21st century reality - Australia out in the cold

There has been a precipitant decline of American financial and political global authority since October 9, 2006, when On Line Opinion first published a paper of mine focused on American decline and the Australian predicament. This places escalating pressure on Australia to countenance a fundamentally restructured world order.

It has, for instance, become necessary to ask whether we are approaching the imminent demise of the post-1945 global financial and institutional system, defined by Anglo-American powers largely to serve their own interests.

Indeed, something like this system has been defined and maintained successively by the United Kingdom and the United States and has been fundamental to Australia’s international identity and well-being throughout our 200-year modern history.

Yet Australian government and mainstream media and commentators all display a firm determination to maintain a blithe ignorance of such a possibility, where international financial and institutional norms might be determined more in Beijing, Tokyo, New Delhi and even Moscow than in traditional, English speaking centres like London, Washington and New York.

“The International Monetary Fund (IMF) has become all but irrelevant in East Asia” wrote Shinji Takagi, Professor of Economics at the Graduate School of Economics, Osaka University in a May 2008 paper in an East Asian Bureau Economic Research newsletter. He did recognise, however, that the IMF’s statistics continued to prove of some value.

On May 4, 2008, on the sidelines of an Asian Development Bank meeting in Madrid, the Finance Ministers of China, Japan, Korea and the ten members of ASEAN agreed to contribute $80 billion to a foreign exchange pool to be used in the event of another regional crisis. While the amount may not be that substantial in today’s world where multi-billion dollar American government bailouts of the like of Fannie Mae and Freddie Mac are the focus of often heated debate, the symbolic and institutional importance of the agreement cannot be exaggerated. Amid increasing talk of a global financial meltdown, it is the membership more than the amount that counts.

Almost 11 years on from the 1997 Asian Financial Crisis, the major consequences of Western actions and triumphalism during that time is becoming clear - namely the determination of Asian nations to free themselves from the machinations and influence of Western financial, institutional and related political centres.

The immediate effect of the 1997 crisis was to catapult China to a leadership role in the region, something that had previously seemed unlikely in the foreseeable future. In a sense the Asian Financial Crisis was Bill Clinton’s Iraq - a bold assertion of American pre-eminence that has gravely weakened the standing of the United States.

Indeed, although the same language has not been used, crony capitalism has been revealed subsequently as much worse in the West than ever imagined in Asia.

In effect, and despite likely denials from many quarters, the May 4 Madrid initiative has established a de facto Asian Monetary Fund (AMF). Growing financial reserves and explosive production capacity in East Asia and threatened banking and economic systems in the West make it difficult to see how the post-1945 International Financial System, based on the IMF, the World Bank and a variety of other discreet arrangements, can preserve any serious continuing global authority.

This conclusion can only be strengthened by the efforts of Hugo Chavez and friends in Latin America to remove the region from dependence on the IMF. There is also the example of Sudan in Africa, where a switch from IMF to Chinese patronage has, according to at least one report, produced the continent’s first Tiger Economy. This remains almost totally unreported in the English language media and in stark contrast to regular reports of human rights abuses in Darfur.

As elsewhere, Western concern over human rights is used often in the English language media to confuse and mislead about contests where American economic interests are losing out to those of China.