Wednesday, November 26, 2008

The Falling Price of Oil

The price of oil right now is sixty percent off its July record price. Speculation certainly played its role in the rising prices of the last few years, as Amy Myers Jaffe (with whom I had an exchange in the journal Survival last August) pointed out-and I agree that the abandonment of oil by the speculators played its role in the recent drop. So did the smothering of the earlier, strong demand growth by the stiff $150 a barrel price tag (and a global economic crisis).

Nonetheless, while providing some much-needed relief, these developments do not change the essential picture. Even if demand is slightly down in 2008-9 from earlier years, this will not last forever. Indeed, the lowered prices are setting the stage for new consumption growth-just as world demand grew again in the 1980s (though, as the current economic crisis demonstrates, there are plenty of reasons to think the road ahead is going to be a rocky one, the availability of energy supplies only a part of that). And barring unlikely regulatory measures, the speculators will be back.

More importantly, the old causes for concern that got another, long overdue hearing during the price rises of 2003-08 remain. Known oil supplies continue to be used up much more quickly than new supplies are being discovered, and the process of getting production up and running at new fields (a decade or more) remain as long as before. No new reason has appeared to think that the reserves of the OPEC countries have not been significantly overstated. The theory of peak oil is no less (or more) valid than it was back in July. And the potential for unconventional oil to fill the gap between supply and demand that peak theorists have long expected to emerge in the next decade is unchanged from what it was not too long ago (10 or 11 million barrels a day, no more).

This makes the question, as I put it in August, not whether the price of oil will drop (as it already has), but how far, and for how long? And when it starts going up again, as it almost certainly will, how far and how long will that go on too? The end of the oil age was never going to be a linear thing, and the worst mistake we can make at this moment is to pretend that things were really fine all along, that the calls for sounder energy policy in the last few years were nothing but hysteria, and abandon conservation efforts and the development of alternative energy sources-the way we did in the 1980s, when R & D and other efforts in this area fell off, resulting in a pattern of underinvestment that set us back decades, particularly in the U.S., but internationally as well.

Those mistakes, which set us up for later difficulties, must not be forgotten by anyone purporting to guess at the future. I only hope they will not be repeated.

In The News

Here's another piece on that report about a Pentagon program to develop human-hunting robots.

A Small(?) Correction
11/17/08
Parameters ("The Next Wave of Nuclear Proliferation?") and Space Review ("A Russian Resurgence? (Part Two)") Articles Up
11/17/08
"What Killed the Robot Soldier?"
11/16/08
Violent Politics, by William R. Polk
11/14/08
In The News (Geoengineering, the Russian navy, Pentagon finances)
11/14/08
New Article Out in the Space Review: "A Russian Resurgence? (Part One)"
11/10/08
Rethinking Military History, by Jeremy Black
11/1/08

Tuesday, November 25, 2008

Societal Complexity and Diminishing Returns in Security (Continued)

Rising Security Costs
Making matters worse is the rising cost of the forces required to provide a given level of security, let alone the higher one that a society with depleted slack and more sensitive and numerous vulnerabilities would appear to require. Security forces, after all, are no less prone than other societal institutions to becoming more complex or to showing diminishing returns to investment in complexity.

These trends are exemplified by the increasing concern with asymmetrical warfare. While the term has been badly abused in the past decade, the focus in such discussions is generally on how smaller powers can use low-technology weapons and commercially available resources to defeat more powerful militaries.76 Put in the language of complexity theory, it can be described as a less complex force's strategy for exploiting the vulnerabilities of a more complex opponent. Not surprisingly, these scenarios typically assume that small powers are on the defensive against an enemy invested in "heavy metal" weapons, vulnerable to global public opinion, and with a low tolerance for casualties—in other words, an opponent operating with little slack.77

The entry of weapons of mass destruction into such scenarios only highlights the exorbitant cost of reliably defeating (rather than deterring the use of) those weapons, a mission likely to be one of the principal sources of new military investment in the years to come, as with U.S. investments in missile defense. The ability to reliably shoot down such missiles poses extremely difficult problems, sufficiently great that whether it can be done at all is highly controversial.78 Even though missile defense certainly poses unique technical challenges, the larger problem is arguably its being a new kind of mission, namely planning for confrontations with the "strength in madness" of irrational actors.79 Arguments for missile defense assume an opponent prepared to strike despite the certainty of its devastation in a counterattack, and so is looked to for a level of security far beyond the levels traditional realist calculations were meant to provide.80

Certainly, many states have responded to these various challenges simply by buying less in the way of defense, spending a smaller part of their incomes on their militaries. Such reductions, however, may be illusory, the character of security spending instead shifting, given that measurements of defense spending (for instance, as a percentage of GDP) tend to cover solely military expenditures. Law enforcement and emergency management units, let alone private security expenditures, are simply not represented, but these are significant and growing. Largely excluding military expenditures, the United States spends $100 billion a year on homeland defense, approximately 1 percent of its GDP.81 Law enforcement cost the United States 1.57 percent of GDP in 1999.82 According to a conservative estimate, private business spends $55 billion annually on private security in the United States (another 0.5 percent of GDP), a figure expected to rise by 50-100 percent as a consequence of the September 11 terrorist attacks.83

All of this suggests that the portion of modern economies devoted to defense spending may be significantly underestimated by the conventional measures by 3 percent or more. Added to the elevated level of defense spending following the September 11 attacks, far more than 4 percent when the costs of operations in Iraq and elsewhere are included, it appears that U.S. spending on security has returned to Cold War levels. Although the argument can be made that this is only because Cold War-era expenditures on criminal justice and private security are not included in such a comparison, this would require ignoring the presently elevated importance of such expenditures. The line between war and crime has become increasingly blurred as nonstate actors such as warlords and criminal syndicates become the principal participants in armed conflict, largely subsidized by illegal activities such as drug trafficking, and for that matter, the criminalization of states.84 The same is true for the agencies combating such organizations, where the line between military and police forces in prosecuting the war on drugs or protecting states from terrorist threats to the homeland has become blurrier, a point raised by the room for argument over whether al-Qa'ida is a criminal rather than military threat.85 In either case, however, the cost of law enforcement rose 140 percent in relative terms in the United States from 0.65 percent of GDP in 1965 to 1.57 percent (as mentioned above), and private security spending is generally thought to have risen over the period as well. As observers sometimes put it, there were twice as many public police as private ones in 1970, but the reverse was the case by 1990, despite the large jump in public expenditure on law enforcement.

Consequently, a comparison between figures including these other categories of security spending in addition to defense still suggests a trend of diminishing returns to these investments. The movement in this direction is only continuing with the war on terror. This fact appears doubly problematic when the information burden is considered alongside the financial one. New technologies and a rising volume of communication and trade continually increase the amount of activity that must be watched, and it seems that the burden is already unsustainable. An examination of the events prior to September 11 suggests that the problem was less one of inadequate intelligence collection than inadequate processing and coordination.86 The National Security Agency, for instance, was already collecting far more intelligence than it could analyze effectively or quickly. Congressional inquiries showed an enormous backlog of unexamined communication elsewhere, totaling "millions of hours of talk by suspected terrorists—including 35% of all Arabic-language national-security wiretaps by the FBI—had gone untranslated and untranscribed."87 One notable example was a message since interpreted as warning of the attack, but nottranslated until the next day, despite the priority given to al-Qa'ida communications.

The problem has likely worsened as a result of the war on terror, given that the number of wiretaps tripled after the attack, and the difficulty government agencies have had acquiring additional personnel with the requisite linguistic skills.88 Over the longer term, the rapid growth in the volume of communication will outstrip anything likely to be achieved by efforts to hire more analysts; simply keeping up with the rise in email flows would mean watching a volume of communication growing by about 16 percent a year. Reforms hinging on stepped-up intelligence collection, epitomized by the proposed Total Information Awareness program, may only worsen the problem by gathering massive amounts of data acknowledged to be of minimal security value.89 "More" is simply not synonymous with "better" in this case.

Conclusion
Investments in complexity seem to have passed a point of diminishing returns in the area of security by creating higher levels of vulnerability, which can only be borne by disproportionately rising security expenditures. Less slack exists to absorb shocks; more points of attack emerge, as do more connections for radiating the effects of the attack throughout the whole of a system; and the means for defending those points becomes more costly.

The result is a strained society under constant pressure to do more with less. In some cases, however, the reverse is likely to be what actually occurs, the actors in question accomplishing less when more needs to be done. A search for alternatives to the continued pursuit of diminishing returns is a logical response, to stop investing in areas that do not pay off and look to investing in those that do. One way may be to concentrate on ameliorating the maladaptive effects of adaptation, as by building more fuel-efficient automobiles to curb pollution and dependence on unreliable foreign energy supplies. Of course, the diminution of slack means fewer resources with which to pursue such approaches, and the tendency toward diminishing returns to complexity generally implies less promise, but certain policies could well pay off, as with the example given above.

The long-term solution to such problems, as Tainter suggests, is likely to be a new technology or an "energy subsidy" (i.e., the acquisition of greater resources through expansion). Given that mere resource extraction has reached its limits as a solution to the problem of diminishing returns, a technological solution is more necessary than ever, suggesting another area for careful investment for producing increasing returns. The precise character of the technological solution, however, is far from obvious. Investment in information technology, widely touted as the area of increasing returns, is insufficient by itself given its dependence on mechanical industries and a fossil-fuel energy base. Moreover, some of the ways in which it is presently exploited mayeven contribute to the problem.90 Even if government and business have made unwise use of the available technologies, however, and more restrained policies are deemed to be well in order, more research and development maybe called for. The same growth in computing power that has accelerated equipment depreciation may also enable advances in artificial intelligence androbotics, allowing them to bear much of the burden of complexity in thefuture.91 Moreover, where information technology has been the object of overinvestment, areas such as renewable energy sources have arguably seen underinvestment.

At the same time, fortifying or monitoring everything must be explicitly recognized as impossible, and security as inherently imperfect. Certain improvements in infrastructure design or intelligence collection may prove rewarding, but these are likely to be comparatively modest in contrast with terrorist- proofing whole societies or "total information" efforts—such as, perhaps, concentrating improvements on key nodes in scale-free-type networks. From a societal-level perspective, the best course is likely to be decoupling key systems so that attacks on any one point do less damage, and certain technologies could facilitate this. The renewable energy sources most likely to supplant fossil fuels have the potential to underlie a highly decentralized system of energy production and distribution.92 A move to more numerous, smaller airports and aircraft could do this for transportation.93 "Desktop manufacturing" and variants on it, may offer a basis for manufacturing that is at once more efficient and less tightly coupled, potentially culminating in viable, nearly self-sufficient microfactories in the future.94

Finally, assessments of security costs must count private security and law enforcement and emergency services expenditures as part of a state's spending on security: for example, baggage scanners should be recognized as just as much a defense buy as a fighter plane. Better accounting needs to be made of hidden costs such as higher insurance premiums resulting from terrorism. With or without such accounting, it is admittedly less clear whether investment in areas such as police and private security has yet reached a point of diminishing returns. What is clear, however, is that the relative and absolute cost of these activities has increased massively in a relatively short period of time, and with uncertain results.

Better accounting may contribute to better decisionmaking over the long term, but in the end the solution is likely to remain primarily technical. Of course, there is a danger in pinning the hopes for resolving such pressing problems on unproven technologies. History is replete with technological revolutions that naysayers said would never happen. There have also been disappointments, however—for example, the overoptimistic claims about space exploration and commercial fusion. It is also dangerous to ignore the significant downsides that exist to these technologies, or to disregard the fact that the "social ingenuity" (to borrow Thomas Homer-Dixon's phrase) for implementing them must go hand in hand with the technical ingenuity that created them.95 Nevertheless, their playing a critical role in a solution to this problem is a possibility, and one that should be of concern not only to futurists but to students of security as well.

Footnotes
1. Joseph Tainter, The Collapse of Complex Societies (New York: Cambridge University Press, 1988), pp.91-126, 209-216.

2. Gene I. Rochlin, Trapped in the Net: The Unanticipated Consequences of Computerization (Princeton, N.J.: Princeton University Press, 1999), p.213.

3. Robert Gilpin, War and Change in World Politics (New York: Cambridge University Press, 1981), pp.80-81; and John J. Mearsheimer, The Tragedy of Great Power Politics (New York: W.W. Norton, 2001), pp.76-79.

4. T.F.H. Allen, Joseph Tainter, and Thomas W. Hoekstra, Supply-Side Sustainability (New York: Columbia University Press, 2003), p.346.

5. Thomas Homer-Dixon, The Ingenuity Gap: Facing the Economic, Environmental, and Other Challenges of an Increasingly Complex and Unpredictable Future (New York: Alfred A. Knopf, 2000), pp.111-115.

6. Charles Perrow, Normal Accidents: Living with High-Risk Technologies (New York: Basic Books, 1984), p.78.

7. Allen, Tainter, and Hoekstra, Supply-Side Sustainability, p.64.

8. W. Brian Arthur, "On the Evolution of Complexity," in G. Cowan, D. Pines, and D. Meltzer, eds., Complexity: Metaphors, Models, and Reality (Cambridge, Mass.: Perseus, 1994), pp.65-78.

9. Stuart Kauffman, At Home in the Universe: The Search for Laws of Self-Organization and Complexity (New York: Oxford University Press, 1995), p.297.

10. Ibid.

11. Arthur, "On the Evolution of Complexity," p.69.

12. Ibid., p.74.

13. Murray Gell-Mann, "Complex Adaptive Systems," in Cowan, Pines, and Meltzer, Complexity, p.22.

14. Ibid.

15. Phillip W. Anderson, "The Eightfold Way to a Theory of Complexity," in Cowan, Pines, and Meltzer, Complexity, p.11.

16. This is consistent with the recommendations of complexity specialists in the past, who have proposed two methods, "algorithmic complexity"—namely the quantity of information needed to reproduce a system's behavior—and "self-dissimilarity," which refers to the difference in characteristics of a system at varying levels of analysis. For their treatments of these respective approaches, see George Chatin, Algorithmic Information Theory (Cambridge: Cambridge University Press, 1987), pp.91-126; and David Wolpert and William Macready, "Self-Dissimilarity: An Empirical Measure of Complexity," Working Paper No. 97-12-087 (Santa Fe: Santa Fe Institute, 1997).

17. Rochlin, Trapped in the Net.

18. The change in Europe's case has been from 6.9 percent to 16.9 percent; in Japan's, it has been from 7 percent to 16 percent. Organization for Economic Cooperation and Development (OECD), "Data—ICT Investment in OECD Countries, 1980-2000," http://www.oecd.org/dataoecd/45/20/2766404.xls.

19. Andreas Schafer and David Victor, "The Past and Future of Global Mobility," Scientific American, Vol. 277, No. 4 (October 1997), pp.58-61.

20. World Trade Organization, International Trade Statistics, 2001 (Geneva: World Trade Organization, 2001), Table II.1. Table II.1 can be located at http://www.wto.org/english/res_e/statis_e/its2001_e/its01_longterm_e.htm.

21. This comprises 30 percent of world trade in manufactures and is growing more rapidly than trade in finished products according to a recent study. Alexander J. Yeats, principal economist, Development Research Group, World Bank, "Just How Big Is Global Production Sharing?" January 1998, http://www.econ.worldbank.org/docs/347.pdf.

22. International Monetary Fund, World Economic Outlook: A Survey by the Staff of the International Monetary Fund (Washington, D.C.: International Monetary Fund, 2000), pp.171-173.

23. Paul Kennedy, Preparing for the Twenty-first Century (New York: Random House, 1993), pp.65-81; Allen, Tainter, and Hoekstra, Supply-Side Sustainability, pp.351-369; and W. Brian Arthur, "Increasing Returns and the New World of Business," Harvard Business Review, Vol. 74, No. 4 (July-August 1996), pp.100-109.

24. The lower productivity growth of the service economy is sometimes offered as an explanation for why mature economies grow more slowly. Gilpin, War and Change in World Politics, p.165. Walt Whitman Rostow, The World Economy: History and Prospect (Austin: University of Texas Press, 1978), pp.270-273.

25. Allen, Tainter, and Hoekstra, Supply-Side Sustainability, pp.83-95. Health care costs increased 50 percent faster than the incomes of OECD states in the 1990s. "Health Spending Outpaces Economic Growth," OECD in Washington, No. 37 (September 2002), p.2. OECD, "Education at aGlance—OECD Indicators, 1998," November 23, 1998, http://www1.oecd.org/media/publish/pb98-42a.htm. Between 1990 and 1995, the cost of education rose more quickly than GDP in fourteen of nineteen OECD countries.

26. Michael E. O'Hanlon, Technological Change and the Future of Warfare (Washington, D.C.: Brookings, 2000), p.194.

27. Arthur, "Increasing Returns and the New World of Business," pp.100-109.

28. Allen, Tainter, and Hoekstra, Supply-Side Sustainability, p.368.

29. Indeed, it is possible that information technology has been an area of overinvestment. Rochlin, Trapped in the Net; and Roland Spint, "What Statistics Do and Do Not Tell Us About Economic Growth," OECD Forum 2003, http://www1.oecd.org/forum2003/speeches/spant.pdf.

30. This happened even as the level of world trade rose annually by 5.6 percent in the 1980s and 7 percent in the 1990s. World Trade Organization, International Trade Statistics, 2001.

31. Spint, "What Statistics Do and Do Not Tell Us About Economic Growth."

32. Clifford Cobb, Ted Halstead, and Jonathan Rowe, "If the GDP Is Up, Why Is America Down?" Atlantic Monthly, Vol. 276, No. 4 (October 1995), pp.59-78; and Jonathan Rowe and Judith Silverstein, "The GDP Myth: Why 'Growth' Isn't Always a Good Thing," Washington Monthly, Vol.31, No. 3 (March 1999), pp.17-21.

33. Cobb, Halstead, and Row, "If the GDP Is Up, Why Is America Down?"; and Row and Silverstein, "The GDP Myth."

34. The slowing of growth in the tax base supporting the government in question aside, such circumstances are also suggestive of the government's own investments in complexity being to diminishing returns, as with its ability to provide social services.

35. "International Fiscal Comparisons," in Department of Finance, Canada, Fiscal Reference Tables, October 2002, http://www.fin.gc.ca/frt/2003/frt03_9e.html.

36. Central government outlays in the Group of Seven countries rose from 32.1 percent to 40.3 percent of GDP during the 1970-2002 period. Gross debt rose from 41.8 percent to 78.1 percent between 1977 and 2002. Although budget deficits shrank during the boom of the late 1990s, they have since returned to their former levels, running at 3.7 percent in 2002. Ibid.

37. OECD, "Education at a Glance—OECD Indicators, 1998"; Barry Bosworth, Prospects for Savings and Investment in Industrial Countries, Brookings Discussion Papers No. 113 (Washington, D.C.: Brookings, 1995); and OECD, Economic Outlook, No. 69 (June 2001), p.182.

38. Congressional Budget Office, "A 125-Year Picture of the Federal Government's Share of the Economy, 1950 to 2075," long-range policy brief, July 3, 2002, http://www.cbo.gov/showdoc.cfm?index?3521&sequence=0.

39. In the United States, mandatory spending rose from 32 percent to 59 percent of the federal budget between 1962 and 2002.

40. Congressional Budget Office, The Budget and Economic Outlook: Fiscal Years 2004-2013, http://www.cbo.gov/showdoc.cfm?index=4032&sequence=0. Old age spending alone is projected to rise by 3-4 percent of GDP by 2050 from the present level of 7.5 percent. OECD, Economic Outlook, pp.145-167.

41. Lester Thurow, The Future of Capitalism: How Today's Economic Forces Shape Tomorrow's World (New York: Penguin, 1996). The U.S. savings rate—an extreme example, but with parallels elsewhere—dropped from 8 percent in 1980 to 1 percent by mid-2002. Milt Marquis, "What's Behind the Low U.S. Personal Savings Rate?" Federal Reserve Bank of San Francisco, Economic Letter, No.2002-09, March 29, 2002. Payments on debt as a percentage of household income have risen gradually from 12.46 percent in 1981 to 14.02 percent in 2003, driven largely by a steady rise in mortgage payments. Federal Reserve Board, press release, "Household Debt Service and Financial Obligations Ratios," http://www.federalreserve.gov/releases/housedebt/default.htm. Debt as a proportion of income also rose from 56 percent to 81 percent of disposable income between 1983 and 1994—and 100 percent by the end of the decade. Glenn B. Canner, Arthur B. Kennickell, and Charles A. Luckett, "Household Sector Borrowing and the Burden of Debt," Federal Reserve Bulletin, April 1995, p.323; and David Broder, "Our Crushing Personal Debt," Washington Post, September 1, 2002.

42. Office of Management and Budget, Executive Office of the President, Historical Tables: Budget of the United States Government, Fiscal Year 2003 (Washington, D.C.: U.S. Government Printing Office, 2002), p.116.

43. Federal revenue was 6.8 percent of GDP, compared with 18 percent in 2002. Debt relative to GDP was 52.4 percent in 1940, compared with 60 percent in 2002. Even in 1944, at the peak of spending during World War II, federal revenues were 20.9 percent of U.S. GDP, compared with 20.8 percent in 1999—tax levels being as high in peacetime during the 1990s as at the height of that conflict. Ibid.

44. Federal debt fell from 121.6 percent to 32.5 percent of GDP between 1946 and 1980. Office of Management and Budget, Historical Tables.

45. Between 1952 and 1960, defense spending ranged from 9.3 percent to 14.2 percent of GDP, but during those same years gross debt dropped from 74.3 percent of GDP to 55.9 percent. Between 1981 and 1988, defense spending ranged from 5.3 to 6.5 percent of GDP, but the debt rose from 32.5percent to 51.9 percent, to eventually peak at 67.3 percent in 1996. Ibid., pp.116-117.

46. Peter Lieberman, Does Conquest Pay? The Exploitation of Occupied Industrial Societies (Princeton, N.J.: Princeton University Press, 1996), pp.25-28.

47. Martin Van Creveld, Technology and War: From 2000 B.C. to the Present (New York: Free Press, 1989), pp.307-308.

48. Perrow, Normal Accidents, pp.93-96.

49. Montgomery C. Meigs, "Unorthodox Thoughts About Asymmetric Warfare," Parameters, Vol.33, No. 2 (Summer 2003), p.9.

50. Ibid.

51. "U.S. Battles Iraq Pipeline Blaze," BBC News, August 18, 2003, http://news.bbc.co.uk/2/hi/business/3159135.stm.

52. Even then the resumption was only at partial capacity. "Iraq's Kirkuk Pipeline Needs Millions of Dollars' Worth of Repairs," CNEWS, March 9, 2004, http://cnews.canoe.ca/CNEWS/ World/Iraq/2004/03/09/375986-ap.html.

53. Industrial College of the U.S. Armed Forces, Strategic Materials, Industry Study 5240-18 (Washington, D.C.: National Defense University, Spring 2002), http://www.ndu.edu/icaf/IS2002/2002%20Strategic%20Materials.htm.

54. Rochlin, Trapped in the Net, pp.35-50.

55. Brian S. Wesbury, "The Economic Cost of Terrorism," September 11, One Year Later: A Special Electronic Journal of the U.S. Department of State, September 2002, http://usinfo.state.gov/journals/itgic/0902/ijge/ijge0902.htm.

56. Ibid.

57. U.S. House Committee on Transportation and Infrastructure, press release, "Financial Condition of America's Aviation Industry in Aftermath of September 11th Attacks to Be Focus of Congressional Oversight Hearing," September 20, 2002, http://www.house.gov/transportation/ press/press2002/release354.html.

58. "Boeing's Deliveries Off 28 Percent; Meets Lowered Goal," Boston Globe, January 6, 2003.

59. Paul Nyhan, "State Jobs: 9/11 Fallout Lingers," Seattle Post-Intelligencer, September 8, 2003, http://seattlepi.nwsource.com/business/138439_terroreconomy08.html.

60. Cardiff University Business School, press release, "Employment Turmoil in the Aviation Industry," January 18, 2002, http://www.cf.ac.uk/news/releases/0201/020118.html.

61. One high estimate is that the attacks produced a 7.4 percent drop in tourism for 2001 and 2002, with a loss of 10 million jobs. World Travel and Tourism Council, press release, "End of the Tunnel in Sight for Travel and Tourism—Recovery Forecast Mid 2002," March 17, 2002, http://www.wttc.org/mediaCentre/020317%20End%20of%20Tunnel%20TSA%202002.htm.

62. Office of Homeland Security, The National Strategy for Homeland Security, http://www .whitehouse.gov/homeland/book/, p.65.

63. One commonly cited estimate is $120 billion in damage to the U.S. economy alone. Wesbury, "The Economic Cost of Terrorism."

64. Perrow, Normal Accidents, p.73.

65. Seth Scheisel, "In Frayed Networks, Common Threads," New York Times, August 18, 2003. This attitude is not only deeply ingrained in business practices from Henry Ford and Frederick Winslow Taylor on, but is also consistent with current thought on risk assessment and cost-benefit analysis. See Perrow, Normal Accidents, pp.306-315; and Rochlin, Trapped in the Net, pp.51-73.

66. Thurow, The Future of Capitalism, pp.279-309.

67. Scheisel, "In Frayed Networks, Common Threads."

68. Barry Eichengreen, "The United States and the World Economy after September 11," in Craig Calhoun, Paul Price, and Ashley Timmer, eds., Understanding September 11 (New York: New Press, 2002), p.125.

69. Alberto-Laszlo Barabasi and Eric Bonabeau, "Scale-Free Networks," Scientific American, Vol. 288, No. 5 (May 2003), pp.60-69.

70. Ibid.

71. House Science Subcommittee on Technology, "The Love Bug Virus: Protecting Lovesick Computers from Malicious Attack," hearing report, May 10, 2000, http://www.nist.gov/hearings/2000/lovebug.htm.

72. Jean-Marie Guehenno, The End of the Nation-State, trans. Victoria Elliott (Minneapolis: University of Minnesota Press, 1995), pp.19-34.

73. Committee on Science and Technology for Countering Terrorism, National Research Council, Making the Nation Safer: The Role of Science and Technology in Countering Terrorism (Washington, D.C.: National Academies Press, 2002).

74. "Statement by U.S. Customs Commissioner Robert C. Bonner: Hearing on Security at U.S. Seaports, U.S. Senate Committee on Commerce, Science, and Transportation," February 19, 2002, http://www.customs.ustreas.gov/xp/cgov/newsroom/commissioner/speeches_statements/ archives/feb192002.xml.

75. Edward Luttwak, The Grand Strategy of the Roman Empire: From the First Century A.D. to the Third (Baltimore, Md.: Johns Hopkins University Press, 1979), pp.159-170.

76. Martin Libicki, "Rethinking War: The Mouse's New Roar," Foreign Policy, No. 117 (Winter 1999-2000), pp.30-43; and Michael T. Klare, "Waging Post-Industrial Warfare on the Global Battlefield," Current History, Vol. 100, No. 650 (December 2001), pp.433-437.

77. Libicki, "Rethinking War."

78. Nader Elhefnawy, "Four Myths about Space Power," Parameters, Vol. 33, No. 1 (Spring 2003), pp.131-132.

79. Zaki Laidi, A World without Meaning: The Crisis of Meaning in International Politics, trans. June Burnham and Jenny Coulon (London: Routledge, 1998), pp.105-122.

80. Keith Payne, Deterrence in the Second Nuclear Age (Lexington: University Press of Kentucky, 1996).

81. Office of Homeland Security, The National Strategy for Homeland Security, p.65.

82. National Center for Policy Analysis, "Using the Private Sector to Deter Crime," Study No. 181, http://www.ncpa.org/studies/s181/s181b.html; U.S. Department of Justice, Bureau of Justice Statistics, "Expenditure and Employment Statistics," http://www.ojp.usdoj.gov/bjs/eande.htm; and Bureau of Justice Statistics, Sourcebook of Criminal Justice Statistics,2001, http://www.albany.edu/sourcebook/.

83. Another cause of the airline industry's losses was the cost of elevated security measures required in the wake of the September 11 attacks, such as new baggage scanners that cost $4-$5 billion just to purchase. International Institute for Strategic Studies, Strategic Survey, 2001/2002 (London: Oxford University Press, 2002), pp.48-49.

84. Martin Van Creveld, The Transformation of War (New York: Free Press, 1991), p.116. For a discussion of the phenomenon of "criminalized states," see Jean-Fran├žois Bayart, Stephen Ellis, and Beatrice Hibou, The Criminalization of the Statein Africa (Bloomington: Indiana University Press, 1999).

85. Michael Howard, "'9/11' and After: A British View," Naval War College Review, Vol. 55, No. 4 (Autumn 2002), pp.11-22.

86. House Permanent Select Committee on Intelligence and the Senate Select Committee on Intelligence, Report of theJoint Inquiry into Intelligence Community Activities before and after the Terrorist Attacks of September 11, 2001, House Report No. 107-792, December 2002, http://a257.g.akamaitech.net/7/257/2422/24jul20031400/www.gpoaccess.gov/serialset/creports/pdf/fullreport_errata.pdf.

87. Daniel Klaidman and Michael Isikoff, "Lost in Translation," Newsweek, October 27, 2003, p.28.

88. Ibid.

89. The Total Information Awareness (TIA) program, which involved the use of a computer system to "mine data" from private databases in search of signs of terrorist activity is an example of a program likely to be beleaguered by the sheer expansion of the quantity of available data. Dr. John Poindexter, "Overview of the Information Awareness Office," http://www.fas.org/irp/agency/dod/poindexter.html. Although the TIA program was canceled, other data-mining programs remain. "Pentagon's Terror Research Shuffled to Other Agencies," USA Today, February 22, 2004, http://www.usatoday.com/news/washington/2004-02-22-terror-projects_x.htm.

90. Rochlin, Trapped in the Net.

91. Ray Kurzweil, The Age of Spiritual Machines: When Computers Exceed Human Intelligence (New York: Viking, 1999); and Hans Moravec, Robot: Mere Machine to Transcendent Mind (New York: Oxford University Press, 2000).

92. Lester R. Brown, Eco-Economy: Building an Economy for the Earth (New York: W.W. Norton, 2001), pp.97-120; and Union of Concerned Scientists, "Lessons from the August 2003 Blackout," September 15, 2003, http://www.ucsusa.org/clean_energy/renewable_energy/page.cfm?pageID=1248.

93. James Fallows, Free Flight: From Airline Hell to a New Age of Travel (New York: PublicAffairs, 2001).

94. For some thoughts on this matter, see Thomas K. Adams, "Radical Destabilizing Effects of New Technologies," Parameters, Vol. 28, No. 3 (Autumn 1998), pp.99-111. See also Douglass Mulhall, Our Molecular Future: How Nanotechnology, Robotics, Genetics, and Artificial Intelligence Will Transform Our World (Amherst, N.Y.: Prometheus, 2002); and Eric Drexler, Engines of Creation: The Coming Era of Nanotechnology (New York: Anchor, 1986).

95. Homer-Dixon, The Ingenuity Gap.

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Monday, November 17, 2008

A Small (?) Correction

I recently ran across a copy of Claire Berlinski’s There Is No Alternative: Why Margaret Thatcher, her biography (hagiography?) of Margaret Thatcher.

I have to admit I find the subtitle problematic: who really needs convincing that Margaret Thatcher "matters," as she puts it? The argument never seems to have been about her legacy's importance, but whether her ultimate impact on Britain and the world was positive or negative (a point that her selection of the infamous quote for the title captures much more effectively).

Still, the reason I've written this blog entry is not the choice of title, but what I found on the dust jacket, where the reader is informed that three decades after Thatcher's accession to the post of prime minister (this seems to be something of an anniversary piece), Britain "is the richest and most influential country in Europe" (for which the blurb of course credits the subject).

Now, I don't like to nitpick that sort of thing. No one's perfect. And small mistakes, however regrettable, do not necessarily invalidate a line of argument. But this one hits us in the face as soon as we pick up the book, and it's hard to see how it could have been made honestly, especially in light of the book's angle on the subject.

While I suspect that France and Germany are a bit ahead of Britain in influence (and certainly Russia is, if one counts it as part of the continent)-and many would say that Britain's influence has suffered alongside that of the U.S. in the last few years (and also, the increasingly evident rejection of the neoliberal path it helped to lead the way in charting)-one may allow the claim on the grounds that "influence" is hard to quantify.

One can't say the same about the claim that Britain is the richest country in Europe. According to the 2007 edition of the CIA’s World Factbook, Germany’s overall GDP ($2.81 trillion) is about a third larger, and France’s only very slightly smaller ($2.075 trillion to Britain’s $2.13 trillion).

Meanwhile, Luxembourg, Norway, Ireland, Iceland, Switzerland, Austria, the Netherlands, Andorra, Sweden, Denmark, Belgium and Finland all come in ahead of Britain when per capita GDP is considered. Even in per capita terms, Britain is only slightly ahead of Germany, with $35,000 per capita, to Germany’s $34,100; and actually behind France (and Spain), if one goes by the UN's Human Development Index instead.

And of course, that's all without saying anything about deindustrialization, trade deficits, inequality or the social baggage that comes with them, things GDP (which, incidentally, factors into the UN stats cited above) tends to ignore, problems which are generally much smaller in those continental economies of which celebrators of Thatcherism are so contemptuous.

In fact, one would be very hard-pressed indeed to find numbers so radically different as to fit the unambiguously glorious picture that Berlinski clearly wishes to promote.

In any event, as such promotion seems to be the main thing here, rather than the more balanced appraisal I'd hoped to find when the book first caught my eye on the shelf (rather than the "fair and balanced" sort of stuff Berlinski seems to specialize in, despite her concession that there was "immense collateral damage," but then, TINA, you know), I don't think I'm going to devote any more time to this book than that.

Parameters and Space Review Articles Up

My article, "The Next Wave of Nuclear Proliferation," is now online at the web site of the journal Parameters. You can check it out here.

The main idea-if atomic fission is the answer to the world's energy problems, then we're looking at a lot more risk of proliferation in the years ahead.

The second part of my article, "A Russian Resurgence?" is also up today at Space Review, and you can read it here. The focus in this section is on the ability of the Russian economy to support Russia's ambitions in space. Contrary to the hype, it's a mixed picture at best.

Sunday, November 16, 2008

"What Killed the Robot Soldier?"

Those interested in the evolution of combat robots should check out this piece detailing the story of SWORDS-interestingly enough, appearing in the Strange Horizons science fiction webzine.

Violent Politics, by William R. Polk
11/14/08
In The News
11/14/08
A Russian Resurgence? (Part One)
11/10/08
Rethinking Military History, by Jeremy Black
11/1/08

Friday, November 14, 2008

Violent Politics: A History of Insurgency, Terrorism & Guerrilla War, From the American Revolution to Iraq, by William R. Polk

New York: HarperCollins, 2007, pp. 304.

As readers of the recent literature on guerrilla warfare, this is a highly contentious subject. It may be a mistake to overlook the role of non-material factors like politics and morale in any type of warfare, but in interstate conflicts, wealth, technology and numbers make themselves felt in a way that is not the case with guerrilla warfare, which frequently sees the weak defeat the strong. Additionally, what constitutes "victory" tends to be more ambiguous, so that there is profound disagreement over what to make of particular campaigns. For instance, is one to chalk up Britain's counterinsurgency efforts in Malaya as a victory or a defeat? (The Communists were prevented from taking over the country--but the British also departed.)

Accordingly some writers present the guerrilla as virtually invincible, others as inherently futile. Max Boot's The Savage Wars of Peace, a self-described history of America's "small wars," for instance, depicts a few thousand American soldiers, sailors and marines venturing out, pacifying a country in short order, and going home time and time again, with the implication that counterinsurgency is a relatively simple matter, and success historically routine. By contrast, when Martin Van Creveld's books address the subject, they tend to read like listings of great power humiliations. His latest, The Changing Face of War: Lessons of Combat From the Marne to Iraq, is no exception.

William R. Polk's recent study, Violent Politics: A History of Insurgency, Terrorism & Guerrilla War, From the American Revolution to Iraq, leans strongly toward the latter view, albeit with important qualifications having to do with the fundamental assessment of the problem. Polk's book characterizes guerrilla warfare as a nationalistic response to the presence of a foreign occupier.

Unchecked, this response proceeds through three phases. In the first phase the insurgency, tending to begin with what may seem like a preposterously small number of active combatants "fight as terrorists" because they are "too few to fight as guerrillas." The actions they take may attract others alienated by the situation to them, and certainly generate government repression, reinforcing the process as embittered citizens also sign up. A successful outcome of this phase (for the insurgents) is their attaining a "critical mass for extended operations and achiev[ing] recognition as a national champion."

The conventional wisdom is that this "political" phase is eighty percent of the conflict, and Polk does not differ on that point. However, Polk offers a more nuanced view of the remaining twenty percent, which other authors often characterize as simply a military component, in his characterization of the next two phases.

In phase two-which accounts for another fifteen percent of the conflict-the guerrillas act to disrupt the functioning of the state as such, and substitute their own "counter-state" for it. They keep the government from being able to maintain order, collect taxes or operate basic services while the guerrillas may attempt to do some or all of these things. This is not a matter of holding ground for the guerrillas, the objective rather to "take control and win over the people."

The third phase-a mere five percent, though also entailing the bulk of the fighting-involves a turn to larger-scale military operations on the part of the guerrillas. This means an end to "small-scale, hit-and-run" and a shift toward regular warfare.

Polk's analysis is much stronger in its consideration of the first two phases than the third, and in particular what makes for a successful phase three. The selected historical examples do not clarify that part of the issue. Where many of these insurgencies met with success, as in the Spanish struggle against Napoleon, or the Yugoslav and Greek resistance during World War II, the guerrillas were often players inside of a much larger context of interstate conflict. (The same might also be said of the American Revolution, or the insurgency in South Vietnam.) In other cases, an exhausted and collapsing empire was fighting a rear-guard battle to hold on to its colonies (as with the Spanish in the Philippines, the French in Algeria and post-World War II Vietnam, or the British in Kenya). Little explanation is offered as to why post-World War I Ireland and Afghanistan-where in the 1980s, massive foreign support was certainly a factor-constitute exceptions to that pattern. (In the case of Ireland, a brief word about public opinion is presented as the decisive difference.)

Additionally, while this book's emphasis is on long-standing historical patterns, some more consideration would have been due the changes that have occurred during the two centuries of history this book surveys. There is virtually no discussion of the impact of urbanization, which has been strongly correlated with the prospects for rebellion and revolution occurring (as in Jack Goldstone's Revolution and Rebellion in the Early Modern World), but which in the analysis of some observers, makes it almost impossible for guerrillas to win (as Anthony James Joes contends in his recent study, Urban Guerrilla Warfare).

Nonetheless, it would be a mistake to linger on these shortcomings, because of the importance of what the book does get right, in particular its recognition that combat operations constitute a relatively small part of the conflict. In this, Polk's study echoes the assessment of contemporary conflict advanced by General Rupert Smith in his book, The Utility of Force (my review of which for Strategic Insights you can read here). Phase One is ultimately where the war is won or lost, the rest just a matter of putting off defeat-and so to be avoided barring a readiness to fight such a war indefinitely.

In The News

The most recent updates of Gyre.org include a lot of worthwhile articles, including a piece from Popular Mechanics about geoengineering for climate control purposes; a Christian Science Monitor article on the state of the Russian navy in the wake of the recent accident aboard the submarine Nerpa; and aa Boston Globe story on a report by the Defense Business Board arguing that the current U.S. defense budget is unsustainable given the current fiscal crisis.

A Russian Resurgence? (Part One)
11/10/08
Rethinking Military History, by Jeremy Black
11/1/08

A Long-Term Trend Toward The Depletion of Fiscal-Macroeconomic Slack in the World Economy? (Postscript)

The global financial crisis would seem an obstacle to the return to rapid, long-term growth suggested by some of the economic data from 2004 on (and quickly seized on by "optimists" like Fareed Zakaria). Oil prices are 60 percent off their record-breaking summer prices, but it remains to be seen how long that case of affairs will last, and with what effect on the global economy as a whole. My expectation, however, is that the first decade of the twenty-first century, like the 1980s and 1990s, will on the whole prove to have been one of slow (and in many ways, hollow) growth, especially if judged by the same criteria.

Where neoliberalism is concerned, many observers have suggested a backlash may be underway, pointing to more statist policies in Russia and Latin America, and even to (weak) signs of change in the advanced industrial countries, from the rhetoric of French president Nicholas Sarkozy to the election of Democrat Barack Obama (and a predominantly Democratic Federal legislature) in the United States. Nonetheless, one should not make too much of these signs; in Sarkozy's case, rhetoric has yet to be followed by action, while in the U.S. one would really have to strain to read into the recent election some referendum on the broad thrust of economic policy. Besides, the end of neoliberalism (and neoliberal globalization) has been prematurely declared on so many occasions before that one should take any such prediction with a grain of salt at this point. Watch what is done, not what is said.

-Nader Elhefnawy, November 2008

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Thursday, November 13, 2008

Are Territorial Military Occupations Becoming More Difficult?

By Nader Elhefnawy

Neoconservative Max Boot's 2002 book The Savage Wars of Peace: Small Wars and the Rise of American Power, a self-described history of America's "small wars" intended to sell the idea that empire is feasible and worthwhile, depicts a few thousand American soldiers, sailors and marines venturing out, pacifying a country in short order, and going home time and time again.

When I first read it, something seemed off about Boot's analysis. He made it seem too easy, and the events of recent years have helped clarify why that was. In the operations Boot describes, U.S. objectives were very limited, quashing an immediate, perceived threat, and otherwise leaving the countries much as they were, so that American forces were likely to return again in the not-too-distant future to do it all over again. By contrast, "proper" nation-building today entails the setting up of a stable government and functioning economy, then leaving with little expectation of a near-term redux.1

In short, territorial occupations are expected to accomplish far more than before. Of course, advocates of such operations point to the cases of Germany and Japan in the post-World War II period. However, these were anomalous in already having been economically viable industrial states, with significant, recent experience of modern civil society and democracy, and a high degree of ethnic homogeneity, eliminating the danger that ethnic or sectarian tensions would exert centrifugal forces in a moment of weakness. In short, it was a matter of getting the country up and running again, rather than building up what was never there in the first place (or dismantling what was there before and building up something entirely new), a much taller order.

The occupations of the immediate post-war period (of which the occupations of Germany and Japan were a part) represent exceptional rather than typical cases. U.S.-led occupations in Western Europe and Northeast Asia during those years represent six of the seven successful occupations that David Edelstein found out of a total of twenty-four he studied.2 A critical factor appears to have been the occupier's guarantee of the occupied nation's security against an external threat, specifically the Soviet Union, which quelled internal opposition.3 In other words, the rapid onset of the Cold War following the end of World War II created unique opportunities which are unlikely to recur in the foreseeable future.

Many observers also forget just how demanding the occupations were. The American presence in West Germany alone (and it should be remembered that there were also British and French zones) involved four hundred thousand troops. The U.S. occupation of Japan involved an even larger number of soldiers, four hundred and fifty thousand at its height--approximately one soldier for every 180 Japanese citizens.

Meanwhile, a number of developments have made occupation more rather than less difficult. Several of them have to do with changes in the countries to be garrisoned themselves, related to their modernization:

* Demographic expansion.
* Urbanization.
* Social mobilization.

Put simply, the populations to be administered and policed in the course of an occupation are larger; and are concentrated in much more complex environments. To give but one example, the population of Baghdad expanded twenty times between 1932 and 2006, producing a metropolis sprawling over some three hundred square miles, and containing seven million people.

That same urbanization, as well as higher levels of education, and greater access to media in virtually all locations, results in a population that is at least potentially more engaged politically, with predictable results. Moreover, all of these count for more in an age where conflict is characterized less by "industrial war" than "war amongst the people," to use General Rupert Smith's terms.4 Battlefield decisions count for far less, as do arms in general, these becoming more clearly just a way of creating conditions in which other "means and levers of power" can be brought to bear to produce the results. And given how slowly those levers work, conflicts "tend to be timeless, even unending."

All of this comes just as a number of other factors have combined to make it more difficult for the major military powers (and especially the developed states) to raise the kinds of military forces needed for long-term occupation:

* Again, demographics, or the graying of populations. Smaller youth cohorts mean smaller (relative) pools of manpower from which to draw armies. This trend is globally evident, but most advanced in North America, Europe, Russia, East Asia and Australasia, the regions containing the countries with the bulk of the world's military capability, and also the ones most likely to stage such interventions-with the countries where interventions are most likely usually in earlier stages of the process, resulting in a significant disparity.5
* Professionalization. The claim that modern armies can only be professional armies is an old one. Basil Liddell Hart made it after World War I, and again after World War II.6 He was proven wrong each time, but it may be that the claim is more valid today. Professional forces are necessarily smaller forces.
* Diminished civic militarism. This extends not only to the willingness to serve in the armed forces, but the willingness to pay for large defense establishments, or politically support operations, particularly when they are messy, lengthy and open-ended. That those operations are much less likely to relate to traditional territorial defense, and more likely to consist of constabulry missions, also makes such operations less gratifying to traditional patriotism, so that this is not simply a function of more pacifistic culture.7
* The "rising cost of war." As societies develop, they afford more (and often more attractive) career opportunities in civilian life to the ambitious. Nonetheless, this is offset somewhat by the reality of high structural unemployment and underemployment, especially among the young.
* Task specialization. It is arguable that there is an increasing divergence between the kind of army necessary for fighting and winning conventional conflicts; and one that might be effective at the tasks entailed by occupation duty. (Modern conventional forces have high support-to-combat ratios, and an emphasis on high-performance equipment of marginal value to such operations, for instance.) Responding to this reality, strategist Thomas Barnett has gone so far as to suggest the U.S. develop two, different forces (the "Leviathan" and "SysAdmin" forces, respectively), one for each task.8

Some observers will also point to the pressure on militaries to preserve their forces, and the enlarged role of the media. It is likely the case that the sensitivity to casualties has been exaggerated in the past, and that the same goes for the scrutiny to which the media subject such operations.9 Nonetheless, these too are factors, despite the exaggerations.

In short, there are very considerable, structural reasons why occupations have become more difficult, and the plain and simple truth is that there is no tactical, technological or political "silver bullet" which will resolve those difficulties. The only reasonable response for the foreseeable future is the recognition of the limits of military power in general, and in particular the capacity of even the strongest military powers to perform these sorts of missions. This means not undertaking given missions with unrealistic ideas about the size or length of the commitments they entail if they are to be done right, or overselling what occupations can do, in the course of moving toward a sounder balance between means and ends.

1 Incidentally, this was never an object for the British Empire (so often held up as a model imperialist by neoconservatives like Boot, and Niall Ferguson), which was ready to go to the greater lengths of permanently garrisoning its possessions and in cases, transplanting significant numbers of colonists.
2 The sole exception was France after the end of the Napoleonic wars. David M. Edelstein, "Occupational Hazards: Why Military Occupations Succeed or Fail," International Security 29.1 (Summer 2004), pp. 49-91.
3 Edelstein, p. 81.
4 The core of this argument can be found in chapter seven of Smith's The Utility of Force: The Art of War in the Modern World (New York: Alfred A. Knopf, 2007), pp. 269-307. You can also find it summed up in my review of the book for the journal Strategic Insights, which you can access here.
5 In 1950 the developed states accounted for about a third of the world's population; today they account for less than a fifth, with most of the world's population growth continuing in poorer and less developed states.
6 See Liddell Hart, Paris, or the Future of War (New York: Garland, 1925); Liddell Hart, Defence of the West: Some Riddles of War and Peace (London: Cassell, 1950).
7 One can also argue that where civic militarism has not decreased, it has been redefined, Andrew Bacevich arguing that militarism has actually risen in American society in recent decades, pointing to a shift from an emphasis on service to politically "supporting the troops." See Bacevich, The New American Militarism: How Americans Are Seduced By War (New York: Oxford, 2005)
8 See Thomas P.M. Barnett, Blueprint for Action (New York: Berkeley, 2006).
9 As Martin Van Creveld recently put it, "'media' has become an excuse for failure." See Van Creveld, The Changing Face of War: Lessons of Combat From the Marne to Iraq (New York: Ballantine, 2007), p. 217.

A Long-Term Trend Toward The Depletion of Fiscal-Macroeconomic Slack in the World Economy? (Author's Note)

This paper, published here for the first time, represents a continuation of a line of inquiry I had pursued in three articles I published in 2004, namely "Societal Complexity and Diminishing Returns in Security" (International Security, Summer 2004), "National Mobilization: An Option in Future Conflicts?" (Parameters, Autumn 2004), and "Feeling the Pinch: Societal Slack and Space Development" (Astropolitics, July-September 2004).

I opted not to pursue the publication of this paper through the usual channels for several reasons. One was that it was essentially a rewrite of the argument I had earlier advanced, with its main merit greater polish and more thorough research rather than a really fundamental development of the earlier thesis (though I do consider some new implications of that data in this essay). Another was my devotion of increasing attention to the issue of energy security, where I have concentrated my research and writing for academic publication since that time.

Prior to publishing this paper on this blog, however, I provided it with a thorough update, so that the statistics are current, and some more recent scholarship is referenced in the text.

-Nader Elhefnawy, November 2008

Continue.

A Long-Term Trend Toward The Depletion of Fiscal-Macroeconomic Slack in the World Economy? (Continued)

Assessing the Evidence, Considering the Consequences and Finding Explanations
Since the 1970s there has been a clear trend toward falling, stagnating and by some measures, even negative economic growth; falling saving rates; rising debt, both public and private; and tightened public finances, with budget cuts and tax raises both increasingly difficult, compared with the case in previous decades. The result is a vicious cycle that keeps those debts growing, while the weight of these debt burdens contributes to continued economic stagnation.

In short, the signs indicate that their fiscal-macroeconomic slack is decreasing as a proportion of their overall (and more slowly growing) resources, and their recent behavior reflects this, particular in a reticence about launching major new initiatives in recent decades (and indeed, a retreat from responsibility in at least some areas) that gave rise to much talk of "the decline of the state" (less fashionable than a few years ago, though the fundamentals of the discourse have changed little). It also bodes poorly for the likelihood of today's states taking preventive approaches to problems or to handle them when they are small, before they become impossible to ignore but much more costly to deal with. (In an area like global warming, the deficiencies of such an approach should be obvious.)

Examining the data, it becomes apparent that the 1970s represent a turning point, economic growth rates dropping sharply after that time, a development strongly related to the rapid growth of debt, relative to income, that also occurred during those years.33 Of course, it is the case that the exceptional growth of the 1950s and 1960s was tied to the rebuilding of Europe and Asia following the Second World War, a one-time event; the subsequent abandonment of the Bretton Woods monetary system, no longer viable after that recovery; and the disruption associated with the "energy crisis" of that decade.

Nonetheless, these have generally not been viewed as fully accounting for the change, and numerous explanations above and beyond these enjoy some currency. Mancur Olson famously proposed that the stability of industrial societies after the 1940s created opportunities for the emergence of "distributional coalitions"-interest groups-which have used public power to benefit themselves at the expense of overall economic efficiency.34 Given that monetarist thinking remains widespread, it is not surprising that many others blame central bankers for instituting what they see as "excessively" anti-inflationary monetary policies, while others have pointed to the growing weight of the service sector, with its comparatively slow productivity growth, as a factor.

However, others have noted that this pattern coincides with a shift toward neoliberal economic policies, making possible economic globalization in the (neoliberal) form in which we now know it (with its undeniable, massive increase of the complexity of economic life). They have even argued that the more regulated, "mixed" economies of the mid-century were simply more effective at "delivering the goods" than the policies of more recent years.35

The establishment of causality is more problematic. Historically, the literature has focused on the national impacts of national policies and their impacts, rather than more global studies.36 For instance, while it has often been noted that the elevation of trade barriers is a standard feature of successful industrialization, while their lowering has been characteristic of periods of "deindustrialization," little thought has been given as to what this means for the global economy as a whole. Even where these developments are problematic-and not all observers argue that this is the case with phenomena like deindustrialization-the liberal argument tends to run that local and temporary problems are the price paid for global and long-run benefit; that the cure would be worse than the disease, the pain surely greater under an alternative policy; even, as Margaret Thatcher famously put it, that "There Is No Alternative."37 Finally, the recent criticisms of neoliberal globalization that did take a broader, more international view have tended to focus on its social and ecological costs, quite apart from its economic costs, with rigorous analysis of the diminution of growth as such comparatively rare.

Nonetheless, enough work has been done in this and related areas for these critiques to at least point to some plausible connections between these policies, and the economic trends of the last three decades.

Wage-Productivity Gaps
Economist Ravi Batra has pointed to the expansion of wage-productivity gaps as a major obstacle for economic growth. The reason is that the drop in wages suppresses consumption, which can only be sustained by the accumulation of debt. At the same time, the weakness of consumption discourages investment in expanded production, and encourages its diversion into speculative channels-the buying and selling of assets rather than goods and services-which in turn negatively impacts financial stability and growth (the consequences of which Batra finds in the weakened economic performance of many advanced economies, the U.S. in particular).38 Neoliberalism and neoliberal globalization, by withdrawing government support for labor, weakening controls on investment flows (and with it, the mobility of capital), and intensifying international competition, has clearly contributed to such a situation, epitomized in what some have taken to calling "the China price."39

"Short-Termism"
The intensified competition and financialization discussed above have also contributed to a more general "short-termism," by which is meant the short time horizon of company managers prioritizing a short-term outlook over a long-term one, a tendency commonly connected with the increased influence that a swollen and unconstrained financial sector has attained over non-financial corporations (NFCs). However, the phenomena itself has been little studied in any serious way, because of the bias in the field in favor of examining the ways in which markets are efficient rather than inefficient, though there is now a small, but growing, academic literature on the subject.40

A widely noted addition to that literature in 2005 confirmed the tendency of corporate executives to favor "smooth earnings" and short-term stock prices over value, and a readiness to do this not only by way of accounting, but actions sacrificing research and development, maintenance, and other such essentials to achieve the desired results.41 Economist James Crotty has also made a compelling case that financialization has led to an emphasis on sustaining stock prices and fighting hostile takeovers (dependent on debt-financed stock buys and special dividends) at the expense of capital accumulation and innovation, and with increasing indebtedness as a result (as well as continuous cost-cutting pressures of the kind discussed by Batra, with their effects).42 It may also be the case that business responds in such a situation by deploying the resources that go to areas like R & D in different ways, one analyst arguing that the energy sector has reacted to the competitive pressures it faces by emphasizing "conservative innovations able to pay off in the short term" rather than "system-shattering" research.43

Long-range growth and innovation aside, the drive "toward leaner operations and ever-shorter time horizons" comes at the expense of the robustness and reliability of a business's operations, and it is at least plausible that this imposes other costs on the larger economy in which it operates, comparatively invisible because they are externalized from the business's own balance sheet.44 Utility companies offer a useful example. In the U.S. following deregulation, electricity companies pursued a gamut of cost-cutting measures, some of these at the price of grid reliability. While the issue has been little studied at the macroeconomic level, there is evidence that the damage done to the U.S. economy as a whole in this way may far exceed any savings it gains at that level.45

Ecological Damage and Resource Depletion
Finally, it is arguable that the new international business environment has contributed to the failure to address the depletion and pollution of natural resources by restraining government policy in this area and helping "reward" those states most willing to absorb such damage with growth (again, as in the case of China). While the tendency has been to write in terms of a trade-off between economic growth and ecology, the reality is that damage to the latter must inevitably diminish the former.

Economic expansion has, despite marked increases in resource efficiency, historically relied on expanded resource use, and the evidence has long been that such expansion has long breached its limits. An oft-cited estimate by the World Wildlife Fund in 1999 was that the world economy is now consuming resources equivalent to those of 1.2 earths, a figure that had risen to 1.4 earths by 2008, and is on track to reach the level of two earths by the mid-2030s.46 While GDP does not register such costs in a comprehensive way, it nonetheless registers some of the effects in slower or negative growth, and even though the global picture of the economic impact of these patterns is sketchy, in the 1990s the Asian Development Bank estimated that the economic costs of environmental degradation ranged from 1-9 percent of a country's gross economic product.47 According to that analysis, China alone suffered an 8 percent loss in the form of damage to its agriculture, production and natural resources from air and water pollution alone. Additionally, resource shortages are quickly felt in the form of slower growth, the most dramatic instance of which was perhaps the cost of rising energy prices in recent years, following the failure of the world's economies to move beyond fossil fuels after the high prices and short supplies of the 1973-1986 period.48

Neoliberalism and Public Finances
In addition to the broad economic consequences sketched above, it is worth noting that neoliberal globalization has also impacted public finances in more direct ways. Besides considering economic growth and the distance between current tax levels and the theoretical limits of capability as issues to keep in mind when considering the prospects for increased taxation, Christopher Hood raised a third point, namely the particular taxing options open to states. Neoliberalism and globalization have restricted the scope not only for tariffs (once an important revenue source for many states), but taxes on capital, marginal income and corporate taxes.49 While arguments have often been advanced that states can successfully reject the neoliberal path, globalization is more likely to harm than help such efforts.50

The result has been more regressive taxation, not only in the downward revision of many of these rates, but a greater dependence on "salary taxes," which affect lower- and middle-income taxpayers most, and increasingly, flat taxes well.51 Given widening inequality, soft job markets and wages that may be stagnant or even falling in their actual purchasing power (with all the consequences this has for consumption, and growth), this increasingly confines taxation to a smaller part of the overall tax base, and makes simple tax-to-GDP ratios (already problematic given GDP's failings as a measure of wealth) an underestimation of the strain on the system.52 Such situations consequently translate into greater difficulty increasing revenue, even during acknowledged national emergencies.53

Conclusions
There are at least the rudiments for making the case that the policies identified with neoliberal globalization (the reduction of labor protections, deregulated financial flows, etc.) are, by way of their impacts on consumption and investment, closely connected with the current tendency toward maladaptive investments in complexity (in their delivering slowing economic growth), and along with it, the (relative) erosion of fiscal-macroeconomic slack that recent decades have witnessed (as indicated by falling savings, the growth of public and private debt, and the tightening of government finances). Tentative as any argument along these lines necessarily is at this point, at the very least it can suggest future directions for research, and in turn, possible paths toward ameliorating the problems with which policy-makers have grappled with such clear lack of success since the 1970s.

1 Gene I. Rochlin, Trapped in the Net: The Unanticipated Consequences of Computerization (Princeton, New Jersey: Princeton University Press, 1999), p. 213.
2 Joseph Tainter, The Collapse of Complex Societies (New York: Cambridge University Press, 1988) 91-126, 209-216. According to his definition, complexity refers to "asymmetric relationships that reflect organization and restraint" between the parts of a system. Important characteristics of complex systems include large numbers of densely interconnected, highly interdependent components and nonlinear functioning.
3 For instance, internal-combustion vehicles solved a transportation problem, but had maladaptive effects in the form of pollution and a dependence on scarce fossil fuel resources. Murray Gell-Mann, "Complex Adaptive Systems," in Complexity, G. Cowan, D. Pines, and D. Meltzer, eds., (Cambridge, Massachusetts: Perseus Books, 1994), p. 22.
4 Seth L. Loyal, quoted in John Horgan, The End of Science (Reading, MA: Addison-Wesley, 1996), p. 288.
5 Philosopher Nicholas Rescher suggests four broad categories: formulaic complexity; compositional complexity; structural complexity; and functional complexity. These refer, respectively, to the volume of information needed to describe or produce a system, or resolve a given problem; the number or variety of elements within a system; the number, variety and elaborateness of relationships between those elements; and the number, variety and intricacy of a system's functioning. Nicholas Rescher, Complexity: A Philosophical Overview (New Brunswick, N.J.: Transaction Publishers, 1998), p. 9. These various types of complexity, however, while theoretically separable, tend to run together in practice; in every respect, a space shuttle is a far more complex machine than the Wright Brothers' Flyer.
6 Nader Elhefnawy, "Societal Complexity and Diminishing Returns in Security," International Security 29.1 (Summer 2004), pp. 155-156.
7 It may be reasonable to speak in terms of ecological-natural resource lack, but where economic production is concerned, this is very hard to disentangle from the technological base exploiting those resources.
8 It should be kept in mind that WTO numbers tend to be lower than those compiled by other institutions, such as the World Bank, and in particular the International Monetary Fund. The 2008 edition of the World Bank’s World Development Indicators offers the following data for the latter part of this period: a 2.9 percent a year growth rate for the years 1990-2000, 3 percent for 2000-2006. WB, Indicators 2008 (Washington D.C.: World Bank, 2008), p. 200. The International Monetary Fund’s World Economic Outlook 2006 offers a still higher 3.4 percent a year for the 1988-1997 period, and 4.1 percent for 1998-2007. IMF, Outlook 2006, p. 177.
9 World Bank, Indicators 2008, p. 195. This change is reflected in the indications of their shares in the figures for the total value of world merchandise exports, fuel and other mining products (and iron and steel) rising 17 percent annually for the years 2000-2006. The result was that where fuel represented just 10.2 percent of the value of world merchandise trade in 2000, it accounted for 15 percent in 2006. WTO, "World Merchandise Exports," in International Trade Statistics 2007 (Geneva: World Trade Organization, 2008), Table II.1, p. 43. The figures for 2000 were derived from the 2001 edition of the same annual.
10 For a discussion of this reconsideration of the estimates, see "A Less Fiery Dragon?" The Economist, Nov. 29, 2007. Accessed at http://www.economist.com/finance/displaystory.cfm?story_id=10209215. A forty percent downward revision in China's 2007 GDP means a five percent downward adjustment of global GDP.
11 Alan Freeman, cited in Heikki Patomaki, The Political Economy of Global Security: War, Future Crises and Changes in Global Governance (New York: Routledge, 2008), p. 103. A pre-publication version of Freeman's relevant paper can be found in "Globalization: economic stagnation and divergence," Jan. 20 2008. Accessed at http://mpra.ub.uni-muenchen.de/6745/1/MPRA_paper_6745.pdf.
This is all without considering the likelihood that the current figures are exaggerated by the understatement of inflation. Of course, inflation estimates were a factor in previous economic calculations, but because of the changes in the techniques used to estimate inflation (particularly innovations like "hedonics"), it seems plausible that recent figures reflect more distortion than the available estimates of earlier performance. Kevin Phillips, Bad Money: Reckless Finance, Failed Politics and the Global Crisis of American Capitalism (New York: Viking, 2008), pp. 80-89.
12 Clifford Cobb, Ted Halstead, and Jonathan Rowe, "If the GDP Is Up, Why Is America Down?" Atlantic Monthly 276.4 (Oct. 1995), pp. 59-78; and Jonathan Rowe and Judith Silverstein, "The GDP Myth: Why 'Growth' Isn't Always a Good Thing," Washington Monthly 31.3 (Mar. 1999), pp. 17-21.
13 Redefining Progress, "Genuine Progress Indicator: 1998 Executive Summary." Accessed at http://www.rprogress.org/projects/gpi/updates/gpi1998_execsum.html#top; Redefining Progress, "Redefining Progress' Genuine Progress Indicator (GPI) Rose Slightly in 2000-Alternative Economic Measure Remains $23,947 Per Capita Below The GDP," media release, Dec. 26, 2001. Accessed at http://www.rprogress.org/media/releases/011226_gpi.html. For the most recent available estimate, which has U.S. per capita GPI at $15,000 in 2005 (roughly where it was in 1978), see Dr. John Talberth, Clifford Cobb and Noah Slattery, The Genuine Progress Indicator 2006: A Tool for Sustainable Development (Oakland, CA: Redefining Progress, 2007). Accessed at http://www.rprogress.org/publications/2007/GPI%202006.pdf.
14 Indeed, this assessment suggests GDP growth has become increasingly divorced from meaningful economic progress. Talberth et. al., pp. 18-19.
15 "A sustained 1 percentage point increase in per capita output growth in industrial countries would over time lead to an almost 1 percent of GDP increase in the national saving rate." International Monetary Fund, World Economic Outlook, Sep. 2005, p. 98.
16 The OECD has reported falling households savings in every member country for which data was available between 1990 and 2004, save France and Norway. No aggregate figures were published, but there were national figures. The U.S. net savings rate fell from 7 to 0.8 percent; Germany from 13.9 to 11.1 percent; Japan from 13.9 to 5.1percent. OECD, Factbook 2005, p. 37. For an analysis of the drop in the developed world between the 1960s and early 1990s, see Brian Bosworth, Savings and Investment in a Global Economy. Washington D.C.: Brookings, 1993. pp. 55-62. He also offered an update of his analysis, which indicated the continuation of the trend, in "United States Saving in a Global Context," Senate testimony, Apr. 6, 2006. Accessed at http://www.senate.gov/~finance/hearings/testimony/2005test/040606abbtest.pdf. For U.S. data, see Bosworth, testimony, "U.S. Net Savings and Investment by Sector, 1960-2005," Table 1.
17 IMF, World Outlook, pp. 93-97. The observation should be qualified, however, by noting that the aging of a population places a downward pressure on national savings. IMF, p. 99. One study indicated that, in line with what economists call the "life cycle model," changes in savings rates in the developed world correlated with such demographic changes. Bosworth, Savings, pp. 62-66. The work of Burtless, however, argues that "other changes in the environment swamped whatever effects were caused by the demographic cycle" in the case of the advanced economies after the 1960s. See Gary Burtless, "Demographic Shocks and Global Factor Flows: Discussion," conference paper, 2001, p. 276. Accessed at http://www.bos.frb.org/economic/conf/conf46/conf46h2.pdf. For data on various regions, see Bosworth, testimony, "Gross Saving as Share of Regional GNI, Selected Years and Regions," Table 2b.
18 Where gross capital formation as a share of regional GNI fell in the U.S. from 19.7 percent in the 1980-9 period, to 17.3 percent in 1990-4, and rebounded to 18.7 in 2000-04, in Europe's case it fell from 21.7 percent in the 1980s to 19.9 in the 2000-04 period. The figures for Japan in the two time frames were 28.7 to 24.1 percent, respectively. See Bosworth, testimony, "Gross Capital Formation as Share of Regional GNI, Selected Regions and Years," Table 2c.
19 Canadian Ministry of Finance, "G7 government net financial liabilities," Table 58. By contrast, central government debt burdens were shrinking, roughly constant or growing more slowly in the decades of faster growth prior to this period. The U.S. Federal debt notably shrank from 121.6 to 32.5 percent of GDP between 1946 and 1980, despite the regularity of modest deficits in the 1960s and 1970s. Elhefnawy, "National," pp. 127-128. For a more international view, see the 2007 International Fiscal Reference Tables, Tables 56 and 57. Accessed at http://www.fin.gc.ca/frt-trf/2008/frt08_9-eng.asp#57.
20 Notably, the share of corporate and mortgage-related debt in the total figure rose from roughly 25 to 44 percent of the total figure during that time frame, another indicator of the importance of private debt accumulation. Securities Industry and Financial Markets Association, "Outstanding Level of Public & Private Bond Market Debt: 1985-2006 Q1," Apr. 1, 2003. Accessed at http://www.sifma.net/story.asp?id=323.
21 J. Kyle Bass, Hayman Advisors, letter, Oct. 14, 2008. Accessed at http://dealbreaker.com/images/thumbs/Hayman%20Letter%20to%20Investors%20Oct%2014%20final%20version.pdf.
22 Federal Reserve, Consumer Credit August 2008, Federal Reserve Statistical Release, Nov. 7 2008. Accessed at http://www.federalreserve.gov/releases/g19/Current/.
23 This is, of course, without considering the complications arising from the internationalization of this debt, which in some cases (such as the volume of foreign-held U.S. debt) may be unprecedented. Peter Drucker, Brent Schlender, "Peter Drucker Sets Us Straight," Fortune, Jan. 12 2004, pp. 115-118. There is also the vulnerability to a rise in interest rates that goes along with bearing a heavy debt burden to think of. See Gerald J. Swanson, Swanson, America the Broke: How the Reckless Spending of the White House and Congress are Bankrupting Our Country and Destroying Our Children's Future (New York: Currency, 2004).
24 World Bank, World Development Report 1997: The State in a Changing
World
(Oxford University Press, 1997), pp. 1-2.
25 Canadian Department of Finance, "G7 general government total tax and non-tax receipts," International Fiscal Reference Tables, Table 54, September 2008. Accessed at http://www.fin.gc.ca/frt/2007/frt07_9e.html#54.
26 Christopher Hood, "The Tax State in the Information Age," in T.V. Paul, John A. Hall and G. John Ikenberry, eds., The Nation-State in Question (Princeton, N.J.: Princeton University, 2003), p. 216.
27 Nader Elhefnawy, "National Mobilization: An Option in Future Conflicts?" Parameters 34.3 (Autumn 2004), pp. 127-130.
28 It was recently estimated that illegal evasion deprives the U.S. Treasury of $300 billion a year. Robert J. Samuelson, "The Price of Democracy," Newsweek, May 17, 2004.
29 Canadian Ministry of Finance, "G7 government net outlays," Table 55.
30 OECD, "Education at a Glance-OECD Indicators 1998," November 23, 1998, http://www1.oecd.org/media/publish/pb98-42a.htm. Barry Bosworth, "Prospects for Savings and Investment in Industrial Countries," Brookings Discussion Papers 113 (Washington D.C.: Brookings, 1995). OECD, Economic Outlook 69 (June 2001), p. 182. The modest success in achieving reductions is reflective of the large and rising share of mandatory spending in national budgets (like debt service). IMF, World Economic Outlook, May 2000, p. 173.
31 The data indicates an improvement in the fiscal picture after 2005, again, correlating with the reported acceleration of growth in the same time frame.
32 Dennis Cauchon, "Taxpayers on the Hook for $59 trillion," USA Today, May 28, 2007. Accessed at http://www.usatoday.com/news/washington/2007-05-28-federal-budget_N.htm.
33 The per capita global economic growth, extrapolated from the same WTO data series noted above, came to roughly 3 percent a year for the years 1950-1973. After 1973 it has been in the area of 1.3 percent a year, less than half as much.
34 Mancur Olson, The Rise and Decline of Nations (New Haven: Yale University Press, 1982). Jonathan Rauch expanded on this idea, including the redistributive effects of litigation in Demosclerosis: The Silent Killer of American Government (New York: Times Books, 1994).
35 John Ralston Saul, The Collapse of Globalism: and the Reinvention of the World (Woodstock: Overlook Press, 2005); Gerald Epstein, ed., Financialization and the World Economy (Cheltenham, UK: Edward Elger, 2005). Also see Paul Bairoch, Economics and World History: Myths and Paradoxes (Chicago: University of Chiacgo Press, 1995), pp. 3-55; Patomaki, who has connected the movement to and from free trade with the upswings and downswings of economic long waves, in Patomaki, pp. 100-123.
36 Heikki Patomaki noted that "relatively few economists have actually studied long-term global trends in any systematic fashion." Patomaki, p. 102.
37 As an example, see Robert Rowthorn and Ramana Ramaswamy, "Deindustrialization-Its Causes and Implications," Economic Issues 10 (Washington D.C.: International Monetary Fund, 1997).
38 See Ravi Batra, Greenspan's Fraud (New York: Palgrave Macmillan, 2005), pp. 142-167. The expansion of the financial sector relative to the rest of the economy in the U.S. has been noted by many critics with alarm. Finance and insurance went from comprising 11 percent of U.S. GDP in 1987 to 14 percent in 1986; real estate from 14 percent to 16 percent during the same time frame. For a critique of the trend, see Phillips, Bad Money, pp. 29-119.
39 Alexandra Harney, The China Price: The True Cost of Chinese Competitive Advantage (New York: Penguin, 2008).
40 For a discussion of this, see Angela Black and Patricia Fraser, "Stock market short-termism-an international perspective," Journal of Multinational Financial Management 12.2 (April 2002), pp. 135-158.
41 The study found that 78 percent would sacrifice value for smooth earnings, that 80 percent would sacrifice R & D and maintenance to achieve this end, and that 55 percent were willing to delay a project at the expense of value for the same purposes. John R. Graham, Campbell R. Harvey, and Shivaram Rajgopal, "The Economic Implications of Corporate Financial Reporting," Journal of Accounting and Economics 40 (2005), pp. 3–73.
42 James Crotty, "The Neoliberal Paradox: The Impact of Destructive Product Market Competition and Impatient Finance on Nonfinancial Corporations in the Neoliberal Era," Policy Economic Research Institute, Research Brief (Jul. 2003); Crotty, "The Neoliberal Paradox: The Impact of Destructive Product Market Competition and ‘Modern’ Financial Markets on Nonfinancial Corporations in the Neoliberal Era," in Epstein, ed., Financialization, pp. 77-107. It may also be that leanness itself poorly positions a company for expansion, recent research indicating that slack in its capacity may be essential for business growth at the entrepreneurial level as well. See Theresa M. Welbourne, Heidi M. Neck, G. Dale Meyer, "Human Resource Slack and Venture Growth," conference paper. Accessed at http://www.babson.edu/entrep/fer/papers99/XXII/XXII_A/XXII_A.html.
43 For the case of the energy industry, see Marshall Goldberg, "Federal Energy Subsidies: Not All Technologies Are Created Equal," Renewable Energy Policy Project, Research Report, July 2000, p. 2. This area is particularly relevant, because where some sectors of technological R & D may be offering diminishing returns to investment, this appears to be one where chronic underinvestment has been the norm. See Robert M. Margolis and Daniel M. Kammen, "Underinvestment: The Energy Technology and R & D Policy Challenge," Science 285 (Jul. 1999), pp. 690-692; Margolis and Kammen, "Energy R & D Innovation: Challenges and Opportunities for Technology and Climate Policy," in Stephen Schneider, Armin Rosencranz, and John-O Niles, eds., A Reader in Climate Change Policy (Washington D.C.: Island Press, 2001). More broadly, such a tendency may at least partially account for the diminishing marginal returns on technological investment some observers have identified in recent decades, with information technology discussed as a lone exception. Michael O'Hanlon, Technological Change and the Future of Warfare (Washington D.C.: Brookings Institution Press, 2000), p. 194; W. Brian Arthur, "Increasing Returns and the New World of Business," Harvard Business Review, 74.4 (Jul.-Aug. 1996), pp. 100-109. However, Robert J. Gordon has noted the limits of the contributions computers and the Internet have made to the global economy, and Roland Spant has written about the macroeconomic effects of the rapid depreciation of IT. Robert J. Gordon, "Does the 'New Economy' Measure up to the Great Inventions of the Past?" Journal of Economic Perspectives 14.4 (Fall 2000), pp. 49-74; Roland Spant, "Why Net Domestic Product should replace Gross Domestic Product as a Measure of Economic Growth," International Productivity Monitor 7 (Fall 2003), pp. 39-43. Accessed at http://www.csls.ca/ipm/7/spant-e.pdf. Part of the problem may also lie in poor decision-making at the adoption end of the process as well. Rochlin, Trapped, pp. 29-34.
44 Nader Elhefnawy, "Societal Complexity," p. 166.
45 One assessment is that grid unreliability cost the U.S. economy $120 billion in 2001 alone. George F. McClure, "Electric Power Transmission Reliability Not Keeping Pace with Conservation Efforts," Today's Engineer Online, Feb. 2005. Accessed at http://www.todaysengineer.org/2005/Feb/reliability.asp. For an assessment of the economic costs of a single recent U.S. blackout (the August 2003 blackout in the northeastern United States), see Electricity Consumers Resource Council, "The Economic Effects of the August 2003 Blackout," Feb. 9, 2004. Accessed at http://www.elcon.org/Documents/EconomicImpactsOfAugust2003Blackout.pdf.
46 Worldwatch Institute, ed., Vital Signs, 2003: The Trends That Are Shaping Our Future (New York: W.W. Norton & Co., 2003), pp. 44-45. Also see Rob Costanza, "Natural Capital, Ecosystem Services," Nature (May 1997), pp. 253-254. For the more recent data, see the World Wildlife Fund Living Planet Report 2008, http://assets.panda.org/downloads/living_planet_report_2008.pdf.
47 One estimate has these at eight percent of GDP in some Asian nations. S. Tahir Qadri, ed., Asian Environmental Outlook 2001 (Manila, Philippines: Asian Development Bank, 2001), p. 11.
48 The comparative experience of the U.S. and Western Europe in this area since that time provides strong evidence of the bankruptcy of "free market" energy policy. Elhefnawy, "Toward a Long-Range Energy Security Policy, Parameters 36.1 (Spring 2006), pp. 101-114; "The Impending Oil Shock," Survival 50.2 (April 2008), pp. 37-66; Elhefnawy, Amy Myers Jaffe and Michael T. Klare, "'The Impending Oil Shock': An Exchange," Survival 50.4 (August 2008), pp. 61-82.
49 Hood, p. 217. Not surprisingly, while polls in democratic countries indicate a general sentiment that corporations and the wealthy are under-taxed, the taxes of these groups have generally been lowered rather than raised. Ibid., p. 218.
50 Rudra Sil, "Globalization, The State and Industrial Relations: Common Challenges, Divergent Transitions," in The Nation-State in Question, p. 285.
51 Allan Sloan, "Why Your Tax Cut Doesn't Add Up," Newsweek, Apr. 12, 2004, pp. 41-46. Social Security is not levied on income above a specified, annually adjusted level-$94,200 in 2006.
52 It cannot be assumed that elevated incomes in the upper quintiles during periods of skewed income distribution will compensate either in the area of savings or overall tax collection, as promised by proponents of Federal tax cuts in the U.S. in the 1980s. The result was instead the dramatic increase in the national debt during those years. Charles Kindleberger, World Economic Primacy: 1500-1990 (Oxford University Press, 1996), p. 179.
53 Ibid., p. 100. The point is demonstrated by the frequency with which such situations figure in portraits of societal collapse. For more on that tendency, see Carlo Cipolla, ed., The Economic Decline of Empires (London: Meuthen, 1970).

Postscript.
Back to previous page.

Central Government Debt Growth Relative to GDP in the G-7 Countries


























































































Table 5.1 Annual Rate of Growth of Central Government Debt in the G-7 Countries (By Decade)
PeriodNet DebtGross Debt



1970-1980




-0.3




0.8




1980-1990




4.6




2.5




1990-2000




1.8




1.8




2000-2007




2.1




1.6











































































































































































Table 5.2 Annual Rate of Growth of Central Government Debt in the G-7 Countries (By Selected Period)
PeriodNet DebtGross Debt



1970-1974




-4.9




-2.3




1974-1980




2.7




2.8




1980-1990




4.6




2.5




1974-1996




4.2




2.9




1990-1996




5




4.9




1996-2000




-2.9




-1




2000-2005




3.5




2.7




2000-2007




2.1




1.6



Source: Calculated from Canadian Ministry of Finance, "International Fiscal Comparisons," Fiscal Reference Tables, Sep. 29, 2008. Accessed at http://www.fin.gc.ca/frt/2008/frt08_9e.html#54.

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