3
Though it be honest, it is never good
To bring bad news
William Shakespeare,
Antony and Cleopatra
By March, I had already been invited to travel to Washington by President Bush on an official visit. There was much to discuss on the subjects of Iraq and Afghanistan, of course, but of more immediate concern were the clouds gathering over the global economy as the crisis in US mortgage and equities markets deepened.
In February, I had had a long conversation with Ken Henry. I wanted to know what contingency plans we had if the US subprime crisis, followed by major falls on the US stock exchange, developed into a full-blown financial crisis.1 I also probed him on our level of foreign exposure, particularly given the $545 billion global private debt that Australian corporations had accumulated by the time our government came to office.2 This figure had quadrupled over the life of the Howard government. As we traced our way through the mechanics of Australia’s current account and capital account, I remember startling him completely when I asked: ‘So, Ken, is it possible that this country could land itself in a balance of payments crisis? And if so, what would we do about it?’
Ken paused for what seemed like a small eternity. He said that international confidence in our economic fundamentals made such a contingency highly improbable.
I persisted in my questioning. What would happen if international lines of private credit were suddenly unplugged, either to Australian corporate borrowers or the Australian banks themselves? Was this a possibility if global financial institutions, most particularly those in the United States, suddenly decided to call in their lines of credit in order to consolidate their domestic balance sheets?
This time Ken paused for a long, long time. It would be the beginning of an even more intense series of conversations between us. By this stage the Lehman Brothers crisis was more than six months away, but the collapse of Bear Stearns in mid-March was imminent. The loss of this venerable American financial institution, which had been established in 1923 and survived the Great Depression, was a distinctly bad omen.
The stability of the global financial system and the fragility of the global economy would become the central focus of my travel to the US, Europe and China in the period ahead. I became increasingly preoccupied with what was happening across the vast economic forces around us over which we had no real control. My public language also began to change. Just prior to leaving for Washington, I addressed the East Asia Forum at the Australian National University and, perhaps for the first time in the Australian discourse on the major problems emerging in the American mortgage crisis, started using the term ‘global financial crisis’. In time I would shorten this to the Australian version, GFC. The name stuck.
*
I arrived in Washington twelve days after the collapse of Bear Stearns. Thérèse and I landed at Andrews Air Force Base and were taken to Blair House, the US president’s official guesthouse for visiting heads of state and government.3 Blair House was redolent with modern American history – and Australian history too. In the pages of an old volume of the official guest book, I found the signature of the great John Curtin, the fourteenth prime minister of Australia, who had stayed at Blair House at the invitation of President Roosevelt. Curtin would be dead less than a year later. I felt honoured to be in the same residence where Curtin had stayed all those years ago. He was a reformed alcoholic and committed pacifist who had national leadership forced on him in the darkest days of the Second World War. His successor, Ben Chifley, was an engine driver. I was the son of a share farmer. The Labor Party had given us extraordinary opportunities.
The next day it was off to the White House, and an Oval Office meeting with President Bush. The first thing to say about George Bush is that he is enormously personable. Of course, I disagreed with him on a wide range of policies, but he was likeable. His great habit, from which all political leaders on the international stage should learn, was to ask about your own politics. No doubt he received briefings on all my strengths and foibles, and the political circumstances in which I found myself, but as a mark of basic personal respect, he wanted to know how politics worked for me and my party in Australia. Apart from the courtesy involved, it also enabled him to understand what sort of political latitude I might have in the future to move on one issue or another.
We didn’t talk a lot about Iraq. Our respective positions were clear. Our two militaries, with our blessing, had agreed on an exit date of July 2008, at the conclusion of the next full troop rotation that had begun in January. This would provide sufficient time for any ‘backfilling’ arrangements to be put in place, although the part of the country where the Australian contingent had been sent had been relatively quiet. We spent far more time on Afghanistan, as I sought to probe what his general strategy would be in the weeks and months ahead and how we might work with him to help set that shattered country onto its own two feet. But in the foreign policy part of our discussion, we spent the lion’s share of our time on China. He was generally curious about how the Chinese political system worked and wanted to know where I thought China was heading in terms of its long-term strategic mission.
But my core reason for being in Washington, and the subject I was most keen to discuss with the president, was what on earth was unfolding in US financial markets and where, in his view, that would lead. I was interested in what contingency plans the administration had in place should it all go to hell in a handbasket. The president kindly arranged for me to have a longer and more substantive session with his Secretary of the Treasury, Hank Paulson. Over this and subsequent visits to Washington we would become good friends. I’d also get to know Ben Bernanke, chairman of the US Federal Reserve. By year’s end, the survival of the US financial system would be in the hands of these three individuals – the president, Paulson and Bernanke.
*
From Washington I headed to New York for meetings with the UN Secretary-General on Afghanistan, climate change, and the confirmation of Australia’s candidature for a non-permanent seat on the UN Security Council for 2013–14. The decision to run for the UN Security Council was a considerable political risk. Australia’s international reputation in general, quite apart from our standing in UN capitals like New York and Geneva, had sunk to an all-time low under the Howard government. Serious damage had been done to our global reputation and I didn’t know if we could turn it around and secure the votes necessary to win a campaign against both Finland and Luxembourg, who had already been in the field for the previous five years. There was a lot of ground to make up as the three of us would be competing for two available positions. But we wouldn’t know unless we tried, and I wasn’t about to die wondering. It had been more than twenty years since Australia was last a member of the Security Council, back in 1987.4 I believed our membership of the UN’s most powerful body on international peace and security was essential if Australia was to have any authoritative global voice in the affairs of the world, beyond the usual array of earnest press statements and furrowed prime ministerial brows, expressing our ‘deep concerns’ about the state of the world while doing nothing about it in concrete terms. This was largely domestic political street theatre rather than seeking to use the available multilateral diplomatic machinery to advance a case. It was part of what I had described in a previous speech in Australia as ‘creative middle power diplomacy’.5 I would use this theme repeatedly across our years in government, resonating with what the great Gareth Evans had called being a ‘good international citizen’. The only thing I hadn’t anticipated was that, back home, the Liberal and National parties would deny us bipartisan support for the UNSC bid. This was unheard of in Australian diplomatic history. It bordered on the treacherous. Of course, when the Liberals won office at the end of 2013 – after we had won the ballot against the odds in 2012 – you couldn’t keep Tony Abbott away from the UNSC, where he would seize the opportunity to pontificate on his great global crusade against Islamic terrorism. In the hypocrisy stakes, Abbott was unparalleled.
New York, however, was not just about the UN; it was the undisputed centre of the international financial community. I therefore took the unique opportunity, given the global financial maelstrom that was beginning to unfold around us, to speak to as wide a Wall Street audience as possible. The American Australian Association, or AAA, organised a luncheon at the Waldorf Astoria for 700 guests. This was not unique; they had done this for visiting Australian prime ministers since the days of Chifley. But I had no intention of delivering the usual peroration on Australia’s place in the world. Instead, I wanted to demonstrate how strong our economic fundamentals were, and how well-prepared we were for any crisis. Those in the audience would be making decisions about whether to maintain capital flows to Australian institutions if the international lines of credit began to dry up.
*
From the US I travelled to Brussels to meet with the president of the European Commission, José Manuel Barroso, and his cabinet.6 Historically, Australia had had an adversarial relationship with the European Union. This was grounded in European protectionist policies, particularly as it related to the Common Agricultural Policy.7 But to my mind it made sense to develop a strong, positive bond with the European Commission, which had already become a principal player in the Doha round of free trade negotiations. Then there was the NATO factor. While the EU was not co-definitional with NATO, the overlapping membership between the two institutions was significant. And given we were all now in this stoush together, it was logical to have all lines of communication open with relevant decision-makers in Europe so that we could work together productively on common global challenges. Thus I decided to launch Australia’s first-ever treaty-level negotiations with the European Union, which would in the years ahead produce the Australia–EU Partnership Framework, which now forms the institutional framework for Australia’s overall relationship with Brussels.8 It would also be a necessary building block for later launching negotiations for a free trade agreement with the EU.
After a day in Brussels, another gruelling day would follow in Bucharest, where the leaders of the twenty-six member states had arrived for a NATO summit, as well as a meeting of heads of government for all International Security Assistance Force (ISAF) countries who were then contributing to the war in Afghanistan. The only upside in visiting Bucharest at this time was the chance to arrange a negotiating session with the Secretary-General of NATO, Jaap de Hoop Scheffer. Defence minister Joel Fitzgibbon and I used to call him the Flying Dutchman. He was a good bloke. Our central gripe with NATO was that despite being one of the larger contributors of troops to combined Allied operations in Afghanistan,9 because we were not NATO members, we were debarred from NATO planning missions on overall political and military strategy. We could have our own separate bilateral negotiations with the Americans, but at the end of the day we couldn’t know what exactly happened when they sat down with the British, Germans, French and other Europeans in their own separate forum. My message to both the Americans and the NATO Secretary-General was blunt: if they wanted Australia to continue its military and aid contribution to Afghanistan, this would have to change. It took about a year, but they finally agreed to the formal establishment of a mechanism for ‘third party’ negotiations at the highest level.
*
British prime minister Gordon Brown had invited me to London, so this is where I went next. As London was the world’s second major financial capital after New York, I wanted to deliver a message there similar to the one I had delivered to the US financial community. Furthermore, if we were going to find ourselves in the trenches dealing with a full-blown financial crisis, we would need to be deeply wired with the British government as well as the Bush administration. I also knew from experience that the ‘special relationship’ that existed between the UK and the US might well have been beneficial to both those countries over many decades, but it did not follow that Australia’s interests would be taken into account. Indeed, in the history of Anglo-American relations, Australian interests were usually politely ignored – or, in the days of Churchill, Roosevelt and Curtin, impolitely ignored.
In London, I delivered an address titled ‘Australia’s Economic Future’ to the Confederation of British Industry and Australian Business.10 I also took the opportunity to deliver a broader message on economic and social reform, entitled ‘Hard Heads, Soft Hearts: A Future Reform Agenda for the New Australian Government’ to the Progressive Governance Conference hosted by Gordon Brown.11 When I wrote this speech, it was with a view to putting international flesh on the bones of a series of speeches I’d made over the years which sought to apply the traditional values of the Labor movement to the modern circumstances of the Australia of the twenty-first century. I’d been writing and thinking on the nature of progressive politics in the age of economic globalisation for years, and I wanted to consider how these values might translate to the international order, particularly at a time of emerging systemic economic crisis. A few days later I would elaborate on this further in a public address at the London School of Economics.12 I was happy with these speeches. They were authentically mine and from my own pen. They sought to give intellectual and policy coherence to what the new Australian government was trying to do in the world at a time when an already complex discourse was taking place on the interconnection between equity and the economy, public goods and private markets, as well as local identity and the Leviathan that was globalisation – while at the same time facing an immediate, real and practical crisis in global finance and economics. These were challenging times for global progressive politics.
*
Going to visit the Queen at Windsor Castle was a different experience altogether. For most Australians, visiting the Queen is a bit like visiting your favourite grandma. And despite the fact that I was a committed republican, I was looking forward to meeting her in her local digs, which others had told me were even more impressive than the Lodge. Besides, I thought that my dear departed mum, a devout monarchist, would have been pleased at the thought of her young lad going off to take tea with the Queen.
The Queen is a quiet, reserved woman. She is also strong and firm. And she has a keen sense of humour, at least when she permits herself to express it. The protocol for meetings between the prime ministers of Her Majesty’s ‘sovereign realms’ had been laid down since well before the beginning of time. Her staff, all fine folks, would brief you on how to greet HM: ‘Please address Her Majesty as “ma’am” as in “jam”, not “ma’am” as in “charm”.’ Such etiquette hadn’t featured prominently on the Nambour High curriculum, one of the obvious disadvantages of a state school education. I’m sure that Alexander Downer would have had it all down pat. Then there was the tutorial on how to approach the royal presence and then how to bow the head. I was relieved to discover that I didn’t have to walk out of the room backwards; my lack of physical coordination would have ensured I fell over in a heap. Instead I was instructed on bowing the head and extending the hand at the appropriate juncture to Her Majesty. While her private staff were perfectly friendly and informal, it all felt as complicated as preparing for the D-Day landings.
Her Majesty and I had a good conversation about Australia and the Commonwealth. The Commonwealth is one of her genuine, continuing passions. She feels for it greatly and is always alert to how the institution could be strengthened for the future. My own view was pretty simple: the Commonwealth, in bringing together more than fifty disparate states from around the world – more than a quarter of the United Nations – was a useful platform for internationalism, and it should be used as such.
I then broached the difficult question of the republic with Her Majesty. She would have known my position from the election campaign in Australia. I had made it clear that the Labor Party remained committed to the establishment of an Australian Republic, but this would not be the first priority of a newly elected Labor government. If the government was returned in a second term, we would put a fresh referendum to the people. It has long been the convention that British and Australian prime ministers do not discuss publicly what the monarch actually says in these conversations, and I do not intend to breach that convention even now. Suffice it to say that while John Howard would, in the years to come, be the recipient of an Order of Merit, I was unlikely to be on the shortlist. I had the distinct impression that Her Majesty was not amused that she was in the presence of such a determined republican.
*
The final leg of this seventeen-day odyssey was the Middle Kingdom. By this stage, I was exhausted, as was the entire travelling party, including the increasingly grumpy gaggle of journalists travelling with us. It had not been a leisurely tour.
It’s a long flight from London to Beijing, but it felt not quite long enough as I sat down with my staff to work on my first speech, to be delivered at Peking University within hours of my arrival. This was a tricky enough speech to prepare in English, let alone in Mandarin; the nuance would be analysed in each language. The inescapable reality was that Australia was a modern, robust Western democracy complete with individual and press freedoms, whereas China was a one-party state with an authoritarian political culture, ultimately ruled through the power of the gun – and my visit happened to coincide with an eruption of global political concerns about Chinese human rights abuses in Tibet. However diplomatic the language with which we described these differences, they were stark. They represented fundamental disparities in the basic values which underpinned our respective political systems.
I thought the best way of handling this in my speech was to be as open about it as possible. The Chinese knew me well. I had visited the country dozens of times, and I’d lived in Beijing with Thérèse and our daughter Jessica for several years. Our hosts knew I could be blunt. I believe, too, that there’s always been a danger in Western political leaders ‘overcorrecting’ themselves when they land in China, believing that it was simply too impolite to raise the deep political differences which existed between our respective systems. It was far more convenient to talk instead about common economic interests, as if values didn’t matter at the end of the day, so long as we were making lots of money with each other. I had a different view. While not seeking to impose Western values on China – that would not only be fruitless, but counterproductive – we should be clear about our differing values, rather than pretending such differences didn’t exist.
One of the standard practices of our Chinese hosts is to describe foreigners they may have met only yesterday as ‘old friends’. The Chinese term for this is lao pengyou. It’s friendly but meaningless, other than to seduce the foreign interlocutor into greater levels of self-censorship when it comes to describing the differences between China and the West. So with the assistance of a good friend and one of Australia’s best sinologists, Dr Geremie Barmé, I determined on a new concept, although one well-anchored in classical Chinese: a zhengyou. While pengyou inferred a friendship in which one would never broach sensitive matters for fear of breaching the relationship, zhengyou referred to friends who were prepared to be candid with each other, to ‘speak truth to power’, whether in private or in public.13 In the rarefied world of international political Sinology, this was considered almost revolutionary.
I set about explaining this new concept in my Peking University address. As with any difficult speech, it’s usually far easier to deliver if you start with a level of self-deprecating humour. Thus I began with my own bastardisation of an old Chinese saying: Tian bu pa, di bu pa, zhipa laowai shuo zhongguohua. This is best rendered in English as: ‘There is nothing on heaven to fear, there is nothing on earth to fear. The only thing there is to fear is when foreign barbarians try to speak Chinese.’14 It brought the house down. Having broken the ice, I was then able to expound on the new concepts of friendship I was seeking to bring to the global discourse with China. We indeed wanted to be China’s friend, but were disinclined to be a silent friend. Consistent with any friendship of depth, we occasionally reserved the right to disagree. This was a long, circuitous route to broach the difficult subject of Tibet in a public forum on day one of my first official visit to the People’s Republic of China. As I put it: ‘[We] believe it is necessary to recognise there are significant human rights problems in Tibet. The current situation in Tibet is of concern to Australians. We recognise the need for all parties to avoid violence and find a solution through dialogue. As a long-standing friend of China I intend to have a straightforward discussion with China’s leaders on this.’15 In the international media such a public statement would be seen as unremarkable, but in China it was a different thing altogether.
The Chinese foreign ministry told my staff that the Chinese leadership didn’t appreciate this. I knew that would be the case. But I would rather that our relationship with China be real rather than one that simply swept difficult questions under the carpet. The danger of doing so was that it would create an expectation about Australia’s preparedness to remain silent on all occasions.
*
On our wider regional security policy, the government had already decided early that year to discontinue our participation in the emerging ‘quadrilateral security arrangement’ between Japan, India, Australia and the United States.16 This had been first proposed by Japanese Prime Minister Abe in mid-2007. Our concerns were straightforward: why would Australia want to consign the future of its bilateral relationship with China to the future health of the China–Japan relationship, where there were centuries of mutual toxicity? For Australia to embroil itself in an emerging military alliance with Japan against China, which is what the quad in reality was, in our judgment was incompatible with our national interests. Then there was China’s historical relationship with India. While not as toxic as Sino–Japanese relations, the two countries had fought a violent border war in 1962 and still had thousands of square kilometres of disputed border regions that periodically erupted into violent clashes. So did Australia want to anchor our future relationship with Beijing with new ‘allies’ which had deep historical disputes still to resolve with China? If the ‘quad’ became formalised, where would that place Australia if we then had to take sides in Delhi’s or Tokyo’s multiple unresolved disputes with Beijing? A further danger we faced was, if Australia proceeded with the quad, what would happen if domestic political circumstances later changed in either Japan or India? Governments could change through elections. Even the policies of existing governments could change. Australia would run the risk of being left high and dry as a result of future policy departures in Tokyo or Delhi. Indeed, that remains a danger through to this day.
Then there was the United States. We were already bound by the articles of the ANZUS Treaty to support the US in the event of an armed attack on US forces ‘in the Pacific area’, which are far-reaching.17 Mindful of these obligations, our government then set about strengthening the military relationship with the US under the Obama administration’s ‘Pivot to East Asia’.18 Strengthening a bilateral alliance is one thing. Embracing a de facto quadrilateral alliance potentially embroiling Australia in military conflict arising from ancient disputes between Delhi, Tokyo and Beijing in quite something else. It was also passing strange that if there were any US anxieties arising from our government’s position on the quad in February 20008, why was it never raised by the Bush administration during my visit to Washington the following month? Furthermore, the absence of the ‘quad’ did not preclude the strengthening of bilateral security cooperation between Australia and India, and Australia and Japan – outside the framework of any more binding set of quadrilateral treaty or sub-treaty arrangements. In fact, the record demonstrates this is precisely what we then set out to do.
The argument therefore that the decisions we took in 2008 on the quad were somehow designed to ‘please Beijing’, as many sloppy analyses have subsequently alleged, has zero factual foundation.19 Whether on human rights or in the then-upcoming 2009 Defence White Paper, we demonstrated we were perfectly prepared to adopt a hardline approach towards Beijing whenever our national interests and values demanded it. The later accusation that our decision on the quad was taken to appease China is demonstrably false. The extent to which political and strategic circumstances may have changed a decade later is another matter entirely. But to conveniently ‘retrofit’ the arguments of the present to prevailing circumstances back in 2007–08 (as later critics of our original decision have happily done) is just plain intellectually and factually dishonest.