Networks of Confrontation

When political scientists and policy wonks wrestled with the prospect of a world war that was not, in any conventional sense, winnable — that is, a nuclear war of comprehensive destructiveness — they turned hopefully to “escalation dynamics.” They tried to find a set of reversible steps between chronic conflict and mutual obliteration. It was a way to imagine how to manage the unmanageable. Today, with widespread access to drones and ubiquitous access to the Internet, it is difficult even to define “escalation.” The means for crossing borders, whether in the air or online, have proliferated to such a degree that actors engaged in conflict seem to lose sight of the de-escalation part of the old “escalation ladder.” Having escalated online, they can next escalate with drones, or by activating proxies of one kind or another, or by directing industrial policies toward harming the enemy at one remove. The jumpy, somewhat hysterical, mode of constant irritation of the status quo — constant escalation — was once the signature style of North Korea alone. Now it is worryingly common. 

 There is an argument that the United States was the first mover in this trend toward border-jumping provocation. The U.S., having done far more than any other state to advance the Internet, did tend to treat it as a network for espionage overseas, if not often for conflict. Having pioneered drone technology, which was greatly telecommunications technology, the U.S. made frequent use of it in others’ sovereign territories. With an economy uniquely globalized because of the nearly universal use of the dollar as an exchange currency, the U.S. had another planetary network it could use against its enemies, for example through financial sanctions. And having driven a globalized trading and manufacturing economy, to its own great benefit, the U.S. is now exploiting the resulting global network dependencies by weaponizing industrial and trade policies.

In each of these networks of confrontation, all of which have developed immensely since the end of the Cold War, the U.S. has moved first.

Now so many others are in the game of what the Oxford scholar Lucas Kello, optimistically limiting himself to cyberspace, once labeled “unpeace.” There is so much signaling of malign intent, expressed over cross-border networks, that the foreign-affairs signaling becomes more like noise. Russia’s appetite for information operations directed at undermining U.S. power around the world seems possibly insatiable. One reliable analyst sees Russia’s government as behind a recent infrastructure attack — all executed remotely — on Texas water systems. China increasingly looks to its diaspora as a population physically outside its own borders that is nonetheless expected to show loyalty to the mainland government. Overseas Chinese are monitored and influenced both physically (through embassy and consular staffs) and online. Iran launches an enormous drone attack against Israel and now awaits retaliation, confident that it will not be in the old, pre-1990 form of actual war but in some new “escalatory” move. But escalation without some logic to it is just random warfare. It is unpeace. A lot of aggressive noise without much clear signaling.

For investors, and for everyone else, the challenge is to identify sources and patterns of stability as well as to identify threats. It is not easy. China and Russia are trying to stabilize themselves through a striking combination of patriotism and ethnicity, rallying the tribe of consumers and producers to defend against the external enemy — a method of stabilization that runs quickly into each country’s dependence on external markets for survival. Autarky only feels stable.

The U.S. has the advantage of corporate and entrepreneurial cultures, as well as multinationals, that accept government direction only when they must. Of course the U.S. has many other advantages, and its lack of supervisory power over business has not always been a good thing. But in the present circumstances, when globalized and globalizing networks are both necessary for growth and increasingly dangerous and unpredictable as platforms for political confrontation, the U.S.’s, or perhaps more accurately North America’s, ability as an economy to resist government direction seems to be a distinctive strength. It creates a resilience in unpeace that, one hopes, can survive changes in government. An economy that can thrive under Obama, Trump, and Biden alike is a resilient economy.

Headlines for the IMF annual meeting this week emphasized American economic strength, with growth far outstripping that in the other Group of 7 members. At the same time, the U.S. was at bottom in a poll looking at G7 public confidence in institutions like the military and courts. Politics must dwell on the latter and strive for improvement. But stability comes mainly from the economic side.

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Dealing with Corruption: Part Four of Four

By Dee Smith

In the first 3 parts of this post, I discussed the nature and history of corruption in non-Western cultures and in the modern West.

Whatever we in the West tell ourselves about the “objectivity” of our institutions, a great deal of life still operates in terms of familial and friendship connections, affinity with like persons, membership in groups (from criminal gangs to professional and religious organizations), and reciprocal obligations. This is the result of human evolution. As we evolved in small societies of like individuals based on trust, outsiders were seen as untrustworthy at best and often presumed to be enemies unless proven otherwise. In many cultures, they still are. Group belonging and identity in all its forms is one of the constants across cultures and time.

There have been many concerted efforts to change these embedded practices. For example, “legacy” admissions of students at universities in the US have recently come under attack as being unfair (which they are). Sweeping efforts are being made to eliminate them, but it is likely they will change only in form, not in substance.

Corruption in Africa, the Middle East, South and East Asia, and Latin America has been profoundly influenced by European conquest and colonization. As an example (and to vastly oversimplify): Latin America was mostly colonized by the imperial powers of Spain and Portugal, and their fundamental goal was to extract wealth and send it back to the regent. The British colonization of India, in contrast, was for centuries managed by a private enterprise, the East India Company, and the goal was to enrich shareholders back in the homeland.

Enriching shareholders in the homeland was also sometimes the goal in North America, for example with the Hudson Bay Company. In many cases, however, North America was settled by individuals and small groups (who were not state-sanctioned), often from the lower rungs of society, fleeing religious and other persecution, and seeking to create a new life in a “new world”—essentially by seizing it from its inhabitants. The goal of these colonists was to produce material prosperity for themselves, in their new homes, not to send it back to the motherland. The legacy of those very different goals informs social realities in Latin America and North America, respectively, to the present day.

Corruption, as we have seen, is a complex issue, and trying to understand it is a monumental task. Generally, it is over-simplified to the point that the descriptions correspond little with the actuality. And all too often, it is simply a blame game where “I’m right and you are wrong.”

From a practical standpoint, what is a Western businessperson to do when confronted with corruption in Africa, Latin America, or anywhere? Lecturing people from other cultures about “their” corruption is very bad form and therefore often bad for business. Furthermore, as we have seen, corruption is equally present in the West—it just works in a different direction—and much of the pronounced culture of corruption that exists in such countries is a legacy of the colonial and commercial goals of the Western powers that colonized these countries and extracted their wealth.

On a practical basis, for many reasons—legal, ethical, moral, or financial—a businessperson from the U.S., the U.K., or many other Western countries simply cannot engage in activities that their own jurisdiction defines as illegal corruption, however endemic it may be in a country in which they are working.

My advice is threefold: first, do your homework and make sure before you initiate talks with a potential partner that they do not represent an individual, family, company, or other party known for egregious corruption. Stay away from those.

Second, be very well informed in advance of what specifically is defined as corruption in the laws of your country, of the country where you are operating, and of the countries in which your investors or other partners are based. All are crucially important.

Third, if and when you are confronted by corruption, the best procedure is legalistic. Something like the following is a good approach: “I simply cannot do that or anything associated with it. It is against the law in my country. If I did it, it would threaten my ability to continue to do business, and quite possibly threaten my personal freedom.”

In that way, you are not “calling out” anyone, you are not making a value judgement of right or wrong, and you are not on a high horse criticizing anybody’s culture. You are simply drawing a bright-line around what you can and cannot do—a bright-line required by the legal regime of your country.

And then, if you have to, you need to be willing simply to walk away.

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Dealing With Corruption: Part Three of Four

By Dee Smith, CEO

The 18th century European Enlightenment made the West quite distinct in terms of intellectual, social, economic forms, even WEIRD:  Western, Educated, Industrialized, Rich, and Democratic, as the phrase goes.  In parts one and two of this series, I looked at how corruption in many non-Western societies has been structured by “social pyramids” that link the high and low of a specific social group in mutual obligations, including cooperation in securing political power in order to succeed economically. This structure I contrasted to that of the post-Enlightenment West, where corruption uses money to get political power. I then argued that Western rules-based social orders, which made it possible to separate corruption from the social pyramids, are breaking down. One way to look at the rise of identity politics in the West is as the re-emergence of kinship- and identity-based structures similar to those of societies structured by social pyramids. The implications of this for society and for the evolution of corruption will be substantial.

Nineteenth-century European and North American societies, as they industrialized and previously rural people were forced to compete for survival in fast-growing cities, came to depend on science, technology, and eventually modern education. These societies developed distinctive hierarchies to manage their growing complexity, increase productivity, and compete with rival societies. Complex hierarchical structures were very different from the old social-pyramid hierarchies, although the two long existed side-by-side and in some ways still do. One difference was that they required social mobility and the possibility of advancement by merit. Dynamic merit-based hierarchies gradually replaced the social-pyramid hierarchies and developed merit-based elites.

“Merit” was and is a social relation, changing over time according to social demand. Imperial China’s merit-based examination system for civil servants rewarded expertise in classics of Chinese literature, rather as Britain’s elite educations emphasized classical Greek and Latin. When social demand for very different kinds of merit strengthened, these systems had to adapt or die, particularly as societies like Japan and the newly unified Germany quickened their pace of industrialization, militarization and social engineering.

Merit-based modern societies create a particular kind of private anxiety in that the creation of open opportunities for personal advancement puts the burden of failure, as well as success, on the individual. The protectiveness  of social pyramids, as well as of mass participation in collective religious rituals and a shared spiritual life, could not survive the rise of merit-based hierarchical societies. The old social pyramids had cared for the people within their structures through a sense and practice of reciprocal responsibility. Modern societies deracinated this—each person is on his or her own. Official, bureaucratic systems now “care” for those who, because of nature, nurture, or accident, cannot care for themselves. Everyone else is homo economicus.

“Economic man” and societies based on competition and maximal efficiency dominated the 20th century to such a degree that almost everything was seen to operate in terms of economic “laws.” Yet markets are human constructs, and we forget that at our peril. The disruptions and anger we see in societies today may be connected to this in more ways than one.

Market-based maximal efficiency undermines social structures in part because it directs capital to technologies that themselves lead, unpredictably, to social transformation. More than 80 percent of unemployment in manufacturing in the US in the last 2 decades is due to automation, not to offshoring (whatever politicians may say). With the rise of generative AI, we face a tsunami of unemployment, coming now for white-collar employees. As Yuval Noah Hariri has noted, we are living for the first time in history without any real idea at all of what jobs will look like in 10 years! What’s a young person—or anyone—to do? People feel profound uncertainty about change that does not seem to have an identifiable logic or purpose but is nonetheless pushed forward relentlessly by developments in technology, from dependence on cyber systems and their vulnerabilities, to bio-error and bio-terror, to generative AI and the possibilities of Artificial General Intelligence.

In such an environment, people long for connection to something meaningful and concrete. They long for stability.  “I don’t even recognize my own country any more” is a phrase I have heard all over the world, in societies very distinct from one another. People thus seek kinship, identity, and affinity with others who share their culture, concerns, maladies, and even bloodlines. And if they do not have a community offline they will find one online, with results that, over the past decade, seem to have been more negative than positive.

It is possible that these changes represent not partial revolutions, as in 1848, nor even the kinds of anti-capitalist revolutions seen in the first half of the 20th century, which were also built around homo economicus. The changes to come may represent a more profound transmutation, into a system (or systems—the outcomes may be very different from place to place) whose nature we cannot, at present, see. If large numbers of people decide their future looks worse than their present—which many perceive as already worse than their past—they may decide that the systems and rule sets and leaders they have been living under are no longer serving their needs. That they are no longer fit for purpose.

And then what? Will we see the rise of a revised form of social pyramids with internal obligations, because people do not feel they can rely on government promises and systems, and do not like the isolation and radical uncertainty that modern life forces upon them? Will the nature of corruption in the West begin (again) to resemble that of the non-Western world? Or will we see something entirely new?

The New Anti-Imperialism

Through Western eyes, anti-imperialism might appear to be an anachronism. Didn’t the empires pack up and go home half a century ago? If so, then what is anti-imperialism against? There is an increasingly stark divide between those who think the post-imperial era is well along and those who think it is just beginning. Whichever side of this divide one is on, the political salience of anti-imperialism in West Africa and the Sahel, from Senegal’s Atlantic coast to Niger’s eastern border with Chad, cannot be denied. Niger decided days ago to eject the United States, having done the same with France late last year. Senegal meanwhile elected on Monday a young former tax inspector whose populist party has built its politics around distancing the country from France, the former colonial power. Imperialism may be dead, but anti-imperialism is thriving.

This is a political reality, and in politics there is always ample room for cynicism. The military governments in Mali, Burkina Faso and Niger are not led by angels. (Chad and Sudan are under military government as well, as is Guinea.) Expectations for sound governance, fiscal prudence, gains in health care and education, or democratic accountability should be kept very low. Nonetheless, these governments are not unpopular. They are seen as an appropriately tough response to an extremely difficult security situation as killings and kidnappings, usually by Islamist groups, have continued. French and American counter-insurgency aid was initially welcomed by many but was not the solution hoped for. The price paid in sovereignty (and military autonomy and accountability) was too high. Western military assistance came to be seen as neo-imperial.

Sovereignty, and something quite intangible having to do with respect, are the keys. All three countries, after all, have at the same time ejected France and the U.S. while seeking to pool their sovereignty, as they choose, in a tripartite security alliance against insurgent groups and while welcoming military aid from Russia, in particular. It is very hard to think of Russia as respectful of sovereignty, at least when it comes to neighbors. So all three nations are demonstrably willing to compromise their sovereign room for maneuver if it is necessary to get them closer to their security goals. They just won’t compromise it for powers perceived as imperial or neo-imperial.

Russia, along with China and even Iran — Niger’s willingness to sell uranium to Iran was a major source of friction with the U.S. — is successfully building its soft-power brand as anti-imperialist. This would seem like madness to a Ukrainian, a Pole or a Taiwanese, or indeed to those in larger states who have been the object of Russian, Chinese and Iranian extra-territorial cyber-attacks and information operations. Yet it is a political reality. Russia backs up its talk with hard power, China with investment — and some hard power as well. They are increasingly the anti-West, and that clearly has appeal.

Happily, this week’s presidential election in Senegal was a victory for democracy against authoritarian moves by the now departing incumbent. Yet much of the new government’s appeal comes from its anti-imperial politics, including agitation against “economic enslavement” by resource-extractive multinationals. The new president’s party made a point of advocating the adoption of a national currency and exit from the CFA currency area, seen as a relic of French colonialism. The CFA franc is pegged to the euro and backed by the French treasury. Replacing it has long been an anti-imperialist touchstone in the region.

And yet: incoming president Bassirou Diomaye Faye has already downplayed the CFA pledge and is most likely to continue backing replacement of the CFA by a regional currency (the Eco) shared by the 15-member Economic Community of West African States (ECOWAS) and scheduled to be launched in 2027. Something similar will probably get in the way of a plan mooted by Niger’s ruling general last month to create a post-CFA currency for Niger, Mali and Burkina Faso as “a first step toward breaking free from the legacy of colonization.”

In short, anti-imperialist sovereignty may be absolute but real sovereignty is relative. As in the 1960s and ‘70s, pan-Africanism, in doses small or large, is seen as the means for successfully blending sovereignty, dignity and survival – even prosperity.

The Networks Trap II: Disrupting a U.S.-led System

What could destabilize the emerging geoeconomic framework based on tech networks and alliances? An earlier post (“The Networks Trap,” 6 March 2024) examined how, as one result of the U.S.-China contest, the international system is dividing into two separate and distinct spheres for tech innovation, telecommunications, and military technology. In both the Chinese and American spheres these three sectors are being protected so that American technology will not be in Chinese networks and vice versa. Security alliances in particular, but also political alliances, are increasingly shaped by an emerging type of technological exclusivity. Most of the world would rather not have to choose between one tech ecosystem and another, but the viability of tech non-alignment seems to be weakening. “The Networks Trap” considered this in terms of Southeast and South Asia, where there are flourishing economies, strong domestic tech ecosystems, long-standing wariness of Chinese and American power, and a tradition of non-alignment. The post concluded that tech non-alignment will not be easy to maintain in the region and that the U.S.-led tech ecosystem was likely to prevail in competition with China’s own, even in China’s backyard.

What could disrupt this solidifying geoeconomic pattern?

One potential disruptor is India, which has pursued a technology-development path that avoids dependence on China or the U.S. India learned many lessons from China’s experience building an indigenous tech sector, including that if you welcome foreign venture capital it will come, but once foreign money and expertise have helped you build domestic capacity it might be best to unwelcome foreign capital except under conditions determined by the domestic private sector and the state. (It is perhaps an irony that much of the capital India welcomed and then unwelcomed was from China itself.) India learned from Europe that simply burdening foreign (American) technology with regulations gave no guarantee that domestic entrepreneurs would seize their opportunities. Like most countries, India has neither China’s technocratic relentlessness nor Europe’s high-end purchasing power. After decades of poor results, non-alignment is finally paying off for India. In principle, it could serve as a third-way model to others, such as Nigeria, Indonesia, and Brazil, and this could undermine the U.S.-China-driven tech-telecoms-security alignment currently under way.

However, India’s security worry is not the United States. It is China and its ally Pakistan. India’s security relationship with the U.S. keeps getting tighter, despite very considerable wariness on both sides. What India covets, as the U.S. well knows, is defense technology sharing and joint R&D — as distinct from arms sales. This gives the U.S. leverage to bring India into its networks and even its tech-innovation ecosystem. China’s comparative ability to do this is very weak. India will continue to seek non-alignment but the trend will nonetheless be toward stronger ties to the U.S.

A second potential disruptor of U.S.-China tech bipolarity is South Korean and Japanese dependence on tech exports. South Korea, Japan, and the United States are growing closer in terms of the tech innovation, telecommunications, and security triad. (The Center for a New American Security will release a report on this next week.) The difficulty is that South Korea and Japan, as aging and immigration-resistant societies with thin resource bases, rely on technology exports for growth at just the time when the U.S. is attempting to locate or relocate as much high-tech production to home as it can. This dynamic occurs with European tech powers and Taiwan as well. One partial solution is for these tech economies to relocate production into the U.S., satisfying the U.S. security requirement for production within American sovereign territory while retaining the earnings — in effect, an internationalization of U.S. production that also makes it possible for Japan, South Korea, and the rest to sell into the U.S. market without difficulty. But U.S. preference will still go to U.S. companies, as the extraordinary subsidization of Intel ($8.5 billion in grants and potentially even more in loans) shows. Powers like South Korea, Taiwan, Japan, and Germany cannot hope to be non-aligned in the way India aspires to be, but all these relationships will need to be sensitively managed on all sides, especially the American side. The economic fruits of a U.S.-led tech alliance cannot go disproportionately to the U.S. or its companies.

There are other potential disruptors. China and Chinese tech companies could extend their established practice of selling into markets too unremunerative (much of Africa and Latin America and parts of Asia) or ethically too dodgy (MENA) or both (Central Asia) to appeal to American, Korean, and Japanese tech companies. That would give China a significant advantage. Another possibility is that cybersecurity will become too difficult to maintain across a large number of semi-allied American partners, resulting in resentment of the core — say, the Five Eyes plus Japan, Taiwan, South Korea and some Europeans — by the periphery and political weakness throughout the network.

But the greatest threat is probably an American inability to share either power or wealth. The U.S. is currently engaged in developing defense-production partnerships around the world. The immediate spur has been the Ukraine war: even the Europeans and the Americans together have struggled to keep production at the necessary levels to meet official commitments to Ukraine. Their defense industrial capacity has barely been up to it. The reason is not a lack of military manufacturing capacity per se. Rather it has to do with the downsides involved in the allocation of that capacity to military purposes, which economists generally understand as among the least productive of economic activities: If you manufacture an automobile, it will be used by its purchaser for a variety of purposes that will themselves be economically significant; if you make a tank, its one purpose will be to destroy value, if it is ever used at all. Defense contractors are therefore peculiar animals, protected by states, and enjoying preferential relationships and long-term contracts, in exchange for the preservation and refinement of industrial capacity to provide the arms a state might need to ensure its survival. But in most cases they are a drag on overall productivity, which is why states are often quite happy to buy arms rather than divert resources to producing them.

So for economic as well as political reasons the U.S. does not want to be sole supplier to Ukraine or others. Instead, the U.S. hopes to broaden defense supply chains, seizing what Assistant Secretary of State for Political-Military Affairs Jessica Lewis called “a once-in-a-generation opportunity to transition countries off Russian-origin equipment, improve NATO interoperability, promote transparency and accountability in security sectors, and strengthen our defense industrial capacity.” (Lewis’s Bureau of Political-Military Affairs handles approval of foreign weapons sales.) By “our” Lewis meant European allies, although she went on, in this December 2023 speech, to identify a similar dynamic in Asia. But is it politically or economically possible to internationalize U.S.-allied defense production? Can such an expansion be secure, in cyber and other terms? Will U.S. defense companies be willing to share the risks and profits of production with overseas partners? Will Congress, which determines the contours of defense spending, be willing to let them?

As the international system divides into two separate and distinct spheres for tech innovation, telecommunications, and military technology, one dominated by the U.S. and the other by China, the process has many potential disruptors. The greatest is that the U.S. will be unable to manage this new and untried variety of internationalism.