* See John Pomfret, "China Losing ‘War’ on Births: Uneven Enforcement Undermines One-Child Policy," Washington Post, 3 May 2000, p. A1.
** Cited in Clay Chandler, "GM’s China Bet Hits Snag: WTO (Car Shoppers Await Discount From Trade Deal)," Washington Post, 10 May 2000, p. E1.

Our second cosmic conclusion concerns the rise of a new system nexus, one that’s likely to recast our appreciation of what constitutes international stability in the 21st Century. Just about everyone who participated in the workshop came away from the day’s discussions deeply impressed by the potential for environmental stress to lead to inter-state tension and even conflict. While none were so bold as to predict future wars over resources, all were certain that a new definition of security would inevitably emerge in Asia over the coming decades: that of environmental security.

The reasons for this growing awareness are several, but the bottom line is basically this: you can’t combine that much population increase with that much economic growth and rising energy consumption and not end up with some serious environmental difficulties in a space that tight (in terms of population density).*

Carbon dioxide (CO2) emissions become a lighting rod subject due to the combination of the Kyoto Protocol (which, although it does not involve many of the Asian economies, portends a future where international agreements will increasingly target environmental issues) and the reality that so much of the region’s future energy growth will inevitably be achieved through coal.

On an international scale, the CO2 issue becomes a divisive point between the post-industrial West (which, in effect, has already burned it’s way through its "high carb years") and the emerging economies of the South and East (which face many more years of such a "bad diet." Will the U.S., which will still burn more coal over the next two decades than anyone in the world save China, scold the region on this subject? You bet, and therein lies the rub. In short, the subject of environmental stress will become part and parcel of international security debates in the 21st Century, and Asian economic growth will drive much of this discussion.

* For an influential article on the subject of environmental stress leading to conflict, see Thomas Homer-Dixon, "On the Threshold: Environmental Changes as Causes of Acute Conflict," International Security, Fall 1991, pp. 76-116.

Our third cosmic conclusion centers on the central role played by China’s energy choices in how the Era of Globalization unfolds over the next decade. To put it succinctly, the decision of how much China adapts itself to the global economy (vice Beijing's preferred approach of asking the global economy to adapt to it) will be largely driven by the choices the country makes on energy.

If China chooses to remain, as much as possible, in the "past" with coal, this decision will essentially delay its full-fledged absorption into the global economy. This is clearly the path of least resistance for Beijing, and there lies the temptation, for the perception of autonomy afforded by coal allows China to remain more opaque to outside scrutiny, to retain more control over its energy future, and to continue the more easily top-down directed path of extensive growth.

If China chooses to move—as much as possible—into the "future" with natural gas, this decision will essentially speed up its full-fledged absorption into the global economy. This is obviously a far more difficult path, because it opens the country up to greater interdependency with the outside world, forces more transparency upon its financial systems, asks it to trade control for calculated risk (nothing is guaranteed in the free market), and demands of it a far greater push for intensive-style economic growth.

Make no mistake, this decision will not occur one afternoon, but unfold over the course of many years, and will involve many internal debates and struggles within the Chinese leadership.*  Staying in the past allows China to enjoy the illusion of its own rule set (capitalism "with Chinese characteristics") and indulges its historical tendency toward parochialism (the "Middle Kingdom" mindset). Striving for the future means acceptance of the one global rule set and all that the New Economy entails. In the end, then, China’s choice on energy is largely a referendum on how it feels about globalization.

* For a good review of China's economic development, see Dominic Ziegler, "A Survey of China: Now Comes the Hard Part," The Economist, 8 April 2000, pp. 1-16.

Our fourth cosmic conclusion concerns international energy markets and the emerging reality of quasi-hemispheric market patterns. As we noted earlier, what Asia needs in terms of future energy requirements is entirely available either in-region (e.g., coal) or from the central portion of the Eurasian landmass (gas and oil from the Persian Gulf, Central Asia and Russia). These distances are all feasibly conquered by pipelines, and most of the involved SLOCs lie within the reach of what naval forces the major regional powers are likely to possess by 2020.

Meanwhile, the West, which has come to rely less and less on Persian Gulf oil, is likewise becoming more regionally-focused in its energy trade patterns. The U.S., for example, imports more energy supplies from Canada than any other nation, and gets the bulk of its imported oil from North and South America.

None of these statements are meant to suggest that East-vs.-West energy "blocs" are forming. In reality, the regionalization of energy trade occurs precisely because the commodities in question are behaving more and more as one would expect of a globally-traded, highly-fungible good. If price determines all, then reducing transportation distance makes sense.

In the end, all of this regionalization (to the extent it is meaningful to even make this distinction) comes about because energy trade is no longer confined to the sort of strategic bilateral relationships of the Cold War era, so the "new rules" of energy are nothing more than that sector’s joining up with the global marketplace and losing its special status as a strategic asset.

Having said all that, the U.S. government (and the U.S. military in particular) faces a different security environment in the 21st Century, whether or not it yet realizes the change: our national security interests in the Persian Gulf, while still preeminently important for the global economy, no longer hold the same immediate importance to our national economy—and that makes for a more complex strategic environment.

Our fifth and final cosmic conclusion is, in many ways, a larger argument (and advertisement) for the NewRuleSets.Project as a whole.

After each of the Economic Security Exercises we’ve conducted over the past four years, participants walk away from the experience speaking excitedly about a new sense of understanding of the connectivity between the military and economic worlds—namely, how the two work in tandem to provide international stability.

We like to describe this combination effect as the global rule set we’ve come to understand as the ultimate international peace dividend arising from the end of the Cold War. As stated earlier, the collapse of the Soviet Bloc and its long-standing challenge (or rejection) of the Western economic rule set made possible, really for the first time in human history, a truly worldwide rule set for how military power buttresses and enables economic growth and stability.

How so? For the first time in human history we have a true global military Leviathan in the form of the U.S. military, and no peer competitor in sight—not even a coherent alternative economic philosophy (although one is clearly brewing in the anti-globalization protests witnessed recently in such places as Seattle and Washington DC). This unparalleled moment in global history both allows and compels the United States to better understand the military-economic nexus, in large part because of its complete reversal of priority from the Cold War era. During the strategic stand-off with the Soviet Union, economic might was seen as supporting military power, but now that situation is completely reversed: to the extent that the military matters, it matters because of the stabilization role it can play in the global economy.

As such, it is essential that these two worlds—military and financial—come to better understand their interrelationships across the global economy.

Uncovering and better understanding this fundamental relationship is especially important because—the vast majority of the time—the military and business communities operate in oblivious indifference to one another.

One’s tempted to counter, "So what? They don’t need to be aware of one another on a day-to-day basis."

And in a basic sense, that’s true. But if you consider the rise of system perturbations as a new form of international security threat in the 1990s, and if you understand that most of these perturbations come in the form of financial crises that can engender serious subnational violence (e.g., Indonesia today), then perhaps this connectivity seems more pertinent. Because ultimately the global economy operates on trust, which is based on certainty, which in turn comes from the effective processing of risk.

Invariably, these two problem sets merge in the increasingly interdependent, IT-driven, globalizing New Economy, so understanding the military-economic connection isn’t just good business, it’s good national security.