THE big global long-term financial threat: Asia's "flowering" welfare states

Excellent Economist piece.

Idea I've spoken about before:  Asia has been the savings center of the global economy for a while.  The West (outside the oddly still-young US) is slouching toward retirement, when traditionally a society needs capital because it's burning up its own.  Meanwhile, the South is like a young couple that needs start-up capital.  

Point is, we expect Asia to fund both - plus take care of its own continuing rise.

The good news: while China's demographic dividend shrinks from here on out, SE Asia's will be around for decades, as will that of the emerging demo-div King Kong - India.

But what happens if Asia adopts the West's cradle-to-grave welfare state model?  Or what the Economist dubs "tigers turning marsupial"?

The Economist's point:  forget Asian values.  When societies reach a certain level of wealth, people expect the same things the world over.

It seems that every country that can afford to build a welfare state will come under mounting pressure to do so. And much of Asia has hit the relevant level of prosperity (see chart 1). Indonesia is now almost as developed as America was in 1935 when it passed the landmark Social Security Act, according to figures compiled by the late Angus Maddison, an economic historian. China is already richer than Britain was in 1948, when it inaugurated the National Health Service (NHS) which, to judge by political ructions—and Olympic opening ceremonies—has become crucial to its sense of national identity.

We are expecting a lot from Asia between now and 2050 . . .. 

Chart of the day: Filling in the gaps on emerging economies = economic dynamic of century

It is THE amazing achievement of US grand strategy that we've created the conditions by which the chart of the direct left unfolds. If ANYBODY tells you that globalization is bad or unfair or says similar things about US "empire" since WWII, then simply show them the slide on the left, because it knocks those lies right out of the ballpark.

Or to be more succinct: the US-created and -enabled globalization process never replicated the dynamics of colonialism - i.e., kept the poor down. It did the exact opposite. The rest is just whiny bullshit propagated by little minds who refuse to accept it. We built a world order that enabled the rise of a global middle class, which means near-universal democracy is in the works (there will remain bedroom communities for the nonviolent rejectionists - we'll just ask them to put orange reflector signs on their buggies).

Further down, you see the legacy gaps in capabilities that will be invariably filled in over the coming 2-3 decades. That's when the resource constraints push the world into resource utilization of an entirely different caliber, but that too will be a good thing.

Time's Battleland: Drones + biometrics: Weapons that conquer globalization's frontiers

Cool NYT story on the US military's use of biometrics (eye scans, etc.) to create unforgeable identification records of roughly one-in-five fighting-age Iraqi and Afghani males, creating databases that can be perused in seconds by a handheld device at a border crossing. Naturally, there is much interest and some desire to use the same technology here in the States, along with the usual fears of loss of privacy.  Trust me, along with drones, these frontier-settling technologies will most definitely infiltrate our society in coming years, just like the military's Internet and GPS did before.

Read the entire post at Time's Battleland.

I first wrote about this concept in Blueprint for Action in the final chapter called "blogging the future."

The Gap is full of fake states, aka Yugoslavias

Thomas Friedman piece in NYT yesterday called "Pray.  Hope.  Prepare."

The gist:

That is to say, in Europe, when the iron fist of communism was removed, the big, largely homogenous states, with traditions of civil society, were able to move relatively quickly and stably to more self-government — except Yugoslavia, a multiethnic, multireligious country that exploded into pieces.

In the Arab world, almost all these countries are Yugoslavia-like assemblages of ethnic, religious and tribal groups put together by colonial powers — except Egypt, Tunisia and Morocco, which have big homogeneous majorities. So when you take the lid off these countries, you potentially unleash not civil society but civil war.

So he ends the piece by saying pray for Germany (homogeneous state revolutions), hope for South Africa (where past grievances are more peacefully dealt with), and prepare for Yugoslavias (more "Pentagon's New Map" material).

The Gap is full of Yugoslavias and not so many Germanys.  How many South Africas we can manage is the challenge, but one thing is for sure:  our current system of ad hoc responses only serves us so well.  While too many in the Pentagon still dream of fabulous high-tech stand-off wars with the Chinese, the future is full of Yugoslavias.

Globalization, meanwhile, continues to advance, and when it hits these fake states, it unleashes decades or even centuries of pent-up grievances.  The results will include plenty of civil wars, which in turn will birth more and more states.  These states will need to be bundled up into larger economic unions as part of their integration process--and for their survival. Eventually, there will be a "united states of everywhere."  That is the globalization replication process we unleashed, and it is the most potent marketizing/remapping process yet seen in the age of capitalism, so much so now that it advances with little to no effort on our part, as the impetus for its advance comes--ironically enough--from those ultra-conservative Chinese capitalists.

But China won't step into that fray unless forced to by our withdrawal from the world, now set somewhat in motion by the fiscal crisis long brewed by our decades-long deal with the world (you grow via export growth, we absorb that growth, you plow your winnings into our debt markets and accept a dollar-denominated financial order, and we fund and provide a Leviathan to manage global security).  We are victims of our own success, but we haven't raised our replacements.  We may take delight in France's recent muscular behavior, but it will not last. The burden must shift Eastward and Southward because that is where the money is (East) and that is where the action and thus incentives are (South).  So, from here on out, we manage the world through more small nudges, eschewing the big bets that no one else is game to join in on.

This is the "end of empire" to some, but to me, it's just the next logical evolution, success being harder than failure because it demands more changes from you and denies you obvious enemies.  

So there's no hoping or praying about it.  We know what lies ahead:  the hardest leftover work created by Europe's disastrous colonial orders of the 19th century.  You may imagine that reality, combined with growing multipolarism, creates a rerun of 19th-century balance of power, but you'd be wrong.  No one is really stepping up for any such competition and no one really seeks such control.  In truth, everybody would just as soon go back to the sole-policeman model, because that was easier on them and provided more certainty.  Now, responsibility is more dispersed but willpower is evaporating across the board, despite this glorious spurt from Europe.  

But, of course, there is no future reality to be found there.  So we enjoy it while we can, because the big adjustments and accommodations with the real risers like China, India, Turkey, Brazil, Indonesia - even Iran, those are yet to come.  So the near-term is more Yugoslavias, but few takers.

The pessimist in me says we enter a long period of let-it-burn tragedies, until the A-to-Z rule set for processing politically bankrupt states truly emerges.  But that's how things usually work out in this world:  you ignore the pain--until you can't.

Same problem, same prescription

LAT op-ed by Congressman Mike Honda, Dem from CA, by way of Chris Ridlon.

Great logic:

Given the comparatively weak Afghanistan team, and the fact that the Iraq inspector general's office is due to close in 2012 despite 50,000 troops and 80,000 defense contractors still operating in Iraq, we need a better form of oversight. Iraq and Afghanistan — and every other U.S. "contingency operation" involving billions of taxpayer dollars — should be under the watchful eye of a permanent, independent Office for Contingency Operations, with its own special inspector general. Rather than a piecemeal and reactive approach to the oversight of billions of dollars in these situations, we need a dedicated shop run by a proven investigator who can report to the National Security Council, and the Defense and State departments, without being cowed by political pressure.

We cannot afford to continue overseas relief and reconstruction efforts in an ad-hoc fashion, spending billions of taxpayer dollars under "emergency" pretexts with too few conditions and too little coordination, transparency, oversight and evaluation. It weakens our economic and national security.

You need a Department of Everything Else because the current approach simply wastes too much money and too much opportunity - and too many lives.

You can say we won't do any more of these, but you're kidding yourself. This is basically all that's left. We either do it or withdraw from the field, because fantasies of terrorists wielding loose nukes or rampaging pirates taking over globalization are silly.  There as two rogue regimes that want protection from U.S. invasion and believe nukes will buy them that (duh), and then there's the now rather symmetricized counter-terror effort spread across 75 states (SOF and drones and other nasty bits), and then there are the issues of failed states.  We can likewise fantasize about months-long bombing campaigns the width and breadth of China - that don't trigger nuclear war - but then we're into the serious nonsense.

Use your mentality.  Walk up to reality.

Get used to this headline, because the Chinese will

NYT story by the always impressive Simon Romero.

Gist:

In its worldwide quest for commodities, China has scoured South America for everything from Brazilian soybeans to Guyanese timber and Venezuelan oil. But long before it made any of those forays, China put down stakes in this desolate mining town in Peru’s southern desert.

The year was 1992. Chinese companies had begun to look abroad. One steelmaker, the Shougang Corporation of Beijing, set its sights on an iron ore mine here and bought it in a move that seemed particularly bold. At the time, Peru was still plagued by attacks by the Maoist guerrillas of the Shining Path.

But the hero’s welcome for Shougang soon faded. Workers at the mine, which was founded by Americans in the 1950s and nationalized by leftist generals in the 1970s, began fomenting the unexpected: a revolt that has endured to this day, marked by repeated strikes, clashes with the police and even arson attacks against their nominally Communist bosses from China.

“We quickly realized that we were being exploited to help build the new China, but without seeing any of the rewards for doing so,” said Honorato Quispe, 63, a longtime union official at the mine, where workers have held three strikes this year alone, including an 11-day stoppage last month.

The long-festering conflict with Shougang over wages, environmental pollution and Shougang’s treatment of residents of this company town does not square well with China’s celebratory vision of its rising profile in Latin America, in which everyone benefits and a “win-win” is “the consensus.” Latin America, as this idea of so-called South-South cooperation goes, sells China raw materials like copper, oil or iron; in return, the region buys goods like cellphones, cars and cheap plastic toys.

The tension in Marcona, one of the most conflict-ridden towns in a country increasingly prone to conflict over mining and energy projects, suggests that China’s engagement in the region — like that of the United States, Britain and other powers that preceded it in Latin America — is not without pitfalls.

While not the dominant theme in the region’s relations with China, a wariness is crystallizing in some countries over the booming trade with China.

Reactions to this surge largely focus on cheap Chinese imports or on China’s assertive efforts to win access to energy reserves. In both Brazil and Argentina, for instance, manufacturers accused Chinese companies of unfairly dumping Chinese products in their markets, prompting new tariffs against some Chinese imports.

The backlash on China's penetration of the Gap is just beginning, and it'll be led by fellow New Core pillars ike Argentina and Brazil, who will have the guts to push back.

Having spent some time talking with China's extractive industry execs, I know that they know that their model isn't what it should be WRT to the win-win notion.  But the truth is, it'll take a build-up of experience and the accompanying backlash to force Chinese companies--and the government that stands behind them--to improve their approach.  Plenty of Western multinationals learned this the hard way, like Honda and Toyota here in the States years ago:  if you want to sell globally, you have to source and manufacturer and R&D locally too.  You become, in Sam Palmisano's terminology, a globally integrated enterprise.

This is the key evolution for Chinese national companies, and it will stress them out considerably--especially in their diverging (in terms of goals) relationship with the Chinese government/single-party state.  But the only way to get from here to there is more connectivity leading to more tension leading to more change.

So I say to Chinese business, bring [the connectivity] on!"

And I also say to the locals, "Don't give up anything without a fierce fight."

The "escape from New York" approach to failed states

Fareed Zakaria remains in full mea culpa mode over Iraq and Afghanistan.  In this WAPO op-ed (via WPR's Media Roundup), he embraces the notion of putting a fence around failed states and sending in the drones only when absolutely needed:

What to do in Somalia? In a thoughtful report, Bronwyn Bruton of the Council on Foreign Relations makes the case for "constructive disengagement." The idea is to watch the situation carefully for signs of real global terrorism -- which so far are limited. Al-Shabab's "links" with al-Qaeda seem to be mostly rhetoric on both sides. But if they become real and deadly, be willing to strike. This would not be so difficult. Somalia has no mountains or jungles, making it relatively hospitable for counterterrorism operations. Just be careful not to become a player in the country's internal political dynamics. "We have a limited capacity to influence events in Somalia, to influence them positively," says Bruton. "But we have an almost unlimited capacity to make a mess of things."

The horrific cynicism on display here is disheartening, but it reflects Zakaria's odd take on nation-building.  For a guy who crystalized the argument about not trying to bring democracy too early to underdeveloped states, he uses the straw-man about either fast-forwarding political modernization (impossible) or pulling back similarly in Afghanistan.  All I can say in response is, Why must the choice be defined in such binary form?  And why put this down solely to "American imperialism"?  In a world where the "rest" are rising, why is our strategic imagination so limited re: potential allies or alternative nation-building approaches?

It's weird, but Zakaria isn't even staying true to his own ideas and observations.  Watching him embrace this kind of self-defeating thought makes me think he's caved in to the conventional wisdom of this administration.  Here I think his journalism is limiting his analysis, meaning his need to maintain access has put him into pandering mode.

And that's too bad.  His voice is too important to waste on a TV show or even this administration.

To shrink the Gap for real starts with fixing "broken windows/states"

Al Shabaab's handiwork in KampalaZakaria on failed states being an enabler of terrorism:  he makes the finer point that it’s mostly the weak states that give the West trouble rather than the truly failed, so a Pakistan trumps a Somalia.

Fair enough, but weak states are often defined by their proximity to truly failed ones, like Pakistan is to Afghanistan and the shared non-state of Pashtunistan.  Truly troubled weak states rarely, if ever, exist in isolation (NorKo is a Cold War leftover).

So the argument shouldn’t be, let’s beg off working failed states and concentrate on weak ones.  The argument should be, let’s be realistic that, until we deal with failed states, expecting the regional environment to improve to the point where weak or rogue nations are forced into better behavior is a pipe dream.  If you want a strong regional community, fix the “broken windows” and raise the security level as a whole.

What Zakaria is peddling here is the Colin Powell sort of benign neglect:  ignore Somalia until al Shabaab pulls off something truly large and we can spot the clear al Qaeda ties.  Then he says, strike.  That sounds like a redux of Clinton’s approach in the 1990s, which was amazingly ineffective.

But notice that Zakaria’s assumptions here seem to be all about what America alone can achieve.  If your starting assumptions are that myopic, then his caution is warranted.  But why start with such myopic assumptions?

China and India and Brazil are coming to Africa in big ways.  Africa is clearly the emerging center of globalization’s integrating dynamics.  Why view Somalia through the lens of Clinton’s 1990s mindset?

More strategic imagination, please.  Time-wise, pay and play it forward—not backward.