Nations Are Only As Resilient As Their Middle Class is Happy

IN HIS BRILLIANT BOOK ON "THE MORAL CONSEQUENCES OF ECONOMIC GROWTH," HARVARD POLITICAL ECONOMIST BENJAMIN FRIEDMAN DEMONSTRATED HOW AMERICA'S RESILIENCE AS A NATION IS - AND ALWAYS HAS BEEN - DIRECTLY RELATED TO THE ECONOMIC VITALITY OF ITS MIDDLE CLASS.  Whenever that middle class enjoyed rising income and expanding economic opportunity, the nation was more welcoming of immigrants, more tolerant of diversity, more progressive in its reforms, and more beneficently - and outwardly - focused in its state affairs.  In short, a happy middle class makes for a better America and better American leadership in this world.  But, when the opposite conditions arise, and the US middle class feels pressed upon, marginalized, and economically threatened, then America inevitably turns less welcoming of immigrants, less tolerant of diversity, more regressive in its politics, and more withdrawn from global affairs.

Any guesses as to which phase America is in now? Since enduring the 2008 subprime crash that set off the Great Recession that still reverberates throughout the vast majority of US households?

America's middle class is not happy right now, and hasn't been in quite some time.  But this is not the first time the US has endured this sort of inner rage and political tumult.

And while it may come as a surprise, when America has previously endured such clear class tensions, our tendency has been to reach for a New York patrician - as in Theodore and Franklin Roosevelt.  Could Manhattan billionaire Donald Trump and former NY Senator Hillary Clinton, the current Republican and Democratic front-runners, respectively, for the US presidency meet such lofty historical standards?  Only time can tell.  My sole point in the comparison is to suggest that America has met this historical challenge before, and regained its economic and political footing.

I have no doubt that this time around will be our most difficult test yet, if only because this globalization - largely of America's creating and spreading - now poses competitive economic challenges of unprecedented ferocity and complexity.

We live in an age when corporate CEOs declare their firms too vast and too complex for even they to understand - much less ethically operate, when national leaders reach for "firewall" solutions versus tackling internal problems head-on, and when great powers no longer aim to defeat the enemies of order but merely to "thin their herds" on a consistent basis.

So, no surprise, Americans are more fearful of the present and future than they've been in a long time.  Our middle class is desperately unhappy, and that makes America desperately unhappy.

Unhappy societies are not resilient societies.  They're brittle as all get-out.  Shocks tend to shatter, pushes come to shoves, and civil discourse is anything but civil.

But a reasonably happy society, one with a rapidly expanding middle class?  That nation can face all manner of problems, dangers, threats, and deprivations and remain unusually resilient. I travel to China frequently in my work, and I am constantly amazed at how upbeat people are there now - despite the myriad of challenges there.  Could that all reverse the minute China's expanding middle class suffered a profound set-back?  Quite possibly.  But a lot depends on that middle class's sense of historical advance.  Right now, no matter what happens in China, life for the growing middle is one heckuva lot better than it was 10, 20, 30, 40 or even 50 years ago.  That buys you a lot of social resilience.

Nigeria falls into a similar category.  Does it have problems?  They're absolutely godawful.  But this is a country where middle-class households are growing at a fantastic rate, where just-opened shopping centers attract crowds like a new ride at Disney World.  You make that big of a chunk of your population optimistic about the future, and that buys you a lot of social resilience.

So where does that leave America?  Searching for answers right now and angry as hell.

Teddy Roosevelt promised a "square deal," while FDR promised a "new deal."  Go watch the hit movie "The Big Short" and you'll readily understand why so many Americans feel like they've been given a raw deal.  There's that sense that circumstances need to be re-rationalized, markets re-tamed, and the economic playing field re-graded . . . all a good deal more in favor of the "99%."  As we saw with the two Roosevelts, that's not so much a Republican or Democratic thing as a "traitor to your class" thing, meaning Americans tend to reach for a One-Percenter in these circumstances (recall how viciously both TR and FDR were pilloried by their fellow plutocrats for their reforms).

The World’s Greatest Stability Enabler – Can North American Agriculture Remain Resilient?

WHEN I FIRST SAW THIS CHART IN THE WASHINGTON POST ALMOST A DECADE AGO, I WAS GENUINELY SHOCKED TO REALIZE HOW CENTRAL TO GLOBAL FOOD SECURITY NORTH AMERICA HAD BECOME. The chart basically shows which regions in the world produce more grains than they need, thus making them available for export - in a net fashion. That's the key point:  everyone exports some grains, but which regions export more than they import? Where are the reserves in the global food system? Where can we count on our resilience as food producers to keep feeding humanity?

Grains are the obvious focal point of any thinking on global food security, because they provide the bulk of humanity's caloric intake. The thing is, thanks to globalization's enabling of the rise of humanity's first-ever majority middle class cohort (reaching 50% of the world's population back in 2006), that demand for more calories significantly outpaces population growth itself - translating into a far more quickly rising demand for grains (used - at varying levels of intensity - to create all manner of foodstuffs).

So, when you look at the map, you quickly realize how global grain reserve capacity exists really in only four regions: North America (US, Canada), South America (Argentina, Brazil, Chile), the Black Sea Region (Russia, Ukraine, Kazakhstan), and Oceania (Australia, New Zealand), with North America typically providing more than half and upwards of two-thirds of that moveable feast on an annual basis.

So what happens if North American agricultural production were to take a long-term - or even a sudden, short-term - hit? Well, food prices would spike globally, and when food prices spike in places like the agriculturally-insecure Middle East and North Africa, where the vast bulk of their food is imported AND accounts for the bulk of household spending, you get political instability and revolution. Bread prices rose dramatically in Egypt in the months leading up to the Arab Spring dynamics there.

Now, America has long viewed itself primarily as a security-exporter (US military's global footprint and operations) and a technology-exporter (Silicon Valley's numerous advances),  but, in truth, one can easily argue that the most important US export is food, where we rule on corn, soybeans, wheat and - unsurprisingly - food aid.

Yes, we can worry about the developed world's approach to monoculture agriculture, and we should remain vigilant on the subject of bio-terrorism against food production, but, long term, the chief threat is clear - climate change and the stress it puts on crops in terms of droughts (longer and more harsh, by all modeling).

I'd like to highlight two MSM pieces that recently bookended - in my mind - our current challenge. The first is a Time summation of a scientific study published in Nature:

Researchers ... found that drought and extreme heat reduced crop yields by as much as 10% between 1964 and 2007. Extreme cold and floods did not result in a significant reduction in crop production, according to the study.

The research provides key insight on the effects of climate on agriculture as policymakers prepare for the number of extreme weather events to spike in the coming decades due to global warming. The study, which evaluated the effect of 2,800 weather disasters on cereal crops like corn, rice and wheat, suggests that the effects of drought worsened after 1985 and are expected to continue to deteriorate in the coming decades. The study speculates that’s because of more intense droughts driven by climate change, increased vulnerability to drought and changed reporting methods, but couldn’t confirm any individual factor with certainty.

Developed countries experienced some of the most severe crop loss due to drought and heat, according to the research. Crop production in North America, Europe and Australia faced nearly a 20% decline(emphasis mine) thanks to drought and extreme heat, compared to less than 10% in Africa and Latin America. Researchers attributed the disparity to a difference between the agricultural methods employed in the different areas. Farmers in developed countries tend to grow crops uniformly across large areas. Drought affects those crops uniformly.

Recent spikes in global food prices typically unfolded in response to reduced production in places like the Black Sea Region and the Horn of Africa - important regions but nowhere near as important to the global system as North America.

So the question then becomes, how is North America - and the US in particular - readying itself for this looming technological challenge? The answer, as argued in a recent NYT op-ed, is not well at all:

DESPITE the four-year drought that has parched California and led to mandatory restrictions on water use, farmers there have kept feeding the country. California produces more of 66 different food crops than any other state, $54 billion of food annually.

Maintaining this level of productivity has been quite a challenge in recent years and is likely to become more difficult over the next few decades as weather patterns, available water and growing seasons shift further and threats of invasive weeds, pests and pathogens rise.

If agriculture is to have any chance of answering these challenges, we must have new and improved techniques and technologies. The problem is that agricultural innovation has not kept pace.

The last time our nation was in a similar crisis was just after the Dust Bowl years in the 1940s, but the country’s agricultural science enterprise was in much better shape. At that point, almost 40 percent of American research and development spending was focused on agriculture. This ambitious embrace of research was part of the “green revolution” that significantly boosted agricultural output around the world.

Today, farm production has stopped growing in the United States, and agriculture research is no longer a priority; it constitutes only 2 percent of federal research and development spending. And, according to the Department of Agriculture, total agricultural production has slowed significantly since the turn of the century. We need another ambitious surge in agricultural science.

Why not leave that to the handful of US agricultural multinational corporations that dominate the world's grain trade?

While private sector research and development in agriculture have grown over the past decade and now exceed what is federally funded, this financing is focused on shorter term benefits. On the other hand, more than 80 percent of federally funded research is designed to provide the building blocks for long-term production increases to address the many problems we face in the decades ahead.

So, how is the US Government doing on funding agricultural research? The answer is, awfully stingy when compared to the behemoth Defense Department R&D budget.

And that's something we should question as citizens of this world, as we collectively move deeper into this century of global climate change.

Ukraine's Electrical Grid Gets Knocked Down, But It Gets Up Again … In a Sign of Threats to Come

RUSSIA IS OFTEN CREDITED WITH EXPLORING THE SUB-THRESHOLDS OF TRADITIONAL STATE-ON-STATE WARFARE, OR WHAT ONE DEFENSE ACADEMIC HAS DUBBED "GREY-ZONE CONFLICTS."  In some ways, Moscow's experiments in interstate aggression represent a continuing acknowledgment of the overarching strategic reality of mutually assured destruction created by the still-formidable nuclear arsenals of the world's major military powers - i.e., Russia knows not to go there.  But great powers still want to act like great powers, so they meddle, they intervene, they topple governments, they support proxies in civil wars, they build artificial islands and militarize them, they insert computer viruses into other states' networks . . . and sometimes they merely send a signal like I can turn off your lights whenever I want.

Vladimir Putin's regime has an established reputation for this sort of international cyber-bullying, launching somewhat impressive online attacks against Estonia in 2007, Georgia in 2008 (as part of its land grab there), and more recently against Ukraine in 2014.  Western security reviews of such incidents typically find little-to-no evidence of official government involvement, and this is the central characteristic of the maskirovka approach (an old Soviet-era term that equates to covert military operations - i.e., masked).  So yeah, the whole point of such shenanigans is to be hide your tracks even as you are rather overtly signaling both capability and intent.

As we used to say about the Soviets during the Cold War, they will try every door and every window until they find one that's unlocked.

Thus, the world is meant to take notice of what recently happened in Ukraine, per WAPO:

Hackers caused a power outage in Ukraine during holiday season, researchers say, signalling a potentially troubling new escalation in digital attacks.

"This is the first incident we know of where an attack caused a blackout," said John Hultquist, head of iSIGHT Partner's cyberespionage intelligence practice. "It's always been the scenario we've been worried about for years because it has ramifications across broad sectors."

Indeed, the hackers-taking-down-electrical-grids is the sine qua non of the "cyber Pearl Harbor" or cybergeddon attack scenario that worries owners and operators of critical infrastructures around the world - but particularly in the US, where 88% of them are private-sector firms.

More details ...

Half of the homes in Ukraine's Ivano-Frankivsk region were left without power for several hours on December 23rd, according to a local report that attributed the blackout to a virus that disconnected electrical substations from the grid. Researchers at iSight on Monday said their analysis of malware found on the systems of at least three regional electrical operators confirmed that a "destructive" cyberattack led to the power outage.

Impression made ...

Why it matters for critical infrastructure writ large:

Electrical outages can lead to ripple effects that leave communities struggling with things like transportation and communication, according to security experts who have long warned about the potential for cyberattacks on the power grid.

Here the attack almost veers into clandestine mode, meaning the actor in question doesn't worry all that much about its identity being revealed:

In this case, the attackers used a kind of malware that wiped files off computer systems, shutting them down and resulting in the blackout, Hultquist said. At least one of the power systems was also infected with a type of malware known as BlackEnergy. A similar combination was used against some Ukrainian media organizations during local elections last year, he said.

So just imagine who was messing with Ukrainian media during local elections last year, and then realize that that same actor didn't bother changing up his cyber pitch this time around because . . . hey, that's not the point here.

Here we get to the true signaling:

While [cybersecurity company] ESET's analysis showed the destructive element was "theoretically capable of shutting down critical systems," it said BlackEnergy malware's ability to take control of a system would give attackers enough access to take down the computers. In that case, the destructive element may have been a way to make it harder to get the systems up and running again, according to ESET. (bolding mine)

That is what should grab the attention of any nation's critical infrastructure operators - not just the takedown capability but the suggested keepdown capacity.

Yes, the fingerpointing is eastward . . .

Hultquist believes the attacks that caused the blackout were the work of a group iSight dubs "Sandworm" that the company previously observed using BlackEnergy. In a 2014 report, iSight said the group was targeting NATO, energy sector firms and U.S. academic institutions as well as government organizations in Ukraine, Poland  and Western Europe.

"Operators who have previously targeted American and European sensitive systems look to have actually carried out a successful attack that turned the lights out," Hultquist said.

He described the group as "Russian," but declined to connect it to a specific government or group . . .

Such is the nature of maskirovka, remembering, of course, that Putin began his career in the KGB.

Now the part that most clearly matters to us here at Resilient Corporation:

The picture can often become clearer as more information trickles out, but the public and even some of those investigating may not be operating with all the facts, according to Cross.

"When a plane crashes, the FAA publishes all of the details about the incident. That makes sense because we pilots want to know what to do to avoid the next crash," he said. "In our industry, when something like this  happens, some information comes out and some doesn't."

Great analogy, suggesting that the lack of industry transparency here can cost us in the long run.  One doesn't counter maskirovka with "proprietary" concealment but with information-sharing.

Not everyone necessarily has an interest in fully disclosing the attacks because it might embarrass them or give new information to attackers, Cross said. But he argues that the more people  know the details about the attack, the better the security industry can prepare for the next one.

"People should operate with an abundance of caution and assume the threat  is real while demanding technical detail and evidence," he said.

Bingo!

As for Ukraine, the final bit of news was heartening:

Assuming that the hackers did take out the power in Ukraine, there was a silver lining, according to Cross: The grid seems to have rebounded quickly.

"The world didn't end here - they did get power back up," Cross said.

This time, yes.  But this scenario will grow less exotic over time, and that's why our resilience still-set must keep pace .

(RESILIENT BLOG) Government and Corporate Transparency Are Resilience Indicators

RESILIENT CORPORATION'S STOCK-IN-TRADE IS BASICALLY TRANSPARENCY IN THE SERVICE OF ORGANIZATIONAL RESILIENCE.  Everybody talks about resilience, but few can agree on what it means because it's so inherently specific to any enterprise's goals and missions.  That's why we define resilience as an organization’s capacity to anticipate disruptions, adapt to events, and create lasting value.  That last bit about "lasting value" may strike you as a bit of a punt on our part - Shouldn't you be more specific? But if you're talking to the entire universe of public and private enterprises out there, you need to leave in that definitional space for them to individually declare what it is they're trying to protect in terms of their core enterprise functioning/service/goal . . .

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(RESILIENT BLOG) Dependency as Vulnerability Means the Best Cyberdefense is a Wicked Cyberoffense

NATIONAL SECURITY, AS A BUSINESS DOMAIN, IS DRIVEN BY THE MANTRA OF "BE AFRAID, BE VERY AFRAID.  When we're just talking among ourselves, the conversation remains professional.  But there's always that temptation to go all apocalyptic when you take those conversations into the public realm.  It's the old if you only knew what I know trump-card that any professional has a hard time not using.  We can currently blame this dysfunctional dialogue on the media (driven to sensationalism) and the Internet (nutcases galore), but we cannot dismiss the grounded reality at the core of these discussions, which is dependency as vulnerability . . . 

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(RESILIENT BLOG) Rating US Healthcare Systems On Infectious Diseases: Which US States Are Most Resilient?

IN THE ADVANCED WEST, WE'VE LONG AGO SHIFTED OUR THINKING ON HEALTHCARE FROM INFECTIOUS DISEASES TO CHRONIC OR "LIFESTYLE" DISEASES.    Why?  Vaccines, antibiotics, and better sanitation in general put most infectious diseases (and subset communicable diseases) in the West's rearview mirror, compared to the East and South. Plus, they've been our biggest killers for a long time, thanks to modernization. Moreover, the big medical gains that we've seen with globalization's spread include a strong shift from infectious to chronic diseases in the "rising" East and a similarly unfolding shift across the South.  Now, of the top-ten killers in the world, according to the WHO, seven are considered chronic problems  That's the good news ...

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(RESILIENT BLOG) EU Leapfrogs US On Data Privacy Rules – And Punishments, Creating A Regulatory Disruption

THE EUROPEAN UNION FANCIES ITSELF AS A "RULES SUPERPOWER," meaning it creates new rules within its ranks and, by the power of its economic heft, they are effectively "exported" to other regions in a sort of regulatory osmosis (you do business with Europe, you adapt to those rules, those rules spread throughout your enterprise).

Fair enough, and certainly something the U.S. has been doing on trade for decades ...

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(RESILIENT BLOG) How Climate Change Will Test Our Resilience On A Very Local – Even Intimate – Level

LIVING IN THE NORTHERN UNITED STATES, ONE DOESN'T EXPECT TO CONTRACT ESSENTIALLY TROPICAL DISEASES LIKE MALARIA (see Lancet's chart on left), and yet, would you be surprised that, in the early-to-mid-19th century, Norwegian pioneers settling in Wisconsin - as a rule - feared malaria significantly more than cholera?  Malaria actually remained endemic in much of the United States (more in the South, obviously) through the 1940s, whereas today in a state like Wisconsin, virtually all cases that present themselves (roughly a dozen a year) feature travelers just back from tropical locations.  But that's changing, per a great WAPO in-depth story of a few days back ...

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(RESILIENT BLOG) Everybody Talks About The [Insert Gripe Here], But Nobody Does Anything About It . . . Without First Establishing Metrics

Resilient CorporationTHE ORIGINAL QUOTE, MISTAKENLY ATTRIBUTED TO MARK TWAIN, CONCERNED THE WEATHER, BUT WE COULD EASILY INSERT "RESILIENCE" TODAY - ALSO MISTAKENLY. It would be a mistake because a lot of people all over the world are working resilience, and yet, like any triumphant management buzzword (big enough to create a C-suite position trend), there's a significant range of thinking as to what the term actually means - hence the interesting blog post ("What is This Thing Called Resilience") by a Harvard academic last year on that very subject. The author, Eric J. McNulty, currently serves as director of research at the National Preparedness Leadership Initiative at Harvard's JFK School ...

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(RESILIENT BLOG) Internet Censorship As An Inverse Indicator of National Resilience

FREEDOM HOUSE RECENTLY ISSUED ITS 2015 REPORT ON INTERNET FREEDOM, a timely notion given the ongoing debates about encryption, monitoring of social media, etc., in the wake of recent terrorist attacks ... 

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(RESILIENT BLOG) President Obama Calls Upon America To Be “Resilient” In The Face of Domestic Terror Strikes, But What Does That Mean?

PRESIDENT OBAMA'S ADDRESS TO THE NATION LAST NIGHT spoke volumes about how we as Americans view the ongoing worldwide struggle with violent extremist organizations, a category within which Islamic terror groups present the biggest immediate challenges.

He began with a description of the San Bernardino shooting, the perpetrators, and the national and local responses to the crisis.

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Resilience is something you learn; resilience is something you earn

WHAT YOU SEE IN THIS PHOTO IS THE FUTURE OF AMERICA: Whites as the "majority-minority."  It's my family's holiday photo from a few years back, showing our three "biological" kids along with three whom we adopted from abroad (one from China, two biological sisters from Ethiopia).  If you're surprised to hear that European-descent Americans will "soon" (2043) be outnumbered by non-European-descent Americans, rest assured that I remain equally (and continuously) surprised to find myself the father of a Scot-Irish-German-Chinese-Ethiopian-American family (with three immigrants).

Actually, whites are the majority-minority already in four US states (Hawaii, California, Texas, and New Mexico), and will achieve that status among US children  in approximately three years.  A done deal, as they say, but certainly a stressful one that can engender all sorts of "take back America!" social tensions.  But as we know from history, the most "mixed" societies tend to be the most resilient, while the most racially homogeneous tend to be most brittle.  It's just that such resilience isn't a given, nor is it something with which we are born.  It's something we learn slowly, on a day-to-day basis.  It's an accumulation of experiences.  It's anything but a trivial skill or characteristic.

There's a lot of political controversy right now over the question of accepting Syrian refugees - particularly after the Paris terror strikes (as it has been discovered that one of the assailants snuck into Greece posing as a refugee).  Roughly half of US governors are - under rather dubious claims of authority - declaring their states off-limits, while others are saying they'll be happy to take them.  At first glance, it's easy to write off the former as "racists" or "Islamophobes," but it's both premature and unhelpful to do so.  Because oftentimes it's a matter of strong variations in social resilience, which - again - comes down to experience.

Two recent Washington Post stories explore these variations.  The first introduces the reader to the "first majority-Muslim U.S. city" in Hamtramck, Michigan.  Muslim politicians there recently won the majority of city council seats, and that's naturally created some tensions in a city long dominated by Polish Catholics.  Simplest example:  mosques in Hamtramck are allowed to issue their five-times-a-day call to prayer.  Unprecedented?  Hardly.  Christian churches have long been free to ring their bells to call the faithful to services.  But still, if you've ever traveled to a Muslim country as a non-Muslim and heard the call, it's truly a different frame of reference - something to which it takes a while to get used.

And that's what's largely missing on this particular political "hot potato": the vast majority of Americans (94%) don't - according to another WAPO article - interact with Muslims on a daily basis.  I'm not pointing fingers here: my Chinese daughter is the first Asian with whom I've spoken on a daily basis.  Ditto for my two black African girls.  Does that exposure now make me an expert on either group?  Hardly. But does it make it a lot easier for me to interact with Asians and blacks on a day-to-day basis?  Yeah, it does.  It also makes me highly interested in social and political and economic issues that touch upon these groups.

This is not a call for some facile, kumbaya personal epiphany among all Americans. I'll leave that argument to the preachers.  It's merely an appeal for patience.  America is 50 states, some of which are better prepared to accept an influx of tens of thousands of Syrian refugees - a flow that, in and of itself, represents a global disaster-management task.  But some US states are not - at this time - similarly resilient.  They may lack the experience with Muslims that makes Michigan more adept.  They may already be struggling to process historically heavy Latino immigrant flows (think of states bordering Mexico).  Point being, not all 50 states are equally endowed with this form of social and political resilience right now.

So here's a potentially controversial proposal:  let's encourage Syrian refugees to go where they're most welcome right now, without demonizing those states where politicians say no.  Over time, the success of those more resilient states will set a competitive example.  It's happened many times across US history with regard to numerous waves of immigration.  It's also recently happened with gays and lesbians.  States learn to want their business, their tourism dollars, their investments, and - ultimately - their permanent presence.  Laws are changed, attitudes are adjusted, communities become more accepting, and we all grow more resilient in the process.  Simply put, the more diverse the perspectives we accumulate, the better able we collectively are to surmount current and future challenges.

Something to consider this Holiday Season.

Local resilience versus national policing

WSJ story.

Nice image from Times Square, eh?  Pay no attention to those men in the tower!

Gist of piece:

The Times Square bombing attempt has re-energized a debate between spies and domestic-security officials within the Obama administration over how to handle ideologically driven violence in the U.S.

Intelligence officials at the National Counterterrorism Center have pushed for more responsibility over countering domestic radicalization, officials said.

But Homeland Security officials say the plot has strengthened their argument for a broader approach that would train local law-enforcement and citizens to spot early warning signs of any violence.

I have to side with the Homeland people on this one--fewer "czars" and more suspicious peasants!

I'd rather have everyone be a bit more suspicious and vigilant than have more powers vested into federal authorities.

Our best deterrence is exactly an outcome like this--repeated ad nauseum.