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Mere anarchy and austerity

August 8, 2011

The condition of the US economy has gone past the point where assigning blame is useful except to clear the consciences of those manning the helm of the ship of state while it hurdles towards potential ruin. First, the US government busied itself with the problem of the debt, which, while extremely serious, is ultimately a medium term problem. They set about doing so in the worst possible way, by manufacturing a crisis when none existed – as if the US had few enough economic problems already. The response of opponents to this recklessness was to fight tooth and nail to achieve a compromise, all without making any substantial cuts to its actual drivers: entitlement programs and a historically low rate of revenue collection.

Unsurprisingly, Standard and Poor, along with other credit rating agencies, was rather disturbed by this completely avoidable national crisis and did feel  confident in the US political system after watching America’s Congress play-act Ragnarok in the Capitol. Naturally, there are concerns that this decision fundamentally reflects political judgments rather than actual economic fundamentals. I would agree, but simply note that much the same applies to US economic policy for the past decade, if not longer.

The perverse result of this is that despite the downgrade, economic uncertainty leaves investors hedging against the abysmal prospects for growth have no good option. As James Joyner exlpains, there is no alternative to the Treasury note. While the US mimes Europe’s descent into an age of austerity, Europe faces a sovereign debt crisis far less artificial and avoidable than America’s. Paul Krugman, within just months of the launch of the European Monetary Union, speculated on the pitfalls that would beset a Europe more concerned with maintaining the image and form of a united, global financial power, without actually thinking through the costs it would have on the continent’s real economic strength. Nor are any of the rising economic powers ready to fulfill the role that US sovereign debt has played in the world economy. The collapse of the stock market and the decrease in bond yields, reflecting a basic lack of confidence in the US ability to recover anytime soon is not at all incompatible with rating agencies’ fears about US creditworthiness. Neither is a refutation of the other – it is merely a difference of which problem investors think is the more immediate concern.

Of course, those fearing the challenges to US growth will find sooner vindication than those fearing US debt. Until an alternative develops, the world has no option but hoping and praying the US does not default.

The real excitement will begin with recovery. Most likely, energy prices will not wait for the Western economies to recover to begin rising again. The entry of new major consumers to the global energy market makes this highly unlikely. So too will the erosion of the Euro and dollar exacerbate the new obstacles to enjoying a free flow of energy. The austerity budgets that the US and major Western powers undertake, combined with the severe damage to the Japanese economy, will have left most of the world’s “status quo” great powers with reduced defense capabilities. Contrary to the fears of the “Defense defenders,” there will not be much ability or purpose to a simple increase in spending. The strain and overstretch of a decade of poorly-strategized wars has left the armed forces of the West vulnerable to economic fluctuations and a prime target for retrenchment. Moreover the decision to emphasize funding for nation building and irregular land warfare has put maritime force planning at a severe disadvantage in budgetary debates.

This would all be well and good if the Western world need not worry about its ability to project power and could instead focus on being the world’s gendarme. However, that era is increasingly coming to a close. Besides the inevitable diffusion of military technology to the non-Western world, the capabilities of Western power projection, especially in Europe, are atrophying at an alarming rate. These trends are likely mutually reinforcing. As the cost of maintaining power projection capabilities rises due to advances in anti-access and area denial systems and doctrines, the ability of European governments to sustain orders for such advanced systems falls. Since the US is preoccupied with saving its own defense industrial base, this leaves European arms manufacturers, and European governments alike, increasingly open to arms sales to rising powers. For all the howling about European arms sales to Russia, its defeat of US contending contracts in India, and the occasional speculation of an EU push to end the arms embargo on China, the US has essentially hastened this outcome through its unwillingness to countenance major purchases of foreign weapons systems.

So, when the Western powers do recover, they will be at a relative disadvantage compared to non-Western powers, who will be at the very least, dissidents from traditional Western norms of international behavior, competitors in the global economic arena, and very serious ones as far as energy is concerned, and potential rivals in matters of great power geopolitics. As growth recovers, political uncertainty and misperception will have ample opportunity to destabilize global geopolitics. Commitments will be probed and tested, capabilities and willpower questioned. The fiction, which the US especially has attempted to maintain for the past 20 years, is that the US simply needs willpower – the willpower to spend, and the willpower to act – to maintain these unlimited commitments will groan under the weight of an international system where the US is first among the great powers but no longer their master. Attempts to counteract the inevitability of a reduction in US commitments will worsen the problem of constrained resources and reduced domestic willpower. They will also, in attempting to inflate the threat posed by the essentially natural growth of Eurasian great powers’ ability to defend their own neighborhoods, exacerbate misperceptions that might make a more serious conflict inevitable.

Meanwhile, as events in London have shown, the potential for massive civil unrest (which remains more likely for Europe than America) will call into question the wisdom of shoring up foreign governments thousands of miles away. Europe has never been as antsy about deploying the gendarmes as Americans have, and at the time of this posting, there are demands for the British Army to restore order in the capital. Vastly more insightful observers of the nexus between irregular warfare, crime, law enforcement and civil order than myself, such as Adam Elkus, have suggested that internal security will become a major theme in the future of armed warfare (a point that Jeremy Black, in his discussion of future warfare, also alluded to). Whatever root causes there might be, order will have to be restored before any of the root causes can be addressed. Should the levers of conventional civilian policy fail to adequately restrain the inherent potential for conflict in human society, we may indeed find that nation-building and state-building  in their truer senses, indeed comes home – not with schools and bridges, but rifles and helicopters.

These are all speculations, not prediction. Yet the constraints we are facing are real. All those airy predictions about the risk and results of retrenchment are now appearing with frightening solidity. The idea of quicksand is an overused trope in critiques of Western grand strategy, but in the future, it will have a new sort of meaning. The voluntary commitments, such as Afghanistan, Libya (Somalia, Yemen, Syria, etc.), like quicksand pits, are unlikely to kill on their own. They kill through exposure, through the heat of the sun or rush of the tide that the victim can no longer avoid or escape. Inflexibility kills. Thinking one must have more to do enough, or that doing more with more is even still an option as far as Western grand strategy is concerned, is to embrace inflexibility. The international and economic arrangements and hierarchies that allowed the West to attempt more with more are fading fast. A slide into a more anarchic world is likely. Averting the potential for catastrophe this brings relies on the West accepting that it must do less with less.

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