Chutzpah Risk


Should developments in military affairs and geopolitics concern global investors? That’s a question that leans into a ready answer: Diminishing deterrence, lessening forbearance, and emboldened military risk-taking due to enhanced capability mean more assertiveness, more pre-emptive action. This spells greater event risk for the global investor. This means perhaps a further layering of the global risk premium.

“America is back at the table…,” so President Biden intoned at the recent G-7 summit in Cornwall. By that statement, Mr. Biden may be implying that his predecessor eschewed “the table”, or any international collective efforts. Whether or not that is true, historians may have the distance to judge impartially. What I find interesting is that while different actors may or may not be eschewing the common table, there is some “jostling” of the global “applecart” taking place.

By that I mean that history in real time continues to unspool, as self-interested state actors and others are coloring each passing frame. People are doing things and making history in the process.

In May of last year, we posted for these pages the entry “The Revolution will be digitized…” In that essay, we noted that the nations of the world, while not necessarily red in tooth and claw, were still always competitive with one another. We highlighted what one former Soviet marshal observed and what decades of Pentagon planning has sought to implement: the revolution in military affairs (RMA). The world’s militaries have taken this revolution, and what it entails, seriously.

The world’s major powers are seeking that revolutionary advantage, which combines evolving information technology and weapons development to fashion the tempered edge. Winning that revolution, which is the revolution in military affairs, means greater sovereign discretion.

And sovereign discretion is the coin of the realm among the global survey of nations. What moderates an “inflation” or unchecked expansion of sovereign discretion is deterrence – so countries block each other, generally peacefully, due to an understanding of mutual destructive force. Or, countries perceive synergies and voluntarily curb discretion to garner the benefits of multilateral membership and collective agreements.

But fundamentally, countries are self-interested, perhaps informed and inspired by multilateralism and transcendent values, but self-interested nevertheless – and often keen to press their advantage. Deterrence tempers that expression of self-interest.

What makes the current period more freighted is technology and the pace RMA has been assuming. Ironically, country development, technology and expanding technical/organizational capability are diminishing the power of deterrence. Of note, for the prevailing keepers of global order, say the US for example, growing emerging country capabilities engender for those countries much more self-confidence, more confidence to remain undeterred and to follow perceived self-interest. Global deterrence diminishes in the process.

Early in June, reporters James Marson and Brett Forrest reported on the recent Azerbaijan-Armenia conflict. The WSJ tandem’s article, “Smaller Militaries around the World Are Deploying Inexpensive Missile-Equiped Drones Against Armored Enemies”, noted how effectively drone technology from Turkish military contractor Bayraktar turned the tide of that conflict.

The Azerbaijanis utilized Bayraktar’s TB2 drone technology to attack and thwart Armenian armored forces, eclipsing the benefits of Russian military aid the Armenians had been receiving. Due to Bayraktar’s weaponry, Azerbaijan was able to wrest control of the disputed Nagorno-Karabakh territory from Armenia, which had held the area during the two preceding decades. The Turkish military contractor, along with Chinese defense companies and others have been plying several theaters of conflict. These recent episodes of military support show how broadly capable a wider survey of countries have become in developing and making use of cheap, advanced military technology.  This fosters “confidence” and it’s twin, adventurism.


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