When a country lacks such deal-making infrastructure, it’s essentially a low-trust environment, meaning most deals are managed by family or clan-defined businesses. These networks are inherently limited in size: Blood ties define the known, trusted universe. These traditional networks may suffice when economic activity is modest or within a classic sustenance economy in which everybody’s just getting by, but they’re insufficient when globalization knocks on the door. Globalization is knocking down a lot of doors right now, as the rising East’s seemingly unquenchable thirst for energy and commodities propels all manner of infrastructure investment in emerging and underdeveloped economies alike. That push, however, reveals just how many immature economies out there lack those institutional and informal counterparty capacities. Do Eastern companies take advantage of this deficiency? You bet. The so-called China model sees Chinese companies employing a lot of bribery to win preferred access.
How do we fight that model so that emerging markets aren’t trapped into playing down to China’s lower standard? We have to help these developing economies rapidly insource (or import) the requisite counterparty capacity. When the fictional Jed Clampett, a “poor mountaineer,” struck “black gold” and suddenly amassed a fortune, he instinctively recognized his own lack of deal-making skills and quickly outsourced that function to his new Beverly Hills banker, Mr. Drysdale, who in turn represented the Clampett family as its competent counterparty in deals with outside entities seeking advantage. When a state does that, as the House of Saud did almost eight decades ago by creating the Arabian American Oil Co., or Aramco, it’s essentially buying time to develop its own counterparty capability. Once that capacity emerged over generations, the Saudis progressively bought out their foreign partners, taking complete control of the company.
As globalization knits together high-trust economies with low-trust ones, a market emerges wherein private entities—typically in partnership with local public ones—temporarily provide an emerging market with sufficient counterparty capacity to jump-start desired connectivity with the global economy. Steve DeAngelis and I call that market the “sovereignty services space.” We think the Core as a whole needs to compete in that space to facilitate rapid integration of Gap economies, not just leaving the China model (or the Hezbollah model, or the Hamas model, or . . . ) as the suboptimal default mode. As such, we foresee a big, initial part of the Development-in-a-Box process consisting of filling in the sovereignty services space (more in a bit on how DeAngelis is pioneering this now in Kurdish Iraq).
Some pundits have commented that the name Development-in-a-Box is a bit too flippant—that it trivializes the difficulties involved in fostering development and that it doesn’t reflect the fact that each nation’s situation is unique. We don’t ignore such criticism, but since the centerpiece of the approach is adapting internationally recognized standards and best practices to local conditions to jump-start development, and improve lives in the bargain, we couldn’t find another name that emphasized both development and standardization. Countries are welcomed as full, contributing members of the global economy when they can be trusted by the rest of the Core. Trust must be earned, but there are shortcuts that can help garner trust when there is no prior history. Those shortcuts are contained in the standards and best practices used by the Core. It makes no sense for each emerging market country to have to reinvent these standards and practices. They can be imported as in-the-box solutions and, where necessary, adapted to local conditions (like financial instruments adapted to account for certain Koranic prohibitions).
This approach doesn’t intend to step on the toes of those already engaged in relief and development. They are providing valuable work and their heroic efforts must continue. Development-in-a-Box, though, offers them a way to better coordinate their efforts with others in a larger community of practice, building on lessons learned in the past. The beauty of communities of practice is that they are voluntary groups, so organizations can opt in or out as their interests coincide with those of others. Because it’s a leaderless community, no organization need fear that joining the community of practice means that it is buying into someone else’s agenda. What keeps the group together is goodwill and shared objectives. Communities of practice also help refine the approach by sharing new lessons learned. They form the critical feedback loop that makes any process sustainable and valuable. If this language sounds in tune with all networking philosophies so far examined in this chapter, that’s by design. Steve and I have no intention of reinventing any wheels here.
Development-in-a-Box is not a humanitarian-assistance program, although traditional development programs often lay the foundations upon which subsequent development efforts build. Development-in-a-Box also doesn’t ignore the special knowledge of those working locally; it provides a framework in which such knowledge can be more usefully applied. It doesn’t try to impose an outside solution on an emerging economy, but it helps reduce the number of roadblocks that could otherwise slow economic progress. Most important, Development-in-a-Box helps set in place the trust framework necessary to attract foreign direct investment—the key to achieving sustainable economic growth.
Supporting this effort is a public information campaign that attempts to educate the population about critical components of economic development. Let me give you a glimpse of how these pieces fit together in a notional emerging market country that is ready to take the next step forward: The country has stabilized and its expatriate citizens begin returning or start investing in the country. Buildings start to go up, other infrastructure investments begin to emerge, but key economic pieces are missing. Some low-price consumer products begin to appear, such as fast food and toiletries. Mobile phone service was one of the first utilities to gain purchase in the new economy, but it was not accompanied by a high-speed, broadband network that is essential for economic trade. The country wants to take the next step, but there is no reason that it has to reinvent how to develop and install the necessary infrastructure. For broadband service, for example, it can adopt standards and practices, such as those used in Asia and Europe, to ensure that once it is up and running, it is world-class. This system is essential to ensure that international business transactions can take place.
Business deals also require a national banking system to process these transactions and handle foreign direct investment. People simply can’t run around the country carrying satchels full of unconvertible hard currency. Banking transactions are also necessary to handle e-commerce, collect taxes, and ensure that payrolls are efficiently handled. For example, more than 1,400 business processes exist that are core and common to every global retail bank. Globalization has rapidly created these as standards and best practices to which all banks subscribe, so there’s no need for the country to stumble through a mistake-ridden, learn-as-you-go process when such a system can be put in place without the local government having to conceive of it.
Local businesses that have no history or expertise in connecting with the global economy need a way to ensure their products meet world standards. They need a way to market their products and support customers once contracts have been signed. To meet their needs, business support offices and business-to-business exchanges can be created to meet local requirements, but using accepted standards and practices. Job training and mentoring programs can be established using the best techniques currently available.
For proving these concepts, Iraq was a pretty daunting environment. We initially weren’t eager to get involved in a situation so highly politicized, thinking we’d instead give it a try in some less in-the-news West African economy. But when the Pentagon offered Enterra the opportunity to hit the ground running in the relatively stable Kurdish north, it seemed like a reasonable risk to endure for getting a chance to prove the idea. DeAngelis operated from a forward operating center in Erbil, the capital of Kurdistan, and this is what quickly ensued: First, he identified a need to sell Iraqi products around the world; however, there were problems w
ith doing this in Iraq. Buyers from around the world would not be willing to get on a plane and fly to Kurdish Iraq, much less southern Iraq, to inspect factories, place orders, and pay for the goods and services in cash. To solve the problem, Enterra created two solution-as-services offerings (i.e., customized technology plus services): (1) a multilingual business-to-business and business-to-customer e-commerce exchange, and (2) an international call center. Sensing the business opportunity, we decided to invest the capital to build both while proposing a services contract to the Pentagon to support former state-owned Iraqi businesses. Once that contract was in place, DeAngelis began pounding the pavement in northern Iraq, signing up commercial entities. But our ambitions went beyond mere systems integration. The trading exchange markets Iraqi products both for Internet-based sales to customers and for trading on major worldwide exchanges, while an associated products portal, also created by Enterra, offers secure credit card and vendor services in English, Arabic, and Kurdish. Naturally, both venues immediately boosted sales for Iraqi manufacturers and suppliers and started attracting foreign direct investment—connectivity leading to transparency leading to opportunity.
Enterra then won a grant from the Pentagon to operate the locally based call center, which pushed us into a partnership with a local Kurdish telecom. To move the goods sold over the e-commerce exchange, Enterra made an alliance with a Kuwaiti logistical firm—one of the biggest, most trusted players in the region. To create the basic banking connectivity to support these transactions, Enterra allied itself with a Lebanese bank, a well-respected firm with great experience at bringing frontier economies online. Distribution centers are being established in Erbil, as well as in Jordan and Philadelphia, to create a trusted chain of logistics from Iraq to the United States. Again, we figured that nobody was going to Iraq to buy two dozen leather jackets, but retail stores would buy the same from a distribution center based in Philly.
Finally, in yet another DeAngelis brainstorm, Enterra proposed and created the Kurdish Business Center, an investment-processing conduit currently coheadquartered in Erbil and Washington, D.C., with regional offices in capital market locations such as Dubai and Abu Dhabi. These offices structure the investment deals triggered by a network of business relationships developed and integrated by Enterra, to include the Kurdish government’s cluster of trusted companies, the U.S. government’s roster of companies coming to Iraq on trade missions, and Enterra’s own global contacts.
All this deal-making connectivity was great, but here’s where DeAngelis spotted, in that sovereignty services space just mentioned, the Kurdish Regional Government’s (KRG) compelling need to rapidly develop a baseline, in-country, counterparty capacity to interact with outside entities eager to develop its oil industry and build its infrastructure. Part of that capacity is being developed via the Kurdish Business Center, but to facilitate the more complex oil-for-infrastructure deals wanted by the Kurds, DeAngelis boldly proposed a twenty-first-century version of the Saudi Aramco model, which Enterra continues to pioneer with the KRG as this book went to print.
Where does this Development-in-a-Box process go next in Iraq? Clearly, our goal, shared by the Pentagon, is to replicate this model in southern Iraq, where we’ll need to employ the same charismatic selling capacity that DeAngelis displayed up north. And this is a key takeaway: establishing the personal trust factor here is paramount. Executing investment deals is a skill any experienced international company possesses, but playing the honest broker on the behalf of Iraq’s Kurds, Sunni, and Shia is far more complex—the “everything else” of effective nation-building that America must master in both public- (i.e., hearts and minds) and private-sector (stomachs and wallets) venues. When we invite a developing economy to rapidly attach itself to globalization’s myriad networks, we’re asking for a lot of trust, or faith that we won’t screw it over and leave it permanently disadvantaged. In many instances, the locals will get only one good bite at the apple—the initial-contact connectivity. Get it right and you’ve expanded the Core. Get it wrong and you’ve simply destabilized a portion of the Gap all over again.
Again, Development-in-a-Box is not a model of extending the Core’s nation-building responsibilities but of curtailing them by speeding up any fragile economy’s integration into the global economic grid. What Enterra received in funding from the Pentagon helped jump-start the process by credentializing us with the Kurds, but beyond that, all the subsequent funding came directly from the Kurdistan Regional Government and the infrastructure providers (both hard and soft) that quickly joined in. Make no mistake, we’re not interested in proving out an infrastructural development model for an emerging market that sees everybody involved lose money. Markets rule, just as they do everywhere else. We assume there will be winners and losers, but that there’s no faster way to develop a stable middle class. In the end, the key thing about Enterra’s Development-in-a-Box process is that it is triggering network connectivity between Iraq and the global economy that simply wasn’t happening under coalition efforts up to that point. We don’t believe America can mandate how Iraqis respond to that opportunity, just that America owes them that opportunity.
My point in explaining all this: With relatively few resources, and armed with nothing more than a new business-oriented vision that emphasized connectivity-building on a regional basis over far more difficult efforts at political reconciliation at the national level, a small business such as Enterra effectively turbocharged Kurdish Iraq’s economic boom. And it was done by providing a simple but standards-based approach for linking external infrastructure providers to Kurdish Iraq’s government and existing businesses, promising each side the opportunity to get these network connections right from the start. And when that happened, the paradigm shifted radically from “quagmire” to “virgin market.”
In short, if we want America to field a robust SysAdmin force to deal with failed or recovering states, we need to create institutions that tap into a suitably wide array of players. We’ve got to get our private sector to want to fund the SysAdmin function for the myriad market opportunities that stabilization creates.
THE BETTER NORMAL: THE RISE OF THE SYSADMIN-INDUSTRIAL COMPLEX
In March 2008, a collection of over fifty retired senior U.S. military leaders banded together in an avowed political movement designed to pressure Congress into rethinking the way America organizes its approach to postconflict and postdisaster situations overseas. Their demands? They wanted U.S. foreign aid overhauled and expanded, and “a corps of civilian workers trained and deployed to work directly with the military and help build education, transportation, economic and political systems in troubled countries.” In the words of one member, General Anthony Zinni, former head of Central Command, “We desperately need civilian partners who have the same robust capabilities that we have.” And if we don’t make such adjustments? As respected defense analyst Chet Richards then noted:
Our defense establishment has suffered some 4,000 fatal casualties, forced the Army into offering enlistment bonuses of $40,000 to raw recruits, begun a program of buying armored jeeps that cost a million dollars each, and run up a generational spending obligation. We did all this not while engaging some worthy foe armed with tanks, missiles and aircraft similar to ours, nor while contending with massed armies of skilled troops on fields of battle. No, we incurred these costs while trying to suppress resistance to our occupations of Iraq and Afghanistan, resistance by lightly armed civilians and poorly equipped militias.
As one of my blog readers, historyguy99, wrote: “Drop the mention of tanks, missiles, etc., and change the location to North America, and this could be a conversation that the British military would be having about the American rebels in 1780.”
America’s window for realigning its grand strategy to the security challenges presented by modern globalization is shorter than we think. The key players in this process are staring us in the face—everywhere we send our troops across the Gap. They’re the frontier integrato
rs of this age, and they hail overwhelmingly from Asia. In our search for an ideological comfort zone, we retreat to the kinetics of “shock and awe,” primacy, and unilateralism, and the West with its “league of democracies.” We go with what we know and surround ourselves with allies who look exactly like us, hoping we’ll find cohesion in our uniformity. All these things worked in the past and they must work again now!
But the truth is that none of these things represents our best choices today. We can’t win this struggle with guns. We can’t win it by ourselves or with the small fraction of humanity we call the West. We can’t win it with a focus on just terrorism and democracy. We can’t secure this most fantastic victory—a truly global liberal trade order—by demanding states leapfrog from their sheltered, disconnected past into an immediate present that matches our level of globalization connectivity, our level of free markets, and our level of political pluralism—all at once. We need to bring them into this globalization universe at a pace their cultures can withstand, employing development models closer to their current realities, fielding allies they can relate to and agents of change who address their most immediate concerns for security and economic opportunity.
America has all these resources in abundance, and our logical grand-strategic goals all resonate with the rising powers of this age. History continues to bless our global leadership, but only when we find the courage to adapt ourselves to changing circumstances. We are today beset by too many leaders who view the world in terms of political ideologies, buying into the propaganda and rhetoric of merely our most obvious enemies, when economic transformation triggers all the violence and instability and environmental ruin of our day. We lead a global revolution that we do not even recognize, so intimidated are we by our own success.
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