The percentage of GDP devoted to defense

OBAMA'S BUDGET PROPOSAL: "Over $700 Billion Sought for Defense," by August Cole, Wall Street Journal< 2 February 2010.

COMPANIES | INTERNATIONAL: "Lockheed under fire from Pentagon: F-35 shake-up spells new era for defence sector," by Jeremy Lemer and Sylvia Pfeifer, Financial Times< 3 February 2010.

The emerging reality is inescapable: the U.S Leviathan force is headed toward hard times--budget-wise, as is any portion of the defense that remains too reliant on selling to it (something I don't believe is the case for Lock-Mart).

The irony? As a percent of GDP, the defense budget peaks this year, according to the accompanying chart derived from OMB data, and then declines back down to pre-9/11-like levels (my theme of 7 fat years followed by 7 lean ones--at least!).

So why the overall pressure? The proximate cause is all the deficit spending related to the financial crisis. The ultimate cause is that we're aging as a society, nothing like Europe or Japan or even skyrocketing China, but we're nonetheless aging enough to make all such national security efforts incredibly harder to sustain, so long as we retain this healthcare and old-age pension approach.

Fortunately, I see both being redefined inevitably, if only for economic competitiveness reasons.

When you piss into the wind, be ready for wet socks

FRONT PAGE: "China warns US of further damage to relations if Obama meets Dalai Lama," by Geoff Dyer, Financial Times, 3 February 2010.

WORLD NEWS: "Beijing Renews Threat: Officials to Punish U.S. Defense Firms for Sales to Tehran," by Aaron Back and Ting-I Tsai, Wall Street Journal, 3 February 2010.

FRONT PAGE: "Aerospace leaders fear China sanctions: Reaction to Taiwan arms deal stirs concern; Spotlight on Boeing as industry urges talks," by Kevin Brown, Kathrin Hille and Daniel Dombey, Financial Times, 1 February 2010.

WORLD NEWS: "Sanctions would be high price to pay for Beijing: Taiwan arms deal," by Jamil Anderlini and Kevin Brown, Financial Times, 2 February 2010.

COMPANIES | INTERNATIONAL: "Asia-Pacific air travel outstrips North America," by Kevin Brown, Financial Times, 1 February 2010.

Ah, the all-important Dalai Lama. Imagine a spiritual leader of South Dakota (we've had those in the past, if you remember) who advocated its secession from the Union and who was feted and medaled by Beijing on a regular basis. Imagine how that would go over here.

But, of course, we must celebrate Tibet's quest for freedom, even though there's little economic logic behind the concept of interior states seeking independence from their connections to oceans. Sadder still, China could kill the impetus if it truly developed the region successfully--at least as far as native Tibetans are concerned. So far, the development, such as it is, seems to benefit the incoming Han far more.

But, compared to the functioning of the global economy, these are the big issues, reflecting America's dream of changing China from without, never mind the logic of leaving it all to the Chinese themselves--at a pace they find appropriate.

So now we head into all sorts of idiotic tit-for-tat nonsense, with the homebody 4th generation types in Beijing knowing no better and the fearful Dems over here (goaded by some supremely stupid Republicans) aiming no higher than to dismiss charges of "softness."

A "tough" Obama will be about as useful as the gentler, kinder Bush of the second term.

As for Beijing's threats, they should be taken seriously in the sense that they dovetail nicely with economic strategies of building-up domestic companies/brands/market shares. So yeah, if you're aerospace and you fear being shut out of--or merely squeezed within--the biggest, fastest growing market on the planet, you've still got a pulse and reasonable business instincts. Boeing isn't making it on Pentagon contracts and never will again. China isn't its future but its now.

Of course, sanctions usually hurt the issuer as much or more than the targets. Asia-Pac air travel demand must be met, if consumers and domestic consumption are going to be satisfied and encouraged to further expand (growing the region's true superpower strength, which is DEMAND). And that pathway cannot be sustained solely on domestic sources.

So we see both sides racing now to see who can cut off their nose first and declare "victory"!

But no great worries. This is an immature bilateral relationship currently being handled by a lot of immature leadership on both sides. Maturity comes with time and experience only, so the 2010s, as I have long noted in talks, will be the tumultuous growing-up period--on both sides.

Typically terrible news from North Korea

POST: North Korea Today No. 331 February 2010, Good Friends USA

This is a great newsletter that I scan regularly.

The scary news: starvation again seems to be stalking the countryside.

One story about an urgent meeting at the Ministry of Interior:

In addition to Danchun City, South Hamgyong Province, it has been reported to the Central Party that the residents of Pyungsung City, in South Pyungan Province, are dying in large numbers due to starvation. In order to address the starvation, the staff of the Central Party and the Ministry of Interior convened an urgent meeting on January 27th and February 1st. The meetings did not lead to a resolution of the food shortage, prompting residents to protest, "[They] said that 'more deaths from starvation must be stopped' and boasted that they would come up with a revolutionary measure, yet there are no signs of improvement." After conducting a survey of conditions in the area, the Central Party learned that Danchun, South Hamgyong Province and Chungjin, North Hamgyong Province, had a large number of deaths due to starvation. The Party also discovered the Soonchun City and Pyungsung City in South Pyongan Province were suffering from starvation, seeing more deaths than even Danchun or Chungjin. It is believed that the City Parties of Soonchun City and Pyungsung City took 65% of last year's harvest for military use and distributed only 5 months' worth of food to the farmers, exacerbating the food shortage.

It's followed by another story of a province suffering starvation:

Starting in February, major cities in South Pyongan Province, including Soonchun City and Pyungsung City, have been seeing an increasing number of deaths due to starvation, a problem that is gradually spreading throughout the entire region. The economic situation in Pyungsung City declined during the six months following the abolition of wholesale markets. With the currency exchange policy, workers who used to depend on trading to make a living are dying off. Over a half of the population in Pyungsung City did not eat for more than a week.

When you abuse the system, you deserve what you get

ARTICLE: Banks Bet Greece Defaults on Debt They Helped Hide, By NELSON D. SCHWARTZ and ERIC DASH, New York Times, February 24, 2010

This sort of gamesmanship truly does give capitalism a bad name, and whatever populist response ensues will be completely justified in the vengeance it exacts through new rules.

Tom on The Atlantic Wire

POST: Best and Worst Case Scenarios for the Iraqi Elections, By Heather Horn, The Atlantic Wire, March 01, 2010

Their graf with Tom:

Best-Case Scenario is Very Good At The Washington Post, Ad Melkert, head of the U.N. mission in Baghdad, writes that "after three decades of wars, sanctions and dictatorship, the shape of a new era is visible from where I sit." World Politics Review's Thomas Barnett likewise points out that "this will be the first [election since the invasion] truly conducted under stable conditions, even if the peace is decidedly fragile ... If expectations of a 70 percent turnout hold and Iraq's Sunnis are not perceived as having withheld their participation (as in 2005), this election will constitute the biggest victory yet for democracy in the Middle East."

Winners and Losers in Iraq's Upcoming Election

The upcoming Iraqi parliamentary elections loom large in the political fortunes of so many players, both internal and external, that it constitutes a historical referendum of sorts -- not just for Iraq, but beyond as well. Across the region, globalization, in all its complex currents, appears poised at a number of inflection points. The outcome of Iraq's elections will leave winners on some fronts, losers on others, and will trigger plenty of bandwagoning by those worried about being left out or left behind. Here's a list of some potential outcomes, none of which are mutually exclusive, in rough order of likelihood:

Continue reading this week's New Rules column at WPR.

Why I largely ignore the in-the-weeds COIN debate

David Martin Jones* and M.L.R. Smith**. "Whose Hearts and Whose Minds? The Curious Case of Global Counter-Insurgency". The Journal of Strategic Studies. Vol. 33, No. 1, 81-121, February 2010.

*University of Queensland, Australia. ** King's College London, UK.

John A. Nagl and Brian M. Burton. "Thinking Globally and Acting Locally: Counterinsurgency Lessons from Modern Wars - A Reply to Jones and Smith. The Journal of Strategic Studies. Vol. 33, No. 1, 123-138, February 2010.

Center for New American Security (CNAS), Washington, DC, USA.

[Ed: thanks to Zenpundit for the articles and the citation]

As a debate goes, it's all hearts and minds and no wallets. Globalization, when it's invoked, consists merely of the networking of bad guys--a very limited perspective.

It is a sadly ghettoized argument--very inside baseball. And I am dismayed to see it happening in a sub-field that should be more inclusive than the usual war-discussed-within-the-context-of-war with the added dimension of the fight for political control in developing/failed economies (the whole national liberation bit, references to Maoism, etc.). So we're still basically treated to two legs of the stool: security with the addition of politics/culture, but the economics remains a no-go-land that elicits the mention of jobs on occasion (the assumption usually being, public-sector financed with aid), but that's it. The private sector seems completely absent from this discussion, which is why the claim of a global insurgency is easily dismissed as not offering much causality.

I thought Nagl's closing comment in response was fine: difference in degree but not kind. The first article reminded me of nuclear targeting theory, it was so esoterically wrapped around itself.

How I square the circle: the reason why we find some value in speaking of a multi-regional or transnational insurgency (not exactly global) is because globalization is currently penetrating a number of fairly conservative/traditional cultures, triggering the usual backpressure we've seen throughout history whenever capitalism takes root and triggers urbanization/industrialization/secularization/modernization and the like. Yes, the resistance engendered finds it pedigree in the usual national-liberation modes of the past, which had a strong class or Marxist component. But this time, the retreat into the past is unbelievably pronounced.

Think back over time and you'll see: Marx said topple capitalism at its peak; then Lenin in effect said, "No, too late, try earlier" (just as the country was industrializing and the proletariat's class consciousness was beginning); then Mao went one step back further (get them while still in the villages), then Pol Pot took that notion to an even crazier degree (Year Zero), and now we've got radical Salafi jihadists asking revolutionaries to reject capitalism by transporting their societies to the pre-economic times of the 7th century. Short of asking for Christ's return (as many are wont to do), we basically can't go back any further. [I made this argument at length in Blueprint.]

This process of retreating into the past as a way of avoiding the inevitable tumult of today as globalization sweeps into traditional cultures has its advanced-world version: the apocalyptics (both religious [already cited] and secular] who are firmly convinced that the only thing that will stop capitalism's "destructive rampage" is collapse from within (usually tinged with either Gaia's or God's revenge for our wanton ways)--to wit, the odd way in which the whole global warming debate has devolved into an argument of extreme orthodoxies/faith. Trying to make the Chinese the new bogeyman of global collapse fits this general pattern too.

So with all this going on, sure, there's little surprise that the loose collection of anti-globalization forces have networked here and there. Does that make it a global insurgency? Yeah, sort of, if you want and need such a unifying vision of the enemy. The problem is, as the first piece points out, the solutions tend to be truly local, so noting the cooperation across borders, while it makes sense in terms of counter-tactics and operations, doesn't add all that much to the perceived discovery of solutions, which--oddly enough--starts with economics and then and only then finds purchase in the realm of politics-making-security-issues-go-away.

Too much of COIN discussion seems to center on walking that dog backwards: the perfect military response that triggers the political reconciliation that somehow leads to economic recovery/revitalization. To me, of course, that's completely backasswards, but I'm realistic: when a bunch of military guys get together, they tackle the problem from what they know, extending themselves about as far as they feel comfortable (into the ideologies of politics but not into serious economics, about which--and I'm being kind here--they know absolutely nothing because it's completely alien to their entire careers [ditto for academics]).

Honestly, that's why I largely ignore this debate. I don't see it growing in any form, just turning ever inward on itself, arguing ever finer points of nothingness, much like what happened with nuclear theory in the Cold War.

Hong Kong: still importing rules--and rulings--to China

WORLD NEWS: "Hong Kong court ruling hits Beijing's Congo hopes: Natural resources; A firm investing in distressed debt has won an unlikely victory," by Tom Mitchell and William Wallis, Financial Times, 24 February 2010.

HK court rules in favor of US firm that invested in Congo distressed debt. It was protesting China's use of "entry fees" to bribe the local government officials and state-owned companies. The de facto bribes were used to secure access to copper and cobalt reserves.

The US firm, and others, also believe China is encouraging Congo to take on too much debt in the resources-for-infrastructure deal.

China FDI to Africa was just over $2B in 2003 and it's over $5B as of 2008. China's share of Congo exports skyrocketed from less than 10% of total Congo exports in 2005 to roughly half in 2009. With that kind of pull, you get the deals you want.

The US firm is no sweetie, but a so-called "vulture fund" that buys into distressed debt and then seeks payments forced by legal proceedings.

Still, nice to see somebody shorting the Chinese on this approach. Without the backpressure, who will force Chinese companies into making better deals for the locals?

Be careful of what you wish for re: a stronger renminbi

GLOBAL INSIGHT: "Consequences of stronger renminbi begin to dawn on US," by Geoff Dyer, Financial Times, 24 February 2010.

Starts off by referencing the "Red Dawn" remake where the Chinese apparently land M&A bankers in Detroit, then moves onto popular and expert pressure across the U.S. for China to revalue its currency upward relative to the dollar.

Dyer says this "would actually exacerbate the very fears behind a film such as the new Red Dawn."

China is currently the third-biggest global economy, when measured by dollars. If appreciated, China would magically leap beyond Japan and suddenly be interpreted as half the size of the U.S. economy. Instantly, Chinese defense and R&D budgets would be seen as roughly ¼ those of the U.S. instead of something more like 1/10th today.

So an argument mostly about perceptions of China's "rise."

Wolf (again) on the narrow road forward for the global economy

COMMENT: "The world economy has no easy way out of the mire," by Martin Wolf, Financial Times, 24 February 2010.

The private sector is now spending less than it takes in, while governments in the West, per their norm during crisis, are doing the opposite with a vengeance.

Success going forward? Reigniting the private-sector credit market.

Failure is continued private-sector investment/credit contraction while the governments continue to spend--the essence of the Japanese malaise since their early 1990s bubble-burst. In that pathway, sovereign debt crises become the norm.

The way out?

I can envisage two ways by which the world might grow out of its debt overhangs without such a collapse: a surge in private and public investment in the deficit countries or a surge in demand from the emerging countries.

When I met Wolf in Australia, his obsession then was (paraphrasing), "Who plays the role of demand generator in the future once the U.S. backs off that seminal role in the global economy?"

To me, this simply heralded the growing importance of the emerging global middle class and why shrink-the-Gap is the global economic--as well as security--imperative.

That's why I continue to find comparisons to Immanuel Wallerstein (primarily because I use the term "core") so idiotic. The neo-Marxists' entire scheme is based on the notion that the Core needs to continue abusing the Periphery to stay rich, when the exact opposite (my point) is so clearly true.

But other than that diametrically opposed logic, my scheme is identical to Wallerstein! I mean, if we agree there's an up-and-down-world but I say it must go up while he says he must go down, that's saying EXACTLY the same thing, right?

Then again, those dumb f--ks have always been at the end of the line, so how much dumber can they get?

Karzai's crazy

ARTICLE: Afghan Leader Asserts Control Over Election Body, By ALISSA J. RUBIN, New York Times, February 23, 2010

Hard to argue for a "truly national" election commission when all sorts of foreigners are fighting and dying to extend your government's rule. You can't take people's money and lives and then state only your people get to validate an election.

Karzai's gone off his rocker on this one--a very self-destructive move that we should push back against immediately and hard.

Populism is mobocracy at its worst

OPINION: "Populism Is Democracy at Work," by Thomas Frank, Wall Street Journal, 3 February 2010

I must admit, as the token liberal on the WSJ opinion page, I find almost nothing of value in Thomas Frank's writings. I simply do not understand the guy's appeal. He's stunningly wrongheaded, in my opinion, almost on a para-by-para basis--as in wrong again, bad idea, bad analysis, bad analogy, bad history, bad start, bad ending, and so on. I simply find that I disagree with virtually everything he writes, not that he gets the facts wrong, but that he spins them so obviously. The bias is just profound and off-putting. He's the Alan Colmes of the Journal.

Every time I try to read Frank, I feel my inner Republican emerging, only to feel it diminish almost every time I read the WSJ's usual crew of conservative writers, my personal favorite being that transparent Bush apologist Rove, who really is hilariously predictable.

Fortunately, the paper remains great in its reporting, although I now place it third after the Financial Times and The Economist as the best sources on globalization.

Gates making sense, as usual

SPEECH: The Nixon Center's Distinguished Service Award, By Robert M. Gates, The Nixon Center, Washington, D.C., Wednesday, February 24, 2010

Excerpts:

We are unlikely to repeat a mission on the scale of Iraq or Afghanistan anytime soon - that is, forced regime change followed by nation-building under fire. But, as the department's Quadrennial Defense Review recently concluded, we are still likely to face scenarios calling on a familiar tool-kit of capabilities, albeit on a smaller scale.

In these situations, the effectiveness and credibility of the United States will only be as good as the effectiveness, credibility, and sustainability of our local partners. As I mentioned earlier, building the governance and security capacity of other countries was a critical element of our strategy in the Cold War. But it is even more urgent in a global security environment where, unlike the Cold War, the most likely and lethal threats - an American city poisoned or reduced to rubble - will likely emanate from fractured or failing states, rather than aggressor states.

It is in many ways the ideological and security challenge of our time. It is the primary institutional challenge as well. For the most part, America's instruments of national power - military and civilian - were set up in a different era for a very different set of threats. Our military was designed to defeat other armies, navies and air forces, not to advise, train and equip them. Likewise, our civilian instruments were designed primarily to manage relationships between states, rather than to help build them from within.

...

America's interagency toolkit is a hodgepodge of jerry-rigged arrangements constrained by a dated and complex patchwork of authorities, persistent shortfalls in resources, and unwieldy processes. Consider that the National Security Act that created most of the current interagency structure was passed in 1947. The last major legislation structuring how America dispenses foreign assistance was signed by President Kennedy. The law governing how U.S. exports military equipment was passed in 1976. All the while, other countries that do not suffer from our encumbrances are taking full advantage to more quickly fund projects, sell weapons, and build relationships.

...

Those authorities and programs - and the role of the defense department in foreign assistance writ large - have stirred debates within the government and with the congress as well. I never miss an opportunity to call for more funding for and emphasis on diplomacy and development. I also once warned publicly of a "creeping militarization" of aspects of our foreign policy if imbalances within our national security system were not addressed. As a career CIA officer who watched the military's role in intelligence grow ever larger, I am keenly aware that the defense department - by its sheer size - is not only the 800 pound gorilla of our government, but one with a sometimes very active pituitary gland.

Nonetheless, in my view, it is time to move beyond the ideological debates and bureaucratic squabbles that have characterized the issue of building partner capacity in years past, and move forward with a set of solutions that can address what will be a persistent and enduring challenge.

Always gratifying to quote Gates, because there is simply so much common sense there.

I especially like the non-predetermined logic at the end, or Gates' call to "move forward with a set of solutions that can address what will be a persistent and enduring challenge" [of nation-building].

Gates' baseline position is always to say he wants more diplomacy and development and that the DoD's role should be delineated clearly wherever possible, and made as reasonably small as possible. His topline position is more subtle: our current structure/balance is unsustainable for what "will be a persistent and enduring challenge." He doesn't say how to answer that challenge per se, and in that silence much flexibility can be found.

Everybody says, "I'm suspicious of organizational proposals," like Bowen's basic call for a Department-of-Everything-Else-like entity to focus on contingencies.

But nobody seems to think that either State or USAID will ever be fixed through internal reforms or more money, so what exactly else is on the table EXCEPT some new organization?

India and Pakistan talking is good

ARTICLE: India, Pakistan vow to 'stay in touch' in first formal talks since Mumbai siege, By Emily Wax, Washington Post, February 26, 2010

Hard to expect too much, and yet this is EXACTLY what the U.S. should be promoting, so kudos to Team Obama.

Contingency planning in Iraq

ARTICLE: U.S. plans for possible delay in Iraq withdrawal, By Craig Whitlock, Washington Post, February 23, 2010

Sensible stuff: prepping plans to slow the withdrawal of combat troops, depending on how the elections go in early March.

Wargames are designed to elicit failure

ARTICLE: War game reveals U.S. lacks cyber-crisis skills, By Ellen Nakashima, Washington Post, February 17, 2010

Perfectly sensible and fine to run such wargames. Just remember that wargames are designed to discover capability gaps and that, if none are found, then the game is considered a failure because it wasn't stressful enough.

Just some perspective.

Working the Naxalites

ARTICLE: Maoist rebels offer to cease attacks, The National, February 23. 2010

Seems New Delhi's efforts to gain a cease-fire from the Naxalites may be bearing some fruit already.

(Via WPR's Media Roundup)

No brainstorm from Ricks

OP-ED: Extending Our Stay in Iraq, By THOMAS E. RICKS, New York Times, February 23, 2010

Bit of strawman posturing here that I like:

The Bush administration's grandiose original vision of transforming Iraq into a beacon of democracy that would alter the Middle East and drain the swamps of terrorism was scuttled and replaced by the more realistic goal of getting American forces out and leaving behind a country that was somewhat stable and, with luck, perhaps democratic and respectful of human rights.

Duh! Those two definitions are one in the same in that region!

(Via WPR's Media Roundup)

Tom around the web

+ Greg R. Lawson linked America's Place in the World.
+ the sad red earth linked Assasinating Al Qaeda: not a problem.
+ Gunnar Peterson commented about Tom on Risk Management Solutions for Sarbanes-Oxley Section 404 IT Compliance.
+ Financial News Watch linked the TED video and posted a couple favorite quotes from it.

+ agumack tweeted We need more Hong Kongs.
+ redstateblogs tweeted Fighting Iranian censorship.
+ Dan Barrett tweeted 'Reading Thomas Barnett's The Pentagon's New Map - making me think twice about nonintervention foreign policy...'

+ Britton Manasco used Tom and the Map as an example of achieving success by thinking in visual terms.

No, China won't rule the 21st century

ARTICLE: Poll shows concern about American influence waning as China's grows, By John Pomfret and Jon Cohen, Washington Post, February 25, 2010

Exhibit A on the current idiotic hyperbole that magnifies all our faults and minimizes all of China's while extrapolating that country's current extensive-growth rates into what necessarily becomes their intensive-growth future: in our current bout of self-doubt, we are ready to cede the entire century to the Chinese.

Please. Grow a pair.