Global Guerrillas

HUMOR?

(h/t Shlok)

Absolutely hilarious.  Should probably hang up a shingle myself (humor):  

Warfare strategist LFW.  Expert in 21st Century warfare, systems disruption, and open source insurgency.   Able to supply unique strategies for  disrupting nation-states, corporations or competitive groups.  Advice on technology selection, DIY weapons, networked organization principles, wealth creation methods, and high ROI tactics.   Retainer or project based relationships are an option.

JOURNAL: The Stress Test

One useful way to look at D2 (the current global depression) is to view it as a stress test for nation-states.  In other words:  can nation-states adapt successfully to the twin pressures of the new global environment?  Here's what I mean.  Nation-states are now caught between two irresistible and strengthening forces:

1. A dominant, turbulent, and uncontrollable global super-network, that is pressuring/weakening/buffeting nation-states from above.
2. Super-empowered individuals/groups rising up from below that are ready to pounce on or exploit any demonstration of nation-state weakness. 

So far, the vast majority of thinking re: the response to the stress test has been a revival of early 20th Century methods/theories of activist government.   I'm fairly sure that this is a sterile response to the challenge.  

In contrast, decentralization that both improves resilience and accelerates (parallelizes) innovation offers a greater chance of success.   Nation-states that ease the process of decentralization will likely have both the easiest transition to the new fluid environment and the best long term prospects (wealth creation).

BREAKING THE BANK

Is business war?  It is in the world of post-industrial, post-state conflict. Battles between the corporate allies of nation-states and the transnational tribes and the gangs of black globalization are at the core of this century's epochal war.  "Piercing the Corporate Veil"

NOTE:   Here's some more thinking on the future of warfare.   I'm taking a bit of a risk with this since I am posting it without data to support a strong domestic trend line.  However, I thought it was important to put it out there early since if/when the violence starts it will be both sudden and very difficult to stop.

Targeting Banks?

So far, the level of violence directed against the corporations and employees of the global financial system has been relatively muted (the occasional riot, as in the breaking of branch windows as we saw in Iceland and a spike in bank robberies in the US).   However, given our experience with the recent punctuated evolution of warfare, that isn't likely to last given the depth/scale of the current crisis.  As we have seen in recently (from Iraq to Nigeria to Mexico), the targeting of corporations is now a fixture of modern conflict (please read).   The targeting of banks would be a natural extension of this trend line given the following:

• The central role they have recently demonstrated in the global economic system (systemic importance to the status quo).
• Their role in bringing the crisis to individuals (revenge, hatred, etc.) -- this could serve as a common point of agreement for group formation.
• The symbiotic relationship between banks and the government.   

How Banks Will Be Targeted

Warfare directed against corporate targets isn't total war nor is it simply theft.  It is best seen as a limited war with limited objectives (as in: "warfare is economics by other means").  For example:  a withdrawal from an area of operation, a change in policy, or repudiation of activities.  Recent examples (this blog has quite a few documented) show that attacks on corporations typically have the following characteristics:

• The targets tend to become specific.  Specific companies, called out by name, rather than diffuse attacks on industries.  In other cases, attacks on firms associated with specific countries has been effective.  
• Attacks on personnel have proven to be common.  These attacks work since it makes it difficult to retain or attract employees.  It also radically reduces productivity and drives up costs.  Attacks on senior management and the board of directors can produce dramatic results.  The effect pierces the corporate veil and makes corporate decision making a matter of personal security.  
• Attacks on assets, logistical networks, and facilities.  Disruption of supply chains, particularly if they are just-in-time, and facilities drives up costs and hurts customer relationships. It also forces an 'armoring' of the entire system.

All of these methods of attack work by generating fear, uncertainty and doubt (FUD) within the target and the members of its economic network.  Unlike governments, corporations don't have the luxury of weathering assaults indefinitely.  They typically fold under the pressure direct assaults, against which they have few natural defenses.  The indirect factors that will eventually force acceptance (as in Adam Smith's invisible hand makes the process of coercion easier): 

• Downward pressure on the stock price.  
• A loss of customer confidence.  Lost sales/lower revenue.
• A radical loss in efficiency/productivity due to security costs.

NOTE:  I'll stop at this point.  Will pick it up again with more specificity of analysis if/when attacks begin. 

RC JOURNAL: Late February 2009

Some items of interest:

•  Bloomberg.  A complete collapse in US consumer confidence in February.  Not only did the current confidence level drop to 25 from 37.4, the expectations index (6-month) dropped to 27.5 from 42.5.  This alone means that D2 is a likely 'a lock.'
• Very interesting exploration of organic security approaches.  A Darwinian Approach to a Dangerous World.  Book.  Article.  Web Site.  YouTube video of presentation on the topic.  
• Problem solving for diverse groups.  Open space technology.  Overview.  Harrison Owen.  Strategies for self-organizing groups.

Some of the core ideas from the video presentation "A Darwinian Approach to a Dangerous World" (click to enlarge):

Interestingly, almost none of these "natural rules of adaptation" applies to reform of existing systems (despite the mental gymnastics the authors attempt).  It does work within the context of resilient communities.  Think of it also in terms of intellectual backfill for Brave New War.

THE QUICK ROAD TO GLOBAL INSURGENCY

Notes on this century's global depression (D2) and the wars that will emerge from its onset.  Here's one potential scenario.  Enjoy.

The summer of 2009 will see protests in the 'West' as the newly financially destitute vent their anger at both the incompetence (unable to anticipate events or formulate plans that work) and corruption (due to looting of government coffers by firms like AIG, RBS, an Citibank) of their respective governments.  However, this phase of the crisis will likely quickly pass as:

1. The realization that peaceful protest, from marches and placard waving, has ceased to be effective tool of political change.   Efforts are lost in the noise. 
2. Regulations on protest have neutered it.   Protesters can't even get within earshot of 'protected' targets -- from the President to targeted firms.
3. Police departments will crack down on protesters.   From the use of counter-insurgency tactics and legal pressure against organizers to a rapid escalation to violence in the street (as the police in London are planning -- as in, no repeat of Athens here). 

The unanticipated result will be that as protest quickly fades and the depression deepens, an open source insurgency will begin as groups form based on new primary loyalties (global guerrillas).  A plethora of groups, from criminal to nationalist to family to religious to ethnic, will form in an attempt to address the needs of specific/targeted populations.  Many of these groups, as we have seen elsewhere, will quickly resort to violence in order to advance their interests.  

This will create a 'long or fat tail' of violent groups, made possible by the growing weakness and demonstrated failure (in that it can't protect its population from the harshness of the now dominant global market system and its financial predators)  of the nation-state as a system of governance.*  The common themes of these groups, will be opposition to the ineffectual state and the advancement of the group's economic interests.  The result will be: 

1. the rapid proliferation of temporary autonomous zones as these groups take control of localities (as in, co-opt or cow police/local governance and coerce local populations not in the group membership), 
2. new forms of 'off the grid' economic activity (black market, smuggling, etc.) flourishes, and
3. an open insurgency, mostly disruptive events meant to coerce and distract, between these groups and the national government that is trying to regain control.  

The Resilient Community Alternative

The option for those not interested in advancing economic interests through the projection of violence, is to disconnect or firewall your community via efforts at resilience.  The most critical element of that effort in the short term is a tremendously difficult judo move:  

How do you prevent the undertow of the failing global financial system from gutting your community via foreclosure/bankruptcy and debt (and thereby driving the development of global guerrillas) while at the same time building alternative forms of local commercial and/or cooperative endeavor?  That's the big question.

*  One thing that makes this "fat tail" of small violent groups interesting is that cumulative violence it can project is much greater than the modern nation-state can project.  Why?  Nation-state power is confined in a 'box' of its own making -- a combination of moral limits, legal restrictions, and global financial pressure enforce the walls of the box.

JOURNAL: Pakistan's Truce

Pakistan, with bankruptcy and nation-wide unrest looming the foreground, has decided to pull the plug on its war with Islamic insurgents in the North West territories.  How?  As we have found, one of the ways weak states try to slow the spread of a rapidly spreading open source insurgency is to embrace it.   In Pakistan's case, it means allowing groups in both Bajaur (Fazlullah) and Swat (Taliban) to set up Islamic courts and enforce Sharia law.  In exchange for this level of local control, these groups have agreed to a truce with the government.  We can expect this process to quickly spread to more provinces soon since the enforcement Sharia law was a central element of the insurgency's 'plausible promise'  (see, how to start an open source war).  

To the extent there is an upside, 

1. Open warfare will slow, curtailing the bad effects of a unpopular guerrilla war on Pakistan's military.
2. These groups can now be negotiated with, since it is likely that by giving these Islamic groups local control, it forces them into a position of defending gains.  They now have something to lose. 
3. Internal opposition will mount as these Islamic groups over reach with their application of Sharia.   

In a move that is likely to catalyze internal opposition (via point #3 above), Pakistan has set up a 'Village Defense Rifle' program.  This program will distribute 30,000 rifles to tribal groups.  This program might enable militia formation that is nominally loyal to the government, and dilute the influence of Islamic groups. 

It also points to what may be Mexico's future.  The combination of a global depression and peak oil production/price collapse points to bankruptcy and broad social unrest.  Out of options and unable to slow the advance of a virulent open source insurgency -- fueled by the outsized profits of drug smuggling -- may lead Mexico to cede control over aspects of its legal system.  In short, it may legalize the production, transport, and sale of drugs as an effort to make the problem go away.  

Finally, does a two part strategy of legalized drugs and locally run Sharia courts loom in Afghanistan's future?

QUOTES: Late February 2009

"Organized crime groups that are part of a national network have decided to use local residents ... to seize the main streets and paralyze traffic in our city."
Gov. Jose Gonzalez of Nuevo Leon in response to four days of road closures in Monterrey Mexico (pop. 3.7 million).  

We are seeing Mexican hit men coming into the US doing hits for the drug gangs. One hit team took out three people at one time in (a middle American city).  My team took out two small groups in (a middle American city), but they are here to stay. Very dangerous group. They cross over into the US then using Greyhound buses to travel up north. They are good at counter surveillance. They have been hiring private eyes to find cops, and informers to deal out death.
Undercover cop in middle American city (I cleaned up the syntax and anonymized it).

AFGHANISTAN

Given the ramp up of US military commitment to Afghanistan, it's important to remember the old saw 'lightning never strikes twice.'  Which means that the luck the US military had in Iraq in achieving a level of controlled chaos, after three years of flailing, isn't something we can count on in Afghanistan.  That previous luck, a combination of: 

• a low level civil war that put two front pressure on guerrilla groups and   
• a commander (Petaeus) that was able to abandon doctrine in favor of developments taking place on the ground (local commanders reporting that Sunni tribal groups were willing to work with the US).

Led to:

• a crack in the Iraqi open source insurgency that enabled the US military to turn hundreds of guerrilla/tribal groups into US funded/armed militias.*    

It's very unlikely that the Iraq strategy will be applicable to Afghanistan.  In contrast, it will require a new approach yet undiscovered before a relatively safe exit (meaning that the area doesn't descend into a chaos that is attributable to the US) can be made.  Unfortunately, the combination of a global economic shock (destabilizing Pakistan), a massive criminal economy (60% of Afghanistan's economy is tied to opium), and a punctuated evolution of warfare means that it will require more than a bureaucratic solution.  It's just too complex a conflict to assume otherwise.  Instead, it will require some amazing innovation to generate even an iota of success.

My suggestion is that we send the most innovative minds on warfare and strategy to Afghanistan in order to generate that required innovation.  People like (here's my very short list, suggestions welcome):

• Martin Van Creveld 
• John Arquilla 
• David Ronfeldt 
• Bill Lind    

It also might be useful to include some very innovative insiders (feel free to forward new names for this list):

• John Nagl
• Frank Hoffman 
• David Kilcullen  

Some outliers from the "grand strategy pool" and potentially some innovators in law enforcement, organizational theory, etc. would spice things up.  Names like Fallows, Singer, Barnett, Bunker, Peters, Richards, etc.

So, here's how it would work.  Give the team a couple of months on the ground in the country, with briefings/exploration of the conflict from the top to the bottom (with a side trip to Pakistan).  In short, the team needs to get a intuitive 'feel' for the conflict as it stands today to drive accurate theoretical modeling.   Next, allow them to debate topics as a group to generate ideas, models, frameworks, and methods that may yield a pathway to success.  Finally, boil this thinking down into a cohesive strategy. 

Hopefully, this effort would generate some extremely valuable, potentially crucial, thinking at the cost of very, very short dollars.   

* Perversely, the US military doesn't see what happened in Iraq as luck.  Revisionist history is now attributing it to the successful application of COIN doctrine and secret weapons (arg!).  As a result of these assumption errors, it isn't using the lull in the conflict as a window of opportunity to withdraw.  This would be the smart thing to do given the fiscal crunch in the US.

RC JOURNAL: US Foreclosures and the Tactics of Delay

2 Questions, 15 Seconds, 45 Days to Get Out; 'What's to Talk About?' 

Judge Charlie Green of Lee County Florida.

"...stay in your homes — if the American people, anybody out there, is being foreclosed, don’t leave." 

Congresswoman Marcy Kapture on the floor of the House of Representatives. 

 NOTE: I'm probably about a year or so early on this.  Enjoy.

The rapid onset of this century's global Depression (D2), is destroying US communities via a tsunami of foreclosures (the 'formerly' high rate of home ownership in the US makes it particularly vulnerable to a debt-deflation crisis).  Double digit levels of foreclosures can turn a viable community into a desolate place bereft of government services and commercial activity.  

Worse, given the deep corruption (sorry, it's impossible to argue that getting multi-million dollar bonuses for incompetence and costless public bailouts that pay off huge  gambling debts is anything else) of the current US elites, we won't see any meaningful effort to mitigate this torrent in the short term.  By early 2010, as the real depth and duration of D2 becomes evident, it may already be too late to save many US communities from dissolution.  The US may quickly become swiss cheese, with ungoverned gaps (temporary autonomous zones, TAZs) emerging from sea to sea, formed from formerly functional/viable communities.  Once that happens, an organic process of criminal insurgency on a national level would naturally follow, akin to what we are seeing in Mexico -- as in, rot begets rot.

However, there are peaceful options that may help preserve communities in the short term.  Think of these methods as a tactic of delay rather than reversal until one of the following events occur:

1. The economic status quo ante returns.  If so, you can apologize.
2. D2 becomes reality and the federal government belatedly moves to reduce/eliminate mortgage debt to preserve stability (unlikely due to corruption/confusion).  
3. D2 becomes reality and no meaningful federal help is on the way. 

What are these methods?  One method is civil disobedience, although early efforts are small.  One good sign is that these efforts are using decentralized networking:

Through phone trees, Web pages and text-messaging networks, the effort will connect families facing eviction with volunteers who will stand at their side as officers arrive, even if it means risking arrest. 

Another is to co-opt law enforcement to categorically halt or slow evictions (starving the eviction enforcement of resources is another way):

In Wayne County in Michigan, Sheriff Warren C. Evans, suspended all evictions starting Feb. 2 until the federal government implements a plan to help homeowners facing foreclosures.

I suspect that most communities won't follow either of these approaches and will suffer horribly from the result.  Why?  For once a community passes a foreclosure tipping point, it is likely irretrievable, and efforts to build a resilient community will be for naught. 

JOURNAL: Swarming Attacks

My friend, the great military theoretician John Arquilla (he's not only one of the most gracious people I've ever met, he's also the author of many seminal works that have greatly influence my thinking) has an excellent new article in the New York Times called "The Coming Swarm."  

It's essentially a warning that swarming attacks of what he terms "the Mumbai model," will become more frequent and most will be successful.  

John is definitely correct.   It's my belief, and I suspect that John would concur, that the reason we will see more swarming is due to the pervasive influence of decentralized organizational forms, like open source insurgency, on warfare's evolution.  Swarming is a characteristic of these loosely connected organizations.  Potential development paths for which we have ample evidence (seen in early proving grounds for modern warfare like Iraq) include:

• More ambitious attacks that eventually attempt complete and sustained urban takedowns.  See "The Coming Urban Terror" for more on how physical attacks and systems disruption can combine to fully disrupt cities.   
• Rapid innovation for DIY weapons development.  See "Tinkering Networks" for more.  
• The development of strategy without generals or think tanks.  See "Emergent Intelligence" for more.   

NOTE:  Since systemic shocks, like the current debt-deflation depression, catalyze the growth of open source insurgency, we can expect to see an accelerating wave of swarming attacks in the future.  

NOTE2:  I suspect that one reason for the atrocious behavior of our current crop of elites is that they (being historically naive) don't fear the mob anymore.  They should.  When things eventually erupt, we will see fewer placards (protest doesn't work anymore) and more bombs.  

NOTE3:  Shlok Vaidya is already working on decentralized approaches to swarm prevention/mitigation  with Indian security professionals for real world applications. 

JOURNAL: The Notre Dame conference

Just got back from the Law and War conference at Notre Dame.   It was a fine conference, but by far the most valuable (and fun) experience for me was the opportunity to befriend Martin Van Creveld.  He's a voracious intellect and an absolute joy to interact with (my definition of joy).  No wonder he is one of the best strategic thinkers alive today.

The missed opportunity was that we didn't record some of our conversations --  on the decline of the state, the future of warfare, and resilient communities -- so that they could be shared with a larger audience (although I have a new and quite amazing high def Flip video recorder, courtesy of my tremendous parents, the venues were never right to set it up).  

Until I figure out how to do that, I am going to spend some quality time with his new book, "The Culture of War."  NOTE: I think his exploration of "identity/primarily loyalties" within warlike groups will mesh nicely with my exploration of the economics of small group warfare.

JOURNAL: The Former USA (FUSA)

Dmitry Orlov (unfortunately, I've only had the chance to correspond with Dmitry when I served as a reader for his recent book) gave a very interesting speech at the Long Now Foundation:

Forget “growth,” forget “jobs,” forget “financial stability.” What should their [the government's] realistic new objectives be? Well, here they are: food, shelter, transportation, and security. Their task is to find a way to provide all of these necessities on an emergency basis, in absence of a functioning economy, with commerce at a standstill, with little or no access to imports, and to make them available to a population that is largely penniless. If successful, society will remain largely intact, and will be able to begin a slow and painful process of cultural transition, and eventually develop a new economy, a gradually de-industrializing economy, at a much lower level of resource expenditure, characterized by a quite a lot of austerity and even poverty, but in conditions that are safe, decent, and dignified. If unsuccessful, society will be gradually destroyed in a series of convulsions that will leave a defunct nation composed of many wretched little fiefdoms. Given its largely depleted resource base, a dysfunctional, collapsing infrastructure, and its history of unresolved social conflicts, the territory of the Former United States will undergo a process of steady degeneration punctuated by natural and man-made cataclysms.

THE DEPRESSION SCENARIO IS HERE

The global Depression scenario is now dominant.  Here are some of the drivers:

• An utterly complete cognitive regulatory capture of the US government (the advent of the Obama administration has done nothing to change this).  Regulatory capture is when monied interests take control, via cultural and mindset transfer, of the government institutions that are supposed to regulate/control them.  In OODA terms, this is a loss of control over the critical orientation phase of decision making loops.  As a result, a vast looting of the government's coffers is now in process.*  
• The D-process (de-leveraging and deflation) feedback loop is now entrenched.  This is a neat term developed by Ray Dalio of Bridewater Associates (Barron's interview).   The D-process is what happens (rarely) when too much debt is accumulated.  Excess debt must be eliminated before growth can return.  In the US case alone, excess debt load is $20-25 Trillion.  Since global governments are unwilling and/or unable to wipe out the world's creditors (they've been captured), the process will drag on and on.  Stimulus and bailout packages, constructed in a way to protect the wealth of the world's creditors/rentiers (looting), won't work.   It will only prolong and deepen the failure as the D-process feedback loop intensifies.
• A large number of countries from Japan to Spain to Latvia are already in depressions.  These failures will serve as a drag on the entire global system, catalyzing the feedback loops of the D-process.  

A global depression, in and of itself, isn't the end of the world.  However, it can set in motion unexpected events (black swans) -- as in how the last depression catalyzed WW2.  The revisionist effort to this economic collapse isn't likely to be a surge in ideology or nationalism.  Instead, we can expect an organic realignment as small groups of people form new primary loyalties (either to violent manufactured tribes or resilient communities), slot themselves into open source movements, and challenge a wheezing group of incumbent nation-states.  This is a global guerrilla century.

*NOTE:  It's even worse than it appears. Here's an example of how terribly flawed Wall Street analytical modeling is.  I suspect we now know what the people of Rome felt when things began to fall apart (they were likely apathetic and confused due to a reality distorting sphere of government spin).

DESIGN GLOBALLY, PRODUCE LOCALLY

Resilient communities aren't only about surviving successive global shocks and instability (retrograde motion).  It is also a societal configuration that offers sustained and accelerated improvements in quality of life for the participants that are potentially an order of magnitude faster than the current societal configuration.  The drivers for this will be:

• Lower costs.  
• Faster innovation cycles.
• More equitable distribution (less distortion and fewer excesses).

Produce Locally

The trend lines in technology are shrinking the requirements for physical production of everything.  From the 3D fabrication labs that MIT is seeding across the world, to factories on a chip for rapid genetic engineering (not to mention biobricks), the scale required for physical production are dropping at an exponential pace.  Even the last bastion of centralized production, the semi-conductor, is currently being assaulted through "grow a CPU" and self-assembly efforts.  Better yet, there have price breakthroughs at this level.  For example, the costs of small and rudimentary 3D fabricator is between $300 for the DIY model to $5k for corporate version.  

Design Globally

Increasingly, the most difficult and potentially expensive element required to produce a product is the informational manipulation required for its design.  Fortunately, nearly every product that can be produced can be designed virtually over the Internet using modern software tools.  That allows the ultimate in decentralization -- you can work as easily at home in mountains of Colorado as in Silicon Valley or New York City.   An interesting aspect of this post-industrial configuration is that it makes it possible for open-source tinkering networks to produce most of the design configurations necessary for many of the worlds products (at a lower cost and a higher degree of customization than ever before).  

END NOTE:  While this approach won't become common accepted for another decade, it will eventually happen.  In fact, my personal experience building and running companies shows that it is ALREADY possible to use the design globally and produce locally model to great success.  

For example, while I was the CTO of a start-up a couple years back, my team built a decentralized manufacturing system that produced products from digital designs that used a standard format.  To make this possible, we virtually grafted our centrally controlled production process onto small manufacturing lines at companies (usually small companies with <$5m in revenue) located in thirty different countries to ensure precise quality control and rapid runs. This allowed our customers maximal design flexibility, since the design work was done centrally through a flexible Web site, without regard to the location of the actual physical production. 

The result: as companies adopted our system, their production runs got much shorter. There was little waste (no over production or excess inventory that needed to be stored in a warehouse). Designs were updated frequently (more customization and more precise reflection of current needs) since large production runs weren't required. Transportation costs dropped to a small fraction of previous costs since the point of delivery was local rather than global.  There was also a corresponding drop in time needed to deliver the product.  In effect, we saw STEMI (space, time, energy, mass, and information) compression across the board that added up to a plethora of benefits for our customers.    

JOURNAL: The Global Normalization of Wages and Salaries

... markets are harsh rulers. They punish non-economic behavior with a sharp slap of the invisible hand. There isn't any special immunity for the US.  November, 2004.

It's been long maintained on this blog that the global marketplace, and not a nation-state or a collection of nation-states, is the sole remaining and dominant global power.  In short, we live in Adam Smith's world and any talk of an American or Chinese Century is an outdated way of looking at the world.  One of the inevitable consequences of living in a world dominated by markets (unmitigated or controlled by traditional social organizations like nation-states) is that artificial differences in wages and salaries between people of different nationalities will evaporate.  

Here's why.  In today's connected world, productivity is globally portable.  This means that David Ricardo's foundational concept of comparative advantage is largely negated.  Economists that maintain the opposite likely haven't experienced the realities of building and operating a global business (in contrast, I've built two). Without comparative advantage, there is no reason to pay a person in one country more than a person of equivalent education in another.  Unfortunately, America (and the West in general) follow economic policies based on a deep faith in comparative advantage.  That faith will prove disastrous as incomes in the West fall precipitously to equalize with incomes in the developing world.

So, on to the news.  It appears that this crisis is serving as a form of punctuated change on this front since it is reseting expectations/assumptions -- which are, for all intents and purposes, the only barriers to full normalization of global incomes.  For example, IBM is now offering US employees an option:  you can be fired or you can move to India, Nigeria, Russia, etc and work there at local salaries/wages (CNN).  

Big Blue is offering its outgoing workers in the United States and Canada a chance to take an IBM job in India, Nigeria, Russia or other countries. Only "satisfactory performers" who are "willing to work on local terms and conditions" should pursue the jobs, the document says. The company also will help with moving costs and provide visa assistance, it says.

NOTE:  As a fun thought experiment, calculate what the global economy would be if the mean income for people working in developed nation-states was equal to the mean income of Chinese workers today.  Also, is this crisis merely an accelerated method of reaching that new and stable equilibrium point?

NOTE2:  Of course, there is a way out this trap of poverty and despair:  resilient communities that allow you to take control of your economic future by going local.

RC JOURNAL: Money Garden?

Burpee is selling a new frugal package called the Money Garden.  Sales pitch:  $10 in selected seeds can "potentially" yield $650 in produce.

"Victory gardens" are smart way to hedge against short term system failure and as a cost cutting measure.  However, a longer term solution for decentralized agriculture needs to be much, much more productive than traditional gardening.  Subscription plots/farming, low cost sensor networks (water, light, PH, etc.), high intensity plot plans, accelerated local composting systems, lawn garden entrepreneurs, tinkering networks, etc. will be needed to flesh out an innovative ecosystem that will drive the productivity curve.  Given these innovations, its possible to see a situation were 80-90% of food consumption is locally derived and sold at a small fraction of current costs and at a much higher level of quality/freshness.  Resilience needs to be productive/affordable to become dominant.

QUOTES: Priorities

"We will move heaven and earth to ensure that bond holders will be paid on schedule." 

HD Palmer, finance spokesman for Gov. Arnold Schwarzenegger, to the AP.  The correct mindset for the privatopia scenario and a good demonstration on how global financial markets will increasingly dictate the priorities of all governance.

“In hindsight, Japan should have built public works that address the problems it faces today, like aging, energy and food sources. This obsession with building roads is a holdover from an earlier era.” 

Takehiko Hobo, a professor emeritus of public finance at Shimane University to the NYTimes.  It's becoming increasingly obvious that nation-states don't have a clue on where to invest stimulus that will yield long-term wealth improvement.  That's yet another sign that the current nation-state dominated system is at the end of its productive rope.  Worse, absent that insight, corrupt allocations (aka looting of the public sphere or state-capture) will continue to dominate.

JOURNAL: The Frontier Analogy

Here's a quick follow up to my review of Tom Barnett's new book, "Great Powers".  Tom's central historical analogy is that the disorder we see around the world today is akin to a frontier that is slowly, but inexorably being civilized.  Here's more (from Mark Safransky's interview of Tom Barnett, PDF):

This is all about frontier integration. Globalization is like America’s rapid and aggressive push Westward across the 19th century: a lot of the same bad actors and a lot of the same tools applied. So don’t be surprised when the Pinkertons show up, or when the covered wagons are attacked, or when the Injuns head to the Badlands for sanctuary. Thus, the goals of our frontline players are fairly straightforward: create the baseline security to allow the connectivity to grow. Focus on social trust and institutions as much as possible, but co-opt existing structures whenever and wherever you can. It doesn’t have to be perfect and it sure as hell doesn’t have to measure up to America’s mature standards. This is a frontier setting within globalization-treat it as such. The good news is, the settlers are already there, with more uncredentialed wealth than we realize (see Hernando DeSoto), if you respect their existing rule-sets and realize they will change only when the locals see the need themselves, so no instant rule-set packages applied by outsiders, please. Finally, acknowledge that with growing connectivity with the outside world, you will see more nationalism, more ethnic tensions, and more religious identity. These are all natural reactions, and not signs of your failure, so patience is the key.

This is a good demonstration that history is a great teacher but it lies with alacrity.  A frontier analogy assumes a system in ascendence.  That's not the case in our current situation, although the look and feel (the rhyme) appears to be similar.  Zones of trust aren't expanding, they are diminishing (Wall Street's excesses are a great example of that).   So, what is actually happening? 

It is true that a baseline of connectivity is being extended via globalization.  However, the more complex upper level rules (social, ethical, cultural, legal, etc.) are being largely ignored. In fact, the opposite process is motion. A widespread disregard for upper level rule sets is rapidly expanding into previously "settled" (using this analogy) areas.

Anyway, it's worth reading Tom's argument in full before you decide who's right.

JOURNAL: Ungoverned spaces and temporary autonomous zones

Here's an interesting paper (PDF) that explores the concept of ungoverned spaces.  It is the result of a cross-government collaboration effort.  What makes it interesting?  The following:

• It has a good discussion of basic concepts.
• It maps efforts to address ungoverned spaces to government agencies, policies, and doctrines.
• It's comprehensive. 

MANUFACTURED TRIBES

In modern economic depressions, it's likely that economic failure will have a high rate of onset.  If so, the result would be widespread and relatively unmitigated economic dislocation (as we have seen, a tightly coupled system can fail both quickly and broadly, faster than governments can respond).  Further, this type of failure will naturally result in a delegitimization of government institutions and the revival of primary loyalties -- as in, people will naturally focus their loyalties on family, friends, community, etc that support them during tough times.  This is the opportunity space for organizers of resilient communities.  

Unfortunately, in many cases a shift to primary loyalties will not be a benign occurrence.  They will be assigned to groups that are not only able, but willing to use violence to advance their objectives.  As each new violent group forms, it will put pressure on adjoining areas to form violent groups of their own.  One question that seems interesting is:  how quickly will these violent groups propagate?  The answer is very quickly, if we use current gang membership as the starting point.

Gangs are, for all intents and purposes, manufactured tribes that fill holes in governance and community networks.  They use a synthetic culture to create a new primary loyalty -- common mythology, fictive kinship, religious interpretation, etc. (in short, anything that sets them apart from everyone else).  Cohesion is maintained through a system of mutual defense, respect, and honor.  So, by extension, warfare is conducted over the same issues: encroachment, disrespect, and slights to honor.

Gangs in the US

Current gang membership in the US is now estimated at more than 1 million people, a 25% increase over 2005 (see the FBI's 2009 report pdf).  These members are divided into over 20,000 different gangs the composition of which falls into three buckets (a classic "Long Tail distribution"):

• Large gangs.  A handful.  Many small to mid-sized structured and unstructured groups connected via a common culture. Membership typically measure in the tens of thousands.  
• Mid-sized gangs.  Scores.  Typically tightly structured groups with membership in the low hundreds or the low thousands.  Typically over 350 members with a middle management (although more acephalous than hierarchical).
• Micro-gangs.  Thousands.  Lots of small gangs with membership in the single digits or tens.*  Likely 5-12 members or 25-150 members (due to organizational constraints).

*Note: in contrast, organized mafias typically have memberships around 100 (give or take), surrounded by a large circle of culturally compatible, financially motivated contractors.

Gangs are now more widely distributed in the US than ever before.  Fully 58 percent of state and local law enforcement agencies now report that gangs are active in the jurisdictions (up from 45 percent in 2004).  Gangs commit as much as 80% of the crime in some communities.  In some sections of the US -- CA, NM, and IL -- gang members outnumber police ~5 to 1.

Another good question is:  will gangs gain the substantive early mover advantages we see when scale free networks expand virally (essentially, the same process that turned a podunk site like Yahoo into a powerhouse)?  If so...

JOURNAL: Economic Scenarios

The US economy is suffering its steepest downturn since at least the 1970s and could descend into a depression. 
Jeff Immelt, CEO of General Electric on February 5th, 2009

One of the most difficult parts of a transition to resilient communities has to do with the tempo of the transition.  This may help.  The two dominant scenarios emerging for the global economy appear to be (a reversion to any approximation of the status quo ala 2006 is rapidly diminishing):

• Stagnation.  Current efforts at stimulus and liquidity infusion stabilize the global  economy.  However, the economy is stuck at a the current level of activity with ~zero growth for a decade or more.  High likelihood of the scenario eventually ending with a protracted depression.  
• Depression.   Policies fail.  Complete economic meltdown and a new economic equilibrium at a small fraction of  current economic activity levels.  

Both scenarios will be triggers for black swan events, since both will set in motion unforeseeable changes on a grand scale (although, given that the vast majority of people, companies, and governments aren't planning for either eventuality, they could be considered black swans in and of themselves).  

For those involved in transitions to resilient communities, the best situation is obviously a period of extended stagnation.  It allows an organic and self-financed transition towards local resilience and an orderly disconnection from the global system.  In contrast, the depression scenario implies an onset rate that will overwhelm local planners with a tidal wave of foreclosures, bankruptcies, and civil unrest.  Disconnection from the global system will be in large part involuntary and the development of resilient local platforms will be ad hoc and desperate.*  

*NOTE:  Global guerrilla proliferation in that scenario will be rapid and likely impossible to mitigate (no preparation) before it reaches critical mass/entrenched levels (as in, a functional bazaar of violence and extensive systems disruption).  That eventuality would make for interesting times.

JOURNAL: Training Global Guerrillas?

Bill Lind, from his perch outside the outside the insular establishment, makes a trenchant observation:  global guerrilla thinking will return home with the very troops sent to fight it.  

American and other foreign troops in places such as Iraq and Afghanistan are learning more than how to make IEDs and how effective they can be. They are learning by direct observation how a place works when the state disappears. To the large majority of American and European soldiers, this is a lesson in horror. They return home thankful they live in a place where the state endures. The last thing they want is to see their native country turn into another Iraq or Afghanistan. 

But a minority will learn a different lesson. They will see statelessness as a field of opportunity where people who are clever and ruthless can rise fast and far. They look upon themselves as that kind of people. They will also have learned it is possible to fight the state, and how to do so. The effectiveness of IEDs is part of that lesson; so are the power and rewards that come to members of militias and gangs. In their own minds, and perhaps in reality, they will have found a new world in which they can hope to thrive....  

There is a parallel here with what the men who fought in the trenches on the Western Front in World War I learned. For most, it was the worst time in their lives. Their experience is captured by All Quiet on the Western Front. But a minority found it the best time of their lives. Their book is Ernst Junger’s Storm of Steel. It was these men, looking to re-create that tremendous experience, who made up the Brownshirts of the S. A. Their very name, Storm Troopers, originated in what they had done during the war. They came home determined to create a different Germany, and they did.

New primary loyalties and an emerging global bazaar of violence can put those skills to work...

++ Unfortunately, the video I linked to was removed.  

BARBARIANS

Here's some fun thinking (at least I enjoyed it):

The most elegant approach to social collapse and renewal is Joseph Tainter's excellent, "The Collapse of Complex Societies".  He makes the case that complex societies are (at root) problem solving systems (a very Boydian or Robbian approach).  As new problems erupt (enemies, environmental problems, etc.), society's evolve solutions that add to their cumulative complexity (the society's toolset).  Eventually, a complex society reach a point of maximal complexity (due to the constraints of its underlying organizational platforms/design) as its "solutions" suffer diminishing returns -- as in, the benefits derived from new laws/institutions/plans approach the costs of implementing them.   

When benefits are equal to or less than costs, a society is ripe for collapse and replacement.   Societies can skirt this edge for decades until something pushes/tips them over the edge.

Internally Driven Collapse

The method of collapse favored by Tainter is a tipping point is defined by a fundamental change (assumption level) in the underlying costs of running the society.   He maintains that every great society is driven to  the heights of its organizational potential by leveraging a "free" (for all intents an purposes) energy input.  Unlimited access to this energy resource allows them essentially "free" problem solving and rapid recovery from mistakes.  However, once that "free" energy becomes erratically available or expensive, the cost/benefit equations of many (if not most) of that social system's evolved solutions turn decidedly negative.  Collapse, at that point, is inevitable.  In our case, this "free" energy input would be fossil fuels (the negligible cost of which underwrites all social solutions).  

Externally Driven Collapse

I'd like to offer another cause of collapse using this model: the threat of barbarians (relatively small and socially cohesive groups that prey on a rich society).  In a society that has reached the limits of its organizational complexity, every attempt to counter barbarians generates negative returns.  Every barbarian engineered looting event, every war to counter barbarian incursions, and every barbarian engineered crisis brings a complex society closer to bankruptcy and collapse.  In our current case, it would be the combined effects of successful societal looting by aggressive tribes of banksters (several hundred thousand technologically superior financial warriors) and disruption from violent groups emerging within the growing number of weak spots of the global social fabric.  Both are what I term global guerrillas.

Will we be able to meet the challenges posed by these barbarians?  

Think about the efficiency of the solutions to Iraq and Afghanistan and the cost/benefit equation they represent -- or worse, the mindset that keeps us paying for a defensive system that guards against a great power war that won't ever come and the efficiency of the proverbial GWOT.

Think about how efficiently the global system responded and put down growing insurgencies in Mexico, Nigeria, and Pakistan (hint: they didn't).    

Think about the benefits/costs derived from the shadow banking system (CDSs, CDOs, etc.) and the ability of the current social system to control it.  

Think about how the financial barbarians have convinced governments that private gains and socialized losses are acceptable and that continued looting through tens of billions in bonuses while on the government dole is entirely OK.   This is a remarkably similar process to how al Anbar's (Iraq) guerrillas, fresh from slaughtering thousands of American soldiers, were able to secure autonomy, weapons, and a paycheck from the US gov't.

Think about climate change and the inability of the social system to even generate any meaningful response that wouldn't entail social bankruptcy.  

ANTIDOTE: Great Powers

If you are interested (and you likely should be), in an antidote or intellectual time-out to the chaos and change detailed on this blog and in BNW, I recommend that you read my friend Thomas Barnett's new book, "Great Powers."  It is a relentlessly optimistic book.  Optimistic about America, the World, and your future.  

Whereas my view of the world is of an ungoverned and increasingly chaotic supersystem (composed of markets, networks, and more) that has diminished the role of nation-states and opened the door to small groups to displace them, Tom's view is that the global system as we see it today is merely a transitional frontier en route to a world that is as economically (and to a lesser extent socially/politically) integrated as America's states.  The 21st Century, according to Tom's thesis, IS America's Century:  the time when the American model maps to the world.  

The current economic crisis, when viewed through this lens, is merely a speed bump on the way to this final integration (rather than being a sign of an increasingly non-linear global system that will hollow out states and recast how we live and work). I suspect that given the approach of the book, it would be Tom's belief that this crisis will be seen (in hindsight) as a golden opportunity for improvement.  As the time when we finally got our regulatory arms around the global economic and financial system and brought it back into service of collective economic progress.  

In short, it is a great read.  While I didn't agree with much in the book, it made me think -- which is the only true test of a book on strategy.

JOURNAL: Descent from Apogee

More on this (from the brief:  "Is China a Threat?" September 2006):

While the US Department of Defense continues to focus on the emerging threat of China as a conventional power and Goldman Sachs contemplates the exact date of China's emergence as the world's leading economy, another scenario is building steam: that China will implode...  

The Chinese government reported that 20 million workers that have lost their jobs have fled from its cities to the countryside.  Clearly, the only strand of legitimacy that supports the Chinese dictatorship is now in the process of being severed:  economic growth. 

THE COMING BOOM IN BLACK GLOBALIZATION

The world is rapidly moving towards protectionism as this article by the economist William Buiter details in The Financial Times (the current system, through Chinese currency manipulation, is already deeply protectionist however it was sanctioned protectionism).  These actions, if not reversed, will almost certainly:

• Reduce legal global economic activity.  
• Lower standards of living for nearly everyone. 
• Create shortages and a plethora of market dysfunctions.  

The Boom

The beneficiaries of these actions will be smugglers of all types currently engaged in black (unsanctioned, criminal, grey market) globalization.  Here's why:

• Instead of being restricted to universally illegal goods -- drugs, slaves/indentured servants, knock-off products, arms, and laundered money -- they will now be able to expand into nearly every good that has become protected.  The current $2-3 Trillion global black market is poised to quadruple over the next decade.
• The communications and information systems necessary for global trade will likely remain intact.   So the means to coordinate the production, sale, and delivery of contraband will still function at a high level of efficiency.  
• The relationships between countries that are necessary to counter-act smuggling will be strained and dysfunctional.  Further, almost all national relationships will become asymmetrical.  It will often be in the interest of a country to turn a blind eye to the trade (since any economic activity is better than none).  

Guerrilla Entrepreneurs Everywhere

Most global guerrilla groups have become increasingly focused on economic insurgency to the detriment of ideological motivations.  The reasons are obvious:  guerrillas that are economically able to self-finance are much more likely to survive long term and gain favor with local populations -- this income provides the means for the legitimacy jiu-jitsu necessary to create temporary autonomous zones (TAZs).  The coming boom in black globalization will catalyze the spread of these groups even into areas in the West previously assumed immune.  Unfortunately, unlike purely criminal organizations in the classic mold, these armed groups will actively compete with nation-states for local legitimacy.