How Covid is creating the perfect distraction for new Cold War adventurism

Flash points across the globe and disturbingly serious geopolitical decisions taking place at this time of the pandemic make for hard reading for any business executive, funds manager or investor.

This is not likely to be a “Cuban Missile Crisis” moment – more of a Berlin Airlift marker in time. Historians and policy wonks alike might suggest that we are facing a mid-pandemic crisis of our own making: authoritarian states acting without due caution and free societies subsumed by the herculean tasks of medical, social and economic recovery.

Three separate but somewhat related news items in April 2021 could easily be ignored or seen as minor footnotes in an already complex defense and security landscape. Taiwan, Ukraine and the UK’s nuclear arsenal seem very different to the expert eye – somewhat awkward for any commentator to bind together into a compelling narrative. But they are just as strategically important as vaccination programs, Covid testing regimes or labor market conditions as societies come to grip with a global shock that was more immediate than the 2008 financial crisis, terrorism or climate change.

The three flash points or markers are a sign that we are neither in “peace” or “war” but in a period of military/security adventurism. The sort of thing that markets, investors and corporate leaders despise for its uncontrollable nature. Mistakes can be made and errors in decision-making can be critically significant.

We have the People’s Republic of China (PRC), with its new found investment in high tech weaponry, blue water navy aircraft carrier capacity and extensive amphibious deployment skills, operating a high-risk incursion strategy over Taiwan’s controlled airspace.

Of course, Beijing views the rebel province as a breakaway relic of the Civil War and Cold War eras. But a democratic, liberal and prosperous Taiwan is a thorn in the side of the narrative that China requires both political and economic authoritarianism to create the conditions for affluence (for the privileged cadres), improvement (the many) and alleviation from abject poverty (the remainder 100 million).

More than a hundred military aircraft incursions over recent months have tested the resolve and the readiness of the Taiwan State. Intimidation and aggressive diplomacy making US commitment to Taiwan’s security a real flash point in super power relations.

Ukraine’s eastern borders have seen massive troop build ups by Russian military operations – so called exercises and regular deployments – in a way reminiscent of the earlier capture of the Crimea and Don Basin.

NATO worries are compounded by the decision years ago to falter in steps of offering Ukraine NATO membership – in support of early post-Cold War guarantees/promises by confident politicians and strategists – long overdue in the eyes of Baltic members like Lithuania. Frontline NATO states like Norway, Sweden, Poland and Turkey have eyed Russian activity with concern over the last three years. Instability in Europe – considered the epicenter of the Covid crisis by some – is feeding a belief that Western security is fragile in the face of robust Russian efforts in the Far North (Artic), Black Sea, Syria and Africa to extend its reach of influence.

Finally, the focus of the United Kingdom’s Integrated Review into its near-term defense and security needs is telling. More money for Cyber, Grey Zone warfare capabilities, Information Warfare and Special Forces. More than nine thousand fewer soldiers and the end of the commitment to deliver a Division to any land warfare environment. The British Army to be more likely to be seen as a “two brigade” asset in this era. Smaller than any time since the early period of Victoria’s reign. But importantly a rise in the permissible number of nuclear warheads – a 15 percent increase that shocked experts and policy writers alike.

This increase in the “hitting power” of the UK and its accompanied media confirmation that the rules/framework behind allowed use of such missiles have changed are critical pointers to a heightened geo-political period of tension, preparedness to respond and ability to cause catastrophic damage. Rogue regimes like North Korea or Iran can be easily seen to be given due warning that diplomatic admonishment or economic sanctions are not the only option available.

What do these three ugly reminders of reality tell us? It is a more dangerous and riskier environment than 2019, 2008 or 2001. There is an appetite by major authoritarian players (Russia and China) to flex their muscles in a way that will undermine and confront the rules based international order. This is no surprise but a meaningful reminder that economic/social nationalism stoked by the pandemic, closed borders and disrupted trade can produce the conditions for aggression unchecked by cautious statecraft. There is a growing appreciation by Western countries that freedoms cost money, investment and updated deployment of relevant technology. A 40% increase in defense spending by Sweden (compared to early 1950s Cold War levels), open investment into ballistic missile technology by Australia, increased nuclear arsenal by the UK and dedicated naval exercises by the Quad (US, India, Japan and Australia) near the South China Sea all deserve attention from business, investors and shareholders.

We are not about to walk into a global conflict. But what we seem to be doing is striding forward towards a pathway that will comprise increased sovereign risk, higher likelihood for technology/trade sanctions and greater taxation calls on corporate profits. Big tech, mutual funds and profitable transnational corporations should not be surprised if Western governments impose more controls and burdens to defend the very societies that create the conditions for wealth and innovation.

It is more like 1948 than 1962. It is the beginning of a fresh conflict between strongly divergent social/political values. What worked in the past – collaboration between Wall Street, Main Street and Government – may not be easily replicated. But expect to be asked what you can do for your country. It might be more significant than any nominal flag waving, BLM or CSR strategy. It is about recognizing that the period of globalization as we knew it (supply chain across five continents with free flows of capital and even people) may well be a thing of the past.

Noel Hadjimichael is a London based public policy consultant in the security, defense and civil society space with relevant experience working in politics, the civil service, industry and the charitable sectors.

The grey zone: How business influence has become the new battleground for state warfare

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In the late 1930s the business model was primarily vested in a national market – you operated in a town, region, city or at most national landscape. The titans of industry were men (just about always men) who sat at the top of social orders that were national in nature and shaped by national narratives. You were an American Company (even if you felt you were Texan or MidWest or cosmopolitan Manhattan), an Australian outfit (either a subsidiary of a British firm or a local home grown product behind protectionist trade barriers) or maybe a Canadian concern driven by the exploitation of huge natural resources, growing labour availability and progressive confidence in a Dominion that was asserting its unique story. Transnational or global was the rare exception like Coca Cola, Ford or BP… and the cultural mindset was still nationalistic.

Survivors from the Edwardian era of mechanical and technological innovation, from the trenches of Polygon Wood, Vimy Ridge or Gallipoli, and the global depression that gave free trade, international markets and free flow of capital a bad name. You were not capitalists or managers of capital of anywhere – you were citizens, community leaders and stewards of precious capital from somewhere. Customers, investors or critics shared your shared citizenship. 

Take us 90 years or just three generations to now, and we are in a business environment where the product is designed in Seattle, manufactured in Shenzhen, shipped to Sydney, used by a backpacker from Sherbrooke with profits eventually distributed to pension funds in Stuttgart, Sheffield and Seoul. Global markets have risen because of technology, access, and trade since the end of the Cold War.

Nationalism is dead… so we thought. Everyone was a student of the “end of history” and reveled in the consumption of the same products, listening to the same music, driven by the same social media and embracing the “one world” viewpoint of unimportant borders, broad live and let live attitudes followed by a blurring of differences in political systems and their redundant values.

But then reality struck: we had invasions of territory by Russia, cyber trolling of opinions across national boundaries, the buying of influence in political parties across Western democracies by “new money” friends of authoritarian regimes, bullying of universities that offered platforms to critics of the authorities in Beijing, St Petersburg, Havana, Pyongyang or Ramallah. All in a decade post the global financial crisis when North American, Australian or European corporations were struggling to return to acceptable returns on investment, productivity or capital. Boom time followed by the downturn.

Faced with global debates on gender, climate, diversity, inclusion and redress for past historic injustices, it was easy to think that your market adversaries were just other global corporations, opinion leaders and a media circus of 24 hours coverage. Corporate Social Responsibility is a well established feature of a mature and risk managing enterprise (private, public or charitable). Corporate National Responsibility (giving due regard to the demands and peculiar requirements of the sovereign state giving you your “license to operate”) is something that fails to excite or trigger the Western executive or decision maker.

But an old problem has returned with a vengeance from the Cold War era: efforts by nations that have differing concepts of what capitalism, markets and freedom are to coerce, constrain, condition western liberal democratic society businesses to their agenda – illiberal, anti-competitive, neglectful of human rights and fundamentally corrosive to the national interests of liberal democracies.

It is played out in what is alternatively called the “grey zone” conflict and is in the news almost daily. We never fail to notice the allegations of impropriety with decision makers or the questioning of our social cohesion. Yet the main focus to-date of “hybrid warfare” — which uses non-military means to achieve warlike ends — has predominantly been on tactical methods such as cyber attacks, fake news campaigns and espionage. But understanding hybrid warfare’s strategic context equips political and business leaders better to address it. 

In simple terms, hybrid warfare uses capabilities not normally associated with war to coerce or subvert. Such techniques are intended to delay recognition that an attack is under way, provoke paralysis in decision making through confusion and discourage the victim from responding forcefully due to the absence of “legitimate” military targets. China, Russia (and to lesser degrees Iran and North Korea) are taking on capitalist democracies and hoping to re-make the international political, economic and trade systems through a coordinated hybrid effort that is taking place largely outside the traditional military or diplomatic realms. 

BRICS, the emerged Chinese development banking sector, the Belt and Road strategies and vast capital flows by the global wealthy from closed societies into Mayfair, Melbourne, and Manhatten all shape our acceptance that little can be done by tired, tense and politically divided free societies. 

The goals of these hybrid efforts appear to harm economic strength; undermine the legitimacy of key institutions such as governance bodies, academia, diplomatic entities and the media; sow social cohesion discord; and weaken the bonds between the nations and international organisations such as NATO. The erosion of economic resilience and the weakening of cultural values are probably the more pressing threats and likely the hardest to reverse once they are accomplished. 

Cyber attacks on private companies, state managed infrastructure and core government entities are a chilling example of grey zone warfare: something that sits below the threshold of naked violence or breaches of international law. 

With entities as diverse as the National Cyber Security Centre in London, the RCMP in Canada, the FBI in the US and Department of Defence in Australia all giving recent alarms over the threat profile facing civil society (in particular business and political decision makers) from State and State-sponsored  interference, the time to plan a modern style of deterrence is long overdue.

Policy voices like the RAND Corporation, the Royal Unites Services Institute, the Australian Strategic Policy Institute and Canada’s Mackenzie Institute have all pointed towards the growing risk profile posed by hybrid warfare and the corresponding requirement to bolster national responses.

Business is not in the business of defending a nation. But is it is a vital stakeholder in upholding the civic values underpinning its own legal, economic and cultural validation. 

Defence, security, intelligence and critical infrastructure leaders operate in an environment where they depend upon the reliability and resilience of private sector entities, their staff, managers and ultimately shareholders. Just as pension funds and mutual investors are long term players in capital markets, business is a long-term stakeholder in the preservation of Western pluralist free societies. 

Any security threat is a market challenge just as significant as the climate emergency, mass people movement, unfair trade practices or corruption. 

Shareholder value, brand or reputation management all contribute to today’s CEO headaches – but rising competition between great and emerging powers also raises the question: “have we met our corporate sovereign nation responsibilities?”. Consumers and shareholders via the media have plenty of opportunity to pass judgement on corporations that fail the test of public opinion.

Business leaders excel and profit from the freedoms derived from free societies under the rule of law. Defending these societies is no longer a luxury in a world only a few mouse clicks or fake news stories away from harm.

Noel Hadjimichael is a London based public policy consultant in the security, defence and civil society space with relevant experience working in politics, the civil service, industry and the charitable sectors.