The Growing Global Middle Class and Its Demands

In what some experts are calling the third great wave of outsourcing -- after manufacturing and services -- cash-rich Arab and Asian governments are buying up arable farmland (read: water rights) all over the developing world. Naturally, the worst-case artists in my field of national security see only one possible outcome: a long, steady decline into a chaotic, Mad Max-like dystopia, characterized by that favorite of the alarmist set -- resource wars.

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

Hearts and minds staying neutral in Helmand

CENTRAL ASIA: "Caught in the Middle: In Helmand province, Afghans are way of both U.S. troops and the Taliban," by Ann Scott Tyson, Washington Post National Weekly Edition, 24-30 August 2009.

Depressing article. To win confidence of locals will take a VERY long time.

This is a babysitting job that will stretch on for many years. We will have to stay until globalization's networks move in big time and the system can support and defend itself.

The good news remains: Afghanistan is not poor in resources, but extractors will not come in enough numbers unless we stay. Nor will the railroads.

Pipes the Elder on Biden comments: so impolite because they are so true

WEEKEND JOURNAL: "Pride and Power: Russia is caught between continents and haunted by its past," by Richard Pipes, Wall Street Journal, 22-23 August 2009.

Great stuff from the grand old man. I took his imperial Russia history course at Harvard as a grad student, and he was imposing from start to finish, but a brilliant lecturer. You never felt cheated in his class.

Points offered here are well taken: Biden's statements about Russia facing severe demographic pressures, their "withering economy," a fragile banking sector--all weaknesses that make Russia less than important as a global player, are all correct and gratuitous at the same time.

Russia's primary importance, Pipes notes, is its sprawling location. By definition, it's a global power if a weak one now. That loss of stature from the Cold War still infects most thinking in Moscow, thus the obsession with the imagery of a great power and sharp reactions whenever that illusion is questioned by outsiders.

Medvedev, to his credit, actually describes Russia's problems with some accuracy: "Russia needs to move forward and this movement so far does not exist. We are making time and this was clearly demonstrated by the crisis . . . as soon as the crisis occurred, we collapsed. And we collapsed more than many other countries."

The biggest issue, like with China, is official corruption. The second is the pervasive depoliticization of the populace: they've never really had any experience picking their own leaders over the past 1,000 years. That fend-for-yourself mentality pervades the political system and its foreign policy. All citizens want from the state is order, and what they miss most about the Soviet past was that it preserved Russia's contiguous empire beyond that of any in Europe or Asia.

Russians have no idea who they are today: they don't feel either European or Asian. Eventually, they'll come to some conclusion about what sitting between those civilizations means in terms of identity.

So patience and care is required.

Very nice piece by Pipes.

US to Brazil: BFF

ARTICLE: U.S. Government to Loan Brazil's Petrobras $10 Billion, Latin American Herald Tribune

Good move on Obama's part. America wants to be part of "rising" Brazil's trajectory, especially when it comes to energy.

(Thanks: jarrod myrick)

If you want the full-throated case for American strikes on Iran, this is it

OP-ED: There Is a Military Option on Iran, By CHUCK WALD, Wall Street Journal, AUGUST 6, 2009

No, Wald admits we won't stop Iran from getting the bomb. We will just delay it.

Yes, Wald admits Iran will turn on us with everything it can as a result.

But here's the part I find fantastic in his thinking--namely the great danger that awaits us if we don't wage this preemptive war right on the border of both Afghanistan and Iraq: Iran gets nukes and then will "dominate" the Persian Gulf.

Really?

Israel has several hundred nukes. How does Israel now "dominate" the Persian Gulf? How does Pakistan "dominate" its region with nukes? How does India? Why haven't we seen any of them detonate nukes against their enemies, using proxies to hide their tracks?

It is odd to see an Air Force officer call for pre-emptive war and totally dismiss the notion of deterrence, especially when Iran is clearly reaching for nukes to deter a U.S. attack.

So, in the end, the argument for attacking Iran is primarily one about preserving our ability to attack Iran.

(Thanks: Michael S. Smith II)

The latest from Lomborg on global warming

OPINION: "Technology Can Fight Global Warming," by Bjorn Lomborg, Wall Street Journal, 28 August 2009.

Promises were made in Rio de Janeiro in 1992 to cut emissions. Then the Kyoto protocol committed three-dozen industrial states to cuts, but they haven't been forthcoming (except in Eastern, former Sov-bloc states where economic decline accounted for the drop more than any efficiency).

The harsh judgment from Lomborg:

The only possible lesson is that agreements are costly, politically arduous and ultimately ineffective."

Now, leaders are to gather again in Copenhagen to negotiate a new treaty.

Lomborg expects failure and irrelevance.

Instead of CO2 cuts, why not focus on adaptation? Why cut GDP growth over the century by 12-13% when the costs of adaptation will be much lower ("the majority of economic models show that unconstrained global warming would cost rich nations around 2% of GDP and poor countries around 5% by 2100."). And Lomborg argues that putting serious technology efforts online as part of this adaptation effort can actually make it a winning proposition.

Meanwhile, "a high carbon tax will simply hurt growth if alternative technology is not ready, making us all worse off."

In short, spend (on technology) to save, not cut (emissions).

Tom around the web

+ Applesauce linked The Real Worst-Case Scenario for Swine Flu 2.0.

+ zenpundit linked Obama Targets Jack Bauer, but Who Takes the Fall?

+ HG's WORLD posted the Map.
+ And linked Yes, the world is more peaceful, and why.
+ And mentioned GP.

+ RED SOUNDING linked The greatest analyst of Marxism who ever lived.
+ Never Stop Moving embedded the TED video.
+ So did Pilgrimage of Dreams.
+ The New Nixon linked The Real Worst-Case Scenario for Swine Flu 2.0.
+ Super Punch linked Ahmadinejad the liability.
+ Surfview Capital mentioned the Leviathan/SysAdmin split.
+ DOD Energy Blog linked 'Peak Oil' tapped out.
+ And linked Drones and the Re-symmetricized Battlefield.
+ Armchair Enlightened Despot linked The big shift arriving on Japan.
+ Surchur/H1N1 linked The return of deficit/debt politics draws nigh.

State screws up Honduras call

ARTICLE: US cuts aid to Honduras, By Lachlan Carmichael, AFP, September 3, 2009

Loser move.

Give State's bureaucracy a call to make and they will screw it 9 times out of 10.

This better be a two-month slap on the wrist. Honduras' next presidential election is early Nov.

(Thanks: Critt Jarvis)

Interrogations got out of the CIA's control

OP-ED: How the CIA Became Dangerously Dependent on Outside Contractors, By Allison Stanger, U.S. News & World Report, August 27, 2009

As per my recent Esquire column, a lot of the MSM analysis said (in effect): "Look at all the wonderful rules the CIA made up for the interrogations. See, they had it all in hand!"

I read the report and got a very different vibe, as I stated. I saw the CIA overmatched by the situation and having to rely a lot on unexperienced contractors and scary legal opinions, with their instinct being to bureaucratize it big-time with rules that gave them the illusion of control, when, deep down, it seems a lot of those involved felt it was going badly from the start.

Allison's piece on US News.com explores, like her upcoming book (which I want the usual free copy of, so I can slavishly push it in a WPR column), just how dependent our national security/intelligence establishment became in recent years, and how--in effect--we now reap what we sowed in this age of frontier integration and all the burden that Gap-spanning tumult causes for our government. The "peace dividend" was a myth in terms of money. It's real in terms of the great-power piece.

Now, we've simply moved onto the next stage of expanding our international liberal trade order, meaning the hardest nuts/regions to crack. Some of it will be outsourced, but we need to be careful on the what and the why.

CIA, DoJ tension and Panetta resignation watch

ARTICLE: Abuse Issue Puts the C.I.A. and Justice Dept. at Odds, By PETER BAKER, DAVID JOHNSTON and MARK MAZZETTI, New York Times, August 27, 2009

Per my Esquire column last week: expectations of even deeper tension between CIA and a Justice Department that the Agency trusted for advice but which now investigates its execution according to those policy guidelines.

I will be surprised if Panetta doesn't quit sometime soon.

More perspective on the debt

OP-ED: Till Debt Does Its Part, By PAUL KRUGMAN, New York Times, August 27, 2009

Amidst all the legitimate hand-wringing over the ballooning deficit and projections going forward, some perspective worth reading from Krugman.

The manufacturing edge: how thin the margin?

THE OUTLOOK: "China's Gains in Manufacturing Stir Friction Across the Pacific," by Timothy Aeppel, Wall Street Journal, 3 August 2009.

Of course we know that China manufactures everything in the world, and the United States virtually nothing anymore.

Except the U.S. is still #1 by size (20% of world total). Still, China will surpass sooner than most experts had previously expected (12% in last year measured--2007, it should surpass us around 2015).

Now for the true non-hype:

U.S. manufacturing is shrinking, shedding jobs and, in the wake of this deep recession, producing and exporting far fewer goods, while China's factories keep expanding.

Thus continued concerns on the trade imbalance.

Still . . .

Many economists argue that the shrinking of U.S. manufacturing--both in terms of jobs and share of gross domestic product--is a normal economic evolution that started long before China emerged as a manufacturing powerhouse.

Unless we want to keep America from moving up the value chain, we will have less manufacturing.

True enough, especially since China consolidated a lot of lower-end manufacturing from a lot of neighboring Asian states, becoming the final assembler of note.

The opposing school of thought says we must retain our industrial base or lose our fundamentals--as it were.

But here's the trick with the manufacturing lobby: many produce in China as well as the U.S.

Spend to save

THE OUTLOOK: "Asian Nations Revisit Safety Net in Effort to Bolster Spending," by Patrick Barta, Wall Street Journal, 27 July 2009.

Important positive sign on the rebalancing-the-global-economy front.

This piece says the OECD standard for social expenditures is only 20% (not 25% as recorded elsewhere recently). China is listed at under 5%. The savings rate in China is a bit over 50% of income, and a primary cause is that only 30% of Chinese elders get a pension and only 20% of the unemployed get benefits, so you hedge against hard times if you're Chinese.

So China is pledging medical coverage to 90% of its 1.3B within three years.

But don't expect any huge plus-up in consumption to occur in the near term. These things take time.

Still, the direction is what matters, not the degree, and it's good.

A misdiagnosis on the OAS

WORLD NEWS: "Crisis Tests Relevance of Americas Group: Failure of Organization of American States to Fix Honduran Standoff Fuels Claim That It Has Fumbled Its Democratic Mission," by David Luhnow and Peter Spiegel, Wall Street Journal, 1-2 August 2009.

Can't be a failure of democracy promotion if the ousted president was angling for autocracy, can it?

Pricing water: Old Core v. New

WORLD NEWS: "China Cities Raise Water Price in Bid to Conserve," by Andrew Batson, Wall Street Journal, 31 July 2009.

Just an interesting chart that show Old Core economies tend to price water a lot higher than New Core ones.

So it's Germany (88g of water bought by $1USD) and UK (111) on the stingy/pricey side of the equation and Brazil (406) and China (840) at the generous/low-cost side.

As so often is the case, America is more New Core than Old, at 357g. Sensible and water-rich Canada sits in the middle at 257g.

Gist of article: China is trying to change its wasteful ways on water.

Nuclear proliferation? Glacial

ARTICLE: Why Obama Should Learn to Love the Bomb, By Jonathan Tepperman, Newsweek, Aug 29, 2009

Nice piece, with the added benefit of words from Ken Waltz:

The risk of an arms race--with, say, other Persian Gulf states rushing to build a bomb after Iran got one--is a bit harder to dispel. Once again, however, history is instructive. "In 64 years, the most nuclear-weapons states we've ever had is 12," says Waltz. "Now with North Korea we're at nine. That's not proliferation; that's spread at glacial pace."

(Thanks: Jim Jeansonne)

The Real Worst-Case Scenario for Swine Flu 2.0

Could a new wave of the H1N1 virus become as radioactive for Obama as Katrina was for Bush? Or could the threat of tens of thousands of children dying help him pass his health-care package? An in-depth assessment of the risks to moms and politicians across the country.

Continue reading this week's World War Room column at Esquire.com.

The deficit might not be as bad as all that

ARTICLE: It's Hard to Worry About a Deficit 10 Years Out, By FLOYD NORRIS, New York Times, August 27, 2009

And another county heard from on the deficit:

Ten years ago, Washington was worried about the budget outlook, and there were forecasts of dire outcomes. And so it is today.

The difference is the nature of the worries. Alan Greenspan, then the Federal Reserve chairman, talked about the dangers of a shortage of Treasury securities as the $5 trillion surplus forecast for the next decade enabled the national debt to be paid down. This week we were warned of a $9 trillion deficit over the next 10 years.

"The last time people got really excited about a 10-year budget outlook, they were hysterically wrong about what transpired," said Robert Barbera, the chief economist of ITG, who mocked the surplus forecasts then and now thinks the consensus outlook is too negative.

"The $5 trillion surplus was a 'nothing can go wrong' forecast," he said. "No recessions, no wars, no bear markets and a perpetuation of inexplicably high tax receipts. You can make the case that the current conversations about our fiscal outlook are effectively, 'Nothing can go right.' The estimates assume we continue to allocate over $100 billion a year for fighting wars. They assume a very mild recovery for the economy, and an even milder recovery for tax receipts."

Reason I cite: I remember that discussion a decade ago and I remember it quite vividly.

The role of China in global recovery

ARTICLE: Asia's Recovery Highlights China's Ascendance, By NELSON D. SCHWARTZ, New York Times, August 23, 2009

Two key bits:

"The economic center of gravity has been shifting for some time, but this recession marks a turning point," said Neal Soss, chief economist for Credit Suisse in New York. "It's Asia that's lifting the world, rather than the U.S., and that's never happened before."

And . . .

"The big question is what happens next," said Kenneth S. Rogoff, a professor of economics at Harvard. "If the consumer in the United States and Europe doesn't come back, I'm not sure Asia has a Plan B."

So it's like everything has changed, but we're just not sure for how long.

But this seems more permanent, no matter how shaky China's recovery may end up being because it's so driven by public-sector investment:

The United States is also being shoved aside as the make-or-break customer for export-driven nations like Germany and Japan. China overtook the United States as Japan's leading trading partner in the first half of 2009, while in Europe manufacturers are looking east instead of west.

The overcapacity argument with China is real, but so is its burgeoning middle class. Booms and busts are expected, but so is the permanent desire for a better standard of living among all those hundreds of millions now armed with disposable cash.

The most compelling issue: how the Party keeps that middle class happy and free from fear about the future.

The SysAdmin tipping point reached a while ago in Afghanistan

WORLD NEWS: "Afghanistan Contractors Outnumber Troops: Even After Surge in U.S. Deployments, More Civilians Are Posted in War-Zone; Echoes of Controversy in Iraq," by August Cole, Wall Street Journal< 22-23 August 2009.

Quelle surprise! When we get serious on the SysAdmin effort in Iraq, we discover that the number of civilians tops that of the military, finally giving Shenseki his number.

Now, as we get serious on Afghanistan, same reality emerges: peace requires more troops than the war, and more civilians than soldiers.

This is why, for about a decade now, I've been saying that the SysAdmin is more civilian than uniform.

In Iraq as of 30 June, there was 120k contractors (down 10 percent from surge) and the troops were at 132k.

In Afghanistan, it's 74k contractors and 58k troops, a balance that goes back for quite a while--just unnoticed. And more troops in the surge simply increases the civilian numbers commensurately.

Obama will not change that reality, despite all the talk.