Introducing Strategic Inflection Points

Inflection points are events or situations that can lead to significant change in the development of a company, industry, sector, economy or geopolitical situation. An inflection point can be considered a turning point after which a dramatic change, with either positive or negative results, might well result.

Andy Grove, Intel’s co-founder, described a strategic inflection point as “an event that changes the way we think and act.”

This month, Second Line of Defense is launching the first in a series of reports that examine emerging strategic inflection points. A collaboration of Dr. Harald Malmgren and Dr. Robbin Laird, The Strategic Inflection Points Report will examine events which have just occurred, are occurring or are likely to occur that constitute strategic inflection points which can re-set history.

The kick-off topic for this first report is upon Chinese developments. We will look first at the prospects of a hard economic landing in China and its political consequences.  And then we will look at the impact on defense relationships in Asia from a hard landing.

Dr. Malmgren draws on his extensive Asian experience to look at the dynamic economic developments in China, which are leading to political crisis.

As Malmgren argues:

Very broad, generational turnover of leadership is taking place at the same time as the Chinese economic engine is faltering.  There are widespread fears among China’s investor class that political power struggles may interfere with timely economic policy decisions in response to domestic and global slowdown.

Power struggles may distract the most senior levels of government, especially during a period of transition when a “learning curve” will prevail as new leaders experience interaction with each other and with each other’s power base.

The initial piece looks at whether the Chinese leadership can cope with a faltering economy.

Dr. Laird then looks at the implications of Malmgren’s analysis for broader questions of Asian security.

Laird argues that

The current transition in the PRC is unprecedented in modern times in Asia.  A major lynchpin of the global economy and an ascendant power in Asia will face significant political uncertainty in an authoritarian power structure.  The rules will be scripted as part of the power struggle; not the other way around.

Another aspect of the transition is equally significant:  this will be the first major political transition in the PRC in which money and power are not held by the same elite.  For the first time, there is an investor or moneyed class separate from the political elite contesting for power in the PRC.

This means that reading the tea leaves will be complicated for outside powers and policy-makers.  This means as well that key Asian powers will be reading each other’s reading of the situation as well, and any efforts by key states to enhance their advantage to leverage any perceived power vacuums created by the transition.

The other major topic addressed in the initial report is the impact of a nuclear Iran. The piece written by Laird looks at how actors in the region are preparing for the probability of a nuclear Iran.

The Black Swan of the Arab Spring in 2011 whose effects are still unfolding coupled with the Gray Swan of an abrupt entry of Iran as a nuclear power will create a very fluid situation for the Middle East in 2012.

Preparing to constrain, contain and attack anticipated Iranian actions outside of Iran – empowered by becoming a nuclear power – will fuel many activities of the Arab states and Israel.  And their activity interacting with the efforts of Iran to complete the nuclear weapons process and to shape a proactive foreign policy accordingly will shape a very explosive security situation in the Middle East.

According to several Middle Eastern actors interviewed for this Strategic Inflection Points Report, the states who could set the Iranian effort back on nuclear weapons are not likely to do so.  Therefore, major actors in the region on moving forward to provide for their own security and ability to constrain Iranian activism.

For the full report see

http://www.sldinfo.com/products/may-2012-sip/

"If everyone is thinking alike, someone isn’t thinking."

—General George Patton Jr.

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