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Risk and Resilience in a Globalized Age: Containing Chaos

Monday, Aug. 17, 2009

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In 1946, George Kennan keyed the famous "Long Telegram," which identified the Soviet Union as an enemy of the United States. In 1947, the original telegram was reworked and published in Foreign Policy magazine as "The Sources of Soviet Conduct." Together, these documents formed the codex for the U.S. Cold War strategy of containment, and thereby the basis of the eventual U.S. victory in that conflict. Here's what a "Kennan" might have written for the 21st century.

The Nature of the Threat Posed by Globalization

We are now engaged in a conflict that will dictate whether we succeed or fail in the 21st century. Our adversary in this conflict is, in short, the threat posed by globalization.

This threat is completely alien to our mode of thought. It is unlike previous threats we have faced since there isn't a single source of ideological opposition: no collective mind or body of thought to contest with, no single enemy that can be named with clarity across all venues. It is, instead, a systemic threat, one posed by the very function of a system we have created for our mutual benefit: a morally neutral, global supernetwork that spans all salient features of modern life, from communications to economics.

The threat posed by the emergence of this global supernetwork comes in three forms. Let's examine them in detail.

Extreme and Chaotic Behavior

News in the age of the global supernetwork is often startling. It features an endless procession of crushing financial panics, unexpected food shortages, sharp commodity price spikes, brazen terrorist attacks that have shut down major cities from New York to Sao Paulo to Mumbai, and much more. These extreme events form a pattern of behavior that should serve as an alarm. They are an indication that the system we have come to rely upon, the global supernetwork that connects us to each other and all manner of goods and services is entering a period of extreme turbulence, where we careen from crisis to crisis at an increasing rate and incremental severity. At worst, it may even be an indication of a looming catastrophic failure of indeterminable duration.

From the standpoint of systemic analysis, our global supernetwork is what is called a dynamically unstable system, or one so responsive and interconnected (i.e., tightly coupled), that it is prone to operating in an uncontrolled manner. That, unfortunately, is the way we made it. Through an organic growth process that emphasized business needs and economic efficiency, we have built a complex web of instantaneous communications, just-in-time computer systems, daily multi-trillion-dollar financial flows, and much more. Even more, we have geared up the system with extreme levels of debt and energy-use to reach the limits of potential performance.

All of this amped-up connectivity provides our global system with an ability to rapidly shift from task to task as the conditions warrant. However, it also makes the system prone to over-reaction and self-reinforcing feedback loops, such that even small changes in the right conditions can cause the system to careen to extreme behavior. Typically, we build systems like this only when we are sure we can control them. For example, high-performance aircraft are dynamically unstable systems. They are designed to want to maneuver, rather than fly straight and level. However, if they aren't precisely managed -- down to the millisecond -- by computerized control systems, they will quickly careen into uncontrolled maneuvers that generate forces exceeding the structural capacity of their airframe. In short, one of these planes will wind up a smoking crater if the computer system fails to control its operation for even a couple of seconds.

Bigger than the Nation-State and the International System

Unlike a high-performance aircraft, our global supernetwork doesn't truly have a control system that can mitigate its excesses. As we are learning, this supernetwork is so large, fast, and complex that it has exceeded the ability of nation-states or collections of nation-states to control it. Rather than being masters of globalization, nation-states have become mere participants, and minor ones at that, in a global system. For example, the notional value of privately held, outstanding financial derivatives is estimated to be over $450 trillion dollars, nearly 30 times the size of the U.S. economy.

Worse, the ongoing growth of the global supernetwork will weaken the traditional forms of national and international power that nation-states still exercise. Through an insidious process of expansive infiltration, made inexorable by the increases in networks' value as new nodes are added, nation-states are losing their ability to control anything.

They have lost control of their finances -- as demonstrated by California's failure to secure financing, and the increasing difficulty the U.S. has in raising new money -- and are in the process of flirting with insolvency as they try to prop up massive global financial systems. (Like Iceland, some nations have banking systems with obligations many times their gross domestic product.)

They have lost control of their borders: Massive waves of immigration swarm to wherever jobs exist -- from the U.S. to Spain, walls are being put up in a vain attempt to staunch the human flow -- and companies outsource domestic jobs to the lowest global bidder in a blink of an eye.

They have lost any meaningful control over their media and communications systems, as new forms of social media swarm and overwhelm traditional outlets like newspapers and TV.

The list goes on and on. Collectively this means that nation-states, as organizational systems, will be less able to effect change due to a shortage of tangible wealth and means of control.

Even decision-making will be harder. The speed of the supernetwork puts nation-states into hyper-competition, since it can create change at a rate that looks and feels very much like a zero-sum game. One nation's gain will appear to come at another's expense. At the international level, this means that nation-states will find it increasingly difficult to agree on anything other than minimalist rule sets. But from global warming to global trade to immigration flows, meaningful solutions will require the kinds of maximal rule sets that nation-states will have the most trouble agreeing on. This is also troublesome, since it means that any hope of creating a control system that can mitigate the excesses of the global supernetwork will also require expansive and intrusive regulation mechanisms.

The impact of the emergent supernetwork will also fragment nation-states' internal decision-making processes. It will turn traditionally cohesive nations into a plethora of competing interests and non-cooperative centers of gravity. New organizational networks -- made possible by new forms of connectivity -- will rapidly emerge, merge, and divide in a global competition for control of all sources of value and power. Every issue will launch contentious debate, every decision will be questioned, every leader will be attacked, etc. As a result, collective action that amasses a broad swathe of public and political support will be increasingly rare and short-lived.

The Parasites of the Global Supernetwork

The third and final threat posed by globalization will be the emergence of super-empowered groups of individuals that compete with the nation-state for money and power. These groups, typically small, leverage easily accessed functions of the supernetwork for their personal benefit at great expense to the collective good. These small networks span the gamut from "trusted insiders" in financial industry to guerrilla/terrorist groups.

Since the global supernetwork is a morally neutral system devoid of intent, it has no natural defense against predation from parasitic groups. Over the past few decades, parasitic groups have found it increasingly easy to access the supernetwork by spanning the gaps between nation-states. Further, by a process of evolution, they are becoming increasingly adept at finding and manipulating the vulnerable core features of the system to their own benefit. By accessing these central features, small parasitic groups can use the network's own internal dynamics to amplify their actions and thereby generate outsized results. In the financial industry, a newfound ability to access the sleepy U.S. mortgage markets allowed financial insiders to turn that market into a giant cash machine, generating billions in profits for themselves and their firms. In Nigeria, small groups of guerrillas (the Movement for the Emancipation of the Niger Delta, or MEND) have been able to target key parts of the country's foreign-operated oil system, causing the loss of a million barrels of oil production each day. (The rate of return, measured in the costs of the disruption divided by the cost of the actual attack, is in excess of a million to one).

Again, the list of small actions that have generated outsized results, thereby conferring extreme wealth or power to the perpetrators and excessive disruption in their wake, has been growing. It will only continue to do so. In practice, as a result of this trend, we will see an increasing number of financial panics, supply shortages (food/energy), and social breakdowns (due to social-network manipulation/disruption) as these self-referencing groups grow and proliferate.

Next page: The global supernetwork will continue to grow. . .

Practical Deductions on a Policy Response

It's unlikely that we will see any reversal in the spread of the global supernetwork. To the contrary, it will continue to expand, complexify, and intensify. As a result, the nation-state as an organizational system will continue to weaken, shocks and disruptions will occur more often, and super-empowered oppositional groups/networks will organically proliferate. In sum, the only policy solution that could possibly work is one that attempts to limit the spread of chaos at the lowest possible cost.

Resilient Communities

The first step to a solution is to mitigate the impact of disruptive events on the population as a whole, whether the disruptions are the result of naturally occurring system malfunctions or malicious intent. Importantly, this solution must be nearly cost-free, both politically and financially, to an increasingly beleaguered nation-state. The only solution that fits this requirement is the development of self-sufficient, decentralized systems at the local level -- from economics to politics to food to energy to communications -- that can operate successfully even when the larger system breaks down. In short, our social and economic systems must become scale invariant.

Scale invariance simply means that the functions and characteristics of the whole are preserved within smaller subsets and clusters. So, when disruption breaks the supernetwork into smaller and disconnected clusters, each self-sufficient, scale-invariant cluster will still be viable as an autonomous entity. Further, once the crisis has passed, these small, viable clusters will then be able to reconnect in order to reconstitute the larger system relatively quickly. For those still grappling with the concept, think in terms of the popular movie, Terminator 2. In that particular installment of the series, Arnold Schwarzenegger -- playing a robust, robotic Terminator -- faces off against a superior, new model of robot, the liquid-metal T-1000. In contrast to Arnold's character, this robot is resilient due to scale invariance. When it is blown to bits, the parts are smart enough and mobile enough to reassemble themselves back into a functional T-1000.

To make resilience a reality, we will need to foster the establishment of systems that enable the local production of food, energy, products, and much more. Fortunately, societal and technological trends appear to be moving in this direction already. Social efforts to build resilient communities and great self-reliance, via gardens and solar power, have already gained traction in response to increasing uncertainty over the future. Local resilience movements are leveraging the same networks and technologies as superempowered parasitic actors to accelerate their local efforts.

On the technology front, more powerful and inexpensive technologies continue to emerge, driven forward by Moore's Law. These technologies span the gamut from social software that simplifies cooperation, to low-maintenance gardening techniques that replace grocery purchases, to easy-to-install solar and wind technologies that improve local energy production. Even the world of manufacturing is going local, with the advent of a likely transformative set of technologies that enables small machines to print products in three dimensions, based on designs shared over networks. Given the trends in place, very little that is produced today will be economically unviable at the local level within several decades.

Confronting Parasites

The second step towards a lasting solution to the threats posed by globalization is to deal coherently with self-dealing groups/networks that operate as parasites on the global supernetwork. Based on previous and projected performance, it is likely that these groups aren't existential threats in and of themselves. Instead, they are persistent pests that will in aggregate severely damage our viability and progress over the long term. So, how do we deal with them effectively?

It's important to realize that the threat of overwhelming force, both military and legal, is unlikely to be effective against parasitic groups, while making us vulnerable to potential misuse of the resulting coercive apparatus. The organizational structures of these networks are too amorphous/fluid to parse, and it's extremely hard to distinguish friend from foe when seeking out network members. Worse, in many cases, the application of overwhelming force merely increases the level of opposition adopted by newly generated groups.

So, what do we do? The best strategies may be indirect approaches: methods tailored to diminishing the opposition by reducing opportunities for amplified exploitation, creating internal dissension and infighting, and extremely targeted removal of malicious actors. All of these approaches require only minimal commitments of treasure, effort, and political capital.

Therefore, one approach to dealing with parasites is to simplify the systems we use to create few opportunities for centralized exploitation. Simply put, "Reduce complexity and increase transparency" should be our mantra. For example, in the financial world, this means reducing most aspects of financial management to utility status. Banks would simply hold and move money (ATMs for example) and nothing else, creating little opportunity for predatory financial groups intent on exploitation.

Another approach requires that we de-escalate conflicts with non-state groups and radically reduce the expenses associated with fighting them. De-escalation reduces group growth and makes them vulnerable to exploitation. Further, long-term success in this conflict means not impoverishing ourselves with massive bills for military forces we don't need. De-escalation makes it possible to co-opt predatory groups and entice them to fight among themselves -- by turning them into allies of convenience. For example, the use of "loyalist" militias against gangs in the slums of Sao Paulo or the Anbar "Awakening" effort in Iraq are examples of this approach.

In some few cases, it will be impossible to leave the actors involved intact. In those cases, tightly targeted efforts (i.e., special operations) to eliminate these malicious groups will be required. In all cases, these efforts will be careful, long-term operations carried out in a way that severely limits collateral damage to civilians. It's important to ensure that these missions are only reserved for the most dangerous of groups and don't result in mission creep to achieve more ambitious goals.

Delivering Benefits and Improving Fairness

The final step towards a lasting solution is to increase societal cohesion and to mitigate the allure of fragmentation, mirroring George Kennan's most important recommendation from his articles. Disruptions that result in societal and economic chaos occur most readily in societies where the health and vigor of a society has decayed. In other words, the social and economic system that the nation-state administers must be seen as fair and just, and it must deliver tangible results to the greatest number of people possible. Anything less than this and societal breakdown becomes extremely likely should disruption occur, since the allure of participation in oppositional groups, from black-market crime to guerrilla/terrorist groups, will outweigh outcomes available through participation in the status quo. In short, the nation-state will lose its legitimacy with large subsets of its population.

Here's an example of not delivering results: The incomes of the bottom four-fifths of Americans have fallen 10 percent, adjusted for inflation, over the last three decades, despite massive improvements in worker productivity. For an example of not being just and fair, we need not go far: Self-dealing financial elites defrauded markets and the government of trillions of dollars realized during the 2008 financial panic, and not one of them went to jail.

In order to retain legitimacy at a level that allows some freedom of action, the government must endeavor to deliver real economic progress to its constituents. That means that every policy should be slaved to increasing incomes in line with increases in worker productivity, and improving the long-term financial wealth of the greatest number. (The best way to measure the success of government efforts in this regard are increases in the median incomes of individuals.) One method of achieving this, already mentioned above, is to remove barriers to community resilience. Community resilience has the potential to substantially improve the incomes and quality of life for the greatest number by reducing end-user costs, creating jobs, and spurring massive leaps in innovation.

The greatest threat to achieving this outcome lies in the potential for parasitic interests to gain control of government function, since one of the quickest routes to illegitimacy is through the appearance of corruption. This unfortunate outcome was evident in the 2008 financial meltdown, as special interests proved capable of snaring trillions in subsidies from the public treasure for no apparent improvement in the lives of most citizens.

Final Thoughts

The solution-set for global instability doesn't fit traditional models of conflict. It doesn't involve vast armies or massive programs. Both of these approaches would not only be ineffectual against the problems that confront us, they would also bankrupt us in the process. Instead, a low-cost and least-effort approach is needed, one that makes it easier for people to create the structures necessary for local resilience and makes the systems we rely upon less prone to exploitation. If we achieve anything close to the plan detailed above, we will win this conflict with a more cohesive, wealthier, and happier society than we have ever experienced to date.

John Robb is an entrepreneur, a former USAF pilot in special operations, and the author of "Brave New War." He has been cited as an expert analyst in newspapers such as the New York Times, the Economist, and the Wall Street Journal, and was named one of the "Best and Brightest" by Esquire magazine. He has lived, worked, and traveled extensively in Central/South America, Africa, Asia, and Europe. His Web site is Global Guerrillas.

Photo: Srisailam Dam, Andrha Pradesh, India (Wikimedia user Chintohere, released into the public domain).