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«Workshop held 9-10 January 2008 in Arlington, VA Prepared for US Strategic Command Global Innovation and Strategy Center (USSTRATCOM/GISC) Prepared ...»

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These actors were eventually neutralized by the 19th Century, but not until states grew in size to effectively rule all the seas with large navies (although some pirate activity of this type remains in the least developed parts of the world even today). In the American Civil War, it is wellknown that groups with only loose connections to either the Union or Confederacy fought very violent, irregular campaigns, often against civilians. Much like current non-state actors, it was often difficult to distinguish those pursuing the pro- or anti-slavery cause from those who were simply common criminals and outlaws. William Quantrill was one such leader, whose violence is legendary (e.g., Lawrence Kansas massacre of women and children) and whose connections to the Confederacy were at least tenuous. Several members of his band went on to infamous bandit careers (e.g., the James-Younger gang).

Most violent non-state actors have appeared on the fringes of civilization, often taking advantage of the technologies that had been harnessed by the state to extend its control. In the case of Deterring VNSA in Cyberspace Rome, the great Roman technologies of road and bridge building, aqueduct and sewer construction, and armor and weaponry, were largely assimilated by their opponents on the fringes of the Empire, and eventually brought to bear against Rome. Similarly with the pirates, who availed themselves of the latest ship-building technology to outfit their vessels to match their guerilla needs.

Until the late 19th Century, such non-state groups had essentially local structures, dictated by the necessity of proximity for communication and coordination of activities. Until then, such actors were essentially local ‘bands’ of like-minded individuals. It is only with the invention of the telegraph and telephone, the first speed-of-light ‘network’ technologies, that such actors could organize their activities while physically remote from one another. As such, the violent non-state actors of the late 19th Century to the present, many of whom were either nationalist or communist/anti-communist in character (or some combination of these), achieved a larger scale, a more elaborate division of labor (e.g., military and political ‘wings’), and an overall structure that was not limited by physical boundaries, but by ideological ones. For example, Chinese communist guerillas were able to extend their organization to much of their country, eventually, but were not simply clients of Soviet Russia, with Maoism being programmatically distinct from Leninism. The critical role of technology also explains why such combatants, once they have achieved some success against the state, target with high priority the control of television and radio broadcasting stations, both for propaganda purposes but also for the enhanced commandand-control possibilities they make possible, especially as the guerillas find it necessary to morph themselves into a state-like apparatus upon achieving victory (e.g., Castro and Guevara).

These historical remarks have been made as evidence for the first point I wish to make, that the current crop of violent non-state actors, in making use of the Internet specifically and computational technologies generally—in a phrase, the cyber domain—represent simply the latest stage in the development of a long line of technologically-enabled combatants with interests opposed to the system of states in which the actors find themselves. Further, in the same way that the telegraph, telephone and television provided the first ‘speed of light’ technologies toward globalization, as sailing ships had provided the first ‘speed of wind’ technologies of globalization before, and Roman roads had provided the first ‘speed of walking’ globalization even earlier, the current cyber domain provides greatly enhanced connectivity and bandwidth, greatly facilitating communication and trade, the hallmarks of globalization.

Every successful new technology produces competing effects, as Schumpeter’s term for innovation, ‘creative destruction,’ suggests (Schumpeter, 1942). On the one hand, new technologies introduce new capabilities that can be harnessed to simplify production, reduce costs, improve productivity, and enhance profits, while providing greater goods and services to end users. On the other hand, they devalue existing investment in older, substitute technologies, upset existing work rules and regimes, challenge cultural practices, and put pressure on extant social conventions. Truly disruptive innovations can spark potentially radical evolution in political, economic, and/or social institutions.

The Internet is, in many respects, a disruptive innovation. It has changed many things: how retailing is practiced, how news is disseminated, how intra-firm communications are managed, even how taxes are filed. How to make money from the Internet—finding the right ‘business Deterring VNSA in Cyberspace model’—remains more art than science, with many traditional businesses yet finding it difficult to profit online but forced to be online because competitors are a presence there.

The cyber domain is a force in globalization, a key player in the progressive development and articulation of worldwide trade and economic integration, but it is not the main driver of globalization. International free trade agreements, minimal controls on capital migration across borders, near open access to very large-scale low-cost labor pools, widespread political stability, relatively smooth fluctuations in currency values, and increasingly ubiquitous communication technologies have all facilitated globalization. It is easy to see that each one of these factors is closer to necessary than sufficient for the process of globalization, for without any of them the pace of the process would be much reduced, while no one factor by itself could have led to the level of global integration we have today.

The present pace of globalization will likely continue for some time, influenced in a limited way by the ebb-and-flow of the various factors mentioned above. For example, political uncertainty due to the Iraq War and currency instability due to US trade deficits and devaluation of the dollar will each contribute to diminishing the amount of globalization that would otherwise have been realized, but the off-shoring of jobs to low labor cost countries will continue, alongside the repatriation of profits to foreign owners. There will continue to be some rearguard actions against globalization, as disenfranchised labor in the developed world seeks compensation for lost jobs and reduced standards of living, but such efforts will be marginal and will have little effect on the overall character of the emerging globally-integrated economy.

The continued process of globalization will produce a great variety of global-scale social phenomena, from the rise of middle classes (and billionaires) in developing countries to environmental progress (e.g., the end of the printed newspaper) to the formation of mega-cities of one hundred million inhabitants. But of these many effects, I would like to focus on the three that I think are the most significant for our purposes.

First, globalization is currently causing a shake-out in all production technologies that feature economies of scale. That is, for industries where the unit cost of making the (n+1)st unit is less than for the nth—typically heavy industry—there is enormous economic incentive to move production to a single regional location where the benefits of increasing returns can be fully extracted. Consider automobiles, where there is tremendous pressure on Detroit at the moment and for the foreseeable future, to become a ‘world class’ producer or go out of business. In essence, a fierce worldwide competition has been ignited between a few automotive manufacturers—Toyota, General Motors, Daimler—to see who will dominate 21st Century vehicle production. This process of global-scale competition is happening in many industries, and will produce, over the next few decades, a few global winners, with world-scale production concentrated in a few hands, a few centers of power. This process is quite different from what T.

Friedman argues is happening in The World is Flat. We are seeing the centralization of power and resources as a result of globalization, which is a ‘flattening’ only in the sense that those not in the centers will see their income and power considerably homogenized. Just try to buy a locally designed, engineered, or manufactured vehicle in 2050! This global shake-out will produce winners and losers and for many it will not be a pretty picture.

Deterring VNSA in Cyberspace This leads to the second great effect of globalization, the spontaneous generation of great disparities of income, wealth, living standards, and quality-of-life. While such disparities have long (always) existed (Smart, 1912), are present today, and would occur in the future with or without globalization, the size of the gaps in the globalized world will lead to strife and unrest.

While the poor of the future will no doubt have a better life than the present day poor, and future middle classes are likely to be better off than their analogs today, there will be more super-rich to envy, especially at the global ‘centers’ that win the world class manufacturing crowns in autos, steel, ship-building, semiconductors, software, and so on. The discrepancies between economic classes will play out in myriad ways, and little can probably be predicted in advance for the kinds of conflict that may arise in any particular region. But suffice it to say that inequitable divisions of the products of human labor and ingenuity have been the source of much conflict throughout recorded history. In under-developed and developing regions, such disparities may serve as the ‘root cause’ of movements that will limit globalization’s ultimate reach, whether because political forces antithetical to globalization gain power, or because such movements simply wreak such havoc that they effectively cut-off the local march toward global integration. Such movements may not be peaceful and therefore the formation of violent, non-state actors may be viewed as a direct consequence of globalization. The cyber-domain and global economic integration lead to status disparities, and knowledge of such disparities, and this fuels anti-global movements.

The third way that global integration is most likely to powerfully manifest itself in the future is through severe financial disruption. If we look at financial history, the first great wave of industrialization in the US—gilded age railroad, steel and other heavy industry, mostly in the Northeast—was an early example of deep economic integration, ‘globalization’ on a regional scale. It largely ended in the ‘Panic of 1893,’ in which the US stock market fell markedly, precipitating four years of recession/depression, then the birth of the Progressive Era followed by the break-up of the large trusts. A generation later the Roaring Twenties in the US was another era of economic integration, this time fueled by technological developments like the automobile, airplanes, radio and motion pictures. This era too ended with financial disruption, as the US stock market ‘Crash of 1929’ brought twenty-five percent unemployment rates to the US by the early 1930s, and propagated around the world hitting essentially all developed countries. It took over a decade for the world to rise from that economic and financial catastrophe, and led to a truly global war.

In summary terms, a main reason for these financial collapses in the wake of economic integration is that the new institutions that grow up in the context of economic growth are not designed to handle large-scale downturns, and so when crisis happens new institutions must be brought into existence to manage the myriad problems that result. Building new institutions sufficient to the job may take years, especially in the context of trying to manage the human tragedies produced by such events (e.g., the New Deal). In somewhat more biological terms, populations are vulnerable to severe fluctuations (and possibly extinction) when they are insufficiently diverse. As economic integration proceeds, firms and industries and regions become more alike—they share the same risks, use the same accounting practices, hire from the same executive pools, etc.—so when exogenous shocks arrive (e.g., bad harvests, technological innovations) the response of the many actors is highly correlated, leading to amplification of the shock. It is only through the diversification of actors or the establishment of organizations to attenuate the shocks that the effect of such events can be limited.

Deterring VNSA in Cyberspace Today, it is being overly generous to call the worldwide financial ‘system’ a system at all.

Rather, it is a hodgepodge of loosely connected electronic markets and regulatory structures, with trading firms providing most of the connectivity between markets, while central (national) banks intervene at the margins. There are important international institutions in place, like the IMF, but the focus of these entities is to provide credit primarily to developing nations and not the overt management of international financial markets. Therefore, given this landscape, as the current wave of globalization proceeds, and economic actors push the existing apparatus to its feasible limits, there will arrive one or more events that trip this system into crisis. When this happens, because the world is largely integrated, it will cause an economic downturn on a global scale. As to the severity of the downturn, if new institutions for managing the crisis internationally can be quickly legislated into existence, and if these function effectively, then perhaps a global recession will be the only result. However, if the situation deteriorates before such institutions are brought to life then a global depression could result. If this were to happen, surely there would be huge demand by affected citizens to form global financial institutions, and incentives for politicians to do so, but in the quagmire of such a global downturn, it might take decades to create truly global institutions with enough power to make a difference on a worldwide scale.

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