to make is that the US is highly unlikely to fight the Taiwan war directly. Even if accidents occur. It will be a proxy war if it is fought at all.

If so, and assuming that Taiwan loses, then all of Asia will fear that they are next on Bejing’s hitlist and all will rush to Washington the sure up alliances. US strategic primacy will not only be absolutely fine, it will bloom.

The second of Hugh’s assumptions is that Taiwan war or not, the US will never be able to contain China economically because it will double the US’ size by 2030.

White has been spouting this rubbish for nearly a decade, right through China’s structural economic slowdown.

Here’s what respective GDP looks like for China and the US as the latter grows at 3% under Biden stimulus then reverts to 2% to 2035 while the former sees its growth taper to 3% gradually over the same period, on precisely its current flight path to lower growth:

The US economy is still larger than the Chinese in 2035. Arguably, this is being generous to the Chinese side. The key growth driver of urbanisation will be all but over by 2030. Population shrinkage and aging will be strangling productive capacity as ever more resources are dedicated to supporting the drastically aging population. And let’s not forget that Chinese growth embeds 1-2% of fake output by failing to write down its dud investments. That is, it cheats.

Perhaps White would counter that he is using purchasing power parity GDP to discuss volumes. But PPP arguments don’t stack up, either. We live in a nominally priced world, especially so in the developing era of technological primacy.

Who cares if China has some areas where it produces more volumes than the US in fidget toys and empty apartments? If it can’t deliver a JDAM within a few meters with a guidance system driven by an advanced chip then the output has no strategic power.

And that’s before we include the US alliance network in the calculations. The output of the free world will still be more than twice China’s size in 2035. As we saw this week, the US will likely bring Europe along for the ride as a liberal power block when and if a Taiwan war transpires.

Alone, the US could do serious harm to the Chinese economy by boycotting exports and capital. As the leader of a liberal world block, it could destroy it, with $1.2tr of exports cut off and capital access starved.

Who will China turn to then? Russia? Iran? North Korea? Good luck. It will disintegrate as local instability overruns the CCP.

Containment will absolutely succeed if it is determined. The assets are in place and need only to be used. This is the message that the free world should be sending (and is starting to send) to the CCP right now. Annex Taiwan and be excised from the global economy.

This brings me to White’s final, and most important, false assumption. Because he accepts the inevitability of Chinese development (oddly, much more so than CCP officials do), the idea of liberalism has no power nor worth in his worldview. For White, this fight is about big, dumb numbers not ideas.

In White’s world, liberalism is not the cornerstone of our economic success, living standards nor power. It something worthless to discard in return for Beijing’s imperial favour.

To be kind, this notion is breathtakingly short of historical rigour.

Western powers did not rise with the industrial revolution by accident. It is the ideas of liberalism that drove it. The CCP itself recognised this when it stole features of the liberal system in the 1990s. That is also why it wants to usurp the US at the top of a laissezfaire global economy today, rather than destroy it. To become rich.

The US and Europe have ridden the dividends of rising liberalism for two centuries. China has only done the easy bit, accelerating out of poverty for two decades, juiced by the favour and capital of foreigners. Its dictatorial political system and central planning are completely untested in a contest of highly productive innovation.

To be blunt, it remains to be seen whether illiberal regimes are able to refresh and renew cycle-after-cycle as technology, demographics and the world change. The higher up the value chain you get, the more essential such flexibility becomes.

The CCP itself recognises this. It is written all over the latest Five Year Plan which aims to address it. It will doubtless succeed in shifting parts of its economy up the value chain. But, it will mostly fail, as we have seen for a decade, building useless stuff directly into the middle-income trap, right along with its geopolitical power.

Herein is the ultimate irony of Hugh White’s black fantasies. To assuage his fears of doom, White wants to give Beijing the very thing that gives us the power to resist it.

Our freedom.

David Llewellyn-Smith
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  1. I just checked. Hugh is 68 so hopefully won’t be blathering about for too much longer.

    I wonder if I he has any good hobbies or other interests? Perhaps we could send him a stamp collection starter kit and maybe a Reusa massage voucher to cover both ends of the extra curricular spectrum?

  2. Ritualised FormsMEMBER

    I teed off with this on the weekend vis reporting/coverage in the SCMP

    The ‘real’ issue here is that Australia’s elites dont want to take responsibility for an epic geostrategic fail, and our government needs a political wedge for the next election – when the opposition ALP do come across as China patsies.

    The inherent contradictions in the Australia China ‘relationship’ come home to roost….

    It is kind of weird that apart from David and Leith here at Macrobusiness nobody else has been calling the fundamental policy idiocy we have pursued for more than 20 years of placing all of our economic eggs into a single basket, and selling out ordinary Australians to do that, while loading them up with debt….

    …and holding them to ransom to comply with the imperatives of a state where they have no representation, and no surety of their interests being pressed, and which quite rightly has quite a few questions about its operations and activities.

    China sends ‘warning shot to Australia’ as patience wears thin
    Catherine Wong
    Published: 4:30am, 8 May, 2021

    China’s latest squeeze on Australia may be largely symbolic, meant as a warning shot for Canberra and other middle powers in the age of US-China rivalry, observers said.

    In the latest in a series of moves, China’s National Development and Reform Commission said on Thursday it would
    “indefinitely suspend” all activities under the China-Australia Strategic Economic Dialogue,
    a forum launched in 2014 and last convened in 2017.

    That’s pretty much on the money – suspending ‘economic dialogue’ would have sweet FA implication in comparison to ending trade in almost every commodity Australia supplies to China apart from iron ore, in the last year to 18 months.

    Ending a dialogue (in any form) which has been central to a narrative of Australia telling itself it needed to do nothing at all in terms of value adding, and could simply be a quarry feedlot or place to plant crops for Chinese consumption is arguably a good thing for many Australians. The adoption of that narrative has been at the core of Australia becoming progressively more an economic bubble reliant on debt for Australian consumers, selling of Australian citizenship, crowding of Australian infrastructure and staggering inflation and speculation in Australian houses, education and healthcare.

    None of that is China’s fault, it is the fault of Australia’s elites. But China is the economic entity which has made it possible. Caveat Emptor and all that – Australia bought what China was selling. Once John Howard and successors decided that Australia should primarily become an adjunct to the Chinese economy any questioning of the upsides and downsides of that were swept under the carpet, as was the fundamental contradiction in reshaping the socioeconomic fortunes of Australians to serving the needs of an unquestionable one party state (however one views it – and there upsides as well as downsides for many Chinese in the operations of that State, and its achievement of lifting millions of Chinese out of poverty should never be underestimated insofar as the Chinese are concerned. It is just that, for Australians, that achievement brings into question who is representing their interests, and what their interests, as far as the Chinese state is concerned, actually are).

    The economic planning agency said it made the decision because Canberra’s “Cold War mindset and ideological discrimination” had disrupted cooperation.

    The decision follows restrictions on a wide range of Australian imports, from lobsters to wine and timber.

    Australia has also cancelled deals struck between the state of Victoria and China over Beijing’s Belt and Road Initiative, a massive infrastructure programme.

    China has yet to use the nuclear option – cutting the iron ore trade – but observers said Beijing was making clear that it was running out of patience.

    ‘Cold War’ mindset. That’s the key phrase here. The suspicion that underlying ideological differences can’t be reconciled, and that ultimately any relationship between them goes one way or the other, at critical points so that one party is effectively bending to the interests of another – that’s where China is. Not just with Australia, but with much of the Western world. Australia is front and square in that dynamic purely because Australia’s politicians opted to embed Australia more wholly than virtually any other nation (excepting maybe New Zealand) and coughed up more of their economic diversity and economic culture (starting with Real Estate and the University sector) to do so. And to do that Australia, more than any other nation, has coughed up more of the employing bases of its economic diversity to wager its economic future on commodities, a sector which doesn’t employ that many Australians, and which a casual glimpse at history suggests can be a precarious economic existence. It is China which is overtly ‘punishing’ Australia for something, expecting Australia will change something, using the economic levers placed into China’s hands by Australian politicians bureaucrats and academics.

    Maybe the suspicion in China is that they think we are pushing them to be more accountable to laws, practices and governance of the rest of the world – or even their own people. In Australia, the suspicion is more akin to wondering if our politicians – not to mention academics and business leaders – have been corrupted by money emanating from China or if our universities have been priced out of meaning for many Australians, while providing a product in some ways distorted to accommodate a non English speaking client base. It is reinforced when we see Chinese security personnel strolling about in Australia shooshing Chinese university students protesting about Hong Kong, or a bit of biffo shelled out to Australians protesting in support of the Uyghurs, or Australian journalists hounded out of China, or the default accusation of racism any time some form of criticism of anything Chinese made it into the public domain. Australia doesn’t lay claim to migrants to China and suggest they are somehow beholden to the motherland, either.

    When all is said and done it was China which started off deploying economic embargoes after Australia’s PM suggested there would be an investigation into the origins and spread of Covid 19. Maybe the underlying ideological differences which cant be reconciled would start with the possibility that just about an overwhelming majority of Australians (and probably the entire Western world) would be expecting some sort of review and investigation which would include the origins of the virus and how it was spread. Thats what ‘democratic’ (and it doesnt need to be particularly democratic) do – they have audits of events, and make reports to their people about how things went and how they will handle them next time. Nobody needs to believe they will lead to anything. But they are expected to happen and give those with a motivation the chance to have a say. It is China’s response and sensitivity to this suggestion which sets it apart from certainly the rest of the OECD, and probably most nations of the planet, and makes it look like an information managing dictatorship which has something to hide.

    Sure, Australia certainly isn’t blameless in this dynamic. The recent commentary (by the PM, Minister for Defence, and a Home Affairs Secretary auditioning to become Secretary for Defence) on possibility of war involving Australia in response to possible events in Taiwan is sheer foolishness and belies generations worth of avoiding discussion in public, avoiding inflaming tensions, and holding off on telegraphing responses. The cancellation of Victoria’s involvement with China’s ‘Belt and Road’ and a lot of commentary about it is effectively cancelling an MoU which was not explicitly going to involve Victoria all that much. The suspicion remains that our government is talking up risk revolving around China to galvanise an electorate sensitive to Chinese activities in Australia, after alienating large swathes of the electorate on other issues, as economic stimulus subsides.

    But acknowledging all of this doesn’t get Australians away from the fact that there are some very serious questions about Australian economic engagement with China which Australian politicians have been avoiding for some time – which Chinese interests may not be all that comfortable with.

    Australia has been vocal in its criticism of China in recent years and is part of a growing US-led network of countries confronting Beijing.

    Xie Maosong, a senior research at the China Institute for Innovation and Development Strategy at the Chinese Academy of Sciences, said Beijing was sending a message not only to Canberra but also other Western capitals that were still weighing their options.

    “Unlike other countries that have conflicts with China, Australia’s motives are ideological, and they think they can separate economic cooperation from ideological confrontation,” Xie said.

    “Countries like Britain, Germany, France and Japan need to understand from Australia’s lesson that they should not pick the US’ side in the China-US rivalry.”

    Well it may be seen as a network of US led countries confronting Beijing, but it can also be seen as a range of societies asking questions which can no longer be avoided – all revolving around ‘How good for the people not in China is closer global integration with China?’ and ‘What sort of administration are we integrating more closely with?’

    Beyond that, yep, Australia is an example for the rest of the world to learn from – Australia can thank its politicians, corporate leaders and academics for that honour. We can only hope that other parts of the world learn and question more.

    Ties between Beijing and Canberra became strained in 2018 when Australia become the first country to publicly ban Chinese tech giant Huawei Technologies from building the nation’s 5G network. Relations worsened last year after Canberra called for an independent investigation into the origins of the coronavirus outbreak.

    Suggests from officials in Canberra that Australia could be involved in joint response to a war over Taiwan added fuel to the fire.
    Australia is also reviewing whether it should cancel the 99-year lease on the strategically important Darwin port signed between a Chinese company and the Northern Territory government in 2015.

    Yeah that’s pretty much it. Australia declined to have a Chinese army connected company essentially embed itself in Australian communications. In doing so it recognised there was a limit to assuming that Chinese strategic interests (and ideological interests) were identical to Australian interests. A very large number of other nations have done so since, recognising that same inability to assume that China’s interests are the same as theirs. Other nations would have just gone harder on selling themselves or their corporate wares. It is China’s response which has become the issue. The response to the outbreak of Covid has made Chinese administration an issue, and underlined the idea that the Western World’s priorities in addressing the virus may not be the same as those in China.

    The officials (including the PM) in Canberra were certainly silly in their comments vis Taiwan and any potential involvement by Australia, but the overarching question about selling a strategically important Australian port facility to Chinese state controlled interests comes back to ‘to what extent are Chinese and Australian strategic interests one and the same?’ and coming to the conclusion ‘not much’ and then asking if their could be circumstances in which Australians interests would be better served by Chinese management knowing as little as possible about that facility. It isn’t as though Australia (or any other nation) is controlling strategic port facilities in China. The Chinese aren’t that stupid.

    Amid the acrimony, trade between China and Australia has plummeted by 40 per cent for almost all industries. But iron ore, a vital component in the production of steel and key to China’s infrastructure spending spree to shore up the post-pandemic economic recovery, remains the only import that is still keeping the bilateral trade afloat.

    “Neither side wants to use this card. We are basically holding each other’s neck,” said a diplomatic source who requested anonymity because of the sensitivity of the matter.

    Song Luzheng, an international relations researcher at Fudan University, said the latest move showed that Beijing was running out of economic options to punish Australia.

    Yes, Iron ore is the nuclear threat. For that very reason it would be worth placing a ‘Strategic Environment’ bounty on every tonne sold to a nation which is threatening Australia in any way to try and coerce a different approach to addressing that nation, and has run out of other options other than the nuclear option. It will be painful all round.

    And maybe that’s why the Australian government is talking up the threat, because at some point not that far away it will potentially run out of options and stimulus, and need to explain to Australians how they have come to this pass.

    “Halting the economic and strategic dialogue means that bilateral conflicts have reached an irreconcilable point. China is nearing the end of its inventory of economic cards, and the next steps are to move to using the diplomatic cards,” Song said, saying possible measures included banning Australians officials from entering Hong Kong or more extreme responses such as expelling diplomats.

    Worth posing the question at that point about how many Chinese diplomats are in Australia compared with how many Australian diplomats are in Beijing. Or how many Chinese journalists are in Australia compared with how many Australian journalists are in China?

    Joerg Wuttke, president of the European Union Chamber of Commerce in China, said the impact of China’s decision had been felt in the wider market.

    “Even if it’s symbolic, it sent messages into the market, as you can see yesterday iron ore prices went up and coal prices went up. In a way it has a market impact right away,” Wuttke said.

    “But it [was] raised in order to pacify the domestic crowd, that we have done something, which is not a good direction.”

    Yes this is it. China might think it is sending messages to Australia, but most of the developed world is now receiving – and all it is doing is leading to more questions about how closer economic engagement with China has been in the interests of the nations which have championed it, and what scope peoples in those nations have to begin to identify its implications. Starting with Australia.

  3. SnappedUpSavvyMEMBER

    Is there a name for this condition these usually smart people get when they go full Chyna re tard. I dunno yellow fever or something

  4. Peter SMEMBER

    Surely China will overstretch itself? Picking fights simultaneously with Europe, North America and its Asian neighbours, as well as Australia, will have the backroom of the leadership class very twitchy, especially as they are now not able to get their favourite red wine from Australia?

    • China is more or less doomed if they go on picking fights like this.
      They’re surrounded by enemies by land and sea and dependent on oil tankers running the gamut past Saudi Arabia, India, Singapore, Malaysia, The Philippines and/or Japan and Korea.
      If a bunch of Somalis with a couple of speedboats can hijack a supertanker, what could someone with an actual navy accomplish?

      • Frank DrebinMEMBER

        You forgot the back door into Pakistan via Gwadar but there is no great affinity for the Chinese in that particular corridor either.

      • Peter SMEMBER

        Remember that the PLA is an army of occupation. Its main concern is the citizens of China not those of China’s neighbours.
        If the CCP begins to destabilise its host’s public the knives will come out especially as affluence rises in the middle class.

    • Hopefully! There is a long line of leaders/countries that have done this, not surprising when they surround themselves with yes men & have some success (though China by it’s size and economic power stands a better chance than most)

  5. He was on ABC radio this morning spouting his vision for Australia as a vassal state of China, presented as the unquestionable ‘China expert’. If it were talk-back I’d have called in to give him a serve.

    • El MerenderoMEMBER

      it’d be good news to the fullest if the veto applied to certain other China centres in certain Go8 universities, as in their current form there’s little difference between them and Confucius Institutes. In fact, you could easily argue they are far worse.

      Equally telling that a certain VC seems to have no issues with the precedent set by non-academic standards

      • El MerenderoMEMBER

        Schmidt clearly has no problem with one of his staff members claiming to uphold academic freedom in defence of a non-academic argument and next to the representative of the very state that curbs and criminalises academic freedom…

        Some people should just keep looking at the stars and stay out of everything else.

  6. Yeah, I started reading that article over the weekend, had to give up half way it was full of so many holes & wrong headed thinking.

  7. bolstroodMEMBER

    The real war already being fought is between The Scrotum and Mr. Potatoe Head for the leadership of the LNP.
    The war it may generate with China is just so much collateral damage.