Sunday, September 25, 2016

Formalizing our Thinking about the Interplay Between Investment in Economic Growth Capacity and Investment in Security

Imagine, sang John Lennon in 1971: Imagine there's no countries, no religion too; no property, and only people living for today. For 98 percent of modern man's (i.e. Homo Sapiens) existence that was our lot. John Hobbes imagined it in 1651 and was not so sanguine.

Hobbes thought that such a state of nature was incompatible with civilization:
In such condition there is no place for industry, because the fruit thereof is uncertain, and consequently no culture of the earth, no navigation nor the use of commodities that may be imported by sea, no commodious building, no instruments of moving and removing such things as require much force, no knowledge of the face of the earth, no account of time, no arts, no letters, no society, and which is worst of all, continual fear and danger of violent death, and the life of man, solitary, poor, nasty, brutish, and short.
For 196,000 years of our existence we did not have dominion over the fowl of the air, and over the cattle, and over all the earth, and over every creeping thing that creepeth upon the earth. Not at all. Our existence was at a subsistence level, and we teetered precariously on the edge of extinction. We were low man on the totem pole of life on earth. As recently as 50,000 years ago when Homo Sapiens set forth from Africa, we were down to a small band of 10,000.

The Paradox of Civilization

Ernesto Dal Bo, director of the Berkeley Center for Political Economy, housed in the Haas School of Business, at the University of California, has written an interesting paper about the paradox of civilization with Pablo Hernandez, professor at New York University in Abu Dhabi, and Sebastian Mazzuca at John's Hopkins University. Brad DeLong, has linked it HERE. In this paper they set up a model to help us think in a more formal way about the trade offs between economic productive capacity--and enjoying the fruits thereof--and national and international security.

Take the earliest known civilization, Sumeria, which emerged along the lower reaches of the Tigris and Euphrates in Mesopotamia around 4,000 BCE. How did this civilization emerge? 

The lower reaches of the Tigris and Euphrates were blessed with rich alluvial soils, an abundance of diverse plant life, domesticable animals, and good weather. With irrigation and political organization the Sumerians were able to produce a surplus of food, and they began to devote energy and resources to civilization building. 

But here is the paradox: the lower reaches of the Tigris and Euphrates were not naturally fortified against intruders. In a state of nature, where tribal societies hunt and gather and move around, any weakly defended region that manages to produce a surplus is likely to be overrun and the surplus dissipated among a wider population. Prosperity attracts predation, and predation discourages the investments that create prosperity.  

In order to overcome this paradox, a society must not only manage to create a surplus sufficient for civilization building, but it must also create security sufficient to protect this surplus and this civilization. Sumeria was the first to manage this. They built city states fortified with external walls. These city states were initially ruled by priests and later by military rulers. In addition to city fortifications, the Sumerians are credited with innovating the plough, irrigation, writing, division of time into 24 hour days and 60 minute hours among many other accomplishments. And they held it together for nearly 2,000 years. 

From the abstract of the paper: 
We study the trade-offs facing a proto-state on its path to civilization through a formal model informed by the anthropological and historical literatures on the origin of civilizations. We emphasize pre-institutional forces, such as physical aspects of the geographical environment, that shape productive and defense capabilities. The solution of the civilizational paradox relies on high defense capabilities, natural or man-made. We show that higher initial productivity and investments that yield prosperity exacerbate conflict when defense capability is fixed, but may allow for security and prosperity when defense capability is endogenous. Some economic shocks and military innovations deliver security and prosperity while others force societies back into a trap of conflict and stagnation. We illustrate the model by analyzing the rise of civilization in Sumeria and Egypt, the first two historical cases, and the civilizational collapse at the end of the Bronze Age.
Civilization is a balancing act between surplus production and surplus security. This balancing act  is not easy to pull off considering that among the thousands of primitive societies, over a period of nearly 1000 years, only Sumeria and Egypt managed the trick of forming civilizations. [First signs of urbanization in the Indus valley did not appear until 3,000 BCE; the first Chinese dynasty did not appear until 2100 BCE]

With inadequate security civilizations can teeter and fall. Dal Bo and his colleagues focus on the collapse of civilization in the eastern Mediterranean in 1,200 to 1,150 BCE known as the late bronze age collapse. 
For a period of almost 400 years, multiple states emerged in the Eastern Mediterranean that improved their productive capacity and were capable–mainly due to fortified walls and chariots–of defending their wealth against “barbarian” populations. This set of thriving states included the city-ports of the Levant, the kingdoms of Anatolia, the Egyptian empire, and the city-states of Mesopotamia and Cyprus. But suddenly a collapse epidemic swept across the Eastern Mediterranean around 1200BC. As Eric Cline puts it (2014: 241), “...the world as they had known it for more than three centuries collapsed and essentially vanished”. According to Drews (1993: 3), “Altogether the end of the Bronze Age was arguably the worst disaster in ancient history, even more calamitous than the collapse of the western Roman Empire.”

Historians speculate that climate change may have been a factor, or new war techniques that suddenly made the level of investment in defense of these civilizations inadequate, or a combination of these and other factors. 

Application of the Model

By developing quantifiable models the authors aim to assist us to think more formally (and better) about the interaction of investing in productive economic capacity and investing in security capacity.  The authors hope to develop insights that might be applied in a wide class of development trajectories in which potentially prosperous regions are surrounded by predatory threats. How do such regions avoid the traps of security-enhancing stagnation or self-defeating prosperity? Dal Bo and his colleagues have an eye, for example, on world investment in developing sub-Saharan states in Africa. If we assist such countries, how much of our efforts should go towards economic development capabilities, and how much should go towards investment in security and stability?

How to foster economic capacity and how to assure stable (and just) security, of course, are related and very large questions.  How is security to be provided, and who will provide it? And how do we keep such security organizations accountable and responsible? 

Over the past seventy years we have witnessed the relationship between economic capacity and investment in security in the creation of Israel and its subsequent growth. We are witnessing it in Ukraine now. How much investment is required in Ukraine's security capability, and how much should be invested in infrastructure and industries that will generate prosperity? Poland, and the Baltic states face the same questions. When it comes time to rebuild Syria the trade off between economic development capacity and security will be front and center. 

The United States is blessed by strong natural defenses--the Pacific Ocean and the Atlantic Ocean--and much weaker and friendly neighbors on both sides. Yet we have invested in the world's most powerful army. Is it overkill? To the extent that we are securing the sea lanes world-wide in order to enable international trade, and we are providing the security blanket for Europe, Japan, and much of the world's economy, perhaps not. To the extent that we have been, and remain for now, the guarantor of Western Civilization, perhaps not? 

Having the analytical tools to formally examine the interplay between investment in economic growth capacities (education, infrastructure, basic research, social services ....) and investment in security (both domestically, and internationally) is surely of benefit. I'm glad good and smart people are engaged in such work. 
USS Theodore Roosevelt leads a formation
in the Persian Gulf (2005)/U.S. Navy photo
Read the paper HERE

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