24 July 2013

Recognizing the End of the Chinese Economic Miracle

TUESDAY, JULY 23, 2013

By George Friedman

Major shifts underway in the Chinese economy that Stratfor has forecast and discussed for years have now drawn the attention of the mainstream media. Many have asked when China would find itself in an economic crisis, to which we have answered that China has been there for awhile -- something not widely recognized outside China, and particularly not in the United States. A crisis can exist before it is recognized. The admission that a crisis exists is a critical moment, because this is when most others start to change their behavior in reaction to the crisis. The question we had been asking was when the Chinese economic crisis would finally become an accepted fact, thus changing the global dynamic.

Last week, the crisis was announced with a flourish. First, The New York Times columnist and Nobel Prize-recipient Paul Krugman penned a piece titled "Hitting China's Wall." He wrote, "The signs are now unmistakable: China is in big trouble. We're not talking about some minor setback along the way, but something more fundamental. The country's whole way of doing business, the economic system that has driven three decades of incredible growth, has reached its limits. You could say that the Chinese model is about to hit its Great Wall, and the only question now is just how bad the crash will be."

Later in the week, Ben Levisohn authored a column in Barron's called "Smoke Signals from China." He wrote, "In the classic disaster flick 'The Towering Inferno' partygoers ignored a fire in a storage room because they assumed it has been contained. Are investors making the same mistake with China?" He goes on to answer his question, saying, "Unlike three months ago, when investors were placing big bets that China's policymakers would pump cash into the economy to spur growth, the markets seem to have accepted the fact that sluggish growth for the world's second largest economy is its new normal."

Meanwhile, Goldman Sachs -- where in November 2001 Jim O'Neil coined the term BRICs and forecast that China might surpass the United States economically by 2028 -- cut its forecast of Chinese growth to 7.4 percent. 

The New York Times, Barron's and Goldman Sachs are all both a seismograph of the conventional wisdom and the creators of the conventional wisdom. Therefore, when all three announce within a few weeks that China's economic condition ranges from disappointing to verging on a crash, it transforms the way people think of China. Now the conversation is moving from forecasts of how quickly China will overtake the United States to considerations of what the consequences of a Chinese crash would be. 

Doubting China

Suddenly finding Stratfor amid the conventional wisdom regarding China does feel odd, I must admit. Having first noted the underlying contradictions in China's economic growth years ago, when most viewed China as the miracle Japan wasn't, and having been scorned for not understanding the shift in global power underway, it is gratifying to now have a lot of company. Over the past couple of years, the ranks of the China doubters had grown. But the past few months have seen a sea change. We have gone from China the omnipotent, the belief that there was nothing the Chinese couldn't work out, to the realization that China no longer works.

It has not been working for some time. One of the things masking China's weakening has been Chinese statistics, which Krugman referred to as "even more fictional than most." China is a vast country in territory and population. Gathering information on how it is doing would be a daunting task, even were China inclined to do so. Instead, China understands that in the West, there is an assumption that government statistics bear at least a limited relationship to truth. Beijing accordingly uses its numbers to shape perceptions inside and outside China of how it is doing. The Chinese release their annual gross domestic product numbers in the third week of January (and only revise them the following year). They can't possibly know how they did that fast, and they don't. But they do know what they want the world to believe about their growth, and the world has believed them -- hence, the fantastic tales of economic growth. 

China in fact has had an extraordinary period of growth. The last 30 years have been remarkable, marred only by the fact that the Chinese started at such a low point due to the policies of the Maoist period. Growth at first was relatively easy; it was hard for China to do worse. But make no mistake: China surged. Still, basing economic performance on consumption, Krugman notes that China is barely larger economically than Japan. Given the compounding effects of China's guesses at GDP, we would guess it remains behind Japan, but how can you tell? We can say without a doubt that China's economy has grown dramatically in the past 30 years but that it is no longer growing nearly as quickly as it once did.

China's growth surge was built on a very unglamorous fact: Chinese wages were far below Western wages, and therefore the Chinese were able to produce a certain class of products at lower cost than possible in the West. The Chinese built businesses around this, and Western companies built factories in China to take advantage of the differential. Since Chinese workers were unable to purchase many of the products they produced given their wages, China built its growth on exports

For this to continue, China had to maintain its wage differential indefinitely. But China had another essential policy: Beijing was terrified of unemployment and the social consequences that flow from it. This was a rational fear, but one that contradicted China's main strength, its wage advantage. Because the Chinese feared unemployment, Chinese policy, manifested in bank lending policies, stressed preventing unemployment by keeping businesses going even when they were inefficient. China also used bank lending to build massive infrastructure and commercial and residential property. Over time, this policy created huge inefficiencies in the Chinese economy. Without recessions, inefficiencies develop. Growing the economy is possible, but not growing profitability. Eventually, the economy will be dragged down by its inefficiency. 

Inflation vs. Unemployment

As businesses become inefficient, production costs rise. And that leads to inflation. As money is lent to keep inefficient businesses going, inflation increases even more markedly. The increase in inefficiency is compounded by the growth of the money supply prompted by aggressive lending to keep the economy going. As this persisted over many years, the inefficiencies built into the Chinese economy have become staggering. 

The second thing to bear in mind is the overwhelming poverty of China, where 900 million people have an annual per capita income around the same level as Guatemala, Georgia, Indonesia or Mongolia ($3,000-$3,500 a year), while around 500 million of those have an annual per capita income around the same level as India, Nicaragua, Ghana, Uzbekistan or Nigeria ($1,500-$1,700). China's overall per capita GDP is around the same level as the Dominican Republic, Serbia, Thailand or Jamaica. Stimulating an economy where more than a billion people live in deep poverty is impossible. Economic stimulus makes sense when products can be sold to the public. But the vast majority of Chinese cannot afford the products produced in China, and therefore, stimulus will not increase consumption of those products. As important, stimulating demand so that inefficient factories can sell products is not only inflationary, it is suicidal. The task is to increase consumption, not to subsidize inefficiency.

What India's Strike Corps will do on Himalayas

July 23, 2013 08:35 IST

While the new Strike Corps is being raised, equipped and trained, the government must make vigorous efforts to speed up the completion of infrastructure projects. Otherwise, the army will have a new Strike Corps and not be able to launch it effectively, says Gurmeet Kanwal

After considerable delay, the Cabinet Committee on Security has finally approved the army’s proposal for raising a Strike Corps for the mountains. 

This excellent move will help India to upgrade its military strategy against China from dissuasion to genuine deterrence as the Strike Corps, in conjunction with the Indian Air Force, will provide the capability to launch offensive operations across the Himalayas and take the next war into Chinese territory.

The new Strike Corps will comprise two infantry divisions and will be supported by independent armoured brigades, the requisite artillery firepower, engineer support and logistics services. It will cost Rs 64,000 crore to raise and equip over a period of seven years.

Approximately 90,000 new personnel will be added to the army’s manpower strength, including those in ancillary support and logistics units. In addition, the army has already raised 56 and 71 Mountain Divisions and deployed them in Arunachal Pradesh to fill existing gaps in the defences. 

Some elements of these divisions will act as readily available reserves for the new Strike Corps to add weight along the axis of attack and exploit success. 

These divisions will also be employed to secure launch pads for an offensive across the Himalayas. Hence, these must be seen as playing a significant supporting role for the Strike Corps.

Despite the ongoing border talks between India and China to resolve the territorial and boundary dispute, often punctuated by ugly incidents like the PLA incursion in the Daulat Beg Oldie sector in April 2013, a limited border conflict cannot be completely ruled out as the Line of Actual Control is yet to be demarcated jointly on the ground and the map.

As the territorial dispute with Pakistan over Jammu and Kashmir is also in the mountains, there is a very high probability that the next conventional conflict involving India will again break out in the mountains. 

Since the war will be fought under a nuclear overhang, particularly with Pakistan, there is a fair possibility that it will remain confined to the mountains so that it does not escalate out of control to nuclear exchanges. 

Hence, it was time for India to pivot to the mountains in its quest for building military capacities and it is creditable that the government has given the go ahead to raise a new Strike Corps.

In any future war that the armed forces are called upon to fight in the mountains, gaining, occupying and holding territory and evicting the enemy from Indian territory occupied by him will continue to remain important military aims. No war plan will succeed without achieving asymmetries in the application of firepower to destroy the enemy’s combat potential and infrastructure.

Army-IAF operational plans must be fully integrated. These must be jointly evolved, meticulously coordinated and flexible enough to be fine-tuned to exploit fleeting opportunities and to take advantage of the enemy’s reactions during execution. 

This is especially so in the mountains where the military aims and objectives are limited in scope because of the terrain. Both the services must work together to create the capabilities that are necessary to take the battle into enemy territory during the next war in the mountains.

J&K: Dangerous Disruption

Ajit Kumar Singh
Research Fellow, Institute for Conflict Management

At least four persons were killed when Security Forces (SFs) opened fire on a violent group of protesters who attacked the Border Security Force (BSF) Dharam Camp in the Gool area of Ramban District on July 18, 2013. The deceased included a teacher at the Government Higher Secondary School, Manzoor Ahmed Shan, who was also the brother of a local National Conference leader, Dr. Shamshad Shan. The others killed were Javed Iqbal Manhas, Abdul Lateef and Farooq Ahmad Baig. The firing by the SFs and stone pelting by the ‘protesters’ during the clashes resulted in injuries to at least another 43 persons, including a BSF trooper and 14 Police constables. An unnamed senior BSF official said the protesters pelted at least 15,000 stones on their post.

Narrating the chain of events at Ramban, a BSF press release stated,

Tensions started some time after 9 pm on July 17 after a patrol party at the Dharam check post asked one Mohammad Lateef, who is the imam of the local mosque, for a proof of identity. Lateef allegedly reacted aggressively and 15-20 people assembled. The troopers, sensing trouble, then returned to their post. However, it is learnt that Lateef made a baseless and false allegation that the patrol party had desecrated the Quran and announced same thing (sic) on the loudspeaker from the mosque. Following this, around 400-500 persons gathered outside the BSF camp and started pelting stones. But the BSF restrained itself, and the Police succeeded in dispersing the mob around 3am... Around 6.45am, mob started to build up again in big numbers and tried forcefully to enter the Dharam campus... Due to deteriorating law and order situation, the Police tried to disperse the mob and fired three-four rounds. Constable Ramhari of the BSF got bullet injury in his stomach. It was learnt that two civilians also got bullet injuries. However again at 9.30 am, around 700-800 men started stone-pelting vigorously on the BSF Post. Police and BSF men had to fire in self-defence which resulted into death of four civilians…

BSF Inspector General, Jammu Frontier, Rajiv Krishna added, “They (mob) tried to break open the gates of the camp. The mob tried to storm their storehouse where a large cache of explosives and automatic weapons was stored.”

There are some suggestions that the incident may, in fact, have been mishandled to a certain extent. While the overwhelming numbers of protesters, relative to the small BSF unit, may have made use of lethal force necessary, Superintendent of Police (SP), Ramban, Bashaarat Masood, claimed on July 19, “Police were standing between the BSF camp and the protesters. We had been controlling the mob for an hour. There was no need to open fire. The BSF men opened fire suddenly. I myself had a miraculous escape. I too would have been killed had my colleague not dragged me away."

The Union Government, the State Government as well as the BSF have already announced a probe into the case. The BSF team of 30 personnel, which was deployed at Dharam to look after the security of the newly opened Qazigund-Banhihal rail link vacated the camp in the night of July 18 itself, and the State Police has taken over the premises.

Earlier, on June 30, 2013, a civilian identified as Irfan Ahmad Ganaie was killed in Army firing in the Sumbal area of Bandipora District when the Army launched an operation in the region after being tipped off about the presence of militants there. On the same day, another youth, Irshad Ahmad Dar, was killed in the same area, after soldiers allegedly opened fire at protesters demonstrating against Ganaie's killing. On July 3, 2013, Police arrested an Army ‘informer’, Manzoor Ahmad Sheikh, who had misinformed Army about the presence of militants to take revenge against Irfan, with whom he had had a fight.

These were not isolated incidents. According to partial data compiled by the Institute for Conflict Management, the SFs have opened fire on violent protesters on at least nine occasions since 2011, resulting in six fatalities. Another two protesters drowned after being allegedly chased by the SFs. It is pertinent to recall here that at least 112 protesters were killed in SF action against violent demonstrators during the turmoil in 2010. Kashmir has sporadically witnessed such incidents, though at varying scales, since 2006. According to a July 2013 Police report, there have been 2,317 incidents of stone pelting in the State, resulting in injuries to 5,643 State Police personnel and 1,356 Central Reserve Police Force (CRPF) personnel, since 2008.

These protests have largely been orchestrated by various fronts linked to Pakistan’s external intelligence agency, the Inter-Services Intelligence (ISI), and have capitalized on every opportunity that presents itself by accident or design. The objective of such a mobilization has invariably been to provoke SF responses that will result in fatalities, and to use such fatalities to feed an unending cycle of street violence – a process that met with its greatest and most protracted success in the stone pelting campaigns of 2008.

RETHINKING XENOPHOBIA- The problem of foreign direct investment

Writing on the wall: Ashok V. Desai

Some months ago, I wrote that since Rahul Gandhi is being such a reluctant prime minister designate, someone would have to fill his shoes while he grows up, and that none could be better than P. Chidambaram, the finance minister. A cheeky journalist asked Chidambaram soon after whom he would choose as his finance minister. He could hardly expect a straight answer like, say, it would be Sis Ram Ola. But he got a revealingly roundabout answer. He was told that the general election was more than a year away. It could mean either that Rahul could still become prime minister, or that there was many a slip between the cup and the lip. Then came the politically correct answer, that Chidambaram would like to do party work — something he has never done before. It could mean doing an Ahmed Patel — sitting in Congress headquarters at 24 Akbar Road and visiting party workers in a few states. Chidambaram would not be any good at it. And then there was the evasive answer, that he would like to read, write and travel. At the moment, he is not writing; he has enough speech-writers. He is no doubt reading a lot of official papers. And yes, he is already travelling a lot. In January he went to Hong Kong and Singapore. In April he went to Japan, Canada and the US. In May he made a trip to London, Paris and Qatar. Last week he was in Washington. All this travel is not for fun. He is going to places where a lot of money resides, and trying to persuade moneybags to come and invest in India. He is not the only one. His colleague, Anand Sharma, was also in Washington last week. On the way he stopped by in Paris and gave a sermon on India’s strong growth fundamentals and democratic values.

Why this industrious courting of foreign investors? The answer is obvious: India is running a deep and chronic payments deficit. Till now it has been financed by foreign investment inflows. But they could cease at any point; if they do, exchange reserves will begin to melt. They went down by ten billion dollars in the past three weeks; if they continued to shrink at that rate, they would disappear in a year and a half. They could fall faster. The Reserve Bank does not reveal figures of our indebtedness too often or too soon. Its latest figures show a total debt of $390 billion last March; if all our creditors decided to take their money away, the government would run out of foreign currency, and have to borrow over $100 billion. True, only about a half of it could be withdrawn in a hurry; short-term debt was $96 billion, NRI deposits were $70 billion, and trade credit was $17 billion. But then, Indian companies had taken $120 billion of loans abroad; as they matured and were repaid, reserves would tumble rapidly to zero. India would be back in the laps of the International Monetary Fund and the World Bank, as it was in 1991. That is when Manmohan Singh became finance minister and purportedly saved India from default. It would be the supreme irony if he presided over the next payments crisis, though it would be an exaggeration to say that he has brought this one on. He probably will not have to take the begging bowl out of storage, since he can hold elections any time; and then, of course, there are other prime ministers in waiting. So politicians will go on; but the country may find the going tough.

It is, therefore, understandable that ministers should be running helter-skelter trying to persuade foreign investors. But if they are so keen on attracting foreign investment, they could do something much cheaper and simpler than taking flight all so often. Indian restrictions on foreign investment are so convoluted that even Indians find it difficult to understand them. A committee headed by Arvind Mayaram, economic affairs secretary, recently recommended various changes. But it only proposed changing permitted levels of foreign direct investment. The government should ask itself why, if at all, all these permissions are necessary.

There are seven levels of foreign direct investment allowed in different industries: 0, 20, 26, 49, 51, 74 and 100 per cent. FDI is prohibited in telegraph services. The postal service is not offering the service now anyway. If any foreign investor is silly enough to offer it, why stop him? Nor is it necessary to keep postal services in the prohibited list, since not even an Indian can invest in them without government permission. Courier services have taken over the lucrative part of the business; the rest does not matter. Professional services — law, accounting, etc — are deprived of foreign investment because they are controlled by cartels that oppose it. They are dinosaurs. Industrialists who opposed FDI failed to stop liberalization, and have adapted themselves very well; these services have remained protected, and their denizens are stuck in the 20th century. Once they are opened up, the cartel members will run to get foreign partners; within a couple of years the professions will emerge fitter and more consumer-friendly. Lotteries and power stations are subject to severe controls anyway, which are enough to control foreign investment. Thus, most of the prohibitions are outdated.

So are the two limits of 26 and 74 per cent. They are used because the government has entitled possessor of 26 per cent of equity to appoint a director. Just what appointment of a single director has to do with this magic figure is unfathomable. Most companies are run by coteries of big shareholders. They would, in any case, bargain and work out power-sharing, including appointment of directors, amongst themselves. If they are not satisfied with their representation in the board, they can sell out. The government’s role in this is neither desirable nor necessary. And incidentally, there should be no special rules for banks or special role for the Reserve Bank; that means exit of the 20 per cent limit.

This ghost will not go away that easily

Tuesday, 23 July 2013 | A Surya Prakash

Many people believe that the death of Ottavio Quattrocchi will effectively put the lid on the Bofors scandal, and consign the issue to the dustbin of history. They are mistaken. Closure will come when truth is out

The news of the demise of Ottavio Quattrocchi, the Italian businessman and close friend of Sonia and Rajiv Gandhi, has prompted some people to say that with his passing, the Bofors kickbacks scandal is laid to rest. To put it mildly, this is wishful thinking.

So many in the dramatis personae of the Bofors Saga are no more. Rajiv Gandhi, Martin Ardbo (president of Bofors when the deal was signed and whose diary entries gave vital clues to the Swedish police), former Defence Secretary SK Bhatnagar, Win Chadha, the company’s agent in India, and now Ottavio Quattrocchi. With the passing of each of these individuals, commentators speculated that the scandal will die a natural death. But, no such thing has happened. And the reason for this is simple: The people of India know that certain persons in power knocked off commissions and bribes while finalising the contract with the Swedish arms manufacturer for supply of field guns. They also know that nobody was punished for these offences.

Although Congress-led Governments at the Centre have tried to bury the scam, there were independent investigators and institutions in the country, including the media, which felt duty-bound to put the facts in the public domain. One such institution was a Delhi Bench of the Income Tax Appellate Tribunal. Even as the CBI responded to its master’s voice, this Tribunal did the most detailed examination of the involvement of Ottavio Quattrocchi as a middleman in the Bofors payoffs scandal. Some key points made by the Tribunal are worthy of mention here:

Ottavio Quattrocchi remained in India from February 28, 1965 to July 29, 1993, except for a brief interval from March 4, 1966 to June 12, 1968. He was a certified chartered accountant by profession, working with Snamprogetti, an Italian multinational company, but “neither Snamprogetti nor Ottavio Quattrocchi had any experience of guns, gun-systems or any related defence equipments”.

The Tribunal noted that despite the Indian Government’s policy against suppliers hiring agents, Bofors entered into a fresh consultancy agreement with a company called AE Services Limited, UK, on November 15, 1985, at the behest of Ottavio Quattrocchi. An extraordinary aspect of this deal was that Bofors committed itself to pay this company three per cent of the total value of the contract only if the Indian Government awarded it the contract by March 31, 1986 (that is within 137 days of the signing of the contract on November 15, 1985). This was indeed an extraordinary stipulation and a tough deadline to meet specially when it concerned a major international weapons deal. But what was even more extraordinary was that Ottavio Quattrocchi met that deadline! The Rajiv Gandhi Government signed the deal with Bofors on March 24, 1986 — just a week before the deadline set by Bofors was to expire. 

After signing the contract with Bofors, the Indian Government released the first tranche of payments to Bofors which was equivalent to 20 per cent of the contract value on May 2, 1986. Once it received the first tranche, Bofors remitted US$7.343 million on September 03, 1986, to A/c No 18051-53 of AE Services Limited at Nordfinanz Bank, Zurich. This worked out to exactly three per cent of the advance payment made by India. Thereafter, the Tribunal recorded the money trail, as tracked by the investigators, in detail. From Nordfinanz Bank the money was transferred to Account No 254.561.60W of Colbar Investments Limited (a company registered in Panama) in the Union Bank of Switzerland, Geneva in September, 1986. From this account, again the funds were moved to Account No 488.320.60 X of a company called Wetelsen Overseas, SA in the same bank in July 1988. Thereafter, the funds were once again moved to Account No. 123983 of International Investments Development Company in Guernsey (Channel Islands) in May 1990. The ITAT said on the basis of records before it that “these Accounts of Colbar Investments as well as Wetelsen Overseas were being controlled by Ottavio Quattrocchi and his wife Maria Quattrocchi”.

In the final analysis, the tribunal noted that Win Chadha and Ottavio Quattrocchi had been transferring the funds received from Bofors frequently from one account to another and from one jurisdiction to another to avoid detection and to obliterate the money trail.

In the final analysis, Bofors paid out the equivalent of 243 million Swedish kroners as commission to Ottavio Quattrocchi and Win Chadha. But the most extraordinary development was that AE Services unilaterally announced that it would forego the rest of the commission due to it from Bofors, after the kickbacks scandal broke out in April 1987.

No closure on the Bofor’s saga

Tuesday, 23 July 2013 | NK Singh

The death of Italian businessman Ottavio Quattrocchi will not wipe away the Congress-led UPA Government’s sordid role in helping him escape the clutches of the law and eventual punishment in India, writes NK Singh

Ottavio Quattrocchi is dead. But Bofors will continue to trouble public memory for long. Undoubtedly, the action of the Government to help out Quattrocchi in Bofors case was sordid. His sudden death cannot wipe it out. Well-known journalist and writer, Tavleen Singh, in her book, Durbar, stated that Quattrocchis were close personal friends of the Gandhis. Not in itself much, but it assumes significance if viewed from the way the Rajiv Gandhi Government and later all, except the VP Singh and perhaps the NDA-led regimes, incriminated themselves on the question of Quattrocchi.

Even though the controversy broke out on April 16, 1987, with a Swedish radio broadcast alleging that bribes had been paid to secure the contract, the nation and Parliament were repeatedly told that nobody, howsoever high, “will be allowed to go free”. But nothing worthwhile was done till VP Singh Government assumed office. A regular case was registered by the Central Bureau of Investigation as late as on June 22, 1990.

The Criminal Procedure Code was amended with effect from February 19, 1990, enabling the investigating agencies and the Central Bureau of Investigation to obtain authorisation, called Letters Rogatory, from the competent court to request foreign countries to collect evidence there. Letters Rogatory were promptly sent to Switzerland. A Geneva court froze five accounts, of Svenska Inc, Panama, of Lotus, Tulip, and Mont Blanc, and another unnamed account. And a Zurich court froze the account of AE Services Ltd.

With the situation getting hot in India, Quattrocchi escaped the country in 1993, whether on tip-off or on his own, one does not know. The CBI took steps to get a non-bailable warrant issued and at its initiative, the Interpol also issued a red-corner alert notice against him. In 1998, in response to a notice received from the Delhi High Court, on Quattrochhi’s petition seeking withdrawal of red-corner notice of Interpol and non-bailable warrant against him, the CBI filed a counter-affidavit, saying, “The then Defence Secretary, SK Bhatnagar, had specifically conveyed in May 1985, to the president of AB Bofors and other bidders for the 155 mm howitzer guns that in no circumstance can an agent be employed... But just six months after Bhatnagar’s instructions, AB Bofors proceeded to flout them. AE Services, a shadowy company with no previous experience of such business, was given a ‘consultancy’ contract by the Swedish armament firm.” The CBI also told the Swiss Court that: “It is clear from the documents received by the agency from Swiss authorities in January 1997, that he (Quattrocchi) is the beneficiary of the money paid into AE Services account, the first installment of which alone was 7.34 million dollars.” Thereafter, the Delhi High Court, in 1998 rejected Quattrocchi’s plea seeking quashing of arrest warrant and Interpol’s red-corner notice. Quattrochhi, however, kept on evading appearance.

In the meantime, in January 1997, the Swiss Justice Ministry handed over to the CBI, in Berne, a sealed box containing secret bank documents and statements of some witnesses. The CBI had already received some documents related to AE Services in 1991. The investigation against some of the accused, thereafter, was completed. The successive Governments took their own time in according sanction for prosecution, which was sought by the CBI in May, 1997. After about nine years of registration of the case and all the travails it went through, part of which is its own making, the CBI filed its first chargesheet on October 22, 1999, against SK Bhatnagar, Italian businessmen Ottavio Quattrocchi, Win Chadha, former Bofors President Martin Ardbo and messers AB Bofors of Sweden. The CBI chargesheet also mentioned the name of late Rajiv Gandhi in column(2) as accused, ‘not sent up for trial’, since he was assassinated in May 1991. It had provoked enormous controversy.

In 2006, a stunned nation heard the then Union Minister of Law and Justice, Mr HR Bhardwaj, telling a television channel, that the Government of India had conveyed to the Crown Prosecution in the UK its opinion to defreeze two bank accounts held by Quattrocchi. “We have conveyed to them the recent rulings of Delhi High Court rejecting the case against Hinduja brothers as well as status of investigation”, added Mr Bhardwaj.

Pakistan’s Brutal Look at Itself

July 18, 2013 · by Mark Stout

A draft report from Pakistan’s Abbottabad Commision, the blue-ribbon panel charged with investigated how the May 2011 American raid into Pakistan to kill Osama Bin Laden could have happened, has leaked to Al Jazeera. While the Express Tribune reports that there were apparently three competing drafts in circulation, and we have not seen the final draft, if this one is at all a good record of the Commission’s deliberations, it is evident that the members were seething with rage and in a take-no-prisoners mood.

Clearly the Commission doesn’t have much use for the United States. The raid was a “stab in the back” and a violation of international law. The United States was “arrogant” and “criminal” and guilty of the “serial murder” of Pakistani troops. The CIA had stretched its “tentacles” into Pakistan and its apparent former CIA contractor Raymond Davis was a “killer goon.”

That said, America-bashing is only a subtext in this document. Earlier this week, my fellow WOTR senior editor, Stephen Tankel, gave a thoughtful reading of the report and what its contents might mean for the U.S.-Pakistani relationship and I recommend his article highly. In a strange way, the report is almost sympathetic to the United States. For instance, it cites Bob Woodward’s book Obama’s Wars to the effect that the US Government saw Pakistan as a “dishonest partner” and its Inter-Service Intelligence (ISI) as having “six or seven personalities” including one which was financing the Taliban. Then the report goes on to all but endorse these views. And brings us to the focus of my piece: Pakistan’s security sector and the ISI in particular. I end with some thoughts on the U.S., Pakistan, al-Qaeda, and – of course – France.

The Commission was unable to determine whether the greatest national humiliation since 1971 (as they put it) happened as a result of Pakistani incompetence or as a result of connivance by rogue Pakistani officials. The Commission was clear, however, that Pakistan was not a competent, credible partner for the United States. In fact, Pakistan characterized by “culpable negligence and incompetence at almost all levels of government,” and was becoming a failed state. The country had a “two-faced” policy on drones and its ISI “had an unfortunate history of…association with militant religious groups.” As a result, the United States, reprehensibly, but understandably in the Commission’s view, pursued its own interest—killing Osama Bin Laden—on its own and violated Pakistani sovereignty in the process. “It is possible to understand if not agree with the US decision to unilaterally implement its special operations mission,” the draft says.

The report said that the US and Pakistan are not natural allies or strategic partners but theirs is “a necessary relationship about which governments in Pakistan have seldom been honest with their own people, leading to inevitable crises of expectations.” The two often have overlapping interests and “at its best…[the relationship between the two] has been mutually beneficial.” The Commission seems to hold out a hope—faint, perhaps, but real—that that mutually beneficial relationship could come to pass. However, much work needed to be done first.

The Commission identified systemic failures from the top to bottom of the country and said that Pakistan must fundamentally change if it wanted to be anything more than a “banana republic” and if it wanted survive the numerous “existential” threats—most of them internal—that it faces. These threats include “nihilistic and murderous organizations acting in the name of Islam” whose “dominance” in the country has had worse consequences even than “enemy military occupation” and which posed a “mortal threat to the existence of Pakistan” and which “has been the direct result of a…malignant interpretation of Pakistan’s values, interests, and security.”

The draft calls on the country’s highest leaders to apologize and then face judgment in the next election. It found that Pakistan had no credible national security concept or grand strategy. The non-military elements of national power were neglected. The civilian Defense Minister freely admitted being irrelevant.

Afghans See Their Army Woo Them With Piety

Published: July 21, 2013
Bryan Denton for The New York Times

Col. Hayatullah Aqtash of the Afghan Army speaking to tribal elders in Chawke, telling them that “God and the Prophet” had given him the responsibility to protect them. “If you shoot at me, you shoot at them,” he said.

CHAWKE, Afghanistan — Dozens of local herders waited on the cold concrete steps of an abandoned school building, warily watching the Afghan soldiers gathered nearby. The tribesmen had been searched twice already, their shawls unraveled and turbans probed for weapons.

An Afghan National Army officer of the Second Brigade of the 201st Corps, in Kunar Province. The brigade relies on its Islamic faith to win support among the people.

Days earlier, a local mullah had declared that it was the duty of Afghans to attack soldiers and policemen as infidels. Col. Hayatullah Aqtash, a small army officer with smoky blue eyes, had come to Chawke District with his men to offer a counterpoint. He strode through the barren courtyard, greeted the men with a prayer and began.

“God and the Prophet, peace and blessings be upon him, put the responsibility on my shoulders to protect you,” he told the men, pointing to his shoulder where the Shahada, an oath all Muslims make, is stitched in gold onto every army uniform. “If you shoot at me, you shoot at them.”

The weathered faces of the men, about 40 in all, shifted. The din of traffic hummed on a neighboring highway.

The colonel continued: “Let’s make a judgment — what the insurgents do versus what we do. I want peace. I want schools and paved roads, electricity. Now what do they do? They blow up the roads. They blow up the schools. They commit suicide in our mosques.”

“Now tell me,” he concluded, “who is the Muslim?”

Even as his Afghan Army brigade patrols violent stretches of Kunar Province in the north, the colonel is waging a parallel battle that he calls his “propaganda war” against the Taliban: to combat the branding of the army as a secular, corrupt puppet of foreigners. By stressing his soldiers’ faith in Islam, and pointing out the absence of American forces on the battlefield this year, Colonel Aqtash is hoping to erode popular support for the insurgents.

It is a tall order. There is still a prevailing suspicion of the army and the police, born of rampant drug use and theft by ill-disciplined recruits in the early years after the Taliban’s ouster. And even as many Afghans acknowledge improvements in those areas, there is still widespread skepticism about the Afghan forces’ ability to secure the country on their own after the exit of Western troops — who have themselves failed to pacify the insurgency over the past decade.

So for Afghan commanders in the field, it is a constant challenge to build credibility with local leaders.

They are taking it on by emphasizing the one advantage that American soldiers and Marines could never claim: commonalities with the insurgents and the villagers who support them — language, culture, custom and, most importantly, religion.

“Naturally, when the Afghans go, people are more welcoming of them,” said Mohammad Hanif Khair Khwa, the governor of Sarkano District, which is adjacent to Chawke District. “The foreigners might even be more kind than the Afghans in the village, but they are still foreigners.”

Across the country, Afghan troops are adopting the strategy, employing religious and cultural affairs officers to craft messaging and outreach efforts. In the 203rd Corps, which patrols some of the most deadly stretches of eastern Afghanistan, troops hand out Korans and prayer rugs to the villagers they meet. In the 209th Corps up north, soldiers pray in the local mosques and invite elders to attend religious ceremonies on base.

“In order to repel the enemy’s propaganda, our top priority is our own personal religious development,” said Col. Shah Wali, the religious and cultural affairs officer for the 205th Corps in Kandahar. “We have mosques in every battalion, and our soldiers pray five times a day.”

It is too soon to know whether the religious emphasis will work, given the myriad challenges for the army.

Fitting Intelligence to the Fight: Lessons from Afghanistan

Journal Article | July 20, 2013 
Fitting Intelligence to the Fight: Lessons from Afghanistan 
David J. Katz


The types of information needed by the military to conduct population-centric counterinsurgency operations in Afghanistan shares little in common with intelligence used for lethal targeting. Years into the Afghanistan campaign, recognition that success required effective population-centric interventions prompted a redirection of intelligence assets to focus more on acquiring detailed sociocultural information about target populations. Other reforms have sought to remedy information deficiencies by revamping the assumptions and concepts that frame the analysis of populations, their identities and attitudes and the so-called “hearts and minds” efforts seeking to change them. These adjustments during a campaign are welcome but still fall short of supplying information that can confer a strong confidence in the success of these non-kinetic activities. Appreciation of the inherent limits to the information and the level of confidence that it confers for such activities needs to be brought into the planning and execution of population-centric interventions of any ilk, whether stability operations, counter-insurgency or humanitarian assistance, regardless of their size and political significance.

Fitting Intelligence to the Fight

As we head for the exits in Afghanistan, reflecting on our performance there yields value if it institutionalizes practice and experience in doctrine so that it is not lost as operations end and people move on. In particular, we can benefit by studying the role of intelligence in conducting population-centric counterinsurgency. While Defense Secretary Panetta announced in January 2012, that the Army and Marines will no longer be sized to support large-scale, long-term stability operations, the military can count on getting involved in complex contingency operations which will have many similarities to the population-centric operations conducted during the campaigns in Iraq and Afghanistan. [iii]

Two broad questions frame this examination: Has the intelligence community been doing the job? Has it been the right job?

In January 2010, Major General Mike Flynn co-authored a paper published by the Center for a New American Security, a Washington think-tank, titled, Fixing Intel: A Blueprint for Making Intelligence Relevant in Afghanistan. In it Flynn, who was serving as the intelligence chief for ISAF Commander General McChrystal, delivered a blunt critique of intelligence effectiveness in Afghanistan, declaring that, “Eight years into the war in Afghanistan, the U.S. intelligence community is only marginally relevant to the overall strategy.” [iv]

The problem for Flynn was that our massive intelligence effort was directed at finding and destroying the enemy but, “Lethal targeting alone will not help U.S. and allied forces win in Afghanistan.” [v] Intelligence was hard at work but it was doing the wrong job, or more precisely, not enough of its capacity was devoted to getting information about “the environment in which we operate and the people we are trying to protect and persuade." [vi] Commanders and senior government leaders lacked vital information about the Afghan people. In a counterinsurgency, tactical-level information has far greater strategic significance than in conventional conflicts, argued Flynn. “U.S. intelligence officers and analysts can do little but shrug in response to high level decision-makers seeking the knowledge, analysis, and information they need to wage a successful counterinsurgency.” [vii]

Flynn made clear that what he proposed in this paper involves “changes that must occur” and “should be considered as a directive by the senior author.” [viii] He called for stepping up collection and production of information about the population through creating special teams of analysts “empowered to methodically identify everyone who collects valuable information, visit them in the field, build materially beneficial relationships with them, and bring back information to share with everyone who needs it.” [ix]

While Fixing Intel casts its concerns in terms of the conduct of a counterinsurgency campaign, the focus is mainly on what is needed for the conduct of stability operations which are those missions, tasks, and activities undertaken by the military, and in some instances along with civilian organizations, to maintain or reestablish for the population a safe, secure environment, deliver essential services, tend to critical infrastructure, and supply humanitarian relief.

The teams that Flynn proposed were to work in new units he called “Stability Operation Information Centers,” that would be located at the regional command headquarters throughout the country. These facilities would research and write “meaty, comprehensive descriptions of pivotal districts.” [x] The products would be kept at the lowest classification level possible so that they could not only be used for intelligence purposes but made available to “all elements with demand for information – including Afghan partners and non-government actors.” [xi]

Flynn sought to separate SOICs from the intelligence operations focusing on the enemy in order to ease outsider access and to promote at these centers a different approach to gathering, processing and disseminating information. He even suggested that in the south and east where the international presence was the greatest, SOICs be placed under the U.S. State Department’s senior civilian repre­sentatives who administer governance, development and stability efforts, outside of the military chain of command. [xii]

The SOICs were launched and commenced operations. During Flynn’s tenure and that of his successor, Brigadier General Stephen Fogarty, SOICs were brought under a new umbrella organization, called the “Civil-Military Integration Program” which was established in response to the problems identified in Fixing Intel. Also brought under the Civil-Military Integration Program were the Human Terrain System with its Human Terrain Teams deployed in the field, the Atmospherics Program – Afghanistan, which gathered open source information, and other units involved in gathering and processing sociocultural information.

Can China’s Leaders “Get Over” Their Growth Obsession?

July 23, 2013

For any “new” leadership, the conventional wisdom goes, there is usually a honeymoon period just after they have acquired their mandate. In this period, they can strive to achieve something big, reset the terms of public debate, and make the political terrain more amenable to their future intentions. Recent leaders like Barack Obama in the U.S. in 2009, François Hollande in France and Shizno Abe in Japan, have all tried to begin their terms with new policies that reshaped their countries’ economic or social landscape. 

On the surface, China’s new leadership doesn’t fit this template. It is a team where seasoned analysts’ expectations of wholesale policy changes were very low from the start, if only because the main guidelines for the macro-economy were outlined in a Five Year Program that predated their ascent by two years, and will run till 2015. In any case, this group of leaders belongs to the same party as the leaders their predecessors, and why would the same party want to rip up what it did in the recent past? It is all about continuity, right?

Up to a point, this is true. But this perspective ignores the sometimes crucial factor of externalities. The one thing we can say about the seven figures on the Politburo Standing Committee in 2013 is that, for the six of them who have had significant provincial leadership positions (Liu Yunshan is the exception, with a career exclusively in the propaganda apparatus), they have shown immense pragmatism.

They’ve been promoted through the party because they can solve problems, including creating local growth, stopping social unrest, and maintaining provincial stability through being practical. Zhang Dejiang is a good example. A North Korean trained economist who has written and spoken against the non-state sector throughout his career, his ideological leanings never stopped him being the Party boss in Guangdong and Zhejiang provinces, where the private sector thrived even as he publicly berated it.

In Chinese politics, words sometime mean little. Zhang and his hardline rhetoric proves that even the most ostensibly rigidly doctrinaires in the CCP, are pragmatists at heart. Deng Xiaoping’s dictum of `practice being the sole criterion for truth’ continues to overshadow Mao Zedong’s ideological Utopian purity in contemporary Chinese politics.

This leadership lives in the world where the GDP growth rate has acquired a semi religious symbolic meaning. For over two decades now, it has at the heart of the government’s strategic objectives and lifted up among Chinese officials as the all-important measure of government achievement. Figures in the past of 8 percent, and now 7 or 7.5 percent, became articles of faith. If the government doesn’t post this sort of figure, then it is regarded as failing, with all the unthinkable consequences failure may hold.

There is little reflection on the true meaning of GDP growth, on its real social and political importance, sustainability and or tangible value. Pumping out raw GDP in ways which degrade the earth and air is surely, in the end, the true basis of a false economy. Today you can shout delivering high growth from the rooftops. But tomorrow, the air will be too loaded with pollution for you to open your mouth at all. What is the value of that kind of growth?

Shifting public debate away from this fixation on growth has been hovering in the background for Chinese leaders for a while. In the early 2000s, Hu and Wen talked a little of having broader measures of social progress that went beyond GDP growth. It is nice to have a simple figure that seems to tell everyone everything they need to know. But more officials are becoming suspicious and questioning what this figure means. The “new” government needs a better narrative.

Setting the template for a coup

Tuesday, 23 July 2013 | Abhijit Iyer-Mitra

The main obstacle to a coup in banana republics, is usually the fear of international isolation. The West's silent acquiescence of the coup in Egypt has shown Pakistan that coups are acceptable, so long as they follow a certain modus operandi

In June last year, Imran Khan had claimed in an interview that ‘the age of coups in Pakistan was over’. Imran Khan, of course, isn’t exactly known for his intelligence — ‘Im the Dim’ being considered the subcontinental version of a Ken doll, but the hope was that being the Inter-Services Intelligence’s chosen puppet at least his statement carried some authority. Many such euphoric statements were also made about Egypt — but as time progressed, and economic mismanagement worsened, a rather vocal section of the Egyptian people clamoured for and got a coup. 

History seldom repeats itself, but it does tend to rhyme, and picking out the relevant rhymes is the important bit here.

Possibly the most important lesson of Egypt has been the West’s reaction to the coup. While not gleeful for sure, the West has not imposed any sanctions on Egypt. More than a decade back when General Pervez Musharraf seized power in Pakistan, by contrast, he faced near total international isolation, but not the new leaders of Egypt. The main obstacle to a coup in banana republics, is usually the fear of international isolation. What the West’s silent acquiescence in Egypt has shown Pakistan is that coups are acceptable, so long as they follow a certain modus operandi which goes something like this: First ensure the economy teeters on the brink, then ensure the security situation deteriorates, consolidate the Opposition, make a lot of jobless hooligans and thugs come out on the street, protest, burn a few buses, and the Army basically ‘bows to the will of the people’ and enacts a Government change. The careful avoidance of the word ‘coup’ in Egypt is telling and probably sets the template for the next Pakistani coup.

Economic mismanagement in Pakistan is so obvious it doesn’t take a rocket scientist to figure that one out. The Pakistani elite — usually military associated, are blasé about their comeback; that Pakistan’s economic indicators have been like this for the last 20 years, and it is the informal economy of Pakistan that keeps the country moving. The issue though is that the International Monetary Fund and World Bank cannot lend based on informal economy statistics.

The dismal security situation is equally obvious from the near daily terrorist attacks, and ethnic strife either between the Pashtuns and the Mohajirs in Karachi, or between the Shias and the Sunnis all over.

The two prerequisites of an ‘acceptable’ coup, therefore, are in place, and have been in place for quite sometime. It is important to note here that both of these are directly the military’s responsibility. Pakistan’s defence spending is so beyond its means, that the ruination of the formal economy can in no small part be attributed to it. Further, its control of about 70-90 per cent of Pakistan’s formal economic activity through the Fauji Foundation has given it the incentive to thwart any competition it may face, despite severe mismanagement. Similarly the internal security situation is largely a result of the Pakistan Army’s quaint notions of terrorists being force multipliers — much the same way a normal Air Force would see aerial refuelling tankers, jamming aircraft and airborne early warning platforms. The omission in India and on part of Pakistan’s civilian leaders has been that for a very long time, these jolly jihadis were seen as an aspect of Pakistani power projection abroad. What we are now beginning to understand is that they are an equally potent tool of the Pakistani military’s internal security mechanism to keep civilian Governments off balance.

According to reports, Pakistan’s Chief of Army Staff, General Ashfaq Parvez Kayani has decided to ‘take a backseat’. What this means is that he won’t micromanage affairs and cajole the judiciary into doing his dirty work for him, but to be absolutely clear, he certainly won’t tolerate Prime Minister Nawaz Sharif meddling with the defence budget, Fauji Foundation or the terrorists training camps or security policy in general. As a result, Mr Sharif can neither fix the economy nor can he improve the security situation. In short this Government, like the last, is hardwired for failure.

Second critical question is who are the likely beneficiaries and why? In all likelihood since the Egyptian coup hasn’t been labelled because it placed civilians in charge, presumably the Pakistani military may end up choosing a civilian face, precisely to avoid international censure. The likely beneficiary will be someone vacuous enough to swallow their agenda hook line and sinker, but ‘respected’ enough to make the media swoon, and powerless enough that they can be disposed easily. The only person to fit all three categories — sexy powerless bimbo — would be Mr Imran Khan at the moment, though Ms Hina Rabbani Khar and her Birken bags that set the Indian media aflutter might also be a probable candidate.

Last and possibly the most important question is what would determine the timing of the next coup or a Government change? Given that the chess pieces have been in position for quite sometime, and Western disenchantment with President Asif Ali Zardari evident for a while, the question is why hasn’t the military acted yet? For starters, the Army needs a civilian shield for its manipulations in Afghanistan. It has to support the Taliban and destabilise Afghanistan, but publicly pretend it is not doing so. At the same time it is obliged to support and actively seek drone strikes within Pakistani territory, while claiming publicly that it is opposed to these strikes. A civilian Government is required first to face international flak and at the same absorb domestic discontent.

One tripwire for a coup then is the day the Pakistan Army loses the benefit of this plausible deniability. Signs are that once the American drawdown is complete in Afghanistan in 2014, the Americans will be loath to buy the Pakistan Army’s lies. At that point, a civilian Government loses its utility. But if the Army takes over directly, its international isolation will only increase and the Army will be associated with both economic and security collapse. At any rate, 2014 will set in motion something big for Afghanistan, but more so for Pakistan.

Thinking and Writing About COIN

Journal Article | July 17, 2013 

Thinking and Writing About COIN: A Review Essay of Fred Kaplan’s The Insurgents: David Petraeus and the Plot to Change the American Way of War

John T. Fishel and Ambassador Edwin G. Corr

Fred Kaplan has a good story to tell and he tells it well. Unfortunately, his account, although adding a great deal to the story, is both incomplete and, in a significant number of assertions, inaccurate. As participants in many of the events Kaplan partly covers and as scholars of those and other related events, we seek here to both fill out the story as well as correct the record.

Although Kaplan shows that the protagonist of his story, General David Petraeus, along with his followers Con Crane and John Nagl, were well acquainted with the classic literature of counterinsurgency (COIN), he fails to demonstrate the full scope of knowledge that was incorporated in both the academic and military doctrinal worlds. Part of the reason is that Kaplan clearly does not understand that COIN is a synonym for many other words that are used to describe the phenomenon that British Colonel C. E. Callwell dubbed “Small Wars” in 1896 and the U.S. Marine Corps adopted in its Small Wars Manual of 1940. Former DOD Director of LIC in the Office of the Assistant Secretary of Defense for Special Operations and Low Intensity Conflict (ASD-SO/LIC), Dr. William J. Olson, built a slide called “The 100 names of LIC.”[1] Although the current version shows only some thirty odd synonyms, the point is that these names are interchangeable, no matter how poorly descriptive they seem to the conventional military and COINdinistas alike. Kaplan’s lack of understanding of this is indicated by his story about former CJCS, General John Shalikashvili, saying, “Real men don’t do MOOTW.” This is especially ironic because the General made his name as commander of Operation Provide Comfort on the Turkey/Iraq border – a classic MOOTW designed to protect Kurdish refugees from the ravages of Saddam Hussein at the end of the Gulf War.

The Literature

We define the literature on COIN as falling into three periods which we identify as the classic – the principal exemplars of which are Carl von Clausewitz’s On War and Sun Tzu’s The Art of War – the semi-classic, and the modern.


Although Kaplan mentions both Clausewitz and Sun Tzu in his book he fails to address their real impact on the study of COIN. In writing about Clausewitz, he focuses largely on Brigadier General Huba Wass de Czega who was the founding director of the School of Advanced Military Studies (SAMS) at Fort Leavenworth’s Army Command and General Staff College. Wass de Czega’s impact on doctrine was the SAMS rewrite of General Dupuy’s 1976 FM 100-5 Operations which abandoned the Active Defense for the concept of AirLand Battle. This was carried over into the 1986 edition directed by Colonel L. Don Holder who was then the Director of SAMS. The only relevance that this development of big war doctrine had for COIN – other than the contention that the army was not really interested in the subject – was that AirLand Battle signified the multi-service interest of the Chiefs of Staff of the Army and the Air Force. In terms of COIN, this bore fruit in the publication in 1990 of FM 100-20 AFP 3-20, Military Operations in Low Intensity Conflict.

It is apparent from Kaplan’s treatment of Clausewitz that he is familiar with the concept that war is an extension of politics and policy with the addition of other means. But Clausewitz had other ideas that were equally relevant to the analysis of COIN but which Kaplan fails to mention and which apparently did not influence Kaplan’s insurgents. One of those notions, resurrected by our colleague Max Manwaring in a number of his works is, “The first, the supreme, the most far reaching act of judgment that the statesman and commander have to make is to establish … the kind of war on which they are embarking; neither mistaking it for, nor turning it into something that is alien to its nature.”[2] This particular Clausewitzian insight has serious implications for the current debate on the future of COIN touched on by Kaplan in his final chapter. More on this later. 

With respect to Sun Tzu, Kaplan gives him only a single mention, on page 57in connection with Wass de Czega’s reading. Of course, Kaplan’s insurgents were all familiar with Sun Tzu, especially his admonition, “For to win one hundred victories in one hundred battles is not the acme of skill. To subdue the enemy without fighting is the acme of skill.”[3] This quote, among many others, sets a large part of the pattern of COIN thinking of men like David Petraeus and John Nagl. Subduing the enemy without fighting is a COIN ideal but one that is not often possible.

Repairing America’s Strategy Bridge

July 21, 2013 · by Frank Hoffman

I don’t know why others want to be part of War on the Rocks, but my reasons relate to the last decade of war and our country’s strategic performance. I don’t have a high opinion of our country’s ability to think strategically and intelligently about war. We have many wonderful people working the problem, many of them friends and mentors, but the last decade and the costs we have incurred leave little doubt that we need to step back and consider the results. Hence, the publication’s name, War on the Rocks, has strong appeal to me as I don’t think we have a realistic understanding about what war and human conflict really is. I would emphatically assert that we have few clues about how to guide our way into and out of modern conflict, and little appreciation for what constitutes a real strategy. Thus, we are on the rocks until we come to a better collective understanding about human affairs and the enduring realities of war.

America’s last decade of conflict has stimulated a number of scathing critiques about American strategic competence. Some have argued that there is a black hole where U.S. strategy should reside. This black hole represents the gap or low level of connectivity between desired political objectives and the application of our instruments of national power. The so-called “American Way of War” consistently struggles to coherently link ends, ways and means.

The impression that U.S. strategic competence is waning is predicated upon a series of perceived disasters in current conflicts. Over the last generation, a series of conflicts have demonstrated exquisite military planning and technological prowess, but limitations in translating military effects into desired political outcomes: Panama, Desert Storm, Kosovo, Somalia, Afghanistan and Iraq.

It is hard to disagree with those who conclude that America’s strategy establishment is, in the words of Andrew Krepinevich and Barry Watts, “increasingly hard-pressed to choose realistic goals or craft strategies likely to achieve our objectives at affordable costs in the face of various constraints….” Ironically, this lost capacity can be traced to America’s success – specifically, its lofty position of global primacy and its incomparable resources. Yet, resources are no longer infinite. And what was just very recently considered a Pax Americana buttressed by American hyperpower is in relative decline.

At the end of the day, strategy is the critical bridge between the often ephemeral aims of policy and the gritty reality of military action. That translation of objectives-to-action requires a guiding logic that only strategy can provide. Without a strategy worthy of the name, the cash transaction of battle has little purpose and an even lower chance of translating that effort into desirable ends at an exchange rate that is acceptable. This is the singular duty of the strategist.

Some of our failings come from the complexity of producing a strategy in a multi-polar world. Other failings may come from the difficulties inherent to generating consensus in a fractious political system that our Founding Fathers designed to impede fast solutions. Some of our failings come from a poor appreciation for the hard work involved in crafting and sustaining a real strategy. By real I mean an actionable and resourced plan that is designed to obtain desired political objectives. I do not mean glossy documents with numerous targets and long lists of aspirations and rhetoric.

Here, Colin Gray’s simple “Strategy Bridge” metaphor is valuable. He argues that the strategist bridges the policy world on one embankment, and the military world of action on the other. The strategy bridge is not just about discourse or the exchange of ideas. It is a connection of institutions and their cultures. In theory, one embankment represents the policy community, largely comprised of very senior civilians. Far on the other bank are the operational and tactical units that provide the action component of strategy. These two communities come from their different worlds, which are filtered by the orientation, culture, education, and the professional lexicon of each community. It is these different lenses or cultures that contribute frequently to dysfunction at the strategic level and make the strategist’s job as complicated as it is.

A clash of cultures can occur and history suggests that it often does. However, more often, by acts of omission, within American policy and strategic circles, the clash is muted or incomplete.  The military community in the United States has its own unique military culture, a subcomponent of its national strategic culture. Three principal cultural attributes of the American military characterize its world view and professional frame of reference.