Investors must recalibrate their expectations and plans as the position of the US as leader of a world order is usurped by “a number of powers”, including Australia’s near-neighbour Indonesia.
Hugh White, a defence expert and Emeritus Professor of strategic studies at the Australian National University, told the Zurich Accelerate conference on Tuesday that Indonesia is on track to having the fourth biggest economy in the world by 2050.
White said the nation will become one of “a number of powers” leading the world “by well before the middle of this century”.
“We used to think of Indonesia as big and close, but poor and weak,” White said. “Now it’s going to be big and close and strong and rich.”
White argued the four biggest economies will be China, India, the United States and Indonesia, although Indonesia will be a “distant fourth”.
White rejected the notion that should the US stop leading the world, China will take its place.
He said while China is “immensely powerful” and will be the strongest country in the world, it can’t lead the world alone. Instead, leadership will likely fall to “a number of powers”, with China included.
White said Australia’s political parties have not begun to understand Australia’s position within Asia, which could be to its detriment.
“Both sides of politics have been too timid and really quite frightened of what it means for us,” White said.
“Australia has not begun to accommodate. We will have to make our own way in this part of the world alone.”
He recommended the government start rethinking and understanding Australia’s relationship to Asia’s great powers, namely China and India, which it has not been doing thus far.
“If we just frame China as a threat, then we won’t have begun to understand the situation we find ourselves in, nor will we position ourselves to handle it,” White cautioned.
“If we just think of India as an ally against China, which is the way in which Australia, and for that matter America, tend to think about India in recent years, we won’t get India either.”
White admitted this is an “extraordinary challenge” for the new government and referenced former Prime Minister Paul Keating’s viewpoint that Australia should be looking for security with Asia, rather than from Asia.
US ‘isolationism’
White told the conference the US-leading era is coming to an end as a result of Donald Trump’s presidency and particularly his economic agenda.
“He really does want to pull America out of the global economy and resort to an economic isolationism,” White said.
White said this is not that the United States will no longer be a powerful country, just that it will no longer lead the world.
Geopolitics academic and economist Danny Quah told the Top1000funds.com Fiduciary Investors Symposium, held in Singapore in March, that while Asia remains the future of global economic growth, it is now “a more difficult story” as the US retreats as an advocate of multilateralism.
He said he does not yet see coherence in a China-led order in Asia and it would be difficult for Asian countries with small economies to buy into a China-led order.
However, global geopolitics expert Stephen Kotkin, a senior fellow at the Hoover Institution at Stanford University, told the same symposium that Trump was “an instrument of processes that are bigger than him” and challenged the view that the US is retreating from the world.
Kotkin said it was instead a rebalancing that will result in a new equilibrium and argued the US-led order was the best option.
