Julia Gillard’s visit to Washington has so far followed a familiar script.

Among the Prime Minister’s first official pronouncements were a $3 million bequest to Washington’s famous Vietnam memorial to highlight Australia’s role as a US ally, and a bilateral meeting with President Obama which stressed what he later called a ‘shared sense of open spaces and a pioneer spirit’ between both countries.

Yesterday, in a speech to the powerful US Chamber of Commerce, Ms Gillard bestowed similarly lavish praise on her hosts, wading into the politically-charged issue of American ‘exceptionalism’ — the popular US conceit that it is both different from and (by implication) superior to other nations.

‘Yours remains what it has always been, a nation which is exceptional in every way’, Gillard told her audience. This would have pleased Sarah Palin, who holds American exceptionalism as an article of faith, more than President Obama, who has been more nuanced.

His 2009 comment — ‘I believe in American exceptionalism, just as I suspect that the Brits believe in British exceptionalism and the Greeks believe in Greek exceptionalism’ — remains a lightning rod for right-wing critics of the administration who accuse him of being insufficiently patriotic.

Now, however, the President’s reference to Britain and Greece looks increasingly apposite for another reason — America has joined these two struggling European economies in terms of its exceptional levels of government indebtedness.

With a debt-to-GDP ratio approaching 100 per cent, with much higher projected ratios in coming decades, America is in the midst of an economic predicament that is without parallel since World War Two.

It is this issue, more than any other, which has the potential to change radically Australia’s relations with the United States in coming years.

The US, once our leading trade partner, is now of declining importance both as a source and a destination for Australian trade. At the same time, America’s debt today stands at $14 trillion dollars — with an annual interest bill alone of almost $1 trillion, the size of Australia’s entire economy.

Forty cents of every dollar spent by Washington today is borrowed — most of it from just two countries, China and Japan.

These are of course the same two Asian superpowers that have pushed America to third place in trade with Australia.

On the back of this startling economic shift is a looming reduction in military spending.

For the first time in many decades, the prospect of serious cuts to America’s extraordinary level of defence spending — currently greater than that of the next 17 largest countries combined — is being actively discussed in Congress.

This may be good news for the American taxpayer facing cuts to their ‘entitlements’ — pensions, superannuation, and social welfare — if the US is to regain fiscal solvency. But it is unlikely to be good news for Australia.

The reason is not hard to discern. As my colleague Michael Mandelbaum has written, America is going to have to become ‘the frugal superpower.’ And with this new frugality will come some very difficult strategic choices, both for the US and for Australia.

Primary among these is whether the US is able or willing to keep investing in the kind of overwhelming military superiority that has been the backbone of its global power.

This includes a massive blue water navy, unparalleled air and space dominance and a network of overseas bases that span the world, not least in the Asia-Pacific region where Okinawa, Korea and Guam play the classic role of unsinkable aircraft carriers.

Australia has been a beneficiary of this lavish force structure, and of the privileged access to the US military establishment that comes with it, not least because we would have to spend vastly more on our own defence without it.

In return we have been the most loyal of US allies (even more so than Britain, as I never tire of reminding my American students) — no country has contributed as faithfully to US overseas entanglements, a point underlined by Gillard’s gift to the Vietnam memorial.

But today, for the first time, there are serious questions being raised about how long such munificence can last in a future of restrained government spending and exploding debt.

It is fitting, therefore, that Prime Minister Gillard’s address to a joint sitting of Congress on Wednesday has as its theme the 60^th anniversary of the ANZUS alliance, an alliance built on a combination of American extravagance and Australian loyalty.

Whether this quintessential 20^th century arrangement will continue to work in a more impecunious 21^st century context will be the big question left hanging in the Capitol dome.

Benjamin Reilly is Professor of Political Science in the Crawford School at ANU, and currently a Visiting Professor at the Paul H. Nitze School of Advanced International Studies in Washington DC. An earlier version of this piece was originally published in The Canberra Times, under the title “PM faces ‘frugal’ superpower headache“.

1. Gillard-Obama meeting gets into alliance management
2. Gillard to Japan: Friends in deed
3. China challenges Washington’s ‘trade-not-aid’ strategy in Latin America

Democracy is a difficult subject for Asia.

Asian leaders may no longer advocate ‘Asian values’, but they still tend to shy away from discussing the internal politics of their neighbours. And when they do, they almost never talk about it in terms of democracy.

Today’s Bali Democracy Forum, an Indonesian initiative which will be attended by the governments of all East Asian nations, including China and other assuredly non-democracies, will do exactly that.

Co-chaired by Australian Prime Minister Kevin Rudd and Indonesian President Susilo Bambang Yudhoyono, it represents an ambitious step to place democracy squarely on Asia’s regional agenda.

This will not be easy. But it is well past due.

All other major world regions now include an explicit commitment to democracy as part of their regional membership requirements.

The European Union is the standout example, requiring all countries to meet stringent conditions of political openness, human rights and a free press before they can be considered for membership. This has done more than anything since the fall of Communism to encourage freedom in Eastern Europe.

Similarly, the club rules of both the African Union and Latin America’s Mercosur grouping today include specific commitments to democratic rule. Countries which fail to meet this criterion are suspended from the club until they return to democratic rule.

No such commitments exist in Asia. Democracy is not mentioned in the founding statutes of any of Asia’s key regional bodies such as the Association of Southeast Asian Nations (ASEAN), or ASEAN + 3 (which adds China, Japan and Korea).

If it was, most member countries would be ineligible. Only Japan, Korea, Indonesia, and (perhaps) the Philippines would currently pass the mark.

The Bali Democracy Forum is thus an historic attempt to put the issue of democracy squarely on Asia’s regional agenda. While it is unlikely to produce any major breakthroughs, the mere fact that the gathering is taking place is significant in several respects.

First, it represents a coming out party for Indonesian democracy itself. The political progress made in that country over the past decade is little short of remarkable. Ten years ago Indonesia was one of Asia’s most enduring autocracies, beginning its third decade of rule under Suharto.

Today, it is easily Southeast Asia’s most democratic country, and one the world’s few successful examples of democracy in a Muslim country. Its success gives the lie to oft-heard claims about the incompatibility of Islam and democracy.

The invitation list for the Bali Democracy Forum also deserves attention. It defines Asia broadly along geographic rather than cultural lines. In so doing, it includes participation not just of ASEAN but also the core Asian civilizations of China, Japan, and India, as well as Australia and New Zealand.

This essentially mirrors the composition of the nascent East Asia Democracy Forum, begun three years ago, which bridges civilizational schisms as potential building-blocks for future Asian regionalism. It marks an increasingly influential vision of the region as a geographic rather than a cultural entity.

This broadness is also a weakness, however. In the name of inclusiveness, the Forum includes some of Asia’s most repressive regimes, including Burma, China and Vietnam. At the same time, it excludes the United States, which has been sponsoring its own alternative grouping, the Asia Pacific Democracy Partnership, which is restricted to genuine democracies.

Naturally enough, the APDP includes the US and excludes non-democracies like China. But the limited enthusiasm shown in the region for this idea suggests it is unlikely to survive the end of the Bush administration.

The Bali Democracy Forum, by contrast, has the potential to be an important step not just for democracy in Indonesia, but also for Asia more broadly. And it underlines the fact that, contrary to proponents of ‘Asian values’, Asia’s past record of authoritarianism is unlikely to guide its future.

Benjamin Reilly is Director, Centre for Democratic Institutions, Australian National University

This post was also published in the Canberra Times here

Update: an alternative viewpoint here

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2. Clinton’s visit to Indonesia
3. Indonesian politics: prospects for the coming presidential election

East Asia contains three of the world’s semi-presidential democracies (as pointed out in the latest APEC Economies Newsletter here) : Taiwan, Mongolia, and East Timor. Each of these countries is an unusual case of democratisation: Taiwan is one of East Asia’s famous ‘tiger’ economies and the world’s only Sinitic democracy, but faces an ongoing crisis of nationhood; Mongolia is one of the few unambiguous cases of a successful transition to democracy and a market economy in the post-Communist world; while East Timor is both Asia’s poorest nation and its newest democracy. Prior to their democratic transitions, each was also under the influence of a large foreign power — be it Russia in relation to Mongolia, Indonesia in East Timor, or China’s claim to sovereignty in relation to Taiwan. This is not a propitious starting point for a transition to democracy; indeed, in different ways, each country seemed to lack some of the essential preconditions for successful democratisation.

Nonetheless, each has succeeded to the extent that successive free elections and peaceful changes of power have now occurred.As part of their transitions to democracy, East Timor, Mongolia and Taiwan each chose semi-presidential constitutions. Semi-presidentialism is an increasingly popular constitutional model which combines a directly elected president with significant powers as well as a prime minister chosen by the legislature. France and Portugal are long-standing examples, along with many new democracies in Eastern Europe and Southern Africa. In Asia, East Timor, Mongolia and Taiwan are all clearly semi-presidential in the sense of having ‘a popularly elected, fixed-term president existing alongside a prime minister and cabinet who are responsible to parliament’.

However, their presidential powers of each differs considerably: Taiwan’s constitution grants extensive powers to the president, while in East Timor the president is largely a symbolic figure whose most important power is as supreme commander of the armed forces — a provision that was to have great importance during the internal conflict in East Timor in 2006. Mongolia sits somewhere between these two in terms of the scope of its presidential powers.

Despite their status as competitive electoral democracies, national politics in each of these countries has been hampered by recurrent problems of gridlocked government, political instability and politically-motivated violence during periods of ‘divided government’ when the president and the majority of the legislature come from different political parties. These pathologies are due, in part, to their semi-presidential constitutional structures, particularly the propensity of such systems to deliver periods of political cohabitation. These ‘split majorities’ have had a pronounced negative impact on political stability and effectiveness, weakening the consolidation of democracy in each of these three cases.

For significant periods of their recent democratic experience, the phenomenon of divided government placed immense pressures on the developing political systems of Mongolia, Taiwan and especially East Timor. One reason for this is that in each case, the initial period of divided government came early in the country’s democratic experience, and many of the political actors had no real sense of how to deal with it. Moreover, divided government brought with it a series of political problems that undermined political institutionalization, turning national politics into a competition between powerful individuals. This led to familiar patterns of political polarization, instability and violence emerging in each country, although a markedly different levels. While the severity of these differed considerably – the crisis in East Timor, for instance, was clearly of a different magnitude from that of Taiwan or Mongolia – the incidence of these problems of political polarisation, instability and violence can be compared to those times when unified governments were in place in each country.

Mongolia had the shortest period of divided government, with cohabitation lasting four years, from June 1996 to July 2000. East Timor’s period of divided government can be assessed as lasting from April 2002, when Xanana Gusmão won the country’s first presidential election with a massive 87 per cent of the popular vote, through to Mari Alkatiri’s resignation and replacement by Jose Ramos Horta as prime minister in July 2006. Taiwan’s experience of divided government was a constant throughout Chen Shui-bian’s presidency, from 2000 to 2008, as his Democratic Progressive Party controlled executive power but the opposition ‘pan-Blue’ coalition, led by the formerly-ruling Kuomintang, maintained a majority in the legislature.

One way of illustrating the problems of political stability in these semi-presidential countries is the World Bank’s Governance Matters database, which includes an aggregate measure of ‘political stability’ for all states drawn from a combination of public and private sources. This ‘political stability’ measure combines indices of politically-motivated internal and external violence in a given country with a separate measure of government durability, that is the government’s ability to carry out its declared programs, and to stay in office. As shown in Figure 1, which compares these indicators for each of the three country cases over the past decade, political stability tends to decline during periods of divided government.

Source: Kaufmann D., A. Kraay, and M. Mastruzzi 2007: Governance Matters VI: Governance Indicators for 1996-2006

In Mongolia, for example, the stability measures were at their lowest during the 1997–2000 period of cohabitation, but have risen since the resumption of single-party rule, at least until the aftermath of the 2008 parliamentary elections. In Taiwan, too, stability measures were at their highest in the late 1990s but declined with the election of President Chen Shui-bian in 2000 which ushered in Taiwan’s period of divided government, with the lowest levels reached in 2006. In East Timor, stability declined sharply between 2000 and 2002 as the UN administration prepared the country for independence, and have since declined considerably further, with the lowest levels reached in 2006 when the standoff between Prime Minister Alkatiri and President Gusmão came to a head.

These indicators help illustrate a key point: while semi-presidentialism has its benefits, it places unusual strains on new democracies. In particular, periods of divided government can put great stress on the stability of countries which have not yet developed established practices of political coexistence. In addition, the uncertainties of constitutional law in situations of shared power create their own problems: in these three country cases, disagreements over which particular office would exercise which particular constitutional powers was a recurring source of conflict. No constitution can codify all situations which office-holders are likely to face, meaning that even the most thorough constitutional text will inevitably leave some grey areas unspecified. This is a particular problem for semi-presidential constitutions, as it is precisely those grey areas of uncertainty which can provide the basis for ongoing conflict.

1. Is Thai democracy really so bad?
2. What’s still wrong with Indonesian democracy
3. The East Asia Summit: ASEAN’s forum for maintaining peace

History has a funny way of repeating itself. In a little-reported development last month, Japan offered to contribute peacekeepers to the Australian-led stabilization mission in the Solomon Islands—the site of some of the fiercest fighting between Japanese and Allied forces of the Pacific campaign in World War Two. While the prospect of Japanese troops returning to Guadalcanal may raise eyebrows on both sides of the Pacific, this is a positive development: It signals Japan’s willingness to cooperate with Australia and other liberal democracies in securing regional stability—and to balance the growing weight of China.

Japan’s offer follows from the annual Trilateral Security Dialogue between the U.S., Japan and Australia, as well as the Joint Declaration on Security Cooperation between Australia and Japan signed in March 2007.

Help is certainly needed in the South Pacific. The Solomon Islands government collapsed in 2002, necessitating armed intervention from Australia and other neighbours. Fiji still has not recovered from its 2006 coup, Papua New Guinea remains volatile, and deep-seated problems of weak governance, conflict and corruption afflict much of the region. For this reason alone, Japan’s willingness to re engage in the Pacific Islands should be encouraged.

But there are other, longer-term reasons for Japan’s renewed interest in the region. A decade ago, Japan was the leading aid donor to the Pacific Islands, contributing more bilateral aid to the region—with the exception of Australia in Papua New Guinea— than any other country. But the relative weight of Japan’s contribution has steadily declined, with Oceania receiving only 1.5 per cent of Japan’s aid budget over the past decade. By contrast, China’s engagement has grown considerably over the same period. In addition to its familiar pattern of building high-profile sports stadiums and government buildings in island capitals, China has expanded both its diplomatic network and its aid disbursements to friendly island governments, mostly in response to Taiwan’s ongoing search for diplomatic recognition in the Pacific. China has also expanded its military links in the region, inking military cooperation agreements with Fiji, Tonga and Papua New Guinea—the three Pacific states that maintain standing armies—and announcing future plans to train their senior military officers in Beijing.

China has also increased its political links, particularly with fellow non-democracies such as Fiji and Tonga. Beijing’s increasingly close relationship with Fiji’s military regime is a case in point. Shunned by Western donors, Fiji’s interim government recently received a huge increase in grant support from China, with no hectoring about democracy and human rights.

An increased Japanese presence would offer an alternative partnership model for the Pacific Islands, one of a genuine Asian democracy working in close partnership with Australia and the United States. Indeed, the Trilateral Security Dialogue is predicated on the shared interests that these three key liberal democracies of the region have in working in tandem on Asia-Pacific security.

Whether Japanese peacekeepers will be welcomed in the Solomon Islands is ultimately up to the 16-member Pacific Islands Forum, which meets later this month in Niue. Accepting Tokyo’s tentative foray into the turbid waters of the South Pacific would be a smart step towards this elusive goal.

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2. Japan and the G20: Ambivalence and the China factor
3. The Solomon Islands and Pacific insularity