.AUKUS is a backward-looking policy. The World needs to move forward.
Economists think that the more interconnected countries are by trade and investment, the less likely warfare will occur between them. On many occasions countries have consciously intensified those interconnections as an alternative to war. Examples include the federation of the American states into the USA following a confederation after customs conflict between Maryland and Virginia; the European Coal and Steel Community (which evolved into the EU) tying up the French and Germany industries after three painful wars; ASEAN which was started after the Indonesian confrontation of Malaya ended; recently India has improved its physical and trade links with its neighbouring China and Pakistan.
Alas, economic relations between China and the US have deteriorated. That this occurred under both President Trump and President Biden suggests a structural tension arising from jostling over their places in the world. According to the World Bank, the Chinese economy is now a quarter larger in total output than the US economy, although its output per capita is only about a third of the US level.
One can explain the First World War and the follow-up Second World War as a consequence of Germany catching up in economic size to Britain and trying to find a comparable place in the world. (Neither noticed that the US was already bigger.) We may be grateful that moving from one global hegemon, Britain, to a second, the US, did not involve conflict between the two (although the two world wars accelerated the transfer from a weakened Britain).
It is unlikely that China is going to be the next global hegemon. Rather, we are moving to a multipolar world where there is none. There is a plausible economic model which predicts that world economic output, and hence power, is moving to where the populations are – the situation before British industrialisation. It occurs because of the ease with which technology and capital can transfer between countries.
That does not mean that Chinese productivity will catch up to the American level – not in this century anyway. Factors like the resource base and social organisation mute the economics. (Nor is it clear what will be the effect of global warming.)
India’s population overtook China’s last year and is expected to greatly exceed it in 2050 (1.7b vs 1.3b), while Pakistan (370m), Nigeria (360m) and Indonesia (320m) may then have populations comparable to the US’s (380m). (The European Union’s is already bigger, at 450m – without much change expected in the future.)*
Economists work on the basis that in the long run wars are decided by economic might once there is a commitment. As the war in the Ukraine prolongs, Putin’s only hope must be that the West has not the commitment to defeat Russia outright. I am not sure what the conclusion is over a short war with nuclear weapons except that no one wins. So while military strategists focus on the shorter term, the longer outlook is likely to be dominated by economic and related considerations.
So behind today’s incipient economic warfare and military machinations we face a multipolar world whose shape is uncertain. There may be regional hegemons. Russia is contesting with the West for Eastern Europe; China wants to be the hegemon in East Asia, which the US is contesting (especially over Taiwan); India has similar ambitions in the Indian Ocean; Iran’s ambition seems to be the Middle East hegemon although anyone who thinks they know what is going on there has not been following closely enough. However, while regional hegemony may be a local military and political solution, global economic connectedness means regions are interdependent.
The challenge for the world, then, is how to get from the current world order, in which the US acts the hegemon, to a multipolar world in which the US is but one of four or so big economies. Full multipolarity may be less than a quarter of a century away.
The US does not seem to see the issue this way. It is largely preoccupied with the short-term task of trying to maintain its current hegemony in a world whose order it sees as not too different from the immediate post-war one. It might have been the only effective global power in 1950, when it was producing around 27 percent of the world’s goods and services (measured in common prices – ‘purchasing power parity’, as all the output data in this column is), but by 2023, the US share was 15% (as was the EU’s, with China at 19% and India’s at 8% – everyone else was below 4%).
Trump admitted the weakening of the US when he insisted that the European nations increase their military spending. However, and ironically, it is Putin who has given the Europeans the spur to spend more, although that is partly because they no longer trust the US commitment to them.
The US strategy seems to be to compensate for its growing weakness by strengthening its alliances. When NATO invited Australia and New Zealand (and Japan and South Korea) to their deliberations, it was not with the intention of involving the two countries in a European war again (at least I hope not) but it was trying to entice the Europeans to make a commitment in the East Asia/West Pacific region.
Similarly, the AUKUS pact is trying to get Britain involved (Australia does not have much choice). The Pillar Two extension is probably more about involving Japan and South Korea than involving us. (Sorry, folks, we really are unimportant.) The difficulty with AUKUS is that it does not seem to be forward looking, contributing to a pathway to the oncoming multipolar world.
That faces New Zealand with a choice of looking forward or looking backward. In an earlier column, I pointed out the short-term conflict between our security and trade interests, between involvement with the US and with China. This column is about long-term concerns. (Parliament grounds must already be booked for demonstrations by educationalists, environmentalists, the gun-control lobby, healthcare advocates, Māori, those concerned with poverty, pro-Gaza and pro-Israel supporters, public servants and unionists. Does the Government need to take on peaceniks as well?)
All of which suggests we should not get too involved in AUKUS Pillar Two. Yes, the US is a friend, but you don’t always join in when a friend is behaving unwisely. Mind you, I am not sure that the US will listen to a friend advising the more prudent course of action of developing an international order which makes more room, especially, for China and India. (It is said that countries don’t have friends, only interests.)
On the economic front we should be encouraging economic interconnectedness, especially a rules-based international order. Disgracefully, the US is vetoing appointments to the WTO Appellate Body which deals with disputes arising from disagreements between trading partners. (Presidents Obama, Trump and Biden have all vetoed, so there is a structural problem here, not a whim.) That weakens the international rule of law.
The US has what amounts to a veto in the IMF and the World Bank, reflecting international circumstances in 1945, not those of 80 years later. With the weak IMF plus the Chinese and US treasuries and the ECB we have, in effect, four world central banks which is, for example, fouling up sorting out countries with serious debt problems.
These arrangements established immediately after the Second World War and reflect neither today’s world nor the future’s. (As do the five permanent seats on the UN Security Council, to which New Zealand objected when that it was established.)
New Zealand may have little influence over the evolving world order. In so far as we have, we should be putting our effort in assisting it to move towards the reality of multipolarity. Ultimately New Zealand is having to balance its short-term interests against its long-term ones. I am not sure our friends always understand this.
* UN Population Division’s central estimates. I also looked at various projects of economic output. They are all over the place but are insistent that the US share in the total will fall further.