An Expensive War That Hasn’t Happened

Fifth generation warfare hasn’t yet occurred, but our economy is being reshaped by it nonetheless. The insurance and re-insurance loses from 9/11 were between 30 and 60 billion US Dollars. The so-called war on terrorism is an attempt to prevent the formation of operational networks of 5GW actors. It strives to limit the conditions and circumstances that would foster an outbreak of 5GW attacks. I am not confident that the “war on terrorism” will succeed any more than the “war on drugs”. On the other hand, what choice do we have. The loses from a 1 megaton nuclear bomb in New York City that kills 1.9 million defies calculation.

9/11 was carried out by a network of religious zealots from one known terrorist organisation, yet they were not noticed until it was too late. Now stop and think about how hard it would be to detect and thwart a network of people from several disparate groups.

Insurgencies (4GW) and 5GW warfare are often described as “low-intensity¬† warfare”. This is a misnomer in the economic sense — just look at the cost of Vietnam, Iraq, and Afghanistan. One must accept at the outset that there will not be a clear winner in such a conflict, and that the participants involved will not value victory in the same way and that the fighting may end before total victory by one side. Unfortunately, many people have a hard time understanding this and in trying to win, spend far too much on the military effort. This lack of understanding of the so-called low-intensity conflict by both politicians and the public creates some opportunities while at the same time creates great economic risk.

My research identified 5 good news/bad news issues surrounding 5GW that are starting to shape policy.

  1. Who will do the fighting and how will this effect the economy? The US consumer represents about 20% of the world economy and between 60% and 70% of the US economy. Consumers in their peak buying period usually do the war-fighting.
  2. The Department of Homeland Security, and similar ministries in other countries, may become”ministries of everything” where every decision is considered for security ramifications. This bottleneck will strangle the economy, except for companies that have an “inside track”.
  3. Adding security costs to the deficit will further devalue the US currency. This is a retrograde tax on American citizens; even worse, to maintain trade with the US, other countries will have to follow suit.  This will really damage the economies of many allied countries. Retired people living on retirement benefits will suffer. This will force governments to raise taxes to pay supplementary benefits. This has the potential to become a destructive self-reinforcing trend.
  4. Power breeds a thirst for more power. The security apparatus of some countries may become overbearing and dangerous to civil liberties and democracy itself.
  5. Two lower cost solutions exist — developing a culture of preparedness and service at home, and extensive use of public diplomacy abroad. The development of a true militia to supply emergency manpower and a more active foreign policy based upon public diplomacy,¬† particularly by the allied countries such as Canada, UK, Australia, New Zealand, and the EU will lower the costs created by fear and uncertainty.

Each of these five issues present strategic opportunities, and risks, for service companies and manufacturers alike.

Previous articles on this topic:

Competitive Intelligence and the Economics of Warfare

Fifth Generation Warfare