Too big to fail

Monday, 30 March 2009 

The timing of the Queensland election told us that Labor was willing to risk an early election because it does not yet have a political response for when the money runs out. As usual with this government, it has gone off overseas in search of one.

This will of course not be the first time that an Australian Prime Minister has done so. The last one was in Washington five years ago committing support for a war that filled an empty program and gave our conviction politician that desperately needed issue to have a conviction about. On that visit, Howard earned the moniker, a ‘Man of Steel’ by the then US President, grateful for the support even a minor player like Australia was giving to the leading power that was struggling to get others to follow. The Iraq war was the second time in just over a decade the US had used the region to create a defining military issue to rally the major powers behind it, and despite 9/11 in between, had even less success than the first. What the Iraq war did show, along with Bush’s attempts to raise the stakes further with his ‘Axis of Evil’, was how prepared the US was to destabilise international relations in order to try and regain leadership of them.

Roll forward five years and the US’s political problem has now become an economic one. The US has done what most countries would like to do but generally cannot, spend its way out irrespective of the debt. It knows that at the end of the day, the rest of the global economy will have to find a way of financing the debt or risk the collapse of the world’s reserve currency. In effect the US government is putting an economic gun to the head of the other major economic powers and doing to the rest of the world what the major US financial institutions did to it, threatening the consequences of any collapse as a way of getting bailed out. By doing so, the US is making sure that any reorganisation of the financial system that was set up on US terms after the war, will remain so.

Once again, the Anglo Saxons are going along for the ride. The Coalition of the Willing has now become the Coalition of Debtors. Just like last time, Australia’s commitment is more token than real (once again the UK is a little more committed), but is playing the part of the mouthpiece as well as ever. This time, however, Australia does have an additional important part to play given the role that major creditor countries in the region like China are expected to have in any financial bail out.

Despite what the Liberals may be saying (if not thinking) and right-wing media commentary might be implying, there is no shift in loyalties going on. Australia’s number one political relationship is, as much as ever, with the US. The Australian government knows, however, to get an ear in Washington it needs to be useful and for now that rests on the role it can play in bringing China into the international order on the US’s terms. This is how Rudd can present this task of helping the US to reorganise the international order in its favour as ‘middle power’ diplomacy when it is no more independent than it has ever been.

Nor indeed is this the first time Australia has played this particular role. As the sheriff in the region, Australia under Whitlam cleared the way for bringing China to play a greater role in stabilising the region as the US lost control of Vietnam. This culminated in Whitlam’s visit to China ahead of Nixon’s recognition of the People’s Republic.

The way the coalition is playing Rudd’s diplomatic manouevres has weird echoes of how they criticised Whitlam’s towards China 38 years ago. If they are not careful, there is also the same likelihood that they will be caught out now as they were when Whitlam’s visit was soon followed by Nixon’s. The dangers of creating a false divergence in Australian and US foreign policy where none exists would be apparent to anyone who saw Rudd’s enthusiastic reception from the US administration. This time, though, it is a little harder to tell where that alliance is going to end up.

Posted by The Piping Shrike on Monday, 30 March 2009.

Filed under International relations

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2 responses to “Too big to fail”

  1. James on 30th March 2009 11:48 am

    It’s clear that China is the world’s economic super power and that it is the key to somehow resolving the global economic crisis. It defies logic that the Liberals would want to undermine the Rudd Government’s attempts to achieve outcomes with China that benefit Australia’s economic interests. The reality is that Chinese bonds largely held the US economy together for years and, if China’s economy crumbles, the US has no hope of recovery. The Liberals’ response to Rudd’s talks with China is yet another example of its view that harking back to the past is the way forward. In this case, the Liberals’ backward view implies a Cold War mentality about China that the Liberals may be pushing for domestic political traction. If that is their approach, then it is a reprehensible and irresponsible approach. With his linguistic and cultural rapports with China, Rudd is shaping as a worthwhile ambassador for promoting western interests to the Chinese regarding its involvement in the resolution of the global economic crisis.

  2. Riccardo on 1st April 2009 5:44 pm

    Also shows the libs are not in with big business any more – business is quite happy to sell the shop, the farm and the family silver too, if need be, to the Chinese.

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