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3:42PM

If you can keep your head when all about you ...

Reuters at WAPO

Great WAPO piece on US intell community surging a response to growing evidence of Kremlin-directed hacking of our election infrastructure.

The key bit of description:

U.S. intelligence officials described the covert influence campaign here as “ambitious” and said it is also designed to counter U.S. leadership and influence in international affairs.

Ambition to counter US leadership in the world ... Damn straight and we must get used to it - whether or not we continue with Obama's hands-off global leadership style.

Russia, like China, wants to reshape both global agendas and rules, having watched the US blithely dominate both since Cold War's end.

This is natural and thus to be expected, particularly as we have signaled to both that we prefer our old allies to accommodating them as our new and inevitable partners in managing this world (understanding that, if we take the long view, it's China first, then India, then Russia et al. in terms of combined economic-military heft and thus strategic importance).

But, for now, with both China and India still feeling their way toward superpower-dom, Putin is the cream of the leadership crop, arguably matched only by Merkel in savvy, boldness, and vision.

Why Trump scares me: he simply isn't smart enough to play at that level, as he is embarrassingly easy to manipulate. My God, would Putin enjoy abusing him for four years.

With Clinton, the fear has to be: will she be embroiled in controversy and scandal all the time (some real, mostly manufactured by her opponents - again a venue where Putin will find many useful American idiots)? Or does she prove to be Merkel's match?  We can only hope.

But back to the point here: this is exactly the sort of influence/agenda-setting/rule-setting-and-bending competition to which we must grow accustomed, not in the sense that we're new to it (we do it in our sleep - please), but that we haven't had any serious direct competitors for a long time (really, a solid quarter-century).

You will say, "But Russia is messing with our process in a manner that we would never dare to pursue with them."

Well, yes and no. 

It all depends on perceptions. America would never try anything that direct, but our indirect methods of supporting democratization are often interpreted by autocratic regimes like China and Russia as direct meddling. That is simply a reflection of the robustness of our political system and the brittleness of theirs. To autocrats, who fear their own people far more than outside forces, even the most indirect sort of pressuring in the direction of democratization comes off as a direct challenge to the rule. That's not to say that we shouldn't engage in such activities, because we most definitely should. Rather, it is to say that, when we do engage in such activities, we can't become upset when those regimes push back in similar - if asymmetric - ways. 

As always, the key is to remember that time is on the side of democracy - as is technology (Orwell continues to be wrong).

So what I really like about this article is the calm and matter-of-fact manner that our political system - for now - is displaying in its reactions to Putin's dirty tricks (putting aside Harry Reid's cited fear factor). In many ways, this is the cyber struggle of the future: not as a precursor to great power war or strategic conflict, but rather as a day-to-day tool of influencing other systems and shaping the international rules to one's own advantage. If we come to accept this as an inescapable reality, while avoiding the temptation for hyperbole and freaking out, then we'll continue to be just fine.

Do I think Clinton can manage that? Yes.

But Trump? Far too risky a proposition. He'd just be in way over his head.



Thomas P.M. Barnett
Sent from my iPhone

9:47PM

What Does Russia/Putin Seek?

Putin's Russia is becoming the Trump of international security: dominating the news cycle with a constant stream of bold moves (Syria, for example) and often outrageous affronts (Russian hackers just did what?!?!). Just like Clinton will win the White House while The Donald is named Time's Person of the Year (bet on it), Obama's "long game" (see Chollet's new book) may be sound, even as it's seemingly trumped (that word again) on every strategic front by Putin's nonstop shenanigans.

So what does Putin seek for Russia?

The obvious answer is: as much reconstruction of the old Soviet empire (however virtually achieved by various Finlandizations) as possible, combining that sometimes actual revanchism with a successful dismemberment of the EU and NATO, leaving Germany once again living in complete fear of its intentions (Russia has ALWAYS been just that into Germany).

Not by a long shot does that constitute an attempted overturning of the world order. It is far better described as a leapfrogging by a resurgent Russia over the faltering "West" (retreating US, freaking-out Europe, aging Japan [where adult-diaper sales now trump baby-diaper sales]) into the Trumpian position of Initiator-in-Chief (a role once clearly held - and abused - by the Bush Administration but clearly abandoned by Lead-From-Behind Obama).

So what does Putin seek for Russia? He wants Russia to be #1 on everybody's speed dial, search engine, and worry list.

And he's readily achieving it.

That's the thing about an essentially US-constructed (and typically led) world order: when we step back to stare at the horizon, others will step in. Ultimately those others will be China and India, but neither is ready for that now. India hasn't hit its demographic/industrialization inflection point yet and China is too obsessed with its front-yard "pond" (their strategic equivalent of staring at one's bellybutton and muttering, Mine! All mine!).  

So we get Russia, Iran, Saudi Arabia, and Turkey running the show in the Center (see map above), while America focuses more on home (and the West Hemisphere) and China looks to lock down the East.

In my old vernacular, the "Gap-shrinking" continues, it is just more obviously and geographically divvied up, with Asian great powers (China, India, Japan) nonetheless forced into some competitive thrusts into the Center (particularly Africa) for reasons both immediate (resource access) and long term (tomorrow's biggest cheap-labor - and consumer - pool).

America, secure in both its energy and food/water (and increasingly Latinized and Millennialized), continues to turn inward for a lengthy Progressive Era that it desperately needs.

Still, we have to play both the Home and Away games, and here is where it gets particularly challenging for the West: imagine Hillary, May (UK), and Merkel (Germany( leading the West's pushback against Putin's many international micro-aggressions. You just know that that macho Vlad will assume he's got the upper hand. One can almost see the misogynystic cartoon: Vlad, in wife-beater shirt, daring  the cowering women to take in the "gun show" (hat tip, Ron Burgundy) as he holds his backhand above his head, poised in bitch-slap-delivery mode.

So yes, expect Vlad to keep pushing things until the West (and specifically America) pushes back, and expect him to continuously elevate his game with little fear of long-term cost.

Putin has seen enough of Obama's "long game" (where America often punted on early downs) to know that, absent a serious course change, the Center field (Europe-writ large, Muddle East, Africa) is his for the reshaping right now (much as Xi Jinping views the East).

This is why any President-Elect Clinton needs to move fast and project an image of a serious housecleaning both internally and - eventually abroad.

But again, none of this signals an existential threat to the system, because, quite frankly, all our great power competitors (not enemies) find it all too much to their liking.

Was this phase of globalization inevitable?

Yes. Nothing moves ever upward in a straight line. It's more Dora's bit about just keep swimming.

America built something so amazing, transformative, beneficial, and enriching that there was zero chance we could control globalization ad nauseum - anymore than we could rule the Internet forever.

Remember: globalization comes with rules but no ruler (a wise man once wrote that).

A dozen years ago I penned a piece for WAPO stating that America's prime partners of tomorrow would be China, Russia, and India (Turkey also mentioned), and that, yes, we'd end up uncomfortably accommodating each in that pathway.  [I soon after added Iran to that group.]  My goal in that piece was simply to signal that the days of America, Europe and Japan constituting a quorum of great powers was over.

At that time, the notion was laughed off.

Not so funny now, is it? I mean, look who's running the Middle East?  China and India are the biggest buyers, while Turkey, Iran, and Russia have all ascended as security actors. I never said we'd be close with any of them, just that we'd have to work with all of them.

Having said all this (again), we need to avoid our usual freak-out response pattern regarding all these powers. Yes, America enjoyed and exploited its post-Cold War unipolar moment to ram globalization down everyone's throats (I approved whole-heartedly), triggering the best set of problems the world has ever known. But that thrust, while an amazing gift to humanity (all that wealth creation, hundreds of millions lifted out of poverty, percentage of extreme poverty less than 10% of human population for first time in history, and a majority global middle class for the first time in history) was unsustainable for the US (or, more accurately, the US consumer and all the personal debt we took one).

Now we move dumbfoundedly into the period where the world's most dynamic great powers seek to consolidate rule-set spheres of influence ("This is how things work around here!"). This period was always inevitable, but keep in mind that we are not looking at the resurrection of great power war (no matter how many hard-talking security types sell you that every night on the news). MAD remains in force with no "offset" required.

What we face now is an extended clash not of civilizations but of great-power rule-sets.

What should America do?

We should persistently and pointedly defend our national interests while not pushing our norms as the only acceptable answer. We tend toward the opposite tack - a habit long ingrained by our "global cop" burden. But that burden has been overtaken by events and developments that we have long sought - a genuine multi-polarity that respects the international structure we've created even as each great power seeks to rule its individual roost (to expect otherwise is naive in the worst way).

So we should stay calm and carry on with our necessarily transformative regrading of our political (less distance between leaders and led) and economic (less tilted toward rich) landscapes. In short, we need to proceed with the next great progressive American era that redefines 21st century capitalism in light of globalization's swift conquering of the planet - finally (with a hat tip to K. Marx) but only under America's tutelage (none of those thieving European empires came even close).

Again, these are the best problems humanity has ever faced - problems of success and not failure.

So, chin up as this US election gets even nastier and more weird - and as daily revelations emerge concerning Moscow's (or Beijing's or Tehran's or Ankara's) latest transgression.

The world system we built remains secure, even as virtually every state now faces very hard choices between open and closed, connected or disconnected, or drawbridges up or down (per the Economist). These are natural reactions and we were all certain to confront these as a result of the Great Recession. What matters now is what we as Americans choose and how we lead - as always - by example.

Make no mistake: I'd gladly take our path and our fundamentals and our challenges over those of any other great power out there - yet another reason to keep all such frenemies in perspective. Neither they nor our true enemies (violent extremist organizations, plus those just-plain-nutty North Koreans) pose any existential threat to either us or our amazingly sturdy world order.

Simply put, don't believe the hype, even as we keep an eye on Russia's Trump.

12:08PM

Making It Hardest For The Most Resilient Among Us

HUMANITY HAS TRANSFORMED THE NATURE OF LIVING OVER THE PAST CENTURY, ROUGHLY DOUBLING LIFE EXPECTANCY AT BIRTH AND THUS SHIFTING THE MEAN AGE RADICALLY UPWARD. This changes the structure of all societies, albeit at uneven paces. Globally, the worker-to-elder-dependent ratio was 12:1 in 1950, dropping only to 9:1 in the year 2000. But with globalization's profound expansion over the last 25 years, we're looking at a ratio of just 4:1 in 2050 (per the UN). That's an amazing burden shift that will be accommodated by people working later in life, technology and productivity advances, and — most crucially — the proper harnessing of youth as future labor. The big problem? Most of those youth are located in the emerging South, where a 10:1 ratio will still exist in 2050, whereas the advanced West will be looking at an untenable 2:1 ratio.

This is why I have advocated, throughout my career, for the West's open borders and active recruitment of immigrants from younger parts of the world. It is the only realistic solution — necessary even as it's insufficient (people will have to work longer and productivity will need to advance). Right now, Westerners seems to be dazzled by the imagery of robots running all and there being no work to be done, but this is a queer illusion that encourages inward-looking perspectives on the future, the classic example being Japan. The zero-sum mindset is also unrealistically greedy — as in, we have ours, so tough on you.

And yes, this generational divide, so well encapsulated in a North-South divide, dovetails quite negatively with the unequal social and environmental burdens generated by climate change, which likewise pits the "old" poles against" young" Middle Earth.

Simply put, we are eating our seed corn.

On this disturbing global trend comes a great editorial in the EconomistSome highlights, with commentary:

Roughly a quarter of the world’s people—some 1.8 billion—have turned 15 but not yet reached 30. In many ways, they are the luckiest group of young adults ever to have existed. They are richer than any previous generation, and live in a world without smallpox or Mao Zedong. They are the best-educated generation ever . . . they are also more intelligent than their elders. If they are female or gay, they enjoy greater freedom in more countries than their predecessors would have thought possible. And they can look forward to improvements in technology that will, say, enable many of them to live well past 100.

Another theme of my work over the years: when America stood up and took on the responsibility of running the world after WWII, it didn't simply replicate the global orders imposed sequentially by Europe's colonial powers over the centuries. Instead, it fundamentally reshaped it to enable global economic integration on an unprecedented scale — and based on our own model of states uniting. This is the primary reason why global standards of living have skyrocketed over the past half century.

But this creates class and generational consciousness on a global scale:

Just as, for the first time in history, the world’s youngsters form a common culture, so they also share the same youthful grievances. Around the world, young people gripe that it is too hard to find a job and a place to live, and that the path to adulthood has grown longer and more complicated.

The primary culprit? "Policies favouring the old over the young."

Last hired, first fired is the most obvious one:

In most regions they are at least twice as likely as their elders to be unemployed. The early years of any career are the worst time to be idle, because these are when the work habits of a lifetime become ingrained. Those unemployed in their 20s typically still feel the “scarring” effects of lower income, as well as unhappiness, in their 50s.

This is very bad news for a planet experiencing rapid demographic aging, the scariest and most self-destructive expression being the tendency of the old to want to "keep out" the foreign or "scary" young. This is a great deal of the emotion behind America's current passion for such slogans as "make our country great again!" It is simply nostalgia for the way things were.

But it denies us sufficient access to the most important resource on the planet — namely, youthful ambition and drive and creativity:

Young people are often footloose. With the whole world to explore and nothing to tie them down, they move around more often than their elders. This makes them more productive, especially if they migrate from a poor country to a rich one. By one estimate, global GDP would double if people could move about freely. That is politically impossible—indeed, the mood in rich countries is turning against immigration. But it is striking that so many governments discourage not only cross-border migration but also the domestic sort … A UN study found that 80% of countries had policies to reduce rural-urban migration, although much of human progress has come from people putting down their hoes and finding better jobs in the big smoke.

The aging of the North is making it brittle, self-centered, and selfish in spirit, and this is being increasingly reflected in government policies, in large part because, on average, 3 out of 5 elders regularly vote while only 1 out of 5 youth do.

The old have always subsidised their juniors. Within families, they still do. But many governments favour the old: an ever greater share of public spending goes on pensions and health care for them. This is partly the natural result of societies ageing, but it is also because the elderly ensure that policies work in their favour. By one calculation, the net flow of resources (public plus private) is now from young to old in at least five countries, including Germany and Hungary. This is unprecedented and unjust—the old are much richer.

This is where the newspaper nails the long-term danger:

That is a cruel waste of talent . . . Rich, ageing societies will find that, unless the youth of today can get a foot on the career ladder, tomorrow’s pensioners will struggle. What is more, oppressing youngsters is dangerous. Countries with lots of jobless, disaffected young men tend to be more violent and unstable . . .

The great challenge of the North's rapid demographic aging is resisting the general political crabbiness that comes with growing old, which eventually turns us all into cranky, get-the-hell-off-my-lawn types.

I don't know about you, but I don't dream of a future of gated communities populated mostly by the elderly who receive "personal care" from robots. That sounds more like the North turning itself into a giant nursing home.

Social resilience is a renewable resource, but it gets renewed generation by generation. We are not promoting that dynamic today in the West/North, and it will come back to haunt us.

 

1:09PM

Rising Sea Levels, Rising Awareness, Rising Resilience?

 

IN GENERAL, HISTORY SAYS HUMANS DO BETTER WHEN IT GETS WARMER AND WORSE WHEN IT GETS COLDER. There are a number of reasons for this, but the simplest explanation is energy: (1) it's easier to cool people than to warm them; and (2) it's easier to grow human energy (food) when it's warmer than when it's cooler. But that's a uber-macro take on the subject, when regional variations in climate change will be the real story of this century — namely, the middle regions of the world will get much hotter and drier while the most northern and southern bands will grow more temperate. Humans will adapt to all this, and huge numbers will be put on the move — poleward (just like plants and animals have been for decades now), but there will be a tremendous die-off of species from this rapid change (not rivaling other mass extinction periods in Earth's history in scope [one, for example, encompassed 96% of all species], but apparently surpassing them in speed). None of this is really negotiable at this point; it's a done deal. We can delay some impacts, or take the worst edge of others, but they are coming — with the bulk arriving in the lifetimes of our children.

No, we're not going to roll back human progress, nor will we succeed in demanding that the still undeveloped regions of the world stay that way to atone for the North's sins. And yes, we will engage in Noah's Arc-like activities designed to transplant vulnerable species to new areas where they might survive and hopefully thrive.

In short, we will continue remaking this planet in our image, because that's what humans do.

But it's the oceans where we have so little say in the matter, even as we have had enormous impact. This is where community, regional and national resilience will be tested the world over.

On that score, lots of new studies just out suggesting that rising sea levels and associated flooding will likely be as bad as most of the scariest predictions have indicated — but again with significant regional variations.

First, from a WAPO story on one just-published study:

A group of scientists says it has now reconstructed the history of the planet’s sea levels arcing back over some 3,000 years — leading it to conclude that the rate of increase experienced in the 20th century was “extremely likely” to have been faster than during nearly the entire period.

“We can say with 95 percent probability that the 20th-century rise was faster than any of the previous 27 centuries,” said Bob Kopp, a climate scientist at Rutgers University who led the research with nine colleagues from several U.S. and global universities . . .

The study was published Monday in the Proceedings of the National Academy of Sciences.

Seas rose about 14 centimeters (5.5 inches) from 1900 to 2000, the new study suggests, for a rate of 1.4 millimeters per year. The current rate, according to NASA, is 3.4 millimeters per year, suggesting that sea level rise is still accelerating.

So, rising more than twice as fast this century versus last — achieving the dreaded "hockey stick" graphs displayed above.

Now, for the variation in the US, from another WAPO story on anther study:

Writing in Nature Geoscience, John Krasting and three colleagues from the Geophysical Fluid Dynamics Laboratory of the National Oceanic and Atmospheric Administration find that “Atlantic coastal areas may be particularly vulnerable to near-future sea-level rise from present-day high greenhouse gas emission rates.” The research adds to recent studies that have found strong warming of ocean waters in the U.S. Gulf of Maine, a phenomenon that is not only upending fisheries but could be worsening the risk of extreme weather in storms like Winter Storm Jonas.

“When carbon emission rates are at present day levels and higher, we see greater basin average sea level rise in the Atlantic relative to the Pacific,” says Krasting. “This also means that single global average measures of sea level rise become less representative of the regional scale changes that we show in the study.”

The Atlantic suffers this additional stress because it churns/circulates/ventilates more than the quiet Pacific.

But, getting it back to us humans, these are emerging realities for our local ecosystems, and, by that, we mean the local operating environment of families, businesses, communities, cities and the like. Our local support systems, or the networks upon which we rely for our organizations' smooth functioning, are all going to come under more regular stress and suffer more regular crises. This will arrive in the form of increasingly weird, unpredictable, and severe weather all over America, but with the added danger of storm surge flooding and destruction along the lowest portions of the coastlines (particularly along the Atlantic).

According to NOAA:

In the United States, counties directly on the shoreline constitute less than 10 percent of the total land area (not including Alaska), but account for 39 percent of the total population. From 1970 to 2010, the population of these counties increased by almost 40% and are projected to increase by an additional 10 million people or 8% by 2020. Coastal areas are substantially more crowded than the U.S. as a whole, and population density in coastal areas will continue to increase in the future. In fact, the population density of coastal shoreline counties is over six times greater than the corresponding inland counties.

Globally, it's even more concentrated, with 44% of humanity living within 150 km of coastlines.

How prepared are we for rising sea levels?

If you're the Dutch, you're feeling pretty confident, because (a) you're rich, and (b) you've been doing this for centuries. If you're Bangladeshi, you're a whole lot less confident ...

The good news is, globalization is reducing global poverty dramatically (spreading wealth) while spreading technical know-how. So we can all be more "Dutch" over time (with their help, as the Netherlands' aid agency specializes in transferring such knowledge).

On that score, we have plenty to do, says Time:

The [recently published] research adds to growing evidence that communities around the world are vastly unprepared to defend against the effects of sea level rise in the coming decades. Rising sea levels erode coasts and place coastal cities in danger. Even areas that may seem safe will be vulnerable to floods that could inundate entire cities and contaminate freshwater supplies ...

“We’re just at the beginning of the curve,” says Benjamin Strauss, co-author of the Climate Central central study. “I think in the next two decades things will deteriorate a lot faster than they did over the last two decades.”

But that's how it is for most things in life: it gets slightly worse for a long time and then gets dramatically worse in a short time. Solutions, per the Dutch and others, are well known:

In addition to mitigation, vulnerable communities should adapt to protect themselves from rising sea levels, researchers say. Those protective measures can take the form of levees, pumps and elevated homes. In other places, policymakers have built up natural defenses like mangroves and reefs. These provide the added benefit of sucking up carbon from the atmosphere and they often cost less than their steel and concrete equivalents, according to Jane Carter Ingram of the Nature Conservancy’s Science for Nature and People Partnership.

The problem is local leadership:

But many of the most vulnerable communities have been reluctant to change. Policymakers in Florida, for instance, have been hampered by elected officials who question the science of climate change despite the state being among the country’s most vulnerable.

We can't be resilient if we can't look problems straight in the eye.

 

3:20PM

Western Hemisphere's Shale Men as Oil Industry's New "World Swing Producers"?

 

FASCINATING BRIEFING IN A RECENT ECONOMIST (23 JAN 16) ADDS A NEW TWIST TO AN ARGUMENT I'VE BEEN RECENTLY ADVANCING ON HOW NORTH AMERICA'S EMERGING ENERGY INDEPENDENCE DRAMATICALLY REDEFINES ITS OWN SENSE OF ECONOMIC RESILIENCE AND – ULTIMATELY – AMERICA'S GLOBAL SECURITY PERSPECTIVE. Think of the future as mostly about energy and water, with the latter accounting for food production. Any country seeking to ensure its economic resilience going forward wants to be either rich in both, or rich in secure access to both. This is essentially where China is weakest now and in coming decades (hence the aggressive military behavior on display off its coast), because it must import both food and energy in ever increasingly amounts (and overwhelmingly via seaborne trade). This is also where America (and North America in general) is strongest now and in coming decades, relative to just about every great power out there – save perhaps Russia. But even there, America has little reason to unduly worry about the widely-perceived renewal of strategic rivalry with Moscow, which invariably becomes China's economic vassal on that basis:

China, please meet Russia, an energy-business-masquerading-as-a-government, which is incredibly vulnerable on the subject of lower energy prices but stands as the world's largest exporter of energy.

Russia, please meet China, which is the world's largest importer of energy and the stingiest, most aggressively demanding trade partner in the world.

Please go about you co-dependency with all the respect and friendship that you've each bestowed upon the other's culture and civilization over the years.

As I've pointed out, North America is already the world's de facto swing producer on grains, which gives us an enormous strategic advantage – and power – that we scarcely realize.

We are, in effect, the Saudi Arabia of grain. So, if, in our imagination, they have the world over an oil barrel, then we've got the world over a breadbasket.

Guess who cries "uncle" first?

And yes, we'll maintain that status in spite of climate change, because we're that clever and that resilient and that blessed by circumstances.

But here's where the Economist's analysis of the recent slide in oil prices is so intriguing: what if North America were to become the world's swing producer on energy – as well?

From the piece:

Now the fear for producers is of an excess of oil, rather than a shortage. The addition to global supply over the past five years of 4.2m barrels a day (b/d) from America’s shale producers, although only 5% of global production, has had an outsized impact on the market by raising the prospects of recovering vast amounts of resources formerly considered too hard to extract. On January 19th the International Energy Agency (IEA), a prominent energy forecaster, issued a stark warning: “The oil market could drown in oversupply.”

Amazing what the fracking revolution in North America has wrought, and don't – for a minute – discount how that sense of energy independence influenced President Obama's decision to see a Nixon-like detente with Iran, identified in the piece as "the most immediate cause of the bearishness."

[Iran] promises an immediate boost to production of 500,000 b/d, just when other members of OPEC such as Saudi Arabia and Iraq are pumping at record levels. Even if its target is over-optimistic, seething rivalry between the rulers in Tehran and Riyadh make it hard to imagine that the three producers could agree to the sort of production discipline that OPEC has used to attempt to rescue prices in the past.

But it gets even more disruptive – again, because of the fracking revolution in North America:

Even if OPEC tried to reassert its influence, the producers’ cartel would probably fail because the oil industry has changed in several ways. Shale-oil producers, using technology that is both cheaper and quicker to deploy than conventional oil rigs, have made the industry more entrepreneurial. Big depreciations against the dollar have helped beleaguered economies such as Russia, Brazil and Venezuela to maintain output, by increasing local-currency revenues relative to costs. And growing fears about action on climate change, coupled with the emergence of alternative-energy technologies, suggests to some producers that it is best to pump as hard as they can, while they can.

So we witness the Saudis – yet again – trying to shake out the market, not to mention its fierce regional rival, through an extended period of self-destructive over-production relative to market demand. It will definitely hinder Iran's re-entry into the world and its energy market, but in the US?

Yet there is also a reason for keeping the pumps working that is not as suicidal as it sounds. One of the remarkable features of last year’s oil market was the resilience of American shale producers in the face of falling prices. Since mid-2015 shale firms have cut more than 400,000 b/d from output in response to lower prices. Nevertheless, America still increased oil production more than any other country in the year as a whole, producing an additional 900,000 b/d, according to the IEA.

And here's where US technological resilience gets truly interesting:

During the year the number of drilling rigs used in America fell by over 60%. Normally that would be considered a strong indicator of lower output. Yet it is one thing to drill wells, another to conduct the hydraulic fracturing (“fracking”) that gets the shale oil flowing out. Rystad Energy, a Norwegian consultancy, noted late last year that the “frack-count”, ie, the number of wells fracked, was still rising, explaining the resilience of oil production.

The roughnecks used other innovations to keep the oil gushing, such as injecting more sand into their wells to improve flow, using better data-gathering techniques and employing a skeleton staff to keep costs down. The money is no longer flowing in. America’s once-rowdy oil towns, where three years ago strippers could make hundreds of dollars a night from itinerant oilmen, are now full of abandoned trailer parks and boarded-up businesses. But the oil is still flowing out. Even some of the oldest shale fields, such as the Bakken in North Dakota, were still producing at the same level in November as more than a year before.

No, we don't want to overestimate the economic boost to the US economy from all this. Our economic restructuring challenges are significant – as evidenced by voter anger in this year's presidential race. But others have it far worse:

Unsurprisingly some of the biggest splashes of red ink in the IMF’s latest forecast revisions were reserved for countries where oil exploration and production has played a significant role in the economy: Brazil, Saudi Arabia, Russia (and some of its oil-producing neighbours) and Nigeria. Weaker demand in this group owes much to strains on their public finances.

Russia has said it will cut public spending by a further 10% in response to the latest drop in crude prices (see article).

So where do we go from here? The article discusses "peak demand," something I've long argued would naturally precede the much-feared "peak oil" moment, primarily due to efficiency and environmental concerns.

Then the Economist lays out the crown-jewel argument – from my perspective – of the piece:

More likely, the oil price will eventually find a bottom and, if this cycle is like previous ones, shoot sharply higher because of the level of underinvestment in reserves and natural depletion of existing wells. Yet the consequences will be different. Antoine Halff of Columbia University’s Centre on Global Energy Policy told American senators on January 19th that the shale-oil industry, with its unique cost structure and short business cycle, may undermine longer-term investment in high-cost traditional oilfields. The shalemen, rather than the Saudis, could well become the world’s swing producers, adding to volatility, perhaps, but within a relatively narrow range.

Bingo!

Please keep that in mind when all the politicians and national security experts are trying to scare you to death during our ongoing transition from one president to the next: when it comes to food/water and energy, North America – and America in particular – is sitting pretty.

Why?

Because our national resilience on both continues to contradict the pessimists while amazing even the optimists like me!

 

5:35PM

America Without Latinos - The Cost to our National Economic Resilience

IS THERE A MORE HOT-BUTTON ISSUE IN THIS YEAR'S PRESIDENTIAL CAMPAIGN THAN IMMIGRATION? ARGUABLY NO. And there are plenty of reasons for why that's so: the historic influx of Latino immigrants in the 1990s/2000s; the steadily declining fortune of the American middle class over much of the same timeframe; and, of course, America's (still) recent (enough) financial crisis/"great recession." Of course, those dynamics aren't all that well related to one another, but their subsequent synergy is clear enough in US history: scare the socio-economic-political middle and you'll get an angry electorate that turns on foreigners. Yes, I know that immigration has declined rather dramatically since the downturn. But long term, we know the die has already been cast: Latinos now are the #1 minority in the US and by mid-century they'll surpass a 1/4 share of the US population, making them the #2 "majority-minority" after whites.

Put it all together and you get the new normal in which  (a) two of the leading GOP contenders are Hispanic (Cruz, Rubio), (b) no one really talks about that being novel (the leading part most certainly is), and (c) both are considered "tough" on illegal immigration. Then again, we also see Donald Trump on top of many polls, and he has most definitely tapped into white discomfort over the rising Latino quotient. Thus, if the Democratic side of the campaign seems very class focused, the GOP side (for now) seems very identify-focused (the whole "real"/"true" America vibe).

Neither party's focus should be a surprise, given how globalization has challenged and changed America's socio-economic landscape since the Cold War's end. There is little doubt that the nation continues to endure a period of great transition. But it's one I can spot all around the world.

Most of us tend to view the world in East-West or longitudinal terms, but I see that changing in the years and decades ahead, shifting to more of a North-South or latitudinal perspective.

  • Northern populations are aging, while Southern populations remain youth-skewed. That alone puts people on the move, overwhelmingly northward. We're watching that now in Europe, but it's really a global phenomenon.
  • Climate change will only turbo charge this people flow, because it'll become that much harder to live and grow food in equatorial regions. Additionally, warmer temperatures and milder seasons in the North will push habitation and agriculture northward.
  • Revolutions in energy production will render regions less dependent on longitudinal flows, something we're already witnessing with the US.
  • Age imbalances between North and South will be matched by economic growth disparities (younger economies, on average, grow faster), leading the North to seek further trade and economic integration southward.

Add it all up and I see an America far more focused on the Western Hemisphere in this century, resuming a southward integration dynamic that was there, roughly a century ago, only to be hijacked by global geopolitical events (WWI, WWII, Cold War, OPEC's rise). I could say that it's only natural for this north-south reorientation to return, given that the fastest growing economies will be found in the South in coming years and decades. But I could also say it was inevitable given the already high rate of economic/trade/financial integration that exists east-west. Thus, the north-south reorientation is both what's next and what's left.

It will also represent - as always - our economic system's instinctive reach for that which will most increase our national resilience in the future.

As evidenced by this year's presidential campaign, that tectonic shift in US perspective will be politically tumultuous, and, by that, I mean, replete with "shocking" revelations and realizations of just how much has already changed. We're just such a laissez faire system that we're constantly "waking up" and discovering things that have been in the works for decades, right under our noses.

A classic way to explore such new understandings is to employ a "counter-factual" - i.e., to explore the completely opposite scenario in which the newly dominant element of reality never really happened. A classic example: what if the US had never entered WWII and the Nazis still ruled Europe?

So, no surprise in seeing such counter-factuals being deployed as political tools with regard to the profoundly pervasive role already played by Latinos throughout much of the US economy.

Today, in my town of Madison WI, we witness the following political demonstration, as reported by a local news channel:

Organizers of "A Day without Latinos and Immigrants" are calling for businesses and individuals to assemble at the state Capitol at 10 a.m. Thursday to protest against what they say are two anti-immigration bills being considered by the Legislature.

One bill would address the issuance of local ID cards by local governments to immigrants. The second bill would prohibit municipalities from creating laws restricting law enforcement officers from inquiring about the immigration status of people whom they contact.

In asking businesses to close their doors on Thursday morning, organizers are hoping to illustrate the void that would exist in the community if Latinos were not participating in the economy.

“I think that’s what mainstream America has to understand, that the Latino, that the immigrant community is highly important to the contributions, and Latinos want to contribute. Latinos, all we want is one word, and that is opportunity,” said Luis Montoto, programming director for La Movida, the only Spanish-language radio station in the community.

Organizers said they have commitments from local restaurants, grocery stores, tax preparation firms and other businesses to close on Thursday in support of the protest. They also expect construction, hotel, manufacturing and farm workers to attend the protest.

Madison Mexican food favorite Taqueria Guadalajara is participating. Imelda Perez, manager of the restaurant on Park Street, said the bills attack immigrants, and she believes closing the restaurant will serve as a wake-up call.

“People will come here to the door, and they ‘ll try to have lunch, and the door will be locked, and then people will realize how important we are,” she said.

The image above is from a 2004 movie based on the same counter-factual premise:

When a mysterious fog surrounds the boundaries of California, there is a communication breakdown and all the Mexicans disappear, affecting the economy and the state stops working missing the Mexican workers and dwellers.

Could other ethnic-immigrant groups have made the same claims during previous periods of America's national history? Absolutely. A great deal of America's economic resilience over its history is owed to various influxes of labor (both slave and free) that were subsequently exploited by the system for all they were worth (or could stand before organizing themselves politically for better treatment).  Our ability to process such immigrant waves is our primary social-resilience skill. This time will be no different.

So yes, expect all manner of "push" from the native-born population in coming years, along with all manner of "shove" coming back from the foreign-born population. This is not the first such stressing political dynamic in US history and it certainly won't be the last.

But it will, I predict, be the one that re-orients America's vision of its future from a predominantly longitudinal perspective to a more latitudinal vision.

And we will be stronger as a nation as a result.

 

10:21AM

America’s Post-Oil Grand Strategy

[Wrote this last June as possible publication, but it was a bit beyond the pale for journal, which wanted dramatic changes. Not unusual for me - happens with every new tack I undertake (the "new map" suffered similarly). I liked it as it was, so we parted on that disagreement. I later used it in China as a written version of the presentations I gave there in Beijing and Shanghai (August 2015). I post it here now because I've recently received a number of requests based on my 2015 presentation in DC (a further iteration of my presentations in China). I also post it because these things just get lost over time if I don't.]

 

America's Post-Oil Grand Strategy
by 
Thomas P.M. Barnett

June 2015


The United States defaulted to a Middle East-centric grand strategy in the waning years of the Cold War and has remained stuck there ever since – sometimes in denial (like now) and sometimes in fervent embrace (George W. Bush and his neocons) but always in a manner that demanded some measure of White House attention.  That seemingly unbreakable focus – particularly in relation to allies Israel and Saudi Arabia – now rapidly dissipates, falling victim first to a technological curveball and ultimately to a demographic shift that leaves Americans less willing to police the world and more interested in recasting their pursuit of happiness.  

America’s political leaders have taken to describing this era as one of unprecedented uncertainty, but this is hardly the case.  Globalization is either winning or has won across all the world’s regions, leaving only the question of which global “brands” (American, Chinese, Indian, European, Russian) will dominate where.  President Obama and much of Washington now project the nation’s grand strategic ambitions in the direction of Asia, but they are mistaken.  America’s historical scheme of integrating the world “laterally” (West to East) since World War II is largely complete, meaning these United States now enter an age of “vertical” integration (North to South) in the Western Hemisphere. This latitudinal expansion of the American System once imagined by our Founding Fathers will define U.S. foreign policy across the rest of this century.

 

The technological curveball that arrives just in time

In many ways, the hybrid U.S. economic system of big firms surrounded by a sea of small, technology-innovating start-ups represents the purest real-world expression of Karl Marx’s dialectic materialism – a theory of history that tracks causality from inexorable technological advance to altered economic reality to inevitable political change. What Marx never imagined was a political system able to structure itself so that those technological waves would just keep coming over the decades, consistently “buying off” the electoral acquiescence of the lower and middle classes in the face of elite domination (oftentimes real, sometimes just imagined) of the highest levels of government.  In Marxian terminology, America’s political “superstructure” has learned how to co-evolve with its economic “base” better than any nation-state in history.

The feedback loop that has allowed that successful co-evolution is America’s sometimes stunningly permissive rule of law.  Basically, you can try or invent just about anything in America that isn’t currently prohibited by law, whose construction trails innovation sometimes for decades. In too much of the rest of the world, one’s innovation and industry is limited to what is allowed by law.  Do Americans pay for that permissiveness?  Regularly – in the form of surges in criminality, environmental damage, labor abuse and sheer greed.  But thanks to our participatory regulatory and legal systems, the “little guy” can fight back and can make those bastards pay for what they’ve done!  So while the construction of protective laws trails crimes, disasters, and tragedies of the common, it never falls so far behind that the political system fractures – save for our unique historical experience with slavery.

Thus, it is only fitting that America’s historically recent Middle East-centric grand strategy, seemingly beholden as it was to the goal of assuring the world’s access to affordable energy, now falls victim to yet the latest in a long string of U.S.-triggered technological waves – the so-called fracking revolution.  This silver bullet development, coming as it does just as two new, energy-import-dependent superpowers (China, India) rise in the East, could not be more fortuitous for extending the global moratorium on great power war begun with the invention of nuclear weapons.  It essentially introduces enough slack in the world energy system to allow both Asian giants to step into their economic primes without needing to militarily challenge either the United States or its long-nurtured global trade system.  When combined with the Western Hemisphere’s most crucial resource advantage – namely, arable land in an age of global climate change, America’s new-found energy independence fundamentally prevents any historical repeat of the structural run-ups to World Wars I or II, much less any revivification of the Cold War’s East-West destructive superpower rivalry.  Thanks to fracking, it turns out that this town is big enough for the both of us – the U.S. and China in the Pacific Rim today, and China and India in Asia tomorrow.

Think about that for a minute: amidst all the continuing expert predictions of overpopulation and rising consumption bankrupting the planet to the point of non-stop “resource wars” among “thirsty” great powers (think oil and water), American ingenuity once again comes to the world’s rescue on both energy and food (i.e., water turned into human energy).

Just a decade ago, America imported almost two-thirds of its crude oil and entertained plans for new infrastructure to facilitate imports of liquid natural gas.  Today it surpasses Saudi Arabia on crude oil production and, according to the U.S. Department of Energy, will become a net exporter of crude oil in roughly a decade’s time. Moreover, by tapping into what is estimated to be the world’s second-largest shale gas reserves (China is number one), America has re-vaulted itself to the leading ranks of world natural gas producers – soon available for export.  This sort of technological turnaround is – quite frankly – just as impressive as China’s economic rise over the similarly long gestation period of the past quarter-century.  But – again – more importantly, America’s technological achievement essentially solves the structural challenge created by China’s rapid ascension in the world power system – but only if both Washington and Beijing become smart enough to realize that.

President Barack Obama was absolutely correct in downsizing America’s “war on terror” from the Bush Administration’s focus on regime toppling to hunting down and killing bad guys.  Frankly, that’s been America’s story on military interventions going all the way back to Panama and Manuel Noriega in 1989.  We don’t take on governments anymore; we take on bad/nonstate actors (the Milosevic gang in Serbia, Al-Qaeda and the Taliban in Afghanistan, the “deck of 52” in Iraq, Qaddafi in Libya, and so on). By re-symmetricizing what has long been described as radical Islam’s asymmetrical war on the West, Obama right-sized the terror war. But to cover his soft-on-defense vulnerability as a Democrat, he coupled that wise decision with the strategically unsound declaration of America’s “pivot to Asia” – in effect, shifting from a region in which globalization’s advance is still being violently contested to one where its victory is already complete.

But here’s where the strategic irony grows stunningly disturbing: by attempting to contain rising China’s natural military expansion in East Asia, Washington inadvertently prevents what must become Beijing’s progressive embrace of the role of extra-regional security Leviathan for the Persian Gulf.  Worse, by doing this, Washington actually encourages rival India to do the same when it must eventually partner with China in providing that regional security umbrella. In other words, just as America’s technological breakthrough on energy relieves it of its unwanted role in the Persian Gulf, Washington wrongheadedly works to prevent our historical relief from moving toward those “responsible stakeholder” roles. 

 

America’s Long(itudinal) War: It only gets worse

Understand this from the start:  the Persian Gulf still matters to Europe in terms of energy flows but not to the United States.  From the five top-10 global oil exporters located in the Gulf (Saudi Arabia, Iran, Iraq, UAE, Kuwait), only negligible amounts of crude oil currently flow to the Western Hemisphere.  The vast majority of Persian Gulf oil exports (roughly four-fifths) flows into East Asia, with China and India alone accounting for half of that flow.  Anti-war protestors got it only half-right: it may have been American blood, but it was never our oil.

If you’re paying attention to Barack Obama’s second-term boldness in foreign policy, this newfound swagger clearly tracks back to a growing sense of both America’s energy independence and its ability to influence global energy markets.  The recent bottoming of global oil prices was due in no small part to rising American production.  In the case of Venezuela’s flagging financial support to Cuba, this left the Castro brothers more open to Obama’s offers of normalizing bilateral relations. In the case of Iran, this increased the White House’s confidence in moving ahead on the nuclear power deal – despite Riyadh and Israel’s obvious displeasure.  Even in the case of Russia’s ongoing squeeze of Ukraine, the Obama Administration reveals no penchant for “blinking,” and why should it?  The more Vladimir Putin isolates Russia from the West, the more Moscow is forced to sell off its vast natural resources to the world’s largest buyer of the same – those notoriously stingy and difficult Chinese.  Putin’s reward for grabbing the Crimea is pitiable: the right to sell off Russia at bargain-basement prices to Beijing.

But make no mistake: there is genuine strategic risk in Obama’s mistimed Asian “pivot.”

In Asia alone, Washington risks a number of stumbling-into-great-power-war pathways, several of which could be driven by local powers (Japan and Vietnam especially) over-reacting to Beijing’s latest – literally – dredged-up beachhead or the right shooting incident between patrol craft operating above, on, or below the disputed waters.  A rising superpower like China has wont of an appropriate whipping boy to demonstrate its growing military prowess.  When America reached that jingoist apogee late in the 19th century, it was smart enough to target the comatose Spanish Empire in the Caribbean (Cuba) and Pacific (Philippines).  For China, still nurturing regional grudges over past “humiliations,” East Asia is a sufficiently target-rich environment.  And with the Pentagon locked and loaded to prove its AirSea Battle Concept, one cannot help but worry that some Asian variant of Archduke Ferdinand is now figuratively riding through the streets with his car-top down. Granted, the resulting shooting war is more likely virtual than real, but there too we find burgeoning cyber-warfare forces on both sides of the Pacific itching to press those keys and reveal to the world the damage they’re truly capable of inflicting.

Should the United States increasingly put at risk its greatest foreign policy achievement in history – namely, the rapid and planet-wide spread of our economic source-code (aka, globalization) – with this China-centric “pivot” to East Asia?  No. In Beijing’s eyes, any U.S. effort to block their naval expansion leaves the Mainland vulnerable to military pressure from the sea – the oft employed attack vector of Western powers seeking China’s “humiliation.”  All Americans have to do to approximate the average Chinese’s nationalism on this point is to imagine Chinese aircraft carriers, submarines and aircraft patrolling just beyond America’s declared national waters.  Think of just how far Fox News could run with that.

Predictably – if not fortunately, crises in the Middle East routinely erupt to recapture America’s dangerously short strategic attention span.  Here, the Obama Administration’s modus operandi of “leading from behind” is a preview of coming distractions. With Washington locally perceived as backing out of its longtime regional Leviathan role, and with relief (China, India) nowhere in sight, we collectively enter a nobody-is-minding-the-stove period in which the region’s preeminent three-sided rivalry between Saudi Arabia, Iran and Turkey will come to a dangerous boil.

We’ve seen this already unfold in the Islamic State’s frighteningly rapid rise.  Fearing growing encirclement by the fabled Shia Crescent, Riyadh secretly bankrolled the group’s emergence in Syria and Iraq.  Ankara, with similar rivalrous instincts, allowed Turkey to become a smuggling sieve for foreign fighters and supplies transiting to and from ISIS.  Now, as their monstrous co-creation threatens them directly, both regimes are caught in the sort of strategic conundrum usually reserved for intervening extra-regional great powers – a truly telling development.  Iran too now faces a certain imperial “overstretch” throughout the wider region, making its determined effort to gain international recognition as a nuclear power oddly reminiscent of the Soviet Union’s efforts with the West during the Cold War, in that, the more Tehran engages in great-power meddling of its own, the more it wants to erase the threat of possible strategic retaliation against the homeland – a decidedly logical move.

But it will be in the nuclear realm where this three-sided Gulf rivalry regularly rattles the world’s nerves in coming years. With Tehran on the verge of getting the Obama Administration to implicitly recognize its nuclear breakout capacity of a year-or-less, Riyadh is strongly rumored to be readying itself to cash in Pakistan’s long-offered promise of ready-to-use nuclear weapons.  Meanwhile, Ankara, with NATO nuclear weapons already on its soil, will likely resist the temptation for now.  Still, soon enough the world will find itself managing a three-sided nuclear standoff – however latent – among Israel, Iran, and Saudi Arabia.  That prospect has to scare even the most fervent believer in the system-stabilizing effect of nuclear weapons, myself included.

Frightening as it may be for the world to re-learn the fundamental logic of mutually assured destruction – particularly in a region chock-full of End Times-embracing millenarians, I have spent the last decade proclaiming the inevitability of this pathway simply because Israel’s regional nuclear monopoly was always unsustainable and a bit spooky with its Masada complex.  Now, the technological curveball that triggers America’s new strategic distance renders this outcome virtually inescapable.  In nuclear terms, the inmates are finally running the asylum.

 

Go South, Young Man

America’s shift from a “horizontal” grand strategy (West integrating East) to a “vertical” grand strategy (North integrating South) is preordained by demographics. Any country’s economic rise stems first and foremost from an advantageous national age distribution, meaning lots of labor relative to children and old people. This “demographic dividend” is typically triggered by improvements in healthcare for mothers and young children, which allows families to eschew additional pregnancies out of the growing assurance that their first two or so children will make it into adulthood. That turning-off-the-fertility-spigot creates a welcome labor bulge that comes with a time limit of roughly a generation’s time – like the journey of America’s Boomer generation from youth to (now) old age.  If you’re lucky, your society gets rich before it gets old.

America took advantage of a fortuitous demographic dividend in the 1950s and 1960s to power the global economy with manufacturing.  Compared to all of its competitors that suffered great loss of young life, the U.S. was overloaded with labor relative to dependents – a glorious run extended somewhat by the first Boomers’ arrival in the workplace in the mid-to-late 1960s. Japan was next to ride a lifting demographic wave, rising like a rocket across the 1970s and 1980s, only to see that trajectory fizzle out since the 1990s as the nation rapidly started stockpiling old people due to stunningly low fertility.  China was next in the 1990s and 2000s, but then predictably saw its demographic dividend peak in 2010.  Now, with fertility still low (the one-child policy became a hard habit to break), China will age (mean age) three times as fast as the U.S. through the middle of the century.

Whose up next?  Southeast Asia enjoys a demographic dividend now, with India’s coming on its heels.  Beyond them lay the Middle East and Africa, the latter looking at the biggest dividend that the world has ever seen (the better part of a billion people).

Why this economic history matters: Once a nation embraces manufacturing to leverage its demographic dividend, it starts “climbing the ladder of production,” moving from cheap and assembled goods to higher-order manufacturing.  A rite of passage is seen in automobile manufacturing, which dovetails with any rising economy’s growing middle-class demand for mobility.  As it climbs that ladder, the nations in question must slough off their lower-end manufacturing to those countries coming into their own demographic dividends.  In short, these nations become inexorably bound to their successors through direct investment and integration via expanding global production chains.  In many ways, then, the shifting center of gravity in the global economy’s cheap-labor surplus is a magnificently integrating and thus pacifying historical force.  China, for example, needs Southeast Asia’s demographic dividend to work for its own long-term economic health.  In the end, that’s the biggest brake on Chinese regional militarism.

Which brings us to why America must turn its welcoming gaze southward – now.

America is the Dorian Gray of great powers.  We’ll age far more slowly than the rest of the West and even most of the advancing East over the next several decades precisely because we enjoy immigration pressures from Latin America – a far younger and faster-growing region than North America. Demographically speaking, the two most important factors in economic growth are slowing social aging and integrating one’s economy with younger and faster-growing neighboring economies.  For the U.S., that’s Latin America, which is why America’s long-standing policy of focusing its foreign policy attention everywhere else in the world but Latin America must end, along with our nation’s highly costly and destructive “war on drugs” – a process thankfully begun in terms of individual states decriminalizing marijuana use.

You may be thinking: shouldn’t America contest China’s spreading influence in places like East Asia, Central Asia, the Middle East and Africa?  The answer is no, for all the economic integration reasons cited above.  Good example: China and Africa are simultaneously engaging in a massive urbanization wave, giving Chinese construction companies clear economies-of-scale advantages in that vast building scheme.  Yes, American companies can and should be part of that build-up process, but we cannot hope to compete with the Chinese for influence brought about by progressively deeper economic integration.  America’s great accomplishment during its demographic heyday was to trigger and nurture and defend Asia’s integration into the global economy.  Now it’s Asia’s turn to extend that historical process to most of the remaining South – but not Latin America if the U.S. plays it smart.

With climate change making the planet’s middle lattitudes increasingly inhospitable over this century, migratory pressures will grow.  In choosing between heading south (Argentina, Brazil, Chile) or heading north (North America), most Latinos will continue to head north – as they should.  In terms of underutilized arable land, upper North America offers far more economic potential than South America’s southern cone.  Today America grows wheat in water-starved Texas.  By mid-century we’ll be growing it in water-rich Alaska.  No kidding.

Right now, one out of six Americans is Latino.  By mid-century, Latinos will approach a one-third share of the U.S. population – and voters.  Already, Miami is the de facto social and economic “capital” of Latin America – a sign of political integration to come.

No, adding new stars to the American flag won’t unfold as some modern, militaristic imperialism. Instead, led by its largest demographic cohort ever – those Millennials, these United States will get back in the historical business of attracting and accepting new members.  Remember, we began this journey of integration as a confederation of 13 colonies (1789), growing over the next 170 years to our current total of 50 states.  That’s averaging a new member roughly every half-decade. Then we shut that door following the admissions of Hawaii and Alaska (non-contiguous states, it must be noted) in 1959, adding nothing since.  Do you want America to stay competitive with those billion-person Asian behemoths China and India?  Well, the Western Hemisphere contains roughly a billion souls.

When America’s Founding Fathers dreamt of an American System of political, economic, social and territorial integration, they weren’t just contemplating our horizontal slice of North America.  Visionaries like Alexander Hamilton and later Henry Clay (who coined the term) imagined that system extending itself to welcome all Americans

The U.S. remade the world over the last seven decades by spreading its system of rules and economic model.  Globalization was a “conspiracy” hatched by Washington and it’s been called many things over the decades, from Teddy Roosevelt’s “open door” to Franklin Roosevelt’s “new deal for the world.”  Having successfully led that integration process from West to East, it’s now America’s duty – and self-preserving opportunity – to build out that American System across the entire Western Hemisphere.

And that process needs to begin now – as in, the next president.

5:39PM

When Wal-Mart Leaves Your Small Town, So Does a Great Deal of Your Community's Resilience

ONCE DEMONIZED AS DOWNTOWN-KILLING MACHINE, A NOW-OVEREXTENDED WAL-MART'S RETREAT FROM SMALL-TOWN AMERICA WILL EXTINGUISH THE MOST VULNERABLE COMMUNITIES.  Many small towns give up the ghost when they lose their local hospital, a sure sign that there's no longer enough local dollars to sustain a high-priced facility and its personnel.  But when big-box, rock-bottom-prices Wal-Mart gives up on your town, it's actually far worse, because now the people with the least disposable income - and often no car - are now locked out of their primary source of just-getting-by consumption.  Stand outside a Wal-Mart sometime and see who walks up (sans car), or bikes there, or is forced to take a bus or taxi to the store, only to come out an hour later with bags of virtually everything they'll consume over the coming weeks, and you'll be looking at the most vulnerable of the 99 percent in America. Because, when Wal-Mart pulls up stakes within their small universe, they've got nowhere else they can go for anything close to the same buying power (and no, the truly vulnerable don't shop much online).

From a powerful WAPO story on the subject:

To hear Mary Francis Matney tell it, Walmart didn’t kill the once-vibrant cluster of shops next to a railroad and a creek in the faded old coal town of Kimball, W. Va. — the disappearance of the mines had pretty well taken care of that already. But now that Walmart’s leaving, too, as one of 154 U.S. stores the company closed in January, the town might be snuffed out for good.

“It makes everyone so downhearted they don’t know what to do,” said Matney, 60, browsing the half-empty shelves of Kimball’s massive Supercenter, leaning on her cart, which contains a dustbuster and door crack insulation. Her husband once worked in the coal mines. Now the couple lives on what little they get from Medicare and Social Security, and with precious few other options she made the hour-and-a-half trip from her home back in the “hollers” once a month to stock up.

“It’s like we’re a forgotten bunch of people,” said Matney, her long gray hair loosely clipped into a bun. “It’s about all there was to look forward to. If we had to go any further, there ain’t no way.”

She patted the metal shelves full of half-off merchandise affectionately. "I hate seeing it die. I really do,” she said. “You could always find better stuff here.”

And two days later, the store was gone.

Wal-Mart just announced it was closing a slew of such "underperforming" stores across the United States, and - big surprise, "a Washington Post analysis of the stores on the closure list shows that they are in relatively lower-income, less dense census tracts." That's the truth of poverty in America: in terms of sheer numbers, it is far more an isolated rural phenomenon than one of the inner-city.

The repercussions of a Wal-Mart closing are many:

In Raymondville, Texas, the disappearance of tax income from Walmart could force city layoffs. In Oriental, North Carolina, the arrival of a Walmart Express had been the final straw for a local grocery store, leaving the community with few options for food — also the case in Fairfield, Ala. and Winnsboro, S.C.

Wal-Mart has never pulled back like this before, essentially killing its entire "Express" convenience store pilot program - the primary way it was going to serve the under-served throughout the country.

In many ways, this is one of those "other shoes" that finally dropped from the Global Financial Crisis and the years-long Great Recession it spawned. Wal-Mart is simply trimming back from an over-saturation strategy that decimated the competition and now leaves plenty of those 99%-communities high and dry.

The many negative ripples are still to be felt:

But Walmart’s disappearance will have more subtle ripple effects, like a drop in traffic to the small neighboring hotel and gas station, and the loss of a place to buy phone cards and hire tax preparation help. It was the main donor to the local food bank, and contributed $65,000 annually in taxes to the county, most of which goes to the school district.

And that's why the 99% continue to exhibit profound political anger in this unfolding presidential election. They feel their personal, family, and community resilience being sapped by economic forces beyond their control, and they desperately want Washington to give a damn about their plight.

 

11:08AM

Political Resilience Is Being Confident To Face Ugly Truths, Knowing Your System Will Survive The Encounter

AFTER AMERICA RODE A TIDAL WAVE OF ECONOMIC INTEGRATION AND EXPANSION FOLLOWING ITS CIVIL WAR (MOVING RAPIDLY FROM A SECTIONAL ECONOMY TO A TRULY CONTINENTAL ONE), A FRIGHTENING STRETCH OF BOOMS AND BUSTS IGNITED A LENGTHY PROGRESSIVE ERA (BREAKING FOR THE ROARIN' TWENTIES) WHEN POLITICAL ACTORS FROM BOTH PARTIES SOUGHT SYSTEMIC REFORMS - LEST THE COUNTRY SUCCUMB TO THE SORT OF RADICALISM LOOMING IN EUROPE (SEE FALLOUT OF WWI, CAUSES OF WWII). It was a frightening journey in many ways, with worried leaders concerned that the very nature of American democracy was at stake. But this is the usual price to be paid in return for a radical and lengthy expansion of economic activity, and it's one the world faces today after that quarter-century-plus boom that ended in 2008-09 and left the global economy with a bad hangover of toxic debt that is still largely to be processed.

Per a solid NYT story of late:

Beneath the surface of the global financial system lurks a multitrillion-dollar problem that could sap the strength of large economies for years to come.

The problem is the giant, stagnant pool of loans that companies and people around the world are struggling to pay back. Bad debts have been a drag on economic activity ever since the financial crisis of 2008, but in recent months, the threat posed by an overhang of bad loans appears to be rising. China is the biggest source of worry. Some analysts estimate that China’s troubled credit could exceed $5 trillion, a staggering number that is equivalent to half the size of the country’s annual economic output ...

But it’s not just China. Wherever governments and central banks unleashed aggressive stimulus policies in recent years, a toxic debt hangover has followed. In the United States, it took many months for mortgage defaults to fall after the most recent housing bust — and energy companies are struggling to pay off the cheap money that they borrowed to pile into the shale boom ...

In theory, it makes sense for banks to swiftly recognize the losses embedded in bad loans — and then make up for those losses by raising fresh capital. The cleaned-up banks are more likely to start lending again — and thus play their part in fueling the recovery.

But in reality, this approach can be difficult to carry out. Recognizing losses on bad loans can mean pushing corporate borrowers into bankruptcy and households into foreclosure. Such disruption can send a chill through the economy, require unpopular taxpayer bailouts and have painful social consequences. And in some cases, the banks might find it extremely difficult to raise fresh capital in the markets.

Sounds like recent American history, yes? It's 2016 but there's still palpable anger over the Wall Street bailouts and far too many Americans still struggle with unsustainable credit debt. But, by way of comparison, the U.S. dealt with the financial crisis with genuine speed.

Yes, op-ed columnists are still arguing about the bailouts and the stimulus spending (the latter being somewhat irrelevant to curing a financial crisis), with plenty still arguing for more spending (like Paul Krugman).  And we most certainly have endured a strange era of name-calling: remember when President Obama was a "socialist" in the eyes of his enemies?

But now we have a serious Democratic candidate for president in Bernie Sanders who embraces the Social-Democrat moniker, and he gets enough traction with that to force Secretary Clinton into making her own claims at the progressive label.  On the other side, Republican candidates are struggling with the terms but reaching for the same sense of popular desperation - the feeling that the middle class has been under assault for years now. It's just that too many candidates in the GOP are having trouble separating that valid concern from the sort of anti-immigrant sentiment that is historically attached to such fears.

Still, all this shouting and posturing and name-calling reflects something positive: compared to the rest of the world, America was more confident in processing its toxic debt overhang. Plenty of work to be done, but the job is engaged. What the NYT article laments is the lack of similar progress elsewhere, and, in my mind, that progress reflects a political lack of confidence in the systems afflicted - one that prevents them from moving more aggressively because they fear the very fabric of their governments' political legitimacy might tear.

China is the scariest example in this regard.  Per the chart above, we see just how integrated and important the Middle Kingdom has become with regard to the global economy's functioning. Scarier still is the damaging precedent set by neighboring Japan:

Japan, economists say, waited far too long after its credit boom of the 1980s to force its banks to recognize huge losses — and the economy suffered for years after as a result.

But Japan stalled out during the go-go nineties, so it could only do so much damage on a global scale. But, as the world went on a growth tear over the next decade and a half, the stakes today are so much larger - as is the poster-child for not facing the truth with enough alacrity - again, China.

Headline figures for bad loans in China most likely do not capture the size of the problem, analysts say. In her analysis, [one prominent local observer] estimates that at the end of 2016, as much as 22 percent of the Chinese financial system’s loans and assets will be “nonperforming,” a banking industry term used to describe when a borrower has fallen behind on payments or is stressed in ways that make full repayment unlikely. In dollar terms, that works out to $6.6 trillion of troubled loans and assets.

None of that was truly unexpected.  You spend your way out of a financial crisis and you're simply delaying your day of reckoning - an essentially political process of regrading the economic landscape like the two Roosevelts (Theodore and Franklin) once did for the U.S. under similarly tumultuous circumstances (may I suggest Ken Burns' 14-hour documentary "The Roosevelts" on Netflix).

It's just that no one can spot that sort of leadership in China right now. We've seen some experts compare Chinese president Xi Jinxing to T.R. in terms of foreign policy machismo (largely on display only in the South China Sea), and Xi has definitely earned his corruption-busting stripes for his lengthy recent domestic campaign. But processing China's frightening large pool of toxic debt?

The looming question for the global economy, however, is how China might deal with a vast pool of bad debts.

After a previous credit boom in the 1990s, the Chinese government provided financial support to help clean up the country’s banks. But the cost of similar interventions today could be dauntingly high given the size of the latest credit boom. And more immediately, rising bad debts could crimp lending to strong companies, undermining economic growth in the process.

“My sense is that the Chinese policy makers seem like a deer in the headlights,” Mr. Balding said. “They really don’t know what to do.”

And that, my friends, is the biggest uncertainty right now in the global system. ISIS, for all its ferocity and atrocities, does not compare.  Sanders/Clinton v Trump/Cruz/Rubio does not compare. The Brexit/Grexit/Whoxit? dynamic in the EU does not compare.

And this is where multiparty, pluralistic democracies rule - when they choose to. They can "throw the bums out."  Heck, they're required to in the U.S. after 8 years - maximum (our presidential administration). Being able to apply the "clean slate" is a huge act of political resiliency, one that China, with its single-party state, is presently unable to employ.

And that is worrisome for the entire global economy as it continues to process the toxic overhang from that great global economic expansion that we all now remember so fondly.

 

 

3:44PM

A World In Which China’s Economic Resilience Seems As Important To The World As America’s

AP photo, used in WAPO citationIT MAY SEEM AN OBVIOUS - ALMOST TRITE - OBSERVATION AT THIS POINT IN HISTORY, BUT YOU WOULDN'T KNOW IT FROM THE WAY WASHINGTON, THE PENTAGON, AND OUR CURRENT SLATE OF PRESIDENTIAL CANDIDATES SPEAK ABOUT CHINA.  That fundamental disconnect is somewhat scary to, as well as dangerous for, the rest of the world. And no, I don't note that as some subtle plea for better and less contentious relations with China, because it will always take two to tango. I do, however, note it as a continuing negative trend when it comes to these two nations' co-management of global economic stability.

A couple of Reuters' pieces today remind us of just how important China has become to global markets and their expectations.  First, any new economic forecast figures from China are momentous enough to shift IMF calculations for future global economic growth:

The International Monetary Fund cut its global growth forecasts for the third time in less than a year on Tuesday, as new figures from Beijing showed that the Chinese economy grew at its slowest rate in a quarter of a century in 2015.

To back its forecasts, the IMF cited a sharp slowdown in China trade and weak commodity prices that are hammering Brazil and other emerging markets.

The Fund forecast that the world economy would grow at 3.4 percent in 2016 and 3.6 percent in 2017, both years down 0.2 percentage point from the previous estimates made last October. It said policymakers should consider ways to bolster short-term demand. [emphasis mine]

Unsurprisingly, the Reuters pieces notes that "concerns about Beijing's grip on economic policy have shot to the top of global investors' risk list for 2016 after falls in its stock markets and the yuan stoked worries that the economy may be rapidly deteriorating."  So, it's not just a matter of China's economic health but what Beijing intends to do about it.  Frankly, until very recently in history, the only countries that registers at that level of impact has been the United States, Japan, and the EU as a collective.  But come back with me to review the stimulus spending that unfolded in response to the global financial distress of 2008-09, and the numbers there previewed just how central China had become:

  • US - 800 billion USD
  • China - 600 billion USD
  • EU - 220 billion USD
  • Japan - 150 billion USD.

In other words, when push came to shove and big economies needed to pony up the money to shore up global economic demand, China outperformed the EU and Japan put together by making an effort bested only by the US.

This is why, per the second Reuters citation, just as many eyes are on Beijing as Washington right now:

Global equity markets on Tuesday snapped back from a rout at the start of the year after data showing weak economic growth in China prompted speculation Beijing would boost stimulus efforts, but a renewed drop in U.S. oil prices raised a cautionary flag.

China's rise from being a detached corner of the global economy - just four decades ago - to its status as second-most important pillar is akin to America's stunning, turn-of-the-20th-century rise to global prominence following our Civil War. And yes, the US of that era scared a lot of the world with its ambition, arrogance, and self-centeredness - just like China does today.

But we lucked out and picked up a mentor in the British, who, over time, had no choice but to encourage our rise as central to their own continued prosperity, security, and even national survival. The truth is, with all the world has on its plate right now with climate change, terrorism, technological leaps, and so on, the US is as likely to become as entirely co-dependent on China's national resilience in the 21st century as the British once became on US resilience in the 20th century.

Do I see any such recognition among our political and military leaders on this score?  No I do not.  And that worries me.

Do I see it across this country?  It depends on your age, as in, the older you are, the more you tend to fear China.  You also tend to fear China more if you are located in the interior and east of the US versus the Pacific-minded US West.

But I do see a different mindset among the Millennials, which, by all polling, appear to view China more as an ally in co-managing this world than an antagonist. And, based on my time in China, I spot enough of the same among China's youth to suggest that this co-dependent relationship will ultimate work out just fine.

What worries me most is getting from now to then.

The US spent decades after WWII working to spread and sustain an international liberal trade order that we now dub "globalization."  We were enormously successful in this endeavor, triggering the greatest reduction in global poverty and the greatest upsurge in global development that the world has ever seen.  But, in doing so, we created a host of economic "challengers" whom we must eventually come to accept as co-enablers of our own national resilience, as well as the resilience of the planet.

The hardest part for Americans seems to be this supposition that, if a foreign civilization joins this global trade order (as China has) and becomes highly capitalistic (as China has), it must rather rapidly become highly American as well (raucously pluralistic in politics).  However, to our continuing bafflement, almost half a century after Nixon went to China, the Chinese are still Chinese.

I know, right?  How dare they!

And that seems to upset a great deal of Americans to no end - but particularly older Americans, many of whom now seem to see, in China, a monster of our/globalization's making - a Frankenstein who cannot possibly be tamed (much less told what to do).

As suggested earlier, I expect generational change in both countries to solve this trust-divide that currently keeps the world's two greatest economies (and militaries) from realizing the full extent of their co-dependencies.  For now, it's important enough for players - and citizens - on both sides to realize just how much we collectively rely on one another's national capacities for resilience in face of common threats and challenges, AND to remember just how different this relationship is from the one we once endured with the Soviet Union - an empire that was bound to our national survival in terms of its nuclear weaponry but not to our economic resilience to any appreciable degree.

And that is what makes China entirely different.

2:30PM

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.

President_Theodore_Roosevelt

Froosevelt

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.

movieposterTeddy 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).

 

1:40PM

(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 ...

READ THE ENTIRE POST AT:


12:17PM

(RESILIENT BLOG) China’s RMB To Become IMF Reserve Currency, Crowding Out Aging Europe and Japan

YESTERDAY THE INTERNATIONAL MONETARY FUND (IMF) ANNOUNCED that China's renminbi would become its fifth designated reserve currency, joining the US dollar, EU euro, British pound, and Japanese yen.  The move comes in response to a several-year campaign by Beijing to have its currency thus credentialized.  For now, central banks around the world hold only about 1% of their reserves in RMB, but Beijing has created an outsized latent reserve currency presence (another 5%)  by concluding numerous significant currency swap deals with major trading partners.  The latter scheme was apparently enough for the IMF to finally move on China's strong desire.

READ THE ENTIRE POST AT:

 

10:54AM

Clinton v Bush (again!)

Story in NYT explores the obvious dynamics of the Dem Party that I hear from everyone in that camp:  it's Hillary and nobody else even close for 2016 election - at this time.

When I spoke at a GOP post-election gathering late last year, I heard the same about them:  it's Jeb Bush and nobody else even close for the 2016 election - at this time.

That'll make it 9 elections out of 10 that we've had either a Bush or Clinton or both running - since 1980.

Remember that when America complains about other countries not being able to come up with anybody but legacy types.

The elections:

 

  • 1980: George H.W. Bush runs for president and is on GOP national ticket as Veep.
  • 1984: Bush repeats as Veep
  • 1988: Bush wins as President
  • 1992: Bush loses to Bill Clinton 
  • 1996: Clinton repeats as President
  • 2000: George W. Bush wins as President (sort of)
  • 2004: Bush repeats as President
  • 2008: Hillary Clinton runs for President and almost wins Dem nomination
  • 2012: the weird election of no Bushes and no Clintons (I believe there was massive solar eclipse)
  • 2016: Jeb Bush runs for the GOP and Hillary runs for the Dems

 

An age of political dynasties.

2:27PM

Time' Battleland: National Security - Hunting Down Bad Guys: China vs. the U.S.

A pair of ostensibly unrelated New York Times‘ stories recently jumped out at me.

Understand, the paper itself made no attempt to link the two.

What struck me was just how calmly the Times reported 3,000 (!) targeted assassinations by the Obama Administration since 2009, after rather breathlessly noting - just days before – China’s “hard-nosed display of the government’s political and economic clout across Laos, Myanmar and Thailand.”

Read the entire post at Time's Battleland blog.

7:44AM

The inevitable counter-reaction to China's aggressive behavior in Asia

The easiest call of the last half-century:  push Japan around enough and you'll get an end to its constitutionally-mandated pacifism.

Unlike Germany, which self-flagelated to the point of altering its social persona, Japan did no such thing.  It simply buried the past, which it can now dig up with enough incentives from Beijing, which seems to have counted on the notion that it could push Tokyo around indefinitely.

No, this doesn't change my attitude on the "pivot" or AirSea Battle.  In both cases, it proves how unnecessary they are as over-the-top reactions (yes, I understand the "show of force" part; I just worry that such things tend to be forgotten fairly quickly inside the Pentagon and thus today's feint equals tomorrow's "unshakeable national security interest").

The US enabled Asia's peaceful rise by playing Leviathan and thus obviating anyone's need to "arms race" with anyone else inside the region.  The result being, for the first time in history, India, China, Korea and Japan all "risen" without any wars.  

Beijing seems to have seen some historic advantage in this situation, which now disappears - inevitably.  Thus, now is NOT the time for the US to "pour it on" but to play the honest-broker all the more.

8:25AM

Millennials as a new way of approaching capitalism/consumerism

Interesting USA Today story on how "Millennials are demanding capitalism with a conscience, and some of America's biggest brands are delivering."

I give a lot of speeches to middle-aged audiences (now borderline Boomers/Gen X like myself) and they express the usual concerns over the Millennials as the next to pick up the torch - so to speak.

So I talk about my oldest two and say most of the things stated in this article, so it was good to come across it and realize I wasn't unduly extrapolating from my kids:

This trend-setting, if not free-spending groupd of 95 million Americans, born from 1982 to 2004, live and breathe social media and are broadly convinced that doing the right thing isn't just vogue, but mandatory.  With nearly a third of the population driving this trend, kindness is becoming the nation's newest currency.

It always amazes me how America raises the next generation that it needs.

8:17AM

Now Japan and EU start talks on free trade deal

FT story.

Comes right on the heels of recent talks with US to consider starting similar negotiations.

This is the West not waiting on the WTO, which is good.

It's also the West recognizing collective strengths, which is also good.

That's the funny thing about trade pacts - they tend to come when times are bad. 

Because, when times are good, everyone's too picky and demanding.  But when times are bad, and everyone assumes trade protectionism will rule, wiser heads prevail.

This is old-school globalization (1945-1980), and it's good to see that it's still capable of moving the ball forward.

12:01AM

What China wants, China gets - at a cost to the planet

One of the ways in which China starts getting blamed for all things globalization is the direct impact its consumers can have on global markets - sending them soaring and crashing in a historical heartbeat.

I've talked about China's incredible hunger for various nuts in the past, and how that demand has fundamentally reshaped ag markets in the US.

This NYT story discusses how fishermen off the coast of Mexico are ignoring governmental attempts to preserve an overfished area for sea cucumbers.  Out-of-area guys are slipping into zones being vigilantly guarded by locals and pulling out hauls right under their noses.  This creates a "wild west" atmosphere were towns square off against towns over their precious slices of the pie and every stranger is treated like a would-be criminal.

Until China emerged in its middle-class glory, they wasn't much of a demand, as sea cucumbers aren't really eaten by Mexicans.  But now the demand is such that one guy poaching can claim $700 a day in profit.

So this section of Mexico's coastline is in uproar . . . because Chinese like their sea cucumbers.

There will come a time - soon enough, when virtually everyone in the world who isn't Chinese will be living some version of this story.

A while back, America played that role, and while everyone wanted to please that American consumer, the dynamic created a lot of antipathy too.

And that is what's coming toward China at high speed.

12:35PM

Iraq at ten years

Cartoon found here (in an FT op-ed that fits this post nicely - if orthogonally).

Read through a variety of the tenth-year anniversary reviews, and I thought Thomas Friedman's was the best - despite the weird title (Democrats, Dragons or Drones?).

His basic notion that it takes the next generation to create and shape the subsequent reality is correct.  Friedman pegs it at "9 months and 21 years to develop."

Fair enough. But the question (as he also notes) hinges on that generation's journey.  Done well, it works.  Done badly enough and a vicious spiral ensues.  In truth, the jury remains out on that score.

We won the war - no doubt, and then took a pass on the postwar.  If we hadn't, then questions of "why?" fade away.  In the post-9/11 mood, America possessed the desire to reshape the region and Saddam was the obvious target. Direct causality was not the issue, although Dick Cheney tried to sell that.  Nor was direct threat, referring to the late and frantic oversell of the WMD to Congress.  The purpose - all along - was structural retribution: as in, you reshaped our world, now we reshape yours.  Americans are just deeply uncomfortable admitting that, so we needed a clear and present storyline to drive our revenge-flick dynamics.

The resulting strategic "pre-emption" was oddly symmetrical in ambition but certainly not in cost (and why should it be so between a superpower and a non-state actor?).

So when we take that pass on the aftermath of the war, and basically pretend that what comes next doesn't really matter, we abort the entire regional restructuring ambition (which, if you remember, was on a nice roll for 2-3 years there) and we allow ourselves to be swallowed up (in terms of strategic effort and attention) by an insurgency that was completely foreseeable and completely manageable - if we had bothered to embrace that inevitability.

But instead of embracing it, we did what we always do and called the postwar another war.  And wars yield a singular answer in US military history - called, more firepower.  And then we found that made things worse (go figure).

And then the White House, chastened finally by the 2006 midterms, relabeled the conflict and rebranded the mission - and then we succeeded again.  

But by then the public narrative had already been cast (Bush lied, too many deaths, too much cost).

So ultimately the Bush administration pays the legacy cost for its mistakes, which mostly had to do with stubbornness.  They had their narrative of a successful war and stuck to it - until it hurt so bad that they had to change.

So what are we left with?

In structural terms, I like what the Middle East has become.  The inevitabilities are being processed and Iran is more isolated than ever.  And thanks to larger structural changes in the global economy, the area is coming under new superpower management - inexorably.  None of it is nice, but it was never going to be anything but painful and violent.  The Arab world has an enormous amount of catching up to do WRT globalization, and it will be awful in execution (and with Africa leaping ahead on many fronts, the Middle East and North Africa - or large portions of it - risk becoming globalization's long-term basket case).

If the US had handed off the region still encased in its many dictatorships, China would have a much easier time over the next two decades.  Now, it faces challenges that are likely to alter its own political structure significantly - just like it did to the US.  Some naturally see the "defeat of American empire" in the region, but since empire was never America's goal, that judgment is meaningless.

All that matters is the relative evolutions of the three superpowers of the 21st century:  China, India and America.

America did, per my original Esquire piece, take strategic ownership of the Middle East in a big way.  That ambition was both debilitating and liberating:  we took our shot (badly) and now we're done "owning" things there (besides Iran's nukes).  In that way, Iraq processed our inevitable post-9/11 over-reaching response (we are a democracy) and hurried us along the exhaustion-collapse-rock bottom-recovery-resurrection dynamic that was always slated for us in the post-Cold War world (our inability to handle the success of the "end of history" - aka, the globalization of our economic connectivity model).  We had gotten used to running things, and we weren't going to stop until something made us stop - an unpleasant journey but a necesssary one.

Now, in grand structural terms, the race among my C-I-A trio is well underway.  The Obama administration, needing a switch-over target, sells its Asian pivot.  This is not a good answer, as I have noted frequently - but rather a red herring.  The real struggle in Asia doesn't involve us except in an off-shore balancing role.

Instead, the real struggles of the future involve the very same frontier integration I've been talking about for a decade now.  On that score, we are looking fine enough in our ongoing restructuring of our portfolio, while China's grows frighteningly larger relative to its ability to deliver and manage regions distant from its shores. India is just begining to recognize what responsibilities lie ahead.

You'll say that China will do it differently, but the structure of the system will force the same responses: China cannot afford to lose its growing overseas dependencies (much greater than any borne by the US), and so the responses will be mounted.  And when they don't go well (whoever gets it right - right off the bat?), change will double back upon China - to its general benefit (along with the world's).

Iraq was always a means to an end (when in history has great power war ever been anything else?).  During the real-time execution, it seems like everything - as does every war throughout history.  But half a century later?  It looks very different.  It's a stepping stone for superpowers:  some step up and some step down, some step away and some step in.  None of it is exactly what it appears to be in the light of present-day reporting.  Per Zhou Enlai's take on the French Revolution, we will be witnessing the downstream consequences across the century.