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Remarks to the Washington International Corporate

Remarks By John Gannon
Chairman of the National Intelligence Council
To The Washington International Corporate Circle

October 31, 1997

"Global Economic Intelligence"

Thanks. As you looked over the program this morning, you might have wondered why an intelligence officer has been invited to address this group. I'm not a professional economist. Nor am I a soothsayer or prognosticator. (If I could predict the future, I'd probably have gone into finance and be retired by now, sitting on my private island, watching the surf, drinking Mai-Tais.)

I hope that I can add another dimension to the conference by talking about the challenges to US Intelligence, including policymakers' requirements for economic intelligence, as well as many other issues on our agenda today. I should add, and stress, that intelligence officers do not make or recommend policy. Rather, the function of intelligence is to help US decisionmakers to better understand the forces at work in any situation, and the opportunities and consequences of any course of action so that policymakers can make informed decisions.

What follows is my own thinking about some of the strategic challenges that confront the United States government, and by extension, other key players in the international economy.

Intelligence Challenges

Let me highlight for you the five general categories of national security challenges:

  • First, there are the great powers in transition: Russia and China. Each unique, both nuclear armed, both undergoing major economic transformations, both of concern to their neighbors and to us.
  • Second, there are those non-democratic states whose hostile policies undermine regional stability and threaten, directly or indirectly, our interests abroad, including Iran, Iraq, and North Korea.
  • Third, there are transnational issues that transcend country and region and could strike any of us at home or abroad with little notice: terrorism, the proliferation of weapons of mass destruction, international organized crime and drug trafficking, economic issues, and threats to our information and computer systems.
  • Fourth, there are regional hotspots, where tensions between nations can erupt into conflict, cost lives, and take unpredictable turns: the Middle East, the South Asian subcontinent, Bosnia, and the Aegean.
  • The fifth category we can just call humanitarian crises. From Bosnia to Burundi, there are states and regions immersed in ethnic conflict, civil war, natural disaster, forced migration, refugees, disease, and starvation. These crises have resulted in heavy demands on US intelligence, diplomacy, and military capabilities.
  • Providing American policymakers, warfighters, and other officials with good intelligence on each of these issues is a complex and difficult undertaking. But it is just as important to our security and well-being as ever. Failure to collect and analyze information on these issues today only risks a heavier diplomatic or military price to pay down the road.

 

The Role of the NIC

The National Intelligence Council has a special role to play in preparing policymakers for the challenges ahead. The Council produces intelligence products that look beyond today's horizon--from six months to a decade or more--and point out potential complications. National Intelligence Estimates, or NIEs, are coordinated--and agreement does not always come easy--by the heads of the various intelligence agencies--CIA, DIA, the State Department, the military services, Treasury, Energy, and as appropriate the FBI--so that policymakers get the views of the entire Intelligence Community in a single document.

In the last year or so, the NIC has produced NIEs and a variety of other papers on a wide range of issues--including weapons of mass destruction, humanitarian emergencies, narcotics trafficking, the environment and critical regions and countries all over the globe.

The NIC also brings experts from outside the Intelligence Community to get their perspectives--and this will be an increasingly important value added by the NIC for an Intelligence Community that is relying on outside expertise more than ever before.

For example, in Fall 1996 the NIC and the Institute for National Strategic Studies held a series of conferences at National Defense University to identify key global trends and their impact on major regions and countries. The exercise was designed to help predict and assess major features of the world in the year 2010. Participants in the conferences were drawn from academe, journalism, business, the US Government, and other professions. Following the conference, we published a document outlining likely global trends in the year 2010. We think it is critical that policymakers think beyond the crises of the day and consider some of the evolutionary trends that will shape our future, both from a national security and an economic perspective. I'd like to mention a few of these trends:

 

  • First, population will increase by 1.2 billion to over seven billion by 2010. About 95% of this growth will be in developing countries. This growth will be accompanied by increased urbanization: about half of the world's population will live in cities compared with one third today. There will be many more mega-cities with populations in excess of 8 million, mostly in developing countries. Countries such as Mexico and Saudi Arabia that hold key geopolitical positions will be among those heavily affected by population pressures. In some societies a "youth bulge"-the growing number of people between 15 and 24-will strain educational systems, infrastructure, and the job market. Population growth will also fuel migration pressures-Haiti's population, for example, is expected to double over the next 20 years.

    For the industrialized world, the population problem will not be associated with growth but with increasing life spans and decreasing birth rates. The "Social Security-Medicare" debate already reverberating throughout the developed world will become even more acute. Governments will struggle to provide social welfare and health services to an aging population, while the labor force-the pool whose taxes help finance these services-shrinks.

    In the Former Soviet Union the issue is not buttressing a safety net, but creating one to cope with a wide range of economic and social problems, the solutions to which will take many years of concerted effort in health, environmental, and economic policies. The extent of Russia's demographic ills is reflected in a sharp and unprecedented decline in male life expectancy.

     

  • Second, the NIC study points to a growth in per capita income. The study projects real growth in per capita income of over 2% per year between now and 2010. Growth will be uneven; not every state, nor every citizen in every state, will benefit equally. Some will not benefit at all, or may lose out. The pace of technological change will be rapid and the fear of being left behind will lead to tensions between countries- and within them- as income gaps widen. More winners will be in East Asia and the West; more losers will be in Africa and the Middle East. Among relative losers will be those states that, unwilling to accept the consequences of their failure will resort to force to alter their status.

    Growth will increase demands on infrastructure- such as water, energy, communications, waste disposal, urban transportation, public health, housing, and education. Failure to accommodate these demands will trigger disaffection with government, emotional backlashes against modernization-and clashes against Western policies, philosophies, and presence.

     

  • The third trend will be the problem of feeding a burgeoning population. According to the experts who drafted the NIC study, the problem is not agriculture or science, but rather political stability, transportation and distribution. Indeed, food production is likely to keep pace with overall demand. The authors anticipate genetic engineering fueling a fourth agricultural revolution by the end of this time span. As in the past, shortages will be man-made. Serious pockets of poverty will put people in developing countries- particularly in Africa- at risk of death from disease and starvation.

     

  • The fourth trend is that the continued digital data and communications revolution will shrink distances and weaken barriers to the flow of information. Communications technology will become so inexpensive that most countries will be able to pay the cost of connecting to the global information infrastructure. Optical fiber will add enormous capacity for data transmission among nodes around the globe. The United States, Europe, Asia, and Latin America will be in the forefront of this communications revolution. To compete, businesses will continue to move beyond regional or national perspectives to optimize global trade. Governments will benefit from the success of these businesses. However, communications will also thwart their efforts of government to control the flow of information, which will undermine authority over time.

     

  • The fifth trend is that growing populations and per capita income will drive the demand for more energy, particularly as the Chinese and Indian economies expand. By 2010 the world will require added production of petroleum on the order of what OPEC produces now. Technological advances, however, can meet this demand. Problems will arise not out of overall shortages but out of short term disruptions in the flow of oil stemming from political-military instabilities. Improvements in the efficiency of solar cells and batteries will result in greater use of these and other renewable energy resources, but they are unlikely to significantly affect global reliance on fossil fuels during this time period.

     

  • The sixth and final trend outlined in the study pertains to military technology & deterrence. Precision-guided munitions and information technologies will be the hallmarks of the revolution in military affairs. Other countries will have technologically advanced military equipment at their disposal, obtained from arms merchants and other governments. However, no power will be able to match US battlefield technological capabilities at lest up to 2010, and potential adversaries are unlikely to repeat Iraq's mistake in challenging the United States via set-piece conventional warfare.
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Policymakers' Interest in Economic Intelligence

Intelligence officers have to think hard about all of these longer term trends. Economic issues are inextricably linked to all other national security issues--political, military and transnational--and economic analysis has always been a big part of what we do.

Today, senior US officials are more interested than ever in the contribution of economic intelligence to international policymaking. Policy officials increasingly view developments and trends in the international economy as a vital element of US national security-affecting the performance of the US economy, altering political relations both within and between nations, and causing shifts in regional and global power balances. They look to economic intelligence to help them better understand the threats to political stability, economic welfare, and US national security worldwide.

Before I describe more specifically the mission of economic intelligence, let me define the parameters:

 

  • First, economic intelligence is helping US policymakers understand the general economic forces faced by foreign officials in key countries that will directly or indirectly affect their policy options, particularly toward the US.

     

  • Second, it is helping US policymakers understand foreign positions and practices towards international agreements, especially those involving the United States.

     

  • Last, it is helping US policymakers understand how foreign governments are violating laws, breaking international agreements, or behaving outside the norm.

     

  • As for the other side of the line, US Intelligence does not engage in "industrial espionage"--spying on foreign companies for the purpose of providing information to US firms.
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The Mission of Economic Intelligence

There are two broad missions for economic intelligence.

 

  • The first is to provide strategic warning of international economic trends that could have a significant impact on US interests.

     

  • The second is tactical-providing information and analysis on important international economic issues to US policy and enforcement officials in support of their day-to-day decisionmaking and interactions with foreign counterparts.
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The Intelligence Community monitors the pace, scope, and direction of economic reform in the former Soviet Union, Eastern Europe, and China, and it tracks economic policies and performance in other key emerging markets of concern to US interests.

Specifically, Intelligence Community economic analyses includes:

 

  • Warning. Anticipating economic crises by providing timely assessments of financial vulnerabilities, national economic performance, and threats to world energy supplies. More integrated international markets increase the risk that an economic crisis in one country will spill over to other trading or financial partners.

     

  • Understanding foreign economic policy making. Identifying and assessing the complex interaction between economic, political, and social factors that drive policymaking and economic performance in emerging economic powers and in countries of strategic interest. This includes the analysis of obstacles to these countries instituting market-based economic reform.

     

  • Rogue states and illicit activities. Monitoring the domestic performance and external economic relations of rogue states--North Korea, Iran, Iraq, and Cuba--monitoring the economic impact of sanctions, and developing approaches that track the complex financial networks that support drug traffickers, terrorists, and proliferators of weapons of mass destruction.

     

  • Helping to ensure that all countries are playing by the same economic rules so we have a "level playing field." The Intelligence Community is not involved in enforcement, but we do report our findings to appropriate officials.
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Economic intelligence has been critical to addressing some of the issues US policymakers have faced over the past year:

 

  • Economic analysis helped policymakers better understand the economic conditions in North Korea.

     

  • Analysis of the economic changes taking place Russia have enhanced policymakers' understanding of Russian military reforms as well as political developments.

     

  • Knowledge of Iraqi economic pressures has helped policymakers evaluate the conditions for Iraq's political leadership and the likelihood of adherence to the UN agreements.
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I hope I've given you a sense of our view of the global scene, the role of economic intelligence, and some of the forces that we think will shape our future.

31Collecting information on economic trends and assessing their implications for US national security will continue to be key facets of the Intelligence Community's effort to help policymakers understand and address the key foreign policy and security challenges facing the United States in the 21st century.


Historical Document
Posted: Apr 03, 2007 08:56 PM
Last Updated: Jun 20, 2008 07:58 AM