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Shipbulding

AT Shipbuilding K2 Navy

Investment in commercial shipbuilding is not necessary for readiness and is not cost-efficient


Slattery et al 14

(Brian, Research Assistant, Defense Studies, Bryan Riley: Jay Van Andel Senior Policy Analyst in Trade Policy, Nicolas Loris: Herbert and Joyce Morgan at the Heritage Institute, “Sink the Jones Act: Restoring America’s Competitive Advantage in Maritime-Related Industries” pg online at http://www.heritage.org/research/reports/2014/05/sink-the-jones-act-restoring-americas-competitive-advantage-in-maritime-related-industries//sd)

Jones Act proponents also argue that America must keep its shipyards in operation in case that capacity and capability is required in times of military buildup. Yet only one of the shipyards that build the Navy’s primary vessels (e.g., carriers, destroyers, amphibious vessels, and submarines) also produces large commercial shipping vessels.[13] The idea that the Jones Act preserves and sustains America’s naval superiority is antiquated. Furthermore, proponents disingenuously argue that it helps to “avoid complete dependence on ships controlled by foreign nations.”[14] Yet the military maintains its capacity to build highly sensitive weapons systems—including naval ships—regardless of the existence or health of comparable commercial sectors in the U.S. Allowing America to use foreign-built ships for noncombative systems makes economic sense when those ships can be built less expensively abroad. The Jones Act directly threatens national security in disaster response. The President can waive the Jones Act during a national emergency and often does. President George W. Bush signed a waiver during the response to Hurricane Katrina to ensure that all maritime assets could aid in restoration and stabilization. More recently, President Obama waived the Jones Act during the response to Hurricane Sandy “to immediately allow additional oil tankers coming from the Gulf of Mexico to enter Northeastern ports, to provide additional fuel resources to the region.”[15] During disasters, recovery efforts should not be slowed by unnecessary legal roadblocks. If during disasters the Jones Act only causes hesitation before engaging in a response effort, it provides no benefit. Harmful to U.S. Economy The Jones Act undermines U.S. economic competitiveness in a number of ways. For example, U.S.-built, U.S.-owned, and U.S.-crewed vessels have dramatically higher operating costs than other options available to shippers. U.S.-flagged container ships and tankers spend over four times as much as foreign vessels on crewing expenditures.[16] Jones Act ships also have higher maintenance costs, and it is more costly to repair and maintain vessels in domestic shipyards compared to foreign ones. Repair and routine work on U.S. tankers costs almost 70 percent more than comparable work on foreign tankers.[17] Foreign vessels have longer trade routes and can spread their costs over a larger amount of cargo, making operating costs cheaper. As indicated by a March 2013 Government Accountability Office (GAO) study, foreign vessels that operate in a global marketplace have the flexibility to adjust their capacity to meet changing markets.[18]

Econ High

Economic trends are positive – consensus of business leaders


Desert Sun 7/14/14

(Morris Beschloss, TDS, “Majority of Financial Officers Turn Positive on US Economy” pg online at http://www.desertsun.com/story/money/industries/morrisbeschlosseconomics/2014/07/14/majority-of-financial-officers-turn-positive-on-us-economy/12645737///sd)

For the first time since the end of the recession, a majority of business/industry top financial management officers have become positive about U.S. economic growth throughout this year and beyond. This conclusion was reported by the American Institute of CPA’s, as part of their second quarter AICPA outlook. What makes this group’s comments especially significant is due to the “hard-boiled” financial nature of this group, which views economic growth through the lens of expanding financial viability. The 51% that registered positive were in stark contrast to the lowly 5% optimism in the eye of the 2009 financial storm, and up 2% over last year. Views expressed by participants includedforward growth, steady hiring, and investment.” Although still tentative as to the intensity of the economy’s anticipated forward motion, most agreed that the corner from deep recession to a solid platform of a longer term recovery had been turned. As these conservative financial managers view the future, the major disagreement lies in the scope of a brighter economic future. This disparity tended to reflect the segment of business and industry sector that each survey participant represented. Most ebullient were from those involved with the energy development, and ancillary businesses, allied with companies participating in the multi-billions of project dollars already committed to the awesome growth awaiting the positive impact of growth dynamics already underway.


Growth resilient—consumer spending indicates firm footing


Star 7/16/14

(“US retail sales, manufacturing data point at firming economy” pg online at http://www.thestar.com.my/Business/Business-News/2014/07/16/US-retail-sales-manufacturing-data-point-at-firming-economy///sd)

WASHINGTON: A gauge of US consumer spending rose solidly in June, in the latest indication that the economy ended the second quarter on a stronger footing. That momentum appeared to have carried into the third quarter, with another report on Tuesday showing factory activity in New York state expanded sharply in July. "This is not a fragile economy," said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ in New York. "The consumer continues to play their part in moving the economy forward." Core sales, which strip out automobiles, gasoline, building materials and food services, increased 0.6% last month after rising an upwardly revised 0.2% in May, the Commerce Department said. Core sales, which correspond most closely with the consumer spending component of gross domestic product, were previously reported as being flat in May. Economists had expected them to rise 0.5% in June. The report added to signs of the economy's strengthening fundamentals, which could buoy optimism the recovery is on a self-sustaining path, after output contracted sharply in the first quarter. Federal Reserve Chair Janet Yellen told lawmakers the economy continued to improve, but noted that the recovery was not yet complete because of still-high unemployment. Yellen, however, cautioned the US central bank could raise interest rates sooner and more rapidly than currently envisioned if the labor market continued to improve faster than anticipated by policymakers. Labour market conditions are firming, with the unemployment rate falling to a near six year-low of 6.1% in June and job growth exceeding 200,000 for a fifth straight month. Prices for US Treasury debt fell on the economic data and Yellen's interest rate comments, while the dollar gained against a basket of currencies. US stocks traded lower. June's gains and May's upward revision to core retail sales suggested a pickup in consumer spending in the second quarter after growing at its slowest pace in more than four years in the first quarter because of weak healthcare consumption. Forecasting firm Macroeconomic Advisers raised its second-quarter GDP growth forecast by three-tenths of a percentage point to a 3% annual pace. Goldman Sachs upped its estimate for the quarter by two-tenths to a 3.4% rate. UPBEAT OUTLOOK A surprise drop in receipts for automobiles, however, held overall retail sales to a 0.2% increase in June after advancing 0.5 percent the prior month. "Consumers will likely gain more confidence to spend as the job market improves and summer travel season hits full swing," said Randy Hopper, credit cards vice president at Navy Federal Credit Union in Vienna, Virginia. "We are optimistic that the second half of the year will deliver stronger sales growth." From employment to manufacturing, the economy appears to be firing on nearly all cylinders, with even housing regaining its footing after slumping in late 2013 following a run-up in mortgage rates. Growth estimates for the second quarter top a 3%annual rate. In another report, the New York Fed said its Empire State general business conditions index jumped to 25.60 this month, the highest since April 2010, from 19.28 in June. New orders edged up, while factory employment and shipments surged. There were also signs of inflation pressures, with measures of both prices received and paid by manufacturers rising in July. Overall retail sales in June were restrained by a 0.3% fall in receipts at auto dealerships. The decline is surprising given automakers reported a surge in motor vehicle sales in June. Auto sales had increased 0.8% in May. Excluding autos, sales grew 0.4% after rising by the same margin in May. There were increases in sales at non-store retailers, which include online sales, as sales at clothing retailers. Receipts at sporting goods shops rose as did those at electronics and appliances stores. But sales at building materials and garden equipment suppliers fell 1%.- Reuters

US Economy is resilient – 5 reasons


Wiseman 7/5/14

(PAUL WISEMAN, AP Economics Writer “What's making US economy a world beater? 5 factors” pg online at http://www.chron.com/news/us/article/What-s-making-US-economy-a-world-beater-5-factors-5601092.php//sd)

Europe is floundering. China faces slower growth. Japan is struggling to sustain tentative gains. Yet the U.S. job market is humming, and the pace of economic growth is steadily rising. Five full years after a devastating recession officially ended, the economy is finally showing the vigor that Americans have long awaited. Last month, employers added 288,000 jobs and helped reduce the unemployment rate to 6.1 percent, the lowest since September 2008. June capped a five-month stretch of 200,000-plus job gains — the first in nearly 15 years. After having shrunk at a 2.9 percent annual rate from January through March — largely because of a brutal winter — the U.S. economy is expected to grow at a healthy 3 percent pace the rest of the year. Here are five reasons the United States is outpacing other major economies: AN AGGRESSIVE CENTRAL BANK "The Federal Reserve acted sooner and more aggressively than other central banks in keeping rates low," says Bernard Baumohl, chief global economist at the Economic Outlook Group. In December 2008, the Fed slashed short-term interest rates to near zero and has kept them there. Ultra-low loan rates have made it easier for individuals and businesses to borrow and spend. The Fed also launched three bond-buying programs meant to reduce long-term rates. By contrast, the European Central Bank has been slower to respond to signs of economic distress among the 18 nations that share the euro currency. The ECB actually raised rates in 2011 — the same year the eurozone sank back into recession. It's worth keeping in mind that the Fed has two mandates: To keep prices stable and to maximize employment. The ECB has just one mandate: To guard against high inflation. The Fed was led during and after the Great Recession by Ben Bernanke, a student of the Great Depression who was determined to avoid a repeat of the 1930s' economic collapse. Janet Yellen, who succeeded Bernanke as Fed chair this year, has continued his emphasis on nursing the U.S. economy back to health after the recession of 2007-2009 with the help of historically low rates. STRONGER BANKS The United States moved faster than Europe to restore its banks' health after the financial crisis of 2008-2009. The U.S. government bailed out the financial system and subjected big banks to stress tests in 2009 to reveal their financial strength. By showing the banks to be surprisingly healthy, the stress tests helped restore confidence in the U.S. financial system. Banks gradually started lending again. European banks are only now undergoing stress tests, and the results won't be out until fall. In the meantime, Europe's banks lack confidence. They fear that other banks are holding too many bad loans and that Europe is vulnerable to another crisis. So they aren't lending much. In the United States, overall bank lending is up nearly 4 percent in the past year. Lending to business has jumped 10 percent. In the eurozone, lending has dropped 3.7 percent overall, according to figures from the Institute of International Finance. Lending to business is off 2.5 percent. (The U.S. figures are for the year ending in mid-June; the European figures are from May.) A MORE FLEXIBLE ECONOMY Economists say Japan and Europe need to undertake reforms to make their economies more flexible — more, in other words, like America's. Europe needs to lift wage restrictions that prevent employers from cutting pay (rather than eliminating jobs) when times are bad. It could also rethink welfare and retirement programs that discourage people from working and dismantle policies that protect favored businesses and block innovative newcomers, the Organization for Economic Cooperation and Development has argued. Prime Minister Shinzo Abe has proposed reforms meant to make the Japanese economy more competitive. He wants to expand child care so more women can work, replace small inefficient farms with more large-scale commercial farms and allow more foreign migrant workers to fill labor shortages in areas such as nursing and construction. Yet his proposals face fierce opposition. "Europe and Japan remain less well-positioned for durable long-term growth, as they have only recently begun to tackle their deep-rooted structural problems, and a lot remains to be done," says Eswar Prasad, a professor of trade policy at Cornell University. China is struggling to manage a transition from an economy based on exports and often wasteful investment in real estate and factories to a sturdier but likely slower-growing economy based on more consumer spending. LESS BUDGET-CUTTING Weighed down by debt, many European countries took an ax to swelling budget deficits. They slashed pension benefits, raised taxes and cut civil servants' wages. The cuts devastated several European economies. They led to 27 percent unemployment in Greece, 14 percent in Portugal and 25 percent in Spain. The United States has done some budget cutting, too, and raised taxes. But U.S. austerity hasn't been anywhere near as harsh. A ROARING STOCK MARKET The Fed's easy-money policies ignited a world-beating U.S. stock market rally. Over the past five years, U.S. stocks have easily outpaced shares in Europe, Japan and Hong Kong. That was one of Bernanke's goals in lowering rates. He figured that miserly fixed-income rates would nudge investors into stocks in search of higher returns. Higher stock prices would then make Americans feel more confident and more willing to spend — the so-called wealth effect.

Manufacturing High

All data shows economy and manufacturing share accelerated growth and sustainability


Independent 7/16/14

(“US economy powers ahead in June as consumer spending advances” in http://www.independent.ie/business/world/us-economy-powers-ahead-in-june-as-consumer-spending-advances-30433964.html#sthash.iEx3a3nz.dpuf//sd)

US consumer spending rose solidly in June, in the latest sign that the economy ended the second quarter on a firmer footing. SHARE That momentum appeared to have carried into the third quarter, with other new data showing factory activity in New York state expanded sharply so far this month. The commerce department said core sales, which strip out cars, petrol, building materials and food services, increased 0.6pc last month after rising by an upwardly-revised 0.2pc in May. Core sales correspond most closely with the consumer spending component of gross domestic product. They were previously reported as being flat in May and economists had expected them to rise 0.5pc in June. June's gains and May's upward revision suggested an acceleration in consumer spending in the second quarter after it was held back by weak healthcare spending in the first three months of the year. A surprise drop in receipts for cars, however, saw overall retail sales rise only 0.2pc in June after a 0.5pc advance in May. While the rise in retail sales lagged economists' expectations for a 0.6pc increase, June's report added to signs of the economy's strengthening fundamentals, which could buoy optimism the recovery is on a self-sustaining path. The economy contracted sharply in the first quarter, but that was probably a temporary setback. From employment to manufacturing, the economy appears to be firing on nearly all cylinders, with even housing regaining its footing after slumping in late 2013 following a run-up in mortgage rates. Growth estimates for the second-quarter top a 3pc annual rate. The steady run of fairly upbeat data, as well as slightly higher inflation readings, prompted Goldman Sachs to move forward its expectations for the first interest rate 
 increase by the Federal Reserve to the third quarter of next year from the first quarter of 2016. The US central bank, Janet Yellen, which is winding down its monthly bond purchasing programme, has kept its benchmark interest rate near zero since December 2008. In another report, the New York Fed said its Empire State general business conditions index jumped to 25.60 this month, the highest reading since April 2010, from 19.28 in June. New orders edged up, while factory employment and shipments surged. The survey of manufacturing plants in the state is one of the earliest monthly guideposts to US factory conditions.

Manufacturing is increasing and is sufficient to wean off of stimulus


Bloomberg 7/16/14

Gain in Factory Output Provides Boost to U.S. Growth: Economy” pg online at http://www.bloomberg.com/news/2014-07-16/industrial-production-in-u-s-increased-0-2-in-june-fed-says.html//sd)

Industrial production climbed in June to cap the strongest quarter in almost four years as manufacturers provided a bigger spark for the U.S. economy. A 0.2 percent increase in output at factories, mines and utilities last month followed a revised 0.5 percent advance in May, figures from the Federal Reserve showed today in Washington. While the June gain fell short of expectations, production rose at a 5.5 percent annualized rate from April through June, the most since the third quarter of 2010. The fastest pace of car sales in eight years and a recent pickup in bookings for business equipment point to further output gains. Improving overseas markets, underscored by a report showing faster growth in China, would also keep assembly lines busy and propel the economy after a first-quarter slump. “The industrial sector of the U.S. economy has been doing well,” said Neil Dutta, head of U.S. economics at Renaissance Macro Research LLC in New York. “It’s indicative of an improving economy.” The housing industry is also starting to show signs of progress. Confidence among the nation’s homebuilders climbed in July to the highest level in six months. The National Association of Home Builders/Wells Fargo’s sentiment measure rose to 53 this month from 49 in June. Readings above 50 mean more respondents said conditions were “good.” Housing Market A strengthening labor market, combined with wage growth and rising consumer sentiment, will probably support further gains as the Fed winds down its unprecedented stimulus program.

Manufacturing is on a positive feedback loop and the fastest US sector


Schaub and West 7/14/14

(Hillary Schaub, Director of Center for Technology Innovation, Darrell West is an American author, political scientist, and political commentator. West is the vice president and director of governance studies and director of the center for technology innovation at the Brookings Institution. Why American Manufacturing is Vital to Future Prosperity pg online http://www.brookings.edu/blogs/techtank/posts/2014/07/14-manufacturing-hubs-innovation//sd)

The Obama administration has enacted policies to spur economic growth and diverse groups of Americans reap the benefits of those changes. Manufacturing supports the economies of local communities in ways that do not show up in national reports. It accounts for a large percentage of R&D spending and American patents. Innovators require manufacturing facilities to create new processes and develop new prototypes. A new wave of “makers” have built new sectors and companies, like 3-D printing and digital manufacturing. This has in effect democratized manufacturing. The positive feedback loop between manufacturing and innovation supports a larger entrepreneurial ecosystem. If America loses the ability to make things it creates a vicious circle that makes it harder to create jobs in the future. Manufacturing is Growing Quickly The manufacturing sector is growing faster than the rest of the economy. Over the past decade, manufacturing lost nearly a third of its workforce due to a lack of demand for American goods, the trade deficit, and general stagnation. However, since 2010 it has grown steadily in terms of the number of workers. Sixteen thousand direct manufacturing jobs were added to the economy this month and over 668 thousand since 2010. This represents the first period of sustained manufacturing job growth since the 1990s. The US share of exports has grown faster than other modern countries. Manufacturing plays a broader role in the economy and creates innovation benefits as well.



Shipbuilding High

Oil booms stimulate commercial shipbuilding—aff can’t solve Navy because of sequestration


Roll Call 7/11/14

(“Domestic Oil Boom Helps U.S. Shipyards Rebound” pg online at http://blogs.rollcall.com/the-container/domestic-oil-boom-helps-u-s-shipyards-rebound/?dcz=//sd)

The oil boom that has sparked controversy over rail shipments of Bakken crude from North Dakota has also been a boon for U.S. shipyards. This week we interviewed Matthew Paxton, the president of the Shipbuilders Council of America, on the health of the U.S. shipbuilding industry. His organization represents small shipyards that build fishing vessels as well as large companies such as Huntington Ingalls and General Dynamics which turn out aircraft carriers and submarines. (Responses edited a bit for brevity.) What’s the state of the U.S. shipbuilding industry? Quite vibrant on the commercial side. We are seeing a surge in large vessel construction; some of that has to do with the boom we seeing taking place with the shale finds and that oil and gas moving around domestically; some of it has to do with the fact that we are re-capitalizing our fleets right now…. On top of that, we are very robust in the building and repairing of offshore supply vessels that service the offshore oil land gas patch in the Gulf of Mexico. And we build all sorts of barges, tugs and other vessels. … We deliver thousands of vessels every year: a little over 1,200 vessels delivered in 2012 alone. Where it gets tricky is on the defense side, because there are budget constraints, there’s this nasty thing called sequestration. And while our shipbuilders that are building Navy assets and Coast Guard assets are doing wonderfully, and are building the most advanced and state-of-the art Navy and Coast Guard in the world, those budget constraints do create some uncertainty on the defense shipbuilding side. But overall we’ve weathered it.

Navy Resilient

Naval power is strong and resilient – even with a net decrease in fleet size, the US Navy has only gotten stronger


Farley 07, Dr. Robert Farley is an Assistant Professor at the Patterson School of Diplomacy and International Commerce. He specializes in National Security Policy, Defense Statecraft, History of Strategy, Airpower, Asian Security, Seapower, Military Diffusion, and Maritime Affairs, (“The False Decline of the U.S. Navy”, http://prospect.org/article/false-decline-us-navy, 11/23/2007) Kerwin

We live in strange times. While the United States is responsible for close to 50 percent of aggregate world military expenditure, and maintains close alliances with almost all of the other major military powers, a community of defense analysts continues to insist that we need to spend more. In the November issue of The Atlantic, Robert Kaplan asserts that United States hegemony is under the threat of “elegant decline,” and points to what conventional analysts might suggest is the most secure element of American power; the United States Navy. Despite the fact that the U.S. Navy remains several orders of magnitude more powerful than its nearest rival, Kaplan says that we must beware; if we allow the size of our Navy to further decline, we risk repeating the experience of the United Kingdom in the years before World War I. Unfortunately, since no actual evidence of U.S. naval decline exists, Kaplan is forced to rely on obfuscation, distortion, and tendentious historical analogies to make his case. The centerpiece of Kaplan’s argument is a comparison of the current U.S. Navy to the British Royal Navy at the end of the 19th century. The decline of the Royal Navy heralded the collapse of British hegemony, and the decline of the U.S. Navy threatens a similar fate for the United States. The only problem with this argument is that similarities between the 21st century United States and the 19th century United Kingdom are more imagined than real. It’s true that the relative strength of the Royal Navy declined at the end of the 19th century, but this was due entirely the rise of the United States and Germany. But the absolute strength of the Royal Navy increased in the late 19th and early 20th centuries, as the United Kingdom strove to maintain naval dominance over two countries that possessed larger economies and larger industrial bases than that of Great Britain. In other words, the position of the Royal Navy declined because the position of the United Kingdom declined; in spite of this decline, the Royal Navy continued to dominate the seas against all comers until 1941. Britain’s relative economic decline preceded its naval decline, although the efforts to keep up with Germany, the United States, and later Japan did serious damage to the British economy. The United States faces a situation which is in no way similar. Returning to the present, Kaplan takes note of the growth of several foreign navies, including the Indian, Chinese, and Japanese. He points out that the Japanese Navy has a large number of destroyers and a growing number of submarines. He warns that India “may soon have the world’s third largest navy” without giving any indication of why that matters. Most serious of all, he describes the threat of a growing Chinese Navy and claims that, just as the Battle of Wounded Knee opened a new age for American imperialism, the conquest of Taiwan could transform China into an expansionist, imperial power. The curious historical analogies aside, Kaplan is careful to make no direct comparisons between the growing navies of foreign countries and the actual strength of the United States Navy. There’s a good reason for this oversight; there is no comparison between the U.S. Navy and any navy afloat today. The United States Navy currently operates eleven aircraft carriers. The oldest and least capable is faster, one third larger, and carries three times the aircraft of Admiral Kuznetsov, the largest carrier in the Russian Navy. Unlike China’s only aircraft carrier, the former Russian Varyag, American carriers have engines and are capable of self-propulsion. The only carrier in Indian service is fifty years old and a quarter the size of its American counterparts. No navy besides the United States' has more than one aircraft carrier capable of flying modern fixed wing aircraft. The United States enjoys similar dominance in surface combat vessels and submarines, operating twenty-two cruisers, fifty destroyers, fifty-five nuclear attack submarines, and ten amphibious assault ships (vessels roughly equivalent to most foreign aircraft carriers). In every category the U.S. Navy combines presumptive numerical superiority with a significant ship-to-ship advantage over any foreign navy. This situation is unlikely to change anytime soon. The French Navy and the Royal Navy will each expand to two aircraft carriers over the next decade. The most ambitious plans ascribed to the People’s Liberation Army Navy call for no more than three aircraft carriers by 2020, and even that strains credulity, given China’s inexperience with carrier operations and the construction of large military vessels. While a crash construction program might conceivably give the Chinese the ability to achieve local dominance (at great cost and for a short time), the United States Navy will continue to dominate the world’s oceans and littorals for at least the next fifty years. In order to try to show that the U.S. Navy is insufficient in the face of future threats, Kaplan argues that we on are our way to “a 150 ship navy” that will be overwhelmed by the demands of warfighting and global economic maintenance. He suggests that the “1,000 Ship Navy” proposal, an international plan to streamline cooperation between the world’s navies on maritime maintenance issues such as piracy, interdiction of drug and human smuggling, and disaster relief, is an effort at “elegant decline,” and declares that the dominance of the United States Navy cannot be maintained through collaboration with others. It’s true that a 600 ship navy can do more than the current 250-plus ship force of the current U.S. Navy, but Kaplan’s playing a game of bait and switch. The Navy has fewer ships than it did two decades ago, but the ships it has are far more capable than those of the 1980s. Because of the collapse of its competitors, the Navy is relatively more capable of fighting and winning wars now than it was during the Reagan administration. Broadly speaking, navies have two missions; warfighting, and maritime maintenance. Kaplan wants to confuse the maritime maintenance mission (which can be done in collaboration with others) with the warfighting mission (which need not be). A navy can require the cooperation of others for the maintenance mission, while still possessing utter military superiority over any one navy or any plausible combination of navies on the high seas. Indeed, this is the situation that the United States Navy currently enjoys. It cannot be everywhere all at once, and does require the cooperation of regional navies for fighting piracy and smuggling. At the same time, the U.S. Navy can destroy any (and probably all, at the same time) naval challengers. To conflate these two missions is equal parts silly and dishonest. The Navy has arrived at an ideal compromise between the two, keeping its fighting supremacy while leading and facilitating cooperation around the world on maritime issues. This compromise has allowed the Navy to build positive relationships with the navies of the world, a fact that Kaplan ignores. While asserting the dangers posed by a variety of foreign navies, Kaplan makes a distortion depressingly common to those who warn of the decline of American hegemony; he forgets that the United States has allies. While Kaplan can plausibly argue that growth in Russian or Chinese naval strength threatens the United States, the same cannot reasonably be said of Japan, India, France, or the United Kingdom. With the exception of China and Russia, all of the most powerful navies in the world belong to American allies. United States cooperation with the navies of NATO, India, and Japan has tightened, rather than waned in the last ten years, and the United States also retains warm relations with third tier navies such as those of South Korea, Australia, and Malaysia. In any conceivable naval confrontation the United States will have friends, just as the Royal Navy had friends in 1914 and 1941. Robert Kaplan wants to warn the American people of the dangers of impending naval decline. Unfortunately, he’s almost entirely wrong on the facts. While the reach of the United States Navy may have declined in an absolute sense, its capacity to fight and win naval wars has, if anything, increased since the end of the Cold War. That the United States continues to embed itself in a deep set of cooperative arrangements with other naval powers only reinforces the dominance of the U.S. Navy on the high seas. Analysts who want to argue for greater U.S. military spending are best advised to concentrate on the fiascos in Iraq and Afghanistan.

AT Econ Impact

No impact to economic decline



Thirlwell ‘10

—MPhil in economics from Oxford U, postgraduate qualifications in applied finance from Macquarie U, program director in International Economy for the Lowy Institute for International Policy (Mark, September 2010, “The Return of Geo-economics: Globalisation and National Security”, Lowy Institute for International Policy, google scholar,)



Summing up the evidence, then, I would judge that while empirical support for the Pax Mercatoria is not conclusive, nevertheless it’s still strongly supportive of the general idea that international integration is good for peace, all else equal. Since there is also even stronger evidence that peace is good for trade, this raises the possibility of a nice virtuous circle: globalisation (trade) promotes peace, which in turn promotes more globalisation. In this kind of world, we should not worry too much about the big power shifts described in the previous section, since they are taking place against a backdrop of greater economic integration which should help smooth the whole process. Instead of ending this section on that optimistic note, however, it’s worth thinking about some reasons why the Pax Mercatoria might nevertheless turn out to be a poor, or at least overly optimistic, guide to our future. The first is captured by that all important get-out-of-gaol-free card, ‘all else equal’. It’s quite possible that the peace-promoting effects of international commerce will end up being swamped by other factors, just as they were in 1914. Second, perhaps the theory itself is wrong. Certainly, a realist like John Mearsheimer would seem to have little time for the optimistic consequences of the rise of new powers implied by the theory. Here’s Mearsheimer on how the US should view China’s economic progress, for example: ‘ . . . the United States has a profound interest in seeing Chinese economic growth slow considerably in the years ahead . . . A wealthy China would not be a status quo power but an aggressive state determined to achieve regional hegemony.’ 62 Such pessimistic (or are they tragic?) views of the world would also seem to run the risk of being self-fulfilling prophecies if they end up guiding actual policy. Finally, there is the risk that the shift to a multipolar world might indirectly undermine some of the supports needed to deliver globalisation. Here I am thinking about some simple variant on the idea of hegemonic stability theory (HST) – the proposition that the global economy needs a leader (or ‘hegemon) that is both able and willing to provide the sorts of international public goods that are required for its smooth functioning: open markets (liberal or ‘free’ trade), a smoothly functioning monetary regime, liberal capital flows, and a lender of last resort function. 63 Charles Kindleberger argued that ‘the 1929 depression was so wide, so deep, and so long because the international economic system was rendered unstable by British inability and US unwillingness to assume responsibility for stabilizing it’, drawing on the failures of the Great Depression to make the original case for HST: ‘ . . . the international economic and monetary system needs leadership, a country that is prepared . . . to set standards of conduct for other countries and to seek to get others to follow them, to take on an undue share of the burdens of the system, and in particular to take on its support in adversity...’ 64 Kindleberger’s assessment appears to capture a rough empirical regularity: As Findlay and O’Rourke remind us, ‘periods of sustained expansion in world trade have tended to coincided with the infrastructure of law and order necessary to keep trade routes open being provided by a dominanthegemon” or imperial power’. 65 Thus periods of globalisation have typically been associated with periods of hegemonic or imperial power, such as the Pax Mongolica, the Pax Britannica and, most recently, the Pax Americana (Figure 9). The risk, then, is that by reducing the economic clout of the United States, it is possible that the shift to a multipolar world economy might undermine either the willingness or the ability (or both) of Washington to continue to supply the international public goods needed to sustain a (relatively) smoothly functioning world economy. 66 That in turn could undermine the potential virtuous circle identified above.

Diversionary war theory is false



Boehmer ‘7

(Charles, political science professor at the University of Texas, Politics & Policy, 35:4, “The Effects of Economic Crisis, Domestic Discord, and State Efficacy on the Decision to Initiate Interstate Conflict”)



This article examines the contemporaneous effect of low economic growth and domestic instability on the threat of regime change and/ or involvement in external militarized conflicts. Many studies of diversionary conflict argue that lower rates of economic growth should heighten the risk of international conflict. Yet we know that militarized interstate conflicts, and especially wars, are generally rare events whereas lower rates of growth are not. Additionally, a growing body of literature shows that regime changes are also associated with lower rates of economic growth. The question then becomes which event, militarized interstate conflict or regime change, is the most likely to occur with domestic discord and lower rates of economic growth? Diversionary theory claims that leaders seek to divert attention away from domestic problems such as a bad economy or political scandals, or to garner increased support prior to elections. Leaders then supposedly externalize discontented domestic sentiments onto other nations, sometimes as scapegoats based on the similar in-group/out-group dynamic found in the research of Coser (1956) and Simmel (1955), where foreign countries are blamed for domestic problems. This process is said to involve a “rally-round-the-flag” effect, where a leader can expect a short-term boost in popularity with the threat or use of force (Blechman, Kaplan, and Hall 1978; Mueller 1973). Scholarship on diversionary conflict has focused most often on the American case1 but recent studies have sought to identify this possible behavior in other countries.2 The Falklands War is often a popular example of diversionary conflict (Levy and Vakili 1992). Argentina was reeling from hyperinflation and rampant unemployment associated with the Latin American debt crisis. It is plausible that a success in the Falklands War may have helped to rally support for the governing Galtieri regime, although Argentina lost the war and the ruling regime lost power. How many other attempts to use diversionary tactics, if they indeed occur, can be seen to generate a similar outcome? The goal of this article is to provide an assessment of the extent to which diversionary strategy is a threat to peace. Is this a colorful theory kept alive by academics that has little bearing upon real events, or is this a real problem that policy makers should be concerned with? If it is a strategy readily available to leaders, then it is important to know what domestic factors trigger this gambit. Moreover, to know that requires an understanding of the context in external conflict, which occurs relative to regime changes. Theories of diversionary conflict usually emphasize the potential benefits of diversionary tactics, although few pay equal attention to the prospective costs associated with such behavior. It is not contentious to claim that leaders typically seek to remain in office. However, whether they can successfully manipulate public opinion regularly during periods of domestic unpopularity through their states’ participation in foreign militarized conflicts—especially outside of the American case—is a question open for debate. Furthermore, there appears to be a logical disconnect between diversionary theories and extant studies of domestic conflict and regime change. Lower rates of economic growth are purported to increase the risk of both militarized interstate conflicts (and internal conflicts) as well as regime changes (Bloomberg and Hess 2002). This implies that if leaders do, in fact, undertake diversionary conflicts, many may still be thrown from the seat of power—especially if the outcome is defeat to a foreign enemy. Diversionary conflict would thus seem to be a risky gambit (Smith 1996). Scholars such as MacFie (1938) and Blainey (1988) have nevertheless questioned the validity of the diversionary thesis. As noted by Levy (1989), this perspective is rarely formulated as a cohesive and comprehensive theory, and there has been little or no knowledge cumulation. Later analyses do not necessarily build on past studies and the discrepancies between inquiries are often difficult to unravel. “Studies have used a variety of research designs, different dependent variables (uses of force, major uses of force, militarized disputes), different estimation techniques, and different data sets covering different time periods and different states” (Bennett and Nordstrom 2000, 39). To these problems, we should add a lack of theoretical precision and incomplete model specification. By a lack of theoretical precision, I am referring to the linkages between economic conditions and domestic strife that remain unclear in some studies (Miller 1995; Russett 1990). Consequently, extant studies are to a degree incommensurate; they offer a step in the right direction but do not provide robust cross-national explanations and tests of economic growth and interstate conflict. Yet a few studies have attempted to provide deductive explanations about when and how diversionary tactics might be employed. Using a Bayesian updating game, Richards and others (1993) theorize that while the use of force would appear to offer leaders a means to boost their popularity, a poorly performing economy acts as a signal to a leader’s constituents about his or her competence. Hence, attempts to use diversion are likely to fail either because incompetent leaders will likewise fail in foreign policy or people will recognize the gambit for what it is. Instead, these two models conclude that diversion is likely to be undertaken particularly by risk-acceptant leaders. This stress on a heightened risk of removal from office is also apparent in the work of Bueno de Mesquita and others (1999), and Downs and Rocke (1994), where leaders may “gamble for resurrection,” although the diversionary scenario in the former study is only a partial extension of their theory on selectorates, winning coalitions, and leader survival. Again, how often do leaders fail in the process or are removed from positions of power before they can even initiate diversionary tactics? A few studies focusing on leader tenure have examined the removal of leaders following war, although almost no study in the diversionary literature has looked at the effects of domestic problems on the relative risks of regime change, interstate conflict, or both events occurring in the same year.3

Low growth makes politicians cautious—they don’t want to risk war because it makes them vulnerable



Boehmer ‘7

(Charles, political science professor at the University of Texas, Politics & Policy, 35:4, “The Effects of Economic Crisis, Domestic Discord, and State Efficacy on the Decision to Initiate Interstate Conflict”)



Economic Growth and Fatal MIDs The theory presented earlier predicts that lower rates of growth suppress participation in foreign conflicts, particularly concerning conflict initiation and escalation to combat. To sustain combat, states need to be militarily prepared and not open up a second front when they are already fighting, or may fear, domestic opposition. A good example would be when the various Afghani resistance fighters expelled the Soviet Union from their territory, but the Taliban crumbled when it had to face the combined forces of the United States and Northern Alliance insurrection. Yet the coefficient for GDP growth and MID initiations was negative but insignificant. However, considering that there are many reasons why states fight, the logic presented earlier should hold especially in regard to the risk of participating in more severe conflicts. Threats to use military force may be safe to make and may be made with both external and internal actors in mind, but in the end may remain mere cheap talk that does not risk escalation if there is a chance to back down. Chiozza and Goemans (2004b) found that secure leaders were more likely to become involved in war than insecure leaders, supporting the theory and evidence presented here. We should find that leaders who face domestic opposition and a poorly performing economy shy away from situations that could escalate to combat if doing so would compromise their ability to retain power.




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