Lowy Institute

The University of Chicago's famed international relations theorist John Mearsheimer has generously updated, and posted free of charge, the epilogue to his legendary realist book The Tragedy of Great Power Politics.

The original book, published in 2001, is frankly hard reading for any young IR or political science major, involving as it does many comparative counts of soldiers, horses and cannons through two centuries of Western European great-state warfare. Other historians like Kenneth Waltz and Rasler & Thomson have explored the nature of European imperial warfare for even longer periods, and have drawn essentially the same realist conclusion: that states seek to maximise their security and therefore their power, and inter-state military competition inevitably ensues.

In recent years, Professor Mearsheimer has turned his attention to the Asia Pacific, for the unsurprising reason that it is now the region of emerging great power competition. In his revised epilogue, he arrives at the equally unsurprising conclusion that China's rise this century will be fraught with challenges.

Mearsheimer, by his own admission, is not an optimistic individual, and he poses a sharp and gloomy challenge to the liberal and constructivist versions of geopolitics. I have a few specific Asian observations on Mearsheimer's new paper, which is impressive for both its completeness of argument and its reference to various specialist sources. But first, here is a quick synopsis for those time-constrained readers who want the punchline:

  1. China will seek the equivalent of a Monroe doctrine in Asia (ie. to be the unchallenged hegemon in its neighbourhood).
  2. This will pose a security dilemma problem, likely leading to an Asian arms race.
  3. It will also motivate a 'balancing coalition' to resist Beijing's dominance.
  4. The US, which will likely lead such a coalition, will respond with 'containment' efforts and other strategies such as 'rollback' and 'bait & bleed', well practiced in the Cold War.
  5. We can therefore expect to see a mutual hardening of rhetoric and positions in the security competition.
  6. Unlike central Europe in the Cold War, Asia's expansive geography (especially in the maritime domain) will create lower barriers to conflict. In a sprawling, largely oceanic theatre of operations, security actors may feel that conflicts can be 'managed'. Perversely, because the perceived cost and threat of nuclear escalation is lower than in Cold War Europe, this will reduce trigger thresholds and heighten dangers.
  7. Even more perilous is the 'unbalanced multi-polarity' structure likely to arise in Asia where China clearly dominates several smaller — but still powerful — regional states. This is the worst posssible architecture of all inter-state relations.
  8. Mearsheimer is particularly concerned about the morphing of Chinese nationalism into hypernationalism since 1989. This is the displacement of 'victor mentality' into 'aggrieved victimhood', dwelling on historical injustice. Hypernationalism has replaced ideology. It goes beyond patriotism and exceptionalism; it is hatred of 'the Other', something regrettably all too common in Asia.
  9. Chinese strategic philosophy values offensive realism as much as, or even more than, the US and USSR. Humane/benevolent Confucianist ideals were rarely practiced throughout China's ancient and bloody history of conflict.
  10. Mearsheimer rightly debunks the myth of 'economic interdependence' as a brake on conflict. WW1 is Exhibit A. There is a rich history of trading between countries at war.
  11. Finally, in recent years China has complained of provocation, and Mearsheimer thinks such complaints are essentially justified. The US 'pivot' may have exacerbated this problem. But more likely it is because weaker states wish to assert their claims before the power imbalance tips even further against them. I think Washington is well aware of this dynamic, and is trying to arrest it.

For me sitting here in Hong Kong, there are a few important (and perhaps hopeful) implications from this bleak assessment.

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Mearsheimer seems surprised by the revival of the wuwang guochi ('never forget national humiliation') narrative, which lies at the core of hypernationalism. He shouldn't be. Wuwang guochi has been the hairshirt (as Geoff Dyer recently put it) of China's 'rejuvenation' for more than a century. It has powerful resonance and motivation for Chinese people. The troubling paradox for Mearsheimer, though, is that as China has become more successful in the international system, its resentment has also risen. He puzzles on why the foremost beneficiary of this order in the last three decades increasingly appears set to challenge it, and to dig up old bones of contention in doing so.

So it would seem obvious that the outside world should strain especially hard to deflect, and where necessary politely challenge, any revanchist challenges. Rather than bait China, we should embrace it and help it celebrate its revival by acknowledging it as a winner (a 'responsible stakeholder') with legitimate interests and painful memories.

This is the liberal argument for engagement: allowing greater Chinese emigration and investment, and reducing barriers (while protecting mutually sensitive sectors, obviously), so that Chinese people view the world as open and welcoming. For example, wouldn't China act differently if there were 50 million ethnic Chinese living and prospering in the West?

But as Mearsheimer would immediately recognise, this effort will be complicated by the rise of other Asian nationalist leaders, with their own agendas quite separate from the US interest. It would be a disaster if Japan, long a champion of the liberal international project, chose this very moment to abandon it. And in which direction is India headed?

Another possibility is that Chinese hypernationalism 'isn't about us, it's about them'. In other words, although it is manifested as anger at foreigners, it may be essentially a domestic debate aimed at establishing nationalist credibility within a complex factional political system.

There are two sides to this argument. The first is that it's essentially benign, and the second that it's, well, not. The benign view is that hypernationalism is just harmless antics, a tirade for domestic audiences, and will burn itself out. The less friendly view is that no matter what foreigners do, there's no pleasing China. And there is nothing that, say, a balancing coalition of 'reasonable' states could do to assuage a bellicose dragon state. More than a few American realists thus think the ball is basically in Beijing's imperial court now; the burden for China's peaceful rise rests largely on its own shoulders.

Mearsheimer also addresses the issue of economic coercion. The problem of 'interdependence' or 'mutual vulnerability' is well known to historians. For example, in the late 19th century, the British political-industrial establishment understood very well that Germany was overtaking it in both power and prowess, yet chose to continue to trade with Germany because it needed Germany's specialised manufactured goods. More importantly, London recognised that Germany would compete hard to find alternative customers for its wares overseas, so a British-led boycott-embargo was essentially futile; in hurting Germany, it might actually inflict more economic pain on Britain's own commerce.

It does not require great imagination to see the parallels today in the US and China. Economic 'containment' would be devastatingly costly for both sides, yet as Mearsheimer points out, it is unfortunately quite feasible because states (or governments) 'will always value security over prosperity, because without security there can be no prosperity'.

There is, however, one additional variation of the economic coercion theme that Australians should ponder: one-way or asymmetric vulnerability. If one state needs another far more than vice versa, there exists the potential for outright coercion. Coercion in the realist sense need not mean military threats; political suasion might suffice.

Consider for example New Zealand's extreme dependence on China for dairy product exports. It is said in Hong Kong that 80% of Chinese infant formula imports come from New Zealand, and 80% of those are from Fonterra. Prima facie, it might seem that Fonterra has great sway over the People's Republic of China!

In fact, the very opposite is the case. When there is a milk safety scare, not only the CEO of Fonterra but the prime minister of New Zealand must get on the next jet to Beijing to attend to the matter. Mearsheimer would surely delight in such delicate exhibitions of power politics. To be sure, assuring important customers about product quality is simply good business. So too is diversification. But try as Fonterra might, there is no substituting the giant Chinese market for infant milk formula. The potential for coercion clearly exists, and anyone who doubts the ultimate power of economic coercion should visit Ukraine this fine spring. We should not be surprised if some New Zealand interests vocalise against joining any future 'balancing coalition' directed at China.

Mearsheimer would recognise New Zealand's dilemma: China is a hegemon in the sense that, perhaps short of all-out war, Beijing will become sufficiently influential to compel its neighbours and partners to its will.

Finally, a word on worst-case scenarios. Mearsheimer is a professor of international relations, not a Marines Corps commander. But he understands well the nature of violent military conflict. The original The Tragedy of Great Power Politics is a sober history of long, agonising wars, gangrene, disease and starvation. The remarkable Prussian blitzkrieg-style advance on Paris in 1870-71 was about the nearest thing we got to a 'short, sharp war' between great powers. I use that term in speech marks because there is a general worry, recently expressed, that China's strategic culture values first-strike advantage (also known in military terms as 'initiative') as a means to trump an enemy quickly and deter escalation. As Mearsheimer and others have noted, this is a risky gamble, especially when facing down great powers with vast strategic depth and resources. China, Russia and the US are three examples of countries that you wouldn't bet on backing down with a whimper.

Mearsheimer and other realists have asked whether nuclear weapons have somehow changed the essential nature of great-state relations. The general conclusion is that they have not.

What nuclear weapons do, however, is raise the risk and consequences of rapid escalation. No sane leader would wish to be in a nuclear-on-nuclear stare-down with minutes running down on the clock. Therefore, given the great annoyance that China must feel at the prospect of being surrounded on several sides, and the emotions which can whip up the Chinese public, it behooves the US and its allies to construct a defence arrangement that is the least provocative it can be. This is more easily said than done; security is a relative concept and one man's defence may look to his adversary like a threat. The US and its allies should explicitly design a doctrine of deliberate, slow, defensive and non-military escalation using diplomacy, time and strategic depth to avoid making hasty choices they'll later regret.

That is my lesson from Mearsheimer's book.

Air Sea Battle (ASB) is confidential and I don't know what it contains (it may all be bluff) but it hints at 'suppression', which is mil-speak for taking out enemy stuff proactively. That is not a recipe for strategic reassurance.

There were a couple of telling exchanges during US Secretary of Defense Chuck Hagel's recent visit to China. The Chinese defence chief Chang Wanquan told him that 'China can never be contained', a statement that is true to a large degree. Containment, a word Mearsheimer uses repeatedly, is a red flag to Beijing. I recommend in future we use the word 'constraint'. Every great power must be constrained, and all can surely agree that is a good thing. To this day, many Europeans (and some Australians no doubt) regret that they had not more effectively constrained and dissuaded Washington from its mad Iraq misadventure in the last decade.

Last week, China's Washington ambassador Cui Tiankai warned against forming an 'Asian NATO'. Alas, Mearsheimer (and Luttwak too) insists that balancing coalitions are inevitable in response to unbalanced multi-polarity, as will likely arise in Asia. Mearsheimer's specific concern is not that an Asian NATO would irritate China (it most certainly would), but that it would be much less effective than the European variety because of Asia's much greater cultural and geographic distances and diffusion. He does not name names, but he recognises that certain Asian states are likely to bandwagon with an assertive China, while other more independent and pricklier ones will be keener to join the balancing coalition. Given their very prickliness, he doubts they will remain cohesive enough to face a China-centric bloc.

Mearsheimer has written a stark and provocative essay which is deeply pessimistic. It will be our great collective project this century to disprove his thesis.

Photo from REUTERS/Petar Kujundzic.



A SpaceX Dragon capsule docked with the International Space Station.

Among the competing portfolios in America's vast government, NASA normally rests quietly as a low-tier agency. It lacks the huge budgets allocated to defence or welfare. No US president has won or lost an election on space policy. The heady days of the 1960s and a frantic Moon Race between two superpowers are long behind us.

Every year, NASA is allocated a slice of the federal budget pie, and carries on fairly quietly. At the moment, however, NASA is at the centre of a perfect storm of economics, local politics and international affairs.

America's space agency has been searching for a new direction for its program for more than a decade. The ageing International Space Station has around ten years of operations left, and NASA needs to start planning its next step. Disagreements are raging in boffin circles, and are complicated by turf wars between lawmakers and aerospace companies. Wild ideas such as cramming two astronauts into a capsule and flying them past Mars on a 500-day mission are complemented by proposals for snaring an asteroid in deep space and towing it back to lunar orbit. Observers are perplexed by NASA's ongoing lack of direction. 

The Russian annexation of Crimea has brought a sharp focus on America's dependence on Russia as its only supplier of astronaut launches. Having retired the Space Shuttle in 2011, NASA must pay hefty sums to buy seats on board Russia's Soyuz spacecraft, which uses a design little changed from the 1960s.

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Simply deciding not to launch astronauts is not an option, as NASA is the 'anchor tenant' in the International Space Station. For the moment, both nations seem to be working normally aboard the station, but other space projects are apparently being scaled back.

This over-dependence on Russia has highlighted another festering problem for American space flight. Nobody knows when the US will deploy another crew-carrying spacecraft, or who will do it. Rivalries between traditional US military-industrial monoliths and a new generation of start-up aerospace companies have been with us for years, but are now being elevated by geopolitical problems. The US Government has been funding the development of private cargo vehicles for the International Space Station (such as the Dragon capsule built by SpaceX, pictured above) and also hopes that private enterprise will eventually build private vehicles for astronauts. Dragon itself can be modified for this purpose (the latest launch of a SpaceX Falcon 9 rocket, which carries the Dragon capsule to orbit, was cancelled just hours ago and is now scheduled for 18 April).

Yes, Washington money is there, but allegedly not enough to help these companies achieve their goals. Alternative proposals for new rockets and capsules from the traditional aerospace establishment are also being funded. Washington is betting on all horses, but may be spreading its money too thin to win anything.

For the moment, US space policy has suddenly become a matter of strategic prominence. The challenge of a robust Chinese space program also lurks. Normally battles for NASA funding resemble minor fistfights on Capitol Hill. This time, it's more like a knife fight.

 Photo courtesy of NASA.


US Treasury Secretary Jack Lew at the IMF/G20 meeting in Washington, DC, 11 April.

The IMF/G20 meetings in Washington last week were not good for the US. And things may get worse.

Instead of focusing on the possibility of additional economic sanctions on Russia, which no doubt would have been the desire of the US, the headlines were 'G20 gives US ultimatum over IMF reforms'

The G20's frustration centres on US failure to ratify the IMF quota and governance reforms agreed by the G20 in 2010. While countries representing nearly 80% of IMF votes have approved the reforms, the required threshold is 85%. The US has a veto with its 16.75% shareholding and the US Congress continues to block the reforms. 

At their recent meeting, G20 finance ministers said that 'if the 2010 reforms are not ratified by year-end, we will call on the IMF to build on its existing work and develop options for next steps'. This has been interpreted as the G20 threatening to move to 'Plan B' which will by-pass the US, an approach strongly advocated by Russia

How significant are the reforms and is there a realistic 'Plan B'? Moreover, what would be the broader consequences of such a move? Or is it all a bluff?

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Joe Hockey said the 2010 IMF reforms are a top priority because they would 'double the IMF's permanent resources and lead to a major realignment of voting shares'.

The reforms will not increase the overall resources of the IMF. While IMF quotas (equivalent to share capital) will be doubled, this will be matched with an equivalent reduction in the IMF's permanent credit line from 38 of its members, known as the New Arrangements to Borrow (NAB). Ironically, the US insisted that the increase in quota be matched by a reduction in its contribution to the NAB, because it judged the reforms were more likely to pass Congress if they involved no net increase in the US financial commitment to the IMF. This logic did not persuade Congress. But an increase in quotas is necessary to achieve a change in quota shares. Moreover, it is considered important that the bulk of the IMF's resource base be linked to members' quotas rather than loans from a small sub-set of the membership.

With regard to the shift in voting shares to better reflect the change in relative weights of countries in the global economy, the 2010 package represents a modest change — the proposed shift in quota share from advanced economies to emerging markets and developing economies is only 2.8%. But the package also includes a shift in shares among the emerging markets, with the rapidly growing economies benefiting at the expense of over-represented countries. The result would see China become the third-largest shareholder in the IMF.

Furthermore, the package is intended to be part of bigger changes to come. Part of the deal is for a review of the formula used to determine quota allocations and an acceleration of the next general review of quotas. This is expected to produce larger shifts in quota shares to emerging markets.

The other key aspects of the reforms are a move to an all-elected IMF Executive Board and Europe agreeing to give up two of its chairs on the Board in favour of developing countries.

Is there a realistic 'plan B' if the US continues to veto these reforms? Neither the IMF nor G20 are giving away any details, but an unnamed G20 official is reported to have said there is no plan B; 'there is nowhere to go, initially you have a discussion, but then when you move to details, there is nothing'.

Bergsten and Truman from the Peterson Institute proposed the idea of moving ahead without the US. Truman subsequently suggested that a way forward would be to set aside the 2010 package of reforms and renegotiate the quota formula such that the US quota would rise; then move to double the size of quotas, with the resolution to increase quotas contingent on the support of 80% of voting power, thus removing the US veto.

The prospect of getting agreement on such a package seems unlikely. The negotiations over the quota formula have been very contentious and given the extent of ill-feeling towards the US, it is unlikely countries will endorse a change with the aim to increase the US share. Moreover, the proposal to end the US veto is based on the assumption that the US Treasury Secretary would vote in favour of such a resolution. This hardly looks like a plan that by-passes the US. It will require the support of the US.

Assuming it could be achieved, the consequences of by-passing the US could be significant. The chair of the IMFC, Tharman Shanmugaratnam, said enacting IMF reforms without US congressional approval would be possible, though less desirable. He said it would reduce American influence in the global economy and could cause a 'disruption in the multilateral system'. Such a move could see Congress become even more insular and result in a reduction in US support for a range of multilateral institutions.

Is 'Plan B' a bluff? It is to be hoped we don't find out and the US Congress does pass the IMF reforms, for if it is not a bluff, it could accelerate a reduction in US involvement in the global economy and international institutions. This would be very disruptive.

Image courtesy of Reuters/Joshua Roberts.

  • Increased appropriations for the EA-18G Growler electronic warfare aircraft appear to reflect concerns that the stealth capabilities of the F-35 are unlikely to prove resilient against modern air defences.
  • How can naval air/missile defence scale up to emerging A2/AD threats?  Huntington-Ingalls has a concept for a huge Ballistic Missile Defence vessel based on the San Antonio amphibious warfare hull.
  • As Western states pull back from Central Asia, Islamabad faces the prospect of balancing between both the conventional challenge offered by India and the sub-state threats emanating from Afghanistan.
  • What is a reputation worth? Patrick Porter argues that an obsession with external assessments of resolve lead great powers down the path to strategic over-commitment.
  • Rosalyn Turner discusses the possibilities offered by unmanned underwater systems in meeting Australia's naval requirements.
  • CIMSEC interviews former Blackwater CEO Erik Prince on his latest venture focused on frontier logistics in Africa, and the future of private military contracting.
  • Henry Farrell explores concerns that the NSA may have known for over two years about the recently-revealed Heartbleed internet security bug, and the implicit tension between the institution's dual mandate for promoting cybersecurity and developing its SIGINT capabilities.
  • Finally, in the latest move in Russia-Ukraine propaganda competition, a high production-value video has been circulating on the internet depicting a pro-Kremlin imagining of a future war over eastern Ukraine. 


On the sidelines of the nuclear summit in The Hague in late March, Pakistani Prime Minister Nawaz Sharif announced that the decision to grant Most Favoured Nation (MFN) trade status to India had been postponed until a new government in India is formed (India's national elections are now underway). The announcement has again dashed hopes of a manifold increase in bilateral trade and economic integration. India has been waiting for more than a decade to get MFN status from Islamabad; India herself granted this status to Pakistan way back in 1996.

India and Pakistan, economically the largest and strongest countries of South Asia, have insignificant trade with one another. The present volume of bilateral trade is a mere US$3 billion; a normalised trade regime could increase that to around US$40 billion. The Sharif Government wants MFN status for India to capitalise on Prime Minister Manmohan Singh's offer of a bilateral trade deal under which, in return, Delhi will grant tariff concessions on 250-300 export items produced by Pakistan's key economic sectors including textiles, cement, surgical instruments and sporting goods.

But as always, Pakistan's dominant military establishment, the self-appointed guardian of the country's national interest, objected to the democratic government's desire to have preferential trade with India.

Leading Pakistan English language daily The News wrote that the government has been 'forced' to postpone MFN for India because of the cold-shoulder attitude by the military. The Times of India, quoting its sources in the Indian Government, wrote: 'In addition to political and security policy, the Pakistan government does not even have the ability to go against the Pakistan military dictates on issues related to economic reforms.' The previous Pakistani government, led by the Pakistan People's Party, actually announced the granting of MFN status to India in November 2012 but was forced to back out by the irreconcilable military.

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Pakistan's military, which has directly ruled the country for nearly half of its existence and has always dominated (if not dictated) its foreign and security policies, has consistently prevented Pakistan from improving relations with Delhi, including on  trade. Pakistan's intelligentsia cite various reasons, mutually reinforcing, for Pakistani military opposition.

The foremost reason is the over-representation of Punjabis in the military. Punjabis are 57% of Pakistan's population while more than 80% personnel of the military are from the Punjab. The Punjab was one of the two provinces divided at the time of creation of India and Pakistan in 1947. Most of the Muslims killed during the mass migration of that time belonged to the Punjab, creating large-scale ill-will among the Pakistani Punjab against India. So, over-representation of the Punjabis in the military resulted in stringent anti-India policies by the military.

Another reason for the military opposition to free trade with India is its apprehensions that volume of the trade would be directly proportional to good relations between the two countries, which would reduce the importance of the military. Around 0.6 million active service and more than 0.5 million reserve military personnel consume a large portion of the country's budget and a good chunk of its GDP, preventing resources from being allocated to health, education and development. As the military has historically justified its huge size due to the security threat from India, Islamabad's good relations with India, the military leadership think, would raise demands for reducing the size of the military.

An allied reason for Pakistani military opposition to freer trade with India is that good relations would shift power over policy-making from the military to the democratic leadership and civil society.

Pakistan's military is also a big corporate entity, owning huge business enterprises in the manufacturing, real estate, banking, construction and transportation sectors. In her 2007 book Military Inc: Inside Pakistan’s Military Economy, Pakistani writer Ayesha Siddiqa finds that the total worth of businesses and enterprises owned by the military is about US$20.7 billion, making it one of the largest corporate entities in Pakistan. The success of the business enterprises and corporations owned by the military is attributed to its dominance over the country. Therefore, the military elite fears that in case of free trade with India, Pakistan would be engulfed with goods from India, inflicting economic losses on the military.

Apart from Pakistan military opposition to free trade with India, extremist Hindu and Muslim sentiments in India and Pakistan have also stopped the two countries from having extensive economic ties. Yet advocates of sustainable peace have long argued that increasing trade would reduce tension and create the conditions to end political and territorial disputes.

Photo by Flickr user My Past.


GDP growth. (Source: IMF WEO Chapter 1.)

The latest IMF World Economic Outlook (WEO) records a watershed moment for the global economy. In terms of purchasing power GDP, the emerging and developing economies are now clearly larger than the advanced economies. Moreover, they have accounted for three-quarters of global growth since 2009 and make up two-thirds of forecast global growth.

Since mid-2011, the emerging economies in aggregate have maintained a stable pace of expansion, with minor deviations, of around 5%. The Fund forecasts this to be a touch faster during the next two years (see graph above).

Yet the Fund continues to articulate concerns about the sustainability of emerging-economy growth. IMF Managing Director Christine Lagarde told the G20 meeting in September: 'Just as some advanced economies have begun to gather momentum, many emerging markets are slowing'. The latest WEO notes that 'downside risks to growth in emerging market economies have increased even though earlier risks have partly materialized and have already resulted in downward revisions to the baseline forecasts.'

This disconnect between the Fund's down-beat words and its actual forecast figures may be coloured by its interpretation of emerging economy evolution during the past two decades.

In the current WEO, the Fund devotes a whole chapter to examining the impact of the advanced economies on growth in the emerging economies. To do this, the Fund averages the growth of the main emerging economies over the period since 1997 and analyses the deviations around this average. The fundamental difference between the unsustainable pre-2008 period and the sustainable post-2010 period gets lost in this averaging process.

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The more nuanced narrative goes like this: in the decade or so leading up to the 2008 crisis, there was an atypical 'alignment of the planets'. China continued its head-long development pace, putting huge resources into government-sponsored investment while at the same time clocking up a massive export surplus. India, hobbled for decades by limitations encapsulated in the term 'Hindu growth rate', turned in a performance close to that of China. Brazil, which for decades had been disparagingly (or despairingly) called the 'country of the future', chronically unable to realise its potential, got its act together.

All of this, however, was unsustainable.

The world was not going to allow China to continue its disruptive external imbalance, running an export surplus equal to 10% of its GDP. Global saving was excessive and China was seen as the main culprit. India and Brazil flopped back into their traditional disappointing sub-par growth mode. To calculate a baseline growth rate by averaging these two fundamentally different periods is to miss the underlying shape of the growth profile.

The 2008 crisis represents the inflection point in emerging-economy growth. Once the advanced economies went into slump, the planets were knocked out of alignment. This was temporarily masked by the 2009 world wide stimulus. China, for example, recorded 12% growth in 2010, thanks to its enormous boost to credit. This stimulus couldn't be maintained and by mid-2011 growth in China, and in the emerging economies more generally, had fallen to a level substantially lower, but more sustainable, than the break-neck pace of the pre-2008 decade.

An alternative explanation for the Fund’s heightened risk-concern for the emerging economies is that it fears a big impact from the unwinding of US quantitative easing (QE). Given the US Fed's rhetoric, this is understandable. The Fed is going out of its way to emphasise that it will take a narrow, domestically oriented view of the unwinding, without any concern for other economies. Both Janet Yellen, the current Chair, and Ben Bernanke, her predecessor and the 'godfather' of QE, seem defiant on this. When Raghuram Rajan, the Indian central bank governor, complained again that QE was adversely affecting emerging economies, Bernanke is reported to have 'taken him to task' for his views.  

Whatever the merits of this argument (and Rajan seems to have the best of the analytical points), QE tapering last year didn't, in practice, do much harm. The shocks to exchange rates and equity prices in the 'fragile five' emerging economies were easily absorbed. If you are going to worry about the collateral damage from unwinding QE, you might worry more about the effect on Europe, with its under-capitalised banks, huge official debt burden and doubtful private-sector debts.

Perhaps the best approach is to focus on the Fund’s actual forecast figures for the emerging economies, rather than its articulated concerns about risks. Not only does the Fund's forecast of continuing good growth numbers seem well founded, but the accumulated growth performance in recent decades has given these economies the heft to remain, permanently, the main drivers of global growth. Today's China, growing at around 7%, contributes as much to global growth as the much smaller pre-2008 China did when it was growing at 10%-plus.  

Tony Abbott's Asian tour-team can hardly fail to have noted Australia's geographic luck. Now all we have to do is make the most of it.


The latest Intergovernmental Panel on Climate Change report makes for gloomy reading. The world needs 'drastic changes' to reduce carbon emissions and prevent global temperature rises, reports the ABC; investment in renewable energy needs to triple, says the BBC; the emissions problem is outrunning political determination to tackle it, says the NY Times.

True, there is also a hint of optimism in much of the reporting, because the IPCC itself says the cost of tackling climate change need not be crippling. But there are a lot of 'ifs' and 'buts' attached to that optimism, often corralled around the phrase 'political will': if there's enough of it, we can crack the climate change problem. 'Political will' is one of the most beguiling phrases in politics but should always be distrusted. The unstated subtext is that political leaders just need to lay aside their national interest and see the 'bigger picture'. That of course almost never happens, particularly if the threat is as nebulous as climate change.

Still, if you're looking for true starry-eyed optimism, I recommend this piece from Ambrose Evans-Pritchard, who argues that solar energy is improving so fast that it could overturn the global energy economy in a decade:

For the world it portends a once-in-a-century upset of the geostrategic order. Sheikh Ahmed-Zaki Yamani, the veteran Saudi oil minister, saw the writing on the wall long ago. "Thirty years from now there will be a huge amount of oil - and no buyers. Oil will be left in the ground. The Stone Age came to an end, not because we had a lack of stones, and the oil age will come to an end not because we have a lack of oil," he told The Telegraph in 2000.

I'm sceptical. If there's a lot of surplus oil, it will be cheap, and at lower prices it will find a whole new market. It's great that renewables are getting cheaper, but if that only serves to drive down the cost of fossil fuels, it will be wasted effort. As renewables get cheaper, fossil fuels need to get more expensive. If only there were a market-based mechanism to achieve that aim...

Photo by Flickr user Johan Douma.


Suva, Fiji.

A key facet of the Australian Government's aid and development policy for the Pacific island region is enhancing private sector engagement. However, the detail of this policy has yet to be articulated. The role of the private sector in aid and development is the subject of an ongoing  inquiry by the House of Representatives' Joint Standing Committee on Foreign Affairs, Defence and Trade. So now is a good time  to pose some key questions that may add to current thinking and assist in identifying opportunities and risks.

Whose private sector?

'Engaging with the private sector' is a broad formulation. It remains somewhat unclear to what extent this engagement is intended to be with Australian private sector players, the private sectors of the Pacific, or both.

With the obvious exception of PNG and very small inroads elsewhere (and leaving aside obvious examples such as ANZ and Westpac), Australian companies are not present in the private sectors of the region in meaningful terms. While there may be advantages to encouraging Australian companies to set up shop in the larger economies of South East Asia, the reality in Pacific island countries — with the notable exception of PNG — is that markets are generally too small to be attractive or to justify set-up costs.

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It is to be hoped that the envisaged private sector engagement comprises elements designed for 'home grown' businesses, and there are indications that this will be the case. While visiting the region late last year, Foreign Minister Julie Bishop announced an allocation of $15 million over five years to the Pacific Business Fund to provide business advisory services to over 250 companies in the region.

It is important to be clear that what 'works' for the private sector in Australia will not necessarily work for private sector operations in the Pacific. Perhaps more importantly, the approach to private sector engagement in one Pacific island country will not necessarily be appropriate in another. A number of factors are likely to affect what type of engagement is going to be best in each environment, including national investment policies and procedures, legal frameworks and regulatory requirements for business registration and operations.

Can or should the private sector 'do development'?

Is it good practice for private sector organisations to be given money from the aid budget in order to pursue 'for profit' activities in the hope that they will also deliver development outcomes?

Many Pacific island business already 'do' development. The terminology they use may differ from mainstream 'development speak', and the drivers of business may be different, but development objectives are most certainly achieved. Providing regular employment over a long period of time leads to improved livelihood for workers and their families, including increased access to education, health services and more.

However, it is hard to assess this impact either in any one country or across the Pacific island region. This is partly because the private sector is exactly that, private. In addition, the costs associated with collecting this information are high compared to the amount of data collected, owing to the small size of the formal business sector in each country. 

Who should Australia be talking to?

Engagement with the private sector is not new either globally or in the Pacific island region. Numerous players already have runs on the board, including Pacific Islands Trade and Invest, the Asian Development Bank, the International Finance Corporation and the European Union, each of which have run several activities receiving co-financing from Australia and/or New Zealand. They have good information to share, based on experience and networks in individual countries. Australia has learning of its own to add from previous activities in this area, including the pilot Enterprise Challenge Fund for the Pacific and SE Asia, which concluded recently.

As the drive for private sector engagement moves from policy articulation to implementation, we would hope to see a real commitment to donor integration and cooperation, as envisaged by the Cairns Compact. Private sector entities in the Pacific island region have small management teams (often the senior management is one person) so there is limited capacity and tolerance for accommodating multiple teams of consultants scoping, designing, monitoring and evaluating the (apparently) same thing.

There is much to be achieved in the area of private sector engagement with aid and development. With good preparation and a willingness to learn and collaborate, the Australian aid program can make a good contribution.

Disclosure: the author was Country Manager (Vanuatu) for the Enterprise Challenge Fund for Pacific and SE Asia 2008-2010.

Photo by Flickr user kyle post.


By Geoff Miller, former Australian Ambassador to Japan (1986-89) and former Director-General of the Office of National Assessments (1989-95).

In their Interpreter article of 27 March, Bates Gill and Tom Switzer respond to questioning of the durability of the US 'pivot' (or 're-balance') towards the Asia Pacific. They say the US is likely to remain the predominant power in the Asia Pacific across key indicators of national power, and they list a number of areas in which they say the US is showing substantial engagement and commitment. They give pride of place to security, saying that 'perhaps nothing better demonstrates the long-term US commitment to Asia than its enhanced security presence'. As examples they mention enhancements of American maritime air capacity in Japan.

Nevertheless, there is room to doubt whether the US commitment will prove as strong as Gill and Switzer believe.

For example, in his book Duty, former US Defense Secretary Robert Gates speaks (p.582) of the 'paralytic polarization' gripping the US system of government today, and says that 'we (the US) have rarely been so polarized and so unable to execute even the basic functions of government, much less tackle the most divisive problems facing the country'.

One example of US policy paralysis affecting the pivot to Asia was recently bemoaned by Treasurer Joe Hockey, who in a speech in Washington castigated the US Congress for blocking the adjustments to IMF quotas recommended by Fund members and long sought by major East Asian countries.

Furthermore, speaking to the Lowy Institute on 25 February, Richard Haass, President of the US Council on Foreign Relations, said the US is suffering from 'intervention fatigue' after Iraq and Afghanistan, that there is no domestic consensus on the US role in the world, and that he does not think the US is doing enough to flesh out the pivot: 'it doesn't have a champion'.

From an Australian point of view, there may be advantages in a less than whole-hearted or fully effective US pivot to Asia.

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It is interesting that Bates Gill put the security dimension at the top of his list of areas showing enhanced US commitment to Asia, since that contains concerns for us. A series of decisions are making Australia more closely integrated into the US force structure in the Pacific: we have the Marines in Darwin, a seconded Australian Army general holds a senior position in the US Army in the Pacific, and an Australian naval ship has been part of a US Navy task force patrolling the North Pacific.

Each of these activities has its rationale, but the cumulative effect is of our becoming increasingly part of the US force posture in the Asia Pacific. If the US became involved in hostilities it would be difficult for us to opt out, whatever we thought of the circumstances.

Why might or should we want to opt out? Two causes for concern are the tendency of some in the US to demonise China, and one type of conflict which is canvased in US strategic circles, namely the 'Air Sea Battle'.

While in theory 'Air Sea Battle' is an enemy-free strategic concept, it seems clear that, in the minds of its proponents, China would be the target. It has obvious attractions for US strategists, who want to avoid future land wars in Asia. Naval and air power are of course America's strengths. But 'Air Sea Battle' would involve the overwhelming use of these strengths, and the question for us is why we would be interested in involvement with it.

We are of course a US ally, but we also have a strategic partnership with China. Only last week, in what seems to have been a successful visit to China, Prime Minister Abbott not only put an enormous amount of national and personal effort into strengthening our trade and investment relationship, but also made important advances in the security field. According to press reports, Mr Abbott said he was 'quite confident' of building on high-level meetings and exchanges with the PLA through 'multilateral exercises in the months and years ahead'. The first such exercise will take place in July, when China for the first time joins more than 20 other nations in aspects of the RIMPAC exercises to be held off Hawaii. In that exercise, at Beijing's request, the PLA Navy will operate under Australian command and control.

Yet at almost the same time, the Commander of the US Pacific Fleet, Admiral Harry Harris has described China as a 'destabilising influence' and accused Beijing of 'revanchist tendencies'.

The AFR's Brian Toohey, a defence specialist for many years, wrote on 5 April that 'Current US projections for a war with China envisage Australia's key contribution would be naval forces at the southern end of China's trade routes to help block the import of commodities such as Australian iron ore and natural gas'. Wouldn't be easier for us to simply not sell our resources to China, if we decided we didn't want China to have them?

But as the PM's visit showed, we do want China to have them, as we want a peaceful outcome to the re-balancing of forces in the Asia Pacific. In this context, we can welcome a US re-balancing or pivot to Asia even while we may remain somewhat sceptical about it. But we don't want the US re-balance to be over-militarised, involving alarming doctrines which have the potential to involve us through a largely unpublicised process of folding our own defence force into US military plans for the region.


CNN suffered a lapse in taste and judgment with this 'light' piece about the royal visit to New Zealand:

Reporter Jeanne Moos  has since apologised for the cultural insensitivity of her piece.

The easiest way to illustrate the tone-deafness of this kind of reporting is to mirror-image it, which Slate does superbly with its regular If it Happened There series, which covers American events and personalities using the same tropes and cliches so often used to report on foreign countries. An example:

WASHINGTON, D.C., United States—On Wednesday morning, this normally bustling capital city became a ghost town as most of its residents embarked on the long journey to their home villages for an annual festival of family, food, and questionable historical facts. Experts say the day is vital for understanding American society and economists are increasingly taking note of its impact on the world economy.

The annual holiday, known as Thanksgiving, celebrates a mythologized moment of peace between America’s early foreign settlers and its native groups—a day that by Americans' own admission preceded a near genocide of those groups. Despite its murky origins, the holiday remains a rare institution celebrated almost universally in this ethnically diverse society.

3 of 3 This post is part of a debate on Snowden WikiLeaks and the future of espionage

I've already had the opportunity to argue that listening in on the wife of Indonesian president Susilo Bambang Yudhoyono (and the subsequent defence of these actions) is clear evidence that our intelligence people have lost that essential quality, their sense of judgment.

I was struck by Allan Behm's argument that revising the law will fix these problems. In everyday life, the law sets the perimeters on our actions, but we all have to constantly exercise judgment above and beyond the requirements of the law. Society can't function without the extra constraints imposed by good sense. International relations are just the same.

There are other judgmental issues. Is the intelligence valuable enough to justify both the cost and the risk of being caught out? Is there a cheaper or better way of gathering the information, say through conventional diplomacy?

We need an external inquiry to establish how our intelligence community lost its judgment and what ongoing supervision will be needed to make up for its demonstrated lack of common sense.


There's an enormous, weather beaten photo of Hamid Karzai glued to the crumbling brick wall of Afghanistan's Helmand airport terminal. Karzai, whose family hails from the Kandahar province next door, won't be president for long. But it's unlikely anyone will move too quickly to peel the photo down.

There are just over 200,000 Afghans living in Lashkar Gah city, where the airport is based. But there's little evidence here in this desolate Taliban region that many of its people have been thinking about Kabul politics.

Votes lodged by the 7 million Afghans who turned up last Saturday will take weeks to count, but few expect a clear winner. Afghanistan's constitution requires the elected president to have more than 50% of the total vote. It means a further battle between the two most popular contenders, Ashraf Ghani and Abdullah Abdullah, is inevitable.

In the remote parts of Helmand province, voting papers were transported on donkeys and will be retrieved the same way.

There are few vehicles on the roads. Mostly it's rickshaws, donkeys pulling carts, and the occasional emaciated grey horse. And camels. In Lashkar Gah they plod down the road loaded with goods, and sometimes languorously graze unfenced areas on the outskirts of town.

Heading towards the region's main public hospital, the streets are noticeably absent of women. The one or two who duck in and out of shops along the sparse, dusty bazaar are in burqua, but not the light blue worn up north – these are a soft moss green, gold, or a deep rich red.

This is the province where the girl from Steve McCurry's famous National Geographic cover grew up. In Afghanistan, it seems, the brightness and beauty of the young women and their clothing is an inverse marker of social progress.

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Inside the hospital, a Congolese volunteer midwife does the rounds of a post partum unit, lamenting the lack of room to keep young mothers in for longer than a couple of hours after the birth. It's particularly difficult, she says, because many are terrified of hospitals, don't trust the expat staff, and have husbands who don't like them being out of the home.

A surprisingly high number of the women are gone within an hour, trudging past the wilting eucalyptus trees and clumps of people languishing on the hot bitumen of the hospital driveway. It's not uncommon for them to begin the six-day walk back to the remote towns in the province the same day they give birth.

They start breeding them young here. 'Oh yes,' the midwife says, completely unperturbed. 'We had a woman in who had given birth 24 times. She died with number 25.'

Much has been made of Afghanistan's patronage from the West, about the vast improvements to social policies and living conditions wrought by astronomical aid budgets and the international military intervention. Diplomats from some Western countries said privately they were even pleasantly surprised at how forward thinking former mujahidin factional leader and presidential candidate Abdul Rasul Sayyaf seems to be now.

Over cocktails in Kabul, hardly anyone mentions the era when Sayaff and his political ally Gulbaddin Hekmatyar spent months building fundamentalist Islamic militias in Peshawar with money and weapons supplied by the CIA and rich Saudi sheikhs like Osama bin Laden.

Instead, it feels as if every expat is talking enthusiastically about economic development, stimulus to trade, boosts to farming and agriculture, the potential for mining, the glowing possibilities now Afghanistan has dodged communism and the Taliban.

That might be so, in Kabul. But Afghanistan is not the sum total of its capital city, the former Paris of the East. Kabul is a political island, where social change is beginning to take effect, where Islam is moderated by the accepted presence of Westerners, where dress shops sell traditional afghan attire to tourists for wads of American dollars and English-speaking taxi drivers deliver bottles of contraband vodka to raucous dinner parties for their English speaking clients.

But in Lashkar Gar, at this time of year, burns are the biggest issue. Two year-olds are admitted with 40% burns after being given the chore of topping up the household oil heater while it was still on. Mothers nurse four year-old boys whose eyelids have been scarred shut after the diesel bottle they were using to light the family's fire blew up in their face.

The policy challenge for international governments seeking to engage and assist Afghanistan after the next president is declared will be to reconcile these disparate realities: Kabul's island and the provinces it floats above.

For now, there's very little evidence the people in Helmand are thinking of the election at all. They're concerned about exactly when NATO's troops will withdraw, and their next meal. Foreigners are merely tolerated by a slim segment of the town's community. Up north in the remote parts of the province, past the British military base at Camp Bastion, foreigners are not tolerated at all. It is a landscape completely apart from Kabul — of rigid traditions, non-existent education and militant attitudes towards infidels.

Soldiers based in the warring provinces are right to be derisive of romantic attitudes about Afghanistan proselytized by visitors who don't leave their compounds in the capital city. To them, Afghanistan is a 'shithole', 'one giant sandpit', 'beyond help'. These soldiers share none of the hope expressed by international aid organisations and embassies that the country will emerge from 2014 with a stable government and a united will to create national prosperity and social transformation.

Instead, they see the poppy fields and the girls married at twelve and the men whose only hope of a better life is a third wife or a belief in the promises of hardline preachers touting religious riches.

In Kandahar, a twenty-minute detour on the way back from Helmand to Kabul's international airport, the plane lands to pick up supplies. On the runway behind it, a US military drone takes off, its grasshopper legs and flat wings grey against the clear blue sky, casting shadows on the red dirt of the outlying hills. In Kandahar, like Helmand, these weapons of war are still the only currency of social change, and even they, eventually, will be gone.

Map courtesy of Wikipedia.

2 of 3 This post is part of a debate on Snowden WikiLeaks and the future of espionage

Allan Behm, one of the participants in Monday's panel session on Snowden, WikiLeaks and the future of espionage, contributed this to the comments thread:

Governments (should) set their own moral compass. It is important that government employees are ethical and moral. But they are not contracted to provide government with ethical or moral advice. While policy advice to government must never be unethical or immoral, the critical determinant is that advice be framed within the construct of the law: governments are required to act legally. So also are government employees. If government employees entertain ethical or moral qualms regarding the actions of government, especially in the contested areas of the military use of lethal force, the law enforcement use of armed force, or the possible intrusion into personal privacy by the intelligence or law enforcement agencies, they have a duty to make their concerns known to those who exercise the principal accountability to government. Institutional leaders have the responsibility to exercise their judgement and advise on these matters. If a government employee remains conflicted, he or she is absolutely entitled to resign. But government employees are not entitled to advertise their dissenting views. Nor is there any self-imposed "duty" to inform the public of perceived government misdemeanors. In a democracy, government employees exercise their rights as citizens to vote governments out of office. Manning and Snowden broke the law. That is why the US court has prosecuted and sentenced Manning. And it is what should happen to Snowden and anyone else who acts outside the requirements of the law.

Dotpols wrote:

This was a fascinating discussion.

However, I must say that I found Allan Behm's assertion that intelligence operatives/defence personnel etc should only concern themselves with the legality of their employer's (in this case the state) actions is naive and flies in the face of post WW2 attitudes.

Effectively what he seemed to be promoting was a silent protest through resignation - an act that is only partially better than 'the Nuremberg defence' for acts of gross immorality. You simply cannot expect people to uniformly accept this.