THE SHIELD OF ACHILLES

by Bobbitt, Philip

  The United States was identified throughout the world as the leading proponent and beneficiary of globalization. Yet the entrepreneurial market-state was by no means limited in its appeal to the United States, which had led the movement to adopt this model, even to the extent of persuading Germany to abandon its corporatist policies. At different times in the first half of the twenty-first century, this model was chosen by Britain, Germany, Japan, the Baltic states, Russia, Spain, Mexico, Chile, Indonesia, Nigeria, Switzerland, Thailand, and Singapore, among others. Each sought a weak, minimal central government with low taxes; each tolerated in some economic sectors a functioning anarchy loosely governed by largely deregulated markets and some degree of persistent corruption. Each developed a high degree of privatization embracing pension plans, power utilities, and, in some states, education and relied to a great degree on local ad hoc action-oriented groups to solve political problems.

  The global society—The Meadow—led by such states proved to be a phenomenal engine of innovation. The Park and The Garden eventually developed the chemical etching procedure for integrated circuits that broke the silicon barrier and multiplied the speed of computers by a factor of 100 billion, but it took so much longer and the finished cost was so much higher than in The Meadow that its benefits were confined to supercomputers in those worlds. Hybrid fuel vehicles (which cushioned The Meadow from the oil shocks of the 2010 – 2015 period and brought forth $10-a-barrel oil for the rest of the scenario period), domestic and agricultural robots, nanodevices for the diagnosis of diseases and stem cell techniques for DNA repair and immune system regeneration, genetic mapping, the ubiquitous handheld wireless computer/television/telephone nanosensors to detect the presence or transport of weapons of mass destruction: all these devices were the offspring of The Meadow. Indeed even though the first computers were developed for military purposes driven by the Long War, it was the commercial success of the first Apple and then IBM personal computers that provided the impetus for the miraculous developments of the early twenty-first century. The difficulty was that The Meadow was not the best place to make these marvels available to the peoples of the world because it invited—perhaps required—severe distributional effects and these eventually dampened demand.

  The Meadow's global economy led to lower wages, as deregulated capital sought cheaper and cheaper costs of production. At the same time, new technologies had enhanced worker productivity, so that for the first time the world began to see both increases in worker productivity and falling wages. Liberalization of markets had led to lower prices. As a result of these three factors, the supply of finished goods increasingly exceeded world demand, and prices fell still lower. Workers were too poor to buy new products, and wealthier citizens tended to invest rather than consume, shifting the prices of financial goods higher and the prices of products lower.

  The Meadow ignored and thus weakened international institutions. For example, the IMF did not have sufficient resources to counter the Asian currency crises that struck in 2003. Japan's economy failed to revive, despite generous fiscal stimuli and real if grudging banking reform. When Japan finally liberalized its financial services industry in 2004, allowing ordinary savers to invest in financial instruments abroad, the government faced a choice: it could either raise interest rates to coax investment back into the economy or it could increase the money supply. Following the precepts of the Meadow, Japan did both. The yen fell calamitously and the Japanese trade surplus rocketed up.

  These events occurred contemporaneously with a deep cyclical downturn in the U.S. economy in 2005 that was powered by the contractions in the money supply that were the Federal Reserve's response to its overreaction to terrorist attacks on the U.S. banking and transportation systems. The Dow Industrial Average fell to 6,000 points from a high of over 14,000. The Federal Reserve then took measures that increased liquidity. These steps weakened the dollar and sent investors to the euro. But the rising euro further dampened U.S. demand, and European exports collapsed. The slower European growth that followed resulted in lower tax revenues and higher claims for unemployment benefits. This caused the European Central Bank to tighten credit. When Japan and the United States felt forced to follow suit in 2006, the resulting tight money policies triggered a world recession. European, Japanese, and U.S. output suffered losses of 1 – 2 percent for the next three years in a row. During this period world growth hovered around zero. The recovery only began when the United States took on considerable debt, ran a series of sharpening deficits, and increased the global money supply.

  This was the situation when a new American administration took office in 2009, stunned by the economic slowdown that, beginning in 2004, had for four years ruined the optimistic projections of the preceding eight years. The terrorist attacks that had struck The Meadow since the World Trade Center atrocity in 2001 had had a harsh effect on the economies of the developed states. Despite repeated interest rate cuts by central banks, the equities markets never regained their pre-2001 highs, and several industries, notably the airlines, were crushed.

  The recovery from this recession had been enormously expensive and the new administration was committed to drastically reducing U.S. government debt, which at that time totaled $3 trillion (in a $9 trillion economy). Several steps were taken by the new administration, including some modest tax increases and even more modest cuts in entitlement spending, but the most dramatic tactic was the devaluation of the dollar, allowing the United States to pay off Treasury obligations with cheap dollars and boosting exports to unprecedented levels. Within ten months the hitherto chronic trade deficit of the United States had been largely erased, but inflation levels soared. As if by implicit collusion, once the greater part of the U.S. debt had been retired, the Federal Reserve tightened interest rates to halt inflation. A second stock market crash—over 1,000 points in a single day—was only a symptom, but a significant one, of the deflation to come. Stock equities composed a far smaller share of U.S. capital than in the 1930s, and so a sharp contraction in the stock market did not itself bring about a catastrophe. The borrowing that would ordinarily replace such lost liquidity, however, had been dried up by the deflation and the flight of foreign capital from Treasury instruments.

  This one-two punch had shattering consequences around the world. Having seen its U.S. financial assets written down by its principal debtor, Japan then saw its export market to America evaporate. By the time the U.S. Federal Reserve acted, a full-scale depression had begun in East Asia. The Fed's action only made things radically worse by depressing American demand just at the time that imports were returning to competitive prices. In Europe, the Eurodollar market had caused European Union currency—the “euro”—to skyrocket, driving up European interest rates and choking off consumer purchasing power. The hitherto willing labor forces in Europe that had accepted tight money policies in exchange for a social contract now demanded higher wages to keep up with the increased cost of living. In 2010 the European Central Bank was repopulated by reformers, appointed by a new coalition of environmental and consumer parties. In the United Kingdom, mysterious groups of cyberterrorists, calling themselves the “New Luddites,” began attacking the computer systems that operated electronic banking and financial infrastructures. The computer plagues that followed may have been a consequence of these attacks, but this was never determined.

  Especially hard hit during this period was the Asian subcontinent. In 1950 the population of India was less than half the 900 million it had reached by 2000; by 2025 this had grown to 1.5 billion. The celebrated Green Revolution that had, for a time, made India a net exporter of grains had been achieved through intensive overplanting, which had depleted both soils and the watershed. In retrospect it appears that the Indians of the late twentieth century were feeding themselves on the food sources of their children in the twenty-first century.

  Nevertheless, the policies of The Meadow allowed India and Pakistan to recover. The water wars predicted by many analysts never mater
ialized and the food shortage that followed the great drought of 2020, which might have triggered such wars, was ameliorated by ample U.S. investment in drought-resistant grains. The widespread use of English, computer skills that were learned during the course of Y2K remediation (most of which was done in India), and the reluctant adoption of the entrepreneurial state model by both countries meant that when the world economy recovered, South Asia was poised to take advantage of it.

  The entrepreneurial market-state—and The Meadow, which is its extrapolation by the society of states—is profoundly indifferent to sex, class, religion, and ethnicity and these were precisely the prejudices that had held South Asia back. Relying on its highly developed merchant class, a skilled labor pool of many millions of scientists and technicians, a British legal system of property rights, and a large domestic market, Indian growth rose from 6 percent in 2000, before the first world recession, to 9 percent in 2010. The Indian middle class, which already numbered 150 million in 2000, doubled by 2015. The discrediting of socialism led to the weakening of unions, and this permitted a restructuring of industry that lured foreign investment. The environment was essentially for sale: multinationals were allowed to use methods in South Asia that were permitted in few other places. The sorts of planning required to modify a pure market approach—developing markets in risks, for example, to spread the impact of foreseeable events—require institutions strong enough and practiced enough to make such an approach work. Yet the very development of highly competitive practices rendered the creation and maintenance of such institutions problematic. The aggressive free-trade intrusions of entrepreneurial market-states made other states wary of cooperation, lest they be co-opted. With weak international institutions and weak allegiances to those institutions on the part of market-states, the political leaders of each state were led to lay blame on the other models for the imperfections of the market-state model each had chosen, rather than to persuade domestic constituencies to accept the costs of modifying the operations of the market. Such adjustments would have met fierce resistance within their respective states, and no government was willing to confront such opposition. The difficulty with the modified market approach of The Meadow is that market-states are less able to muster the political strength to mitigate the operations of the market (just as nation-states had difficulty assembling the political will to overcome the vested interests that grew up around regulation). The problem really was that the United States—of all the market-states—had fixatedly followed the entrepreneurial market-state model, and without U.S. leadership to find common economic interests, the society of market-states could prosper but not thrive. This failure of leadership was exacerbated by the common perception among the other states that world events—in genetic engineering, in currency flows, in computer innovation, all with incalculable consequences—were in the hands of the reckless and self-absorbed Americans.

  THE PARK

  SECURITY

  Perhaps more than any other driver, it was the implicit erosion of confidence in U.S. nuclear extended deterrence following the terrorist attacks on the United States that began in earnest in September 2001 that brought the world of The Park into being. Once the hitherto protected states of Japan and Germany sought their own weapons of mass destruction, regional security alliances developed that excluded the United States from North Asia, Western Europe, and elsewhere, with important consequences for nuclear proliferation.

  The Korean crisis that bedeviled the Meadow in 2010 never occurred in the Park because South Korea had earlier acquired nuclear weapons and the North was unwilling to test Southern resolve to use these weapons, even against other Koreans. Japan's leapfrogging of nuclear technology had set in motion nuclear proliferation to Korea, and this had the ironic effect of pushing U.S. forces (some would say releasing them) from the Korean peninsula. Once the Japanese navy went postnuclear, the Koreans demanded an American nuclear guarantee against Japan. This the Americans were unwilling to give, though various other assurances were offered, including the continued forward positioning of U.S. troops as a kind of hostage to Japanese intentions. The Koreans, however, determined to deploy nuclear weapons on their own—they faced potential adversaries on every frontier (China, Russia, North Korea, Japan)—and, after lengthy but failed bargaining, went ahead with these deployments, as a result of which the American forces, as well as their nuclear umbrella, were withdrawn.

  The South Koreans had the wealth and the technocracy to deploy these weapons, but the world was surprised at the speed with which the necessary advanced technology found its way to South Korea, whose nuclear reactors had a spotless International Atomic Energy Agency (IAEA) inspection record. In the summer of 2010 an event took place at the Indian port of Kandla that led to an unraveling of the true history of the Korean program. At Kandla, Indian customs officials acting on a tip demanded to examine the hold of a Korean ship unloading a cargo of sugar. Inside the 9,600-ton steamer they found 150 containers listed on the cargo manifest as “water purification machinery” destined for Malta. These containers in fact held warhead components. In time it was revealed that a lucrative partnership in nuclear delivery systems (China), fissile material (Russia), and warhead design and computer simulation (Israel) had loosely cooperated to arm, or partially arm, a number of wealthy but otherwise unlikely states. By this means, Iran acquired nuclear weapons, one of which was detonated in an underground test in 2012. Pakistan and India had weaponized their own nuclear materials as far back as 1998. Now two consortia of states—Iraq, Russia, and India on the one hand; China, Pakistan, and North Korea on the other—competed as suppliers in the burgeoning trade in nuclear weapons technology and delivery systems. When Indonesia acquired MRBMs in 2011, Australia pulled out of the ANZUS pact and began to develop weapons of its own. This in turn prompted a rush for weapons by Malaysia and Tokyo; in the region, only Taiwan held back, at least overtly, from nuclear or postnuclear weapons of mass destruction, and clung to the American security guarantee.

  The American guarantee was abrogated when evidence was laid before the press showing that Taiwan had approached two Italian suppliers for technology whose only practical use could have been to develop chemical and biological weapons delivered by medium-range ballistic missiles. These disclosures confirmed what had long been suspected: that the states of the European Union were violating treaty restrictions on the export of nuclear and missile technology. France had aided Iraq by providing crucial technology at about the same time German companies helped bring Iran into the nuclear club. When international terrorism repeatedly hit the United States but not the European mainland, American alienation increased.

  The public outcry in the United States at these revelations may have hastened the inevitable shift from a European security pillar within NATO to a separate E.U. community-wide defense system. After some modest progress toward political union in the late 1990s, the European Union now attempted to create a common defense policy under the umbrella of a European Defense Community (to which particular weapons and units were assigned) within the Western European Union (which largely replaced the role of NATO and from which the United States was excluded). U.S. troops were entirely withdrawn from the continental landmass of Europe, though they continued to conduct joint naval exercises with Britain.

  The Fifth Yugoslav War never occurred because NATO forces were withdrawn from the Balkans in 2005 as a result of U.S. retrenchment. Serbia and Croatia quickly partitioned Bosnia with tacit European support and Serbian forces retook Kosovo the following year. This returned the province to the legal status quo ante the NATO intervention of 1999, with some residual terrorism by the Kosovo Liberation Army (KLA) but with less depredation by Belgrade.

  British and French nuclear weapons were assigned to the EDC, for use under EDC/WEU commands, on a dual key basis—that is, both the French or British commander and his EDC/WEU counterpart had to concur before any weapons could actually be used. Two developments soon cast doubt on this arrangement: first, the Fr
ench refused to participate in planning that would target any of the states of Eastern Europe or the former Soviet Union, even after it was learned that Ukraine had deployed weapons thought to have been turned over in 1996 to Russia; second, the United Kingdom refused to take part in planning that would target the United States. The result of this dissension was the so-called Multilayered Concord, which delegated some weapons to the EDC for “all-azimuth planning” but not actual targeting, and provided some rather general rules for WEU engagement. After Russia's amalgamation with Belarus, Poland acquired a limited number of postnuclear weapons (possibly with French commercial collusion), putting the accord in question and generating inevitable pressures in Germany for that state to acquire her own nuclear and postnuclear arsenal. Concern for reassuring Russia, however, checked any German moves in this direction and, by 2015 EDC nuclearization, including the Multilayered Concord, still held. German access to a nuclear trigger continued to depend on British or French concurrence. That year Slovakia and Ukraine were made associate members of the E. U. (Slovenia and Croatia having previously achieved this status along with Poland, Hungary, and the Czech Republic) and atomic demolition mines were deployed in the High Tatras of Slovakia.

  Europe had set a pattern for the development of regional security associations that now sprang up all across the society of market-states. Authorized by the U.N. Charter and created pursuant to Security Council resolutions, these associations were created to deal with the sort of problem that the U.N. and the E.U. had ducked in 2004 when the Balkan crisis had erupted. Principal among these were the North Asia Security Group (including South Korea, Japan, and China), the West African Organization for Peace (Nigeria, Cameroon, Ghana, and Cote d'Ivoire), the South Pacific Treaty Association (Malaysia, Singapore, the Philippines, Indonesia, and Viet Nam), the Caspian Sea Security Arrangement (Georgia, Azerbaijan, Kazakhstan, and Turkmenistan), and others.