Eric Hobsbawm begins his three-volume account of Europe in the 19th century by observing that the industrial revolution was perhaps the biggest event in human history. This is a plausible claim. Although it directly affected only a relatively small proportion of the world’s population, and bypassed the two most populous countries – China and India – almost completely, Europe’s industrial revolution fundamentally shifted the global distribution of economic and strategic power towards the West, and laid the foundation for almost everything that has happened since.

Now the industrial revolution is finally reaching the rest of the world, and the effects are being felt quickly. The global balance of wealth and power is swinging back towards Asia. If all goes well, within a few years China will again be the world’s richest country. A decade or two later India will, on current trends, become the second richest, pushing the US into third place. Before the middle of the century, Indonesia could well be in fourth.

This is what the Asian Century is all about, and why it is so significant. If Hobsbawm was right about Europe’s industrial revolution, then Asia’s is perhaps the second most important shift in human history. It is certainly the most momentous for Australia since European settlement. For the first time in our history, our Asian neighbours will not just be richer than us, but richer than our Western allies.

Julia Gillard captured something of the magnitude of this phenomenon, and the challenge it poses for Australia, when she commissioned her ‘Australia in the Asian Century’ White Paper just over a year ago: “We are now seeing the most profound rebalancing of global wealth and power in the period since the United States emerged as a major power in the world.” She employed some very smart people to work out how Australia should respond. It seemed reasonable to hope that Gillard was serious about all this.

Reasonable, but wrong. It turns out that Gillard’s Asian Century White Paper is not really about the Asian Century after all. Asia’s ascent to wealth and power instead serves simply as a narrative backdrop to spin a reassuring story about a country with a bright future and a government that knows what it is doing. The White Paper presents an unremittingly optimistic view of Asia’s future and Australia’s place in it: Asia will keep growing, and Australia will keep growing too, and we won’t need to change a thing.

This combination of optimism and complacency runs right through the White Paper’s lists of “Policy Objectives” and “Pathways”. The objectives are breathlessly aspirational but reassuringly vague; they include “vocational education and training systems that are among the world’s best”, being “among the most efficiently regulated places in the world” and “a higher skill, higher wage economy”. The pathways to these objectives promise that we can reach them without acting very differently: verbs like “continue” and “maintain” predominate.

The result is an almost comic incongruity. Asia is being fundamentally transformed by the second biggest event in human history, and all we need to do is maintain our current policy settings, hire a few more diplomats and teach a few more languages. No hard choices or uncomfortable reforms  – let alone serious investments – required. Ever the Lucky Country, we can sit back and let our Asian neighbours make our future for us.

There are many reasons to think that this jejune optimism is deeply misplaced, but perhaps the White Paper’s most serious failing is evading serious discussion of the immense strategic risks and uncertainties that threaten Asia’s stability and prosperity, and Australia’s security.

This is disappointing but not surprising. Over the last few years the Gillard government has been notably silent in the debate about the strategic implications of China’s rise, the future of US–China relations and what it all means for Australia. The debate draws sharp disagreements, but few people outside the government – and, privately, few inside – would deny that the rise of China poses an immense challenge to the US-led strategic order in Asia, and that managing this challenge is vital to Australia’s wellbeing in the Asian Century.

Instead of joining this debate, let alone leading it, the government has tried to close it down altogether by systematically misrepresenting what the debate is about. It likes to claim that those who question current policy are proposing that we should abandon the US alliance and align ourselves instead with Beijing. This permits the government to respond that Australia does not have to choose between the US and China.

This line is repeated in the White Paper. It is a straw man. No serious observer argues that we should make such a choice, which would obviously be disastrous for Australia. The real question is what we can do to avoid a situation in which such a choice is forced on us.

That, of course, will depend on how the US and China get on. The more they come to see one another as adversaries, the more likely it is that Australia will find itself pressured from both sides to choose between them. The White Paper assures us that their relationship is not becoming more adversarial: “Beijing and Washington both want to develop constructive relations and avoid conflict: their governments have consistently said so …”

The evidence points the other way. China’s determination to challenge US primacy has been starkly displayed in territorial confrontations with US allies Japan and the Philippines over recent months. American determination to push back against China has been made equally plain in its military and diplomatic ‘pivot’ to Asia, as was illustrated in Barack Obama’s 2011 speech in Canberra. So the rivalry between the US and China is real and growing, and it poses a real and growing risk to the stability and prosperity of Asia, and to Australia’s future.

Australia’s present policies are helping to fuel the rivalry. When Gillard announced the day before Obama’s speech that US marines would be based in Darwin, she was giving the clearest possible support for the US stance. Indeed, though Gillard says we do not have to choose between the US and China, the Darwin decision was precisely such a choice. That’s the way they saw it in Washington and Beijing, and that is what counts.

So the real choice that we in Australia must debate today is not, as the government wants us to think, about siding with the US or China. It is a choice between sticking with policies that increase strain between the two countries, or working actively to reduce tensions.

The problem is that this would mean challenging Washington, because the only way to avoid escalating rivalry between the US and China is for each to agree to make room for the other in Asia’s new order. This is something that the US, for its part, so far has flatly refused to consider. Like Canberra, Washington doesn’t really get how different the Asian Century is going to be. It remains in denial about the stark fact that China’s economy will soon be bigger than its own and, again like Canberra, cannot imagine a regional order that it does not lead.

Until Australia’s leaders understand this, and find the courage to talk frankly to Australians about it, let alone to the Americans, our future in the Asian Century will remain very much at risk. Unfortunately, if the recent White Paper is any indication, they don’t have the nerve.

A Blueprint For The Asian Century? White-papering The Cracks