Brave New World: Constructive Engagement And Us Foreign Policy

De-stabilization, Re-architecture and Constructive Engagement: US Foreign Policy for a Brave New World

Introduction and Summary “Brave New World” is a series of related blog posts that explore current events in the international arena using a set of frameworks for evaluating US foreign policy, the state of the international system and the situation and performance of individual countries. Taken as a whole it sketches out a long-term strategic approach for how the US can encourage the development of a new, non-zero sum international system by pursuing constructive engagement with the other players in the Great Game. We are all best served by a policy that recognizes that the old international paradigm of “winner take all” was harmful to the well-being of the system, the participants and even the so-called winners. Instead what we should be seeking is an international system that provides a stable and secure framework for states to continue to pursue the domestic development agendas. In other words in the millennia old debates between the relative advantages of trade vs. raid we come down heavily on the side of trade. The data over the last 20-30 years bear this because we’ve seen more progress in human prosperity for more people than at any time in history. At the same time this view is not pollyannish but explicitly recognizes that any system of governance is based on the use of force to create and sustain the necessary institutional framework for a stable and progressive world order. It also explicitly recognizes, and analyzes, the critical role that good government within each state plays in benefiting itself and the system as a whole. The framework, which have taken to labeling, socionomics, is based on integrating economics with politics and culture. Among the results are: 1. The national interest of the US is best served by a stable, predictable and flexible world order. 2. As part of the pursuit of both our national interests an the health of the overall system we should be constructively engaged with each player, but especially the major players, to encourage them to be responsible and contributory stakeholders in the overall health of the system. Because that is in their best interest. 3. Good government is a central and critical requirement but the nature of good government depends on the history, character and development stage of each state. In other words pure democracy is not necessarily the best immediate alternative when the necessary political institutions and cultural values are not capable of supporting it. Rather we should be encouraging the development of government that acts in the best interests of the society and the people by trading off the extent and nature of participation with the role of the government. Over time a more representative and participatory government is demonstratably better for long-term development. A pre-maturely representative government easily degenerates into a power-hungry elite who act against the public interest. In the readings in this collection you’ll find discussions of the international system, good government and key states, particularly Russia, China and others that demonstrate and test the model of good government we’ve developed. Since each “chapter” is based on a blog entry the URL for that entry is enclosed. Each entry usually has a very extensive collection of background readings that illustrate and support the discussion and if you would like to dig into a particular topic is a good place to start.

Table of Contents

1. From Wild Geese to Tears of the Sun: Development & World Futures

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2. What Makes for Progress

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3. Knowing China: Issues, Trends, Futures, Culture

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4. Brave New World: Non-Flatness, History and Challenges

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5. SoW I (the Good): Britain, Brazil, Mexico and India

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6. SoW II (the Maybe So): Africa and Asia (China, Burma)

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7. SoW III (the Bad): Challenged Russia...another Potemkin Village

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8. Having Fun, Doing Good, Making Sausage: Goodtime Charlie's War

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9. Marching thru Georgia: the World Just Changed and We Can't Get Off

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10. Georgia, Scary Old World and the Return of History

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11. Round Two Strategic Assessments

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12. Stories Being Told to Us: Welcome to the New World Disorder

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13. Oil and Other System Shocks: Beyond Iraq & Georgia

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14. Oil Shock to Crisis to Systemic Threats

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15. 3of4 BRICs: Governance, Stability & Outlook in China, Russia and India 21 16. From Complacent Stabilities to Disruptive Challenges: Europe, Latin America, Africa

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17. Sounds of Angry Men, Whimpering Politicians & the Global Crisis

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18. G-20 Perspectives: How Well Do Bears Dance ?

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From Wild Geese to Tears of the Sun: Development & World Futures July 10, 2007 http://llinlithgow.com/PtW/2007/07/from_wild_geese_to_tears_of_th.html Some years ago I had the pleasure of seeing the "adventure" movie, "The Wild Geese" about a mercenary force recuited by a London merchant banker to rescue a deposed African leader so as to restore decent government to his country and, oh by-the-way, give the banker' s companies access to the vast copper and other mineral desposits. Any resemblance to the real world is entirely coincidental and the fact that a mysterious plane landed with a few remaing mercs and a dead African rumored to be Moise Tshombe is entirely besides the point. Nor that the history of the Congo (Zaire, Central African Republic, whatever) closely resembles the highlights of the fictional homeland. And strictly a technical matter is that Michael "Mad Mike" Hoare, commander of the white mercs during the early Congo troubles is the movie' s technical adviser. As another s "Special Ops" - historical fiction about Communist sidepoint may I recommend W.E.B. Griffin' insurrection in the Congo and the role of the Green Berets in dealing with same. The fact that it' s highly entertaining, a fun read and embeds quite a lot of technical knowledge and historical information that' s accurate as far as we can tell is also beside the point. More recently a friend, who normally doesn' t recommend adventure movies, suggested I see "Tears of the Sun" about an American SEAL team sent into a cauldron of civil war and a collapsed state in Central Africa to rescue a politicaly connected American medical missionary. Who of course refuses to leave and abandon her patients so the the Team Leader surrendars all normal discipline and shephards her and her charges thru miles of jungle to get across a border. Now the action is better, the special effects spectactularly and clearly they had better technical support becasue the tactics and weapons appear like they could have been used as a training film. Watch both and compare and contrast. Because, you see there' s another and deeper - more profound difference - difference that points to the failures of the last 50 years of policy and nationbuilding. In the Wild Geese Pieter Coetzee, the South African farmer carries Julius Limbani on his back because he must, all the while calling him kaffir. Limbani objects and tells him that they need to forgive each other and build a future together because otherwise African will become nothing but a cauldron of war, insurrection and violence. In Tears the team is just focused on the rescue and there' s no bones made that it' s a failed state and not going to change. A 1978 movie about mid-60s events and a 2003 movie that could have been made anytime in the last 10 (20 ?) years, or perhaps the next 10 (or 20 ?). If you can keep a dry eye more power to you. How did we come from the painful hope of the first to the heroic fatalism of the second ? And is that a true path ? Or do we need to suck it up and learn from our mistakes rather than continue to look for simple formulas ? It' s one thing to have physical courage, another to have the moral courage to lead and a whole different thing to admit your wrong and find a new path. (An insight I owe to James Stockdale talking about the civilian leadership of the Vietnam War btw). There are 980 million people in Africa and most of them are in deep trouble. Victims of Cold War machinations, neglect and the failures of their own societies. Good government matters - in fact on 911 we learned two things. It matters a whole heck of a lot, more than we ever acknowledged, and - ethics and morals aside - doing good is in our self-interest ' cause if these folks have no hope and no voice what do they care what happens to the rest of us ? So in the name of enlightened self-interest let me finally recommend a new book on institutions and development policy.

The Least Among Us :Why the Poorest Countries Are Failing and What Can Be Done About It. Neill Ferguson gives it a sound and glowing review and compares & contrasts it to the two polar opposites of Jeffrey Sachs (more money, more money) and William Easterly (this may not work):

There are, he suggests, four traps into which really poor countries tend to fall. The first is civil war. Nearly three-quarters of the people in the bottom billion, Collier points out, have recently

been through, or are still in the midst of, a civil war. Such wars usually drag on for years and have economically disastrous consequences. Congo (formerly Zaire, formerly the Belgian Congo) would need 50 years of peace at its present growth rate to get back to the income level it had in 1960. Unfortunately, there is a vicious circle, because the poorer a country becomes, the more likely it is to succumb to civil war (“halve the ... income of the country and you double the risk of civil war” is a characteristic Collier formulation). And once you’ve had one civil war, you’re likely to have more: “Half of all civil wars are postconflict relapses.” Why, aside from their poverty, have so many sub-Saharan countries become mired in internal conflict? Collier has spent years trying to answer this question, and his conclusions are central to this book. Civil war, it turns out, has nothing much to do with the legacy of colonialism, or income inequality, or the political repression of minorities. Three things turn out to increase the risk of conflict: a relatively high proportion of young, uneducated men; an imbalance between ethnic groups, with one tending to outnumber the rest; and a supply of natural resources like diamonds or oil, which simultaneously encourages and helps to finance rebellion. It was in fact Collier who first came up with the line “diamonds are a guerrilla’s best friend,” and a substantial part of this book concerns itself with what economists like to call the “resource curse,” his No. 2 trap. As he sees it, the real problem about being a poor country with mineral wealth, like Nigeria, is that “resource rents make democracy malfunction”; they give rise to “a new law of the jungle of electoral competition ... the survival of the fattest.” Resource-rich countries don’t need to levy taxes, so there is little pressure for government accountability, and hence fewer checks and balances. Countries don’t get to choose their resource endowment, of course; nor do they get to choose their location. Trap No. 3 is that landlocked countries are economically handicapped, because they are dependent on their neighbors’ transportation systems if they want to trade. Yet this is a minor handicap compared with Trap No. 4: bad governance. Collier has no time for those who still seek to blame Africa’s problems on European imperialists. As he puts it bluntly: “President Robert Mugabe must take responsibility for the economic collapse in Zimbabwe since 1998, culminating in inflation of over 1,000 percent a year.” If these four things are the main causes of extreme poverty in Africa and elsewhere, what can the rich countries do? Clearly we can’t relocate Chad or rid Nigeria of its oil fields. Nor, Collier argues, can we rely on our standard remedies of aid or trade, without significant modifications. As a general rule, aid tends to retard the growth of the labor-intensive export industries that are a poor country’s most effective engine of growth. And much aid gets diverted into military spending. As for emergency relief, all too often it arrives in the wrong quantity at the wrong time, flooding into postconflict zones when no adequate channels exist to allocate it. Trade, too, is not a sufficient answer. The problem is that Asia has eaten Africa’s lunch when it comes to exploiting low wage costs. Once manufacturing activity started to relocate to Asia, African economies simply got left behind. Now, to stand any chance of survival, African manufacturers need some temporary protection from Asian competition. So long as rich countries retain tariffs to shelter their own manufacturers from cut-price Asian imports, they should exempt products from bottom billion countries. This, however, is not the most heretical of Collier’s prescriptions. Reflecting on the tendency of postconflict countries to lapse back into civil war, he argues trenchantly for occasional foreign interventions in failed states. What postconflict countries need, he says, is 10 years of peace enforced by an external military force. If that means infringing national sovereignty, so be it.

At a time when the idea of humanitarian intervention is selling at a considerable discount, this is a vital insight. (One recent finding by Collier and his associates, not reproduced here, is that until recently, former French colonies in Africa were less likely than other comparably poor countries to experience civil war. That was because the French effectively gave informal security guarantees to postindependence governments.) Collier concedes that his argument is bound to elicit accusations of neocolonialism from the usual suspects (not least Mugabe). Yet the case he makes for more rather than less intervention in chronically misgoverned poor countries is a powerful one. It is easy to forget, amid the ruins of Operation Iraqi Freedom, that effective intervention ended Sierra Leone’s civil war, while nonintervention condemned Rwanda to genocide. Still, it would be wrong to portray Collier as a proponent of gunboat development. In the end, he pins more hope on the growth of international law than on global policing. Perhaps the best help we can offer the bottom billion, he suggests, comes in the form of laws and charters: laws requiring Western banks to report deposits by kleptocrats, for example, or charters to regulate the exploitation of natural resources, to uphold media freedom and to prevent fiscal fraud. We may not be able to force corrupt governments to sign such conventions. But simply by creating them we give reformers in Africa some extra leverage. Or as Mr. R.A. Heinlein put it one time, "good intentions are no substitute for knowing how a buzz saw works". To which I' ll add if we need to build a house we' d better figure out how to get the timber out and learn how to work the buzz saw. Otherwise we' ll keep stacking up the thumbs, innocent and guilty alike.

WRFest 23Feb08(Int'l Affairs): What Makes for Progress February 23, 2008 http://llinlithgow.com/PtW/2008/02/wrfest_23feb08intl_affairs_wha.html In these weekly reader linkfests we try to provide excerpted summaries of interesting and valuable stories that cover the range of topics impacting our world: Int' l Affairs, Politics & Economics, Science, Culture & Values with the coverage varying by the ebb and flow of news and interests. This time there' s been enough that we' re going to split them up into three parts with the first one being on Int' l Affairs. Yet at the same time we' ll ask you to remember that they' re part of a bigger whole and are woven together. Or can be interwoven with a little word and thought magic by looking at the shared themes, linkages and constructs. Here let' s focus on what' s going on in the world. We' ve talked before about a couple of things. First is all the rapid fire changes and second is the fact that in the last 2-3 decades more things have gotten better for more people than at any time in human history. Think about that for a minute - you are literally living thru an evolutionarily important moment. Take a look at the multi-part chart. The top chart shows GDP per person since 1980. It may help to know that a roughly equivalent chart since 1500 a.d. is pretty flat at best. In fact as best we can guess it' s flat for the last 10,000 years. Literally.

The bottom chart shows the same data for different regions of the world. You' ll notice some significant and profound differences. The question is why. Let' s point to a recent paper by Andrei Shliefer:

The Age of Milton Friedman. The last quarter century has witnessed remarkable progress of mankind. The world’s per capita inflation-adjusted income rose from $5400 in 1980 to $8500 in 2005. Schooling and life expectancy grew rapidly, while infant mortality and poverty fell just as fast. Compared to 1980, many more countries in the world are democratic today. The last quarter century also saw wide acceptance of free market policies in both rich and poor countries: from private ownership, to free trade, to responsible budgets, to lower taxes. Three important events mark the beginning of this period. In 1979, Deng Xiao Ping started market reforms in China, which over the quarter century lifted hundreds of millions of people out of poverty. In the same year, Margaret Thatcher was elected Prime Minister in Britain, and initiated her radical reforms and a long period of growth. A year later, Ronald Reagan was elected President of the United States, and also embraced free market policies. All three of these leaders professed inspiration from the work of Milton Friedman. It is natural, then, to refer to the last quarter century as the Age of Milton Friedman. The association between free market policies and social progress notwithstanding, economists remain divided in their assessments of this Age. Two recent books illustrate the divisions. Click on the link and you can read the whole thing, which is very non-technical, explains that graph and several others and discusses some of the issues and debates (it' s also dloadable if you like). We' ll give you one more from a major Indian entrapaneur talking sustaining and extending India and the developing country' s success to date (btw in the chart above a) India is South Asia roughly and b) it picked up after market reforms in the ' 90s): A Challenge for India N.R. Narayana Murthy, chief mentor and cofounder of Infosys Technologies, sees a bright future for developing countries — if they can use their success to address the problems of poverty. Infosys Technologies, one of India’s oldest and biggest software companies, is a dominant player in the outsourcing industry. And its cofounder N.R. Narayana Murthy has helped drive India’s emergence as a global economic powerhouse. He recognizes the enormous growth that lies ahead for India, China, and other developing nations as they take greater part in the global economy, but also sees challenges. For Murthy, who has long eschewed the trappings of wealth in favor of a more modest life, India’s success — and, implicitly, the continued growth of other developing nations — will not be guaranteed until its benefits reach the country' s rich and poor alike. So we' d ask you to read the following excerpts with all that in mind: what is progress, how does it come about and what kind of political framework is required ? Most of these stories are about folks struggling with one or another or all of those questions. There all interesting (otherwise why post) and probably deserve their own post but they make an interesting set. But we' d like to point to three in particular because they highlight some key issues. 1. China has concentrated it' s development efforts on the coasts, just as earlier they started with Agricultural reform to lay a foundation for manufacturing. Now the coast is experiencing rising labor coasts, congestion and pollution while the central provinces have lagged and there' s rising social dissent at the income disparities. It' s always been the plan to eventually shift to Central China but that' s now becoming a major new direction. Remember China has to create something like 60 million new jobs/year just to break even. They can' t afford for growth to slow without social collapse, and therefore neither can we. 2. Everybody is worried about the resurgence of aggressive Russia foreign policy but in fact the underlying reality is that their military forces are incapable of projecting power and on a relative scale are not very

meaningful. What this is really all about is a bit of posturing for the domestic audience to continue to restore a little pride and faith - a pride which was sadly damaged by the West' s not-so-benign paternalism. A little forebearance and civilized charity a decade ago on our and the Europeans part would have done a great deal to have kept a calm bear. As yea sow so shall yea reap. 3. Germany is beginning to undertake the most serious re-consideration of it's socio-economic structure, quietly, without fanfare and without quite meaning to, since the formation of the modern state in the late 19th C. Germany the modern nation was formed by the shape and nature of German corporatism which is often given credit for the post-WW2 "Wirtschaftswunder", or economic miracle. Perhaps but it also leads, and has led, to a lot of cronyism, corruption, malfeasance, lack of adaptation and innovation and general non-responsiveness. All of the things we were lecturing the SE Asian countries about a while back, eh ? :). What most people don' t realize is how central the institution and forms of big business are to the central structure of our societies. Nor how the different ones evolved by different choices on industry, structure and governance. The reference work cited along with the article on German changes will take you toward the best discussion ever written, IOHO, to explaining how that' s worked around the world over the last 100 years. If you' d like to know what some of the deep currents and structures have been...well...try that...

Knowing China (Readings): Issues, Trends, Futures, Culture May 6, 2008 http://llinlithgow.com/PtW/2008/05/knowing_china_readings_issues.html China has been unprecedentedly successful over the last several decades in creating a rapidly growing and modernizing economy that has brought more wealth and well-being for more people than at any other time in history. Anybody' s history. Hopefully they' ll be able to continue but associated with that development are a rising set of challenges that arise as a consequence. Some of those issues have to do with how China relates to the world, how it develops the necessary institutional infrastructure and how it recovers and re-develops the necessary cultural values. Before we dive into discussing those and the related readings let' s wrap it in a little context with the chart at right. Drawing on the work of Angus Maddisson on long-term economic development it shows shares of world GDP by major region. For well over a 1,000 years Asia was the dominant economy, not largest. DOMINANT. And for nearly 1500 it was the largest. It wasn' t until the Industrial Revolution really got going toward 1870 that its'relative share declined. Well boys and girls welcome to the brave new world where China, India and the rest of Asia is rediscovering, or re-covering, their historical positions. Now long-term socio-economic performance is based on three things: population growth, growth in productivity and social-economic structure. For millennia no matter what else what went on we were all trapped in the Malthusian economy cycling from feast to famine. Western Europe began to break out of that with the emergence of Commercial Capitalism around the late 1600s but China under the Sung dynasty had done the same thing around 1000 a.d. In the West however the socio-economic innovations were the foundation for the industrial revolution. At the end of the day it is this "big picture" organization of society that enables the breakout. The West has enjoyed a 100 years of clear superiority based on it' s organizational innovations but societies learn, adopt and adapt. Asia is beginning to do that.

The two major drivers of socio-economic resiliency are Institutions and Values. We' ve pretty well established that the key institutions for capitalism and industrialization are secure private property that' s immune from arbitrary seizure - otherwise nobody makes long-term commitments. And the Rule of Law and a justice system that is fair, predictable and credible. As well as a government that provides these things as well as security and isn' t too predatory in it' s tax collections. Better even if those taxes are re-invested in the general social capital, from bridges to education to healthcare because that re-investment of capital accelerates growth, health and per capita income. That' s the necessary institutional framework for progress. A parallel requirement is a set of values that place an emphasis on hard-work, honesty and diligence. That' s the values part. China enjoyed nearly 1.5 millennia of prosperity because it had a history of enterprise, good government that was on the whole honest and acted in the general interest, had a large population and natural wealth and a set of Values developed almost 3,000 years ago that supported the sinews of a stable and relatively prosperous society. Take all that down to today. China is having to adjust to its'growing importance on the world stage, to become an invested stakeholder as Zoellick puts it. It must also adapt and innovate its'current institutional infrastructure to increase the security of the population, address growing income distribution disparities and gain and maintain a sense of legitimacy; that is it must convince the populace that it deserves to be the government. All of which places a burden on the political and cultural processes. The latter is addressed by culture, both high and low. Low culture, as we' ve discussed are those unconscious and pre-programmed rules by which we live our lives and make decisions. The Chinese have a bedrock foundation that' s been consistent for many millenia. What they lack is a sense of purpose and commitment which is the role of High Culture. Ironically, in case you haven' t noticed, the Government has been promoting what it calls "Social Harmony" as the new set of values that replace the now badly discredited Communist doctrines. Unfortunately under Mao they did their level best to destroy their cultural inheritances in the name of progress. Considering the corruption and dysfunction of the last dynasty' s final decades one can hardly blame them. But what do they evolve to replace it ? Well there are several pieces of good news. First off Chinese cultures, as all are, is extremely persistent and much of the old high culture survived. On that note btw "Social Harmony" was the central value of Confucianism and of good Chinese government. But even more importantly a new Chinese "intelligentsia" has emerged that is wrestling with developing a new High Culture. Hopefully they will be successful. After the break you' ll find a set of readings on Chinese current events, particular the recent talks with Taiwan as well as the unrest in Tibet where they are talking to representatives of the Dalai Lama. Yet if various protests get out of hand we' d be in danger of seeing the sort of spontaneous combustion of popular protest that has brought down prior dynasties in Chinese history. At the same time China has a healthy, vibrant and evolving socioeconomic eco-system based on adaptations of historical institutions which we hope continue and become more formal and structured; and thereby sustainable. Finally we borrow several recent NYT reviews to illustrate a small sampling of the new efforts at re-developing a High Culture. These are indeed interesting times.....boy, don' t you just hate that. Thought it' s not as if we have any choice. As Gandalf puts its it, "we don' t choose the times we' re given. It' s up to us to deal with them as best we may" !

Brave New World: Non-Flatness, History and Challenges May 16, 2008 http://llinlithgow.com/PtW/2008/05/brave_new_world_nonflatness_hi.html We' ve talked before about the tremendous changes going on all around is, which significantly impact all of the political and policy challenges we face (discussed in the last two posts). But we' d like to take a step back and talk about the "brave new world" that' s emerging here. After the break you' ll find a collection of readings which speak to this macro concerns from the accelerating pressures and breakdowns facing Europe' s middle class, on which sustainable long-term prosperity and socio-politico development depend, to growing strains in the world system as more countries reach beyond initial takeoff. That middle class breakdown is a symptom of these deeper and larger changes as are exponentially rising energy and commodity costs and the metastasis of the food crisis. Fareed Zakaria' s recent appearance on Charlie Rose is worth an evening' s entertainment. He' s always thoughtful though we don' t endorse all of his arguments and conclusions. But in his argument that we' re facing a new and growingly multi-polar world we wholeheartedly agree and second. What we find enormously ironic is that this new

world has been visible for almost a decade now. In other words Zakaria' s position is something he should have come to a long time ago...but then he had a few distractions. What that does tell us, given that he' s an "insidebaseball" player is the level of grasp on the things going on around us. Just to wrap some context around this discussion let' s take a look at the long-term performance of Europe over the last two millenia (again basing our charts on the work of Angus Maddisson). Take a look at the chart on the right which shows the average % change in GDP, Population and GDP per capita for as long as Prof. Maddisson' s data will allow us to take a look and let' s decipher it a bit. One would think that such dry statistics are....well, dry. But in fact when you stop to think about it the entire history of the Continent is represented from a certain perspective. The stories, the lives, the achievements and the disasters. And it all shows up in the numbers. Stop and think for a minute what the per capita numbers might be telling us - in how many centuries could how many people afford even a basic minimal caloric requirement ? In Fogelman' s work(The Fourth Great Awakening and the Future of Egalitarianism) on l.t. bionomic indicators he found that ~ 1/3 of the European population wasn' t eating well enough to work more than a few hours/day. And that it wasn' t until the post WW2 revival that food intake was sufficient to create a healthy lifestyle for the majority of the population. You can see the various periods in European history laid out rather cleanly. History may not be entirely what you thought it was but you can see the 700 years of a Malthusian economy from 1000-1700 where famine was a constant threat. Yet you can also see the period of the High Middle Ages when GDP rose relatively rapidly, partly thru population growth but also thru the invention of major new technologies from the horse collar to windmills. Dark indeed ! Then you see the beginnings of the Smithian revolution in 1700 when GDP and per capita growth exploded though population growth flattened out as the requirement to have lots of babies was replaced by the advantages of investing more in children who might survive. And then of course there was the Industrial Revolution which changed the game for Europe, and everybody else now. But what did Europe do with their new found wealth ? They committed suicide. Look at the abrupt drops in all indicators beginning around 1913. Talk about paying the piper ! You can see the post WW2 recovery (think Marshall Plan please) where GDP and per capita income recovered. Yet population growth slowed and has now gone negative. In the long-run it' s the sum of productivity and population growth that increases wealth and well-being. Europe appears to have replaced a rapid suicide with a slow-motion democide. That along explains all the "guest workers" brought into France, Germany and elsewhere in the ' 80s. And the foundations for the current minority troubles all the European countries have experienced. So you see numbers can tell a story as dramatic as any written by the great Greek playwrights...if you know how to read the text. Now as you read the following excerpts consider what other stories are being told about the rest of the world duplicating the early history of Europe' s rise. The question is...can they and we find an alternative to adjusting to the pressures than the ones the Europeans founds ?

SoW I (the Good): Britain, Brazil, Mexico and India May 19, 2008 http://llinlithgow.com/PtW/2008/05/sow_i_the_good_britain_brazil.html SoW stands for State of the World and we ended up accumulating enough readings that we' ll end up with multiple posts covering various parts of the world that share some common characteristics. Those however won' t strictly be geography or level of economic development. Rather we' re going to emphasize a redcurrant theme - what does a stable, progressive and prosperous society require to achieve those goals. Earlier we' d reviewed (Iraq Resartus (Readings): Stability, Progress and Will) the situation in Iraq using the comprehensive, thorough and deeply insightful work of Col. David Kilcullen, the Australian counter-insurgency expert, to analyze the situation in Iraq. The point we' ll make here is that the "nation-building" requirements that we' ve re-learned so painfully in Iraq are the same ones, at various stages of development, required to answer those critical questions. If you' ll take another look at the chart it lays out the structural underpinnings that create a good society - things we often take for granted in the US and in the rest of the developed world. Yet ones that are scarce and difficult to come by in many places, not least Iraq of course. But our point remains that each and every society must "answer the mail" on these critical elements. As you skim over the excerpts below we' d ask you to read them with this in mind. The excerpts cover Britain - one of the historical exemplars for centuries of an adaptive and innovative society where these pillars are so deeply embedded in the Culture that everybody, not just the Brits, takes them for granted. But consider for example what other even of the advanced countries where that is true ? France - it had a major revolution as recently as the 1950s ? Germany - well under the aegis of the US they' ve managed to establish and keep a democratic system since the end of the Occupation (NOTE: not the end of WW2). Who else ? Two countries that have had relatively small instabilities but seem to be making some sort of progress are Brazil and Mexico. Mexico has been ruled by the same institutional framework since the Revolution of the early 20thC and has undergone major changes in the last decade or so. But finds itself seriously challenged by drugs and violence. Contrawise Brazil finally seems to be moving into the camp of societies that have learned the cardinal rule: "we' re all better off when we' re each better off". And to continue to pursue a moderate, centrist course vs its'historical swings between Populist demagoguery and Oligarchic dictatorship. Finally India which, as a lead character in one of my favorite fun movies (Bride and Prejudice) India is a very young democracy which has nonetheless managed to remain stable, cohesive, and now, growing. Not without some really serious and growing challenges of course. As

last week' s headlines about terrorist bombings show. Kilcullen' s summary chart, reproduced here, is actually a pretty good checklist of the things that any society must do. Keep it in mind any time you see the headlines and ask yourself - against that checklist how would we rank the various factors ? Once you stop taking our hard-won heritage for granted and asking those questions your views on how the world works might develop in very different directions indeed. Try it, you may not like it of course. But it' ll be good for you, and us. :) !!

SoW II(the Maybe So): Africa and Asia (China, Burma) http://llinlithgow.com/PtW/2008/05/sow_iithe_maybe_so_africa_and.html Continuing our little survey of the State of the World here' s some interesting stories from Africa and Asia. Bad as the stories continue to be out of Africa, Darfur, Somalia, et.al. for example, large parts of the rest of the continent aren' t quite the abyss they' ve been. In fact Africa as a whole has experienced more socio-economic progress in the last few years than it has in decades. A key part of that is the growing demand for African resources from the Emerging countries, especially China and India. When you stop and think it that' s actually perfectly natural and reasonable. For one thing they' re geographically proximate. For another they' ve had trading relationships, literally, for millenia. And, most importantly, this is a winwin for everybody. China and India need resources and African nations need customers, financing, development and markets. Sounds like the theory of classical trade to me. It' s also a symptom and harbinger of the new, emerging world order. We' re used to thinking of the world as bipolar, pun intended, during the 1950-1990 Cold War period. Though it wasn' t really. Or planetary with the US "super-power" as the central start around which various players orbited. Now a better model is a molecule or tinker-toy. Think of each of the players establishing it' s own network of relationships. The patterns, structures and power flows of the new world are going to be very...very different. If you want two interesting canaries that have flown in ahead of the storm listen to world music and ask yourself what the cultural synthesis, geo-political and socio-economic interactions will be in 25 years or 50 years if similar links and fusions occur. As they are beginning to. Or look at the rapid evolution of the Olympics - who' s got large contingents and how well they do in which sports. So with all that in mind, and presuming you don' t need any more news on the Earthquake problems, our China excerpt focuses on a different aspect. China' s adjusting to its'new role and the rest of us adjusting to it. And by way of compare and contrast between relatively good government and terrible government we have Burma where maintenance of power is more important than the lives of the populace.

SoW III (the Bad): Challenged Russia...another Potemkin Village May 20, 2008 http://llinlithgow.com/PtW/2008/05/sow_iii_the_ugly _challenged_ru.html Now it' s time to take a look at Russia...and hopefully this won' t be the only one. After the collapse of the Wall and the well-meaning but deeply flawed and culturally/historically misinformed imposition of free-market facades on Russia by the reformers the net results were the near (maybe actual) collapse of the Russia socioeconomic system. A point which is lost on almost all Western commentators who evolved from pitying disdain thruout the ' 90s to hectoring lectures about Putin' s methods as he restored peace, stability and economic progress to angst and agita about where Russia' s headed. Now don' t construe those as endorsements of Putin and Russia' s current path ahead; they' re not. Be need to recognize realities grounded in facts on the ground and history.

And the first fact is that in the Country of Ivan the Terrible the Russian' s had no cultural nor institutional memories of civic society with the rule of law, peace and stability, respect for property nor any of the other things we take for granted. Instead what they had was memories of Mongol oppression and exploitation burned into their folk memories at the deepest and most subliminal levels. Combined with a post-Mongol history of strong men taking power and ruling with terror and oppression but creating stability and a measure of prosperity. When Putin removed the regional governors from direct election as well as squashed the oligarchs he crushed exponentially growing challenges to the central authority. When Khondorvsky was sent to prison it wasn' t just an abuse issue. Rather he was starting to use his own power and wealth to become, as many/most of the oligarchs were, to seize increasing control of political power and the institutions of the state. A position of power that resulted from their own fortunate and fortuitous exploitation of the corruption and weaknesses of the Yeltsin regime to seize monopoly control of state assets, e.g. gas, oil, forests, mines, etc. etc. They were acting under different veneers much as the Warlords did in China during the ' 20s and ' 30s but with less attention to the wellbeing of their controlled populace. So Putin who has restored some measure of peace and honesty and definitely, on the backs of rising worldwide oil prices, economic progress is understandably very popular with the Russian populace and electorate as a whole. The question is now what because that success has bred it' s own challenges. Partly because the new centralized authority is falling back on corrupt cronyism as a means of governing with all that entails for malfeasance and economic inefficiencies. But mostly because Russia' s way forward lies in taking the next jump step in strategic institutional innovation and adaptation - which they know. The opening graphic, courtesy of the Economist, captures the Potempkinesque nature of Russian prosperity and strategic outlook but let' s put in "dry" context. That is let' s tell the story with yet another graph of historic economic performance. If the chart at right doesn' t cause your heart to bleed you need to think about what you' re looking at. We' ve made the comment before that Communism and similar ism' s and ologies conducted the largest open-air experiments in political economy in history, and ultimately failed abysmally. You can see where slow, semi-Malthusian progress was made under the late Czars and where the early Communists were able to jumpstart growth and per capita well-being thru a Command & Control economy. You can see the terrible prices paid in lost lives thru the 20thC, the spurts of growth under the late Czars and early Communists with an accompanying rise in per capita GDP. Due more to falling population than not. And the collapse of population growth beginning in 1973 followed by a collapse that accelerated thruout the ' 80s and ' 90s. And if you ever wondered how/why we wont the Cold War now you know. So as you skim these reading excerpts you might bear all that in mind.

Having Fun, Doing Good, Making Sausage: Goodtime Charlie's War July 13, 2008 http://llinlithgow.com/PtW/2008/07/having_fun_doing_good_making_s.html

Did you ever stop to wonder why we won the Cold War ? And how hard, difficult, costly and unlikely it was ? Not to mention a big element of luck and good fortune ! Well there are big answers and little answers. Beyond some of the theoretical abstractions were people like "Goodtime Charlie" Wilson. A hard-drinking, hard-partying Democractic Congressman from Texas who engineered the largest and, arguably, the most effective covert war in US history. If you click on the graphic it starts up the movie trailer which captures a lot of the gist of the movie much better than almost any other trailer I' ve seen. And what a movie - just as movie. First off it was put together by Tom Hanks as the lead producer - in other words he wanted to make this movie and went out of his way to "make it so". He also played the lead along with Julia Roberts and Phillip Seymour Hoffman - three Academay Award winners is a lot of horsepower. They all must' ve seen something in it as well. It was directed by Mike Nicholas, one of America' s greatest modern directors (The Graduate, Catch 22, Silkwood,...), and written by Aaron Sorkin of West Wing fame. That means to start with it was not only extraordinarily well acted and written but on the surface it' s very funny, very clever and very insightful. BtW - it' s almost the only recent gig that Sorkin fought hard to get - another telling indicator. You see it' s also a true story. And offers up several lessons we think tell us a lot about maneuvering inside the Sausage Factory (Inside the Sausage Factory: the 4P' s of Political Reality) to get things done for the good of us all. Hard as that might be to believe. The Wikipedia synopsis is pretty decent though a tad limp-wristed trying to be even-handed. You see we won the Cold war partly thru inherent dysfunctions of the Soviet system which made it unable to adapt and grow. Partly thru the military and economic pressures Reagan put on the Soviet system, including a secret economic war which has yet to make it beyond hints in various thrillers - if you can ever find it it' s worthwhile tracking down Cap the Knife Weinberger' s review of Tom Clancy' s novel "Cardinal of the Kremlin" - written as the sitting Sec. of Defense and published as the main editorial in the WSJ of all places. Talk about a broad hint. Another reason was the growing restiveness of Eastern Europe, particularly the Poles, encouraged and motivated by Pope John Paul II. But did you ever wonder why the Red Army didn' t put down the Poles like they had earlier put down the Czechs and the Hungarians ? Because they weren' t allowed to after the debacle of Afghanistan, where they suffered horrendous casualties, demonstrated a barbarism toward the population more reminiscent of the Mongols, had (as Charlie Wilson points out) their hearts broken and destroyed their credibility with the Politburo. Gorbachev wasn' t just being civilized when he wouldn' t support their plans to suppress Eastern Europe - he didn' t believe they could do it. It' s worth your time to watch this interview on Charlie Rose with Goodtime Charlie in which the supposed buffoon has a lot to say about politics, partisanship, and partying. And this much earlier one with George Crile - the 60 Minutes producer who first got Charlie interviewed and later wrote the book that brought all this to light for us. Who basically back up the fact that a rogue Congressman who set out to do the right thing was the primary mover on one of our greatest foreign policy successes. An amazing story from the real world, better than fiction. In fact the movie' s tag line captures it exactly - "base on a true story...you think we could make this up ?" And some of the lessons are pretty sad indeed, and revealing and salutary. But if we want the sausage factory to make better sausage we' d better figure out how to learn them, apply them and repeat them. After the break we' ll dig into several of them - though perhaps we didn' t catch them all and you' ll have to watch the DVD and get back with some comments. In the meantime this quote captures the nature of the challenge: CIA Award Presenter: The defeat and break up of the Soviet empire, culminating in the crumbing of the Berlin wall, is one of the great events of world history. There were many heros in this battle, but to Charlie Wilson must go this special recognition. Just thirteen years ago the Soviet army appeared to be invincible. But Charlie, undeterred, engineered a lethal body blow that weakened the communist empire. Without Charlie, history would be hugely, and sadly

different. And so for the first time a civilian is being given our highest recognition; that of honored colleague. Ladies and gentlemen of the clandestine services, congressman Charles Wilson. One final question, maybe two:

1. What would it have cost us in the ' 90s to turn Afghanistan into a viable state - $30-40 million a year ? (Wilson' s estimate). What did it cost us on 911? What' s it costing us now? 2. What 4P lessons do we take away here for Energy, Education, the Economy and National Security that a) we' ve known what to do about for decades ? Alright three: why does Congress have Attention Deficit Disorder ?

Marching thru Georgia: the World Just Changed and We Can't Get Off August 14, 2008 http://llinlithgow.com/PtW/2008/08/marchi ng_thru_georgia_the_worl.html Stop the world, I want to got off. Where' s Tom Friedman, his Lexus and his Olive tree, when you need them ? Crushed under the treads of a Russian tank likely. At least let Eddie Arnold do the sound track ("Make the World Go Away"). Presuming, since you' re reading this, that you haven' t missed the minor detail of Russia' s making an unprovoked attack, disguised as a peace-keeping mission and ethnic-cleansing stopper, you might want to stop and reflect that your world just changed. Well actually not. And on a 1-10 scale we' re about a 3 and those poor folk in George about a 20. We though we' d summarize a bit of the news and wrap it in some context in case your MSM headlines didn' t help anymore than they typically do. When we finish sorting things thru a bit we suspect the cartoon not only won' t be funny but it' ll ring as an all too accurate assessment of the brilliant geo-political maneuver it is. As well as the triumph of amor prope (hurt self-image) and testosterone. 1. First off this was presented as the a quick response by the noble Russian defense forces to stop the mighty Georgian army from proceeding with ethnic cleansing of the ethnic Russians of North Ossetia. To understand what a crock that is you need to look at the map AND understand that you don' t mount a multi-divisional attack thru tough mountainous terrain without months of preparation. Nor couple it with multiple coordinated airstrikes and a major amphibious assault with more of the same. Clicking on the map should talk to an interactive version where you can watch all this play out. 2. Second you need to know that this has been bubbling away for years, if not decades. We' re pretty sure we wouldn' t have attacked into Ossetia if we were president of Georgie but then again Russian "peacekeepers" have been sitting there, and in Abkhazia, for a very long time. Mostly to encourage the pursuit

of separatist leanings and support "banditry" into Georgia (smuggling, attacks,etc. etc.). Though we will also admit that, looking at the map, we' d have let North Ossetia - on the wrong side of terrible terrain, go a long time ago. 3. There is no evidence, let alone credible evidence of any attempt at "ethnic cleansing" on the part of the Georgians. 4. This has been presented, as we said, by the Russians as a noble enterprise. It actually fits the working definition of a massive disinformation, or "Maskirovka" campaign worthy of any of the better attempts of the KGB. In the starting perspectives section of the excerpts you' ll find some background therein as well as two Charlie Rose interviews. The second, with Russia' s UN ambassador, is a finer example of the art than even Ahmandenejad' s appearance. But much more dangerous. 5. The general European reaction is truly worthy of the folks who let real ethnic cleansing go on in the Balkans for years while they dithered, having emasculated their military forces. But again more dangerous on several levels. •

• •

It brings a new level of "old" Russian/Soviet/Czarist discipline back to those countries in what is referred to as the "near-abroad"; the countries immediately bordering Russia they spent centuries conquering once upon a time and effectively have started in again on. BtW - after the "cease-fire(s)" Russia kept attacking thruout much of Georgia and it' s not clear how much has been destroyed; or even if any country will be left. It completely isolates the new nations of Central Asia from Western Europe, and effectively the rest of the world.

6. It also brings all the potential energy resources of Eastern Europe under Russian control or direct influence. And thereby finishes isolating Europe from any major energy sources that are not imported under the political control of potentially hostile powers. Need we mention how much at the mercy of the Russians this puts them now ? 7. It changes the world system back to the old one we were all hoping was gone forever. The one of zero-sum games, lack of international institutions and realpolitik. All on the Russian historical theory that there are no win-win solutions. Which they are in the process of re-proving as an effective principle of statecraft - to their own long-run detriment, given how badly they need trade, investment, technology and other Western resources. 8. It changes the balances of power in Central Asia and the Middle East. 9. And it makes it more likely that Russia will support and encourage intransigence on the part of folks like Iran. In a worst case scenario it even makes it more likely that Iran will get the window of opportunity to pursue its'own aggressive export of terror and the continued development of nuclear weapons. It at least makes it easier - if for no other reason than any chance at sanctions just went out the window. 10. Finally, for now, it makes (or should) Russia a pariah state who should be expelled from the G8, now have no chance at membership in the WTO, makes investment in Russian operations and companies one of the riskiest on the planet (not that they weren' t already headed that way) and, given what' s likely to happen on the Security Council henceforth, makes that august debating society even less useful and productive. And that' s all this week - what will serendipity, hurt feelings, domestic nationalism and out-of-control testosterone bring us tomorrow...or next week or next year. Strangely, considering the level of potential damages, nobody seems to be reacting very much to this. Aside from some well-meaning hang-wringing in the European chancelleries.


         
            

Yesterday' s post (Marching thru Georgia: the World Just Changed and We Can' t Get Off) on the war in Georgia laid out a first round of assessments and evaluations. Now let' s add some further reflections for your consideration as well as try to put this, at least conceptually, in a larger context. After the break you' ll find an even larger collection of readings grouped into Media reporting/analysis, assessments and diagnosis and strategic consequences. Interestingly this worldwide collection of what could be considered the more thoughtful folks tends to converge on our prior arguments. Which is not to say that if we were just collecting stories and commentaries that a much wider spectrum wouldn' t be possible - there' s quite a bit of "they had it coming" and "the running dog US lackies should have expected this" or "this is all a vast CIA conspiracy" stuff out there. Since those struck us as ill-founded, distorted and un-constructive they aren' t, by-n-large, shown. A partial exception is made of Mikhail Gorbachev' s Wash Post editorial which parrots the party line to a T; and should see the revocation of his Nobel IOHO.

Round Two Strategic Assessments August 17, 2008 http://llinlithgow.com/PtW/2008/08/georgia_scary_old_world_and_th.html These aren' t well formed as yet so this is a testflight to put them out there and see how they work. To recap we have the prior post - the gist of which is there is a large agenda being played out with major geo-political consequences. A correspondent got me/us off on the cultural DNA and history of Russiaas in why they' d do this. Because it really doesn' t appear to make sense, no matter how well played it is. The answer to which is they see the world entirely differently and more hostilely than we' ve been seeing it. This is the bad old Russia coming back full force - which will have very bad consequences for us and the world but could lay the groundwork for a future disaster for them. That briefly summarizes a lot of back and forth, 4 pp. of softclips, etc. etc. Here' s my 3/4 morning thoughts: 1. Following on - this has immediate benefits for control of energy resources, Central Asia and playing power games with Europe. At least a decade' s worth of ripple consequences. But it doesn' t do them as much good as developing their oil, bringing in foreign investment, diversifying their economy, building road, schools, etc. etc. On balance they' ve made a very bad choice but a traditional one. 2. In the long-run they' ve destroyed themselves. Population is declining, productivity is down, they' ve made themselves potential pariahs though the Europeans will waffle and are no longer as critically important, the Chinese will hold their noses and watch their backs and much of the rest of the world will applaud as the political cartoons (some) illustrated. Including some of our own more benighted and misguided citizens. In the long-run as few will do as little business as they can manage, which will cut them off from the resources required for the future they could have had. Actually a very sad thing to see. 3. The biggest danger they create is systemic. Everybody games the system to their own advantage, whether it' s the Chinese, the Brazilians, the Indians, the Europeans, or whomever. Nonetheless what all we' ve spent nearly three decades benefiting from and supporting one way or another, is the architecture of the world system that the US created and supported. And were looking forward to, admittedly difficult, evolution into a new one with greater roles for various players. But nonetheless the emergence of a major

adaptation to the rising powers. Now that' s in serious question. And Russia' s role and reliability even more so. 4. Russia' s returning to the old way of doing things makes that more difficult and indicts the fundamental assumptions that the prognostication and policies were built on. Beggar thy neighbor instead of let' s grow the pie and then compete for who gets what piece. If Russia' s example is not managed and contained we could end up aborting the international framework that underpins the growing worldwide prosperity we' ve seen over the last two decades. Collectively we cannot afford to let that happen. That last point is particularly important and critical. NYC is a fun place - talk to the cabbies and hear the world. One of mine was (claimed) to be an ex-KGB officer and insisted on telling me that the Russian' s hadn' t given up on the bad old ways but were merely pursuing their old goals with new methods and new guises. I took him semi-seriously but countered that what they wanted to do and what was feasible might be two different things. His words now look like they needed to have been taken more seriously. On the other hand, despite the terrible short-term consequences, and the bad long-term ones Russia needs the rest-of-the-world more than we need it. Back in the day when Russia' s non-innovative economy was stealing most of it' s technology from the West they managed to have an "oil-field fire" in Central Asia. Actually what happened was that they' d stolen the software from the West and it was planted with some major Trojan horses. Which, when triggered, caused a major refinery/oil pipeline explosion visible from space. Look it up - William Safire covered it in one of his columns. Other things that weren' t covered were the secret economic war conceived and mounted that helped further the emasculation of the Soviet economy. We didn' t win the Cold War with tanks, at least alone. Why would the Russians, who' ve now chosen to reveal themselves as dangerous opportunists willing to violate the norms of the international system we' d all hoped would help us advance collectively, think the West is any less capable now ? Or more tolerant ? Or, beyond that, why would they think the other major emerging players who' s survival depends on continued economic growth in a stable and predictable international system tolerate the Russians breaking this for only their own advantage ? Now that' s an interesting question indeed ! Let me share an old picture with you that tries to capture some of these issues conceptually. It shows two axis - the horizontal with is the collective attitude of the world' s major players toward the maintenance and support of the international system. And the vertical which shows the character of US strategic policies. And the paths and colored regions show the evolution over time of the collective performance and well-being of the world. IF the US pursued an isolationist or chauvinistic policy while the majority of the world acted as free-riders or opportunists the world was likely to coast into trouble. Which would feedback on itself and lead to major problems. Only with the US continuing to support a world system and some active and positive support from other major players could we move into the green. Where do you think Russia' s actions take us now ?




Stories Being Told to Us: Welcome to the New World Disorder August 27, 2008 http://llinlithgow.com/PtW/2008/08/stories_being_told_to_us_welco.html Historically, without much fanfare, US President' s spend approximately 50% of their time and energy on foreign affairs even when things are going well. When Bill Clinton came into office he cut that as close to zero as he could manage and focused on domestic, and eventually, personal issues. Don' t believe me ? Well it' s rather extensively documented in Halberstam' s interesting little book: War in a Time of Peace: Bush, Clinton, and the Generals by David Halberstam. But we can' t entirely blame Clinton - he was reflecting the consensus of the times that the old ideology wars were over, that liberal democracy and free-market capitalism were triumphant and now all we had to do was put a Lexus under every Olive Tree. Well we' ve pretty extensively document the deep structural fallacies with that but in case you were wondering 911 was a wake-up call why hiding behind our oceanic moats was impractical and dangerous. And in the last couple of weeks our friends in Moscow have given us another lesson in why they call it Realpolitik, why Furst von Bismarck was brilliant and far-sighted statesman whom we all miss and why at least 50% of the President' s time is likely not enough. Now hindsight is 20/20 and it' s not fair to criticize the leadership for doing their best on the facts as they knew them at the time. The critically important thing is to figure out where you' re at, where you want to go and can go, and how you propose to get there. That said studying the past still makes sense because history defines the trends and context - after all what were/are the Balkan Wars without millennia old ghosts ? And Russia' s invasion of Georgia but the legacy of paranoia built into the Russian DNA by the Mongols and Ivan the Terrible, who is btw still a great historical hero to the Russian people for the stability and order he created.

Dealing with the brave old world of great power politics is now back on the front burner so we thought we' d take a little survey of the news and the issues. And let' s not think a cigar and a you-know-what is more important please. Just for the record and to help sort things out here' s our little architected list of key policy and strategic issues. You may notice the Foreign Policy is one of the "Big Three" IOHO. As it happens, and strangely enough, while it' s critical to our survival we don' t consider it the #1 priority. That goes to economics. But not at the exclusion of each other - there must be a balance. With that in mind after the break you' ll find some excerpted readings in the FP area that survey what we think are the biggest concerns, in the order of urgency but not necessarily significance, facing the next President. At this point we should have learned it' s not a single-pole world but an evolving multi-polar one where the interests and concerns of the other players have to be considered. They are not just blind ciphers were we can pull a lever and get what we want. And their interests are not our interests. On the other hand the US will continue to be the dominant political and economic power for decades. And as a result we have a greater stake in a stable, orderly and workable international system than any other. At the same time the rising powers have benefited enormously from the system the US created and maintained with its'allies post-WW2. In the next iteration and evolution we need their active participation and contribution balanced against their benefits and interests. Our challenge therefore is to be constructively engaged with the nations of the world in a way that promotes their positive contribution where possible and feasible. And to carry on around them where not. Part and parcel of that constructive engagement is to encourage them to do as well for their own people as they can manage. Which leads, based on the framework we' ve sketched and the readings below, to the following assessments and suggestions. 1. Middle East - Iraq is going much better than anticipated but has a ways to go. Obama' s reluctance to admit this is disheartening; nor is Afghanistan the central problem of our times. Contrawise hunting down Usama isn' t either, Johnboy. Afghanistan is certainly at risk and will take a concerted and integrated effort, like we should have made after Charlie' s War and were forced into in Iraq. But it requires nowhere near the resources and does require the NATO so-called allies to actually perform to promise or be replaced. If you want a balanced assessment Gen. Barry McCaffrey' s After Action Report is worth your time. If you click and read you can also download. The real problem though is that the kind of Unified Action he' s recommending that' s really nationbuilding in disguise is urgently required in Pakistan, which is coming apart at the seams. Replacing Musharrif was all well and good but Pakistani politicians have a decades long history of incompetence and corruption which is on the verge of creating a catastrophe. The Middle East in general and Pakistan in particular become the #1 foreign policy problem.

2. Russia - despite Russia' s subterfuge and intransigence in Georgia, which has been building and built over decades going back to the very disdainful way they were treated by Clinton, they are neither military, economically or politically powerful enough to cause us to re-think our overall strategies. We must deal with this, they have destroyed the assumptions of a peaceful new order and returned us to something older, and in the process destroyed the last three decades of European complacency whether they admit it or not, but do not in fact violate our views of how the world system should and could work. They just make themselves untrusted participants who may be in the process of committing socio-economic suicide. 3. China and India - are the most important long-term foreign policy issues we have to face. Fortunately for us the US has pursued adult relationships with them over the last several years, respected their interests while defending our own and encouraged them to be constructive participants in the international system. They are both crossing several key cusp points that will be challenging for us all. The worldwide economic downturn that' s emerging will put severe pressure on their domestic systems. At the same time those systems were facing the need to evolve to the next level of capabilities anyway. Finally we need to encourage to continue to be constructively engaged and contributory to the re-architecting of the world system we hope to achieve. Our ability to accommodate China and India's rise, to adjust the system, to encourage them to contribute and to see the health of that system as in their own long-term best interests will be the central question of early 21rst C international affairs. Consider this your blueprint and checklist for evaluating the candidates - in this case how do they respond to the stories we' re being told, rather forcefully. Agree or disagree, build your own or not. But don' t just take empty slogans or give them a pass. All of the issues we worry about day-to-day required a peaceful and stable world order for easier and cheaper resolution. At the end of the day you really do care.

   


        ! " #
 September 02, 2008 There' s more to the major policy issues confronting the candidates, and us, than economic and domestic challenges, obviously. As we' ve been reminded recently by our friendly neighborhood bear. Yet there' s far more going on than "just" Iraq, or the Middle East or Georgia. Though each of them is individually important, critical (as in possibility of a Simpson-like red zone incident) individually and collectively. Nonetheless there' s a lot more going on in the world than than just these small isolated events. Just kidding in a way and not in others. After the break you' ll find a slew of readings worth your skimming that we' ve selected to provide the same kind of crosssectional and decent quality sampling across international problems that the prior post tried to for politics and domestic issues. They range from key stories in the developed countries, including the surprise resignation of yet another Japanese prime minister - an indicator of Japan' s continuing failure to find the leadership it needs to adapt to the changes in the world. Or the story about the growing political strength in Germany of the Far Left and their political alliances - can you imagine a re-tread Communist forming the next German government ? That' s not the only challenge - both China and India are rapidly reaching short- and medium-term cusp points in their development paths that will create major systemic stability problems for them. And are already reflected in severe tremors. Some of the other news is from the Middle East and Iraq. In the latter, despite the lack of MSM coverage lots of the news continues to be outstanding, such as the handover of Anbar province to Iraqi control - or the fact that Iraqi bonds are now rated less risky than state government bonds in the US Midwest !!! The other news includes a nice little summary of Iran' s multi-dimensional breakdowns coupled with Syria' s increasing feistiness and renewed maneuvering.

Oil Shock to Crisis to Systemic Threats September 2, 2008 http://llinlithgow.com/PtW/2008/09/oil_and_other_system_shocks_be.html

Those last two in particular illustrate a key point we' d like to make - things don' t happen in isolation. Syria has more room to manuver and manipulate because Russia' s less likely to pressure it and is increasing arms sales. Similarly while Iran is imploding it' s getting more dangerous and less subject to international pressures now that Russia has over-turned the last twenty years of progress in re-architecting the international system. But we' re not just picking on Russia or those particular examples - rather we' re using them to point out that not only is it one damm thing after another but they are all inter-related and feed off one another. Have you ever thought what it might be like to be in the situation room in the White House and have five of these a day come whistling at you ? Any one of which could blow up to a major crisis with little or no warning. We can say that but it' s hard to grasp. Fortunately our friends at Harvard' s Kennedy School have done us all a great public service by hosting a public policy war game that was developed by several think tanks that looks at a relatively "minor" disruption in oil supplies and what happens. There' s a whole bunch of things you can learn from watching this and we can' t recommend it highly enough. An incomplete list would include: 1) What it' s like to be in the hot seat during one of these crisis. This "game" is constructed exactly like war games that are used to analyzed policy issues all the time and this particular one includes extremely high powered people who' ve sat in the real chairs. What you see is what we' re all gonna get. 2) The discussion of oil supply disruptions and how it spreads across the global economy is accurate. 3) The complicated linkages to other geo-political, diplomatic and national security problems illustrates as well as anything we' ve seen in the public domain how these things all play off one another and establish scary feedback loops. 4) The scenarios depicted are actually somewhat optimistic since they are pre-Georgia, i.e. Russian cooperation is presumed in looking for resolutions. 5) The discussions of a National Energy Policy, the constraints, the possible alternatives and how long it would take to put those alternatives in place is also quite accurate. We won' t detail them on the grounds it' s better for you to be snuck up on but trust us - it' s all entirely in line with our previous sketch of the situation (In Search of a Nat'l Energy Policy: Check the Mirror Pogo). 6) The discussions of how to position the President' s responses mirrors everything I' ve ever read, the people I' ve talked and my own more limited experiences in much smaller settings. The distance between what the actors know is the short- and long-term best response and what they can sell is honest, excruciating and debilitating. As Larry Summers points out - one of the things you should learn and we' ll give away - if you think we can become independent of foreign oil inside 2-3 decades you' re nuts. No matter what we do. In other words we' re now in a cleft stick where we' re reaping the results of ignoring a rational energy policy for thirty years.(Inside the Sausage Factory: the 4P' s of Political Reality). We really hope you can find the time to watch the simulation - total time is about two hours but you' ll learn more in those two hours about oil, the energy crisis, the real problems with policy-making and a whole host of other things. If you have trouble getting to the KSG multi-media center try clicking here. And if you' re interested in a downloadable PDF report that provides some background briefings the report is here. Click and dload as you would.

The one other observation, comment and suggestion we're going to make is what we really hope you take away is this: every single story below could turn into one of these little games. For real.

3of4 BRICs: Governance, Stability & Outlook in China, Russia and India March 12, 2009 http://llinlithgow.com/PtW/2009/03/3of4_brics_governance_stabilit.html That last post re-started a focus on International Affairs with a survey of the major crisis facing us collectively and the (re-) introduction of some conceptual frameworks on designing and managing a stable international system and the role and importance of good domestic governance. In particular we emphasize the importance of the peaceful control of force between nations and within nations combined with the criticality of domestic stability for economic development and socio-political health. The arguments can be summarize as 1) the viability of the international system depends on the interest and commitment of the potential stakeholders relative to their interests and capabilities, 2) those interests and capabilities depend on their domestic stability and development, 3) the US has mad major strides in coming back on balance, re-factoring it' s Defense and Intel/Security institutions and is re-positioning it' s foreign policy strategies to balance hard and soft power and 4) it is a vital national interest for US to be constructively engaged in promoting the stable progress of other nations while encouraging their responsible behavior while discouraging irresponsible free-loading and/or opportunism. Here we' re particularly thinking of Russia and their wounded amor prope (discussed in prior posts cited in the Russia section btw). Now we' d like to take a deeper dive using some of those concepts and tools on the situation and prospects for China, Russia and India.

 
%%  !  $   
  Amusingly business and finance types ignore geo-politics until it blows up in their faces, at least in theory. But in practice what they react to is the prospects of stability, economic progress and earnings. The bottomline results (implied joke intended) are that, to some extent, international markets are useful proxies for taking the temperature for the general world assessment of any particular country and the regime that governs it. Brazil for example seems to have finally broken the Oligarchic exploitation/Populist Revanche cycle that the Latin countries have been in since the dismemberment of the Spanish Empire. As a result it' s actually performing better over the last several years than many others, has a very solid reputation in the markets and looks to weather the storms relatively better than the other BRICs. Those relative assessments are represented here by a composite chart showing the relative performance for India (BSE), Brazil (BVSP), China (SSEC) and Russia (RTSI) since Jan08 and for the last six years. Notice that for five of those years India, Brazil and Russia moved up dependably on the meme that the BRICs were the "Next Big Thing" while China showed some serious speculative swings as it' s new markets went thru some speculative excesses. Since Jan08 they' ve all fallen over the same crisis-induced cliff but the real "tell" is the long-term differences relative to the start point. China started giving back speculative excesses early but has recovered somewhat. B/I/R started over the cliff later but have had enormously different timepaths as India has re-stabilized, Brazil had

a reduced fall and is re-climbing a bit and Russia came apart at the same in two different cusp points as it' s internal structural weaknesses became apparent under stress and stupidities.

% %&       Make no mistake about it the world is changing, willy-nilly, and it won' t look like anything we' ve experience in our lifetimes and on which we tend to base our rules-of-thumb for decisions. But strangely enough what it' s really doing is beginning a process of re-stabilization and re-balancing as we can see in this chart. It combines world shares of GDP, GDP growth and per capita GDP. The first sub-chart shows that China and India dominated the world economy for better than a 1,000 years; almost 1500 or better in fact. Then Western Europe and the US crossed the Malthusian barrier to modern exponential growth, based on industrialization and good governance. It' s not far of a stretch to argue that this entire phenomenon is relative recent, within the spans of "four to five" generations, from great-gparents to kids now. That' s born out in the third sub-chart that shows per capita GDP. Notice it' s early rise in Europe and the US followed by Japan - the first Asian nature to put a modern socionomic infrastructure in place. We take this composite set to argue that what we' ll see in the first will be the equalization of per capita GDP around the world and the re-balancing of relative shares. Of course that all depends on two things. One, keeping the lid on thru this crisis and reaching the other side still in shape to work on these challenges. And two, the gradual and continued development of more inclusive governance that enlists broader portions of the polity in socionomic progress. In the WaPo' s most recent neo-logism competition willy-nilly was defined as "impotent". Ironic and amusing because willy-nilly the world will re-balance...the only open question is at what level. High per capita or low per capita GDPs ! Progress or catastrophe...take your pick. Our vote is pretty clear, we think.

&   '  
(  )  #   The key to which path we collectively follow depends very much on each separate nation-state establishing the institutional foundations that provide stability and are built from their culture and history. History in general is pretty clear...good government is the sine qua non of progress. But it' s also clear that as societies become larger, more complex and more difficult to manage that the more inclusive they are the better, all things being equal. That is if representative government and associated civil institutions can sustain that inclusion. Because history is equally clear that trying to leap ahead of yourselves can be disastrous. Let' s compare and contrast the cases of China and Russia.

CHINA From the historian and socionomic analyst' s perspectives China is almost an ideal field study since it' s had millennia of good and bad government. In fact it seems to continually cycle thru the rise and fall of dynasties as chaos and corruption led to the fall of the old, the slow emergence of the new, the rise of competence, the development of organosclerosis by self-serving elites and the re-start of the downward spiral. Hence the region of the graphic that shows China' s historical experience; picture it oscillating inside that region for thousands of years. The discussion points outline more recent Chinese history and show the fall of the last Dynasty, the rise and de-generation of the Kuomintang, the Communist victory in the Civil War and their self-immolation under Mao and, finally, the emergence of a new technocratic oligarchy more interested in the general public welfare than in exploitation..though corruption remains a very serious problem. Just to keep on flogging the historical analogies the founder of "modern" China was the Quin Emperor who was quickly replaced by a great dynasty the Han. Mao seized power but was eventually replaced by the more reformist leadership. Will cycles never cease ?

RUSSIA Russia on the other hand has had an entirely different historical experience, over several millennia and in the last 150 years. For starters Russia was effectively a howling frontier wilderness, more comparable to the the North American experience than the long-settled Asia geopolities. The first semi-stable governments were the descendants of the Vikings (the Rus) who were displaced by one of the harshest and most exploitative regimes in history, the Mongols. As their power waned they were replaced by the "modern" Russian dynasties, started by Ivan the Terrible and succeeded by the Romanovs. Ivan' s surname was incredibly well earned but he set the pattern of strong, intelligent, willful and merciless powerful rulers that' s embedded in the Russian soul to this day. If you think we' ve just summarized Putin' s rise and impact we wholeheartedly agree; and if you don' t we beg to differ strongly. Think about it. Unfortunately in saving Russia

from the oligarchs he' s also re-birthed the old models which appear to be quickly succumbing to the old vices. But the lesson on "Big Bang" democratization when it' s not congruent with historical capabilities should be pretty clear indeed !

 * +   ) )  !  #    This next chart translates those qualitative assessments into relative economic performance by comparing these three countries over the last two millenia in terms of GDP, Population and GDP/capita indicators. In some ways, odd as it may seem, this is one of the saddest charts we' ve ever seen. Let' s explain why, starting with Russia. During the 19thC the Romanovs were beginning to make some serious progress but the 20thC was as bad for Russia as anybody. The two world wars and the Communists collapsed the population though Stalin managed to fore-march per capita income increases. As corruption and mis-governance became pervasive even that tanked. No wonder the Russians are suspicious and paranoid - the world has been out to get them. Combine that with the historical lack of relative socio-political maturity and you get a prideful people who all too easily succumb to things like the Georgian incursion. China and India have done enormously better (note that the scales have shifted enormously) though China has done relatively a lot better than India. Notice that this is due partly to differences in population growth - the Indians didn' t curtail population growth and as a result experienced lower GDP/capita growth. Also notice that all three were stuck in the Malthusian trap until the 19thC and China, in particular, was experience a Renaissance. Which was likely curtailed by foreign incursions, the Opium War which forced addiction of tens of millions of Chinese and drained the state' s revenues. It also set the stage along with dynastic decay for the Taiping Rebellion which led to a massive loss of 40 million lives (relatively much worse than the Communists screwups) and permanent foreign debts, dependencies and influences. The wonder is that anything survived. But as we wrap historical narratives around dry charts....don' t think the Chinese have forgotten who was the proximate trigger if not cause of one of the very worst periods in their history. Almost on a par with the Mongol destructions and depredations ! That they and India are seeking their places on the world stage should be no surprise though their acting responsibly is a tribute to their good sense and self-discipline. That the Russians are acting "less so" is also no surprise, at least in IOHO, given the cultural legacies of their history.

From Complacent Stabilities to Disruptive Challenges: Europe, Latin America, Africa March 24, 2009 http://llinlithgow.com/PtW/2009/03/from_complacent_stablities_to.html If we learned anything on and from 911 it should be that we can no longer neglect the rest of the world or deal with it as an after-thought. With that in mind we' re going to continue our dive into international affairs by looking at Europe, Latin America and Africa. Some other principles have emerged as well. First good government is critically important, second while you can frame these little looksees the devil' s in the details of each region and country so you have to get granular within the framework. On the other hand the framework is powerfully useful for analyzing structures, trends and outlooks. Perhaps that' s a whole separate set of principles - the data is important. AND you have to have structurally accurate frameworks but apply them granularly ? Which leads to another finding which we' ll organize this posting around to some extent - all the world' s countries can and are proceeding down the same paths to development. Some at different rates and with different challenges. You can see that in the accompanying graphic which shows the GDP/capita against life expectancy for the key developed powers. Notice that first everybody worked up the life expectancy ladder and then followed similar paths in income growth (each circle is a year and the size represents population). Here you see Great Britain, the US, Japan, France and Germany, and not by accident. Those are and were the great economic and socio-political powers of the last 150 years.

, - *    In this next chart we look at the New Powers, at least the European ones and have left the UK and Japan as comparative benchmarks. There are several more lessons that are fundamental here (aside from let the data tell you what' s really going on thank you Gapminder !). First off Japan developed earlier and faster than the new powers of Italy, Ireland and Spain. Western European (& US) pride and complacency aren' t justified by the historical record. You just have

to map different countries to the same historical structural trendlines to understand them correctly. Secondly European late-comers didn' t really start accelerating until the late 20C ! Remember in the last post we used Spain and France as our bad examples of how rigid, non-responsive and special interest controlled governments led to historical sclerosis ? Well let' s consider that a well-established hypothesis, being polite. If we were to also look at Taiwan, South Korea and the advanced SE Asian nations we' d likely find them ahead of the European laggards ! Perhaps the most important historical finding here is that we' re living thru the biggest changes in human history there have been. The US didn' t create a prosperous middle class until the 1950s - a historical first. The most advanced European countries didn' t follow, arguably, until the 1970s while the lagging countries didn' t hit their strides until the ' 90s !!! And Asia is coming up fast.

.  /    Shifting our focus to some key countries in Latin America we look at Brazil, Argentina, Mexico and Cuba, compared to the UK again as the benchmark. Did you know that Buenos Aries was considered the Paris of Latin America in the 19C ? Well a century of oscillation between exploitative oligarchies and populist malfeasance left it' s mark on a continent endowed with resources, skills and capital. Nonetheless they too have begun their ascents. In fact when you look at Latin America overall the progress in establishing good governance and socionomic development is remarkable - much of it concentrated in the last 1020 years no less ! There' s a meme running around that Mexico is a failing state for example and nothing could be further from the truth. First off they' re struggling with a transition delayed for decades to a truly representative democracy with the PRI' s loss of power. The Cartel Drug Wars are a major challenge that' s JUST now coming to US attention though it' s been a burgeoning problem for years. One that perversely is more due to US drug consumption habits. And they still have a rigid economy controlled by the old powers with major challenges in redevelopment. Brazil has similarly made enormous progress. In fact of the four BRICs it' s turning out to be the most stable, resilient and internationally respected. BtW - maybe this is the time to point out that whatever problems you think the US has are worse abroad. Much worse. Riots across Europe, major economic problems, shell-shocked governments refusing to adapt, etc. Actually Brazil and China are doing better in terms of levelheaded responsiveness than continental Europe !

/   When you look at Africa the same picture emerges with a couple of major caveats. First off though we want to emphasize our basic argument - when judged by relative historical stage African countries are moving ahead at about the same pace that the European countries or the US did. They just started from enormously farther back. And have had enormously worse governance problems which has caused, again being polite, some strong "recidivism". For comparative purposes you

should think of the bulk of Africa today as being equivalent to early 19C Europe, Spain in the 1950s, western and rural China today or the vast mass of peasant agriculture of India. And victims in some ways of a much more damaging historical legacy than Latin America as well from being thrown to their own devices without adequate socio-political resources during de-colonization (which also btw leads us to remember that European colonization of Africa was a senseless competition that cost the home countries more than it ever made them on the whole) to being a Cold War battleground. If you want to understand how this poisonous mixture and wounded pride led to terrible consequences go watch "Last King of Scotland" or read the news from Zimbabwe today. You can see the consequences in the graphic where the Congo has regressed enormously and even South Africa has stalled out because of the AIDs crisis. A crisis made enormously worse by conspiracy theories that prevented proper treatment and prevention as well poverty. That Japan ranks roughly with these other world powers should put paid to the notion that Western institutions are unique prerequisites for socionomic development !

Current Pessimisms vs Future Optimisms Nonetheless the challenges are similar around the world, the real questions are going to be which governments are both resilient and effective and we' re entering into a period of greater stress that will test those capabilities severely. Strangely enough however we still remain hopeful and optimistic for several reasons. First off is the historical record combined with our improved understanding of the multiple factors involved in development. Second, perhaps even more perversely, is our feeling that it' s better to have these crisis of world re-balancing now because it gives us a chance to reengineer the world governance systems before the continued rise of the middle class around the world strains available resources and socionomic infrastructure to far. And third - it highlights the opportunities. After all if China is exhausting it' s water and needs clean energy those become the new economic opportunities. What we really need to remember and realize is that if we all grow the pie we end up better off rather than where we end up when we squabble over splitting it up. In fact given how essential governance and global cooperation is to all our prosperities squabbling leads to implosion (the red line), hunkering down to devolution (the yellow line) and re-architecting and collaboration to bigger pies all around (the green line).

Sounds of Angry Men, Whimpering Politicians & the Global Crisis March 30, 2009 http://llinlithgow.com/PtW/2009/03/sounds_of_angry _men_whimpering.html Peter Drucker had a famous and insightful saying (many actually): "change the people or change the people". In other words when an organization had to

change to meet new circumstances and challenges either the behavior of the people had to change or you need to get new people on board. We can paraphrase that by in these times by saying, "change the institutions or change the institutions". This applies on the micro-level, for example with the re-regulation of the Finance Industry (Helmet Laws vs Adult Supervision: Re-Regulation & Finance Industry Futures), or on a macro and global scale. To get those changes however we need leadership for and from all the organizations and institutions who are involved as serious stakeholders. That paraphrase can be extended however and just how and when is best captured in the accompanying YouTube video clip. Either change the institutions or they will be changed for you, by a mob of angry citizens. Unfortunately history is not very encouraging as to the results. One cannot argue, for example that the 2nd French Revolution led to either permanent or constructive changes. Rather it seems to have continued a dysfunctional cycle in French socio-politics that still exists to this day. In a Charlie Rose interview Lee Kuan Yew, the founder of Singapore, made the fascinating observation that family ties and guanxi were so important in Asian societies because they had millennia of surviving failed states and they only thing they knew to fall back on was family and social ties. AS the worldwide credit and economic crisis continues to metastasize into a worldwide social and political crisis it would be well to keep the alternatives in mind !



    *  If you look around the world there is no single country where trade hasn' t literally fallen off a cliff. That ought to tell the whole story if you understand how critically dependent many, even most, of these countries are on trade for manufacturing, employment and general economic health. Whatever you think the situation is in the US the depth of the economic downturn is more severe in most of these countries. And threatens to drive many of the poorer ones over other kinds of cliffs. That drive will lead over a third precipice profound socio-political instability that could strain many of these governments to the breaking point. Something they are all well aware of. With the upcoming G-20 meetings the question then becomes how will they respond ?

0    . & 1 1 1  ) 

 +  

We can say that but it' s not entirely clear it has emotional weight to most, including ourselves. Let' s consider an analogy. Consider the human circulatory/respiratory system that takes air and food from the environment, processes it, turns it into cellular structures and then carries those to each and every location in the body where complex, large-scale and very fast bio-chemical interactions enable us to breath, burn energy, build new bones, muscles and other tissues and, in short, exist. Not enough food and we begin to waste away, literally eating ourselves up. What

allows for that food to be burned up is the oxygen in the air. Well trade is the analogy of food and the energy it contains while credit is the air that fuels the fires.

 /   /  2 !   3   4  

When the crick' s rising to fast, the food running out and there' s a fire in the school we can either all pull together or we can run around in circles, screaming, shouting and pointing fingers of blame. And we can look to our leaders to step up the challenges of putting out the fire, organizing the dike repair teams, buying food from other regions and then making sure enough is saved out for Spring planting while also changing the engineering of the dikes and creating a fire department when we didn' t have one. The upcoming G-20 meeting was supposed to be the opportunity of the key world leaders to step up and do the right things. Unfortunately there seems to be an extremely limited supply of folks acting to both quell the emergencies, repair the system and start the process of evolving a new and improved one. Actually, broadly speaking, the folks acting proactively and correctly seem to be limited to the US, China, the UK and Brazil while the erstwhile leaders of the EU still seem to be in profound denial and Japan is rocking from one political breakdown to another. When you add those up you' ve added up the bulk of the world economy. On which the fate of all now rests. What was that about interesting situations ? Unfortunately the number of self-responsible adults let alone the ones willing to take public responsibility seems to be very limited even in the countries who are leading. Pundits to the left of them, politicians to the right, challenges in front, still into the Valley of Responsible Decision-making rode the six hundred (600 ? Really). With all apologies to Tennyson ! That' s hardly our sole assessment, btw. In the readings excerpts you' ll find everything from state and outlook on the world to key oped pieces by Steve Perlstein of the WaPo and David Brooks of the NYT to the first in a series by the Economist on re-thinkings of global capitalism. We particularly recommend the Martin Wolf Rose interview and the Perlstein/Brooks pieces. As well as the Yellen situation summary and our own prior posts on the situation and the realities vs the politics.

G-20 Perspectives: How Well Do Bears Dance ? (Updated) April 08, 2009 http://llinlithgow.com/PtW/2009/04/g20_persepctives_how_ well_do_b.html With the conclusion of a jam-packed foreign policy week+ from the G-20 to NATO to trips to Turkey, Iraq, etc. it might be time to gain a little perspective. Unfortunately that' s very hard to do from the headlines and stories as they' ve drifted by, for many reasons. Let' s start by setting reasonable expectations. The interesting thing about a dancing bear is not so much how graceful and skilled they are but that they' re dancing at all. Something everybody forgets, along with the fact that there is no magic fairy dust where with a few words, the wave of a wand and shazam...everything' s all of a sudden mended. As it happens, while the words reported were fairly accurate, they were moved far enough

out of context and then interpreted by folks who appear to have totally lacked the historical, analytical and technical background to analyze, interpret and explain exactly what went on at these meetings. So we' re going to take our best shot at it but there' s no substitute for actually listening to some of the press conferences. If you have any interest whatsoever in foreign affairs and are willing to invest a little time there are two that are very...very worthwhile. The first is the joint press conference between Brown and Obama that kicked off the G-20 and the second is the townhall meeting in Strasbourg where the President spoke to the locals. The press tried to magnify the differences of opinion and policy among the attendees by emphasizing the "vast" differences between them on many issues, e.g. stimulus. In fact we' re here to tell you there were NO major differences and there were debates mostly on the margin. Now the press is biased by it' s business model - if it bleeds they' ll read and we' ll get paid. Which unfortunately is not a reliable indicator of value and interest. Of the many major policies considered the level of substance, agreement and commitment was literally stunning. We are in fact laying the groundwork for an evolutionary re-architecting of the world system by including more key players and involved parties and working out collaborative agreements on how to proceed on all these major challenges that have been deferred or ignored for so long. The bear danced very well indeed.

$    $   5  5  '  (   Both WW1 and WW2 were triggered by, among several key factors, by a fundamental view that the world was/is a zero-sum affair where my wins are your loses. An alternative view that' s supposed to prevail inside society is that by living in an agreed upon political, legal and civil framework we can agree to get along and work in fair exchange. This is a non-zero sum world and is the source of ALL the world' s progress. In an international situation it' s not often clear where different countries will choose to tradeoff their immediate narrow interests against the good of the whole system, even when their own long-term interests benefit from a stable, secure and predictable system. And since no one country has a monopoly of force any international framework must be agreed by the participants. After WW2 when Europe was collapsing in chaos (literally) and it looked like the Soviet Union was going to be able to cheaply conquer all of Western Europe the US committed to the Marshall Plan which saved Europe and laid the foundations for it' s future stable evolution. One of the most interesting things the US administrators found early on was that the various European powers were pursuing the same self-aggrandizing policies that "beggared their neighbors" as they' d pursued at Versailles. And pretty much the same ways for the same reasons. There was a 35 years period there were Europe as we know it today was going extinct. (The Most Noble Adventure: The Marshall Plan and How America Helped Rebuild Europe). It was literally the US who forced collaboration and cooperation and set up the necessary institutional frameworks. At the G-20 there were more players with more interests but nonetheless we' re seeing massive global stimulus programs, concerted efforts at monetary easing and collaboration, rigorous new policies fore worldwide financial regulatory reform, some joint efforts on climate change, major new commitments and investments on trade and aid and on down a long list. Consider the number of powerful players this is probably the most effective and substantive major international meeting in several decades. Possibly rivaled only by Bretton Woods but this time more open, inclusive and forward-looking. This is not to say all was sweetness and light or that it will be but what you say was responsible stakeholders finding common ground based on enforceable and workable agreements

that serve their individual and collective interests. Any time you want to get a group of power players together around a policy you need to recognize the 4P' s of Negotiation: Issues/Policy, Players, Position, and Power. And understand that serious resources commitment come about if and only if an agreement provides workable satisfaction to all relative to their gains and costs. Try looking at the above graphic and ask yourself what each of the major players position and influence was on each of those issues. We saw more coming together this time than we' ve seen in at least three decades. BtW for a graphic depiction of the full range of major policy risks click the highlight to see a graphic summary from Davos.

% % & 6     *   '   Let' s re-visit another old graphic we put together to try and look at what leads to a stable international order. The vertical axis represents different US strategic policy positions while the horizontal represents a collective summary of the other major stakeholders policies. (Foreign Policy for a Dangerous Old World: Adoption, Adaptation & Resilience) A key to getting widespread buyin is understanding, reflecting and incorporating the interests, positions and biases of all the players. In the readings section you' ll find a representative sample of some decent information looking at the positions of China, Russia, Europe, Mexico and Brazil to serve as a representative sample. You' ll also find some key other readings excerpts on just what the stakes were and are in terms of getting this right. The stakes literally couldn' t be higher. We' re really playing for all the marbles here. But not all we' re going to be playing for. As a final note and a point we' ve made before...the next thirty years will see the continued development of the rest of the world. Which will require a new global architecture to hold things together. As the incomes rise and resource demands increase the pressures on the world for resources, economic competition, etc. etc. will escalate exponentially until we reach a new steady state of stable population and no major new surges in income growth. That' s in an ideal world. In the world we know from history, recent history, the international system fails to adopt and adapt, countries pursue pure aggrandizement and the result....KABOOM. What we need then, and now, is a pluralistic system where stakeholders rights and responsibilities are in balance as are their contributions; the latter relative to their gains. That' s what we saw the groundwork being laid for in London this last week. Judged by realistic expectations and historical standards it literally couldn' t have gone better. Which doesn' t mean the next several years will be easy. But looking at the preceding graphic where would you rather be - the green line or the red one ? Judging from the talking heads and the pontificating pundits we were headed to red perdition or at least the yellow road to devolution. In fact our judgment is that we' re started down the blue road to plural stability, however shaky and fragile that path might be. Something else you' ll find in the readings is a set of vidclips from Hans Rosling, Paul Collier, et.al. on the challenges and opportunities which we urge you to take a gander at. Hopefully they' ll convince you of the magnitude and urgency of the situation while also persuading you that serious improvements are in fact happening RIGHT NOW and that it' s to all our benefits.

UPDATES: We' ve just added a new reading on the growth of Indian and Chinese naval power in the Indian ocean and the need for evolving a new multi-party arrangement. Which exemplifies and amplifies many of our main points.