The problem lies in how Australia’s strategic policy choices are currently being framed and made.
Strategic policy is overwhelmingly framed from a security perspective in political–military terms. Yet the economic dimension of national power and influence is also central to the hard choices to be made on strategic policy. Economic policy and engagement reinforce and habituate a rules-based international order and, significantly, they create bigger, broader interests and pluralities in countries. Incorporating economic options with political-military elements in thinking about strategic policy broadens options for attaining both national security and prosperity.
Consider infrastructure. Concern is expressed in the media that China is seeking to use its Belt and Road Initiative (BRI) on infrastructure to make developing countries more dependent on China and to use debt to compromise these countries’ political independence — all at a time when concerns are rising about the South China Sea, cyber activity and the signalling from China’s shift to presidential life-time tenure. While the BRI does provide China with a means to increase its influence, as other countries like Japan have in the past, it is also a way for China to support economic development and poverty reduction by building infrastructure and creating economic links between countries, and to become a responsible global and regional player commensurate with its growing economic size and power.
The security specialist’s impulse is to stay clear of the BRI. The economist’s impulse is to ensure that project selection is based on delivering high local economic and social returns (through independent cost-benefit analysis, open bidding and transparency) and is supported by strong governance and laws in recipient countries or nested in global norms and institutions to ensure debt sustainability and growth. Taken separately, the responses of the security specialist and the economist are each inadequate. But bringing them together offers a path of constructive yet active engagement that can support both security and prosperity. Drawing away is not going to stop China pursuing the BRI, while engaging intelligently and systematically can mitigate some of the downside risks and help lift global prosperity and security.
This sort of complexity is not isolated to infrastructure. Trade, investment, energy, communications, resources, agriculture, financial markets, water, mechanisms for preventing and resolving financial crises, the Pacific Islands, Southeast Asia and Antarctica are all specific policy areas where there is some mix of security and economic interests and, arguably, strategy needs to be comprehensive, integrated and forward-looking.
The problem is that Australia’s strategic decision making is not currently configured to integrate security and economic considerations in a way that balances and integrates these twin objectives.
Responsibility for defining and achieving the national interest lies with ministers, and the cabinet relies for advice on its National Security Committee, which is chaired by the prime minister and comprises the defence, security and foreign affairs ministers and the treasurer, supported by their officials and the heads of the military and intelligence agencies. The treasurer is the only economic minister systematically engaged, and economic ministers and officials are only brought into the ministerial and the bureaucratic processes on issues as required and as guests.
This system worked well when our main security and economic partners were the same. But the world has changed while our systems for formulating strategic policy have not but remain fixed on the security dimension.
There are two significant changes that might help strengthen strategic policy making.
The first relates to cabinet decision making.
The National Security Committee is essential for dealing with the sensitive and secret matters of national security, but it is not the right place to determine Australia’s broader national strategic interests and actions. A cabinet committee on national strategy, which brings senior economic and security ministers together at the outset under the leadership of the prime minister, is the right place for ministers to discuss and decide Australia’s domestic and international priorities, policies and actions in an integrated way. Material from this committee would then proceed to the full cabinet. The National Security Committee of cabinet would continue to deal with security issues but not overall national strategy.
The other change relates to the public administration that supports strategic decision making by the prime minister and ministers.
There is an extensive bureaucracy, centred on national security, defence and intelligence departments and agencies that support the National Security Committee of cabinet. These institutions are not well placed to provide advice on strategy that integrates Australia’s security and economic interests and see economic engagement as a form of political influence. If the world has changed and stronger institutions are needed to integrate strategic analysis and policy advice, the Australian government — and the Parliament — might consider creating a new agency for that specific purpose.
The crucial element is to develop deep and integrated capability in security and economic analysis and advice, in a way that lifts the capability of existing departments and agencies and properly supports the policy performance of ministers in an area that is clearly now of the highest priority.
Peter Drysdale is Professor of Economics and head of the Asian Bureau of Economic Research, The Australian National University.
Shiro Armstrong is Director of the Australia-Japan Research Centre and Director of the Asian Bureau of Economic Research, The Australian National University.
Peter Drysdale and Shiro Armstrong have admirably highlighted the complex role of national economic power as a key element of strategic policy.The “stovepipe” thinking and the associated bureaucratic divisions that reinforce it are by no means limited to Australia. In 1993 the Clinton administration created a “National Economic Council,” thus removing economic expertise from the National Security Council and fortifying the bureaucratic and analytic divisions that the authors describe. Now, twenty-five years later, the task of developing “deep and integrated capability in security and economic analysis and advice” should be a high priority for all Western leaders.
Australia is an Asian country. It became a British colony and with it, over the years, from an acolyte of Britain to an acolyte of the US now. It is under pressure to be an obedient servant to US but realises its future is with Asia, esp with China, India and Asean. It would be a grave mistake for Australia to be used by the US in its power struggle with China. It is much worse if it allows itself to be used as a springboard by US to launch an attack on China. I’m sure Turnbull is aware that China will have Australia in its gun sights if it does so. Do you seriously think China will let you go free if this happens? Australia has much to lose. It must chart its own future, free of encumbrances, esp of the American type. Asians look to Australia as a member of its fraternity but not as an acolyte of the US. Australia was “independent” for a short while but as expected the PM was sacked by the Governor General. This is another opportunity for it to chart its own course.
1 “Australia, it has been said, is faced with hard choices in strategic policy because its principal security partner is the United States and its major trading partner, China.”
It is a choice between a sword and plowshares. The United States represents the sword while China represents the $165 billion of plowshares (Trade) and why Australia, “The Lucky Country”, has not been in a recession for at least the past 15 years.
Yes, Australia is in an unenviable position. It is not unlike a man having to decide whether to save his brand new Chevrolet Corvette which is about to roll over a cliff with his much maligned, proverbial mother-in-law in it. There are mixed emotions and hard choices to make.
But according to former Prime Minister, Paul Keating: “The (Australian) Government does not seem to understand the economic importance of the relationship with China or the strategic issues involved. We are putting all our faith in our relationship with China through the lens of the United States.”
And according to James Laurenceson, Deputy Director of the Australian-China Relations Institute University of Technology, Sydney: “Such is the scale of the trade that financial markets have been of the view that the Australian dollar is one of the best proxies for bets on China itself”.
2 “If the world has changed and stronger institutions are needed to integrate strategic analysis and policy advice, the Australian government — and the Parliament — might consider creating a new agency for that specific purpose.”
This is advisable as the world has changed. Today, China is the largest trading nation on Earth and on a PPP basis China’s GDP has been larger than the GDP of the United States since 2014.
In the 1970s the United States was a creditor nation. Since then its National Debt has ballooned to US$21.197 trillion and according to Prof Lawrence Kotlikoff of Boston University, the US Unfunded Debt was already US200 trillion in 2013.
On top of the above eye-watering fiscal woes, according to Prof Mark Skidmore of Michigan State University, who is an expert in public finance, the sum of US$21 trillion is missing and no one seems to be able to account for the missing money. If all the above claims are true then the United States is facing a big-time insolvency crisis in the foreseeable future.
Will the US still have the political will to go to war against China over islands and rocks in the South China Sea then? Will there be a Thucydides Trap? The jury is still out.