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2012 US Army War College Strategy Conference is under way. Fortunately, the major events are being videotaped and uploaded to Youtube.

Panel # 1 “Panel I – An Age of Austerity: What Is It and What Does It Mean?”

Moderator: Professor Jef Troxell, U.S. Army War College
Panelists: Dr. Lawrence Korb, Senior Fellow, Center for American Progress; Mr. Tom Davis, Vice President for Strategic Planning, General Dynamics; Dr. Thomas McNaugher, Georgetown University

Or, at least a palliative.  Civilizational progress past and future.

Strategist and military analyst Frank Hoffman, now Director of National Defense University Press, takes a warm view of the new strategic guidance from DoD as a risk balancer in line with a dire fiscal and political reality. A “Pivot and Partner” strategy:

DefenseNews – Pentagon’s New Guidance: Sound Strategy Intricately Linked to Policies 

….Despite the fact that the Pentagon’s guidance represents the essence of “good strategy,” it was immediately panned by numerous pundits and several serious commentators who should know better.

What my critical colleagues have a problem with is not this document’s long-overdue need to reconcile our interests, priorities and resources. No, the real problem is that this guidance reflects a policy decision to sacrifice nearly $500 billion of planned increases to the defense budget over the next decade. Rather than resolve the strategic solvency gap between America’s goals and funding, the guidance’s critics want to continue to borrow money to maintain an unsustainable agenda.

The most common criticism is that the guidance is risky. There is little doubt that reductions in defense spending of the size now contemplated will increase risk. Such risks would be even more severe if sequestration is triggered by political gridlock.

However, the critics have no concern for the risk of fiscal collapse or the risks borne by the lack of renewal in the foundation of America’s power. Nor can they find fault with the increased risk borne by the $2 trillion already spent to prosecute two wars and build up America’s military budget to its current high of $550 billion, which exceeds Cold War-era spending levels. That’s the sort of thinking that partially got us into our economic crunch in the first place.

This has some possible geopolitical implications:

Greek government in chaos with debt deal in doubt

ATHENS, Greece (AP) – The Greek government teetered and stock markets around the world plummeted Tuesday after a hard-won European plan to save the Greek economy was suddenly thrown into doubt by the prospect of a public vote.

One day after Prime Minister George Papandreou stunned Europe by calling for a referendum, the ripples reached from Athens, where some of his own lawmakers rebelled against him, to Wall Street, where the Dow Jones industrial average plunged almost 300 points.

Papandreou convened his ministers Tuesday night, and a spokesman said the prime minister was sticking to his decision to hold the referendum, which would be the first since Greeks voted to abolish the monarchy in 1974. Papandreou has also called a vote of confidence in his government, to be held midnight Friday.

“The government is not falling,” said Angelos Tolkas, a deputy government spokesman.

….A Greek rejection of the second rescue package could cause bank failures in Europe and perhaps a new recession in Europe, the market for 20 percent of American exports. It could also cause Greece to leave the alliance of 17 nations that use the euro.

European leaders made no secret of their displeasure.

“This announcement surprised all of Europe,” said a clearly annoyed French President Nicolas Sarkozy, who has been scrambling to save face for Europe before he hosts leaders of the Group of 20 major world economies later this week.

“Giving the people a say is always legitimate, but the solidarity of all countries of the eurozone cannot work unless each one consents to the necessary efforts,” he said.

French lawmaker Christian Estrosi was even more direct. He told France-Info radio that the move was “totally irresponsible” and reflected “a wind of panic” blowing on Papandreou and his party.

“I want to tell the Greek government that when you are in a situation of crisis, and others want to help you, it is insulting to try to save your skin instead of assuming your responsibilities,” Estrosi said.

Sarkozy and German Chancellor Angela Merkel, who have been at the forefront of Europe’s efforts to contain national debt, talked by phone and agreed to convene emergency talks Wednesday in Cannes, France. Papandreou will also attend.

Merkel also spoke by telephone Tuesday with Papandreou, his office said.

The response was brutal in the international financial markets, especially in Europe. Greece’s general price index plunged to close down 6.92 percent, while in Germany the Dax index, the major stock market average, lost 5 percent – the equivalent of about 600 points on the Dow.

The French stock market closed down 5.4 percent, the Italian 6.7 percent and London 2.2 percent.

“Talk about your all-time bonehead moves,” said Benjamin Reitzes, an analyst at BMO Capital Markets….

While it is likely that the EU will muddle through this latest Greek crisis, I have to wonder if the EU will exist at all in five years? Or perhaps as a rump Northwest European confederation? This will not be the last debt crisis.

Our unlamented and departed Soviet adversaries used to talk about what they called “the contradictions of capitalism”. In the current crisis we are seeing the contradictions of technocratic governance as practiced by European elites. It seems that lacking the political ability to coerce Southern member states into genuinely accepting austerity programs, or alternatively spur their less developed economies to higher growth rates, the EU structure is both the raison d’etre and the obstacle to a solution.

An essentially undemocratic elite project, the EU is stymied by the residual democratic capacity of national citizenry to resist. Ordinary Greeks are not inclined to accept financial castor oil spooned by foreigners to please the international markets and I suspect the tolerance of German taxpayers for footing more than their share of the EU bills is wearing dangerously thin.

Either power will increasingly flow to the EU nations still writing the checks, making the EU even more unrepresentative, but more economically rational in political decision-making, or there will be a rush for the exit door.

ADDENDUM:

Greek Prime Minister abruptly sacks military chiefs

That are complementary:

Fabius Maximus –Our fears are unwarranted. America is in fact well-governed.

….America is in better shape than Europe and Japan.  We have good demographics, sound fundamentals, relatively easily solved problems, and no powerful enemies.  Why the constant sense of crisis?  QE2, hyperinflation, climate armageddon, Obama the socialist, AIDS, alar on apples, jihadists, debt, swine flu – a constant drumroll of doom, explained by Peter Moore in “The Crisis Crisis” (Playboy, March 1987).   Answer:  elites govern a weak people by exploiting their fears.  For example, look at the “government is broke” panic.

• The Federal government’s net debt is only 2/3 of GDP, well below the 100% of GDP “red line” (that Italy reached many years ago).
• The short-term deficit is mostly the result of the recession.  The medium-term deficit results from the Bush tax cuts.
• Social security’s funding gap is small vs. GDP and easily fixed.
• The massive funding gap is mostly Medicare, easily fixed by adopting features from the mixed public-private systems in Europe.

Panic pushes Americans to allow cuts to popular social services plus increased and highly regressive taxes.  No matter who wins, after the 2012 election our representatives will implement the necessary policy changes:  raising taxes, cutting expenditures, rebuilding our infrastructure, and beginning the long process of reforming health care.  It will be another morning in America.  There is no crippling polarization, just distracting noise masking a consensus between both parties about the key points of economic and foreign policy.

We do not see this long-standing pattern (see the previous post for details) because our collective OODA loop is broken (see section 6 here).  That makes us easier to lead.  Relying on wealth-based elites to run the country has a cost.  They take a large share of the pie; we take a small slice….

Global Guerrillas –JOURNAL: Global Financial Cancer

….A couple of years ago, I wrote that the underlying structure of the global financial system was a “bow-tie.”  Here’s what I said (it’s worth going back and reading the entire article and this paper on bow-ties from John Doyle at Caltech):

If we look at this new global system from a distance, its architecture is something called a bow-tie. This is a universal control system architecture that underlies complex systems from the Internet to cell metabolism.

What is a Bow Tie?

The bow-tie is a very powerful approach to organizing a complex system (it’s a system design that is used by controls engineers.)  Visually, it starts with complex inputs (the left side of the bow-tie), boils them down into simple build blocks (the knot), which then allows the construction of complex outputs (the right side of the bow-tie….

….Unfortunately, as I mentioned in the earlier article, bow-ties are vulnerable to organisms that attach themselves to the knot at their center (like the way cancer uses the body’s metabolism system).  These organisms relentlessly use the bow-tie’s knot to for selfish ends (rapid growth).  The end result is typically death for the system.  My suggestion was that the instability we were seeing in the financial system was an indication that it had been co-opted by a malicious, self-serving organism.

Of course, at the time there wasn’t much data to support this systemic analysis.  That has been rectified with a new paper, The Network of Global Corporate Control by Vitali et. al. from ETH in Zurich.  This paper finds, through extensive network analysis, that a small group of tightly intertwined financial institutions control the bow of the global financial system.  It is in effect, the world’s first super-organism….

They are both right. Probably not perfectly, the American economy, even more the world’s, is too complex a subject, but right enough.

FM is right that the emerging class of people I have been calling “the Oligarchy” the past couple of years do not intend to deliberately implode the system that is working outrageously to their benefit. They are currently in the stage of trying to come up with an arsenal of tax-farming schemes that will pass political muster (i.e. – not provoke uncontrollable, “Arab Spring” street demonstrations or a successful populist electoral revolt  that would eject their sycophants from government en masse in a single election) and are quietly, methodically and strategically neutering the capacity of the populace to resist their rule over the long term. It is there that we see seemingly unrelated measures as the coordinated political attack on public education and university education, restrictions on the ability of citizens to get courts to review arbitrary actions of Federal agencies, imposition of laws to permit total surveillance of US citizens and acquisition of their personal information and so on.

The elite, who are not completely cohesive or formally organized, are supremely confident in their ability to manage the technocratic economy they are putting into place, or if bumps in the road appear, to squeeze sufficient new leverage from the populace through inflation, devaluation and other forms of expropriation. Unfortunately, I am not confident that these folks are nearly as competent as they imagine themselves to be. Nor am I sure that the global system that they have built, a high-performance, deeply complex, ultra-leveraged, financial sector dominant political economy isn’t as fragile and dangerously unstable as people like John Robb and Nassim Nicholas Taleb have maintained it is. The system might not just crash, it could crash to extreme depths with unprecedented speed with unforseen consequences (financial systems also ensure the reliable and continuous logistical flow of *food* and *power* to population centers).