Peter Keating's geopolitical analysis links US political malaise to global economic order

snatching the naked flame and hanging on. But the cost of this strategy is not simply a cost to him; it is a cost to the whole world. "On the other hand, Chancellor Merkel is the archetypal worry-wart. She does not lead; she assesses. "You really wonder why leaders want these jobs when they really do not want to lead. And what is their risk? That Barack Obama will not get a second term? Or that Angela Merkel's coalition might finally end up on the rocks? If they actually made the leap they might astound themselves. Because, in the end, everyone in political life gets carried out - the only relevant question is whether the pallbearers will be crying." For Keating, the 20th-century leader exerting most influence on the coming century is China's Deng Xiaoping. "If you look at the other figures of the century, Roosevelt, Churchill, Stalin and Mao, none will leave the legacy in terms of the 21st century that Deng leaves,” he says. "He walked away from the ideology of the Communist Party just as effectively as Mikhail Gorbachev walked away from the essence of the Soviet Union." By 2050 Keating sees a world order with nations in terms of gross domestic product in this hierarchy: (1) China, (2) US, (3) India, (4) Japan, (5) Brazil, (6) Russia, (7) Britain, (8) Germany, (9) France and (10) Italy. The key, however, is that Japan lags a distant fourth behind the top three. On America, Keating is dismayed by the pivotal change in its outlook after the end of the Cold War. "When the Berlin Wall came down the Americans cried victory and walked off the field," he says. "Yet the end of the Cold War offered the chance for America to develop a new world order. It didn't know what to do with its victory. This at the moment the US should have begun exploiting the opportunity of establishing a new world order to embrace open regionalism and the inclusion of great states like China, India and the then loitering Russia. "Well, frankly, the US didn't have the wisdom. It just wanted to celebrate its peace dividend. The two Clinton terms and the two George W. Bush terms, that's four presidential terms, have cost US mightily.” For Keating, the malaise in US politics is the problem. He says: "The most compelling thing I've seen in years is that in the great burst of American productivity between 1990 and 2008, of that massive increment to national income, none of it went to wages. By contrast, in Australia real wages over the same period had risen by 30 per cent." Keating sees this "as the breakdown of America's national compact", the shattering of its prosperity deal. He says American conservatives abandoned the middle ground represented by Republican presidents such as Dwight D. Eisenhower, Richard Nixon and Bush Sr and became radicals. The derailment, he argues, began under Ronald Reagan and reached its zenith under George W. Bush. With the goodwill gone the US “is not able to produce a medium-term credible fiscal trajectory or get agreement on rebuilding its infrastructure”. This paralysis “is significant not just for the US but for the world." Keating links the collapse of this "prosperity compact" to the financial crisis. Too many Americans were unable to sustain themselves from wages and salaries. How did they get by? They used the easy credit of the banking system, thereby feeding the frenzy that ended in bad loans and meltdown. Keating's book has an abiding message for Australia: in the transformed world we “will find ourselves increasingly on our own" having to master our own destiny. The job is to rediscover the productivity and savings agenda of the 1990s. Why did Australia survive the 2008 financial crisis? "Because of the flexibility of the economy," Keating says. "Flexibility which came from the reform of Australia's financial, product and labour markets that began 25 years ago. This has given us one of the most flexible economies in the world - arguably the most flexible. But further structural changes are ahead of us." HOUSE_OVERSIGHT_029660