Q: At the ASFA Conference, you spoke about three major geopolitical trends; the rise of China, populism and the challenging of rules-based international systems. Do you see any other major trends emerging in the coming 12-18 months?

A: Over the next 12 months there is likely to be a continuing deterioration in public support for mainstream political parties throughout the western world. This is being driven by a number of factors. First, mainstream political parties have misjudged the general public’s commitment to national identity. They feel their national identity has been challenged by uncontrolled immigration (especially in Europe), by globalisation and by the denigration of national pride by elites. Watch out for the European Parliamentary elections in May of this year. It is possible that nationalists could gain a considerable number of seats. Given that the European Parliament decides ultimately on the membership of EU institutions and its laws, this could be a defining development in the politics of the European Union.

Liberal democracies in Europe, North America and Australasia will become increasingly challenged by the growing incivility in public debate. This is most obviously manifested on Twitter and other social media. The consequences of growing incivility and associated partisanship is that the public will gradually lose faith in public institutions, be they political institutions or business, the judiciary, the media and so on. This is discouraging and could lead to a gradual disillusionment with democratic processes. One of the great challenges of the next year will be to try to restore a modicum of civility into public discussion and public debate.

Q: What will China’s rising power mean for stability and the status quo, both globally and for Australia?

A: The rise of China need not be a threat to status quo powers – particularly the United States. If China acts according to the rules-based international system and resists the temptation to try to change the status quo through the use of force—be it economic force or even military force—then any tensions arising from the rise of China can be contained. The Americans need to accept the rise of China as a given and ensure that China is able to play its full part in international institutions. It is reasonable for the Americans to take action to try to liberalise the Chinese market. It may be that the trade war declared on China by President Trump will lead to a greater liberalisation of the Chinese economy than would otherwise have been the case – so that in net terms, taking aggressive trade action against China may prove to be worthwhile.

Q: How will the challenges ahead for China impact Australia?

A: We should not assume that China’s continuing rise will be uncomplicated. China has considerable debt—particularly at the local government level—as state-owned enterprises have low levels of productivity, the banking system needs substantial reform to make it more efficient and, above all, China faces a very significant demographic challenge. As a result of decades of pursuing a one child policy, China’s population growth is starting to decline. Indeed, in absolute terms China’s working-age population has now begun to shrink. This plays to the saying that China needs to get rich before it gets old. For Australia, this means that the Chinese market will not continue to grow at the rate it has done over the last 20 years. China’s economy will become more “normal” which means that rates of growth will be lower in the years ahead, and also less predictable.

Q: There seems to be a current trend away from globalisation and reversion to protectionism and nationalism. Do you think this trend will continue and, if so, what are the likely implications?

A: We need to remember that globalisation has never been particularly popular, including in Australia. Trade liberalisation and trade agreements opening up Australian trade to other parts of the world are not political winners. Equally, free trade is not especially popular in Europe or even in North America. Political leaders need to understand that the public are not just interested in economics. They do have pride in their own nations and the nation state is the fundamental building block of the international system. Leaders have not sufficiently taken that into account in recent years. As a result, there has been a strong reaction to the disparaging of national identity by metropolitan elites. This has particularly manifested itself with the demands by the elite that the public accept high levels of immigration and, in parts of Europe and North America, shambolic and unregulated immigration. It’s not the migrants themselves who are the problem, it’s the sense that some sort of internationalism is more important than the nation state. People imagine this in all sorts of different ways but essentially they do not like it. I do not see that the rise of protectionism is going to continue apace. The European Union is not likely to raise barriers and nor are Asian economies likely to. Trump is using increased tariffs to try to force better trade agreements on countries like China and, for that matter, Europe. In time, this strategy may work.

Q: What impact will the rise of populist political parties have, both internationally and in Australia?

A: The rise of populism in Australia is a substantial threat to our political system. At the next election, there is a real risk that independents will win several seats and gradually build on that foundation. Independents offer the public in their electorates whatever they want. They depend on getting the preferences of the one major party which doesn’t think it can win in that particular electorate. Once elected, they are very hard to get rid of because they never form government, they just criticise anything the government does which is unpopular and claim credit for everything the government does which is popular. If every member of Parliament was an independent, then it would be almost impossible to have a government at all. This is the greatest danger of populism in Australia. It has the potential to lead to a very serious deterioration in the quality of governance of Australia. Internationally, populists are more extreme still. Some of them are quite ideological. To govern will require sometimes making unpopular decisions but with populists in power, good decision-making will be rare indeed.

Q: During your presentation at the ASFA Conference you said that “changes can be managed with wise leadership”. What characteristics and values do you believe constitute wise leadership?

A: Good and wise leadership in this era will strike a balance between policies which capitalise on the benefits of globalisation—particularly trade and investment agreements and so on—and making sure the nation state’s pride and identity are well protected. Leaders need to try to unite their nations around their national values and historical narratives and try to avoid salami slicing society into gender, racial and sexual identities. So in a phrase, good international policy needs to be married with moderated and reasonable national pride.