The world has changed

by Daniel Wild

In his recent address to the National Press Club, leader of the National Party Matt Canavan said that he has been “angry the past few years at seeing our great country go down the toilet.”

“I am not interested in an economic reset. Given the state of our country, we need an economic revolution,” he said.

Finally, someone in Canberra thinking big and thinking bold. Tinkering around the edges is simply not going to rebuild Australia into a successful and confident nation, with the self-assuredness and living standards we once enjoyed.

Speaking in the heart of the Canberra swamp, Canavan declared we need to scrap the net zero madness, protect our industries so we can defend ourselves, and grow our country in many different ways.

What was so critical about Canavan’s address was his willingness to break with the old economic orthodoxy of the 1980s and 1990s, criticising the political class for being “trapped in… the thinking of the last generation, the thinking of the Thatcher and Reagan era…. I don’t think microwaved Milton Friedman is going to save the day.”

And this is the key point. The economic reforms of past generations were necessary. They were implemented when we lived in an industrial and manufacturing heavy economy which was eager to develop its natural resources and export them to the world. Australians benefitted tremendously as a result. But the reality of the world, and of Australia, is not the same as it was in the late 1980s or the early 1990s.

Now, we live in a largely ‘service-based’ economy, which mostly means taxpayer-funded jobs in healthcare, education, and the public service, that has created a large and ever-growing government. The economic liberalism of the past, as fitting as it was at the time, doesn’t match up to the challenges we currently face as a nation.

Nor does it match up to the global environment we find ourselves in. It is worth returning to one of the main intellectual arguments for Australia’s embrace of trade liberalisation and the free flow of products and people. In 1989 Ross Garnaut, Bob Hawke’s former economic advisor, published a major study commissioned by his old boss which became the basis of the final dismantling of Australia’s trade protection.

In Australia and the Northeast Asian Ascendancy, Garnaut argued that the world was changing and Australia had to change with it. “This is a time of great opportunity for Australia… In global political terms, it is a time of peace and diminishing tensions extending into our Western Pacific region. In “an era of commitment to peace and to internationally-oriented growth in the Western Pacific, there is a wide concurrence of interests, so long as we ourselves and others are clever and disciplined enough to move consistently with shared interests.”

That period of “peace and internationally-oriented growth”, which Francis Fukuyama famously referred to as the “end of history”, is well and truly over. Showing how much times have changed since Garnaut’s study, contrast to today his contemporaneous analysis of Chinese-Taiwanese relations: “By the second half of the 1980s, economic ties and associated political self-confidence were supporting positive Taiwanese responses to mainland Chinese overtures for closer contact.”

The reality is that the western world has been moving to a post-liberal setting for some time now, certainly since the Global Financial Crisis of 2007-08, and arguably since China joined the World Trade Organisation in 2001. This move is not an unalloyed good and presents many challenges. But it is a reality. As Senator Canavan said in response to a question at the National Press Club:

I support free trade too. I’m sad this era is over, but I live on this planet and have to deal with the reality in front of me. I said earlier, this era of globalisation and free trade did deliver great benefits for our country, and it would be better if we could return to such a world. But at some point, we do have to face the fact that things have changed.

The pandemic exposed how fragile Australia has become as a result of the decline of our domestic manufacturing and industrial capabilities. We failed to learn from this and take change seriously, and now with the Iran conflict our fragility is once again being exposed.

But it was not just our fragility that was exposed by physical disruptions to trade, such as blockades, rising insurance costs, and pandemic-era restrictions on activity. We have also been a victim of trade weaponisation. According to a recent report, China has nearly tripled its use of export controls in the past five years. After the current Iran conflict broke out, China quickly cut back on exports of fuel and fertiliser (about one-third of Australia’s jet fuel comes from China, and China is Australia’s largest source of fertiliser). Similarly, China has used import restrictions to levy political pressure, notably on Australia by restricting wine, rock lobster, and other goods after the Morrison government called for an inquiry into the origins of the coronavirus pandemic.

Evidence that the era of liberalism was ending was there before the pandemic. “This is the age of disruption, in politics as much as in business,” former Prime Minister Tony Abbott wrote in late 2018, “and political parties must respond or fail.”

The disruption caused by traditional trading relationships, including with a strategic adversary, was leading to greater levels of instability in much of the West. Tony Abbott argued, for example, that “we conservatives can’t decide whether it’s more important that trade is free or that it’s fair”. And that:

Although freer trade undoubtedly produces more total wealth, it’s little comfort to an unemployed car worker that his Chinese-made flat screen TV is now cheaper. So far, the economic rise of China has indeed been good for the world, but it’s been much better for China than for the countries whose manufacturers have been undercut and whose technical secrets have been stolen. Likewise, the many benefits of immigration are less clear to the long-time residents who now feel like strangers in their own neighbourhoods, or to the former workers whose jobs have been taken by newcomers ready to work for less.

Canavan has shown leadership in responding to this long-overdue question about Australia’s economic future in the context of declining global trade. Our political leaders have allowed our nation to become vulnerable in key areas – especially when it comes to fuel, fertiliser, and basic minerals processing and chemicals and plastics manufacturing.

This does not mean a return to the protectionism that existed in the 1920s. It means dealing with the reality of the 2020s and establishing a new policy agenda suited to our times and our circumstances.

Matt Canavan should be commended for undertaking something so few political leaders have demonstrated a capability for over the past decade: leadership.