In Focus: We have to be committed to building our industrial capacity

One of the key takeaways from the COVID-era has been the recognition that all nations require a sovereign, robust, innovative, and globally competitive industrial base as a critical component to responding to an any national security equation.

Meanwhile, the advent of renewed great power competition and multipolarity across the geopolitical spectrum has served to only reinforce the necessity for the development of a reliable, sovereign industrial capacity.

This global paradigm shift has equally heralded the rise of an increasingly multipolar world, driven in large part by the rise of ancient powers, namely China and India, flanked by an equally formidable array of emerging powers including Indonesia, Vietnam, Brazil, South Africa, and a myriad of others across the globe.

In the face of this rapidly evolving — and as the government is often fond of reminding us — deteriorating strategic environment, Australia’s strategic thinkers and policymakers have been forced to improvise, adapt, and overcome in order to adjust to the new paradigm and its implications on national security.

Australia isn’t alone in staring down the immensity of these mounting challenges, with even the world’s sole superpower, the United States, confronting the very real limitations of its own industrial, economic, and political power following nearly three decades of living the equivalent of a fast-food junkie.

Nowhere is this clearer than with mounting economic stagnation and de-industrialisation, in the name of globalisation, beginning in the 1980s and continuing unabated through the 1990s and into the early 2000s, have further undermined the world’s great powers and are serving to dramatically shift the global balance of power.

Addressing these challenges has emerged as a major political battleground for the major parties at home and abroad. While this conversation can no doubt be good for the future economic prosperity and national security of the nation, we have to be committed to the long-term development and delivery of this critical component of long-term national security.

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Speaking to Defence Connect, Dr Ross Babbage, chief executive officer and director at Strategic Forum Limited, senior non-resident Fellow at the US-based Center for Strategic and Budgetary Assessments think-tank to discuss the economic and industrial challenges facing Australia, the United States, and broader Western world following the release of his new book, The Next Major War.

Defence Connect: Ross, what was the logic and reasoning behind your new book The Next Major War?

Dr Babbage: There were several drivers for writing this book.

First, we need to better understand the risks we are now face in the Indo-Pacific.

The core problem is that we have China and the United States at loggerheads, especially over the future of Taiwan. Xi Jinping has repeatedly made very explicit threats about incorporating Taiwan into China.

He has stated on numerous occasions that this can not only be done, but it must be done. To reinforce these threats, the Chinese continue to rapidly expand their military forces and make many other expensive preparations for a major military operation against Taiwan and also against the US and its allies in the Western Pacific. For instance, they’ve built full size replicas of the major government buildings in Taipei such as the Presidential Offices and the Foreign Ministry so that People’s Liberation Army regiments can practice assaults on these and other strategic facilities.

And, of course, the regime is flying combat aircraft and ordering naval vessels into the immediate vicinity of Taiwan on almost every day to coerce the Taiwanese people to capitulate.

Meanwhile, on the other side of the Pacific, President Biden has stated four times since his election that if Taiwan is attacked, then United States forces will be heavily engaged in defending Taiwan. In addition, the Japanese Government has also made it pretty clear that if Taiwan is attacked they will be there to also help defend the vibrant democracy on Taiwan.

And if we are confronted by a conflict like that, it’s very hard to see Australia would stand aloof. Canberra would almost certainly commit forces to assist.

Another driver for this book was that we needed to analyse very carefully not only the military aspects of such a crisis and conflict, but the economic aspects, the broader global political effects, and so on. We need to consider and analyse all key dimensions of such a crisis then put it together in a net assessment.

Defence Connect: There is some startling information about the decline of industrial capacity across the Western alliance, particularly within the United States. I think a lot of people would be forgiven for believing that the United States still has the industrial capacity to hold its own, but that isn’t entirely true, is it?

Dr Babbage: TYes, the book has a quite detailed analysis of what’s actually happening in the Indo-Pacific economy and particularly in the economies of the United States and China. One of the key points is that the era of American industrial superiority is effectively over. This means that the industrial supremacy of the US that played such a central role in the allied victories in both world wars is no more.

America was able to outproduce all the Axis powers, Germany, Japan - the lot, between 1941 and 1945 and this was really central in many ways to winning both the First and Second World Wars.

But now we have a completely different situation. In 2004, US manufacturing output was double that of China. But by 2020, China’s manufacturing output was almost double that of the United States. This huge change has happened because the United States and its allies, including Australia, have exported most of their manufacturing bases to Asia and particularly to China. In Australia we have shunned our manufacturing industries, increased their costs in unsustainable ways, forced on them layer upon layer of often unnecessary regulations and made most of our manufacturing sectors uncompetitive. By contrast, China has been doing exactly the reverse.

Recovering from this disastrous situation is going to mean a different industrial model for the West. The United States won’t be able to do the job on its own. It’s going to need much more international industrial cooperation between allies and trusted friends. This will require new mechanisms, new cooperative understandings, not only between governments but between sectors of industry and individual business between the democracies, not only in East Asia, but also in India, Europe and so on.

A key theme in the book is the importance of getting the industrial base well organised in advance of a future crisis. It will be essential for our future security and our success in future crises and conflicts. Failure to move rapidly on this reform agenda could be disastrous.

Defence Connect: This is clearly a terrifying prospect, how do we remedy this particularly in an increasingly complex and competitive security paradigm?

Dr Babbage: We have to make sure that the critical manufacturing and other economic requirements for the security in our own countries and those of our friends are intact, and fully functioning in a viable manner.

That means action is urgently needed on a number of front. It certainly means that we must lift our productivity and make ourselves far more competitive internationally. Many Australians have forgotten that to be prosperous and fully employed, and to generate good futures for our children effective performance in this field is critical. If we fail Australia will become an economic backwater with little international influence and we will be extremely vulnerable to international aggressors. . We will also become far more dependent upon other countries for our security.

The bottom line is that we have to make ourselves far more efficient and more competitive. We also need to restore our reliability as a trusted economic partner and minimise interference and manipuation by all levels of government. We have to attract more foreign investment as well as our own domestic investment, to do sensible things in this country.

I’m also not suggesting that we need to manufacture or produce all of our needs. But we should work hard to restore domestic production or trusted partner supply of all of the things that are critical for our security. We must ensure that we’ve got secure supply lines to and from people who we fully trust and who trust us. It is pretty obvious who most of those candidates are, and you can see a range of countries already adapting to this new reality and looking for new relationships with us.

We clearly have a lot of work to do to embrace the substantial industrial and broader economic reforms that are necessary. Making rapid progress in this field will be essential for Australia’s future security and ultimately for our survival.

The full podcast interview with Dr Ross Babbage will be available shortly.

Get involved with the discussion and let us know your thoughts on Australia’s future role and position in the Indo-Pacific region and what you would like to see from Australia’s political leaders in terms of partisan and bipartisan agenda setting in the comments section below, or get in touch This email address is being protected from spambots. You need JavaScript enabled to view it. or at This email address is being protected from spambots. You need JavaScript enabled to view it..