Global and Regional Perspectives: “Setting the Broader Context: How Australia-Japan Relations ‘Fit’ into the Global Security Dynamics”
Today’s topic offers a generous opportunity to be entirely undisciplined in the way I might fulfil my responsibilities. There’s even a claim that the organisers mandate for it. Thank you, William Tow, for the invitation to speak at this workshop today. Leaving the invitation to one side, globally there is any number of issues to examine and there is as always the challenge of knowing where to begin. Globally the good news continues to merge with the bad, producing of course complexity, confusion and considerable uncertainty. Overall, however, the global prospect for greater security and increased prosperity appears to me to have deteriorated over the last 12 months. To quote Hilary Clinton, there are the enduring system-wide perils that persist – things like the dangers of nuclear proliferation, terrorism, pandemic, and environmental catastrophe. Then of course there are the more specific dangers thrown up by problems in places such as Afghanistan, Pakistan, the Middle East and distressingly large parts of Africa. While I can’t hope to deal with all this in the time that is available to me, I cannot avoid the issue that should concentrate our attention which is the global financial meltdown. Let me try and pick some themes on topics likely to be of specific importance to a generously defined Asia region and therefore likely to also be of some significance to Australia and Japan.
The current global meltdown is of course, primarily a crisis of the world’s financial markets. More specifically, it seriously threatens the foundations of the international banking system. However, if that is all it was we could perhaps be grateful. What is clear is that the consequences are far more widespread. The crisis is responsible for nothing less than a level of economic carnage beyond all recent precedents. It is causing: a severe down turn in international trade, the collapse of global equity markets, a plummeting of global economic growth which among other things will shrink individual countries’ economies, create massive unemployment and cause huge losses of corporate wealth. If ever any affirmation of the capacity of globalisation to affect great economic transformations were needed this is it. Indeed, Australia and especially Japan are already feeling many of the alarming consequences of the crisis.
I imagine the issue of most interest to us is the likely extent of the geopolitical consequences. Of course the answer is manifestly unclear. One argument is, the impact might be limited, essentially for three reasons. Firstly, the key forces that are shaping the international order have not been significantly affected by the crisis. Secondly, there has not been a sudden and dramatic change in the geostrategic environment – what might be called a shift in geostrategic reality of a kind such as the end of the cold war or a 9/11. Thirdly, the impact of the crisis has been as widespread as profound. All countries have been affected but it is not obvious that there has been any significant change in the existing global distributions of power. However, optimism of this kind is almost delusional. There is every possibility that the meltdown will have some profound and highly disruptive geopolitical consequences. The collapse of the Suharto regime in Indonesia in the wake of the 1997 Asian financial crisis testifies, financial crises almost always have unanticipated political consequences. This crisis is far more serious: its impact is more widespread, its affects reach deeper into the economic structures of the international; system and it will take longer to resolve. We should prepare ourselves for considerable geo-political fallout – impacts that will deepen existing problems, create new ones and perhaps result in some significant shifts in global geopolitical power.
Clearly, the crisis confronts globalisation with a profound challenge, one with ramifications well beyond the often acrimonious debate over the best way to generate wealth and prosperity: it goes to the very heart of the international order. At the very least, it has caused an implosion of the international banking system and of global financial markets, proved highly disruptive to global trade and exposed serious institutional weaknesses in the global economic architecture created after World War II. Some reform in this area must now be on the international agenda, but it would be foolish to expect that this can be accomplished easily.
All economies are affected, but of course unevenly. In the EU for instance, the Czech Republic is so far weathering the storm reasonably well, while the UK, Ireland and Greece are in deep financial distress. The emerging and underdeveloped economies are doubtless the most exposed with their fragility further threatened by reduced demands for exports, declining commodity prices and reduced capital flows. Not surprisingly, responses vary. For some states, currency reserves and assistance from the IMF may be enough to stave off collapse, but many face chronic economic difficulties and will almost certainly fall deeper into poverty. Here the dangers of political instability perhaps affecting neighbours and causing interstate tensions could easily proliferate. An increase in the number of failed states is certainly not beyond serious prospect.
Elsewhere, it is already clear, that some governments are turning inwards in effort to contain the effects of the crisis. As a result, economic nationalism and trade protectionism is on the rise – a worrying sign since historically mercantilism has been a source of tension and conflict in international affairs. It is also likely to delay a recovery and a major diplomatic effort will be required to forestall the protectionist danger.
The crisis being widely characterised as almost certain to encourage a further shift in geopolitical power from West to East. Various themes to this debate – America’s perceived decline, the alleged discrediting of the western economic model and the rise of the BRIC countries, make this a complex issue. Firstly, it’s true that a new global order has been emerging over the last decade and represents a challenge to the western liberal order of the last 350 years. The crisis could well add momentum to this process. We are certainly likely to see the emerging great powers (China and India) take a more high profile and perhaps responsible role, in some international institutions such as the IMF. Long over due reform to the IMF is likely. The G20 will replace the G7 as the more significant arena for regular dialogue on global financial matters. This will have the effect of drawing the Australia/Japan relationship into a new and potentially very important geopolitical setting.
Secondly, none of the world’s great powers have been able to escape the many catastrophic consequences of the crisis. Certainly not Russia and the faultlines now emerging within the EU as it struggles to respond to the crisis are potentially very debilitating of unity. China it emerges has not been able to decouple itself from the global economy either. We know it has massive foreign reserves and some underlying economic fundamentals likely to aid its survival in the crisis. But in the absence of policy transparency it is difficult to know precisely how it is coping. There are any number of signs that it faces serious economic challenges as a result of the crisis. Still, the crisis is enabling China to advance its ambition to be regarded as a responsible global and regional power and could well capitalise on the crisis.
Thirdly, America is clearly at ground zero in this crisis, but for all the economic misery it is suffering and likely to continue to suffer, its geo-strategic position relative other great powers could well end up being enhanced by the crisis. America has suffered, but other great powers have suffered at least as much or more. At the same time, America has a commanding structural power underpinned by a political and economic culture that is resilient, adaptive and responsive to severe challenges. Nor should we dismiss the determination of the Obama administration to rebuild America’s place in the world. Here it is useful to note the new Administration’s positive policy start in East Asia. It is clear that Secretary Clinton’s visit to the region was calculated to underscore the importance she and Obama attach to the region. This could reflect a historical shift in US interests away from Europe.
Clinton’s visit to Japan is especially important in seeking to allay Japanese fears of a widening breach in the alliance that began to emerge during the Bush years. It is also important to take the visit to China as significant – at the least an encouraging sign that the Obama Administration wishes to have a constructive relationship with Beijing. All that said, I still think that asserting US primacy will not be any easier than in the past. Superpowers attract envy, opposition and resentment – a natural consequence of commanding uplands of the geopolitical landscape. Obama has to overcome inter alia: the Bush legacy, severe budgetary constraints and the perception that it was the profligacy of US capitalism that caused the crisis in the first place.
In a financial meltdown of these proportions, managing the world's urgent environmental problems is unlikely to become any easier. Perhaps the contraction in economic activity coupled with lower oil prices will provide a reprieve from some of the intense developmental, resource and energy pressures producing climate change and creating anxiety over environmental security. But two of the strongest drivers of environmental risk are rapid population growth and urbanisation, and both are unlikely to diminish in the face of the crisis.
The pressures on land and water resources, fragile ecosystems and declining biodiversity will almost certainly intensify as will the affects of climate change. As Denis Blair remarked recently, the greatest danger may arise from convergence and interaction of many stresses simultaneously. The risks for the international community including the Asia Pacific are many – including, resource depletion and competition leading to conflict, the undermining of community sustainability, increased refugee movements, and perhaps state failure. In this environment, the task of negotiating a new climate change agreement, or at least one of any merit, must surely have become more difficult. With several of the world’s largest green house gas emitters in the Asia Pacific this poses an enormous for the region.
Moreover, two broad trends exist with ideology and terrorism in the wake of the crisis. Ideology has made a strong return to the international agenda and is manifest in some very ugly and dangerous ways eg. terrorism borne of Islamic extremism. The progress of the latter part of the 20th century towards the expansion of democratisation has stalled. In places democracy is either in retreat or teetering. The GFC probably compounds the challenges states face in dealing with these developments. The risks range through straight forward things such as distraction, the diversion of resources that faced with severe economic problems states will be distracted from the threat of terror, that resources will be reduced, that stretching scarce security resources and no doubt in some places serving as a basis for undermining the legitimacy of the liberal democratic ideal.
There has been some good news on the progress of efforts to contain the terrorist threat. The Bush inspired, “war on terror” may have ended, but events in Mumbai and Lahore underscore the persistence of the danger. South and East Asia remain regions of prime risk for further terrorist attacks, making expanded cooperation to defeat the threat a matter of high priority. We will also have to shore up the western democratic/capitalist model of prosperity which some will no doubt see as having failed and a cause neglect of this challenge will only serve to strengthen the hand of autocrats, despots and dictators who resist change and seek to discredit western liberalism.
The Asia Pacific region has been deeply affected by the crisis and is suffering severe economic contraction. Growth rates have fallen alarmingly in Southeast Asia and since all have export oriented economies the short term prospects for a reversal in their fortunes is not good. The situation in Northeast Asia is hardly more promising. Others are better able to speak on Japan but for all those who are its friends, the situation there is deeply troubling as it seeks to confront both an economy in deep recession and the uncertainty of the political hiatus in the lead–up to this year’s elections.
More generally, one commentator can see "political tension, nationalist outbursts, growing distrust and ultimately military miscalculation" as dangers in the Asia Pacific. These seem unlikely at this juncture, but if the crisis persists, the risks may escalate so we need to think how we might contain them. Enhanced regionalism may be part of the answer here. So we are bound to ask what the crisis may portend for the progress of Asia Pacific regionalism. If the 1997 crisis is any guide the effect will be profound and dispiriting to those who are its ambitious proponents. It encouraged governments to turn inwards and concentrate on their own affairs, effectively setting back Asian regionalism by about a decade. But the regional ideal has probably matured since then.
The study of Asian elite opinion on regionalism published recently by CSIS offered some conflicting evidence on this matter. One key finding of the study was that elites lack confidence that existing regional institutions are well suited to meeting the major challenges now facing Asia. There was a major difference of view between the major military powers and smaller states on the efficacy of multilateralism as a means of guaranteeing security. Most respondents placed greater reliance on military self sufficiency and for some, alliances, as a way of preventing threats. Even so, there was support for the concept building an East Asia community, though no clear consensus, on the membership of any future community.
There were some interesting findings specific to Australia and Japan: Australia was widely seen as a natural partner in any community, a view held most strongly by Japanese respondents. An equally welcome finding was that Japan was generally seen as not offering any serious security threat to the region and both Australia and Japan were among the strongest supporters of the US strategic presence.
The geopolitical fallout from the 2008-09 financial meltdown is only just beginning to become visible, but already there are signs that it will not be business as usual and that the international community needs to prepare itself to face a new set of challenges. Asia has not and will not escape the continuing consequences of the whole sorry mess. That means the states of the region will have to limit the economic as well the possible political fallout. The extent to which this challenge will be managed by states acting largely in their own interests or through enhanced multilateralism is an open question. Certainly much of the current rhetoric is towards the latter. In the end it could well be that East Asia will lead the world out of this crisis, though this cannot occur until the US undertakes serious financial reform. This will have the historic consequence of affirming East Asia’s place as the epicentre of a restored, increasingly integrated and globalised global economy.
Assuming that Australia can not remain immune from whatever may be coming, it needs to preserve and indeed build on its capacity to respond. The emerging international environment will demand that Australia develop new and more innovative ways to advance and protect its national interests and diplomatic agility is likely to be as important as military capabilities and including that may suggest that now the idea commands greater support and may have greater resilience. Things will intensify diplomatic engagement, including by Australia, may well be demanded if they are to be avoided. As Admiral Blair remarked to the US Congress a few weeks ago, the extent of the geopolitical consequences will be determined by the length and depth of the crisis. The global financial meltdown has added a new and deeply alarming dimension to the global outlook and to the contemporary challenges of international affairs.