Weekend catch-up: The White Paper and China, anti-submarine warfare, the Coalition and national security, 'helicopter drops' and more

Following the release of the long-awaited 2016 Defence White Paper, coverage and analysis of the document dominated The Interpreter this week. However, our coverage dealt not only with the proposals and strategic outlook, but also the politics in Australia surrounding it. First, Hugh White on what he believes is one of the fatal assumptions the document rests on, whether war with China is possible:

In fact, I think it is unlikely Australia would go to war with China in any situation short of the outright invasion of the undisputed territory of another sovereign state. I think it is quite unlikely America would either, once a president was brought face to face with the military realities. So we are just bluffing, and our bluff is being steadily and systematically called by China.

Next, Nick Bisley on the possible faulty economics behind the costings in the White Paper:

The White Paper goes to great lengths to say that the costs of the projected program have been independently verified, and we have no reason to doubt this. But it is entirely silent on how all this spending will be paid for. Given ever-growing demands on social services and health costs, the eroding tax base and projections of a long period of slow global economic growth, this absence is striking.

Also Julia Newton-Howes suggested Australia should produce a White Paper on diplomacy and development:

When discussions of national security are dominated by military security, decisions involving vast amounts of money seem to be made without adequate consideration of the soft-power options — the current situations in Afghanistan and Iraq attest to this. The Australian Government and people would be better served by ensuring development, diplomacy and defence have equal weight in Cabinet and national security discussions. But to do this effectively, the Australian Government needs to produce a White Paper on Diplomacy and Development, and then invest in increasing our competencies across both these dimensions.

I made a contribution on the anti-submarine warfare aspects of the White Paper. I thought they were pretty good: [fold]

I agree that there are areas in which the White Paper is lacking and is not particularly forward thinking. But in the area of maritime military modernisation, particularly the fast growing world of undersea warfare, the Paper does an able job in addressing strategic risks. If all the procurement programs are delivered (a big 'if'), Australia will likely have one of the best ASW capabilities in the region.

Crispin Rovere made eight observations concerning the White Paper:

The repeated exhortation to preserve the 'rules-based' order is therefore an admission of this epochal strategic shift. The US-led order that has underpinned strategic stability in Asia over the past 40 years is fast disintegrating. We are entering a new era of strategic uncertainty characterised by intense great-power rivalry and challenges to international norms with which Australia is long accustomed.

Moving towards politics, Euan Graham wrote about a speech made by former Prime Minister Tony Abbott in Tokyo shortly before the White Paper's release:

Mr Abbott’s comment that 'if Japan wins the submarine bid, Mitsubishi will be returning to Adelaide', arguably goes further even than promoting the strategic benefits of submarine cooperation with Japan, by specifically identifying with the lead manufacturer behind the Japanese bid. Most potentially damaging of all was Mr Abbott’s comment that 'For Japan, this submarine deal is strategic; for the other bidders, it’s commercial'.
Mr Abbott’s words obviously carry more weight than an ordinary backbencher, and by overtly revealing his partiality towards the Japanese bid he raises an obvious question whether the CEP initiated during his premiership was genuinely entered into in the spirit of fair and open competition. 

Sam Roggeveen on the internal division within the Coalition regarding national security:

The Defence Department's own analysis is telling us that Chinese defence spending will be roughly equal to that of the US by 2035, and that Indonesian defence spending will match ours by that same year. If these forecasts are accurate, we're facing economic trends which we simply cannot resist; the issue of whether we get our new submarines in ten years' time or fifteen is beside the point. A much more substantial boost in defence spending would be needed to counteract those larger trends, something closer to the historical levels Hugh White talked about in his op-ed in the Fairfax papers on Monday. But defence hawks such as Abbott show no sign of wanting to face this reality.

Our debate on the latest Lowy Institute Paper, The Embarrassed Colonialist, continued this week. Michelle Nayahamui Rooney:

Dorney wants Australia to better understand PNG, and his book will certainly help. But perhaps he underestimates just how difficult the task is. PNG political leaders face a set of domestic political accountability practices and norms that are alien to most Australians. He rightly argues that a relationship anchored on money alone is not enough, and a more nuanced relationship based on equality and deep understanding (and, I would add, frank exchanges) is required. The challenges for Australians and Papua New Guineans will be to remain open and willing to understand and contribute to this endeavour.

Also, Allan Bird on Australia's aid program in PNG:

There is plenty of scope to improve the bonds between people and government. I recall one discussion I had with some of Australia’s top minds on foreign development when DFAT was scrapping an Agricultural empowerment program in PNG, one that had run very successfully for five years. I asked the Australian representatives why they were dumping the program despite its success. The response was 'Well agriculture is not a PNG government priority. We only fund PNG government priority programs. In addition, it is not in Australia’s interest to keep the program going'. With 85% of PNG's population dependent agriculture, that statement dumbfounded me.

Why are 'helicopter drops' a bad idea? Stephen Grenville:

Thus there is now increasing talk of ‘helicopter money’; the most unconventional policy of all. Central banks would give money directly to households to spend. This was first proposed by Milton Friedman and subsequently explored in a 2002 speech by Ben Bernanke, when he was a Fed Board member but not yet Chairman. The image of a helicopter dropping banknotes is compelling, but it wouldn’t happen so dramatically, or so randomly. Many Australians will remember the ‘cash splash’ of 2009, where most families received a direct deposit from the government into their bank accounts. This is usually judged to have been successful in providing a boost to demand. This was similar to, but not the same as, a helicopter drop as envisaged by Friedman and Bernanke. The crucial characteristic of the 2009 cash splash was not the method of delivery, but the source of funding. It was funded from the budget, not directly from the balance sheet of the central bank. It was fiscal policy, not monetary policy.

Leon Berkelmans thinks Australia is ignoring the risks stemming from capital control measures:

That could be a problem. If Australia were to impose capital controls at some point, what guarantee is there that we will see eye-to-eye on their rationale with the other TPP signatories? We’ve disagreed with our friends before on appropriate crisis responses – the Asian Financial Crisis comes to mind. There’s no good reason why it won’t happen again.
If that happens, and a financial behemoth then takes Australia to an ISDS tribunal…well, that is going to be awkward.

In a very popular post, Yiftah Shapir looked at Saudi Arabia's military:

Saudi Arabia's economy is highly dependent on foreign labor (roughly a third of the population). The armed forces are no exception. That's fine, as long as the military goes out of its barracks for exercises only. But a war is something else, and on the battlefield it is difficult to rely on foreign contractors to remain with units. Some sources even maintain that a large part of the fighting in Yemen is done by mercenaries (Saudi Arabia's ally — the UAE — is recruiting soldiers as far away as Latin America).

Rodger Shanahan gave a quick analysis of parliamentary election results in Tehran:

Even theocratic systems of government require popular legitimacy to survive and the mood of the electorate will certainly have been noted by the Supreme Leader and the conservative factions in Iran. How both of them react to the electoral result, as well as how parliament forms, will determine how much progress moderates can make in shifting the tone and policies of the Iranian government. It could be the change in the composition of the Assembly of Experts may, in retrospect, come to be viewed as more significant in the long term than the change in parliament.

A good analysis of the strategic situation in the South China Sea from Ashley Townshend:

First, Beijing is using American FONOPs as a justification to carry out specific acts of tactical militarisation, even as it expands its strategic presence independent of US actions. It's by no means a coincidence that the last two FONOPs were quickly followed by an increase in China's military footprint on Woody Island. This shows Chinese officials have been serious when warning that US naval intrusions might lead Beijing to 'strengthen and hasten the build up of relevant capabilities' for island self-defence. However, this tit-for-tat dynamic is only part of the story

Is the Australian 'twin peaks' model of financial regulation a possible model for other countries? Andy Schmulow:

Under the Twin Peaks model, one peak is responsible for financial system stability (in our case, APRA) while the other (ASIC) is responsible for good market conduct and consumer protection. Within this system the Reserve Bank remains partly responsible for financial system stability, and remains the lender of last resort. So in fact, the model is a misnomer. It is in fact more correctly called the Triple Peak model.

Peter Cai examined Xi Jinping's continuing media crackdown:

In 2015, the government arrested a high profile liberal journalist, Shen Hao, who was the editor in chief of the 21st Century Business Herald on extortion charges. The Washington Post described Shen as 'inspiration to a generation of Chinese journalists, a writer whose belief in the power of truth symbolised an era of optimism and idealism in the profession.' As the article goes on to say, that era of optimism is barely a memory now.

The US Pacific Commander delivered a speech in New Delhi pushing for quadrilateral defence exercises between Australia, India, Japan and the US. Rory Medcalf was there:

He has called for India, Japan and Australia to consider the idea of a quadrilateral dialogue with the US, to caucus on security challenges to the rules-based regional order. The obvious context for this is China and its destabilising behaviour in extending self-proclaimed authority over much of the contested South China Sea.
Beijing will not be pleased. It will likely reject this fresh talk of the quadrilateral as a provocation, an Asian NATO, a club for containment, a gang of four determined to strangle its rise – even though what is being proposed is just a dialogue, not a formal naval coalition, as some media headlines imply.

Federic Mousseau from the Oakland Institute summarised a report from the organisation that detailed financial irregularities from logging companies operating in PNG:

As showed in the report, if transfer pricing is taking place in PNG through an undervaluation of log exports, the export duties unpaid by logging companies would result in a significant loss in public revenue. For instance, a US$50 undervaluation of log export prices per cubic meter (a conservative assumption given the US$191 difference found between PNG and global prices for 2014), would result in a loss of nearly $60 million in annual revenue from export duties. This is significant when compared to the $80 million average annual revenue that the Government receives from such duties.

Super Tuesday has come and gone, with James Bowen recommending that Republicans should start looking towards 2020:

Given either a Clinton or — a nightmare scenario as far as the rest of the world is concerned — a Trump presidency, the GOP will be desperately in need of some quite profound soul-searching. It needs to find a way to reconnect to its support base in a manner that might be more acceptable to its elites, potential recruits from other political persuasions, and global opinion at large.

Finally, Ian Satchwell on the future of Indonesia's energy supply:

Delivering electricity to the more populous islands of Java and Sumatra, which will soon be increasingly interconnected, is relatively simple. Delivering electricity to the rest of Indonesia's 6000 inhabited islands, many of them remote and with small populations, is much more difficult – but socially, economically and politically imperative. Generation is likely to involve a mix of fuels, including LNG, CNG, diesel and solar.

Photo courtesy of Australian Defence Image Library.

Brendan Thomas-Noone