The Gap Again Widens

 The September trade numbers are out and America’s Trade deficit increased significantly since August. Not only did it increase, but it made the largest percentage increase since February of 1999. Of course, part of that dramatic note is due to the contraction that resulted as part of the economic down-turn.

An AP article (see: http://www.google.com/hostednews/ap/article/ALeqM5gNiyJ905Ho0Ur96V2TQhsBX19lGwD9BUNGF80) sites authorities who suggest that the increase in energy prices is outstripping the benefit gained in the export sector by a falling dollar.

As President Obama travels through Asia this will no doubt be a subject of discussion. A Chinese Yuan that is kept artificially low is credited with a not insignificant portion of the problem. The Chinese have indicated a willingness to let the Yuan adjust a little, but are, not unexpectedly, quite concerned about the state of the dollar (being holders of vast quantities of dollar assets.)

Source: www.kremlin.ru

The venerated first Strategic Arms Reduction Treaty (START I) will expire on December 5, 2009. The importance of this treaty lies not merely in the fact that it reduced the numbers of nuclear warheads and the platforms on which they reside in both the Soviet and US arsenals (later the five weapon holding successor states of the Soviet Union and the US.) Perhaps more important were the unprecedented levels of verification and information exchange incorporated into the Treaty- a codification of President Reagan’s often quoted “trust, but verify” line.

Currently, negotiations are underway to replace the expiring START. Reports indicate that there are two major outstanding bones of contention. The first involves the issue of ground-based mobile launchers, which the Russians have but the US does not. The US would apparently like to see more control over them, but the Russians object to what they see as a unilateral concession. This may be a gambit in search of a concession on the US side. The second issue deals with the details of the allowable numbers of various weapon platforms.

There has been talk in the US Senate of extending START I six months because, even if a new treaty is concluded in the next three weeks, it won’t be ratified and enter into force until much later.

RoK Navy Ships Like Those Involved in Skirmish

The navies of North and South Korea engaged in a brief, 2-3 minute, skirmish that resulted in the North Korean ship returning to port for repair. The engagement occurred after a North Korean ship apparently ventured across a limit line off the west coast of the peninsula and then failed to heed an extended volley of warning shots. There were no South Korean casualties.

There seems to be a widespread belief that the North Koreans engaged in the provocation to send a signal in advance of President Obama’s impending  trip to Asia. Incidentally, the US recently announced that it would send a special envoy, Stephen Bosworth, to North Korea to engage in talks on North Korea’s nuclear weapons program.  Of course, this rationale may or may not be accurate. For all we know, the North Korean captain and crew were attempting to carry out a “Hunt-for-Red-October-esque” defection plot. However, the hypothesis about sending a message does seem consistent with North Korean behavior historically, which tends toward the provocative and crisis bargaining.

Assuming that the North Korean action is an attempt to either send a message or influence behavior, what is the goal and how does Kim Jong Il imagine this behavior will translate into his objective? From this side of the street one might assume that the provocative action is designed to push the Obama Administration away from the negotiating table. One does not have to have a great understanding of American politics to understand that the more North Korea engages in provocation, the more it makes it impossible for President Obama to extend an olive branch. While the President may enjoy creating a more peaceful tone for global diplomacy and a large swath of the American citizenry may support him in this, he is also well aware that politically he cannot afford to respond to aggression with conversation or concession. More broadly than just the President, the Democratic Party realizes that one of its greatest Achilles’ Heels is an appearance of weakness that the American public finds unappealing in times of crisis. Of course, this assumes that Kim Jong Il has internalized the old lesson from Sun Tzu, and that he knows his enemy as well as himself. The evidence doesn’t seem to support this in that what Kim Jong Il says he wants often seems to be paired with actions that are designed to do anything but achieve his stated goals.

A second possibility is that Kim wants to negotiate but wants to avoid starting from a position in which his country is seen as the weak party in the negotiation. I suspect this is what most people refer to when they say that Kim Jong Il ordered his Navy to be provocative because of Obama’s visit. This raises the question of how provoking a naval force whose capabilities seem to be several generations ahead of yours achieves this goal. The somewhat predictable outcome of the North Korean ship returning to port in flames while the South Korean ships remain untouched does not seem to bode well for an expression of strength. However, there is an alternative to showing strength by might, and that is showing strength by way of the will to be kooky. That is, Kim Jong Il may be saying: “Look I know my country is poor and seems too weak to have leverage, but I am willing to press things to the limit so don’t discount me.”

There is another possibility, and that derives from the inability to segregate domestic from foreign messages. That is, Kim Jong Il may be trying to convince his people that the dynasty is still alive and well without having any intended message for actors abroad. I have not heard much about Kim Jong Il’s successor in all this, but internally there may be an attempt to build some gravitas for him.

I don’t know what resides in the mind of Kim Jong Il or Kim Jong Un, but it seems clear they need better advice on strategy.

When I started studying the question of how nuclear power’s expansion was likely to transpire, I, like many, took it as  a given that there would be a substantial global expansion of nuclear power plant construction. I expected the “renaissance” would include both growth in countries that have long had a near de facto moratorium on plant construction (e.g. the United States) as well as some of the more promising aspirant countries that have not previously had commercial nuclear power such as Indonesia and Turkey. While I never believed that most of the states clamoring for nuclear energy would achieve it in my lifetime, I did expect a significant swing. After all, with a price on carbon and renewables not ready to take a chunk out of king coal at an affordable cost, nuclear power seemed to stand to be a big winner from climate change.

Today I am far less sanguine about an expansion that could be reasonably be termed a “global renaissance of nuclear power”. Perhaps it can be said that Asia is experiencing a nuclear boom. 57%  of the plants currently under construction are being built in just five Asian countries (China [over 25% of the total alone], India, Japan, South Korea, and Taiwan), and if you add Russia you have accounted for almost 3/4ths of the current construction. However, beyond rhetoric and political attempts to signal support for nuclear energy, there is little evidence of a full-fledged renaissance yet. The graph below shows the number of power plants being brought on-line each year, and the number of countries in which plants were brought on-line.

Just recently, the US government has signalled support for nuclear. The EPA predicted 180 new plants constructed by 2050 as a result of climate change legislation in its recent analysis (see: http://www.examiner.com/x-19285-Chicago-Economic-Policy-Examiner~y2009m10d26-EPA-sees-180-new-nuclear-power-plants-over-the-horizon ). Furthermore, there is evidence that the Obama Administration is backing nuclear expansion as part of a bid to get the required legislative support for passing carbon-constraining legislation. (see: http://www.washingtonpost.com/wp-dyn/content/article/2009/10/27/AR2009102704081.html )

Should we expand nuclear power? I believe that, if we want to slow the pace of and eventually reduce carbon output, nuclear will have to be part of the solution. When you consider the scale on which we use electricity, wind, solar,  geothermal, and conservation in their current state of development don’t do the job . Hopefully, one day we will be able to cost-effectively tap the power of the sun for most of our electricity needs and will be vastly more efficient in our use of power, but that day isn’t today and by the time it arrives we may have suffered a dire price. 

It is essential to  understand the differences between nuclear power and renewables in terms of scale. Nuclear plants are typically both rated higher in terms of the amount of electricity they generate, and have much higher capacity factors than renewable plants. The capacity factor is a percentage of the rated power that a unit actually produces over the course of a year. For nuclear, capacity factors tend to be above 90% on average, and can be 100% in years in which fuel is not changed out and there are no other disruptions. For wind, a reasonable capacity factor is about 33%. This means that a typically sized nuclear plant (1000 MW(e)) produces more than 4000  wind turbines of 600 KW (e) or almost the same as 500 massive 5 MW(e) wind turbines. (These are at conservative capacity factors of 85% for nuclear and 35% for wind.)

So what is the tough nut to crack if the legislative environment is suitable for nuclear power’s growth? If one asks what policies need to be put into effect to spur US nuclear renaissance, one might quickly note that said policies are largely already in place, and still the evidence of a resurgence is primarily on paper.

First, you would need to provide loan guarantees. Why? Because private utilities don’t typically have enough assets to get people to loan them billions of dollars over a relatively short timeframe. It is not that these firms are small or not profitable, but rather that the magnitude of costs and risks for nuclear is so high. This is exacerbated by the many examples of planned plants that have not panned out. Famously, the Shoreham Nuclear Power Plant in Long Island, New York was completed but never made a return on investment. The operator eventually went out of business / was subsumed by a government entity. The Energy Policy Act of 2005 provides for a program that would reimburse lenders up to a cap in case of default. Current discussions are considering increasing the $18.5 billion pot for this program as that, sadly, is a scant amount on the scale of spurring a massive increase in nuclear power.

Second, while the nuclear power industry has had a quite respectable safety record, the scale of possible consequences and liabilities makes it impossible for utilities to afford the kind of insurance they would need to ensure they could stay in business in the aftermath of an accident. The government has the utilities covered on that front as well with the Price-Anderson Act that caps the liability of private firms so that they only have to insure up to a certain level.

Third, a major problem in nuclear power plant construction, much as in Defense Department acquisitions, is a proclivity towards cost-overruns and delays. One can imagine that stretching out the interest payments on an $8 billion dollar loan could be quite costly proposition.

It is useful to understand that nuclear plants are cost-intensive in front-loaded construction costs, but are relatively cheap in terms of fuel and operations and maintainance. This means that, once plants are built, they are relatively profitable when the utilities no longer have to funnel a big chunk of the money back into paying off the capital costs. I’ve heard an employee from Georgia Power say that nuclear was by far their least expensive power source, but this was, of course, based on the fact that the plant costs had depreciated off their books. The Federal government has provided delay insurance to cover delays that are due to the regulatory requirements (i.e. if the NRC puts a hold on you, the government picks up the tab) for a limited number of early plants. Furthermore, some jurisdictions (i.e. Georgia and Florida) have approved the extremely controversial practice of allowing their utilities to charge customers for plants before they are even running (for that matter, before construction has even begun.)

Despite all these policies, I remain skeptical that we will see a major nuclear power plant construction boom given the magnitude of costs and risks involved. This puts me at a loss. While I believe in the benefits of nuclear power, I am also quite concerned about our massive deficit, so I’m not too sure about the one policy prescription that remains available to jump start a renaissance. That is, if the government buys or substantially increases subsidization of nuclear power that may make a difference. Any such policy would have to ensure that taxpayers got their investment back in terms of a cut of the earlier mentioned profitability.

In the Fall of 2002  I drafted an essay that became a Cato Institute Policy Analysis paper on why invading Iraq was a bad idea. In essence, the paper used rational actor theory to propose that there were better ways to address the threat to US security interests posed by Iraq, to the extent such threats existed, than by going to war. Now, seven years later, it is interesting to revisit the subject.

What made me think about this the recent discussion about a surge for Afghanistan. General McChrystal’s suggestion that 40,000 additional troops need to be introduced into the theatre raised quite a stir in the news. However, there seems to be a widespread opinion among military leaders that the 40,000 could not begin to be introduced until the new year, and could not fully be in place until late next year (presuming that they would all come from the US.) Perhaps President Obama’s delayed response is due to an attempt to figure out where they could get these troops in a reasonable timeframe. It is telling that despite a budget of over half a trillion dollars (not counting supplementals) and a military of over three million people when all branches and reserves are included, we cannot come up with 40,000 troops. Of course, few of the three million are relevant to the task at hand (i.e. sending F-16 mechanics or submariner firemen to Afghanistan is not that useful), but this raises a question for another day about why our military seems to be so ill-tailored to the wars it fights. However, the point to note here is that we can’t come up with 40,000 troops because many of the relevant troops are either in Iraq, already in Afghanistan, or are momentarily  rotated out of one of our two war zones long enough to keep their private lives in order and their sanity intact.

Let me acknowledge first that I, at least, was as fooled as anyone about the likelihood that Iraq had weapons of mass destruction (WMD) and /or programs for WMD. Readers of past posts will note that I place little stock in the ability to know or predict behavior absent first-hand knowledge. Despite the sound advice of Sun Tzu that we cannot know an enemy’s capabilities (much less their intentions) without first-hand information (e.g. through spies) and that such knowledge cannot be derived from oracles, humanity still thinks it can – except our oracles are probabilistic risk models. That said, in the absence of certain knowledge one is forced to make a best guess based on a reasonable reading of past actions and the available  indicators. I maintain that, given the uncertainty, it was not unreasonable to think that Iraq had WMD, and, at any rate, the advice given was optimal whether Iraq had WMD or not. The fact that Hussein did not have WMD by no means invalidates but rather bolsters the core message of the paper that (even believing that there were chemical weapons or worse) the threat to US security interests was overblown, and, to the extent these threats existed, they could be handled more effectively without force.

The question at hand here is whether we are better off having attacked Iraq, and I would maintain that we are certainly not at the moment. If, unlikely as it may be, we are threatened tomorrow by an actual threat to our existence or fundamental strategic interests we would be slow and hard-pressed to respond because we are stretched thin by the war in Iraq. True, there is one less dictator in the world. Nice as that may sound, as long as that dictator is not ruling the US, it is not a good measure of whether US interests are improved.

One issue to consider is the threat posed by the perception of the US as a “high capability – low will” state. I don’t suspect we have any enemies that think the capability of the US military is anything but extremely high. Our military is technologically without peer, and is, at best, matched by few in terms of the level of training and morale of forces (I would contend that an all-voluntary military is a force-multiplier unto itself, particularly after spending so much time studying the Russian system and its influence on combat-effectiveness when I was a graduate student .) However, there is also a perception that the US has a limited stomach for warfare, and will not see its engagements through to the end. This problem is created when a country is a little too fast-and-loose in going to war. Its danger is that it decreases the perception of other states of the cost of conflict with America and makes them more likely to engage in activities that may be viewed as threatening.

Frankly, I am astounded at the relatively slow erosion of support for conflicts in Iraq and Afghanistan that is, I presume, a mix of the influence of the 9-11 events on the national psyche and a detachment of the average American to these distant wars. The erosion is present none-the-less. It is not unreasonable that American support for the war in Iraq has diminished. The outcome of the conflict fundamentally affects the way people in Iraq live but not substantially how Americans live, and so it is a given that people over there will be willing to fight long after our will wanes. You may remember hearing a line during the political debates to the effect that ”Timelines to withdraw would be a boon to insurgents and radical elements”. I hate to break it to those critics, but whether we leave now, next year, or in 20 years, some radical element will be around to claim victory. 

The US needs to look at war more like it looks at nuclear war. In other words, it is an extreme action against dire attacks against the national existence or critical national interests and should not be engaged in lightly, and that, having made the decision, we will fully accept the consequences of war and see the conflict through to a definitive end. War as a means to reach limited objectives such as tweaking the world into a more palatable form – as I would suggest was the case in Iraq – is a dangerous game. 

Unfortunately, we are really only mid-course in the conflict in Iraq, so knowing the degree to which we will be better or worse off after than before the war remains unclear. If our government (both the Bush and Obama administrations) is correct in its prevailing presumption that we can leave an Iraq that is democratic, stable, and friendly to the US we may end up better off. However, we live in a world where uncertainty is inexorable, and there are other scenarios, that we cannot accurately judge the likelihood of, that may make us worse off. The most prominent of these alternative scenarios is that the Shia majority takes control and reciprocates against a minority that oppressed them for decades. Under this scenario, we will have essentially built an Iraq – Iran alliance that will make any involvement we have in the Persian Gulf region more challenging and may shake up regional stability.

I was disappointed to see that the Obama administration rejected a meeting with the Dalai Lama on his upcoming visit to Washington DC. This symbolic act of deference to the Chinese seems like an interesting follow up to slapping a massive 35 percent tariff on tires imported from China.

This shows just how politics results in bass-ackwards policy. While comparing the Chinese Tire Tariff to the Hawley Smoot Tariff Act may be hyperbole, it cannot be said to be sound economic policy by any stretch of the imagination. (Proponents of tariffs often forget that the US exports things as well, and life gets a lot harder for those US companies that export goods and services when tariffs are imposed. [Why shouldn't other countries return the favor.] So, in essence, you are hamstringing the companies that do things well relative to the rest of the world in support of those companies that are not competitive of their own faculties.) Of course, the tariff is not an economic policy in that it is not a plan of action designed to achieve an optimal effect on US national income. Instead, it is a political policy designed to increase / maintain support for a political party, and no doubt there was some sort of tit-for-tat agreement (presumably related to support for healthcare and / or carbon constraints) that played into the agreement.

On the other hand, because there are relatively few voters of Tibetan origin in the US, it is quite easy to use turning down a meeting with a the Tibetan religious leader as a means to buy good will with the Chinese. Of course, the Chinese may gladly accept the actual injury imposed by the tariff in exchange for the imagined victory of being able to point out that the US doesn’t recognize the Dalai Lama’s status. The Chinese often seem more concerned about what appears trivial and symbolic than real offenses. However, from the Communist Party of China’s perspective, the economic cost of a tire tariff may be inconsequential compared to the boon of realizing that they can do as they please domestically and regionally without suffering the slightest loss of legitimacy on the international stage.

Of course, as we in the United States have gleefully accepted a situation in which we gluttonously overspend while the Chinese willingly buy up our debt, we are not in a great position to say anything if the Chinese say… abscond with a little boy in order to usurp a religious lineage (particularly one which has relatively few adherents / voters in the US.) [This referring to the Panchen Lama, who disappeared and was replaced with a Party-sanctioned puppet. I, of course, don't know that he was killed, just that he has been kept out of the public eye and incommunicado.]   

 Needless to say, I think, in this particular case, the Obama Administration got it entirely wrong. The Administration should foster free trade, and not encourage China to believe that they can set the White House’s meeting agenda and /or replace religious leaders without loss of legitimacy. It was big news that Italy dropped in the most recent Freedom House rankings from “Free” to “Partially Free”, but no one would imagine that Italy could get away with saying: “Sorry Cardinals, we know you picked this ‘Benedict’ guy, but we’ve got this other guy- ‘Antonio’, and he’s now the real Pope. By the way, before you complain, Vatican City is no longer a sovereign country - we took it over as it was never really its own country anyway.”  There would be outrage, and people would stop treating Italy like a first world power.

Iran’s President Ahmedinejad has a lot to keep straight. When he’s inside Iran, the Holocaust didn’t happen, but when abroad it did happen (no, may have happened?) – but is irrelevant to today’s world. Is it any wonder that it would have slipped his mind to mention to the International Atomic Energy Agency (IAEA) that Iran was building another uranium enrichment facility until, once again, Tehran was caught with its hand in the cookie jar.

This does answer a question that I’ve asked many times, which is how Iran intended to get from its current position to having a nuclear weapon without the intervening event of having its offending nuclear infrastructure bombed to smithereens. There were essentially two paths available to an Iran bent on having the bomb. The first was to build yet another covert facility (which is apparently what Tehran chose to do.) The second, and this is the one I’ve never heard a convincing explanation of the process by which it could succeed, would be a “strategic breakout” of the Nuclear Nonproliferation Treaty (NPT) regime. The idea of strategic breakout is to get all your ducks in a row, and then withdraw from the NPT and kick inspectors out of the country / remove surveillance equipment. The problem with this is that it is essentially saying “we’d like to build our atomic bomb now, please leave us in peace.” While it is true that they could get a lot of their affairs in order, there would seem to be plenty of time between their announcement and the production and machining of the requisite material to allow a country to bomb the facilities into oblivion, perhaps even with a Security Council resolution in hand.  The second covert facility was the only path I’ve ever suspected was workable, though there have been proponents of a strategic breakout scenario.

This building of covert facilities only to have them discovered has got to get prohibitively expensive at some point. I’m not saying Allah is trying to send you a message, Mr. Ahmedinejad, but maybe you should consider it a hint. Allah might just find an Iran with a nuclear weapon to be as disturbing a prospect as the rest of us do.

Two news stories this morning highlight the bold independent-mindedness of a couple of South Asian scientists, and how they might yet manage to get tens of millions of people killed.

The first story involves the complete unshackling of Abdul Qadeer Khan from the last “official” vestiges of restriction on his movement. [I say "official" because he probably can't leave the country without being abducted for interrogation - there remains a great deal that is unknown about the extent of his proliferation network and who it gave what.] Better known in the West as A.Q. Khan, this Pakistani national hero is responsible for spreading the technology and knowledge necessary to build nuclear bombs to anyone willing and able to pay. Among most well-known customers are / were Iran, North Korea, and Libya. While Libya has since verifiably disarmed of Weapons of Mass Destruction and the technologies used to produce them and is in such good stead that they are now being handed back their brutal terrorists from decades past, Iran and North Korea are probably both much closer to a working nuclear weapon than they would have been without the “Johnny Appleseed of Nuclear Weapons”, Khan. While Islamists love to portray Khan as a great equilizer who has helped spread nuclear weapons technology in the Islamic world, they forget that North Korea, whose position on religion is that it is the opiate of the masses and should either be brutally crushed or usurped by the party, was also a customer. This makes Khan more of a greedy bastard who is willing to put the whole world in peril to make some cash than any kind of hero to Islam.

The other story involves Indian scientist, K Santhanam, who claims that his country’s 1998 test of a thermonuclear device was actually a dud. Santhanam goes on to state that because of this unexpectedly low yeild, that India needs to conduct further testing in order to have a reliable nuclear deterrent. The Indian government and high-ranking military officers have dismissed this suggestion. Why might a citizen of India shout from the roof-tops that his country’s strategic forces are defective? [If you were worried that a criminal had entered your house, would you shout out that you didn't have a gun?] A prevailing theory is that not only do Santhanam and a few others want more tests to be conducted, they want to put the kibosh on any momentum toward India’s signing and ratification of the Comprehensive Test Ban Treaty (CTBT). The CTBT will have a profound impact on nonproliferation because members that don’t have nuclear weapons won’t be able to develop any sophisticated weapons while complying with the treaty, and states that do have nuclear weapons will not be able to build new models.

Yesterday was a sad day for Highlander and Braveheart fans, as it will forever mark the day that Scotland went Nancy on us. Scotland has a long proud history of being a country of men’s men. Sure they wear the same skirts as Catholic schoolgirls, but they were able to carry it off because they had reason, by way of mastery of head-butts and telephone-pole throwing, to be secure in their national manhood.  

Now, having let a terrorist responsible for killing almost 300 people go free on a hardship release, the Scots have surpassed France’s valiant 12 minute defense of Paris in 1940 to take the prize for the All-time Fancy Cakes and Doilies Act of National Wussitude. Soon, once hyper-masculine names like Angus McLeod and Clyde Wardlaw will replace Jean Floubert and Remy Christian as the kind of names mothers give sons who they want to grow up to be top-ranked figure-skaters. Not to cast aspersions on moms, most of whom would probably respond to the argument that al-Megrahi was dying of cancer with a brusk: “He might have thought about that possibility before he vaporized 300 people.”

What’s next Scotland, might you let your pedophile inmates take recess at the local elementary school to ease their jangled nerves? Perhaps let everyone with an enlarged prostate go free? I hear there is a lot of that going around in prisons.

Love it, hate it, or satire it hilariously (ala. Dr. Strangelove), it is hard to argue that there isn’t a satisfying elegance to the concept of Mutually Assured Destruction (MAD). By satisfying, I mean that there is a clearly defined logic that results in unambiguous policy prescriptions. If two countries each have the “absolute weapon” [i.e. weaponized thermonuclear warheads], and can retain the ability to blow the hell out of each other, they won’t go to war. It is as simple as that. It is true that the policy prescriptions often sound completely daft at worst or faintly fortune-cookie-esque at best, as in: “defending yourself increases your danger”, or “targeting cities is less belligerent than targeting missile silos.” 

If you take a positive view of MAD, and turn the words around to “increases your danger, defending yourself does”, it sounds sage – like something Yoda might say. However, for those opposed to MAD,  it sounds like the kind of thing you might hear a crazy homeless person mumble to themselves as they push their shopping cart down the street, just like “I get drunk to think clearly”, “I built this city from pudding and matchsticks”, or “buying up mortgage-back securities,…how could I lose?” However, the Zen koan-like quality of the policy prescriptions aside, it is a pleasant rarity to not have counter-veiling forces pulling policy in multiple directions. ”Cash for clunkers” results in a lot of energy and material being expended on vehicles that might not otherwise be built, and may result in people going through more vehicles than they otherwise would (i.e. the environmental laudableness of the program is not as patently clear as it first seems.)  Increasing minimum wages will, under most conditions, increase unemployment. Subsidizing farmers results in more grain production and depressed grain prices (exacerbating the condition that led to the policy in the first place.) In short, the realm of policy-making is rife with catch-22s, but MAD seems, ironically, straight forward.

 The challenge before us is to find an equally compelling logic of strategic stability in a world disarmed of nuclear weapons. It may require taking the most brilliant people in the country and shipping them off to someplace like Santa Monica for a few years (just like the formation of RAND after Word War II, whose eminent scholars were largely responsible for MAD), but I’m confident there is a way.