Magazine of Socialist Action in Australia

Australia caught in the middle as US-China relations sharpen

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The ongoing impacts of the international crisis of capitalism have triggered enormous unrest across the world. So far Australia has been lucky enough to avoid the worst of this crisis. However, the changing nature of global capitalism has fast-tracked a shift in global power relations, a process playing out on Australia’s doorstep and highlighting the contradictions of Australia’s so-called ‘stability’.

China has emerged from the crisis strengthened in comparison to its rivals. The world now looks towards Asia, particularly China and to a lesser extent India, to drag the world economy out of the doldrums. Because of this the Asia-Pacific region is become an increasingly vital centre of economic, political and strategic relations.

China’s rise as a world superpower is occurring rapidly. China recently over took Japan to become the world’s second largest economy. In 2011 the IMF predicted that China’s economy would overtake America’s by 2016. The Economist magazine suggests this will occur in 2018. Some commentators speculate that China has already over-taken America to become the world’s largest economy. Others remain more skeptical about China’s ability to continue growing.

However, the accuracy of such predictions is of less significance than the debate itself; the imminent expectation of a serious challenge to America’s role as the world’s number one superpower.

There are very few countries in the world that are more vulnerable to the consequences of this shift than Australia.

The American Century

For more than a century America has reigned as the largest economy in the world. The world as we know it is one that has been shaped by American global dominance. The 20th Century was, without a doubt, the American Century.

America has paid huge costs at home and internationally, always at the expense of the working class, to maintain their world dominance and halt the rise of opponent superpowers like Japan, Germany and the USSR.

While we cannot underestimate the enormous ‘ideological’ threat posed by the Soviet Union, all of these competitors had serious economic obstacles to overcome to genuinely pose a threat to American economic superiority. The obstacles facing those countries were far greater than those facing China today.

In fact, China’s rise poses a far greater threat to American economic dominance than any other country throughout the 20th Century did. One important factor is the sheer size of the Chinese working class.

America has had the world’s largest economy since the 1880’s largely due to the fact it has had by far the largest workforce in the developed world. While China and India remained semi-agricultural, America benefitted from the productivity gains of the industrial revolution.

Now, this gap between the productivity of the economies of the Western world and the economies of the developing world is closing, and closing quickly.

The Chinese economy over the last 40 years has grown from 1/20th the size of Americas in 1972, to potentially overtaking it. One of the key differences between China and India on the question of industrialisation and growth is the differing nature and history of these economies.

Unlike India, China, after the 1949 revolution, developed a centralized and planned (albeit undemocratic) economy. The basic integrated national infrastructure of roads, train networks and industry that was built under the planned economy has been the base on which China has been able to grow so quickly.

Recognising the legacy of a planned economy in no way apologises for the brutal and undemocratic rule of the Chinese Communist Party (CCP), but goes towards explaining China’s rapid economic growth. Because of this China has not had the same barriers to growth, and does not have the same future barriers to growth, as other Asian nations like India, Pakistan and Indonesia.

As China’s economy has grown we’ve seen a huge migration of agricultural workers into the cities to become part of China’s industrial working class. Not only has this happened on a huge scale over the last few decades, but there are also hundreds of millions of Chinese still living subsistence lifestyles in the countryside that are continuing to make this transition.

It’s estimated that China’s workforce is now four times the size of America’s. Essentially this means the average Chinese worker need only to produce one quarter of what the average American worker produces to equal American economic output.

The Asian Century

Many commentators, including representatives of the Gillard Government, have argued that despite the rivalry between China and America, their mutual economic reliance on one another is so great as to dissuade an escalation in conflict.

While it is true the two economies are tied together by a thousand strings, this view is incredibly optimistic and conveniently ignores what is already taking place.

Since the onset of the global economic crisis China has become much more assertive on a number of issues, from international and financial affairs, but most clearly in their maritime and territory claims in the South China and East China Seas.

China has shown it is increasingly willing to risk confrontation to challenge American interests in Asia.

The Obama administration has recognised this, giving top priority to the Asia-Pacific in a foreign policy described as America’s “Pivot to Asia”.

In general, American strategy so far has been to build and strengthen military and diplomatic relations among countries in the region.

America has long-term allies in East Asia and the Pacific: Japan, South Korea, Australia, New Zealand and the Philippines. The Obama regime has also made serious moves to build tighter relations with Vietnam, Indonesia and Thailand.

Last year Obama toured the Asia-Pacific to negotiate increased American military presence on Australian, New Zealand and Philippine soil, including the stationing of 2,500 us marines in Darwin. America is also stationing warships in Singapore and seeking to access bases and ports in Thailand and Vietnam.

These moves are part of a broader strategy to ensure American domination over vital shipping routes through South East Asia. This is what lies behind the ongoing South China Sea dispute.

America is also pushing a largely secret Trans-Pacific Partnership free trade deal that excludes China. This is an attempt to entrench American access to East Asian markets.

Can Australia avoid conflict?

All of America’s allies and friends in the Asia-Pacific rely on America to some extent for their national security, but increasingly on China for their economic security.

For Australia, China is the country’s biggest trading partner, consisting 21.8% of the export market. Much of this is mining industry related. Considering that outside of the mining sector the Australian economy is faring poorly, a reduction in trade with China would be disastrous for the Australian economy.

However, the alliance between Australia and America is stronger than ever. If the rivalry between China and America escalated into out-and-out conflict, no matter how small, there would be a huge amount of pressure on Australia to back America or risk losing that alliance.

Similarly, there would be an enormous amount of pressure on the Australian government to protect business interests in China.

The uniqueness of the Chinese economy in terms of the integration between business and government makes it very easy for China to apply economic pressure for diplomatic ends. The idea that Australian economic interests in China would be safe if the Australian government sided politically and militarily with America is utopian.

Both China and America have much to lose if they concede dominance over the Asia-Pacific. America could very soon find that maintaining dominance in Asia carries too many risks, but withdrawal would also carry risks as America’s economic future depends on American access to Asian markets.

China, on the other hand, does not yet have the military capacity or the regional allies to assert dominance over the region. However, they do have an increasing capacity to challenge American dominance in the region.

From this we must conclude that the status quo of America as the unrivalled power in the Asia-Pacific has ended, and serious power struggles lie ahead.

The immediate and short term choices facing all of the countries in the region are ones that will inevitably draw out the contradictions between their political alliances and their economic interests. This is especially true for Australia, and is a process socialists across the region must be prepared for.


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