Blast from my past: "Romania Domino Stays Upright" & "Why Ceaucescu Fell" (1989)

Romania Domino Stays Upright

by Thomas P.M. Barnett

COPYRIGHT: The Christian Science Monitor, 1989 (11 December edition, p. 18)

A political earthquake is rumbling through Eastern Europe.

Stalinist leaders are toppled like dominoes, each succumbing to domestic unrest while Moscow looks on.

So far only Nicolae Ceausescu, Romania's 71 year-old dictator, has escaped this fate. Why are there no mass protests in Bucharest calling for his downfall? The answer is simple: Mr. Ceausescu has been preparing for this kind of political disaster for over 20 years.

The Romanian dictator realized long ago that a political chain of command existed in the Soviet bloc, and that he would have to establish autonomy from Moscow. This meant defending himself from two dangers: first that the Soviets would try to intervene militarily, and second that the Soviets would disavow socialism and undercut him politically.

The USSR's military channels of influence are restricted. No Red Army troops have been stationed in the Balkan country since 1958. Ceausescu built up his national defenses to such an extent that Romania can offer strong resistance to an invasion from any quarter.

Ceausescu also curtailed Soviet influence by distancing himself from Moscow's schemes to integrate Romania's economy into the Eastern bloc. While the USSR is Romania's biggest trading partner, Moscow's ability to force Ceausescu's regime into economic reforms is very limited.

The Kremlin also doesn't have any friends within the Romanian Communist Party. Ceausescu rooted out any Moscow sympathizers by making Romanian nationalism the litmus test of party loyalty.

Finally, Ceausescu severed the ideological umbilical cord connecting Bucharest and Moscow. Ceausescu realized that every Stalinist regime requires its own Stalinist anchor.

It was too risky to rely on Stalin's legacy alone. The whole edifice could collapse if, at some time, a Soviet leader repudiated Stalinism as Khrushchev had tried to do in 1956.

For now, Ceausescu is prepared to ride out the political shock waves resulting from Mikhail Gorbachev's perestroika. This is feasible because Ceausescu's despotism is home-grown. His rigid central planning keeps the economy in a straitjacket, while he stocks the leading political posts with relatives and cronies. His extensive police empire keeps the people cowed, and his personality cult rivals Stalin's.

Symbolically, Ceausescu has skillfully exploited Romania's deep nationalism and its historical weakness for paternalistic dictators.

While Mr. Gorbachev's leverage with Bucharest remains limited, the West's ability to encourage change is nonexistent. Ceausescu labored for years to win most-favored-nation trading status from the US in 1975. Yet just last year he was willing to forsake it when the State Department dared to link its renewal to improvement in Romania's abysmal human rights record.

Perhaps the best hope for change in Romania is Ceausescu's advanced age and poor health. While Ceausescu has lined up his wife and son as his political heirs, neither will sit comfortably, or for long, in a throne designed specifically for one man.

In the short run, Ceausescu's grip on power appears firm. Not only was he unanimously reelected at the recent Communist Party congress, but the tyrant vehemently denied the possibility of reforms. Sending a signal to reformist Hungary, Ceausescu even sealed the border with his Warsaw Pact neighbor.

For all his despotism, Nicolae Ceausescu is a shrewd and farsighted politician. Events in Eastern Europe may have caught the West unprepared, but Romania's present stability indicates that Ceausescu has been ready for this upheaval for quite some time.

Why Ceausescu Fell:  His Silent War Against the Romanian People Backfired

by Thomas P.M. Barnett

COPYRIGHT: The Christian Science Monitor, 1989 (28 December edition, p. 19)

The end finally came for Romania's Nicolae Ceausescu.

Literally scared out of office by an angry population that no longer feared his bullets, the fleeing tyrant and his wife were eventually captured, arrested, and executed after a secret trial. Genocide was the first of several charges leveled against the deposed leaders by the military tribunal.

Less than two weeks ago Ceausescu's dictatorship seemed immune to Eastern Europe's political upheaval. Now, new questions arise in light of the widespread violence that accompanied the end of this Stalinist regime.

Why was Ceausescu willing to wage open warfare against his people? And why would Romanians risk death rather than see his rule continue? The answers must be found in the silent war Ceausescu waged against his subjects for the last seven years.

This silent war dates back to 1982, when Ceausescu implemented severe austerity policies designed to retire the nation's foreign debt by 1990. Why so quickly? The Romanian dictator had witnessed Warsaw's near default on its large foreign debt. Poland's subsequent economic collapse convinced Ceausescu that his regime had to avoid this scenario at all costs.

Three elements drove him to this drastic conclusion:

First, a debt crisis would force the self-proclaimed "Genius of the Carpathians" to admit his economic mismanagement.

Second, such a crisis would cause Ceausescu's regime to lose credibility with the already hard-pressed workers. The ever-vigilant dictator could not allow a Romanian version of Solidarity to develop.

Finally, Ceausescu abhorred the idea of Western financial institutions gaining leverage over Romania's economy. The despot had spent years reducing Moscow's influence, and was not about to have it replaced by Western meddling.

Like his brash anti-Sovietism of the late 1960s, Ceausescu again cloaked his policies in the guise of defending Romania's sovereignty. But the cruel and uneven nature of his austerity program meant that ordinary Romanians were paying for the leader's paranoia with their lives.

Bucharest rapidly reduced its foreign debt over the 1980s, but the extreme rationing of food, basic amenities, and energy created virtual wartime conditions. Exiled dissident Mihai Botez estimates that at least 15,000 Romanians died annually from starvation, cold, and shortages.

Romania was rich enough to provide all these basic requirements, but Ceausescu chose not to do so. Instead, the debt was finally retired earlier this year.

Not everyone suffered these shortages equally. Ceausescu's ruling clan continued to live like modern-day Roman emperors, awash in luxury and decadence. The autocrat also kept his dreaded security police well paid so they would be willing to crush dissent wherever it arose.

After overseeing the economic strangulation of the Romanian people for seven years, it was not surprising that Ceausescu ordered the Timisoara massacre. What were another 4,000 dead to a tyrant who had already sacrificed 20 times that amount?

Similarly, when the security troops fought on like desperate gangsters after the regime's collapse, they were well aware of the people's deep anger over their long history of oppression.

It was anger so great, that when faced with their eighth straight winter of this silent war, Romanians were ready to choose death over Ceausescu. The turning point of the popular uprising occurred when military leaders realized that the people could be pushed no further.

With Ceausescu's downfall, Romania faces severe tests in the weeks ahead. The No. 1 task of the newly formed opposition, the National Salvation Front, is to contain the potential for continued violence.

The anger resulting from Ceausescu's silent war must be properly channeled in order to avoid a long and ugly backlash. An orderly and fully disclosed trial for Ceausescu would have gone a long way in releasing some of this pressure.

It is a good sign that the National Salvation Front is led by political figures—such as the interim president, Ion Iliescu—who, because of their past dissent, fell out of Ceausescu's favor many years ago. Their social stature will be instrumental in promoting new government policies which address Romania's present problems rather than dwell on its past.

Ceausescu subjected his people to any sacrifice necessary to maintain his absolute power. The end result was a nation isolated abroad and economically crippled at home. While the isolation has ended, the economic damage remains.

Both East and West have declared their readiness to aid in Romania's economic recovery. But both sides must also continue to be patient with Romania. It is a country coming out of a long and brutal conflict. While open warfare didn't break out until last week, Ceausescu's silent war had been claiming victims for years.

Blast from my past: "The Overly Qualified Critic: Esquire's National-Security Expert on the New Film 'In the Loop'" (2009)

 

The Overly Qualified Critic:  Esquire's National-Security Expert on the New Film In the Loop

by Thomas P.M. Barnett

Esquire, August 2009, p. 27.

In the Loop, by veteran British satirist and first-time director Armando Iannucci, is a deadpan farce that wickedly echoes the joint Anglo-American sales job on the Iraq invasion. Imagine dueling diplomatic versions of The Officecolliding at the United Nations over a proposed war resolution, with the decisive press leak sheepishly offered up by a two-timing British bureaucrat to his enraged Foreign Ministry girlfriend as evidence that his bedding an American counterpart was nothing more than an "antiwar shag."

The Brits are fronted by a peace-seeking but tongue-tied cabinet minister (Tom Hollander), who says things like "To walk the road of peace, sometimes we need to be ready to climb the mountain of conflict," triggering the prime minister's press flack (Peter Capaldi) to retort, "You sound like a fucking Nazi Julie Andrews." The warmongering Americans are captained by a Rummy-esque übercrat (David Rasche) who favors live hand grenades as desktop paperweights and pontificates to baby-faced aides, "In the land of truth... the man with one fact is the king."

The film, which slips in an effortless turn by James Gandolfini (above) as a foulmouthed U. S. general, contains enough fucks to qualify for the Tarantino award at Sundance, where it premiered in January, yet it's the script's many accurate details that earn this former badge-holder's praise, to include: the ubiquitous acronyms whose actual meaning nobody knows, the constant backstabbing among careerists, senior officials who float their resignations with less thought than they give their office decor, and the vigorously hedonistic lifestyle of D. C.'s young single staffers.

Which makes it a hilarious and helpful primer for anyone new to Washington.

Blast from my past: "Obama's New Map" (2009)

Obama's New Map

As he assumes leadership of this freaked-out world, the success of our new president's foreign policy — and presidency — will depend on the thinking he does inside the box.

By Thomas P.M. Barnett

Esquire, March 2009, pp. 53-54.

For roughly the past quarter century, America has run the world using the following two levers: its massive consumption rate and its willingness to deploy military forces around the planet. Together these two drivers facilitated the rise of many new great powers by enabling their export-fueled growth and obviating any need for them to engage in distracting military buildups or overseas interventions.

That U. S. grand strategy has essentially run its course, having proven both amazingly successful (the death of great-power war in East Asia) and extremely exhausting (our crippling debt overhang).

As President Obama renegotiates America's role in this world that we created, four potential flash-cum-bang points stand out for the year ahead.

Flash Point No. 1

First, and most obviously, is the second global economic summit in April to deal with the world's ongoing financial crisis. With the EU and Japan accompanying us into recession and our economy unlikely to turn any corner until early 2010, China's Keynesian role as globalization's "spend to save" stimulant is of critical importance, meaning that China today plays the same role vis-à-vis America that we played to imperial Great Britain at the end of World War II: The imperial power needs a bailout, and the rising power has the cash. As a rule, the price for such cooperation is steep — to wit, America got to call most of the shots in the resulting Bretton Woods financial order.

So what does China want? It wants to graduate from the kiddie table that is the expanded G20 crew of emerging economies and gain a seat at the more exclusive G8, where actual heads of state meet. If Obama is serious about his "team of rivals" philosophy, he'd do well to acquiesce, even to the point of permanently expanding the G8 to include the adjunct dozen.

But here's the tough compromise that may hold up this much-needed expansion: The EU seems determined to get some sort of global securities-and-exchange commission to regulate intermarket financial flows in the future — in effect, viewing the current global crash as Washington once did Wall Street's 1929 collapse. As far as emerging markets are concerned, that's going to feel suspiciously constraining; having just achieved some wealth, the rising East and South now face the West's desire to regulate crucial investment flows so as to smooth out an inevitable global business cycle. Which is like wanting to go all the way on the first date — that trust simply does not yet exist in the system.

Obama's balancing act here is difficult. No one wants to derail the emergence of a global middle class, the bulk of which will be found overwhelmingly in emerging markets in coming years, but globalization's periodic panics have clearly grown more frequent and more volatile. Obama must ask China to grow up very fast and assume a lot more leadership (read: exposure to monetary risk), meaning his "fair trade" agenda must inevitably yield to Beijing's definition — and, by extension, New Delhi's and Brasília's — of a fair deal for its still-impoverished masses.

Flash Point No. 2

Flash point No. 2 will be the Afghanistan-Pakistan border region, which took on more urgency after Pakistani militants tried to trigger a diversionary war with India by launching the frighteningly effective mini-invasion of downtown Mumbai.

Washington's national-security community is wrapping up a comprehensive strategy review, much like it did on Iraq a couple of years ago, and this time the logic of regionalizing the solution damn well better prevail. If the Obama administration displays an inkling of Bush-Cheney's Great Gamesmanship, then say goodbye to the "good war," because the Hindu Kush is where bankrupt empires go for slaughter.

If Obama is smart enough to socialize the problem beyond NATO (because it's truly beyond NATO in every sense of the word), then we're into the Shanghai Cooperation Organization's roster of member states and observers. You know that old bit about crazy in your bedroom versus crazy on my front lawn? Well, this is their front lawn.

Besides India's hard-earned seat at the table, China must be included in some high-viz capacity (Britain's PM Gordon Brown recently floated the notion of Chinese peacekeepers joining the fray) and so must nuclear bad-boy Iran (more on that below). Hell, we should also rehabilitate the Russians, if Obama is clever enough to exploit the situation to defuse recent tensions over Moscow's August smackdown of Georgia.

Remember: This insolvent Leviathan needs some immediate credit-default swaps (what we called "burden sharing" in the Before Time) in both the financial and security realms, so don't be surprised to see both great-power dances (the mega-stimulus package and the new military strategy) either succeed or fail in concert. The era of "separate lanes" is over in American grand strategy.

Flash Points No. 3 and 4

The next two potential flash points are equally intertwined: No. 3, the presidential election in Iran, and No. 4, the question of Obama's follow-through on Bush's August deal to deploy missile-defense facilities in Eastern Europe — ostensibly to protect NATO from Iranian missiles. (Feeling out of the loop on ancient Polish-Persian hatred? You're not alone.)

If Mahmoud Ahmadinejad manages to win reelection (and yes, Israel's Gaza adventure strengthens his hand), it'll signal that the Supreme Leader isn't looking for any "Nixon goes to China" overtures to rescue its moribund economy with Western investments and technology. Such a dead end would complicate any future U. S. cooperation with India and China on either global finance or Afghani-Pakistan, because both states need long-term access to Iran's energy as their own domestic demand grows. It would also make it near impossible for Obama to finesse the missile-shield issue (i.e., indefinitely delayed until "further testing"), thus further antagonizing Moscow when Putin's already in a pissy mood and looking to test our young leader.

If Ahmadinejad is toppled by either the moderate former president Mohammad Khatami or the technocratic Tehran mayor, Mohammad Qalibaf, then Iran is definitely back in play, giving Obama plenty more wiggle room elsewhere, but only if he and Hillary Clinton can keep a lid on Israel's hard-line factions, which seem intent on taking out Iran's nuclear facilities preemptively. (Such strikes won't succeed, but they would trigger Iran's hard-line retrenchment, no matter which candidate prevails.) To that end, when the Obama camp coolly floats the notion of extending America's nuclear umbrella over Israel and — implicitly — any friendly neighboring Arab state that desires it, the former junior senator from Illinois is breaking out the big-boy voice of the world's sole military superpower.

That's the cluster of strategic issues that either facilitates or foils Obama's first year as leader of the freaked-out world. Everything else waits on this unscrambled Rubik's Cube, unless Kim Jong Il decides that he's so lonely that he wants to pop off another nuke to get back on Washington's radar.

And in the end, everything depends on how many new frenemies Obama is willing to add to his great-power Facebook. If our new president decides that America is still stuck with the same old friends we've always had, then he will quickly find himself as boxed in as George W. Bush was at the end of his second term and as impotent as Jimmy Carter was at the end of his only term.

The worst thing Obama can do coming out of the gate is attempt to demonize any of these rising powers with doofus labels (e.g., axis of evil/diesel, league of autocracies) or to simultaneously "contain" all their regional ambitions. Trust me, if they're not a significant part of the solution, they'll invariably constitute the insoluble heart of the problem.

Thomas P. M. Barnett is a contributing editor and best-selling author whose new book, Great Powers: America and the World After Bush (G. P. Putnam's Sons), is being published this month. 

Blast from my past: "The Americans Have Landed" (2007)

 

The Americans Have Landed

by Thomas P.M. Barnett

Bryan Christie Design

Esquire, July 2007, pp. 113-17 & 134-37.

A few years ago, with little fanfare, the United States opened a base in the horn of Africa to kill or capture Al Qaeda fighters. By 2012, the Pentagon will have two dozen such forts. The story of Africa Command, the American military's new frontier outpost.

The word came down suddenly in early January to the fifty or so U.S. troops stationed inside Camp Simba, a Kenyan naval base located on that country's sandy coast: Drop everything and pull everyone back inside the compound wire. Then they were instructed to immediately clear a couple acres of dense forest. Task Force 88, a very secret American special-operations unit, needed to land three CH-53 helicopters.

"We had everybody working nonstop," says Navy Lieutenant Commander Steve Eron, commander of Contingency Operating Location Manda Bay, a new American base in Kenya, including a dozen or so on-site KBR contractors. By the next day, every tree had been hauled off and the field graded and packed down using heavy machinery. The pad was completed in thirty-six hours.

Soon after, U.S. special operators flying out of Manda Bay were landing in southernmost Somalia, searching for survivors among the foreign fighters and Al Qaeda operatives just targeted in a furious bombardment by a U.S. gunship launched from a secret airstrip in eastern Ethiopia.

The 88's job was simple: Kill anyone still alive and leave no unidentified bodies behind.

A few weeks later, the president would announce the creation of a new regional command -- Africa Command -- that would commit U.S. military personnel to the continent on a permanent basis. The January operation would be, in effect, the first combat mission of Africa Command, and it would not go as planned.

Ethiopia's Meles regime, which American Central Command officers describe as "xenophobic to the core," was going into Somalia last December whether the Americans approved or not. The recently installed Somali Council of Islamic Courts, with its loose talk of getting back another star point in its flag (otherwise known as Ethiopia's Ogaden region), simply had to go. As it happened, the Americans, who had been quietly training the Ethiopian troops for years, did approve.

In fact, Centcom was very eager for the operation. Most press leaks made it sound like our main targets were a trio of Al Qaeda senior operatives responsible for bombing American embassies in Kenya and Tanzania a decade ago. But the real story is one of pure opportunism, according to a knowledgeable source within the headquarters: "There were three thousand foreign fighters in there. Honestly, nobody had any idea just how many there really were. But we wanted to get them all."

When the invading Ethiopians quickly enjoyed unexpected success, Centcom's plan became elegantly simple: Let the blitzkrieging Ethiopian army drive the CIC, along with its foreign fighters and Al Qaeda operatives, south out of Mogadishu and toward the Kenyan border, where Kenyan troops would help trap them on the coast. "We begged the Kenyans to get to the border as fast as possible," the Centcom source says, "because the targets were so confused, they were running around like chickens with their heads cut off."

Once boxed in by the sea and the Kenyans, the killing zone was set and America's first AC-130 gunship went wheels-up on January 7 from that secret Ethiopian airstrip. After each strike, anybody left alive was to be wiped out by successive waves of Ethiopian commandos and Task Force 88, operating out of Manda Bay. The plan was to rinse and repeat "until no more bad guys," as one officer put it.

"We could have solved all of East Africa in less than eight weeks," says the Centcom source, who was involved in the planning. Central Command was extremely wary of being portrayed in the media as Ethiopia's puppet master. In fact, its senior leaders wanted to keep America's participation entirely secret. The goal was for Ethiopia to get all the credit, further bolstering America's controversial but burgeoning military ties with Meles Zenawi's increasingly authoritarian regime. Proud Kenya, still visibly nervous from the 1998 embassy bombing, would have been happy with a very quiet thank-you.

It was a good plan. And it was leaked to the press almost as soon as it started.

Those involved in the Central Command operation suspected two sources: 1) somebody in the Office of the Secretary of Defense who couldn't wait to trumpet their success to bitter personal rivals in the State Department, or 2) a dime dropper from our embassy in Kenya who simply couldn't stand the notion that the Pentagon had once again suckered State into a secret war.

The first New York Times piece in early January broke the story of the initial AC-130 bombardment, incorrectly identifying a U.S. military base in Djibouti as the launching point. That leak just let the cat out of the bag, tipping off the main target, a senior CIC leader named Aden Hashi Ayro, who, according to Centcom intelligence, had been completely fooled up to that point, thinking the Ethiopians had somehow gotten the jump on him. Ayro survived his injuries, and he's now back in action in Mogadishu and, by all accounts, mad as hell at both the Ethiopians and the Americans.

Six weeks and a second Times story later, the shit really hit the fan in Addis Ababa. Now the intensely proud Ethiopians, who had done all the heavy lifting in the operation, were being portrayed as bit players in their own war -- simpleton proxies of the fiendishly clever Americans. After angry denials were issued (Meles's spokesman called the story a "fabrication"), the Ethiopians decided that if the Americans were so hot to mastermind another intervention in Somalia, they would just wash their hands of this mess as quickly as possible.

The return of the foreign fighters to Mogadishu's nasty mix, along with Ethiopia's fit of pique, quickly sent the situation in Somalia spiraling downward. The transitional Somali government, backed by the United Nations, is faltering, and in scenes reminiscent of America's last misadventures in Mog, both Ethiopian troops and African Union peacekeepers are taking fire from 360 degrees' worth of pissed-off Somali clans determined to -- once again -- drive off the invading infidels. Osama bin Laden himself couldn't have written a better ending.

Naturally, it wasn't supposed to happen this way.

America's Central Command set up shop in Djibouti in May 2003, moving ashore a Marine-led Joint Task Force that had been established six months earlier aboard the command ship Mount Whitney to capture and kill Al Qaeda fighters fleeing American forces in Afghanistan and Iraq. The task force did register one immediate big hit in November 2002: A top Al Qaeda leader was taken out in Yemen by a Hellfire air-to-ground missile launched from an unmanned Predator drone in a scene right out of Syriana. But other than that, the great rush of rats fleeing the sinking ship has not yet materialized, and so the Marines took up residence in an old French Foreign Legion base located on Djibouti's rocky shore, just outside the capital.

Uncomfortable just sitting around, the Marines quickly refashioned the task force with the blessing of General John Abizaid, then head of Central Command, who envisioned Combined Joint Task Force-Horn of Africa (CJTF-HOA) as a sort of strategic inoculant. If the Marines weren't going to get to kill anybody, then they'd train the locals to do it instead.

But CJTF-HOA, whose area of responsibility stretched from Sudan down to Kenya, soon evolved into something so much more: an experiment in combining defense, diplomacy, and development -- the so-called three-D approach so clearly lacking in America's recent postwar reconstruction efforts elsewhere. Because the task force didn't own the sovereign space it was operating in, as U.S. forces in Afghanistan and Iraq did, the Marines were forced to work under and through the American ambassadors, their State Department country teams, and the attached U.S. Agency for International Development missions. If little of that cooperation was occurring in Kabul and Baghdad, then maybe Africa would be better suited.

The Horn of Africa was supposed to be Washington's bureaucratic mea culpa for the Green Zone, a proving ground for the next generation of interagency cooperation that fuels America's eventual victory in what Abizaid once dubbed the "long war" against radical Islam. But as its first great test in Somalia demonstrated, the three D's are still a long way from being synchronized, and as the Pentagon sets up its new Africa Command in the summer of 2008, the time for sloppy off-Broadway tryouts is running out. Eventually, Al Qaeda's penetration of Muslim Africa will happen -- witness the stunning recent appearance of suicide bombers in Casablanca -- and either the three D's will answer this challenge, or this road show will close faster than you can say "Black Hawk down."

Djibouti

After being ignored since the beginning of time (save for its slaves and its treasure), Africa just got strategically important enough for us to care about. And the Bush administration's decision to set up Africa Command is historic, but not for the reasons given or assumed.

There aren't enough Islamic terrorists in Africa to stand up a full combatant command. If all we wanted were flies on eyeballs, a small number of special-operations trigger pullers would have sufficed for the foreseeable future.

There's oil here, but the United States would get its share whether Africa burns or not, and it's actually fairly quiet right now.

The Chinese are here en masse, typically embedded with regimes we can't stand or can't stand us, like Sudan and Zimbabwe. But the Chinese aren't particularly liked in Africa and seem to have no designs for empire here. Beijing just wants its energy and minerals, and that penetration, such as it is, doesn't warrant Africa Command, either.

America is going to have an Africa Command for the same reason people buy real estate -- it's a good investment. Too many large, hostile powers surround Central Asia for the radical jihadists to expand there, but Africa? Africa's the strategic backwater of the world. Nobody cares about Africa except Western celebrities.

So as the Middle East middle-ages over the next three decades and Asia's infrastructural build-out is completed, only Africa will remain as a source for both youth-driven revolution and cheap labor and commodities. Toss in global warming and you've got a recipe for the most deprived becoming the most depraved.

The U.S., through its invasion and botched occupation of Iraq, has dramatically sped up globalization's frightening reformatting process in the Middle East, and with Africa on deck, the United States military is engaging in a highly strategic flanking maneuver.

Africa Command promises to be everything Central Command has failed to become. It will be interagency from the ground up. It will be based on interactions with locals first and leaders second. It will engage in preemptive nation-building instead of preemptive regime change. It will "reduce the future battlespace" that America has neither intention nor desire to own.

It'll be Iraq done right.

Combined Joint Task Force-Horn of Africa here in Djibouti is the clear model for what comes next, according to Rear Admiral Bob Moeller, who heads up the Defense Department's transition team planning Africom's structure. It is the franchise that will be replicated across the entire continent.

Camp Lemonier, home to CJTF-Horn of Africa, is one nasty, hot, and oh-so-stanky chunk of rock adjoining the Red Sea, a place where the view of the night sky is routinely blocked by the thick black smoke rising from the capital city's burning garbage pit located just outside the base wire. Take away the port and there's not much reason for anyone to come here, where the bulk of Djibouti's 750,000 citizens live.

Djibouti welcomes the Americans as a counterweight to its neighbors, none of whom have the country's best interests in mind. To the north is Eritrea, which broke off from Ethiopia years back and favors Somalia against their common archrival. Landlocked Ethiopia to the west wants a stable Djibouti primarily for its access to the sea. But as Addis Ababa doesn't mind fomenting trouble in Somalia, to Djibouti's south, the relationship is frequently strained.

Besides being welcoming, Djibouti was a natural place for the United States to plant its first African precinct: It's where Africa meets the Persian Gulf.

Camp Lemonier was just a bunch of tents surrounded by walls filled with sand for the first three years, with the serious settling in beginning when the Navy took over the command from the Marines in early 2006. Until recently, the camp's roughly fifteen hundred sailors, marines, Army, Air Force, Coast Guard, and civilians were crammed into a very cramped hundred-acre plot, buttressed on one side by the sole runway the task force shares with both the Djibouti International Airport and a French marine base still operating there. Now, thanks to a new five-year lease signed with the Djiboutian government, the camp has expanded to roughly five hundred acres, to include a sprawling suburb called "CLU City," named after the rows and rows of containerized living units, housing two thousand people in all, plopped down in what is certainly one of the world's most brutally utilitarian bedroom communities.

The spartan CLU City (for containerized living unit), built on four hundred acres recently ceded to Camp Lemonier by the Djiboutian government, will eventually house two thousand U.S. troops.

I got a glimpse of CLU City from the guard tower just inside the eastern wall of the base late one Sunday afternoon. The task force's public-affairs officer, Major David Malakoff, was right on my elbow the entire time. Malakoff had walked me around the camp the day before, carefully pointing out the "wire within the wire" that is the special-operations compound. He said no one would be answering questions about them because no one on base knows anything about what they do.

This is a common theme from senior officers at Lemonier. Captain Bob Wright, who heads up strategic communications for the task force, told me that he had "absolutely no access" to the special-ops unit there, despite having "all the right clearances."

As I stood up on the guard tower, snapping photos of CLU City, I looked over toward the Djibouti airport, and my eye was drawn to the sight of men dressed in black scrambling down the side of a nondescript building on the north side of the base.

"What's going on over there?" I asked, pointing.

"Over where?" Malakoff answered slowly. "I don't see anything."

Behind me, the base commander's aide was tensing up.

I pulled my eye back from my camera slowly, looked down off the tower, and calculated the drop in feet to the ground. Better to continue this conversation below.

"Okay, got a nice shot of a plane. I'm done!" I started heading to the ladder. A rapid-fire chorus of "Great!" "Good!" and "All right!" triggered everyone's movement right on my heels.

Back on the ground, Malakoff turned to me and whispered, "You didn't take any shots of those guys on the building, did you?"

"No."

"Good," Malakoff said. "That would have been the end of your camera right there, and maybe more. I'm just trying to look out for you here."

Special-operations enthusiasts, like the journalist Robert Kaplan, love to romanticize the almost limitless utility of the trigger pullers in globalization's dark alleys like the Horn. This makes some sense, as they tend to generate all the "kinetics," or killing, and that's what draws in the international press. But with CJTF-HOA, the regular military is trying to reassume its historical role in the everything else that accompanies the trigger-pulling: the civil-affairs work, the humanitarian stuff, the community projects designed to win hearts and minds. In a pinch, the SOF guys will do these sorts of things as well, but the long war has become one long squeeze on special operators, who are now such rare commodities -- recruitment-wise -- that some are commanding reenlistment bonuses well above $100,000, lest Blackwater USA hire them all.

A scene at Camp Lemonier, Djibouti. While special operations makes most of the news, the task force consists of far more well-diggers, engineers, civili-affairs specialists, and medics.

So the romantic view of special operations encouraged by Kaplan and others, that the SOF guys are all you need for a backwater like Africa, is yielding to a new normal: a strategic view that recognizes there are too few trigger pullers to go around, and with the Marines backfilling Special Operations Command where it can, bases like Lemonier are quickly being taken over, often by reservists who haven't been on an aircraft, ship, or submarine for years.

The U.S. Navy now commands the base, freeing up the Marines for more pressing duty elsewhere in the region, and although CJTF-HOA's C is supposed to signify a "combined" effort involving coalition member states, only a dozen or so officers are actually drawn -- as liaisons -- from ten militaries (five local, five distant) other than our own. Indeed, the French, with their roughly three thousand men next door, along with all their wives and kids living off base, constitute by far the largest foreign contingent in Djibouti. In comparison, the Americans remain somewhat isolated on their base with their 10:00 p.m. curfew, as Lemonier is still considered a "hardship post" that rules out families.

The task force's stated mission -- a profound expansion of, and evolution from, its original capture-and-kill orders -- is to prevent conflict by promoting stability regionally and, in that prophylactic approach, ultimately "prevail over extremism" by never letting its seeds find purchase in local soil. In the Horn of Africa, when you're talking urban, middle-class, educated, commercial, and connected, you're more likely describing Christian populations, and when you're talking rural, impoverished, uneducated, agrarian, and off-grid, you're mostly describing Muslim villages. So it's not enough to interact with the capital's elites. You either go "downrange," as task-force officers like to say, or you might as well stay on base.

In addition to Camp Lemonier, three permanent contingency operating locations are up and running, two in Ethiopia (Bilate and Hurso) and one in Kenya (Manda Bay). A fourth base was established more than a year ago in Gode, Ethiopia, but it was closed as events heated up next door in Somalia. If CJTF-HOA does become the model for Africa Command, the United States could easily be running a couple dozen such military bases on the continent by 2012.

The pattern of our military's expanding presence in Africa seems clear: 1) look where the locals or former colonials set up shop previously; 2) move inside the existing wire first with your special operators for capture/kill missions and military-to-military training with the locals to do the same; and then 3) settle in more formally with new versions of Camp Lemonier. Once set up, the task force storefront can be used to flow trigger pullers onto the scene at a moment's notice -- the precinct that hosts the SWAT team.

To old hands in the State Department and USAID, the Pentagon's growing incursion into long-neglected Africa arouses ancient bureaucratic impulses toward territoriality. They can't help but feel like their turf's being invaded by the gun-toting crowd, hell-bent on opening a new front in a new war.

If Djibouti is a front, then it's a messy one, because the fault lines seem more cultural than tactical. The place is a great example of the tectonic stresses at work here, its battered visage almost exemplifying the numerous civilizations that have crashed into one another here on the streets of this ancient port city.

Djibouti was hopping my last night in town before I flew downrange. Several thousand French sailors were on liberty that Sunday night, fresh off the carrier Charles de Gaulle and the other ships in its task force. Half the port's prostitutes are said to be HIV-positive, and the sailors were taking their lives in their hands.

As the French were landing, I headed out in a Toyota Land Cruiser with Captain Bob Wright and a few of his young officers to find the local Ethiopian restaurant that everyone at Lemonier raves about but no one can ever find. An hour later, we're still not there. Finally, we head into Djibouti's main square, to a restaurant Captain Wright knows well. He jumps out of the Toyota and chats up the owner, who takes the whole hospitality thing so seriously that he sends Bob back to the car with his eldest son as our guide.

We careen through back alleys that squeeze tighter and tighter and finally come upon the Ethiopian Community Club, nestled between a Coptic Orthodox Christian church and a mosque.

The captain pays a couple of kids hanging out in the alley to watch the car, and we head up to the unlighted rooftop restaurant.

Sitting atop the building in the warm night air, we are serenaded from three sides in a mash-up only Tom Friedman could love. The Coptic priest is haranguing his parish in an endless sermon; on the other side, the looming mosque tower is booming its taped call to prayers; and, once our waiter gets around to opening up the makeshift bar on the roof, Eminem joins in about what a whore his mother is from a boom box in the corner. Popping beers and shouting through the din, Captain Wright steers the conversation to the tension between the two halves of HOA's mission, the civil-affairs stuff and what everyone keeps calling "the recent kinetics in Somalia." The whole affair was a nightmare to Wright and his officers, he says, trashing years of patient effort by hundreds of officers to present a new and different face of the U.S. military.

"Strategic communications" means that no one ever sees the men in black rappelling down that building, the same men in black I hadn't seen the day before.

Walking back to the car, Wright says, "Stuff like that makes everyone think that what we're trying to do here at HOA really doesn't count, but it does. You can't make the Horn a better place simply by killing bad guys."

So the question becomes, Is the civil-affairs stuff just a continuing cover for the special operations, or will they eventually yield an Africa that makes American interventions unnecessary? There's a lot of concern here that the establishment of Africa Command may do more harm than good -- the poised hammer that makes everything suddenly look like a nail.

Manda Bay, Kenya

Traveling to HOA's contingency operating location in Manda Bay, along Kenya's eastern coast, is a multiday affair from Djibouti, including a couple of long flights on Kenya's national airline and a two-hour military transport from Nairobi to a makeshift airstrip a few miles' drive from the surrounding Kenyan naval base. On the C-130 flight with the task force's deputy commander, Rear Admiral Tim Moon, we shared the cargo bay with a couple of huge pallets of well-digging machinery and more cases of Red Bull than I could count. The ground crew in Nairobi said we were dangerously overloaded for the short runway, but after being unable to find a forklift big enough to repack the load originally put on board in Djibouti, our Air Force pilots just said, "No worries" (and yes, in Swahili that really is hakuna matata), and we were off in a plane built the year I was born (1962).

We skimmed the landing zone on our first pass to make sure no wild animals were on the strip. From inside the windowless C-130, that experience feels like a last-second aborted landing, which I handled okay because I'd skipped lunch earlier. My seat companion, Major Tesfa Dejene from Ethiopia, laughed when he caught my grimace. "I thought all you Americans like excitement!"

Camp Simba, the Kenyan navy's name for the base, is a struggle against nature. Lieutenant Commander Steve Eron warns you upon entry that the concertina wire strung around the base perimeter is useful only in stopping humans. The animals -- baboons, monkeys, hyenas, deer, and probably more deadly snakes than anywhere else in the world -- "come on through like it's not even there."

"I call it the zoo in reverse," says Eron. "Because they come here to watch us." Something to remember at 3:00 a.m. when you're making that walk to the latrine forty yards from your hut, which is kept incredibly cold with air-conditioning because "keeping it cold keeps those cold-blooded animals out," Eron says.

I make a mental note of where the camp's sole medical corpsman is located.

Manda Bay's origins tell you everything you need to know about why the Americans showed up here. The Kenyan navy built the base in 1992, in response to the collapse of the Siad Barre dictatorship in Somalia the year before, right about the time U.S. marines were stepping off their amphibious ships and entering Mogadishu. Kenya's predominantly Muslim northern coastal area is so remote that it was simply easier to send military supplies to its border with Somalia along the coast using naval vessels than to head up inland by vehicles, as the sandy roads are impassable in the rainy season.

Years later, as Somalia began spiraling downward yet again, Central Command sent a special-operations contingent into Manda to begin training the Kenyan navy on antiterrorism tactics using high-speed patrol craft. That effort laid the groundwork for Task Force 88's sudden appearance earlier this year.

Rear Admiral Rich Hunt, who commanded HOA in 2006, likes to brag that "we've never fired a round in anger," which is a little like saying, "HOA doesn't kill people; special operators do."

This is a part of the world where military trucks and helicopters suddenly appearing on the horizon typically set off alarm bells with the locals, because it has usually meant that troops from the capital were coming to round them up and/or kill them, just like our troops were doing to those high-value targets in southern Somalia earlier this year. Here, you're just another scary guy in a uniform until you prove differently.

Jumping out of the tail of the C-130 in Manda Bay's intense March heat, I am surrounded by marines temporarily bivouacked alongside the remote airstrip in a cluster of tents. They're here for a bilateral naval exercise with the Kenyans. The engineering brigade will come ashore soon and help rebuild a school, and Marine doctors will vaccinate the locals and treat all their basic maladies. If this is a cover, it is very convincing.

On posts like this, the rank-and-file American troops tend to fall for the locals. Not in some white-man's-burden sort of way but simply out of the desire not to be sitting around on their asses, marking time across their tours, waiting like firemen for the next blaze.

There's nothing in the traditional military system that demands, recognizes, rewards, or basically gives a flying fuck about making friends with local populations. But still, soldiers like Army Captain Steve McKnight do it.

Team leader of Team B/413th Civil Affairs Battalion, McKnight is an instantly likable fellow. He's a balding bear of a guy whose uniform is a Cubs cap and a bike-messenger bag, and he comes off like a good high school football coach. And he did coach at a school in an unglamorous part of Miami. "Suburban kids didn't need me because they've already got parents," he says.

Unmarried at forty-three, McKnight stumbled into this African posting because of bureaucratic downsizing. "I'm a medical-service-corps officer -- direct commission. I got attached to a reserve combat hospital down in Miami that folded, and there was a civil-affairs unit next to mine, and I walked over there and I was like, 'Hey, I need a home. You guys got a place for me?' "

Civil affairs promised him the most remote locations with the neediest clients. Now sitting across from me at a seedy Internet café located in the sweltering waterfront of Lamu, Kenya, an ancient seafaring port, McKnight downs a huge beer in a single gulp and leans back, flashing his gap-tooth grin like Vince Lombardi. He's been in country for almost six months now and has put in repeated requests to extend his tour of duty, to no avail. "I'll probably get me something deep in South America next," he says.

Army Captain Steve McKnight with Kenyan children at a school recently rehabbed by visiting marines.

McKnight in his element is a superb intelligence gatherer (or what they call in spycraft "human intelligence"). We took a long tour of Lamu's labyrinthine back alleys, where the carved wooden doors mark the homes of some of the world's oldest slave traders, and the open sewers reek. I'm holding my nose while McKnight presses the flesh of every shopkeeper we pass, most of whom warmly yell out his name in greeting. He's like some muzungu running for office on Lamu's south side: exchanging gossip, asking how business has been lately, needling them for details about this or that local issue.

Admiral Moon's visit included a showy meeting with senior Kenyan military officers down on the coast to mark the bilateral military exercise with the Americans. A message had just come down from the embassy, which McKnight relayed to Moon: "The embassy says it wants everybody in civvies today, Admiral, just to play it safe."

"The embassy is concerned about some photojournalist snapping a shot of the admiral standing next to some Ethiopian officer in uniform," McKnight said. "After the recent events in Somalia, that could trigger a lot of negative coverage."

McKnight and I skip the photo op because he's got a civil-affairs project to check on: the rebuild of a local rural school by a U.S. Marine Expeditionary Unit's engineering battalion. McKnight had done the preliminary scouting work with the Marines weeks earlier, picking out a school that HOA had helped build three years ago but that was already showing some structural problems, in large part because the Americans had relied too much on local contractors, who tend to mix way too much sand in their cement to cut on costs.

"Handing the money over to the contractor, disappearing for the life of the project, and coming back for the dedication? That's a recipe for disaster," says McKnight.

So this time around, the Marine combat engineers not only rehab all the buildings, they erect a significant fence to surround the entire school compound to keep out the wildlife that constantly wanders in, threatening the kids, raiding the pantry, and eating its way through the crops the staff grow to feed themselves and provide meals to the kids.

There's going to be a problem when the Marines fly in the VIPs for the school rededication. Their Chinook helos need such a large landing space that the school's kitchen, made of sticks and mud, is put at risk. Huff and puff and blow your building down. On the spot, the Marines offer to trash the old kitchen and build a new, wood-frame one from scratch.

The headmaster convinces the Marines to build a new food pantry right next door. He is elated. "When you have the food, the kids are so happy, and they come in great numbers, and we keep them in school."

Having worked that scene, McKnight's on to connect his next dot: Sammy Mbugua, deputy director of the local Kenyan National Youth Service facility, a sprawling agriculture camp that experiments with all manner of crops and helps local farmers adopt new practices. It's a run-down collection of buildings, and looking at all the holes that pepper every piece of wood in the place, you quickly come to the conclusion that ants run the place more than anybody else.

McKnight has to reassure Sammy about all those helicopters buzzing by. Mbugua, a slow-moving, middle-aged man whose rheumy eyes say he's no stranger to tropical diseases, is looking for explanations to give all the local villagers who pester him with questions. "Some people are worried, Steve," he says. "Can you hear them go, the aeroplanes?"

McKnight does his best to explain all the activity, emphasizing all the civil-affairs projects being conducted simultaneously alongside military exercises.

"Please tell them there's nothing to be alarmed about," he says. "They're doing exercises. Yeah, that's nothing to worry about."

When the kinetic troop buildup happened on the border earlier this year, it scared everyone. "They were like, 'What's happening? Is there going to be a big battle here or something?' " McKnight says. "The secondary school that does not exist here anymore was taken over by General Morgan, a Somali warlord, in 1992. He destroyed it and they haven't had a secondary school since. The people here remember that."

McKnight confirms with Mbugua that all the youth-service personnel got checked out by the Marine doctors running a medical exercise down the road. "Yes, yes," says Sammy. "They all got their shots."

This is what McKnight calls "housekeeping." And in his work, he has the bearing of a Peace Corps volunteer, not an Army officer. "It's the little things that make the difference," he says. "It's not the big-picture project stuff, it's remembering to bring that fourth grader in Kiunga the English books that we promised her. It's remembering to bring the chief a new stainless-steel coffee thermos. And it's not just the material stuff, it's doing the interaction. It's humanizing the relationship. You know, this business of just giving stuff, it's dehumanized us and it's dehumanized them."

Promising to meet up with Sammy over drinks at a cocktail party hosted by the director of the National Youth Service next week in Nairobi, McKnight is out the door.

Cruising back to Manda Bay, we pass a couple of Kenya Wildlife Service trucks. McKnight has our Kenyan driver pull over, and McKnight exchanges information with the group's leader. "Always got to say hello," McKnight explains. "Those guys are the best security operating in this neck of the woods."

The captain's been in every room along Kenya's border with Somalia that Al Qaeda operatives have been in. He has interacted with every leader they've tried to recruit, telling me that clerics there immediately renounced these guys once their identities became known. While conservative, none of Kenya's Muslims seem, in McKnight's opinion, particularly attracted to radical ideology promoting violent separation from the outside world. Rather, the local mullahs are desperate to have roads improved so that teachers can be attracted from the cities to their remote villages. "Jihadism is a failed concept here," McKnight says. "It's like trying to sell a vegetarian steak."

We'll see.

He tells the story of a primary school deep in the Muslim village of Bargoni where all the girls would drop out once they hit puberty. In Africa, the impulse would be to think: AIDS, birth control, clerics bearing down. But it was something far more prosaic. When I had first arrived inside the wire at Camp Lemonier, I'd seen a portable toilet labeled "Muslim female." The girls at the school were forced to quit at puberty because strict Islamic practice says that males and females can't share the same bathroom once girls come of age. McKnight and his crew offered a simple fix: HOA would build the school a bathroom just for girls.

The impact was immediate. For the first time, girls stayed in school, parents were happy, mullahs were satisfied, local leaders immensely gratified. Word got around: "The Americans did this!" McKnight's eyes well up as he remembers.

Kinetics is what the military does. Iraq is a quagmire because kinetics is all we planned for. But in this new time, on this continent, the military also builds latrines for girls. That simple act might someday keep trigger pullers out of this village.

"I don't need to go back to Florida and my inner-city school," McKnight says. "I've got it all here. It feels just like home."

Africom

For the Pentagon, the corporation that runs the only military on earth with a global reach, the world is carved into regional commands. Until now, Africa has been nothing but a strategic backwater -- the one place where America clearly had no interests and no bureaucratic structure to manage those nonexistent interests. Africa was divided haphazardly between European Command, Central Command, and Pacific Command. In a globalized world where bad actors live to exploit unguarded seams, we seemed to be providing Al Qaeda with several to exploit.

The U.S. military's strategic take on Africa has long been "We have no compelling interests there, and we sure as hell don't want anybody else to have any, either!" It was that attitude that got Washington nervous about the Soviet Union's seeming ideological penetration of the continent in the late 1970s, and it's what gets the Pentagon nervous today about China's obvious economic penetration.

But denying other great powers strategic interests in the region does not constitute a strategy of our own, nor does the great hunt for "high-value targets." Which is why America has come to Africa militarily and isn't leaving anytime soon. The same can be said for China in the economic realm. To work, a lot of preconceptions about what an American military presence is really good for in underdeveloped countries will have to change. What we've not learned in Iraq -- or taken far too long to learn -- will have to be somehow acquired, soldier by soldier and tour by tour, on the ground in Africa.

Rounding a corner in Lamu's claustrophobic back alleys, Captain Steve McKnight leads a military group through a dirty, cluttered courtyard. It's happy hour, and this multinational force consists of six HOA liaison officers -- a Brit, a South Korean, two Ethiopians, a Djiboutian, and a French colonel -- and Admiral Moon, and the whole group is guarded by two "force protection" infantrymen who hover fore and aft like mother hens. We stick out like sore thumbs, and must conjure the past, when Africa was cynically sized up by visiting military officers for its potential to join what passed for globalization a century ago.

Barefoot, dirty kids, wearing clothes whose logos faded two or three owners ago, kick up the dust as they chase one another around the cracked plastic buckets that serve as their mother's laundry system. She's busy hanging clothes out to dry on lines strung between the buildings, and we're ducking under her wash, trying not to interfere.

The woman's husband sits on what passes for the stoop of their house -- a single slab of rock. He's busy slurping a bowl of soup.

The grizzled old fisherman looks up from his bowl at the parade of military officers in mufti and says in perfect English: "Welcome to another world."

Admiral Moon passes under the clothesline, straightens up, and stops. "Thanks. We feel welcome," he says.

The man dismisses us with his hand, turns away to finish his soup, and a few seconds later we're gone.

Blast from my past: "The Man Between War and Peace" (2008)

 

The Man Between War and Peace

by Thomas P.M. Barnett

Photographs by Peter Yang

Esquire, April 2008, pp. 144-53.

As head of U.S. Central Command, Admiral William "Fox" Fallon is in charge of American military strategy for the most troubled parts of the world, including the entire Middle East.  As hawks in Congress and at the Pentagon planned for war with China, Fallon instead urged cooperation with the Chinese.  And now, as the White House has been escalating the war of words with Iran, and seeming more determined to strike militarily before the end of this presidency, the admiral has instead urged restraint and diplomacy.  In the end, who will prevail, the president or the admiral?

1.

If, in the dying light of the Bush administration, we go to war with Iran, it'll all come down to one man. If we do not go to war with Iran, it'll come down to the same man. He is that rarest of creatures in the Bush universe: the good cop on Iran, and a man of strategic brilliance. His name is William Fallon, although all of his friends call him "Fox," which was his fighter-pilot call sign decades ago. Forty years into a military career that has seen this admiral rule over America's two most important combatant commands, Pacific Command and now United States Central Command, it's impossible to make this guy -- as he likes to say -- "nervous in the service." Past American governments have used saber rattling as a useful tactic to get some bad actor on the world stage to fall in line. This government hasn't mastered that kind of subtlety. When Dick Cheney has rattled his saber, it has generally meant that he intends to use it. And in spite of recent war spasms aimed at Iran from this sclerotic administration, Fallon is in no hurry to pick up any campaign medals for Iran. And therein lies the rub for the hard-liners led by Cheney. Army General David Petraeus, commanding America's forces in Iraq, may say, "You cannot win in Iraq solely in Iraq," but Fox Fallon is Petraeus's boss, and he is the commander of United States Central Command, and Fallon doesn't extend Petraeus's logic to mean war against Iran.

So while Admiral Fallon's boss, President George W. Bush, regularly trash-talks his way to World War III and his administration casually casts Iranian president Mahmoud Ahmadinejad as this century's Hitler (a crown it has awarded once before, to deadly effect), it's left to Fallon -- and apparently Fallon alone -- to argue that, as he told Al Jazeera last fall: "This constant drumbeat of conflict...is not helpful and not useful. I expect that there will be no war, and that is what we ought to be working for. We ought to try to do our utmost to create different conditions."

What America needs, Fallon says, is a "combination of strength and willingness to engage."

Those are fighting words to your average neocon -- not to mention your average supporter of Israel, a good many of whom in Washington seem never to have served a minute in uniform. But utter those words for print and you can easily find yourself defending your indifference to "nuclear holocaust."

How does Fallon get away with so brazenly challenging his commander in chief?

The answer is that he might not get away with it for much longer. President Bush is not accustomed to a subordinate who speaks his mind as freely as Fallon does, and the president may have had enough.

Just as Fallon took over Centcom last spring, the White House was putting itself on a war footing with Iran. Almost instantly, Fallon began to calmly push back against what he saw as an ill-advised action. Over the course of 2007, Fallon's statements in the press grew increasingly dismissive of the possibility of war, creating serious friction with the White House.

Last December, when the National Intelligence Estimate downgraded the immediate nuclear threat from Iran, it seemed as if Fallon's caution was justified. But still, well-placed observers now say that it will come as no surprise if Fallon is relieved of his command before his time is up next spring, maybe as early as this summer, in favor of a commander the White House considers to be more pliable. If that were to happen, it may well mean that the president and vice-president intend to take military action against Iran before the end of this year and don't want a commander standing in their way.

And so Fallon, the good cop, may soon be unemployed because he's doing what a generation of young officers in the U.S. military are now openly complaining that their leaders didn't do on their behalf in the run-up to the war in Iraq: He's standing up to the commander in chief, whom he thinks is contemplating a strategically unsound war.

It's not that Fallon is risk averse -- anything but. "When I look at the Middle East," he says late one recent night in Afghanistan, "I'd just as soon double down on the bet."

When Fallon is serious, his voice is feathery and he tends to speak in measured koans that, taken together, say, Have no fear. Let Washington be a tempest. Wherever I am is the calm center of the storm.

And Fallon is in no hurry to call Iran's hand on the nuclear question. He is as patient as the White House is impatient, as methodical as President Bush is mercurial, and simply has, as one aide put it, "other bright ideas about the region." Fallon is even more direct: In a part of the world with "five or six pots boiling over, our nation can't afford to be mesmerized by one problem."

And if it comes to war?

"Get serious," the admiral says. "These guys are ants. When the time comes, you crush them."

2.

It was Rumsfeld's fall that led to Fallon picking up his greatest and, inevitably, final mission. Smart guy that he is, Robert Gates, the incoming secretary of defense, finagled Fallon out of Pacific Command, where he'd been radically making peace with the Chinese, so that he could, among other things, provide a check on the eager-to-please General David Petraeus in Iraq.

As the head of U.S. Central Command, his beat is the desert that stretches from East Africa to the Chinese border -- a fractious little sandbox with Iraq on one edge and Afghanistan on the other and tens of thousands of American boots already on the ground in both. Pakistan's there in one corner, threatening to boil over and spill its nuclear jihadists forth upon the world; in another, the Gaza Strip continues to hum like a bowstring; and up north, the post-Soviet republics of Central Asia, the 'Stans, rattle along under dictators who range from the merely authoritarian to the genuinely insane. And right in the middle lies Iran.

Where there's peace in the region, how do you keep it? Where there's war, how do you contain it or end it? Where there are threats, how do you counter them? For starters, you might want to make some friends. Which is what Fallon was doing recently on a tour of his area of responsibility.

It's late November in smoggy, car-infested Cairo, and I'm standing in the front lobby of a rather ornate "infantry officers club" on the outskirts of the old town center. Central Command's just finished its large, biannual regional exercise called Bright Star, and today Egypt's army is hosting a "senior leadership seminar" for all the attending generals. It's the barroom scene from Star Wars, with more national uniforms than I can count.

Judging by Fallon's grimace as his official party passes, I can tell that the cover story in this morning's Egyptian Gazette landed hard on somebody's desk at the White House. U.S. RULES OUT STRIKE AGAINST IRAN, read the banner headline, and the accompanying photo showed Fallon in deep consultation with Egyptian president Hosni Mubarak.

Fallon sidles up to me during a morning coffee break. "I'm in hot water again," he says.

"The White House?"

The admiral slowly nods his head.

"They say, 'Why are you even meeting with Mubarak?'" This seems to utterly mystify Fallon.

"Why?" he says, shrugging with palms extending outward. "Because it's my job to deal with this region, and it's all anyone wants to talk about right now. People here hear what I'm saying and understand. I don't want to get them too spun up. Washington interprets this as all aimed at them. Instead, it's aimed at governments and media in this region. I'm not talking about the White House." He points to the ground, getting exercised. "This is my center of gravity. This is my job."

Fallon was quietly opposed to a long-term surge in Iraq, because more of our military assets tied down in Iraq makes it harder to come up with a comprehensive strategy for the Middle East, and he knew how that looked to higher-ups. He also knows that sometimes his statements on Iran strike the same people as running "counter to stated policy." "But look," he says, "yesterday I'm speaking in front of 250 Egyptian businessmen over lunch here in Cairo, and these guys keep holding up newspapers and asking, 'Is this true and can you explain, please?' I need to present the threats and capabilities in the appropriate language. That's one of my duties."

Fallon explains his approach to Iran the same way he explains why he doesn't make Al Qaeda the focus of his regional strategy as Centcom's commander: "What's the best and most effective way to combat Al Qaeda? We tend to make too much or too little a deal about it. I want a more even keel. I come from the school of 'walk softly and carry a big stick.'"

Fallon is the American at the center of every circle in this part of the world. And it is a testament to his skill, and to the failure of American diplomacy, that so much is left for this military man to do himself. He spends very little time at Centcom headquarters in Tampa and is instead constantly "forward," on the move between Iraq, Afghanistan, Pakistan, and all the 'Stans of Central Asia.

He was with Pakistani strongman Pervez Musharraf the day before he declared emergency rule last fall. "I'm not the chief diplomat of this country, and certainly not the secretary of state," Fallon says in Kabul's Green Zone the next night. "But I am close to the problems." So, he says, that leaves him no choice but to work these issues, day in and day out.

Late that night, I am sitting with Fallon deep in the compound that encompasses the presidential palace and the International Security Assistance Force. We are alone inside the cramped office of ISAF's chief public-affairs officer.

Fallon had spent several hours with "Mushi" the day before in Islamabad, discussing his impending decision. The press coverage would emphasize how Fallon had sternly warned Musharraf not to impose emergency rule. But on this night, the admiral seems neither alarmed by the move nor resigned to its more negative implications. As he talks, Fallon casually takes off the elastic bands that clamp his camo pants to his regulation tan boots. He's beat after a long day that included meetings with President Karzai and a helicopter trip to Khost, Osama bin Laden's pre-9/11 Afghanistan stronghold. But it was the martial law next door in Pakistan that is the focus of the world. Fallon has been through this before.

"I didn't do any preaching," Fallon says about his talks with Musharraf. "In a previous life here, I had two extra constitutional events: a coup in Thailand, and a head of the military took over in Fiji. So I talked to the president for quite a while yesterday, both with the ambassador and then alone. He walked me through his rationale for what he was going to do and why he was going to do it and why he thought he had to do it. We talked about what planning he'd done for this, the downsides of this, what could happen, and how that could screw up a lot of things. At the end of the day, it's his country and he's the boss of it, and he's going to make his decision."

Before he walked into that room in Islamabad, Fallon had plenty of calls from Washington with instructions to pressure Musharraf down another path.

"I'll talk to him," Fallon replied. "There's an awful lot of china that could break. So I'll do it in a professional manner, because I still have to work with him."

As the admiral recounts the exchange, his voice is flat, his gaze steady. His calculus on this subject is far more complex than anyone else's. He is neither an idealist nor a fantasist. In Pakistan, he has the most volatile combination of forces in the world, yet he is deeply calm. "Did I tell President Musharraf this is not a recommended course of action? Of course. Did I tell him there are very negative effects that this could have? Of course. Is he aware of these? Yes.

"He's made his calculations. He feels very strongly that he's responsible for his country. His alternative is to step down. That would not be the most helpful thing for his country."

Why not?

"It's a very immature democracy. Look at the history of the place. It's rough. Musharraf knows his country. He knows what he's got. Their factions, their tribes. There's that group of folks that wants nothing more than to start war with India, another group that wants to take over the FATA [Federally Administered Tribal Areas], another group that wants to take over part of Baluchistan. He's got a tough road. Most guys in his position do."

As for Washington's notion that Benazir Bhutto's return to the country would fix all that, Fallon is pessimistic. He slowly shakes his head. "Better forget that."

Less than two months later, of course, his rueful prophesy will be confirmed when Bhutto is murdered by militants in Rawalpindi.

Meanwhile, Fallon argues that with U.S. plans in the offing to arm Pashtun tribes against Al Qaeda and the Taliban in the FATA, now would not seem to be the time to be pushing the democracy agenda in Pakistan.

When Fallon asked Musharraf, "How long do you expect to have to do it?" the general answered, "Not long." And twenty-four hours later, Fallon counseled patience. After all, he said, think about how strong America's military relationship is with Egypt despite Hosni Mubarak's twenty-seven-year "emergency rule."

But that doesn't mean the relationship building remains limited to just Musharraf, and so the rest of Fallon's long day in Islamabad was spent networking with General Ashfaq Kayani, former head of Pakistan's much-feared Interservices Intelligence agency and new chief of army staff. If Musharraf were ever to step or be pushed aside, Kayani is a leading contender to replace him.

But more to the point for Fallon, Kayani becomes the operational point man for any increased collaboration between the U.S. military and the Pakistani army to tackle the issues of the FATA, which a Centcom senior intelligence official calls "the huge elephant in the closet."

That's putting it mildly. The tribal region is where, according to our own National Intelligence Estimate last year, Al Qaeda was reconstituting its operational capacity, and was now in its strongest position since 9/11.

As with Pakistan, Fallon keeps his powder dry when he deals with Iran. He doesn't react like Pavlov's dog to inflammatory rhetoric from inflammatory little men. He understands the basic rule of international diplomacy: Everybody gets a move.

"Tehran's feeling pretty cocky right now because they've been able to inflict pain on us in Iraq and Afghanistan." So the trick, in Fallon's mind, is "to try to figure out what it is they really want and then, maybe -- not that we're going to play Santa Claus here or the Good Humor Man -- but the fact is that everyone needs something in this world, and so most countries that are functional and are contributing to the world have found a way to trade off their strengths for other strengths to help them out. These guys are trying to go it alone in this respect, and it's a bad gene pool right now. It's not one with much longevity. So they play that card pretty regularly, and at some point you just kind of run out of games, it seems to me. You've got to play a real card."

And when the real cards finally get played, that's when Fallon will double down. 

3.

The first thing you notice is the face, the second is the voice.

A tall, wiry man with thinning white hair, Fallon comes off like a loner even when he's standing in a crowd.

Despite having an easy smile that he regularly pulls out for his many daily exercises in relationship building, Fallon's consistent game face is a slightly pissed-off glare. It's his default expression. Don't fuck with me, it says. A tough Catholic boy from New Jersey, his favorite compliment is "badass." Fallon's got a fearsome reputation, although no one I ever talk to in the business can quite pin down why. There are the stories of his wilder days as a young officer, not the partying stuff but more the variety of rules bent to the breaking point, and he's been known as anything but a dove in his various commands, which makes his later roles as champion for engagement with both China and Iran all the more strange.

In keeping with the naval-officer tradition of emasculating bluntness, Fallon can without remorse cut the nuts off peers and subordinates alike. But it is more the intimation of his ferocity than its exercise that has the greatest effect. And Fallon has recently discovered that his reputation can leave him open to stories that might sound true but are not. Last fall, it was reported in the press that Fallon had called General Petraeus an "ass-kissing little chickenshit" for being so willing to serve as the administration's political frontman on the Iraq surge. The old man had told reporters that it hadn't happened like that -- that that's not the way he operates, and, in fact, any time he talks with Petraeus, there are only two men in the room -- the admiral and the general -- and their exchanges remain private. And when they're not in the same room, "We e-mail each other constantly and talk by phone just about every day." Just the two of them, he says. No outsiders observing. The press sources had an overactive imagination, Fallon said. Now when the subject comes up, he dismisses it with a wave of his hand.

"Absolute bullshit," Fallon tells me.

Fallon and his executive assistant, Captain Craig Faller, say that they both suspect "staff agitation" to be behind the story. Interservice rivalry is mighty strong, and Admiral Fallon is the first navy man to be head of Centcom, so it's not hard for them to imagine somebody from the Army stirring the pot.

Fallon says the tip-off that the story was bogus was the word chickenshit. "My kids called me up laughing about that one, saying they knew the story wasn't true because I never use that word."

So put Fallon down as a "bullshit" and not a "chickenshit" kind of guy.

And in truth, Fallon's not a screamer. Indeed, by my long observation and the accounts of a dozen people, he doesn't raise his voice whatsoever, except when he laughs. Instead, the more serious he becomes, the quieter he gets, and his whispers sound positively menacing. Other guys can jaw-jaw all they want about the need for war-war with...whomever is today's target among D.C.'s many armchair warriors. Not Fallon. Let the president pop off. Fallon won't. No bravado here, nor sound-bite-sized threats, but rather a calm, leathery presence. Fallon is comfortable risking peace because he's comfortable waging war. And when he conveys messages to the enemies of the United States, he does it not in the provocative cowboy style that has prevailed in Washington so far this century, but with the opposite -- a studied quiet that makes it seem as if he is trying to bend them to his will with nothing but the sound of his voice.

So when, during a press conference in Astana, Kazakhstan, Fallon whispers, "The public behavior of Iran has been unhelpful to the region," with his pissed-off glare and his slightly hoarse delivery, he is saying, I'm not making you an offer; I'm telling you what your options are right now.

"Iran should be playing a constructive role," he continues. "I hear this from every country in the region."

Translation: I've got you surrounded.

He'd rather not do it, but if he has to go to war, there won't be any anguish. Whatever qualms Fallon had about using force were exorcised long ago in the skies over Vietnam.

"I try to be reasonably predictable to my own people and very unpredictable to potential adversaries," he tells me.

No wonder Fallon sticks out like a sore thumb with the neocons, who have the unfortunate tendency to come off as unpredictable to their allies and predictable to their enemies. Which is the opposite of strategy. He knows this stuff cold, because he's had his hand on the stick for a very long time. The oldest of nine kids, Fallon's old man was a mailman in Merchantville, New Jersey, following his World War II stint in the Army Air Corps. As a boy, Fallon delivered newspapers, bagged groceries, worked in the local Campbell's Soup plant, and would become the first in his family to attend college. His dad's military experiences, along with those of several of his mom's brothers, naturally pushed him in the direction of West Point.

But his local congressman screwed up his application, and so Fallon chose the naval ROTC program at nearby Villanova, a Catholic haven that has produced three Centcom commanders. More than thirteen hundred carrier landings later, Fallon began his long climb through various combat command experiences -- including Desert Storm and Bosnia -- to the pinnacle of his profession: four four-star assignments that include vice chief of Naval Operations, commander of the Atlantic Fleet, and then boss of Pacific Command and Central Command in rapid succession.

Sitting in his Tampa headquarters office last fall, I asked Fallon if he considered the Centcom assignment to be the same career-capping job that it'd been for his predecessors. He just laughed and said, "Career capping? How about career detonating?"

At the time, I took that comment to be mere self-effacement. I have since come to think that Fallon was deadly serious.

Weeks later, back in that hotel lounge in Kazakhstan, after a brutal eighteen-hour day of wall-to-wall summits and meetings, Fallon is in a more pensive mood, admitting that he never expected to stay this long in the service. At sixty-three, he's one of the oldest flag officers in uniform, and if you count his ROTC time, he's been in for a whopping forty-five years total. And at this cookie-cutter chain hotel deep in the 'Stans, Fallon wears an expression that is equal parts fatigue and bewilderment. "I expected to be running a start-up company by now," he says.

But something else came up.

4.

When the admiral took charge of Pacific Command in 2005, he immediately set about a military-to-military outreach to the Chinese armed forces, something that had plenty of people freaking out at the Pentagon and on Capitol Hill. The Chinese, after all, were scheduled to be our next war. What the hell was Fallon doing?

Contrary to some reports, though, Fallon says he initially had no trouble with then-secretary of defense Donald Rumsfeld on the subject. "Early on, I talked to him. I said, Here's what I think. And I talked to the president, too."

It was only after the Pentagon and Congress started realizing that their favorite "programs of record" (i.e., weapons systems and major vehicle platforms) were threatened by such talks that the shit hit the fan. "I blew my stack," Fallon says. "I told Rumsfeld, Just look at this shit. I go up to the Hill and I get three or four guys grabbing me and jerking me out of the aisle, all because somebody came up and told them that the sky was going to cave in."

But Fallon stood down the China hawks, because as much as military leaders have to plan for war, Fallon seems to understand better than most the role they also have to play in everything else beyond war. And like a good cop, Fallon doesn't want to fire his gun unless he absolutely has to. "I wouldn't have done what I did if I didn't think it was the right thing to do, which I still do. China is our most important relationship for the future, given the realities of people, economics, and location. We've got to work hard and make sure we do our best to get it right."

For Fallon, that meant an emphasis on opening new lines of communication and reducing the capacity for misunderstanding during times of crisis. But beyond that, it meant telling the Chinese, "If you want to be treated as a big boy and a major player, you've got to act like it."

If you want recognition of your power, then you have to accept the responsibility that comes with such power. That's the essential message Fallon delivered to the Chinese, and if that meant he was out of line with the Pentagon's take on rising China, then so be it. If it seemed as though Fallon was downplaying the threat of North Korea's missiles, it was because he preferred pushing a regional response that signaled a united front but still left the door open for North Korea to come in from the cold.

Fallon now brings the same approach to Iran in Central Command: "I want to go through something positive rather than a negative like Iran, which is a real problem." To that end, and right on the heels of Secretary of Defense Robert Gates's meetings with Middle Eastern ministers of defense, Fallon held a similar summit of Persian Gulf chiefs of defense in Tampa earlier this year, something Centcom has never attempted before.

Could Iran be a participant in something like this down the road?

"Oh, absolutely, eventually. It's like the Chinese," he says. "It would be great if Iran turned into a team that decided to play ball in the end."

So how does something like this happen?

How do you turn Iran into a responsible regional player? How can the United States even approach Iran when the regime seems populated by only hard-liners and ultraconservatives?

You start down low, says one of Fallon's senior intelligence officials. For example, there's the shared interest in stemming the flow of narcotics from Afghanistan to Iran. "Iran has a huge drug problem," so that's "a potential cooperative area." More recently, the Iranians promised to stop the flow of munitions into Iraq, arguably contributing to the dramatic decrease in U. S. casualties from roadside bombs. After three sets of talks with the Iranians last summer that went nowhere, another round is being teed up. To Fallon, this sort of engagement is crucial, given America's overall lack of experience in dealing with Iran.

"I don't know as much as I'd like about Iran," he says. "You've got to go elsewhere, to people in other countries. There aren't many Americans who've had extensive experience with these guys. So that puts us both at a disadvantage. Plus they're secretive -- intentionally so -- about us. It makes it more of a challenge."

Early in his tenure at Pacific Command, Fallon let it be known that he was interested in visiting the city of Harbin in the highly controlled and isolated Heilongjiang Military District on China's northern border with Russia. The Chinese were flabbergasted at the request, but when Fallon's command plane took off one afternoon from Mongolia, heading for Harbin without permission, Beijing relented.

The local Chinese commander was beside himself. It was the first time in his life he had ever met an American military officer, and here he was at the bottom of a jet ramp waiting for the all-powerful head of the United States Pacific Command to descend. Then, to his horror, he realized that Fallon had brought his wife, Mary, along for the trip. Scrambling to arrange the evening banquet, the Chinese commander brought his own wife out in public for the first time ever. 

When the time came for dinner toasts, after the Chinese commander thanked Mrs. Fallon for coming, the admiral returned the favor by thanking the commander's wife for her many years of service as a military spouse. The commander's wife broke down in tears, saying it was the first time in her entire marriage that she had been publicly recognized for her many sacrifices.

And there was peace in our time.

5.

Fallon is what is called a "four-star action officer," meaning he tries to do too many things himself. He spends no more than a week each month in Tampa, Centcom's headquarters. Captain Faller jokes that if it weren't for federal holidays, Fallon's staff wouldn't know what a day off even was.

Fallon travels at least three weeks out of each month, spending, on average, two weeks in theater, meaning the Middle East, the Horn of Africa, and Central Asia. He travels to Iraq and Afghanistan every month like clockwork.

It's an unseasonably warm early-winter morning in Kabul, and Fallon is out in the field, walking his beat. And short of the president of the United States himself, this convoy is the richest and most opportune terrorist target in the world at present. So everybody wears the heavy armor. Weighed down by a helmet that feels like twenty pounds -- applied directly to my forehead -- and a desert-camo flak jacket that's decidedly heavier, I climb into the back of an armored Suburban that'll play third-on-a-match in Fallon's three-vehicle convoy. We are told to expect a bumpy ride, as ours is the vehicle that will routinely swerve from side to side to position itself to ram any vehicle that might approach the command vehicle from the side.

It's like riding in a car with the biggest asshole in the world behind the wheel. We almost pass Fallon's vehicle -- time after time -- only to slam on the brakes, slip back behind, lurch over to the other side, and do the same thing. A word of advice: Don't do this on a heavy breakfast. Fallon's personal enlisted aide, strapped in next to us, says our driver is actually being fairly mellow, on the admiral's orders. That's good to hear, as the streets are full of women and children on foot.

Thirty minutes after we've left the maze of barricades that line every entrance into the Green Zone, giving the place a sort of Maxwell Smart sense of never-ending doors, we arrive at a military airport where two Black Hawk UH-60's await. I ride with Fallon's senior aides in the second one. I am strapped into a four-part harness, the body armor keeping me well cocooned. Minutes after takeoff, as is the universal custom among military personnel, everyone but the personal-security-detail soldiers is asleep.

I scan the moonscape that is the mountains west of Kabul.

Traveling at high speed, we've been dipping ever so gently around the mountains as we travel to Bamiyan Province, ancient home to the giant Buddhas that are no more -- parting shots from the once and future Taliban. I can spot Fallon's Black Hawk out the window, framed from above by the sky and below by the barrel of a large machine gun sticking out of our helicopter's side. It's manned by a rather short fellow whose face is almost completely obscured by his Star Wars blast shield.

The view is amazing and reminds me why banditry and smuggling remain dominant industries here. Every road seems to lie at the bottom of a narrow, meandering ravine, and every walled compound looks like a fort out of America's Wild West days. Most of the time, the only things moving across this barren landscape are the shadows from our helos.

We alight from the Black Hawks after touching down on a strip of asphalt located in the center of the wide, flat plain that is Bamiyan Valley. Immediately your eyes are drawn to the dominant geological feature: cliff walls as high as skyscrapers that run along the valley's northern edge as far as the eye can see. Carved into the stunning vertical cliff are two empty frames, each running fifteen or so meters deep into the rock. Here stood the gigantic stone Buddhas carved hundreds of years ago by monks who lived in a warren of caves connecting the statues.

We're met at the landing zone by the Kiwi colonel, Brendon Fraher, who leads a small unit of New Zealand's finest civil-affairs specialists operating out of a small fort a few clicks away. The camp is home to a Provincial Reconstruction Team manned by the Kiwis, who work hand in glove with U.S. State Department, U.S. Agency for International Development, and ISAF personnel in coordinating coalition reconstruction aid to this province.

As we head to a convoy of armored Ford F-350 pickups, Fallon says that Fraher reports two enemy rockets landed nearby yesterday, but other than that, all's quiet. We speed off to meet the only female provincial governor in Afghanistan. Pulling up to the local government building, we pile out of the pickups and file into a large receiving room blanketed by modest Persian rugs and surrounded by even more modest couches. Just inside, we strip off the helmets and vests and heap them into a pile of fabric-covered metal and ceramic in the corner, all of it too heavy to hang on any coatrack.

Fallon -- who's done this sort of thing so often, he seems to glide through the protocol -- zeroes in on Governor Habiba Sarabi, a middle-aged woman of average height who's dressed in a reform sort of way -- head covered but face exposed. Despite all our accompanying security, you've got to believe she's the biggest Taliban target in the room.

Tea is served and formal greetings are exchanged with no need for translation, as the governor speaks English with calculated fluency, a skill she demonstrates a half hour into the meeting, when Fallon makes clear that he wants to hear her complaints.

It's a tricky moment for Sarabi, because she's basically critiquing Western aid and the military agencies represented by the officials surrounding her now. It's like bitching about your parents in front of Child Protective Services: Strike the right note and you might suddenly find yourself free of them for good.

Speaking about a road long-promised by Kabul and the coalition that would connect this isolated valley to Afghanistan's central circular artery, the Ring Road, she suddenly blurts out, "This is three years that the Bamiyan people have been waiting for this road!"

Fallon aggressively queries the assembled officials in order, running from the deputy chief of mission at the U.S. embassy to the USAID leader to the ISAF officers and, finally, the local Kiwi PRT commander. Each offers a typically complex, bureaucratic response in turn. Glancing at the governor, I can almost feel her anger rising.

With obvious passion, Sarabi interrupts the proceedings with a stream of complaints about the length and complexity of USAID's planning process. This is where her fluency in English suddenly falters, as Sarabi's sentences start trailing off, leading the assembled officials to fill in the blanks.

"It is very... "

"Long?" chimes in the USAID official.

"And there is such a lack of...ahh." Sarabi raises a finger to her chin, scanning the far wall as if the word lingers there.

"Coordination?" offers the deputy chief of mission.

"It all makes me so incredibly...how do you say?"

"Mad?" one officer suggests.

"Depressed?"

"Angry?"

It's almost like an auction now as the bids keep rising. I'm just about ready to toss in my personal favorite, "pissed off," when Fallon weighs in with "frustrated" -- no question mark.

Sarabi turns toward the admiral, a sly smile passes across her face.

Fallon starts probing yet again, this time cutting off officials, as their answers obscure rather than illuminate.

Emboldened, the governor piles on with a new complaint: Every winter, a local river becomes impassable for a local migratory tribe that is then stranded outside the valley.

Fallon asks the deputy chief of mission, "Are you aware of this?"

The DCM replies, "No, I wasn't, and I promise to look into that."

Fallon's on a roll now, and the governor is beaming, but his efforts soon head into a bureaucratic cul-de-sac that no one in the room can fix. Kabul's central government simply does not prioritize this heartland province. Fallon asks the senior American ISAF officer if the coalition could arrange a Bailey pontoon bridge just for the winter months. In return, he gets a complex answer about past surveys.

Fallon cuts him off and turns to the governor. "I tell you what, I'm not getting a satisfactory answer here. I'll be honest. I don't think we can do anything for you this winter. However, I will try to get, from many miles away, a screwdriver big enough to push this process for next year."

The governor immediately thanks Fallon for his promise.

Fallon doesn't forget details like that. Six months earlier, he noticed that the American flag flying outside the Hyatt hotel in Bishkek, Kyrgyzstan, was frayed. He had told one of the defense attachés at the U.S. embassy to get it replaced. The beaten-up flag was still there when we arrived. It's late on the fifth straight day of nonstop travel that has taken Fallon's entourage from Florida to Qatar to Pakistan to Afghanistan and now to Kyrgyzstan. Tomorrow, Tajikistan, where he'll have to put up with the Putin clone who is president. So at the moment, maybe the flag is not all that's frayed. His gaze fixed on it, Fallon quietly repeats his order, his voice so low and so quiet that you can almost hear somebody's next promotion getting axed. 

6.

Unlike his Arabic-speaking predecessor, Army General John Abizaid, Fox Fallon wasn't selected to lead U.S. Central Command for his regional knowledge or cultural sensitivity, but because he is, says Secretary of Defense Gates, "one of the best strategic thinkers in uniform today."

If anything has been sorely missing to date in America's choices in the Middle East and Central Asia, it has been a strategic mind-set that consistently keeps its eyes on the real prize: connecting these isolated regions in a far more broadband fashion to the global economy. Instead of effectively countering the efforts of others (e.g., the radical Salafis, Saudi Arabia's Wahhabists, Russia's security services, China's energy sector) who would fashion such connectivity to their selfish ends, Washington has wasted precious time focusing excessively on transforming the political systems of Iraq and Afghanistan, as though governments somehow birth functioning societies and economies instead of the other way around.

Waiting on perfect security or perfect politics to forge economic relationships is a fool's errand. By the time those fantastic conditions are met in this dangerous, unstable part of the world, somebody less idealistic will be running the place -- the Russians, Chinese, Pakistanis, Indians, Turks, Iranians, Saudis. That's why Fallon has been aggressively hawking his southern strategy of encouraging a north-south "energy corridor" between the Central Asian republics and the energy-starved-but-booming Asian subcontinent (read: Islamabad down through Bangalore and then east to Kolkata), with both Afghanistan and Pakistan as crucial conduits.

On this trip, he's been shepherding a new bridge that links isolated Tajikistan with Afghanistan. The potential here is huge: Tajikistan is 95 percent mountainous and extremely food dependent. Its main asset is its untapped hydroelectric capacity. Afghanistan presents just the opposite picture -- food to export but most of the country lacks an effective electric grid.

So what should America be pushing first in both states? Free-and-clear elections for massively impoverished populations, or whatever it takes to get Tajikistan's resource with Afghanistan's resource? Which path, do you think, would scare the Taliban and Al Qaeda more? To Fallon, there isn't even a question to answer.

But this part of the world is defined by its fortresses, and is not known for willingly connecting to the outside world. Tajikistan's powerful security chief, Khayriddin Abdurahimov, had been doing his best to gum up the works on the just-finished bridge, which he allowed to open for business only four hours a day. Having just achieved control of the country's border-security agency, Abdurahimov believed the bridge made the country vulnerable to Afghanistan's dangerous drugs and nothing more.

On the eve of Fallon's arrival, President Emomali Rahmon intervened and extended the bridge's operating schedule to eight hours a day, admitting to Fallon in their first summit that he needs to do more to champion the economic potential.

But Fallon doesn't stop there. Immediately following his meeting with Rahmon, he meets face-to-face with the highly secretive Abdurahimov, who almost never meets with foreign officials.

Just as with Musharraf, Fallon does not preach. He suggests, he encourages, he cajoles, he offers, and he debates, but he does not preach -- save the gospel of economic connectivity. Even there, he is not eager to appear competitive with any regional power. "I don't want to create the impression that we're just replacing the Russians," he says.

He just wants a damn bridge.

Fallon gets his bridge. 

7.

Fallon's got a spread in a little town in Montana. The streams of this town seem to be full of eighteen-inch fish that he says he'd like to take a crack at someday soon. But the fish of Fallon's town are safe for the moment.

While Condoleezza Rice and the State Department manage a vague endgame on the two-state solution in Palestine, Gates and Fallon have begun the regional-security dialogue that's truly regional in scope.

The rollback of Al Qaeda seems to be both real and continuing, save for the border region of Pakistan. And to gain greater flexibility to plan for the region, Fallon says that he is determined to draw down in Iraq. One of the reasons Fallon says he banished the term "long war" from Centcom's vocabulary is that he believes real victory in this struggle will be defined in economic terms first, and so the emphasis on war struck him as "too narrow." But the term also signaled a long haul that Fallon simply finds unacceptable. He wants troop levels in Iraq down now, and he wants the Afghan National Army running the show throughout most of Afghanistan by the end of this year. Fallon says he wants to move the pile dramatically in the time he's got remaining, however long that may be. And he gets frustrated. "I grind my teeth at the pace of change."

Freeing the United States from being tied down in Iraq means a stronger effort in Afghanistan, more focus on Pakistan, and more time spent creating networks of relationships in Central Asia. With Syria and Lebanon recently added to Centcom's area of responsibility, look to see Fallon popping up in Beirut and Damascus regularly. And he says he is more than willing to take on Israel and Palestine to boot, which for now remains a bastard stepchild of European Command.

The Persian Gulf right now is booming economically, and Fallon wants to harness that power to connect the failed states that pockmark the landscape to the outside world. In this choice, he sees no alternative.

"What I learned in the Pacific is that after a while the tableau of failed, failing, or dysfunctional states becomes a real burden on the functional countries and a problem for their neighborhood, because they breed unrest and insecurities and attract troublemakers very well. They're like sewers, and they begin to fester. It's bad for business. And when it's bad for business, people tend to start restricting their investments, and they restrict their thinking, and it allows more barriers, so we're back to building walls again instead of breaking them down. If you have to build walls, it means you're moving backward."

Fallon has no illusion about solving the Middle East or Central Asia during his tenure, but he's also acutely conscious that with globalization's rapid advance into these regions he may well be the last Centcom commander of his kind. Already Fallon sees the inevitability and utility of having a Chinese military partnership at Centcom, and he'd like to manage that inevitably from the start rather than have to repair damage down the line.

"I'd like to continue to do things that will be useful to the world and its inhabitants," he says. "I've seen a lot of good things, and I've seen a lot of stupid things."

And then there is Iran. No sooner had the supreme leader Ayatollah Khamenei signaled a willingness to deal with any American but George W. Bush, and no sooner had Fallon signaled America's willingness to refrain from bombing Tehran, than a little international incident occurred.

Just the kind of incident that doughy neocons dream sweetly about. Right after the new year, three American ships were passing through the Strait of Hormuz, exchanging normal greetings with Gulf State navies, checking them out as they passed. The same with the Iranian navy. And then, suddenly, small Iranian Revolutionary Guard Corps boats started speeding toward the American ships, showing, the admiral says, "very stupid behavior, showboating, and provocative taunts. Given that it was a small boat that did in the USS Cole, this was very dangerous behavior."

The Iranians dropped boxes in the water, simulating mines.

"Remember," he says, "my first day on this job, I was greeted by the IRGC snatching the British sailors, and so it was a sense of here we go again. You wonder, Are they really acting on their own, because the pattern seems clear."

Fallon's eyes narrow and his voice becomes that whisper: "This is not how a country that wants to be a big boy in the neighborhood behaves. How are we supposed to take these guys seriously as players in the region? You'd like to deal with them as big-league players, but when they do this, it's very tough."

As before, there is the text and the subtext. Admiral William Fallon shakes his head slowly, and his eyes say, These guys have no idea how much worse it could get for them. I am the reasonable one.

And time will tell whether being reasonable will cost Admiral William Fallon his command.

Blast from my past: "The State of the World"--with commentary track (2007)

 

The State of the World

by Thomas P.M. Barnett

Illustration by Joe McKendry

Esquire, May 2007, pp. 108-15 & 136.

COMMENTARY TRACK:

In this exclusive post, writer Thomas P.M. Barnett reassesses and updates his overview of the global geopolitical situation. [DATED: 30 April 2007]

By Thomas P.M. Barnett

Mark Warren, my editor at Esquire asked me to write a blog post on "The State of the World" in order to extend or update it a bit. So... This behemoth weighs in at roughly 6,500 words -- 500 longer than the actual piece. Oh well, Marty Scorsese always out-blabs his own movies when he does commentary, but that’s the whole idea, is it not?

What most people don’t realize is that, if an article appears in the May issue, it comes out in early April, which means it goes to the printers in early March, which means you edited it in February and probably wrote it in late January or early February, meaning you researched or reported it back in December. Now, when it’s a set piece (e.g., you interview somebody), the timeline’s not so crucial, but when you’re presenting the “State of the World,” you’re trapped somewhat in dealing with current events (duh!), so you’re not only dealing with some hedging language here and there, you risk some great intervening event ruining your whole party.

I had my share of fear in that regard on this piece, in large part because it seemed like Bush was launching a number of diplomatic initiatives around the dial as the piece was “shipping out” (meaning, going to the printers in early March). So factoring in all those possibilities was crucial, and yet, I had high expectations that no serious breakthroughs would be achieved, in keeping with the tone of the piece (Bush’s post-presidency). I’m unhappy to say I wasn’t disappointed by the administration, which just confirms my judgment rendered long ago that Bush’s post-presidency basically began with Katrina (can’t get it done in Iraq, can’t get it done at home), hence the general trend of rising backtalk from the world (and the Dems), less cooperation from major allies, and more powers taking matters into their own hands (including Nancy Pelosi), seems to proceed apace.

What I’m going to do in this post is this:

1. Deconstruct the thinking behind each segment, providing director’s commentary, so to speak. 
2. Extend each segment by rendering a judgment as to how it’s held up over the past few weeks. 
3. Give you a sense of where my thinking is going now on each segment.

So, I’ll give you a sort of a past-present-future troika for each segment.

I’ll be as blabby as I g -- damn wanna be, because that’s how I blog, so don’t wade through all this unless you’re naturally a “Disc 2” kind of DVD watcher and love this sort of backstory detail (like most egomaniacs, I love to deconstruct my own thinking most of all).

Let me start with the extended title page and intro.

The State of the--

No, screw that. Let me start with the cover!

The May 2007 Cover 

Deconstruction: I totally approve of Halle Berry on the cover.

How it holds up: Like most men my age, I’ve never quite gotten over Monster’s Ball and like to be reminded of that fact as frequently as possible. 

Looking further ahead: I may try to link up with fellow Hoosier Tom Chiarella on the subject. Halle “interviewed” him for the piece.

As I’ve over said about working for Esquire, it’s not like I was the guy who shot Britney Spears when she wasn’t wearing any pants. But I have met the people who did...

Okay, back to the original plan. 

Now that the Bush presidency is over, it's time those of us left behind assess the damage and seize the opportunities. There's plenty of both. But there's no time to waste, so let's get started: the good news, the bad news, and the news that could change everything.

COMMENTARY TRACK:

Deconstruction: This was the title of the piece from basically the moment Mark proposed it to me in early December. As soon as he planted that seed, I started setting aside articles from my blog collection that I thought were appropriate. Easy to do at the end of the year, because everyone’s writing that sort of stuff.

I was excited to try the piece and wasn’t particularly intimidated by the scope, because it’s the sort of world-survey stuff I grew up on during my early years of doing strategic planning for the Navy at the Center for Naval Analyses. Seriously, we’d just sit around cranking this sort of stuff like we were doing daily warm-up exercises or something -- you know, sharpening-the-blade kind of activity.

About two weeks before I started brainstorming on the structure of the piece at the beginning of Feb, I interviewed my old mentor at CNA, Hank Gaffney, who’s famous for generating this sort of material in his sleep. I simply talked him through a tour of the world’s major regions and major relationship and major crises, and we calibrated our sense of what was going on. It was an up-front sanity check for me to make sure I wasn’t going off on any benders. I later had Hank read the piece for any boners that stuck out, because when you write at this level, you naturally step on toes and transgress reality now and then, because you’re compositing a lot of trends and material and bold statements like that can be poorly rendered if you’re not careful. Hank caught a few, gave me several parentheticals to insert, and generally validated the piece (no, he doesn’t agree with every take I offer here, but I don’t expect that from anyone).

Now, the big question for me on this piece was structure. How to do the tour without being highly repetitive (I mean, everything feeds into everything else) and highly contradictory (when you’re whipping through things, it’s always appropriately ass-covering to say, “on the other hand” every other sentence)? Plus, it’s just the nature of the time we’re in now that it’s both pregnant with possibility and dulled by a sense of interregnum: you can see so much potential right on the horizon, you just know that most of it will wait until Bush is out of office. On the other hand … (see how easy that is!), I know from other end-of-term times that a lot of below-the-radar stuff does actually get accomplished in the waning months of a presidency, often by the most anonymous of people, so you don’t want to shut any doors on stuff.

To that end, I kept finding myself struggling to define the governing structure of the piece. Would I just run Bush out of town on a rail? Would I give you the half-glass-full wherever possible and leave open the notion of the great foreign policy correction designed to secure the legacy?

Then I thought: I’ve already given Bush the two “Mr. President” pieces, and since he had his chances (as all presidents do), now was the time to take stock in that early-post-presidency sense (my argument on the blog for months now), while simultaneously setting up the conversation for what comes next, since the election’s preliminaries are already overshadowing this presidency. So I was tempted to offer some grading scheme, although that always seems so prosaic. I thought about thumbs-up or thumbs-down (so very Rome). I even toyed with glass-half-full or empty. None were rocking my boat.

I knew there was a host of issues I wanted to cover, so I spent the entire Friday (about ten hours straight) before the Super Bowl just sitting in my home office above the garage writing list after list on my white board, seeing what would stick. I kept struggling with a sequence for the issues, but each time I tried to craft one, I realized I was setting myself up for a particular line of argument, and I didn’t want to commit to any one line of reasoning. I wanted to go bang-bang through the subjects, saying what I felt was going well, where I was scared, and where I thought the next possibilities were.

Now, when I’m trying to dissect the world like that, I often build a big matrix full of questions to organize and deconflict the material (so you don’t repeat too much). I tried a variety of approaches, but kept coming back to “the good,” “the bad,” and “the wildcard” (or basically, the optimistic view, the pessimistic view, and what could change either). I’m just anal enough to like a round number (ten, dozen, “sweet sixteen,” etc.), so I kept dicking around with the number of issues to cover, mentally deconflicting the implied components.

Once I had the list down, I started to fill in the blanks on good-bad-wildcards, but I kept thinking, “This is going to be a waste of time because I won’t structure the piece like this.” I kept hoping that giving it this sort of structure would reveal an obvious narrative logic, but it didn’t.

Finally, it dawned on me: just forget the narrative logic and make the piece modular. That way I didn’t have to choose whether I’d go overboard on Bush either way. Instead, I’d give both arguments plus the look-ahead segue. Plus, if I kept it super-modular, I could avoid a lot of bridging language that would force me to shorthand a lot of material (when you write in the essay structure, you constantly have to write yourself into and out of paragraphs, and so you spend a lot of words making all those transitions happen). So doing entries meant I could keep it bang-bang but likewise dense, plus I could go both ways on the judgment and intrigue you with the wildcards as provocative projections.

Once I started thinking this way, the piece seemed a lot easier. Plus, it felt like I was -- in many ways -- going back to the “map” article and coming full circle on the Bush administration: here I would just repeat the tight briefing style of delivery that Mark had talked me into on the hotspot survey we added to the ’03 map.

Having settled all that (and clearing it with Mark by phone), I quickly ginned out my matrix on the 16 subjects, and decided I would write them without thinking about sequence, so they’d need to stand alone, material-wise. I planned each segment to be about op-ed column size, or about 700-750 words, which gave me about 300 for good and 300 for bad and maybe a quick 150 for the wildcard. Pretty tight quarters.

I wrote half of the entries over the next day (Saturday) and the other half on Sunday, finishing just before the kickoff of the Super Bowl. As I penned them, they felt great, so I felt pretty relaxed about how the edit would go with Mark.

How it holds up: Mark wrote the expanded sub-title himself, and once I saw it, I felt a bit shocked about committing myself to the post-presidency idea. But when I thought about it more, I realized this was just Mark recognizing a major theme from my blog over the past year, and either I believed in that analysis or I didn’t. I did, so I got comfortable with the opening and remain so to this day.

As I noted above, Bush and Co. (specifically Rice) gave me a bit of a scare in late February and early March when it seemed like he was finally getting around to the Iraq Study Group’s recommendation to start engaging the region as a whole in serious diplomacy (especially coming on the heels of the announced freeze deal with Kim Jong Il), but as we’ve seen since, all of that’s gone basically nowhere, in large part, I would argue, because everyone’s discounting this presidency pretty heavily, meaning they’re balancing the utility of any deal now versus waiting on possible bargains down the road in the administration’s last days or the successor administration’s first days.

So when I read the title and intro today, I’m still very cool with it. We’re giving you the state of the world, so do with it what you will, America.

Looking further ahead: I keep coming back to this prediction I made when I first started writing about the emerging Bush post-presidency: everyone in the world is going to reduce prices by about half whenever the new president arrives in Jan ’09. By that I mean it’ll be 50 percent off the top of any implied price for renewed cooperation for America. Everyone will give the new president a massive discount because everyone will be so happy to have America-the-Normal back. Frankly, they miss us when we’re gone.

The only guy I think who might not get that discount would be McCain, because of his stand on Iraq. Everyone else seems so clearly solutions-based in their thinking -- as in, how does America get what it wants out of the Middle East as soon as possible? -- that I don’t see their elevation to the presidency signaling anything but the notion that everything (and everyone) is on the table for negotiation come Jan ’09.

No, that doesn’t mean any “selling down the river” stuff to any ridiculous degree. It just means flexibility and pragmatism and deal-making will be the order of the day. I think everyone around the world will welcome that new tone and that it’ll pay off, because -- again -- the world misses America when we go off on a bender like Bush on Iraq.

 

001 Iran: The Coming Distraction

Good News: Mahmoud Ahmadinejad suffered a worse midterm election than George Bush, with his political allies losing metro elections all over the country and his mullah mentors failing to grab seats in the crucial Assembly of Experts, a college-of-cardinals body that'll pick Grand Ayatollah Ali Khamenei's successor. With the supreme leader on a Francisco Franco-like deathwatch, Ali Akbar Rafsanjani's stunning resurrection (crushed by Ahmadinejad in the '05 presidential election, now he's the Assembly's deputy mullah) suggests our latest Muslim "Hitler" is nothing more than a Persian Newt Gingrich. And over the next two years, we're looking at a potential wholesale swap-out of the senior leadership, and if the result isn't more pragmatism, expect supremely pissed-off college students to do more than just chant "Death to the dictator," like they did recently during an Ahmadinejad speech. Iran is crumbling from within, economically and socially, much like the late-Brezhnevian Soviet Union. In any post-Khamenei scenario, Rafsanjani could easily play Andropov (patron) to the rise of some would-be reformer (like the currently ascending mayor of Tehran) who'd likely try to restructure (perestroika, anyone?) the failed revolutionary system as a going concern in the global economy. Bush's recent full-court press -- UN sanctions, moving a carrier battle group into the Persian Gulf, arresting Iranian operatives in Iraq -- has put the mullahs on the defensive and might end up being very clever. But the president's got to be careful. The minute he gets violent, Beijing and Moscow are outta here, not to mention the American public.

Bad News: Iran is successfully spreading its influence throughout the region, with significant regime-bonding investment strategies unfolding in southern Lebanon, Syria, Iraq, and Afghanistan. But since that's intimately tied to the price of oil, Iran's strategy is subject to Saudi containment. Tehran's mullahs may put a muzzle on Ahmadinejad now and dump him in two years, but they still want the bomb (and no, that's not an irrational desire after we toppled regimes to their east and west). As far as they're concerned, America's wars to date have left Iran the regional kingpin, and they're right. So Tehran might as well start acting like it while taking the necessary precautions against an inevitable downstream military confrontation with Washington. (Did I mention that the Persians gave us chess?) Iran's shown itself to be a crafty asymmetrical warrior, using proxies Hamas and Hezbollah to demonstrate that it can conflate the region's conflicts at will, so it is not to be underestimated. The mullahs get deterrence all right, as well as preemptive war. If you're unconvinced, talk to Israel as it continues to lick its wounds from last summer.

Wild Card: As Tehran nears the bomb, Israel may well strike first, convinced the second Holocaust is imminent due to Ahmadinejad's skill at turning phrases. A signal of the end times to many believers, it may well be Dick Cheney's plan all along. The problem is, Israel's not up for much more than a token strike (unless it goes preemptively nuclear, at which point all bets are off), so having Israel try and fail conventionally may be a necessary precursor for Bush's -- and the Saudis' -- final solution. But don't expect Iran's pragmatic mullahs to sit on their hands in the meantime. They recognize a losing hand when they see one and may well trade off on Lebanon and Shiite Iraq if Israel's push comes to Bush's shove. At that point, everyone will recognize that Riyadh -- and not Tehran -- really won the Iraq war.

COMMENTARY TRACK:

Deconstruction: To me, this was always the most animating aspect of the list: the sense that Bush is gearing up for another war. As I’ve written in my blog extensively, I believe Bush and Cheney were clearly setting Iran up for a major military strike/war before the end of their second term. You could just see it in the whole re-running of the WMD drama. No surprise, but Tehran didn’t sit on its ass waiting for the blow, using their proxies in the region to launch a pre-emptive asymmetrical strike against our proxies in the region (i.e., Hamas and Hezbollah target Israel), striking with great purpose before the midterm elections rolled around over here. By doing this, Tehran’s basically said, “You think I can’t conflate this mother-f -- ker anytime I want? Then you don’t get this whole Shiia thing, do you?”

And no, Bush doesn’t get it.

How it holds up: The vaunted F2F opportunity at the regional peace conference on Iraq came and went without so much as a whimper (seriously, read any press on it?). Bush continues the press on Iran with targeted sanctions and the plus-up in naval activity arrives on schedule, but since Bush is not really offering any out here, or even a serious venue to discuss such an exit for Iran, nothing seems to be happening.

Everyone got excited when the Russians seemed to yank Tehran’s chain on back-payments for the nuke work, but that’s just a contractor bitching, because Moscow really does want to protect Tehran’s back on this, not because of any ideological solidarity. This is strictly business, nothing personal.

China continues to play along and why the hell not? If it works (the squeeze), then Iran’s not a hotspot anymore and China can access its oil and gas in peace. If it goes badly and the West tries to shut down Iranian oil exports, then China will just step in and steal Japan’s share (something Tokyo freaks about silently on the sidelines).

The EU and its companies will string this out as long as possible. No one wants to lose access to Iran, because once lost, companies find it extremely hard to get back in again down the road. Frankly, it’s better for us if such companies don’t lose access, because eventually our solution set becomes reconnecting Iran to the world through business.

As for the recent British hostages deal, as far as I was concerned, that was just another asymmetrical strike against our proxies in the region. We slap on some harder sanctions and start snatching Iranian operatives in Iraq, so Tehran fights back by grabbing some Brits: all designed to signal without triggering direct conflict with the U.S. What’s the signal? Tehran wants to deal.

Hardliners on our side keep saying, “But we’ve offered Iran plenty in the past and it keeps saying no.” That’s bullshit. We’ve never offered Iran anything of value that it really wants. Basically, Tehran wants some sense of regime security and its place in the sun and Bush doesn’t want to offer either, so Iran keeps fighting back the best it can and we keep taking the pain, hoping we can drive up Iran’s pain in a nastier way that will bring them to the table on our terms. That won’t happen because Iran won’t roll over on the nuclear question so long as the U.S. threatens regime change.

As I wrote in Esquire back in early 2004, I’d temporize on the nukes (Iranian nukes will change nothing) and cut what deals are necessary to get us relief on Iraq, setting up the mullahs for the soft-kill through expanded economic connectivity. I’d send Nixon to China (read Margaret MacMillan’s brilliant book, “Nixon and Mao” for all the fascinating parallels here) and finesse Iran over the longer haul. But since the Bush crowd is so impatient and so godawfully Manichean in its mindset, there’s just no chance that’ll start before Jan ’09, when we’ll still be trying to figure out how to find a place for Iran in the Middle East. So Bush punts on that one.

Looking further ahead: It does worry me how so many in Congress and so many of the prez candidates are mouthing hot-and-heavy on Iran, like it’s time to check who’s gone limp on this litmus test, because it’s all just so Rovian to fall into that trap. Sometimes when you watch lips moving you hear the House of Saud talking, sometimes you hear AIPAC, and sometimes it’s just the usual end-of-times crap that’s so popular nowadays (“Iran gets the bomb and our Savior returns to protect the Holy Land!”).

The overwhelming presumption of Iranian irrationality just doesn’t impress me. We’re just not being very rational ourselves, just because both the Saudis and the Israelis are working overtime to get us hot and bothered enough to do their dirty work for them. It’s bad enough that we swallow our enemies’ propaganda so willingly, but when our “allies” do it, we should know better. No one should expect the Saudis or the Israelis to look out for anybody but themselves.

Our interests on Iran seem clear: we have to find a place for it in the Middle East. The revolution has failed and the society is sinking fast. It feels empowered in the region because of the Shiia revival, but that’s got a short half-life. The mullahs know their long-term situation is not bright, and the smart ones realize that their bargaining position will never be better than it is now (e.g., America hurting in Iraq and Afghanistan, they’re close to the bomb, Shiia revival, Bush’s post-presidency), so the time for deal-making is at hand. Would we get a fair shake from Tehran? Hell no. They’d try and take us for everything they could, given our difficulties in Iraq, but here is where our silly need for clear “victories” does us in. They are plenty of ways to skin this cat, but Bush seems intent on just rerunning the whole Iraq approach again on Iran, and that’s not going to solve Iran prior to the end of the term, and that means Iran will continue to screw us as much as possible on the subject of Iraq in the meantime.

And that really sucks if you have any loved ones in Iraq right now.

002 The Middle East: The Big Bang Theory

Good News: It's not as dead as you may think -- or pray. Cynically expressed, the Big Bang strategy was always about speeding the killing necessary to trigger systemic change, so the worse Iraq becomes, the more the process picks up speed. I mean, you can't get to the punch line any faster than by forcing the House of Saud to deal directly with an Al Qaeda hornet's nest right next door in the Sunni Triangle (the Saudis' first choice was a security fence on the border -- go figure!) while simultaneously triggering Riyadh's proxy war with Tehran in Baghdad. Toss in some Israeli nukes and finally the neocons have really got this party started, because those are the three knockdown fights they believe need to unfold before any serious restructuring of the region's power relationships can occur. A lesser variant has Washington prying Damascus away from Tehran, holding down the fort in Baghdad, and getting Riyadh's tacit approval for Israel's preemptive war on Iran in exchange for a supported solution on Palestine, but that almost seems boring in comparison.

Bad News: It's not as dead as you may think -- or pray. Bush and the neocons never had a clue about what was naturally coming on the heels of Saddam's fall (i.e., the Shiite revival) any more than they had a plan about Iraq's postwar occupation. Their in-progress Iranification of the Long War against the global jihadist movement makes even less sense than Bush's poorly planned decision to invade Saddam's secularized Iraq. The Salafist jihad spearheaded by Al Qaeda is exclusively Sunni derived, so why add into the mix their hated enemies, the Shiites? Bush is like the barroom brawler who enters the joint and declares, "I'm taking all of you bastards on" -- read: axis of evil -- "right here and now!" His administration has committed the fatal mistake that Clinton deftly avoided in the Balkans: They've let the conflicts accumulate instead of tackling them sequentially. The White House's unfolding Iran strategy is nothing more than an ass-covering exercise on Iraq and Afghanistan -- a third splendid little war to divert attention from the two previous failures.

Wild Card: If there was ever a time for Al Qaeda to cripple Saudi Arabia's oil infrastructure, now is it. Delivered with the right fingerprints, Al Qaeda might be able to get just enough unity among the United States, Saudi Arabia, and Israel for a full-blown war with Iran. Nothing would set China on a more aggressive course regarding its long-term access to energy in the region, and therein lies Osama bin Laden's best hope for setting "rising Asia" against an aging West in the Persian Gulf.

COMMENTARY TRACK:

Deconstruction: Of all the segments, this one drove me to the good-bad-wildcard approach the most, because I’m so clearly of two minds on the subject. Yes, it would have been better if we had done Iraq right from the start, but since we didn’t and we’re stuck with Bush through Jan ’09, there’s almost the sense that the worst Iraq gets, the more it is likely to foster desperate and dangerous change in the region, and since any change beats the status quo, you have almost this perverse, pro-Bush desire to hope that Bush continues to screw up Iraq so that the follow-on regional dynamics are as profoundly upsetting as possible.

Then you start getting paranoid and wondering if Bush and Cheney do that on purpose, and thus you get the tone of this segment.

How it holds up: Because this is meta-analysis of region-wide possibilities, this one was going to get screwed up by current events only if Rice pulled off some magic at the regional peace conference on Iraq, which she didn’t even seem to try. I know it seems like Sy Hersh is going overboard on the Iran war scenario, but I honestly think it’s very important to sound that alarm early and often on Bush and Cheney because -- again -- left to their own devices, I do think they were targeting Iran for the end of the second term. Given the macho factor in DC on the Iran issue, I do worry that the right trolley car coming down the street will suddenly become enough for Bush to sell his next war on his way out the door, bequeathing to the next president a serious lemon just like his old man did to Clinton on Somalia (“Have a nice presidency, asshole!”).

Looking further ahead: The more I think about the Middle East in grand historical terms, the more I believe that its capacity for self-destruction will do itself in. Yes, everyone will continue to buy its oil and gas, but no one will be planning to keep the region in its future requirements and everyone will slowly but deeply discount their connectivity to the place. To the extent that happens and alternative energy dependencies are pursued, the Middle East can be effectively firewalled from globalization’s future, making Africa’s future bright by default (the last great untapped labor pool).

The bright spot? The smallest Gulf states seem to be pursuing the most innovative and intelligent economic connectivity with the outside world. If they can have a Singapore-like demonstration effect and pull the others along, then there’s reason for optimism. Again, the scarier we make Iraq look, the more these countries are incentivized to imagine a different future -- sad to say.

Then again, fear is a great motivator toward change.

003 Globalization: Life During Wartime

Good News: The world has never enjoyed a bigger and more dynamic global economy than the one we're riding high on right now, with unprecedented amounts of poverty reduction concentrated in China and India alone. Advanced economies are expanding steadily in the 2 to 3 percent range, while emerging markets dash along in the 7 to 8 percent range, giving us a stunning -- and steady -- global growth rate of roughly 5 percent. Rising Asia will add upwards of a billion new consumers (i.e., people with disposable income) in the coming years, providing the biggest single impulse the global economy has ever experienced. Financial flows in 2005 hit $6 trillion, more than double the total in 2002. If terrorists are running the world, nobody has told the global financial markets.

Bad News: There's plenty to be nervous about, especially if you're a white-collar worker who's always assumed your job can't be outsourced. (Hint: If your graduate degree involved tons of memorizing facts, you're in the crosshairs.) But with financial panics becoming far less frequent and damaging (e.g., a recent scare in Thailand passed without turning contagious), the biggest dangers now are political. Trade protectionism is on the rise (keep an eye on our Democratic Congress), and the World Trade Organization's Doha Development Round is going nowhere because the West refuses to reduce agricultural subsidies. But neither trend surprises, as a rising tide lifts everybody's demands when it comes to trade deals.

Wild Card: A supply shock in the maxed-out oil industry, which faces a persistently rising long-term global demand due overwhelmingly to skyrocketing requirements in emerging markets led by China and India. "Peak oil" predictions are overblown, focusing exclusively on easily extracted, known conventional reserves. If prices remain high, then the shift to exploiting unconventional reserves and alternative energy sources will grow exponentially. But timing is everything, so a shock to the system could have the lasting effect of moving us down the hydrocarbon chain faster toward hydrogen, nuclear, and renewables. When that happens, it won't be just Al Gore sticking out his chest in pride -- we'll all be able to breathe more easily.

COMMENTARY TRACK:

Deconstruction: First is simply to note the title of one of my all-time favorite Talking Heads songs.

I wrote this segment first and meant it to headline the piece, because to me, it’s stunning to realize that despite all this terrorism and Middle East bullshit, the world has never been more at peace or thriving economically as it is today. And the future’s so bright for globalization that I gotta wear shades to look ahead.

Most of the time I think it’s just me and my buddy Larry Kudlow sounding this non-alarm, because the fear mongering on CNN and Fox is just so frickin’ out of control at this point in history, as one uses it to condemn Bush’s failures (CNN) while the other uses that to excuse them (Fox).

How it holds up: Better than ever, I must say. Doha continues to go nowhere, but bilateral trade agreements are continuing to be cut (we’ve just finished our proposed free-trade pact with South Korea and Bush sends it soon to the Hill), and the Middle East continues to slowly but surely connect itself more and more to the outside world during this oil boom (unlike last boom).

Yes, I expect the Dems to do a certain amount of stupid stuff on trade in Congress, and I expect Bush to stand up for free trade and fight them tooth and nail (Bush has actually been wonderfully sensible on foreign trade throughout his time). Lou Dobbs and his ilk notwithstanding, I expect cooler heads to prevail, with the best news being that, other than Edwards, none of the prez candidates are talking much protectionism.

Looking further ahead: I’m hoping the Korean-U.S. deal, once it goes through Congress, will accelerate the movement toward a free trade agreement for Asia proper that integrates America nicely into the mix. The big fear of recent years was that the U.S. would eventually get shut out of any ASEAN-plus enlargement process, but if the Korean-U.S. deal serves as template for others to cut similar deals with us, then we might just negotiate ourselves right into some larger Pac-rim package, and that would be great.

004 Al Qaeda: The Global Brand

Good News: We have killed or captured a good portion of Al Qaeda's senior brain trust, meaning the generational cohort of leaders who built up the transnational network to the operational peak represented by the 9/11 strikes. As a result, Al Qaeda's network is a lot more diffuse and dispersed, with the surviving leadership's role trimmed back largely to inspirational guidance from above on strategy and tactics. Yes, Al Qaeda now takes credit for virtually every terrorist act across the globe, but the truth is that its operational center of gravity remains southwest Asia -- specifically Iraq's Sunni Triangle and the Afghanistan-Pakistan border region. As worldwide revolutionary movements go, this one is relatively contained and successful only in terms of generating local stalemates against intervening external powers, meaning we get to pick the fight and keep it consistently an "away game." As the Middle East "middle-ages" -- demographically speaking -- over the next quarter century, time is definitely on our side, since jihadism, like all revolutionary movements, is a young man's game.

Bad News: Al Qaeda's operational reach may now be effectively limited to the same territory (southwest Asia and extending to adjacent areas) as were the classic Middle Eastern terrorist groups of the 1970s and 1980s, but that just means America's efforts to date have made us safer at the expense of allies in Europe, Asia, and Africa. In short, we've turned back the clock but made no strategic headway, plus we've created a dual cause célèbre in Iraq and Afghanistan that will stoke Al Qaeda's recruitment efforts for the long haul. Neither winning nor losing, the Bush administration has merely engineered a back-to-the-future operational stalemate at an unsustainably high cost in blood and treasure, effectively isolating America from the world in the process. Strategically speaking, we've reached a dead end.

Wild Card: Al Qaeda's pursuit of a weapon of mass destruction (think biological, not nuclear) is unrelenting, meaning eventually we will face this threat, and ultimately one side in this Long War will need to break out of the strategic stalemate. The key question, then, is, Which side is more energized and which is more exhausted? With the majority of Gulf oil now flowing to Asia and that trend only increasing with time, won't the American public eventually revolt at the notion that it's their oil and our blood? Osama sure hopes that one more strategic bitch-slap does the job.

COMMENTARY TRACK:

Deconstruction: To me, this is both the most depressing and the most over-hyped segment, meaning you can feel bad about it but you really shouldn’t. By sinking our teeth into Afghanistan and Sunni Iraq (where the insurgency’s based), we give Al Qaeda a lot of definition and structure where there wouldn’t otherwise be, meaning we attract them to these battlegrounds of our choosing and let our professionals duke it out with their version of professionals. All said and done, our casualties have been low and slow in coming for a “global war,” and the fight’s over there instead of over here.

How it holds up: Just fine. I mean, you may hang on Peter Bergen’s every word about the whereabouts of Osama and Mullah Omar and so on and so forth, but as somebody who looks at this whole package as holistically as possible, it doesn’t strike me that terrorists are running anything in this world save for the tribal areas in NW Pakistan and Sunni Iraq -- and Allah bless ‘em -- they can have them both.

Looking further ahead: Yes, Virginia, there will be another 9/11. But keeping things in perspective, I don’t think al Qaeda will ever measure up to the hype nor justify the expenses we incur. I’m not saying the preparations we make, the security measures we take, or the money we spend is wasted. I think all that stuff is good and necessary and important for the sheer reason that globalization is complex and demands all such efforts.

I just don’t think that -- over time -- transnational terrorism will routinely be able to rise above the white noise level of day-to-day disruptions and disasters and snafus arising from globalization’s continued expansion.

005 Iraq: The Quagmire

Good News: The Kurdish areas are secure and thriving economically. Then again, they've been in the nation-building business ever since America started that no-fly zone in the early 1990s. The insurgency is still centered primarily in the Sunni Triangle, so many parts of the Shiite-controlled southeast are surviving okay, thanks in part to significant Iranian investment. Though the central government remains weak, it has forged some important compromises, like a deal to share oil revenue. Following our last best effort on the "surge," the inevitable U. S. drawdown -- and "drawback" from combat roles -- will look like Vietnam in reverse: We shift from direct action to advising locals. With any luck, Iraq's not much more of a fake state than Pakistan or Lebanon is, and America's military presence can retreat behind the wire of permanent bases in the Kurdish areas or Kuwait, where we currently keep about twenty-five thousand troops. By increasing our naval presence in the region, America can return somewhat to its historic role as offshore balancer in the region. And by participating in the regional peace conference on Iraq, it seems Bush may have finally discovered diplomacy in the Middle East. About time.

Bad News: Baghdad itself is an unmitigated disaster, and the Sunni Triangle has become a no-go zone for all but the most heavily armed outsiders. The horrific social toll of constant violence and massive unemployment is measured in dog years, meaning Bush's surge strategy is far too little and way too late. There is no "Iraq" any more than there was a "Yugoslavia," so America will have to accept this Humpty Dumpty outcome for what it is: a Balkans done backward. The Iraq Study Group rejected partitioning, saying it would be impossible to divide up major cities. Too bad the locals didn't get the word, because that low-grade "ethnic cleansing" proceeds rather vigorously -- neighborhood by neighborhood -- fueled by rising sectarian violence that outside interested parties (Iran, Saudi Arabia) clearly feed. America cannot stem this tide; only a combined effort by the neighbors can.

Wild Card: The right wrong move by embryonic Kurdistan could trigger a military intervention from anxious Turkey, especially after the highly contested oil-rich city of Kirkuk votes to join "free Kurdistan." Also looming is a Saudi-Iranian proxy war within Iraq itself, just as the persecution and targeting of restive Shiite minorities by entrenched Sunni regimes hits an inflection point regionwide -- nudge-nudge, wink-wink from the White House. For now, the Saudis seem content to 1) limit Iran's oil revenue by ramping up their production and 2) curb Iran's influence in Lebanon by funding Hezbollah's opponents. The regional peace conference on Iraq puts everyone at the same table, but if Sy Hersh is correct that Bush has already "redirected" on Iran, that parley might just be for show.

COMMENTARY TRACK:

Deconstruction: This was the trickiest one to write, given all the competing perspectives on the subject. I mean, you could spend 10k words on definitional issues alone (Civil war or not? Winning or losing? What do any of these words mean anyway?).

How it holds up: The whole McCain deal on walking through a market struck me as odd (why does he choose stands like that?), although his basic take on our predicament remains sound (from America’s perspective, “victory” or “progress” is all about reducing U.S. casualties). I just wonder why talking about what comes next is such a third rail for so many politicians (“Give the surge a chance!”), when everyone should know that the surge will logically succeed over the short haul but get untenable over the longer haul (opponents will lay lower and simply wait us out, knowing our troops strains will grow almost exponentially).

Given that Bush isn’t really trying any serious regional diplomacy, I can’t escape the feeling that the surge was never designed to succeed in the first place, but just to give Bush the excuse to broaden the conflict to include Iran down the road (again, the animating aspect to this entire piece) because then he can say, “I tried, but Iran screwed us over and now it’s payback!”

Looking further ahead: This segment is obviously the most frustrating to contemplate, in large part because Bush continues to make our military fight under the worst possible strategic circumstances.

As I look to the next prez, only Giuliani makes me think he’s got the go-your-own-way courage to cut the deals necessary to extricate our combat troops from harm’s way in a reasonable amount of time while making that transition seem less like a “loss” and more just plain common sense. I mean, you take what you can get after a while, and what we’ve got is a free and safe Kurdistan, and relatively stable and safe and recovering Shiite Iraq, and that hell-hole called Sunni-land.

The notion that we somehow “lose Iraq” unless we fight it out in Sunni-land until all the bitter-enders have all met their bitter end is just goofy.

Since Bush seems unable to define anything short of that mythical desired outcome as “victory,” we’re in desperate need of somebody who can. Hell, the Balkans were a piecemeal victory/stalemate/loss that slowly but surely turned into something we’re all relatively proud of, so why do we think we’re ever going to reach some magical moment where everything’s perfect in Iraq as a whole so we can pull out with our pride somehow completely restored?

Simply put, Rudy’s the most Nixonian of the bunch, and we need a plain-talking hardass to make this work. He’s got just enough gravitas and just enough arrogance to pull it off -- unless the cast of “Law & Order” runs as a full-slate.

006 The Long War: The Theater-After-Next

Good News: As we squeeze the Persian Gulf-centric radical Salafi jihadist movement, that balloon can expand in two directions over the near term: north into Central Asia or south into Africa. For now, Central Asia is relatively quiet, and local authoritarian regimes -- with the consent and support of all interested outside parties -- aim to keep it that way. Simply put, there are just too many untapped energy reserves in that region for neighboring great powers (e.g., Russia, Turkey, India, China, and even Shiite Iran) to let radical Sunni terror networks establish significant beachheads. Remember, China and Russia set up the Shanghai Cooperation Organization way before 9/11, so calling our recent arrival (now down to just one military base in Kyrgyzstan) the resumption of the "great game" is a bit much. The Chinese and Russians are basically watching our backs on this one, and we should continue to let them do so because...

Bad News: ...This fight's headed south into sub-Saharan Africa over the long haul. The recent rise and fall of the Islamic courts in Somalia was but a preview of coming attractions. Don't believe? Then check out similar north-versus-south (i.e., Muslim versus Christian) fights simmering across a wide swath of middle Africa (basically where the desert meets the grasslands and forests), because it might not surprise you to find out that the cowboy and the farmer still can't be friends. Al Qaeda, according to our Defense Intelligence Agency, recently brokered an alliance with the Algerian Group for Salafist Preaching and Combat and has famously issued threats regarding any potential Western intervention in Sudan's Darfur region to stem the genocidal war being waged by the invasive Arab janjaweed against indigenous black Africans. Success in the Long War will not be marked by less violence or less resistance but by a shift in the geographic center of gravity out of the Gulf region and into Africa. Egypt, with its looming succession from Mubarak father to son (Hosni to Gamal), will continue to either fulfill or fail in its role as continental bulwark, much the way secular (and poorly appreciated) Turkey holds the line for Europe. But in the end, Africa simply offers too many attractive traction points for the Salafi jihadists not to engage as the Middle East middle-ages.

Wild Card: Bush has already announced and will sign into existence sometime between now and the end of his administration a new regional U. S. combatant command: AFRICOM, or African Command. The placeholder, the Combined Joint Task Force-Horn of Africa, now sits in a former French Foreign Legion post in Djibouti. It was originally set up as a picket line to trap Al Qaeda operatives as they exited the Gulf for the dark continent. These are the guys who recently helped engineer Ethiopia's intervention in Somalia, and their command represents a serious experiment in combining the "Three D's": diplomacy, development, and defense. AFRICOM will be the future of the fight and the fight of the future.

COMMENTARY TRACK:

Deconstruction: This is really based off the slide in my briefing that deconstructs our efforts to lay a Big Bang on the region. The assumption is, eventually we succeed (time is simply on our side, so it’s all about not screwing up in the meantime). When we do, where does the fight go next? Logic says the radical Salafis will retreat to the northern half of Africa, so then the next question becomes, How do we make that continent as unattractive as possible to radical Islam over the coming years and decades?

How it holds up: This is basically the subject of my next piece for Esquire, which I’m structuring right now as I finish up interviews back here in the States, so I’m passing on this one.

Looking further ahead: Look no further than the July issue.

007 Defense Department: The New Coin of the Realm

Good News: The Army and Marine Corps continue to calibrate their forces and doctrine to adapt to the long-term challenges of counterinsurgency and a return to the frontier-taming functions last witnessed when our Army of the West really was just our Army in our West. With General George Casey coming back from Iraq to become Army chief of staff and General David Petraeus, chief architect of the U. S. military's new counterinsurgency manual, slotting in behind him in Baghdad, that much needed trend can only accelerate. Two other solid moves by Bush: 1) selecting former CIA chief Robert Gates to replace Donald Rumsfeld as secretary of defense (at this point in the fight, it's better that insider agency types run the Pentagon than the outsider neocons) and 2) sliding Admiral "Fox" Fallon over from Pacific Command to Central Command, bringing along his substantial diplomatic experience and stubbornly strategic vision. (He led a PACOM effort to bolster military-to-military ties with China despite disapproval from Rumsfeld's Pentagon.) With AFRICOM standing up in 2008, we're seeing some serious lessons being learned from Iraq and Afghanistan. Failure is a great teacher.

Bad News: The acquisition overhang from Rumsfeld's transformation initiative remains large, meaning we've still got way too many absurdly complex and expensive weapon systems and platforms (e.g., ships, aircraft) in the pipeline. As ongoing, largely ground operations increasingly exhaust the Army and Marine Corps (and their respective reserve components) both in personnel and equipment, many tough funding cuts loom on the horizon. Rumsfeld never confronted those hard choices, preferring in the end to send his generals to the Hill to beg for more money and let defense contractors stuff emergency supplemental bills with their pet programs. Hopefully, intel-savvy Gates will recognize that a substantial resource shift must ensue, in effect curtailing the Pentagon's obsession with smart weapons and boosting its ability to crank out smarter soldiers. But much depends on how Gates and the Bush administration continue to interpret China's rise in military terms. If you keep hearing the word hedge, then expect the Pentagon to keep overstuffing the war-fighting force while starving the nation-building one, and that nasty habit matters plenty if it's your loved ones over in southwest Asia today.

Wild Card: A winner would be Congress somehow stepping up and delivering "Goldwater-Nichols II," or an omnibus restructuring legislation that fixes the broken interagency process (the real cause of our failures in Iraq and Afghanistan) just as the original fixed the dysfunctional interservice rivalries that plagued our military in the post-Vietnam era. Of course, the really bold step would be to create some Cabinet-level department that focuses on transition or failed states. We basically know how to deal with countries in war (Defense) and peace (State). What we lack, though, is a bureaucratic center of gravity that specializes in getting weak states from war to peace. Presidential candidates and a blue-ribbon commission or two are already raising this proposal, so it's out there, waiting for our next massive fuckup to bring it into being.

COMMENTARY TRACK:

Deconstruction: This one is pretty straightforward analysis of institutional change, very much in line historically with the “Monks of War” piece from March of last year.

In general, I’m very optimistic about the scope and rate of change in the military’s adaptation to the Long War. Clearly, Iraq’s the great strain, but nobody’s talking about packing it all in after we wrap up Iraq, so there’s a clear consensus growing that the military needs to adapt itself comprehensively to this new security environment.

As recently as last Quadrennial Defense Review (2005), you were seeing a lot of idiotic articles claiming the Middle East is “just a blip” and the real long-term fight is with China, but the continuing crushing reality of Iraq and Afghanistan and the rising sense of Africa’s importance seems to have squelched that talk -- and that’s both realistic and good.

How it holds up: Both Fallon and Petraeus are such straight-talking, stand-up guys that no matter how the surge goes (and I expect it to go better at first but then become unsustainable over time), there won’t be any silly stab-in-the-back mentality among the military. Guys like Petraeus cut their teeth in the Balkans, and they’re simply too smart for that intellectual dodge, so again, I’m very confident that the learning curve flattens but we keep climbing it vigorously across the defense community.

Looking further ahead: The question of how Africa Command turns out is a big indicator of the military’s further strategic adjustment in this Long War. Again, I beg off of that one until the July issue.

Other than that, expect to hear a lot of very legitimate “train wreck” tales about personnel and some very hyperbolic ones on long-term force structure acquisition (most of the high-end stuff we’re buying today we could purchase in smaller future numbers and still easily remain the world’s strongest military without any loss in our ability to hedge on China).

In industry, watch how Lockheed Martin uses its new purchase, Pacific Architects & Engineering, to move into the “second half” or postwar/post-disaster world. PAE is the KBR of the State Department. Lock-Mart bought it to position itself better for the future, and when the world’s largest defense contractor makes a move like that, you pay attention.

008 War on Terror: The Legal Underpinnings

Good News: The International Criminal Court was set up in The Hague in 2002 as a permanent version of the UN-sponsored International Criminal Tribunal for the Former Yugoslavia. As an international court of last resort, it's designed to put war criminals on trial for crimes against humanity. With 104 signatory states, the ICC possesses a well-credentialed system for adjudicating and imprisoning such bad actors. What it's missing is a mechanism for bringing them to justice. Oddly enough, the United States possesses a military force with global reach that routinely snatches these guys, only to hide them in secret prisons and put them on secret trial with secret evidence. The U. S. has kept the court at arm's length, fearing its power enough to negotiate bilateral immunity treaties with roughly a hundred states around the world where we anticipate the possibility of future military interventions (since we fear our soldiers and officials will be subject to war-crime accusations). These arrangements will retard the development of global case law. Eventually, Washington will come to its senses.

Bad News: The Bush administration's continuing Dirty Harry take on the Geneva Conventions destroys America's international reputation for the rule of law, providing us with a host of highly questionable practices in the name of "global war," such as the suspension of habeas corpus, the holding of ghost detainees who disappear into the paperwork, the ordering of "extraordinary renditions," by which suspects are deposited with allies who have long histories of torture, and the extraction of confessions by methods right out of the Salem witch trials. If our own Supreme Court can't stomach much of this, how can we expect to win any hearts and minds abroad by mimicking the human-rights abuses of the very same authoritarian regimes (e.g., Saudi Arabia, Egypt) targeted by our lawless enemies, the Salafi jihadists?

Wild Card: Abu Ghraib didn't do it. Gitmo hasn't done it. Short of killing fields being dug up, it's hard to imagine what would dramatically alter the playing field as seen by the Bush-Cheney team. Bush the Decider, after all, basically blew off both the November election and the Iraq Study Group, so it would seem he's not one to be swayed by much when his famous gut tells him otherwise. Our best hope would seem to be for our Supreme Court to step up more aggressively over time -- maybe even before Oslo starts handing out Nobel prizes to the whistle-blowers.

COMMENTARY TRACK:

Deconstruction: This one is my favorite segment, very much an extension of the “Dirty Harry” piece I wrote for Wired way back when (Oops! Shouldn’t have mentioned that!). It’s such an obvious and clear-headed point that you’d think it wouldn’t need to be stated in print, and yet it’s so great to do just that and make clear that America needs to rejoin the world on this contentious subject.

How it holds up: No problems here. We’re never going to be able to talk ourselves out of this pathway of realigning our rule set on terror with some larger, globally-accepted rule set like that being forged by the International Criminal Court, because all the secret trials and stuff will continue to embarrass ourselves no matter how they turn out.

Looking further ahead: This one is such a no-brainer for a new president, that I assume almost any of the front-runners could handle it (aren’t they all lawyers?).

No big whoop for anybody who doesn’t gag on the word “multilateral.”

 

009 Afghanipakistan: The Ungovernable

Good News: The Karzai regime muddles along, keeping the bulk of Afghanistan reasonably stable while enabling legitimate economic growth in those pockets not controlled by the druggies. The Musharraf regime does one better in Pakistan, which is growing at a solid clip and finally starting to attract foreign direct investment that underscores its strategic location as connector between the energy-rich southwest-central Asia and the energy-hungry south and east Asia. When you're talking about the parts of both countries that are effectively governed by the center, either situation is arguably described as a slowly modernizing "success story" in the Long War. Hey, when Iraq defines the floor, these two mark -- by comparison -- the ceiling.

Bad News: The problem is, of course, that neither capital effectively controls the hinterlands, which overlap precipitously along their shared, mountainous border. There the poppy trade booms, prestate tribalism rules, and the Taliban are back in the business of state-sponsored terror, thanks in no small part to a de facto peace treaty with Musharraf's regime. The Pashtun tribes of northwest Pakistan have been ungovernable for as long as history records. While outsiders can effectively ally with them against perceived common enemies, as America did against the Soviets in Afghanistan, none have effectively conquered them. And yet the Taliban are carving out a ministate within these lands, employing their usual brutal techniques. The result is, once again, a secure sanctuary for Al Qaeda's global leadership (to include Osama bin Laden) and a training ground for motivated jihadists.

Wild Card: The next 9/11-like attack on American soil -- especially if WMD are involved -- could well trigger the gravest consequences for the Taliban's state-within-a-state. Americans might just countenance a limited nuclear strike in an eye-for-an-eye moment of unleashed fury and frustration. Unthinkable? We did it to Japan under far cooler circumstances but for similar reasons -- namely, a full-scale invasion seemed prohibitively costly in human life. Is nuking Afghanistan advisable? No, nuking is always a bad idea. But rubble, as they say, makes no trouble, and bombing them back to the Stone Age would be a very short trip.

COMMENTARY TRACK:

Deconstruction: This one also leverages itself off a previous piece I wrote for my syndicated weekly column, although I expanded the logic considerably with recent intelligence reports.

This segment was hard to keep balanced in that the good news ain’t so good and the bad news could get awfully bad if the right lucky strike gets pulled off.

How it holds up: Everything on this one tracks nicely.

Looking further ahead: This one scares me the most for all the obvious reasons.

 

010 China: The Slated Near-Peer

Good News: China's torrid growth continues, despite all predictions that it must soon end lest it tear the country apart through some combination of the horrific environmental disasters just unfolding, a financial panic caused by a still-rickety banking system, or -- Mao forbid! -- political unrest among the masses of rural peasants left behind in abject poverty. So long as the foreign direct investment flows (China's the number-one target in the world outside the West) and export volume rises, the Chinese Communist Party, which has staked its regime legitimacy almost entirely on raising income levels, continues to pull off the seemingly impossible: creating a world-class domestic market while whittling down the world's largest state sector. How hard is that? Bill Clinton created more than twenty million new jobs in America across his eight years as president. China's leaders need to generate almost the same number of new jobs every year to keep this juggernaut moving forward.

Bad News: China's military buildup is real, although America's slated to outspend it by roughly $10 trillion over the next two decades, so our lead seems pretty safe. What's so scary right now about China's strategic relationship with the United States, or lack thereof, is that our economic interdependence is very real and rapidly expanding while our security ties remain embryonic at best and highly suspicious at worst. Even if we get past North Korea, the Taiwan situation still divides us strategically, and as China increasingly penetrates the Middle East, Africa, and Latin America with its rather unprincipled investment strategies, opportunities for conflict with U. S. security interests will abound. Given the right breakdown of cooperation over Iran (or failure to get any in places like Sudan, Nigeria, Zimbabwe, Venezuela -- you name it), wecould be looking at a resumption of cold-war binary thinking by which Washington hawks calculate every international loss (or even slight) as China's zero-sum gain. Factor in a Democratic-led Congress eager to take on the threat of "cheap Chinese labor" and their underappreciated currency, and what should be globalization's strongest bilateral relationship could easily turn into its worst -- even the cause for its demise.

Wild Card: You'll get the same answer from Wall Street CEOs and White House staffers: Nobody wants to see a financial meltdown triggered inside China, because nobody -- and I mean nobody -- has any idea how bad that could get for the global economy as a whole. Eventually, something has to give in China's still-white-hot economy, so the question really isn't Can a financial panic happen in China? but rather How will America handle it when it does?

COMMENTARY TRACK:

Deconstruction: If you read my blog, you know I write about China constantly, so this one was easy to pen. It reads like a greatest-hits list of statements from my current brief on global affairs, so it’s very much my mainstream thinking.

How it holds up: Bush continues to be very reasonable and moderate on China, and for that I thank him. Unlike Clinton, Bush has plenty of China hawks to parry, and he’s remained vigilant on that subject -- probably his greatest foreign policy achievement.

Looking further ahead: The big thing on China that I always mention is the swap-out of their leadership from the 4th to 5th generations, a shift that will dramatically increase our potential cooperation with China.

Actually, I have a piece sitting with Esquire right now on this subject, so I’m hoping to have another major-league swing at this later in the year.

011 North Korea: the Persistent Outlier

Good News: The Bush administration has been successful in maintaining a fairly coherent unity of effort with Russia, Japan, China, and South Korea, in that we're all still talking and cooperating and worrying about the same things. Admittedly, we've not accomplished much vis-a-vis Kim Jong Il's regime (the recent deal smells of a Clinton-like "freeze," with the truly hard details -- like the actual bombs -- left to the future), but the dialogue itself is laying the groundwork for a post-Kim effort to construct an East Asia NATO-like security architecture that cements China's role as the Germany of Asia and ends fears of emerging security rivalries with offshore Japan. (Asia's never enjoyed a stable peace when both China and Japan were powerful.) While Kim's successfully blackmailed us in the past on nukes, his kleptocratic regime's reliance on self-financing through criminal activities does leave it vulnerable to the sort of stringent financial sanctions recently imposed by the U. S. That tactic begins to work when Chinese banks, more interested in maintaining their international credit ratings, start choosing transparency over illicit dealings with Pyongyang. Talk Tokyo and Beijing into a naval blockade and we may set an endgame in motion.

Bad News: The recent Bush deal is a bad deal that should give no one comfort, as it is unlikely to force Kim into giving up his nukes (not when the blackmailing still works for aid), and then there's the unacknowledged second nuclear program that Pyongyang bought from Pakistan years back. We haven't even begun the negotiations on that one yet. Unlike the years-in-the-making danger of a nuclear Iran, Kim's got the necessary missile technology in hand, and he tested his first crude nuke last October. Remembering East Germany's fate, Kim confronts the high likelihood of not just near-term attempts at regime change but the inevitable liquidation of his entire nation as the wrong half of the last divided-state situation to linger beyond the cold war. Despite Ahmadinejad's fiery threats, Iran's mullahs have plenty to live for, while Kim's got everything to lose, making his long-demonstrated siege mentality and willingness to sacrifice millions of his own people to preserve his rule two crucial indicators of his undeterrability. The problem with the slow squeeze we're pursuing is that eventually it'll trigger some reckless act from Kim, which in turn sets in motion the following scary scenario: South Korean and U. S. forces pouring in from the south and sea, Chinese forces entering from the north to prevent refugee flows, and somewhere in that small chaotic space, the world's fourth-largest military armed with some unknown number of nuclear devices and a Gotterdämmerung-inducing ideology of racial superiority. No wonder Beijing's not so psyched to get it on.

Wild Card: Beijing's clearly in the driver's seat on this one, which makes the government's not-so-quiet examination of Ceausescu's rapid fall in Romania in late 1989 (hint: Moscow's KGB gave him a push) all the more telling. China's leaders are definitely exploring an exit strategy on this one, the timing of which couldn't be more crucial for the future of Sino-American relations.

COMMENTARY TRACK:

Deconstruction: This one’s based largely on conversations I’ve had with the Chinese during two trips last year to Beijing. I remain consistent on the subject: I don’t think Beijing’s leaders can turn Kim into a “mini-me Deng Xiaoping,” so either they get rid of him or they risk a far riskier conflict scenario that puts them at great danger of miscalculation with the U.S.

How it holds up: Chris Hill is one of those career diplomats who often rise up to become second-tier superstars at the end of an administration -- you know, when all the principles get bored with the details of foreign policy. He’s done a magnificent job of simply keeping the whole thing moving, even as the current envisioned outcome is totally Clintonian.

Looking further ahead: In my observation, both South Korea and China are preparing fairly realistically in military terms for North Korea’s collapse, so I’m optimistic that when the times comes it’ll go okay.

012 The White House: The Bush Imperative

Good News: There's about twenty months left in W.'s presidency and his heart's one helluva lot stronger than Cheney's. The Iraq tie-down pretty much means Bush can't start any more wars anywhere else, despite all the tough talk. Much like Jimmy Carter near the end, Bush seems wholly engulfed by the Gulf, but since nobody other than that pesky Hugo Chávez seems intent on pressing our disadvantage, that's probably a good thing. Although this administration has been willfully oblivious to its gargantuan federal deficits up to now (what is it about Republican administrations?), Bush has somewhat cynically found religion on the subject recently, declaring his new goal of eliminating those deficits somewhere around the end of his successor's first term. Talk about passing the buck! Then again, if Bush's surge strategy in Iraq creates even the slightest semblance of job-not-too-horrendously-done and allows for our troops' effective withdrawal from combat duty there by January 2009, I doubt we'd hear any complaints from the new resident at 1600.

Bad News: Condoleezza Rice is proving to be an even weaker secretary of state than Colin Powell, although at least she talks out of only one side of her mouth. Then again, since Rice's diplomacy consists solely of delivering White House talking points the world over, that is a mean trick. All dissing aside, the real problem with American diplomacy under Bush (if you can call it diplomacy) is that Dick Cheney has been in charge of it all along, and now that ¸ber-ally Don Rumsfeld is gone at Defense, we won't even see its muscular version (the Bush Doctrine) employed anymore, leaving us with basically no foreign policy whatsoever. The big problem with this state of affairs is that Bush's postpresidency has started earlier in his second term than any leader since Richard Nixon, leaving America's global leadership adrift at a rather fluid moment in history. I'm not just talking the Long War but the other 95 percent of reality that actually makes the world go round. With Tony Blair leaving office in the UK, there's virtually no adult supervision left anywhere, which is sad because, with a global economy humming as nice as this one is, the world could really take advantage of some visionary leadership right now to tackle a host of compelling global challenges like AIDS, global warming, childhood diseases -- you know, the whole Two Bills/Bono agenda!

Wild Card: Bush has said repeatedly that he's on a personal mission to deny Iran nuclear weapons, and Cheney wants nothing more than to go down in history as the man who restored power to the American presidency. Put those two scary dynamics together and you've got the mother of all October surprises come 2008. Washington is naturally all abuzz with this prospect, causing Bush to deny publicly any plans for war. But as we've learned with this administration, it's Deny, deny, deny, and then strike! If and when Bush pulls that trigger, watch the Democratic Congress start impeachment proceedings. That'll make it two-for-two with Boomer presidents, but that only makes sense for a generation who came of age with Watergate.

COMMENTARY TRACK:

Deconstruction: Clearly, I tee off on Rice here, but I honestly think she deserves it. She is the classic example of the Peter Principle whereby people get promoted beyond their skills. As the consummate protégé, she’s just not genetically cut out to be a serious leader and Bush’s second term suffers dramatically as a result (though not Cheney’s ...).

Mark set this one up as the “great ending” prior to the jump page. It’s the climax of the piece, in many ways.

How it holds up: Well, since this one lays out the fear that’s animated my thinking on Bush and Cheney for quite some time now (the planned inevitable strike on Iran somewhere near the end off the second term), there was never any danger of it being up-staged in the meantime, unless you believe those rumors that the Bush White House offered a variety of strike packages to Blair WRT the hostage mini-crisis.

Looking further ahead: I do honestly feel that if people who care about this subject don’t continue to attack this notion, we seriously risk its unfolding. Bush may get nostalgic near the end, but Cheney will not.

013 The Rising East: The Degree of Compliance

Good News: The Bush administration has been successful in drawing both Russia and China into multilateral security discussions on Iran and North Korea, and even when both nations routinely water down our proposed responses, they're staying in the conversation, offering their own helpful ideas (like Moscow's proposal to outsource Iran's uranium enrichment) and generally becoming more comfortable coordinating security policies with the West's great powers on issues of shared concern. It may not sound like much, but such routine is what builds up relationships over the long haul. As Washington's relatively successful courtship of rising India has shown, it's the small gestures that matter most, like the United States finally acknowledging New Delhi's standing as a nuclear power. With India and China, we're looking at two big body shops -- as in, million-man-plus armies -- that logically should someday soon be enlisted for long-term cooperative peacekeeping and nation-building efforts in Africa, where both nations currently deploy tens of thousands of nationals in market-making commercial and developmental activities. You want to do stuff on the cheap? Well, you better find cheap labor.

Bad News: Each of the big players suffers from strategic myopia, meaning none are currently capable of punching their weight internationally at America's side. With Russia, it's their obsession with their so-called near abroad (the Caucasus and Central Asia) and Putin's aggressive push to renationalize the commanding heights of Russia's new economy -- namely, the energy sector. The Chinese, despite their ballooning reliance on distant foreign energy sources, still act as though their entire strategic environment boils down to the Taiwan Strait. Ditto for India and Kashmir. South Korea's ready to climb on Oprah's couch over its queer embrace of its long-lost sibling to the north, but don't expect it to climb out of any foxholes anytime soon on our behalf. Toss in glass-jaw Japan and there's not really anybody in the East we can count on in a tight spot.

Wild Card: The truly intriguing wild cards are local disasters that provide the U. S. military the pretext for drawing out these rising states' militaries in cooperative humanitarian responses, the way the 2004 Christmas tsunamis helped the Pentagon reestablish military-to-military ties with Indonesia (as well as triggering the internal solution of Indonesia's Aceh secessionist movement). If there's going to be a global-warming tipping-point disaster, it'll probably unfold in the East Asian littoral.

COMMENTARY TRACK:

Deconstruction: Pretty basic stuff. Just couldn’t do a tour of the world and not address India and Russia on some strategic level.

How it holds up: The “bad news” stuff is my most depressing take on the subject, because -- of course -- I advocate aggressive partnering with these nations. But the truth is, there will be a lot of hand-holding and strategic mentoring between here and getting these new pillars to the altar on such alliances. Each day we see plenty of evidence that all of these players are punching below their weight internationally on military affairs, and yet each sees their global economic profile continue to blossom.

Looking further ahead: We desperately need a visionary on this subject in the White House in 2009. I’d rule out McCain and Edwards and Thompson, but Clinton, Obama, Giuliani and Romney could all make it happen. We have simply got to abandon this Bush habit of casually adding new enemies while adding no new allies.

014 The Aging West: The State of Alliance

Good News: Recent elections and those looming on the horizon are not producing a crop of anti-American leaders among our traditional allies, which is extraordinarily generous on their part given the unprecedented anti-Americanism that's pervaded the vast majority of the world across the Bush administration. With France and the UK in transition, Germany's Angela Merkel has emerged as Europe's most powerful female leader since Margaret Thatcher, to whom the "iron Frau" is most commonly compared. Most important for America, Merkel is intent on keeping the transatlantic relationship strong and bolstering the role of NATO as its preeminent security structure. With Shinzo Abe taking the reins in economically resurgent Japan and pushing for expanded ties with NATO, we're seeing the old West as a whole assume a more forward-leaning security posture. Given the UN's enduring weakness, NATO's imprimatur is as close as America can get to approval by the international community for most overseas military interventions, with our Balkan missions serving as the best model to date.

Bad News: Though NATO is in Afghanistan, the many operational limitations imposed by individual members make its employment consistently suboptimal, and it has done little to bolster U. S. troop efforts to tame the Taliban's growing influence in the south. As for Iraq, the Middle East, much like all of Africa, simply remains a bridge too far for this collection of former colonial powers who aren't much interested in any lengthy return engagements (although the French occasionally pop up in Africa now and then). Other than the Brits (who've already opted out of Bush's surge strategy in Iraq), it is hard to imagine NATO countries taking serious numbers of casualties anywhere outside of Europe (okay, the French and Italian effort in south Lebanon has some merit), not with the EU's growing unease over its "absorption capacity" of new eastern members and popular fears of the invasive species known as Homo Islamicus. In a Long War with a high body requirement, it's unrealistic for America to assume that its traditional military allies, all of whom are demographically moribund, will suffice for the quagmire-like interventions that lie ahead.

Wild Card: The globalization wormhole that connects the United Kingdom to Pakistan features substantial two-way traffic whose upshot is a steady stream of radicalized expats landing in British working-class neighborhoods on a daily basis. The West's "stargate" on this, Britain's world-class internal security service, MI5, cannot possibly uncover every plot, so if that lucky strike hits the right target at the right time, our European friends could suddenly veer into a Children of Men-like extreme-lockdown scenario.

COMMENTARY TRACK: 

Deconstruction: My ode to Mark Steyn, God forgive him. 

How it holds up: Since I ask nothing of the Europeans, they cannot disappoint me, now can they?

Still, it’s sad to contemplate less utility over time in this alliance, because so many of these officers are really quite exceptional and can teach us a lot. But maybe that’s the way to look at it: not many bodies but plenty of good mentors.

Looking further ahead: Actually, I take back what I said on Afghanipakistan, because this scenario is the one I truly think is inevitable, despite the new James Bond. 

015 All the Rest: Other Complications

Good News: Despite all the ominous news, the developing world is not awash in civil strife. Africa, for example, was suffering from sixteen major civil or cross-border conflicts half a decade ago but endures only a half dozen today. Thanks to the commodities boom, infrastructure development there has shifted from being a supply-push aid effort led by the West to a demand-pull construction effort led by the East. In Latin America, the only serious insurgency still operating is the Revolutionary Armed Forces of Colombia (FARC), and the dozen recent elections there produced far more market-friendly leaders than Chávez-like populists. East Asia's relatively quiet, with nasty flare-ups in Sri Lanka and East Timor, and the dominant economic trends there continue to be rapid marketization and long-term integration with China, globalization's premier final assembler of manufactured goods. Best of all, the current oil boom has triggered voluminous "east-east" capital flows, whereby Arab energy producers direct their surplus capital to Asia's infrastructure build-out while Asia's high savings rates are beginning to flow into the Gulf's emerging financial hubs, in addition to its energy sector. 

Bad News: The West's stubborn holdout on its agricultural subsidies keeps the WTO's Doha Round from doing what it should to jump-start agricultural markets in developing economies. While China's doing plenty to create infrastructure in many resource-rich states, it's also replicating the profile that European colonial powers once employed: trading low-cost manufactures for even lower-end commodities. Net result? Local producers and small manufacturers tend to be crowded out by China's Wal-Mart-like impact. No wonder rising economic nationalism in Latin America, for example, is increasingly directed at China instead of just the usual culprits in the West.

Wild Card: Anything that torpedoes China's economic juggernaut would have a huge impact throughout the developing world, so probably the nastiest wild card to cue up would be the SARS/avian-flu-after-next that both derails Asian economies while overwhelming the meager public-health capacities of developing economies.

COMMENTARY TRACK:

Deconstruction: Of all the titles, this one I regret the most, because, truth be told, there are very few complications out there.

Actually, come to think of it, this is the one title Warren changed! The original was, “the complicating variance” (to rhyme with “alliance” and “compliance”).

Of all the segments, this is the one I owe the most to Hank in terms of his inputs and guidance.

How it holds up: Just fine. Again, the world’s much quieter and far more peaceful than people realize. In historical terms, we’ve never had it so good. 

Looking further ahead: It’s the most inevitable scenario (something bad this way comes to China’s financial markets), but after the stock bubble burst in the Middle East and Thailand’s currency scare passed with no real after-effect, I’m getting much more optimistic on this score.

016 The Wildest Card: 2008

The ancient Greek poet Archilochus said, "The fox knows many things, but the hedgehog knows one big thing." Let me submit that we're living through the final months of the hedgehog presidency of one George W. Bush, whose greatest failure has been his lack of strategic imagination.

Now, as the 2008 presidential campaign gears up, let me presume to offer this: avoid hedgehogs. Don't listen to candidates who tell you this whole election boils down to one thing and one thing alone. We need a president with more than one answer to every question, one whose tool kit is as diverse as his -- or her -- ideology is flexible. We need a deal maker, a compromiser, a closer. We need someone able to finish what others cannot and start that which others dare not.

We need a leader who knows many things, because we've had quite enough of those who know only one big thing.

COMMENTARY TRACK: 

Deconstruction: Sharp readers will recognize this as a lift from a column I wrote on Bush months ago. No worries, as I retain copyright. 

Honestly, I threw in these paras to end the piece because I couldn’t think of any better way to terminate the first draft and the Super Bowl kickoff was just minutes away and I figured Mark would toss it and make me write something new.

How it holds up: Mark didn’t toss it because it remains three of the coolest paras I’ve ever written in terms of soaring political prose.

Looking further ahead: So far I’ve mixed it up with representatives/operatives of two Dem candidates (Clinton distantly, Obama once-removed) and two GOP guys (Brownback F2F twice on Iran and a credible candidate to be named later -- after I sit down with him this Friday and give him the full-up brief). This last possibility intrigues me most, because word is, he really loved Pentagon’s New Map.

My wife, as always, worries I’m turning Republican. I keep telling her the Dems won’t have me!

But on some level, I say, “F -- k ‘em all!’ I can’t wait on these people to get elected. With the Bush post-presidency so moribund, I decided to pursue my own personal foreign policy a while back and it’s going great so far.

I suggest you do the same...

Blast from my past: "The 75 Most Influential People of the 21st Century" (2008)

 

The 75 Most Influential People of the 21st Century

Deng Xiaoping: Chinese Communist leader, creator of modern China, dead

by Thomas P.M. Barnett

Esquire, October 2008, p. 146. 

The 21st century will not belong to one region, much less one superpower. It will belong to the entire planet — a world made interdependent for the first time in human history. What drives all that connectivity is demand for a better life, and the one man most responsible for unleashing all that desire was Deng Xiaoping. You want to know why the price of just about everything in your world seems set by China? He is the guy to blame.

Five simple words said to have been spoken by Deng in 1979 got this party started: "To get rich is glorious." America might have gotten a big head start — 11 score and 12 years ago — with its unbridled "pursuit of happiness," but Deng's legendary formulation is how the rest of humanity will actually catch up. Between these two historic phrases, the world spent untold blood and treasure trying to come up with the magic formula for national economic success. But when China cast its vote for wealth creation through individual empowerment, all such history — as Francis Fukuyama famously wrote — essentially ended.

Because of Deng, globalization is no longer a choice, but a condition. Mikhail Gorbachev, celebrated for ending the cold war, closed the door on the 20th century through his miscalculations. By pursuing political reform before economic reform, he inadvertently dissolved the Soviet empire. Deng chose wisely, pursuing economic reform before political liberalization, and, in the farthest-reaching act of the 20th century, catapulted America's most precious gift to humanity — our American system-cum-globalization — into worldwide majority status.

None of this was preordained.

Deng Xiaoping survived the Long March, World War II, China's civil war, and multiple attempts by Mao Tse-tung himself to destroy him during the Cultural Revolution.

But when he survived Mao and achieved power in the early 1980s, Deng did the unthinkable: He dismantled Mao's dysfunctional socialist model, repudiating Marx without having to say so.

And now, the more Deng's system evolves, the more his legacy resembles that of Alexander Hamilton, a quintessentially 18th-century man whose greatest influence was felt in the 19th century with America's stunning rise.

Of course, to some, Deng Xiaoping will always remain the butcher of Tiananmen, but frankly, that's giving in to the fallacy that political freedom comes before economic freedom, when history says otherwise. By setting China on its long march up Abraham Maslow's hierarchy of needs, Deng transformed America's liberal trade order into a truly global phenomenon, making him the closest thing the world has to a "father of globalization."

Hassan Nasrallah:  Leader of Hezbollah, 48 * Lebanon

by Thomas P.M. Barnett

Esquire, October 2008, p. 130. 

Most terrorist movements go one of two ways: They either fall apart after the top leaders are captured or killed, or they are successfully drawn into the political process and ultimately assimilated by the ruling political forces. Hezbollah's rise within Lebanon increasingly looks like the latter, except it is Lebanon's splintered political system that is being assimilated into Hezbollah's radical Islamic agenda rather than the other way around. Now in control of close to a dozen ministries and capable of forcing the installation of its preferred president (a feat Hezbollah pulled off this summer), this Shiite militia -- backed extensively by Iran -- has become Lebanon's de facto ruling party.

Forty-eight-year-old Hassan Nasrallah, Hezbollah's charismatic secretary-general since 1992, is part Yasir Arafat (he earned his stripes as a guerrilla commander fighting Israel's occupation in the 1980s) and part Ayatollah Khomeini (then spent years abroad burnishing his meager religious street cred and honing his skill for mob-igniting fiery sermons). And, oh, part Huey Long, because he has proved that he can deliver services to a desperate people that the government couldn't or wouldn't. Israel long ago decided that it can't live with him (attempting to assassinate him just like his predecessor) but eventually may come to the conclusion -- along with Washington -- that it can't live without him.

Nasrallah, who currently holds no public office, wants to rule Lebanon openly, but with Shiites constituting roughly a third of the population, his only route to Supreme Leadership replicates Iran's long-standing strategy of emphasizing a staunchly anti-Israeli/U. S. front. In this quest, Nasrallah has succeeded brilliantly, presiding over both Israel's embarrassing withdrawal from Lebanon in 2000 and its failed military effort to reduce Hezbollah's southern state-within-a-state in the summer of 2006, yielding a 34-day war that shell-shocked Beirut's fragile ruling coalition, not to mention the world.

With Israel staring at two unthinkable long-term scenarios (South African-style apartheid rule over a soon-to-be majority Muslim population in Palestine and a nuclear Iran), the diplomatic race may soon be on to capture Nasrallah's support for the mythical two-state solution in exchange for Western acceptance of Hezbollah's achievement of clear rule in Lebanon. In effect, banking on the notion that Nasrallah is more a power-hungry nationalist than he is Tehran's ideological puppet.

The United States helped turbocharge the Middle East's ongoing Shiite revival by clumsily creating the first modern Arab Shiite-dominated state in post-Saddam Iraq. In a "one man, one vote" world, that means learning to live with the likes -- and dislikes -- of Hassan Nasrallah.

Meghan O'Sullivan:  Former national-security advisor; foreign-policy realist, 39 * Cambridge, Massachusetts

by Thomas P.M. Barnett

Esquire, October 2008, p. 146. 

She has--by the ripe old age of 39--racked up more history-making national-security policy stints than anyone under 40 you can name. Now safely ensconced at Harvard after surviving genuine dangers early on in Baghdad (the "mistakes were made," tragically incompetent first year) and then braving Washington's hostile political climate during George Bush's worst years in this long war (she co-led the White House review that birthed the surge strategy), she is both celebrated and vilified, but clearly credentialed.

Neither ideologue nor naive, O'Sullivan is that most annoying of D. C. creatures--the pragmatic centrist, whose biggest handicaps seem to be her good looks (she once modeled) and her insistence on taking the long-term view. Oh, and she's nuanced, arguing for things like engaging Iran and avoiding official labels like "rogue regimes," two views that still render her suspect among the neocons.

Not surprisingly, both O'Sullivan's admirers and detractors can only see her moving up the food chain in coming years. Good indicator? General David Petraeus asked the White House to send her back to Baghdad in the summer of 2007. The question "going forward" (which is her pet phrase, revealing a durable optimism that endeared her to Bush) isn't, Was she there for the screwups? Because she was there for the screwups. The question history will ask is, Was she there for the repair? Because that's when her leadership potential began to emerge. "Bush-bot" to some, O'Sullivan can only rise in stature as Iraq heads into the late innings, continuing to stabilize.

Blast from my past: "Old Man in a Hurry" (2005)

Old Man in a Hurry

by Thomas P.M. Barnett

Esquire, "10 Men" issue (July 2005)

The inside story of how Donald H. Rumsfeld transformed the Pentagon, in which we learn about wire-brushing, deep diving, and a secret society called the Slurg

The secretary of defense's suite of offices in the Pentagon is on the third deck, outermost, or E-ring of the five-sided building, in the wedge between corridors eight and nine. It's one of the older wedges, on the far side of where the new ones are to be found or are being renovated, and on the opposite side of the building, one thousand feet away, from the section that was destroyed on September 11, 2001.

Room 3-E-880 overlooks the Potomac in the direction of the White House and Capitol, but the famous skyline is hard to recognize on a rainy afternoon through the queer greenish tinting that covers all the windows here. You're tempted to adjust the picture on your screen, but this special coating repels electronic surveillance and denies enemy spies a view inside the Building.

The secretary's inner sanctum is a threshold so secure that you have to surrender your cell phone and BlackBerry to cross over. SecDef's office is classified a SCIF, meaning a sensitive compartmented information facility, or what people in the business call a "vault." Being inside a SCIF means you can engage in the most classified of conversations without fear, and when you leave, the Maxwell Smart doors close heavily behind you.

It is from this suite of rooms that Rumsfeld has become one of the most loathed and revered men in the world. The man is too impatient, too damned arrogant, too beyond politics, and just too stubborn for his own good. He is the famously combative, two-time SecDef (both youngest and oldest ever) who chews up and spits out experienced reporters in what are easily the most skillfully performed press conferences since John Kennedy walked the earth. He has brilliantly executed a couple of wars, and badly botched a peace. Let us stipulate all these truths just to move the conversation along.

But something else has been going on in this office, and it's nothing short of the most profound transformation of the U. S. military since World War II--a historic process that will, paradoxically, yield a force Americans haven't seen since our frontier days. The United States had one Defense Department on January 20, 2001, and it will have a very different one by January 20, 2009. Donald H. Rumsfeld, thirteenth and twenty-first secretary of defense, is the reason why.

He is known to his personal aides and longtime colleagues as a "deep diver." Confront him with a tough new bureaucratic nut to crack and he goes deep--waaaay down--on the subject until he feels he gets it sufficiently to assemble the right smart people to handle the job. It doesn't matter how much time he appears to be wasting on the process; he simply doesn't move ahead until he's got the picture in his head of what "this thing"--whatever it is--is really all about. He will keep the U. S. military's most powerful men sitting around a table for however long it takes for that to happen.

Rumsfeld's first deep dive of his second tour as secretary of defense started on the Sunday after the Saturday he was sworn in, January 21, 2001, at a meeting he called of his most trusted advisors, all of whom he had known for years, some since he was a congressman from Chicago in the 1960s, one from college fifty years before. The meeting took place in room 3-E-880, and for several participants, it was the first time they'd been together again in that vaunted space since January 1977, in the last days of the Ford administration.

Rumsfeld had been reassembling his kitchen cabinet since the day the president called him at his ranch in Taos, New Mexico, in late December and offered him the job. He said, Thank you, Mr. President-Elect, and immediately called Marty Hoffman, who had been his secretary of the Army the first time around and who also has a place in Taos. Marty was a classmate at Princeton and is one of Rumsfeld's best friends. "Can you bring together some of the people who helped and worked with me the first time around?" he asked Hoffman.

"Defense transformation" was the train already leaving the station by the time Rumsfeld was sworn in on January 20, 2001. Trapped in cold-war thinking and armed with contingency plans that had not been reviewed for years, sometimes decades, the Pentagon spent the 1990s scrambling from one overseas crisis intervention to another, in the process piling up mountains of "supplementals," or ad hoc requests for additional funding from Congress to cover unexpected operations. As one of Rumsfeld's senior aides, Pete Geren, told me in 2002, "When your 'crisis response' lasts several thousand days, it stops being a crisis and starts being a feature of your strategic landscape."

So transformation was a "mature debate," as they say in the Building, but for Rumsfeld it was too far tilted in the direction of high-tech weaponry rather than changes in "tactics, techniques, and procedures," which is a favorite military phrase of his. Because Rumsfeld was identified with space and missile defense from the time in the 1990s he spent chairing congressional commissions, everyone thought his definition of transformation would be tech heavy, but it hasn't turned out that way.

To change the culture of the Pentagon, he'd start with people, not technology. He knew that achieving any kind of meaningful transformation was going to be damn near impossible without new people, given the entrenched interests in the Building and the old ways of thinking. For new thinking, Rumsfeld sought out old friends.

In addition to Marty Hoffman, there was Tom Korologos, the grand old man of Washington politics, who had managed his confirmation in 1975 and would do the same this time, too; Paul Wolfowitz, the ideologue in the room, who would come on as his deputy; Steve Cambone from National Defense University, who was the new boy, having met Rumsfeld in the 1990s while working on the Rumsfeld-led Space Commission and Missile Defense Commission; Bill Schneider, Rumsfeld's favorite gray eminence, who would later become chairman of the Defense Science Board; and Ray DuBois, who had met young Congressman Rumsfeld in 1967 when he was working as an intern to Chuck Percy, the senator from Illinois, and then went with him to the Pentagon. He would become "mayor" of the Pentagon this time around.

"I was all of twenty-one when we met," says DuBois, "and I told friends at the time that I had met this guy named Rumsfeld who had been captain of the wrestling team at Princeton. I said, 'He's a young man in a hurry.' So I worked for a young man in a hurry when he was forty-three years old and became secretary of defense, and now I'm working for an old man in a hurry. Same guy, different age, same impatience, still in a hurry."

There was great excitement around the table. "Can you believe it? Can you believe we're all back?" was the feeling. And there was a growing sense of the enormous task that lay ahead.

Rumsfeld, at the head of the long table, ran the meeting himself, but in his typically indirect way; clearly he had an agenda, but he did not reveal it, instead wanting to tease ideas out of the assembled brains. Immediately clear was that this was not a meeting about imminent threats or weapons systems but rather a wholesale reform of the "business side" of the Pentagon. By this time, Rumsfeld had spent two decades as a CEO, at G. D. Searle & Co., General Instrument Corporation, and Gilead Sciences, and he had become a corporate technician, a philosopher of that kind of stuff, and if he had an abiding ideology it was efficiency.

Rumsfeld tossed out a series of strategic questions, trying to define the job ahead. "What should be the main transformation initiatives in my tenure?" he asked. Once they agreed on what those changes would be, Rumsfeld was intent on generating an immediate sense of momentum and inevitability. He continued. "Do we have the right projects in the pipeline? Do we have the right number of troops? I've read the reports, so I know that we have too much infrastructure. Do we need to shut down bases?" He turned to Wolfowitz. "What issues in the world do we want to address and shape from the start?"

The first goal would be reshaping Rumsfeld's massive office (the Office of the Secretary of Defense, or OSD) and recasting its "civil-military" relationship with the Joint Staff and all four military departments, something that had been impossible during the cold war but was imperative now to adapt the Pentagon to the changed world. The U. S. military has been struggling to build a single integrated force out of the Army, Air Force, Navy, and Marines ever since the Berlin Wall came down. Why make the effort? Why change the winning hand? Because these forces were constructed to meet old threats, not new ones, and the United States no longer needed and could no longer afford four militaries, and the world couldn't afford an America that was not prepared to fight future wars effectively. The main impediments to this idea would be the services themselves, dominated as each was by senior officers who had risen to the top by protecting their branch's slice of the pie from the "sister services" and, by doing so, had perpetuated such belt-and-suspender traditions as each service sporting its own particular brands of aircraft. Why? Apparently, a single plane wouldn't do--even for the "joint force," in which all services allegedly fought side by side in a seamless fashion.

To achieve integration, Rumsfeld announced that they would push for another BRAC (Base Realignment and Closure Commission), arguing that they must succeed where secretaries William Perry and Bill Cohen had failed under Clinton.

The underlying assumption to all at the table was that the dimensions of the job were such that there was simply no way that full implementation could be reached before a second term. One day after a new president had been sworn in, coming into office with the shakiest of mandates, Rumsfeld was talking about an eight-year plan.

And transformation was born.

Just as quickly, it almost died.

Rumsfeld pops out of his chair with the speed of the weekly squash player he still is at age seventy-three and strides over to shake my hand with a big, welcoming smile on his face, employing the enthusiastic, familiar tone one associates with longtime acquaintances. "Hey, how are ya? Nice to see ya!" I'm surprised by how short he is, as I can look right over his head.

In advance of this meeting, I have talked to three joint chiefs (Navy, Air Force, Army), two undersecretaries (policy and intel), Rumsfeld's chief of staff, Larry Di Rita, aka "Heavy D," who is also SecDef's press secretary, and others close to Rumsfeld, including Ray DuBois, the mayor of the Pentagon. It is a testament to his penchant for preparation that Rumsfeld reviewed the transcripts of all these interviews beforehand.

With the blinds drawn, I can't tell if it's day or night as I enter an office that could pass for a small ballroom. Like the man, the room has a definite old-school feel about it--a massive wooden desk smack-dab in the middle, lots of rugged Remington-style bronze statues of Indians and buffalo, a bronze bust of Winston Churchill. This is a room you smoke cigars in and decide the fate of the free world.

We sit down at a long table on the far side of the room. He's wearing a zippered fleece vest over his shirt and tie, Mr. Rogers style, and he is very at ease. He asks several questions that he already knows the answers to, testing and probing, as is his way. When he speaks, his hands are in constant motion, tearing apart and rearranging invisible things, physically grappling with the subject at hand. There's a lot to grapple with these days.

Rumsfeld is warming to the topic of how a transformed military looks and feels on the battlefield.

"One of our folks made a comment the other day, and I called him on it and said, 'You said you have 20 percent of something you need,' and he said, 'Yeah.' And I said, 'You have 100 percent of what you have, and you've decided you need something else.' And he said, 'That's right.' And I said, 'Well, when did you decide that?' and he said, 'Last week.' And I said, 'Well, what you need to do is not say that you have 20 percent of what you need. What you need to do is adapt your tactics, techniques, and procedures to fit what you have, because that's what you asked for. And you now have it. That's what you wanted, and now you've got it. And now you've got to go do what you do with what you have and make sure that you're protecting lives and achieving goals by designing tactics, techniques, and procedures to fit it.' There's nothing wrong with saying you want more of something or something different. But you're against a thinking enemy; the enemy's going to change. If you are successful and you get a body armor that will stop a certain size slug, he's going to come at a different angle or he's going to get armor-piercing slugs. It doesn't take a genius to figure that out. If you get a jammer to take these frequencies out, they're going to go to these frequencies or they're going to roam or they're going to do something different. That is the nature of it.

"And you will never have the ability to defend against every location and every conceivable technique at every moment of the day or night with stuff. We would sink a country with that stuff! So that's what the commander's gotta do. He's gotta use his head."

This sounds dangerously close to the kind of talk that got Rumsfeld in hot water late last year, when a soldier complained to him about a lack of armored vehicles on the ground in Iraq, and he replied, "You go to war with the Army you have, not the Army you might want or wish to have." It struck many as grossly insensitive and had congressmen calling for Rumsfeld's head. So if nothing else, he is an unrepentant cuss.

Moreover, the treatment he subjected the poor 20 percent bastard to is known in Rumsfeld's Pentagon as wire-brushing. This particular officer got off pretty easy, actually, because you really don't want Donald Rumsfeld after you with a wire brush. But the wire brush is an integral tool Rumsfeld uses in his deep dives.

Giving someone the wire brush means chewing them out, typically in a public way that's demeaning to their stature. It's pinning their ears back, throwing out question after question you know they can't answer correctly and then attacking every single syllable they toss up from their defensive crouch. It's verbal bullying at its best, and when you're a ranking civilian and we're talking some military officer, you can certainly get your rocks off doing it because--hey--they have to take it from you, what with civilian control and all. Plus, there's a certain brand of military officer who really keeps it in--really tight inside. Those guys you can play like a fiddle.

Rumsfeld has created enemies in the ranks with this tactic, and during the Afghanistan campaign, he wire-brushed someone big right out of the service. Marine Lieutenant General Greg Newbold held the all-important position of J-3 on the Joint Staff during that war, meaning he was the flag officer overseeing combat operations from the Pentagon. In that role he routinely briefed the press on the progress of the war. One day, he announced that the Taliban had been "eviscerated." Immediately signaling Rumsfeld's displeasure at this potentially explosive choice of words, General Richard Myers, who had recently been named chairman of the Joint Chiefs of Staff, said, "We were surprised that a marine even knew what eviscerated meant."

Newbold knew he was in for it. Soon after, he was jerked back from press briefings and replaced by a more savvy Navy admiral. Subjected to some intense wire-brushing, Newbold chose to end his military career by requesting early retirement. Later asked about Rumsfeld's "abusive" ways, Newbold cited an even bigger concern: that Rumsfeld's tough style intimidated some generals from doing their jobs right. As he put it, "If the environment's intimidating and suppressive, if it demeans, people tend to clam up."

There are ways to parry the old man's wire-brushing, of course, and most serious military leaders have that sort of right-back-up-yours-sir! kind of patter down. Take, for instance, a three-star general who's briefed Rumsfeld a half dozen times. This guy's led men into battle, so the old man has nothing on him. Well, one day they're going back and forth and the general just stops him dead. He says, "Sir, I don't know why it is we get along so well. I've got a big family and you've got a little one. I'm an army ground-pounder and you were a stinkin' navy pilot. I like to use little words and you like to use big ones."

This guy's wire-brushing back. He's giving the old man some guff. He's saying, I'm not afraid of you. Rumsfeld responds to this, he respects it.

Then the general clinches the deal. "So I've finally figured out why we get along so well," he says. "We've both run with the bulls at Pamplona!"

Rumsfeld shrieks in delight and then launches into a fifteen-minute reverie about the time he ran with the bulls. And for fifteen glorious minutes, he put away the goddamn wire brush.

Having been told by the Bush-Cheney ticket in 2000 that "help is on the way," people in the military expected a nice fat budget amendment for 2002, a pile of money they could use to begin to make up for all the "procurement holidays" taken by the soft-on-defense Clinton crowd. But Rumsfeld delivered only $18.4 billion--peanuts given the demand. Many in the defense community in the Pentagon and on the Hill started whispering about how the old man had lost his first bureaucratic battle, and badly. The "experienced hand" just looked old and lost all of a sudden, and his never-ending Friday-afternoon bull sessions about the meaning of transformation just seemed goofy.

But in Rumsfeld's view, he was preparing the bureaucratic battlefield in a way no other SecDef had before him. People thought Robert McNamara and his "whiz kids" had come in with an agenda for change under Kennedy, but their ambition was nothing compared with Rumsfeld's. He wanted to change it all: breaking up and reassembling every cold-war process for planning there was and making it lighter, faster, simpler, leaner.

Rumsfeld's first Quadrennial Defense Review in spring 2001 highlighted the concept of "deter forward," reflecting his belief that just having the force was one thing but being able to use it rapidly and decisively was another. Rumsfeld didn't want to deter America's enemies with the stuff we had over here but with the threat of what we could do with it over there--before the enemy had a chance to act.

Today, we call that concept by the far more direct term of preemption. A preemptive force can't take weeks to amass its personnel, much less months to send over all the tons of stuff that force might use. One thing that really sticks in Rumsfeld's craw is that the Pentagon was forced to bring back to the U. S. roughly 90 percent of what it had shipped over to the Persian Gulf to fight the first Iraq war with Saddam back in 1991. ("We would sink a country with that stuff!") That's how huge and sluggish the pipeline was: By the time the war had ended, we had enough stuff over there to fight nine more wars. And they brought it all back! Dammit, there was your Exhibit A in why we couldn't go on like that anymore.

The one question Rumsfeld purposefully avoided in all of his early mind-melds with staffers and generals was "To what end?" Believing that future enemies and future wars are too hard to predict, and that he was a businessman who would leave the war to the warriors, he made little effort to dive deep on that question. So the Pentagon planning process defaulted on that score to the neocons, Wolfowitz and his undersecretary for policy, Douglas Feith, who, at that point, had China in their crosshairs and a distinct aversion to Bill Clinton's sloppy attempts at nation building, à la Somalia and Haiti.

But so alien and unpopular were Rumsfeld's ideas, so out of sync was he on Capitol Hill, and so loathed was he by the flags and the generals that by Labor Day 2001 The Washington Post had all but announced a write-in contest for his successor, so certain were the cognoscenti that the old man would be the first Bush Cabinet member jettisoned. Gone by Christmas was the word.

But the terrorist attacks of September 11 would change all that, providing Rumsfeld's means with a very definitive end--the global war on terrorism. This war would become the proving ground, the laboratory, for Rumsfeld's transformation. Absent 9/11, transformation would have remained nothing more than a bureaucratic slogan. Absent 9/11, Donald Rumsfeld would be back on his ranch right now, rearranging the deck chairs on his back patio.

And since 9/11, no one in Pentagon history has used people like Rumsfeld has, and he's broken more rules and requirements than anyone thought possible.

When the president wanted the Taliban dislodged in Afghanistan as quickly as possible after 9/11, Rumsfeld backed General Tommy Franks's quick-and-dirty plan using an unprecedented mix of Special Forces, precision bombing, and CIA paramilitaries to exploit the on-the-ground capabilities of the anti-Taliban Afghani warlords and their forces. That experiment proved to be an eye-opener for Rumsfeld regarding the potential of Special Operations Command (SOCOM), and he quickly anointed the Tampa-based command as the lead Combatant Command in the global war on terrorism, taking what had always been a bastard-stepchild command that supported other commands and instantly turning it into one that now receives support from others. In the Pentagon, this was profound, like the rich father designating his chauffeur's son as his new heir.

By doing so, Rumsfeld not only transformed the role of SOCOM, he designated it as a cannibalizing agent within the U. S. military, saying to the rest of the armed forces: Go be more like them!

In the summer of 2003, Rumsfeld skipped over an entire generation of army senior generals to bring a four-star "snake eater" out of retirement to serve as his army chief of staff. Plucking General Pete Schoomaker from his retirement ranch nearly three years after he left the service as the boss of Special Operations Command was a serious kick in the pants to a hidebound Army that was struggling to transform itself under General Eric Shinseki, who, despite coining the term transformation, had fallen out of favor with Rumsfeld for, as one senior aide put it, becoming too fixated on improving the Army's efficiency in combat without questioning the relevance of the capabilities he was developing, as in, Great force, wrong war.

Schoomaker was down in Texas meeting with one of his ranching partners (everybody in this crowd, it seems, has a ranch) when he got a call on his cell phone. At first he thought it was a joke. "You've got to be kidding," he told Rumsfeld. "I'm not interested."

"That's not a good enough answer," Rumsfeld replied. "You've at least got to come talk."

So Schoomaker drove twenty-one hours straight back to his home in Tampa and then immediately flew up to Washington and spent the weekend with Rumsfeld. "By the time we got through talking . . . you get to a point where it's your duty to do things," says Schoomaker. "It's totally illogical. My wife, she thinks it's nuts."

Now Schoomaker is redesigning the Army's century-old division structure (fifteen to twenty thousand troops each) into something far more flexible and modular, or what he calls "brigade units of action" (thirty-five hundred to four thousand troops each). That's eighteen divisions, a cold-war structure, a structure for fighting the Russians, morphing into almost eighty brigades to face new enemies, brigades that are interchangeable among the active-duty force, the Army Reserves, and the National Guard. This is nothing less than returning the Army to its frontier days of cavalry-sized field units and leaving behind the division-driven history of two World Wars and the entire cold war. In a generation, the divisions will remain only as ceremonial vestiges of a type of war that no longer

exists. That's the idea anyway.

In return, Schoomaker made Rumsfeld promise that there'd be no divisions cut (so the manpower pool wouldn't change) and that he'd buy the general some "head room" with thirty thousand extra active-duty troops. Rumsfeld agreed, even as he knew he'd catch hell from Congress for having to admit the Army needed more men as the insurgency heated up in Iraq in the summer of 2003. After all, Eric Shinseki's parting shot to Rumsfeld had been to testify that the Pentagon had vastly underestimated the number of ground forces needed to secure postwar Iraq. Schoomaker told me that Rumsfeld went to the president directly on that one.

And to emphasize the importance of getting the people right before talking about the weapons, Schoomaker got Rumsfeld's promise to push back the production of the Army's superexpensive, all-encompassing Future Combat Systems to the latter years of the second administration to give the general additional time to boot up the new brigade structure. Rumsfeld agreed without question.

In the Building, this is providing what they call "top cover." Get past the wire-brushing, bond with the guy, and he'll go to the mattresses for you.

In room 3-E-880, Rumsfeld is talking about the brief that let him know what a mess there was to clean up. It was about a month after he was sworn in, and he had demanded to get a presentation on, "Where are the levers in the building? Not just where are they, but who pulls them? And what are they connected to?" What he saw that day is now called the Levers Brief.

Walking into his conference room, participants remember the walls being covered with giant charts full of boxes and arrows and lines and flow diagrams galore. Conveyor belts like crazy, like something out of I Love Lucy. "I looked at all these conveyor belts that seemed like they were loaded six, eight years ago," Rumsfeld says, "and they were just chugging along, and you could reach in and take something off, or put something on, but you couldn't connect the different conveyor belts. Each process had a life of its own and drivers that were disconnected from the others, and it was really just stark for me to see it that way, having been in a company where you could make things happen."

That day taught him that he had to change the entire culture of long-range planning throughout the Building, not just within his office. Once he had the right people on both sides of the process--both military and civilian--he had to create a new venue for these two sides to fight out budgetary and policy decisions in an integrated way. Because there are lots of brawls to get out of the way. Otherwise, you still end up buying for four different forces and then trying to operate them in the field as though they're an integrated whole when they're not. The result is that you always end up with a force that's driven more by budgetary considerations than it is by policy goals, when in the rest of the known universe, strategic thinkers will tell you that it makes much more sense for policy to drive budgetary choices, as in, "I want to do this, so I buy that." What the Pentagon has had for decades is the complete opposite, as in: "I want to buy that, so I can only do this."

As they say, when all you have is a hammer, the entire world starts to look like nails.

Thus, Rumsfeld's fight club was born. It's a secret society, and it's called the Slurg.

The Senior Level Review Group consists of eighteen top-drawer members: The secretary, the deputy secretary, the three service secretaries, the five undersecretaries, the six joint chiefs, the general counsel, and the assistant secretary for public affairs. What's so magical about eighteen? That's how many fit around the table in Rumsfeld's conference room. Six more members sit against the wall. It's not written down or anything; they just know to sit against the wall. The additional six are the assistant secretary for legislative affairs, the director of administration and management (the "mayor"), the assistant secretary for networks and information integration (the computer geek in chief), the director of program analysis and evaluation, SecDef's senior military assistant, and his senior special assistant. That's the two dozen regulars. Additional senior players drop in now and then as required.

Of course, it wouldn't be a Rumsfeld invention if it didn't have a bunch of rules attached to it, as Rumsfeld is famous for his rules.

The first rule of the Slurg is: You do not talk about the Slurg.

This secrecy is crucial. Top leaders, both military and civilian, need to be able to speak freely without creating, as Rumsfeld told me, "chatter about, Gee, this guy said something dumb and he proposed this." Those kinds of leaks can set off a lot of useless bureaucratic skirmishes down below. As one participant put it, "Because people were meant to speak their minds, you have to have someplace where they can be passionate on an issue." Or, as Rumsfeld puts it, "You have to have a process where people are confident they can talk, they can take risks, they can speculate on things and raise questions."

The second rule of the Slurg is: You DO NOT talk about the Slurg!

During the Clinton administration, the biggest and most important discussions occurred in the Tank, or the conference room where the six joint chiefs regularly meet. Under Rumsfeld, you never hear about the Tank anymore. It still meets. It's just not where the biggest decisions are made.

And that's crucial. Because the Tank is military territory, a space the secretary enters now and then but where he cannot run the show, because by tradition the Tank is where the chairman rules. Early in the first Bush term, Rumsfeld participated in a Tank session where some strong words were spoken, and the next day those words appeared in the media. To this day, one of the only two chiefs still serving from that time, Admiral Vern Clark, swears that it wasn't one of his colleagues who talked out of turn but one of the "straphangers," a military term for the personal aides who sit along the wall. After that, meaningful Tank sessions involving Rumsfeld became far less frequent.

No straphangers are allowed in the Slurg.

The third rule of the Slurg is: If you don't show up, you don't get to fight.

If the principal doesn't show up, then his seat at the table is forfeited for that session. You can't send a note taker to report back, and only a few key players are allowed substitutions under duress, meaning a vice-chief of staff can sub for the chief, but nobody lower than that.

The fourth rule of the Slurg is: No SecDef, no Slurg.

Rumsfeld once let Wolfowitz chair a Slurg in his absence, and when he got the debrief on it, he quickly decided that that would be the last Slurg to occur without his being present to steer things. The old man has a very distinct definition of what constitutes being "on topic."

The fifth rule of the Slurg is: One fight at a time, and fights will go on as long as they have to.

Rumsfeld decides the Slurg's agenda in advance of each meeting, but once things open up, he often just sits back and lets people go at it in front of him, intervening little in the process. Participants know to keep it civil and that personal rivalries are supposed to be checked at the door. But it's pretty freewheeling, and the meetings routinely drag on for more than two hours. Decisions are hammered out only in the roughest sense, as the ultimate calls reside with Rumsfeld himself, who often makes up his mind afterward and transmits his decision in one of his "snowflake" memos, so named because they fly off his desk in a flurry.

The sixth rule of the Slurg is: When the war fighter's involved, the war fighter's invited.

When the agenda touches upon subjects with big implications for the combatant commanders, or the four-star admirals and generals who command the forces in the major regional commands, then they're invited to a special, expanded version of the Slurg called the SPC, or the Strategic Planning Council.

Those are the basic rules, and there are no others. That is also a rule.

The Slurg has become the birthing room for something called the Joint Capability Integration and Development System. In plain English, the Slurg is the venue in which senior civilian officials and military officers have begun to engage in up-front comparisons of each service's acquisition strategies. That means head-to-head competition between programs in a rigorous environment that focuses on capabilities, not service shares. The Slurg makes the JCIDS (jay-sids) possible by getting all the necessary players around the table and forcing a truly "joint" discussion: joint among the services, joint between the civilian and military sides of the house, and joint between the force provider (Pentagon) and the force consumer (Combatant Commands).

This is the Holy Grail of jointness, or the historical process of operational integration among the services that stretches back to 1986, when Congress passed the Goldwater-Nichols Act in response to--among other things--the embarrassment of the 1983 invasion of Grenada, a comedy of interservice errors that could have resulted in the Bay of Pigs if there had been any competent enemies on the scene. Goldwater-Nichols sought to force greater integration and cooperation among the four services by diminishing the power of the service secretaries and increasing the power of the chairman of the Joint Chiefs and the various regional battle commanders. To a certain extent it's succeeded, as the four services now "fight joint" even if they don't "buy joint."

JCIDS, then, is the quest to create future weapons systems and platforms that are joint from the start, not service-specific capabilities that are later forced to adapt to one another, probably once a war is already underway. If jointness were a religion, then the concept of being "born joint" would be the equivalent of the Immaculate Conception--an article of pure faith.

The very secret Slurg is the Round Table of jointness. It is the altar of transformation. It is a very exclusive room. It will go down as the single biggest organizational legacy of Rumsfeld's reign.

Rumsfeld is leaning forward, almost standing up out of his chair, and he's talking about the ongoing experiment of Iraq. "We've got people out there who are so good, and they've got the guts to call audibles, and they do," he says. "And I think it's admirable. I mean, the idea that the president of the United States, the secretary of defense, or the combatant commander in Tampa could tell our people in Iraq or Afghanistan what they're supposed to do when they get up in the morning just isn't realistic. These soldiers and sailors and marines and airmen are so good, and their leadership is so good, that they are doing an enormously complex task the way it should be done. It's different in every part of that country. If [Commanding General] George Casey designed a template and dropped it down and said, 'Here's what each division should do . . . each brigade,' it wouldn't work! Because the situation is different in the north, in the south, in Baghdad. . . . We've got rural problems out west. So what he has to do is get very good people, give them the right kind of leadership, encourage them to be bold and to take risks, and to communicate back what they need, what they're doing, get ideas from others--and go out and do their best, and that's what they do."

So Donald Rumsfeld is not at war. In fact, a postwar feeling pervades Rumsfeld's office, and his focus has returned full-time to leaving a much different Pentagon in his wake. He has told those who need to know that he intends to stay until the end of the second Bush administration, and he's aiming to lock in the big changes he's setting in motion. If he had been around just one term, anyone could have reversed all of this with a few strokes of a pen. Now, well, it will take another Rumsfeld to un-Rumsfeld this Pentagon when he's done and out the door in January 2009.

"Change takes time," he says. "Any CEO in a corporation, you ask him what the rough amount of time to do it, and it's eight or ten years."

Now Rumsfeld is working the "gearbox" issues, as he likes to call them. He's gotten way down into the guts of the Pentagon's machinery, making changes that will redefine how things are planned, how people are employed, how resources are acquired, and how America fights and wins both the wars that lie ahead and the inevitable nation building that must follow. And he aims to make those changes permanent, because "you can get backsliding, but if you go down deep enough in this institution, where nobody notices and nobody sees it and nobody understands it and it's hard to figure out, and you get those things going right, they're going to go on for a long time. Once they're ingrained, they'll go on that way until somebody spends enough time, enough effort, to go in and readjust them down there. But you can't do it superficially along the top. It just doesn't happen."

To go along with all the other ongoing transformation, this gearbox approach of Rumsfeld's is producing two huge philosophical sea changes in the Pentagon that have implications for the entire United States government that will reach across the decades to come.

First, the 2005 Quadrennial Defense Review, to be released in the fall, will shift China from "near-peer competitor" to a rising power whose emergence we need to guide. It also will enshrine the notion that nation building is something the military does, finally reversing the long-standing Powell Doctrine to conform with what's happening in the real world, because dealing with failed states is a fact of life in a global war on terrorism, especially when terrorists seek sanctuary in them.

But perhaps most stunning are Rumsfeld's plans for something he calls the National Security Personnel System, which will radically redefine civilian and military service in the Defense Department, changing from a longevity-based system to a performance-based system. Already, radical new features of this plan have been field-tested in the Navy, where, in the past, so-called detailers told sailors where they were going on their next assignment--with little warning and like it or not. Eager to break that boneheaded tradition, the Navy is experimenting with an eBay-like online auction system in which individual servicemen and -women bid against one another for desired postings. As Admiral Vern Clark told me, "I've learned you can get away with murder if you call it a pilot program."

So Clark is pioneering a system by which, instead of sending people to places they don't want to go on a schedule that plays havoc with their home life, "they're going to negotiate on the Web for jobs. The decision's going to be made by the ship and the guy or gal. You know, we're going to create a whole new world here."

The plan is designed to save the services money and effort by reducing early departures from the ranks by people who just can't take it anymore. The Navy's so-called "slamming" rate, meaning the percentage of job transfers against a person's will, has hovered at 30 to 35 percent in recent years. That means the Navy has been pissing off one third of its personnel on a regular basis. Now, under this program, the slamming rate is down to less than one percent.

More profoundly, Clark's pilot program has already spread to the other services, and in turn could well change the very nature of civil service throughout the United States government.

After considerable time with the top-ranking civilian and military leaders of the Pentagon, a new picture of Donald Rumsfeld has emerged for me, and I now believe something that I would have thought preposterous before: There are no "Rumsfeld wars." Of course, he's integral to how the Pentagon has conducted these operations, and he deserves all the credit and blame any defense secretary naturally receives as a result. But they're not his wars, and they never were. And in that, critics of the war might have something. The rationales behind the Iraq war belonged to the departing neocons Wolfowitz and Feith (who took pains in an interview to lecture me on the correct usage of the word neocon). And of course the president.

Rumsfeld does not seek those badges of war because he does not understand why any SecDef would claim them. He is a technician, not a warrior; a businessman, not an ideologue. He sees his main job as taking care of every single move made up to the first shots being fired. He wants it lighter, faster, simpler, leaner. And he wants that whether or not you give him wars to wage. It just so happens that in his time there have been wars to wage.

The war decisions are somebody else's business. But once you give him those wars to wage, he will use them at will as his proving grounds, sending one force over, bringing another one back. Four armed services existed at the outset of the Rumsfeld era, but only one military force will remain when he's gone.

As the admiral said, if it's a pilot program, you can get away with murder. And the wars in Afghanistan and Iraq have been an astonishing proving ground for Rumsfeld's idea of a transformed Pentagon.

Someone told me this story about Donald Rumsfeld.

Before becoming a public man, Rumsfeld grew up in Illinois, and fifty years ago, he married his high school sweetheart, Joyce. Recently, he told his wife, "I'm concerned that because I've been written about so much, our grandchildren will know all they need to know about me, but they won't know their grandma in the same way." So he decided to write his wife's life story himself in his spare time. So when he has spare time, that's what he does.

The man who told me this was a four-star admiral who got misty-eyed as he sat there talking in his Pentagon office. As a rule, four-star admirals do not get misty-eyed.

But to me, this story says less about the vast unexplored emotional landscape of Donald Rumsfeld and more about a man who simply wants to do things that last.

Back in room 3-E-880, the old man's got a grip-and-grin with a visiting dignitary to see to and has to be on his way. Before he does, though, Rumsfeld emphatically shrugs off the notion that, despite popular perception, he ever gets frustrated. He is, he says, not the frustratable sort. But he does get surprised.

"And the surprise for me is that, I guess the surprise is, in an institution this big--and it is enormous--you can interact with only so many people. And you can provide the energy and the urgency to that universe. If you drop a pebble in a pond, the ripples go out. And the ripples go out from those people. And the test is, how big a stone can you throw in the pond? And how big are the ripples? And how many of them can you do?

"Every once in a while, I find a dead spot that missed the ripples, and I'm amazed! You think, My gosh, you get up at five in the morning, you're in here at six, six-thirty or something, and you're here in the evening, and you work at home, and you're going. . . . All these people are just working their heads off, everyone around me is working their heads off, doing a great job, and then you find a dead spot, and you think, They don't get it! They didn't hear! The ripple never got there! It's a still! It's just a little eddy going around in a circle over there! And you think, Isn't that amazing!? How could they not hear!? What's going on!? And, you know, people want to do the right thing. It isn't that people are resistant to it. Most people want to feel useful; they want to feel they're accomplishing something. So it always surprises me. And then I think to myself, Well, what can we do? How many more of those dead areas are there? The stills, the eddies, where nothing's happening? It's just going around in a circle? And we have to find them. And get after them."

Blast from my past: "The Chinese Are Our Friends" (2005)

 

The Chinese Are Our Friends

by Thomas P.M. Barnett

Esquire, November 2005, pp. 92-102 & 214.

... despite everything you hear from the fearmongers at the Pentagon. Don't listen to them. The Sino-American partnership will define the twenty-first century.

The greatest threat to America's success in its war on terrorism sits inside the Pentagon. The proponents of Big War (that cold-war gift that keeps on giving), found overwhelmingly in the Air Force and Navy, will go to any length to demonize China in their quest to justify high-tech weaponry (space wars for the flyboys) and super-expensive platforms (submarines and ships for the admirals, and bomber jets for both) in the budget struggles triggered by our costly wars in Afghanistan and Iraq.

With China cast as America's inevitable enemy in war, the Air Force and Navy will hold off the surging demands of the Army and Marines for their labor-intensive efforts in Southwest Asia, keeping a slew of established defense contractors ecstatic in the process. How much money are we talking about? Adding up various reports of the Government Accountability Office, we're talking about $1.3 trillion that the Pentagon is locked into spending on close to a hundred major programs. So if China can't be sold to Congress and the American people as the next Red menace, then we're looking at a lot of expensive military systems being cut in favor of giving our troops on the ground the simple and relatively cheap gear they so desperately need not only to stay alive but also to win these ongoing conflicts.

You'd think the great search for the replacement for the Soviet threat would have finally ended after 9/11, but sadly that's not the case. Too many profits on the line. Army generals are fed up with being told that the global war on terrorism is the Pentagon's number-one priority, because if it were, they and their Marine Corps brethren would be getting a bigger slice of the pie instead of so much being set aside for some distant, abstract threat.

It's bodies versus bucks, folks, and that's a presidential call if ever there was one. So it's time for George W. Bush to make up his mind whether or not he's committed to transforming the Middle East and spreading liberty to those Third World hellholes where terrorists now breed in abundance. If he is, the president will put an end to this rising tide of Pentagon propaganda on the Chinese "threat" and tell Secretary of Defense Donald Rumsfeld in no uncertain terms that our trigger pullers on the ground today deserve everything they need to conduct the counterinsurgency operations and nation building that will secure America's lasting victory in his self-declared global war on terrorism. If not, then Bush should just admit that the defense-industrial complex--or maybe just Dick Cheney--is in charge of determining who America's "real enemies" are.

The most important thing you need to know about the Pentagon is that it is not in charge of today's wars but rather tomorrow's wars. Today's wars are conducted by America's combatant commanders, those four-star admirals and generals who sit atop the regional commands such as Central Command, which watches over the Middle East and Central Asia, and Pacific Command, which manages our security interests in Asia from its perch in Honolulu.

Central Command has gotten all the attention since the Soviets went away, and as a result of all those boots being on the ground in places like Afghanistan and Iraq, the Tampa-based command is clearly dominated by a ground-forces mentality. Ask CENTCOM about the military's future needs and you'll get a long laundry list of requirements focused on the warfighter who's forced to walk the beat in some of the world's scariest neighborhoods, playing bad cop in nightly shoot-outs with insurgents and good cop by day as he oversees sewer-line repairs or doles out aid to the locals.

Nothing fancy here, as most of these unconventional operations are decidedly low-tech and cheap. It's what the Marines like to call Fourth Generation Warfare, or counterinsurgency operations designed to win over civilians while slowly strangling stubborn insurgencies. Completely unsexy, 4GW typically drags on for decades, generating real-time operational costs that inevitably pinch long-term acquisition programs--and therein lies the rub for the Pentagon's Big War clientele.

During the cold war, it was easy for the Pentagon to justify its budget, as the Soviets essentially sized our forces for us. We simply counted up their stuff and either bought more of the same or upgraded our technology.

When the Soviets went away, the Pentagon's strategists started fishing around for a replacement, deciding on "rising China" in the mid-1990s, thanks to a showy standoff between Pacific Command and China's military over Taiwan. Since then, the Taiwan Strait scenario has served as the standard of the Pentagon's Big War planning and, by extension, fueled all budgetary justifications for big-ticket weapons systems and delivery platforms--everything from space-based infrared surveillance systems to the next generation of superexpensive strike fighter aircraft.

A key but rather anonymous player in this strategic debate has been Andrew Marshall, legendary Yoda of the superinfluential Office of Net Assessment, which reports directly to the secretary of defense. Marshall's main claim to fame was convincing the Pentagon in the 1980s that the Soviet Union's Red army was hell-bent on pursuing a revolution in military affairs that would--unless countered--send it leapfrogging ahead of us in high-tech weaponry. It never happened, but never mind, because as the neocons brag, it was Ronald Reagan's massive military buildup that bankrupted the Soviets. Now, apparently, we need to do the same thing to "communist" China because its rapid rise as a freewheeling capitalist economy will inevitably close the gap between their military and ours.

Do the Chinese have a trillion-plus dollars locked up in huge acquisition programs like we do? Are you kidding? We spend more to buy new stuff each year than the Chinese spend in total on their entire military. In fact, we spend more on operations in the Middle East each year than China spends on its entire military.

Prior to the September 11, 2001, terrorist strikes, the China threat was being successfully employed to win congressional support for all manner of Big War toys that logically had no real application in the 4GW scenarios that U. S. ground forces routinely found themselves in in the post-cold-war world. (Think dirt-poor Haiti or Black Hawk Down Somalia.) But 9/11 changed all that, and the Bush administration's global war on terrorism and resulting Big Bang strategy of transforming the Middle East inadvertently shifted the budgetary argument from the capital-intensive Navy and Air Force to the labor-intensive Army and Marines.

And when did that worm really turn? When Army and Marine officers began their second tours of duty in Iraq and Afghanistan last year. Program Budget Decision 753, signed by Deputy Secretary of Defense Paul Wolfowitz at the end of 2004, was the budgetary shot across the bow to the Big War crowd, as it announced a substantial shift of more than $25 billion to the Army's coffers. That "war tax," as it became known within the Defense Department, swept through the defense community like the Christmas tsunami, as basically every budget program was forced to give it up to the ground-pounders.

This shift was long overdue. During the cold war, the American military used to engage in nation building every decade or so, but since then it's more like once every two years, with a clear concentration on backward Muslim states. All these operations cost money, and as most drag on for years, either the Pentagon forgoes some of its Big War systems in budget battles, or soldiers and marines on the ground inevitably get shortchanged.

Star Wars, say hello to hillbilly armor.

Want to know why it's taken so unbearably long for our loved ones currently serving in Iraq to receive the body armor and armored Humvees they so desperately need? Because budget battle after budget battle, year in and year out, the Big War crowd inside the Pentagon has consistently defeated the Small War constituency found in the Army and Marines. And China has been the hammer the Big War strategists of the Navy and Air Force have used to beat back the Fourth Generation Warfare arguments of the ground-pounders, going all the way back to General Tony Zinni's complaints about all the things his CENTCOM troops were lacking in Somalia in the mid-1990s.

But Zinni's advice was routinely ignored by the Pentagon in the years that ensued, yielding the U. S. military that we have today: a first-half team that plays in a league that insists on keeping score until the end of the game. And of course this all culminated last December when Donald Rumsfeld was asked by an Army specialist on his way to Iraq why the soldiers there had to scrounge up scrap armor in garbage dumps to fortify their thin-skinned Humvees, and he responded that "you go to war with the Army you have, not the Army you might want or wish to have."

Well, the Army that the Pentagon's Big War machine has been wanting for the past ten years is one that's not properly equipped for such second-half efforts as peacekeeping or nation building. None of that mattered so long as the Powell Doctrine reigned supreme and America couldn't give a rat's ass about what came after the wars it waged (because our troops were already home by then, celebrating their "decisive" victory). But the war on terrorism gives the lie to the notion that drive-by regime change has any lasting impact other than making countries safe for terrorist networks. And so now the Defense Department is faced with a new rule set: Don't plan to win the war unless you plan to win the peace.

The Pentagon's own Defense Science Board noted this profound shortcoming in its recent seminal report on postconflict nation-building efforts in the post-cold-war era, "Transition To and From Hostilities," recommending Rumsfeld "direct the services to reshape and rebalance their forces to provide a stabilization and reconstruction capability," one that will require "substantially more resources" if America is going to become more successful in our overseas military interventions.

How so? Doesn't the fact that America fields the most awesome war-fighting force on the planet ensure that we'll win any wars we wage? Wars yes, but not the peace that must inevitably follow. As the DSB report noted, our enemies in this global war on terrorism have already cracked our operational code: Don't fight the Americans in the first-half war; simply wait until the second-half "peace" and then go on the offensive--insurgency-style--against a follow-on U. S. force that's poorly equipped and poorly trained for the job of securing the original victory.

How many $2 billion attack subs did it recently take to recapture Fallujah--yet again!--from the Iraqi insurgents? None, which is not enough as far as the Big War crowd is concerned--not nearly enough.

But how many of our soldiers and marines give up their lives each and every time our ground forces are forced to engage in such desperate urban warfare because the neocons screwed up the Iraq occupation?

Ouch. Let's not go there, because if we do, the Pentagon's Big War propaganda machinery might be exposed for what it really is: an unprincipled scheme to put the long-term profitability of major defense contractors ahead of the equally long-term needs of our troops in the field.

So tell me, which scenario do you think is more likely in the future? More inescapable? That our sons and daughters will get stuck patrolling urban shooting galleries in Africa and the Middle East, or that America will fight some fabulous high-tech war with Wal-Mart's main subsidiary, China, Inc.? And which scenario do you think has more relevance to a global war on terrorism? Met any good Chinese terrorists lately?

Atlantic Monthly writer Robert Kaplan is probably more identified with Fourth Generation Warfare thinking than any other journalist working today. His steady stream of articles and books on the Mad Max battlefields of failed states, where drug-crazed teenage mercenaries rule the day, have done more to popularize the 4GW arguments of Army and Marine strategists than anything else. And boy, do the ground-pounders love him for it.

Which makes his recent conversion to the China hawks' camp all the more stunning. Writing in the June issue of The Atlantic, the widely respected journalist performed the equivalent of a strategic lap dance for Pacific Command by outlining "how we would fight China," which is the title of the article. Not why, mind you, just how.

Kaplan takes such an indirect route because the "why" argument on China frankly sucks. I mean, we're going to fight China to prevent it from becoming our biggest trade partner? To punish it for generating such a huge trade deficit, already our largest with any country in the world? To stop Beijing from funneling all those trade dollars back into U.S. Treasury bonds and secondary mortgage markets, thus keeping our interest rates low? Because China's cheap labor exerts deflationary pressure on global prices? Because China's rapid embrace of globalization has lifted hundreds of millions of Asians out of poverty in the last twenty years?

No, Kaplan avoids all such arguments for just that reason--they defy logic. Instead, he simply flips the Taiwan card on the table and then he's off to the races, or, should I say, the many wars--both hot and cold--that he imagines America must inevitably wage against China in the coming decades.

Why? Let Kaplan tell you himself in what constitutes the stunning thesis of his argument: "Pulsing with consumer and martial energy, and boasting a peasantry that, unlike others in history, is overwhelmingly literate, China constitutes the principal conventional threat to America's liberal imperium."

Got that?

China's "pulsing" with "consumer energy," which apparently means those "literate peasants" want to buy stuff left and right, and since consumerism and literacy go hand in hand with "martial" tendencies (what the Chinese can't buy, they'll wage war to acquire, yes?), obviously America must go to war with them. I mean, a billion-plus Chinese consumers must represent a threat to our "liberal imperium," right?

Having spent a long afternoon in a Wal-Mart in the Chinese city of Nanchang last year, I can personally attest to the horror that is the Chinese consumer: Pushy, demanding, and downright aggressive in their price haggling, these people are not to be trusted under any circumstances. And don't even get me started on their line jumping at the checkout!

But the Chinese threat, we are told, is almost always masterfully indirect, so Beijing's growing economic ties around the planet portend a clear diminution of American military power. Check out how our new Sinophobe cleverly ties "rising China" with the global war on terrorism: "While stateless terrorists fill security vacuums, the Chinese fill economic ones."

Notice that subtle linkage? China and Al Qaeda are basically two sides of the same coin! If there's a vacuum to be found (meaning any place not firmly under America's "liberal imperium," one imagines), we're looking at one of two outcomes: Either Al Qaeda or the Chinese will eventually take over. The former may be committed to killing Americans on sight the world over, but the latter--with their "literate consumerism"--most assuredly want to...I dunno...sell us low-priced furniture and cars?

Don't get me wrong. I do worry about China's yuan being still overly pegged to the U. S. dollar (despite the recent micro-revaluation), and no American shareholder in his right mind doesn't fear the amount of intellectual piracy currently occurring in China ("One for a dolla!" being the martial cry of Chinese street vendors hawking Hollywood DVDs the very day those movies open in theaters back home). And when pressed to describe what I consider to be the biggest threat to international security in the near term, I always cite the threat of a financial panic brewing inside China's far too rickety banking sector.

But how the Pentagon solves any of these economic "conflicts" with China is really beyond me. Our strategic exposure here is financial, not force-on-force war. And outside of the pure Taiwan scenario, upon which China's military buildup is clearly focused, it's not clear to me that U. S. and Chinese interests necessarily clash whatsoever.

Here's another good example of this queer logic: The Wall Street Journal recently ran a front-page story that laid out--in rather breathless detail--China's "broad push into Africa." The Chinese are accused of courting African dictatorships to gain access to strategic resources, including--God forbid!--oil.

Good thing America could never be accused of similar motivations and tactics.

But the Chinese aren't waging war in Africa, nor are they establishing military outposts like we are. No, China's "indirectness" comes in the form of building dams and laying roads and "cultivating desperately poor nations to serve as markets for its products decades down the road."

My, that is scary, reflecting, as the Journal story points out, "Beijing's policy of actively encouraging its companies and citizens to set up shop in Africa at a record pace."

Hmmm. China's investing and creating business and market opportunities in Africa, a continent long ravaged by civil wars and AIDS and America's complete indifference to a Holocaust's worth of preventable deaths in the last decade. And that's considered bad?

To listen to some fire-breathing congressmen, it sure as hell is, because China will secure long-term access to strategic raw materials, leaving our economy high and dry in the "resource wars" that must inevitably ensue.

This is zero-sum thinking at its worst, reflecting a strategic mind-set that declares a rise in any country's commercial influence around the world as necessarily signaling a decline in American power. If you had proposed in 1980 that the biggest threat to America's "liberal imperium" in 2005 was going to be a China whose rapacious style of capitalism surpassed even our own, you would have been drunk.

Donald Rumsfeld recently did some heavy lifting himself for the Big War crowd, signaling just how powerful it remains in the Bush administration. While in Asia in June for an annual regional security conference, he issued a "sharp rebuke," according to The New York Times, to China for its rising military spending. "Since no nation threatens China," Rumsfeld wondered out loud, "why this growing investment?"

Interesting question. Since no "nation" threatens the United States, but merely a transnational terrorist movement, perhaps the Chinese are wondering about America's skyrocketing defense budget of the last four years. Baseline defense spending is up 35 percent since 2001, not including the couple hundred billion extra in supplementals to pay for the wars. The U. S. routinely spends as much on research and development alone as China, according to the highest estimates, spends on its entire defense budget (approximately $70 billion). Meanwhile, the Rand Corporation's estimates of Chinese defense-spending increases, while routinely registering double-digit annual percentage growth, place China's military spending as a percentage of GDP at far less than that of America's defense burden--roughly 2.5 percent to America's almost 4 percent.

Using George Orwell's "newspeak" from 1984, I guess you could call our defense hike doubleplusgood to China's merely plusgood. But who's counting?

The Pentagon is. Its latest annual projection of Chinese defense spending, titled "The Military Power of the People's Republic of China," suggests that in two decades' time, China could, according to our highest estimates, be spending roughly half (as much as $250 billion) of what America's total defense bill was for 2005 (roughly $500 billion)--sort of a doublehalfbad prediction, if I may be so bold.

Do such wild projections matter? You bet. They will play heavily into the Pentagon's Quadrennial Defense Review debate, which in recent months, according to a recent article by Greg Jaffe in The Wall Street Journal, has "intensified divisions among policy makers over how to approach China." Which means, of course, that the immediate tasks of the Army and Marines--fighting terrorists and insurgents in Iraq--will be balanced against the hypothetical threat of China, the "driver of U. S. military modernization," according to the Navy and Air Force.

With Rumsfeld--who has seemed committed to transforming the Pentagon from its leaden cold-war thinking--himself sounding the China hawks' alarm, you have to wonder just how committed the Bush administration remains to fighting this global war on terrorism. Prior to 9/11, the Republican neocons were firmly fixated on "rising China." With Saddam gone, has the Pentagon's preferred analysis of China simply resurfaced, suggesting that the war on terrorism was nothing more than an excuse to target Iraq?

Trust me, Mr. President, you don't ever want to have that conversation with Cindy Sheehan.

If Rumsfeld's comments in Singapore were designed to test the waters for a redemonization of China, they failed dramatically with our allies there, who told the secretary in no uncertain terms that such fearmongering wasn't welcome. Somewhat chastened, Rumsfeld returned to the Pentagon and, according to department insiders, instructed that the Pentagon's annual assessment of China's military capabilities be rewritten to tone down the hype. The final draft that emerged weeks later certainly couldn't have satisfied the neocons or the Pacific Command's hawks, citing as it did only the long-term possibility that "if current trends persist, [the People's Liberation Army's] capabilities could prove a credible threat to other modern militaries operating in the region." Hardly the red meat the Big War crowd requires, and that alone may give the Army and Marines just enough bureaucratic breathing space to prevail in the QDR debates, which will be fought out--PowerPoint slide by PowerPoint slide--in Pentagon conference rooms throughout the fall and right up to the final report's unveiling to Congress in February 2006.

But don't harbor any illusions that anyone will give up the fight anytime soon. With Chinese companies buying up America's industrial-age crown jewels, like IBM's PC-production unit, and planning to build almost thirty nuclear power plants in coming years with the help of global giants like Westinghouse, rest assured that plenty of old men with military-industrial ties will be keeping a close watch on Beijing's so-called communists, hoping to spot some "disruptive" technology that justifies that trillion-and-a-half pipeline of Big War products. Check out the new "China caucus" in Congress and count the number of members who likewise sit on the House Armed Services Committee.

This game ain't over by a long shot.

The winning strategic construct that's likely to emerge in the Quadrennial Defense Review is described by Pentagon insiders as the "one-one-one" strategy of organizing our military's force structure around three main pillars, all seemingly equal: 1) homeland defense; 2) the war on terrorism (and all the nation-building efforts it inevitably triggers); and 3) deterrence, an old term now recast to mean, "China, we've got our eyes on you, so don't try anything ...you know ...disruptive!"

But let's be honest here. Homeland defense doesn't generate any force requirements beyond having enough National Guard to save lives in natural disasters and to baby-sit nuclear power plants on Code Red days. As the response to Hurricane Katrina demonstrated, homeland security requires an emphasis on the very same kind of low-tech, labor-intensive forces we've long neglected. No big programs are won or lost on that "pillar." And we know that the global war on terrorism tends to generate lots of Small War equipment needs, largely for the Army and Marines. That leaves "deterrence" as the long pole in the tent, and that means the Penta-gon needs China like Red Sox fans need the Yankees.

Business executives who've worked China's increasingly open market over the past decade or so will tell you flat out: If possible, avoid working with older Chinese businesspeople, because that first generation of capitalists is simply too tainted by its socialist upbringing to get anything done according to what we would consider to be normal business standards and practices. Frankly, that crowd you bribe--a lot.

No, if you're smart, you deal with the generation of capitalists that followed, which puts almost all of them under age fifty. This crew came of age after Chairman Mao departed the scene, during the long-running economic boom that began with Deng Xiaoping's "four modernizations" campaign in the early 1980s. Moreover, an amazing number of them got some training or education in the U.S., so they get us--and our style of capitalism--in ways we tend to underestimate.

I got a good description of this dynamic when I sat down recently for dinner with a couple of big American distributors of high-end consumer products. This pair of old-school guys told me of their recent attempts to forge a strategic alliance with a Chinese company to import a large volume of Chinese-produced big-ticket goods. Their initial attempts at negotiations were complicated by a lot of previously proposed deals that reflected early Chinese capitalist sensibilities, meaning those deals set up by the original Marco Polos who raced into China in the 1990s. Not surprisingly, few of those deals have gotten off the ground, mired as they are in the usual back-scratching arrangements.

The American executives I spoke to were not willing to grease anyone's palms, and they won't be conned into any questionable investments. But they discovered that when they dealt with younger Chinese managers at the factory level, the attitude was entirely focused on "What do you need" to make a deal work in the American market. Chinese capitalism has matured to the point that the government is starting to back off and say, "Don't talk to us, talk to the factory."

And it is the simple fact that American businessmen will be making billions of dollars either in China or partnered with Chinese businesses that leads us to a new twenty-first-century rule: If you're better off not trusting anyone over fifty in China on a business deal, you're also better off not listening to anyone over fifty in Washington on the "threat of rising China." The Cold Warrior crowd received its ideological imprinting on China decades ago, and no matter how smoothly they may talk about global affairs today (think Condi Rice), they are none of them to be trusted on China. Here's an easy way to spot them: If they ever quote Henry Kissinger or Zbigniew Brzezinski, tune them out completely. If they think Ronald Reagan defeated communism single-handedly, watch your wallet, but if they've ever worked under, or anywhere near, Dick Cheney, then watch your back.

It is no secret that in a generation's time China's influence over the global economy will rival America's, so it requires no great leap of logic for any strategist shy of fifty to realize that China and America are destined to enjoy a deep strategic partnership if globalization is to continue its historic expansion across the twenty-first century. This is probably the biggest strategic choice we've ever faced as a nation, because if we avoid this path, we'll most certainly prevent a future in which all of humanity can benefit from globalization's promise.

Few historic ends will ever come close to justifying such a wide array of means as the strategic alliance of the United States and China in coming decades. In this century, this partnership will define global stability just as much as the U. S.-British "special relationship" of the twentieth century did. It will be that important in its execution, that precious in its bond, that profound in its reach. The blueprint for global peace will be a joint Sino-American document. There is no alternative.

Too big of a paradigm shift for you? Check that birth certificate. If it's dated earlier than 1955, you're excused for the century, and here's why: Cold-war babies can't escape the logic that says, "If you resemble America politically, then you must be our friend." That was fine and dandy for the late-twentieth-century version of globalization, limited as it was to the narrowly defined West. But that's not the globalization we face today--much less tomorrow. No, that process is far more defined by the emergence of such new pillars as China, India, Brazil, and Russia than it is by that old-boys' club of North America, Western Europe, and industrialized Asia.

In the future, America will have more in common with China than with Japan, with India than with the UK, with Brazil than with Canada, and with Russia than either France or Germany. In general, if you're more like us economically, then you're logically America's strongest allies--despite whatever political differences appear to divide us. That's realism in the age of globalization--love it or leave it.

If you're an aging Boomer, take a seat, but if you're an Echo Boomer, the largest American age cohort in history (currently aged ten to twenty-five), then please stand up and be counted--now--because your future is on the line in this debate.

And if you're one of those Echo Boomers, like my two nephews, wearing a uniform in Iraq today, your life is on the line in this debate.

Today, more than ever, the question of U.S.-Chinese security relations depends on how the president of the United States chooses to define the global future worth creating. And China's continued emergence as a stable pillar of the global economy is crucial to that vision, whether the Pentagon's advocates of Big War planning realize it or not.

America will expend blood and treasure in coming years no matter which strategic path we take. But a whole lot less of each will be wasted if our leadership in Washington displays the moral courage and the strategic vision to realize that China is our natural strategic partner in any global war on terrorism, and not a strategic excuse to lowball that effort and--by doing so--needlessly sacrifice American lives in the process.

Americans need to demand more from our political leaders than an unimaginative strategy of just waiting around for the next "near-peer competitor" to arise--in effect, keeping our powder dry while the blood of our loved ones is spilled in Southwest Asia. America can't embrace its globalized future until it lets go of its cold-war past.

Get moving, Mr. President.

Blast from my past: "Mr. President, Here's How to Make Sense of Your Second Term . . . " (2005)

Mr. President, Here's How to Make Sense of Your Second Term, Secure Your Legacy, And, Oh Yeah, Create a Future Worth Living

by Thomas P.M. Barnett

Esquire, February 2005, pp. 90-93-128-29.

So you say you have no concern for your legacy. That some historian eighty years from now will figure out if you were a good president or not. Fair enough, but let's review so far. Your big-bang strategy to reform the Middle East took down Saddam, which was good; you've completely screwed up the Iraq occupation, which is bad; and now you don't seem to know exactly where you're going, which is not so great. This brings me to the bad news. The two players with the greatest potential for hog-tying your second term and derailing your big-bang strategy don't even live in the Middle East. Instead, they're located on little islands of unreality much like Washington, D. C.: Taiwan and North Korea. When either Taipei or Pyongyang decide to sneeze, it's gonna be your legacy that catches a cold, and here's why: Either country can effectively pull all your attention away from the Middle East while simultaneously torpedoing the most important strategic relationship America has right now. Yeah, I'm talking about China, a country your old man knows a thing or two about (hint, hint), even if the neocons don't have a clue. Your posse rode into town four years ago convinced that China was the rising military threat to America, only to be proven wrong by bin Laden on 9/11. Enough said.

3 SIMPLE STEPS: Iran, you can have the bomb, but you must recognize Israel. Next, China. Let's be partners. Sorry, Taiwan, the defense guarantee's got to go. We've got bigger fish to fry. Namely, Kim Jong Il.

What I'm here to tell you is this: You can achieve the fabled Middle East peace, but only if you lay down an effective fire wall between that region and the two potential flash points that can still ignite East Asia and send this whole global economy up in flames in a heartbeat. China is the baby you can't throw out with the bathwater you've dubbed the "global war on terrorism." You lose China, you might just kill globalization, and if that happens, it won't be just a matter of what historians write eighty years from now; you'll spend the rest of your days wondering why the world thinks you personally destroyed the planet's best hope for ending war as we know it.

So here's the package you need to pursue: Co-opt Iran, lock in China, and take down North Korea. Let's get started, shall we?

Nixon Goes to Tehran

WORK WITH ME ON THIS ONE. Iran getting the bomb could be the best thing that's ever happened to the Middle East peace process.

Whoa! Don't put down the magazine before I've had a chance to explain.

Iran is the one country standing between you and peace in the Middle East. You can't solve the Israeli-Palestinian conflict without its say-so, because the mullahs are the biggest potential spoilers in the region. They fund the terrorist groups that can effectively veto peace efforts in both Jerusalem and Baghdad. Iran is the one regional power that can still menace the Gulf militarily. Everyone else there operates in Tehran's shadow.

You and I both know Nixon would have inevitably headed to Tehran by now, absent 9/11 and your subsequent Axis of Evil speech. The Shiite revolution is a spent force in that country, whose sullen majority pretends to obey the mullahs while they pretend to rule over a very young population that's frighteningly ambitious for a better life. We're looking at a very late-Brezhnev-type situation here, with the Gorby already on the scene in the person of reformist president Mohammad Khatami. His version of perestroika took one step forward and then ten steps back once we lumped him in with Saddam and Kim, but even though his preferred course of treatment is on hiatus, the political diagnosis remains the same for Iran.

I know, I know. If the mullahs are so weak and scared, then why do they reach so obviously for the bomb?

Look at it from their perspective, Mr. President. Those scary neocons just toppled regimes to Iran's right (Afghanistan) and left (Iraq), and our military pulled off both takedowns with ease. Moreover, your administration has demonstrated beyond all doubt that you don't fear leaving behind a god-awful mess in your war machine's wake. Frankly, you're as scary as Nixon was in his spookiest White House moments on Vietnam. All I'm saying is now's the time to cash in on that reputation with Iran.

And don't tell me we can't do that rapprochement thing with a hostile regime that supports international terrorism. If we could do it with the Evil Empire back in 1973, we can do it with the Axis of Evil's number two today.

Our offer should be both simple and bold. I would send James Baker, our last good secretary of state, to Tehran as your special envoy with the following message: "We know you're getting the bomb, and we know there isn't much we can do about it right now unless we're willing to go up-tempo right up the gut. But frankly, there's other fish we want to fry, so here's the deal: You can have the bomb, and we'll take you off the Axis of Evil list, plus we'll re-establish diplomatic ties and open up trade. But in exchange, not only will you bail us out on Iraq first and foremost by ending your support of the insurgency, you'll also cut off your sponsorship of Hezbollah and other anti-Israeli terrorist groups, help us bully Syria out of Lebanon, finally recognize Israel, and join us in guaranteeing the deal on a permanent Palestinian state. You want to be recognized as the regional player of note. We're prepared to do that. But that's the price tag. Pay it now or get ready to rumble."

This is a win-win for everybody. The ruling mullahs desire survival most of all, and once Iran opens up economically, its people will stop blaming them for all that's wrong with the country because they'll be too busy taking advantage of all that opportunity. Israel wins because Tel Aviv finally gets someone on the Muslim side who is big enough and scary enough to sit down with the "Little Devil" as a real nuclear equal but still willing to guarantee Israel's existence. I know, it might seem insane to Israel (especially the Likud party), but mutually assured destruction really works and, frankly, Mr. President, now's the time to use some of that political capital you've built up with Ariel Sharon.

No doubt some neocons will try to sell you on a military option in Iran, but don't pull that thread under any circumstances, because if you do, you'll find yourself having to go medieval across an "arc of crisis" stretching from Riyadh to Islamabad, and nobody's got cojones that big. Trust me, Afghanistan and Iraq alone are enough to tap Central Command and Special Operations Command.

I'm also aware that there are plenty of regional experts who'll tell you we've got to do this or that with Egypt or Saudi Arabia, but, frankly, neither of those regimes has shown the ability to do squat when it comes to forging a lasting Middle East peace. Iran's the key. Squeeze it now while it's scared--and while Arafat's still dead. America has played bad cop long enough with Iran. For crying out loud, Iranians are the only people in the Middle East who actually like us!

What's more, Iran is the gateway for bringing both India and China into the mix. Both countries have recently cut huge oil and gas deals with Tehran. You know you want India and China to feel secure about their energy flow, and you know Iran's simply too big a player on both counts for either country to pass up. Plus, India considers itself both a major Gulf security player and Iran's natural mentor, while China's emerging alliance with Tehran (not to mention its ties with Pakistan) should be exploited for all it's worth. New Dehli and Beijing want to stabilize the Islamic arc of crisis as much as you do.

If detente with Iran secures Iraq to the south, then it's clear whomwe need to romance in the north on the issue of the Kurds--Tur-key. Yes, the role of the Kurds in Turkey is a long and complex tale, but who the hell else is going to step up to the plate on that one?

The price tag is not hard to dream up. You twist some arms in the European Union until they either fall off or Turkey's admission gets fast-tracked. If NATO won't come to our rescue in the Sunni triangle, it's the least Old Europe can do.

Speaking of the triangle, that stinker's going to remain ours for the long term, but with Israel and Palestine off the table and real cooperation from both Iran and Syria in clamping down on all those jihadists with a one-way ticket to paradise, we'll extinguish the dream of the Saddam Baathists who are still fighting hard by effectively killing Iraq as a unitary state. Eventually, Iraq's Sunni population will realize that it can either become the recognized master of the triangle and nothing else (the same narrowing solution we forced on the Serbs in the Balkans), or it can choose to live in the region's new West Bank, surviving on intifada for the rest of its days.

Lock in China at Today's Prices

TO UNDERSTAND CHINA TODAY, you have to remember what it was like for the United States back in the early years of the twentieth century. Here we were, this burgeoning economic powerhouse with a rising yet still relatively small military package, and all the old-school powers worried about us as an up-and-coming threat. While the European form of globalization predominated at that time, our upstart version ("We don't need no stinkin' empire!") would come to dominate the landscape by the century's midpoint, primarily because Europe decided to self-destruct all its empires via two "world" wars that in retrospect look like the European Union's versions of the American Civil War.

China is the United States of the early twenty-first century: rising like crazy, but not really a threat to anyone except small island nations off its coast. (God, I miss T. R. and the Rough Riders.) Hu Jintao, China's current president and party boss of the country's fourth generation of leaders, has tried to calm global fears by proposing his theory of Peacefully Rising China, a tune that, frankly, none of the Pentagon's hardcore neocons can carry.

Why? The far Right is still gunning for China, and precious Taiwan is its San Juan Hill. Nixon burned Taiwan's ass back in the early seventies when he effectively switched official recognition from Taipei to the mainland, so the price it demanded was the continued "defense guarantee" that said we'd always arm Taiwan to the teeth and rush to its rescue whenever China unleashed its million-man swim of an invasion.

That promise is still on the books, like some blue law from a bygone era. Does anyone seriously think we'd sacrifice tens of thousands of American troops to stop China from reabsorbing Taiwan?

I know, I know. China's still "communist" (like I still have a full head of hair if the lighting's just so), whereas Taiwan is a lonely bastion of democracy in an otherwise . . . uh . . . increasingly democratic Asia. So even though the rest of Asia, including Japan, is being rapidly sucked into China's economic undertow (as "running dogs of capitalism" go, China's a greyhound), somehow the sacredness of Taiwan's self-perceived "independence" from China is worth torching the global economy over? Does that strike anybody as slightly nuts?

Here's the weirdest part: China's been clearly signaling for years that it's perfectly willing to accept the status quo, basically guaranteeing Taiwan's continued existence, so long as Taipei's government maintains the appearance of remaining open to the possibility of rejoining the mainland someday.

Now I know people say you don't read books, Mr. President, but being a Southerner, you know something about the Civil War. Imagine if Jefferson Davis and the leftovers of the Confederacy had slipped away to Cuba in 1865 to set up their alternative, nose-thumbing version of America on that island. Then fast-forward to, say, 1905 and imagine how much the U. S. would have tolerated some distant, imperial power like England telling us what we could or could not do vis-a-vis this loser sitting just off our shore. Imagine where old Teddy Roosevelt would have told the Brits they could shove their defense guarantee.

My point is this: In a generation's time, China will dominate the global economy just as much as the United States does today. (Don't worry, we'll be co-dominatrices.) The only way to stop that is to kill this era's version of globalization--something I worry about those neocons actually being stupid enough to do as part of their fanciful pursuit of global "hegemony." That nasty, far poorer future is not the one I want to leave behind for my kids, and I expect you feel the same about yours. China won't go down alone; it'll take most of the advanced global economy with it. So on this one, let's go with those vaunted American interests I keep hearing about and look out for number one.

This may seem a back-burner issue, but there's credible talk of Taipei doing something provocative like adding the word Taiwan in parentheses behind its official name, the Republic of China. That may not seem like much to us, but Beijing's reluctant hand may be forced by this act. Seems crazy, doesn't it?

Again, how much of the global economy--how many American lives--are you prepared to sacrifice on your watch just so Taiwan can rejoice in this moment of self-actualization?

I vote for zero. Zip. Nada.

Take America's defense guarantee to Taiwan off the table and do it now, before some irrational politician in Taipei decides he's ready to start a war between two nuclear powers. Trust me, you'd be doing Taiwan a favor, because it's my guess that our defense guarantee would evaporate the moment any Taiwan Straits crisis actually boiled over, leaving Taipei severely embarrassed and Beijing feeling excessively emboldened.

Let's lock in a strategic alliance with rising China at today's prices, because it's got nowhere to go but up over the coming years. Buying into this relationship now is like stealing Alaska from the czars for pennies on the dollar; it'll never be this cheap again.

More to the point, preemptively declaring a permanent truce in the Taiwan Straits is the quid we offer for Beijing's quo in the solution set that really matters in East Asia today: the reunification of Korea following Kim Jong Il's removal from power.

Kill Kim: Volumes 1, 2 & 3

NOW WE GET TO THE GOOD PART. The Koreas issue is the tailbone of the cold war: completely useless, but it can still plunge you into a world of pain if middle-aged Asia slips and falls on it. North Korea is the evil twin, separated at birth, and yet, because it's still joined at the hip with its sibling, its better half grows ever more irrationally distraught as time passes, contemplating the inevitable invasive surgery that lies ahead.

So while it might seem at first glance like a job for Team America: World Police, you'll want something less South Park in its comic simplicity and a little more

Tarantinoesque in its B-movie grandeur. That's right, we need a Deadly Viper Assassination Squad to make Kim an offer he can't refuse.

Kim Jong Il's checked all the boxes: He'll sell or buy any weapons of mass destruction he can get his hands on, he's engaged in bizarre acts of terrorism against South Korea, and he maintains his amazingly cruel regime through the wholesale export of both narcotics and counterfeit American currency. Is he crazy? He once kidnapped two of South Korea's biggest movie stars and held them hostage in his own personal DreamWorks studio. But if that doesn't do it for you, then try this one on for size: The Kim-induced famine of the late 1990s killed as many as two million North Koreans. If that doesn't get you a war-crimes trial in this day and age, then what the hell will?

Here's the squad we need to assemble: China, Japan, South Korea, Australia, and New Zealand, plus Russia.

You just shook hands with China over Taiwan. Japan's there because both China and America are on the team and because it's got the most cash to finance the reconstruction. The Aussies and Kiwis are invited out of respect for their longtime security role in Asia, and the Russians are in because they might just run a pipeline to Japan through the Korean peninsula when it's all said and done. As for the wobbly South Koreans, just smack 'em upside the head and tell them it's strictly business--nothing personal.

Those are the Seven Samurai that walk into Kim Jong Il's palace and offer him three possible endings to this thriller: the Good, the Bad, and the Ugly.

Version #1 (Good) is the Baby Doc Duvalier package. Keep your money, keep your women, keep your entourage, keep it all . . . just somewhere else. China can offer Kim a fabulous forbidden city somewhere in Inner Mongolia. Hell, promise this Cecil B. Demented a five-picture deal and tell him Steven Spielberg wants to do lunch.

If he doesn't bite on that one, then show Kim Version #2 (Bad). He goes on trial in the Hague for years on end, paraded around like the freak job he is, and once he's thoroughly stripped of what passes for his "majesty," we'll let him rot in a jail cell for the rest of his days.

Version #3 (Ugly) is delivered sotto voce. Just have Paul Wolfowitz show Kim the "six-month reconstruction plan" the Pentagon neocons drew up for the postwar occupation. If he thinks you're bluffing, then instruct Wolfie to slip him some of those morgue shots of Uday and Qusay looking all stitched up like a pair of Frankensteins. Kim'll get the hint. Your administration has proven that you're willing to wage war with almost no concern for the resulting VIP body count, the subsequently incompetent occupation, or the inevitable political uproar back home. I say when you've got it, flaunt it.

If it comes to trigger-pulling, can we pull it off? You know we can, and even here we've got a choice between the stripped-down package (i.e., just kill Kim) and the tricked-up models (e.g., smash-and-grab WMD, decapitating command-and-control, pounding ground forces). North Korea's military will prove less brittle than Saddam's Republican Guard but hardly invulnerable. Plus, on this one the local players will provide plenty of boots on the ground (South Korea, China) and humanitarian aid (Japan) just to prevent refugees from flooding across their borders. Moreover, Kim's slim power base sits atop a Mafia-like criminal empire that features the usual "honor" among thieves, so bribing his fellow kleptocrats with golden parachutes is quite feasible. Finally, the postconflict investment flow will be heavy on this one, because there will be no insurgency, no jihad, no nothing, just a gulag's worth of political prisoners to set free.

But the truth is, it probably won't come to that simply because both you and the neocons have such a scary reputation that you can likely stare down Lil' Kim, so long as you've got China glaring at him disapprovingly over your shoulder. You know China would just as soon jettison Kim because he's a genuine nut and he's terrible for property values. So what you really need to offer the Chinese on the far side is something truly useful, and that something is an Asian NATO. That's right: Kim's tombstone should mark the spot where a NATO-like security alliance for East Asia is born.

If you terminate Taiwan's defense guarantee in order to bring Beijing to Kim's table, then you offer to kill all your plans for missile defense to get the Chinese to pull the chair out from under him. Star Wars has been the single worst boondoggle in the history of the Pentagon--nearly $100 billion wasted and not even Tang to show for it. By securing America's military alliance with China, Japan, and Korea, you not only kill the concept of great-power war in Asia for good, you've just ended Osama bin Laden's bid to pit East against West.

That's it. And you've got about ten months to get it all rolling, with maybe another twenty months to wrap most of it up. By the summer of 2007, your presidency and all the power you wield right now will begin to be severely discounted by politicians both at home and abroad.

Mr. President, I know you're committed to following through on what you've set in motion in the Middle East, and I know you're hell-bent to prove all the eggheads wrong about the possibility of democracy taking root there--and I like your certitude on both points. You're the just-do-it president. You react from your gut more than either your heart or your brains, and you know what? You're as big a gift from history as 9/11's wake-up call turned out to be--and almost equally hard for many Americans to swallow.

You believe that America will defeat global terrorism only if it is willing to transform the Middle East in the process, and I agree. But just as we had to make peace with the Soviets before we could "tear down that wall," your administration will have to make peace with Iran's mullahs before we can begin dismantling the many walls that still isolate that insular region from the global economy and the mutually assured dependence that defines its long-term stability and peace. The road to lasting security in both Jerusalem and Baghdad starts in Tehran, and ultimately it must run through Beijing as well.

You lock down Asia by putting a leash on Taiwan, inviting China into the copilot seat and shoving Kim underground, and you'll not only free up America's military resources for more-urgent tasks in the Middle East, you'll create a sense of strategic despair in the minds of bin Laden and Zarqawi that they'll never be able to overcome. Their dream is to split up the advancing core of globalization and stop its creeping embrace of their idealized Islamic world, which they know will be forever altered by that integration process. Their best strategic hope in this conflict is that some hostile great power will rise in the East to challenge the American-led West. You lock in China today, Mr. President, and you will corner and kill transnational terrorism tomorrow.

And not that you care, Mr. President, but there's your legacy.

Blast from my past: "The Pentagon's New Map" (2003)

The Pentagon's New Map

by Thomas P.M. Barnett

Esquire, March 2003, pp. 174-79 & 227-28.

IT EXPLAINS WHY WE'RE GOING TO WAR. AND WHY WE'LL KEEP GOING TO WAR. BY THOMAS P. M. BARNETT, U. S. NAVAL WAR COLLEGE [MAPS BY WILLIAM MCNULTY]

Since the end of the cold war, the United States has been trying to come up with an operating theory of the world--and a military strategy to accompany it. Now there's a leading contender. It involves identifying the problem parts of the world and aggressively shrinking them. Since September 11, 2001, the author, a professor of warfare analysis, has been advising the Office of the Secretary of Defense and giving this briefing continually at the Penta-gon and in the intelligence community. Now he gives it to you.

LET ME TELL YOU why military engagement with Saddam Hussein's regime in Baghdad is not only necessary and inevitable, but good.

When the United States finally goes to war again in the Persian Gulf, it will not constitute a settling of old scores, or just an enforced disarmament of illegal weapons, or a distraction in the war on terror. Our next war in the Gulf will mark a historical tipping point--the moment when Washington takes real ownership of strategic security in the age of globalization.

That is why the public debate about this war has been so important: It forces Americans to come to terms with what I believe is the new security paradigm that shapes this age, namely, Disconnectedness defines danger. Saddam Hussein's outlaw regime is dangerously disconnected from the globalizing world, from its rule sets, its norms, and all the ties that bind countries together in mutually assured dependence.

The problem with most discussion of globalization is that too many experts treat it as a binary outcome: Either it is great and sweeping the planet, or it is horrid and failing humanity everywhere. Neither view really works, because globalization as a historical process is simply too big and too complex for such summary judgments. Instead, this new world must be defined by where globalization has truly taken root and where it has not.

Show me where globalization is thick with network connectivity, financial transactions, liberal media flows, and collective security, and I will show you regions featuring stable governments, rising standards of living, and more deaths by suicide than murder. These parts of the world I call the Functioning Core, or Core. But show me where globalization is thinning or just plain absent, and I will show you regions plagued by politically repressive regimes, widespread poverty and disease, routine mass murder, and--most important--the chronic conflicts that incubate the next generation of global terrorists. These parts of the world I call the Non-Integrating Gap, or Gap.

Globalization's "ozone hole" may have been out of sight and out of mind prior to September 11, 2001, but it has been hard to miss ever since. And measuring the reach of globalization is not an academic exercise to an eighteen-year-old marine sinking tent poles on its far side. So where do we schedule the U. S. military's next round of away games? The pattern that has emerged since the end of the cold war suggests a simple answer: in the Gap.

The reason I support going to war in Iraq is not simply that Saddam is a cutthroat Stalinist willing to kill anyone to stay in power, nor because that regime has clearly supported terrorist networks over the years. The real reason I support a war like this is that the resulting long-term military commitment will finally force America to deal with the entire Gap as a strategic threat environment.

 DISCONNECTEDNESS DEFINES DANGER: Problem areas requiring American attention (outlined) are, in the author's analysis, called the Gap. Shrinking the Gap is possible only by stopping the ability of terrorist networks to access the Core via the "seam states" that lie along the Gap's bloody boundaries. In this war on terrorism, the U.S. will place a special emphasis on coopertion with these states. What are the classic seam states? Mexico, Brazil, South Africa, Morocco, Algeria, Greece, Turkey, Pakistan, Thailand, Malaysia, the Philippines, Indonesia.

FOR MOST COUNTRIES, accommodating the emerging global rule set of democracy, transparency, and free trade is no mean feat, which is something most Americans find hard to understand. We tend to forget just how hard it has been to keep the United States together all these years, harmonizing our own, competing internal rule sets along the way--through a Civil War, a Great Depression, and the long struggles for racial and sexual equality that continue to this day. As far as most states are concerned, we are quite unrealistic in our expectation that they should adapt themselves quickly to globalization's very American-looking rule set.

But you have to be careful with that Darwinian pessimism, because it is a short jump from apologizing for globalization-as-forced-Americanization to insinuating--along racial or civilization lines--that "those people will simply never be like us." Just ten years ago, most experts were willing to write off poor Russia, declaring Slavs, in effect, genetically unfit for democracy and capitalism. Similar arguments resonated in most China-bashing during the 1990s, and you hear them today in the debates about the feasibility of imposing democracy on a post-Saddam Iraq--a sort of Muslims-are-from-Mars argument.

So how do we distinguish between who is really making it in globalization's Core and who remains trapped in the Gap? And how permanent is this dividing line?

Understanding that the line between the Core and Gap is constantly shifting, let me suggest that the direction of change is more critical than the degree. So, yes, Beijing is still ruled by a "Communist party" whose ideological formula is 30 percent Marxist-Leninist and 70 percent Sopranos, but China just signed on to the World Trade Organization, and over the long run, that is far more important in securing the country's permanent Core status. Why? Because it forces China to harmonize its internal rule set with that of globalization--banking, tariffs, copyright protection, environmental standards. Of course, working to adjust your internal rule sets to globalization's evolving rule set offers no guarantee of success. As Argentina and Brazil have recently found out, following the rules (in Argentina's case, sort of following) does not mean you are panicproof, or bubbleproof, or even recessionproof. Trying to adapt to globalization does not mean bad things will never happen to you. Nor does it mean all your poor will immediately morph into a stable middle class. It just means your standard of living gets better over time.

In sum, it is always possible to fall off this bandwagon called globalization. And when you do, bloodshed will follow. If you are lucky, so will American troops.

MAPPING AMERICA'S WAR ON TERRORISM: AN AGGRESSIVE NEW STRATEGY The maps on these pages show all United States military responses to global crises from 1990 to 2002. Notice that a pattern emerges. Any time American troops show up--be it combat, a battle group pulling up off the coast as a reminder, or a peacekeeping mission--it tends to be in a place that is relatively disconnected from the world, where globalization hasn't taken root because of a repressive regime, abject poverty, or the lack of a robust legal system. It's these places that incubate global terrorism. Draw a line around these military engagements and you've got what I call the Non-Integrating Gap. Everything else is the Functioning Core. The goal of this new strategy is simple: Shrink the Gap. Don't contain it, shrink it. -- THOMAS P. M. BARNETT

SO WHAT PARTS OF THE WORLD can be considered functioning right now? North America, much of South America, the European Union, Putin's Russia, Japan and Asia's emerging economies (most notably China and India), Australia and New Zealand, and South Africa, which accounts for roughly four billion out of a global population of six billion.

Whom does that leave in the Gap? It would be easy to say "everyone else," but I want to offer you more proof than that and, by doing so, argue why I think the Gap is a long-term threat to more than just your pocketbook or conscience.

If we map out U. S. military responses since the end of the cold war (see the following pages), we find an overwhelming concentration of activity in the regions of the world that are excluded from globalization's growing Core--namely the Caribbean Rim, virtually all of Africa, the Balkans, the Caucasus, Central Asia, the Middle East and Southwest Asia, and much of Southeast Asia. That is roughly the remaining two billion of the world's population. Most have demographics skewed very young, and most are labeled "low income" or "low middle income" by the World Bank (i.e., less than $3,000 annual per capita).

If we draw a line around the majority of those military interventions, we have basically mapped the Non-Integrating Gap. Obviously, there are outliers excluded geographically by this simple approach, such as an Israel isolated in the Gap, a North Korea adrift within the Core, or a Philippines straddling the line. But looking at the data, it is hard to deny the essential logic of the picture: If a country is either losing out to globalization or rejecting much of the content flows associated with its advance, there is a far greater chance that the U. S. will end up sending forces at some point. Conversely, if a country is largely functioning within globalization, we tend not to have to send our forces there to restore order or eradicate threats.

Now, that may seem like a tautology--in effect defining any place that has not attracted U. S. military intervention in the last decade or so as "functioning within globalization" (and vice versa). But think about this larger point: Ever since the end of World War II, this country has assumed that the real threats to its security resided in countries of roughly similar size, development, and wealth--in other words, other great powers like ourselves. During the cold war, that other great power was the Soviet Union. When the big Red machine evaporated in the early 1990s, we flirted with concerns about a united Europe, a powerhouse Japan, and--most recently--a rising China.

What was interesting about all those scenarios is the assumption that only an advanced state

can truly threaten us. The rest of the world? Those less-developed parts of the world have long been referred to in military plans as the "Lesser Includeds," meaning that if we built a military capable of handling a great power's military threat, it would always be sufficient for any minor scenarios we might have to engage in the less-advanced world.

That assumption was shattered by September 11. After all, we were not attacked by a nation or even an army but by a group of--in Thomas Friedman's vernacular--Super-Empowered Individuals willing to die for their cause. September 11 triggered a system perturbation that continues to reshape our government (the new Department of Homeland Security), our economy (the de facto security tax we all pay), and even our society (Wave to the camera!). Moreover, it launched the global war on terrorism, the prism through which our government now views every bilateral security relationship we have across the world.

In many ways, the September 11 attacks did the U. S. national-security establishment a huge favor by pulling us back from the abstract planning of future high-tech wars against "near peers" into the here-and-now threats to global order. By doing so, the dividing lines between Core and Gap were highlighted, and, more important, the nature of the threat environment was thrown into stark relief.

Think about it: Bin Laden and Al Qaeda are pure products of the Gap--in effect, its most violent feedback to the Core. They tell us how we are doing in exporting security to these lawless areas (not very well) and which states they would like to take "off line" from globalization and return to some seventh-century definition of the good life (any Gap state with a sizable Muslim population, especially Saudi Arabia).

If you take this message from Osama and combine it with our military-intervention record of the last decade, a simple security rule set emerges: A country's potential to warrant a U. S. military response is inversely related to its globalization connectivity. There is a good reason why Al Qaeda was based first in Sudan and then later in Afghanistan: These are two of the most disconnected countries in the world. Look at the other places U. S. Special Operations Forces have recently zeroed in on: northwestern Pakistan, Somalia, Yemen. We are talking about the ends of the earth as far as globalization is concerned.

But just as important as "getting them where they live" is stopping the ability of these terrorist networks to access the Core via the "seam states" that lie along the Gap's bloody boundaries. It is along this seam that the Core will seek to suppress bad things coming out of the Gap. Which are some of these classic seam states? Mexico, Brazil, South Africa, Morocco, Algeria, Greece, Turkey, Pakistan, Thailand, Malaysia, the Philippines, and Indonesia come readily to mind. But the U. S. will not be the only Core state working this issue. For example, Russia has its own war on terrorism in the Caucasus, China is working its western border with more vigor, and Australia was recently energized (or was it cowed?) by the Bali bombing.

If we step back for a minute and consider the broader implications of this new global map, then U. S. national-security strategy would seem to be: 1) Increase the Core's immune-system capabilities for responding to September 11--like system perturbations; 2) Work the seam states to firewall the Core from the Gap's worst exports, such as terror, drugs, and pandemics; and, most important, 3) Shrink the Gap. Notice I did not just say Mind the Gap. The knee-jerk reaction of many Americans to September 11 is to say, "Let's get off our dependency on foreign oil, and then we won't have to deal with those people." The most naïve assumption underlying that dream is that reducing what little connectivity the Gap has with the Core will render it less dangerous to us over the long haul. Turning the Middle East into Central Africa will not build a better world for my kids. We cannot simply will those people away.

The Middle East is the perfect place to start. Diplomacy cannot work in a region where the biggest sources of insecurity lie not between states but within them. What is most wrong about the Middle East is the lack of personal freedom and how that translates into dead-end lives for most of the population--especially for the young. Some states like Qatar and Jordan are ripe for perestroika-like leaps into better political futures, thanks to younger leaders who see the inevitability of such change. Iran is likewise waiting for the right Gorbachev to come along--if he has not already.

What stands in the path of this change? Fear. Fear of tradition unraveling. Fear of the mullahs' disapproval. Fear of being labeled a "bad" or "traitorous" Muslim state. Fear of becoming a target of radical groups and terrorist networks. But most of all, fear of being attacked from all sides for being different--the fear of becoming Israel.

The Middle East has long been a neighborhood of bullies eager to pick on the weak. Israel is still around because it has become--sadly--one of the toughest bullies on the block. The only thing that will change that nasty environment and open the floodgates for change is if some external power steps in and plays Leviathan full-time. Taking down Saddam, the region's bully-in-chief, will force the U. S. into playing that role far more fully than it has over the past several decades, primarily because Iraq is the Yugoslavia of the Middle East--a crossroads of civilizations that has historically required a dictatorship to keep the peace. As baby-sitting jobs go, this one will be a doozy, making our lengthy efforts in postwar Germany and Japan look simple in retrospect.

But it is the right thing to do, and now is the right time to do it, and we are the only country that can. Freedom cannot blossom in the Middle East without security, and security is this country's most influential public-sector export. By that I do not mean arms exports, but basically the attention paid by our military forces to any region's potential for mass violence. We are the only nation on earth capable of exporting security in a sustained fashion, and we have a very good track record of doing it.

Show me a part of the world that is secure in its peace and I will show you strong or growing ties between local militaries and the U. S. military. Show me regions where major war is inconceivable and I will show you permanent U. S. military bases and long-term security alliances. Show me the two strongest investment relationships in the global economy and I will show you two postwar military occupations that remade Europe and Japan following World War II.

This country has successfully exported security to globalization's Old Core (Western Europe, Northeast Asia) for half a century and to its emerging New Core (Developing Asia) for a solid quarter century following our mishandling of Vietnam. But our efforts in the Middle East have been inconsistent--in Africa, almost nonexistent. Until we begin the systematic, long-term export of security to the Gap, it will increasingly export its pain to the Core in the form of terrorism and other instabilities.

Naturally, it will take a whole lot more than the U. S. exporting security to shrink the Gap. Africa, for example, will need far more aid than the Core has offered in the past, and the integration of the Gap will ultimately depend more on private investment than anything the Core's public sector can offer. But it all has to begin with security, because free markets and democracy cannot flourish amid chronic conflict.

Making this effort means reshaping our military establishment to mirror-image the challenge we face. Think about it. Global war is not in the offing, primarily because our huge nuclear stockpile renders such war unthinkable--for anyone. Meanwhile, classic state-on-state wars are becoming fairly rare. So if the United States is in the process of "transforming" its military to meet the threats of tomorrow, what should it end up looking like? In my mind, we fight fire with fire. If we live in a world increasingly populated by Super-Empowered Individuals, we field a military of Super-Empowered Individuals.

This may sound like additional responsibility for an already overburdened military, but that is the wrong way of looking at it, for what we are dealing with here are problems of success--not failure. It is America's continued success in deterring global war and obsolescing state-on-state war that allows us to stick our noses into the far more difficult subnational conflicts and the dangerous transnational actors they spawn. I know most Americans do not want to hear this, but the real battlegrounds in the global war on terrorism are still over there. If gated communities and rent-a-cops were enough, September 11 never would have happened.

History is full of turning points like that terrible day, but no turning-back points. We ignore the Gap's existence at our own peril, because it will not go away until we as a nation respond to the challenge of making globalization truly global.

 

HANDICAPPING THE GAP

My list of real trouble for the world in the 1990s, today, and tomorrow, starting in our own backyard:

1) HAITI Efforts to build a nation in 1990s were disappointing. · We have been going into Haiti for about a century, and we will go back when boat people start flowing in during the next crisis--without fail.

2) COLOMBIA Country is broken into several lawless chunks, with private armies, rebels, narcos, and legit government all working the place over. · Drugs still flow. · Ties between drug cartels and rebels grew over decade, and now we know of links to international terror, too. · We get involved, keep promising more, and keep getting nowhere. Piecemeal, incremental approach is clearly not working.

3) BRAZIL AND ARGENTINA Both on the bubble between the Gap and the Functioning Core. Both played the globalization game to hilt in the nineties and both feel abused now. The danger of falling off the wagon and going self-destructively leftist or rightist is very real. · No military threats to speak of, except against their own democracies (the return of the generals). · South American alliance MERCOSUR tries to carve out its own reality while Washington pushes Free Trade of Americas, but we may have to settle for agreements with Chile or for pulling only Chile into bigger NAFTA. Will Brazil and Argentina force themselves to be left out and then resent it? · Amazon a large ungovernable area for Brazil, plus all that environmental damage continues to pile up. Will the world eventually care enough to step in?

4) FORMER YUGOSLAVIA For most of the past decade, served as shorthand for Europe's inability to get its act together even in its own backyard. · Will be long-term baby-sitting job for the West.

5) CONGO AND RWANDA/BURUNDI Two to three million dead in central Africa from all the fighting across the decade. How much worse can it get before we try to do something, anything? Three million more dead? · Congo is a carrion state--not quite dead or alive, and everyone is feeding off it. · And then there's AIDS.

6) ANGOLA Never really has solved its ongoing civil war (1.5 million dead in past quarter century). · Basically at conflict with self since mid-seventies, when Portuguese "empire" fell. · Life expectancy right now is under forty!

7) SOUTH AFRICA The only functioning Core country in Africa, but it's on the bubble. Lots of concerns that South Africa is a gateway country for terror networks trying to access Core through back door. · Endemic crime is biggest security threat. · And then there's AIDS.

8) ISRAEL-PALESTINE Terror will not abate--there is no next generation in the West Bank that wants anything but more violence. · Wall going up right now will be the Berlin Wall of twenty-first century. Eventually, outside powers will end up providing security to keep the two sides apart (this divorce is going to be very painful). · There is always the chance of somebody (Saddam in desperation?) trying to light up Israel with weapons of mass destruction (WMD) and triggering the counterpunch we all fear Israel is capable of.

9) SAUDI ARABIA The let-them-eat-cake mentality of royal mafia will eventually trigger violent instability from within. · Paying terrorists protection money to stay away will likewise eventually fail, so danger will come from outside, too. · Huge young population with little prospects for future, and a ruling elite whose main source of income is a declining long-term asset. And yet the oil will matter to enough of the world far enough into the future that the United States will never let this place really tank, no matter what it takes.

10) IRAQ Question of when and how, not if. · Then there's the huge rehab job. We will have to build a security regime for the whole region.

11) SOMALIA Chronic lack of governance. · Chronic food problems. · Chronic problem of terrorist-network infiltration. · We went in with Marines and Special Forces and left disillusioned--a poor man's Vietnam for the 1990s. Will be hard-pressed not to return.

12) IRAN Counterrevolution has already begun: This time the students want to throw the mullahs out. · Iran wants to be friends with U. S., but resurgence of fundamentalists may be the price we pay to invade Iraq. · The mullahs support terror, and their push for WMD is real: Does this make them inevitable target once Iraq and North Korea are settled?

13) AFGHANISTAN Lawless, violent place even before the Taliban stepped onstage and started pulling it back toward seventh century (short trip). · Government sold to Al Qaeda for pennies on the dollar. · Big source of narcotics (heroin). · Now U. S. stuck there for long haul, rooting out hardcore terrorists/rebels who've chosen to stay.

14) PAKISTAN There is always the real danger of their having the bomb and using it out of weakness in conflict with India (very close call with December 13, 2001, New Delhi bombing). · Out of fear that Pakistan may fall to radical Muslims, we end up backing hard-line military types we don't really trust. · Clearly infested with Al Qaeda. · Was on its way to being declared a rogue state by U. S. until September 11 forced us to cooperate again. Simply put, Pakistan doesn't seem to control much of its own territory.

15) NORTH KOREA Marching toward WMD. · Bizarre recent behavior of Pyongyang (admitting kidnappings, breaking promises on nukes, shipping weapons to places we disapprove of and getting caught, signing agreements with Japan that seem to signal new era, talking up new economic zone next to China) suggests it is intent (like some mental patient) on provoking crises. · We live in fear of Kim's Götterdämmerung scenario (he is nuts). · Population deteriorating--how much more can they stand? · After Iraq, may be next.

16) INDONESIA Usual fears about breakup and "world's largest Muslim population." · Casualty of Asian economic crisis (really got wiped out). · Hot spot for terror networks, as we have discovered.

New/integrating members of Core I worry may be lost in coming years:

17) CHINA Running lots of races against itself in terms of reducing the unprofitable state-run enterprises while not triggering too much unemployment, plus dealing with all that growth in energy demand and accompanying pollution, plus coming pension crisis as population ages. · New generation of leaders looks suspiciously like unimaginative technocrats--big question if they are up to task. · If none of those macro pressures trigger internal instability, there is always the fear that the Communist party won't go quietly into the night in terms of allowing more political freedoms and that at some point, economic freedom won't be enough for the masses. Right now the CCP is very corrupt and mostly a parasite on the country, but it still calls the big shots in Beijing. · Army seems to be getting more disassociated from society and reality, focusing ever more myopically on countering U. S. threat to their ability to threaten Taiwan, which remains the one flash point that could matter. · And then there's AIDS.

18) RUSSIA Putin has long way to go in his dictatorship of the law; the mafia and robber barons still have too much power. · Chechnya and the near-abroad in general will drag Moscow into violence, but it will be kept within the federation by and large. · U. S. moving into Central Asia is a testy thing--a relationship that can sour if not handled just right. · Russia has so many internal problems (financial weakness, environmental damage, et cetera) and depends too much on energy exports to feel safe (does bringing Iraq back online after invasion kill their golden goose?). · And then there's AIDS.

19) INDIA First, there's always the danger of nuking it out with Pakistan. · Short of that, Kashmir pulls them into conflict with Pak, and that involves U. S. now in way it never did before due to war on terror. · India is microcosm of globalization: the high tech, the massive poverty, the islands of development, the tensions between cultures/civilizations/religions/et cetera. It is too big to succeed, and too big to let fail. · Wants to be big responsible military player in region, wants to be strong friend of U. S., and also wants desperately to catch up with China in development (the self-imposed pressure to succeed is enormous). · And then there's AIDS.

Blast from my past: "Global Transaction Strategy" (2003)

 

Global Transaction Strategy

Operation Iraqi Freedom could be a first step toward a larger goal: true globalization.

By Thomas P.M. Barnett and Henry H. Gaffney Jr.

Military Officer, May 2003, pp. 68-77.

Thomas P.M. Barnett is on temporary assignment from the Naval War College as the assistant for strategic futures in the Office of Force Transformation, Office of the Secretary of Defense. Henry H. Gaffney Jr. is a team leader with the Center for Strategic Studies, The CNA Corp., Alexandria, Va.

The Bush administration's response to the terrorist attack of Sept. 11 was both swift (the global war on terrorism) and profound (the Department of Homeland Security). With last year's publication of the National Security Strategy, the White House went even further and described - rather boldly - a global future worth creating. By doing so, the Bush administration embraced the notion recently put forth by many experts: that Washington now stands at a historical "creation point" much like the immediate post-World War II years.

When the United States finally went to war again in the Persian Gulf, it was not about settling old scores or simply enforcing U.N.-mandated disarmament of illegal weapons or a distraction in the war on terror. Instead, the Bush administration's first application of its controversial preemption strategy marked a historical tipping point - the moment when Washington took real ownership of strategic security in the age of globalization.

This is why the public debate about the war has been so important: It has forced Americans to come to terms with what [the authors] believe is the new security paradigm that shapes this age: Disconnectedness defines danger.

Saddam Hussein's outlaw regime was dangerously disconnected from the globalizing world, from its rule sets, its norms, and all the ties that bind countries together in mutually assured dependence. Understanding this distinction is crucial for our understanding of the tasks that lie ahead as the United States not only wages war against global terrorism but also seeks to make globalization truly global.

As globalization deepens and spreads, two groups of states are essentially pitted against one another: one, countries seeking to align themselves internally to the emerging global rule set (e.g., advanced Western democracies, Vladimir Putin's Russia, Asia's emerging economies); the other, countries that refuse such internal realignment - and thus remain largely "disconnected" from globalization - due to either political/cultural rigidity (the Middle East) or continuing abject poverty (most of Central Asia, Africa, and Central America). [The authors] dub the former the "Functioning Core" of globalization and the latter countries the "Non-Integrating Gap."

Although the United States is recognized as both economic and political-military leader of the Core, our foreign policy did not reflect much unity of vision regarding globalization until the Sept. 11 attack triggered the ongoing war on terrorism. Rather, globalization was treated as a largely economic affair that the U.S. government left to private business, with the government promoting the tariff cuts and regulations that support free trade both at home and abroad. The U.S. security community worried about globalization only to the extent that it fostered the proliferation of weapons of mass destruction and the actions of certain nefarious transnational actors.

The perturbations of the global system triggered by Sept. 11 have done much to highlight both the limits and risks of globalization, as well as this country's current and future role as "system administrator" to this historical process. For example, the vast majority (almost 95 percent) of U.S. military interventions over the past two decades have occurred within the Non-Integrating Gap. That is, we tend to "export" security to precisely those parts of the world that have a hard time coping with globalization or are otherwise not benefiting from it.

Fulfilling this kind of leadership role will require a new understanding on our part as to the Functioning Core's essential transactions with the Gap, which is - unsurprisingly - the source of virtually all the global terrorism we seek to eradicate. 

Living large

Although the United States represents only one-twentieth of the global population, its environmental footprint is dramatically larger. This country consumes roughly a quarter of the world's energy while producing approximately a quarter of the pollution and garbage. Economists will point out that we also produce roughly a quarter of the world's wealth, but frankly, a lot of that stays home, while we tend to import our energy and "export" our pollution. Simply put, we live well beyond our environmental means.

Our economic footprint is equally skewed. As our consistently huge trade deficit indicates, we also tend to live well beyond our economic means. Basically, we count on the rest of the world to finance our sovereign debt, which most countries - like Japan - are willing to do because the U.S. government is such a good credit risk, and the dollar is the closest thing there is to a global reserve currency. There is not a whole lot we should complain about in this deal - basically trading pieces of paper for actual goods. Put these two transactions together and it is easy to see why the United States has benefited from the rise of a global economy.

So what has the United States provided the world in return? Clearly we are a leader in technology and cultural exports, but these are fundamentally private-sector transactions that any advanced economy can provide.

The one U.S. public-sector export that has only increased its global market share with time is security. We account for nearly half the global public spending on security, and unlike any other state, we actually can export it to other regions on a substantial and continuous basis. And that is our fundamental transaction with the global economy: We import consumption and export security.

Sharing our surplus of security with the world is what makes us unique. Any advanced industrial state can sell arms, but only the United States can export stability. Yes, it does engender plenty of anger from some quarters, but from far more it elicits real gratitude - and allowance for our "living large." 

 

Beyond containment

During the Cold War, our policy vis-à-vis the Soviet Bloc was one of containment. The Globalization Era presents a different challenge: The Non-Integrating Gap does not just need to be contained, it needs to be shrunk. Doing so will take decades, however, and in the meantime we need to "firewall" off the Core from the Gap's worst exports: terrorism, narcotics, disease, genocide, and other violent disruptions.

The good news is we already have plenty of experience working the Gap - in fact, it has been the major focus of U.S. military crisis response for the past generation. Four key events in the 1970s marked our fundamental shift from Cold War containment to Gap firewall management:

• détente in Europe;
• OPEC (Organization of Petroleum Exporting Countries) oil shocks of the early 1970s;
• the end of the Vietnam War; and
• the fall of the Shah of Iran in 1979.

Prior to this quartet of events, the patterns of the U.S. military's permanent forward deployments and crisis responses were largely in sync - clustered in the Cold War foci of Europe and Northeast Asia. But by the early 1980s, we were clearly out of balance. Most of European Command's response activity had shifted to the Eastern Mediterranean, while most of Pacific Command's responses had slid toward the Persian Gulf.

Logically, the United States created the Central Command at that point, signaling the effective shift of our focus from Cold War containment to Gap firewalling. According to the Center for Strategic Studies (css), in the 1980s the Middle East already accounted for just over half of the four services' combined situation response days (9,288 of 16,795, or 55 percent).

Turning to the css' response data since 1990 gives us an even clearer outline of the Non-Integrating Gap. The maps on this page and the next display U.S. military responses in the post-Cold War era (1990-2002). When a line is drawn around roughly 95 percent of those responses (isolating responses involving Taiwan and North Korea in an otherwise stable northeast Asia), it captures those portions of the world that are either losing out to globalization or rejecting much of the content flows connected with its advance.

Looking at this experience, a simple logic emerges: If a country is either losing out to globalization or rejecting much of the content flows associated with its advance, there is a far greater chance that the United States will end up sending forces at some point. Conversely, if a country is largely functioning within globalization, we tend not to have to send our forces there to restore order or eradicate threats. 

Flowing globalization

Four major flows must proceed over the next several decades if globalization is to continue its advance and the Gap is to be shrunk. The U.S. government and its allies in the Core must enable and balance all four of these flows, for the disruption of one will damage the others, leaving the global economy and security environment vulnerable to the sort of system perturbations witnessed in connection with Sept. 11.

Flow of people from Gap to Core. According to the United Nations, by 2050 our global population should peak somewhere around 9 billion people and decline thereafter. This will be a huge turning point for humanity in more ways than one. Take graying: By 2050, the global 60-and-over cohort will match the 15-and-under group at roughly 2 billion each. From that point on, the old will progressively outnumber the young on this planet.

In theory, the aging of the global population spells good news regarding humanity's tendency to wage war, either on a local level or state-on-state. Today, the vast bulk of violence lies within the Gap, where, on average, less than 10 percent of the population is over 60 years of age. In contrast, Core states average 10 percent to 25 percent of their population over age 60. Simply put, older societies are associated with lower levels of conflict because these older societies are emerging out of the success of globalization, with prosperity and fewer children per family. 

The big hitch is this: Current U.N. projections say that by 2050, the potential support ratio (psr, or people aged 15-to-64 per one person 65-and-older) in the advanced economies will have dropped from 5-to-1 to 2-to-1, while in the least developed regions the psr still will stand at roughly 10-to-1. That means that worker-to-retiree ratios in the Core will plummet just as the retirement burden there skyrockets - unless the Gap's "youth bulges" flow toward the older Core states. Japan will require more than half a million immigrants per year to maintain its current workforce size, while the European Union will need to increase its current immigrant flow roughly fivefold - but both have great difficulty acceding to that need.

In effect, emigration from the Gap to the Core is globalization's release valve. With it, the prosperity of the Core can be maintained and more of the world's people can participate. Without it, overpopulation and under-performing economies in the Gap can lead to explosive situations that spill over to the Core. One hopeful sign of the future: The Philippines has demonstrated that such flows can be achieved on a temporary deployment or "global commuting" basis without resorting to permanent emigration or generating increased xenophobia in host nations.

Flow of security from Core to Gap. For now, the war on terrorism and our long-term commitment to rehabilitate Iraq have superseded previous Bush administration talk about an East Asian security strategy. These continuing interventions underline the reality that the U.S. military remains in the business of working the bloody seam between the Gap and the Core. In the 1990s, that seam ran from the Balkans to the Persian Gulf, but today it also extends into Central Asia, where we have built a number of "temporary" military bases in former Soviet states to support our operations in Afghanistan - with Russian acquiescence - in a remarkable turn of history.

The reality is that the United States will end up exporting security (e.g., bases, naval presence, crisis response activity, military training) into Central and Southwest Asia for some time to come. For the first half of the 21st century, the primary cluster of security threats will lie in these areas - which also happen to be the supply center of the global energy market (we identify them as a cluster because the ultimate resolutions of individual conflict situations there are highly interrelated): 

While the United States already is pursuing an ambitious plan to rebuild much of post-Saddam Hussein Iraq, there is little doubt among regional experts that the world is really looking at a lengthy rehabilitation period similar to post-World War II Germany or Japan. The United States might well establish permanent military bases in Iraq, moving them from Saudi Arabia to relieve the political situation there.

The Israeli-Palestinian issue is heading toward a Berlin Wall-like separation. It may eventually involve a United States-led demilitarized zone occupation force. Then we simply would have to wait out a couple of generations of Palestinian anger as that society ultimately is bought off through substantial Core economic aid and the Palestinians reduce their family size as they achieve some economic viability.

Saudi Arabia's dramatic slide in per capita income during the past 20 years signals a downward spiral that will trigger radical political reform and/or substantial internal strife. Forestalling this may require a lot more prodding by the United States if institutional reforms are to occur and the Core is to avoid organizing yet another peacekeeping force. The course of events in Iraq will bear strongly on this evolution.

Assuming the United States remains deeply involved in the West Bank, Saudi Arabia, and Iraq, Iran's mullahs will fear Tehran is next and likely step up their anti-Americanism - if that is possible. The United States therefore will continue its long-term containment strategy until the restive Iranian public prevails in its desire to join globalization. 

The combination of prosperity stemming from globalization and the export of U.S. surplus military power has taken "great power war" off the table in region after region. As the 21st century begins, such warfare is essentially unthinkable in the Western Hemisphere, in Europe (where nato members and Russia have joined in a common effort), or for that matter anywhere on the high seas. We hope that in a couple of decades, the same combination of efforts - a mix of economic and security cooperation - makes war unthinkable throughout developing Asia. But for the foreseeable future, it is the export of U.S. security into the Islamic regions of Southwest and Central Asia that remains our most serious international security task. We are witnessing the beginning of a long-term integration effort there, one that will ultimately rival our Cold War effort in Europe in its strategic centrality.

Flow of energy from Gap to Core. Sometime in the next 20 years, Asia will replace North America as the global energy market's demand center. That is because U.S. energy demand will increase rather slowly in the coming decades while Asia's will double. Asia has sufficient coal but will import the vast majority of both natural gas and oil as demand skyrockets. 

The great source for all that Asian demand will be Central and Southwest Asia plus Russia. A codependent relationship is already in the making: Energy-strapped Asia increasingly depends on political-military stability in the Middle East, while the no-longer cash-rich Middle East increasingly depends on economic growth in Asia. According to Department of Energy projections, by 2020 Asia will buy just under two-thirds of all the oil shipped out of the Persian Gulf, and the Gulf will account for roughly four-fifths of Asia's oil imports.

Disrupt the flow of Middle East oil, and Asia's full integration into the Core is put at risk as its economies falter. India or China could feel the need to play "great power" in the Gulf if the United States drops that ball. That could create an awkward competition among the Core countries, putting us all at the mercy of the Gap's chronic conflicts.

The United States must enable the smooth flow of energy from the Middle East to Asia because the latter is such an important partner in our global transactions. China and Japan are the two greatest sources of our trade deficit, and Japan long has been a leading buyer of our sovereign debt. China's domestic market may become our greatest export opportunity as it opens up under the World Trade Organization's guidelines. India, meanwhile, supplies half the world's software. In the end, it may not be our oil supply but it most certainly will be our prosperity that we protect when we export security to the Middle East.

Flow of investments from Old Core to New Core. Unprecedented flows of foreign direct investment are required for Asia's energy and other infrastructure requirements, approaching $2 trillion by 2020. Asians themselves will shoulder much of the burden, but plenty more long-term money will have to come from private investors in the United States and Europe, which in combination control roughly two-thirds of the annual global flow of approximately $1 trillion. So not only is Asia (the "New Core") dependent on the Gap for energy, but it is also dependent on the "Old Core" countries (the United States, European Union) for the financing. Put these two realities together, and you begin to understand that China's "rising" is far more about integration with the global economy than Beijing seeking some illusory power or hegemony.

The major problems with Asia's energy demands and investment climate are threefold: Asian governments, especially in China, still play far too large a decision-making role, delaying the rise of private-sector markets; national legal systems are still too arbitrary, meaning the rules are not applied equally to all players; and there are still too many chronic security flash points.

Continuing U.S. military presence in Asia helps deter the "vertical scenarios" of war (e.g., China-Taiwan, India-Pakistan, the Koreas), while enabling markets to emerge and tackle the harder, long-term "horizontal scenarios," such as meeting the region's ballooning energy demands while mitigating the already profound environmental costs. So long as markets can deflate buildup of pressure associated with all this development, none of these horizontal scenarios should segue into vertical shocks, i.e., conflicts. In effect, our military forces occupy both a physical and fiscal space in the region, encouraging Asian states to spend less on defense and more on development - the ultimate security.

Transaction Strategy

The "Transaction Strategy" is nothing more than a U.S. national security vision that recognizes the primacy of these four global flows. That means the U.S. government cannot pursue any national policy - such as the war on terrorism, the preemption strategy, missile defense, or exemptions from the International Criminal Court - in such a way as to weaken this fragile, interdependent balancing act across the globe as a whole. Instead, all security initiatives must be framed in such a way as to encourage and strengthen these system-level bonds. We will accomplish this best by being explicit with both friends and foes alike that U.S. national security policy will necessarily differentiate between the role we need to play within the Core's ever-strengthening security community (i.e., more assurance/deterrence-oriented) and the one we must assume whenever we enter the Gap (more dissuasion/preemption-oriented).

If that is the overarching principle of the Transaction Strategy, then its macro rule set on security can be summarized as follows:

• Do everything feasible to nurture security relations across the Functioning Core by maintaining and expanding our historical alliances.
• Discretely firewall off the Core from the Gap's most destabilizing exports - namely, terrorism, drugs, and pandemic diseases - while working the immigration rule set to provide opportunities to those who can contribute.
• Progressively shrink the Gap by continuing to export security to its greatest trouble spots while integrating any countries that are economic success stories as quickly as possible.

Is this a strategy for a Second American Century? Yes and no. Yes, because it acknowledges that the United States is the de facto model for globalization - the first multinational state and economic union. And yes, because it asserts that U.S. leadership is crucial to globalization's advance. But no, in that it reflects the basic principles of "collective goods" theory, meaning the United States should expect to put in the lion's share of the security effort to support globalization's advance because we enjoy its benefits disproportionately - hence this is a practical transaction in its own right.

Blast from my past: "The Top 100 Rules of the New American Way of War" (2003)

The Top 100 Rules of the

New American Way of War

By Dr. Thomas P. M. Barnett and Dr. Henry H. Gaffney Jr.

British Army Review, Spring 2003, pp. 40-45;

reprinted with permission

THE PATHS TO WAR

The United States Stands Ready for Any Type of War

1. The U.S. military stays ready because it understands that while the world is full of ongoing situations in which it remains involved, it must be prepared for any acts of war against the United States that come "out of the blue."

2. U.S. forces believe in constant training, both to facilitate their command of their complex war- making system and to deal with a wide variety of circumstances.

3. Because the United States must move forces long distances to fight, it does extensive contingency planning to conquer the time and distance factors.

Whom the United States Fights in Wars

4. The United States wages war on states or nonstate actors that attack or threaten to attack the U.S. homeland.

5. The United States wages war on states or nonstate actors that attack U.S. military forces or other instruments of the government; because the United States is the de facto global cop, any such attack is perceived as an attack on global stability itself.

6. If all other measures fail, the United States reserves the right to bring war preemptively to states or nonstate actors that actively seek to acquire weapons of mass destruction for use against the United States or any of its allies.

7. The United States wages war on states that harbor or actively support terrorist groups with transnational objectives and reach, and this war encompasses all elements of U.S. national power.

8. Maintaining a commitment to global stability, the United States wages war on states or nonstate actors that threaten or launch wars against our key allies, including other North Atlantic Treaty Organization (NATO) countries, Saudi Arabia and other Gulf states, Israel, Taiwan, South Korea, Japan, Australia, and others.

Where the United States Is Ready to Fight Wars

9. The United States is prepared to intervene within the western hemisphere, and especially in the Caribbean and Central American areas, because this is its neighborhood.

10. The United States is ready to defend against aggression in Europe because this was the source of the worst wars of the past and because NATO is its strongest and oldest security alliance.

11. The United States is ready to wage war in Southwest Asia, particularly in the Persian Gulf region, where it is the only power capable of stabilizing the area—thus ensuring the continuing flow of energy out of the region.

12. In strong alliance with Japan, the United States is prepared to deter or defeat a Chinese invasion of Taiwan and a North Korean attack on South Korea.

13. Beyond these cases, the United States is ready to go anywhere to combat terrorist groups that are part of a global organization and plot.

What Triggers the United States to Go to War

14. The United States retaliates automatically to any direct attack against its homeland, although this may not be instantaneous in the case of a terrorist attack because a nonstate actor’s identity and home base may not immediately be clear.

15. Other than in response to direct attacks on the United States, there currently are five situations where the United States reflexively would engage in war:

• If Iraq were to attack Kuwait, Saudi Arabia, or Israel
• If China were to attack Taiwan
• If North Korea were to attack South Korea
• If Iran or Iraq were to attempt to close the Persian Gulf to oil traffic
• If al Qaeda or any successor terrorist group attacks U.S. citizens, forces, or property anywhere in the world.

16. Outside of those circumstances, any overt U.S. war effort will follow an extensive debate within the U.S. and international political system, with the critical questions being:

• How much congressional and public debate?
• How much U.N. consultation/approval?
• What level of allied consultation and contributions?

17. The United States pursues covert operations as part of the global war on terrorism in accordance with presidential findings.

U.S. Goals in the Conduct of War

18. Beyond preserving or restoring national security, the fundamental U.S. goal is sustaining global norms against the aggressive use of force, meaning U.S. actions are limited to those states or actors that transgress these rule sets.

19. Beyond that, U.S. interventions are meant to ensure aggression does not reoccur by supporting the institution of the rule of law and democracy.

20. In waging war, the United States seeks to protect the functioning of the global economy as necessary, since trade can flourish only under conditions of peace and freedom under law.

21. In any conflict, the United States seeks to limit its own absolute losses, so as not to damage the American public’s support both for the intervention in question and for this nation's long-term involvement in international security.

22. The United States seeks to limit collateral damage, thus to limit foreign resentment concerning the use of U.S. military force and to set the stage for restoration of economies and government once the conflict has ended.

Whose Help the United States Seeks in War

23. The United States seeks as much approval, cooperation, and mutual agreement as possible from the global community for any conflict it responds to or initiates, because it wants all such actions to further the advance of collective security.

24. When practicable, the United States seeks approval and sanctio n in the U.N. forum, but reserves the right to act unilaterally or to organize a "coalition of the willing" if such consensus cannot be found.

25. As appropriate, the United States seeks the aid and agreement of the other NATO countries (especially the United Kingdom) because they are its closest allies and can provide forces most able to join U.S. efforts.

THE CONDUCT OF WAR

How the United States Commands in War

26. U.S. political control is direct and detailed at the start and conclusion of any war, and is coordinated with diplomatic actions.

27. The Unified Combatant Commander plans operations in detail.

28. The Unified Combatant Commander manages relations with involved coalition partners.

29. Combined Joint Task Forces closer to the action execute the plans, while keeping the Unified Combatant Commander fully informed.

30. As one specialized command, a Joint Forces Air Control Center or Combined Air Operations Center is set up to manage all air assets.

31. The common operational picture, compiled from extensively networked data and information flows, is available to every command element in the chain.

What the United States Mobilizes and Takes to Any War

32. Any war the United States wages involves all elements of national power, meaning the United States works to defeat its enemy in every way possible:

• Destroying their ability to wage war
• Isolating them from potential allies
• Denying them resources
• Denying them the sympathy of others.

33. The United States establishes logistical lines of communication because—aside from homeland defense—all operations are "overseas," and for the most part not likely to be where U.S. forces are stationed permanently. Thus the United States maintains and obtains airlift and sealift to get equipment, personnel, and supplies to the theater in sufficient time and quantities.

34. Relying heavily on space assets, the United States mobilizes a global information grid to achieve information dominance before a single shot is fired.

35. The United States brings as much firepower of the joint forces to bear as possible, supported by intelligence, surveillance, and reconnaissance within a comprehensive command-and-control system so it can be applied as precisely as possible.

36. To preserve personnel, the United States mobilizes the world's preeminent combat medical system.

How the United States Gets to War

37. Because the United States maintains the world’s only global blue-water navy, most U.S. forces and supplies go safely by sea.

38. If speed is required, or if the United States wishes to strike directly from the continental United States, other remote bases, or the sea, it can deliver much force by strategic airlift or long-range strike aircraft, using midair refueling.

39. The United States prepositions equipme nt and supplies both on ships and on allies’ territories for easy breakout and rapid deployment of personnel.

40. The United States uses established overseas bases, establishes new bases in adjacent countries that are supportive, or establishes lodgments in remote areas of hostile territories.

What Forces the United States Brings to War

41. The United States is ready to draw on all five services as needed for any particular war.

42. The United States brings overwhelming force to bear before joining a conflict, not committing forces piecemeal.

43. The United States seeks to overwhelm the opponent with joint firepower, and endeavors to keep the ground forces’ "footprint" as economical as possible.

44. The United States operates air assets from both adjacent bases on allied territory and carriers in adjacent seas, as well as distant, over-the-horizon bases and even the continental United States, taking full advantage of its midair refueling assets.

45. The United States uses Special Forces—including Central Intelligence Agency paramilitaries—for special up- front and follow-on tasks, and for guiding precision munitions from on-the-ground locations.

46. Whenever interagency collaboration makes sense, those additional civilian personnel are brought along, rather than the military trying to replicate their capabilities.

How the United States Fights

47. The underlying principle for employing regular forces is the United States’ desire to keep the conflict "over there" as much as possible; retaliation against terrorist attacks on the U.S. homeland is an "away game."

48. The United States aims for rapid dominance of any battlefield it may enter, so the initial blows come from the air:

• First, the United States suppresses air defenses, including airfields
• Next, it hits strategic targets like command and control
• Then, it breaks the logistic connections to the deployed enemy forces
• Finally, it directs air strikes against opposing ground forces.

49. The United States uses ground forces to roll up enemy ground forces that have been softened by air attacks and to occupy territory.

50. Leveraging its space assets, the United States possesses and keeps expanding an unparalleled capacity to wage network-centric warfare:

• It drives up the enemy’s information requirements and then degrades its ability to meet them
• It achieves as much transparency over the battlefield as possible for U.S. forces, then leverages that advantage to destroy enemy forces, equipment, and installations.

51. U.S. forces maneuver rapidly to avoid static "front lines," turning each engagement into an ambush across a "noncontiguous" battlefield.

52. Because no potential foe matches well, the United States expects opponents to defend themselves with dispersal and concealment, to seek destruction of high- value U.S. assets, to use chemical or biological weapons, and to seek sanctuary in both urban and remote environments; therefore the United States increasingly anticipates and prepares for those tactics and develops capabilities for combat in those venues.

How U.S. Forces Defend Themselves in War

53. If the United States has evidence that a potential foe possesses both the where-withal and the intention of employing weapons of mass destruction, it reserves the right to engage in preemptive strikes against that capability.

54. In any conflict, the U.S. military seeks to defeat its enemy in the field while simultaneously waging a three- front defensive strategy:

• Preserving its forces in-theater through mobility, range and stealth
• Defending U.S. military and diplomatic installations around the world through vigilance
• Protecting the homeland from retaliatory strikes by preventing their launching at the source.

55. The United States seeks to avoid using its nuclear weapons, but remains ready to retaliate against any state that first uses weapons of mass destruction against its forces.

How the United States Protects Its Homeland during War

56. Protecting the homeland remains the most important defense function of the Defense Department, therefore it makes forces available for those purposes as necessary.

57. Protecting the homeland is first and foremost a matter of deterring attacks that employ weapons of mass destruction by the threat of nuclear retaliation, so the United States maintains and modernizes its nuclear forces.

58. The United States develops and deploys missile defense to strengthen deterrence and to defend in the event deterrence fails.

59. The United States is prepared to strike preemptively against any regime or nonstate actor it knows to be planning for, or mounting, an attack against the homeland as part of a strategy to degrade U.S. power projection capabilities.

How the United States Stabilizes Situations as Wars Subside

60. The United States conducts "psychological operations" to try to win the hearts and minds of the local population toward the goals of its intervention.

61. The United States makes every necessary effort to track down and incapacitate known belligerents who refuse to comply with conflict-termination agreements; it also facilitates the capture, processing, and confinement of individuals suspected of war crimes for later adjudication by internationally recognized courts.

62. The United States works with local social and political leaders to resurrect basic elements of the government and infrastructure to return life to some semblance of normality.

63. When necessary, the United States conducts emergency humanitarian missions on its own, until civilian or international relief groups can pick up the task.

THE AFTERMATH OF WAR

When the United States Leaves a War

64. The United States does not leave until the capital city is under firm control by friendly forces and government.

65. The United States does not leave until the countryside is no longer roiling with conflict, and appears to be quiet enough for the local constabulary to once again extend its political reach—sometimes with the help of other states’ peacekeepers.

66. The United States does not leave until all the major local players in the conflict basically sign up to the conflict termination agreements and demonstrate their adherence.

67. The United States does not leave until the magnitude of any ongoing humanitarian crises have been reduced to the point where the international community can meet the population’s basic needs.

What the United States Leaves Behind Following a War

68. The United States may leave behind Special Forces or other Army trainers to help the country rebuild its military and to train them to combat remaining rebels.

69. If the United States expects to return for further combat in the country or region, it may leave behind a supply of prepositioned materiel, signaling a strong relationship with the surviving/reconstituted government.

70. The United States may leave with signed agreements for long-term military cooperation or government- financed arms sales to help the country get its military back on its feet.

THE EMPLOYMENT OF VARIOUS FORCES IN WAR

How the United States Uses Air Forces in War

71. The United States strikes enemies first from the air to suppress air and ground defenses and to hit strategic targets, using its Air Force and/or naval aviation as defined by circumstances.

72. Once the United States effectively rules the skies, it is free to choose the time and location of strikes for strategic effect.

73. Over time, because of increasing accuracy and better intelligence, the United States realizes greater economy of force with its air strike assets, limiting collateral damage.

74. The United States is able to strike with aircraft stationed far away and keep those aircraft loitering on station at length since it has an enormous capability for midair refueling.

75. U.S. air strike assets are managed centrally through an air tasking order, but as network-centric operations mature and enemy forces resort more to dispersing themselves, an increasingly larger portion of these assets is freed to respond flexibly to targets of opportunity.

76. Airlift is a major tool for delivering, dispersing, and removing ground personnel and materiel throughout combat areas.

77. By gradually increasing the use of unmanned air platforms, the United States loiters longer and closer in dangerous environments while risking fewer personnel.

How the United States Uses Naval Forces in War

78. Because the United States "owns" the world's oceans, it focuses its naval forces' combat activities onto the land—including strategic targets deep inland—as part of joint combat operations.

79. U.S. naval forces are responsible for defending the sea approaches to land against threats from mines, submarines, attack boats, cruise missiles, and air attacks.

80. Naval forces are part of U.S. joint air strike forces, with Tomahawk land-attack missiles playing a leading role.

81. U.S. naval forces provide off-shore staging platforms for Marines, Special Forces, and Army forces; the Marines, in particular, are customized to approach combat zones from the sea.

82. The Military Sealift Command, as part of the joint Transportation Command, transports the vast majority of Army troops and logistic supplies to a theater.

How the United States Uses Ground Forces in War

83. Marines, having been designed as a self-supporting force, are a useful interim force until the U.S. assembles larger ground forces.

84. Marines have specialized capabilities for special operations, chemical-biological responses, and urban warfare, thus expanding the joint commander’s tool kit.

85. The Army offers broadly capable large-scale ground units featuring heavy firepower, armored mobility, and air and missile defenses.

86. Large Army units are moved mainly by sea to prepared staging areas, except for the lightly equipped 18th Airborne Corps.

87. To minimize ground force casualties, the United States avoids attrition warfare by stressing reconnaissance, overwhelming force, armor and other protections, and rapid maneuver.

88. Ground forces complete the liberation of territory and the eradication of opposing forces.

89. The Army is the premier long-term occupation force, which means if any nation building is pursued postconflict, the Army maintains the peace while the transition is made to international or local civilian rule.

How the United States Uses Unconventional Forces in War

90. Special Forces are the clandestine/covert infiltration force, so they are used in small numbers for specialized tasks.

91. Where minimal personnel are needed in the most dangerous situations (e.g., pre-invasion reconnaissance, spotting for air strikes), Special Forces are preferred because they require the least support.

92. Special Forces set the military standard for cooperation with law enforcement agencies, apprehending combatants in both war and peace.

93. Special Forces set the standard for cooperation with intelligence agencies because of their sensor- like role in command and control and their unique abilities for unconventional tactics against asymmetrical opponents.

94. When covert preemptive strikes are attempted, the United States employs Special Forces with a level of impunity far beyond previous use of U.S. military power in a peacetime environment.

How the United States Uses Reserve Forces in War

95. Reserves are the backbone of an American hedge force and homeland security.

96. Reserves are the cornerstone of logistics for combat operations, manning a large part of the airlift and air refueling force.

97. Because of high demand, civil affairs personnel are de facto active-duty assets.

How the Services Fight Jointly in War

98. Operations are joint from beginning to end, because Combatant Commanders plan operations according to the law.

99. Space-based communications assets are the sine qua non of jointness because they move the services past mere deconfliction to genuine operational integration.

100. Facing no peer competitor and enjoying the lion's share of the earth's surface and space as its operating domain, the United States exploits the exterior position to employ all five services in a network-centric approach that yields their maximum combined combat power.

Dr. Barnett, a Naval War College professor, currently serves as the assistant for strategic futures, Office of Force Transformation, Office of the Secretary of Defense. Dr. Gaffney is a research manager at The CNA Corporation, serving as team leader in the Center for Strategic Studies. The authors thank Vice Admiral Arthur K. Cebrowski, U.S. Navy (Ret.), Professor Bradd Hayes, and Professor Hank Kamradt for their advice on the list.

Blast from my past: "The American Way of War" (2003)

 
 

The American Way of War

by Arthur K. Cebrowski & Thomas P.M. Barnett

British Army Review, Spring 2003, pp.39-40;
reprinted with permission

U.S. Naval Institute Proceedings, January 2003, pp. 42-43;
reprinted with permission

The effort to identify and characterize the American Way of War is—in many ways—an attempt to understand how U.S. warfare evolves once freed from the bilateral and all-consuming competition with the Soviet Union. In other words, left to our own devices to manage a complex and constantly changing global security environment, how does this country choose to wage war?

By our reckoning, the United States—and the world—stands at a historical creation point similar to the immediate post-World War II years. Across the 1990s global rule sets became seriously misaligned, with economics racing ahead of politics (as evidenced by current corporate scandals) and technology racing ahead of security (e.g., the rise of transnational terrorists exploiting globalization’s growing network connectivity). Now it is time to play catch up, as we did in the early Cold War years, with the U.S. military once again serving as an instrument of rule-set exportation through the global war on terrorism.

Can we as a nation go overboard in this endeavor and destabilize globalization in the process? Only if we forget who we are and what we represent to the world: democracy, free markets, and the rule of law. That is why it is so crucial for us to understand this nation’s particular approach to waging war, taking into account all its operational complexity and moral imperatives. To that end, here are our summary observations concerning the emerging American Way of War.

The Networking of American Warfare

Network-centric warfare combines the four military branches into a seamless, joint warfighting force. It is a new form of warfare that capitalizes on the trust we place in our junior and noncommissioned officers: as information moves down echelon, so does combat power, meaning smaller joint force packages wield greater combat power. Network-centric warfare generates new and extraordinary levels of operational efficiency. It enables and leverages new military capabilities while allowing the United States to use  traditional capabilities more discretely and in new venues (e.g., strikes, not battles). This is allowing the U.S. military to downshift effectively over time from system-level wars (the Cold War and its World War III scenarios) to state-on-state wars (Iraq and Korea major theater wars/scenarios) to the emerging wars fought largely against groups of individuals (Taliban take-down, rolling up the al Qaeda network).

In short, the rise of asymmetrical warfare is largely our own creation. We are creating the mismatch in means as we increasingly extend the reach of our warfighting machine down the range of conflict—past the peer competitor, past the rogue nation-state, right down to individual enemy combatants. This constitutes in itself an amazing transformation of the American Way of War over the past generation. 

The Inevitability of American Warfare

There is an enormous literature about how everything connected with warfare is accelerating—technological advances, technology proliferation, the pace of events on the battlefield. But it is not only the speed of the U.S. response to aggression that matters; the inevitability, even unstoppability, of our power projection once we choose to employ it is critical as well. Again, the rise of antiaccess strategies by our opponents is largely our own creation, as we try to maintain a capacity to reverse significant acts of aggression within a security system we seek to administer like an empire, but one based on shared values rather than imposed order.

Over time, it is a “fast” U.S. military establishment the advanced world fears most: reckless, trigger-happy, and prone to unilateralism. An inevitable military Leviathan, on the other hand, is what the global system needs most: decisive in its power projection, precise in its targeted effects, and thorough in its multilateralism. 

The Speed of American Warfare

The decision to go to war must never be quick, but a defining characteristic of the American Way of War is the growing ability of U.S. forces to execute operations with unprecedented speed. This is not so much speed of response as speed within the response. In other words, we may choose our punches with great care (strategy), only to unleash them with blinding speed (operations, tactics). Most of this speed comes from increased battlespace transparency, although the speed of platforms remains crucial to protecting our personnel.

U.S. operations increasingly resemble hockey superstar Wayne Gretsky’s “speed” on the ice. Never the fastest skater, Gretsky concentrated less on skating to where the puck was and more on skating to where the puck would be. The goal of the common operational picture within network-centric warfare speaks to this sort of speed: not trying to be everywhere all the time, but to be exactly where you need to be exactly when you need to be there.

The Precision of American Warfare

It is from this information-driven speed that another key attribute of the American Way of War emerges: the increasing precision of our operational effects. Trapped within the distant, abstract near-peer attrition scenarios still favored by some within the Pentagon, this sort of operational precision always risked seeming pointless. The objective of precision is not the weapons effect, but the enabling of our political objectives—effects-based operations. In the increasingly transparent battle space, the speed and access of our networked forces open the way to profoundly altering initial conditions of conflict, developing high rates of change that cannot be outpaced, and sharply narrowing an enemy’s strategic choices.

When downshifted by the global war on terrorism, such effects-based operational capabilities appear both more credible  and more useful, primarily because in a war fought largely against individuals, the capacity for discrete applications of military power is prized most of all—likewise for focused, preemptive strikes against rogue states enabled by weapons of mass destruction.

The Transformation of American Warfare

Pulling together the major conceptual threads of the emerging international security environment, one is led to the conclusion that even when homeland security is the principle objective, the preferred U.S. military method is forward deterrence and strike operations. As a matter of effectiveness, cost, and moral preference, operations will have to shift from being reactive (i.e., retaliatory and punitive) to being largely preventative. Forward presence therefore will be valued more than strategic deployment from home, necessitating a major force posture shift from the current condition where 80%-plus of the force is U.S. based. Accordingly, the emerging American Way of War speaks to a future military force that features more:

• Special operations-like forces whose easier insertion and extensive local knowledge will give them greater power and utility than large formations deploying from remote locations
• Forces capable of applying information-age techniques and technologies to urban warfare, else we will not deny the enemy his sanctuary
• Surveillance-oriented forces to counter weapons of mass destruction, else unambiguous warning will come too late
• Concepts of “jointness” that extend down through the tactical level of war
• Interagency capabilities for nation building and constabulary operations, lest our elite forces get stuck in one place when needed in another
• Adjustments in force structure and posture in consideration of the growing homeland security roles of the Coast Guard, the National Guard, the Air National Guard, and the Reserves.

The ultimate attribute of the emerging American Way of War is the superempowerment of the war fighter—whether on the ground, in the air, or at sea. As network-centric warfare empowers individual servicemen and women, and as we increasingly face an international security environment where rogue individuals, be they leaders of “evil states” or “evil networks,” pose the toughest challenges, eventually the application of our military power will mirror the dominant threat to a significant degree. In other words, we morph into a military of superempowered individuals fighting wars against superempowered individuals. In this manner, the American Way of War moves the military toward an embrace of a more sharply focused global cop role: we increasingly specialize in neutralizing bad people who do bad things.

Adding these new responsibilities to the U.S. military is not only a natural development but a positive one, for it is the United States’ continued  success in deterring global war and obsolescing state-on-state war that now allows us to begin tackling the far thornier issues of transnational threats and subnational conflicts—the battlegrounds on which this global war on terrorism will be won.

Admiral Cebrowski serves as Director, Office of Force Transformation, Office of the Secretary of Defense. Dr. Barnett, a Naval War College professor, serves as the Office of Force Transformation’s assistant for strategic futures. The authors are indebted to Henry Gaffney, Colonel Pat Garrett, U.S. Marine Corps, and Bradd Hayes for their input.

Blast from my past: "Foreign Direct Investment" Decision Event Report" (2001)

Foreign Direct Investment:  
Decision Event Report II of the
NewRuleSets.Project

by

Dr. Thomas P.M. Barnett

with

Prof. Bradd C. Hayes

and inputs from

Dr. Lawrence Modisett

Cdr. Carl Carlson, USN

Prof. Gregory Hoffman

 

18 May 2001 final draft

Contents

I. Project overview and introduction

II. The Asian Energy Futures key findings

III. The Foreign Direct Investment workshop

IV. Starting line analysis

V. The Here and Now of FDI in Asia

VI. The New Rule Sets of FDI in Asia

VII. The There and Then of FDI in Asia (2010)

VIII. Cosmic conclusions about the future(s) of FDI in Asia

I: Project overview and introduction 

This annotated briefing serves as the Decision Strategies Department (DSD) Report for the Foreign Direct Investment: 3+x(Asia)=Triad2? decision event held in New York City on 16 October 2000.

As of 25 May 2001, this summary brief of the NewRuleSets.Project (both an overview of the project and a summation of the Asian Energy Futures and Foreign Direct Investment events) has been presented on approximately 50 occasions to a variety of Washington think tanks, government agencies, and Wall Street firms. Future briefs are always being scheduled, so contact Tom Barnett directly if you are interested in receiving the brief.

The original draft of the Foreign Direct Investment report was posted on the Naval War College’s web site ) on 9 April 2001. Comments on this final version are welcome from all quarters, but especially from the workshop’s participants and anyone who’s seen the brief in person. Comments should be emailed directly to Tom Barnett, the project’s director (<barnettt@nwc.navy.mil>). He can also be reached by phone at 401.841.4053. 

The Foreign Direct Investment event was the fifth in a series of Economic Security Exercises that the DSD has conducted in New York City with the support of Cantor Fitzgerald, the world's largest broker of U.S. Government securities, Eurobonds, and sovereign debt. These events are designed to bring together the worlds of finance and national security to explore issue areas of common interest and, by doing so, build mutual understanding.

For more than 25 years, Cantor Fitzgerald has played a pioneering role as a private-sector intermediary for the fixed income markets. In the early 1970s, Cantor developed the world's first screen-based marketplace for the trading of U.S. government securities. In 1998 it created Cantor Exchange, the first U.S. electronic futures exchange for U.S. Treasury futures. In 1999, Cantor launched a new division known as eSpeed to operate all of its electronic markets. All told, Cantor’s business operations involve financial flows of approximately 50 to 70 trillion dollars a year.

Cantor Fitzgerald provided significant analytic and organizational support to the first three Economic Security Exercises in the series:

• December 1997 event focused on a dual cyber terrorism/disruption of the sea lines of communication (SLOC) scenario involving Wall Street and Southwest Asia, respectively (hard copy of event report is available from the DSD by calling 401-841-1798)
• June 1998 event focused on a dual financial crisis/SLOC disruption in Asia involving Indonesia (hard copy of event report is available from the DSD by calling 401-841-1798)
• May 1999 event focused on the potential global financial repercussions of a substantial Year 2000 Problem (find the report online at ).

eSpeed has stepped to the fore on the NewRuleSets.Project, and serves as Cantor’s support lead for all five of the planned Economic Security Exercises envisioned in this project, beginning with the inaugural Asian Energy Futures event of May 2000 (find the report at <www.nwc.navy.mil/newrulesets/AEFreport.htm>). 

The NewRuleSets.Project is a two-and-a-half-year, five-workshop effort designed to explore how globalization and the rise of the New Economy are altering the basic "rules of the road" in the international security environment, with special reference to how these changes may redefine the U.S. Navy's historic role as "security enabler" of America's commercial network ties with the world. Not a data gathering effort, this project lives and dies with the participants we bring together at our workshops—from throughout the global financial and national security communities. The project has five main goals:

• Explore how globalization and the rise of the New Economy are generating new rule sets with regard to how nation-states and national economies interact with one another
• Determine how these new rule sets alter the basic "rules of the road" in the international security environment
• Link these changes in the international security environment to the U.S. Navy's current quest for a "transformation strategy," with special reference to how these changes may redefine the U.S. Navy's historic role as "security enabler" of America's commercial network ties with the world
• Translate these changes in the international security environment into conceptual paradigms of use to strategic planners in the international financial community
• Generally deepen the cross-cultural understanding both sides—the Pentagon and Wall Street—bring to the table during periods of overlapping geo-strategic and geo-economic instability.

Dr. Thomas P.M. Barnett serves as project director. He is currently a Professor/Senior Strategic Researcher in the DSD. Other DSD personnel involved in the project include:

• Prof. Bradd Hayes, Senior Strategic Researcher, DSD
• Dr. Lawrence Modisett, Chairman, DSD
• CDR. Carl Carlson, USN, Deputy Chairman, DSD
• Prof. Gregory Hoffman, Associate Researcher, DSD. 

The global rule set that has characterized international relations throughout the Cold War period finds its roots in the systemic stresses of the 1930s—namely, the Great Depression and the rise of fascism in Europe. These twin developments led inexorably to the Second World War, from which sprang the hope that "never again" would the international community allow itself to engage in the sort of economic protectionism that destroyed most of the global economic connectivity achieved by “Globalization I” (roughly, 1870 to 1929).

Based on that "never again" spirit, the postwar Western great powers, led by the United States, attempted to "firewall off" the experiences of the 1930s by creating a new global rule set, whose main attributes were exemplified by such international organizations as the General Agreement on Trade and Tariffs, the UN, the International Monetary Fund (IMF) and the World Bank (WB).

This new global rule set engendered the second great period of economic globalization, creating what we've come to know as the globally networked "New Economy." As this New Economy spreads across the planet, it has suffered significant "growing pains" (e.g., Mexico ’94, Asia ’97-’98, Russia ’98, Brazil ’98-’99), leading some to question whether the postwar rule set is still appropriate for the 21st Century. In other words, as national economies become increasingly intertwined in this information technology-driven New Economy, legitimate questions arise as to whether or not a new global financial architecture is in order and, if so, what it might entail.

While not focusing specifically on any of the ideas currently forwarded by economists for such a new financial rule set, our project takes as its starting premise that the current era will witness great change in the planet’s economy, and that these changes will eventually alter our definitions of national security.

NOTE: A portion of this text is adapted from Thomas P.M. Barnett et. al, Final Report of the Year 2000 International Security Dimension Project, DSD Report 00-5, pp. 15-16, found online at . 

As our starting point for analyzing how an emerging new global economic rule set could alter U.S. definitions of national security, we employ the three-tiered analytic perspective introduced by Kenneth Waltz in his seminal 1954 book on the theory of the causality of war entitled, Man, the State and War (New York: Columbia University Press). Waltz’s approach to this eternal question (“Why do interstate wars start?”) was simply to “view” the matter from three separate perspectives, which he labeled “images”:

• The first image, or “bottom up” perspective, is that of humanity itself, or better stated, human nature. In other words, the question he posed was, is it the essential nature of humanity to engage in violence?”
• The second image, or “straight on” perspective, involves the nation-states themselves. In other words, do certain types of states instigate wars while others do not?
• The third image, or “top down” perspective, involves the all-encompassing international system within which these wars between states occur. In other words, does the current structure (i.e., lacking Thomas Hobbes’ Leviathan, or authoritative enforcer of global order) simply allow or even encourage conflict among states?

In essence, Waltz used these three perspectives to test—or poke holes in—conventional wisdom concerning the presumed complicity of man, states and the international system in fomenting war.

We likewise employ Waltz’s analytical framework in discerning the future of inter-state relations in the post-Cold War era, which we will label the Era of Globalization. We think this three-tiered approach forces a certain discipline to our analysis by pushing us to dis-aggregate the emerging global rule sets according to the “location” of the needs they seek to address—namely, the international system, state governments, or individuals.

NOTE: A portion of this text is adapted from Thomas P.M. Barnett et. al, The U.S. Marine Corps and Non-Lethal Weapons in the 21st Century: Annex A—Alternative Global and Regional Futures, Center for Naval Analyses Quick-Response Report 98-9, September 1998, pp. 2-3. 

It is our baseline contention that most militaries—but especially the U.S. military—are largely “frozen” in Waltz’s nation-state image. Why so?

In the Cold War, things were fairly straightforward, as both the international system (through blocs) and individuals (through ideologies) were kept in strict subordination to the state-centered superpower conflict. So when the Pentagon looked abroad, all it saw was "us" and "them" states, with that pesky nonaligned gang in between. The focus on states remains to this day. We call it the "Willie Sutton effect," after the famous bandit who, when asked why he robbed banks, replied, "Because that's where the money is." In other words, nation-states have long served as the preeminent collection point (i.e., taxes) for collective security efforts (militaries), but that has begun to change.

The United States has not yet adjusted its state-centered defense policy to account for the two biggest security trends of the globalization era:

• Power and competition have shifted upward, from the state to the system (in the form of the global economy, culture, and communications grid).
• Violence and defense spending (e.g., small arms races, private security firms) have shifted downward, from the state to the individual.
• Worldwide state defense spending and arms transfers are down dramatically from Cold War peaks, leaving some observers to wonder if the U.S. military is being disintermediated from the global security environment—namely, the perception that it is both irrelevant to the rising market of system perturbations (e.g., financial crises) and largely impotent in responding to the booming market of civil strife. While this is a decidedly harsh judgment, we think it’s important to consider the possibility that the U.S. military is—in effect—losing its market share as global security is transformed by the New Economy.

NOTE: A portion of this text is adapted from Thomas P.M. Barnett, “Life After DODth or: How the Evernet Changes Everything,” U.S. Naval Institute Proceedings, May 2000, p. 48. 

Our take on the future stems from our appreciation of the different trends we see unfolding across the three Waltzian perspectives. First and foremost, we see a future of fewer interstate wars. The early 20th century's high volume of state-on-state warfare will not carry over into the 21st. Nuclear weapons ended great power-versus-great power warfare back in 1945, and as John Keegan predicts, the future belongs far more to civil strife than traditional war.

However, on the international system level we’ll see the U.S. government focusing a lot of diplomatic attention on trying to keep systemic crises—usually triggered by financial tumults—from blossoming into real conflicts among states. Much of this future potential for system-based conflict arises from threats to the global information infrastructure (GII). We get only the slightest hint of this possible future through the emergence of worldwide computer viruses such as the “Love Bug” virus of early 2000. For now, such disruptions seem relatively minor, and since no focused motivations lie behind the acts, little danger is perceived. But it only makes sense that as Information Age economies become increasingly dependent on the movement of raw data, much as Industrial Age economies depended on the movement of raw materials, system-based conflict will be characterized by focused and well-motivated attacks on GII functioning. In short, this is a growing market.

In comparison, real conflicts below the level of the nation-state (i.e., civil strife) should remain fairly constant in the future. Globally there have been a good three to four dozen conflicts every year since World War II that generate 1,000 or more casualties. And while these conflicts are real, U.S. interests tend to be virtual, affording us the flexibility to choose the ones we want to deal with (e.g., Bosnia) and to turn a blind eye to those we don't (e.g., Rwanda).

NOTE: A portion of this text is adapted from Barnett, “Life After DODth,” p. 51. 

So where can a military fit in this new global environment, where almost all the important crises are either too global or too local for most states to tackle with military force? In a world featuring both integrating globalization (i.e., we are all drawn together by the Internet, transportation, mass media, e-commerce, etc.) and dis-integrating localization (so why then do so many societies and economies seem to be coming apart at the seams?), the great challenge facing governments is fostering compromises between the two, otherwise known as glocalization—adapting the local to the global in ways that improve the former's living standards.

Naturally, this can be fairly contentious, with many societies resisting what Thomas Friedman calls "revolution from beyond” (see his The Lexus and the Olive Tree; New York, Farrar Straus Giroux, 1999). In many societies, globalization is looked upon as forced Americanization, and frankly, that’s too much for most people to swallow. Localization, then, becomes a largely anti-Western rejection of the social homogenization fueled by globalization. In turn, any rejection of globalization constitutes a rejection of the concept of a single global rule set, meaning you tell the world, “Hey, in this corner of the planet we do things differently!” You can call it “Asian values,” or “Chinese characteristics,” but in effect you’re just saying that local identity still matters, even as your region may increasingly embrace globalization and all the social and political change that it ultimately forces.

In short, glocalization is the containment of the Globalization Era—sort of a dot.communism, love it or leave it. This individual choice, made again and again in societies throughout the world, will define the ideological conflict of this age: Davos Man (globalization) versus Seattle Man (localization).

NOTE: A portion of this text is adapted from Barnett, “Life After DODth,” pp. 49-50.

All of the published analytic output connected with the NewRuleSets.Project is available online at the Naval War College’s web site at the following address: http://www.nwc.navy.mil/newrulesets.

The web site provides a Project Summary, which we will update on a regular basis as the multi-year research effort unfolds.

For each decision event, such as the Foreign Direct Investment event, we will post three products:

• Read-ahead package that details the event from a procedural standpoint
• Copy of the brief slides
• Event report, such as this annotated briefing.

The web site also offers links to various related sites:

• Naval War College
• Center for Naval Warfare Studies
• Decision Strategies Department
• Biographies of NewRuleSets.Project personnel
• eSpeed.

The web site also offers direct email to project director Tom Barnett for the purposes of commentary and feedback.

The Foreign Direct Investment event is the second of at least five Economic Security Exercises we plan on conducting for the NewRuleSets.Project. Our current schedule is as follows:

• Asian Energy Futures (conducted 1 May 2000)
• Foreign Direct Investment (conducted 16 October 2000)
• Special Decision Event with the National Intelligence Council (conducted 6 December 2000 at the Center for Strategic Studies, Alexandria VA)
• Asian Environmental Solutions (planned for 4 June 2001)
• Special Decision Event with the Naval War College Foundation Board of Trustees (planned for 14 June 2001)
• Food and water resources (tentatively Fall 2001)
• Critical assets of the New Economy (tentatively Spring 2002).

Beyond the June 2001 events, the schedule is tentative and subject to change. We may also add additional events as the research warrants.

Each of the decision events—unless otherwise noted—will occur in one of two places:

• Windows on the World conference center, World Trade Center, New York City
• Decision Support Center, McCarty-Little Hall, U.S. Naval War College, Newport, Rhode Island.

If you or someone you know is interested in attending one of these events (space is extremely limited), please feel free to contact project director Tom Barnett with your nominations.

Each of the decision event workshops involve roughly thirty participants drawn equally from the financial community, the political-military community, and the regional expert community. The point of the effort is not to amass the most impressive collection of focused subject-matter experts, but to bring together a diverse array of experts, decision makers, and opinion leaders from both the public and private sectors, and let the synergy of their intellectual interactions serve as the fundamental analytic output. In short, the goal of our workshops is a "clash of paradigms," and not a rigorous forecasting effort.

These decision events typically unfold over four to five major sessions. Each session involves both facilitated discussion by the group as a whole and individual participation in collective brainstorming tasks, in which we employ a decision software system known as GroupSystems. Using GroupSystems, each participant enters ideas anonymously via a dedicated laptop, while simultaneously commenting on each other’s inputted ideas asynchronously via a portable Local Area Network, or LAN. In effect, then, we intersperse facilitated discussion with a LAN equivalent of a "chat room" where we explore numerous specific ideas in greater detail.

II: The Asian Energy Futures key findings

The following five slides summarize the decision event report we published concerning our first workshop in the series, Asian Energy Futures. This report is found online at .

The following individuals participated in this workshop:

• Dr. David Baldwin, Columbia University
• Mr. Jim Bishop, Caithness Energy
• Mr. Jim Caverly, Department of Energy
• VAdm. Arthur Cebrowski, USN, U.S. Naval War College
• Dr. Alberto Coll, Center for Naval Warfare Studies
• Capt. Dave Duffie, USN, Council on Foreign Relations
• Dr. Dennis Eklof, Cambridge Energy Research Associates
• Mr. Mike Feeley, Sino-American Development Corporation
• Adm. William Flanagan, USN (ret.), Cantor Fitzgerald
• Dr. Ellen Frost, Institute for International Economics/National Defense University
• Mr. Doug Gardner, eSpeed
• Dr. Philip Ginsberg, Cantor Fitzgerald
• Dr. David Gordon, National Intelligence Council
• Under Secretary of the Navy Jerry Hultin
• Dr. David Jhirad, Department of Energy
• Cdr. Mark Montgomery, USN, National Security Council
• Mr. Roy Nercesian, Poten Partners
• Dr. Minxin Pei, Carnegie Endowment for International Peace
• Mr. Robert Randolph, U. S. Agency for International Development
• Dr. Leif Rosenberger, U.S. Pacific Command
• Amb. Paul Taylor, Center for Naval Warfare Studies
• Dr. Katsuaki Terasawa, University of Mississippi
• Mr. Neal Wolkoff, New York Mercantile Exchange
• Mr. Lundy Wright, Morgan Stanley Dean Witter. 

Asia as a whole currently uses about as much energy as the United States, or about 100 quadrillion Btu. By 2020, however, Asia will roughly double its energy consumption while U.S. consumption rises just over a quarter. Asia’s plus-ups are significant no matter what the energy category:

• Oil increases by roughly 88 percent
• Natural gas, 191 percent
• Coal, 97 percent
• Nuclear, 85 percent when Japan is included, but 178 percent when it is not
• Hydroelectric/renewable, 109 percent.

Of the hydrocarbons, Asia comes close to self-sufficiency only in coal. Natural gas is a far different story. This year Asia will use around 10 trillion cubic feet, with Japan, South Korea and Taiwan representing the lion’s share of consumption. These three already buy up virtually all of the region’s currently available methane. The trick is this: Asia’s demand for natural gas skyrockets to 25 trillion cubic feet by 2020, with the vast bulk of the increase occurring outside of that trio. So if those three countries already buy what’s available in-region, that means the rest of Asia will have to go elsewhere—namely, the former Soviet Union and the Middle East.

Asia currently burns about as much oil as the U.S., or roughly 20 million barrels/day (mbd). Since oil is mostly about transportation nowadays, and Asia’s looking at a quintupling of its car fleet by 2020, there is a huge swag placed on this projection. The Department of Energy’s latest forecast is roughly 36 mbd, but even that means Asia has a whole has to import an additional 12 mbd from out of region, or roughly double what it imports today from the Persian Gulf region.

We foresee a series of "rules of the road" emerging for Asia’s energy future.

On the system level:

• We note the decarbonization trend line of human history, moving from wood to coal to oil to methane to hydrogen. Complementing that trend—in an aggregate sense—is the Kyoto Protocol on greenhouse gases, which encourages movement "down" that trend line, even as the CO2 regulatory regime allows some to trade "up" or "down," depending on assigned ceilings and means to purchase additional allowances from others.
• There is the perceived "catch 22" between Asia’s need for large amounts of FDI and the resistance many countries display regarding the transparency Wall Street and other super-markets require for the sort of long-term faith required in infrastructure investments.

On the nation-state level:

• We note the crux of the entire Asian energy problem set: all that infrastructure development will primarily entail private sector money, but too much of the decision making will be performed by government bureaucrats—never a great combination in Wall Street’s opinion.
• It’s also important to remember that Asia is a region still beset by powerful inter-state rivalries and some particularly complex political-military flashpoints that can sour the FDI climate with some alacrity. The four key sources of instability in the coming decade will be: Pakistan-India, China-Taiwan, the Koreas, and Indonesia.

On the individual or subnational level:

• We note that much of the predicted energy growth will depend on individual consumption and usage patterns connected to appliances, electronics, and car transportation. Moreover, the choice to fuel all that electricity demand is often a by-product of economic times, with gas being an easier choice when times are good and coal a last resort when times are hard.
• Finally, workshop participants, while disagreeing on the extent to which green movements would arise in Asia over the coming decades, all agreed that environmental damage (especially health-related concerns from poor air quality) would prove to be an important constraint on many countries’ energy ambitions—unless greater attention was paid to this collective good. 

The following Decalogue describes how Asia achieves its ambitious energy development plans by 2020*:

• The starting-point proposition is that the world possesses more than enough resources to accommodate Asia’s energy growth requirements. There is enough coal, oil and gas to make all those projections come true, and they all exist in sufficient amounts right on the Eurasian continent. So it’s not the resources themselves that are in doubt here, just the economic and political transactions required to move them from A to B.
• Along those lines, so long as the markets work, the resources will flow, but the markets require a certain amount of stability—a sense that economic relationships will pay off over the long haul.
• The biggest input to stability is continued economic growth across the Asian market. Populations have been placed on steep consumption trajectories, and expectations of "better days ahead" widely instilled. So long as things progress, no matter how slowly, stability is likely to remain.
• The energy resources are the key to future growth patterns. The only energy Asia has in abundance is coal, whereas oil and gas must come largely from out of region to accommodate future growth requirements.
• The movement of all this energy into the region will require great infrastructure development, especially as the region shifts ahead to greater natural gas use.
• All that infrastructure development will necessitate large amounts of foreign direct investment—of the long-term variety.
• That money will not flow in sufficient amounts unless Western financial institutions see sufficient transparency, accountability, and rule of law.
• That general transparency stems first and foremost from an overarching sense of security across the region. When countries feel threatened, they necessarily become more opaque to the world at large, erecting more firewalls between themselves and the outside they fear.
• Because serious rivalries still exist across the region, and because multilateral security arrangements are non-existent compared to Europe, the region’s closest thing to a Leviathan is the bilateral security relationships most major players currently possess with the U.S.
• If you remove the U.S. military from Asia, you negate the U.S.’s ability to play Leviathan, and thus threaten the underlying security upon which all this development ultimately depends. Right now the U.S. provides the lion’s share of the collective good of Asian security. It is, in many ways, our main export to the region.

* This slide is presented in an article by Thomas P.M. Barnett, "Asia’s Energy Future Requires U.S. Naval Presence," Proceedings, forthcoming.

How Asia fails to achieve its ambitious energy development plans by 2020:

• The starting-point proposition is that the current global security system is based on universal adherence to—or at least deference to—a single global economic rule set. For most of the last century, the world was divided into two competing rule sets, but that basically ended with the fall of the Soviet Bloc. Now, only a single rule set remains (capitalism), although philosophical struggles remain about the Anglo-Saxon model of capitalism.
• The single global rule set ends if Asia becomes truly insecure—either internally (state on state) or externally (region versus outside world). If Asia’s regional security collapses, the global rule set collapses along with it, for once Asia’s development path is seen as unique, then markets will work one way in Asia and another way elsewhere in the world.
• The internal stability of the region’s major states (and key neighbors) is essential to the security of the region as a whole. Six major players—in addition to the U.S.—seek spheres of influence along largely overlapping definitions of national interest (Russia, China, Japan, India, Indonesia, Australia). Instability in a major regional power therefore invites the perception of vacuum, upsetting the region’s sense of a balance of power.
• Increased consumption is a key component of the internal stability of states across Asia.
• Energy growth is required to fuel this consumption growth, defined increasingly by ballooning demands for electricity and transportation requirements. Most of this new energy demand will have to be met with outside resources.
• Moving all this energy into the region requires great infrastructure development.
• All that infrastructure development will necessitate large amounts of long-term FDI.
• That money will not flow in sufficient amounts unless Western financial institutions see sufficient transparency, accountability, and rule of law.
• That level of reform is unlikely in Asia without a serious pain trigger in the formof an economic downturn of major proportions or a broad financial panic that crumbles years of economic advance. So long as states can muddle through without real reform, they will.
• If such an immense pain trigger were to occur, the shock to Asia’s body politic could be profound enough to call into question it’s ability to adhere to the concept of a global rule set. In short, major portions of the regional economy could—in effect—drop out of the rule set for indeterminate lengths of time—a sort of firewall capitalism. At that point, all bets would be off regarding the West’s willingness to finance Asian energy developments. 

Looking ahead to long-term outcomes, we generate a quartet of long-range scenarios, or landing paths. The X-Y axis is constructed of two questions:

• What is the balance of the overall energy content?
  • High-carb diet = more weighted to coal and oil
  • Low-carb diet = more weighted to natural gas and renewables.
• What is the balance of the overall decision-making mechanism?
  • State-based strategies = more decision-making control is left to public entities
  • Market-based strategies = more decision-making control is left to private entities.

The four scenario titles (generated by our participants) are as follows:

• Pipe Dreams (Low-carb diet + Market-based strategies) reflected the participant’s strong skepticism about such a positive outcome combination. It also captured the consensus opinion that gas pipelines would signal movement in this direction. The skepticism stemmed from the participants’ sense that too much cultural change was needed (and too quickly) to achieve the transparency that would, in turn, trigger a sufficient FDI flow for this outcome to unfold.
• Air Today, Gone Tomorrow (High-carb diet + Market-based strategies) reflected the concern of many participants that an unfettered free-market approach would lead to a spoiling of the "commons"—most notably the air. In short, markets promote cost-cutting behavior and Asia’s path of least resistance here is coal-fired electricity.
• Gaz Kapital (Low-carb diet + State-based strategies) reflected the opinion of most participants that, in many instances, it’ll take a strong state to force the sort of monopolistic approach to infrastructure building that a gas-heavy future would require. So, in effect, participants cited this scenario quadrant as a possible transition stage prior to achieving the preferred Pipe Dreams outcome.
• Coal Day in Hell (High-carb diet + State-based strategies) reflected the pessimism most participants held concerning state-dominated economies with large domestic coal supplies. In effect, they believed the temptation to "burn your own" would be too great for power- consciousness bureaucracies to resist. Naturally, this was seen as the worst possible environmental outcome for states with limited political freedom, since no strong venues would exist to promote the public good.

III:  The Foreign Direct Investment Workshop

We designed the Foreign Direct Investment event with the following goals:

• Generate a "relationship profile" delineating how both Asia and the West must adapt past practices to meet the coming challenges of Developing Asia's huge demand for foreign direct investment (FDI)*
• Explore the key scenario variables and dynamics likely to emerge as Developing Asia's FDI requirements balloon in the coming years, focusing on the need for viable rule sets underpinned by a stable regional security environment
• Determine which political-military instability scenarios present the greatest potential to ruin Developing Asia's FDI climate
• Construct realistic downstream scenarios (covering the next 10 years) capturing Developing Asia's movement toward, or away from, a shared FDI rule set with the world's leading economies (i.e, the Triad of the U.S., EU and Japan "squared" to include a fourth leg—Developing Asia).

The one-day workshop (16 October 2000) was held at the Windows on the World restaurant atop the World Trade Center One. The host for the event was the online securities broker-dealer, eSpeed, represented by Adm. William Flanagan, USN (ret.), Senior Managing Director of the parent company, Cantor Fitzgerald, as well as Dr. Philip Ginsberg, Executive Vice President.

* For the purposes of this decision event, we defined Developing Asia as including: Afghanistan, Bangladesh, Brunei, Cambodia, China (to include Hong Kong and Macau), India, Indonesia, Laos, Malaysia, Maldives, Mongolia, Myanmar, Nepal, North Korea, Pakistan, Philippines, Singapore, South Korea, Sri Lanka, Taiwan, Thailand, and Vietnam. These countries constitute the category of South, East and South-East Asia as defined in the United Nations Conference on Trade and Development’s (UNCTAD) annual World Investment Report, which serves as the source for much of the global FDI data presented in this report. 

The Foreign Direct Investment event basically explored, over five substantive sessions, a rough "influence net" model that we constructed to describe the key dynamics of Developing Asia’s ability to attract outside investment and that flow’s long-term impact on the global economy and security environment:

• Concerning "The Blend," we conducted two sessions. In the first session called "Where Asia Gets the Money," participants were asked to determine the likely global pool of FDI stock for the year 2010 and then, through a series of "drill down" votes, determine how much of the total global pool would likely end up in Developing Asia. In the second session called "Energy Case Study," we reviewed the findings from the Asian Energy Futures event and asked participants to brainstorm reasons why state governments in Developing Asia should play a lesser or larger role in developing the energy sector.
• Concerning "The Players," we conducted one session called "Build Your Own Free Trade Zone." This voting process was based on the same logic of "connectivity" that fuels the popular movie trivia game known as Six Degree of Kevin Bacon, or The Kevin Bacon Game. In this effort, we asked participants to build three separate free trade zones, and then, by comparing the three groups, drew some conclusions about which Developing Asian states offer the greatest financial connectivity to the region as a whole.
• Concerning "The Unfolding," we conducted two sessions. In the first session called "Pick Your Dream Investment Partner," we had participants brainstorm ideas about what makes Developing Asia more or less attractive as a target for FDI, as well as what makes the U.S., the European Union and Japan more or less attractive as Developing Asia’s sources of FDI. This session was based on the 1960s American television game show called The Dating Game. In the second session called "Scenario Flashpoint," we examined how a future collapse of the North Korean regime would impact the region’s overall FDI climate, with our participants writing advisory emails to various involved political leaders.
• Concerning "The Adjustment," we conducted one session called "Rule Set Scenarios." In this voting process we asked the participants to name and populate—using "Headlines from the Future" —a quartet of long-term FDI climate scenarios for Developing Asia.

All of these participant brainstorming and voting sessions were captured by the GroupSystems software program for our subsequent analysis, along with our notes of the accompanying discussions. Collectively, this material forms the basis for the analysis we present in this report.

The following individuals participated in the day-long workshop:

• Mr. Mark Arens, U.S. Joint Forces Command
• Dr. James Auer, Vanderbilt University
• Mr. Guy Caruso, Center for Strategic and International Studies
• Mr. James Caverly, Department of Energy
• VAdm. Arthur Cebrowski, USN, U.S. Naval War College
• Mr. Thomas Cunningham, Emcor Group
• Dr. Peter Dombrowski, Center for Naval Warfare Studies
• Mr. Mike Feeley, Sino-American Development Corporation
• Adm. William Flanagan, USN (ret.), Cantor Fitzgerald/eSpeed
• Dr. Philip Ginsberg, Cantor Fitzgerald/eSpeed
• Mr. Jeffrey Goetz, Poten and Partners
• Dr. David Harries, Waterpeople Inc./Maccaferri Consulting
• Mr. Russell Hayward, Dynamic Strategies Asia
• Mr. Jeff Huang, Golden Calf Capital
• Dr. Gary Hufbauer, Institute for International Economics
• RAdm. Michael McDevitt, USN (ret.), Center for Strategic Studies/CNA
• Mr. Edward McDougal, Lehman Brothers
• RAdm. Barbara McGann, USN, U.S. Naval War College
• Mr. Jim Miller, Hagler Bailly
• Deputy Under Secretary of the Navy Charles Nemfakos
• Dr. Minxin Pei, Carnegie Endowment for International Peace
• Mr. John Pike, Zentrale Commerzbank AG
• Dr. Jonathan Pollack, Center for Naval Warfare Studies
• Mr. Lucian Pugliaresi, LPI Consulting Inc.
• Ms. Smita Purushottam, Ministry of External Affairs (India)/Weatherhead Center
• Dr. Leif Rosenberger, U.S. Pacific Command
• Ms. Elisabeth Scheper, Netherlands Org. for Internat’l Cooperation/Weatherhead Center
• Capt. Peter Swartz, USN (ret.), Center for Strategic Studies/CNA. 

This graphic serves as both table of contents for the presentation of analysis and as a rough theoretical model for the NewRuleSets.Project as a whole.

On the question of the future of foreign direct investment in Asia, we break the process down into five distinct stages (moving from left to right across the graphic):

• We begin with the Here and Now time period, which encompasses the Starting Line environment (i.e., current global FDI market), the inevitably larger flows of FDI from the major global sources to Developing Asia (Triad to Quad?), and the dialectical relationship between the size of the global FDI Pie (i.e., do global FDI flows slow or speed up?) and how much of that global pool actually makes it into Developing Asia (Do the Math).
• Moving from the Here and Now into New Rule Sets, we describe the transition point as a sort of Dating Game between Developing Asia’s three great external "suitors" (North America, Europe, Japan), using this paradigm to explore notions of what makes for an "attractive" long-term FDI relationship.
• In the New Rule Sets time period, rather than trying to present an all-encompassing theoretical model of how various potential pathways unfold, we offer instead a "black box" model, or Scenario Dynamics Grid that displays a matrix listing the key economic, political, technological, cultural, environmental, and security dynamics involved in Developing Asia’s effort to attract FDI. As a dialectical expression of those scenario dynamics, we define the evolution of Developing Asia’s FDI environment as a struggle between the forces of transparency (New Laws) and the region’s continuing inability to move away from Old Orders, or that which keeps Asian capitalism an idiosyncratic model of the global brand.
• Moving from the New Rule Sets to the There and Then, we describe the transition point as a series of Tipping Points, or paradigm shifts that we think Asia must undergo before being able to achieve its maximum potential as a global magnet for FDI.
• In the There and Then time period, we present an X-Y axis with four major outcome scenarios, or Landing Paths, fleshing this framework out with a a series of possible sign posts (projected newspaper headlines) for both positive (Good Signs) and negative (Bad Signs) outcome scenarios. We wrap up this model with The Kevin Bacon Game, which has us exploring the concept of which Developing Asian economies are the "most connected" players in the global FDI game.

We begin our analysis with the Starting Line.

IV:  Starting Line Analysis 

This slide shows where FDI sits within the universe of financial flows into and out of Developing Asia (1999) and demonstrates why we chose to focus on just direct investment as we looked ahead to the region’s economic future. First, let’s break down the numbers:

Developing Asia self-finances to the tune of about 40 to 50 percent of its investment needs. So when these countries need money, they can basically count on one another for roughly half of it. The rest of their external net financing comes primarily from three main sources: Japan, the EU and the United States. In 1999, the net flow was approximately $40 billion.

Of that $40 billion, almost three-quarters came from private sources, while just over a quarter came from government entities. This breakdown gives you a sense of the relative importance of the private sector versus the public sector.

On the public side of the ledger, very little actually flowed from the International Financial Institutions (IFIs) such as the International Monetary Fund or World Bank. Most (over 90 percent) originated from bilateral aid agencies such as the U.S. Agency for International Development. These numbers give you a sense of the relatively narrow role played by IFIs.

On the private side of the ledger, there was a large outflow of credit, or previously loaned funds. This flow represents several countries (e.g., South Korea, Malaysia) paying back loans that were extended to them during the Asian Flu of 1997-98. Most of this money was loaned by commercial banks.

Also on the private sector side, there was a huge inflow of equity investments. A small portion of that focused on portfolio investments, or the region’s stock markets, but the vast bulk of that flow involved direct investments—meaning foreign entities actually purchasing assets or existing firms.

We chose to focus on FDI because it is usually more strategic and long term in nature, typically involving transnational corporations or small and medium-sized companies setting up overseas operations. Whereas portfolio investments and loans are far more volatile, FDI reflects the global investment community’s appreciation of the region over the long haul. Also, unlike loans, stocks, or foreign aid, FDI involves actual ownership, meaning it is a far less liquid form of investment suggesting cross-border economic integration.  

Here we look more closely at the relative importance of public sector foreign aid (ODA, or Official Developmental Aid from the Organization of Economic Cooperation and Development, or OECD) versus FDI for emerging markets.

During the Cold War, ODA substantially outpaced FDI as a source of external financing for developing economies. Even as late as 1990, ODA flows were roughly double that of FDI. In that economic paradigm, IFIs like the World Bank and bilateral donor agencies like USAID were major players in deciding which developing economies would receive the most attention. 

This paradigm was turned on its head quite rapidly over the course of the 1990s, suggesting a very different, or new rule set regarding external financing of emerging markets. By the end of the decade, FDI was routinely outpacing ODA by a five-fold margin, effectively pushing the IFIs and bilateral agencies to the margins of the developing world—or to the truly undeveloped economies. Meanwhile, transnational corporations (TNCs) became the great arbiters of the designation "emerging," for TNC-fueled direct investment now represents the largest component of external resource flows to developing countries. According to the United Nations, the world’s average annual FDI outflow for the late 1990s (1995-99) was four times as large than a decade earlier (1985-89).* Simply put, FDI is now one of the most powerful variables of the global economy.

* All references to United Nations figures on FDI are drawn from the UN Conference on Trade and Development’s (UNCTAD) World Investment Reports, various years. Global FDI outflows for the years 1995-99 averaged $540 billion compared to $136 billion for the years 1985-89.

In this slide we explain why we chose to focus on FDI stock (i.e., the accumulated total) versus annual flow.

The chart above compares the net flow of portfolio investments, loans, and FDI into Developing Asia over the 1990s. Looking at stock investment and loans, it is not hard to spot the Asian Flu of the late 1990s, as both lines suffered significant—and in the case of loans, severe—net outflows following its onset.

But looking at the annual flow of FDI, it is not at all apparent that any financial crisis occurred in the region in the 1990s. So while Developing Asia experienced some genuine volatility in both stocks and loans, FDI flows expanded smoothly across most of the decade. This means that at the end of the 1990s, an enormous accumulation of FDI had been achieved by Developing Asia. Unlike loans that have to be paid off at some point, or stock market flows that reverse at a moment’s notice, FDI represents a long term stake—something to be protected by the foreign firm that has put its money on the line. 

We chose to focus on FDI stock because we think the accumulation of such direct investment in Asia’s economic future represents that region’s genuine integration into the global economy—a process so huge and unprecedented that it generates new rules for globalization as a whole. Simply put, by accepting long term foreign investments, Asia puts itself on a pathway of accommodating its particular economic rule set to that of the larger international economic community, represented here by Europe and the U.S.

Now let’s look at the distribution of global FDI stocks by source (outward) and target (inward) regions.

Looking first at the inward stock, we get a sense of where TNCs like to invest, or which countries do the best job of attracting outside investors. What the world is really saying to your country when it invests directly in your economy is this: "We like your future market and we want to be a more permanent part of your success." In short, it is a seal of approval or a sign of long term confidence in a country’s internal rule set.

As the numbers above make clear, four regions of the world attract the vast majority of FDI (just over 90 percent): 

• Europe (39%)
• North America (25%)
• South/East/Southeast Asia (17%)
• South America (10%).

Who are the great sources of that FDI? Here we look at outward stock totals and see that only three regions register in the double digits:

• Europe (53%)
• North America (28%)
• South/East/Southest Asia (15%).

What this charts makes abundantly clear is this: if Asia has to turn to the former Soviet bloc and the Middle East for energy, it has to turn to Europe and North America for the financial resources to make it happen.

V:  The Here and Now of FDI in Asia

Having completed our cursory tour of the FDI landscape, let’s turn our attention to the unfolding of the Here and Now, which we define as the inevitable expansion of the current Triad of global FDI holdings (i.e., United States, European Union, Japan) into a downstream expression which we dub the future Quad (namely, the Triad + Developing Asia).

The concept of the Triad comes from UNCTAD’s 1999 World Investment Report, which described the concentration of global FDI stock in the U.S., Western Europe, and Japan as constituting a special, longstanding stronghold in the global financial community.*

* See UNCTAD, World Investment Report 1999: Foreign Direct Investment and the Challenge of Development (New York: United Nations, 1999), p. 22. 

We like to describe the Triad as the financial embodiment of George Kennan’s Cold War strategy of containment, which focused on the U.S. denying the socialist bloc hegemony over Western Europe and Japan. Obviously, we succeeded in more ways than one, for not only did we deny the Soviets an opportunity to divide and conquer the West militarily, we likewise laid the cornerstone for the second great era of globalization by extensively linking these three pillars through foreign direct investment. 

Not surprisingly, this chart likewise displays the two strongest bilateral military relationships in the international security environment:

• NATO, or the U.S. and Europe
• The U.S.-Japan security alliance.

In other words, FDI follows the flag even more than trade, because FDI represents long term relationships of trust, and these grow most easily between members of stable military alliances.

The Triad of the U.S., the EU and Japan constitute just over two-thirds of the world’s GDP. In this first snapshot of the Triad’s FDI holdings, we include the European Union’s intra-EU investments, which are sizeable. When we do so, the Triad’s share of global FDI outward stock is 80 percent.

Looking within the Triad itself, we recognize the EU as the largest source of FDI at just over half. But this snapshot is a bit misleading, for as the EU continues its process of integration, counting France’s FDI in Germany gets to be a little bit like counting Michigan’s FDI in Wisconsin. In this report, what really interests us is the amount of the West’s FDI assets that are available for cross-regional flows—namely, into Developing Asia.

We gain a better sense of the relative weight of each leg of the Triad when we exclude the European Union’s intra-EU FDI. By lopping off that large amount from the EU’s FDI total (roughly half), we see that the Triad’s share of global GDP and FDI are equal. In this snapshot, it is easier to identify the United States as the world’s largest source of cross-regional FDI resources.

In this and subsequent calculations, we will include the European Union’s intra-EU investments because, for the foreseeable future, the EU remains an entity far closer to a multinational economic union than a federated state like the United States. This approach also (frankly) allows us to use UNCTAD’s FDI data without having to constantly estimate the intra-EU share. 

Proceeding in this manner, we estimate the global FDI stock at $5.7 trillion as of October 2000. If the Triad holds four-fifths of that total, they control an aggregate pool of $4.6 trillion. Using the relative shares established by Snapshot A (EU = 55%, U.S. = 35%, Japan = 10%), we thereby estimate each leg’s holdings as follows:

• EU, $2.6 trillion, with roughly half invested within the EU itself
• United States, roughly one and a half trillion
• Japan, approximately $400 billion. 

It is interesting to note that the Triad’s members each have their own little financial sphere of influence with regard to FDI. UNCTAD’s World Investment Report 1999 (p. 22) identified those countries in which the Triad "dominates," meaning those economies in which one of the Triad’s members accounts for "at least 30 percent of total FDI inflows during a three-year period."

Not surprisingly, much like security-based spheres of influence, these financial variants are based on geographic proximity and/or past colonial relationships (with one notable exception noted below).

The United States’ financial sphere of influence is centered almost exclusively on Latin America: 

• Latin America = Argentina, Bolivia, Chile, Columbia, Costa Rica, Venezuela, Mexico, and Trinidad and Tobago
• Southeast Asia = Singapore (the noted exception).

The EU’s sphere of influence is clearly bifurcated between regional neighbors and former colonies:

• Former colonies = Brazil, Peru, Cape Verde, Egypt, Swaziland, Tunisia and India
• Regional neighbors = Czech Republic, Hungary, Poland and Turkey.

Japan’s sphere of influence is solely concentrated in Southeast Asia, meaning both neighbors and, in several instances, former WWII-era occupied territories:

• Singapore, South Korea and Thailand.

In essence, just as the containment triad represented a political reach extending beyond its immediate membership, its financial counterpart represents an economic whole that’s larger than the sum of its immediate parts.  

Now we turn to Developing Asia and what it brings to the table in terms of FDI outward stock.

Developing Asia’s current pool of FDI outward stock is roughly equivalent to that of Japan, or $400 billion. Using the latest UNCTAD data, we estimate that roughly nine-tenths of that total has been invested within the region itself, leaving only a tenth for distribution to the outside world. Of that 10 percent, the large majority goes to the Triad, and only a tiny fraction to emerging markets outside of Asia. 

In effect, Developing Asia pretty much looks out for itself in terms of direct investment, and does not stray very far from home. That tendency, in combination with the substantial FDI provided by Japan, means that Developing Asia has limited—up to now—its reliance on Western investors to roughly one-third of its total FDI requirements. As developing regions go, this has been a relatively closed system in terms of Western influence. 

As a theme for the Foreign Direct Investment event, we proposed the emergence of a Quad by 2010, meaning:

• European Union (with any new members unlikely to alter its aggregate FDI total in any significant manner)
• North American Free Trade Area (United States, Mexico, Canada)
• Japan
• Developing Asia.

This expansion could be viewed as the next great step in a sort of post-containment strategy designed to:

• Bring Asia into the now-Western dominated community of developed economies
• By doing so, effectively rule out great power warfare in Asia in the same way it has been ruled out among the Triad members.

Such a Quad would be a formidable concentration of economic might, encompassing (as it does today) roughly 85 percent of the global GDP and 90 percent of the global FDI stock.* The individual shares of the Quad’s total FDI pool would be as follows:

• European Union, 55 percent (including its intra-union FDI)
• NAFTA, 30 percent (including its intra-area FDI)
• Japan, roughly 7 to 8 percent
• Developing Asia, roughly 7 to 8 percent (including its intra-regional FDI).

In many ways, the Quad must emerge in practice, if not in form, for Developing Asia to attract the out-of-region FDI it needs over the coming generation.

* The proposed Quad’s current share of global GDP is 85 percent. The GDP percentage shares of NAFTA and the EU would not change appreciably by 2010, while Developing Asia’s would rise slightly from today’s figure and Japan’s would decline slightly. These changes largely stem from demographic changes in Developing Asia (growing) and Japan (shrinking).

Having presented the notions of the Triad and Quad, we can now explain our somewhat cryptic, pseudo-mathematical decision event "formula": 

• 3 refers to the Triad of the United States, the European Union and Japan, or what we like to call the financial embodiment of the Cold War strategy of containment, as well as the three main pillars of Globalization II.
• + x(Asia) refers to our proximate thesis that Developing Asia must turn increasingly to these three main sources of foreign direct investment over the coming years if their ambitious plans for economic development and energy consumption are to be realized.
• = Triad2? refers to our ultimate thesis that eventually Developing Asia will combine with the current FDI Triad to form a recognized Quad.

In terms of global financial architecture, this process is arguably the most important dynamic the world will witness over the coming generation. Naturally, new rule sets (e.g., politically codified expressions of consensus economic tenets) will be required for this process to unfold, but new rule sets will also be a downstream effect.

Where security fits in this argument is a complex question. Clearly, security relations between the legs of the Triad are very strong, forming the deep trust that allows these FDI bonds to form. Currently, many political-military analysts and decision makers in the United States are predicting that Asia will be the focus of interstate conflict in the coming decades. For this Quad to come into being, improved security relations within Developing Asia, and among all four legs of the quartet, is a minimum requirement. If the Quad is achieved in any real fashion, it will reduce the potential for great power war both within Asia and between Asia and the outside world to a considerable degree.

In effect, we argue that the primary strategic goal of the West should be to foster the security and economic integration of Developing Asia to the extent that it effectively joins a developed North that is committed to the long-term integration of free markets and democratic societies.

Having laid our vision for the progressive unfolding of the Here and Now, we now explore the dialectic tension between the amount of money the world has available for foreign direct investment and that share of The Pie that actually makes its way to the countries most in need—the so-called emerging markets. In this section, we asked our participants to Do the Math in a two-fold sense:

• Tell us how how much money the world will likely make available for cross-regional FDI flows over the coming decade
• Help us understand how much of that global pool would end up in Developing Asia, which in effect allows us to plot the strengthening and weakening of existing financial relationships both within Asia and between Asia and the outside world.

Before we took any votes on the subject, we presented participants with the following information regarding the explosive growth of global FDI outward stock over the past 20 years:

• In 1980, the global FDI outward stock was approximately half a trillion dollars. This amount represented 5 percent of the global gross domestic product of approximately $10 trillion.
• Over the 1980s, FDI flows averaged $120 billion a year, increasing the global FDI outward stock in 1990 to roughly $1.7 trillion, or 9 percent of the global GDP of $19 trillion.
• Over the 1990s, FDI flows averaged $400 billion a year, bringing the global FDI outward stock total in October 2000 to approximately $5.7 trillion. This amount represents 18 percent of the current global GDP of roughly $31-32 trillion.

In sum, global FDI outward stock has essentially tripled in both of the last two decades, or a ten-fold increase in all from 1980 to 2000. The FDI stock’s percentage share of the global GDP has basically doubled in both of the last two decades, or a 2 to 3 fold increase in total from 1980 to 2000. Annual flows of FDI has increased 10-fold from 1980 to 2000.

The total picture presented by this data suggests that FDI has become a profoundly important variable in the functioning of the global economy, both as an absolute amount and when measured against the world’s economic growth. For example, global outward FDI flows averaged 5 percent of gross fixed capital formation at the Cold War’s end, but rose to roughly 12 percent by 1998.

What we proposed for the next ten years was that the twin patterns (i.e., rough tripling in absolute stock and rough doubling of percentage share of global GDP every decade) would extend themselves one more time. If this were to occur, the global FDI outward stock in 2010 would be approximately $15 trillion, or 36 to 38 percent of expected global GDP. The annual average flow of FDI required to achieve this growth is approximately $900 billion. For comparison’s sake, the 1999 FDI flow was $800 billion, and in 2000 it was $1.1 trillion. The Economist predicts a drop to roughly $800 billion in 2001 (24 February 2001, p. 80).

This slide lays out our four-step process for Doing the Math on the likely growth of FDI inward stock for Developing Asia by 2010:

1. Our participants voted on the global total of FDI outward stock for the year 2010. Noting that the current global total was just under $6 trillion, we gave the participants a range of 5 to 15 trillion US dollars (constant), instructing them to pick a whole number.
2. Having then determined the Quad’s share of the global total (using the previously established estimate of 90 percent), our participants voted on the percentage share of the Quad’s total that would remain within the quartet, i.e., invested in one another.
3. Having established how much of the global total would be kept within the Quad, our participants next voted on the likely distribution of the Quad’s pool among its four members.
4. Finally, we determined the likely inward stock of Developing Asia’s FDI for the year 2010 by adding up the estimated FDI stock totals flowing from:
   • United States to Developing Asia
   • European Union to Developing Asia
   • Japan to Developing Asia
   • Developing Asia to itself.

The point of this effort was not to come up with the most accurate forecast of FDI flows, but to force the participants to confront their own expectations about the future functioning of the global economy and their assumptions regarding the ability of the West to pull Asia into a closer, more integrated financial relationship.

We begin the process with the first vote on global FDI outward stock in 2010.

Our participants voted for a global FDI stock of $11 trillion, or a rough doubling of the current (October 2000) global stock. Considering the decline of global equity markets since the decision event last fall, this prediction may strike some as still unduly ambitious, despite the resistance of our participants to embrace the notion of another tripling of the stock amount.

Let’s put this vote in some perspective. First off, global FDI annual flows could drop to roughly $500 to 550 billion and still reach the $11 trillion mark, meaning annual flows could average roughly half of 2000’s record flow of $1.1 trillion. So, in many ways, this vote represented a certain pessimism about the future, despite the prediction of a doubling effect.

Secondly, a 2010 FDI stock total of $11 trillion would represent just over a quarter of the predicted global GDP of $41 to 42 trillion—far from a doubling of today’s percentage share of 18 percent.

Finally, as a point of comparison,we note that the Economist Intelligence Unit (EIU) has just published a report (February 2001), entitled World Investment Prospects, which they claim is the first detailed global forecast of FDI flows. In this report, the EIU predicts a global FDI outward stock total of $10 trillion by the year 2005. This would equate to an average annual flow of $900 billion, or a flow roughly 60 percent heavier than what our group of participants predicted.

If the Quad, as we predict, holds 90 percent of the global FDI stock in 2010, then its combined total would be just under $10 trillion. The totals for each leg of the Quad would be as follows:

• NAFTA, 30 percent or $3.0 trillion
• EU, 55 percent or $5.5 trillion
• Japan, 7.5 percent or $750 billion
• Developing Asia, 7.5 percent or $750 billion. 

Having voted on the size of the global FDI "pie" for the year 2010, we next asked our participants to determine the likely share of the Quad’s total FDI outward stock that would remain within the quartet. In effect, we asked them to think ahead to how much the Quad members would choose to concentrate their FDI in one another vice the rest of the world. 

In preparation for this vote, we informed participants that the Triad members currently keep approximately two-thirds of their pooled FDI outward stock within the Triad itself (i.e., invested in one another and, in the case of the EU, within the Union itself).

We also reminded participants that, on average, Developing Asia states invest upwards of 90 percent of their outward FDI flows in one another.

In this vote, we asked participants to make a number of simultaneous decisions:

• How the current distribution within the Triad’s three legs would change with the addition of Developing Asia
• How much Developing Asia might redirect its FDI outward toward other Quad members versus how much it would likely keep for itself
• How much remaining FDI each member of the Quad would employ outside the quartet, or to the rest of the world (e.g., Latin America, former Soviet bloc, Southwest Asia, Africa).

Accounting for Mexico and Canada in NAFTA’s total.

In this second vote, our participants voted to keep roughly 80 percent of the Quad’s predicted 2010 FDI stock pool of $10 trillion within the quartet, or approximately $8 trillion. This represents a higher percentage of concentration than that currently seen within the Triad, but that only makes sense given the tremendous economic opportunity represented by Developing Asia over the coming decade, and the fact that Developing Asia adds roughly 4 billion people to the mix.

After deciding how much of the Quad’s FDI total will remain within the quartet, we asked the participants to decide how the pool would likely be distributed among the four legs over the next decade. In effect, we asked them to think ahead to how much the Quad members would choose to concentrate their FDI in Developing Asia vice the other legs—and the rest of the world.

In preparation for the third vote, we informed participants of the current breakdown in FDI stock percentages for each leg of the Triad:

• The strongest bond obviously exists between Europe and the United States, as both direct over 90 percent of their in-Triad FDI total to one another.
• In contrast, neither the EU nor the United States seems able to achieve much direct investment in Japan, which, by all descriptions, throws up a lot of formal and informal barriers to inward FDI flows.
• Japan’s outward FDI is the most evenly distributed within the Triad, with approximately two- thirds going to the U.S. and one-third to the European Union.

In many ways, it is fair to describe the Triad as an incredibly strong dyad with a third leg that clings to both.

Finally, we reminded our participants that Developing Asia currently directs only a small fraction of its FDI outward flows to developed economies.

The one thing we did not provide the participants were current estimates of each Triad members FDI flows to Developing Asia, preferring to let them "guesstimate" those flows on their own.

This last vote was the most complex of the three, but in many ways, all we were asking the participants to do was to tell us which dyad relationships within the proposed Quad would grow stronger in terms of FDI flows over the next decade and which would grow weaker.

Rather than present percentages here, we delineate which dyad relationships grow stronger (measured against today’s estimated percentage shares) over time and which grow weaker. 

For NAFTA, the participants voted for stronger dyads with all three Quad partners, meaning less FDI available for the rest of the world. The same basic judgment was offered for the European Union.

In Japan’s case, the group voted for a stronger FDI relationship with only the EU, envisioning a smaller percentage of Japan’s FDI flowing into North America (presumably because it is hard to imagine us investing any less in Japan given how little we do today) and Developing Asia. As a result, a greater share of Japanese funds would be made available for the world outside the Quad (e.g., former Soviet bloc, Mideast, Latin America).

As for Developing Asia, the group basically predicted an opening up of the region’s heretofore "closed" FDI loop, meaning far higher percentage flows to all other Quad legs, as well as to the world outside.

We believe we can draw three basic conclusions from this vote:

• Even a strong reorientation of Western investment toward Developing Asia is unlikely to weaken the already formidable trans-Atlantic FDI bond.
• A strong reorientation of U.S. investment toward Developing Asia may weaken some of our financial connectivity with Japan, in large part because they do not yet allow us into their economy in a meaningful way.
• A strong reorientation of Western investment toward Developing Asia is likely to free up Asia FDI for redirection to other parts of the world.

In sum, when the West invests in Asia it helps to integrate that region into the global economy on two levels: by tying the West closer to Asia and by tying Asia closer to the rest of the world. 

Having completed our three "drill down" votes, we are now able to calculate our workshop’s estimate for the likely available inward stock of FDI in Developing Asia in the 2010 timeframe. This calculation is not presented as a "scientific forecast"—something better obtained from an industry group or The Economist Intelligence Unit—but rather as a bias-revealing vote by a cohort of experts covering the issue from political, economic and security angles.

A second point to remember about this calculation is the timing of the vote in relation to market trends. As of mid-October 2000, the market decline was already in full swing, although the full extent of the bear market was not yet in view. Accordingly, it is fair to say that this group vote was not taken by those still caught up in the so-called high-tech bubble of 1998-2000, nor by those unduly depressed by the markets’ rapid decline in the first half of 2001. Nonetheless, this entire voting scheme must be viewed as nothing more than the collective opinion of some smart people one morning in the fall of 2000. 

Using our "drill down" voting process, we finally arrive at the following estimated figures for inward FDI stock available to Developing Asia in the year 2010. 

Not surprisingly, our participants predicted that Developing Asia itself would provide the largest share of FDI, or between 35 to 40 percent of the total amount of $1.45 trillion. NAFTA would provide the second largest amount at just over a third of a trillion, then the EU with just over a quarter. Japan and the rest of the world would combine to provide approximately $300 billion, or one-fifth.

How do we interpret this combined estimated total of $1.45 trillion FDI inward stock for Developing Asia in 2010?

First, we note that Developing Asia typically accounts for roughly half of the FDI flows into Emerging Markets. So if we double $1.45 trillion to get a $2.9 trillion total for all Emerging Markets, that would represent a 26 percent share of the global total ($11T) the group voted for previously. Such a percentage would be in line with historical averages. According to UNCTAD, Emerging Markets have typically garnered one-quarter of global FDI flows over the years.

Second, we will cite the particular vote of Dr. Gary Hufbauer of the Institute of International Economics, who recently completed a major study on world capital markets.* Hufbauer’s 2010 estimate for all Emerging Markets was $2.9 trillion, or 24 percent of his global FDI stock vote of $12 trillion.

In sum, we believe the participants’ votes are defensible both in terms of fitting within historical ranges and corresponding reasonably well to mainstream economic forecasts. Again, compared to the Economist Intelligence Unit, our group was fairly conservative, but we only expected that since we brought together a fairly wide range of expertise to discuss both future potential and future problems.

* Wendy Dobson and Gary Hufbauer, World Capital Markets: Challenge to the G-10 (Washington DC: Institute of International Economics, 2000). 

By any fair estimate, our vote was somewhat rigged. After all, our starting premise for the workshop was Developing Asia’s need to attract more FDI from the West over the coming years to accomplish its ambitious growth targets. So it’s no surprise that our voting process indicated that experts expect more Western investment in Asia in the future. 

The question we were really searching to answer here was: How much might the West’s relative financial influence in Developing Asia increase? In effect, if Asia can continue to self-finance to a large degree through intra-Asian FDI, state-based financing, internal savings, and trade surpluses, then the West’s ability to draw Asia toward a single global rule set is limited.

What do we then draw from this session?

• Right now we estimate that the West has cumulatively provided just under a quarter of Developing Asia’s inward FDI stock, compared to the two-thirds that Asian themselves (Japan included) have supplied.
• Based on this voting process, we believe Developing Asia is transitioning to a new reality in which extra-regional providers will come to dominate the FDI market.
• Over the next decade or so, we foresee the West’s position in Developing Asia’s inward FDI stock roughly doubling from its current percentage share.
• While it would be naïve to equate a rough doubling of percentage share with a doubling of financial "influence," it does seem fair to say that the West’s economic influence in Asia will rise dramatically over the coming years as a result of further financial integration brought on by a combination of globalization and Developing Asia’s extraordinary need for foreign investment.

Of course, what cannot be extrapolated from this simple exercise is the answer to the eternal question about the chicken and the egg, which we paraphrase here: Does the West’s rising economic influence lead to the emergence of new rule sets in Asia or must new rule sets arise in Asia for the West’s economic influence to grow?

Where does this vote leave us following the great decline in equity markets in early 2001 and the resulting slowdown in the global economy? How much stock (pun intended) can we place in this sort of projection?

Again, we like to emphasize how modest our group’s projection actually turns out to be when compared to recent history.

Developing Asia ended the 20th Century with an inward FDI stock total of about three-quarters of a trillion dollars. To achieve a 2010 stock total of $1.45 trillion, the region would need to attract around $70 billion a year (counting both intra- and inter-regional flows). $70 billion equates to roughly the average inward flow of the mid-1990s, or substantially less than what poured in during the heyday of the high-tech bubble in stock markets at the very turn of the century.

During this voting process, we took time out at several occasions to ask participants to brainstorm reasons why they might be wrong in their collective guesstimate of $11 trillion in global FDI stock for 2010. This slide presents ten of the best arguments we heard about why there won’t be a larger FDI flow into Developing Asia over this decade.

The arguments can be grouped into four general camps:

• The 1990s were extraordinary, and past performance does not guarantee future results.
• There is a natural ceiling on FDI: at some point more mature market venues appear and investors will prefer them for their increased efficiency and ease
• The global economy is due for some breakdowns, crises, snafus.
• Developing Asia is simply ill-equipped to absorb all this investment without destabilizing outcomes.

Here we present the flip side arguments, or why there very well could be a bigger FDI flow into Developing Asia than we’re envisioning.

The arguments can likewise be grouped into four general camps:

• The global fundamentals are in good shape; this is just a necessary pause in the action.
• Transnational corporations are the big drivers here, and they see a big market they want to be part of (think about a middle class of perhaps a billion people!).
• If there is a natural ceiling on FDI, Asia is a long way away from it, given the immaturity of their financial markets.
• Asia is opening up and working on new rules, so the long term looks very solid.

By presenting these alternative analyses, we give you a sense of the range of opinions that came together in three, very particular votes. In short, we had a full complement of both bulls and bears.

VI:  The New Rule Sets of FDI in Asia

Moving to New Rule Sets, we shift gears from number crunching to a norm-oriented brainstorming exercise where we explore the notion of what makes a region an "attractive" FDI partner, in terms of either providing or receiving investment flows.

We dub this workshop session "The Dating Game," after the 1960s American television game show of the same name.

The original version of "The Dating Game" debuted in December 1966 and immediately became a major game show hit on American television.

During its seven-and-a-half year daytime run on the ABC network, earning a distinction as the 31st longest running television game show in history, the program set up some 3,000 dates for contestants. Appearances on the show helped launch the fledgling careers of numerous actors who later became major television and movie celebrities, including Sally Field, Tom Selleck, Burt Reynolds, Arnold Schwarzenegger, and Steve Martin—to name a few.

The show was designed to feature two date selections during each half-hour program. The format was simple: three young men or women (the "contestants") sit on stage and vie for a date with a young woman or man (the "guest") who is hidden from their view. Only the host, the studio audience and the television audience could see both the guest and the contestants at the same time. Asking questions especially prepared to reveal the romantic nature of each contestant, the guest judges their responses to determine which one is best suited to his or her particular taste. At the end of each segment, the selected contestant joins the guest to share a prize date, which always includes a fun-filled weekend during which they travel to some desirable and romantic destination.

In effect, the Dating Game was an early form of what we now call reality-based television: the show replicates a real-life dynamic (choosing someone for a date) in an artificial environment for the entertainment value of simple voyeurism. 

In our version of the game, we cast Developing Asia as the guest, with three contestants vying to win the FDI "date" that leads to a long term economic relationship: 

• NAFTA
• European Union
• Japan.

And yes, as with any committed relationship, this one also involves a subtle mix of personal attraction (e.g., cultural ties), fear and loathing (security issues), interpersonal conflict (political controversies) and a desire for long-term financial security (it always comes down to money, doesn’t it?).

In this first round of questioning, the guest (Developing Asia) asks the three suitors to offer up what they think is their single best feature.

Having opened the game as such, we turned our participants loose with their laptops to brainstorm how each of the contestants might answer.

This slide presents a selection of the best ideas we received from our participants. They are grouped in trios along the following lines: 

• The first row ("Most dynamic…," "Alternative to US…," "Most money…") focuses on a combination of sheer market capacity and the security muscle that comes with it. The U.S. is presented as the obvious leader in both categories, but Europe is seen as offering the same economic package without the additional national security "baggage." Japan is presented as the most liquid ("most money and fewest scruples") or easiest to deal with, since it does not represent a security challenge.
• The second row ("Management talent…," "Experience in…," "Strong existing networks…") focuses on management capacity. The U.S. is presented as the most forward leaning, while Europe is presented as the most experienced. Japan, once again, is presented as the easiest fit.
• The third row ("Most New Economy…," "Don’t judge…," "We’re here…") focuses on Developing Asia’s hopes and fears regarding globalization’s ultimate impact. The U.S. is presented as the leading edge of the New Economy, while Europe is contrasted for its ability to export Western efficiency without imposing "alien" values. Japan is contrasted even more as the "local boy made good," who is more like its neighbors than these upstart, New Economy-types from the West.
• The last row ("...movies!" "...movies," "...movies") focuses on cultural differences. The U.S. is seen as an egomaniacal exporter of culture, while Europe is contrasted for its sophisticated acceptance of other cultures. Japan, yet again, is presented as the insider who can really understand the local environment. 

In this second round of questioning, the contestants are asked to reveal their least attractive feature as it relates to serving as a source for FDI. Here our participants brainstormed critical descriptions of all three economic players, as they might be viewed from the perspective of Developing Asia. 

This slide presents a selection of the best ideas we received from our participants. They are grouped in trios along the following lines:

• The first row ("Impatient business…," "Labor rigidity to US…," "Not reciprocal…") lists the classic gripe about each economy’s business practices. The cliché on the U.S. is our lack of patience and our incomprehensible political system (to wit, the 2000 presidential election). The European cliché is the pampered, privileged German worker who’ll defend his eight weeks of vacation to his dying breath. Japan’s cliché focuses on its lack of reciprocity.
• The second row ("Impose values…," "Lotsa bureaucrats…," "Very arrogant…") explores the concept of business culture. The U.S. is blamed for Seattle Man and our tendency to moralize about other people’s "unfair practices." Europe is criticized for going overboard on rules, especially as the EU cracks down on union-wide standards for everything from beer to ball bearings. Japan is tagged for its well-worn mask of cultural superiority, which as of late has definitely shown signs of cracking.
• The third row ("We’ll pollute…," "Not very good…," "Terrible corporate…") zeros in on each system’s Achilles heel. America is the land of the lowest common denominator—a Hobbesian economic wasteland where everyone races to the bottom. Europe is an old fogey in a young man’s game, and clearly doesn’t have the stomach for hyper-competition. Japan’s corporations, once the envy of the world, are now despised by many as dinosaurs from another age.
• The last row ("…experience at building nations," "…experience as landlord...," "…experience as labor overseer...") gets at the worst historical baggage each side brings to the table in Asia. The U.S. is seen as the militaristic bully, Europe as the former colonial master, Japan as the unrepentant war criminal. 

In the last round of questioning, the tables are turned on the Guest, and we ask our participants to brainstorm both compliments and criticisms of Developing Asia as a target for FDI.

This slide groups the most interesting ideas in best-worst pairings:

• The first row ("…growth potential," "…growth dangers") gets right to the heart of the matter. When the international business community looks at Asia, the first thing they see are markets, markets, markets. It’s the bromide, "If I could just get every person in China to buy one . . .." But with that potentially massive market comes a demographic downside: Asians have already abused their environment mightily in their rapid industrialization. How much worse could it get when you combine all that population growth with mass consumerism?
• The second row ("Great labor…," "Our markets…") tackles two great clichés: Asians as hard- working (true, but what Emerging Market features lazy workers?) and Asian as one vast marketplace (when in reality Asia is a jigsaw puzzle of countless markets, each a little different from the rest). India is a good example on both counts. Non-resident Indians certainly do well abroad, suggesting that if the Indian government just got out of the way more often, India would have a lot more to offer the world. On the other hand, there is no more fractured market in the world, with its hundreds of languages and dialects.
• The third row ("We love technology…," "Don’t like to share info…") highlights the great irony of the region: the juxtaposition of great skill in information technology design and manufacturing and an almost culturally ingrained distaste for transparency. Outside of India, where is the press truly free in Asia?
• The fourth row ("Governments are friendly…," "Governments are rigid") targets governments which seem to specialize in maximizing control versus encouraging individual and corporate risk-taking. If China spent half as much time encouraging e-commerce as it does trying to keep its population under "mouse arrest," how much further ahead would that economy be in ten years?
• Finally, the last row ("I don’t have a weight problem…," "I have a very unstable personality...) cites arguments about the region’s historical maturity. Despite featuring some of the oldest continuous civilizations in the world, Asia features a lot of insecurity—both real and imagined—that detracts from its obvious positive attributes as a up-and-coming center of the global economy.

We now turn to the Scenario Dynamics Grid, which is our "black box" model of sorts. Here we seek to arrange, in a systematic fashion, those broad scenario elements that we think—in aggregate—offer us the majority of the explanatory power we need to analyze how this huge process of change unfolds over the coming years.

The scenario elements we cite here are obviously not the only ones in play, and we don’t pretend that this 3X6 matrix encompasses the universe of change that will be FDI in Developing Asia from now to 2010. Rather, we choose to focus on these 18 scenario elements because we think it’s important to tackle the subject with both vertical depth (i.e., drilling down through Waltz’s three levels) and horizontal breadth (i.e., our six global "lenses" of economics, politics, technology, culture, environment, and security*).

These 18 scenario elements are, so to speak, signposts directing us to where the change connected with the growing role of FDI in Asia’s economic development is most likely to be concentrated—in terms of causality. Naturally, the more we research the subject, the better our signposts become in terms of clarity, but for now, these are the best 18 scenario elements we can identify.

The scenario dynamics grid as a whole should be viewed as a sort of smorgasbord: we think all of these elements are potentially in play for all of the countries in question, but obviously each country’s path will be a selection of sorts from the larger menu of possibilities. As such, the grid is purposely defined in a rather generic fashion, so as not to concentrate too much explanatory power on just one country to the detriment of others.

* The six global "lenses" roughly correspond to Thomas Friedman’s notion of "six-dimensional" thinking about globalization, as expressed in his The Lexus and the Olive Tree: Understanding Globalization (New York: Farrar Straus Giroux, 1999), see the chapter, "Tourist With an Attitude," pp. 3-24.

Beginning with the economic lens and focusing first on its nexus with the international system, we cite the fundamental tension between two possible future pathways: an Asian economic grouping that is Japan-centered or one that is anchored more by a rising China. The difference may be crucial not only for Western business interests, but U.S. national security interests as well. A Japan-centered grouping is more likely to favor a trans-Pacific orientation, while a China-centered one would likely remain captive to Beijing’s concept of "globalization on our terms."

In many ways, Japan is ahead on the learning curve, having already experienced the collapse of its state-dominant development model, whereas China’s may linger for years to come—or collapse soon enough from the rigors of international competition once it finally joins the WTO.* But eventually one country will emerge from that crucible, and whoever gets there first may well determine which country dominates the region over the long haul. For now, both are too weak to serve as the organizing principle of a truly integrated Asian market.

At the level of the nation-state, we note the all-important question of whether or not Asian economies move away from the Japanese banking model and toward that of the U.S. In a nutshell, Japanese banks, in collusion with the government, value firms more for their strategic relationships than their profit potential, leading to lots of bad loans to businesses that would otherwise falter in a more open marketplace. As a result, Japan’s banking crisis has dragged on for years now, while the U.S.’s Savings & Loan crisis of the late 1980s was dispatched with our usual harsh speed.**

Finally, on the individual level, we cite the potentially large role Asian personal savings accounts could play in the region’s investment future. Simply put, too much of Asia’s financial assets sit in do-nothing bank accounts when they could be employed in more efficient capital markets.

* On this subject, see Craig Smith, "Private Business in China: A Tough, Tortuous Road," New York Times, 12 July 2000, p. A1.

** For a good review of the crisis, see Stephanie Strom, "Rickety Japanese Banks: As Borrowers Collapse, Is New Bailout Needed?" New York Times, 8 September 2000, p. C1.

Turning to politics and focusing first on its nexus with the international system, we note the important role played throughout the region by Strategic Financial Alliances (SFAs). SFAs are prevalent in Asia because too many governments there simply do not get along well with one another. A classic example is Taiwanese airlines investing in their Chinese counterparts despite a ban on direct flights between the two countries. Often, SFAs work through a neutral intermediary, which is how a lot of investment flows into China via Hong Kong and Singapore—two linchpins in Asia’s SFA network. For example, two firms that otherwise would not join together are willing to do so if the right Singaporean firm steps in as a cornerstone in the alliance. In sum, SFAs represent international networking at its best: getting around the political roadblocks that too many governments put in the way of value-enhancing business partnerships.*

Dropping down to the nation-state level, we cite the obvious issue of rule of law. Few things scare away foreign investors more than judicial caprice, especially when it smacks of political motivation. Governments can facilitate a return on investment, but only a sound judiciary guarantees a return of investment when conflicts arise.**

Finally, and much in the same vein, we focus on cronyism and corruption at the level of the individual. It is the judgment of many experts that Asia simply has not "cleaned up its act" sufficiently as a result of the Asian Flu of 1997-98.*** While a few heavyweights disappeared in the financial earthquake (Indonesia’s Suharto the most prominent example), the culture of cozy business-government relationships persists throughout the region.

* Thanks to Dr. Minxin Pei for his inputs on SFAs.

** For a good description of this problem in China, see Erik Eckholm, "Judicial Caprice in China: 4 Families Share Stories," New York Times, 10 September 2000, p. A10.

*** On this subject, see Sheryl Wudunn’s chapter, "Reinventing Lives," in Nicholas D. Kristof and Wudunn, Thunder From the East: Portrait of a Rising Asia (New York: Alfred A. Knopf, 2000), pp. 143-62.

Turning to technology and focusing first on its nexus with the international system, we emphasize India’s emergence as a global information technology superpower. The country’s high-tech enclaves already account for roughly half the software written in the world today, an achievement that is not so surprising when you realize India has the largest pool of IT workers in the world. Then again, it also possesses the largest pool of illiterates in the world. In some ways, India matters most as an example to the rest of the developing world. If globalization succeeds in India, where half the population is terribly impoverished, then it can succeed just about anywhere. But if it can’t succeed in democratic India, with its booming IT sector, then where can it succeed?*

Moving to the nation-state level, we note the loss of control many Asian states are experiencing as a result of the Information Revolution. One good example is last year’s South Korean parliamentary election, when the Internet proved itself a political force. When political activists wanted to publicize past corruption by certain candidates, the timid mainstream press took a pass, only to find itself outflanked by the Web. Out of 86 candidates named in a corruption "blacklist," 58 lost in a stunning turn of events.** A second prime example is seen is the mobilization of Falun Gong members in China by the group’s reclusive, New York City-based leader, working primarily through postings on his website.***

Finally, on the individual level, we cite the coming wireless revolution in Asia, which is likely to transform social interactions there to an unprecedented degree. One reason why this revolution will advance so quickly in Asia versus the U.S. is that Asians never became addicted to "fat" visual content on the Internet in the same way that Americans have. As such, Asians are far more willing to adapt themselves to using handheld devices for real-time alphanumeric communications, moving them ever closer to the concept of an "Evernet" of 24-7-365 connectivity.****

* On India’s IT, see Anthony Spaeth, "India’s New Incarnation," Time, 27 November 2000, p. B2.

** See Doug Struck, "Internet Changed Culture of S. Korean Vote," Washington Post, 15 April 2000, p. A14.

*** On Falun Gong, see Elisabeth Rosenthal, "Beijing in Battle With Sect: ‘A Giant Fighting a Ghost,’" New York Times, 26 January 2001, p. A1.

**** On the Evernet concept, see Barnett, "Life After DoDth," and Thomas Friedman, "Brave New World," New York Times, 22 September 2000, p. A29. 

Shifting over to culture and focusing first on its nexus with the international system, we cite global fears regarding Asia’s cheap labor. Of course, this is a bit of a red herring, because if all it took to attract FDI was cheap labor, then Sub-Saharan Africa would attract the lion’s share, and this surely is not the case. Clearly, more than just cheap labor must go into the mix. But it is just as clear that Asia as a whole suffers from widespread underemployment, which is the real reason why labor remains so inexpensive. Simply put, many Asian workers are poorly utilitized in many sectors, where great gains in efficiency could be had, given the right blend of new rules and greater access to financial capital, which, in effect, work to free private firms from the influence of political powers more interested in preventing unemployment than maximizing growth potential.* 

Dropping down to the level of the nation-state, we highlight the phenomenon of Asia’s clannish business structures, wherein a small number of families tend to control inordinate amounts of national economies in states such as Indonesia and the Philippines. In effect, these oligarghic market structures mean—as one of our participants put it—"a lot of FDI flowing into Asia is really ‘family direct investment’" that never escapes the grip of these powerful clans, thus limiting the potential multiplier effect in the economy as a whole.**

Finally, at the individual level we note the important variable represented by the overseas Chinese who work throughout the world, but are especially concentrated in the Asian region. They are important in a two-fold sense:

• Their remittances back to China are substantial, as are their estimated personal savings.
• Their presence in other Asian countries not only causes local concerns about a Chinese "fifth column," it also places these expatriates in the position of serving as convenient scapegoats during economic tumults.***

* On China, see Craig S. Smith, "Sharp Shift for China’s Economy as Entrepreneurs Woo Investors: New Rules Easing Companies’ Access to Capital," New York Times, 28 December 2000, p. A1.

** The top 15 families in Indonesia control over 60 percent of the corporate assets; in Philippines and Thailand it is between 50 and 60 percent. Other countries registering 25 percent of higher include Malaysia, Singapore, and South Korea. This data is cited in Andreas Kluth, "A Survey of Asian Business: In Praise of Rules," The Economist, 7 April 2001, p. 6.

*** This was most obviously the case in Indonesia following the onset of the Asian Flu; for an overview of this situation, see Brian Barry, "A Survey of Indonesia: The Faltering Firefighter," The Economist, 8 July 2000, pp. 1-16. 

Switching to the environment and and focusing first on its nexus with the international system, we cite Asia’s growing out-of-area energy requirements. The region approaches self-sufficiency only in coal. In natural gas, where requirements are expected to roughly triple over the next two decades, Asia must increasingly turn to the former Soviet bloc and the Middle East, since advanced economies in the region already buy up the lion’s share of what’s produced locally. In oil, Asia’s requirements for out-or-region imports are predicted to double by 2020. Asia already buys up roughly two-thirds of all oil produced by the Persian Gulf region, and will buy approximately three-quarters as early as 2010. These dynamics create a co-dependent relationship between Asia and the energy-rich regions of the Persian Gulf and Central Asia: Asia is increasingly dependent on the political-military stability of these regions, and these regions are increasingly dependent on the economic stability of Asia.*

Moving down to the level of the nation-state, we focus in on the role of the state in the energy sector. One of Wall Street’s great concerns about the future of energy in Asia is the disproportionate mix of public decision making and private finance—namely, too much of the former controlling the latter. The historical record of state energy planning around the world is rather dismal, and yet, in the case of Asia, the states that will experience the most rapid increases also feature the heavy hand of state control.** In sum, while Wall Street likes to see monopolies build networks, it prefers them to be run by market forces once they are operational.

Finally, on the level of the individual, we note the general environmental issues connected with all this rapid growth. It is fair to say that Asia’s infrastructural requirements over the next two decades are unprecedented in human history. The combination of rapid rises in energy consumption, population, urbanization, and water usage will further damage an already battered regional ecosystem.***

* For a good overview of this connectivity, see Robert A. Manning, "The Asian Energy Predicament," Survival, Spring 2000, pp. 73-88.

** For a good description of Enron’s difficulties in the Indian electricity market, see Celia W. Dugger, "High-Stakes Showdown: Enron’s Right Over Power Plant Reverberates Beyond India," New York Times, 20 March 2001, p. C1.

***For good analysis on this subject, see National Intelligence Council, Global Trends 2015: A Dialogue About the Future With Nongovernmental Experts, NIC 2000-02, December 2000, .

Finishing with security and turning first to its nexus with the international system, we will argue that there exists in Asia a division of spheres of influence between China and the United States.* In effect, China is the dominant mainland power in the region, while the U.S. is the dominant maritime power. By and large this regional balance of power has been stable, with occasional lapses into mini-standoffs such as the 1996 controversy over Taiwan or this year’s surveillance plane imbroglio. But on a bilateral basis, it is fair to say that both sides have spent most of the 1990s coming to the conclusion that the other power constitutes the main threat to peace in the region.** How this military relationship unfolds over the coming years will go a long way in determining the region’s security environment. 

Downshifting to the level of the nation-state, we cite the "UK effect," as in, United Korea. No single change to the region’s security landscape over the coming years will be more profound than the eventual reunification of the Korean peninsula. With the inevitable demise of the North Korean regime, the potential for a major land war in Asia will be immediately and significantly reduced. Two questions arise about this scenario: the speed of the collapse (fast versus slow) and the nature of South Korea’s response (can it just "buy out" Pyongyang or must it go in and literally take over the country?). Naturally, the best outcome in terms of the FDI climate is a slow collapse where Seoul "buys out" the North Korean regime in piecemeal.***

Finally, on the level of the individual, we cite the issue of Asian xenophobia about Western companies coming in and buying up big chunks of the economy, thus replicating, in some sense, a colonial-era atmosphere of "distant owners." This tendency to "blame the West" was also seen in the Asian Flu of 1997-98.****

* Thanks to RAdm. Michael McDevitt, USN (ret.) for this concept.

** On this trend, see Thomas E. Ricks, "For Pentagon, Asia Moving to the Forefront," Washington Post, 26 May 2000, p. A1, and John Pomfret, "U.S. Now a ‘Threat’ in China’s Eyes: Security and Taiwan Issues Lead to Talk of Showdown," Washington Post, 15 November 2000, p. A1.

*** During the FDI decision event, we asked the participants to vote on which of the four possible scenarios (established by the two questions cited above) they believed was most likely. Their overwhelming choice was the Slow-Pay scenario, as in, a slow North Korean collapse accompanied by Seoul’s progressive buy-out.

**** See Paul Markillie, "A Prickly Pair: How Will Malaysia and Singapore Respond To Greater Openness in the Region," in his "Survey of South-East Asia: The Tigers That Changed Their Stripes," The Economist, 12 February 2000, pp. 8-11.

Having presented our overview of the key scenario dynamics we believe will shape the future FDI market in Developing Asia, we now turn our attention to existing obstacles (Old Orders) that our participants identified as hampering the region’s ability to attract outside investment. These ideas are culled from various brainstorming sessions and discussions we conducted over the course of the workshop, and are organized across same six topic areas we employed in the previous section: 

• Economics
• Politics
• Technology
• Culture
• Environment
• Security.

For each Old Order, we have identified a corresponding advancement or correction, which we dub a New Law. These ideas were likewise culled from various brainstorming sessions and discussions.

This section basically presents a wish list. In effect, we ask our participants to provide us two types of ideas here:

• Tell us something you don’t like about Developing Asia with regard to FDI.
• Give us an example of some event or deal that would signal an improvement in this issue-area.

In sum, the ideas all come from the participants, but we have provided the packaging and linkages.

To explain a bit further, we will say that "new laws" represent significant reforms, treaties, contracts or deals of some sort that our participants identified as signaling an improvement in Developing Asia’s long term FDI climate. "Old orders," in contrast, represent a significant deficiency in the current FDI climate that would be overcome or seriously diminished by the achievement of a relevant "new law." 

We organize these pairings in a three-tiered manner:

• Letting go of the past refers to some long-standing order or way of doing things
• Getting a grip on the present refers to a more recent or near-term obstacle
• Reaching for the future refers to those situations whose solution set is probably the furthest from actual achievement.

Obviously, the "wish" element grows stronger the farther back you delve into the past or the farther ahead you look into the future.

Starting with economics, the Asian order with the longest pedigree is the cozy relationship that exists between major banks and their clients—or borrowers. In the U.S., banks foreclose bad loans based on their own objective economic standards, but in many Asian countries, an unusual degree of closeness exists between bankers and their corporate clients, so much so that a political consensus is often required for the painful decision to actually bankrupt a failing firm. Absent such political decision-making, the tendency of the banks is to let bad debts pile up, creating an untenable overhang for the banking system as a whole. It is exactly this sort of vulnerable situation that convinces foreign investors that currency depreciation is in the offing, which in turn can trigger a currency crisis and/or financial panic. As Japan is one of the worst offenders in this regard, a truly stringent reform of the banking laws there would be viewed as a significant step forward.* 

Moving to the near term, we cite the Asian "values" so prominently celebrated during the heyday of the Asian Tigers. In essence, the crux of these "values" is the acceptance of the collusion of corporations, financial markets, and governments in a national economic policy that emphasizes macro-stability and broad-based development via an export strategy and deemphasizes the market’s role in picking winners and losers through competition.** The "new law" proposed here is the creation of an Asian Securities and Exchange Commission.

Looking more to the future, we cite growing Asian resentment over perceived Western meddling, most notably through international financial institutions such as the IMF and World Bank. Both institutions, and the IMF in particular, were harshly criticized for their handling of the Asian Flu.*** The "new law" proposed here is for an Asian Central Bank that would allow the region to—in effect—rescue its own during times of trouble.

* On this subject, see Stephanie Strom, "Japan’s Corporate Woes Compound Bank Troubles," New York Times, 3 April 2001, p. C1; and also "Japan’s Emergency Relief Plan Is Brought Out to a Cool Reception," 6 April 2001, p. B1.

** For an interesting overview of China’s stock markets, see Clay Chandler, "A Bull In China Stocks: Wild Rise Giving Investors Risky Ride," Washington Post, 4 August 2000, p. E1.

*** On this, see John Micklethwait and Adrian Wooldridge, A Future Perfect: The Challenge and Hidden Promise of Globalization (New York: Crown Business, 2000), pp. 174-82.

Shifting to politics, we start with the cliché of China as an expansionistic power bent on reconstructing its near-mythical, Middle Kingdom past. We call this a cliché because too many observers tend to extrapolate from China’s efforts to reclaim "lost provinces" a more generalized ambition to gobble up large chunks of Asia. In reality, China’s appetite for expansion has always been narrowly focused.* Now that Macau and Hong Kong are back in the fold, the last significant piece of this puzzle remains China’s claim of sovereignty over Taiwan, which it views as a renegade "province" destined to rejoin the motherland at some point. Because Taiwan represents such a tremendous financial gateway into the Chinese mainland, we note that any accord that would solidify the two countries’ standing with one another—regardless of content— would greatly enhance investor confidence in both.

Looking more to the present, we cite investor concerns over the fate of China’s state-run enterprises, most of whom have long been propped up by subsidies from the state. With China’ imminent accession to the WTO (probably by the end of this year), many of these unprofitable enterprises will face foreign competition for the first time in their existence, leading to many failures within the coming years.** Therefore, how China handles this process will go a long way toward signaling to the outside world its commitment to free markets.

Scanning ahead to the future, we cite Western concerns over the course of one-party rule in China. Clearly, the Chinese Communist Party is weaker now than it has ever been, controlling less and less of the country’s social and economic life as free markets expand across the economy. The real question is, how quietly will the party exit stage left? One step that would quell investors’ fears about that downstream outcome would be for Beijing to make the Yuan, or Renminbi, convertible.*** This development would signal a significant loss party control over the economy, making its inevitable departure from power less uncertain. 

* For a counterpoint, see Robert S. Ross, "Beijing as a Conservative Power," Foreign Policy, Mar/April 1997, pp. 33-44.

** For a good overview, see Craig S. Smith, "Chinese See Pain As Well As Profit in New Trade Era: Fears About Job Losses," New York Times, 21 September 20001, p. A1.

***For inklings in this direction, see Craig S. Smith, "China to Let Banks Set Own Interest Rates Over Next 3 Years," New York Times, 20 July 2000, p. C3.

Shifting to technology and looking first to the past, we cite Asia’s long-standing tendency toward copycat R&D, or basically breaking Western patents and copyrights. This issue has long been associated with Japan, and more recently with India’s pharmaceutical industry, where the issue has become caught up in the global debate on how best to handle the AIDS epidemic in Africa.* On another front, one of the U.S.’s main beefs with China over trade has been copyright infringement on recorded entertainment and software, a subject that periodically threatens to poison economic relations between the two. As such, the "new law" proposed would be some sort of treaty or series of national laws outlining Asia’s willingness to enforce the legal concept of intellectual property. 

Turning more to the near term, we note the growing concern that Southeast Asia is falling behind in the so-called New Economy, as, relative to the rest of Asia, states here are not attracting the same level of information technology investment. For example, Chinese citizens are twice as likely to use the Internet than Southeast Asians. In short, Southeast Asia lacks much of the physical infrastructure for e-commerce to take root. Plus, the societies there do not adapt well to the transparency required for networks to flourish.** Along these lines, investors would welcome some explicit recognition of this danger by regional governments and coordinated economic incentives to accelerate Southeast Asia’s development of the necessary infrastructure.

Finally, looking more to the future, we note a similar concern. Many of our workshop participants were adamant about dispelling the myth of Asia as one giant undifferentiated market for Western goods and investment. Focusing on localism which they believe is exacerbated by the region’s minimal infrastructure development, one idea proposed was the emergence of an Asian NASDAQ, or PACDAC, that would focus investment toward IT and IT-related infrastructure development.***

* On this point, see Donald G. McNeil, Jr., "Selling Cheap ‘Generic’ Drugs, India’s Copycats Irk Industry," New York TimesI, 1 December 2000, p. A1.

** Wayne Arnold, "Southeast Asia Losing Ground In New Economy, Report Says," New York Times, 7 September 2000, p. C4.

***A Japanese version of the NASDAQ was launched last June. For a brief description, see the report by the Japan Economic Foundation, "Nasdaq Japan market was launched on June 19," . 

Moving on to culture and focusing first on the past, we note Japan’s continued resistance toward accepting full responsibility for its actions in the Second World War. This historical amnesia perpetuates huge reservoirs of mistrust and even hatred of the Japanese in such countries as South Korea and China, to name the two most prominent cases ("comfort women" and the "rape of Nanking," respectively). To this end, we propose some sort of official reconciliation treaty between China and Japan over the latter’s rule in Manchuria during the 1930s and first half of the 1940s.* 

Looking more at the near term, we focus on China’s growing sense of anxiety over its perceived non-acceptance into the ranks of global powers. In short, Beijing wants desperately to be recognized by the world, and the United States in particular, as a relative co-equal, and not merely as an upstart power that needs to be contained. The proposal here is for Beijing to be awarded the 2008 Olympics, signaling its emergence as a world-class city capable of putting on a global show.**

Finally, peering into the more distant future, we note the Chinese leadership’s continuing obsession with cracking down on Falun Gong, out of the fear that cults or religious-based movements have historically played substantial roles in fomenting political upheaval in the country.*** Understanding how these specific fears contribute to an overall hostile religious environment in China, we propose the achievement of a diplomatic recognition treaty between China and the Vatican as a positive step in the direction of demonstrating the government’s willingness to allow greater pluralism in general.

* For a description of one legal case involving Japan’s infamous Unit 731 and its activities in China, see Howard W. French, "Japanese Veteran Testifies in War Atrocity Lawsuit," New York Times, 21 December 2000, p. A3; see also Doug Struck, "Chinese Confront Japan In Court: Germ Warfare Victims Testify," Washington Post, 9 March 2001, p. A20.

** Another interesting idea along this line (but probably a lot farther off) would be the awarding of an National Basketball Association franchise. The first ever Chinese player joined the Dallas Mavericks this season.

*** For an overview on the resurgence of religion in China, see John Pomfret, "Old-Time Religion Popular Again in Rural China," Washington Post, 24 August 1998, p. A1.

Shifting over to the environment and focusing more on the past, we cite the plethora of border and maritime disputes between major powers in the region, with a number of countries still technically at war with one another (dating back to WWII). Paraphrasing Robert Frost, we believe good pipelines make good neighbors, and given the region’s skyrocketing requirements for oil and natural gas, it only seems natural that these old border disputes should be put aside in favor of linking energy producers and consumers. A good example of a breakthrough in this arena would be Japan and Russia moving past the Kurile Islands dispute and finally going ahead with one of the natural gas pipelines currently proposed.* 

Looking more at the near term, we highlight the general powerlessness of individuals to seek redress for personal and property damage brought about by environmental pollution. One way to achieve some corporate responsibility in this arena would be class-action lawsuits that would begin to define the private-sector’s responsibility for the environment.**

Looking ahead to the future, we note the failure of any advanced economy to ratify the Kyoto Protocol on climate control, in large part because of resentment over the fact that large, emerging economies such as China and India were excluded from the regulatory regime. To that end, we propose the notion of a successor Kyoto accord that would be far more inclusive and thus present a better chance for a global consensus to emerge.

* On this subject, see Mark J. Valencia, "Energy and Insecurity in Asia," Survival, Autumn 1997, pp. 85-106.

** For a good example of this sort of progress, see Elisabeth Rosenthal, "Pollution Victims Start to Fight Back in China," New York Times, 16 May 2000, p. A1.

*** For some of the arguments against the Kyoto Protocol and the rationale behind President George W. Bush’s recent decision to turn the U.S. away from that agreement, see Andrew C. Revkin, "Bush’s Shift Could Doom Air Pact, Some Say," New York Times, 17 March 2001, p. A7.

Finishing up with security, we first zero in on the region’s most prominent Cold War hangover: the divided Korean peninsula. The consensus we heard at the workshop—especially from the Wall Street participants—was that South Korea should not wait until North Korea collapses to begin trying to "buy out" the regime in every sector possible. In other words, rather than wait out Pyongyang and face a very expensive reunification process, Seoul is better off seeking economic integration now, even at the risk of lengthening the socialist government’s life span. Exposure to South Korea’s vastly higher standard of living can only have a subversive effect on the North Korean regime’s legitimacy. Meanwhile, the deeper Seoul’s financial tentacles reach into the North Korean economy, the easier the process of later reunification. 

Looking more at current events, we highlight the dangerous nuclear standoff between India and Pakistan, where the focus of conflict is the disputed Indian state of Jammu and Kashmir. Radm K. Raja Menon, Indian Navy (ret.) likes to say that India’s national security paradigm remains trapped within "the sacred soil syndrome."* On the one hand, you could argue that no nation has lost more land since WWII (e.g., Pakistan, Bangladesh). On the other hand, no economy today better demonstrates the "death of distance" associated with information technology. As Thomas Friedman might say, India is at once a leading "Lexus" economy (i.e., high-technology producer) and a classic "olive tree" society (i..e., still fighting over seemingly meaningless bits of land). To move India beyond this trap, we look to some strategic arms limitation treaty with Pakistan.**

Looking ahead to the future, we target the Pentagon’s never-ending search for a "near peer," which is clearly focused on China. Granted that Wall Street has a different appreciation for China, they would welcome some downstream multilateral security agreement that brought together the U.S., China, and Japan.

* This quote comes from RAdm. Menon’s presentation to the International Maritime Seminar held in conjunction with the Indian Navy’s first-ever International Fleet Review in Mumbai, India, 16 February 2001.

** For an overview of Indian national security strategy, see Thomas P.M. Barnett, "India’s 12 Steps to a World-Class Navy," Proceedings, forthcoming.

VII:  The There and Then of FDI in Asia 

Moving into the third and last of our "diamond dialectics," we now turn to the subject of Tipping Points, a concept we borrow from Malcolm Gladwell’s recent book by the same name.* 

In a nutshell, we’re employing the term tipping point to mean a pinnacle moment in the adoption of a new understanding or perception (i.e., a paradigm shift), beyond which we can speak about a "new rule set" becoming thoroughly embedded in a country’s (or region’s) political and economic culture.

To illustrate this point, we employ the imagery of Sisyphus (see following slides), the legendary king of Corinth who was condemned, according to Greek myth, to roll a heavy rock up a hill in Hades only to have it roll down again as it nears the top—ad infinitum. While not wanting to insinuate that these tipping points are, by any stretch of the imagination, unachievable, we do want to impress upon the reader our sense that these "journeys" will not be easy ones.

We will propose six tipping points, corresponding—yet again—to our six global lenses (economics, politics, technology, culture, environment, security).

* Malcolm Gladwell, The Tipping Point: How Little Things Can Make a Big Difference (New York: Little Brown & Co., 2000). 

In this first tipping point, we focus in on the key economic paradigm shift that needs to occur to improve the long term climate for FDI in Developing Asia. In a nutshell, it is fair to say that the current investment environment in Asia is almost the complete opposite of that in the United States. In the U.S., most individuals have little to no personal savings (i.e., traditional bank accounts), but do have financial assets at work in various capital markets, such as stocks and bonds. In Asia, the situation is completely reversed: many individuals have substantial personal savings in traditional banking institutions, but few of their financial assets find useful employment in capital markets. 

The tipping point is obviously the development of efficient capital markets that are universally accessed. At that point, the cost of money both inside and out are equalized, meaning that—all things being equal—individuals and firms should not care about where their capital comes from because all available capital adheres to the "law of one price." When Developing Asia’s capital markets reach this tipping point, the economies there become indifferent about Western versus Asian sources of FDI, giving them maximum choice opportunities and fostering competitive rates for all.

In this second tipping point, we focus in on the desired political paradigm shift. Here we highlight the issue of ownership within the economy. In the classic Asian format, exemplified by the chaebol (South Korea’s industrial conglomerates) and the keiritsu (Japan’s families of companies), complex patterns of cross-ownership and financial alliances lead to a melding of political and economic power in a system best described by the oxymoron "state-directed capitalism." The extreme closeness between public and private sectors allows for focused national economic policy, but likewise facilitates protectionist tendencies, seen most vividly in the inability of foreign investors to achieve significant levels of direct ownership in these economies. 

For now, the West is largely limited to bottom feeding (buying only the most distressed firms) in the more closed Asian economies. A tipping point would therefore come when foreign firms are freely able to merge and/or acquire (M&A) not just the "losers," but the real "jewels" (meaning high-profile firms or assets, like famous chunks of real estate or signature companies in media, entertainment, energy, or finance). We know Asia reaches a tipping point when we are able to buy outright the Asian equivalents of the Chrysler Building, MGM Studios, the Los Angeles Dodgers, Pacific Gas & Electric, or J.P. Morgan.

In this third tipping point, we focus in on the desired technological paradigm shift. Here we zero in on the issue of which sector of the economy receives the most FDI attention. Right now, Asia is a collection of scattered outposts of the New Economy, or—better said—increasingly networked enclaves, but enclaves nonetheless. In other words, many Developing Asian states have a hard time integrating high technology throughout their economies as a whole, even as—collectively—Asia continues to rise as a new global center of gravity in IT (both in terms of hardware and software).*

The measure we chose to focus on here is sector shares of inward FDI flows. In developed economies, almost 60 percent of inward FDI flows go to the service sector, with just over 40 percent going to the primary and manufacturing sectors combined. In contrast, Developing Asia’s current inward flows display the opposite spread: two-thirds to primary and manufacturing and one-third to services. A tipping point that suggests Developing Asia has achieved more broadly based integration of information technology will be when FDI flows into the service sector outpace that of the manufacturing sector.

Along these lines, we asked our participants to vote on what they think the likely sector shares will be for Developing Asia in 2010. The results displayed above suggest that considerable ground can be covered within the next decade and that this tipping point is likely to be achieved within a generation.

* On this, see Celia W. Dugger, "In India, Unwired Villages Mired in Distant Past," New York Times, 19 March 2000, p. A1. 

In this fourth tipping point, we focus in on the desired cultural paradigm shift. Here we emphasize the shift from the region’s current oligarghic business culture to one more clearly based on merit. The key ingredient to a meritocracy, however, is universal access to education, and here Asia lags desperately behind the rest of the world. But more pertinently, the entire region currently lacks a graduate business school with an international reputation of a Harvard, Wharton, or University of Chicago. Instead, Asia (mostly its elite) has taken to sending large number of students to U.S. universities, where too many are lost for good to the West. 

So we choose as a tipping point the development of world-class business schools in Asia, be they of Asian origin or Western export. Hopeful signs in this regard include:

• Prominent U.S. and European business schools establishing satellite operations throughout Asia*
• A decline in the brain drain to the West for both India and China, as young people start to return in numbers following the achievement of degrees or simply stay behind as career opportunities improve.**

* See David Leonhardt, "All the World’s a Campus: Top Business Schools Have No Borders," New York Times, 20 September 2000, p. C1.

** See Pamela Constable, "India’s Brain Drain Eases Off: For Best and Brightest, Staying Home Is Option to High- Tech Jobs in U.S.," Washington Post, 14 September 2000, p. A23; and John Pomfret, "A Brain Gain for China: Western-Trained Professionals Return," Washington Post, 16 October 2000, p. A1.

In this fifth tipping point, we focus in on the desired environmental paradigm shift. Here we explore the reality that most governments simply have not yet stepped up to the plate on environmentalism, remaining too friendly with the private sector and barely enforcing standards that are far too lax. According to Daniel C. Esty, an expert on international environmental standards at Yale University, "The worst pollution in the world is unequivocally in Asia. The statistics on China are stunning, and right behind those Chinese cities stand almost every other major city of Asia." The World Health Organization estimates that roughly 2 million people die each year from air and water pollution. Which means, as New York Times reporter Nicholas Kristof notes, that more Asians die each year of pollution than perished in the entire Vietnam conflict across the 1950s, 1960s, and 1970s.* 

Asia’s historical tendency has been to treat the environment as a private good with limited public liability. What they need is a mindset that says the environment is a public good worth protecting, with private liability for those who pollute or otherwise damage it. But because the region’s development needs are so great, we believe the best route to a green future is one built on transparent capping systems employing trading regimes that allow the most responsive firms to monetize their efficiencies and the least responsive ones to purchase credits.

* The quote and World Health Organization data are cited in Nicholas D. Kristof, "The Filthy Earth," in Kristof and WuDunn, Thunder From the East, p. 295. 

In this last tipping point, we focus in on the desired security paradigm shift.* Here we target the lack of genuine civil-military relations in many Asian states. What we mean by that is, in too many instances, there is civil-military identity rather than true separation and natural tension. The classic example is the military leader who also holds tremendous political power within the government, and then also controls significant private-sector assets. This situation is bad on four levels: 

• It gives the military too much influence within governments
• It offers the military too much protection from both market and political forces that might otherwise stem defense spending
• It detracts from the professionalism of the military, as we have seen in China in recent years when the military was encouraged to "self-finance"
• It presents the military with too many opportunities to crowd out natural market growth due to their relatively large weight in the national economy.

When Asian generals and admirals are limited to only one title, then we will know that a tipping point has been reached—namely, the role of the military has been appropriately subsumed to a background, enabling function with regard to overall FDI climate.

* Thanks to David Harries in particular for this concept. 

Shifting from Tipping Points to the There and Then, we’ll now examine a quartet of rudimentary outcome scenarios for Asia’s potential investment future. We call them "rudimentary" because we won’t present any great detail as to the alternative futures they portend. Rather, we’ll offer them up as a way to capture varying degrees of optimism/concern exhibited by workshop participants regarding the likelihood of each pathway’s unfolding.

The scenarios were framed in the following fashion:

• We constructed the X-Y axis beforehand and presented it "ready-made" to workshop participants at the beginning of the "Outcome Scenarios" session.
• The participants then spent several minutes brainstorming—via GroupSystems—notional "headlines from the future" that served as illustrations for each of the four scenarios; selections of these headlines are presented in the next section.
• Following facilitated group discussion of the four scenarios, participants nominated—via GroupSystems—titles for each of the four scenarios.

The X-Y axis is constructed of two simple questions:

• What is the nature of the regional security environment?
  • Does the U.S. remain the regional Leviathan?
  • Or does an Asian-based Leviathan emerge (either singular or collective)?
• What is the relative flow of FDI into the region?
  • Does the "pie" continue to grow?
  • Or does a Western economic crisis reduce it significantly?

The four resulting scenario titles are as follows:

• The Dow Rises in the East (U.S. as Levithan + Expanding Pie) reflected the optimisim of those who see Asia as still a largely untapped market for both trade and investment. In this scenario, an expanding pie keeps Asia’s great powers more focused on economic development than arms races, enabling the U.S. to retain its Leviathan status. This scenario was seen as a simple extrapolation from today.
• Asia Cries, "Uncle!" (U.S. as Leviathan + Shrinking Pie) reflected the concern of many participants that an economic slowdown in the West would not only shrink the cross- regional FDI flow, but likewise put the U.S. in the awkward position of trying to enable security in a region undergoing increasing economic and political stress—think of an "Asian Pneumonia" next time around. The worry here was that the U.S. would have a hard time avoiding the perception of being a bully/taskmaster, not just in security affairs but also in economic relations—especially as the IMF and World Bank are perceived to do our bidding.
• Bye, Bye Miss American Pie (Asian Leviathan + Shrinking Pie) reflected the opinion of most participants that, in the event of a severe economic downturn in the West, U.S. military presence in Asia could well come under pressure back home. If U.S. financial and security presence were simultaneously curtailed, Asia’s adherence to the concept of a single global economic rule set would surely decay. The danger seen in this scenario is one of Asia pursuing a competitive rule set, or one that rejects not only Western dominance in security matters, but financial ones as well.
• Chinese Carry Out (Asian Leviathan + Expanding Pie) reflected the sense of inevitability that some participants felt about a security challenge eventually rising in Asia due to China’s rapid rise in the global economy. Simply put, an economy that grows that much cannot adopt the security posture of some small trading state. But security challenge to whom exactly? Japan? India? The United States? Everyone? And what strategy does an emerging China seek to carry out once it has "arrived"? 

In this section, we flesh out our long-term scenarios a bit by providing several "headlines from the future" for each quadrant. These headlines were generated by the workshop participants as a way of populating the outcome scenarios. Of the several hundred notional headlines provided, we selected two dozen that we felt captured the lion’s share of our participants’ concerns and/or desires regarding Asia’s future investment paths.

As for which headlines constitute Good News or Bad News, we leave that judgment to the reader.

First we examine the scenario that most closely resembles an extrapolation from today’s situation: The Dow Rises in the East. 

Four themes emerged among the numerous entries we received for this scenario whereby the U.S. remains regional Leviathan and the FDI pie continues to expand:

• A growing military cooperation between the U.S. and China
• A rapid acceleration of mergers and acquisitions in both directions, to include real "jewels"
• An integration of financial markets
• Economic integration within Asia that did not trigger U.S. fears of being shut out.

Next we examine the scenario entitled Asia Cries, "Uncle!" 

Four themes emerged among the many entries we received for this scenario, whereby the U.S. remains regional Leviathan but the FDI pie shrinks significantly:

• China, failing in the heightened global economic competition, turning rightward and inward
• Increased xenophobia and social anxiety about globalization
• A search for domestic scapegoats as well
• The U.S. perceived as pursuing a security posture in the region akin to a colonial power.

Here we examine the scenario entitled Bye Bye Miss American Pie. 

Four themes emerged among the many entries we received for this scenario, whereby an Asian Leviathan emerges under the conditions of a shrinking FDI pie:

• Within the region, major states begin allying themselves against China
• Increased xenophobia leading to active anti-Westernization measures
• Some smaller states seeking U.S. "adoption" due to heightened security fears
• Russia and the U.S. finding new reasons for cooperation 

Finally we examine the scenario entitled Chinese Carry Out.

Four themes emerged among the many entries we received for this scenario, whereby an Asian Leviathan emerges under the conditions of an expanding FDI pie:

• The most Western states seek explicit economic union with the United States
• China replaces Japan as the Asian economy we most respect and fear
• India’s emergence as an IT superpower provides some balance to China’s emergence as a manufacturing superpower
• China becomes the "France" of Asian security: always pushing for regional solutions that limit the role of the U.S., while being careful never to engage us head-on.

We wrap up our presentation of workshop output with an exploration of the concept of "connectivity," as suggested by the Internet-based trivial pursuit known as the Kevin Bacon Game (or alternately, Six Degrees of Kevin Bacon). This popular movie trivia game is based on the notion of trying to determine the shortest number of linked steps between any two points.*

After explaining how the game works and what it suggests about connectivity, we’ll show you how we used it in our workshop to get our participants to think about the "most connected" FDI targets in Developing Asia.

*  The discussion of the Kevin Bacon Game that follows is based on Malcolm Gladwell’s description of the same in his chapter, "The Law of the Few: Connectors, Mavens, and Salesmen," pp. 46-49, The Tipping Point. 

According to the Oracle of Bacon, the most comprehensive version of the Kevin Bacon Game on the Internet, "The object of the game is to start with any actor or actress who has been in a movie and connect them to Kevin Bacon in the smallest number of links possible."* Two actors are linked if they've been in a movie together, but links through television shows, made-for-TV movies, or through production staff (e.g., writers, producers, directors) do not count. Most actors can be linked in 4 steps or less, meaning a typical "Bacon number" for any actor is 2 or 3, meaning it takes 2 or 3 movies to link the subject in question to Kevin Bacon. 

According to the University of Virginia’s School of Engineering and Applied Science (Department of Computer Science), which maintains the Oracle of Bacon web site, the average Bacon number for all actors is roughly 2.8, based on a combined pool of approximately 450,000 actors.**

The example we use here is Kevin Kline, who can be linked to Kevin Bacon in as few as 2 steps, but we use 3 movies here, to make it a little easier.

Spend a minute to contemplate which two actors appearing across three movies will link Kevin Kline to Kevin Bacon. The process would go something like this:

• Kevin Kline + Actor A in Movie #1
• Actor A + Actor B in Movie #2
• Actor B + Kevin Bacon in Movie #3.

Then check out our preferred answer on the next slide. 

* The Oracle of Bacon is found at <http://www.cs.virginia.edu/oracle>.  The Oracle uses data from the Internet Movie Database <http://us.imdb.com>.

** Cited at <http://www.cs.virginia.edu/cgi-bin/oracle/center-cgi?who=Kevin+Bacon>. 

Here’s how we do it:

• Kevin Kline appears with Meg Ryan in French Kiss (1995), a romantic comedy. That’s movie link #1.
• Meg Ryan appears with Tom Hanks in Sleepless in Seattle (1993), another romantic comedy. That’s movie link #2.
• Tom Hanks appears with Kevin Bacon in Apollo 13 (1995), a space adventure based on a true story. That’s movie link #3.

So Kevin Kline is easily linked to Kevin Bacon in three steps.*

Of course, so long as movies are being made, any actor’s Kevin Bacon number can rise or fall, depending on who appears in movies with them (especially if that person is Kevin Bacon).

Who is the actor who currently holds the lowest Kevin Bacon number at 2.599102? Turn the page and find out.

* According to the Oracle of Bacon, Kevin Kline actually has a Bacon Number of 2 (he appears with Diane Lane in Chaplin (1992) and she appears with Kevin Bacon in My Dog Skip (2000). When Kevin Kline finally acts in a movie with Kevin Bacon, he will join the exalted ranks of actor who possess a Kevin Bacon number of one (approximately 1,500 actors currently enjoy this recognition), according to the Oracle site. The only actor with a Kevin Bacon number of zero is—of course —Kevin Bacon himself.

The current holder of the lowest Kevin Bacon number is Christopher Lee, who recently edged out the long-time reigning champion, Rod Steiger. 

What makes Christopher Lee the most connected actor of all time?

• He has been acting for a long time, appearing in his first movie, Corridors of Mirrors, in 1948.
• He has acted in a lot of movies, 215 in all (including the next Star Wars movie due in theaters in 2002).
• He is a "character actor," meaning not the lead actor, in the vast majority of his movies.
• He has appeared in all sorts of movies.

These characteristics are what make him the most connected Hollywood movie actor of all time. Does this make him the most powerful or most famous movie actor of all time? Obviously not, but it does mean that—compared to actors in general—he is extremely well-known within the industry. In short, if you wanted "inside information" on the widest array of industry players over time, he would be your best source among actors—your quickest link.

What makes for a well-connected player in direct investment flows to a particular region?

• That country would have a long-established reputation as both a target and source of investment flows. It would be considered a gateway to other economies.
• It would be a high-volume player. When measured as a percent of GDP, its inward and outward stock would register a relatively high percentage, meaning more than 50 percent.
• It is more than likely not a huge industrial state, but rather a smaller, trading state with strong financial markets.
• It would deal in a broad array of sector investments, demonstrating great versatility in its partnerships both within the region and throughout the world.

Our version of the Kevin Bacon Game was to ask our participants to construct a variety of Free Trade Areas linking Developing Asia to the three main sources of global FDI—the Triad members.*

Here is how we did it:

• We presented the participants with a list of states in Developing Asia (note that we did not break Hong Kong out as a separate player).
• Then we asked them to construct a Free Trade Area from the direction of NAFTA. Specifically, we asked them to choose the ten "best" countries for a NAFTA-led Free Trade Area that linked North America with Developing Asia.
• Then we did the same for both the European Union and Japan.
• Finally, we combined the top-ten rankings from all three Free Trade Areas to determine those Developing Asian economies with the lowest Kevin Bacon-like number, meaning the countries most easily connected to other countries in the region though FDI flows, as estimated by our diverse group of participants.

In each vote, we instructed the participants to consider:

• All the characteristics of a well-connected state
• Which states would provide the best fit with the primary FDI source in question, not just in terms of economic compatibility (and certainly not just the absolute size of the economy), but also political, technological, cultural, environmental and security "fits."

* For some examples of countries currently moving in this direction, see Agence France-Presse, "China Outlines Need For Free-Trade Zone," New York Times, 26 November 2000, p. NE9; Joseph Kahn, "Practicing What Free Traders Preach," New York Times, 3 December 2000, p. WK6; and Elizabeth Olson, "Regional Trade Pacts Thrive As the Big Players Fail to Act," New York Times, 28 December 2000, p. W1.

Our first vote on a NAFTA-led Free Trade Area for Developing Asia yielded the following top-5 candidates: 

• Singapore: former British colony, like the U.S. and Canada; following loss of U.S. military base in Philippines, security relationship with U.S. blossoms rapidly
• Philippines: former "possession" of the U.S.; until recently, long-time site of U.S. military facilities; member of U.S.-dominated South East Asia Treaty Organization (SEATO) during Cold War
• South Korea: strong security alliance with U.S.
• Taiwan: strong security relationship with U.S.
• Thailand: good military ally of the U.S. in the region; member of SEATO.

Note that none of these states has had anything close to an adversarial security relationship with the U.S. since the Second World War.

Our second vote on an EU-led Free Trade Area for Developing Asia yielded the following top-5 candidates: 

• India: past colonial ties to Portugal, France and UK
• Malaysia: past colonial ties to Portugal, Netherlands, and UK
• Singapore: former British colony
• China: past colonial ties to several European powers over the centuries
• Indonesia: past colonial ties to Portugal, Netherlands, and UK.

Note that—at one time or another—all five states were colonized in some portion by European powers. It must have been that sort of colonial hubris that pushed our participants to envision a FTA that includes both India and China.  Then again, China just joined the so-called Bangkok Agreement that reduces tariffs on over 600 products among the following countries: India, South Korea, Laos, Sri Lanka and Bangladesh.*

*The Bangkok Agreement was formulated in 1975.

Our third vote on a Japan-led Free Trade Area for Developing Asia yielded the following top-5 candidates:

• Singapore:occupied by Japan during WWII
• Taiwan: former Japanese colony
• Malaysia: occupied by Japan during WWII
• Thailand: occupied by Japan during WWII; later Japan’s ally during the conflict
• Indonesia: occupied by Japan during WWII.

Note—yet again—the linkages between past security-based relationships and current financial relationships. 

In this slide we present the top-ten lists for all three Free Trade Areas constructed by our participants. Note first how they all selected the same ten states, just not in the same order. The line across the middle separates the top five from the bottom five. Combined rankings (an average of the three ranks) appear on the far right. 

Based on this process, we declare Singapore to have the lowest Kevin Bacon-like score on FDI connectivity. This should not be surprising. Singapore has the second largest inward and outward FDI stock totals in Developing Asia (after China/Hong Kong). The global average for FDI as a percentage of GDP is approximately 14, both inward and outward. Singapore’s outward stock percentage is 56, while its inward share is 86 percent.

Singapore has had strong past/current political-military relationships with all three global pillars of FDI. It is a well-known and much trusted player. It is the closest thing in Asia to a pure trading state (now that Hong Kong has joined China).

In sum, it was the collective judgment of our participants that, if you wanted your investments in Developing Asia to have the greatest flexibility and reach—or the most connectivity—Singapore was the best place to start. For once your money enters Singapore, it can move elsewhere around the region in the fewest number of steps.

Not surprisingly, a recent Economist survey cited Singapore as having the highest ratings for quality of corporate governance, transparency, and rule of law —all characteristics you would expect from the Kevin Bacon of Asian FDI flows.*

* See Kluth, "A Survey of Asian Business," pp. 4 & 16. The source of the survey data is Political and Economic Risk Consultancy. 

VIII:  
Cosmic Conclusions About the Future(s) of FDI in Asia

Having worked our way through our conceptual model and presented the output from the Foreign Direct Investment event, we’d now like to wrap up this report with a handful of "cosmic conclusions" about the future(s) of Asian economic development.

One thing we heard several times throughout the workshop and in subsequent email traffic was how so many of our participants were excited about long term investment prospects in India, primarily in information technology but also in pharmaceuticals and energy.

India is hard for Westerners to grasp due to its enormous and eclectic population. If you took the population of the entire Western hemisphere and crammed it into the U.S. west of the Mississippi, you would have something like an India. There would be plenty of very rich people, about three hundred million middle class, a similarly sized working poor, and then even more people living in abject poverty—all in the same country. And then there is the incredible diversity: the religions, the languages, the lingering caste divisions.*

But as we stated earlier, India is a very important country for the future of globalization.** With everything it offers the New Economy, the world needs India to be a success story. But for that story to be written, India needs substantial foreign investment.

To date India has attracted about as much FDI inward stock ($16 billion through 1999) as long-isolated Vietnam ($15 billion), with roughly half of that coming in a three-year spurt between 1995 to 1998, peaking in 1997 at a flow of 3.5 billion but declining since then.***

What struck us about the workshop was the enthusiastic sense of many participants that India was turning a corner in terms of global perceptions of its investment climate. In some ways, the manner in which participants spoke about India’s prospects reminded us of how people spoke about China’s prospects half a decade earlier. Can India make such a leap into "star"economy status? Much depends on how its IT sector holds up during the current slowdown in the West.

* On India as a nation, see Shashi Tharoor, India: From Midnight to the Millennium (New York: Harper Perennial, 1998).

**On how globalization is changing the lives of average citizens in India, see James Traub, "Keeping Up With the Shidhayes: India’s New Middle Class, New York Times Magazine, 15 April, p. 20.

***Data comes from UNCTAD, World Investment Review 2000, p. 297. 

One statement we heard time and time again during the workshop was, "If we were having this workshop back in 1990 instead of 2000, imagine how much we would have been talking about a Japan dominating Asia versus a China." Indeed, thinking back to the national debates triggered by Paul Kennedy’s 1989 book, The Rise and Fall of the Great Powers, you would half-expected that the subject of our workshop might have been Japan’s dominant FDI position in the United States and what we were going to do to protect ourselves.

The point the participants were trying to make was two-fold. First, it certainly is hard to predict the economic future of great powers.

But more importantly, it would be just as irresponsible now to count Japan out as a future crucial player in Developing Asia because of its prolonged economic slump and financial crisis. Japan has displayed an uncanny knack for painful rebirth and resurrection over the course of its history. Recent calls by some senior officials to let the economy "die once so that it can live again" suggest that the country is moving ever closer to the drastic steps many financial experts have long advocated for a banking sector awash in bad loans.*

How Japan emerges from this crisis will go a long way toward determining the future course of investment and economic development across Asia as a whole. Japan is simply too big a piece of Asia’s FDI puzzle to be discarded, no matter how dire its short term situation becomes.

* On this notion, see Clay Chandler, "As Japan’s Economy Sags, Many Favor a Collapse," Washington Post, 9 March 2001, p. A1. 

It has been said so many times about China, but we will say it again here: something has got to give over the coming years. Either the politics will come unglued from the social pressures created by all this economic development or, if political leaders cling too tightly to their controlling ways, the economy will eventually fall victim to one of the several "train wrecks" predicted (e.g., banking crisis, regional disparities growing too large, massive unemployment due to foreign competition).

In terms of FDI, China remains one of the world’s most intriguing products, trapped within one of the world’s worst packages. Deng Xiaoping decided to reform economics before politics, and since Mikhail Gorbachev proved just how hard the opposite course was for the former Soviet Union, it is hard to argue with his strategic choice. But China will be dealing with those political reforms over the coming decade, whether it wants to or not.

In short, what the Second Generation of leaders (Deng) started in economics has not been matched by the Third Generation (Jiang Zemin, Zhu Rongji) in the political realm, largely in frightened response to the Tianamen Square protests of 1989. Now as the so-called Fourth Generation rises to power in the next two to three years, questions abound about their willingness to further political reform in response to economic advance.

This Fourth Generation, however, is rightly described as the stay-at-home generation. They did not travel to Russia for education like the Third Generation, nor do they resemble the Fifth Generation that spent so many formative years in the U.S. and Europe.* One thing is clear: this cohort is relatively non-ideological and technocratic in outlook. Oddly enough, a few prescient Soviet watchers were quietly pointing out the same things about the Gorbachev generation just as they came on the national stage in the mid 1980s.

* On the Fourth Generation, see John Pomfret, "China’s Generational Shift: People’s Congress May Signal Rise Of New Leaders," Washington Post, 5 March 2001, p. A12.

Much has been made about Developing Asia’s tremendous future requirements for foreign investment, especially in infrastructure development and energy. Given the huge sums projected, many have made the case—including us—that Asia has no choice but to turn to the West for a good portion of that investment flow.

While not backing away from previous statements, we do feel the need to point out the tremendous sums of personal savings in Asia that remain largely untapped in this development process, primarily because the region lacks efficient capital markets that are broadly accessible to the bulk of the population. Looking at just China and Japan, we have come across numerous estimates that suggest if Asians had the same access to capital markets as most Americans do, Developing Asia’s opportunities for intra-Asian FDI might be significantly enhanced.*

For now, these assets remain largely trapped in unproductive savings accounts and pension funds. They remain a variable of considerable potential importance, but one dependent upon new rule sets emerging in Asia to free them for better employment.

* Good references include the Japan Statistical Yearbook, Standard & Poor’s Current Statistics, and various annual reports by the International Monetary Fund (World Economic Outlook), the Organization for Economic Cooperation and Development (International Direct Investment Statistics Yearbook), and the United Nations (Statistical Yearbook).

Our fifth and final cosmic conclusion is, in many ways, a larger argument (and advertisement) for the NewRuleSets.Project as a whole. It is the same argument upon which we ended our first report on Asian Energy Futures.

After each of the Economic Security Exercises we’ve conducted over the past five years, participants walk away from the experience speaking excitedly about a new sense of understanding of the connectivity between the security and economic worlds—namely, how the two work in tandem to provide international stability.

We like to describe this combination effect as the global rule set, or what we’ve come to understand as the ultimate international peace dividend arising from the end of the Cold War. As stated earlier, the collapse of the Soviet Bloc and its long-standing challenge (or rejection) of the Western economic rule set made possible—really for the first time in human history—a truly worldwide rule set for how military power buttresses and enables economic growth and stability.

How so? For the first time in human history we have a true global military Leviathan in the form of the U.S. military, and no peer competitor in sight—not even a coherent alternative economic philosophy (although one clearly brews in the anti-globalization protests of Seattle Man). This unparalleled moment in history both allows and compels the United States to better understand the security-economic nexus, in large part because of its complete reversal of priority from the Cold War. During the strategic stand-off with the Soviet Union, economic might was seen as supporting military power, but now that situation is completely reversed: to the extent that the military matters, it matters because it stabilizes the global economy.

How do we define this ying-and-yang relationship between the military and economic worlds?

First we speak of stability, which comes from military security, and then we speak of transparency, which is both demanded by, and engendered by, free markets. These two underlying pillars form the basis of the single global rule set that now essentially defines the Era of Globalization.

Within those two pillars, the U.S. clearly plays a crucial role:

• The U.S. Government, through the U.S. military, supplies the lion’s share of system stability through its Leviathan-like status as the world’s sole military superpower.
• The U.S. financial markets, which lead the way in fostering the emergence of a truly global equities market that will inevitably operate 24-7-365, play the leading role in spreading the gospel of transparency, in large part because it’s any country’s best defense against the sort of financial currency crises that have periodically erupted over the last decade (Mexico 1994, Asia 1997, Russia 1998, Brazil 1999, Turkey and Argentina 2001).

As such, it is essential that these two worlds—military and financial—come to better understand their interrelationships across the global economy. 

Uncovering and better understanding this fundamental relationship is especially important because—the vast majority of the time—the military and business communities operate in oblivious indifference to one another.

One’s tempted to counter, "So what? They don’t need to be aware of one another on a day-to-day basis."

And in a basic sense, that’s true. But if you consider the rise of system perturbations as a new form of international security threat in the 1990s, and if you understand that most of these perturbations come in the form of financial crises that can engender serious subnational violence (e.g., Indonesia today), then perhaps this connectivity seems more pertinent. Because ultimately the global economy operates on trust, which is based on certainty, which in turn comes from the effective processing of risk.

In the end, the military and financial markets are in the same business: the effective processing of risk.  For the military, it’s the risk of conflict and the disruption of normal life by large-scale violence, while in the financial world, it’s the risk of bankruptcy (insolvency) and the disruption of normal business by large-scale panics or failures.

Invariably, these two problem sets merge in the increasingly interdependent, IT-driven, globalizing New Economy, so understanding the military-economic connection isn’t just good business, it’s good national security.

Blast from my past: Final Report of the Year 2000 International Security Dimension Project (1999)

NOTE: see "Other Publications/U.S. Naval War College projects"
for PDF version of report

U.S. Naval War College

Center for Naval Warfare Studies

Decision Support Department

 

Year 2000 International Security Dimension Project Final Report

by

Dr. Thomas P.M. Barnett

with

Prof. Henry D. Kamradt

and based on inputs from

Dr. Lawrence Modisett, Prof. Bradd Hayes, Prof. Theophilos C. Gemelas & Prof. Gregory Hoffman

 

Originally posted 23 July 1999

TABLE OF CONTENTS

I. Introduction -- Page 3

II. Our Big Picture Approach -- Page 9

III. A Series of Y2K Onset Models -- Page 17

IV. The M Curve of Influence -- Page 33

V. The Scenario Dynamics Grid -- Page 43

VI. Some Preliminary Thinking on CINCs' Strategies -- Page 66

VII. A View From Wall Street -- Page 79

VIII. Some Cosmic Conclusions About Y2K -- Page 94

Appendix Y: List of Workshop Participants -- Page 99

I. Introduction:  How This Project Started and Why

The Year 2000 International Security Dimension Project is the brainchild of Vice Admiral Arthur K. Cebrowski, President of the U.S. Naval War College. For those familiar with his career, this should come as no surprise, as he has long served as a leading thinker within the military regarding the intersection of technology and global change. Admiral Cebrowski believes the Year 2000 Problem (hereafter Y2K) can have a significant historical impact on humanity's relationship with technology, if only to rapidly teach us all a great deal about what it means to live in an increasingly interdependent, interconnected, and information technology-driven globalized economy.

Soon after assuming his post at the War College in the summer of 1998, Admiral Cebrowski tasked the Center for Naval Warfare Studies' Decision Support Department, led by Dr. Lawrence Modisett, to engage in a year-long study of Y2K's potential to trigger significant scenarios of internal or transnational instability in the world outside the United States.

We've since defined "significant scenarios" to mean a crisis situation of significant magnitude to demand--under the potentially unprecedented global circumstances of Y2K--Defense Department (DoD) attention in terms of possible crisis response. Such a response could range from anything as minor as the rapid insertion of a small "tiger team" to help foreign nationals repair a specific network facility to something on the order of a Complex Humanitarian Emergency mission to some country or region especially hard hit. In short, it's a wide open playing field, with a key uncertainty being how the United States itself weathers the Y2K Event.

From the beginning of this project, we've stressed an "agnostic" approach on Y2K and its potential impact, meaning we seek neither to rally a broad social or governmental response to deal with this problem (e.g., the ongoing remediation effort) nor to present any sort of "official" government outlook on what is likely to happen. Instead, we've approached the Y2K event as we would any other potentially destabilizing event of serious political-military impact--by employing a standard decision scenario approach. By "decision scenario approach," we mean using credible scenarios to create awareness among relevant decision-makers regarding the sort of strategic issues and choices they are likely to face if the more stressing pathways envisioned come to pass. Naturally, because we work for the military, we're more interested in the "darker" scenarios. That doesn't mean we expect or predict really bad things will happen, only that we think it's essential the U.S. Military must consider the potential scope of the problem in advance so as to avoid both errors of omission and comission once the Y2K Event begins--with an emphasis on the latter.

How We View the "Whole Enchilada"

As you'll notice, we call our project the Year 2000 International Security Dimension Project--not the Y2K International Security Dimension Project. Why? It's our firm contention that DoD should view the Millennial Date Change Event as comprising a constellation of simultaneously unfolding elements, of which Y2K is clearly the most important. Our draft list of globally significant pieces to this puzzle would begin as follows:

• Year 2000 computer problem (e.g., software and embedded chips) in and of itself
• Y2K--the global remediation effort and all that it entails
• Y2K as a global education process regarding the pervasiveness of "all this invisible technology"
• Y2K as a global crisis management challenge and economic threat 
• Global economy just coming off a period of significant widespread turmoil (e.g., the Asian Financial Crisis of 1997 and its subsequent spread to Russia and Brazil), resulting in significant reform efforts by many of the affected countries
• Millennial Event in its largely secular form, i.e., the "world's largest party ever"
• Millennial Event in its religious form, i.e., celebrating the onset of the Third Millennium since Christ's birth
• Millennial Event in its socio-political form, i.e., marking a milestone period in the planet's history during which political leaders, as well as ordinary citizens, engage in extraordinary debate regarding the status quo and what should logically follow
• Millennial Event is its extremist form, i.e., the strong assumption by some in society that the event will usher in profound and cataclysmic global change, typically associated with apocalytic visions involving a deity or supernatural force
• Tendency of humans to seek grand unifying theories for periods of human history that involve above-average levels of complexity, and utilize those theories as guides for self-perceived "strategic" action.

Looking at that list, you quickly come to the conclusion, as we did last fall, that this was not a subject one could handle in the typical BOGGSAT-style (Bunch Of Guys & Gals Sitting Around a Table). No, we needed many bunches of guys and gals sitting around many tables, parsing out this huge puzzle from a variety of perspectives. Since the Decision Support Department's greatest expertise comes in talking with experts and synthesizing their views for wider distribution, we soon settled on a workshop approach that would involve a very broad range of expertise outside the military. [A complete list of our workshop participants can be found in Appendix Y.]

Looking over that list, we likewise came to the conclusion that, since the Millennial Date Change Event appears to have so much "baggage" and "fellow travelers," so to speak, our project risked expanding into a study about anything happening to anyone anywhere in the world come 1 January 2000. While not shying from that challenge, for you'll see that comprehensiveness is our calling card, we readily realized that ours would not be a technical approach of lists upon lists of things that could go wrong. Rather, we decided that the most feasible approach for a small research unit such as ours would be to concentrate on the broad dynamics of the possible scenarios, to include not only the functioning of networks (broadly defined as any distributed system that moves material), but economic activity, societal responses, as well as the operations of government entities.

In a nutshell, then, our project became focused--despite the broad nature of the subject matter--on the possible scenario dynamics the Defense Department could face if it were tasked by the national leadership to engage in crisis response activities abroad during the Millennial Date Change Event and the subsequent unfolding of the Y2K Event. Mind you, our assumption going in was that we would not uncover any new or unprecedented missions for the CINCs (Commanders in Chief) of DoD's various regional military commands (e.g., Southern Command covering Latin America, Central Command covering SouthWest Asia, European Command covering Europe and most of Africa, and Pacific Command covering most of Asia in addition to the Pacific island states)--and, to date, we have not found any. Rather, our assumption has been all along that, while the CINCs are likely to engage in very familiar missions of crisis response, it is the internal or regional dynamics into which they may delve that will be unusual and worth preparing for in advance.

The Structure and Schedule of the Workshops

We conducted four workshops, starting in December 1998 and concluding in May 1999.

DECEMBER SCENARIO-BUILDING WORKSHOP

For our first workshop in December of last year, we invited about two dozen functional experts to help us construct and flesh out a series of generic onset models (presented later). The experts invited fell into four rough categories of knowledge and experience:

• Distribution/Service Networks (e.g., food, basic needs, oil/gasoline, air and mass transit, electric power, and telecom service)
• Business activity (e.g., major manufacturing, major retail, medical, insurance, and finance-banking)
• "Social communications" (e.g., mass media, government regulation of mass media, face-to-face and individual comms, the Internet)
• Government services (e.g., defense, police, basic services, and emergency services).

Visit our archive website (http://www.nwc.navy.mil/y2k) to view the readahead package for the December Scenario-Building workshop held at the Decision Support Center of Sims Hall at the U.S. Naval War College in Newport, RI.

The participants at this event provided us with a number of useful and imaginative inputs via a meeting facilitation software program known as GroupSystems (e.g., scenario pieces presented in the format of "newspaper headlines," possible warning indicators of events moving from one scenario to another, "bumper sticker" names for individual scenarios), in addition to their moderated participation in nine separate discussion sessions covering the following topics:

• Y2K as a series of discrete and periodic events
• Y2K as a widespread and sustained event
• What makes a country’s "networks" (broadly defined to include social networks) robust?
• What makes them vulnerable?
• Signposts indicating the nature of the Y2K event’s unfolding
• The best-case scenario (Y2K as discrete/periodic and systems are robust)
• The next-best-case scenario (Y2K as sustained/widespread and systems are robust)
• The next-worst-case scenario (Y2K as discrete/periodic and systems are vulnerable)
• The worst-case scenario (Y2K as sustained/widespread and systems are vulnerable)
• "You Make the Call!" on Y2K both within the US and around the world.

We were able to gather and edit several hundred ideas and scenario vignettes from the various GroupSystems sessions and subsequently published them on our web sites at the Naval War College and Geocities. Visit our archive website (http://www.nwc.navy.mil/y2k) to view the GroupSystems inputs from this workshop.

JANUARY SCENARIO-DYNAMICS WORKSHOP

At our second workshop in January of this year, we brought together about two dozen functional experts with a strong experience/knowledge base in networks, business activity, social issues and/or government in one of five world regions:

• Western Hemisphere outside of US
• Europe (to include Russia)
• Southwest Asia (to include Middle East, Central Asia, and Indian sub-continent)
• Asia
• Africa.

Visit our archive website (http://www.nwc.navy.mil/y2k) to view the readahead package for the January Scenario-Dynamics workshop held at the Senator Claiborne Pell Center of Salve Regina University in Newport, RI.

Participants at this event provided the study team with a number of useful and imaginative inputs via the GroupSystems approach (e.g., advice-filled "e-mails" written to their "close personal friend" who serves as top policy adviser to the President of Country X), in addition to their moderated participation in eight separate discussion sessions covering the following topics:

• "Mania" phase of the Y2K event (see the section, The M Curve of Influence for details)
• "Countdown" phase
• "Onset" phase
• "Unfolding" phase
• "Peak" phase
• "Exit" phase
• Possible malevolent acts by those seeking to destabilize social order
• Region-by-region predictions as to how Y2K will impact nation-states.

We were able to gather and edit several hundred ideas and scenario vignettes from the various GroupSystems sessions and subsequently published them on our web sites. Visit our archive website (http://www.nwc.navy.mil/y2k) to view the GroupSystems inputs from this workshop.

MARCH SCENARIO-STRATEGIES WORKSHOP

At our third workshop in March, we explored the possible range of DoD policy measures and associated CINC regional strategies that might be pursued in response to the unfolding of the Y2K and associated Millennial Date Change Events along the phased scenario timeline developed and populated in the January workshop. While we benefited by some CINC representation, our real focus was on tapping into the extant inside-the-Beltway knowledge base regarding Y2K contingency planning, with an eye toward blending that knowledge with our own for eventual provision to the individual CINCs as both they and the Joint Staff begin planning against the threat of Y2K-induced crises around the world. The participants at this workshop came mainly from defense-related federal agencies and think tanks.

Visit our archive website (http://www.nwc.navy.mil/y2k) to view the readahead package for the March Scenario-Strategies workshop held at the headquarters of The CNA Corporation in Alexandria, VA.

Participants at this event provided the study team with a number of interesting and illuminating inputs via the GroupSystems approach, which in this instance involved providing us feedback on our proposed list of "policy do's and don'ts" for the governing authorities of a notional country as well as our list of possible CINC mission categories (see the readahead package for details). For purposes of the one-day workshop, we reduced our six-phase scenario timeline to the following three groupings (which formed the basis for our three discussion sections):

• "Mania/Countdown" phases
• "Onset/Unfolding" phases
• "Peak/Exit" phases.

We were able to gather and edit several dozen ideas and commentaries from the various GroupSystems sessions and subsequently published them on our web sites. Visit our archive website (http://www.nwc.navy.mil/y2k) to view the GroupSystems inputs from this workshop.

MAY ECONOMIC SECURITY WORKSHOP

At our fourth and final workshop in May, we focused on how global financial markets would "process" and/or be impacted by the Y2K event. Most specifically, we were interested in exploring how Y2K could trigger a "new rule set" for the international economy by further crystalizing some of the most pressing issues arising from the Global Financial Crisis of 1997-98 (e.g., push for more controls over international capital flows, calls to revamp/reform the IMF, more transparency in Emerging Markets and Hedge Funds, de facto dollarization of some economies). The participants at this workshop came from a variety of Wall Street investment banks, brokerage firms, and related financial organizations.

Visit our archive website (http://www.nwc.navy.mil/y2k) to view the readahead package for the May Economic Security workshop hosted by Cantor Fitzgerald LP in the World Trade Center in Manhattan, New York.

Participants at this event provided the study team with a number of interesting and illuminating inputs via the GroupSystems approach, which in this instance involved providing us with arguments--both pro and con--as to Y2K's potentially negative impact--both short and long term--on global financial markets across the same three scenario-phase pairings employed in the March workshop.

We were able to gather and edit several dozen ideas and commentaries from the various GroupSystems sessions and subsequently published them on our web sites. Visit our archive website (http://www.nwc.navy.mil/y2k) to view the GroupSystems inputs from this workshop.

Some Caveats Before Proceeding

Understanding that there is a tremendous gap between the public face many corporations and governments put forward on this issue ("we will have it well in hand") and the private fears and concerns expressed by many information technology experts (ranging from "global recession" to "apocalypse 2000!"), we wanted to explore this topic in as systematic a fashion as possible. We've never pretended that we'll end up with all the answers, but merely a sensible read on what's possible, how governments and companies are likely to respond across a range of scenarios, and what the USG and DoD should be prepared to undertake in response to Y2K's global unfolding. In short, while we're not interested in unduly hyping the Y2K situation, we are interested in exploring the "dark side" potentials because, frankly, that's what we get paid to do as a research organization that serves the U.S. military.

So read on, understanding that all our "what-if?-ing" serves neither as prediction nor perception management by the U.S. Naval War College. Like everyone else on this planet studying Y2K, we're groping for answers. Yes, we've done our effort in a rather comprehensive fashion, and yes, we are experts at thinking about future events. But please don't approach this analysis as "cookbook," but rather as "primer." The confidence we seek to instill in readers--key decision-makers and average citizens alike--is one of comprehending the potential scope and complexity of the scenario, and not of reducing the Millennial Date Change Event into a crude or simplistic "one-to-ten scale" type of crisis management strategy.

There's nothing wrong with being deeply concerned about Y2K on a global scale after you've read our report, but if you're fearful or panicked, then you haven't really understood what we said. 

II. Our Big Picture Approach

DoD Preparations for Y2K and Where We Fit In

We won't be offering any "official history" here, nor any insider critiques of US Government efforts to prepare for Y2K.  We just want to be up front and clear in explaining how we see our work fitting in with the rest of DoD's broad, long-term effort that stretches back several years.  By and large, we're late-comers to this party, having only begun our research effort in August of 1998.  To the extent that we've moved closer to the head of the pack on scenario planning, it's because we've focused on the broad dynamics of how the Millennial Date Change Event may possible unfold--not on the technical aspects of network, software, or embedded chip failures directly caused by Y2K, nor on any remediation efforts to prevent such failures.  In short, we're pure crisis management in focus, which is why our analysis has attracted particular attention within the intelligence community.

Slide 1: Inside the Wire vs. Cross Wire vs. Outside the Wire Perspectives

DoD preparations for Y2K through the spring of 1999 have almost exclusively focused on dealing with what we'd describe as the known knowns (see Slide 1 above), or identified problems that have identified answers.  For DoD, it's useful to think of these problems--albeit in a highly reductionist manner--as those that occur inside the wire ("wire" referring to that which separates the military world from the civilian world, or the fences that typically surround military bases), meaning those activities that occur within bases or between operating platforms (e.g., ships, planes, transport vehicles).  This is the classic remediation focus one would expect: making sure all our systems work individually and collectively.  By most reasonable measures, DoD has this problem set well in hand--and it only makes sense that it would.  It's a huge organization with lots of money and lots of responsibility.

Starting early this year, DoD attention has turned increasingly to the subject of host nation and US local community support to military bases--namely, utilities such as electricity, phone systems, and sewer.  We like to describe this set of potential issues as the known unknowns, meaning identified problems without easily identified answers.  If the known knowns can be thought of as existing inside the wire, then the known unknowns are basically those Y2K issue areas that cross the wire that separates the military and civilian worlds.  From DoD's perspective, no matter how well they remediate their own systems and networks, there's still the huge question of how much their base operations rely on host nation support.  This will be a subject of intense DoD effort and planning as the rest of the year unfolds.

Our project's work really has nothing to do with either of those first two problem sets, for what we're really concerned with is what can still go wrong beyond the wire.  Moreover, we're not concerned with bases located within the US, as Y2K crisis management within the US will be led by the Federal Emergency Management Agency in conjunction with a host of state and local government agencies.  Thus, our study's focus is exclusively on what could go wrong during Y2K beyond the wire in foreign countries, or crises to which DoD could be called upon by National Command Authority (i.e., the White House) to respond.  This is the real set of unknown unknowns, for while most Y2K analysts will agree that we have a fairly decent read on what will or will not likely happen in the US, our sense of what could or could not go wrong abroad is far weaker.

Historically, the US responds to about 5 to 8 major crises a year around the world with some sort of significant military effort (e.g., ships dispatched, troops deployed, planes fly sorties).  Typically, 2 to 3 of these crises are ongoing situations where we continue operations begun in a previous year, like those today in the Former Republic of Yugoslavia or Iraq. The rest tend to be "peaks in messes," meaning ongoing bad situations that flare up or deteriorate to the point that the US decides to intervene militarily in some manner, such as recent forays into Haiti or Somalia.

Of course, the $64,000 question with Y2K and the Millennial Date Change Event is,  "Is this confluence of elements likely to create a higher-than-normal crisis load for DoD over the year 2000?"  For example, instead of looking out on the world and seeing the usual 10 to 20 crises and picking 5 to 8 for response, does the US Government look out over the course of 2000 and see some larger number of crises, and, if so, do we pick the same "top 5 to 8?"  Or a different "top 5 to 8?" (meaning our calculus of national interest might be changed during this unusual period).  Or do we try to do more than the usual effort?  In short, how important may Y2K turn out to be in terms of US foreign policy--both in the short term and over the longer term?

No one can offer precise answers to these questions.  What we can say, though, is that our analysis to date hasn't uncovered any serious evidence that what DoD could be called upon to do in terms of crisis response would be dramatically different from what we've done in the past--namely, disaster relief and humanitarian assistance.  Of course, there's always the chance that crisis will generate conflict, but again, we don't foresee any new species of crisis here, but rather the types of situations with which DoD has great experience.

We believe our analysis offers particular utility in alerting military planners, decision makers, and operational commanders to the sorts of broad scenario dynamics they may encounter if they are called upon to engage in military operations in response to Y2K-related crises, or even non-Y2K-related crises that occur during the same time period.  So while the missions may not change, the local and regional environment within which those missions occur may experience social, political, economic and infrastructural dynamics that are unusual and linked to either Y2K or the larger Millennial Date Change Event.  Moreover, to whatever extent our analysis of generic Y2K and Millennial Date Change Event scenario dynamics illuminates potentially similar dynamics within the US, additional understanding may accrue concerning the overall stress level that may occur "back at the home front."

Again, none of our material here is meant to be predictive in the sense of providing a step-by-step "cookbook" approach to Y2K and Millennial Date Change crisis management.   Our fundamental goal in collecting and synthesizing this analysis is to avoid any situation where US military decision makers and/or operational commanders would find themselves in seemingly uncharted territory and declare, "I had no idea . . .."  We can't and won't tell any regional CINC staff how to run a military operation during Y2K's unfolding or the Millennial Date Change Event.  They know far better than we how to proceed in such real world contingencies.  All we can do is alert them to the particular scenario dynamics that may come together during this potentially unusual global experience.

A Process View of Y2K

"Y2K--The Event" will feature a distinct build-up phase (already begun), a peak period we consider "THE crisis," and an "end" phase in which the crisis unwinds either by its own accord or, more likely, by decree.  Either governments will declare that the "crisis has passed" or some other crisis will arise and capture our attention.  Slide 2 below presents another way of thinking through the process of Y2K's build-up, unfolding, and end.

Slide 2: A Process View of Y2K

The vertical axis of Slide 2 speaks to Network Instability/Failures, meaning the sorts of computer and network failures we've all experienced in our daily lives.  The horizontal axis offers a timeline from 1998 to 2001.

As we move from left to right, the relatively low level of network instability and/or failures that we show for 1998 represents life as we know it--i.e., computers and networks break down with a certain frequency that we have come to know and accept.  A big part of that acceptance is the "rule set" we have developed for dealing with these failures, such as "Always check by phone if the pager seems down," or "Always follow up with a phone call when the e-mail doesn't seem to go through."  We'll call these familiar rules of thumb the "old rules," which we've developed as workarounds for familiar failures.  These are our effective coping mechanisms, to use a psychological term.

The key uncertainty for 1999 is the extent to which the level of network instability/failures begins to rise over the course of the year as we get closer to dateline 010100 (six digit code representing the first day of January, 2000, as in, ddmmyy).  If Y2K turns out to be a significant experience, then at some point in late 1999 or perhaps the first few days of 2000 the frequency and/or severity of the network instability and/or failures will reach some unknown threshold past which the "old rules" will no longer seem to apply.  At that point, society would--in effect--develop a "new rule set," or "new rules" that apply to the dramatically altered parameters of the perceived crisis situation--however defined.

Our project is largely concerned with uncovering and understanding the potential "new rule set" that would ensue if Y2K, when combined with the Millennial Date Change Event, turns out to cause a significant and unprecedented rise in network instability for an extended period of time.  Now, we can debate what the word "extended" means, but for our analytical purposes, it would be a length of time that exceeds what a reasonable citizen might expect in terms of network, economic, social, and government service disruptions arising from the "3-day snowstorm" measure that many advocate as a planning parameter for Y2K.  Any unfolding of Y2K that doesn't create a lengthier array of significant disruptions for any area, country, or region, is unlikely to generate a "new rule set."

Finally, once the Y2K Event plays itself out (signified in the slide by the break in the chart line) and the failure/instability rate begins to decline, the question in terms of Y2K's long-term legacy is whether or not we return to the "old rules" associated with the previously understood standard of network instability, or whether we settle in on some "changed rule set" engendered by our experiencing of the Y2K Event.  In large part, that will depend on the extent to which we come to understand Y2K as either a one-time event unique in human history or a preview of what "network instability" (and its associated crises) may evolve into as we move ever deeper into a period of history where individuals, communities, countries, and regions of the world become more interconnected and interdependent.  In short, if globalization and networking represent the future, maybe Y2K has far more to teach us about that future than we might think if we view it as nothing more than the "last stupid act of the 20th Century."

Millennial Mania as a Key Element of the Millennial Date Change Event

In this section, we'll define Millennial Mania as corresponding to one of our previously noted elements of the Millennial Date Change Event--namely, the Millennial Event in its extremist form, i.e., characterized by expectations of profound and cataclysmic global change, typically associated with apocalyptic visions involving interventions by a deity or supernatural force.  Having to define this element, we might seem to be relegating it to the extreme edges of society, and, to a certain extent, we are.

However, given the simultaneity of Y2K's unfolding and the opportunity afforded by the Millennial Date Change Event for a portion of the public to interpret Y2K's meaning and causality through the prism of an apocalyptic perspective, the Millennial Mania element may--in effect--"pour fuel on the fire," heightening inappropriate or counter-productive responses to those direct Y2K failures that may occur.  This can happen in a variety of ways, with the three most important avenues being:

• Tendency to extrapolate direct Y2K failures into "overwhelming evidence" of the collapse of society
• Propensity to attribute causality of "fellow traveler" failures to Y2K, thus feeding the "overwhelming evidence" of the collapse of society
• Capacity to behave in response to such "overwhelming evidence" in ways that, in turn, lead to cascading network failures or related societal breakdowns where none would have otherwise occurred, which subsequently provide even more "overwhelming evidence" in a self-fulfilling fashion.

It is the last concept that we would like to highlight--namely, the notion of "iatrogenesis," which is narrowly defined as the unintended side effects resulting from treatment by a physician, but which we use more broadly to mean average people doing stupid things during stressful times (although the notion of unintended side effects caused by a true expert is useful as well--namely, the mistakes created by software remediation).

As is readily apparent to anyone who's tracked the Y2K debate, there are many Y2K "physicians" currently on the scene, many of whom have little understanding of information technology, but who are nonetheless offering all sorts of "advice"--usually for a fee.  By and large, we are not talking about IT firms and consultants in the business of remediation or commercial crisis management, but the relatively narrow group of self-proclaimed experts who offer frightening predictions regarding Y2K effects, as well as ways to "weather the storm"--usually by purchasing their products or services.

In addition to the hucksters and outright scam artists, there is a relatively small but highly vocal and well connected (over the Internet) group of individuals and organizations promoting all sorts of apocalyptic interpretations of Y2K's meaning and causality.  Some seek remuneration, but many do not, as they firmly believe--in their millennarian fashion--that the "signs" of the "end times" are somehow foretold in Y2K's onset and unfolding.  The vast majority of these "physicians" tend to predict great harm will come to those elements of society for whom they have historically shown great contempt.  In other words, these "experts" tend to warn of disaster for those unlike themselves, with "unlike" being defined in terms of religious beliefs, racial or ethnic categories, political attitudes, social mores, sexual orientation, and the like.  The tendency of some of these "experts" to attribute Y2K's alleged destructiveness to the "evilness of their ways" is unmistakable and deplorable.

Such fear-mongering "physicians" prey on those intimidated by information technology in general, and in particular those looking for external guides to help them interpret and understand Y2K's meaning and causality.  The impact this small but influential group of "experts" may have on societal response to Y2K's onset and unfolding is extremely difficult to predict.  Mass media and elites in general tend to grossly overestimate the panic factor in natural and man-made disasters, as proven time and time again throughout history.  Moreover, the tendency of elites to censor the flow of information out of fear of panic is often a far larger source of instability than the crisis itself.  In that sense, it is less the power over mass behavior that fear-mongering "physicians" or "experts" actually exert during Y2K's onset and unfolding, than the power they seem to exhibit in the preceding months and weeks that may negatively impact elite decision making regarding the transparency of government preparations and plans for dealing with whatever crisis may actually ensue.  In short, the most profound iatrogenic effect these "physicians" or "experts" may have could be on elite behavior vice mass behavior--again, in that self-fulfilling manner that exemplifies iatrogenesis.

For further insights into Millennial Mania and the forms it may take surrounding Y2K and the Millennial Date Change Event, we recommend the following:

• Visit Boston University's Center for Millennial Studies' web site (www.mille.org) for more information regarding millennarian or apocalyptic groups and their potential for disruptive or iatrogenic behavior in the coming months; the site provides many good links in addition to numerous interesting and illuminating interpretations of ongoing social response to both Y2K and the Millennial Date Change Event
• Rent any of the following movie videos for glimpses into a variety of extreme responses or emotional dynamics that  segments of society may exhibit during Y2K and/or the Millennial Date Change Event:
  • The Rapture (1991), on why certain people are attracted to visions of religious-based apocalypse
  • The Trigger Effect (1996), on how stressful situations can lead to iatrogenic behavior due to "battle fatigue"
  • The X-Files (1998), on "paranoia" (you can figure out your own definition of that word) over government conspiracies, cover-ups and the abuse of political power during crises
  • Deep Impact (1998), on divided loyalties in the face of looming crisis and popular responses to the notion of "The End of the World As We Know It (aka, "TEOTWAWKI," a broad theme that runs through much of the apocalyptic interpretations of Y2K's potential global impact).

And if none of that jars your imagination regarding Millennial Mania, then just consider that astronomers are predicting one of the most violent periods of solar flare activity in recorded history for the period January through March 2000. So, if you're looking for a sign from above . . . you'll get it.

The Biggest Picture View of Y2K's Potential Impact on Global History

The Y2K Event comes at what may be a pivotal point in global history.  We'll explain this bold statement using Slide 3 below:

Slide 3: The Biggest Picture View of Y2K

The global rule set that has marked international relations throughout the Cold War period and into the 1990s finds its roots in the systemic stresses of the 1930s--namely, the Great Depression and the rise of fascism in Europe.  These twin developments relatively quickly segued into the Second World War, from which came the notion that "never again" would the international community engage in the sort of self-destructive behavior (e.g., economic protectionism) that both led to and exacerbated the Great Depression, and by doing so laid much of the groundwork for World War II.  Based on that "never again" spirit, the global system's great powers, led most notably by the United States, attempted to "firewall off" the experiences of the 1930s and early 1940s by creating a new global rule set, whose main attributes were exemplified by such international organizations as the General Agreement on Trade and Tariffs, the United Nations, the International Monetary Fund and the World Bank.

This new global rule set gave birth to the second great period of economic globalization (the first being roughly from 1880 to 1929), creating what we've eventually come to know and identify as the globally networked "New Economy." This New Economy features, as Thomas Friedman has noted in his book, The Lexus and the Olive Tree (New York: Farrar Straus Giroux, 1999, pp. 39-58), three critical democratizing processes:

• Democratization of global finance
• Democratization of global communications
• Democratization of global technology.

As this New Economy emerges on a global scale, it has begun to feel some "growing pains," most notably in the global financial crisis of 1997-98 (beginning in Asia and spreading to Russia and Brazil), leading some to question whether the Global Rule Set of the early postwar years is still appropriate for the world in which we currently live.  Granted, the now seemingly "old" Global Rule Set of the late 1940s and early 1950s succeeded beyond the wildest dreams of its progenitors.  It not only outlasted the main threat to global stability of its time, the Soviet Bloc, but created the greatest period of global economic advance in history, not to mention the longest period of great power peace in the 20th Century. However, as states and their economies become increasingly intertwined in this information technology-driven New Economy, legitimate questions arise as to whether or not a new Global Rule Set is in order.

Naturally, the United States is not particularly enamored with the call for a new Global Rule Set, for it is doing quite nicely in the current set and most of the calls for new rules typically center on placing restrictions on the free flow of international capital, something the U.S. does not wish to see for reasons of its obvious economic success over the course of the 1990s.  If, however, Y2K were to induce serious global economic disruptions, coming as it does on the heels of the Global Financial Crisis of 1997-98, then it is possible that international sentiment for some aspects of a new Global Rule Set, however defined, would grow so powerful that even the United States might find it advantageous to shape its emergence rather than delay or prevent its emergence.

Could Y2K play the role of the "straw that breaks the camel's back?"  At this point, it seems like a long shot, and yet, 1989 looked to be a rather ordinary year until 1990 rolled around and we realized the Cold War was essentially over.  In short, we rarely have the opportunity to schedule moments of global historical importance--they simply appear on their own and usually elicit our great surprise.  The fact that Y2K is indeed a scheduled moment in history only adds to its mystery, but in the end, if Y2K proves to be an historical turning point between one era and the next, it won't be because of what Y2K is, but because of what it told us about the status quo and the need for change.  In short, it's not what Y2K destroys that will be important, but what it illuminates. 

III. A Series of Y2K Onset Models

Explaining Our X-Y Axis

Our X-Y Axis (shown below as Slide 4) begins with two simple questions:

• Horizontal axis asks the "What?" question: What is the nature of the Y2K Event?
• Vertical axis asks the "So What?" question:  What is the impact of the Y2K Event?

There is a huge difference between these two questions, for the first question focuses on cause, while the latter focuses on effect.

One way we like to differentiate between the two questions is to employ a medical analogy.  Think of the horizontal axis (What? question) as the nature of the trauma or illness and the vertical axis ("So What? question) as the patient's overall health.  Two extreme examples show why this analogy is illuminating:

• Example 1 is an elderly man who is stricken with a very slow growing bladder cancer.  While this elderly man could have lived with this cancer for several years, the stress of his hospitalization, exploratory surgery, and the frightening diagnosis stresses his already fragile system to the point where he suffers a stroke and is dead within two weeks as a result of major organ failures cascading throughout his system.  To sum up, while the initiating event (bladder cancer) was more minor than major (placing it on the left side of the horizontal access below), the man's overall system robustness was weak (placing him on the lower side of the vertical axis).  The medical outcome was--irrespective of its modest origins--disastrous.
• Example 2 is a two-year-old child struck with a very aggressive kidney cancer that--by the time of diagnosis--has spread to both her lungs.  Other than that, though, the child is in excellent health, and as such, is more than able to survive the surgeries, radiation, and months of chemotherapy with no lasting negative effects of clinical value.  To sum up the child's case, while the initiating event (kidney cancer) was more major than minor (placing it on the right side of the horizontal axis), the child's overall system robustness was strong (placing her on the higher side of the vertical axis).  The medical outcome was--again, irrespective of its profound origins--quite positive.

These two very different medical case histories, drawn from the author's family history, highlight the importance of juxtaposing the "What?" and "So What?" questions to create the four quadrants of the X-Y axis, for it is not enough simply to ask how bad Y2K may be.  Given how bad it may be (i.e., how many computerized systems fail), Y2K's ultimate impact will depend greatly on the targeted system(s) in question.

Looking at Slide 4, we then explain our X-Y Axis as follows:

• The horizontal axis, asking the "What?" question of the Y2K Event, posits the minor extreme on the left as being "Y2K events are discrete and episodic" and the major extreme on the right as being "Y2K event is widespread and sustained."
• The vertical axis, asking the "So What?" question of Y2K's impact, posits the minor extreme on top as being "Systems are robust," and the major extreme on the bottom as being "Systems are vulnerable."

Two caveats are in order:

• By "Y2K Event(s)," we refer only to network failures directly attributed to Y2K or those caused via subsequent cascading system failures, to exclude any social, economic, or political responses that exacerbate or reduce failure rates.
• By "Systems," we refer not only to a country's network systems (broadly defined to mean any network that moves something--e.g., bytes, people, electricity),  but also its political, economic and social systems, with the key attributes of robustness being:
  • Distributiveness
  • Recovery capacity
  • "Workarounds" capacity
  • Trust "capital."

Having defined the extremes of our axes, we break down the four quadrants in the following manner:

• Best Case is when Y2K events are discrete and episodic and systems are robust
• Next Best Case is when the Y2K event is widespread and sustained, but systems are robust
• Next Worst Case is when Y2K events are discrete and episodic, but systems are vulnerable
• Worst Case is when the Y2K event is widespread and sustained and systems are vulnerable.

Slide 4: The X-Y Axis for Y2K Onset Models

Y2K Onset Model #1: The Ice Storm

The Ice Storm onset model is depicted in Slide 5 below.

In the embedded chart, the vertical axis defines a "field of Y2K failures," meaning we're not going to offer any percentages or "hard numbers" here, just a rough notion of overall failure saturation.  Along the vertical axis we display the years 1999 through 2001, with the months of 1999 noted in solid-line marks and the months of 2000 noted in dashed-line marks.  The difference between the two markings is meant to suggest that while we may feel we have a firm grasp of appropriate time units for the timeline leading up to 010100, perceptions of time's passing once we pass through the 010100 threshold may vary greatly depending on locale.  For example, the subjective time unit of note for Wall Street at the beginning of January may be the first day of trading--a mere several hours' time, whereas the subjective time unit of note for a sheep herder in a less developed country may be as long as until the first time he brings his sheep to market--possibly several weeks.

Slide 5: The Ice Storm Onset Model

The Ice Storm onset model offers the classic, TEOTWAWKI view of Y2K: it hits en masse on or about 010100 and strikes virtually every aspect of society.  To the extent that such a model may seem to hold true on a perceptual basis in any one locality or region (meaning, for all practical purposes, it seems as though all systems are impacted to some disabling degree), we posit that the Ice Storm's components are logically broken down into three categories:

• Direct Y2K failures
• Cascading system failures resulting from the direct failures
• Iatrogenic crisis management or social responses that exacerbate the cascading failures or trigger new threads.

While this model held implicit sway during much of the Y2K debate in 1998, it has receded in prominence over the course of 1999, as remediation efforts make clear that this is not a useful universal model.  Having said that, however, we believe the model retains great validity for understanding pockets of significantly damaging Y2K impact that may occur around the world, meaning those areas where--for all practical purposes--the TEOTWAWKI notion may well emerge among significant portions of a population battered by widespread network failures.

Of course, even here we're still talking only about the perceived onset, and not some sustained environmental status that would realistically drag on for months.  As such, the key question for the Ice Storm onset model is, "How fast can the society or economy in question recover by necking down the failure rate to some level commensurate with reasonably sub-optimal functioning (meaning, for many around the world, the return to "life as we know it")?"

Y2K Onset Model #2: The Flood

The Flood onset model is depicted in Slide 6 below.

Slide 6: The Flood Onset Model

The Flood onset model depicts a slow but inexorable bulge of network failures that first rises above the usual "background noise" level on or about 010100 and then expands for something in the range of the first six months of 2000, peaking near the end of the 2nd Quarter or at some point in the 3rd Quarter.  In some ways, we could suppose the same breakdown of elements (direct, cascading, iatrogenic) here as with the Ice Storm model, but because of the greatly extended timeline (thus allowing for more effective crisis management and network triage), we limit our description here to direct and cascading network failures, thus positing a peak failure rate somewhere in the range of 50 percent of all networks.

As such, the Flood model gets nowhere near the TEOTWAWKI pain range, but instead describes something more akin to a significant economic downturn, most likely corresponding to popular perceptions of a recession or financial market "correction."   In that manner, the Flood  model possibly describes a more profound economic impact than the Ice Storm, which, while it is a shock to the system, is probably of shorter duration.  So, like the Ice Storm, the Flood model involves an interrelated sequence of network failures, albeit with a far smaller immediate impact on the overall functioning of society.

In keeping with the weather analogy, the key question for the Flood model is, "What constitutes a 'low-lying area?'"  One example of a potential low-lying area would be manufacturing, whose network failures would not likely be centered on the 010100 threshold, but rather build up over time as production continued throughout 2000.  Another could be medical supplies, especially the production and distribution of key pharmaceuticals.  Still another might be the processing and distribution of clean drinking water.

Y2K Onset Model #3: The Hurricanes

The Hurricanes onset model is depicted in Slide 7 below.

Slide 7: The Hurricanes Onset Model

The Hurricanes onset model presents a series of sectorally-limited (meaning unconnected across sectors) but relatively lengthy (meaning some cascading effect) constellations of network failures.  In effect, this model is a hybrid of the Ice Storm and Flood models.  The Hurricanes model packs the same immediate punch as the Ice Storm model, albeit in isolated "low-lying areas" (echoing the Flood model), thus limiting the overall impact on the functioning of a society.

The Hurricanes model speaks more to the "winners and losers" approach to thinking about Y2K's ultimate impact:  some sectors of society will seemingly get off scot-free, while others will seemingly suffer great damage.  The key difference with the Flood model is the lack of interrelation and simultaneity, so rather than employing the economic language of "downturns," we're more likely to describe "shake-ups" in one or another industry.

The same approach to identifying vulnerable sectors that one uses with the Flood model would apply here, although in an overall sense, the Hurricanes model is probably best used to think about countries whose remediation efforts have been weak, for here we run into the notion of over-confidence possibly leading to poor crisis management preparation.  If such "poor remediators" turn out to be far more vulnerable than they realize, then the key question becomes, "How can coordinated triage and crisis management avert the appearance of a critical mass of substantial--yet still relatively isolated--network failure clusters?"

Y2K Onset Model #4: The Tornados

The Tornados onset model is depicted in Slide 8 below.

Slide 8: The Tornados Onset Model

The Tornados onset model refers to a "season" of sectorally- and temporally-limited Y2K-induced network failures.  This model is the closest to a null hypothesis of Y2K's overall impact, for, in many ways, it describes life as we know it, albeit with a higher-than-average failure rate.  The Tornados model can likewise be thought of as the "key dates" model, for the two go naturally hand-in-hand when one seeks real-world evidence of significant network failures that either produce serious disruptions of service or require extraordinary efforts at repair.  For if such key dates come and go without displaying any significant failures, meaning they're so big they can't be hidden by the service providers in question, then these Y2K milestones pass by without registering significant values on any sort of TEOTWAWKI scale, becoming the Y2K equivalent of a "tree crashing in the forest when no one's there to hear it." 

The "key dates" approach does correspond nicely with the Gartner Group's predictions of Y2K failure rates rising and falling over the course of 1999 and through the year 2001, but the big deficiency of this model to date has been the lack of any stunning failures on key dates that have already passed.   For example, no failures featuring major negative impact occurred on 1 or 3 January, the first day and business day, respectively, of 1999.  The start of many fiscal year programs on 1 April also failed to reveal any serious disruptions for the governments involved.  The so-called "nines" problem that was slated to appear on 9 April likewise produced no failures of great societal value in any country around the planet.  Most recently, the 1 July threshold came and went with no apparent damage to the 46 U.S. states whose fiscal years began that day.

Meanwhile, Cap Gemini America, the computer consulting firm, declares on the basis of their recent survey of  Fortune 500 companies and a smattering of U.S. government agencies that close to three-quarters of the respondents report experiencing a Y2K-related failure through the first quarter of 1999.  But if these firms are having these failures and none are making any headlines, how is that much different from everyday life as we know it?  Aren't private firms and government agencies experiencing network problems on a fairly regular basis, and just as regularly keeping such failures under wraps?  The key missing data involve how much different 1999 is turning out to be compared to any previous year, meaning what is the "instability added" from Y2K?  And that's the data we haven't found anywhere yet.

Having said that, the key question for the Tornados model remains, "What constitutes good learning over time?"  For example, should our confidence grow due to the lack of Y2K headlines stemming from the key dates already passed?  Or should we ignore most if not all of that success, especially for a pure fellow traveler such as the "nines" problem?   After all, we can get fixated on Y2K key dates all through 1999, get through them all quite nicely, and still suffer significant tumult on 010100.  Uneventful key dates make that seem less likely, but don't rule out it out by any means.

Onset Models Leading to Generic Y2K Outcome Scenarios

Of course, none of the four onset models are likely to hold sway for any one region's entire Y2K experience, and in that sense, we are likely to see versions of all four models occurring simultaneously around the planet at various points in the Y2K Event.  As ideal types, the four models are designed to help the reader disaggregate the complexity presented by Y2K's myriad of possibilities, rather than provide a "pick one of four" analytical choice that would invariably prove false and pointless.

Slide 9: The Onset Model Arrayed on the X-Y Axis

Slide 9 above arrays the four onset models on our X-Y axis, and the placement should seem fairly intuitive given our descriptions:

• Tornados represent the "Y2K events as discrete and episodic" and "systems are robust" quadrant, meaning a season of relatively isolated and concentrated damage that follows little rhyme nor reason to the extent that we can trace causality.
• Flood represents the "Y2K event as widespread and sustained" but "systems are robust" quadrant, meaning a rising tide or deluge of damage that follows the logic of systematic vulnerability, i.e., the low-lying areas analogy.
• Hurricanes represent the "Y2K events as discrete and episodic" but "systems are vulnerable" quadrant, meaning a season of somewhat isolated but wide-swath damage that follows the logic of either poor remediation or unforeseen vulnerabilities--basically one in the same.
• Ice Storm represents the "Y2K event as widespread and sustained" and "systems are vulnerable" quadrant, meaning a seemingly pervasive or all encompassing damage pattern that is inescapable, but one that at least reveals itself in its entirely with great speed, thus facilitating recovery.

Again, our rationale in presenting such onset models is not to encourage a "pick one" mentality, but rather to break down the abstract nature of the potentially universal problem set into a series of weather analogies that are far more easily understood by the average citizen--not to mention your average elite decision maker.

Slide 10 below presents a series of outcome-focused Y2K scenario titles arrayed along our X-Y axis.  By pairing them up with our onset models, we--in effect--offer a "coming and going" view of the Y2K Event (leaving the "guts" of our Y2K analysis for the section on Scenario Dynamics).

Slide 10: Outcome Scenarios Arrayed by Y2K Onset Models

• Run of the "Mille" refers to the Best Case Scenario, meaning Y2K comes in bits and pieces and we prove far more robust than we give ourselves credit for.  So it's "run of the mill" in that we take Y2K in stride, but Run of the "Mille"  in the sense that the Millennial Date Change Event still exists at the core of the Y2K null hypothesis.  Thus, in this scenario, whatever social instability occurs around the 010100 threshold is more driven by millennial elements (e.g., apocalyptic-driven behavior, world's largest party, great religious feast) than by actual Y2K-driven network failures. Humanity emerges on the far side of this "crisis" wondering what all the hype was about.
• "Humans 1, Computers 0" refers to the Next Best Case Scenario, meaning Y2K is big and bad but we weather the deluge of failures and only the systematically weak are left with permanent damage.  This is the Nietzschean social scenario that says, that which does not collectively kill us, makes us collectively stronger.  Humanity emerges on the far side of this crisis with a renewed confidence vis-a-vis the invisible and pervasive information technology that "seems" to control so much of our lives.
• "Houston, We Have a Problem" refers to the Next Worse Case Scenario, meaning Y2K comes in bits and pieces but we are surprised to realize how fragile our systems are.  Like the Apollo 13 mission from which this quote was drawn, it seems as though relatively minor weaknesses--the IT-equivalent of an Achilles' heel--sequentially disable many sectors of society with ferocity, leading to cascading failures that can threaten the sum of the whole.  Humanity emerges on the far side of this crisis split into winners and losers, meaning--respectively--those who proved resilient and those whose weaknesses were exposed.  In some ways, Y2K will unfold something like a computer virus: those with sufficient immunity will survive just fine, while those with weakened immune systems will suffer catastrophically.
• "Y2 KO!" refers to the Worst Case Scenario, meaning Y2K is big and bad and we're far more vulnerable than we realized.  We are collectively "knocked to the mat," with the real uncertainty being, do we get back up before the "referee" finishes his "count?"  Or do we lie there prostrate, dazed and confused?  Of course, at some point we do get up, and how humanity emerges on the far side of this crisis is largely determined by the nature of the "knockout."  Is Y2K merely a "TKO," meaning a "knockout" attributed solely to "technical" failures?  Or is Y2K a genuine "whupping" where all our systems (political, economic, social, and network) fail us miserably?  In other words, are we merely embarrassed and so continue on as before?  Or are we truly humbled and thus serious changes result?

Potential Y2K Impact by Country Groups: Conventional Wisdom Has Changed Over Time

The conventional wisdom on which countries around the world are more vulnerable to Y2K has changed dramatically over the past year.  We display our interpretation of this changing debate in the following two slides.

First, a word on how we break down the world into four IT categories:

• We define an "Ultra-Modern" IT category as including only the United States, which, by all measures, stands head and shoulders above the rest of the planet in terms of IT adoption rates.  To put it bluntly, there's no way Y2K will be bad enough to derail the US's progressive adoption of IT.  There's simply no going back.
• A "Modern" IT category basically captures the rest of the OECD-type states (Organization for Economic Cooperation and Development) such as Japan, Germany, France, etc.  These economies tend to be relatively distributed in terms of networks, but not nearly as "New Economy" in outlook or practice as the U.S.  Like the U.S., these countries are unlikely to see the further adoption of IT derailed by Y2K, although it could greatly influence some of the choices they make in coming years.
• The "Modernizing" IT category corresponds to Jeffrey Garten's list of the "Big Ten" emerging economies, with the addition of Russia.  Garten's "big ten" are:
  • China
  • India
  • Indonesia
  • South Korea
  • Turkey
  • South Africa
  • Poland
  • Mexico
  • Argentina
  • Brazil.

What's most immediately noticeable about this group is that you're talking about the bulk of the world's population, not to mention several that recently experienced serious economic tumult (or at least serious buffeting) in the Global Financial Crisis of 1997-98.  With this group, you're also talking about countries that have adopted IT in a huge way only in the past decade or so, so Y2K has some potential here to trigger a bit of a technology backlash if its overall impact is bad enough.

• The "Pre-Modern" IT category bundles up the Rest of the World (ROW).  Here we're talking about countries with low IT penetration rates.

Slide 11: Conventional Wisdom on Potential Y2K Impact (1998)

Slide 11 above displays the conventional wisdom that we consistently bumped into when we began our research back in the summer of 1998.  In short, the broad assumption implicit in most writings about Y2K's potential impact was that there was a direct relationship between a country's development level and its potential vulnerability on Y2K-induced network instability.  Following this rule, an ultra-modern IT country like the U.S. was the most vulnerable, while Pre-Moderns like a Haiti or Somalia were least vulnerable.  On the face of it, this made perfect sense, because you can't be harmed by breakdowns in what you don't have--or so it seemed.  This thinking likewise tracked with much military strategizing regarding Information Warfare, which also posited that the more IT-intensive your society was, the more vulnerable it was to Information Warfare. 

Slide 12: Conventional Wisdom on Potential Y2K Impact (1999)

What a difference a year makes!  Or so it seems if you buy into the Gartner Group's estimates of likely Y2K network failure rates by country (see Slide 12 above).  Now everyone knows that the Gartner Group's data is heavily based on the self reporting of the countries in question (or the private firms within those countries), so taking this very rough estimate with a grain of salt, you're nonetheless faced with a stunning reversal of fortune that's apparently occurred solely on the basis of the remediation efforts each country has or has not pursued over the last year.  In short, from the perspective of failure rates, the U.S. goes from most vulnerable to least vulnerable, along with a host of like-minded states (e.g., Canada, United Kingdom, Australia).  On the other end of the spectrum, the countries looking at the highest failure rates are the modernizing countries, such as China and Russia, and the IT Pre-Moderns, such as a Vietnam and Zimbabwe.

Slide 13: The So-What Filter Applied to Today's Conventional Wisdom on Country Vulnerability

While failure rates (the percentage of system failures) are expected to be much higher in the pre-modern and modernizing countries than they are in the U.S. or OEDC nations, failure rates do not, by themselves, describe the whole picture.  As noted earlier, IT is far more integrated into the economies and infrastructure of modern countries than those of emerging and modernizing nations.  Consequentially, 25 percent system failure in the U.S. is likely to be much more significant than a 90 percent failure in a small pre-modern nation.  In the most primitive of these, even 100 percent system failure is likely to be below the event horizon; while even 10 percent system failure in a modern IT-intensive economy could result in significant economic upheaval.  As suggested in Slide 13, when all the factors—remediation effort, dependency on IT, network maturity, distribution and redundancy of the architecture—are integrated, the nations that seem to have the most to fear from Y2K would seem to be those in the process of modernizing.  In general these tend to be increasingly dependent on IT, but have not been able to spend much money on remediation and have not developed the highly distributed and redundant networks of the U.S. and other modern nations.

So really, in the short span of about 12 months, the conventional wisdom on which countries are most vulnerable to Y2K has been dramatically reversed.  Like the original conventional wisdom before 1999, this one also makes eminent sense when you think about it: rich countries with a lot more to lose and a lot more disposable income to throw at the problem have succeeded most in remediating the Y2K threat into something more manageable.  Meanwhile, countries new to the IT scene, whose awareness of Y2K lagged significantly behind that of more advanced IT countries, tend to possess less resources to throw at the problem.  Moreover, they tend to pirate software more and, as such, pay less attention to system administration concerns such as Y2K or viruses such as CIH.  In that sense, the destructive path of CIH, the so-called Chernobyl virus, may well prove to be reasonably predictive of Y2K's ultimate impact--namely, more serious in Asia, Latin America, and the Middle East than in Europe or North America.

Matching Country Groups With Y2K Onset Models

So, to the extent that we're willing to go out on a limb regarding which country groups are likely to experience which Y2K onset model, our best guess would be as portrayed in Slide 14 below.

Slide 14: How Y2K May Go Down By Country Groupings

By arraying the countries across our X-Y axis, we're not so much predicting how we think Y2K will unfold for each and every country belonging to each grouping as suggesting that if any one of the onset models is going to be strongly associated with a particular development or IT-intensiveness level, they are likely to correspond as follows:

• We see the U.S., along with very similarly structured near Ultra-Modern states such  as Canada, Australia, and UK, probably experiencing the Tornados onset model, meaning that Y2K comes in bits and pieces and the countries are essentially robust.  Gartner predicts several other advanced European states, along with Israel, will fall into this category.  Correspondingly, this country group would likely experience the outcome scenario described as Run of the "Mille."
• To the extent that many important Modern states, such as France, Germany, Italy and Japan, have not progressed nearly as much as they might have in the time allotted, we expect that this country grouping may experience something closer to the Hurricanes onset model.  In short, we see the damage stemming from Y2K failures to be more significant than it might have needed to be because those countries enter into the situation more vulnerable than they realize. Correspondingly, this country group would likely experience the outcome scenario described as Houston, We Have a Problem.
• If the Ice Storm model actually occurs, we believe it's most likely to happen to a Modernizing country, such as a Russia, China, India, Poland, or Turkey.  Here, Y2K may hit with far more force both because remediation has been weak and because these countries' systems are--in general--more vulnerable to disruptions.  Correspondingly, this country group would therefore be more likely to experience the outcome scenario described as Y2 KO!.
• It is in the IT Pre-Modern category that we expect to witness the Flood onset model, or the slow build-up of progressive failures.  While these countries' systems in general tend to be more robust in the sense that they are more used to "doing without" or "working around problems," it may well be the slow but steady deluge of many small failures that causes Y2K to seem like a widespread and sustained event that drags out over several months.  Good candidates for Flood status would therefore be less developed states in Latin America, Africa, the Middle East, and South and Southeast Asia.  Correspondingly, this country group would likely experience the outcome scenario described as Humans 1, Computers 0.

IV. The M Curve of Influence

Understanding Where Opinion Leaders Can Influence Social Response

The strategic vision of Y2K we have encountered again and again, both in our Internet-based research and in our many discussions with experts and ordinary citizens from around the world, is that the event will unfold, peak, and then disappear--all with great speed--in a tight timeline surrounding the Millennial Date Change Event.  In effect, what the majority expects is a very tall Bell Curve surrounding 010100, which we depict below in Slide 15.

Slide 15: The Y2K Bell Curve Too Many People Expect

In other words, the conventional expectation is that Y2K failures will:

• Ramp up dramatically along an asymptotic curve in the last couple of months in 1999
• Experience a rapid topping off in the first few days of 2000
• Decrease in a similarly steeped downward curve until basically disappearing as a phenomenon of note somewhere in the middle of the First Quarter of 2000.

The problem with this view is three-fold:

• It tends to draw off strategic resources from both mid-1999 and the rest of year 2000 (and beyond) and concentrates crisis management approaches on the 010100 threshold.
• It inaccurately reflects the likely spread of Y2K-related network failures, as predicted by the Gartner Group.
• It fools decision makers into thinking that not only will their influence be best used in a concentrated fashion around the 010100 threshold, but that it will likewise be effective during that specific period.

We believe one or more of these three mistaken assumptions are incorporated--to some degree--in much if not all of the strategic planning for crisis management of the Y2K Event around the world.

Instead of focusing on a Bell Curve perspective regarding Y2K's onset and unfolding, we argue that Opinion Leaders, whom we'll define as anyone with the power to influence the actions of others, should instead approach the Y2K timeline with the following three assumptions in tow:

• Your best time to influence social response is during the months leading up to Y2K's onset, with an emphasis on reasonable mass preparations, the establishment of crisis management arrangements, and the shaping of popular perceptions as to what will likely lie ahead.
• Your influence will disappear in the last few weeks and days leading up to the 010100 threshold, as the public will have largely made up its mind regarding individual preparations and strategies for experiencing--not to mention celebrating--the Millennial Date Change Event and the associated onset of Y2K; moreover, your influence will never be lower than on 010100, when your ability to control mass events will essentially approach zero.
• Your influence will reemerge once the Millennial Date Change Event expires and the true nature of Y2K's unfolding--however bad or minor that may be--makes itself apparent to you and society, for at that point you will have problems to solve, targets for resource allocation, etc.--in short, the battle will be joined.

Slide 16: The M Curve of Influence Explained

Thus our "M Curve of Influence" (Slide 16 above) describes both the utility of Opinion Leaders' efforts before (Schedule/Shape the Build-Up) and after (Define/Execute Exit Strategies) Y2K's onset, while emphasizing the loss of influence over societal actions and response during the actual onset (Slow Down the Abnormal Time).  In short, our strategic advice mantra would be: 

Organize . . . Relax . . . Attack

Explaining the First, or Pre-010100 "Hump" of the M Curve

We ascribe the first hump of the M Curve, or the bulge of influence we think Opinion Leaders enjoy over the summer and fall of 1999, to what we describe as the popular competition between awareness and fear regarding Y2K and the associated Millennial Date Change Event. Slide 17 below explains this competition.

Slide 17: The "Trigger Effect" Explained

The first thing to note on the slide is our humility.  The vertical axis is labeled "Order of Magnitude," which is just a fancy way of saying we're theorizing about a very complex phenomenon and thus can only describe it in rather vague terms.  The timeline, on the other hand, is fairly straightforward--namely, we're talking about 1999. 

It's our general hypothesis that no matter what country you're talking about, awareness of Y2K will precede--and in some ways, trigger--fear about Y2K.  In a generic situation, then, we're describing the rise of "Awareness and the Public Transcript" as occurring more in the first half of 1999 than in the second half, meaning most people heard and came to understand Y2K in the initial sense in early 1999.  This happened primarily as a result of their being flooded with all sorts of Public Transcripts about the state of remediation efforts and the (typically) non-likelihood of Y2K-related failures come 010100.  Public Transcripts can be described as authoritative statements by authoritative people.  They typically highlight a rosier-than-average perspective on Y2K, quite often out of official fear of "alarming the public unnecessarily."  Of course, much of the awareness-raising effort encapsulated in such Public Transcripts requires "scaring" the public enough to take action, and therein lies the rub.

As we enter into the summer and fall of 1999, the Awareness and Public Transcript wave begins to give way (i.e., awareness has peaked) to the Fear and Private Transcript wave, which is likely to peak in the last few weeks and days of the year.  The fear part of the equation is nothing more than anxiety over the uncertainty caused by the looming event, whereas the Private Transcript describes the "off-line," unofficial, or individual preparations and/or decision making regarding how a person, economic firm, national government, etc., plans on either enacting or following a particular rule set for what it perceives will be the crisis period surrounding Y2K.  So, for example, the differences between a Public and Private Transcript could be as follows: 

• An individual's Public Transcript could be that he or she is administrator of a small town and thus plays a prominent role in community preparations and perception management while simultaneously engaging in the Private Transcript of stockpiling food, water, and weapons at home.
• A firm's Public Transcript could be publicizing the success of its remediation effort while its Private Transcript could be its quiet stockpiling of key industrial material inputs, the cutting of ties with suppliers and vendors it does not deem sufficiently compliant, or the preparation and public announcement of new rule sets.
• A government's Public Transcript could be publicizing how all essential services will survive the Y2K Event intact and without any disruptions while quietly establishing all sorts of emergency procedures to deal with just such failures.

We describe the point in the year when the Awareness and Public Transcript wave is surpassed by the Fear and Private Transcript wave as constituting a Trigger Zone of sorts.  This is where we believe the manic, or Mania Phase of Y2K begins.  In short, this is when you will see individuals, firms, and perhaps even governments start to exhibit extraordinary behavior in response to whatever they believe "others" in society may do--i.e., the fear of fear itself. 

Slide 18: What the Trigger Zone Might Look Like in US 

Having said all that, we want to be careful not to leave readers with the impression that we're predicting a serious "freak out" factor for the United States come Labor Day, for it is by no means a given that the Fear and Private Transcript must overwhelm the Awareness and Public Transcript wave.  In effect, if Opinion Leaders do their job correctly in terms of the Awareness and Public Transcript effort, the Fear and Private Transcript wave can be greatly reduced (see Slide 18 above).  By way of analogy, think of how Wall Street spent much of the 1990s educating Baby Boomers about the dangers of yanking their money out of mutual funds at the first sign of trouble.  Then think about how well that effort paid off during the Global Financial Crisis of 1997-98.  In short, the better Opinion Leaders shape popular expectations, the less likely it is that Fear and the Private Transcript will balloon to dangerous proportions--not every knee has to jerk.

And indeed, it is our impression that as far as the United States is concerned, it is quite possible that the Fear and Private Transcript wave will remain marginal, meaning perhaps 15 to 20 percent of the population will engage in fear-based behavior that could be described as "excessive," understanding what a loaded term that is for many in the Y2K debate.

Slide 19: What the Trigger Zone Might Look Like Overseas

When looking abroad, however, we are far less sanguine outside of Canada, Australia, the U.K., and a few other, mostly northern European states.  In many countries overseas, we perceive the Awareness and Public Transcript effort to be woefully inadequate, thus inviting an explosion of the Fear and Private Transcript wave once the public comes to grasp what may be--by then--a significant and largely unavoidable period of profound network failures (see Slide 19 above).  In this dynamic situation, Opinion Leaders in these countries will see their influence plummet and possibly be curtailed for a far greater time post-010100 than would have otherwise occurred, meaning a popular backlash. 

Explaining the Second, or Post-010100 "Hump" of the M Curve

We ascribe the second hump of the M Curve to nothing more than the prediction by the Gartner Group that as much as 70 percent of Y2K failures will occur after 1 January 2000.  As depicted below in Slide 20, the Gartner Group estimates that only about one-third of all Y2K-related failures will have occurred by the end of 1999, leaving upwards of two-thirds or more still to unfold once the clock strikes midnight on 31 December 1999. 

Slide 20: The Gartner Group Prediction on Y2K Failure Rates

True to the Bell Curve image, Gartner is predicting that the highest frequency rate will occur in the ten days surrounding the 010100 threshold, where 10 percent of all Y2K failures will be concentrated.  However, their prediction that close to two-thirds, or 60 percent of Y2K-related failures will follow this peak frequency period stands in dramatic contradiction of the Bell Curve assumption.  Why we push the notion of the second, or post-010100 "hump" in the M Curve of Influence is our concern that too many decision makers in positions of authority will, in their concern for maintaining control over what we perceive will be a largely uncontrollable situation surrounding the Millennial Date Change Event, squander precious resources that should be held in reserve for the failures yet to come.

Slide 21: The Gartner Curve Versus the Bell Curve

Another way to express our general concern is to raise the following issue, portrayed above in Slide 21.  If the halfway point in Y2K-related failures doesn't occur until some point after both the Millennial Date Change Event and the peak frequency period of 10 days surrounding the 010100 threshold, then what is the danger that private and public organizations will have misallocated their resources based on a predicted disruption period lasting through only the first few days of January 2000?  Note, we're not saying to abandon such predictions or weather analogies (such as the Three-Day Snowstorm analogy), because most are based on the predicted loss of utilities--primarily electricity.  For that particular core set of issues, the days-long predictions as an expectation management tool may well be appropriate.  However, for other aspects of the economy, the days-long paradigm may end up misleading and thus misdirecting the strategic use of resources, not because individual disruptions last longer than a few days, but because the cumulative period wherein many simultaneous days-long disruptions occur may drag on for weeks or even months in certain countries.

Summing Up Our Strategic Advice From The M Curve

Slide 22 below juxtaposes the M Curve of Influence against the Gartner Group's curve of Y2K-related failure rates.  By presenting both projections together, we seek to highlight what may--at first glance--seem like the counterintuitive nature of our strategic advice.

Slide 22: The Gartner Curve Versus the M Curve of Influence

To sum up: we believe Opinion Leaders should concentrate their strategic resources and efforts at two distinct points in the Y2K Event timeline--namely, during the pre-010100 and post-010100 phases.  Correspondingly, we think it best not to try to exert too much social control or direction during the Millennial Date Change Event or Y2K's immediate onset surrounding the 010100 threshold.  Much like in preparing for the land fall of a hurricane, we think authorities should concentrate their activities in the following three-pronged manner:

• Prior to 010100, do as much as you can to prepare the population for inevitable disruptions, with a strong emphasis on shaping expectations and delineating personal crisis management strategies.
• When the 010100 threshold looms and then passes, do not try to control events that cannot be controlled, but seek to "ride out the wave."
• Post the initial wave of high-frequency failures, engage in aggressive triage to drive down the impact of the remaining failures as they continue to unfold.

Our underlying philosophy in all of this advice is that people in general respond quite well DURING disasters or crises, but that the panic potential beforehand and the "battle fatigue" danger afterwards are far more important management points than the actual threshold event.

V. The Scenario Dynamics Grid

Creating a Composite, "Black Box" Scenario

So far we've offered a series of "going in" and "coming out" scenarios for Y2K, with the Onset Models (Tornados, Hurricanes, Flood, Ice Storm) serving as the former and the Outcome Scenarios (Run of the "Mille," Humans 1 Computers 0, Houston We Have a Problem, Y2 KO!) serving as the latter.  Again, we've constructed these bookend scenario sets less to predict than to frame the potential problem set presented by Y2K. In this section we'll tackle the "black box" in-between those bookend scenario sets, but rather than mechanistically trace Best Case Onset Model to Best Case Event Scenario to Best Case Outcome Scenario and so on, we're going to present a single composite scenario that is both phased and broken down into components sectors (Networks, Business, Social Response, Governance).

When we say "composite," we mean a single scenario that posits Y2K as both substantial and relatively drawn out. We won't offer any more detailed parameters than that, because we're not interested in debating those fine points that we can't really predict, but rather concentrate our analysis on the scenario dynamics we feel confident would appear in a reasonably stressing scenario.  Having said that, we need to stress that this composite scenario is simultaneously about all countries and no one country in particular, meaning we strive for relatively generic content.  Obviously, being Americans, our cultural biases will show through, but since we're writing first and foremost for U.S. decision makers, that's not the worst sin we could commit here.

By "composite" we also mean that no one should view this compilation of scenario dynamics as an all-or-nothing prediction (i.e., either we're right or we're wrong), for we don't think Y2K will go down exactly and completely like our scenario anywhere in the world.  However, we do believe that many if not most of these dynamics will appear in an country suffering a dramatic Y2K experience, and we think that all of these dynamics will appear in some countries in various subsets and combinations.  In short, this composite scenario should be viewed as a smorgasbord--i.e., all of these items will be laid out on the Y2K table, but not every guest will partake of every dish.

Breaking Down the M Curve Into a Six-Phase Composite Scenario

Slide 23 below breaks down the M Curve into six separate phases along a composite stressing Y2K scenario.  We emphasize stressing because, if Y2K turned out to be a complete dud, then our M Curve of Influence would immediately go from being a Bactrian to a dromedary, or from a "two-hump" to a "one-hump camel."

As you view Slide 23 and read the explanation below, please keep in mind that the M Curve does not represent the course of Y2K failure rates, but only our sense of the peaks and valleys of Opinion Leaders' capacity to influence social responses to such failures.

Slide 23: The Six Phases of the Composite Y2K Event Scenario--Arrayed Against the M Curve of Influence

We explain the six separate phases as follows:

Mania refers to the phase during which public awareness, anxiety, and preparation for Y2K accelerates dramatically.  For most countries, this will be across the summer and/or fall of 1999, with the "size" of the mania growing in direct relationship with the lateness of its onset (meaning the later in the year it starts, the more profound it will be).  For the U.S., for example, we'd predict the Mania Phase to really kick in come Labor Day (i.e., end of summer and beginning of fall, when thoughts turn to preparing for the winter), but for a country like Russia, probably not until November. 

In general, a good rule on start dates would seem to be: the more "crises" a country has on its plate, the later will be the start of the Mania Phase.  Of course, it there's enough crises a country may well skip the entire concept for all the obvious reasons, but that would clearly be a special case outside of our generic model.  One key assumption of this phase is that enough "evidence" (a very slippery concept here) surfaces by this time that says Y2K may well be significant and/or sufficient "public outcry" or "alarm" is orchestrated by Opinion Leaders (whether they come from officialdom or the public itself) to fuel the Mania in the absence of such "evidence."

There are probably several factors that will determine the intensity of the Mania phase.  The first is the degree of obfuscation or denial associated with the Public Transcript.  This can have two affects on the resulting mania:

• In cases where there is significant obfuscation/denial associated with the Public Transcript, once the Private Transcript (perceived truth) is revealed, there is likely to be a very large delta between the public and private positions (i.e., between what I’m told and what I see).  The degree of discontinuity between the two positions is likely to be one of the primary determinants of mania intensity.
• The greater the obfuscation in the Public Transcript, the more evidence to the contrary (Private Transcript) will have to emerge before the public script is rejected by the masses.  This might very well delay the emergence of the widespread concern until very late in the game.

This brings us to the second primary determinants of mania intensity, available preparation time.  The later in the game the Private Transcript is revealed, the greater the Mania is likely to be for any particular delta between Public and Private transcripts.  The Mania is most accentuated when large public vs. private discontinuities appear so late in the year that people feel they no longer have adequate time to prepare for an event that now seems will be very different from what they’ve been told to expect.  Here we'd see the increased likelihood of shortages, panic, and generalized iatrogenic activity.

The third important factor is mass trust in the ruling elites.  If you believe in your leader strongly enough, you’ll follow him or her right into a brick wall (or a spaceship hiding behind a comet).  In extreme cases, trust in leadership could completely dissipate the mania.  Of course, if the leader is overly optimistic, the Onset and Unfolding phases could provide a rude awakening.

Ultimately, frequent communication between the leader and the led, along with the most transparent possible information on Y2K preparations, seem to provide the best opportunity to mitigate the Mania.

Countdown refers to last few weeks and days of 1999, when individual and group preparation for the Y2K and associated Millennial Date Change Event takes on a life of its own, meaning the simultaneous actions of a substantial portion of the populace rapidly propels Y2K up to the level of a social phenomenon no longer easily made subject to any organizational control--private or public.  On the face of it, that sounds pretty scary, but depending on the society and culture, it need not be.

Much will depend on the individual's sense of vulnerability in the face of a potentially destabilizing event, and that sense of vulnerability will depend proximately on his or her sense of achieved preparations but ultimately on his or her expectation of the event ahead.  Preparations alone are unlikely to reduce uncertainty, thus the previously shaped expectations of the public at large will loom large at this point.  But like riders traversing the first great drop of a roller coaster ride, few minds are likely to be changed in transit.  Most people will turn a blind eye and a deaf ear to further entreaties or advice, as they steel themselves for the remainder of the "ride."

Onset refers to probably no more than the first week of January 2000, but is primarily concentrated on the 31 December 1999 (Friday)  through 3 January 2000 (Monday) time frame.  Y2K's overlap with the Millennial Date Change Event and all the associated angst, celebration, joy, and violence that milestone is likely to evoke from large numbers of people around the planet will make for a very confusing time period, during which far too many simultaneous local experiences will be processed for widespread consumption via a global mass media blow-out of epic proportions.  Almost by definition, a crisis is a compression of time, during which "more things happen than usual," making societal response patterns unpredictable.  So given all that's likely to be going on during Y2K's Onset Phase and the accompanying media saturation coverage, we will--by definition--experience a crisis atmosphere that will inevitably skew most people's perceptions of events.

Unfolding refers to the  indeterminate length of time (depending primarily on a country's level of IT) that will have to pass before the private and public leadership circles within individual countries can ascertain the extent of Y2K-induced network failures they collectively face.  Our assumption here is that more advanced IT countries will more quickly catalogue and analyze those failure events that have already transpired and thus generate more accurate estimates of  what's left to unfold than will less advanced IT countries.

As a crisis management rule,  this capacity for gathering intelligence and processing estimates should not be considered a predictor for the country's aggregate failure rates, so a shorter Unfolding Phase shouldn't be considered commensurate with a less traumatic Y2K Event, for the rush of failures is likely to be greater and thus more traumatic in a shorter phase.  However, in terms of social response dynamics, it's fair to assume that the shorter the Unfolding Phase, the easier it is for Opinion Leaders to rebuild their influence over public perceptions.  Correspondingly, the longer the Unfolding Phase (meaning the longer the sense of public uncertainty regarding the question, "How bad will this whole thing turn to be?"), the greater the potential for mass iatrogenic behavior that only confuses the situation further and complicates both direct recovery and broader crisis management efforts.

Peak refers to period during which a country experiences the maximum impact of its Y2K-induced network failures and whatever side effects those failures may create throughout the economic, social and political arenas.  Naturally, the definition of "peak" is highly subjective, since it is very unlikely that countries or regions will experience Y2K in a collective, unifying sense.  Y2K, if it turns out to be substantial for any one country, is likely to exhibit a strong "localizing" effect, meaning it will tend to cut communities off from one another, thus varying their individual experiences greatly.  As such, any attempts to define or declare--on a country-wide basis--the "peak" of the Y2K Event will be highly contentious and politicized affair.

Exit Point refers to either an apparent or a self-declared end to the systemic Y2K Event and any associated crises.  Like the definition of the "peak," this will be a highly contentious and politicized debate that will--assuming Y2K has been substantial--immediately segue into, and thus set many of the key judgment parameters for, the official and unofficial "score settling" that inevitably accompanies any crisis period.  For example, in the United States the Y2K Exit Point is likely to overlap with the first few weeks of the 2000 Presidential primary season.

One key alternative scenario element for this phase is the emergence of a follow-on crisis--whether it be related or unrelated to Y2K--that effectively "ends" the Y2K Event by superseding it in national importance.  Of course, in this instance, much would depend on the public's perception of the causality surrounding the "new crisis"--namely, did it truly arise "on its own" or was it "engineered" by "powers-that-be" to divert public attention from the continuing Y2K crisis (e.g., the "splendid little war" scenario, alternatively known as the "wag the dog" scenario).

The Scenario Dynamic Grid Explained 

Slide 24 below presents our Y2K Scenario Dynamic Grid.  The four-by-six grid is arrayed in the following manner:

• The four rows correspond to our four Y2K sector areas:
  • Networks
  • Business
  • Social Response
  • Governance.
• The six columns correspond to our six-phase composite scenario timeline:
  • Mania
  • Countdown
  • Onset
  • Unfolding
  • Peak
  • Exit Point.
• The main entry for each grid box represents our definition of the key scenario dynamic in play for that sector area during that scenario phase.  For example, "F2Q," or "flight to quality" is the key scenario dynamic in play in the Business sector during the Countdown Phase.
• The secondary entry (in the smaller red box-arrows) for each grid box represents our definition of a key emerging scenario dynamic to look out for as the timeline moves from that particular phase to the next one.  For example, "Answer Man" is the key emerging scenario dynamic to watch for as the timeline moves from the Unfolding Phase to the Peak Phase in the Governance sector.

We offer the same general caveat regarding the Scenario Dynamics Grid that we cited for the M Curve: we feel fairly confident that the first three phases (Mania, Countdown, and Onset) will occur regardless of how Y2K actually unfolds post-010100, so the dynamics we cite in those columns are essentially predictions that we think will come true in some combination for enough states around the world so as to serve as a useful generic model.  As for the final three phases (Unfolding, Peak, Exit Point), there we're getting into hypotheses regarding an assumed Y2K Event that proves to be stressing and substantial.  In that regard, the scenario dynamics listed for those columns do not represent predictions of what must happen--only estimates of what could happen given a particular stressing scenario.  In other words, if Y2K is a dud, you can largely forget the last three columns.

Slide 24: The Y2K Scenario Dynamic Grid

The Network Timeline in Detail

Moving from left to right along the timeline:

In the Mania Phase you see the ramping up of the Stockpiling dynamic, with individual stockpiling attracting the most media attention, even though it's the stockpiling by economic firms and governments that will have far more profound market impact.  Of course, stockpiling will occur in direct relationship to public fears concerning the interruptions of key network services (utilities and food distribution being the big drivers), and will reflect the strategic distance between the Public and Private Transcripts of business firms, i.e., the difference between what they're saying to reassure customers and the steps they're taking to deal with non-compliant suppliers and vendors.  In both instances (individual and organizational stockpiling), it's the "little guy" who will suffer or fall behind, thus increasing "his" anxiety.

Thus the dynamic to watch as we go from Mania to Countdown is the emergence and increased agitation of the Most Vulnerable.  On the individual basis, stockpiling is a middle-class (or better) phenomenon in that it requires disposable income that the poor do not possess.  Since rural poor tend to have a better system of workarounds for these situations, the group to watch are the urban poor, who will likely be the first to feel any squeeze from stockpiling purchases and thus grow more anxious.  In terms of economic firms, it's the Small/Medium Enterprises that will suffer, simply because they don't have the capital of larger firms to safeguard themselves against supplier disruptions.

In the Countdown Phase, Getting (It) There refers to two phenomena: 1) movement by people to locations where they may choose either to "celebrate" or "ride out" the millennial date-change event; and 2) a "topping off" of crucial supplies by individuals or organizations.

In the first sense, we expect to see a greater than average amount of travel in anticipation of the 010100-threshold.  Rich people will want to travel somewhere exotic for fabulous celebrations.  More religious-minded people will travel to holy meccas and shrines to celebrate Christendom's Third Millennium.  Party-goers will pack urban areas for mammoth New Year's Eve extravaganzas.  Apocalyptic-minded individuals will head to the hills or sanctuaries.  Safety-conscious people may leave urban areas for rural ones.  Families may gather with even greater frequency, either out of a simple desire to share the moment or out of concern for more vulnerable members.  Governments may organize and move around security and/or crisis management forces.  In short, a lot of movement may occur, with gross numbers linked to popular anticipation of the event as being historic or "once in a lifetime."

The "topping off" phenomenon in Networks will occur along a myriad of avenues, with one good example being the advice proffered by many authorities that it would be wise for everyone to have their cars' gas tanks filled up.  If, for example, a large majority of a population attempts to actualize that advice in the last 2 to 3 days on 1999, it is quite possible that spot shortages will immediately appear (i.e., gas lines) and most nations' distribution networks aren't set up to handle that much volume in a concentrated time period.  This, of course, would create a social dynamic all its own.

As we move from Countdown to Onset, the dynamic to watch involves efforts by authorities to encourage both individuals and organizations to go off-line as much as possible in the last few hours of 1999 and during the first 24-72 hours of 2000 (i.e., through the holiday weekend). Going Off-line means doing whatever is possible to reduce loads on utility networks.  For example, it means encouraging large-scale celebrations to be as low-tech as possible to reduce electricity loads.  It may mean also that authorities encourage more distributed celebrations to reduce stress on mass transit networks.  Much of any government's success in encouraging this conservation will depend greatly on previous public education campaigns.  For example, in the U.S. the FCC has already begun asking the public not to use telephones or modems on 31 December and 1 January to avoid overloading the public telephone system.  In effect, the FCC fears some combination of the "Mother's Day" effect (i.e., everyone calls family members to note the historic occasion) and a "testing the system" effect (i.e., everyone checking to see if the phones and Internet are still working).  Of course, if everyone tests or calls Mom at the same time, the stress on the telephone network can become a self-fulfilled prophesy.  In countries around the world with less robust public utility networks, this dynamic is all the more important.

A particular subset of the Going Off-line dynamic refers to the possibility that some energy power plants--namely nuclear power plants--may be taken off-line for some indeterminate period of time surrounding the 010100 threshold due primarily to safety concerns.  If this were to happen, then obviously a country's energy power grid would suffer diminished load capacity.  At this time, however, predictions regarding such actions are highly speculative.  For example, earlier this year there was a lot of loose talk about airlines and ports shutting down for some period surrounding 010100, and although some isolated declarations of intent have been made (e.g., Virgin Airlines giving employees New Year's Day off for "family reasons"), widespread shutdowns in either industry seem ever more unlikely as time passes and confidence regarding Y2K grows.

Once we get to the Onset Phase, despite the best efforts by authorities to encourage low-voltage celebrations, we nonetheless foresee great potential for the overloading of network systems.  Again, we're talking the world's largest party, plus it's the middle of winter in the northern hemisphere.  Factor in all the additional activity--and thus added network load--associated with Y2K, and we're looking at a possible spiking of demand for network services (e.g., electricity, phones, Internet access, mass transportation). The key element here is obviously electricity, for if that keeps flowing, then whatever additional demands emerge in other network areas can probably be handled in "rush hour" modes.

As such, it only makes sense as we move from Onset to Unfolding to watch out for Black Outs, or the disruptions of basic utilities, "downing" of the Internet in places, spotty phone service, etc.  Current predictions for such disruptions range from the "Three-Day Snowstorm" analogy in the U.S. to predictions of far longer outages in places such as China or Russia.  The key question for any country, though, is not whether the outages will happen, for some inevitably will, nor how long they last, as many countries deal quite nicely with such disruptions (thinking of Russia), but rather whether or not these blackouts represent the first of many interrelated waves of failures, or simply the early flame-out of the Y2K phenomenon.

If Y2K proves to be substantial and long-lasting, it will reveal itself in the Unfolding Phase, which in the Networks sector would lead to the dynamic of Rationing, meaning anything from rolling brownouts/blackouts in some utilities, to possible restrictions on access to mass transit or thoroughfares, to even the distribution of basic foodstuffs by authorities.  The key point is that either non-market mechanisms will arise by government fiat and/or market prices will rise high enough to cause de facto rationing by wealth of items typically viewed as basic.

Since transportation of goods into areas where shortages exist is the primary means of relieving the rationing dynamic and thus ending the "localizing" phenomenon of Y2K-related network failures, it would be precisely a broad and continuing slowdown in this sector that would signal a movement from the Unfolding to Peak Phase--hence we cite the dynamic of Traffic Jams as the key indicator in this transition.  A good example of the type of transportation slowdown would be the dozen or so global mega-ports through which flows the vast majority of goods shipped over the high seas.  Substantial slowdown in several of these mega-ports would exacerbate the Y2K Event, with the most likely culprit in this equation being neither the ships themselves nor the off/on-loading networks, but rather the recording keeping--i.e., the paper work.

A Peak Phase in the Network sector would feature the dynamic of Haves vs. Have Nots, caused simply by the disparities in deprivation engendered by network failures.  Reasons for this would include:

• Better preparations for deprivation by some
• More disposable resources for some to deal with deprivations once they appear
• Some areas will feature a higher percentage of vulnerable populations (e.g., very young, very old, sick or disabled)
• Localizing effect will mean some communities are better situated in terms of basic supplies than others (e.g., southern areas will be in growing season while northern areas will not)
• Remediation efforts will have varied greatly by area
• Failures will not be evenly distributed or evenly timed.

In short, because some people and/or areas will do better than others, tensions will inevitably rise between groups suffering varying levels of "pain" or varying rates of recovery.  Note, this is not the same as saying "people tend to freak out" during disasters, for here we're past the initial "disaster" and deep into the painful aftermath.  By analogy, the Onset would correspond to the "people coming together when disaster hits" notion, whereas the Peak corresponds to the period weeks later when tempers begin to flare as people start realizing that although "we were all in the same boat in the beginning," that initial leveling phenomenon has given way to serious differences in rates of recovery and the ultimate resumption of "life as we knew it."

Getting us from the Peak  to Exit Point, which we define as Metropolis Saved, meaning that if the cities are back to near-normal then the crisis is largely over from a Network perspective, may require some extraordinary efforts by some extraordinary actors.  These efforts must either solve the problem of "things not moving" by fixing the networks themselves or by generating and supporting sufficient workarounds to get things moving by alternative means.  We have dubbed this dynamic Network Leviathans, meaning super-empowered organizations that can somehow make things move even when it seems that normal network pathways are hopelessly disabled.  By definition, we're first and foremost talking about militaries here, for it's the military that specializes in creating logistical networks where none have previously existed--typically on a battlefield.  The down side to this is that no military in the world comes even close to matching the logistic capabilities of the U.S. Military.  The up side is that most militaries around the world have some real experience in providing these functions within their own countries during times of natural disasters.  So if it's a ragged capability in many countries, at least it's one that's familiar.  Given that the U.S. Military is unlikely to get deeply involved within the United States, given the relatively robust nature of our distributed police, emergency response, and National Guard networks, one of the main roles it may play will be that of Network Leviathan overseas in conjunction with international and foreign national relief organizations.

We end our discussion of the Network sector by positing the legacy issue of New Faultlines.  By this we mean humanity discovering divisions among itself that were not apparent before the Y2K Event.  In effect, we're taking about divisions based on information technology that have arisen during the past couple of decades but have not yet made themselves as obvious in a popular sense as they might be after a traumatic Y2K experience.  The two obvious extremes of this equation are:

• Those "too dependent" on information technology will have their "comeuppance" while those more "self sufficient" will emerge from this experience more confident about a future that inevitably features an ever increasingly frequency of this sort of IT "disaster."
• Those "too slow" on information technology will have their "comeuppance" while those who adapt themselves with greater speed will emerge from this experience more confident about a future that inevitably features an ever increasing IT quotient.

The Business Timeline in Detail

Moving from left to right along the timeline:

In the Mania Phase we see the phenomenon of firms Taking Options, meaning business firms setting up and/or implementing alternative supplier/vendor arrangements in anticipation that some portion of their existing supplier/vendor base will not perform well in the coming Y2K Event.  This is a variant of life-as-we-are-coming-to-know-it in the New Economy, with its rapidly shifting alliance strategies and frequent market-share quakes, and yet, it may take on an added dimension here because of the (potential) simultaneous actions of many firms focused around a single date in time.  But in the end, all it really says about business and finance is that when managers look ahead to Y2K, they see winners and losers, and therefore plan accordingly.  Nothing personal, mind you, just business.

As we move from Mania to Countdown, a compelling dynamic becomes the appearance and use of Leper Lists, which finger those suspected of not performing well in the coming Y2K Event.  They are definitely a double-edged sword, for, on the one hand, they represent a great motivator for remediation laggards while, on the other hand, they can bring the same sort of self-fulfilling prophesies that one associates with rumors about a bank's liquidity--namely, bank runs. So if a supplier gets a bad wrap as "non-Y2K compliant" and then sees orders dry up as it is shunned by long-time business partners, then problems are bound to ensue regardless of the firm's ultimate Y2K vulnerability.  The recent experience of the Global 2000 Coordinating Group and their near-publication of a Y2K-readiness rating of major trading nations (they backed off at the last minute for fear of sparking capital flight) speaks volumes about the dangers involved with such lists, and yet appear they will, for they represent serious intelligence about potential market failures by competitors.  Firms will naturally want this information and--once they have it in hand--will naturally use it to their own advantage.

Flight to Quality is the natural dynamic of choice for the Countdown Phase, for it speaks to the notions of last-minute panics and the desire for safe haven.  Recent history has given us plenty of examples of what Thomas Friedman would call "stampeding" by the international "Electronic Herd" of global investors.  Moreover, there's plenty of good history to back up the concern, as the Economist pointed out in its September 1998 survey of Y2K (19 September 1998, p. 4):

Since the start of modern times, the end of a century has been a time of economic unease.  The British and Dutch stock markets in 1699 and 1799 and the Dow in 1899 all saw sharp falls in prices, according to ING Barings, a Dutch bank; between December 2nd and 18th 1899, the Dow fell by 23%.  A millennium, even more than a centennial, would be spooky enough without the fear of computer failure.  Perceptions, rather than reality, may turn out to be the most dangerous aspect of that pesky millennium bug.

Of course, none of this says anything about the mid-term stability of global financial markets, nor about Y2K, but only about the psychology of investors and their periodic tendency to engage in fear-fulfillment.

So where does the money go?  Gold prices are at historical lows.  The U.S. stock market is overvalued already by the measure of many experts, and yet would seem to offer a great place to park cash in the short run since the U.S. should come through Y2K okay.  Or do Internet stocks come tumbling down, bearing the brunt of the technology fear?  In short, you ask enough questions and fairly soon you're back in the life-as-we're-coming-to-know-it territory that one associates with the emerging New Economy, again begging the question of whether or not Y2K represents something fundamentally unique in history or a harbinger of the future.

The dynamic to watch as we move from Countdown to Onset is what we refer to as Cash On Hand, meaning both the issue of liquidity in markets (e.g., everyone trying to sell bonds at once in a certain small-country market and finding no buyers) and the issue of paper money in circulation.  Both issues revolve around panic and the desire for fungible assets during a perceived time of great uncertainty.  So cash on hand may be an important safety cushion for a country's central bank in terms of protecting themselves from both outside forces (e.g., foreign currency reserves to ward off speculators) and inside forces (e.g., sufficient money in circulation to ward off bank runs).  A rule we might propose for this dynamic would be, the more control you have over your country's cash reserves (having more is obviously better) and money in circulation (to include the printing of money), the safer you are regarding Y2K-induced financial panics.  Again, there's nothing terribly particular to Y2K about this advice, rather it's simply the occurrence of Y2K that highlights a capacity that countries are increasingly coming to value in a globalized New Economy.

With the Onset of Y2K, we expect to witness the dynamic of an economic Dead Zone that will encompass both retail and financial transactions.  In retail, we're talking about a consumer that's already spent his or her available disposable income either on Y2K preparations or end/beginning-of-year holidays or some combination thereof.  In the financial world, we're talking about companies--far more than usual--working to move transactions away from the end of the calendar year, meaning "earlier" into December or "later" into January.  Again, neither of these dynamics is particular to Y2K or the Millennial Date Change Event, but are part of the normal end-of-calendar-year business cycle.  All we're predicting here is a larger than normal effect.  For example, we'd expect extra market "holidays" around the 010100 threshold in many countries around the world, as markets there attempt to ease their financial sectors past the date change in as relaxed fashion as possible (possibly phasing them in over several days before reaching full working volume).  Even if markets or governments didn't take these extraordinary steps, the wariness of individual firms and investors to play in those first few days might well do the trick all by itself.

Of course, at some point, financial markets have to come back online completely, and here's where our more speculative material kicks in. If Y2K turns out to be widespread and substantial in impact starting in January, the dynamic we look for in financial circles are what we'd call Market Quakes.  This refers to Y2K-induced or related network failures that either directly disable financial market operations or create cascading investor panic about broader economic dynamics (including disabled market operations) that find their reflection in wild market swings.  Such quakes, of course, can start anywhere on the planet, but once started, tend to move with time zones from one global super-market to another (e.g., from Tokyo to Hong Kong to Europe to London to New York and then all over again).  Rather than labeling this dynamic a "financial contagion," it's really more a matter of copied behavior: investors in one market fear that what they're watching in another market is a clear indicator of their own future, thus eliciting similar defensive responses.  For the business timeline as a whole, this is probably the key single dynamic, for if Y2K is going to kick into a larger economic downturn, the first real signs probably appear here.  Conversely, if Y2K is going to turn out to be a financial non-event, the lack of any market instabilities here will go a long way toward killing any potential downturn in its tracks.

Moving in the Unfolding Phase, here is the time for the Internet-based economic "doombrooders" such as Edward Yardeni either have to fish or cut bait, meaning either we see the dynamic of Fortressing and Islanding rise up in a serious way or these theories of economic back stabbing decimating social trust and destroying business chains will need to be quickly discarded.  Of course, some of this dynamic may have already unfolded during the previous phases, especially the Mania one, but it's really in this phase, when the supply chain failures pile up that this dynamic should rear its ugly head in a broad-scale manner if Y2K is going to unfold in a truly dramatic and destructive manner.  And again, what's dramatic and destructive about islanding and fortressing is the loss of social trust and what that will do to aggregate economic behavior.  If individuals see great numbers of long-standing trust relationships evaporate overnight in response to Y2K-related failures, then perceptions of the future will change drastically and for the worse.  In short, we'll clearly be in a new and largely unknown rule set.

The key dynamic to watch regarding popular perceptions of an emerging rule set is what we call Personal GDP—namely, the depletion of financial resources set aside to weather the Y2K Event.  Everyone—every person, firm, government, etc.—will enter into the Y2K experience with certain expectations regarding how much this is going to cost them.  When this threshold is reached, meaning the money (and/or other assets) set aside is gone, perceptions of economic loss can escalate dramatically and result in a significant skewing of individual and collective decision making.  Of course, the more individuals and organizations plan for a “tall” Bell Curve, but instead find themselves riding the stretched-out “far side” of a curve that never seems to end, the worse this dynamic becomes.

The Peak Phase in the Business timeline is defined as a de facto Cash Economy, meaning a virtual de-creditization of the economy as social trust evaporates and almost nothing gets done unless cash or other hard "currencies" (depending on what society you're talking about) are involved.  Realistically speaking, within the hardest hit pockets of a country, we'd see cash economies sprouting up, without the country as a whole devolving to a cash-on-demand status (meaning the semblance of normality tends to be preserved in official circles).  The obvious model for this type of situation would be Russia since the fall of the Soviet Union.  Having said that, we'd note the Russian tendency to muddle through--with great day-to-day effectiveness--what advanced Western countries would consider a state of almost complete economic collapse; in other words, our worst nightmares are often many countries' normal operating procedure.

To go from the Peak to Exit Point, countries may well have to face the task of some sort of SME Triage, meaning some sort of economic or political response to substantial numbers of Y2K-related business failures among Small and Medium Enterprises.  We don't have any simple answers on this one; we just note the potential rapid loss of jobs connected with SMEs and the tendency of many governments around the world to consider that a serious threat to political stability.  For SME failures to occur in great numbers, one would imagine the confluence of three dynamics over a substantial length of time:

• Direct Y2K failures leading to failed business operations
• Islanding and fortressing of extant business partners by firms in response to failed business operations
• Increased exposure to litigation liability for breached contracts or product liability issues.

We define the Exit Point as Winners Crowned, meaning the identification of individuals or firms that are perceived as having flourished during the Y2K-induced economic crisis and who, by doing so, set the tone for whatever New Rules characterize the resulting economic legacy of Y2K.  This, of course, will be greatly determined in most countries by the accompanying political legacy to be discussed below in the Governance timeline.  A good way to think of this dynamic is to reflect on how Wall Street periodically crowns some new set of financial "giants" every X years as defining what seems to be a new model of market activity (e.g., the "quants" or "professors" after 1987).  Of course, if Y2K is substantial for a country, we could see the "winners" emerging with a far greater concentration of wealth, particularly if many SMEs are to die off or be absorbed by larger firms.  If this occurred, one could easily consider--yet again--that Y2K fits well within the paradigm of the New Economy, which is described by many as featuring a high SME failure rate and a winner-takes-all playing field.

The Social Response Timeline in Detail

Moving from left to right along the timeline:

In the Mania Phase we cite the Truth is Out There dynamic signifying large amounts of popular distrust of the Public Transcript put forth by government and business leaders regarding Y2K potential impact.  By some estimates, for example, there are more than 100,000 web sites currently devoted to "surviving Y2K."  Clearly there's a significant market for this sort of material, meaning that the "good cop, bad cop" approach pursued by many authorities (i.e., Don't worry!  But get ready!) tends to drive a percentage of the populace to non-traditional sources of crisis-related information.  In short, many people "out there" assume that the "full story" is somehow being "kept from them," while the "official story" is not to be fully trusted.  It's not hard to see why there's so much mistrust.  It is very hard to determine who is an "expert" on Y2K, much less what good data is, and very little of the material you see on the subject expresses anything close to ambivalence.  In the end, the fine line between proper preparation and overreaction is almost impossible to pin down.  Meanwhile, advocates on both sides of the argument constantly deride the other's attempts as "misinformation" of some sort or another.

Not surprisingly, the dynamic to watch as we move from Mania to Countdown are Rumor Mills, for when people don't feel that authorities are being fully transparent in terms of information sharing, then they tend to seek out and respond to whatever informal information they can get their hands on.  The Internet naturally plays a huge role in this, as does the mass media, but it is really the face-to-face communication that tends to hold the greatest sway over popular actions as uncertainty rises.  That's only natural, since people tend to turn to others close to them for advice and collaborative thinking during crisis periods.  So, as a general rule, the greater the popular perception of looming crisis, the greater the role played by rumor mills in particular, and informal communication channels in general, with the most dangerous situation being when authorities have effectively lost the attention of the public regarding preparations for crisis management.  It is also fair to say that rumor mills tend to work more effectively in less developed economies than in more advanced ones, where access to mass media is virtually universal.  Finally, it's probably accurate to say that rumor mills will generate increasingly wilder stories (e.g., urban legends) as the 010100 threshold looms, therefore many of the activities of authorities near the end of the Y2K build-up will be focused on stamping out "bad information" vice spreading "good information."

When the Countdown Phase ensues, Information Overload seems inevitable for all societies not undergoing some greater sort of "crisis," whatever that could be.  Mass media coverage of the Millennial Date Change Event and "looming Y2K crisis" is likely to reach epidemic and epic proportions, in large part because the latter presents almost everything one could ask for in terms of a global media event:  great uncertainty, great danger, great debate, lots of conflicting expertise eager to sway public opinion, a worldwide "playing field," and a worldwide audience.  Toss in the world's largest party and we're talking some high ratings, especially for news programs which increasingly specialize in releasing frightening bits of information to the public over a stretch of time as a way to ensure continued loyalty.  Since bad news sells better than good, it goes without saying that much "bad news" will be "found" by the mass media during the last few weeks of 1999.  The effect of all this "bad news" can have one of two effects on the public:  scare them into action or numb them into inaction or indifference.  Much will likely be determined by individual exposure to network failures prior to 010100 that can be causally linked to Y2K: if no to little exposure happens, the heavy media coverage is likely to incite indifference, whereas significant exposure may incite some level of panic among those "convinced" by their experiences.

Moving from Countdown to Onset,  we watch for the dynamic we entitle, Final Solutions, by which we mean individual citizens and organization actively engaging in "endgame" strategies decided upon weeks or perhaps even months earlier.  This aggregate pursuit of what could be highly idiosyncratic coping (or simply celebratory) strategies may well be disorienting for society as a whole, for it may appear to all that significant segments of the population are clearly "going their own way" at the last moment, thus decreasing social trust as a whole as the 010100 threshold looms.  Since, in many cases, the exhibited behavior may be the first public expression of that which up to now has been a strictly Private Transcript, the sudden shift in behavior by many may ratchet up the level of uncertainty and fear for the society as a whole.  Of course, the classic story here is the one concerning survivalists or apocalyptics "heading for the hills" at the last moment, determined to "escape the chaos."  Another variant that may wreak serious social harm is that small minority of mentally unbalanced individuals who may seek to "go out with a bang" on their own terms, raising the potential for a cluster of Jamestown-like mass suicides, Littleton-like shooting tragedies, and/or Waco-like stand-off between authorities and heavily-armed religious cults.  In this regard, we'd argue that special security attention be given to religious shrines or meccas, or any place with strong significance for typically marginal social elements with a history of acting out violently during times of stress.

When the Onset finally hits, there will simply be a Will to Party that is both inescapable and profoundly powerful.  To a great extent, the public desire for mass celebration should be accommodated to the greatest degree possible while seeking to reduce network pressures and limit unmanageable concentrations of people.  Typical celebrations magnets, such as religious meccas, capital cities, and cultural landmarks, are likely to be packed to the breaking point, and while that presents significant security problems, attempts by authorities to block access are likely to be counterproductive.  Naturally, the "world's largest party" is likely to produce a corresponding large amount of personal injuries, sporadic low-level violence, spontaneous riots, alcohol- and drug-related crimes and medical situations, and so on and so on.  Almost none of this will have anything to do with Y2K in and of itself, but instead will simply reflect the nature of the Millennial Date Change Event in the country in question.  If Y2K failures do disrupt such celebrations, there should be cause for alarm and yet, most people "trapped" in such situations respond quite nicely by rising to the occasion according to the spirit of the celebration. This is not to say that riots, violence, etc., won't happen, but that the additional burden of Y2K-related failures is unlikely to exacerbate their normal course to any significant degree.  In short, it will be a wild party no matter what, and if Y2K "joins in," its immediate effect is likely to be negligible.

As we move from the Onset to Unfolding, an inevitable dynamic will be one of Panic Release, meaning social expressions of exasperation, anger, fear and loathing.  The possible angles are many, with the following being just a few:

• Some will be exhausted by all the recent uncertainty, build-up, and celebration
• Others will be angry that Y2K turned out to be a "sham"
• Still others will be angry that Y2K turned out to be "far worse" than authorities "let on"
• Some will be angry at the lack of the "apocalypse," "rapture," or supernatural intervention in human affairs
• Others will be convinced that such "end times" are indeed unfolding
• Still others will be frightened by all the "odd behavior" they seem to be witnessing.

In short, the Millennial Date Change Event, along with the threat of the Y2K Event, is likely to elicit a strong build-up of social tension, not all of which will be spent in the celebrations surrounding 010100.  There will be burn-out, a sense of let-down, along with heightened anxiety that Y2K "has finally begun."  Many, if not most of the population will take all this in stride, but a significant minority will not.  The big question will be whether that minority's actions will trigger broader social responses that authorities cannot control or simply be contained by authorities and written off by the larger public as the "typical nonsense of the extremists/troublemakers/wackos."

Assuming a significant Unfolding of the Y2K Event, the next dynamic of note is the Iatrogenic Zone, or what we like to call, "average people doing stupid things under duress"--something we're all familiar with.  This is not so much panic, as the purposeful attempt to "fix things" that only leads to making them worse.  Tackling real and identifiable problems is only a small portion of this dynamic (e.g., "experts" who attempt to "fix" things, armed only with their blinding ignorance), because the real damage tends to be done by those individuals or groups that target the imaginary, insignificant or unrelated "Y2K problems" with great gusto and, by doing so, create follow-on failures and clouds of confusion about actual Y2K causality.  This dynamic is a key one for extending the Y2K Event beyond its minimal boundaries and into the realm of an unanticipated disaster, with the paradigm being the stunned local official staring into the news reporter's camera stammering, "We had no idea that people were going to . . .."

As we watch for a transition point from Unfolding to Peak, the crucial social dynamic is what we call the Trigger Effect (referencing the 1996 Amblin Entertainment movie of the same name noted earlier in this report).  As stated before, most people do not panic during disasters, but rather rise to the occasion nicely, with only a very small minority succumbing--temporarily--to so-called disaster shock (i.e., a massive mental reordering of priorities following a cataclysmic event).  The Trigger Effect doesn't refer to either of those two realities, but rather to one that appears much further down the road in a crisis--namely, when "battle fatigue" sets in.  A particularly acute trigger of this sort of "crossing-the-line" behavior is the perception that either the crisis is being artificially drawn out by uncaring authorities ("Why don't they fix things faster?") or that recovery rates are unequal "for a reason"--meaning preferential treatment is being afforded by authorities.  Nothing brings on the "short fuses" faster than the sense that "we're no longer in this together," whether the "they" are those receiving preferential treatment or the slow-footed authorities suspected of tending to their own needs first.

The Peak situation is obviously the most volatile phase in the social sphere, for it is here that group anger boils over and looks for ways to express itself.  Typically, that means the targeting of small, easily identifiable demographic groups toward whom long-standing resentments have been harbored by the majority, usually over a sense of economic injustice ("They have exploited us long enough!").  Scapegoating, or the dynamic of targeting relatively weaker groups for persecution, is nothing more than the age-old practice of human sacrifice in light of "unexpected" and "unexplainable" disaster (meaning, in a practical sense, that those truly "guilty" are unreachable, so instead, "you hate the one you're with"--with apologies to Stephen Stills).  In effect, disaster seems to rain down on you from on high, and since there's nothing you can do about the "source," you appease the anger within by striking out against those nearby that you've always resented anyway.  In Indonesia, for example, during the 1997-98 Global Financial Crisis, it was the ethnic Chinese that often served as scapegoats, although sporadic reports of "ninja witches" being hunted down by villagers in remote areas made for the most compelling reportage.  No matter what the idiosyncratic explanations by locals for this violent behavior, it remains nothing more than the inherent human tendency to look for someone to blame and target for persecution whenever "hard times" suddenly appear and the causality seems unclear or complex.

Of course, Scapegoating lies not only in the realm of mass behavior, but often serves as a political tool by those already in, or vying for, power.  For example, an embattled regime is well served by blaming the society's ills on some small demographic group and then arranging for their state-sponsored persecution (think of Rwanda, for example).  Then there's the targeting of political opponents or rivals (e.g., Malaysia following the financial crisis) designed to buttress the sagging political fortunes of a leader perceived to have done poorly by his or her people.  In short, "hard times" breed harsh attitudes, and harsh attitudes make for absolute solutions, which in turn make for excellent political tools for those leaders with the will and way to divide and conquer (or typically, reconquer) their own populations during conditions of internal crisis.  Think of Lenin in Russia during World War I, or Hitler in Weimar Germany, and you get the picture of the potential for political tumult under the right conditions.

Can Y2K create such dire circumstances in any country?  Assuming the right set of truly disastrous proportions, anything is possible. In short, our planet's recent good fortune in seeing unrest lead to greater political freedom shouldn't blind us to the potential for equally negative outcomes.  One true bright spot, though, is our hypothesis that Y2K will probably present greater political unrest potential for authoritarian states than for democracies.  Why?  Again, distributiveness equals robustness with regard to network failures, and democracies are simply more distributed than authoritarian regimes.

The dynamic to which authorities may have to resort to move their societies out of the Peak Phase and into the Exit Point is proving to their public that the Guilty Will Pay.  Now, this probably sounds a bit hypocritical following the previous paragraphs on scapegoating, but the reality is that a key motivation for scapegoating is the perception that the truly guilty are out of reach and therefore untouchable, so instead you reach for what's at hand.  When authorities act to demonstrate to the public that rules still matter and those who break them will not get away with it due to the perception of unusual circumstances ("All bets are off!"), they send a strong signal that while a new rule set may be emerging, the old one still operates in familiar ways, forcing accountability in the end.  Accountability is what keeps vigilantism and scapegoating at bay, for it says that--ultimately--those who break the rules will pay for their crimes.  Hopefully, authorities can convince the public that state-directed retribution will remain within legal parameters, but it's entirely possible that in certain extraordinary situations, extraordinary (meaning, extra-legal) measures will have to be taken.  That can sound fairly sinister from an American perspective, because we have relatively high legal standards, but in many countries around the world, definitions of extra-legal means are highly dependent on the circumstances or the crisis and cultural (in)sensitivity to losses of political liberty.

The Exit Point for the Social Response timeline is easily defined--namely, the broad perception that the "Worst is Over!"

Once the perception takes hold that the Y2K Event has crested and we're on a downward glide path back toward "life as we knew it," the crisis effectively ends in terms of social response.  Naturally, attempts by authorities to will this view into popular acceptance will probably be met with significant resistance if the gap between rhetoric and reality is too much for the populace to bear.  In the best possible path, a freely operating mass media senses this spontaneous mood shift among the citizenry and "declares" victory on their behalf.

The legacy issue for the Social Response realm is the potential for New Faiths to emerge from Y2K's ashes. These faiths can be either secular (i.e., political movements) or religious based, with the key attribute being their self-perceived "birth" under conditions of great crisis.  Along these lines, we cite the emergence of the revolutionary Marxist group Tupac Amaru in Peru following a tremendous natural disaster (earthquake).  In short, disaster can bring people together in all sorts of ways, with political or social activism--be it peaceful or violent--a frequent long-term outcome.  Given the tumultuous global changes of the 1990s, it's only natural to assume that new faiths will rise up in challenge to, or support of, new definitions of the status quo.  If Y2K triggers enough social tumult, it may crystallize a larger moment in history in the minds of those either happy or unhappy with the recent transformations wrought by the end of the Cold War, the Information Revolution, and the emergence of Globalization and the New Economy.

The Governance (aka, Political) Timeline in Detail

Moving from left to right along the timeline: 

In the Mania Phase we focus on the dynamic of the Credibility Gap, referring to the tendency of populations to distrust "official truths" put forth by government agencies on the subject of Y2K.  This gap extends in both directions, meaning it includes both those who believe the state is too lax in tackling the issue and doesn't warn the public enough about its potential effects and those who believe the state is unnecessarily hyping the issue and scaring the public.  The later any government began its efforts to raise public awareness and push remediation efforts, the greater the gap will be, for the public tends to respond in one of two ways:

• People assume the government "blew it" by not tackling the subject earlier, and hence is covering up its "mistakes" now.
• People assume the government  is "caving in" to Y2K "fear mongers" and doesn't really have a good grasp of the actual situation or resulting vulnerability.

Outside of the U.S., the dynamic carries the additional burden of potential anti-Americanism, anti-Westernism, anti-capitalism, and/or anti-technologism, for the Y2K "problem" is easily identified as stemming from any or all of those quarters and thus remains suspect in terms of actual causality ("Is it a real problem or an American scam?").  Additionally, tied to both these variants is the sub theme that either the government or the U.S. Government in particular really knows how to "make Y2K go away" but isn't "coming clean with us" for some selfish reason (e.g., profit motive, "plot" to derail the Euro's introduction).

Given this substantial level of distrust of government leadership on the issue, a crucial dynamic as we move from Mania to Countdown is any public or private sector efforts to educate the public about how to prepare for the Y2K Event, aka Y2K & U-type promotional and educational material or campaigns.  Obviously, the earlier and more aggressive the campaign, the better.  Likewise, the more transparent and honest the campaign, the better.  Sounding too ominous only scares the public either into hyperaction or inaction, while sounding too optimistic only makes people think you're holding back the "bad news."  Emphasis should be on the universality of the effect and the universality of the response--"we are all in this together."  Since IT-awareness is relatively scarce in many countries around the world, while work-arounds for network failures are a fact of daily life, these campaigns in many parts of the world can focus more on explaining causality than the provision of "survival information."  In other words, in most places people know what to do already in response to Y2K-induced failures (i.e., the same old, same old), so authorities should focus their educational campaign on dampening any potential social backlash that could be fueled by disparities in suffering or recovery times, as well as ignorance of causality leading to the propagation of conflict-triggering "explanations" ("Let me tell you why this really is happening to us and why you shouldn't take it anymore!").

Once the Countdown Phase begins, our dynamic comes more in the form of advice, as in, "Go with the Authority on Tap."  By this we mean that governments should not seek to introduce special leaders, authoritative bodies, or new rule sets in the waning days of 1999, but rather should stick with the architecture of authority they (hopefully) have already put in place during the previous months.  If new authorities and rules are introduced at this late date, governments are likely to trigger more distrust than trust, and more rule-breaking than rule-abiding than if they simply went with what they already have--no matter how deficient.  Why?  Any last-minute introduction of new authority only fuels popular suspicions or fears that the government is ill-prepared and/or now is finally "coming clean" on its "secret plans" to use Y2K as a pretext for some sort of reordering of political relations either within the government or between the government and the population.  The positioning or use of military and/or security forces becomes a highly volatile issue during this phase, for it represents the worst fears of some regarding the government's "true motives" vis-a-vis Y2K.

Such popular suspicions only highlight the government's need to get it's security "house in order" substantially prior to the 010100-threshold.  This is especially true in relation to the key dynamic we cite for the transition period from Countdown to Onset--the danger of the First Strike.  First Strike refers to the high probability that significant numbers of activist groups will seek to mark the Millennial Date Change Event by engaging in some high-profile activities--both malevolent and benign, but focused foremost on garnering mass media attention--in support of whatever cause they espouse.  Most political causes or movements--not just the extreme, apocalyptic ones--tend to be very date sensitive, meaning history and the milestones of time's passage play a great role in motivating action and determining its timing.  The 2000 threshold will simply be too great a target for most such groups to pass up, regardless of their motives (i.e., anything from simple self-celebration to catastrophic violence).  Moreover, the rise of the Information Revolution provides new avenues for such strategies, most notably the Internet and the World Wide Web, which are likely to see explosions of released viruses and various expressions of hacktivism (i.e., politically-oriented hacking).   In short, authorities should expect all sorts of groups standing up at this point and declaring, in so many words, that either "We rule!" or "We're not going to take it anymore!"

Once the Onset hits, the government's key task is Keeping Up Appearances, meaning maintaining normal routines to whatever extent possible as Y2K emerges and millennial celebrations/activities are played out so as to avoid fueling any popular fears regarding the potential for social disorder.  Those elements looking for opportunities to foment greater levels of popular uncertainty or fear will likewise be watching closely for signs that things are amiss.  So to this end, governments must be prepared to see through to completion whatever normal routines exist for marking the beginning of the new year, with special emphasis placed on the safety of notable figures--both public and private--who may participate or attend.  For example, imagine the potential uncertainty and fear engendered by the missed or failed (for whatever reason) appearance of an important religious leader at a long-scheduled and highly-attended public celebration.  Following this line of reasoning, governments should avoid overloading themselves with too many events and their attendant security requirements.  Better to do less and do it well than do too much and risk unintended consequences.  In short, stay with what you know.

Moving out of the Onset and into the Unfolding, be aware that Opportunists Abound.  For the same reason why we advise authorities not to overextend themselves right at the 010100 threshold, many political opportunists such as terrorists and others looking to take advantage of a decreased security environment under conditions of "chaos" will likewise probably adopt a wait-and-see attitude regarding Y2K's unfolding.  Unlike the First Strike types who are so eager to make their mark with an eye toward history, these typically more malevolent actors will look to piggy-back their destructive or criminal actions on Y2K-related failures so as to maximize their impact and/or rewards.  A variety of strategies can be imagined:

• Spoofing Y2K failures to induce more network uncertainty and increase popular fears
• Striking to take advantage of security failures caused by Y2K
• Taking credit for Y2K failures they had no part in producing.

Naturally, those who normally seek to play "outside the rules" are at a distinct advantage during periods when rule sets are either suspended or unclear, so authorities must assume that such elements are actively planning to exploit Y2K's unfolding in any way possible. 

The Unfolding Phase witnesses the dynamic of Backlash, meaning the potential for some segments of the population to lash out at authority over perceived failures to address whatever Y2K-related difficulties emerge and linger.  Again, we're not talking about the immediate popular reaction to any potential difficulties, but rather the tendency for negative emotions to emerge as the period of suffering drags on.  Obviously, the Most Vulnerable segments mentioned above are most likely to serve as "tinder" for any such backlash, highlighting once more the great utility in assuring their basic needs during the Y2K's unfolding.  Governments should focus crisis management and response efforts on Y2K causes vice symptoms, although the latter requires special efforts if more vulnerable segments of the population are affected.  Public relations efforts are paramount here, especially any efforts by leaders to show that they are aware of and responding to public "pain."  The key goal of the government, though, should be on gathering sufficient intelligence so as to manage public perceptions of the "time remaining" in the Y2K "crisis."  Obviously, honesty is the best policy here, so transparency in all matters should be the top priority in all state-public information flows.

The dynamic to watch out for as we move from Unfolding to Peak is the appearance of the Answer Man, or the political and/or military leader who promises a rapid reduction in disorder and uncertainty if only he (or she) is allowed to amass--albeit on a "temporary basis"--extraordinary power and institute certain strong measures that typically involve a drastic loss of civil liberties for the population as a whole.  Of course, history teaches us that this "temporary basis" often turns out to be a great number of years, usually ending with the "great leader's" death and the plunging of the political system into great turmoil.  If such an individual is to appear under Y2K's peak conditions, his or her ideological appeal is likely to be based on anti-Americanism, anti-Westernism, anti-capitalism and/or anti-technologism.  Thus the "cure" offered will likely involve sort level of detachment from the global economy, or a firewall strategy of sorts.  In this way, the likely outcome of any state's Y2K "disaster" is likely to be one of systematic withdrawal versus striking out in anger against one's neighbors or the West in general.  The regions where this outcome is most likely are those with the lowest development levels, i.e., the least to lose in such a strategy.

The Peak Phase dynamic of greatest importance is the state's Mobilization Capacity in the face of an onslaught of popular demands for government services and general redress under conditions of social stress and perhaps open disorder.  If all of the dynamics outlined above are occurring in the Network, Business and Social spheres, then the government is likely to inundated with a flood of trouble calls, appeals for disaster relief, anger and resentment, etc.  Only the most advanced states have historically exhibited a great capacity to effectively channel such a broad array of public demands in a short period of time under crisis conditions, and even there capabilities are occasionally found to be greatly lacking (e.g., the slow response of the Japanese government to the Kobe earthquake).  Even in these advanced states, however, the potential universality of the Y2K Event presents a huge challenge, for crisis management of natural disasters, for example, is based on the principle of attacking the problem through a huge and rapid in-flow of out-of-area help.  Outside the rather small circle of advanced economies with strong mobilization capacity, the vast majority of states around the world exhibit far more meager skill sets.  A good indication of this is the exceeding thin nature of local police in most developing states.  Just like individual regions within advanced states, less developed countries face the additional burden of possibly being denied out-of-area help from those very same advanced states too preoccupied with their own Y2K problems.  In short, many may dial their version of 9-1-1, only to receive a "busy signal."

Again, taking into consideration all the different Peak Phase dynamics presented in other timelines, it's easier to understand the notion that--in the political realm--desperate times often require dramatic acts be taken by those in power to maintain social control.  We call this dynamic, Killer Apps, referring to bold political actions that serve to erase popular uncertainty and  restore public faith in government control.  At its most benign, a killer app can be nothing more than a Churchillian speech by a national leader that calms the public and draws people together in the "common cause" of recovery.  At its most malevolent, a killer app can be nothing less than an authoritarian leader's liquidation of a troublesome opposition party through mass arrest and imprisonment or executions.  It can be the calculated, top-down direction of ethnic conflict designed to unleash maximum violence or the imposition of martial law to avoid unnecessary bloodshed.  In effect, it can be almost anything so long as it's bold and redraws the lines of uncertainty and disorder set in motion by the Y2K Event.  But as with any attempt to "seize the bull by the horns," unintended consequences can abound.  In short, it can be a very wild ride.

We define the Exit Point dynamic as the beginning of the Legal Deconstruction, meaning anything from letting the lawyers "go at it" to the collapse of a coalition government and the resulting special election, to the passing of new laws, to the resignation of top government officials, to special government investigations as to "what went wrong," and so on.  In short, the legal deconstruction is nothing more than the resumption of standard government procedures for "digesting" a crisis experience and moving back to "life as we knew it."   Obviously, this is where many of Y2K's legacy issues will be dealt with.  Likewise, this is where the great social debate will be held as to whether Y2K represented a unique, almost exogenous event akin to an Act of God, or the harbinger of what instability and crises will look like in the next century.

The legacy issue of the political realm is Y2K's potential to alter leadership rosters.  Obviously, Y2K will occur on someone's "watch," so popular perceptions of the current government's handling of its crisis management duties will determine the likelihood of turnover by either legal (e.g., elections) or extra-legal (e.g., revolts) means.  New Rulers are likely to arise on the basis of:

• Popularity untainted by the crisis (e.g., leaders in exile or out of power)
• Popularity achieved during the crisis (e.g., military or technically-focused leaders)
• Popularity on the basis of representing a stark alternative (e.g., so-called Green or anti-technology/development leaders, those advocating a "simpler lifestyle" or a "less Western lifestyle, those advocating a return to "better values")
• Willingness to take advantage of disorder through bold political means (e.g., revolutionaries, dictators).

Looking across the other legacy issues defined earlier (New Faultlines, New Rules, New Faiths), it's not a great stretch of the imagination to say that Y2K, if it were to unfold as a global event of significant disturbance, has the potential to represent a turning point in human history, coming as it does on the heels of the end of the Cold War, the rise of Globalization, and the unfolding of the Information Revolution.  Then again, history is rarely scheduled as neatly as Y2K.

VI. Some Preliminary Thinking on CINCs' Strategies

Missions the U.S. Military Might Have to Perform

Slide 25 below presents a list of missions we think the U.S. Military could be called upon to perform across the six-phase timeline of our Y2K Scenario Dynamics Grid.  We don't mean--by any stretch of the imagination--to suggest that all of these missions are likely to be performed.  Rather, we're simply hypothesizing what the U.S. Military could be called upon to do if the National Command Authority (e.g., the President) saw reason to respond to any of the particular dynamics listed below with regard to any country or region of the world.  Like the Scenario Dynamics Grid itself, this is another "smorgasbord" listing of possibilities, designed to orient U.S. political-military decision makers as to the potential breadth and scope of the problem.

Along those lines, you'll note that we're not talking here about inter-state wars or full-blown military "sneak attacks."  Instead, our advice is geared more to U.S. Military interventions abroad in states or regions undergoing significant dislocation and dysfunction as a result of the Y2K crisis.  As such, note also that we really haven't ginned up any new or exotic "Y2K missions."  That could reflect the limits of our imagination, but we think not.  Rather, our list speaks to the great breadth of missions that the U.S. Military already undertakes on a regular basis all over the world.  It also reflects the underlying reality  that if Y2K is going to be all about the breaking down of connections and infrastructure, then the military remains--to the extent its own Y2K house is in order--ideally suited to responding to such crises if they are deemed in the national security interests of the United States.

In short, the military (really, all militaries) are built around the principle of making things move and work under conditions of great environmental distress (i.e., war) or where infrastructure is lacking (i.e., remote or austere locations).   Of course, given the logical localizing effect of any significant Y2K unfolding (i.e., communities cut off from one another and outside help in general), local resources will be the key--thus the useful emphasis on grass-roots responses wherever possible.  Just as obviously, we note that, in the grand scheme of all things global (such as Y2K), militaries in general represent a relatively scarce resource that should only be used in a strategic fashion.  Simply put, militaries in general, much less the U.S. Military, cannot be the cure for whatever ails the world as a result of Y2K.  This resource represents but one of many social assets that can be applied to triage what may turn out to be a very broad and interconnected problem.

Slide 25: Possible U.S. Military Missions Arrayed Across Scenario Dynamics Grid

So, if Y2K turns out to be significant and long-lasting in the manner suggested by our six-phase scenario time line and associated dynamics, we foresee ten mission categories possibly arising:

• Y2K Intelligence Preparation of the "Battlefield" (Network/Business/Social Response-Mania/Countdown) refers to the normal pre-crisis/conflict gathering of information relevant to possible downstream missions.  As such, any CINC is likely going to want to know the answers to four essential questions:
  • Which countries in my AOR (Area of Responsibility) are most vulnerable to Y2K?
  • How may the U.S. Military intervene most effectively to help nation states restore network operations?
  • Who may seek to take advantage of Y2K to pose security threats to U.S. interests in the region?
  • How much may Y2K be "worth" to the United States in this region?  And what are we as a nation willing to pay for it?

• Logistic/Network "Tiger Teams" (Network-Onset) refers to sending specialized personnel into a particular country to help authorities bring crucial network nodes and/or facilities back online during the onset of the Y2K event.  Since such assets are typically scarce resources, any such efforts are likely to be focused on host nations where U.S. military bases are located so as to ensure sufficient infrastructural support to allow continued operations.  Beyond that we're talking about either key strategic allies or key network junctures that support the global economy--usually one and the same.
• Freedom of Navigation/Escort Operations (Network-Peak/Exit) refers to role the military can play in providing security for the transport of essential resources during periods of crisis when criminal or rebel elements tend to be more bold.  As we've learned in previous interventions abroad during Complex Humanitarian Crises such as Somalia in the early 1990s, it's not enough to guard relief supplies at key nodes (usually metropolitan centers).  You also have to provide security as they are transported between key nodes, for it's there where the pirates, bandits, mafia or rebels tend to lurk, thus exacerbating the already bad resource strain.
• Complex Humanitarian Emergencies, or CHEs (Business-Onset/Unfolding/Peak) refers to a total breakdown of the civilian economy and the resulting loss of social and political control by authorities, otherwise known as a "failed state."  What happens here is typically the Non-Governmental Organizations (NGOs) and Private Voluntary Organizations (PVOs) of the international relief community come to the fore and administer broad-scale relief, while the U.S. Military or United Nations Peacekeeping forces provide infrastructural assistance (e.g., logistics, essential security, basic government services) designed to help local authorities "get back on their feet" and resume political control over a reasonably stable economic and social situation.
• Show of Force (Social Response-Onset) refers to prepositioning of military assets or troops at any location within a CINC's AOR so as to signal U.S. resolve regarding, and the capacity for responding to, threats to U.S. national security, to include threats to friendly or allied governments. This is obviously a tricky thing to figure out beforehand with Y2K, because it won't necessarily be clear which situations of value to the U.S. will be threatened by Y2K, or when.  Nonetheless, certain key relationships or situations are routinely identified as possessing high U.S. national security value, and these are likely to receive special attention as the 010100-threshold approaches.
• Medical Support (Social Response-Unfolding) refers to the Iatrogenic dynamic by which ordinary people do stupid things under conditions of duress and end up hurting themselves in significant numbers, either by injury, the spreading of disease, or poor responses to physical deprivations brought about by network failures.   Obviously, we're talking here about situations of sufficient scope to overwhelm local medical response capacity, which, in many nations around the world, is rather limited in comparison to the United States.
• Chapter 7 Humanitarian Interventions (Social Response-Peak) refers to the potential for Scapegoating during the worst periods of any Y2K event, and the potential for military interventions designed to protect the targeted demographic group by either providing safe havens or repelling/disarming those inflicting the violence. This can range from spontaneous riots to top-down directed efforts at ethnic cleansing.  Along these lines is the potential for certain governments or political movements to target members of opposition groups opportunistically in conjunction with the Y2K event.
• Military-Military Programs (Governance-Mania) refers to the typical U.S. military cooperation with foreign militaries that we conduct on a regular basis around the world, with the notion here being that such activity should be focused on raising local military awareness of the possible Y2K scenario dynamics that may arise in any one nation or region.  Likewise, if any CINC engages in training and/or exercises for the 010100-turnover, serious consideration should be given to including as many allied militaries as possible within any AOR.  In short, outreach ends on 010100, so it's use or lose it.
• Information Warfare/Defensive (Governance-Countdown) refers to protecting the critical information infrastructure of the United States and its military/diplomatic facilities around the world against the First Strike potential of those elements that would mark the 010100-threshold by engaging in protests or criminal or terrorist acts.  Obviously, the U.S. Military must be most concerned with maintaining its own capacity for tracking events globally, for once lost, our collective ability to manage any subsequent crises evaporates.  Once secured, though, any capacity we may offer to allies and friendly regimes in terms of facilitating their own defenses against such attacks represents a significant value added to international security during this potential global crisis.  Likewise, this experience may end up telling us much about what the U.S. may be able to offer allies in the future under the rubric of an "information umbrella" akin to the nuclear umbrella of the Cold War era.
• Counter-Terrorism/Crisis Response (Governance-Onset) refers to standard counter-terrorist operations and generic crisis response capabilities every CINC possesses.  The key issue here is not how to apply these assets, but where, when and why?  Other than the obvious threat to U.S. citizens and facilities abroad, the trick will be in determining which situation is worthy of a U.S. response, and which should be allowed to play out under strictly local conditions involving local players--a sort of "let it burn" strategy.  What will be unclear during the 010100 transition is whether any outbreak of terrorism or crises represents a one-shot deal, or the beginning of a lengthy wave that will feed off a subsequently significant unfolding of the Y2K Event.  If the former holds true, then any 010100-centered outbreak would logically be dismissed as so much "white noise" associated with the Millennium Date Change Event, with U.S. assets better held in reserve for other, possibly far larger crises.  If the latter were true, then an early-on blunting of such activity could prove decisive in the end.
• Non-Combatant Evacuation Operations, or NEOs (Governance-Unfolding) refers to the evacuation of U.S. citizens from foreign countries when broad-scale threats arise as to their safety.  With regard to the Y2K scenario, this corresponds to the dynamic of Backlash that may unfold as Y2K's breadth and depth become more apparent and people grow angry with authorities for not preparing better, not telling them more in advance, etc.  Since Y2K is easily identified in many cultures with the United States and the West in general, U.S. citizens and firms operating abroad may make inviting targets for those local elements (either public or private) seeking foreign scapegoats to "atone" for whatever economic or social dislocation results.
• Information Warfare/Offensive, Special Operations Forces, Covert Operations (Governance-Peak) refers generally to the range of extraordinary or special military operations that are logically considered as being "on the table" if U.S. national security interests are subject to grave risk abroad during the height of any Y2K-related political crises.  In essence, if countries of high value or interest to the United States are experiencing a peak-range confluence of Y2K-triggered dynamics as described by our model, it's only reasonable to expect that we'd consider using such extraordinary instruments of influence.

Again, looking over this list of possible missions, one is tempted to wonder whether or not we've lent too much drama to the Y2K Event. But understanding our goal of thinking through the permutations of a significantly disabling global unfolding of Y2K, we come away from the list less impressed by what we've included that what we've left out: specifically combat operations associated with a major regional contingency.  While there's nothing to say that a major regional contingency (also known as a war) can't happen during the Y2K Event, we note that even this stressing rendition of a generic Y2K scenario doesn't easily lend itself to contemplating such large-scale scenarios.  To repeat, Y2K impresses us as a localizing phenomenon more likely to create civil strife and internal breakdown in political order rather than trigger inter-state conflict.  To the extent this is true, U.S. Military operations in response to Y2K-related crises abroad will fall wholly under the rubric of Military Operations Other Than War (MOOTW), meaning that if Y2K represents a harbinger of global systemic crises of the 21st Century, it may represent a significant reordering of U.S. Military force structure and operational priorities.

Primary Tasks, Strategic Choices, and Key Uncertainties

Slide 26 below presents a CINC-specific version of the Scenario Dynamics Grid which focused on the primary task CINCs face in each scenario phase, plus the main strategic choice and key uncertainty each faces in making that choice.  Obviously, we presume a lot here, as any CINC is going to understand his AOR a lot better than a bunch of academics sitting in Rhode Island.  But, going with the proposition that it's always easier to respond to a straw man than gin up ideas from scratch, we toss this CINCs' Scenario Strategy Grid out on the table to start the conversation.

Slide 26: The CINCs' Scenario Strategy Grid

In the Mania Phase, we see the primary task as Update existing plans.  Again, our list of "Y2K missions" is fairly standard, and there's almost nothing we can tell a CINC about doing any of those tasks better.  What we think needs to be done, though, is a review of the extant plans--a scrubbing, if you will--to take into consideration the environment within which those standard missions may occur.  So while the plans may largely remain the same, the execution may differ somewhat during the Y2K event due to the dynamics we presented earlier, not to mention the Y2K vulnerabilities faced by the military itself, especially in the area of host-nation support.

The strategic choice here is the Degree of outreach, meaning how much does the CINC open up to countries (both friendly and not-so-friendly) within his AOR regarding the common and individual security challenges they may face in the coming months?  As with any position of high authority, this is a very tricky question that involves walking a fine line between motivating your audience and scaring them into either misdirected action or inaction.  Probably the stickiest issue here involves the sharing of information or intelligence, for, as with so many aspects of the Y2K Event, this particular issue will tell us much about the price of secrecy and the promise of transparency.

Finally, the key uncertainty here is the typical $64,000 question: how vulnerable is the AOR?  Our back-of-the-envelope analysis suggests the following:

• EUCOM probably faces the least challenge of the four warfighting CINCs, since Europe as a whole probably does fairly well.
• SOUTHCOM faces some real challenge, because several countries in Latin America may do quite poorly, although the security risk here will be low and the focus on relief support.
• PACOM faces even more challenges, because many large economies in Asia may do quite poorly, and because there are key security tensions in the region (e.g., Koreas, Pakistan-India, Indonesia).
• CENTCOM probably faces the biggest challenge of the four warfighting CINCs, since the Mideast as a whole has done poorly in Y2K remediation and is quite vulnerable in terms of having centralized, monoculture economies paired with relatively authoritarian political regimes.

Clearly, the CINCs need to do everything they can to ramp up their level of awareness regarding key individual countries within their AOR in the time remaining.

In the Countdown Phase, we see the primary task as Exercises and ramping up Command and Control focus regarding Y2K.  Obviously, command personnel in the AOR field need to be up to speed as the 010100-threshold approaches, and whatever efforts can be made to train the HQ command staff that will be on hand for the first few weeks of 2000 will probably pay off.  In short, no command personnel should enter the Y2K Event without receiving an immersion in the range of potential situations and dynamics they could face--thus avoiding the utterance, I had no idea it was going to be like this!

The strategic choice here is the Force Posture question, meaning does the CINC want his forces spread out across the AOR in anticipation of the 010100-threshold, or does it make more sense to have the forces pulled in and ready to move out in whatever direction seems most appropriate once Y2K begins to unfold?  A big factor here, obviously, is that nature of the CINC's trust in his own networks, i.e., the more vulnerable he feels, the more likely he is to keep forces closer in to HQ and vice versa.  Then there's the issue of raising expectations by forward presence, and the possibility that moving forces after 010100 could create tensions in those areas of departure (i.e., Why are you leaving us and going over there?).  Clearly, this is a very tricky subject full of political-military nuances.  Finally, there's the issue of whether any special force posture can be justified, given the overall lack of knowledge as to how Y2K will unfold.  In short, any force posture is likely to be off-base in some unforeseeable manner.

The key uncertainty here is the politically-charged issue of the CINCs' ability to access specialized reserves and National Guard forces for duty overseas.  Therefore, as resources go, it quickly becomes a homeland vs. CINCs dynamic.  Naturally, National Authority Command decision making will favor the U.S. domestic scene over the international scene, thus the capacity of state governors to tie up such personnel through the first days of 2000 is a given.  The big question here is how long will it take for the U.S. to become comfortable enough with Y2K in the domestic arena to allow CINCs' access to these personnel for employment overseas, where their specialized skills may be crucial to many of the missions listed above.

In the Onset Phase, we see the primary task as Intelligence regarding Y2K's unfolding, with the obvious question being, What's going on that we can definitely link to Y2K?  So it's not only understanding the breadth of activity across the AOR (something the CINC's staff performs on a routine basis), but also the capacity to disaggregate Y2K-direct failures from fellow travellers, secondary and tertiary cascading failures, and then also the iatrogenic factor of "people doing stupid things under stressful conditions."  The only useful rule of thumb we think we can offer here is as follows: treat clearly identified Y2K "disease" wherever it triggers significant security problems, otherwise concentrate on "symptoms" of distress and assume the private sector will deal with the "disease."

The strategic choice here is the Move vs. Wait question, meaning when does the CINC--in conjunction with NCA directives, naturally--know enough to move ahead and assume a proactive posture.  At first glance, the answer may seem obvious, as in "move when you see a problem you can deal with!"  But given the fact that the 010100-threshold may represent only a small fraction of Y2K's ultimate unfolding (only 10 percent, according to the Gartner Group), there's a clear disutility to responding too frantically to the "opening shots" of what may be a far larger "conflict."  Certainly, the CINC must feel confident that his own house is in order before doing anything, and how long it takes to ascertain that is not easy to predict.   But once beyond that threshold, the move-vs-wait question looms very large as a national security issue--one we must essentially resolve "in the dark" until we come to a clear consensus as to how much Y2K is worth to U.S. foreign policy.

The key uncertainty here highlights the difficult of the move-vs-wait issue, for no matter when the CINC and NCA decide to move ahead to deal with whatever Y2K-related crises arise in any AOR, no one can be sure how many Unknown Unknowns are still out there.  In effect, once military forces leave the security of the base or garrison, they enter into the larger process of Y2K's unfolding on the international scene and thus become caught up in the larger dynamics they seek to mitigate or mollify.  A force in reserve represents an asset, whereas a force incapacitated in the field represents a liability.  Once committed to the open playing field of Y2K, it may be quite difficult to "turn back the clock" and resume any pre-game position.  So while some may argue, "use it or lose it" on the employment of military forces in response to Y2K, the counter-argument may be made that, "once you use it, you may lose it."

In the Unfolding Phase, we see the primary task as Consequent Management of whatever political-military crises erupt and meet the NCA's criteria for response.  Again, we see the CINC conducting standard missions under non-standard conditions.

The strategic choice here is the Triage questions of what and where?  Any such thinking along these lines depends heavily on how the U.S. values Y2K in the aggregate sense--namely, what is Y2K worth to the U.S.?  Without a sense of the aggregate value of Y2K, prioritizing individual crises in the manner of triage becomes difficult, unless we simply fall back on the notion that our allies come first, our friends second, and our non-friends last.  However, a wholesale borrowing of the national security template for implementing Y2K crisis response may well prove to be misguided for anything other than maintaining our current security relationships around the world--i.e., it may poorly capture our long-term economic security concerns surrounding Y2K's ultimate impact.

The key uncertainty here is Troop Morale.  For example, suppose Y2K's immediate unfolding in the U.S. is minimal and we end up committing forces abroad in crisis response actions stemming from Y2K-related problems.  What might be the effect on troop morale in the field if the situation subsequently deteriorated back in the United States, or, more likely, back at the overseas base?

In the Peak Phase, we see the primary task as Juggling Resources across whatever crisis response missions the CINC might be pursuing across his AOR.  As described in the Scenario Dynamics Grid, we think the military's role as Network Leviathans (i.e., making things move when the usual networks are incapable) may constitute the most crucial impact it can have during the worst points of the Y2K Event.  Thus, in the end, it may be TRANSCOM that turns out to be the most important CINC-dom.

The strategic choice here is the question, How much do you throw in? Again, this choice revolves largely around the question, How much is Y2K worth to the U.S.?  While it's easy to say that Y2K is not a problem the military can "solve," there is the undeniably reality that many states around the world will feel the strong temptation to play the blame game on Y2K, with the United States as the most logical target of anger.  After all, we're the clear global leader in IT, and Y2K is largely of our "creation." After all, if you buy into the notion that a country can take credit for a technological revolution, then you certainly shouldn't be surprised that many might blame that same country for a global technological snafu--especially if it ends up dropping those countries farther back in the economic "race."  Y2K may be a no-win situation for the U.S., thus suggesting a low value be assigned.  But it's likewise also a potentially big loss situation in terms of foreign policy aftermath.

The key uncertainty here is the potential resource competition, CINC vs. CINC, as Y2K reached its peak-level impact.  This would not only entail the competition over scarce resources across AORs, but also the competition between resources for Y2K-related crises versus more traditional fellow travelers that could opportunistically appear during the same time frame.  For example, suppose North Korea attacks South Korea, believing its defense is hobbled by Y2K failures.  Under normal circumstances, that Major Theater War, or MTW, would automatically assume top priority, just as the far smaller Kosovo bombing campaign recently achieved.  Now, it may seem completely reasonable to state that such a scenario should automatically receive top priority, but if the competing broad threat is a global economic meltdown triggered by Y2K, then must that priority status automatically be given over to the Korean scenario?  Or does the Korean scenario immediately fall into some sort of quasi-Cold War domino status, meaning the U.S. must show resolve here lest the world think everything's fair game now that Y2K has turned out to be substantial.  Again, it all depends on how you value Y2K in terms of U.S. short-term and long-term interests.

In the Exit Phase, we see the primary task as the Gracious Hand-off, which basically assumes that the U.S. has engaged in some collection of military interventions and/or missions related to Y2K, and now seeks to disengage itself from the environment following the close of the Y2K Event.  This is nothing more than implementing your exit strategy in a graceful manner, but it does bring up the issue of what would constitute the criteria for ceasing an intervention that was triggered by Y2K-related failures.  For example, if we intervene in a country because the network failures triggered mass unrest, do we leave once the network function is restored, or when the mass unrest dissipates?

The strategic choice here is the question of When to declare victory?  Clearly, this is a crucial choice for the United States Government, for while there will be strong political pressure to declare Y2K "over and done with" domestically as quickly as possible (i.e., we will be on the eve of the presidential primary season), it seems only reasonable to expect that a different calculus may need to be employed regarding overseas situations.  The U.S. will likely be viewed as a "winner" in the Y2K Event, so it's behavior toward so-called Losers will be closely watched by the international community.

The key uncertainty as the Y2K Event wraps up for the CINCs is the amount of damage done to rotation schedules and overall OPTEMPO.  While the civilian world might feel itself justified in luxuriating in some sort of Y2K "hangover" period, the military community will simply resume its normal duties, which, as we'll discuss below, are fairly substantial at this time.

How Much is Y2K Worth to the U.S.?  Thinking About a Maximum DoD Crisis Load

Table 1 below represents our attempt to develop a back-of-the-envelope measure of how many crises the U.S. Military can handle at the current time.  By developing a sense of how many crisis response "chits" the Defense Department could employ during the Y2K Event, and then noting how many of those are likely to be unavailable due to ongoing operations, we get a sense of how much more the DoD could handle regarding Y2K above and beyond its current activity load.

CINCdom	CRISIS UNIT	CURRENTLY IN USE?
SOUTHCOM	1	Available
EUCOM	1	In Use--Balkans
"	2	In Use--Balkans
"	3	In Use--Balkans
"	4	In Use--Balkans
"	5	In Use--Northern Iraq
CENTCOM	1	In Use--Iraq
"	2	In Use--Iraq
"	3	Barely available--Focused on Iraq
"	4	Available
PACOM	1	Available
"	2	Available
"	3	Available

Table 1:  Back-of-the-Envelope Calculation of DoD's Crisis Management Load Capacity, With Estimate of Current Load

Our reasoning here is fairly simplistic.  We started with SOUTHCOM, the smallest of the warfighting CINCs and decided to give them one crisis response chit, which we define as something roughly analogous to Operation Just Cause, or the invasion of Panama to capture Manuel Noriega in 1989.  Given that valuation for SOUTHCOM, we decided to award the remaining CINCs the following number of crisis response chits:

• EUCOM: five
• CENTCOM: four
• PACOM: three.

That gave us a total of 13 crisis response chits of the size of Just Cause.

Next we decided how many of those 13 chits were likely to be available as of 010100.  Despite the continuing activity of SOUTHCOM troops in relief efforts connected with Hurricane Mitch, we felt that this CINC would have its single chit available for use come 010100.

With EUCOM, our sense is that, between the constellation of Balkan operations and its Northern Watch (No Fly Zone) duties in northern Iraq, that CINC's five chits were all likely to be unavailable come 010100, especially given the additional burdens accruing from the ground presence in Kosovo.

With CENTCOM, our sense is that their current conduct of operations involving Iraq takes two of their four chits off the table.

Finally, with PACOM, we foresee all three chits being available at the 010100-threshold, although either a China-Taiwan or a Koreas scenario could easily intervene between now and then.

Add that current level of activity up, and what you see is that, of the 13 possible crisis response chits, the U.S. is likely to have only 6 available as Y2K unfolds.  Speaking geographically, the U.S. is likely to have but one crisis response chit for the Western Hemisphere, roughly two for the Middle East and Africa (thinking of EUCOM and CENTCOM as a whole), and three for all of Asia and the Pacific region. This is a very generous calculation that could easily be criticized as overly optimistic.

What's important to remember about this calculation is as follows: any MTW would automatically eat up the remaining six crisis response chits, meaning a substantial Iraq, Korea, or South Asia scenario--if pursued--would effectively rule out any U.S. Military response capacity for Y2K.   In short, if an MTW scenario rears its ugly head, the U.S. needs to ask itself whether or not such a standard political-military scenario represents a value significantly greater than the aggregate global damage that may be caused by Y2K.  For if the U.S. chooses to pursue an MTW scenario, it will effectively write off Y2K on a global basis as far as any military crisis response is concerned.  In the end, this may be a perfectly reasonable choice, but make no mistake--it is a huge choice fraught with great uncertainty as to the long-term outcome.

U.S. Foreign Policy Legacy Scenarios:  Who Feels the Pain?

Slide 27 below presents a rather simple two-by-two matrix that explores the notion of Y2K's legacy for U.S. foreign policy, something that we think the CINCs need to consider as they think ahead on their AOR strategies regarding Y2K crisis management.

Slide 27: Possible Y2K Legacy Scenarios--U.S. versus World

The four legacy scenarios are built off of two very basic questions:

• How bad is Y2K for the U.S.?
• How bad is Y2K for the rest of the world?

In the best outcome (Not So Bad for both the U.S. and World), we predict that Y2K will go down in history as one big Rorschach Test, meaning each country will take from the experience that which serves them best--proximately, a rationalization of their Y2K response strategy and ultimately, a justification of their overall economic development strategy.  For example, for those who prepared much, they'll claim Y2K proved the utility of their proactive approach, while those who prepared little might claim that it was all a big hoax perpetrated by the U.S. in particular or the West and its mass media in general.  By and large though, countries and cultures will emerge from the experience with most of their biases about IT intact (e.g., it's great, it's evil, it's progressive, it's destructive).

In the next best outcome for the U.S. (Not So Bad for U.S. and Bad for the World), we predict that Y2K becomes further evidence in the minds of many around the planet that the U.S. is a bullying hegemon who selfishly looks out for its own interests while trampling those of others.  In effect, the U.S. will Win the Battle, But Lose the Peace.  Y2K will be viewed by many countries that fall further behind in the New Economy race as just another power play pulled off by the United States, wherein our dominance is reasserted in humiliating fashion.  After all, we created the crisis, then somehow managed the solution in such a way as to benefit ourselves while damaging the economies of others.  Our motivations or our efforts in trying to mitigate Y2K's global impact will matter some, but coming on the heels of the Global Financial Crisis of 1997-98, it will seem like every global game is increasingly tilted to the advantage of the U.S. and the disadvantage of emerging economies.

In the next worst outcome for the U.S. (Bad for the U.S. and Not So Bad for the World), we predict that Y2K could trigger a strong isolationist streak in the United States.  By Atlas Shrugged, we suggest that the U.S. would, in a fit of peak, essentially "take its ball and go home," being unwilling to "play" anymore in the global economy in the same free-wheeling and no-holds-barred manner of the 1990s.  In effect, the Y2K Crisis would be a crisis of confidence for the United States, especially since it would catch us so much off guard and challenge all our suppositions that our mastery of the New Economy made us invincible to severe economic downturns.  Of the four legacy scenarios, this one strikes us as least likely, but because that's so, we find it completely plausible given the shock value.

In the worst outcome for all involved (Bad for both the U.S. and World), we predict that Y2K would have posed a horrible dilemma for the United States: either we would have tried to play System Administrator to the world and worked hard to mitigate Y2K's damage around the globe, probably at huge cost to ourselves, or we would have--at some point--thrown in the towel, pulled up the Firewall around our nation, and simply ignored the rest of the world's pain.  The key question here (beside the usual one about "How much is Y2K worth to the U.S.?) is which pathway would be less traumatic?  Trying to play superpower to the world and failing?  Or taking a cruelly calculating stance that says, "sometimes Nature just has to take it's course?"  In effect, our dilemma would be between trying to put out all the fires or just letting them burn uncontrollably, for like a raging forest fire, there may be few reasonable choices in-between.

VII. A View From Wall Street

Are We Moving to a New Global Rule Set?

If Y2K had happened back in 1995, it certainly would have been a different beast, and not just for the lack of any accompanying Millennial Mania.  Back in the mid-90s we were talking about the "end of the business cycle" and the New Economy in such bold tones as to suggest that this current era of globalization (the first being from the 1880s to approximately 1929) would seamlessly and quickly knit the planet together in a win-win manner.  In short, everyone was going to make lots of money and everyone was going to move up at roughly the same pace.

Of course, what's happened since then has tempered much of the naive enthusiasm about globalization, emerging economies and the New Economy.  The Global Financial Crisis (Asian Flu of 1997 spreading to Russia and then Brazil in 1998) effectively left the global economy with only two vibrant engines of growth: North America and Europe.  Since that time, Europe has likewise suffered an economic slowdown, leaving really only the United States and its "Goldilocks Economy" (and the U.K., to a certain extent) still riding the great 90's bull market.

When, not too long ago, the conventional wisdom on Y2K was that the most advanced, IT-intensive economies were at greatest risk, the economic worst case scenario on Y2K was that it would cripple the global economy's #1 engine of growth, the U.S.  Today, with our current sense that the least advanced, and least IT-intensive economies are at greatest risk, the economic worst case Y2K scenario is that almost everyone in the global economy suffers badly except the U.S. and a few other, very similar economies (e.g., U.K., Australia, Canada, Israel).  So while the former scenario predicted a near-instantaneous, TEOTWAWKI-like collapse of the U.S. economy stopping the global economy in its tracks, the latter scenario predicts a slower and broader Y2K-induced global slowdown eventually lapping up on U.S. shores and ultimately derailing the Goldilocks Economy.  In essence, the shift in global recession/depression Y2K scenarios has been from "pay me now" to "pay me later," at least as far as the U.S. is concerned.

Slide 28: Time for a New Rule Set for the International Economy? (repeat of Slide 3)

No matter which scary scenario prevails, or even if neither comes to pass, it's reasonable to say that we're currently living in a rather fragile global economy, certainly one far more fragile than we assumed back in the mid-1990s.  Thus, the big picture argument for why Y2K could play a crystallizing role in terms of forging a new global consensus for international financial reform (e.g., more controls over capital flows, greater transparency among hedge funds, better accounting in emerging economies, revamping the IMF and World Bank, dollarization of certain economies) arises less from the notion that Y2K in and of itself is THE cause of a global downturn than the notion that any associated slowdown tags Y2K as an identifiable culprit that crystallizes in many people's minds all that's wrong with the current global financial system (i.e., too given to wild periods of breakneck speculation and financial tumult).  This argument was originally suggested in Slide 3, and is repeated above in Slide 28.

To repeat the basic argument:  the origins of the current Global Rule Set dates back to the Great Depression of the 1930s, which ended the planet's first great period of globalization from roughly 1880 to 1929.  That global economic downturn constituted a drastic systemic stress that gave way to World War II.  Following that experience, the great powers (at least in the West) essentially swore, "never again," and decided to erect a new international order, or rule set (e.g., Bretton-Woods, GATT, U.N., IMF and World Bank), to prevent the 1930s style economic nationalism or protectionism from ever occurring again.   Led by the United States, the Western great powers were eminently successful in this effort, and the lasting fruit of their collective labor was and is the globalized economy we now enjoy.  This feat, far more than the story of the Cold War, represents the greatest historical legacy of the post-WWII period.

The question that arises in the late 1990s, however, is whether this new, globalized, IT-driven economy has advanced to the point of outgrowing the "new rule set" of the late 1940s and early 1950s, in effect creating the need for a new rule set for the New Economy.  Those who make this call basically point to the systemic instabilities since 1997 (or even back to Mexico's peso crisis of 1994) as evidence that the old post-WWII rule set is now antiquated, thus endangering this second great period of globalization to the same fate as the first.  So it's into this somewhat shaky rule-set environment that Y2K appears as 1999 draws to a close, the basic question being, With the global economy so fragile right now, how big of a disruption would Y2K need to be to throw a wrench into the world's financial machinery, finally crystallizing a broad-scale effort to rewrite its operator's manual?

Will There Be A "Flight to Quality" Prior to 010100?

In our May workshop in New York City, hosted by the brokerage firm Cantor Fitzgerald, we presented out six-phase Y2K Event timeline to a group of Wall Street investment experts, traders, bankers, brokers and research/media types, exploring the complex question, How would global financial markets adjust to, and process the unfolding of, such a broad, stressing scenario?

Slide 29 presents "what we heard" from Wall Street in terms of the Mania and Countdown phases, or basically the build-up toward the 010100-threshold.  In this phase pairing, we proposed that Flight to Quality was the most likely global financial dynamic in response to the looming Y2K Event.  While simplifying some of the arguments greatly, we arrayed the major points offered by participants into two distinct camps--here, pro-panic and anti-panic.

Slide 29: What We Heard--Mania & Countdown (Key Issue Defined as "Flight to Quality")

We'll start with the pro-panic arguments, the first of which is the standard grip about the great bull market of the 1990s--namely, all this success makes everyone feel like they're geniuses and thus the market's never had so many idiots spending their money so foolishly as right now.  While that's been the standard cry of many "bears" for several years now, it certainly carries a lot more weight after the near-global meltdown of 1997-98, when the global market run-up in emerging markets reached great "bubble" proportions and finally collapsed in on itself.  Naturally, when the most disastrous bet made was spearheaded by a highly respected U.S. hedge fund fronted by two Nobel Economics Prize winners (Long Term Capital Management), the notion that the average investor may be in well over his or her head becomes a lot more believable.

Another pro-panic argument says that the U.S. financial markets are long overdue for a correction, noting that much of the recent run-up in stocks has been concentrated within a very small pool of highly successful New Economy firms such as Microsoft, the Silicon Valley giants (e.g., Oracle), the Internet constructor firms (Cisco), and all those "anything.com" IPOs.  Naturally, if so much of our optimism about our collective economic future is tied up in IT firms, then certainly a IT-triggered global economic shock would strike deep into the heart of investor confidence concerning the so-called Nifty Fifty.

Looking more to the U.S. investor, concern was expressed that all this "doom and gloom" flying over the media airwaves (e.g. AM radio) might trigger many to withdrawal their funds from the stock market as the year wound down, and as goes the U.S. flagship markets, so too could go the rest of the world's.  In short, given the slim foundations of this very long-in-the-tooth bull market in the United States, it wouldn't take much in terms of investor jitters to trigger a significant stampede out of equities.

Finally, there was a nagging sense that the U.S. Congress would never muster enough will to pass a liability-limit bill that would survive a presidential veto, a bit of pessimism that already seems unwarranted, as it now seems inevitable that such a bill will be signed by President Clinton.  Still, much criticism has been voiced concerning the compromise, with many strong-voiced opponents labeling the law a sell-out to big IT corporations at the expense of small and medium enterprises.

Among the anti panic arguments, the most compelling comprehensive argument was that the 1997-98 global financial crisis served to vaccinate markets against the flight to quality threat.  The argument here was many sided:

• There's a lot less "gypsy" or "hot" capital streaking around the world now
• Hedge funds have come under a lot more scrutiny after the Long Term Capital Management debacle
• Emerging markets have cleaned up their act a lot by adopting far more transparency in terms of market operations, banking, and general financial accounting practices
• Global investors are now much less naive about emerging markets
• International Financial Institutions like the IMF and the World Bank have learned much from the process, and, along with the U.S. Treasury, now act more preemptively to stave off currency crises, such as the recent rescue package for Brazil
• Markets and market players have, in general, learned much about the pitfalls of the globalizing New Economy, therefore acquiring many of the skills needed to weather whatever financial tumult Y2K might toss in their direction.

In sum, this argument states that the 1997-98 Global Financial Crisis was sort of a dry run or dress rehearsal for Y2K.

A second anti-panic argument states that even if a flight to quality occurs, it will simply "even things out" financially by moving more money into securitized debt markets in general and, within equity markets, away from the so-called New Economy heavyweights into small and middle capital firms and those old market standard bearers, the cyclicals (i.e., more industrial-era firms specializing in production).  While this shift might burst the Internet bubble, that's hardly the end of the world as we know it, and really only proves that no great laws of economics have been repealed by the Information Revolution.  In short, much ado about nothing.

A third anti-panic argument points to the clear readiness of the U.S. Federal Reserve to keep money plentiful and cheap as 1999 draws to a close.  The unprecedented step last December by Chairman Alan Greenspan to print out an extra $50 billion for injection into the U.S. currency supply signaled that in spades.  In short, this will be exactly the sort of experience the Fed was designed to mitigate, and with the impressive Greenspan at the helm, all is likely to be well in the world's financial center of gravity.

Finally, Europe feels Y2K okay as a result of going through their own vaccination-like experience: preparing for and introducing the European Monetary Unit, or Euro.  Now, the oft repeated counter to this notion is that Europe's preoccupation with the Euro's introduction in January 1999 served as a huge distraction that diminished its Y2K remediation effort, thus exposing it to more danger come 010100, but many in Europe feel--much like Wall Street does about the 1997-98 Global Financial Crisis--that much good came out of the Euro experience in terms of preparing them for new levels of coordination among state governments and financial markets.  Again, many Europeans feel the Euro's introduction taught them much of the New Economy skill set needed to deal with a systemic challenge such as Y2K.

To sum up this section, we note that the majority opinion here lay with the anti-panic arguments.  In effect, whatever financial knee jerks Y2K could trigger were seen as falling within the normal, sometimes roller coaster-like parameters of major markets in our IT-driven, globalized New Economy--definitely not for the weak hearted, but not out of the ordinary for today's financial environment.

Could Markets Go Broke in Post-010100 Meltdowns?

Slide 30 moves us on to the Onset and Unfolding phases, or basically the first several weeks past the 010100-threshold.  In this phase pairing, we proposed that Markets Going Broke was the most likely global financial dynamic in response to the Y2K Event initial unfolding.  Again simplifying the arguments, this is what we heard in terms of pro- and anti-crash rationales.

Slide 30: What We Heard--Onset & Unfolding (Key Issue Defined as "Market Liquidity")

The biggest pro-crash argument concerned oil, and the argument was an unusual one.  Most participants were sanguine about the oil companies themselves and the shipping of oil over the seas, whereas the biggest concern revolved around the transshipment ports and specifically, the record keeping or "admin."  The reality is that it doesn't take much of decrease in the flow of oil, for example, into the United States to trigger short-term price rises. A slowdown in the range of only 5 percent is sufficient to send gasoline prices significantly upward, according to Department of Energy representatives, and once that happens, the economy adjusts accordingly to account for higher cost in such a crucial commodity.  In short, that price rise alone is enough to make Wall Street sit up and take notice of the possibility of a Y2K-induced downturn.

Another pro-crash argument centered around the enterprise software systems that allow for the just-in-time supply chain margins that have come to define the New Economy.  We can sum up the Wall Street thinking here rather easily: This will be a big test of enterprise software systems. If they work, they will have proven themselves in a very profound way, but if they don't, the economy could be in for a nasty surprise.  Along with manufacturing, this argument points in the direction of the Flood Onset Model, i.e., the slow but inexorable "gumming up" of the supply chain "works," especially among critical component suppliers.

Another pro-crash argument concerned countries with xenophobic tendencies.  In short, those states that have a hard time letting outsiders help may be in for the harder times.  Taking into account that Y2K is ultimately a localizing affair to the extent it's significant, most participants assume the U.S. and Europe will do reasonably well, leading to the possibility of providing immediate help to lesser-developed countries suffering worse. Thus, to the extent that such countries are politically open to this aid (i.e., "Western help for a Western problem"), they may weather the "storm" like any other complex emergency.  However, if cultural norms or political values such as the desire for autarky ("We solve our own problems without the West's help!") predominate, the interconnected nature of the Y2K Event may force the West, along with neighboring states, to effectively "quarantine" the state in question, thus exacerbating the ongoing situation in a multiplicity of ways.

Finally, there was the sense that International Financial Institutions like the World Bank and IMF would be forced, for lack of funding, to turn a deaf ear to those states suffering Y2K-induced economic crashes that had not "cleaned up their acts" following the 1997-98 Global Financial Crisis.  In short, if you "firewalled" your economy off from the world a bit in response to IMF calls for reform, don't expect to find yourself at the top of the list for it's attention come 010100.

Moving on to the anti-crash arguments, the first and most obvious one offered was that the markets would naturally take Y2K into account when forecasting 1st Quarter earnings estimates, with consideration given to firms that experience unusually high volume in the last two quarters of 1999 and suffer a dearth of sales in the first due to a combination of Y2K disruptions and the inevitable draw down of stockpiled supplies.  In other words, so long as there's enough realistic thinking on Wall Street concerning vulnerable firms, there'll be no surprises, and since the market basically responds to "current events six months into the future," 1st Quarter activity will reflect the view of the inevitable recovery in the 2nd or 3rd Quarters, and not the immediate difficulty of the first.  In sum, losses aren't the problem, surprises about earnings are the problem.  But no surprises should happen if Wall Street firms and other markets do their homework.  Of course, this gets us back to the problem of all that self reporting that goes into generating those Gartner Group (and others) reports, but "putting on a good face for the investors" isn't exactly a Y2K-specific problem, now is it?

A second anti-crash argument cites a perceived but not yet proven IT "lockdown" by major firms, meaning a freeze on IT purchases through the last two quarters of 1999 until Y2K passes.  On this point, participants noted that IT firms had taken this dynamic into account already, and we're planning to unleash a torrent of new products during 2000.  In effect, Silicon Valley saw this lull coming and is prepared to jump start the market ASAP once the Y2K Event recedes into the background.  If Y2K turns out to be minor, then confidence regarding Silicon Valley and the Internet stocks should soar in combination with the expanding market moment for hardware and software firms.  In short, this argument is not only anti-crash, but pro-boom.

Another anti-crash argument notes the usual "January effect" whereby markets, responding to positive earnings reports from the previous year's 4th Quarter, tends to look rather optimistically toward the future year, especially if the markets end up in positive territory after the first business week (historically a good sign of positive returns for the year).  A corollary to this may be a rapid influx of cash from individual Americans who, having taken substantial amounts out of equities in weeks prior to 010100, now feel reassured enough to put their money back into play.

Finally, participants predicted that the IMF, World Bank, and the US Treasury would work hard to protect those emerging economies that had suffered much in 1997-98 but had "cleaned up their acts" as a result.  A good example of this would be the story that Thomas Friedman repeats in his book, The Lexus and the Olive Tree, where he notes how far South Korea's Ministry of Finance has come since late 1997 in terms of transparency to the outside world. In December 1997, when the country's currency was under attack by international speculators, international organizations seeking to help Seoul inquired as to the state of their foreign currency reserves, only to be lied to by the Ministry of Finance, which had claimed three times as much as it actually possessed.  Learning from that mistake, and the pounding it took from the "Electronic Herd" when the truth came out, the Ministry of Finance now sends out an email at the end of every business day detailing its foreign currency reserve holding down to the last penny.  In short, Y2K will show the price of secrecy and the promise of transparency.

To sum up this section, we note that the majority opinion here lay with the anti-crash arguments.  In effect, however Y2K unfolds over the 1st Quarter, Wall Street thinks it and other global super-markets can adjust accordingly, with the caveat being that "you're only as smart as the information you possess."

What's the Likely Long-Term Market Impact from Y2K?

Slide 31 wraps us up with the Peak and Exit phases, or basically the first several weeks past the 010100-threshold.  In this phase pairing, we proposed that Small and Medium Enterprises (SMEs) Failing was the most likely global financial dynamic in response to Y2K's peak experience.  Again simplifying the arguments, this is what we heard in terms of pro-downturn and pro-boom rationales.

Slide 31: What We Heard--Peak & Exit (Key Issue Defined as "SME Failures")

The first pro-downturn argument centered on consumer and investor confidence within the United States, and the potential for Millennarian-engendered social unrest to sap the public's optimism about the future.  For example, what would be the social climate in the U.S. if November and December witnessed several Littleton-like shooting sprees, several "Heaven's Gate" mass suicides, and one or more Waco-like standoffs between federal police forces and a Millennarian group.  It would not be overstating the possibilities to say that such a confluence of seemingly "crazy" tragedies would shove the country's collective psyche into levels of fear we haven't experienced since the 1968.

A second argument is more general, noting that the current global economic picture features really only one solid engine of growth--the United States.  As Secretary of the Treasury Robert Rubin warned repeatedly during his last weeks in office, it's simply not enough to hope that the U.S. economy can keep the global economy moving all on its own, especially given the rather slim foundations upon which recent stock market rises have occurred (i.e., the concentration on the Nifty Fifty, or New Economy/Internet/".com" firms).  Moreover, it's dangerous to assume that the IMF could do much more than help out a small handful of affected nations, given its limited resources.

Another argument turns a previous one on its head: namely, worse-than-expected 1st Quarter earnings could trigger a mass exodus out of equities, given the scary long-term perspective those numbers might create among individual investors (i.e., "Wall Street had no idea how bad it was going to be!").  Linking back to the previous negative argument concerning oil, we'd note the consensus view that no commodity cost increase could throw off earning estimates more than a rapid jump in oil prices.  More obviously, a peak Y2K environment would provide the average investor with more than enough signs that the future was uncertain above and beyond what was happening in the markets.

Switching to pro-boom arguments, many participants argued that most large firms--especially US ones--looked at the Y2K Event more as an opportunity to expand market shares than a threat to their existence.  In effect, they're defining Y2K as a sped-up market experience, not some one-of-kind exogenous catastrophe that affects all equally.  So-called New Economy firms stand at the forefront of this aggressive thinking, believing that the organizational and marketing skill sets they've mastered to flourish in the New Economy are well-suited to coming through the Y2K Event in good enough shape to capture market shares lost by less agile competitors.  In short, they don't view Y2K as something to sit out, but rather as an inevitable set of dynamics they will encounter again and again as the New Economy matures.  In their minds then, there's no escaping Y2K, so why get as good as you can at dealing with this sort of market experience?

A second pro-boom argument basically discounts the economic "threat" of high SME failure rates, noting that this dynamic is increasingly part and parcel of the New Economy anyway, where a winner-takes-all mentality prevails.  We could call it a sort of "T Rex" economy, where a relatively small number of behemoths regularly gobble up (acquire or bankrupt) smaller dinosaurs (firms), which in turn are constantly being replaced by new species, i.e., start-up firms promoting a singular service or product that eventually draw the attention of the giants.  If, many of our participants argued, the Y2K Event forces a higher SME failure rate for some significant length of time, then all we'll see is a faster concentration of wealth and market shares in a few giant firms in each industry, but no more of a concentration than would have happened without Y2K's intervention.

Another pro-boom argument says that if fortressing occurs, much of it will be time-based rather than business partner-based, i.e., you won't ditch your long-term partner, but you may force him to engage in some wholesale IT upgrade if his current system fails the Y2K test.  In effect, this has happened in many firms throughout the remediation period, as many simply found it cheaper to replace than to fix.  If this dynamic must be repeated for those who fail post-010100, it'll be hard on them financially, but doable in many instances.  And for those who can manage this, efficiencies will naturally accrue.

Finally, there is the general pro-boom argument that has long been offered regarding Y2K, especially in terms of the lengthy remediation effort leading up to the 010100-threshold: namely, all this preparation for Y2K constitutes a "great IT housecleaning" for almost all firms, organizations, and government entities--one that was long overdue.  In many instances, firms and governments have bought into the IT Revolution with little planning or forethought, resulting in a mishmash of systems and poor overall understanding of architecture and best practices.  Y2K's arrival has force many efficiencies in this regard and, in the long run, the economy will benefit greatly from them.

To sum up this section, we note that the majority opinion once again lay with the more positive perspective, making it 3 for 3.

While it's easy to brush aside such optimism as reflecting the narrow, profit-obsessed perspectives of these oft described Masters of the Universe, there are a number of good reasons to believe their opinions are not misplaced:

• Wall Street firms place a lot of emphasis on good intelligence
• They've got tremendous financial exposure on Y2K (i.e., incentive) and tremendous financial resources to deal with it (i.e., remediation)
• They are greatly familiar with the dynamics of the New Economy, and think Y2K (as a threat) is part of that paradigm they've spent so much time and money seeking to understand
• They're not naive about the risk, just confident that the markets can process that rise
• They see the recent Global Financial Crisis as a wake-up call that a good portion in the industry took seriously, especially in the United States.

Summing Up An Optimistic Wall Street:  Market Indicators

As a way of summing up the Wall Street perspective on Y2K as we found it, we'll present the participants' sense of where the markets would go if Y2K turns out to be significant (meaning these are not their predictions for markets if Y2K turns out to be less than significant). We won't offer any hard numbers here, just gross directions, although we'll note that none of the cumulative percentage swings were greater than roughly 10 percent, meaning the group as a whole did not foresee great market instability out of line with the last year or so.

Table 2 below presents the directions predicted in a significant Y2K Event across nine key market indicators based on the price levels recorded at the close of business, 30 April 1999 (last market day prior to the workshop).

INDICATOR   @ 043099	NET DIRECTION   @ 123199   Vs 043099 CLOSE	NET DIRECTION   @ 033100   Vs 123199 ESTIMATE	NET DIRECTION  @ 063000   Vs 033100 ESTIMATE
Gold   (286.40)	Higher	Higher	Lower
Oil--Brent   (16.70)	Higher	Higher	Lower
Nikkei   (16701.53)	Lower	Lower	Lower
Dow Jones  (10789.04)	Lower	Lower	Higher
Yen/Dollar   (119.40)	Higher	Higher	Lower
Dollar/Euro  (1.06)	Higher	Lower	Lower
2-Year Note  (5.05)	Lower	Lower	Higher
30-Year Bond  (5.66)	Lower	Lower	Lower
Fed Discount Rate   (4.50)	Higher	Lower	Lower

Table 2: Market Indicators in a Stressing Y2K Scenario

For purposes of clarity, we explain the results in the following method.  If the global Y2K event was significant and destabilizing, then we would expect the following trends:

• Gold would rise in cost through the start of next spring and then decline
• Oil would rise in cost through the start of next spring and then decline
• The Nikkei would decline throughout all scenario phases
• The Dow Jones would decline through the start of next spring and then rise
• The Yen would weaken against the Dollar through the start of next spring and then strengthen
• The Dollar would weaken against the Euro through the end of this year and strengthen thereafter
• The return on a 2-Year Treasury Note would decrease through the start of next spring and then increase
• The return on a 30-Year Treasury Bond would decrease throughout all scenario phases
• The Fed Discount Rate would increase through the end of this year and then decrease thereafter.

Again, in none of the nine cases did the group consensus predict a cumulative swing of more than ten percent, reflecting the overall positive tone of the workshop regarding the ability of markets to manage the global risk presented by Y2K.

Spotlight: Have We Asked Too Much of Emerging Economies Lately?

All our research to date suggests that the Emerging Economies of note (e.g., Argentina, Brazil, China, India, Indonesia, Mexico, Poland, Russia, South Africa, South Korea, and Turkey) represent a sort of "swing vote" for Y2K's ultimate global economic impact.  There seems little doubt that the most advanced economies will largely do well and that the least advanced economies will largely do poorly, so the key question remains, "What happens with the Emerging Economies?"

What troubles us and some on Wall Street with regard to this Y2K "referendum" on Emerging Economies is that it comes right on the heels of a number of other challenges that we in the West has tossed in their general direction (see Slide 32).

Slide 32: Emerging Economies in the 1990s

At the beginning of the 1990s we asked most Emerging Economies to democratize their political systems--and be quick about it!  The Berlin Wall had fallen and most in the West had rather unrealistic expectations in this regard, despite some heroic (and not-so-heroic) responses to this huge challenge by key states.  Once President Clinton came into power in 1992, the U.S. (largely led by then National Economic Council director Robert Rubin who later became Secretary of the Treasury) pushed an aggressive agenda overseas to have the Emerging Economies open themselves up dramatically to U.S. financial markets.  Succeeding in this effort dramatically over the next 5 to 6 years, the Clinton Administration provided rocket fuel to the course of globalization, freeing up the global movement of investment funds in unprecedented ways and, by doing so, creating some of the conditions that led to the Global Financial Crisis of 1997-98.  Once the Asian Flu had started, the West, again led by the U.S., pushed hard to have many Emerging Economies "clean up their acts" and reform economic practices almost overnight.  And then comes Y2K in 1999, and once again the Emerging Economies are being asked to "fix things up" and be damn quick about it!

In short, it has been one tough "row to hoe" for most Emerging Economies across the 1990s.  The amount of change they been asked to endure and promote is immense.  To the extent that Y2K proves to be a "separation point" between IT- or New Economy-competents and incompetents, one is tempted to ask whether or not too much has been asked of Emerging Economies as of late, and whether the West is really setting itself up for dangerous economic times ahead by adding Y2K compliancy to what already is an overstuffed and overly ambitious agenda of reform for these relatively fragile states.

Y2K As a Sped-Up Market Period: Winners and Losers

One of the themes of the workshop was the notion that Y2K represented a sort of deadline for entry into the New Economy of the 21st Century, with the natural question for any country being, "Are you ready?"

To the extent that one can speak of winners and losers or a "global scorecard," Wall Street definitely has some opinions about who they'd expect to do well or poorly with Y2K, which we've summarized below in Slide 33.

Slide 33: A Global Y2K Scorecard on 010100?

The first thing we can say about probably winners is that they'll look more like the U.S. than different.  By "like" we mean they'll tend to have some or most of the following characteristics:

• Proficiency in English
• Former English colony
• Democracy; federated political structure
• Distributed economic structure; free market orientation
• Wide open social scene that's accustomed to processing a certain amount of "chaos" with aplomb
• Distributed network systems (more "parallels" than "sequentials")
• Problem-solving culture that enjoys challenges as "finest hours."

Obviously, the countries that tend to have the most difficult relationships with the U.S. tend to be the states least like the U.S., so there's where you might look for countries destined for harder Y2K experiences.

Another key attribute of probable winners is lots of transparency and rules regarding domestic and international economic behavior.  The more Thomas Friedman's Electronic Herd can access in terms of good information about your national economy, the more likely it is that you'll be treated fairly (i.e., according to objective economic criteria), whereas the worse the access to good information, the more likely the Electronic Herd will interact with your economy on the basis of half-truths, rumors, and false information.

Since Y2K is considered part and parcel of the New Economy (i.e., the sort of system perturbation one just has to get used to in a globalized, IT-driven economy), the more you've mastered the skill set associated with the New Economy (e.g., ability to swap out partners at the drop of a hat, strategic alliances to hedge against uncertainty, rapid adaptation to market shifts) the better off you'll be with Y2K.  Conversely, the more your economy is based on long-term relationships that do not easily change or adapt, the harder Y2K is likely going to be for you.

Wealthier states or firms will, in general, do better with Y2K due to the resources they can free up and bring to bear in terms of both remediation pre-010100 and consequence management post-010100.  But even more important that resources is IT-savvy, since competency is the "long pole" in the tent, so some less wealthy states such as Ireland, a rising "virtual tiger economy" in its own right, should do well.  On the other hand, poor and IT-backward economies are far more likely to be blind sided by Y2K.

Finally, among the emerging economies (about 80 percent of the global population), those who have learned most and best from the 1997-1998 Global Financial Crisis (basically moving more in the direction of the previous four bullets above) will do far better than those who suffered much during the crisis and have done little to change.  In short, Wall Street views the 1997-98 crisis as a wake-up call for having your house in order regarding Y2K in that the skill sets required to deal with each crisis are similar (i.e., the "basic fundamentals").

To sum up, there's not a lot of mystery, as far as Wall Street is concerned, regarding likely winners and losers with Y2K.  Scorecards are already being prepared in global financial super-markets, and judgments are likely to be swift.

VIII. Some Cosmic Conclusions About Y2K

Our Y2K Meta Model: Connecting the Dots

While we won't pretend that we always knew where we were going with this project, it recently dawned on us that, in pursuing our various models and scenarios across our four workshops, we actually created what could be described as a Meta Y2K Model, i.e., a model of models.  Slide 34 arrays our various models, grids, etc., in what we hope is a coherent pattern.

Slide 34: Year 2000 International Security Dimension Project "Meta Model" of Y2K

We explain the growth of this Meta Model as such:

• In October 1998 we developed our Onset Models (Tornados, Flood, Hurricanes, Ice Storm) to help us and others wrap their minds around the concept of what it would feel like when Y2K began to appear.
• In December 1998 we held our first workshop, the Scenario-Building Workshop, where our functional experts helped us populate a series of generic Outcome Models (Run of the "Mille"; Humans 1, Computers 0; Houston, We Have a Problem, Y2 KO!).  At that point, we felt we had a decent sense of some "going in" (Onset Models) and "coming out" (Outcome Models) scenarios, but very little sense of the dynamics in-between, i.e., the playing out of the Y2K Event itself.
• In January 1999 we held our second workshop, the Scenario-Dynamics Workshop, where our regional experts helped us populate a generic, composite, six-phase timeline Y2K Event scenario.  The resulting framework, which we dubbed our Scenario Dynamics Grid, become our Black Box Model for explaining the range of possible dynamics that could be in play, in various combinations at various phases in the timeline, during any one country's Y2K Event experience.
• In March 1999 we held our third workshop, the Consequent Management Workshop, where our political-military experts helped us explore potential CINC strategies for dealing with Y2K-induced and related crises within individual theaters of operations around the world.  In effect, we collectively examined how the U.S. Military could influence the playing out of the various scenario dynamics captured within our Black Box Y2K Model.
• In May 1999 we held our fourth and final workshop, the Economic Security Workshop, where our financial experts helped us explore how global markets would respond to and thus shape Y2K-induced or related economic crises around the world.  Here we likewise collectively examined how Wall Street and other global super-markets could influence the playing out of the various scenario dynamics captured within our Black Box Y2K Model.
• Finally, what we hope to do in the Fall of 1999 is hold one or more additional workshops with Pentagon officials to examine Y2K Legacy Models. Here we plan to explore low probability, high impact "wild cards" that may emerge from the Y2K Event. By doing this we hope to explore two key issues:
  • How much is Y2K worth to the U.S. Government in a long-term sense?
  • What is the next Y2K-like system-wide IT perturbation upon which we should next focus our attention?
  • This is also a substantial chance that we will recongregate a portion of the participants from our four previous Y2K workshops for a Post-Y2K Analysis Workshop sometime in the late Spring or Summer of 2000 (all things going as planned!).

The Miniature Meta Model: We Call It . . . Mini Me!

Now, while we're happy that we can actually array all our models in a manner that seems to make some sense to us, we thought it made even more sense to try and distill that complex arrangement into something a bit more elegant.  This Miniature Meta Model, or what we like to call our "Mini Me" Model, boils down to two simple questions (presented below in Slide 35):

• Hardware Question:  How distributed is your country?
• Software Question: How "New Economy" is your economy?

Slide 35: Miniature "Meta Model" of Y2K, aka Mini Me

Those two questions yield four outcome boxes, which, harkening back to our original X-Y axis, allows us to string together a series of individual judgments from our various models and workshops:

• More New Economy + More Distributed = Best Case
• More New Economy + Less Distributed = Next Best Case
• Less New Economy + More Distributed = Next Worst Case
• Less New Economy + Less Distributed = Worst Case.

Which countries go where?  Well, we obviously see the U.S. and countries close to it in overall appearance and functioning to end up in the Best Case box.  On the far extreme of that, we'd expect mono-political, mono-economic, mono-cultural, centralized states like an Iran or North Korea to be potential Worst Case situations, remembering our constant admonitions about asking the "So What?" question.

The in-between cases, of course, present the most intriguing situations.

A country like Japan or France could well end up in the Next Worst Case box as countries that are fairly distributed in terms of their networks, economies, etc., but are not yet adept at the playing the "New Economy" game that stresses rapidly shifting business relationships.

Most difficult to select are examples of countries that exhibit a lot of New Economy potential or capacity, but still have fairly centralized or collective economies married to unitary political states.  These Next Best Case countries will inevitably be surprises, since they will be hit hard by Y2K, and yet seem to emerge stronger and more confident for the experience.  In this light, one thinks of possibly South Korea or even China.

Conclusion #1--How You Describe Y2K Depends on From When You View It

People who describe Y2K as "different in kind" from anything humanity has ever experienced, or something that is unique, tend to look at the event from the perspective of the past century.  But those who look at Y2K from the perspective of the coming century, exhibit the exact opposite tendencies: they tend to describe Y2K as only "different in degree" from the sort of system perturbations humanity will increasingly face as we become more interconnected and interdependent on a global scale.  In their minds, then, Y2K is a genuine harbinger of next definitions of international instabilities or uncertainty, in effect a new type of crisis that leaves us particularly uncomfortable with its lack of a clearly identifiable "enemy" or "threat" with associated motivations.

Our bottom line (paraphrasing Rick in Casablanca): We'll always have Y2K . . ..

Conclusion #2--Y2K Moves Us From Haves-vs-Have Nots to Competents-vs-Incompetents

Success at dealing with Y2K has a lot to do with resources, and anyone who believes otherwise is painfully naive. And yet, defeating the challenge of Y2K says as much or more about one's competency than it does about one's wealth.  The rich can survive Y2K just fine, but only the truly clever can thrive in Y2K, which IT competents tend to view as a sped-up market experience within the larger operational paradigm of the New Economy.  The rise of "virtual tigers" such as India's software industry, Ireland's high-tech manufacturing, or Israel's Wadi Valley, tell us that it doesn't necessarily take a wealthy country to succeed in the New Economy, just a very competent one.  Y2K may well serve as a microcosmic experience that drives this new reality home to many more around the planet: it's less about what you have than what you can do.  For in the end, Y2K is less about vulnerability and dependency, then dealing with vulnerability and dependency.  You can buy your way toward invulnerability and independency, but you can also work around vulnerabilities and dependency.

Our bottom line: Competents will thrive, while incompetents nosedive.

Conclusion #3--Y2K As A Glimpse Into the 21st Century: Divisions Become Less Vertical and More Horizontal

The 20th Century featured an unprecedented amount of human suffering and death stemming from wars, and these conflicts came to embody humanity's definition of strife--namely, state-on-state warfare.  The divisions that drove these conflicts can be described as "vertical," meaning peoples were separated--from top to bottom--by political and geographic boundaries, known as state borders.

If the 20th Century was the century of inter-state war, then the 21st is going to be the century of intra-state or civil strife.  Divisions of note will exist on a "horizontal" plane, or between layers of people that coexist within a single state's population.  These layers will be largely defined by wealth, as they have been throughout recorded history.  But increasingly, that wealth will depend on competency rather than possession of resources.

Y2K will help crystallize this coming reality by demonstrating, in one simultaneous global experience, who is good at dealing with the New Economy, globalization, the Information Revolution, etc., and who is not.  And these divisions will form more within countries than between them, as borders will become increasingly less relevant markers of where success begins and failure ends.  The coming century of conflict will revolve around these horizontal divisions.

Our bottom line:  We have met the enemy, and they is us.

Conclusion #4--Y2K Will Demonstrate the Price of Secrecy and the Promise of Transparency

Those who are more open and transparent and share information more freely will do better with Y2K than those who hoard information, throw up firewalls, and refuse outside help.  Secrecy will backfire in almost all instances, leading to misperceptions and harmful, stupidly self-fulfilling actions.  Governments must be as open with their populations as possible, or suffer serious political backlashes if and when Y2K proves more significant for their countries than they had previously let on.  People's fears about "invisible technology" will either be conquered or fed by how Y2K unfolds.  This is a pivotal moment in human history: the first time Information Technology has threatened to bite back in a systematic way.  In a very Nietzschean manner, Y2K will either "kill" us or make us stronger, and the balance of secrecy versus transparency will decide much, if not all, of that outcome.

Our bottom line: The future is transparency--get used to it!

Conclusion #5--Our Final Take on Y2K:  As It Becomes Less Frightening, It Becomes More Profound

The more you accept the notion that Y2K represents the future and not some accident of the past . . . the more you see it as different in degree than in kind from the challenges we will increasingly face . . . and the more you realize that it's part and parcel of the globalized, IT-driven New Economy than some exogenous one-time disaster, then the more profoundly will Y2K loom in your psyche even as it becomes less frightening with regard to the 010100-threshold.   Why?  Because the more it becomes associated with the broader reality of our increasingly interconnected and interdependent world, the more inescapable it becomes.  In short, you can sit out the Millennium Date Change Event and all the hoopla surrounding it, but there's no avoiding Y2K in the big-picture sense, because the skills it demands from humanity are those same skills needed for our not-so-collective advance into the brave new world of the 21st Century.

Our bottom line:  There's no escaping Y2K.

Appendix Y: List of Workshop Participants

3-4 December 1998 Scenario-Building Workshop @ Decision Support Center, U.S. Naval War College, Newport RI

The following individuals participated in the workshop:

• Wayne Bennett, lawyer, Bingham Dana LLC
• Suzanne Bergman, senior project engineer, Boeing
• Robert Bosnak, psychoanalyst, The Newport Institute
• Charles Cameron, fellow, The Arlington Institute
• Donald Clark, maritime data expert, I2 Technologies
• George Esper, journalist, Associated Press
• ADM William Flanagan, USN (ret), securities director, Cantor Fitzgerald LP
• Martin Gerra, management professor, College of Notre Dame of Maryland
• Philip Ginsberg, financial director, Cantor Fitzgerald LP
• Norm Green, deputy national intelligence officer for science & technology, National Intelligence Council
• Kent Harrington, media expert, The Harrington Group, LLC
• Michael Harrington, Y2K expert, MITRE Corporation
• Ethan Kapstein, professor of political economy, Univ. of Minnesota
• Paul Kourtz, technology expert, CIA
• Richard Landes, millennial history expert, Boston University
• Don Linford, banking official, Chase Manhattan
• Frank Mahncke, chief analyst, Dept. of Defense Joint Warfare Assessment Center
• Kenneth Malpass, telecommunications consultant, Stanford University
• Eugene Miasnikov, physicist, Moscow Institute of Physics and Technology
• Kathy Parker, social ecologist and long-time consultant to USAID
• Jeffrey Scannell, Y2K remediation expert and information technology consultant
• John Weiss, environmental affairs expert, CIA
• Nicholas Zvegintzov, software expert, Software Management Network.

13-15 January 1999 Scenario-Dynamics Workshop @ Clairborne Pell Center, Salve Regina University, Newport RI

The following individuals participated in the workshop:

• Robert Bosnak, psychoanalyst, The Newport Institute
• Mark T. Dudman, director of software development, Comverse Network Systems
• Julia B. Gippenreiter, professor of psychology, Moscow State University
• Paula Gordon, visiting research professor, George Washington University
• Gabriel Gutierrez, economic consultant, UN Economic Commission for Latin America
• George Honadle, consultant, numerous international economic development agencies
• Michael Harrington (speaker), Y2K expert, MITRE Corporation
• Paul Kourtz, technology expert, CIA
• Richard Landes, millennial history expert, Boston University
• Jennifer Lee, Latin America specialist, Department of State
• Douglas MacIntyre, oil market analyst, Department of Energy
• Sipho Veli Mahlangu, risk analyst, National Year 2000 Decision Support Center of South Africa
• Angus McCrone, economic writer and consultant, Center for Economics and Business Research (UK)
• John Noer, project director, Center for Naval Analyses
• Kathy Parker, social ecologist and long-time consultant to USAID
• Daniel Pipes, editor, Middle East Quarterly
• Tony Pryor, Africa Bureau, US Agency for International Development
• Jeffrey W. Schneider, South Asia specialist, Department of State
• Paul S. Triolo, Asian specialist, Department of State
• Mitzi Wertheim, senior manager, The CNA Corporation.

4 March 1999 Scenario-Strategies Workshop @ The CNA Corporation, Alexandria VA

The following individuals participated in the workshop:

• CDR Charles Adams, Y2K liaison, U.S. Coast Guard
• Ken Alnwick, Director of Gaming and Simulation Programs, Kapos Associates Inc.
• CAPT Joe Bouchard, staff member, National Security Council
• Jim Caverly, Office of Science and Technology Policy, Department of Energy
• VADM Arthur Cebrowski, President, U.S. Naval War College
• Ed Deagle, chairman, Potomac Finishing Company
• LTC Bill Finehout, J7 staff member, Joint Staff
• Jeff Gaynor, Director of Y2K Operations, OASD C3I
• CAPT Bill Gravell, staff member, CNO Executive Panel (N00K)
• Michael Harrington (speaker), Y2K expert, MITRE Corporation
• Paul Kourtz, technology expert, CIA
• Richard Landes, millennial history expert, Boston University
• Jennifer Lee, Latin America specialist, Department of State
• Maureen Lischke, administrator, U.S. Army National Guard
• Frank Mahncke, chief analyst, Dept. of Defense Joint Warfare Assessment Center
• Jim Melnick, J2 Y2K Working Group member, Joint Staff
• John Osterholz (presenter), Director of Information Integration and Interoperability, OASD C3I
• Daniel Pipes, editor, Middle East Quarterly
• RADM John Sigler, Director of Strategic Plans and Policy (J5), CENTCOM
• Olen Sisson, senior analyst, Department of Navy
• Paul S. Triolo, Asian specialist, Department of State
• Mitzi Wertheim, senior manager, The CNA Corporation
• Robert S. Wood, dean, U.S. Naval War College.

3 May 1999 Economic Security Workshop @ Cantor Fitzgerald LP, World Trade Center, New York NY

The following individuals participated in the workshop:

• Bill Bone, Year 2000 administrator, NASD
• Dan Casey, IT administrator, Paribas
• Jim Caverly, Office of Science and Technology Policy, Department of Energy
• Len Costa, reporter, FORTUNE
• ADM William Flanagan, USN (ret), securities director, Cantor Fitzgerald LP
• Philip Ginsberg, financial director, Cantor Fitzgerald LP
• Calvin Gooding, trader, Cantor Fitzgerald LP
• Norm Green, deputy national intelligence officer for science & technology, National Intelligence Council
• Damien Hart, chief trader, West Deutschelandes Bank
• Kent Karosen, director, Cantor Fitzgerald LP
• Glenn Kirwin, senior trader, Cantor Fitzgerald LP
• Carolyn Landry, banking and finance analyst, National Intelligence Council
• RADM Peter Long, Provost, U.S. Naval War College
• Paul Nicholas, staff member, U.S. Senate Special Committee on the Year 2000 Technology Problem
• Michael J. O'Connor, Y2K administrator, Merrill Lynch
• John Rice, U.S. Treasurer, Citicorp Bank
• William G. Roe, syndicate manager, Melhado, Flynn & Associates
• CDR Gary Shrout, public affairs officer, U.S. Naval War College
• Richard R. Snape, COO, Telerate
• Robert Stevens, National Information Protection Center, FBI
• Mitzi Wertheim, senior manager, The CNA Corporation
• Robert S. Wood, dean, U.S. Naval War College.

How to contact Professor Thomas P.M. Barnett

phone:

401.841.4053

email:

barnettt@nwc.navy.mil

mail:

Dr. Thomas P.M. Barnett, Code 39 (McCarty-Little Hall/DSD), US Naval War College, 686 Cushing Road, Newport RI 02841

Blast from my past: U.S. Naval Institute Author of the Year (2002)

Dr. Thomas Barnett named Proceedings 'Author of the Year'

By Lt. David Ausiello

Copyright: The Newport Navalog (5 April 2002)

Newport, R.I., April 3, 2002 -- If you are looking for Tom Barnett on a Saturday afternoon this summer, you may not have to look any further than Second Beach.  Chances are you will find him there, showing his 7 year-old son, Kevin, the fine art of boogie-boarding.  Locating him during the week, however, could prove to be a little more difficult.  You could try his office at the Naval War College, where he is a Senior Strategic Researcher in the Decision Strategies Department.  Then again, you could look in Washington D.C., where he works as an assistant to Retired Vice Adm. Arthur Cebrowski in the Office of Force Transformation.  If you still haven't been able to track him down, try calling him on one of the two cell phones he keeps firmly attached to his belt.  One organization that undoubtedly possesses one of these numbers, is the U.S. Naval Institute.  For the past nine years, Tom Barnett has been writing articles for their Annapolis-based magazine, Proceedings, and on April 3rd of this year, he was honored as their 'Author of the Year' for 2001.

Vice Adm. Dennis V. McGinn (center), Deputy Chief of Naval Operations for Warfare Requirements and Programs presents Prof. Tom Barnett (left) with the Naval Institute's 'Author of the Year' award as Rear Adm. Rodney P. Rempt (right), Naval War College President looks on during a ceremony in Annapolis, MD.

Although a contributor to Proceedings for close to a decade, Barnett readily admits that his production for the magazine increased dramatically in 2001.

"I began pitching articles (to the Naval Institute) in February about the post cold war era, and then again last summer after I returned from India's International Fleet Review.  By the fall, they were calling me.  It's become a relationship where they trust what I write." 

In the early part of 2001, Barnett was in the midst of a two-year project centered on security issues in the new globalization era.  This endeavor took him up and down the East Coast, but mainly he found himself speaking to audiences at the two centers of security and globalization in America: The Pentagon and The World Trade Center.  Ironically, he was scheduled to brief in the Navy's Command Center Sept. 18th, which was completely destroyed exactly one week earlier.  On Sept. 25th, Barnett was scheduled to meet with members of Cantor-Fitzgerald for a briefing on the 105th floor of World Trade Center Tower One.  Obviously, neither meeting took place as scheduled, and since Sept. 11th, Barnett's focus has gone through a serious transformation.

One of the first calls Barnett received after Sept. 11th was from Proceedings editor, Fred Rainbow. 

"We were on deadline on Sept. 11th for the October issue.  We decided to make room for some thoughtful reflections on different aspects related to the attacks," said Rainbow.  "We called six people, gave them 24 hours to write 1,000 words…Professor Barnett was one of those authors we called and he produced."

Barnett, who worked closely with many members of Cantor-Fitzgerald who perished on Sept. 11th, describes writing about the effects of the attack as a "cathartic" experience.

"Personally, it felt like such an amazing attack on the work that I had been doing.  Sept. 11th in general ended the project I was working on because so many lives were lost.  The project was kind of shot out from under me."

According to Barnett, a major issue raised by Sept. 11th revolves around the nature of combat in the present day.

"Is it a uni-polar moment and are we just waiting for a great power to rise up in a traditional way, or do we find ourselves going down a dramatically different path where there are those who can accept globalization versus those who can not?  It puts the whole context of naval power in a different light.  What was a post cold-war era starts to look, all of a sudden, very dramatically like a globalization era," said Barnett.

One of Barnett's current positions is as an assistant to his previous boss, Retired Vice Adm. Arthur Cebrowski.  Cebrowski was appointed by Secretary of Defense Donald H. Rumsfeld this past November to be the Director of Force Transformation for the Department of Defense.

According to Barnett, his relationship with Cebrowski, who retired from the U.S. Navy in October 2001 after serving as the president of the Naval War College in Newport, R.I., got off to an awkward start.  Just prior to his arrival at the Naval War College, Barnett authored an article for Proceedings entitled, "The Seven Deadly Sins of Network Centric Warfare."  Cebrowski has been called the "father of network-centric warfare" for helping to initiate the concept that has become one of the centerpieces of the Defense Department's transformation planning.

"My article definitely could have been interpreted as being openly critical of Network Centric Warfare.  (Adm. Cebrowski's) article was quite historic and sometimes I see mine paired with it as a sort of counter-position.  It got the idea started that we were at odds," said Barnett.  Cebrowski's article, "Network-Centric Warfare: Its Origin and Future," appeared in the January 1998 issue of Proceedings, and was co-authored by John J. Garstka.

"Proceedings did a lot of good by publishing articles about Network Centric Warfare because it recognized it as a serious, debatable issue…and a healthy debate enabled the best ideas about Network Centric Warfare to rise," continued Barnett.

One of the first projects Barnett and his boss, Cebrowski, were involved with was Y2K.  And even though Y2K did not materialize into a catastrophic global event, the results of their research were extremely prophetic.

"We predicted a lot of things about what a negative Y2K situation could be and it is interesting to look at those predictions and see how much of the reality of Sept. 11th and its aftermath we captured," said Barnett.

Barnett describes his position (Assistant for Strategic Futures) within the Department of Defense as one in which he is responsible for helping bring a larger context to the debate of the "direction, content and pace" of transformation.

As for the future of the Navy, Barnett sees the service defining itself less in terms of what we have to do to defeat other naval forces, but more in terms of what our capability to control the seas gives to us.

"No other country is trying to control the ocean anymore, it is ours.  So the starting position (of thought) is, because we control the oceans, what can we do?"

According to Barnett, the nature of the transformation is evident in our current war on terrorism because the Navy has been called upon to do "new and unusual things to support operations on land."

For someone who obviously possesses 'Washington Insider' knowledge, Barnett claims life in Newport has given him the "best of both worlds."  After spending 14 consecutive years in big cities, the last 8 in the beltway, Barnett was "burned out" and anxious to escape the "allergies of Washington."  In Newport, he has found a different pace of life and an opportunity to spend more time with his family.  He and his wife Vonne have three children, Emily, 10, Kevin, 7, and Jerome, 2.

Describing himself as a "triple threat," Barnett acknowledges the Naval War College has enabled him to concentrate on three different professional areas.  Specifically, in Newport, Barnett has found time to pursue entrepreneurial interests while still concentrating on his main work in both public policy and national security research.

"Just like Harvard, to my great delight, the package exists at the Naval War College to fulfill yourself professionally."

Barnett also said both Rear Adm. Rodney P. Rempt, President of the Naval War College Rempt, and Rear Adm. Barbara McGann, Provost of the Naval War College, have kept the organization extremely relevant and have enabled the staff to come to Newport and be really ambitious.

In comparing life in Newport to his previous assignments, Barnett offered, "There is a great appreciation here, like anywhere, for delivering content on time.  However, if at 4 o'clock on a Wednesday afternoon in July, I have had enough for the day, you can find me on the beach boogie-boarding with my son."

As for being named 'Author of the Year,' Barnett is extremely grateful to the U.S. Naval Institute, and he indicated his relationship with Proceedings will continue.

"There are a lot of big issues on the table now, and it's a fun time to be writing."

A link to Barnett's Proceedings articles can be found at the following website: www.nwc.navy.mil/newrulesets.

Blast from my past: "Asia: The Military-Market Link" (2002)

Asia: The Military-Market Link

by

Thomas P.M. Barnett

China could be the world's largest auto market by 2020, increasing its oil needs by 40%.  The Pentagon and Wall Street must understand their interrelationship: economic and political stability are crucial to reducing energy market risk.

COPYRIGHT: The U.S. Naval Institute, 2002 (January  issue, pp. 53-56); reprinted with permission

There is a real push within the Department of the Navy to enunciate the presumed linkage between the Navy’s worldwide operations and economic globalization. Some of this analytic effort is dismissed as pouring old wine into new wineskins, because many Navy-as-the-glue-of-globalization formulations sound an awful lot like the old bromides about the “Navy as the glue of Asia.” Nice work if you can get it, but given the relative lack of naval crisis response in Asia since the end of the Vietnam War, it is a hard story to sell.

But all that is about to change, if you believe the Department of Energy’s stunning projections of Asia’s growing energy consumption over the next 20 years.1 Because to ensure the region’s much-anticipated economic maturation, a lot of good things must occur over the next two decades in both Asia and the Middle East—and across all paths in between.2 In short, if you want a Pacific Century, you’ll need a U.S. Pacific Fleet—strong in numbers and forward deployed.

Asian Energy: A Globalization Decalogue

As the director of a long-running Naval War College project (NewRuleSets.Project) on how globalization alters definitions of international security, I have had the opportunity to spend a lot of time with Wall Street executives and regional security experts (both military and civilian) discussing Asia’s future economic and political development.3 The following decalogue distills the essential rule sets our project has identified concerning Asia’s energy future.4

1. The Global Energy Market Has the Necessary Resources.

Asia as a whole currently uses about as much energy as the United States, or almost 100 quadrillion British thermal units (Btu).5 By 2020, however, Asia will roughly double its energy consumption while U.S. consumption rises just more than 25%. Asia’s likely increases are significant no matter what the energy category:

• Oil, 88%
• Natural gas, 191%
• Coal, 97%
• Nuclear power, 87% when Japan is included, 178% when it is not
• Hydroelectricity and other renewables, 109%.

This is a genuine changing of the guard in the global marketplace—a shifting of the world’s demand center. Today, North America accounts for just under a third of the world’s energy consumption, with Asia second at 24%. Within one generation, those two regions will swap both global rankings and percentage shares (see chart).

The good news is that there’s plenty of fossil fuel to go around. Confirmed oil reserves have jumped almost two-thirds over the past 20 years, according to the Department of Energy, while natural gas reserves have roughly doubled. Our best estimates on coal say we have enough for the next two centuries. So supply is not the issue, and neither is demand, leaving only the question of moving the energy from those who have it to those who need it—and therein lies the rub. 

2. But No Stability, No Market.

Asia comes close to self-sufficiency only in coal, with Australia, China, India, and Indonesia the big producers. All told, Asia self-supplies on coal to the tune of 97%, a standard it will maintain through 2020. That is important, because virtually all of the global growth in coal use over the next generation will happen in Asia, mostly in China and India.

Natural gas is a far different story. In 2001 Asia used around 10 trillion cubic feet, with Japan, South Korea, and Taiwan representing the lion’s share of consumption. The trick is this: Asia’s demand for natural gas will skyrocket to perhaps 25 trillion cubic feet by 2020, with the vast bulk of the increase occurring outside of that trio. So if those three countries already buy what’s available in-region, that means the rest of Asia will have to go elsewhere—namely, the former Soviet Union (Russia, with 33% of the world total) and the Middle East (Iran, with 16%).

Finally, even though oil will decline as a percentage share for Asia as a whole over the coming years, absolute demand will grow by leaps and bounds. Asia currently burns about as much oil as the United States, or roughly 20 million barrels per day (mbd). Since oil is mostly about transportation nowadays, and Asia is looking at a quintupling of its car fleet by 2020, there is a huge swag placed on this projection. The Department of Energy’s latest forecast is roughly 36 mbd, but even that means Asia as a whole has to import an additional 12 mbd from out of region, or roughly double what it imports today from the Persian Gulf region.6

Asia already buys roughly two-thirds of all the oil produced in the Persian Gulf, and by 2010 that share will rise to approximately three-quarters.7 Meanwhile, the West’s share of Gulf oil will drop from just under a quarter today to just over a tenth in 2010. Strategic upshot? The two most anti-Western corners of the globe are inexorably coming together over energy and money. Increasingly, the Middle East becomes dependent on economic stability in Asia, and Asia becomes dependent on political-military stability in the Gulf. If either side of that equation fails, the energy market is put at risk.

3. No Growth, No Stability. 

As a middle class develops in Asian countries, a significant portion of the global population is being rapidly promoted from an 18th- or 19th-century lifestyle into a 20th- or even 21st-century consumption pattern. If international investors decide to take it all away one afternoon in a flurry of currency attacks and capital flight, the struggling segment of the population that suddenly finds itself expelled from the would-be middle class is likely to get awfully upset.

4. No Resources, No Growth. 

Asia cannot grow without a huge influx of out-of-area energy resources. The quintupling of cars is impressive enough, when you consider that General Motors predicts China will be the world’s largest car market in 2020.8 But even more stunning will be the 250% increase in electricity consumption (300% in China), which will be generated mostly by coal and, increasingly, natural gas. Put those two together and we are talking about an Asia that must open up to the outside world to a degree unprecedented in modern history.

5. No Infrastructure, No Resources. 

Asia’s infrastructure requirements over the next two decades are unprecedented. The combination of a doubling in energy consumption and rapid rises in population, urbanization, and water usage will damage further an already battered regional ecosystem, placing great political pressures on national governments to limit the pollution associated with energy production.

In Asia, the push for energy is really a push for infrastructure, which comes in three forms:

• For the near term, the vast majority of natural gas that flows into Asia will arrive in a liquid form on ships. That means port facilities on both ends of the conduit, plus liquefaction plants on the supplier’s end and regasification plants on the buyer’s end.
• Over the longer haul, pipelines by both land and sea become the answer to meeting the rising demand.
• Finally, there is the domestic infrastructure required to pipe all that gas to the final consumers.

None of this comes cheaply, and as the recent history of regional electricity development makes clear, lots of outside money is required.9

6. No Money, No Infrastructure.

Foreign direct investment (FDI) is the most significant scenario variable for Asia’s energy future. Asia’s energy infrastructure requirements easily will top $1 trillion by 2020, according to many estimates. Such numbers overwhelm the region’s ability to self-finance, and that means Asia will have to open up its energy generation and distribution markets to far more joint or foreign ownership. If it seems inevitable that Asia must turn to the former Soviet Union and the Middle East for energy in the coming decades, it is just as inevitable that it must turn to the West for the money to finance this trade.

7. No Rules, No Money.

Many on Wall Street voice the opinion that Asia has not sufficiently cleaned up its act as a result of the 1997–1998 financial crisis, referring primarily to internationally accepted accounting practices in the financial and corporate sectors.10 Another problem with Asia’s energy investment climate is the current mix of private-sector investments and public-sector decision making. In most Asian economies, the government still plays far too large a role as far as Western financiers are concerned. As long as rule sets lag behind, the rise of private-sector market makers is delayed, for firm rules of play are required before deregulation of state-run energy markets can proceed.

8. No Security, No Rules.

Foreign direct investment does not occur in a vacuum. Long-term certainty is the greatest attraction a country can offer to outside investors, whereas war and political-military instability (especially leftist revolutions) are the best methods to scare them away. Developing Asia readily presents a handful of potential and/or existing security trouble spots that could negatively affect the region’s FDI climate in significant ways.

9. No Leviathan, No Security.

Many international experts agree that Asia’s current security situation belongs to what Thomas Friedman calls the “olive tree” world, where backward tribes fight over little bits of land, while rising economic powerhouses clearly join the “Lexus” world, producing many of the global economy’s best high-end technology products.11

In this region there remains a viable long-term market for the services of an outside Leviathan—namely, the United States. The United States enjoys healthier security relationships with virtually every Asian government than any two governments there enjoy with one another. While it is easy to deride the notion of a “four-star foreign policy,” there is little doubt that the commander-in-chief of U.S. Pacific Command plays a unique role in working the security arrangements that underpin the region’s strong record of structural stability over the past quarter century.12 Our forward presence both reassures local governments and obviates their need for larger military hedges. Our presence is a moneymaker on two fronts: they spend less on defense and more on development (the ultimate defense), and FDI is encouraged, however subtly.

10. No U.S. Navy, No Leviathan.

The U.S. government—and the U.S. Navy in particular—faces a far more complex strategic environment in the 21st century than it did during the Cold War, whether or not it yet realizes the change: our national security interests in the Persian Gulf, while increasingly important for the global economy, no longer hold the same immediate importance to our national economy. In effect, U.S. naval presence in Asia is becoming far less an expression of our nation’s forward presence than an “exporting” of security to the global marketplace. In that regard, we truly do move into the Leviathan category, for the “product” we provide is increasingly a collective good less directly tied to our particularistic national interests and far more intimately wrapped up with our global responsibilities.

And in the end, this is a pretty good deal. We trade little pieces of paper (our currency, in the form of a trade deficit) for Asia’s amazing array of products and services. We are smart enough to know this is a patently unfair deal unless we offer something of great value along with those little pieces of paper. That product is a strong U.S. Pacific Fleet, which squares the transaction nicely.

Understanding the Military-Market Connection

The collapse of the Soviet bloc and its long-standing challenge of the Western economic rule set made possible a global rule set for how military power buttresses and enables economic growth and stability. For the first time in human history we have a true global military Leviathan in the form of the U.S. military, and no peer competitor in sight—not even a coherent alternative economic philosophy (although bin Laden’s anti-Westernization resonates with those who fear globalization as a form of forced Americanization). This unparalleled moment in global history both allows and compels the United States to better understand the national security-market nexus.

How do we define this yin-yang relationship between business and the military? First we speak of stability, which flows from national security, and then we speak of transparency, which is both demanded and engendered by free markets. These two underlying pillars form the basis of the single global rule set that now defines the era of globalization. Within those two pillars, the United States plays a crucial role:

• The U.S. government, through the U.S. military, supplies the lion’s share of system stability through its Leviathan-like status as the world’s sole military superpower.
• U.S. financial markets, which lead the way in fostering the emergence of a global equities market, play the leading role in spreading the gospel of transparency—any country’s best defense against the sort of financial currency crises that have erupted periodically over the past decade (Mexico 1994, Asia 1997, Russia 1998, Brazil 1999, Turkey 2001).

It therefore is essential that the Pentagon and Wall Street come to better understand their interrelationships across the global economy. Uncovering and better understanding this fundamental relationship is especially important because the vast majority of the time the security and financial communities operate in oblivious indifference to one another. Ultimately, however, the global economy operates on trust, which is based on certainty, which in turn comes from the effective processing of risk.

In the end, the national security and financial establishments are in the same fundamental business: the effective processing of international risk. Invariably, these two problem sets merge in the historical process that is economic globalization. Understanding the military-market connection isn’t just good business, it’s good national security strategy. Bin Laden understood this connection when he selected the World Trade Center and the Pentagon for his targets. We ignore his logic at our peril.

1. See the Energy Information Administration’s International Energy Outlook 2001, DOE/EIA-0484(2001), March 2001, found at www.eia.doe.gov/oiaf/ieo/index.html.

2. For the purposes of this article I define Asia as extending from Afghanistan to Japan, but not including Australia and New Zealand (Oceania), although I identify Australia as an in-region supplier of energy because of its proximity.

3. The NewRuleSets.Project is a multiyear research effort designed to explore how globalization and the rise of the new economy are altering the basic “rules of the road” in the international security environment, with special reference to how these changes may redefine the U.S. Navy’s historical role as security enabler of U.S. commercial network ties with the world. The project is hosted by the online securities broker-dealer firm eSpeed (an affiliate of Cantor Fitzgerald LP) and involves personnel from the Decision Strategies Department of the Center for Naval Warfare Studies. Adm. William Flanagan, USN (Ret.), and Dr. Philip Ginsberg, of Cantor Fitzgerald (senior managing director and executive vice president, respectively), serve as informal advisors to the project, actively participating in all planning and design. The first three joint Wall Street-Naval War College workshops in the series involved energy, foreign direct investment, and the environment in Asia. Follow-on events are planned for food and water, information technology, and human capital. All research products relating to this effort are found at www.nwc.navy.mil/newrulesets. 

4. All the energy data presented in the decalogue, unless otherwise specified, comes from the Department of Energy’s International Energy Outlook 2001.

5. A good rule of thumb for thinking about quadrillion Btu is that you can take the annual number for a region, divide it by two, and get the rough equivalent in millions of barrels of oil per day the region would need to burn if it was achieving that entire energy amount by oil alone. For example, North America used 116 quadrillion Btu in 1999, which would equate to 58 million barrels of oil per day (mbd) if that entire amount was achieved by oil alone. For point of comparison, the United States currently uses about 20 mbd, importing roughly half that number. 

6. For an excellent exploration of this, see Daniel Yergin, Dennis Eklof, and Jefferson Edwards, “Fueling Asia’s Recovery,” Foreign Affairs, March/April 1998, pp. 34–50. 

7. The Middle East currently accounts for roughly 90% of all Asian oil imports; on this see Fereidun Fesharaki, “Energy and Asian Security Nexus,” Journal of International Affairs, Fall 1999, p. 97.

8. Cited in Clay Chandler, “GM’s China Bet Hits Snag: WTO (Car Shoppers Await Discount from Trade Deal),” The Washington Post, 10 May 2000, p. E1.

9. See “Foreign Investment in the Electricity Sectors of Asia and South America,” International Energy Outlook 2000, pp. 120–21. 

10. On this, see Andreas Kluth, “A Survey of Asian Business: In Praise of Rules,” The Economist, 7 April 2001, pp. 1–18 (insert).

11. Thomas Friedman, The Lexus and the Olive Tree: Understanding Globalization (New York: Farrar Strauss Giroux, 1999).

12. For an excellent exploration of this concept, see Dana Priest, “A Four-Star Foreign Policy? U.S. Commanders Wield Rising Clout, Autonomy,” The Washington Post, 28 September 2000, p. A1. See also the second and third articles in the series (29–30 September). 

Dr. Barnett is a professor at the U.S. Naval War College, currently serving as the Assistant for Strategic Futures in the Office of Force Transformation within the Office of the Secretary of Defense. 

Blast from my past: "Globalization Gets a Bodyguard" (2001)

Globalization Gets a Bodyguard

by

Thomas P.M. Barnett and Henry H. Gaffney, Jr.

Definitions of U.S. national security never will be the same after 11 September 2001.  Americans now have a costly bodyguard in the form of a Homeland Security Council which could impact globalization on many fronts.

COPYRIGHT: The U.S. Naval Institute, 2001 (November  issue, pp. 50-53); reprinted with permission

To the vast majority of the world, the United States represents the leading edge of globalization—a harbinger of a future where efficient markets, political pluralism, and individual choice reign supreme. Moreover, as the new rules of this new era emerge and governments step in to regulate the markets, the United States (especially its Treasury Department) plays chief rule-maker. In the meantime, the U.S. military has remained strong, saving most countries the trouble of having to finance big or expeditionary militaries, leading the coalitions that tidy up those conflicts on the edges of globalization, and containing the trouble-makers who threaten to disrupt it.

Think about what an unprecedented combination that is: the world’s most open society, most vibrant economy, and strongest military power. And the United States had maintained a careful, stable balance among those elements.

Then consider how much has changed as a result of 11 September:

• The rear admiral and pilots of the Enterprise (CVN-65) Battle Group operating in the Arabian Sea ask reporters not to use their names for fear that such publicity might endanger their families.
• The Coast Guard conducts its largest port defense operations since World War II.
• National Guard personnel stand watch in every major domestic airport.
• Debates rage in the Pentagon and in Congress about creating a “combat command”—“CinCAmerica”—to fight terrorism within our borders, in  support of the domestic agencies.
• Military intelligence agencies poll Hollywood screenwriters for their best ideas on where and how terrorists will strike next.

But most telling of all, American citizens just got a permanent bodyguard in the form of a Homeland Security Council. Not a military escort but a civilian bodyguard, the centrality of this new political entity will indicate how the United States may balance homeland introspection with world interactions in the coming years.

On the one hand, Osama bin Laden has challenged the United States to retreat from the world (or at least from his world, which stretches from Sierra Leone to the Sulu Archipelago). On the other hand, we have found a world community beyond unilateralism.

Osama's Real Victory

Until 11 September, there was a clear consensus in this country that “national security” meant the Defense Department’s four military branches operating in forward deployments around the world, or being ready to do so. “Defense” was an “over there” concept, something we paid military professionals to perform overseas. The forces were deployed or “expeditionary,” not homeland defense forces. Even missile defense was no longer to be simply “national,” but worldwide.

Following the September terrorist attacks, we now have a dual definition of national security, largely because our confidence concerning the ability of our deployed and expeditionary forces to defend the United States forward has been shattered.

DoD covered both the forward and homeland defense portfolios during the Cold War by assuring our domestic strategic security vis-à-vis Soviet missiles while containing Soviet bloc expansion around the world with our forward-deployed forces. But that world is gone. Our forward-deployed military was proven essentially irrelevant when it came to defending our strategic security on 11 September. Yes, DoD will hunt down bin Laden in Afghanistan, and other agencies and countries ultimately will roll up bin Laden’s terrorist network overseas. But as far as this country’s domestic strategic security is concerned, the Pentagon has just been demoted to subcontractor to the Homeland Security authority.

That stunning turn of events represents Osama bin Laden’s real victory over the United States and its regular military establishment—one that no amount of well-aimed cruise missiles can erase.

Downstream Effects from 9/11

As anyone in the private security business will tell you, bodyguards cost plenty. As a cost of doing the nation’s business, this charge will be too large for state and local governments to absorb, signaling an expansion of federal power and spending not seen since Franklin Roosevelt declared, “The only thing we have to fear is fear itself.”

Homeland security will grow—as a concept, strategy, bureaucracy, and budget—in direct proportion to our society’s ballooning fear concerning terrorism. George W. Bush cannot win this “new war”—or a second term—merely by producing bin Laden’s head. He can only prevail in this strategic struggle by restoring Americans’ sense of personal security.

Up to now, Americans have largely looked after themselves for personal security, augmenting our reasonably robust local police structure by shelling out their own dollars for personal weapons, home-security systems, gated communities, and the like. But again, bin Laden’s stunning strike has merged definitions of strategic and personal security, and that conflation will long be felt in the Congress’s willingness to redirect federal discretionary spending toward restoring our collective personal security and away from all this international engagement we had become accustomed to during the Cold War and in the decade after it.

When President Bush announced the homeland security entity, it was first described as just an “office,” but soon we learned it would grow into a “council” on a par with the National Security Council. How much more authority might it gain, and what budgetary resources will it command?

Clearly this will be an event-driven process largely beyond DoD’s control. Another 5,000 dead, say, in Chicago or Los Angeles, and we shortly will have a Homeland Security Agency or even a Department that absorbs command of elements of DoD—an interior ministry like many other countries have.

After 11 September, this pathway is conceivable, and in many ways, it may be inevitable given the opportunities for terrorists to infiltrate the United States in this globalization era. At the very least, it is a greater long-term likelihood than Governor Tom Ridge ending up as just another “drug czar.” That is because our continued consumption of narcotics threatens no one in the world except ourselves, whereas the terrorists want to kill Americans to drive us out of the huge Islamic world they dream of someday running like the Taliban’s Afghanistan.

In short, our collective determination to not let “them”—the terrorists—change our way of life is met with their equal determination to not let “us”—American-led globalization—destroy their way of life. That is why this war may well rival or exceed the length of our Cold War standoff with the Soviets. Terrorism has been around for a long time and has excelled at dispatching monarchs, but the world neither has seen anything on the scale of 11 September, nor have the opportunities to slip in and out of countries been so easy since the 18th century.

Assuming that this conflict will drag on year after year, it is inevitable that the federal homeland security effort will demand a larger share of the federal discretionary budget. At first, this trend will plunge the U.S. Government back into the universe of deficit spending. DoD will benefit substantially from the generalized boost in “security” spending in 9/11’s immediate aftermath, but that plus-up likely will be short-lived, meaning a couple of years.

Now, and continuing to the 2004 presidential election, we likely are to face an economy experiencing nowhere near the record growth rates of the booming 1990s. Say goodbye to the record revenue flows and say hello to the additional costs—both real and opportunity—associated with all this expanded internal security and the consequent restrictions on international traffic entering the United States. Meanwhile the nation will be growing older, as the leading edge of the boomer generation hits the 60-year mark, leading to a further squeeze on the discretionary budget in favor of mandatory social security programs.

After the campaign in Afghanistan is over, whenever that happens, DoD’s budget inevitably will be squeezed. In a three-way race among taking care of elders (who vote), taking care of our personal and domestic security, and resuming the task of maintaining regional stability somewhere “over there,” guess which funding stream gets squeezed the tightest?

The Vision Thing

Many in the national security community who declare that we just experienced another Pearl Harbor likewise assume that the American public inevitably will remain wedded to the notion that this country must stay forward engaged militarily—no matter what the relative cost. That is a huge assumption worth examining.

First, we tend to idealize the “greatest generation’s” selfless willingness to endure the privations and sacrifices of World War II—especially on the home front.

• It was fairly easy to demonize our enemies in that declared war, for those national regimes were truly demonic. We have a much finer line to tread in this virtual “war” against nonstate actors, for no other reason than to avoid the appearance of a generalized “clash of civilizations” with Islam itself, something bin Laden obviously seeks to promote.
• Americans knew it was an us-or-them fight; either our country would prevail or we would have found ourselves largely isolated in a fascist-dominated world. Radical Islam offers no realistic world view. It basically just wants the West—and especially U.S. forces—out of the Middle East.
• World War II lasted a mere four years as far as the United States was concerned. This “war” is likely to drag on far longer. As both the United Kingdom and Israel have shown in recent decades, it is possible to live with ongoing terrorist challenges, but the societal tensions are dramatic and costly. None of this increased domestic security is going to be cheaply achieved and maintained.

Second, since the end of the Cold War, the American public and their representatives in Congress have been clear that they are uncomfortable with the role of global policeman. Some claimed that it was a more dangerous world after the Cold War, and that we had to police it since no one else was going to. They did not have in mind fighting a war like the Soviets did in Afghanistan. It was more like containing the rogues, making a few interventions in internal conflicts once truces had been arranged, and the occasional show of force off Taiwan.

Now, if forward presence and interventions become identified with retaliation by terrorists that results in periodic civilian casualties numbering in the thousands, we should expect strong domestic opposition to emerge and force a debate about the role of the U.S. military in regulating the international security environment. Yes, our collective sense of revenge/justice will propel us sufficiently along to eliminate bin Laden and roll up his al Qaeda network, but there is no guarantee that Americans will remain united beyond that discrete goal.

Third, we just endured a direct attack against our homeland in which roughly as many people died as in the bloodiest day of our nation’s history—the Civil War’s Battle of Antietam. The Bush administration did not panic, but slowly and patiently formed an international coalition and planned carefully prior to beginning military strikes. But think about what that says about what a complex world in which we live.

Bin Laden just killed 5,000 of ours and other countries’ citizens, but our retaliation and our capturing of bin Laden and tracking down his cells in 60 countries mean we have to go out there and do it. We can not do all that from the sea and Whiteman Air Force Base. Bin Laden may have struck us, but a lot of the advanced countries, and Russia and China too, could be struck next. All the countries benefiting from globalization are in this together.  This is a complex international security environment where unilateralism simply does not work.

Fourth, there will be no unlimited pie for “national security,” especially as the mounting deficit is recognized, so any rise in resource requirements for Homeland Security will inevitably eat into the Pentagon’s budget. Less money means either fewer operations, less purchases, or smaller force structure, or diversion of force structure (military personnel) to homeland defense. In any case, U.S military capabilities would be spread more thinly, assuming Americans still think we should be policing the world.

We will need to take some different perspectives on what we thought were going to be threats to our interests. Some interests may not seem so vital anymore, some relationships not worth pursuing to the same degree. But this is not because of the thinness of the forces—they will still be the strongest, most capable forces in the world. It is because of the new perspective of what is most important to the American people.

Finally, there are the dilemmas posed to the Navy itself. The Navy may be tempted in the coming months and years to prove how useful it is in homeland security, just as it was in jumping on the national missile defense bandwagon. Homeland defense in U.S. coastal waters is the job of the U.S. Coast Guard, and it may well benefit from some of the resources diverted from DoD. The U.S. Navy probably does not want to lower its technological sights, but then these roles are not its choice, but the nation’s.

The United States has kept a global navy of great capability, and this has permitted most other countries in the world to concentrate on their “coast guard” navies. If the United States starts operating its navy like a coast guard, we abdicate our role as the world’s navy, and maybe then bin Laden will have succeeded beyond his wildest dreams. Saddam and the Iranians would be happy too.

But we do not need to do that. Under any conditions, the United States has much more navy than needed for homeland defense. The U.S. Navy has a critical role in the Persian Gulf and in adjacent waters. It also has a highly symbolic role in maintaining East Asian stability. And we have this broader coalition that we have rediscovered, of which navy-to-navy cooperation plays an important part. There is no reason for the United States to retreat from the world now.

Whither Transformation?

Before 11 September, the strategic debate in defense was between policing the world in the here-and-now and transformation to face an unknown peer competitor, or simply to take advantage of changing technology. But now, it appears that U.S. forces as they exist—with the addition of C4ISR (command, control, communications, computers, intelligence, surveillance, and reconnaissance) improvements and more precision-guided munitions—are more than adequate for the war against terrorism. More important may be their new roles in homeland versus international defense:

• The U.S. Army, especially the National Guard and Army Reserve, is taking a big role in homeland defense, and may get to administer the resources for a national missile defense.
• The Air Force, which had organized well for expeditionary responses (AEFs), takes on more a dual role in continental air defense as well as expeditionary operations.
• The Marine Corps proposes a super brigade for domestic and overseas antiterrorism operations.
• With the Coast Guard watching the coasts, the Navy still patrols the Persian Gulf and Asia.

This is not the kind of radical technological transformation most had in mind before 11 September.

The Newer World Order

It is fair to say that when the Bush administration came into power it really did not have a foreign policy, just a firm notion that Clinton’s approach to globalization was far too focused on the broad architecture of free trade.  The anti-Clinton foreign policy basically was a my-way-or-the-highway unilateralism.

In the new administration’s world view, Russia and China were back to being more front-and-center concerns, and India could be a new friend if it signed off on our missile defense. Japan and our European allies were expected to fall in line, even though we were not going to give an inch on things like Kyoto or the World Court. Iran and Iraq were told there was a new sheriff in town, unafraid to crack the whip of tighter sanctions.

That was then, this is now:

• The other NATO members are ready to defend us!
• Japan is gearing up to make real military contributions.
• Moscow is advising us on how to take down Afghanistan.
• China is openly approving a U.S. military intervention in Asia.
• India is asking us for help with Kashmiri terrorists.

Do not think for a minute that all this support will not come with price tags, but clearly we are experiencing an historic moment not seen since Iraq invaded Kuwait. So the question for the Bush administration is this: What world architecture are you going to build to consolidate this groundswell of cooperation?

In effect, we will now see how Bush the Younger’s edition of a New World Order might surpass the aborted version of Bush the Elder. There is good reason to believe that this time that wildly ambitious slogan will stick—both in name and substance. All of the world’s great powers understand that a strong antiglobalization backlash is brewing, threatening the long-term growth and prosperity of all. Before 9/11, Seattle Man was this movement’s scariest face, but he looks laughably impotent compared to the still-rippling global economic shock wave bin Laden unleashed with his World Trade Center/Pentagon attacks.

By making it clear that the major powers are not going to stand by idly while terrorists try to sow systemic disruptions, the East and West may come together to discover a sense of global community that proves to be globalization’s version of “soft power.”

The Navy is a versatile tool for assisting in the sort of security networking among great powers that globalization needs now. So while its key task right now is suppressing the Taliban so others can track down bin Laden, the Navy’s longer-term vision must be twofold:

• Contributing where it can to homeland defense, depending on national decisions on missile defense and the patrolling of coastal waters
• Containing and suppressing those who would disrupt peace and economic progress—the essence of globalization—forward, especially in the Middle East arc of crisis.

It appears that U.S. naval technological capabilities, as they may be incrementally improved, will be adequate for these tasks. The greater challenges may be to take good care of naval personnel, who may be tasked for long stays in distant waters, maintaining adequate readiness, and keeping numbers of ships instead of striving for the ultimate in technologies.

Dr. Barnett is a professor at the U.S. Naval War College, serving as a senior strategic researcher in the Decision Strategies Department of the Center for Naval Warfare Studies.  Dr. Gaffney is a research manager at The CNA Corporation, serving as Team Leader in the Center for Strategic Studies.

Blast from my past: "Globalization is Tested" (2001)

"Globalization is Tested"

by

Thomas P.M. Barnett

COPYRIGHT: The U.S. Naval Institute, 2001 (October issue, p. 57); reprinted with permission

Globalization has taken some serious hits in recent years.  Now, with the terrorist strikes in New York and Washington, it is fair to say that globalization faces its greatest test yet.

The extreme antiglobalization wing represented by terrorist Osama bin Laden is not interested in debating the pace of globalization; it wants it stopped dead in its tracks.  For bin Laden, U.S.-led globalization represents the worst possible corruption of his ideal Muslim society.  It is expressed politically in our support for Israel, culturally in our military presence in Saudi Arabia, and financially in our ability to isolate Iraq and Iran through sanctions.

Bin Laden's symbology of attack could not have been expressed more clearly:

• Operating from one of the most isolated--and least globalized--countries in the world (Afghanistan)
• Using icons of our international connectivity as weapons (United, American Airlines)
• Wreaking unprecedented destruction on our financial and military nerve centers (World Trade Center, Pentagon), while just failing to land a similar blow against our political command center (White House).

How will the United States respond to the challenge?  This question is not adequately answered by any immediate military response.  Rather, it is answered by our willingness to forge a new international rule set, much as we did following World War II. Our goal then was preventing a reoccurrence of the economic nationalism that killed the first wave of globalization (1870-1929).

Today, it is not so much economic nationalism that threatens globalization as cultural nationalism--the assumption that globalization equal forced Americanization.  How does the United States combat that fear? Three steps move us in the right direction.

First, we need to expand dramatically the dialogue between Wall Street and the Pentagon regarding how globalization changes our definitions of national security. Over the past several years, the Naval War College has collaborated with the broker-dealer firm Cantor Fitzgerald in conducting a series of Economic Security Exercises examining scenarios such as a terrorist strike against Wall Street, the Year 2000 Problem, and Asia's future energy needs.

These pioneering wargames are the brainchild of retired Navy Admiral William J. Flanagan, Senior Managing Director of Cantor Fitzgerald, which until 11 September had its international headquarters in the uppermost floors of the World Trade Center. It is not hyperbole to call the September terrorist strike a new form of warfare.  Cantor Fitzgerald's catastrophic human loss (roughly two-thirds of the 1,000 employees headquartered in the World Trade Center) only underscored the paradigm shift.  These individuals were killed not only to terrorize the American people, but also to disable U.S. financial markets and, by doing so, diminish global investor confidence in their long-term stability.

Second, we need a better understanding of which countries are the real enemies of globalization--and thus the United States. Samuel Huntington, in Clash of Civilizations, mistakenly lumped Asia with Islam as "challenger civilizations." Nothing could be further from the truth.  Developing Asia desperately needs two things in the coming years: energy from the Middle East and capital from the West. If either of these two global markets breaks down, Asia cannot move forward and instability will ensue.

Until September, the Bush administration clearly focused national security strategy on Asia in general and China in particular. This was a huge mistake in the making, but the danger has not yet passed. As the United States pursues this war against international terrorism, we must be aware that the West and Asia can either come together or be driven apart by events in the Middle East. Remember this: as far as globalization is concerned, China is not the problem; it is the prize.

Finally, both Washington and the American public need to come to grips with the inevitable reality that this war on terrorism only will cement our nation's role as global policeman.  There will be a rather scary blurring of the lines between external war fighting and internal policing roles--not only abroad but within the United States.

Since the Cold War, the U.S. military has bifurcated progressively into a high-tech strike force designed for state-on-state war and a lower-tech mobile police-state forces designed for military operations other than war. This war on terrorism only will exacerbate that emerging split and render it permanent, with much of the change coming under the guise of "homeland defense."

Dr. Barnett is a professor at the U.S. Naval War College, serving as a senior strategic researcher in the Decision Strategies Department of the Center for Naval Warfare Studies.