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Saturday, 14 May 2011

Machiavelli from the next century to the next decade


 DURING my 2010 holiday in Turkey, I brought only one book to read George Friedman's The Next 100 Years (pic). Friedman is an American political scientist and founder of the private intelligence company Stratfor. I first came across him through browsing on the Internet and found his analysis of political events uniquely penetrating and bold. For someone to forecast the next century showed an audacity that few would dare to prognosticate, let alone pontificate.

Friedman rightly claims that he has no crystal ball, but his grasp of the grand order of history, the dictates of geography and imperatives of demography and culture all enable him to weave a framework for us to think about the future.

In an age when world watchers are wondering whether Pax Americana is going through self-doubt, Friedman sees the 21st century as the American Age. In his view, the United States is central because of its dominant geography, securely protected by the Pacific and Atlantic oceans, endowed with rich land and small population and the most open, technologically advanced culture in existence. Militarily and economically, the United States has defined the second half of the 20th century and he thinks that North America will dominate the current century.

Friedman is a disciple of the Machiavellian approach to geopolitics to him, it “is not about the rights and wrongs of things, it is not about the virtues and vices of politicians, and it is not about foreign policy debates. Geopolitics is about broad impersonal forces that constrain nations and human beings and compel them to act in certain ways.”

His boldest forecasts is that the European Age has ended, that Turkey will be the dominant Muslim power, that China is a paper tiger, and that there will be a world war in the middle of the 21st century.

Most of us cannot think beyond our lifetimes, but we must thank Friedman for framing our thoughts around what can happen in the future. His new book, The Next Decade: Where We've Been ... and Where We're Going is much closer to home and again, US-centric. It is in fact a lecture to the current and next US President what he or she should be thinking about in this unfolding decade.

He argues quite correctly that the United States must address the question of its unintended empire, in the same way that the Romans and the British had to deal with their position of pre-eminent power. The former British Prime Minister Harold Macmillan famously said that the British Empire was founded not by design, but by pirates. The United States was founded against British imperialism, with its War of Independence and Civil War fought on the moral basis that all men are equal.

Friedman's clear-eyed Machiavellian approach is to state that “justice comes from power, and power is only possible from a degree of ruthlessness most of us can't abide.” In this, he draws upon three great US Presidents Lincoln, Roosevelt and Reagan who understood that power is defined between the limit of good intentions and the necessity of power. To exercise power to ensure goodness requires greatness, but also amorality.

Friedman's fundamental point is that the United States should go back to the idea that the Romans and British did not rule by dominant military power or moral high ground, but by divide and rule a delicate balance of strategic interests to cancel their competing power in the broader interest of Pax Americana.

Friedman reminded us that the US President may appear to be the most powerful person on earth, but actually he has limited powers domestically and can only lead through his powers on foreign policy. The founding fathers designed a constitution where much of state power, civil society, religion, press, culture and arts are checks and balances on the President domestically. In this sense, his job is to prevent the United States from becoming more inward looking but open to global trade, where the US derives its true economic power, both as consumer and thought leader. But trade comes from the hard fact that the United States is the only global military power.

Accordingly, Friedman recommends three power balances. The first is to accommodate with Iran to achieve a new balance in the Middle East, to keep oil flowing and to neutralise the terrorist threat. The second is to manage Europe in such a way that Germany does not align with Russia. After all, there is a resurgence of Germany and Russia that came out of the current crisis in Europe. The third is to manage Asian rivalries between China, India, Japan and the others to ensure that Asia is not a threat to US and global interests.

Friedman's major insight is that the current crisis was due to imbalances in American power that can be corrected, such as speculation and financial manipulation. However, it is the demographic forces and technological innovation that will shape the years to come. America has the advantage over Europe and Asia in its openness to immigration and its still low population/arable land ratio. This means that the United States will still enjoy a demographic endowment, rather than the European and Asian deficit of looking after an aging population with a smaller labour force.

He rightly worries that technology may be lagging behind human needs, because we are still reliant on fossil fuels and there are no game-changing technologies in sight to deal with the challenges of climate warming. Like Asians, he warns that market forces are not enough and that the state must take the lead.

To sum up, Friedman sees that the United States “must manage the chaos of the Islamic world, a resurgent Russia, a sullen and divided Europe, and a China both huge and profoundly troubled.”

There is no other writer who is so clear-eyed and brutally realistic on the global scene. If he is right, we are turning away from the recent US foreign policy of moral preach and reach, back towards no permanent friends or enemies, only permanent interests.

> Andrew Sheng is the author of “From Asian to Global Financial Crisis”.

Machiavelli for the 21st Century: “The Next Decade” Review

Mercenary Trader

George Friedman’s “The Next Decade” could alternately be described as Machiavelli 101 or a crash course in realpolitik.

Friedman’s central thrust is this: America is an accidental empire – like it or hate it, the world must deal with it – and it is thus in the United States’ best interest to maintain the “balance of power” at all costs.

The balance of power is predicated on status quo. When you are at the top of the heap (as America is in Friedman’s view), any major shifts threaten to destabilize the top dog’s position. As the British and Roman empires did before it, the American empire must anticipate and prevent such shifts, blocking up-and-comers from excessive power accumulation.

As Friedman sees it, a century is about events but a decade is about people.  The main actor over the next ten years will be the POTUS, or President of the United States. In his role as shaper of strategy and manager of expectations, the POTUS must act as a classic “prince” in the Machiavelli mold.

This role also involves double-dealing with the populace, in terms of appearing to meet unreasonable demands (such as overwhelming focus on the war on terrorism) while actually focusing on more critical things (behind-the-scenes issues too nuanced or complicated to explain).

To safeguard America’s interests, Friedman endorses what one might call an enlightened amorality – doing what is necessary for the sake of the greater good. Friedman argues for a middle ground between the idealists and the realists, pointing out unworkable flaws at both extremes. The idealists are ill-equipped to function in the real world, while the realists find themselves lost without a guiding moral compass. Ruthless execution in commitment to moral principle is the solution Friedman endorses.

It is easy to see how many people, Americans and non-Americans alike, will be offended by this book. Some will resent the broad brush strokes Friedman uses. Others will resent the hard-nosed subordination of idealistic principles, or strongly disagree with certain controversial forecasts.

But in many ways this book is more valuable as a high level thinking exercise than a blueprint for world events. It is useful to understand, if only in abstract, the various drivers that shape international relations – many of them deliberately unspoken.

Within the text, Friedman makes many provocative assertions. For example:
  • Increased global interdependence via free trade can actually increase, rather than decrease, the danger of war.
  • Osama Bin Laden’s goal in attacking the U.S. was to encourage local overthrow of Middle Eastern governments (by demonstrating that seemingly invulnerable power structures are actually weak).
  • Iran calculatingly embraced a “North Korea” strategy of appearing crazy and unstable for greater advantage at the negotiation table.
  • It will be in America’s best interests (from a balance of power standpoint) to back away from Israel – and strike up an uneasy strategic partnership with Iran.
  • The European Union was formed out of necessity as a counterbalance to the consolidated power of America and the USSR.
  • Poland will be a regional linchpin, especially in terms of counterbalancing a Germany-Russia linkage.
  • The U.S. will need a nurturing relationship with China to contain a growing power imbalance with Japan (rather than the other way round).
Again, the most helpful thing about “The Next Decade” is not necessarily the accuracy of the fault lines prtrayed, but the illumination of critical thinking as applied by geopolitical strategists in today’s world.

As a trader with a global macro focus, my biggest criticism – and the reason the book only gets four stars – is because of the short shrift given to the causes and consequences of the global financial crisis.

In his chapter on the financial crisis, Friedman tips his hand early by saying “there was nothing at all extraordinary about what happened in 2008.” (Really!) For the next few pages, the tendency to engage in sweeping generalities overlooks critical details that still shape the world situation today.

Friedman seems oblivious to the fact that the Federal Reserve, the banking system it serves, and Wall Street on the whole have their own internal geopolitics – a mix of influence, legacy and corruption that impacts the global economy greatly.

One is willing to give Friedman a partial pass in this area, as macroeconomics and monetary policy are not his chosen forte. Still, though, the weighting of various financial crisis variables seemed unacceptably light, given how money and finance could aggressively shape some potentially dramatic outcomes in the next few years. (Weimar Germany anyone? Panic of 1907?)

All in all, “The Next Decade” is a fast read (243 pages, written in plain English) that will certainly make you think, whether you whole-heartedly adopt Friedman’s view or disagree with every page. The book could prove an especially fruitful exercise for traders and investors seeking to hone their big picture skills, via the extra practice of connecting dots and putting puzzle pieces together.