Economic war games: The Pentagon says we're not ready to rumble

According to Politico, the Pentagon recently hosted a set of economic war games. Headquartered at Fort Meade, Maryland, the exercises employed hedge fund managers, college professors and business executives to help explore the ways in which America's opponents could use the tools of business to conduct warfare. Unsurprisingly, the participants determined that China was the power best situated to emerge victorious from a global economic conflict.

While the cross-breeding of armed combat and economic conflict sounds like the plot of a John Grisham thriller, one could argue that many of the twentieth-century's real-life wars were based in the struggle for economic dominance. The 1956 Arab-Israeli war, for example, could easily be seen as an attempt by France and Great Britain to seize control of the Suez Canal. Similarly, many people forget that Saddam Hussein's original justification for invading Kuwait was that they were "slant drilling" across his border, tapping into oil deposits that belonged to Iraq.

In this context, Saddam's Kuwaiti adventure and the subsequent American response were basically battles over petroleum reserves. For that matter, the quick deployment of Halliburton (HAL) to Iraq, combined with America's confusing and conflicting justifications for its 2003 invasion, suggest that Operation Iraqi Freedom might have had little to do with spreading democracy or stopping phantom WMDs and everything to do with the fact that there were two oilmen on the 2000 GOP presidential ticket.

What could change in the decades to come is the the way plowshares are used instead of, or in tandem with, swords. In WW II, as Japan was gearing up it annexation of the Far East, it launched what it hoped would be a crippling preemptive strike against Pearl Harbor. Today, it's easier to imagine China laying the groundwork for an actual invasion of Taiwan by waging a year or two of economic carpet bombing against the U.S., erecting trade barriers, calling in debt, in an effort to render the U.S. too economically impotent to intervene. Sound far-fetched? Well, consider that America's continued dependence upon foreign oil has already made it less inclined to question the undemocratic policies of Saudi Arabia and the recent military incursions by Venezuela and Russia.

Regardless of whether the ultimate goal is land, resources or power, it seems reasonable to expect that, in an age of interconnected economies and weakened global markets, countries will continue to use money as a tool for warfare. What's more, as the recent Pentagon war games demonstrated, the United States needs to seriously take stock of its ability to counter a sustained economic attack. In the coming decades, the strongest weapons may well be bonds, not bombs.
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