The Chinese state and Australia’s economy: ‘snapping back’ must not mean business as usual

The one thing Australia can’t do as we get the pandemic under control is ‘snap back’ to the old ways of doing business with the one-party state that is the People’s Republic of China.

The fundamental design and operation of China’s authoritarian government, and the way it’s running the massive chunk of the world’s economy and environment it controls, mean it will deliver us more large shocks.

The Chinese Communist Party is motivated by self-protection and self-preservation at all costs—whether those costs are borne by China’s 1.4 billion people or by the citizens of other nations.

That’s why officials covered up the beginning of the Covid-19 pandemic, threatened doctors and downplayed the risk of human-to-human transmission as they locked down Wuhan. And it’s why the Chinese government criticised others for banning travel while instituting severe travel restrictions at home.

The CCP prioritised its survival over the health of its own people and of the rest of us—and it will always take that approach.

The 1989 Tiananmen Square massacre demonstrated this design principle at work. The CCP turned its armed wing, the People’s Liberation Army, on its own people because, by calling for participation in political decision-making, they threatened the party’s rule. Last year, China’s defence minister said the massacre was correct policy, implying he’d do it again. The clampdowns in Hong Kong—continuing amid the pandemic—and the mass detention of Uyghurs in Xinjiang are other examples.

The spread of HIV/AIDS through botched blood-collection programs and the contaminated food and tainted baby formula scandals are all examples of mismanagement brought on by the corruption and distortions of CCP rule.

The 2003 SARS epidemic and now Covid-19 are part of this long heritage of adverse consequence as the party’s obsessive self-protection instinct wins out over the people’s wellbeing.

In the globalisation model that Australia and others have adopted, almost all manufactured products, including those needed in a public health emergency, are produced by a vulnerable chain of global relationships. The supply chains wend their way into and through China, bringing inordinate risks.

Before the Covid-19 crisis, we treated the Chinese state as an externality, which meant we didn’t need to factor it in to our decision-making while we all made a lot of money.

That allowed us to ignore the effects of Chinese state actions on our own level of risk and wellbeing. The clearest case at the government level was Premier Daniel Andrews’s decision to sideline national security issues as he’s sought to tie Victoria deeper and deeper with the Chinese economy and provided window dressing for Beijing’s signature strategic influence program, the Belt and Road Initiative.

In economics, externalities are great when someone else is managing them, but when no one is taking care of them they can be extraordinarily damaging. Covid-19 is in the latter category. Every government and company that outsourced pandemic prevention and preparedness to the World Health Organization and relied on reassuring but misleading statements from Chinese state authorities has now experienced what happens when an externality comes home to roost.

With Covid-19, the Chinese state has created unacceptable risks for the rest of us and it will continue to do so unless it changes or until we reduce our dependence on activities within its jurisdiction.

That’s the underlying driver of the strong bipartisan signal Australia’s foreign minister Marise Payne and her opposition counterpart Penny Wong sent recently about needing to know what happened in China at the start of the pandemic.

All of this may sound obvious, but economists and policymakers are strange creatures. As the pandemic recedes, we’ll find on display the stickiness of policy thinking in the government, corporate and university arenas that makes them reluctant to change approaches even when the environment changes.

So, as the world slowly gets back to business, expect myriad calls to restart our economic relationship with China as it was before, or to double down on it as the ‘bridge back’ to prosperity.

In some sectors, notably resources, where we’re the seller and Chinese firms are the buyers, we can probably resume much as we were without adverse consequences for us or for the Chinese, depending, of course, on the strength of Chinese demand. But that will not be a general recipe for success in our changed world.

The calls for a return to the past will come from treasury types in Western governments as well as those with deep self-interest—a lot of wealthy people and leaders sprinkled across our corporate and university landscapes. But we can’t pretend that the Chinese state can be returned to its pre-Covid-19 place in our minds.

The ‘China inevitabilists’ will also return to the stage, saying that somehow the glaring failings and weaknesses that created the conditions for the global pandemic and economic depression are actually demonstrations of China’s unstoppable rise. They’ll probably even believe this.

Alcoholics Anonymous pegged this type of thinking correctly when it adopted the adage that insanity is doing the same thing over and over again and expecting different results. While we should expect to hear the voices of rusted-on self-interest advocating that we maintain or even increase our dependence on China, we must discount them as we make decisions.

Instead, ‘snapping back’ means using what we’ve done to cope with the pandemic to create new forms of prosperity and security for Australians. Our institutions, government agencies and civil society are not some failing, fading Western model on the brink of being replaced by resurgent authoritarian alternatives.

We’ve shown that Australian institutions, companies and society are able to rise to a challenge that many others have failed to meet. We can make what we need here when pressed to do so. We can become a leading digital economy if we keep the practices we’ve developed during this time of socially distant work. We can take and implement better decisions than many other places.

Let’s snap back to being a nation that controls its own economic destiny. Let’s build partnerships with those we can rely on in crises and increase our ability to do what we need to do and to make what we need to make in times of challenge, civil or military.

Australia has unique strengths we haven’t yet tapped, including the wealth in our superannuation savings. This can work with government stimulus to create the new economy we can see growing out of this crisis.

This positive focus on future wellbeing, security and prosperity is exciting. It’s time to do something different, to stop putting more and more of our economic and security destiny in the hands of the Chinese Communist Party.