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21st century reality - Australia out in the cold

By Reg Little - posted Friday, 25 July 2008


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.

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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.

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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.

Moreover, the May 16, 2008 initial meeting of foreign ministers of the BRIC nations - Brazil, Russia, India and China - in the Russian city of Yekaterinburg foreshadows a potential economic and political alliance that could relegate the Atlantic powers of America and Europe very much to the sidelines. A spokesman for Russia’s foreign ministry at the meeting put it succinctly in the following words: “BRIC unites the major economic growth centres with more than half the world’s population, the role of which in international affairs will grow.”

Somewhat troublingly for Australia, given their land size, population and growing economic power, these four nations all compare favourably with Australia in their potential for mineral commodity production. Moreover, two of them are today’s most important markets for mineral commodities.

The Shanghai Cooperation Organization (SCO), the China-ASEAN Free Trade Agreement (CAFTA) and the Greater Mekong Subregion (GMS) are other instances of effective Chinese diplomacy. Working discreetly and flexibly with new partners, China has become a powerful mobilising force that is transforming Australia’s world. This has no need to address the interests of an isolated and easily forgotten Australia, which is often too closely identified with discredited American policies.

Most central and important, however, may be the AMF, which has the potential to begin the unraveling of the whole international institutional system put in place by the British and Americans after victory in 1945. This includes the United Nations, the World Trade Organization and all other global institutions where Anglo-American power is disproportionate to 21st century realities.

In other words, we are likely witnessing the beginning of a rapid process of change that will leave Australia in a world that is totally unlike anything experienced in its written history. With America, in the words of Gore Vidal, “broke” after the use of 9-11 to overthrow its normal forms of government, it is hard to anticipate the terms on which Australia will seek to engage its dynamic Asian neighbours, excluded as seems likely from a variety of emerging organisations critical to its interests.

The neglect by the mainstream media of serious comment on these developments is reminiscent of the manner in which it has managed reports on Iraq and Afghanistan. Misguided and counterproductive policies have been given credibility by misreporting or non-reporting of critical information.

At the same time, Australia’s new government seems to be even more in thrall to Washington than its somewhat underrated predecessor. The first American administration of the 21st century has squandered in two presidential terms what might have been three or four decades of measured and managed, if inevitable, decline of Anglo-American authority.

Even the March 2008 publication of Eamonn Fingleton’s In The Jaws of the Dragon: America’s Fate in the Coming Era of Chinese Hegemony has disturbed little of the self-congratulation that surrounded the phoney futurism of the 2020 Summit. While not at his best in addressing the region’s robust and strategic Confucian civilisation - probably best viewed in the circumstances as a necessary concession to American readers - Fingleton offers a penetrating and accurate account of the nature of American and Western failure and ineptness in the East Asian region.

Australia is also profoundly troubled by these failings. During recent Prime Ministerial tours of China, Japan and Indonesia neither the media nor the official party seem to have taken any interest in the various financial and institutional regional developments outlined above. Rather the focus was on Australia’s proposal for new institutional initiatives that seem quite unreal in the context of the more practical, focused and purposeful initiatives addressed above that leave Australia in the cold.

Moreover, it is worrying that all the initial reporting on work on the Rudd Government’s forthcoming defence white paper seems to make no allowance for the potential impact on future Australian defence purchases should there be a major shift in power, financial and technology relations between the United States and the BRIC nations. Already, there is much evidence that American military technology has become dependent on East Asian hi-tech materials and components and, given the apparent priorities of its military-industrial complex, it is imperative to evaluate the capacity of the United States to maintain a serious lead in military technology.

It is certainly an advance that Australia has elected a Prime Minister with claims to be bilingual, and maybe even bi-cultural. We may, however, be entering a global order where only the multi-lingual and multi-cultural will be adequately equipped.

The demise not only of Anglo-American financial and institutional authority but also of Anglo-American linguistic and cultural authority would confront most Australians with challenges of a character that few have contemplated. India is the sole BRIC nation that uses English widely but English offers little insight into the psyche of elite Brahmins or Indians of other castes. Even less does it capture the Russian soul, the Brazilian spirit or the Chinese Dao.

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About the Author

Reg Little was an Australian diplomat from 1963 to 1988. He gained high level qualifications in Japanese and Chinese and served as Deputy of four and Head of one overseas Australian diplomatic mission. He is the co-author of The Confucian Renaissance (1989) and The Tyranny of Fortune: Australia’s Asian Destiny (1997) and author of A Confucian Daoist Millennium? (2006). In 2009, he was elected the only non-ethnic Asian Vice Chairman of the Council of the Beijing based International Confucian Association. His other writings can be found on his website: www.confucian-daoist-millennium.net.

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