Will the CIA and Pentagon Be Ready for the Next Crisis?
As Leon Panetta and David Petraeus move into their new jobs at the Pentagon and the CIA, they should use the occasion to fundamentally reorient U.S. intelligence and national security planning.
Consider the intelligence community. We spend around $80 billion on intelligence every year — more than the rest of the world put together — and yet we seem perpetually unprepared for global events. The CIA did not imagine the fall of the Soviet Union, the revolutions of Eastern Europe, the breakup of Yugoslavia, Sept. 11, Saddam Hussein’s nonexistent arsenal of weapons of mass destruction, the global financial crisis and, most recently, the Arab Spring.
I’m not suggesting that it was possible to predict these events. Very few people or organizations foresaw them, certainly not in a timely manner, and those who did might well have simply been lucky. International crises happen when they happen for a variety of complex reasons that are always easier to see in hindsight.
The goal should instead be preparedness. Government agencies should be readying policymakers and bureaucrats for sharp changes in international, regional and national patterns. They should be imaginative about the possibilities of sudden shifts and new circumstances and force policymakers to confront the scenarios in advance. That is what has distinguished the most successful private-sector firms in managing crises. Contrary to the mythology rampant in Washington and across the country, banks such as JP Morgan and Goldman Sachs did not “know” the housing market would collapse in 2007. They could have made that prediction as easily in 2005 or 2006, bet on it and lost lots of money, as many firms did. What JP Morgan, Goldman Sachs and others that weathered the financial crisis did was to carefully manage their risk — being prepared for sharp shifts in the market. Rather than betting on continuity — which is the default mechanism for people and organizations — they prepared for the possibility of a sudden shock.
That’s why I hope that at the highest levels of the U.S. government, there are multiple scenarios envisioned for a crisis in Saudi Arabia. Of all the possible effects of events in the Middle East, the most complex by far would be serious protests in Saudi Arabia. This is not probable, but it is possible. The Saudi monarchy has roots in its society, a compact with powerful religious groups and staggering amounts of money with which to bribe its people. But still, there are fissures in the society — most notably between Shiites and Sunnis. If they were to erupt, there would be seismic implications ($200-a-barrel oil, anyone?), and Washington would have to react shrewdly and quickly. It would make perfect sense to have a basic set of responses planned and even discussed with our allies instead of having to react on the fly as television images demand action in the heat of the moment.
The other way to be prepared is to be in a position of stable finances and commitments, so you can deal with a shock. The analogy with the private sector holds here, too. The key to riding out a financial crisis is to not be overleveraged but to have comfortable reserves of cash that will allow you to manage difficult times. The United States is overextended in every sense: struggling with debt, fighting military actions in multiple places and beginning to be hit by a demographic time bomb. We might be able to navigate through all this as long as we don’t hit another big crisis. That’s not a comfortable place to be.
Look at Japan. It prepared well for the possibility of earthquakes, so that even when a mega-earthquake plus a tsunami hit, it was able to minimize the loss of life. But over the previous two decades, it had run up such enormous deficits — its debt is 200 percent of gross domestic product — that it lacks resources to properly respond and rebuild its economy.
We will never be able to predict the next geopolitical, economic or natural disaster. But we can position ourselves to be prepared — and have a little more cash in the bank than we do now.