The Rules-Based Order

Empire by Another Name

During the Biden administration’s first official meeting with China in March 2021, US Secretary of State Antony Blinken declared he was ‘committed to leading with diplomacy to advance the interests of the United States and to strengthen the rules-based international order’. Yang Jiechi, the director of China’s Foreign Affairs Commission, countered by saying that China and the international community upheld ‘the United Nations-centred international system and the international order underpinned by international law, not what is advocated by a small number of countries of the so-called rules-based international order’.1

But what is ‘the rules-based international order’? And what role does Australia play in it? 

Australia and the first rules-based international order

There was no need for euphemisms when James Cook claimed the eastern portion of the Australian continent for the British Crown in 1770; the British Empire was called just that. Cook sailed up the east coast of Australia in the same year that the British East India Company’s activities caused ‘the loss of at least one-third of the inhabitants of the province’ of Bengal, or 10 million deaths, according to its governor, Warren Hastings.2 The British parliament, nearly a quarter of whose members held East India Company stock, backed it with state power, spending vast sums on naval and military operations to protect its acquisitions.3 It began exporting Indian opium to China in the same year. Two decades later, Britain’s Australian colonies benefited from the subjugation of Bengal. The colony at Sydney Cove came close to starvation because its supply ship Guardian sank. Supplies of rice, semolina, lentils, clothing, livestock and seeds from Bengal in June 1792 provided a lifeline.4 Soon, two ships a year came with supplies from India, and by 1840 a ship travelled between India and Australia approximately every four and a half days. The ships were vital for the colonies. The imperial connection saw army personnel, administrators, merchants and others moving between India and Australia.5

The Australian colonies prospered under the umbrella of British imperial power. They were the largest recipients of British foreign investment in the economic boom of the 1870s and 1880s, a period in which the Australian economy was transformed forever.6 That investment, in turn, came from the drain of wealth from the colonies. Between 1765 and 1938, Britain drained from India what amounts to $18 trillion (£9 trillion), or ten times the United Kingdom’s annual GDP today.7 It sent about 45 per cent of its foreign investments to North America and Australasia between 1865 and 1914.8 Meanwhile, Indian income collapsed by half and average life expectancy dropped by a fifth from 1870 to 1920.9 

Australia’s settlers shared the empire’s cultural, racial, economic and strategic perspectives. Their British roots, family connections and imperial consciousness led them to identify with British military supremacy in the colonies. In 1893, Alfred Deakin wrote that India ‘has been won by the sword, is still held by the sword, and can only be retained by the sword… What is certain is not only that there must always be a supremacy in India, but that it must be the supremacy of arms’.10 Australian security under this system meant much more than the military defence of the colonies. It meant a commitment to upholding the empire that guaranteed the colonies’ economic interests. The empire prioritised the rights of private investors over the sovereignty of colonised regions—an essential feature of that era’s ‘rules-based international order’. Upholding the empire wasn’t regarded as ‘other people’s wars’ but as an essential component of Australia’s security, properly understood: the security of economic interests and the military-political order that secured them. This view of security has deep roots in Australia’s geopolitical tradition. 

Intellectual justifications for empire came from the most respectable liberal sources. John Stuart Mill justified Britain’s conquests on humanitarian grounds. Britain, he said, acted ‘rather in the service of others, than of itself’. The ‘aggressions of barbarians force it to successful war’, but Britain bore the costs of war while ‘the fruits it shares in fraternal equality with the whole human race… A nation adopting this policy is a novelty in the world; so much so it would appear that many are unable to believe it when they see it’.11 Mill was writing in 1859, a date that is significant for two reasons: Britain was involved in the largest narco-trafficking operation in history, compelling millions of Chinese to become opium addicts through force of arms.12 And imperial force had just crushed the Indian Mutiny, killing around 800,000 people, although the number could well be higher.13 Yet Mill no doubt genuinely believed in the benevolence of the empire. Intellectual support for a US-led global order today has a familiar ring.  

Economics of the rules-based international order

A century before, Adam Smith had explained the economics of empire. The American colonies, he wrote in The Wealth of Nations, should focus on agriculture and leave manufacturing to Britain. If the Americans were ‘to stop the importation of European manufactures’ in favour of ‘their own countrymen as could manufacture the like goods’, they would ‘obstruct instead of promoting the progress of their country towards real wealth and greatness’.14 Having defeated Britain, however, the Americans could reject his advice and construct an industrial base behind high tariff walls. The United States became the ‘mother country and bastion of modern protectionism’, as Paul Bairoch has shown. Tariffs aimed at protecting local industry began as early as 1789. By 1816, import duties were about 35 per cent for most manufactured goods. The United States imposed ‘strict protectionism’ from 1861 until the end of the nineteenth century, resulting in very rapid growth from 1870 to 1892, a period that ‘can be regarded as among the most prosperous in the whole economic history of the United States’.15 Had the Americans followed the principle of comparative advantage, they would be exporting furs and bison meat. 

Cotton and water were the key inputs of the nineteenth century’s textile-based Industrial Revolution. History is kind enough to provide a comparison: Egypt, like the southern United States, was rich in water and cotton and was in a good position to undertake rapid economic development. Its modernising leader, Mohammad Ali, had begun to build a modern military. He constructed factories and shipyards to support this endeavour and imposed state monopolies to pay for them. British leaders had other ideas. ‘A manufacturing country Egypt never can become’, one declared. Rather, ‘by the peaceful development of her agricultural aptitude she may interest and benefit all’.16 Imperial force ended Mohammad Ali’s attempt at industrialisation and ‘Egypt was relegated to the status of a province whose sole commercial and economic function was to supply raw materials for European industry’, as an Egyptian historian recounts.17 

The different fates of the United States and Egypt are a good illustration of the economics of empire. The principle of comparative advantage promoted by Adam Smith and David Ricardo, who followed him, held that specialisation and trade according to comparative costs would lead to mutual benefit. Using a two-country, two-commodity model, Ricardo said that even if Portugal could produce both cloth and wine more cheaply than England, England should still specialise in cloth and Portugal in wine because the relative costs were different; that is, England, by producing one unit less of wine could produce more cloth than Portugal could by the same method. However, as Utsa and Prabhat Patnaik have shown, the argument contains a fatal flaw: it depends crucially on the assumption that both countries produce both goods. But Britain, unlike Egypt, could not produce sufficient cotton at home regardless of the amount of land and water it used in the attempt. More generally, capitalism as it actually exists has its home base in the Northern countries, which are primarily located in the temperate areas of the globe. They demand a range of goods that can be produced only in the tropical and semi-tropical regions. And that requires the subordination of those regions by military force or trade agreements. 

Belief in imperial benevolence supplied the ideological justification for empire. Comparative advantage supplied the economic justification. Military force supplied the hard power. Military historian Jeffrey Grey correctly observed that ‘the greatest overarching myth of Australian military history’ is the claim that ‘Australia always fights “other people’s wars”’.18 Military historians are well aware that Australian governments have not gone to war for sentimental reasons or because they were duped. The organising principle of Australian foreign policy is to remain on the winning side of a worldwide confrontation between the empire and the lands dominated by it. Australia’s strategic reflex is thus to fit into the global strategy of a great power.   

Australia and the second rules-based international order

This strategic reflex was on display in the 2016 Defence White Paper. Issued by the Turnbull government in the last year of the Obama administration, it exhibited a deep anxiety about the security of US power projection capabilities in Northeast Asia. It mentioned the rules-based order fifty-three times, didn’t mention the Asia-Pacific at all, but referred to the Indo-Pacific sixty-eight times. Clearly, China’s ability to retaliate against US bases in Okinawa is of deep concern to Australia’s defence and security establishment, which has coasted in the slipstream of US supremacy since the end of the Second World War. 

This concern was heightened by President Trump’s less than reflexive support for US alliances with Japan and South Korea. There was a palpable sense that Australia needed to be a more vocal advocate for US power in the region, and to put its money where its mouth is. This is the context for the 2020 Defence Strategic Update and Force Structure Plan, launched with great fanfare by the Morrison government, and the classified Defence Planning Guidance. The documents show that the policy planners who determine Australian defence policy will do what it takes to strengthen American resolve.

The Biden administration did not disappoint them. It announced the relocation of US marines from Okinawa to Guam, where an integrated air and missile defence system is planned. The system involves a Homeland Defence Radar in Hawaii, a Tactical Multi-Mission Over-The-Horizon Radar in Palau, and—in the second half of this decade—air power based in the Federated States of Micronesia, the Marshall Islands and Palau. The aim is a Joint Fires Network that enables anysensor from anyplatform (air, land, sea, space, cyberspace) to provide targeting guidance to anyweapon. 

Australian planners see all this as an opportunity to demonstrate greater relevance to the United States. The more vulnerable the United States becomes in Japan, Taiwan and the northern Philippines, the more attractive Australia becomes as a secure location for US forces. Australian planners have signalled that the intelligence bases at Pine Gap and the North West Cape will be joined by more facilities intended to militarise space. Australia’s role in the United States’ space surveillance network includes hosting the C-band space surveillance radar and the space surveillance telescope. Our geography covers one-third of the earth’s rotation and we look directly into the solar system, unlike countries in the northern hemisphere. Australia will develop launch capability for equatorial- and polar-orbiting satellites, benefitting from vast coastlines, open water and stable weather. 

Australian policy planners know that Australia could become a target if key US assets are stationed here—but that is not their greatest concern. Rather, they fear that other countries in the region might become more powerful and more relevant to the United States, which would choose them over Australia as a military ally. When some writers warn that the United States has an unsentimental, cynical view of power, it comes as no surprise to Australian policy planners. ‘Speaking truth to power’ is irrelevant when those in power already know that the rhetoric of ‘mateship’ is window dressing for the public, the media and the parliament. They don’t need to be told that the true character of our relationship with the United States is a transactional, dramatically unequal one. Australian diplomats strive continuously to show their relevance to American policymakers precisely because they know how little Australia features in US thinking.

But to what end? Isn’t the economic relationship with China too important to jeopardise? Why aren’t Australia’s mining and energy billionaires up in arms? The answer is that they take seriously the government’s insistence that its highest priority is to uphold the rules-based international order—and they know that that order is the US-led imperial system, whose preservation offers greater long-term benefits to them. They know it prioritises the rights of private investors over the sovereignty of most states. They know the US-led imperial system serves as a bulwark against efforts in developing countries to extricate themselves from the integrated world system dominated largely by Western investors—otherwise, developing countries might use their resources for their own social and economic development instead of making them available under the comparative advantage system. 

The rules-based order ensures that state sovereignty is subordinated to the interests of private investors. It is an imperial order in the sense of being ‘a relationship, formal or informal, in which one state controls the effective political sovereignty of another political society. It can be achieved by force, by political collaboration, by economic, social or cultural dependence’.19 The ‘rules’ by which other countries’ political sovereignty is controlled include the investor-rights treaties misleadingly called free trade agreements. They include the policies of the World Bank, where the combined voting strength of the United States, United Kingdom, Japan, France and Germany is greater than one-third of the total.20 An internal US Treasury study of 1981 said that the ‘advantages inherent in our predominant position’, combined with expectations of ‘our ability and will to use those advantages’ and ‘our position as a world leader’, gave the United States decisive influence over the policies and practices of the World Bank and other multilateral development banks. The World Bank was particularly important because it was the ‘largest and most important’ of the lot. Its policy outcomes ‘generally determine the outcome in the other banks’.21 Similarly, Australia often channels its aid through the Asian Development Bank, where it, the United States, and allies like Japan, Canada, South Korea, Germany, France and the United Kingdom control 55 per cent of the shares.22 China’s Belt and Road Initiative challenges this rules-based order. 

On the specific question of iron-ore exports, the mining magnates understand that China has no effective alternative to Australia; the only competitor is Guinea, on the west coast of Africa. But the Simandou mine there, which has higher iron content, is yet to export a single tonne of the commodity. Developing it will require the construction of a 650-kilometre railway with multiple bridges, sidings and more than 25 kilometres of tunnels to link it to a deepwater port on the coast.23 And then the transport costs will be higher, given the longer sea route. It is no accident that the National Party, which enjoys the closest links to mining and trade interests, is out in front on war talk. When Barnaby Joyce regained the Nationals leadership and was sworn in as deputy prime minister in June, he issued a stark warning about China in his first speech to the Coalition party room. He said there was ‘a unifying cause’ that is ‘more important to the nation than anything else…what is required of us is to make Australia as strong as possible as quickly as possible in order to protect our way of life’. Pointing to the electoral benefits, Joyce added that it was ‘a comparative strength for the Coalition’.24 

In the 1950s, the ideology of anti-communism was a political bludgeon against the parliamentary Opposition and a justification to use the police and intelligence agencies against domestic constituencies. It was also a highly effective technique of mobilising the public to support intervention and subversion in Southeast Asia as Australia joined the United States in defeating revolutionary social transformation among newly independent former colonies. Of course, the Chinese Communist Party’s monopoly on state power is real enough. So is its authoritarianism towards those who challenge it, as people in Hong Kong, Tibet and Xinjiang can testify. What is a fiction is the pretext for which it is used: concern about self-determination for China’s ethnic minorities. After all, Indonesia’s West Papuan minority receives almost zero support for self-determination. The real aim is to stop China reaching the technological frontier. The new Cold War is therefore highly functional for policy planners and for private investors, who will benefit from the national security–based subsidies that will flow their way in semiconductors, 5G networks, artificial intelligence, robotics, gene editing, data flows, autonomous vehicles and rare earths.

There is another reason that the mining and energy sectors aren’t telling politicians to pull their heads in. Important parts of the Australian economy are owned by US-based investors. The top twenty companies on the Australian Stock Exchange account for approximately half its market capitalisation. US-based investors are the biggest owners of sixteen of the top twenty companies. As owners of the equity, they determine the corporations’ priorities and practices. According to data from the Bloomberg Professional Terminal, US-based investors own more than two-thirds of BHP, the largest company on the ASX. They also own two-thirds of Rio Tinto, the second largest company, and two-thirds of Woodside, Australia’s largest stand-alone oil and gas company. The only mining company on the ASX that isn’t US majority-owned is Fortescue Metals, which Andrew ‘Twiggy’ Forrest controls. It is perhaps no coincidence that Forrest has been the most visibly vocal member of his tiny class to differ from the New Cold War rhetoric. 

Paul Hasluck, the best explainer of Australian foreign policy to become foreign minister, said that ‘Any country has a foreign policy so that its domestic policy can be put into effect’.25 And that domestic policy reflects the fact that Australia is an anomaly among advanced economies. We focus on economic growth rather than economic development. Joseph Schumpeter explained the distinction almost a century ago. Economic development, he wrote, involves ‘only such changes in economic life as are not forced upon it from without but arise by its own initiative, from within’. But if an economy is ‘dragged along by the changes in the surrounding world’ and adapts itself to them, then there is economic growth without economic development.26 The distinction is captured in modern economics by the concept of economic complexity. Complexity increases with a country’s level of diversification (the number of products it exports). It decreases with ubiquity (the number of countries exporting the same product).27 A country’s level of economic development is associated with the complexity of its economy. 

Australia has the lowest complexity of all the OECD countries, and our performance over the last forty years leaves considerable room for improvement. In 1980, Australia was ranked as the fifty-first most complex economy in the world; in 2017, it was fifty-ninth. The lowest point was in 2014, when it fell to eighty-ninth.28 Australia’s exports remain highly specialised in a few products such as iron ore, coal briquettes, gold, petroleum gas and wheat, which are typically produced by many other countries. According to the chief economist in the Department of Industry, Innovation and Science, ‘Australia’s economic complexity is an anomaly among advanced economies, with the economic complexity closer to that of a developing country’. Australia is ‘comparable to the economies of Kazakhstan, Cambodia, Kenya and Saudi Arabia’.29 Our low economic complexity reflects the dependency inherent in our role in the first rules-based international order, the British Empire. British investment fostered vertical economic ties with London more than horizontal economic ties integrating the economies of the six colonies. Typically found in imperial–colonial relationships, such vertical economic relationships result in monoculture economies that produce mineral resources and agricultural goods for export. By contrast, horizontal economic linkages generate a ‘spread effect’, such that mining operations enable new domestic industries and workers who are trained for more highly skilled tasks.30

You can’t have an independent foreign policy when you have a dependent economy. Vital sectors of the Australian economy are integrated into the value chains of US corporations. Achieving economic independence will require boldness, imagination and resolute economic nationalism. Since the new Cold War will play out on a technological battlefield, an obvious first step is to assert greater policy autonomy over Australia’s critical minerals. In 2013, Geoscience Australia conducted a study of ‘Critical commodities for a high-tech world’.31 It found that Australia was rich in antimony, beryllium, bismuth, chromium, cobalt, copper, graphite, helium, indium, lithium, manganese, molybdenum, nickel, niobium, platinum-group elements, rare-earth elements, tantalum, thorium, tin, titanium, tungsten and zirconium. Some of these commodities are considered most critical by the EU, Japan, South Korea, the United Kingdom and the United States. We could establish a nationally owned company that exercised ownership and control of strategically important minerals. We would then be in a position to increase domestic innovation and support higher value-added sectors, such as high-technology research and development, advanced manufacturing, and energy efficiency. The aim here would be to increase Australia’s economic complexity by diversifying our exports into higher value-added sectors.

But Australia’s industry department is a true believer in the doctrine of comparative advantage. Its Critical Minerals Strategy isn’t concerned with nation-building or increasing economic complexity but with creating a benign environment for private investors to carve up our critical minerals. The business press reports approvingly that ‘the Aussies come to Europe’s rare-earth rescue… When the EU goes looking for supplier countries’ for critical minerals to feed its manufacturing, ‘several sets of ears around the world prick up at this, but few as eagerly as those in Canberra’.32 You could say the same thing about Australia’s Defence and Foreign Affairs officials, whose ears prick up just as easily—since their pursuit of relevance to the United States is the external expression of this economic dependence. 

Australia has established a Critical Minerals Facilitation Office, whose explicit goal is ‘to position Australia globally as a secure and reliable supplier of critical minerals’.33 The head of the office, Jessica Robinson, intends ‘to give advanced manufacturing economies such as the European Union a full-range service’.34 The industry department’s official publication celebrated the 200th anniversary of David Ricardo and comparative advantage—in a special contribution by Lisa Gropp, chief economist at the Business Council of Australia.35 There is an elite consensus that combines the pursuit of relevance to the United States in foreign and defence policy with the doctrine of comparative advantage. The ambition is for Australia to be a better quarry, not to develop formal industrial policies aimed at stimulating economic development, creating jobs and rebuilding the manufacturing base to better position us in advanced technology areas. 

Some key features of an earlier imperial relationship are therefore present in today’s rules-based international order: control of the effective political sovereignty of other countries, a belief in imperial benevolence, the economics of comparative advantage and a military strategy that fits Australia into the global strategy of a great power. Since policy planners cannot bring themselves to say empire, the ‘rules-based international order’ serves as the euphemism.

1 US Department of State, Transcript of Meeting, Anchorage, Alaska, 18 March 2021,  

2 Warren Hastings, letter to the Court of Directors of the British East India Company, 3 November 1772, Appendix A, ‘Bengal portrayed in 1772’, in W. W. Hunter, The Annals of Rural Bengal, London: Smith, Elder & Co., 1868, p. 381.

3 William Dalrymple, The Anarchy: The Relentless Rise of the East India Company, New Delhi: Bloomsbury, 2019, p. xxxiii. 

4 James Broadbent, Suzanne Rickard and Margaret Steven, India, China, Australia: Trade and Society 1788–1850, Sydney: Historic Houses Trust, 2003, pp 9–10; David Walker, Anxious Nation: Australia and the Rise of Asia 1850–1939, St Lucia: University of Queensland Press, 1999, p. 13.

5 Walker, p. 13.

6 Barrie Dyster and David Meredith, Australia in the Global Economy: Continuity and Change, Port Melbourne: Cambridge University Press, 2012, p. 61.

7 Utsa Patnaik, ‘Revisiting the “Drain”, or Transfers from India to Britain’, in Shubhra Chakravarti and Utsa Patnaik (eds), Agrarian and Other Histories: Essays for Binay Bhushan Chaudhuri, New Delhi: Tulika Books, 2017, pp 278–317.

8 A. K. Bagchi, ‘Some International Foundations of Capitalist Growth and Underdevelopment’, Economic and Political Weekly, August 1972.

9 Irfan Habib, ‘Studying a Colonial Economy—Without Perceiving Colonialism’, Modern Asian Studies,19(3), 1985, pp 355–81; Mike Davis, Late Victorian Holocausts: El Niño Famines and the Making of the Third World, New York, NY, and London: Verso, 2002, pp 311–12.

10 Alfred Deakin, Temple and Tomb in India, Melbourne: Melville, Mullen & Slade, 1893, pp 129–30.

11 John Stuart Mill, ‘A Few Words on Non-Intervention’, Fraser’s Magazine (1859), reprinted in Libertarian Alliance, Foreign Policy Perspectives, no. 8, ISBN 0948317965.

12 R. K. Newman, ‘Opium Smoking in Late Imperial China: A Reconsideration’, Modern Asian Studies, 29(4), October 1995, p. 787.

13 Douglas Peers, India under Colonial Rule: 1700–1885, London: Routledge, 2006, p. 64. 

14 Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations, Book 2, Chapter 5, pp 486–7.  

15 Paul Bairoch, Economics and World History: Myths and Paradoxes, Chicago, IL: University of Chicago Press, 1993. 

16 John Bowring, Report on Egypt and Candia, London: W. Clowes and Sons, 1840. 

17 Afaf Lutfi al-Sayyid Marsot, A History of Egypt: From the Arab Conquest to the Present, Cambridge: Cambridge University Press, 2007, p. 77.

18 Jeffrey Grey, ‘In Every War but One? Myth, History and Vietnam’, in Craig Stockings (ed.), Zombie Myths of Australian Military History, Sydney: UNSW Press, 2010, p. 192. 

19 Michael W. Doyle, Empires, Ithaca, NY: Cornell University Press, 1986, p. 45.

20 World Bank, Top 8 countries voting power,, accessed 12 July 2021. 

21 Timothy J. McKeown, ‘How U.S. Policymakers Assessed Their Control of Multilateral Organizations, 1957–1982’, Review of International Organizations, vol. 4, no. 3, 2009, pp 279–80.

22 Asian Development Bank, ‘Shareholders’,, accessed 12 July 2021. 

23 Neil Hulme, ‘China Consortium Wins Rights to Develop Guinea Iron Ore Deposit’, Financial Times, 2 December 2019. 

24 David Crowe, ‘China Warning: Joyce Calls on MPs to Prepare for End of Pax Americana’, Sydney Morning Herald, 22 June 2021.  

25 Paul Hasluck, ‘Australian Foreign Policy’, Current Notes on International Affairs, vol. 38, no. 1, January 1967.

26 Joseph A. Schumpeter, The Theory of Economic Development, Cambridge, MA: Harvard University Press, 1934, pp 273–4.

27 Cesar A. Hidalgo, Ricardo Hausmann and Partha Sarathi Dasgupta, ‘The Building Blocks of Economic Complexity’, Proceedings of the National Academy of Sciences of the United States of America, vol. 106, no. 26, 30 June 2009, pp 10570–5.

28 The Growth Lab at Harvard University, The Atlas of Economic Complexity, http://www.atlas.cid

29 Office of the Chief Economist, ‘Globalizing Australia’, Industry Insights, June 2018.

30 Gunnar Myrdal, Economic Theory and Under-Developed Regions, London: Methuen, 1963.

31 Roger G. Skirrow, David L. Huston, Terrence P. Mernagh, Jane P. Thorne, Helen Dulfer and Anthony B. Senior, ‘Critical Commodities for a High-tech World: Australia’s Potential to Supply Global Demand’, Geoscience Australia,

32 Alan Beattie, ‘The EU Plan to Live in a Raw Materials World’, Financial Times, 26 November 2020.

33 ‘Critical Minerals Facilitation Office launches operations’,

34 Beattie.

35 Lisa Gropp, ‘The 200th Anniversary of David Ricardo’, Industry Insights, June 2018.

About the author

Clinton Fernandes

Clinton Fernandes is in the Future Operations Research Group and is a Professor at the University of New South Wales. His research focuses on emerging war technologies and advanced materials and manufacturing methods. His most recent book is Sub-Imperial Power: Australia in the International Arena, published by Melbourne University Press in 2022.

More articles by Clinton Fernandes

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