(Bloomberg Notice) – Australian foreign policy was radically overhauled 80 years ago in ways that are still reverberating today. It was accompanied by a major overhaul of economic life, the contours of which lasted long enough to help drive a exit from the pandemic recession. These wartime military and financial arrangements endure in what critics call overdependence on quantitative easing from Washington and the Reserve Bank of Australia.
As Japanese troops descended the Malay Peninsula in the last days of 1941 and Singapore was soon to be invaded, then Australian Prime Minister John Curtin abandoned the idea that the United Kingdom would be the protector of the island-continent. The fundamental principle of security since the founding of a penal colony in the 18th century has been abandoned. Washington became the hub around which defense and diplomacy were organized – the architecture that shapes Australia today.
Asked to write an article for the December 27 edition of the Melbourne Herald newspaper, Curtin wrote: with UK. The column, titled “The Task Ahead,” also called for a revolution in Australian life to prepare industry and finance to meet the demands of war.
John Edwards, author of the two-volume biography “John Curtin’s War,” told me about what Curtin intended to convey in the remarks and how the sentiments have been canonized in history and politics. Australian. Edwards is a non-resident researcher at the Lowy Institute in Sydney. He worked as an advisor to former Prime Minister Paul Keating, was Chief Economist for Australia and New Zealand at HSBC Holdings Plc and served on the Board of Directors of the Reserve Bank from 2011 to 2016.
Daniel Moss: You called “The Task Ahead” the most famous Australian foreign policy document. Why was this so important?
John Edwards: Importance arose because of what happened next. Turning to the United States at the time had very limited validity. It was limited to the circumstances of World War II. The significance arose out of the post-war circumstances: the British exit from India, Malaysia, Burma, the Middle East and the impoverishment of the United Kingdom. Britain’s whole role in the world has changed. The Empire vanished and Australia found itself in a world of new nations where Britain was absent. If the UK had come out of the war any differently, Curtin’s remarks might have been just another speech of war.
The awkwardness and controversy the text sparked was not so much Australia turning to America, as Britain had turned to America before. The real annoyance for Britain in the article was its demand that Australia share with the United States the leadership of Allied efforts in the Pacific, rather than going through the United Kingdom as the arrangements would have dictated. imperial. It was embarrassing for British Prime Minister Winston Churchill while in Washington speaking with President Franklin D. Roosevelt on the same issue. Curtin demanded that the Pacific conflict be treated as a new war and a war of equal status to that waged against Germany, which was contrary to British policy, as well as the American approach.
DM: Is Australia as unbalanced dependent on America today as the country was on the UK before 1941?
I : Curtin had no intention of such a change. In public and in private, he urged Britain to return to the Indo-Pacific as a major presence. He wanted a large base for the UK reopened in Singapore after the war with a fleet to support it. He didn’t understand that what had happened temporarily was going to become something permanent. In a sense, it is true that Australian foreign and defense policy is driven by fear of abandonment by the great powers. We are not comfortable in our own region without the support of a great guarantor of external security. This is particularly relevant today. We fear China’s defense capacity, the size of its economy, its regional ambitions, and we have reaffirmed our ties with the United States and, in a limited sense, the United Kingdom.
Underlying your question: are we doing enough for our own defense? In a way, what we do is underestimated. We spend just over 2% of gross domestic product on defense. We have a tremendous capability of submarine and air defense and attack. We have a small but effective army. Despite the controversy over China, we have no threat. And it is certainly not China, in an offensive sense. China does not have that capacity or that intention. It’s not that we don’t do enough, but we mistakenly imagine that America’s interests are ours.
DM: That brings us to AUKUS – a trilateral security pact between Australia, the UK and the US – and the crash a few months ago over the abandonment of French-built diesel submarines for a deal on nuclear powered submarines. Can you draw a direct line between the debates in Australia at the end of 1941 and the sub-agreement?
I : It’s evocative, but the circumstances are radically different. AUKUS ultimately gives us very little more than our existing defense agreements. It doesn’t add much to our treaty with the United States or our agreements with the United Kingdom other than the aspect of an agreement on Australia’s access to propulsion under-construction. nuclear. It’s very, very specific. If it were to materialize – we are talking about a program that will not be completed for another 40 years – would it be a major addition to our defense capacity? Nuclear submarines are designed for long-range offensive tasks that relate more to our alliance with the United States than to our actual home defense needs.
DM: Curtin spoke in his article of a “revolution” in society. What did he mean by that?
I: Curtin was a little scolded at this point in his life. He was offended that Australians continued to attend races and drink beer and so on. He was furious at the strikes on the seafront and in the coal mines. Curtin wanted a better appreciation of the challenge Australia faced. He demanded a mobilized society in the same way we came much closer during the pandemic: adherence to the rules in which behavior determined to be for the greater good is the rule. There are resonances with this rhetoric and what politicians have said over the past two years. Metaphorically, we often describe ourselves as being at war with Covid. There are links in a kind of mental attitude. But I wonder if they’ll be more permanent this time around than in a real war? People get back to what they want quite quickly.
DM: Curtin overhauled the tax system and the central bank during the war. Did he lay the foundations for the modern Australian economy?
I : It was, in a sense, the real revolution that Curtin brought about. Before Curtin, the central bank, which was then the Commonwealth Bank, had fairly limited powers, limited authority, and a limited view of how it would use those powers. With his treasurer, Ben Chifley, Curtin made legislative changes that created a true central bank. More or less, with some organizational and structural changes, it has the same authority over financial institutions that the Reserve Bank exercises today. In terms of fiscal policy, we are relying on another war innovation that has become permanent. It was the effective monopolization of personal income tax and corporate income tax by the federal government. This gave Canberra significant revenue and purchasing power that Curtin’s successors never saw fit to reverse.
DM: Has this federal authority been eroded by the Covid? State governments seem to have taken the upper hand, setting their own rules.
I: It is true that the federal government had to fight to achieve its ends. On the other hand, our recovery has depended on the RBA and the federal government. We have gone from a near balanced budget to the biggest deficit. We have moved from a position where the RBA did not consider buying government debt to a position where it is a significant holder of bonds. The exercise of these powers, won by Curtin, has supported our economic resilience and our recovery today.
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Daniel Moss is a Bloomberg Opinion columnist covering Asian economies. Previously, he was Bloomberg News Editor-in-Chief for the Global Economy and led teams in Asia, Europe and North America.