In this remarkable piece, Greg Sheridan sounds the alarm on the vulnerability of Western democratic powers to the Chinese Dictatorship in terms of strategic industrial policy.
Coronavirus: Time for urgent reassessment of vulnerability
Australia is a nation grievously unprepared for a serious national security emergency.
The coronavirus crisis is an urgent wake-up. We must reassess our deep national vulnerabilities across a devastating range of national security issues.
Australia is more vulnerable to a wider range of dangers in a more disruptive time than we have been since the threat of Japanese invasion in World War II.
This is not a criticism of Scott Morrison’s response to the virus crisis. The latest actions — a national cabinet, tough travel advisories, a halt to non-essential mass gatherings — give a chance of slowing the worst phase of this crisis.
Health Minister Greg Hunt is determined that, when the acute phase comes, we will not be triaging elderly people to death, we will fight for every life.
The Prime Minister’s leadership has been sure. Australians traditionally respond well to crisis and pull together when we have clear direction and know what to do.
But COVID-19 is a ghastly ambassador from a future with many new demons. It is not the only intruder we will meet.
The three great disruptions since the Cold War have been: the 9/11 terror attacks of 2001, the global financial crisis of 2008-9, and now coronavirus. Each has radically disrupted the international order and, while each has been responded to more or less effectively, they have left the system weaker, more distorted and with more structural dangers.
These three crises are the children of globalisation — hi-tech terror spawned in an Afghan cave and executed with huge passenger jets in Manhattan; a breakdown of the international financing system that destroyed value, brought national economies to the brink of collapse and embedded chronic debt into the budgets of all Western governments; and now a pandemic that exposes the toxic reliance on Chinese supply chains and the inherent weakness of just-in-time economic systems.
Australia responded to each crisis well enough. But we are wilfully refusing to recognise the dangers staring us in the face.
Consider that, while the COVID-19 story unfolds, Energy Minister Angus Taylor was in the US negotiating access to US fuel as part of our strategic reserve. The International Energy Agency requires all its members to hold 90 days of oil reserves onshore. Instead of 90 days, we hold a little more than three weeks.
This is not the fault of the Morrison government. It inherited this vulnerability. There is immense bureaucratic opposition to having a meaningful strategic reserve in Australia. This is part of a now anachronistic faith in globalisation and just-in-time economics. The government, in thrall to the bureaucracy, wants to count oil we have purchased, or have a guaranteed right to purchase, as part of our reserves. The Petroleum Institute agrees.
That is fine, as is everything we do, so long as we never face a real crisis. Unlike the Menzies generation of leaders, who ruled with the living memory of two world wars, our bureaucracy cannot take seriously the prospect of a real crisis ever confronting Australia.
Our security people, who can see the environment deteriorating, disagree. Peter Jennings, of the Australian Strategic Policy Institute, delivers this withering judgment: “I don’t think it’s a credible guarantee.
“In an emergency the Americans, like any country, would privilege their own needs. The only realistic option is to bite the bullet and develop modern fuel farms. Sensible nations like Japan and Israel have done this.”
Former deputy prime minister John Anderson labels it “a matter of national urgency” to establish the 90-day onshore reserve. “We are so vulnerable to a fuel supply shock,’’ he says.
“Relying on American supplies is reasonable in economic terms, but if there’s a military disruption to supplies it may not be of any use if we can’t keep our sea lanes of communication open. And we have a very small navy, even with recent expansion, by our own historical standards.”
Andrew Hastie, chairman of parliament’s intelligence committee, also supports the 90-day onshore reserve: “We run a just-in-time economy. I sit an hour south of Perth and watch the trucks deliver supplies to Woolworths and Coles, just in time. Pharmaceuticals too. What happens if we run short of petrol?”
Senator Jim Molan, a former major-general in the army, has been scathing of the lack of reserves. He tells me: “I support the arrangements made with the US for access to its crude reserves. But for certain scenarios, economic and security, we should have a much bigger store of liquid fuel in Australia as a strategic reserve.”
The key difference is this: Jennings, Anderson, Hastie and Molan can conceive, seriously, of a crisis, even a security or military crisis, which might mean we have to look after ourselves.
But our nation’s operating system is geared against this kind of thinking. Until forced by events, such as 9/11 or the series of pandemics including SARS, avian flu and MERS, we don’t take national security threats seriously. We only pretend to.
Our bureaucracy, most businesses, even some in our defence establishment, are so invested in the just-in-time model, and the chimera security provided magically through international economic integration, that they can never plan for, nor spend money on, the growing security risks.
The Australian settler economy, Hastie argues, did rely on great and powerful friends but always insisted there were certain things it had to produce itself.
Molan again: “We lack resilience in almost all national security areas. Water, energy, pharmaceuticals, fertiliser, liquid fuels, cyber and IT are just a few. Globalisation has made us rich but there must be a level of national production and resilience below which we must not go, or we risk our independence, our sovereignty.”
No one person caused this. No one political party brought us to this pass. It is a national syndrome of complacency, high costs, laziness and forgetting absolutely the lessons of history.
Anderson thinks there could be a silver lining in our present distress: “I hope the bushfires and coronavirus provide us with a moment of national reflection which allows Scott Morrison to drive forward and say we must learn the lessons of these crises. We must produce the things that are critical to us ourselves. For the first time in our history, we are more alone than we’ve ever been.”
The strategic oil reserve is neither the beginning nor the end of the syndrome, nor is it even the most important part. Because of the oil war between Saudi Arabia and Russia, and the temporarily reduced demand because of COVID-19, there is a glut of oil right now. But these situations can turn in a moment.
We used to produce all our own oil. Now we import 80 per cent of the oil we use. Fifteen years ago we had eight refineries, now we have four. We import both crude oil for those refineries and refined oil. Twenty years ago, manufacturing made up 12 per cent of our economy, today it is barely 5 per cent.
A lot of advanced economies have gone that way. But the West, in making China the global factory, has opened itself to tremendous strategic vulnerability. This week China provided medical equipment to Italy and Spain. The US couldn’t make such a donation. If COVID-19 gets bad there, it will be scrambling for its own supplies.
China produces the vast bulk of medicine used in the US, and in Australia too. What if one day there is a serious military dispute between them?
Beijing actually donated the medical equipment to Spain and Italy. You read that right. China, still with a per-capita income a fraction that of Europe’s, donated medical supplies to two rich but poorly governed European nations. Beijing is not behaving badly here, but well.
But only a fool would say there is no chance of conflict in the future and it is an abject failure of the encounter between Western civilisation and globalisation that it should structure the global economy to give Beijing such enormous strategic leverage.
The Morrison government is sensibly considering manufacturing more medical items in Australia, specifically masks and pathology tests. But this is time for a deep strategic reassessment.
It is not Cold War thinking to determine we need the ability to guarantee ourselves more of the stuff we must have. Beyond that, there is a category of strategic goods we should be happy to get only from our friends. Beyond that, there is a large range of goods we can get from anywhere.
This is not reactionary. It is prudently facing reality.
There are countless examples of the way we’ve let control slip away. We are the only country that commands a full continent. We have a huge agriculture industry. Yet we must import fertiliser. Why? Because labour costs, gas costs and general energy costs have made it uneconomical to produce in Australia.
Our gas is expensive partly because we refuse to explore even onshore for conventionally produced gas. That is a political decision, and a mad one, the type of decision only a complacent, wealthy, foolish nation makes. Yet we do not even have the courage of our own foolishness, for we import products made with gas obtained by fracking while refusing to explore even for conventional gas.
We have overdone globalisation and in some areas overdone the application of free-market nostrums. New Zealand is a giant in global dairy partly because it is run as a cohesive national project. We dismantled the old clumsy agricultural marketing bodies but put nothing in their place. Then we hamstrung our farmers with ludicrous energy costs.
The politics of climate change make it even harder for us to rebuild a sovereign, strategically capable economy. The only way to seriously cut emissions is by de-industrialising, and we have de-industrialised at a faster pace than almost any other OECD nation.
But the right is often as foolish as the left. There is now an absurd, embarrassingly uninformed populist campaign on the right to ditch our commitment to build 12 French-designed submarines and get nuclear subs instead. Yet anyone with any knowledge of the area understands there is no option for a nuclear sub. You may as well say we should ditch submarines and embark on manned missions to Mars.
The only possible consequence of this ridiculous campaign is to discredit the capability we get, and at worst perhaps stop us from getting any capability at all. This shows the populist right, as much as the green left, does not take defence seriously. It’s just another toy in the culture wars carnival.
In an important change in this debate, former prime minister Tony Abbott tells Inquirer he has changed his position and no longer regards it as realistic to pursue nuclear subs unless we first establish a nuclear industry. Says Abbott: “Of course it’s not realistic to have nuclear subs without having a nuclear industry. This is something we should consider.”
Our unstated but real national security policy boils down to two main components: the Americans will always rescue us, and we are rich, so we can buy what we need. No one supports the US alliance more than I do, but there are countless scenarios in which the US, even if it wants to help us, may have to simultaneously cope with a crisis which threatens its own security. For us to neglect the need to look after ourselves is the irresponsibility of perpetual childhood.
Anderson points out that the Morrison government has the ability to fight COVID-19 with fiscal measures because of the spectacular budget repair carried out by the Howard government. But on the other side of this crisis, even those tools will be exhausted.
We are in danger of becoming the fair-skinned Saudi Arabians of the South Pacific, relying always and only on our money, and finding one day our money runs out.
But, when history calls with the next big national security crisis, we can console ourselves with one product we still produce here: we are self-sufficient in toilet paper.