Australian leaders talk a lot about “statecraft” and are increasingly turning to economic statecraft as a tool to advance national interests at home and abroad.
But can the tools of economic statecraft effectively balance our national priorities when things like development assistance, labour mobility programs and trade are used to both tackle regional poverty and instability, as well as advance geostrategic goals?
We ask the experts: How can Australia’s turn to economic statecraft help the poor?
What’s economic statecraft, as opposed to normal statecraft? Economics is just what economists do. Let’s assume economic statecraft refers to using a broader range of policies to advance foreign policy objectives.
When did we turn to economic statecraft? For trade? Always was. For foreign aid? Aid serves foreign policy and strategic objectives more since the DFAT-AusAID merger, but it would be naïve to think this did not already happen. More DFAT-led infrastructure projects are an obvious shift, as is the rise in labour mobility and integration with the Pacific.
While infrastructure generally needs to connect people to opportunities to deliver benefits and poverty reduction, the welfare impacts of labour mobility - likely larger than those of the entire aid program - are unambiguous. While it is not empirically clear how much the increase in Pacific labour mobility has reduced poverty, recent evidence suggests it has done so much more than current social protection, which regrettably does not focus much on the poor in the region.
So, how to reduce poverty with a broad range of tools? I have three humble suggestions.
One, keep moving towards open labour markets in the Pacific.
Two, make poverty reduction DFAT’s primary development objective again, within and across countries. Take the promise of direct cash transfers, learning what works, and cost-effectiveness seriously, as colleagues in USAID’s Office of the Chief Economist are leading the way with.
Three, reengage with and scale up activities in countries where most of the world’s poor actually live.
Formerly at Dartmouth and Stanford, Ryan is now the Deputy Director at the Development Policy Centre here in Canberra. He’s also a Fellow in the Arndt-Corden Department of Economics among many other impressive research endeavours. The Lab loves Ryan’s deep knowledge across the intersection of development and labour economics, international trade, and the environment, and of course his crafty Twitter feed – a must-follow if you’re not already.
We live in an era where two traditional separations are breaking down – between economics and security and between domestic and international. Policymakers have shown that they are willing to use economic tools for foreign policy ends. This includes strengthening specific industries for geostrategic purposes – such as the Future Made in Australia plan – or using visas and work rights for international advantage – such as the Pacific Engagement Visa. This turn to economic statecraft can be utilised to justify investments in international development, positioning overseas development assistance – along with loans and investment – as levers to achieve foreign policy goals.
Australia has an interest in a secure and prosperous region. Poverty and instability are a threat to these goals. This positions development funding as a preventive (and cost effective) investment. Adding to this is the argument that poor and fragile states are susceptible to acts of economic coercion, positioning development spending as a defensive measure. The argument is that maintaining close relationships with regional partners through acts of positive economic statecraft – especially development assistance – is a key tool for Australia to shape the trajectory of the region.
Some may prefer that we didn’t need to make the national interest case for development. Myself, I’m always on the watch for paradigms that bolster the argument for development spending. I see the turn to economic statecraft as an opportunity to show the link between helping the poor and Australia’s foreign policy aims.
Melissa is a well known leader of public policy think tanks like AP4D and AIIA. She is always fostering new collaborations to tackle complex foreign policy challenges. Her name is well-known in the development and foreign policy community alike. At the Lab we admire Melissa for her generosity, humility and commitment to fostering young careers. We particularly like that she’s always up for a good laugh.
As Australia adapts all its tools of statecraft to a more complex and contested international system, economic tools remain vital in helping the poor at home and beyond. Three key points:
I. Some of the sharpest tools in the statecraft kit are economic. Powerful Australian statecraft includes green energy incentives, food security partnerships and targeted scholarships.
II. At home, these tools create jobs and equip people with the skills needed to adapt to shifts in technology and trade. Green energy policies secure Australians’ access to opportunities and prepare Australians as energy systems shift over time. While international scholarship programs pull the top talent into Australia, maintaining dynamism in the economy to compete in a more contested world.
III. Internationally, Australian economic statecraft reduces threats to the poor, building the regional stability and resilience that Australia wants. For example, Australian regional food security partnerships support vulnerable households and producers facing climate pressures, while providing access to Australian markets and expertise.
Alongside other tools of statecraft, Australian economic tools make the poor at home and abroad more prosperous and resilient. As our international system becomes less easy or certain to navigate, these are valuable tools indeed.
Helen Mitchell is an economist and former diplomat, currently a Sir Roland Wilson Scholar at the Australian National University working on economic statecraft. She also serves as a Non-Resident Fellow in Economic Security at the United States Studies Centre. At the Lab, we admire Helen’s savvy and open-minded work on modern economic statecraft, and her no-nonsense approach to complex policy challenges. It's great to see more bureaucrats spending time in the think tank landscape – Helen’s fun to have on the ‘outside.’
