Saturday, April 11, 2009

Economic War Games

The financial crisis is causing the US to rethink just about everything it does. One of the most important areas being reconsidered is its planning for future wars and its best options for combating future enemies.

From Politico (h/t to The Automatic Earth):

Photos from The Daily Mail and AP

The Pentagon sponsored a first-of-its-kind war game last month focused not on bullets and bombs — but on how hostile nations might seek to cripple the U.S. economy, a scenario made all the more real by the global financial crisis.

The two-day event near Ft. Meade, Maryland, had all the earmarks of a regular war game. Participants sat along a V-shaped set of desks beneath an enormous wall of video monitors displaying economic data, according to the accounts of three participants.

“It felt a little bit like Dr. Strangelove,” one person who was at the previously undisclosed exercise told POLITICO.

But instead of military brass plotting America’s defense, it was hedge-fund managers, professors and executives from at least one investment bank, UBS – all invited by the Pentagon to play out global scenarios that could shift the balance of power between the world’s leading economies.

Their efforts were carefully observed and recorded by uniformed military officers and members of the U.S. intelligence community.

In the end, there was sobering news for the United States – the savviest economic warrior proved to be China, a growing economic power that strengthened its position the most over the course of the war-game.

Read On
Is there even any question at this point in time as to whether China is a superpower or not? It looks like China may even be able to overtake the country that's been the superpower for the past twenty years - the United States.

The Politico article goes on to talk about the lessons learned from the exercise and some reasons why the Chinese were, in fact, the winners of the simulation.
At the end of the two days, the Chinese team emerged as the victors of the overall game – largely because the Russian and American teams had made so many moves against each other that they damaged their own standing to the benefit of the Chinese.

Bracken says he left the event with two important insights – first, that the United States needs an integrated approach to managing financial and what the Pentagon calls “kinetic” – or shooting – wars. For example he says, the U.S. Navy is involved in blockading Iran, and the U.S. is also conducting economic war against Iran in the form of sanctions. But he argues there isn’t enough coordination between the two efforts.

And second, Bracken says, the event left him questioning one prevailing assumption about economic warfare, that the Chinese would never dump dollars on the global market to attack the US economy because it would harm their own holdings at the same time. Bracken said the Chinese have a middle option between dumping and holding US dollars – they could sell dollars in increments, ratcheting up economic uncertainty in the United States without wiping out their own savings. “There’s a graduated spectrum of options here,” Bracken said.
Indeed, the US is in a precarious situation. It's gambled its future on backing up toxic assets and saving its failed financial systems. It now is married to possible adversaries because those countries are financing its "economic recovery" packages.

Seeing how poorly the Pentagon has handled the wars its been mired in so far in the twenty-first century, I'm concerned about how my country would conduct itself if the world economy continues to tank and countries across the globe get increasingly desperate.

Sure, W. is no longer the president. But I haven't seen profound change from Obama and the way he's running things. From the guy in charge of the financial systems to the guy in charge of the military, Obama seems to be very conventional in who he's chosen to help him run the country.

I admit that things are getting better with Obama as president. But to say that the status quo has been completely changed from the Bush presidency just doesn't seem to be true to me. And in the end, the president can only do so much as one person. Even if Obama is leaps and bounds smarter than Bush, if the people around him are the same people who helped run America into the ground with the previous president, well, that's a serious problem.

The fact that these war games brought in such a wide variety of people and agencies shows that the battlefield in future conflicts will be exponentially larger than where soldiers or war vehicles rove. The institutions that Obama builds and that work for him will be the ones that determine the future of the US.


Anonymous said...

Peking Duck turned me onto this blog, and I must say, all the praise has been well founded. Always a great read. I personally was very relieved when we here in the states went a new direction with Obama. I agree with your assessment that the new administration needs to be more courageous in breaking with the mentality of the past administration. True, the status quo hasn't been completely changed, but I do think its getting there, its just gonna take more than a few months to transition from that brand of lunacy. said...

Gaming against china and russia was a waste of time and resources... the next challenge will come [is here already] from non-state actors. they should be gaming pirates... more evidence of backwards looking thinking that got the u.s. where it is today. Perhaps they should have studied how/why the Soviet Union collapsed and see if the U.S. is in the same death spiral.

Mark said...

Thanks for the props, Hopfrog.

I agree with you, Obama isn't going to be able to do away with the eight years of disaster that Bush caused in a snap. But at the same time, his insistance of offering jobs to repubicans has been a bit maddening.

I'm not sure whether he's handling the financial crisis well or not. I'm inclined to say that it's not going so well. But time will tell.

Richard said...

I think it's really important to define "superpower." As you said in an earlier post, China is a conundrum in this regard. A superpower is supposed to be strong, and Chine is economically strong but in a strange and fragile way, without the deep roots that can hold everything up during storms and floods. Just because they have economic clout doesn't yet make them a superpower, in my view. China, as is often the case, goes into a category all its own, something of a hybrid - incredibly rich in investments and dirt poor and hopelessly overwhelmed with challenges down here in the real world.

Obama is trying, but failing. He's probably doing as good a job as anyone could in the face of a totally impossible situation.

Mark said...

You're right. China does not fit a traditional notion of a "super-power."

I just think with things like the "G2" and its status in a number of world matters, it, more than any other country, is the one right there with the US.

But it isn't on par with the US. That is true. And saying it is the US' peer in most matters is incorrect.

So your point is well taken, Richard.

Anonymous said...

It is US that suggest G2 to China. Not the other way around...

Perhaps US should ask India to become a G2, see if India interested...

If India is not interested, maybe US can ask Pakistan to become his G2

Anonymous said...

"but on how hostile nations might seek to cripple the U.S. economy"

Peak Oil will do that for every nation.
It also seems to me, that the US could cripple their own economy without any outside help.

Anonymous said...

Obama is not different from Bush, he continues the same policies with very few exceptions:
- empire building
- military buildup
- handing taxpayer money to big banks

Exceptions are climate talks (but it is already too late) and alternative energy (too late as well).

The US empire is in decline, collapse is only a question of when.