Nitpicking JOE
Yesterday, U.S. Joint Forces Command released its Joint Operating Environment 2010 report (JOE). JOE is an ambitious document, an attempt discuss a broad range of 25-year global trends, all in less than 75 pages. Topics range from demographics, economics, and the environment, to regional security issues, and then on to advice on how U.S. military forces should prepare for war in the 21st century. Each of JOE’s numerous topics merits a book-length treatment. JOE’s authors deserve praise for providing a useful executive summary of these trends and for discussing their implications for global security.
It is inevitable that observers will have their gripes with a few parts of JOE. Here are mine:
1) JOE’s discussion of the U.S. government’s disastrous budget trends is spot-on and I would not change a word of it. The discussion of global trade and financial imbalances is, however, off the mark and could have been much more useful, especially as they relate to emerging international tensions.
JOE says,”Furthermore, chronic trade and currency exchange imbalances in the global economic system (see graphic below) have exacerbated both U.S. current account deficits and overall government indebtedness such that the amount of U.S. government debt held by foreigners has grown from 1.3 trillion to 3.5 trillion dollars representing some 40% of total U.S. debt. Large exporting nations accept U.S. dollars for their goods and use them both to build foreign exchange reserves and to purchase U.S. treasuries (which then finance ongoing U.S. federal operations).” JOE implies that because U.S. households consume too much (like the federal budget deficit, evidence of a moral failing), mountains of U.S. dollars, in the form of U.S. Treasuries, have thus ended up in the hands of the Chinese government and others around the world.
This makes for a good morality tale. But JOE gets the economics on this point mostly wrong and in doing so misses the real security issue. The actual direction of causation is in the opposite direction to what JOE implies. Following a path proven over many decades by its Asian neighbors, China has grown its economy through export promotion. A key to promoting its exports has been to keep the yuan-dollar exchange rate low, which makes Chinese products cheap for U.S. consumers. It does this by printing yuan and buying dollars, investing the proceeds in U.S. Treasuries. This is the same economic strategy nearly all Asian economies have used since the 1950s to gain access to the U.S. market. Thus the buildup of Chinese (and others) foreign exchange reserves is a partial cause, and not a consequence, of U.S. trade deficits.
What should JOE have said instead about global capital flows? Something like, “National governments that use exchange rate manipulation strategies to promote their exports can create large and destabilizing imbalances in the global financial system. These imbalances, the result of explicit policy decisions, can have harmful secondary effects in interest rate and equity markets, exacerbating boom and bust cycles. In addition they can disrupt labor markets, creating social tensions which could heighten trade and diplomatic tensions between countries.” There is the straight line between economics and international political friction JOE should have discussed.
2) JOE said (p. 40), “In the year 2000, the PLA had more students in America’s graduate schools than the U.S. military, giving the Chinese a growing understanding of America and its military.” Citation please?
3) In its discussion of China (pp. 39-42), JOE spends much space discussing China’s possible intentions. This is important and worth discussing. But why is there almost no space given to discussing trends in China’s military capabilities? It would have been useful for a JOE written in 1995 or 2000 to discuss the trends in China’s short and medium range ballistic missiles and tactical aircraft. As a result of those trends, Taiwan may no longer be able to defend its airspace, meaning that it may now have to switch to an irregular warfare defense. Similarly, try to imagine a British Admiralty JOE written in 1890 or 1900 that avoided discussing trends in German warship construction. One would wonder what the purpose of the document was.
4) Finally, I believe JFCOM should have used Part V to more aggressively promote the concept of experimentation. JOE does mention experimentation in the Concluding Thoughts (p 72). But a major theme of JOE is to expose the shortcomings of forecasting and to address the need for more effective adaptation. One of the best ways to hedge forecasting risk and to enhance adaptation is to expand the use of experimentation. Experimentation is a major focus of JFCOM. JOE was an opportunity to highlight this aspect of JFCOM’s mission and to explain how the government could make greater use of experimentation to cope with an uncertain future. JOE missed this opportunity.
In sum, JOE is a worthy survey of global trends. I think it bypasses a few sensitive issues and misses a chance to promote experimentation. But it is well worth reading.
