Watershed

The Watershed of the 21st Century

Tim Oren - 9/19/01

In searching for some economic and technology investing implications of the events of September 11th, I find it impossible to approach the problem directly. The crisis that has been precipitated is not fundamentally one of business or engineering, but of politics, foreign affairs, and culture, all uncomfortable ground for the Silicon Valley analyst. But, it is these arenas that will drive the macro trends of the landscape now, a sharp contrast to the decade past in which secular economics has set the pace. For that reason, as well as some self-confessed personal catharsis, I start with the political dimension.

Landmark or Watershed?

There are famously events so powerful that any American living at the time can remember what they were doing and how they were affected: Pearl Harbor, the assassination of JFK, the Challenger explosion, the beginning of the Gulf War. But these are really of two kinds: landmarks - graphic punctuations of time that do not change fundamental trends, and watersheds - that announce the beginning of a new era, where all the streams flow another way. Of the events listed above, only Pearl Harbor was a watershed. To illustrate with two counter-examples:

Kennedy's assassination changed no fundamental trends. Although it was shocking to the sense of order of Americans, it had no substantial effect on events that dominated the US in the 1960s: civil rights, the rise of the welfare state, the Vietnam debacle and loss of government credibility.

More relevant to today's issues, the Gulf War can now be seen as merely a landmark. In contrast to the 'New World Order' and 'Pax Americana' rhetoric of the time, the war and coincident collapse of the Soviet Union left a power vacuum. The succeeding American administration was notably tentative and timid in asserting power, preferring (for instance) to expend most of the ready stock of US smart munitions rather than risk ground casualties in Kosovo. Instead, the decade was driven by the economic hegemony of the liberal democracies and globalization, with the wave of IT and Internet fever as an accelerator.

In contrast, Pearl Harbor did change everything. While the trends that led to war are retrospectively obvious, the event was an enormous shock. But it has become shorthand for an aftermath that was fundamentally transformative - total war, the Bomb, the transformation to an urban, technological society, the image of the US as leader of a Free World. Pearl Harbor was the proximate trigger that resolved for 50 years one of the fundamental internal ambiguities of the United States, between isolationism and internationalism.

What separates landmarks and watersheds is not the event itself, but the aftermath. So of which type is the World Trade attack? Certainly it is a landmark at least. According to those who have lived through both (my parents), this shock is harder than Pearl Harbor: it is immediate, graphic, has hit the homeland, was targeted at civilians, and there is no immediately obvious foe on which to vent the rage. It is inevitable that the painful, public removal of rubble and corpses will keep the agony refreshed for months to come.

Does it rise to the level of watershed? I believe so. Landmarks become watersheds when they resolve ambiguities or indecision about fundamental goals, or expose the outcome of long term trends. Several fundamental issues stand at balance:

The Role of Nation-states. From Metternich to the Geneva conventions and the United Nations, nation-states have occupied a privileged position, with (nominal) legal monopolies on force and sanctity of borders. But there has been steady erosion of the privilege, by NGOs, supra-national organizations, and the de facto foreign policy of multinationals and other economic interests. But we are now faced with the stark fact that a movement with no semblance of nationhood, and with no proxy relationship to a major power, can inflict casualties at the level of national acts of war. Combating that movement will be a stark challenge to the power and legitimacy of the previous order, and its relationship to non-national power structures, and may indirectly unleash other issues related to the sanctity of national borders and the rights of internal groups.

The Spread of Liberal Progressivism.Since the fall of socialism, an inter-linked agenda of economic liberalism, political democracy, and (more weakly) multiculturalism has been moving forward around the world. I believe that, when they are conscious of it, Americans have regarded this as not only right, but inevitable. After all, even the Russians and Chinese are doing their best to become capitalists, if not democrats. We have become complacent, believing this change would happen without pain to either ourselves or to those whose lives would be transformed, and that it was slowed only by the backwardness of governments or peoples. (Those criticizing globalization directly, though noisy, are neutered by the very success they deplore.) Now, however, we have hit a hard stop. There are those in world who not only don't want to join this party, but regard it as enough of an affront to their way of life that they will kill or die to stop it, and they will fight offensively as well as defensively. It is the late realization of this fact that the Europeans correctly criticize as naiveté.

The Destructive Power of Technology. The terrorists leveraged a few dozen knives into the death of over 5,000 and the destruction of tens of billions of value. This force multiplication was made possible by a simple operational concept combined with 40 year old civilian technology - jet aircraft. It's now obvious that pure civilian or dual use technologies are becoming so powerful and omnipresent that they will put increasing force potential in the hands of small groups, with biologicals being the most obvious next threat. This problem strikes to the core of the progressive agenda, with its long and deep embrace of technological optimism.

[N.B. for any blog readers: I'm obviously using the 'classic' definitions of liberal and progressive above.]

'The Next Thing'While not a fundamental driving trend, some psychological significance must be given to the fact that these events occurred when the US in particular, and the liberal democracies in general, had a feeling of uncertainty over what would come next. The Internet boom had turned into a hangover, a recession of varying severity was obviously coming, and there was no real sense of the direction ahead. The US administration in particular was weak, having difficulty with finding an affirmative domestic agenda and with indifferent support for its foreign policy directions. Now its weakness is transformed into strength, with political will (for now) united behind the most experienced military and foreign policy team of many decades. The ambiguity between isolationism and internationalism, which had re-emerged in the last ten years, is again resolved.

The exact structure of the watershed is impossible to know this close to the event, but I believe its fundamental character is shown by the very difficulty of our analytic task. The world driver of change has abruptly changed from the economic sphere to the political sphere, for the foreseeable future.

The Nature of the War

Is it a war? Maybe not (initially) by the standard formula of opposing nation states, but it certainly fits the practical definition: the use of force to destroy the enemy's will and capability to fight. It's not about 'retribution' but about victory, which in this case is difficult to define and achieve. It's more useful to ask what kind of war it will be, and whether it will become a World War in either conventional or unconventional senses.

The target of our enemies is obvious: the will of the people of America and the liberal democracies. The direct economic and military impact of the current attacks is only a pinprick; the damage is almost entirely psychological. The capability of the democracies is not in question, but the ability to project it effectively and the will to sustain it could be. The forging and support of that will is one of the major battlegrounds of the struggle to come. It will be made more difficult because of this war's exposure of some of the most poignant internal struggles of American society, most notably the contradictions between naive multiculturalism and crude nativism, between individual freedoms and social control, and between technological optimism and fear of change.

Analyzed in conventional terms, the enemy's force and ability to project it has been seen as limited up to now. Even Pakistan and Iraq, harboring states, have very limited ability to project force beyond their borders.

However, it's now obvious that this has changed. An unconventional enemy is now seen as able to project force, using modern communications and transportation as control, and multiplying damage at its target through stealth and leverage of the dangerous technologies. The will of this enemy is not in question, and conventional replies carry the risk of reinforcing it.

The magnitude of the struggle can be seen through a clear statement of the implied threat. We must now presume that the terrorist networks are able to fund and coordinate the delivery of any hi-tech payload that falls into their hands. This must include, specifically, weapons of mass destruction from Iraq, from a fallen Pakistani state, or leaking from the former Soviet Union. A war plan must include the pre-emptive destruction of these weapons at source, to the maximum extent possible, including forcible actions across national boundaries, since allowing their delivery is unthinkable.

(For this reason, the fate of Pakistan is now more crucial than that of Afghanistan. If the Pakistani government falls to Islamists, a pre-emptive removal of their nuclear capability will become mandatory. Down this road lies a regional conflagration combined with global terror - true World War III.)

A second element of a war plan must be the disruption of the enemy's ability to utilize transportation, financial and communications networks for coordination and delivery of force. Lacking most conventional targets, this is the true target of direct action. Getting Osama ben Laden is symbolic, destroying his network's ability to act is essential.

One element of this plan will be the embargo and destruction of networks close to the origins of terror, in the harboring states. The next generation of sanctions will include the overt, forcible severing of harboring states from the modern world, and destruction of network hubs within them, by means ranging from EMP bombs to commando strikes.

However, most of the networks utilized by the terrorists lie within the boundaries of the democracies. The continued free action of these networks is essential to sustaining the nations' economies and will. Communications, financial and transportation networks are about to become battlegrounds in a true sense. This is the first strong clue to the nature of the new war's technological impact. 'Cyberwar' is upon us, but it is not a crude attempt to destroy networks, but a sophisticated leveraging to multiply force and destroy will.