Australia’s personality-disordered PM, Scott Morrison, is galavanting around the world drumming up support to contain China. He’s invited himself to the G7 to lace it with anti-CCP warnings. He’s dropped into Downing Street to spray Beijing. He’s soon off to the White House for an anti-CCP powwow. At home, more US marines and naval access are on the way because the Morrison Government believes that war over Taiwan is now a distinct possibility.
I’m all for this great China pushback. I part ways with the disordered PM is his total lack of a plan to deal with it.
You have to ask yourself, if the CCP threat is so grave, and I agree that it is, then why are we not preparing our military, our economy, our immigration program and society to bolster our way of life before it all goes pear-shaped?
Labor says it’s because Morrison is just playing domestic politics, meaning he’s exaggerating how bad is the CCP threat. But, clearly, Morrison’s anti-China world tour and determination to cut off all exports bar iron ore is more than that.
No, it’s the disordered PM’s usual total lack of policy process that is at work here. He’s not a leader with a strategic outlook. He never plans anything. He can’t execute his way out of a wet paper bag. He’s a glorified real estate agent with a gift for gaslighting. It could even be argued that his national interest anti-CCP crusade is accidental, the result of his own blundering motormouth, not any strategic insight.
So, if the CCP threat is real then what should he be doing about it? If you’ll permit me the luxury, I’m going to answer that question with another.
The closest historical analogy we have to our emerging circumstances is the period before WWII when a range of fascistic states challenged an existing imperial order. The Nazis and Japanese imperialists had very similar plans to the CCP.
Like both, the CCP has invaded neighboring Rhinelands and Sudetenlands. It seeks lebensraum. It is operating concentration camps for the “divergent” and ethnically impure. It is eugenic, seeing itself as superior to foreign and local barbarians. It has plans to invade other neighboring democracies. Its declining economic fortunes and rising nationalism require forever war to keep it in power. It seeks imperial overlordship in its continental region and global hegemonic power.
So, the question is this. If you possessed a secret that could destroy the Nazis or ultra-nationalist Japanese parties in 1935. Long before they could launch their apocalypse upon the world. And you had a time machine to unleash it then would you use it?
The funny part is, equipped with this future history under the CCP, Australia possesses just such a secret and the time machine to use it.
It’s called iron ore.
If we accept that the CCP is the latest manifestation of the historical tendency to give rise to political evils intent on dominating the lives of freedom-loving humanity, then why don’t we cut the flow of iron ore right now unless or until China installs a democracy?
The results would be instant. The Chinese economy would be structurally shocked to its knees. 30% of its GDP is real estate-related. 60% of the iron ore that drives it is sourced in Australia. Roughly speaking that is 18% of Chinese GDP that would virtually collapse overnight. Vast tracts of industry would fall silent. An instant debt crisis would sweep the Chinese financial system as its bizarre daisy chain of corruption froze. Local governments likewise. Unemployment would skyrocket.
It’s possible that it would trigger a political revolution in China. Who knows what forces would rise and who would win. What we can say with confidence is that it would pre-occupy the CCP for many years and hobble it permanently. Its plans for regional domination would be set back decades if not be entirely over.
Australia would suffer too. So would the world. It would trigger global recession as financial contagion sent shock waves through global markets. Stock markets would crash. Credit spreads across emerging markets would blow up. Commodity prices would crater.
The Australian dollar would crash straight to 40 cents if not lower.
But, you know what? We’d be OK. The very large initial hit to national income would quickly be offset by the halving currency.
There would be a blow to living standards as our national purchasing power plunged. Imported goods prices would become more expensive (though nowhere near as much as the degree of currency fall). Australians would travel less overseas as well. House prices would no doubt fall for a while but QE would support them again before long.
China would counter-boycott all exports to Australia so we’d see some short-term shortages. In 2018/19, we imported roughly $15bn in useful electronics from China that would need substitution but the rest was pretty much cheap China crap:
We’d quickly source new supply chains or rebuild our own production.
What else might China do? It would contemplate a Pilbara invasion but so long as Australia had Washington’s backing in advance that would be a silly idea quickly dismissed. It would probably bring forward its plans for the invasion of Taiwan or strike west into the “Stans” to distract its suddenly idle masses.
From a realist perspective, this would be a good outcome. Forcing China to move before it is ready would bring forward its ultimate containment. Whichever military adventure it chose, it would force Wall St to stop whoring with the enemy. Europe would fall into line with a mass China boycott. The rosy dawn of Sino-Russian relations would freeze as Putin’s sphere of influence was jeopardised. Countries across the Indo-Pacific would recoil in fear and horror, and join the anti-China liberal bloc.
We’d certainly see cyberwar launched on Australia. As well as soft power war in all multilateral forums. But the backing of the US and other liberal democracies would get us through that. Rare earth minerals would be blocked. But we can ramp that up here. There’d be a whole lot of futile screaming from wolf warriors which we could pack onto a Hercules and drop off in Antarctica.
So, why don’t we do it? Especially since the most likely scenario over the next twenty years is that this all happens anyway. As China’s economy stalls with the end of urbanisation, and it is increasingly blocked from export markets, the iron ore trade will end and the CCP will need wars to stoke nationalism in lieu of prosperity. Why wait until 2035 to let the CCP crush Taiwan, by which time it will have a blue water navy to threaten far-flung democracies and protect global commodity supply chains. Why wait until CCP expansionism threatens WWIII?
The answer to that question also lies back in time. In the 1930s, when we last faced the paradox of supplying bullets to the very fascistic state that was coming south to destroy our way of life, we didn’t stop then either. We were still supplying Imperial Japan with pig iron on the verge of war in 1938, even as its forces slaughtered Chinese peoples in their millions and planned the attack on Pearl Harbour. Australian government support for this idiocy earned the Attorney General Robert G. Menzies the moniker “Pig Iron Bob”.
Within a few short years, that pig iron was slaying young Australians. Yet we had neither the wit nor courage to stop it in advance.
The answer is twofold. First and most importantly, such bold endeavour is very difficult in liberal democracies that are constrained by the limits of accepted public discourse. This is great strength in peacetime as it preserves openness and prosperity. But it becomes a liability when, every so often, an autocratic regime rises to threaten it.
Second and related, we want the cash. Particularly the cash that goes into certain hands. Australia can survive cutting all China trade relatively well, but the iron ore interests that run the joint can’t. They would go from hero to zero overnight.
That’s what you might call political economy inertia. Things can’t change when so many interests are embedded in the architecture of national management. Even when that edifice is a crumbling relic from a bygone age.
Bar one, there is nobody more in the pocket of those interests than “Pig Iron Scott” Morrison. Bizarrely, the one exception is the Australian Labor Party, which defends China and the CCP at every opportunity.
So there’s your answer. We put on a good show but facing the hard truths and planning accordingly is well beyond us.