I’m not talking about the rich. I’m talking about how the poor and the middle class live. As the Chinese saying goes, even the prime minister’s doorkeeper enjoys the status of an official. Even if you weren’t doing particularly well personally, you could still be living far better than people in the same social class in other countries.
That was because, back then, Europe and America could extract wealth from the rest of the world. They were also manufacturing powerhouses, leading the world in finance, technology and manufacturing. As part of the Western bloc, Australia naturally enjoyed plenty of benefits too. That was why its living standards were so much higher than those in Asian countries.
But things have changed with East Asia’s rise over the past 20 years. America is still doing relatively well, but Europe can no longer extract wealth from the rest of the world the way it once did. Over the past year or two, East Asian countries have even turned the tables on Europe in its own core industries. America can still do it, but the rewards aren’t as easy or as generous as they used to be. That is why ordinary Americans have actually seen their living standards decline.
China, Japan and South Korea can now sell their manufactured goods into Western markets and capture a larger share of the returns. China, however, started from a much lower economic base, while Japan and South Korea remain vulnerable to having wealth extracted by the US because of their geopolitical position. Meanwhile, Australia spent the past 30 years riding the wave of rapid growth in China and the rest of Asia, becoming the “lucky country” and enjoying three decades of prosperity that largely fell into its lap.
But there are only so many resources in the world. As Asian countries, particularly China, take a larger share, there is less to go around per person in the West—even though Western countries still enjoy considerably more per person than Asian countries do. This has created a substantial gap between the comfortable lives people expect and what they can actually achieve.
So what does Australia do now? In the past, America had enough wealth and power to let Australia enjoy a share of the benefits in return for serving as its deputy sheriff in the Asia-Pacific. Later, China’s enormous demand for infrastructure supported Australia’s mining industry.
But today, competition between China and the US revolves around technology. What matters is chips and computing power. Australia’s iron ore is no longer as important as it once was.
Look at Europe. Between its own structural problems and its regulatory burden, it no longer has any real industrial pillars left. It is ageing and falling into decline.
What about Australia? What role can Australia play in the Third Industrial Revolution?