The United States government has decided it can no longer afford to fight two land wars at the same time. You may have missed that little news item from last week. And if you didn’t miss it, you’d probably agree that for a nation over $15 trillion in debt, it’s going to be pretty hard to pay for two big land wars, much less fight them. But still, that little fact, and what it means for Australia, is the subject of today’s Daily Reckoning.
We’re referring to President Obama’s vision of US defence strategy in the 21st century. The President went over the Pentagon unveiled the document. It’s called Sustaining US Global Leadership: Priorities for 21st Century Defence. Australians interested in what the next twenty years of gradually weaker US military power will look like ought to have a read.
The relationship between Australia, the US, and China is the single most important topic for Australians for the next twenty years, we’d contend. Sure, Europe’s current crisis is the most important issue THIS year. But in the bigger picture, the economic and military rivalry between the US and China, and Australia’s uncomfortable place in the middle of it, is going to have the biggest impact on your investments.
Don’t get us wrong. The US isn’t giving up on Asia-Pacific as its military gets smaller. If anything, it’s double down. Or in the words of the Defence review, it’s “rebalancing.” The review states, with our own emphasis added in bold, that:
U.S. economic and security interests are inextricably linked to developments in the arc extending from the Western Pacific and East Asia into the Indian Ocean region and South Asia, creating a mix of evolving challenges and opportunities. Accordingly, while the U.S. military will continue to contribute to security globally, we will of necessity rebalance toward the Asia-Pacific region. Our relationships with Asian allies and key partners are critical to the future stability and growth of the region. We will emphasize our existing alliances, which provide a vital foundation for Asia-Pacific security.
One of those existing alliances is America’s alliance with Australia. The President actually repeated this in his remarks at the Pentagon. He said, “As I made clear in Australia, we will be strengthening our presence in the Asia Pacific, and budget reductions will not come at the expense of that critical region.”
The Marines are coming to Darwin!
Does this mean the US views China as an economic threat? A military threat? An economic partner? Or all three? Here’s what the review has to say, specifically about China:
The maintenance of peace, stability, the free flow of commerce, and of U.S. influence in this dynamic region will depend in part on an underlying balance of military capability and presence. Over the long term, China’s emergence as a regional power will have the potential to affect the U.S. economy and our security in a variety of ways. Our two countries have a strong stake in peace and stability in East Asia and an interest in building a cooperative bilateral relationship. However, the growth of China’s military power must be accompanied by greater clarity of its strategic intentions in order to avoid causing friction in the region.
It’s nice to hear that the US is thinking in “cooperative bilateral” terms. It’s not nice to think about a US military that’s increasingly made up of drones loitering at 35,000 feet all over the world with permission to rain down extra-judicial death on anyone the President (any President) classifies as a potential future terrorist threat.
The Chinese, for their part, are not impressed. There’s been no official reaction from Beijing. But a commentary published by the official State media outlet Xinhua reported:
The U.S. role, if fulfilled with a positive attitude and free from a Cold War-style zero-sum mentality, will not only be conducive to regional stability and prosperity, but be good for China, which needs a peaceful environment to continue its economic development.
However, while boosting its military presence in the Asia-Pacific, the United States should abstain from flexing its muscles, as this won’t help solve regional disputes. If the United States indiscreetly applies militarism in the region, it will be like a bull in a china shop, and endanger peace instead of enhancing regional stability…
Over the past decade, the United States fought wars in Afghanistan and Iraq, which cost thousands of lives and over 1 trillion dollars. The two wars became a heavy burden for the United States and caused a tremendous amount of suffering for the two Asian countries. History teaches us that military intervention can’t usher in lasting peace and prosperity in another country.
The United States should learn from its past painful experiences and play a constructive role in the Asia-Pacific instead of recklessly practising militarism. After all, might does not always make right.
The full US defence review doesn’t come out for a few more weeks. But the battle lines, so to speak, are already being drawn. The US isn’t willing to quietly as a military power in Asia-Pacific. China wants room to grow. Australia occupies a unique place somewhere in the middle.
There are so many aspects to this issue – and so many investment opportunities and risks associated with it – that we’ve decided to dedicate two full days to discussing it in depth. Each of the five editors at Port Phillip Publishing, plus a handful of carefully invited keynote speakers, will spend two days in Sydney discussing the premise of investment life “After America” at the Intercontinental Hotel on March 15th and 16th.
We’re not expecting everyone to agree with the idea that America’s best days are behind it. But we are expecting a rollicking and thoughtful few days. And we’re expecting you’ll be able to walk away from the closed-door sessions with a better understanding of what’s to come and what to do about it now. Stay tuned for more details later this week.
In the meantime, if you want to be notified as soon as the 350 tickets are released for sale, go here and enter your email address. We’ll notify you directly the day the After America conference opens its doors to the public. Tomorrow, more on economic rivals who desperately need each other. Until then…
for The Daily Reckoning Australia