The com­ing CLASS war

Financial Mirror (Cyprus) - - FRONT PAGE -

The eigh­teenth-cen­tury Ger­man mil­i­tary strate­gist Carl von Clause­witz de­fined war as the con­tin­u­a­tion of pol­i­tics by dif­fer­ent means, and, like the an­cient Chi­nese strate­gist Sun Tzu, be­lieved that se­cur­ing peace meant pre­par­ing for vi­o­lent con­flict. As the world be­comes in­creas­ingly tu­mul­tuous – ap­par­ent in the re­vival of mil­i­tary strug­gle in Ukraine, con­tin­ued chaos in the Mid­dle East, and ris­ing ten­sions in East Asia – such think­ing could not be more rel­e­vant.

Wars are tra­di­tion­ally fought over ter­ri­tory. But the def­i­ni­tion of ter­ri­tory has evolved to in­cor­po­rate five do­mains: land, air, sea, space, and, most re­cently, cy­berspace. Th­ese di­men­sions of “CLASS war” de­fine the threats fac­ing the world to­day. The spe­cific trig­gers, ob­jec­tives, and bat­tle lines of such con­flicts are likely to be de­ter­mined, to vary­ing de­grees, by five fac­tors: creed, clan, cul­ture, cli­mate, and cur­rency. In­deed, th­ese fac­tors are al­ready fu­el­ing con­flicts around the world.

Reli­gion, or creed, is among his­tory’s most com­mon mo­tives for war, and the twenty-first cen­tury is no ex­cep­tion. Con­sider the pro­lif­er­a­tion of ji­hadist groups, such as the Is­lamic State, which con­tin­ues to seize ter­ri­tory in Iraq and Syria, and Boko Haram, which has been en­gaged in a bru­tal campaign of ab­duc­tions, bomb­ings, and mur­der in Nige­ria. There have also been vi­o­lent clashes between Bud­dhists and Mus­lims in Myan­mar and south­ern Thai­land, and between Is­lamists and Catholics in the Philip­pines.

The sec­ond fac­tor – clan – is man­i­fested in ris­ing eth­nic ten­sions in Europe, Tur­key, In­dia, and else­where, driven by forces like mi­gra­tion and com­pe­ti­tion for jobs. In Africa, ar­ti­fi­cial bor­ders that were drawn by colo­nial pow­ers are be­com­ing un­ten­able, as dif­fer­ent tribes and eth­nic groups at­tempt to carve out their own ter­ri­to­rial spa­ces. And the con­flict in Ukraine mo­bilises the long-sim­mer­ing frus­tra­tion felt by eth­nic Rus­sians who were left be­hind when the Soviet Union col­lapsed.

The third po­ten­tial source of con­flict con­sists in the fun­da­men­tal cul­tural dif­fer­ences cre­ated by so­ci­eties’ unique his­to­ries and in­sti­tu­tional ar­range­ments. De­spite ac­count­ing for only one-eighth of the world’s pop­u­la­tion, the United States and Europe have long en­joyed economic dom­i­nance – ac­count­ing for half of global GDP – and dis­pro­por­tion­ate in­ter­na­tional in­flu­ence. But, as new economic pow­er­houses rise, they will in­creas­ingly chal­lenge the West, and not just for mar­ket share and re­sources; they will seek to in­fuse the global or­der with their own cul­tural un­der­stand­ings and frames of ref­er­ence.

Of course, com­pe­ti­tion for re­sources will also be im­por­tant, es­pe­cially as the con­se­quences of the fourth fac­tor – cli­mate change – man­i­fest them­selves. Many coun­tries and re­gions are al­ready un­der se­vere wa­ter stress, which will only in­ten­sify as cli­mate change causes nat­u­ral dis­as­ters and ex­treme weather events like droughts to be­come in­creas­ingly com­mon. Like­wise, as forests and ma­rine re­sources are de­pleted, com­pe­ti­tion for food could gen­er­ate con­flict.

This kind of con­flict di­rectly con­tra­dicts the prom­ise of glob­al­i­sa­tion – namely, that ac­cess to for­eign food and en­ergy would en­able coun­tries to con­cen­trate on their com­par­a­tive ad­van­tages. If emerg­ing con­flicts and com­pet­i­tive pres­sures lead to, say, economic sanc­tions or the ob­struc­tion of key trade routes, the re­sult­ing balka­ni­sa­tion of global trade would di­min­ish glob­al­i­sa­tion’s ben­e­fits sub­stan­tially.

More­over, the so­cial un­rest that of­ten ac­com­pa­nies economic strife could cause coun­tries to frag­ment into smaller units that fight one an­other over val­ues or re­sources. To some ex­tent, this is al­ready oc­cur­ring, with Iraq and Syria splin­ter­ing into sec­tar­ian or tribal units.

The fi­nal key risk fac­ing the world con­cerns cur­rency. Since the global economic cri­sis, the ex­pan­sion­ary mon­e­tary poli­cies that ad­vanced-econ­omy cen­tral banks have pur­sued have caused large-scale, volatile cap­i­tal flows across emergin­ge­con­omy bor­ders, gen­er­at­ing sig­nif­i­cant in­sta­bil­ity for th­ese coun­tries and fu­el­ing ac­cu­sa­tions of “cur­rency wars.”

The ex­tra-ter­ri­to­rial use of reg­u­la­tory and tax pow­ers – par­tic­u­larly by the US, which has the added ad­van­tage of is­su­ing the world’s pre­em­i­nent re­serve cur­rency – is re­in­forc­ing the view that cur­ren­cies can be wielded as weapons. For ex­am­ple, the US has ef­fec­tively balka­nised global bank­ing by re­quir­ing all for­eign banks op­er­at­ing there to be­come sub­sidiary com­pa­nies and re­quir­ing in­ter­na­tional banks with US-dol­lar clear­ing ac­counts to com­ply fully with US tax, reg­u­la­tory, and even, to some de­gree, for­eign pol­icy (for ex­am­ple, re­frain­ing from trad­ing with US en­e­mies).

Hefty fines im­posed by US reg­u­la­tors for breach­ing the rules – no­tably, the re­cent $8.9 bln set­tle­ment by BNP Paribas – are al­ready caus­ing Euro­pean banks to re-think their com­pli­ance costs and the prof­itabil­ity of op­er­at­ing in the US. Mean­while, Amer­i­can courts have forced Ar­gentina into an­other na­tional de­fault.

But per­haps the strong­est mes­sage is be­ing sent via tar­geted sanc­tions on Rus­sia’s oil, fi­nance, de­fense, and tech­nol­ogy in­dus­tries, as well as on Rus­sian of­fi­cials. With this ap­proach, the US and its al­lies are send­ing a clear mes­sage to any­one who may dis­agree with US pol­icy: avoid us­ing the dol­lar and dol­lar­de­nom­i­nated bank ac­counts. Some fi­nan­cial ac­tiv­ity has al­ready been driven into the shad­ows, re­flected in the use of Bit­coin and other cur­ren­cies that are be­yond the reach of US reg­u­la­tors.

In a re­cent speech, Pres­i­dent Barack Obama de­clared that the ques­tion is not whether the US will lead, but how it will lead. But, as creed, clan, cul­ture, cli­mate, and cur­rency cause the world to be­come in­creas­ingly alien­ated from the US-cen­tric in­ter­na­tional or­der, such dec­la­ra­tions may be ex­ces­sively op­ti­mistic. In­deed, in the com­ing CLASS war, no one seems quite sure whom to fol­low.

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