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'Love all' – a personal memo for Australia and the world in the year ahead.

by Steve Howard, Secretary General of The Global Foundation. 27 January 2012

Please note that the views contained herein are the writer’s own views and do not necessarily reflect the official views of The Global Foundation.
Read down for an opportunity to contribute your comments ......

Over the recent summer break, as with occasional past years, I had the opportunity to spend professional and private time in the Northern Hemisphere, where it is damp and chilly and the prospects of warming sunshine are a long way off.

Well, the overcoat and scarf are back in the wardrobe and I thought you might be interested in some personal observations from spending time away, in the company of a diverse array of people, looking back at Australia.

Each northern winter creates the perfect scenario for Australia to globally ‘own’ the contrasting summer season.   Yes, there are the occasional beach horror stories in the world's media about a shark or crocodile attack, or a sailor lost in the deep Southern Ocean.

More enduringly and positively, however, the Australian Open tennis, involving sublimely talented athletes from every continent, beams energy and sunshine across the globe into otherwise dark living rooms throughout the second half of January and elevates Australia, in general, to a much higher international profile than is usually the case.  How fortunate (and clever) we are to have one of the world’s four great tennis tournaments and at this time of the year.  We have successfully added value to our global comparative advantage in sport!

However, for me, the start of this year was different from previous times, in that while the tennis still grabbed the headlines, the Australian sunshine now acts as much more than a sporting metaphor, certainly when measured against the accumulating global gloom. In a world where financial volatility and economic uncertainty are the new normal, where trust and confidence have vaporised, where direction and leadership at the international level are strangely absent, Australia and its economy and society (with a few notable exceptions), looks pretty extraordinary, from wherever you observe it.

In my view, these days Australia is held in a new and different regard by the international community.  In economic terms, we are now a stand-out exception in the developed world.  Yes, observers are well aware of the virtuous, or is it vicious, circle? - our obvious dependency on exports to China and the drastic implications if China’s economy makes a hard landing (which I judge to be unlikely; either way, doesn't this demand of us a more effective China strategy?).
All are aware, of course, that today's prosperity is the harvest of good fortune and the hard yards made by previous generations, who created important and enduring legacies, such as thrift and sound institutional and regulatory pillars, which are still worlds' best in some cases.  And we are seen, over and above this, to enjoy a basically good and decent society, having avoided, or successfully managed, many of the fractures and tensions evident in other parts of the world.  A successful economy and a vibrant society, co-existing, hand in hand.

Australia is an envied success story and in the eyes of many, as a consequence, we are, or could be, an even more effective global actor, as we have much to offer from experience, but also from our disposition, our natural character.   This is an expectation, more than a hope, one that should not be ignored, yet one which may be difficult to fulfill without some fundamental recalibration of our national strategy, to rediscover and exploit what might actually be possible in an emerging new world order.
This would require us to get our house in order at home and to reconnect outwards to the world with honesty and confidence.  My fear is that we might otherwise wallow in a sea of complacency at our relative short-term national circumstance and miss the long horizon which, on the positive side, would see Australia emerge in 10-20 years from now as an even more remarkable example of a western society in the Asian hemisphere, firing on all cylinders and an admired global benchmark.  The flip side is too painful to contemplate.

I personally think that this should be our essential national focus over the coming year or so, above the ruck of day to day.  The global financial crisis of the past years has clearly demonstrated the growing extent of national (in)capability and global interdependence - for good and ill.  To a greater degree than ever, today and into the future, as goes the world, so goes Australia, locked in an embrace, so perhaps it is well worth revamping our national and global efforts in tandem?
How to arrive at this preferred future is, of course, another matter.  Who will provide the necessary leadership that is worldly, unifying and effective?  We are all alert to our delicately poised national political circumstances, but at the same time conscious that much of the western world, at least, is in a kind of political drift these days and that leadership may, in part, have to take different forms from now on.

But who else is capable of asserting leadership authority?  Business?  While certain business commentators puff on about the need to fix this and fix that, I draw your attention to the much more fragile, underlying issue of business needing to retain a community mandate or licence to operate, as illuminated in the recent Financial Times series on 'capitalism in crisis'.  Academia?  Without overstating our China dependency, we have created a national higher education policy which requires our educational institutions to develop a disproportionate reliance on income earned from foreign students.  Will the media show constructive leadership?   With a few notable exceptions, I, for one, do not think so.  So, instead we've seen a loss of respect for traditional leadership and a flattening of top-down hierarchies.
But if government - in all its forms, at all its levels, with all its weaknesses and flaws, decided to respond to this user-generated world and adopted a different style of governance, collaborating with all sections of society, these components could come together in a more effective partnership, one which genuinely involves and engages the community.   This is, in my view, the new flat world of 'civil society' and such an approach would give us the best chance of navigating to a successful future, because we would all then be in the same boat, needing to build mutual trust and confidence together.
If this is true, then leadership and responsibility for shaping and living in this new, exciting and uncertain world, falls to each and every one of us, first and foremost as citizens of Australia and of the world and only then, as a secondary consideration, as partisans or sectional players in whatever are our respective fields of endeavour.

As a stimulus to further discussion and debate, here are a few specific personal observations and comments, not necessarily in order of priority, that frame my thinking for 2012:

Global politics:  the G2 is central; elections and transitions; the G20 matters:

  • When was the last time that the two most influential global political powers faced leadership transitions in the same year?   Then, for good measure, add in elections in Taiwan, France, Iran, Russia, Mexico and elsewhere.  You get the picture:  all politics is local (ie national) and this is the year when local politics really does matter at the global level. So beware those who are insensitive to this reality.

    Australia needs to maintain great, balanced relations with the G2 (who, by the way, have very sophisticated and effective means of managing relations with each other).  Our alliance with the United States is deep and enduring.  Our commerce with China is extensive and increasingly intertwined.  Both matter to us to such a degree that maybe we can be smarter in extracting the very best from both relationships, but not to the detriment of one or the other.  More on China later.

    The G20, at which Australia has a deserved seat at the table, remains our best chance of effecting the necessary transition to ensure global institutional balance and multi-polarity over the coming years.  Global eminent persons associated with the Foundation, including international institutional leaders in their private capacities, are working with us on this, as are the Mexican and Russian Governments, who will host the next two G20 summits.

    The corollary to having such a globally balanced approach, where all boats rise on a rising tide, is to avoid the 'odd-man out' syndrome.  If it is not always possible - and for now it has become exceedingly difficult - to reach global consensus agreements on rules-based initiatives for critical matters such as global trade, where Australia has been a clear leader and beneficiary, then let's proceed very carefully about adopting sub-optimal regional arrangements which might advantage some of our trading partners but exclude others.
On difficult states:
  • Armed conflict with Iran is in the ether.  Sanctions may not in fact work, but that they might appear to work seems an entirely preferable option, while all efforts are expended to bring Iran further into the international tent.  At the superficial level, North Korea might be best left alone, for now at least, while China is encouraged to play a stronger role and burnish its international credentials.  It is interesting to note that both the Japanese and South Korean leaders have made positive visits to Beijing since the leadership transition in the DPRK.
The ‘Arab Spring’ label and unheralded success stories
  • While much attention has been given to the so-called ‘Arab Spring’ and its causes and uncertain consequences, two of the biggest growth economies, great success stories over the past year, have been large, democratic, and pre-dominantly Muslim.  Take a look at the performance of Indonesia and Turkey and their likely trajectories.  Australia could do well to more deeply engage with both of these remarkable societies and the world might show greater respect to the achievements of these substantial nations.
Looking over our shoulder or building the road ahead - 40 years of Australia-China relations and wider implications
  • It should be fairly self-evident from my earlier comments that Australia and China    have to create a new form of complementary partnership going forward, one that is not only economic and short-term.  We need shared vision, pathways, stabilisers, not in an exclusively bilateral sense, but in ways which advantage both parties and also bring wider global benefits.
  • This 40th anniversary year of official relations is the moment to enact this strategic upgrade. How do we help set up China's next 40 years of sustainable growth, in food, energy, resources, services and at the same time, continue the effective but increasingly tougher process of influencing China's ability to become an ever more responsible global participant?  In my view, China is ready for the conversation.
  • Over-arching this, let's get our whole-of-Asia strategy right, while ensuring we don't diminish vital relations with the US and EU and other traditional allies.  There's room also for opening doors to other emerging markets, Brazil, for example.  Global engagement should not be a zero-sum game, rather, every specific action should also be a positive global building block.
On getting the world out of its finance mess
  • Well, it seems to me that unless and until we agree a binding international system of financial regulation to overcome the obvious and easy global financial arbitrage that exists between global financial markets and nation states, this current mess could continue for years to come.  It's not just an EU problem, although in Europe it is most pronounced due to its hybrid governance, it's a global problem.  The responsible global finance sector - and Australia and its major banks have big cards to play in this - should be pushing hard for global standards, rules and more effective systems of management of global financial markets, before popular revolt burns down the whole house.
  • Good capitalism works when frameworks are respected and adhered to, when trust and risk and a social contract mean something, when instruments serve not themselves but progressive economic purposes and build confidence, not fear.  I highlight the breathtaking hypocrisy of the global ratings agencies, who have run and hunted in equal measures over these past years.  These folks were the ones who oversaw the debt boom originating with the sub-prime crisis. Now they are wearing hair shirts and are cheerleaders for a new fashion of austerity which may in fact snuff out fragile growth.
Feed the world by doing what we're good at - food!
  • Global food security is the great global challenge on the 5-year horizon that, if not tackled effectively and at scale, is more likely than traditional causes to lead to conflicts between and within nations, over water scarcity and so on.
  • Australia can lead and help solve the world food security challenge. Earlier, I mentioned Australia's comparative advantage in sport and how we had successfully capitalised on this with the Australian Open tennis.  Why don't we, as a nation, revisit our comparative advantages, not at the level of picking winners with individual firms, but in those macro sectors of the economy where we have distinct advantages and markets - matching supply and demand.
  • Alongside our obvious and expanding achievements as a global minerals and energy superpower, Australia should be a global food superpower, providing much greater value and volume of food for a growing world which will be increasingly less capable of feeding itself.  We've made some progress towards a national strategy, but this is against a backdrop of complacency, where we dropped the ball some time back and downgraded our food sector, just as world demand was about to take off.
  • Better still, let's not only be a global producer of raw materials but also, where possible, the preferred provider of high value-added food and also expertise.  The world, particularly our region of more than 3 billion people, is looking at us and saying: 'why wouldn't you play your rightful role in nourishing us?' To do this, we've started getting our house in order, demonstrating through practical and large-scale examples, that we can grow more food with less water, that we can improve our soils and landscapes while increasing food productivity, that we can be a more responsible global actor.  It's significant, but it's only the beginning of a long and necessary journey, to cherish our farmers, to support investment in our food manufacturing and export sector.

Beware of oracles delivering tablets from high mountains

A final word.  It seems to me that there is an ever-expanding supply of worthy oracles who ascend high mountains from time to time to collectively expound on their assembled wisdom.  Their track record hasn't been that flash of late and I don't see why that is likely to change.
It goes back to my earlier point of the flattening of hierarchies.  Perhaps, in addressing all of these complexities and challenges for Australia and its global future, we might be better off if we spent more time actually talking to, rather than at, each other.  Providing opportunities to bring people together on this 'win-win', not 'win-lose' basis, might be a very valuable service.  To borrow a tennis analogy, we could badge this approach as 'love all'.



0 #15 Dr Geoff Garret AO 2012-03-16 07:55
Queensland Chief Scientist
Government of Queensland

Thoughtful and constructive note, Steve. Thank you.
0 #14 Mr Tim Besley AC 2012-03-07 07:52
Patron, The Global Foundation

A thought provoking piece read with interest. All the best for 2012.
0 #13 Penny Cranmer 2012-03-02 10:10
PA to Rick Allert AXA Australia

I enjoyed your opinion piece and I particularly appreciated the second paragraph under the heading “On getting the world out of its finance mess” on page 4. I can’t believe how the rating agencies have not been more roundly criticised.
0 #12 Dr John White 2012-03-02 09:47
Chairmans Ignite Energy Resources

“...In my view, the major global challenges ahead are a bit broader and include:
• population growth and distribution
• security of food and water supply, supported by relatively stable prices
• new and improved energy technologies, coupled with fuel security at relatively stable prices
• improved health and well-being at all stages of development.
Of course, there are huge opportunities for Australia, not only in minerals and energy, but also - as you highlight - in food production and value adding.

I would be inclined to cast the net a bit wider – and try to lend support to other sectors with good prospects too. Having regard to the expected population and income level increases in Asia, Africa and South America over the next 10-20 years, I expect there are probably going to be further opportunities in services areas such as tertiary education, technology (including biotechnology) and green growth.

As I see things, Australian success in all these areas will depend greatly on two crucial streams of activity:
• continuous improvement in all important aspects of international competitiveness (eg as assessed by the WEF in its world competitiveness report)
• strategic public and private investment at home that can be linked with targeted investments abroad (eg in developing countries) - which seems most likely to deliver the improved outcomes being sought.
Both streams will require far greater cooperation and commitment to strategic improvements with longer time horizons than the current pattern (changing governments and institutions with short-term, piecemeal priorities) appears able to deliver. “
0 #11 Mr Ross McPherson 2012-03-02 08:40
Executive Chairman McPherson Media Group

Nice thoughts, Steve.
0 #10 Mr Fergus Ryan AO 2012-03-02 08:38
Chairman, Advisory Council, The Global Foundation

Thanks Steve. Very good read.
0 #9 Tracey Fellows 2012-03-02 08:30
President Microsoft Asia Pacific

Well Steve that was one heck of a memo! It was perhaps the business equivalent of Jerry McGuire’s sporting memo – if you ever watched that movie.
I am now in Singapore – running Microsoft Asia Pacific so the reference to Indonesia indeed struck a chord, but as did much of the memo.
0 #8 Jingmin Qian 2012-03-02 08:29
Non-Executive Director, Golden Cross Resources

This is a very good note at the beginning of the year. I am interested in many topics, but China in particular. I agree it is a time that we do more "talk to" each other. With a "love all" mindset, we will be able to achieve good results.
0 #7 Prof Peter Cook 2012-03-02 08:25
University of Melbourne

Steve, thanks for this – an interesting and thoughtful piece which I enjoyed reading.
0 #6 Ross Buckley 2012-03-02 08:21
Professor of International Financial Law, UNSW

I enjoyed it. Agree totally with most of it, and certainly with respect to the criticism of the ratings agencies.

Why don’t you drop the first three paras, commence with the Australian Open and look to publish it in Australian Policy Online or some such similar outlet. It deserves a broader audience. Having just spent 4.5 months in the US myself on a Fulbright I see Australia as still grappling with defining who we are and why we matter – so the more writing like this, the better.

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The Global Foundation is a citizens’ organization with extensive private sector membership, based in Australia. Fully independent of government and funded by its members, The Global Foundation promotes high-level thinking within Australia and cooperation between Australia and the world. It works with government and institutions, the private sector, academia and the community, to help shape longer term solutions to great challenges.

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