The great hollowing out and the rise of new threats

This morning I testified before the House Armed Services Committee. The subject of the hearing was "Security Consequences of the Global Economic Crisis." The others testifying were: Richard Haass, President of the Council on Foreign Relations, Richard Cooper of Harvard, and Dov Zakheim, former under secretary and comptroller at the Department of Defense. 

The full text of my formal testimony is here. 

But here are the headlines:

• On 9/11 terrorists attacked Wall Street because it was seen as a symbol and source of our national power. We responded by turning our attention to the terrorists and lost focus on the well-springs of our strength. The damage done by the financial collapse has not been just to our markets or our 401-Ks but to our national security. We have been substantially weakened and distracted from important international concerns even as new problems have been created.

• We face two core sets of security problems associated with the economic crisis. The first is a great hollowing out of the institutions and mechanisms upon which we have depended to maintain the peace globally. The second are those new threats that have emerged or will emerged as countries are buffeted by downturn.

• There are three principal types of risk we are facing as a result of the crisis. The first is linked to the destabilizing internal effects of the crisis, the way it eats away at the resources of countries and creates social pressures and political tensions. This is the mechanism by which viable states become weak ones and weak states become failed states. The second set of risks is associated with the destabilizing bilateral or regional effects of the crisis. Economic pressures produce cross border immigration or grabs for resources or inflame old enmities or cause demagogues to lash out at neighbors as a way of distracting from problems at home. The third set of risks is associated with the destabilizing global effects of the crisis. Nations turn inward and protectionism and other corrosive impulses create tensions even within strong alliances. Further, the crisis of confidence in institutions worldwide combined with the impulse to turn inward will, as discussed in a blog post a few days ago, undercut the viability of the international system and impede progress toward strengthening it as circumstances require. Institutions, alliances and the willingness to collaborate falter.

• Nations at risk from within include but are not limited to Mexico, Pakistan, Ukraine, Turkey, Egypt, Iran, Russia, Venezuela, Argentina, Indonesia, the Philippines, China, and North Korea. The region around Pakistan including Afghanistan and Central Asia is particularly vulnerable here to the combination of economic downturn and large populations of frustrated, easily radicalized young men.

• Risks between nations are well illustrated by the growing border concerns associated with the instability within Mexico. (On the TV as I write this is a Mexican arguing that "Mexico is not Somalia." What a relief.) Upheaval in Pakistan could have serious consequences in India and in Afghanistan. Russia could continue to threaten its neighbors with by force as in Georgia or via economic leverage as in Ukraine. Africa is already rife with such conflicts and more could take place and become intermingled with growing interest in resources within that part of the world.

• As for risks on a global scale, these range from the risks of protectionism to a substantial weakening of key institutions such as the EU, NATO, or, should they not get the recapitalization they need, the IMF, the World Bank, and the regional development banks — all organizations we finance as a means of preventing future conflicts.

• In the near to medium term, the crisis may lead to distractions from issues that should be getting front-burner attention from us whether they may be associated with proliferation of weapons of mass destruction or fighting climate change. We are also likely to see during this period a shift in geopolitical power. American power has been very much linked to our easy access to capital…should that be constricted for a long-term it will weaken our ability to turn ideas into actions and actions into growth. Emerging markets are likely to recover from the crisis faster than us and oil producers are likely to benefit from spikes in demand post crisis and this could accelerate the shift toward the rise of a new set of emerging powers.

• In terms of response, we must prioritize because our resources are and will be constrained. The top threats on which we should focus are: the economic and political constraints placed on the United States, the economic and political constraints placed on the EU, China and other potentially stabilizing actors, the crisis of confidence in institutions worldwide and threats to the international system, the exacerbation of critical threats associated with the proliferation of weapons of mass destruction, the consequences of protracted crisis for the world’s weakest states and the threats to those weak and weakened states which most directly impact the United States.

• The principal recommendations offered were: be strategic about marshalling and maintaining U.S. resources (including greater U.S. fiscal restraint and rethinking defense budgeting, maximizing the means of leveraging U.S. power (maintaining critical institutions and alliances), leading a coordinated, proactive global effort to reduce, eliminate or contain threats, maintaining a credible deterrent against bad actors, recognizing the likelihood the crises will emerge beyond those we are focused on now and to fight the temptation to turn inward at home and abroad.