Turnbull versus Morrison in Liberal crisis over Craig Kelly


Michelle Grattan, University of Canberra

Scott Morrison faces a major Liberal party crisis after Malcolm
Turnbull moved to torpedo the Prime Minister’s plan to protect the
preselection of controversial rightwing backbencher Craig Kelly.

Morrison wants the NSW Liberal executive to re-endorse sitting NSW
federal members so Kelly does not have to face a ballot in which he would be defeated.

Kelly has threatened to run as an independent if he loses preselection
and also at times has left the way open to go to the crossbench.

The Coalition is already in minority government after the loss of
Wentworth and last week’s defection of Julia Banks.

Kelly has lost the support of his local branch members, and the
moderates have the numbers to remove him. His preselection opponent,
Kent Johns, has been under pressure to pull out of the race – as he
was persuaded to do before the last election to save Kelly.

Kelly was one of those who scuppered the National Energy Guarantee, in
the party meltdown that ended Turnbull’s leadership. He is a constant
presence in Sky and used his appearances to undermine the Turnbull
position on energy.

After hearing of the save-Kelly plan Turnbull immediately began
lobbying moderate executive members not to agree to the
cross-factional deal. When his lobbying reached the media, he took to
Twitter.

In a series of Sunday night tweets he said: “Today I learned there was a move to
persuade the State Executive to re-endorse Craig Kelly as Liberal
candidate for Hughes in order to avoid a preselection – in other words
to deny Liberal Party members in Hughes the opportunity to have their
say.”

He said he had spoken with “several State Executive members to express
my strong view that the Party’s democratic processes should operate in
the normal way especially after such a long debate in the NSW Liberal
Party about the importance of grass roots membership involvement.”

“It is time for the Liberal Party members in Hughes to have their say
about their local member and decide who they want to represent them.”

“It has been put to me that Mr Kelly has threatened to go to the cross
bench and “bring down the Government”. If indeed he has made that
threat, it is not one that should result in a capitulation. Indeed it
would be the worst and weakest response to such a threat.“

Turnbull said he was “strongly of the view that the normal democratic process should proceed.”

The Australian reports that Turnbull told one executive member, NSW Minister Matt Kean, that if Kelly moved to the crossbench it would “force Morrison to an early election and that will save the Berejiklian government”.

Turnbull had said that when he was PM he and Morrison had agreed to a
March 2 election – before the state poll later in March – but Morrison
was reneging.

The Liberals believe that whichever government faces the people first
in NSW will get a double whack from angry voters. Morrison indicated
last week that the election would be in May after an April 2 budget.

Another NSW rightwinger, senator Jim Molan is arcing up over his
dumping to an unwinnable position on the Senate ticket. Molan is also
looking to Morrison to do something about his position.

“Let’s see what he does, but I’m not here to be taken for granted,”
Molan told 6PR on Sunday.

“I would make the arrogant statement that the Liberal Party needs me
more than I need the Liberal Party.”

UPDATE Kelly survives after Morrison appeal

The NSW Liberal executive has voted to save the preselection of rebel
MP Craig Kelly after Scott Morrison personally lobbied key executive
members.

Morrison, who only landed in Canberra on Monday morning after his trip
to the G20, rang several executive members to appeal to them not to
follow Malcolm Turnbull’s strong urging to veto a deal to endorse Kelly.

The key four executive members to be persuaded to abstain were moderates Wayne
Brown, Harry Stutchbury, Chris Rath, and Sally Betts.

It is understood that Morrison said that while he wanted them to
support the motion for re-endorsement, if they couldn’t do so they should abstain for the good of the government.

The government feared that Kelly – who was among those who destroyed
Turnbull’s energy policy and his prime ministership – would run as an
independent at the election and go to the crossbench in the meantime
if disendorsed.

He had left the way open to do so.

Kelly, who would have lost an ordinary preselection because he did not
have local support, was part of a job lot of federal members endorsed
by the executive after Morrison’s efforts on Monday.

In a statement, a spokesman for the NSW Liberal party said it had “re-endorsed John Alexander OAM MP as our candidate for Bennelong, Jason Falinski MP as our candidate for Mackellar, Craig Kelly MP as our candidate for Hughes, and Lucy Wicks MP as our candidate for Robertson.” It did not mention Craig Laundy who is still making up
his mind whether he wants to recontest. All other NSW MPs have been re-endorsed.

Earlier Turnbull, after intensive private and public lobbying on
Sunday, said on Monday it would be “the antithesis of good government”
to give into Kelly’s threats – if he had made them.

But assuming he had made threats “that is the worst and the weakest
reason not to have a preselection process”.

He said even if Kelly went to crossbench the numbers would not be
there for a successful motion of no confidence against the government.

Turnbull said he had planned to have an election on March 2, ahead of
the NSW election later in March.

Many NSW Liberals believed “it would be in the party’s interest for the federal government to go to an election before the NSW government’s set election date of 23 March. “He described the Berejiklian government as “outstanding”.

If the Morrison government faced the people first Berejiklian could
“go to the polls and be judged on her record rather than being hit by
the brand damage that arose from the very destructive, pointless,
shameful leadership change in Canberra”.

“I know there’s been this proposition put around that no one’s really
interested in the leadership change or the internal machinations of
the Liberal party. The fact is they are and it has done a lot of brand
damage to the Liberal party.

“That’s something the party is going to have to work through. But
there’s no point being mealy mouth about it or pretending that that
damage hasn’t been done”.The Conversation

Michelle Grattan, Professorial Fellow, University of Canberra

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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Essential reading to get your head around Australia’s aged care crisis



File 20180917 177953 yjyeak.jpg?ixlib=rb 1.1
Almost half of residents in Australia’s residential aged care facilities suffer from depression.
from shutterstock.com

Sasha Petrova, The Conversation

Tonight ABC’s Four Corners will air the first of a two-part investigation into the often shocking treatment of the elderly in aged care homes around Australia.

The timing coincides with Prime Minister Scott Morrison’s weekend announcement of a royal commission into Australia’s aged care system. The prime minister said poor standards had led authorities to close one aged centre per month since the Oakden aged mental health home scandal.

South Australia’s Oakden facility closed nearly a year ago, following revelations of abuse and neglect dating back a decade.

While the terms of reference are yet to be determined, the royal commission will likely look into issues already raised by previous inquiries into the sector. These include the changing demands of Australia’s ageing population, staffing ratios, funding levels and the mental health, well-being and safety needs of nursing home residents.

Below are five articles in which our experts have previously explored the complex aspects of Australia’s aged care system, drawing on research which has exposed where the problems are, and have been for some time.

Lack of medical care

Our ageing population, and the focus on helping the elderly stay at home for as long as possible, means by the time people enter aged care they are older and sicker than before. Around half of people living in aged care today have dementia, depression, or another mental health or behavioural condition.

In fact, the proportion of older people requiring high care for complex needs, which includes assistance with all activities of daily living such as eating and bathing, has quadrupled from 13% in 2009 to 61% in 2016.

Yet there is no legal requirement for all aged care facilities to provide 24-hour registered nursing care. In the article below, Jane Phillips, David Currow, Deborah Parker and Nola Ries explore how today’s nursing home residents have minimal access to quality medical care.

1. Australia’s aged care residents are very sick, yet the government doesn’t prioritise medical care

In a separate piece on health care in nursing homes, Sarah Russell has also written:

nursing home providers looking to cut costs are bypassing registered nurses and employing less-skilled personal care attendants (PCAs) who aren’t adequately trained for the job.

2. Here’s why we need nurse-resident ratios in aged care homes


Funding for older Australians to stay at home

Research consistently shows more people want to stay in their own homes as they age. In the 2018-19 budget, the government announced an extra A$1.6 billion over the next four years for an additional 14,000 Home Care Packages. These deliver an agreed set of services to meet the specific needs of aged Australians who want to remain at home.

The government also subsidises a number (currently around 283,000) of residential care places for older people unable to continue living independently.

Aged care subsidies are allocated through a ratio, which aims to provide 113 subsidised care places for every 1,000 people aged 70 and over. This ratio will increase to 125 places for every 1,000 by 2021-22. Within the overall number of places, the government also sets sub-targets for the numbers of Home Care Packages and residential care places.

The government is aiming to amend the ratio in favour of more home care packages. By 2021-22, the target for home care packages will increase from 27 to 45 per 1,000, while the residential target is to reduce from 88 to 78 per 1,000.

But as Professor of Health Economics at University of Technology Sydney, Michael Woods has written, this still won’t be enough to meet demand.

3. There is extra funding for aged care in the budget, but not enough to meet demand


Poor mental health

Older Australians living in nursing homes represent one of society’s most vulnerable populations. More than 50% of residents in nursing homes suffer from depression compared to 10-15% of adults of the same age living in the community.

Recent research conducted by Briony Murphy and Professor Joseph Ibrahim from Monash University’s Health Law and Ageing Research Unit, found around 140 Australian nursing-home residents took their own lives between 2000 and 2013.

The authors found nearly 70% of those who took their own life were male, 66% had a diagnosis of depression and nearly 80% were experiencing one or more major life stresses, such as health deterioration. Around 43% were experiencing isolation and loneliness, and nearly 30% had trouble adjusting to life in a nursing home.

They wrote:

The small proportion of adults over 65 living with depression in the community shows that depression is not a normal part of the ageing process… the much larger figure of those suffering depression in nursing homes raises some serious questions.

4. Too many Australians living in nursing homes take their own lives


Poor oral health

Stories of abuse and neglect in nursing homes have also highlighted the issue of poor nutrition and oral health. In November 2017, the dire state of this was shown in a report of a nursing home resident in NSW who was found with maggots in her mouth the day before she died.

Researchers have long highlighted people living in aged care have substantially poorer oral health and three times the risk of untreated tooth decay than people living in the community.

Bronwyn Hemsley, Andrew Georgious, Joanne Steel and Susan Balandin collated a list of ways family members can help ensure their loved ones’ oral health is adequately looked after. This includes visiting your family member around mealtimes

…or helping the person to eat… Ask the resident permission to look into her mouth to check if she is swallowing or removing leftover food promptly.

5. The shocking state of oral health in our nursing homes, and how family members can help


If you or someone you know is experiencing depression or another mental health problem, contact Lifeline 13 11 14, beyondblue 1300 22 4636 or SANE Australia 1800 18 7263.The Conversation

Sasha Petrova, Deputy Editor, Health + Medicine, The Conversation

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Joyce fires broadside at Turnbull, as Coalition crisis deepens


Michelle Grattan, University of Canberra

Barnaby Joyce has lashed out at Malcolm Turnbull, accusing him of “pulling the scab off” Joyce’s personal life and interfering in National Party affairs.

As the crisis within the Coalition over the Joyce affair deepens, Joyce held a news conference to respond to Turnbull’s Thursday denunciation of his personal behaviour.

Turnbull – who has announced a ban on sexual relationships between ministers and their staff – accused Joyce of a “shocking error of judgement” over his affair with his former staffer, Vikki Campion, who is now his pregnant partner.

Turnbull also said Joyce should “consider his own position”, in effect flagging he would like the deputy prime minister to stand down.

Joyce on Friday said Turnbull’s comments were “inept” and “unneccessary”.

“I listened to it and thought that it was completely unnecessary – all that is going to do is basically pull the scab off for everyone to have a look at.”

In regard to the National Party, “there is nothing that we dislike more than implied intervention into the party processes”.

“We are our own independent political unit – we make our own decisions, especially around those who are the office-holders.”

That outside interference “locks people in … behind the leader. So I would not be making comments or implied comments about the leadership of the Liberal Party, and we don’t expect to get implied comments about the leadership of the National Party.”

The plunge in relations between the two leaders is now threatening Coalition unity, with uncertainty about how the situation will play out. While Turnbull is putting pressure on Joyce to go, some Nationals predict it will be counter-productive, as Joyce is saying.

Visiting Tasmania, Turnbull told reporters: “Joyce has my confidence as deputy prime minister”.

But he also said: “Barnaby has been considering his position and I do not think there is any question about that, but I have not called on him to resign. I have not asked him to resign – he has to form his view on his circumstances.

“He has a lot to reflect on given what has happened, and I say again, he has made some big errors of judgement and he acknowledges that.”

Turnbull dodged attempts to pin him down on when he first learned of Joyce’s affair with Campion. “I can’t recall when I first heard rumours but I can say to you that he did not say to me that he was having an affair with this woman – I’m not going to go any further than that.”

Joyce said that he was intending to make sure his relationship with Turnbull “get backs onto an even keel”.

He again made it clear he has no plans to resign.

“My colleagues support me. This was a personal issue – a personal issue that has been dragged into the public arena and I don’t believe that people should be resigning in any job over personal issues.”

Later Friday, Turnbull, obviously alarmed about the increasing fracture between the Coalition partners, told reporters he had not sought in any way to influence the deliberations of the National Party.

“Neither I nor my colleagues have made any criticism of the National party.”

The ConversationHe said criticism of Joyce’s conduct was not criticism of the National Party.

Michelle Grattan, Professorial Fellow, University of Canberra

This article was originally published on The Conversation. Read the original article.

Grattan on Friday: Voters just want citizenship crisis fixed – but it isn’t that easy



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There was much cynicism about Malcolm Turnbull resisting a full audit.
James Ross/AAP

Michelle Grattan, University of Canberra

The citizenship crisis is politics at its worst, has been unresolved far too long, and is a distraction from much more important issues. That’s the view from the real world, reflected by voters in focus groups this week.

As Malcolm Turnbull and Bill Shorten play politics over a disclosure motion to be put to parliament, these ordinary people are baffled and impatient with the whole affair.

While the four groups of “soft” voters (two each in Brisbane and Townsville) were part of a Queensland election study for the Institute for Governance’s research at the University of Canberra, the dual citizenship imbroglio was raised unprompted and the comments give an insight into ordinary Australians’ thinking about the fiasco engulfing the parliament in general and the Turnbull government in particular.

People are mystified by the fallout from the High Court decision, especially when citizenship of Britain, Canada or New Zealand is involved. As one participant put it: “It’s not like they’re aligned with some enemy”.

For many, the Constitution is out of date, failing to reflect modern Australia, and should be changed. “Australia is a young country so we’re going to have a mixed bag,” said a female flight attendant from Brisbane.

There’s also concern about money. “This business of saying you’re going to have to quit parliament – it’s going to cost a bomb,” a retired Brisbane woman complained.

People do differ, however, about the substance of the issue. Some think the consequences have been too severe, or invite ridicule. “It’s making Australia the laughing stock of the world,” said one.

A few were judgemental, taking the attitude the law is the law and candidates should have checked they met the rules. A retired Brisbane man was blunt: “We wouldn’t even be in this situation if they weren’t negligent”.

In terms of MPs rectifying their status, some voters thought the inadvertent dual citizens should be allowed to correct their situation without having to resign – “just renounce their citizenship and go on with it”, as one put it. If only it were so easy – unfortunately, that path is no answer constitutionally. The test is a person’s eligibility when nominating.

Some people favoured definitive action, such as a comprehensive audit or a fresh election. A Townsville retiree believed “they should have a full, complete audit of all federal politicians, of current and future ones, to make sure you comply with Section 44”.

There was much cynicism about Turnbull resisting a full audit. A young Brisbane voter opined that it was “probably because he’s hiding people”; another said the prime minister had not got a big enough parliamentary margin “to be sure that he’s going to keep the power”. More generally, a Townsville health worker condemned “a lame-duck federal government not achieving anything”.

The bottom line is that voters want the matter fixed quickly. “We don’t want this distraction to stretch for another two months. It’s just dumb,” declared a Brisbane engineer, while a young female occupational therapist from Townsville said: “I’d like them to get it finished and done with so they can look at other issues. … Let’s just finish it”.

Given the paralysing effect of the crisis, with multiple names now being tossed into a cauldron of uncertainty, tactical skirmishing can only become increasingly unacceptable to the public. Yet even if the games were put aside, this nightmare can’t be resolved fast, despite the voters’ frustration.

It demands both short-term and permanent solutions.

Most immediately, bipartisan agreement is required on the disclosure regime, with parliamentary decisions before Christmas on whatever High Court referrals are to be made. The leaders have been fighting and posturing over the detail but agree on pre-Christmas action.

Any MPs in obvious breach should resign at once – the recent cases have set benchmarks with brutal clarity. If that happened with lower house members, court referrals wouldn’t be needed. If senators quit, the court would formalise their disqualifications and order recounts to fill their seats.

But when cases are arguably more murky – MPs who have renounced their foreign citizenship but only received their confirmation after nomination, such as Labor’s Justine Keay and the Nick Xenophon Team’s Rebekha Sharkie – High Court clarification surely would be needed. In light of the potential extent of the debacle, it’s just possible the court might decide their efforts were sufficient.

Assuming there are some dual citizens in the lower house, the timing of byelections will depend on when resignations and/or court decisions come.

There is no way of knowing whether the process will be catastrophic for the government, or something less. It would all depend on the ownership and margins of the seats hit with byelections, and what attitude the voters took in them.

What about the long term?

Despite all the difficulties involved, it’s increasingly looking like the best course would be a referendum to attempt to change the Constitution’s Section 44 (i), which prohibits dual citizens sitting in parliament.

The objective should be to capture the broad intent of the provision, and facilitate candidates meeting that intent.

Turnbull is right when he says that, despite our multicultural makeup, people would not vote for a change that permitted dual citizens to sit.

But if there was bipartisan support, there surely would be a reasonable chance – perhaps no more than that – of passing new wording saying that a candidate must have only Australian citizenship and that a sworn declaration was sufficient to renounce any other citizenship.

The High Court judgement in effect makes federal MPs – and so the federal parliament – hostage to changes in other countries’ laws. This is unacceptable. New constitutional wording would stop that.

I must admit to altering my view on this matter. I’ve previously thought voters are so angry at politicians they wouldn’t want to make things easier for them. But in view of the chaos, it may be that people would be persuaded by the need to instil clarity.

Anyway, it would be worth a go, because while a defeat would be bad, it wouldn’t have the sort of negative consequences of, say, the loss of a referendum on Indigenous recognition.

If this course were taken, the commitment to a referendum could be made soon, but the vote could then be held with the election, to prevent an argument about cost.

There has been speculation that perhaps the situation could be sorted by a change to citizenship legislation. But constitutional expert Anne Twomey, from Sydney University, doubts this – given the court’s indication that determining issues of dual citizenship involves the laws of other countries over which Australia has no control.

Twomey – who doesn’t advocate constitutional change – also points out that if the citizenship part of Section 44 were to be tackled, it would only be prudent to also clarify the parts of the same section that disqualify from parliament anyone who holds an office of profit under the crown or has any direct or indirect pecuniary interest in any agreement with the public service of the Commonwealth.

This makes sense, although admittedly it could complicate the task of selling a referendum.

The ConversationBut let’s stand back. If our politicians, and we as voters, can’t update a troublesome section of this more-than–century-old document, what does it say about all of us?

https://www.podbean.com/media/player/k3zus-7afe23?from=site&skin=1&share=1&fonts=Helvetica&auto=0&download=0

Michelle Grattan, Professorial Fellow, University of Canberra

This article was originally published on The Conversation. Read the original article.

Kim Jong-un’s nuclear ambition: what is North Korea’s endgame?



File 20170904 8551 14eotg2

Reuters/Toru Hanai

Nick Bisley, La Trobe University

North Korea’s sixth nuclear test, following soon after a series of missile provocations, tells us a great deal.

Most obviously, North Korea does not feel at all constrained by US President Donald Trump’s rhetoric, and nor has it been coerced by UN sanctions. It also illustrates the acute regional tension caused by the acceleration of the isolated country’s weapons acquisition program.

While we wait for technical detail that will reveal the exact magnitude of the blast, and thus how close the regime has come to acquiring a viable nuclear weapon, it is important to try to determine just what it is that North Korea seeks in taking the risky, expensive and diplomatically fraught steps down the nuclear path.


Further reading: Q&A: what earthquake science can tell us about North Korea’s nuclear test


Determining intent in the mind of political leaders is always a fraught endeavour. Working out what the leader of a highly closed society like North Korea wants is harder still.

On this question there is little reliable information, and the best we have is educated guesswork. But discerning what Kim Jong-un wants from his nuclear gambit is necessary to determining how to respond to North Korea’s latest test.

North Korea’s nuclear program began in the early 1990s, and in its first decade or so was often thought to be a means of extorting financial and material support. The Agreed Framework, established in 1994 to manage the crisis, looks in hindsight like a reward for stopping the country from behaving badly.

Given how economically fraught North Korea’s existence had become after the Soviet Union’s collapse, nuclear blackmail as a means to remain viable had a certain logic.

The tempo and success of the various tests show that North Korea’s nuclear program is not a creative revenue-raising exercise. For one thing, the country is no longer as economically fragile as it was in the 1990s. More importantly, the program is so far down the path of weapon acquisition that this motive can be ruled out definitively.

If there were any doubts, the latest tests show North Korea is committed to acquiring a nuclear weapon that can hit the US and other targets both near and far. The reasons are as follows.

Contrary to the way it is often portrayed, North Korea is motivated by the same concerns as all country. Above all, Kim wants nuclear weapons to increase the country’s sense of security.

Due to their destructive force, nuclear weapons are thought of as the ultimate guarantee. The regime perceived that Iraq and Libya were vulnerable to regime change because they could not deter the US or other powerful countries.

As a country that believes the US and its allies pose a significant threat, nuclear weapons are increasingly seen as the only way it can protect itself. While North Korea has a very large military – its defence force is comprised of nearly 1.2 million people – its equipment is badly outdated, and would perform poorly in a fight with US or South Korean forces.

Nuclear weapons are thus a way to maximise the chances of regime survival in what North Korea thinks is a hostile international environment.

The ability to confer disproportionate power on their owners bestows nuclear weapons with considerable prestige. North Korea wants to be taken seriously as a military power of the first rank. The only way in which it can achieve that ambition is through acquiring nuclear weapons.

And while North Korea has been protected by China – it is the reclusive country’s only partner – it is also aware of the vulnerability that that dependence brings. An indigenously developed nuclear weapon promises security, status and autonomy.

Finally, Kim has made nuclear weapons a core part of North Korea’s identity under his leadership. The country’s constitution was amended in 2012 to describe North Korea as a nuclear-armed state.

This was a clear statement of intent not only about getting the weapons, but about their importance to North Korea’s political identity. They are intimately bound up with Kim’s leadership and his sense of North Korea’s place in the world.

How to calibrate the response to North Korea has to start from recognising the fundamental importance of the weapons to North Korea, and more particularly to Kim’s leadership. He cannot be bought off, and the desire to have a properly nuclear-free Korean peninsula is impossible for as long as he rules.


Further reading: Trump can’t win: the North Korea crisis is a lose-lose proposition for the US


All policy options are unpalatable but some are much worse than others.

Regime change or some other coercive effort to stop North Korea comes with the risk of horrendous loss of life as well as no clear guarantee that it would work.

Equally, cutting off the already very isolated country could cause it to collapse with millions of refugees. And more likely North Korea would figure out a way around any more strict sanction regimes, as it has done for many years already.

The best-case scenario is a negotiation in which North Korea agrees to freeze its program. It would not hand over what it has but it would stop going any further. Yet even this is difficult to envisage, and politically would be very difficult for Trump to accept.

The most important thing policymakers in the US, China, Japan and elsewhere can do now is begin to prepare for a North Korea with nuclear weapon capabilities. It is the most likely outcome given Kim’s ambitions and the very limited choices the outside world has.

But while it would be dispiriting development, it would be likely to create a more stable environment than the volatile context created by North Korea’s sprint to the finish.


The ConversationFor more on this topic, you can listen to Benjamin Habib and Nick Bisley discuss North Korea on this recent La Trobe Asia podcast.

Nick Bisley, Executive Director of La Trobe Asia and Professor of International Relations, La Trobe University

This article was originally published on The Conversation. Read the original article.

Trump can’t win: the North Korea crisis is a lose-lose proposition for the US



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North Korea is more likely to use nuclear weapons if backed into a corner where the perpetuation of the Kim regime was directly threatened.
Reuters/KCNA

Benjamin Habib, La Trobe University

North Korea’s sixth nuclear test confirms it is very close to perfecting a miniaturised warhead for deployment on its missile delivery systems. The 6.3 magnitude seismographic reading registered by the test blast is approximately ten times more powerful than that recorded from its nuclear test in September 2016.

There seems to be no outcome from this crisis in which US power is enhanced. This adds to the gravity of the Trump administration’s impending response to the nuclear test. Let’s walk through the possible scenarios.


Further reading: Q&A: what earthquake science can tell us about North Korea’s nuclear test


War

If the US goes to war with North Korea, it risks the lives of millions of people across the region.

US Secretary of Defence Jim Mattis responded to the latest test with a threat of an “effective and overwhelming military response”. This is the kind of rhetorical overreach that is undermining US regional standing under the Trump administration.

There are high risks in any military action against North Korea. There are essentially no good options for compelling it with force. As recently departed White House adviser Steve Bannon said:

There’s no military solution [to North Korea’s nuclear threats], forget it. Until somebody solves the part of the equation that shows me that ten million people in Seoul don’t die in the first 30 minutes from conventional weapons, I don’t know what you’re talking about, there’s no military solution here, they got us.

The US loses in any war scenario, even though its combined military forces with South Korea would inevitably win such a conflict.


Further reading: Attacking North Korea: surely Donald Trump couldn’t be that foolish


Squibbing it

If the Trump administration talks tough and doesn’t follow through, it leaves America’s regional allies exposed – and gifts China pole position in shaping relations in northeast Asia.

America’s northeast Asian alliances, particularly with South Korea, will be challenged regardless of what Donald Trump does next.

North Korea’s nuclear-capable intercontinental missiles increase the risk to the US of defending South Korea and Japan in the event of war. This undermines their governments’ faith in America’s security guarantee. It does not help that the Trump administration has been slow to fill the ambassadorial roles to South Korea and Japan.

Any military action that leads to an escalation to war risks a North Korean artillery attack on Seoul, and missile strikes on other targets in South Korea, Japan and further afield.

North Korea is more likely to use nuclear weapons if backed into a corner and the perpetuation of the Kim regime was directly threatened. US alliances with South Korea and Japan would come under great stress if they were attacked, given that those alliances are in place to prevent such an occurrence.

Sanctions

If sanctions continue to be ineffectual, North Korea completes its end-run to having a deployable nuclear weapons capability.

This outcome undermines the nuclear nonproliferation regime. North Korea’s successful nuclear weapons development weakens this system by serving as an example to other would-be proliferators that they can develop nuclear weapons without any meaningful consequences – the ineffectual economic sanctions regime notwithstanding.

This outcome will also demonstrate that the US cannot prevent a determined nuclear proliferator from undermining its nuclear hegemony.

Nuclear monopoly, underpinned by the limit on the number of countries with nuclear weapons built into the Nuclear Nonproliferation Treaty, is one of the pillars underpinning US global power. The “nuclear shadow” cast by countries with nuclear weapons provides them with greater leverage in dealing with the US and narrows America’s menu of choice for exercising power.

Trade war with China

If the US threatens to squeeze China as a path to influencing North Korea, it risks a trade war it inevitably loses.

Trump has tweeted that the US “is considering, in addition to other options, stopping all trade with any country doing business with North Korea”. This is a not-so-veiled message to China, North Korea’s largest trade partner.

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Treasury Secretary Steven Mnuchin doubled down on this proposition. He claimed his department was working on a sanctions package that would strangle “all trade and other business” with North Korea.

There have also been calls to urge China to embargo crude oil deliveries to North Korea to further squeeze the Kim regime.

However, the US consumes Chinese imports to the tune of US$463 billion worth of goods. As Hillary Clinton pointed out while secretary of state, China has enormous leverage over the US as its largest creditor.

Risking global recession through a foolish protectionist spiral or forcing China to drop the “dollar bomb” is not a credible strategy for soliciting Chinese assistance with handling North Korea.

Nuclear freeze

In the unlikely event that the US negotiates a nuclear freeze with North Korea, it simply kicks the can down the road.

When we strip back the ritualised tough talk that regional leaders routinely articulate after North Korean provocations, and the inane repetition of the meme that diplomacy equates to “appeasement”, talking to North Korea may be the least-worst option forward.

The Kim regime may agree to a nuclear weapons development and production freeze, or a missile testing moratorium to buy time.

But given the importance of nuclear weapons to Kim Jong-un’s Byungjin development model (simultaneous nuclear weapons proliferation and economic development) to his domestic legitimacy, and North Korea’s long history of coercive bargaining tactics in which it engineers crises to obtain concessions in exchange for de-escalation, this could only be a postponement of North Korea’s inevitable proliferation success.

The problem with the negotiation gambit is that there is no mutually agreeable starting point. There is no outcome in which the regime willingly relinquishes its nuclear weapons program because the Kim regime is so heavily invested in nuclear weapons as the foundation of its security strategy, economic development pathway. and domestic political legitimacy.

A peace agreement

If the US sits down to negotiate a peace treaty with North Korea, its regional prestige will be forever damaged – and the raison d’être of its military presence in South Korea will evaporate.

Another avenue for negotiations to progress may arise once North Korea has perfected and deployed its nuclear weapons capability.

At this time, North Korea may call on the US to negotiate a security guarantee and a formal conclusion to the Korean War, which remains technically alive since the 1953 Armistice Agreement.

But why would North Korea want to engage in such negotiations? It will have greater leverage in these negotiations when backed by a nuclear deterrent.

Yet such an agreement might be the least worrying option available to the Trump administration, given the unpalatability of other options. It seems likely that regional countries will ultimately have to find a way to manage a nuclear North Korea.

A marker of US decline

There are no avenues for the Trump administration to demonstrate strength and resolve that do not ultimately expose the limitations of that strength.

Could current events on the Korean Peninsula represent America’s “Suez Crisis” moment? In 1956, Britain over-reached in its attempt to maintain a post-war imperial toehold in Egypt, exposing the chasm between its imperial pretensions of a bygone era and its actual power in the aftermath of the second world war.

The North Korea crisis is the most obvious face of hegemonic transition. Trump’s US is facing a set of outcomes to the current crisis that are lose-lose. They are exposing the reality of US decline and the growing limitations of its ability to shape the strategic environment in northeast Asia.


The ConversationFor more on this topic, you can listen to Benjamin Habib and Nick Bisley discuss North Korea on this recent La Trobe Asia podcast.

Benjamin Habib, Lecturer, School of Social Sciences, La Trobe University

This article was originally published on The Conversation. Read the original article.

Vital Signs: how likely is another financial crisis? It comes down to what we believe


Richard Holden, UNSW

Vital Signs is a weekly economic wrap from UNSW economics professor and Harvard PhD Richard Holden (@profholden). Vital Signs aims to contextualise weekly economic events and cut through the noise of the data affecting global economies.

This week: let’s take a break from the data and analyse why the Chair of the United States Federal Reserve says another financial crisis is unlikely in our lifetimes.


Last week I wrote in this column that Reserve Bank of Australia Governor Philip Lowe was not taken to giving boring speeches. This week, Federal Reserve Chair Janet Yellen went him one better with her remarks to the British Academy.

Yellen said of the prospect of another financial crisis like that of 2008:

I do think we’re much safer, and I hope that it will not be in our lifetimes, and I don’t think it will be.

Her rationale was that the regulatory changes put in place since the crisis have made the system a great deal safer.

Yellen expressed her hope that these regulations would not be overturned, saying of attempts to do so:

We’re now about a decade after the crisis and memories do tend to fade, so I hope that won’t be the case, and I hope those of us who went through it will remind the public that it’s very important to have a safer, sounder financial system and that this is central to sustainable growth.

One piece of evidence supporting Yellen’s view were the so-called “stress tests” that the Federal Reserve has performed on US banks since 2011.

Just hours before this writing, the Fed approved plans for proposed dividend payouts for all 34 firms taking part in their annual stress tests. This is the first time since the annual stress tests began that all participating firms got a passing grade from the Fed.

So what should we make of Yellen’s prediction? This doesn’t have the ring of “confidence-boosting” rhetoric. It seems as though this is her genuine view.

At this point I should make two things clear. One: I have enormous respect for Janet Yellen, and two: I was fairly surprised by her remarks. So how does one reconcile these?

We still don’t know what caused the global financial crisis

It’s important to understand that the proximate cause of the financial crisis was a kind of “bank run on the system”. In a classic bank run – like the ones of the Great Depression – depositors go from believing that other depositors think their banks are safe, and are therefore willing to leave their money there, to believing that others consider the banks unsound.

Once investors believe that other investors are going to run on the bank, they want to run too (because banks typically hold less than 10% of the cash required to pay back all depositors). In the language of game theory, there is a switch from the “good equilibrium” to the “bad equilibrium”.

In the financial crisis there wasn’t a run on traditional banks so much as on investment banks and other financial institutions. This led to credit markets drying up (such as the commercial debt and “repo” markets).

What caused this shift in beliefs is a hotly debated issue. The large increase in US house prices and imprudent lending by US mortgage originators played an important role. The use of collateralised debt obligations (CDOs) and synthetic versions of CDOs were important. Lack of regulator controls allowed these things to happen, and incentives within financial institutions facilitated and encouraged risk and bad behaviour.

Yet for quite a long time the “good equilibrium” prevailed. What caused the switch?

That is the big question, and I’m pretty confident that not even Yellen knows the answer.

It all comes down to what we believe

What Yellen does seem to be saying is that regulatory responses to the crisis have made it much less likely that bad behaviour is going to occur. That certainly seems plausible. And if there is no – or very little – bad behavior, then beliefs about what other believe may not be particularly important.

But if there is a view that some new form of moral hazard is taking place, and people lose faith in the regulatory regime, then perhaps 2008 could occur again. And soon.

As game theory – and the lessons of the classic depression-era bank runs – teach us, it all comes down to what people believe about what other people believe.

The ConversationThat seems like a pretty slippery object to me.

Richard Holden, Professor of Economics and PLuS Alliance Fellow, UNSW

This article was originally published on The Conversation. Read the original article.