Skip to main content

2012 | Buch

Economics and Modern Warfare

The Invisible Fist of the Market

verfasst von: Michael Taillard

Verlag: Palgrave Macmillan US

insite
SUCHEN

Über dieses Buch

By referring to a handful of battles throughout history, a new form of military strategy is derived through the manipulation of supplies, capital, and markets. This book combines economic theory with applied analyses of military successes and failures, explaining them simply for audiences of all levels of interest.

Inhaltsverzeichnis

Frontmatter

Introduction

Introduction

In 1776, Adam Smith’s pivotal economic treatise, An Inquiry into the Nature and Causes of the Wealth of Nations, was published wherein Smith describes what he saw as “the invisible hand of the market”; a metaphorical reference to the market forces of supply, demand, and price that naturally control production and consumption within and between nations assuming no intervention by the government. He detailed with great accuracy and at great length the nature of the free market as he saw it and the processes by which we, as people, allocate resources through production and trade. The natural behaviors that we exhibit and the processes to which we all adhere in our interactions to acquire the necessities for comfort and survival are, as Smith described them, predictable and measurable. Since that time, and particularly since the start of the twentieth century, we have built on and refined our understanding of economics to the end that it is possible to manipulate these processes and behaviors to create specific benefits or detriments, to include its potential to compel nations and peoples into submission during conflict.

Michael Taillard

A Critique on Current Methods

A Critique on Current Methods

Economic warfare, in its modern incarnation, has come to be something of a misnomer. More than anything, those tools that currently compose the body of economic warfare are those of political maneuvering in the context of international relations. The tools of economic warfare today not only come primarily in the form of fiscal policies, which change the amount that a government spends and earns, but also include monetary policies, which alter the quantity and value of a nation’s currency. These economic policies are most frequently used for the purposes of appealing to pressure on domestic issues and are, for the most part, entirely ineffective or even self-destructive when applied for the purposes of protectionist foreign economic policy. To make the distinction between the topics of this book, which are intended to be applied to military operations in a direct and strategic manner, and those political concerns described above, the phrase “economic combat” will be used. Economic combat is the use of applied economics for combat purposes.

Michael Taillard

Supply Manipulation

Frontmatter
1. Creating Shortages of Supplies

The simplest strategy in “supply manipulation” is to cut off supplies to a geographic location. This is a very broad strategy that will allow a force to manage which supplies, if any, will go into or out of a cordoned area and is typically done through the use of military blockades along roads, trade routes, ports, channels, and air fields. By stopping the source of supplies to a region, one is effectively stopping the ability of people within the region to continue performing routine operations. For a combative force, this means diminishing or even completely eliminating the ability of enemy militants and those associated with them to perform combat-related missions.

Michael Taillard
2. Creating Shortages of Capital Assets

Capital assets are those that are used to purchase supplies. Money is included among these, as are investments, property and equipment, and trade goods such as agricultural and manufactured products. Anything of value that a force can use to obtain supplies necessary for combat operations is considered to be a capital asset. By altering the availability of these, often the same effect is had as if one had altered the availability of supplies directly, though the typically indirect nature of cutting off capital assets is less visible to front-line troops and creates less incentive for an immediate physical confrontation, making such a strategy less risky in many cases. In addition, cutting off capital assets often does not even require direct involvement by soldiers, which has the added benefit of consuming fewer resources, reducing direct risk, and decreasing the amount of visible operations observable by the enemy, leaving them ignorant of what is occurring. There are three primary sources of capital that help fund combat operations; financial instruments, trade goods, and commercial funding.

Michael Taillard
3. Creating Shortages of Human Assets

The most valuable resources of any organization are, without a doubt, its human resources. Even the most well-designed and well-funded organization cannot properly function without the proper types of people in proper quantities. Put simply, unless a militant group can, for the purposes of fighting or operating equipment, either recruit people themselves or outsource people from private companies, all combat operations will stop. The organization must have not only the proper number of people but they must also have the proper skill sets to perform necessary functions with enough quality to ensure that their efforts are useful to the mission. In contrast, a force that has skilled individuals dedicated to a cause, in having few supplies will find resourceful methods to continue to defend their cause. Mercenaries fighting for the Taliban and Al-Qaeda, though with little capital with which to acquire combat supplies, have proven to be very resourceful in their strategies by using cheap, common supplies. Their ability to turn even broken objects and refuse into devastating weaponry such as IEDs (Improvised Explosive Devices) and EFPs (Explosively Formed Penetrators) is evidence of a great level of skill and resourcefulness among combatants that have little besides skill and resourcefulness with which to fight.

Michael Taillard
4. Physical Confrontation

No matter how effectively one is able to manipulate supplies, this will rarely, if ever, be a substitute for physical confrontation. In fact, many of the supply manipulation tactics described until this point are capable of triggering the enemy into an attempt at a direct attack sometimes out of retaliation, often out of desperation. The actions that will be taken in response to these tactics, however, are predictable and can often be measured in terms of the amount of resources allocated to retaliation or recovery operations as well as the amount of time it will take for them to execute such a strategy. Anticipating the actions that the enemy will take through analysis of their behaviors and incentives will allow for preemptive preparations to either continue manipulating their supplies through additional layers of economic tactics or engage the enemy in combat when it is deemed that they are at a juncture critical to their defeat.

Michael Taillard
5. Systempunkt Targets

The value of the defeat of any target can potentially be greater than merely the assets destroyed or seized during the attack itself, if one’s target is chosen carefully. As noted in the discussion on supply channels and distribution points, stopping or even just diverting supplies from a single point can create shortages on several different operations in several different locations. The popular game “Jenga” is based on this concept, wherein removing one piece of a tower of identical wooden pieces has the potential to collapse the entire tower (the goal is the remove and restack pieces, one by one, without collapsing the tower in the process). Any point in a system of interacting or of related processes wherein the destruction or removal of the point in question will stop all the processes from functioning properly is called a “systempunkt target.” The term “systempunkt” is derived from the German word schwerpunkt, meaning “heavy point,” which was used by the Nazi soldiers during World War II to refer to any point on the enemy’s line of defense that, when destroyed, would destabilize the entire defensive line. These points were typically the focus on heavy attack for the Nazis because they were ideal targets for their blitzkrieg style of warfare (blitzkrieg, meaning lightening war, was meant to be a very fast use of mechanical warfare to overwhelm a target all at once).

Michael Taillard
6. Limitations and Failures of Supply Manipulation

Supply manipulation is not without its failures and shortcomings. There are specific issues in which supply manipulation, by itself, will simply not be effective. At times, when used carelessly, it also has the potential to actually backfire, thereby creating more harm than good. Generally speaking, any attempt with a targeted strategy will create less collateral damage than one with broad influence yet will also be less effective in time.

Michael Taillard
7. Suggestions for Future Research

In no way is this book meant to be an exhaustive account of the potential use of economics in combat. On the contrary, this is merely an introductory text designed to illustrate the potential for economic combat by applying historical examples of its use and by deriving a foundation from which to expand on for future study. As a result, there are a number of areas where additional research may be either necessary or yield important breakthroughs in the study. There may actually be limitless areas for future research but in regards to those issues addressed thus far a few naturally present themselves.

Michael Taillard

Trade Manipulation

Frontmatter
8. Preliminary Concept: Terms of Trade

To discuss those strategies made available through trade manipulation, it is necessary to first have an understanding of some terms and concepts associated with trade theory, as they will be used throughout this chapter with the assumption that the reader already understands how they function and can be applied. They are not difficult to understand, by any means, but they are necessary to fully grasp this chapter. Specifically, a basic grasp of the “terms of trade” and how the terms of trade can be altered is required. The terms of trade are a ratio of the cost of imports relative to the cost of exports for a group. That is to say, terms of trade measure whether the value of a nation’s exports is greater or lesser than the value of its imports (or to put it another way, how much a nation much change the price or quantity of their exports to be equal to or greater than the value of its imports). This is almost exclusively used in the analysis of trade between nations but can very simply be applied to smaller groups, such as between two organizations or even between the departments of a single organization, if accounted for properly.

Michael Taillard
9. Preclusive Purchasing

The most basic form of trade manipulation is one that has been used for centuries with varying degrees of success. “Preclusive purchasing” is a term that refers to the purchasing of resources with the intent to affect the enemy’s ability to purchase the same resources. By purchasing these resources before the enemy, the price of a particular supply will have been increased due to increased demand and the supply of a particular good may not even be adequate to meet their needs.

Michael Taillard
10. Resource Appropriation

Sun Tzu, often toted as one of the greatest military minds in history, is among the first, if not the very first, to record in writing topics on the economics of warfare. He has written on subjects ranging from motivating soldiers using monetary incentives for each of a type of enemy killed (a chariot was worth more than a foot soldier) to gathering intelligence on the enemy’s supply usage to predict their actions. In particular, he was very concerned about replenishing those supplies consumed by soldiers during extended travel where shipping additional supplies would be difficult. In his book The Art of War, Sun Tzu says, “Each pound of food taken from the enemy is worth 20 pounds you provide yourself.” Now, of course, pounds weren’t the unit of measure during Sun Tzu’s time but the meaning of the translation remains valid, even if the exact measure may vary.

Michael Taillard
11. Supply Exploitations

One of the primary shortcomings of supply manipulation and many strategies of trade manipulation is that any time an artificial shortage is created either through economic combat strategies, legal prohibitions, price requirements (such as minimum wages laws), and other such concerns, a black market will be created to meet the demand. If a blockade or other limitation is put into place where traditional methods of transacting sales are no longer a viable option, there will always certainly be those willing to risk alternate means to profit from the circumstances. Having the knowledge that black-market trading is the unavoidable result of many forms of economic manipulation allows one to anticipate and appropriately act in a manner that exploits this inevitability to the further detriment of enemy forces. Once one understands that supplies cannot, in most circumstances, simply be stopped, the opportunity to leverage the way in which these supplies enter the region becomes a possibility with very powerful potential.

Michael Taillard
12. Tactical Hiring

In Chapter 3, the importance of hiring foreign nationals and, in particular, those individuals either neutral or who have changed sides from working with the enemy, was stressed. Up until now, however, the issues of quality of life have only been hinted at as a method of giving these individuals incentive to associate themselves with an organization whose purpose it is to be involved in combat and, in extreme examples, even encouraging individuals to change their allegiance in the conflict. In supply manipulation, this was done simply to reduce the quantity and quality of skilled workers for the enemy and provide one’s own people with an ample supply for high-quality individuals ready to be utilized. Since the high pay will attract not only better people but also more people, the amount that people could expect from other employers would increase as well, putting the quality workers out of the price range of enemy combatants who are otherwise still using local wage levels and forcing them to allocate a disproportionate amount of resources to supporting operations rather than combat operations thereby leaving them understaffed and with inferior labor quality.

Michael Taillard
13. Tactical Pricing

The term “predatory business practices” is an umbrella phrase that encompasses any of a varieties of actions and strategies that a business might take to improve sales and profits by harming the competition via the hampering of the free market rather than becoming more competitive themselves. Examples of such actions might include filing frivolous lawsuits to delay a competitor from releasing a product or push smaller companies into bankruptcy, purchasing majority ownership of stock to control a competing business, selling products cheaper than it costs to make them to force competitors to stop operating, and a number of other similar strategies. These activities are nearly universally discouraged on an official level, being both publicly condemned by industry leaders as well as legally outlawed by federal law and international trade organizations such as the WTO. It is in the nature of military conflicts that all involved should be predatory, providing ample opportunity to take advantage of these actions for tactical purposes. The use of predatory business practices in combat can greatly alter the amount and types of capital available as well as the source of the supply and the degree to which each side of the conflict has influence over it. While this can give great tactical advantages to the one employing such methods, in many cases they also have the potential to be illegal.

Michael Taillard
14. Trade Agreements

One of the greatest boons to the Coca-Cola company was their 1941 partnership with the USO that brought the cola beverage to US troops across the globe starting in World War II and continuing until at least 2012 during OEF. In 2011, Coca-Cola celebrated the seventieth anniversary of their partnership with the USO by giving to all United States military worldwide one free 20 ounce bottle of any Coca-Cola soda, redeemable by downloading and printing a gift certificate to be used at any military installation. This contract, by itself, helped to develop the distribution infrastructure and public exposure required for Coca-Cola to gain a dominating share of the beverage market worldwide. Today, Coca-Cola is one of the most recognized brands in the world, available in many of the most rural regions of the world.

Michael Taillard
15. Currency Manipulation

For more than a decade during the twenty-f irst centur y, US government officials, and to a lesser extent others around the world, have furiously accused the Chinese government of keeping their currency artificially undervalued. What exactly does this mean, though?

Michael Taillard
16. Counterfeiting

Besides altering the availability of currency, “counterfeiting” is an effective way that has been used a great number of times throughout history to discredit local currencies, although this is no longer as easy a task as it once was. The prevalence of counterfeiting throughout history has led many nations to take a number of anticounter-feiting measures to protect against such strategies. The result is not an end to counterfeiting but, rather, a limited number of people skilled in the trade being secretly employed by military and intelligence agencies either for purposes of creating this false-currency or, more commonly, detecting counterfeits and tracking perpetrators. Counterfeiting, when done successfully, is such an effective strategy that it can completely discredit entire governments, particularly when distributed through targeted channels to maximize their effectiveness. As a result, nations go to great lengths to combat counterfeit currencies, including some of the following: 1Serial numbers are logged and monitored to identify and track bills while confirming the existence of counterfeit bills and expediently finding them.2The addition of a portrait is extremely common, and has been so for centuries, among many world currencies. These are difficult to replicate and added detail results in increased difficulty.3Printed textures are included in the backgrounds of the images on both sides of the bill using extremely fine lines.4An offset watermark identical to the portrait and printed on both sides of the bill becomes visible only when held up to the light.5Layered seals are printed over or under other text but still remain visible giving the appearance of translucency.6Money is often printed on various types of special “paper,” made by incorporating materials such as wool, cotton, or synthetic polymers.7Color-shifting ink used in the one corner of bills that appears of one color when looked at directly and appears to change colors when looked at from an angle.8Microprinting used to create the drawings and include text in various spots are extremely detailed, additional textures are also added, and are extremely difficult to replicate clearly.9Federal Reserve indicators show exactly which bank issued the currency to assist with tracking, alongside the serial numbers.10Within the paper lies an ultraviolet-reactive security thread that can be seen when held up to the light and will glow under a black light.11Low-vision, machine readable numerals at one corner of the bills are designed to be read by machines created to be used by blind individuals to help them cope with the challenges of identifying currency denominations without the help of others.

Michael Taillard
17. Limitations and Failures of Trade Manipulation

While trade manipulation resolves many of the challenges associated with supply manipulation strategies, and even expands on the economic tools available to a fighting force in their pursuit of military conquest, trade manipulation in itself is not without its own challenges. The logistics of developing and executing these strategies is difficult and requires a significant amount of intelligence gathering regarding both enemy operations and market trends. Even when this is accomplished, these strategies require constant maintenance to remain effective, so they are best used in conjunction with the intention to take advantage of otherwise temporary trade fluctuations as an opportunity to overwhelm a weakened stance for the opposition.

Michael Taillard
18. Suggestions for Future Research

These descriptions are far from comprehensive. Neither the full wealth of historical use of trade manipulation nor the full potential of future use is described within these pages, as the number of examples available are too numerous to be included. On the contrary, the number of strategies that may yet be developed and the breadth of understanding that we may yet have on this subject far exceeds that which is included, and history is fertile with templates upon which grander inspiration will bare ripened fruit of economic strategy.

Michael Taillard

Market Manipulation

Frontmatter
19. Economic Intelligence

The data that make up economic intelligence are relatively easy to collect compared to other forms of intelligence and provide a detailed look at the inner workings of enemy operations including any future plans that they might have to take action. Economic intelligence consists of information in the volume of sales of goods, the specific types of goods that are being sold, availability and distribution of goods, changes in pricing, and so on. By collecting this information one can determine the amount and types of resources being used by the enemy and when they are being used. Not only does this allow one to determine how effective their economic strategies in combat have been, but it even allows one to deduce the actions that are being taken or are going to be taken sometime in the future, accurately predicting the intentions of the enemy and responding to those intentions through calculated anticipative reaction.

Michael Taillard
20. Labor Exploitations

All markets can be altered, including labor markets. While manipulating labor markets without direct intervention can be easily the most devastating economic human resource strategy available, it can also be the most difficult to implement, requiring intimate knowledge of the regional labor markets as well as critical individuals within those markets. When utilized properly, these can create a chain reaction that brings a vast proportion of an entire nation or global industry to a complete stop.

Michael Taillard
21. Expropriating Peoples

During his campaign to expand the northern Greek state of Macedon, Alexander the Great was quite often not fought off as a conquering commander and his mighty military, but greeted and welcomed by those regions that he would soon overtake. This was, in part, a result of being given the option to either be conquered in battle by the overwhelming power of his military or avoid the devastation of war by simply agreeing to be annexed by the Greek state. Avoiding war was not the only motivator, however, and many regions actually went as far as to request to be “conquered” because of the incentives, or positive motivators, associated with becoming a part of Macedon.

Michael Taillard
22. Equity and Debt Engineering

It has been hinted at multiple times so far that control over the entire operational landscape can be engineered. Recall from Chapters 8 and 11 that manipulating the terms of trade for organizations can alter the proportion of asset ownership can be altered. Using trade manipulation, the ownership of resources was changed by artificially altering the price or value of goods and money. This was meant, in part, to ensure that through managed exchanges those organizations friendly to one’s cause obtained either a greater value from the exchange or that those organizations had the ability to force competing organizations out of business. When the goal is to engineer ownership of the market, this can be a very indirect method that exaggerates normal competitive exchanges in a free market. There is a more direct method to accomplish this goal, however. By directly engineering the amounts and types of equity and/or debt, control over organizations, supply chains, entire industries, or in some cases even a large percentage of the local economy can be obtained.

Michael Taillard
23. Equilibrium Redirection

Strategies that are meant to change the equilibrium of supply and demand have been talked about at length, such as through preclu-sive purchasing, distribution channel destruction, and so on. Some are meant to improve economic conditions, others to harm them, and many are meant to target only specific groups within a region rather than the general population. In all cases, however, there is some direct manipulation of economic forces that are meant to have strategically important results, and in all cases such a direct approach may have too strong a result. It is possible to have an impact on the economic environment of a geographic location without any actual actions other than simply having people and equipment in the area. This will result in a far more subtle influence on the economic conditions but, by looking at the economic role that occupation troops have on a nation without any further actions, or the effect that an OCONUS (Outside Continental United States) military base has on a nation that the United States is not at war with (such as Ramstein Air Force base in Germany), it becomes possible to determine exactly what economic influence a military is possible of exerting without taking any additional actions beyond merely arriving in the area.

Michael Taillard
24. Decision Management Modeling

Decision management is the process by which organizations determine the best ways to utilize the resources that they have to optimize their interactions with customers, suppliers, competitors, partners, and general stakeholders. At its heart, decision management is a study in statistics, giving people a systematic process by which they might determine which option, among several developed alternatives, is the best despite having to make that choice in a state of uncertainty, having incomplete information. Every day people are faced with a great number of decisions that they must make, many being mundane and routine, while others are of great consequence. During times of warfare, the consequences of a decision can be dire, so each option must be carefully considered but certainly with a sense of urgency. Regardless of the importance, however, each decision is still a product of two things: the resources available to the parties involved, and the probability of estimated outcomes using our limited availability of information as the decision is being made.

Michael Taillard
25. Resource-Based View of Warfare

Now it’s time to bring it all together into a final, unifying tactic. Probably the most significant breakthrough in warfare analysis came from English mathematician Lewis Fry Richardson in his 1948 analysis, when he published a data set called “Statistics of Deadly Quarrels,” 1809–1949. In it Richardson provides some of the most comprehensive information on conflict available even today, collected from 779 separate conflicts, and includes data ranging from the size and duration of the conflict, to economic variables such as involvement in trade, to metrics on cultural distinctions between opposing forces participating in the conflict such as dress and marriage customs. The data collected are still being analyzed as of the writing of this book and little has been found that allow for the use of correlated variables to accurately predict the duration or severity of a war. Little, that is, except that Richardson himself discovered a pattern in the frequency of fatal attacks measured cumulatively by duration between the first attack and an attack on any given day thereafter. In other words, the number of fatal attacks that will have occurred cumulatively up until any day after the first attack, in any conflict in history with properly recorded data, will be significantly close to that predicted by a single mathematical formula as follows: (1.1)% MathType!MTEF!2!1!+- % feaagCart1ev2aaatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbuLwBLn % hiov2DGi1BTfMBaeXatLxBI9gBaerbd9wDYLwzYbItLDharqqtubsr % 4rNCHbGeaGqiVu0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq-Jc9 % vqaqpepm0xbba9pwe9Q8fs0-yqaqpepae9pg0FirpepeKkFr0xfr-x % fr-xb9adbaqaaeGaciGaaiaabeqaamaabaabaaGcbaGaaiikaiaads % fadaWgaaWcbaGaamOBaaqabaGccqGH9aqpcaWGubWaaSbaaSqaaiaa % d6gaaeqaaOGaamOBamaaCaaaleqabaGaeyOeI0IaamOyaaaakiaacM % caaaa!3F55!$$({T_n} = {T_n}{n^{ - b}})$$

Michael Taillard
26. Limitations and Problems of Market Manipulation

Used in combination, supply, trade, and market manipulations complement each other very effectively, each resolving the problems of the next. Like the others, market manipulation is not without its limitation. Also like the others, many of these limitations are resolved by resorting to tactics outside of those discussed in Part III. Generally speaking, the strategies available through market manipulation have been so infrequently studied that the exact limitations are, themselves, not well-defined. A few problems ready present themselves, however.

Michael Taillard
27. Suggestions for Future Research

Market manipulation, probably more than any other use of economics in warfare, holds the potential to greatly benefit from further research. With vast amounts of economic information available about warfare, and new information made available every day, the potential for intelligence gathering is great, yet it is not currently being used. Unlike many forms of intelligence, economics can be directly manipulated; if one can see the strings, then they can become the puppeteer. This book has only begun to explain some of the most basic strategies, though.

Michael Taillard

Conclusion

Conclusion

Economic combat is a study still in its infancy but with potential to have dramatic results. There is currently no formal study of the military application for economics; military strategists treating many of these events as anomalies, while economists tend to avoid the subject entirely. Through this neglected overlap, however, there is born the possibility to submit enemy combatants while reducing the risk of harm to one’s own soldiers, neutral civilians, and even the opposition’s soldiers. Any progress made to further this cause would be a boon to both efforts for peaceful resolution as well as the militaristic goals of submitting the enemy.

Michael Taillard

Afterword

Afterword

The content of this book began as an attempt to find a method of assessing and managing risk that was simple enough for army soldiers to use quickly and without advanced training, yet more effective than the current military method, called Composite Risk Management (CRM). The CRM grid, described in Chapter 24, is currently used along with recommendations for reducing and preparing for those risks within the regions of modern, high, and extremely high risk. As an economist, naturally, I applied my knowledge of the mathematics of risk management and variability to the task at hand. While collecting data on military risk, however, it became apparent that if one could accurately and quickly calculate risk then the variables that are inherent to the risk of any situation could be managed to alter that risk. Those variables were almost always related to the resources available to one’s own soldiers or, in combat scenarios, the resources available to the enemy’s soldiers. I came to call the resulting revelation the “Resource-Based View of Composite Risk Management.” This name was far too long, however, so as the study expanded to not just risk but warfare itself, I dubbed it simply the “Resource-Based View of Warfare,” upon which all economic combat is derived.

Michael Taillard
Backmatter
Metadaten
Titel
Economics and Modern Warfare
verfasst von
Michael Taillard
Copyright-Jahr
2012
Verlag
Palgrave Macmillan US
Electronic ISBN
978-1-137-28225-5
Print ISBN
978-1-349-44140-2
DOI
https://doi.org/10.1057/9781137282255