A disturbing beginning to the century : failed models, weak warning signs

by Alain Bauer, President of the CSFRS	and Philippe Baumard, Chairman of the CSFRS Scientific Council

The 21^st century appears to have become the century of global crises. Nature has reminded us of the reality of our human interdependency. Three major "crises" have haunted the first decade of the century : a crisis of government systems ; a crisis of the climate and natural ecosystem ; a crisis of governance and anticipation.
None of these crises lacked forewarning. Some of the signs were almost imperceptible. Many were ignored, or minimised by a collective desire not to see, or no longer to see. When voices rose to warn of global malaise, some saw only the bitter agitation of a small number, no-one anticipated the genuine uprising around the Mediterranean.
When Olivier Roy wrote his two-page memorandum to the Minister of Foreign Affairs on 24 February 2005, he had no doubt that the future would be "written" exactly as he had described it, to the country and to the mechanism : failure of authoritarian regimes of the "Baas" type, popular democracy principle, nationalistic transformation or fronts, and a "message of democratization which is being conveyed". Only the time of fulfilment of the prediction detracted from its technical precision.
In the crises of the 21^st century, local and global issues intermingle. Of course, no political situation is equivalent. Each coastline, each region, each valley of the Mediterranean region has it own culture ; but there is also what appears to be a higher "new order", a world organisation of trade, social life, consumerism, all moving at a fast pace and prompt to organise and disorganise. Flows are conveyed by social networks, where each local reality can be compared, with varying degrees of bitterness, and within a single moment, to any other. Messages are conveyed. Encrypted and secure Internet surfing, which was once the privilege of States, is now available to all ; even at the heart of authoritarian regimes which attempt to block digital ports, access, servers… a worn-out generation clings to its model of a "multidomestic" world and believes, or wants to believe, that it is incorrectly informed, and believes, or wants to believe, that the world is incorrectly informed. To attempt to overcome this invisible frontier, the "wall" that divides rich and poor, that has, within a decade, brushed aside the notion of "developed" or "developing" country, we all try to bypass. The wall is everywhere, within each society, within each neighbourhood. Its presence is clear, even palpable in Saint-Denis, in Tunis, in Jerusalem, in Detroit. These crises, in gestation, in the pipeline, are crises of political systems, in the literal sense of the term : crises of imbalance between strata of society that are physically closer and closer, but socially further and further apart.
We then speak, timidly, of hybridization. It would appear that social fabrics encouraging criminality and a society quick to rise up have now met… If we take stock of thirty years of setbacks, Afghanistan is perhaps also a combination of rightful aspirations for freedom and fanatical terror… We seek to place phenomena in "boxes" we are familiar with : here, we see organised and creeping criminality, there, we see a desire for power on the part of emerging countries ; but what we no longer see is the most obvious phenomenon : the extent to which our strategic models, our dogmatic certainties about the world and its blocks, our climate scepticism, our energy cartesianism have smashed to pieces. In the space of just ten years, we have already experienced three episodes which, despite the geographical distance separating the epicentres and apparent differences, in fact have deep-rooted similarities. These three crises mark the failure both of traditional strategic models and of their warning systems.
The first major crisis was a terrorist crisis, with September 11 in the United States. The strategic surprise was complete. Believing that it was protected behind its "technological Maginot line", for a long time blind to the threat of violent salafism, incapable of understanding the warning signals received, the United States endured and then reacted by means of a long and imprecise "War on Terror". The reaction was violent : two long wars, violations of public freedoms in the United States and abroad, for a disappointing result, to say the least…
The second crisis also started in the United States. The financial crisis arose when the real-estate bubble burst (subprimes), and spread throughout the world like a virus, via securitization. At the time, we knew how toxic a mechanism which consists of passing on a major risk to the next link of the chain can be, but no-one in the financial community, among the "initiates", reacted, even when funds, and then entire countries, generated a system violating accounting rules in a climate of dishonest compromise. Despite the fact that it occurred recently and that it has lasting consequences (social, economic, geopolitical), the subprimes crisis seems to be already forgotten, as if absorbed by collective amnesia.
The third major crisis, at industrial and energy level, arose in Fukushima (Japan). It was the direct consequence of an earthquake followed by a tsunami which, after cruelly hitting a nation, raised the issue of the future of nuclear energy at global level. There was also an "Olivier Roy" for the Japanese crisis. In fact, there were two. A seismologist, Yukinobu Okamura, warned the authorities as early as 2007 that the Fukushima plant was located at the exact spot devastated by the great tsunami of 869. Then, Professor Ishibashi Katsuhiko, from the University of Kobe, gave the authorities a precise warning about the weakness of the dykes, given that they were too low, just as Professor Robert Bea, from the University of California at Berkeley, had done about the dykes surrounding New Orleans in 2004. These crises of the climate ecosystem are also anthropocentric : they show our collective incapacity to listen, to take into account elements of knowledge in a world overwhelmed by warnings, information and signals.

Tragedies beyond disasters

How could three major events, on the financial, social and climate-energy levels, trigger such a destructive phenomenon at global level ? What excesses could have provoked such chaotic situations, in the strict sense of the term ? How were the tensions inherent to these crucial flows transformed into tragedies ? In their multiple and complex causalities, they are indeed tragedies, and not mere disasters.
September 11, 2001. The Western World allowed the development of the Salafists which would later turn against it. Obsessed with the Soviet threat in Afghanistan and by the Islamic Republic of Iran, the United States understood too late how their one-time ally (Oussama ben Laden and the nebulous Al Qaïda) had become their worst enemy.
Subprimes. The American financiers at the origin of the subprimes constantly used disaster-related vocabulary (tsunami, storm, etc.) to deny their individual responsibility. The "system", an abstract and disembodied entity had, according to them, "become dysfunctional", but human responsibility was nowhere to be seen. These financiers preferred to impose a fatalistic view of events, thereby very conveniently avoiding any personal accountability and far-reaching questioning.
Fukushima. In Japan, the action of nature does not explain everything. The extent of the natural disaster can be explained by the action of man, in this case by a good dose of blindness. It was, after all, following a human decision that the nuclear plant was placed at a given location and that warnings were disregarded.

Cold models, inaudible warning signs

We therefore need to come back to the essential issue : the dual question of risk models and warning signs (governmental, intellectual, administrative, etc). Critical analysis of the recent crises leads us to observe a major failure.
In fact, risk anticipation models turned out to be too technocratic, too cold. Time after time, this coldness led us to take risks that were probably excessive. A deceptive feeling of safety not only lulled our general watchfulness, but also pushed us to develop dangerous options. Probability invaded our reasoning in many risk theories. Machines have taken on increasing importance in the decision-making process : in 2010, machine-to-machine communications exceeded human communications for the first time. Today, they represent 60 % of world communication traffic. We live among complex technical, financial and energy systems that are highly dependent on autonomous data. The software that manages automatic decision-making on financial markets make "decisions" in less than a second. This digital velocity is of course vital for the economy, but the time frame is humanly too short to allow the "warmth" of critical analysis.
What happened to the "visible hand" of management described by Alfred Chandler ? Neither the invisible hand of the markets nor the "cold hand" of rational governance systems was able to prevent the major crises we have experienced since the beginning of the 21^st century. As responsibility for the drift was pushed towards the periphery of the system, a simple doxa came to the fore : the risks arising from mortgage securities are reasonable and whatever happens, markets are omniscient and self-regulatory : innovative finance is free of danger and the "invisible hand" of the markets is infallible. Ideological alignment and conformity with dominant preconceived ideas led to almost general blindness. Rating agencies, at the heart of major conflicts of interest and de facto regulators of the financial market, awarded laudatory ratings to financial products backed by subprime loans, which turned out, for the most part, to be manipulated.
The excessive coldness of risk models used by the financial community cannot be the only explanation for the accumulation of errors. The central issue is indeed that of responsibility shifted to the client, encouragement to take excessive risks, what the Anglo-Saxon world refers to as the "moral hazard".
Whether they be considered as combinatorial probability analysis or simply disregarded, as was the case for Robert Bea, Olivier Roy, or Yukinobu Okamura, predictions of failure are no longer heard. Cynicism ? Dilution of governance authorities ? Decision-making crisis ?
The drift of a significant part of international finance can probably be explained by its systemic opacity ; but in the decision-making chain, where does genuine ignorance lie ? Where does informed complacency start ? If a household finances excessive consumption of electronic goods by mortgaging real-estate assets when it already has a level of indebtedness above 70 %, is it naïve, is it ignorant or is it an accomplice ? If a credit institution is aware of the situation and continues to offer increasing commitments along the lines of mortgage logic, is it skilful, malevolent or criminal ? Can we describe a society in which "just don't get caught" is the norm as tolerant, blind or corrupt ?

Strategic blindness

Both for the subprimes and for Fukushima, we already have a full column of misunderstood signals and ignored warning symptoms. These warning signs remained inaudible because they were drowned in a chorus of conventionality. Examination of major crises, whether of terrorist, financial, industrial, or energetic origin, always ends of showing that information and predictive analysis were available. Theses crises are simply ignored at the time and then unearthed afterwards. The question is therefore why the warning signs remained inaudible. Time after time, there have been whistle blowers and other issuers of warnings, but their voices appear to be lost in the surrounding noise. This means that contemporary crises are not, strictly speaking, unforeseeable, arising from lack of knowledge. It would be more accurate to say that these crises are incomprehensible in the strict sense of the term : they result from difficulty to combine and connect scattered and apparently autonomous facts.
Reality is generally denied in good faith, meaning by mere error or ignorance. In literature, from Edgar Poe to Jacques Lacan, via Sigmund Freud or Clément Rosset, examples abound of the different avoidance mechanisms used by individuals and institutions alike. We spontaneously channel towards the information that validates our expectations and, with the same eagerness, reject information that is deeply disturbing. We tend to suppress all the unbearable realities. To overcome these perceptual filters, it is vital that we constantly review the foundations of our beliefs and preconceived ideas. To detect the "strategic" aspects, we first need to increase our awareness of the many cognitive biases that obstruct our vision of the world.
However, denial of reality can also draw on conscious motives. We then touch on self-interested motives, involving concealment and fraud, which are often explained by a focus on short-term profit.

A culture of short cuts, cultures of arrogance ?

The authorities heard the warnings. In 2004, the Governor of Louisiana understood the problem with the dykes. It was not only a question of price. In Louisiana, the issue was questioning the jurisdiction of the Army Corps of Engineers, a corps that could not accept the diagnosis, an institution that did not want to hear the "Doomsayers" from outside its own ranks. In the report on the Challenger shuttle incident, the managers of the space programme did not want to lend credit to the tarmac engineers. In Japan, leaders hesitated before accepting international technical aid.
This culture of "cold" risk control is a culture of short cuts : short cuts in reality, strategic thinking, in a "robust" financial system, where premises are never debated, where everyone has forgotten, has wanted to forget, so that the short cut can do its job and speed up the decision : capitalistic, political and human. A culture where we no longer debate on our own culture is either crippled or arrogant.
This arrogance is multiple. There is no global arrogance, but regional, sector-based and cultural expressions. In the United States, it is the arrogance of the rating agencies, which, when warned about the lack of "orthodoxy" of their experimental combinations, replied by means of harsher ratings against the messengers. This is a subtle form of subversion : it wears the cloak of propriety, it shows the face of respectability, it moves in the most exclusive circles. This is not a collusion of "common direction", but a collusion of reasonable silence, of "non decision", of complying with the now vital short cut. Every time, this orchestra of common interests, industrial and financial in the United States, nuclear in Japan, has succeeded in influencing governments and regulatory authorities to its advantage and to the detriment of the general interest. Time after time, confusion of roles and interests has produced a culture of arrogance ("we know better") and of concealment ("we know for you"), where the fraudulent dimension is never explicit, rarely deliberate, but often present.
The crises that have arisen have made those same States that initially failed in their regulatory mission the ultimate saviours from the consequences of their own negligence. Thoughtlessness is not that of the industrialist, or of the State, or of the engineer who is suddenly described as an interim culprit. It becomes a collective product, a generic brick, a "side effect".
Up to now, States have presented a financial and logistic surface broad enough to curb the successive strategic crises of the last ten years. In the name of "too big to fail", States have become the guarantors of the last resort of systems which refuse questioning or introspection.
In this mechanism of dilution of responsibilities, strategic blindness of each component of the system offers itself external resilience at low cost, as long as it is needed. Once the break has arisen, it looks for a scapegoat and then attempts to start out again on a new market.

Spectacular crises, silent crises

Dangerous as they may be, these crises have at least received treatment – in the medical sense of the term – precisely owing to their explosive nature, in fact to their visibility in the media. The "spectacular crises", however, are not the only ones concerned by the scope of strategic questioning. We are confronted with "silent crises", which are permanent and discreet. We refuse to perceive them either because the threat of collapse is neither immediate nor "visual", as it cannot feature as the top story in the evening news, or because it is politically impossible to imagine or evoke a scenario where we would have to admit that we have no control variable, no means to intervene, and no alternative to offer.
The current criminal crises fall within this category. Their great lethality joins the flow of the trivial, the tiny paragraph in the news in brief, the television anecdote. "Light" weapons remain a key cause of violent death, counterfeit medication is one of main causes of death in the southern hemisphere, entire societies are plunging into criminal economies in Mexico, Central America, West Africa… but the peaks, the extremes, the visual violence have sometimes become so commonplace that the harshest realities become silent. Discord has reached a sort of global indifference zone : warning, detecting and listening have become subversive acts.
Contrary to what we could have expected, or hoped, the constant revelation to the world of its imperfections does not disturb its peace of mind. There are no domino effects, no chain collapses caused by the internet. A knowledge society is not necessarily a society of action. The criminal drift of entire sections of society in Central America, the criminalisation of social systems both in Europe and in developing countries are not weak or little-known signals. They belong to another strategic time which is taking place right now, in a territory that is both present and parallel. The paradox of this contemporary society is to have reached agreement with its critics : it is already the expression of a future as described by Philip K. Dick, where indifference is no longer orchestrated, but autonomous matter to common perception; a society that has forgotten that the strategic time always comes down to the unit element of the here and now.

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The 2011 edition of the National Forum for Strategic Research therefore has the stimulating task of identifying what falls within strategic action at the heart of these Clausewitzian "fogs of war", whether environmental, social, financial or computerized. The Forum is organised around four key themes which have marked the year 2011 and will be focal points of our strategic future : cyber defence and cyber security ; strategic flows under strain ; strategic models in question; sustainability, a power challenge. These workshops will first and foremost question existing paradigms, dominant logic that we no longer challenge, the silent crises, or those we pass over in silence.

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