The Pentagon's New Map

by Thomas P. M. Barnett

  Cantor’s interest in seeing financial rule sets expand around the world led me to the military-market nexus: Where security enables the steady rise of connectivity between any national economy and the outside world, markets logically emerge to manage the marginal risks that remain, and where markets can effectively manage risk, investments invariably flow toward desired resources, such as relatively inexpensive but dependable labor. Over time, these essential transactions engender further connectivity among nations and regions, reflected in the rise of more complex and suitably entangling rule sets that moderate the behavior of not just nation-states but likewise firms and individuals. The desired security end state of this integration process is a community of states within which rule-set transgressions find certain—if not immediate—resolution through universally agreed-upon legal means. In other words, the military never has to get involved.

  When you look at the military-market nexus in this manner, then the successful application of U.S. military power around the world must be defined in the same self-negating manner as foreign aid: ultimate success means you stop doing it in a particular country or region. Or to put it more specifically, wherever a market maker like Cantor Fitzgerald plays the role of a rule-set enforcer, there you should expect to find a marginal role for the U.S. military, and vice versa.

  Admittedly, I am an economic determinist, but I’m darned proud to be one. My credentials are nearly impeccable: I once taught Marxism at Harvard. From those nefarious beginnings, though, I found rehabilitation at the hands of my Wall Street mentors, Bud Flanagan and his longtime collaborator Philip Ginsberg, a true Renaissance man who probably would have had a brilliant teaching career if he hadn’t been so focused on the practical applications of his degrees in economics. What these guys taught me over the years and through the several workshops we codesigned and conducted was that security and economics were two sides of the same coin, both built around the principles of connectivity and rule sets. With security, you mostly deal with the disconnected and the rule breakers, but conquering that challenge is what yields the economic opportunities associated with growing connectivity and adherence to rule sets.

  To Bud and Phil, it was all about knowing what the rules were and either playing by them or accepting the consequences of non-adherence. Phil once explained to me why Cantor didn’t dive into Russia in the early 1990s, when plenty of other firms were rushing in with their investments. “Those guys simply weren’t playing by the rules we believe are essential to making markets work. So if we give them money, and then at some point we want that money back, maybe they’ll just tell us, ‘Too bad.’ So then what do we do? Hire some Russian mafia to get our money back? We don’t need money that badly. If they don’t want to play nicely, we simply stay home. No rules, no money.” So when Russia went bankrupt in 1998, Cantor did not get burned as other firms did. Russia in turn lost out on the connectivity that would have accompanied that resource flow.

  After several of these economic security workshops, I sat down one afternoon and tried to capture them in a string that I was certain would describe the military-market link I had so long been hunting. Being so Catholic, I arranged them in a Decalogue, sort of a Ten Commandments for globalization:◈

  1. Look for resources, and ye shall find

  For decades, both futurists and environmentalists have gone on and on about how the world is running out of resources, especially in fossil fuels. But it simply isn’t true. The historical record is incontrovertible: the more we look for “nonrenewable” energy, the more we find. Confirmed oil reserves have jumped almost 60 percent over the past twenty years, according to the Department of Energy, while natural gas reserves have more than doubled. Our best estimates on coal say we have enough for the next two centuries.◈ So supply is not the issue, and neither is demand, leaving only the question of moving the energy from those who have it to those who need it—and therein lies the rub.

  2. No stability, no markets

  To get from producers to consumers, energy needs markets, and markets don’t grow in a vacuum. I could have saved Karl Marx the effort of writing his very long Das Kapital. The Popeye cartoon character “Wimpy” summed up everything you need to know about capitalism when he promised, “I will gladly pay you Tuesday for a hamburger today.” Capitalism is built on trust, and markets simply organize that trust into complex mechanisms of credit, which is what Wimpy was all about. Credit is extended to participants in markets based on a collective faith in the future, or the sense that your operating environment won’t just allow a return on your investment, but a return of your investment as well. That’s what Phil was worried about with Russia in the 1990s: not enough political and economic stability to allow markets there to operate freely, thus generating the unacceptable risk of losing it all.

  3. No growth, no stability

  Growing economies generally beget happy societies, despite the inevitable disparity in individual wealth that ensues. Richer societies are, on average, much happier than poorer ones. But the most consistently contented countries are those with rising per capita incomes, meaning money really does buy happiness, up to a point. Big increases in income within developing economies lead to big increases in happiness, but once you reach about $20,000 per capita, other, less material factors kick in.◈

  How growth buys stability is even easier to prove, because the richer the country, the more likely it is that it will become a stable democracy. There are no authoritarian states featuring widespread development, although there are a few rich countries, notably in the Middle East, that are fairly authoritarian, and that’s because both the power and the money are concentrated in the same hands. But when broadband economic development does occur, the longevity of any resulting democracy becomes virtually infinite. As Fareed Zakaria has noted, when a democratic regime achieves a level of per capita GDP above $9,000, it essentially becomes “immortal,” meaning no such state has ever collapsed.◈

  4. No resources, no growth

  Developing economies use energy less efficiently than advanced ones, and truly poor societies are the most wasteful. An advanced economy like the United States can achieve one percent of growth in GDP while increasing its energy use less than one percent. An emerging economy, like China, will—on average—grow its economy and energy use at roughly a one-to-one rate. But most poor economies require more than a percent increase in energy consumption for every percent of economic growth (or an “energy elasticity” above 1.0). Obviously, we want Gap economies to grow and—by doing so—demand less energy over the long run. Moving countries from the Gap to the Core will be energy-intensive in the near- and mid-term, and most Gap countries are highly dependent on energy imports—Developing Asia being a case in point. Without stable access to reasonably priced energy, these countries will find it difficult to grow without severely damaging their environments.

  5. No infrastructure, no resources

  Infrastructure is the essence of economic connectivity, and nowhere are the demands greater than in the energy trade. As the planet progressively decarbonizes its energy usage (e.g., moving from coal to natural gas for generating electricity), the world economy will need a whole lot more long-distance pipelines connecting cities, states, and regions. The same will be true due to burgeoning fleets of automobiles in emerging markets like China, which will drive up the global demand for oil in coming years quite dramatically.◈ That is why dependency relationships that would have seemed impossible during the Cold War are now becoming commonplace: Russia is supplying natural gas to Europe, for example, and there are plans to build oil pipelines from Siberia to both China and Japan. Add on top of all that the networks required to generate and move all that electricity, not to mention all the oil and liquid natural gas that currently move through major ports, and you quickly realize that developing an economy is first and foremost about moving energy.

  6. No money, no infrastructure

  According to Department of Energy (DOE) projections, “Many developin
g nations have ambitious goals to expand their electricity infrastructure over the coming decades.” As DOE warns, “Some plans may prove feasible and others not.”◈ The biggest concern—naturally—is the availability of capital. Most developing economies cannot self-finance, so it comes down to a combination of loans (both commercial and public), foreign aid, the listing of companies on stock exchanges, and foreign direct investment (FDI) by firms willing to acquire equity in networks. Of that group, foreign investors represent the greatest potential flow. For example, while official developmental aid (ODA) from the advanced countries was almost twice as large as the private sector’s FDI flow to emerging markets at the end of the Cold War, by the end of the nineties FDI had outpaced ODA roughly four to one.◈ While foreign aid administrators are notoriously picky about how they dole out money, they come nowhere near the kind of scrutiny demanded by foreign investors using their own money.

  7. No rules, no money

  Back to Phil Ginsberg’s basic point: foreign investors need to see rule of law, transparency, and good corporate governance before they will put their money at risk overseas. So the countries with the strongest economic rule sets inevitably attract the greatest amount of FDI. In 2001, the Economist ranked Asian economies by the strength of their rule sets, and Singapore came out consistently on top. Not surprisingly, Singapore is a magnet for foreign direct investment, enjoying one of the highest flows as a percentage of GDP in the world.◈ As one Chinese securities regulator told the Economist, “Until two years ago, no one here had heard of ‘conflict of interest’ or ‘fiduciary duty.’ ” His answer for the problem? “Right now we’re just pushing concepts into rules.”◈ Last year China attracted the largest single share of FDI flowing to emerging markets.

  8. No security, no rules

  Forget Clausewitz and his notion of war as politics “by other means.” Conflict is at best the temporary suppression of normal rule sets, and, at worst, the obliteration of rules. Madagascar is one of my favorite examples of rule-set loss. This island off the eastern coast of Africa became a magnet for FDI in the textiles industry across the 1990s, only to suffer the most incredible outcome any stable democracy could imagine following a presidential election: both contestants remained convinced they had won. Can you imagine such a thing happening in the United States? (Okay, almost never.) Well, because Madagascar does not enjoy the same robust legal rule set that the United States possesses, these two candidates began squaring off amid significant incidents of violence. The result? The country came to a standstill overnight and investors caught the chill, leaving the economy substantially less well off in the process.◈ The potential downside from even larger security lapses is not hard to imagine: think of how Silicon Valley might view India’s back-office potential following a nuclear exchange with Pakistan, or what would happen to FDI flows into China if its Communist leadership finally decided to invade Taiwan.

  9. No Leviathan, no security

  Security rule sets will always need to be backed up by someone willing to use force on their behalf. Historically, states did this for themselves, creating an every-man-for-himself environment described as the “security dilemma” (basically summarized as, “Maybe I should attack you before you decide to attack me”). During the Cold War, much of the world’s population deferred to the superpowers, or the dual Leviathans East and West. Now only the United States stands as potential global security Leviathan. The toothless United Nations is not up to the task, nor is feeble Russia or a barely united Europe. As for the rising Chinese, they were recently excited about sending a whopping 800 peacekeepers for temporary duty in the Congo, so don’t expect them to rush a quarter-million troops to the Persian Gulf anytime soon. Only the Pentagon can truly assume the Leviathan role, along with a handful of potential helpers like the Brits and their former colonies (e.g., Canada, Australia, India).

  10. No will, no Leviathan

  Spending American treasure on securing global peace is one thing (because we’re rich), but spending American blood is something altogether different. A big part of the so-called Vietnam Syndrome was the notion that the American public is casualty-averse, something many strategists believe was reinforced by the terrible experience in Somalia, when the bodies of American soldiers were dragged through the streets of Mogadishu. But in reality, Americans are not risk-averse, even with their sons and daughters, if two basic conditions are met: (1) the goals are well defined; and (2) the cost seems worth the potential gain. According to polling expert Steven Kull of the University of Maryland, “The critical question in the American public’s mind is not whether there are body bags, but whether the military operation makes sense to them and whether they think it’s succeeding.”◈ Poll after poll has demonstrated this American will to act as Leviathan under the right conditions. On the eve of the war with Iraq, an overwhelming majority of Americans declared that invasion was a reasonable course of action primarily to remove Saddam Hussein as a continuing threat to his own people.◈ In my opinion, such a war can be filed under “Do unto others as you would have them do unto you,” and it is that sort of moral compass that makes for a just global Leviathan.

  Understanding the military-market link is not just good business, it is good national security strategy. Osama bin Laden understood this connection when he selected the World Trade Center and the Pentagon for his targets.◈ We ignore his logic at our peril. In many ways, the wars that will define this era of globalization will be quite symmetrical: we will seek to extend globalization’s connectivity, and those who oppose us will seek to derail globalization by disrupting that connectivity. A bin Laden engineers a 9/11 with the expressed goal of forcing the Core to clamp down on its borders, seek its energy elsewhere, take its investments elsewhere, and “bring the boys back home.” He wants all of that connectivity gone, because its absence will afford him the chance for power over those left disconnected.

  Understanding globalization’s most crucial strands of connectivity (the flows of people, energy, money, security) helps us understand the nature of the grand historical struggle we now face. It puts this war on terrorism within the context of everything else. It helps us understand why our loved ones won’t be coming home anytime soon. It helps us realize the balance of life all around us and why America’s continued role as security Leviathan across the Gap is necessary not only for keeping the violence over there, but for making sure that globalization makes it over there.

  If you want a happy ending to this story, you will find it here. These flows speak to how we make globalization truly global. They form the outline of the future worth creating.

  The Flow Of People, Or How I Learned To Stop Worrying And Love The Population Bomb

  When I turn fifty, I will worry about my PSA, or my prostate specific antigen. But at forty-one, I worry about my PSR, or what the United Nations calls my potential support ratio. My personal PSR is currently projecting out at 1.5, meaning my wife and I have three kids we hope will be willing to support us in our old age. So if Vonne and I split Emily, Kevin, and Jerome between us, we’ll each end up with 1.5 persons working on our behalf after we reach sixty-five. That’s how you calculate a PSR: it’s the number of people between the ages of fifteen and sixty-four for every person above sixty-five.

  The UN calculates PSRs by national populations.◈ Right now, America’s collective PSR is somewhere in the range of five to one, meaning there are five people between the ages of fifteen and sixty-four for everybody over sixty-five. That’s not bad, but it’s a lot lower than it used to be. Worse, as our population ages over the coming decades, our PSR is going to decline dramatically. The PSR for the planet has slid somewhat over the last half century, but nothing like it will over the next. In 1950, the world PSR was twelve to one, which reflected the fact that most of the world remained rural and agrarian. When you’re still on the farm, having lots of kids makes sense, because you can use all the help you can get. By the time our planet reached the third millennium, our PSR dropped to nine to one.
That’s not too bad, primarily because Globalization II (1950-1980) involved only a fraction of the global population (America, Western Europe, Developed Asia). But the decline is accelerating.

  My wife, Vonne, and I are in the process of adopting a baby girl from one of the poorer, interior provinces of China.◈ We’re not doing this to raise our personal PSR, but it will incidentally have that effect, and in so doing we are—in a tiny way—setting in motion the migration that will have to be repeated millions of times in the decades to come as the Core’s population grows older much faster than the Gap’s: the movement of people from there to here. This great shift defines the first of the four massive flows I believe are essential to protect if Globalization III is going to advance.

  China currently has a surplus of baby girls, thanks in large part to its one-child policy of the last couple of decades. Much as India has done, China has been working hard (and often brutally) to control its population growth as part of its push for economic development and integration into the global economy. As both nations topped one billion souls recently, signs abounded that each was rather successful in limiting births, setting the stage for a momentous and unprecedented turning point in human history that will occur sometime in the middle of the twenty-first century.

  Sometime around 2050, humanity will begin to depopulate as a species. That’s right. In about five decades the world will reach a turning point that, in past ages, would have frightened us if we were able to understand its significance. But in the middle of the twenty-first century, the fact that we’ll begin depopulating as a species won’t seem scary (though it’s never a bad idea to keep a close watch on those damn, dirty apes!), and we should welcome this turning point, even as it presents us and the globalizing world with a task of immense proportions.