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flaneur musings by teodor mitew Posts

US Joint Forces Command and global strategy

This, a strategic study by the US Joint Forces Command, is a thoroughly fascinating read.  The part of immediate interest  is of course the section on energy, and the prediction of oil shortages made already in the introduction by the commander of the USJFC General Mattis.

“By 2012, surplus oil production capacity could entirely disappear, and as early as 2015, the shortfall in output could reach nearly 10 million barrels per day.”

And then this:

“While it is difficult to predict precisely what economic, political, and strategic effects such a shortfall might produce, it surely would reduce the prospects for growth in both the developing and developed worlds. Such an economic slowdown would exacerbate other unresolved tensions, push fragile and failing states further down the path toward collapse, and perhaps have serious economic impact on both China and India.”

The rest of the text is equally interesting however. For starters, Mattis is a Marine, and the Marines seem to have been very interested in Fourth Generation Warfare lately. There are plenty of Sun Tzu references throughout, and the depth of the analysis is fascinating.

Joint Operating Enviornment 2010

China links

“What’s at Stake in Kyrgyzstan?” by Ariel Cohen, Wall Street Journal, 14 April 2010.

“Bismarck holds lessons for a rising China,” by Wen Liao, Financial Times, 14 April 2010.

The recent action in Kyrgyzstan prompted a lot of speculation on spheres of influence, hands under the table belonging to the usual suspects, the great game, etc.  Tom Barnett has some very insightful comments on China’s role in this and the wider neighborhood. This  relates in a way to the earlier post on complexity – the Chinese do not engage as much with the ‘center’ of adjacent systems, but instead try to interconnect economically with the local ‘peripheries’. A low-radar high-impact strategy. Key bit from Barnett for me:

“If anything, China’s rise and the growing organized resistance it generates means its diplomacy is arguably the biggest change-agent on the planet right now–even bigger than our own, because everybody is simultaneously adjusting to and preparing against China’s trajectory.”

Dealing with entropic complexity

John Robb over at Global Guerrillas has an interesting post on the root problem in dealing with entropic complexity (entropic because of the inevitability of collapse) – influenced by the work of Quigley and Tainter. As he narrates it, the key issue is the uniqueness of each system at the level of its smallest nodes – the entities/actors enacting the system. In other words, whether it is the international wheat market, the English Premier League, or the Australian banking system, while there are certain structural similarities once the systems reach a certain level of complexity (network power laws, etc) at the most local level each system is absolutely unique, and differs even from ‘similar’ systems next door. Furthermore, the local level is the fastest changing part of a system, in that it is the closest to the inputs (of course all levels are local as actor network theory argues, but that is all too often not understood), and consequently when viewed over time there grows a chasm between the fluidity of the local and the structural integrity of the wider system. As Robb words it:

The need for evolutionary advances at the local level will always outstrip the pace of evolutionary change at the center.  When the mismatch grows too large, the entire system collapses.

Of course, Robb forgets that every system is always local at every layer of its network, the center and the periphery are equally situated in a local setting, and the problem he describes is not one of miscommunication between local and global, but of breakdown of translation between equally local layers. The solution Robb proposes is one of resilient local communities existing in some sort of semi-autonomy from a wider system. This of course has been an old political dream of both the far left and the far right. Interestingly though, the Austrian economic school and Murray Rothbard in particular have long argued for the independent city-state as the optimal politico-economic entity on a global scale – I don’t think Robb is aware of that though.

The collapse of complex systems

There is a lot to be said for the inevitability of a complex system’s collapse, starting from the second law of thermodynamics, going through the costs of rising complexity usually purchased at the expense of system stability, and ending with the crucial point where a system’s capacity to adapt to a changing environment fizzles out precisely because of the need for stability.  This inevitability seems to hold true for all kinds of complex systems, from bio-ecologies, to organizational models and societies. Couple of fascinating posts on this:

In his  The Collapse of Complex Business Models, Clay Shirky makes an interesting argument on the future of the current business model of media production. Basing on Joseph Tainter’s The Collapse of Complex Societies, and using as an example TV companies, Shirky argues that the active participants of complex systems are at the end simply unable to integrate a new rule-set into the complex structure of the system, therefore causing the at first paradoxical situation where ‘the most powerful/connected/etc’ are the least capable of innovating to survive. As a media company how do you compete with content such as  Charlie bit my finger when your content production costs are astronomical by comparison, and you cannot afford to lower them if you want to remain in existence as an organisation? The answer is – you can’t. Which comes a long way in explaining Murdoch’s desperate attempts to shore up the defenses and patch up the walls of his crumbling empire.

John Robb’s The Simplification of Complex Societies takes that argument to the complexity of the present global society, and unsurprisingly concludes that collapse is imminent, albeit with the caveat that there is a way out, as pointed by China’s successful transition from Maoist barbarity by allowing totally unregulated innovation at its societal periphery (arguably the largest and most successful peasant revolution in human history).  While predicting the imminent  collapse of capitalism is a hobby century-and-a-half old, there is a lot to be said about the growing layers of complexity involved in international governance, financial and otherwise. Plenty to ponder.

Barcelona vs Arsenal

I am still in mild shock after watching that game… Barcelona produced probably the best football ever in the first half, a truly enchanting performance. I am reminded of Marcelo Bielsa‘s famous words:

“Totally mechanised teams are useless because they get lost when they lose their script. But I don’t like either ones that live only on the inspiration of their soloists, because when God doesn’t turn them on, they are left totally at the mercy of their opponents.”

The thing with Barcelona is that they have struck the golden balance between the background hum of the tiki-taka system (4-3-3) and the dizzying virtuosity of the soloist (Messi).

The tiki-taka:

Some more tiki-taka:

China links

Interesting perspectives on China, Pettis is a professor and Beijing University, and Roach is the Chairman of Morgan Stanley Asia.

China is misread by bulls and bears alike, by Michael Pettis, FT.com

“Will China collapse? No. It may have a painful financial contraction, but this will not necessarily lead to a collapse in growth. Instead it will grind away at its overinvestment and excess capacity, which, with a reversal of the favourable demographics enjoyed since the mid-1970s, will slow growth sharply, but this will coincide with three more favourable circumstances.

First, China will continue to urbanise rapidly, which will raise household income and create new sources of growth. Second, even as the workforce declines, increased education and infrastructure spending will raise worker productivity. Third, a sharp contraction will force Beijing finally to liberalise the financial system and transfer resources from the inefficient state sector to small and medium enterprises, increasing productivity.”

Blaming China will not solve America’s problem, by Stephen Roach, FT.com

“The US would be far better served if it faced up to why it is confronted with a massive multilateral trade deficit. America’s core economic problem is saving, not China. In 2009, the broadest measure of domestic US saving – the net national saving rate – fell to a record low of -2.5 per cent of national income. That means America must import surplus saving from abroad to fund its future growth – and run current account and trade deficits to attract the foreign capital. Thus, for a savings-short economy, there is no escaping large multilateral trade imbalances.”

As usual, the devil is in the details, and the more uncomfortable the details – the bigger the devil.