Xi’s China: The rise of party politics


Part one: The president is wresting control of economic policy away from other parts of government
 
 
 
A front-page article in the People’s Daily in May sent shockwaves through the Chinese bureaucracy. It quoted an unidentified “authoritative figure” warning readers of the ruling Communist party’s flagship newspaper about the country’s dangerous addiction to debt.
 
After a tumultuous start to the year, which began with a stock market and currency crisis, the government had needed strong first-quarter growth to restore confidence in its ability to manage the world’s second-largest economy. So there was relief when it was announced, on April 15, that the economy had grown 6.7 per cent in that period. The feeling soon evaporated, however, over concerns that the growth had been “bought” at the expense of financial discipline. In January alone, banks had issued Rmb2.54tn ($380bn) in new loans, expanding China’s property bubble and giving rise to a new one on its commodity exchanges.
 
According to party and government insiders, the article — a blunt warning that things had to change — was written by one of President Xi Jinping’s key economic advisers, Liu He, who runs a Communist party “leading group” on financial and economic affairs. Such groups have existed for decades but since Mr Xi took office in March 2013 they have achieved a new prominence as he employs them to drive home his status as the country’s most powerful leader since Deng Xiaoping.
 
The front-page story was interpreted by party officials as a shot across the bow of the government’s top body, the State Council, traditionally responsible for the day-to-day management of the economy, and headed by Premier Li Keqiang. That the criticism can be traced back to a group headed by Mr Xi and one of his key advisers hints at their frustration with the State Council’s handling of the economy.
 
“The leading group was annoyed by the first-quarter growth statistics because it felt that using the property sector and government-directed leverage to boost growth was irresponsible,” says one person familiar with the group’s deliberations. “Its argument was that Xi was going to have to get more involved [in economic policy]. Li hadn’t used the space effectively.”
 
The State Council information office says suggestions of discord between Mr Xi and Mr Li are “without foundation”. According to Li’s defenders, such debates are not suggestive of a broader factional rift between the president and premier. There is, however, increasing disagreement over how fast and effectively agreed polices are being implemented.

Presidential consolidation
 
China’s party-state has always been just that — a party-led entity. Mr Xi’s real power flows from his positions as party general secretary and head of its military commission, which controls the People’s Liberation Army. He assumed both posts in November 2012, four months before becoming president.

How has he grown to have such power in such a short time and what does he want to do with it?

James Kynge, the FT’s Emerging Markets Editor, talks to Kerry Brown, professor of Chinese politics at King’s College, and Tom Mitchell, FT Beijing Bureau Chief.
 
The party’s primacy, however, has never been more blatant than it is today. In less than four years Mr Xi, the son of one of China’s founding revolutionary heroes, has placed it front-and-centre in spheres, such as economic policy, that were previously delegated to the State Council and its ministries. In doing so, he has transformed the nature of power in China and changed the way foreign governments, multinational corporations and international financial investors interact with the world’s most populous country.

“It [the article] was as if the chairman of a large state-owned enterprise had sent a critical email to the chief executive, cc’d to everyone in the company,” says one Asian diplomat. “After that, nobody was sure what to do.”

By telegraphing his intentions so explicitly on the front page of the party’s flagship newspaper, the president was further raising the stakes in what is already a bold gamble. Mr Xi had already shocked the establishment by unleashing the party’s anti-corruption watchdog to target not just the senior echelons of the party and government, but also the military. Now he is using another party entity to deliver a similar jolt to those running the economy.
 
His boldness appears motivated by two convictions: that China’s economy is poised at a “make-or-break” moment, and that only a reformed party can steer the country through the treacherous rapids ahead.

Mr Xi has built his formidable reputation on the strength of his domestic anti-graft drive and a willingness to project power abroad, as Beijing asserts its territorial claims in the South and East China seas. But he will have to tackle deep-rooted economic problems in order to be recognised by history as a “transformative” leader in the mould of Deng, the architect of the country’s economic reforms, and its revolutionary founder, Mao Zedong. This partly explains the urgent tone of the People’s Daily broadside in May, especially as growth is slowing to rates not seen in a quarter of a century.
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He has a commanding presence and rhetorical eloquence but also a ruthlessness that his two immediate predecessors, Hu Jintao and Jiang Zemin, lacked. “Xi’s rivals were shocked at how quickly he consolidated power,” says one senior Chinese government official.

By dint of his family’s revolutionary heritage and a career that has taken him through every level of government — from an impoverished village in the country’s north-west to head of one of its most economically advanced provinces — China’s president has demonstrated a fearsome understanding of the internal power dynamics of the Chinese Communist party. 
 
Unlike his two predecessors, Mr Xi assumed control of the party military commission at the outset of his term and heads a streamlined Politburo Standing Committee, the party’s top decision-making body, which has been reduced in number from nine members to seven. Adding to the sense that China’s president had an ambitious blueprint, two of his erstwhile rivals — Bo Xilai and Zhou Yongkang — were jailed for life in 2013 and 2015 respectively for corruption.

“Jiang Zemin and Hu Jintao both began their terms in office with anti-corruption campaigns,” David Shambaugh, a Sinologist at George Washington University, said at a recent lecture in Beijing. “[The campaigns] both lasted about six months. They fizzled out and corruption continued to grow. This one has not fizzled out.”
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Mr Xi’s anti-graft effort, which has felled more than 150 senior officials with vice-ministerial rank or higher plus thousands of other low-ranking figures, and the more muscular foreign policy are closely interlinked. One of the core aims of the crackdown has been to clear out the rot in the People’s Liberation Army, transforming it into a lean military capable of enforcing the country’s territorial claims.

Both initiatives are popular with the Chinese public. Ask any man or woman on the street what they think of their president, and the most common reply is that he is a strong leader who is fan fubai — “opposed to corruption”. His willingness to project power across the South and East China Seas also touches a chord with a populace steeped in nationalist propaganda — so much so that the party risks a political backlash if it is ever perceived to be weak in asserting territorial claims.
 
That popularity has in turn given Mr Xi the political capital he needs to tackle his third and arguably most difficult policy objective — the most ambitious set of economic reforms since those launched by Deng almost 40 years ago. These include some 340 policy initiatives, ranging from the relaxation of China’s “one-child policy” to land reform, unveiled at the third plenary of the 18th Communist party congress in 2013.
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Many of Mr Xi’s core reforms are politically risky, especially a “supply side” restructuring of the economy away from investment and heavy industry to consumption and services. They entail plant closures and job losses and must be enforced by central government ministries and local officials who fear the instability they could create. So far, China’s president has little to show for his bold economic visión.
 
“Almost three years later we see minimal implementation,” said Mr Shambaugh. “The [reform] package was more of a blueprint than a road map . . . There was no sense of prioritisation or sequencing in it. They sort of threw it all out there and said here are 340 things you [party and government officials] have to do.”

Party control

In frustration, Mr Xi is using the party to assert authority in areas traditionally devolved to central or local governments. The change has been so dramatic, especially over the past year, that party and government officials talk about Mr Xi’s rapid consolidation of power in martial terms. “The south,” they say, “has taken over the north.” The reference is to the 1.2 sq km compound at the heart of the Chinese party state, Zhongnanhai, where government offices are situated near the north gate while party offices are clustered further to the south.

A central element of Mr Xi’s power grab has been his use of the party “leading groups” — whose existence was in some cases treated as a state secret for many years — to co-ordinate policymaking and implementation across government agencies.

The leading group for financial and economic affairs run by Mr Liu, the president’s adviser and author of the People’s Daily article, is the most prominent. It first began to garner attention in the wake of the State Council’s botched effort last summer to rescue China’s cratering stock markets.

“[Its] influence really increased in July [2015] after the stock market crisis,” says one Asian investment strategist who now receives news alerts every time Mr Liu or any of his party colleagues are quoted in the Chinese media. “What the leading group says seems to have more influence. Its voice is clearly becoming louder.”



Under Mr Xi they are increasingly recognised as important power centres. The president is director of at least six of the leading groups, including newly created ones focused on cyber space, economic reform and national security.
 
Evan Medeiros, a former Asia adviser to President Barack Obama now with the Eurasia Group, the political risk consultancy, says the function of the leading groups is “similar but not identical to” the National Security Council or National Economic Council in the US. “They can call together most other organisations and try to drive everybody to answers on difficult policy questions,” he says.

Foreign governments, companies and investors have taken notice. US and EU negotiators, for example, have been surprised to see representatives of the party in attendance at bilateral trade negotiations, in addition to usual suspects such as officials from the National Development and Reform Commission and banking regulator. “We always knew the party kept a close eye on things,” says a European diplomat. “But it never had a seat at the table before.”

Similarly, when US and European business groups last year sought to express their concerns over draft regulations governing Chinese banks’ use of foreign IT equipment, they sent a letter to the newly created Party Leading Group for Cyberspace Affairs, bypassing the banking regulator.

“There was a lot of discussion about whether to send it to the banking regulator,” says one person involved in the lobbying effort. “But we were worried it would just get lost in the weeds [there]. In our analysis the cyber space leading group was the swing factor.” After an intense lobbying effort by western trade associations and government officials, including Mr Obama, implementation of the draft regulations was delayed.

‘Disrupting the pecking order’

Such incidents have not endeared the party leading groups to front-line ministries and regulators, especially those traditionally entrusted with responsibility for the economy and financial sector.

“The leading groups add another layer to the decision-making process, which the bureaucracy hates,” says a former Chinese government official who maintains close ties to his former colleagues. According to another person close to Chinese policymakers, the leading groups have coalesced into a kind of “kitchen cabinet around Xi Jinping that has disrupted the pecking order”.


“The leading groups have gained more authority under Xi at the expense of the State Council and the ministries,” agrees Timothy Heath, a China specialist at the Rand Corporation. “There is consensus in the [party] about the need to centralise power in this manner to ram through reforms.”

Whether Mr Xi succeeds in his ambitious project will have reverberations far beyond China and the Asia-Pacific region.

“Xi Jinping’s stable hold on power matters to us in ways that probably weren’t true even three or four years ago,” says Kerry Brown, a Chinese studies professor at King’s College London.

“The EU is in disarray [and] America looks like it’s very unstable at the moment . . . [So] suddenly Xi becomes hugely geopolitically important in ways he probably didn’t want to be.

“We’re going to see pretty soon whether this man is for real. That means that he’s got to not just start talking about initiatives but really effectively implementing them.”

Additional reporting by Gabriel Wildau


Xi’s leading man: When Liu met Lew

The Communist party leading groups that President Xi Jinping has used to consolidate his power often receive little, if any, mention in Chinese state media.

A notable exception is the group responsible for financial and economic affairs, which is increasingly at the forefront of important policy debates. Headed by Mr Xi, it has some two dozen members including Liu He, a key presidential adviser who runs the group’s general office and oversees its operations on a daily basis.

Mr Liu’s clout is increasingly recognised abroad. When China’s equity and currency markets melted down in January, it was Mr Liu who spoke about the developments in a phone call with Jack Lew, US Treasury secretary.

While Mr Liu holds a government position — he is one of 10 vice-ministers at the National Development and Reform Commission — he derives his real power from his party leading group job.

It was in the latter capacity that he spoke to Mr Lew.

The US Treasury secretary has also visited Mr Liu at his office in an unmarked compound within easy walking distance of Zhongnanhai — the compound at the heart of the Chinese party state.
 
According to visitors, one of the rooms in Mr Liu’s compound is lined with pictures of him meeting foreign dignitaries including Susan Rice, US national security adviser, and Christine Lagarde, managing director of the International Monetary Fund.
 
One foreign government official who recently visited Mr Liu says the president’s adviser is worried about the Chinese economy’s prospects. “He told us not to believe the people who say it’s spring in China again. It’s still Winter.

“Our meeting with him was in English without translation and he was surrounded by overseas-educated staffers,” the person adds. “It was like meeting with a group of Americans except they were all members of the Chinese Communist party.”


A Country on Tenterhooks

Germans Wonder If Terror Can Be Prevented
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Following the attacks in Munich, Würzburg and Ansbach, many are asking how the violence can be stopped. There is an answer to this question, but will it be heard in these turbulent times? By SPIEGEL Staff

Just about every Munich local dreams of scoring a spot inside the "Himmel der Bayern" beer tent at the Oktoberfest. Anyone fortunate enough to get their name on a table inside the festival's most magnificent structure is usually a happy camper.

Recently, however, a number of people have been calling the tent's operator, Toni Roiderer, to cancel their reservations -- an unusual occurrence seven weeks before one of the world's most popular events. What if the Oktoberfest rolls around and no one feels like going?

"The world has changed," says Stephan Baumanns, a shop owner in Munich. "We're staying home."

The joyous commotion inside the tent that he enjoyed for years suddenly no longer seems safe to him. Baumanns is done tempting fate after what happened in Munich and elsewhere in Bavaria recently. Both of his children were regulars at the Olympia Einkaufszentrum shopping center, where an 18-year-old shot and killed nine people on July 22. The shooter was from the same neighborhood as the Baumanns. "I'm afraid of copycat killers," the shop owner says.

Baumanns isn't the only Bavarian who gets uneasy when he thinks about the Oktoberfest. Three violent attacks within the space of just seven days deeply upset the self-understanding of Bavaria as a haven of joie de vivre. How cozy can a person feel in a packed tent if they think another one of the guests might have an axe, pistol or bomb with them?

State of Shock

Munich is in shock. As the city mourns, local politicians are seeking to reassure people -- to little avail. A ban on backpacks and a perimeter fence around the Oktoberfest grounds could make the event safer, said Josef Schmid, the head of the annual event. But that "wouldn't be an ideal solution," retorted Munich Mayor Dieter Reiter, who added that a possible attacker could simply blow himself up among the crowds waiting in front of the entrance.

Some locals understood that to mean they'd be better advised to stay home this year and forego Oktoberfest altogether. This summer, it seems, many people are preferring a more solitary lifestyle, with only their fears to keep them company.

Can anyone blame them? Last year, 2015, was already full of horrors. The fact that this year wasn't likely to be any more peaceful became clear early on when authorities received a tip about a potential terrorist attack in Munich on New Year's Eve. It turned out to be a false alarm, but then came July, a month so full of calamities and horrific scenes it seemed worthy of a Hieronymous Bosch painting.

  • On July 14, France's national holiday, a 31-year-old man killed 84 people with a truck.
  • On July 18, a 17-year-old attacked passengers on a regional train near Würzburg with an axe and a knife.
  • Then came the July 22 massacre in Munich.
  • On July 24, a 27-year-old in Ansbach blew himself up.
  • The same day, a 21-year-old Syrian in Reutlingen, near Stuttgart, murdered a woman using the kind of long knife used to slice the meat for doner kebabs.
  • On July 25, several perpetrators shot and killed two teenagers in front of a nightclub in Fort Myers, Florida -- as if seeking to copy the attack in Orlando that took place just weeks earlier and left 49 dead.
  • On July 26, two men, both 19, stormed a church in Saint-Étienne-du-Rouvray, France, and slit the priest's throat.
  • The same day, a 26-year-old in a small town near Tokyo broke into a facility for the disabled, stabbing and killing 19 residents.
People are never far from these horrors as news of them is broadcast live on their smartphones.

The distant countries of France, Japan, the United States and Germany blur together into a single, pixelated image of terror.

Even while forensic experts are still analyzing blood samples and investigators are putting together the pieces of the puzzle, users on social media waste no time sharing their convictions that every single attack is the work of terrorists. For many, every crime of passion, every shooting spree, every bloodbath and every meticulously planned attack by fanatics can only be one thing: terrorism. More specifically: Islamic terrorism.

This is how fear seeps into peoples' heads.

'Taboos of Civilization Are Being Broken'

This became particularly apparent in Germany as it emerged that the perpetrators in Würzburg and Ansbach had struck as "soldiers" of the Islamic State (IS) terrorist militia. In response to what is believed to have been the first IS attack and the first Islamist suicide bombing to take place on German soil, German Chancellor Angela Merkel said last Thursday that "taboos of civilization are being broken." She added that the "abstract threat" that the security agencies had been warning about for years had now become a concrete one in a brutal way, right in front of our doorstep. The questions now dominating the public debate include: Was this just the beginning? How can we put an end to it? Most importantly: Are we stronger than our fear and stronger than potential attackers?

Comments made by Thomas de Maizière, the German interior minister and a member of Merkel's conservative Christian Democratic Union (CDU) party, were refreshingly nuanced. He said it is true that the Germans will have to get used to some changes. "We will have to get used to more intensive security precautions at major public events like Carnival parades, football matches, church congresses or Oktoberfest," he told SPIEGEL in an interview. At the same time, he added, it is advisable to remain calm.

But does that go far enough?

The Israelization of Our Streets

Such reserve didn't last long. Others quickly defaulted to arguments promoted by the security industry, which seems to have only one response when it comes to addressing violence, no matter how rash or calculated it may be: surveil, imprison, combat. The Israelization of our streets has suddenly become plausible, with heavily armed officers at intersections and entry controls in front of businesses and restaurants. The state of emergency seen in neighboring France could insidiously become a part of daily life here. At the moment, German politics seems driven by people's fears.

"Islamist terror has arrived in Germany," Horst Seehofer, the head of the Christian Social Union (CSU), the Bavarian sister party to Merkel's CDU, said last Tuesday. One must "stand up to it courageously." He sounded a bit like French President François Hollande, who used the word "war" one more time after the murder of a pastor in Saint-Étienne-du-Rouvray. Keeping calm is no replacement for protection by the state, Seehofer said, before announcing a long list of proposed government measures.

Fighting terrorism is once again the dictate of the hour -- rather than fighting the roots of terrorism. And it doesn't seem to matter to fear-mongering politicians that this will only serve to exacerbate the threat, or that there are other, more level-headed approaches, or even that, as Interior Minister de Maizière has said, society must "to a certain extent … endure" some excesses of violence. But for these politicians, the final straw came long ago.

The degree to which Germans have become susceptible to collective panic could be observed on the evening of July 22. When 18-year-old David Sonboly began his mass shooting in front of a Munich shopping center, many reflexively thought it was an IS attack against Germany. Within minutes, rumors began circulating on the Internet that a terrorist commando had gone on a killing spree in the Bavarian capital. The reports centered on men with assault weapons, of shots being fired on Karlsplatz square and of detonations in downtown Munich. The social networks amplified people's fears even though they were wrought with speculation, half-truths and erroneous reports.

By midnight, police had received more than 4,300 emergency calls, most of which turned out to be false alarms. Armed officers, including many in plain clothes, responded to the calls and in the process, unintentionally caused residents to panic even more. In no time at all, people were under the impression that Munich would become Germany's Paris, where 130 people died late last year.

Meanwhile, the country's media machine began to overheat, with journalists lacking any information interviewing experts who had none to offer. When US President Barack Obama spoke later that evening to ensure Germany his full support, it appeared to be confirmation of the terror meltdown that many had been expecting for so long.

Even after it became clear that the deadly events had been committed by a youth with xenophobic views and not jihadist fanatics, parts of the online community refused to budge in their view that the attack had been conducted by an Islamist terrorist. Of course, the "lying cartel" comprised of politicians and the media had kept all this under wraps, they alleged.

Twitter users wrote that jihad had finally arrived in Germany and were validated with likes for having the courage to say what felt like the truth.

Seldom has a single crime illustrated so plainly the incomprehension that prevails in these times of violence as the shooting spree in Munich. The perpetrator was a young German man with Iranian roots -- and possibly racist motives -- who wanted to lure people of the same age into an ambush. For a while, he was even regarded as a potential jihadist. There are no simple categories left for classifying these kinds of attacks -- not in Munich, Würzburg, Ansbach or Reutlingen. There are also no easy answers.

The Nightmare of Every Investigator

Is it all just terrorism? By no means. Violence has many causes. But given that it is happening at such frequent intervals and because fear is clouding our thinking, it can be difficult to differentiate between a spontaneous crime and a premeditated one. Was it conducted by a mad man or an Islamist?

Or perhaps neither? For law enforcement officials these days, it can feel like staring at a "Where's Waldo?" puzzle. It's also unsettling that they have to deal with such a sinister phenomenon, namely that of the lone wolf -- a perpetrator who comes out of nowhere before suddenly inflicting death.

The lone wolf is every investigator's worst nightmare. From 2006 to 2014, almost three-quarters of the terrorism deaths in Western nations were the product of lone wolves or small, autonomous cells. After the latest attacks, the question of whether lone wolves can be stopped is more relevant than ever.

The US and the European Union are making an enormous effort to answer this question, with some success. Research indicates that lone wolves actually leave behind more of a trace before committing their crimes than officials trying to track them had previously believed. In many cases, lone wolves act anything but alone. And they suggest that authorities would be well advised, even after 9/11, not to assume that terrorism will be perpetrated exclusively by Islamists.

In a study called "Lone-Actor Terrorism," several European think tanks analyzed 98 attacks by individuals in the EU, Switzerland and Norway and determined that from 2009 to 2014, some 38 percent of attacks may have been "religiously inspired," but 33 percent were also perpetrated by right-wing extremists like Anders Behring Brevik, who killed 77 people in Norway on July 22, 2011 -- the same man who apparently served as an inspiration for the Munich shooter. Researchers are therefore warning the European security apparatus against focusing primarily on the threat from Islamists, as many have done in recent years.

At the same time, no other group has been as savvy in Europe at attracting lone wolves for its purposes as the Islamic State. Its propaganda apparatus is non-stop in its efforts to animate activists worldwide for do-it-yourself jihad. And it appears that IS' virally distributed hate sermons are particularly appealing to people going through life crises or who are suffering from mental problems.

Security authorities believe that a large share of the Europeans who kill in IS' name have mental disorders. This group also now likely includes Mohammad Daleel, the Ansbach suicide bomber. He had been facing deportation from Germany and had allegedly attempted to kill himself twice before.

Was he sick or an Islamist? Possibly both. "Before, people with depression simply committed suicide," says French sociologist Farhad Khosrokhavar. "Now they take other people down with them" and claim to be part of IS when they do so.

Early Warning Systems

That makes combatting lone wolves more difficult for investigators. Still, the fact that lone wolves don't act nearly as secretively and discreetly as people long thought offers one glimmer of hope for security agencies. In a study financed by the US Justice Ministry in 2015, American researchers Mark Hamm and Ramon Spaaij determined that, "Virtually all lone wolves demonstrate affinity with some person, group or community, be it online or in the real world."

Since the rise of social networks, many supposed lone wolves have left behind digital hints about their plans, which could make it easier to track them before they strike. "If lone wolves announce their violent intentions beforehand, then steps can probably be taken to stop them," Hamm and Spaaij wrote.

In this age of violence, an old hope of criminologists has reemerged, namely that of prevention.

Intelligence services in America and Europe have been working for some time now on a kind of global digital early warning system. In building it, they are also encroaching ever more deeply into our personal privacy. Around the world, governments have invested billions in programs aimed at casting light on virtual spaces.

In July 2015, Europol's Internet Referral Unit began tracking and investigating user accounts that are used to spread terrorist propaganda.

In Germany, the Federal Office for the Protection of the Constitution, the domestic intelligence agency responsible for monitoring extremism, established a special unit in an effort to detect potential perpetrators in the digital world. Meanwhile, the Bundesnachrichtendienst, Germany's foreign intelligence agency, is planning to intensify its monitoring of social networks within the scope of its "Strategic Initiative Technology" program. The German Federal Criminal Police Office also has a program in place for the early identification of potential attackers. Following the Munich massacre, investigators are also increasing their efforts to scrutinize the so-called Darknet.

No agency in the world can sift all the data created online. On YouTube alone, several hundred hours of new videos are posted each minute. Instead, Western governments are counting on assistance from net communities with their billions of members.
Ansbach and Würzburg Are not New York, London or Paris

In early 2016, representatives of the US government and its intelligence agencies met with major Internet companies, including Apple, Facebook, Twitter and Microsoft. The high-level deliberations took place behind closed doors, seeking answers to the question of how "to deal with the growing threat of terrorists and other malicious actors using technology." The meeting reportedly included considerations for establishing a permanent system for using crowd-sourcing to track terrorists.


Facebook's anti-suicide alarm could serve as a model. The service allows users to alert others if one of their friends' posts seems unusually gloomy or shows troubling signs of depression.

Will users set off alarm bells in the future if they search for things like "IS," "decapitation" and "infidels" too often? And how many researchers, criminologists, politicians and journalists will be caught up in the authorities' wide dragnet? How many of their names will one day be included on lists of terrorism suspects -- lists that are constantly growing and easy to lose sight of?

Even if the authorities manage to create an early warning system with the help of algorithms and citizen volunteers, one question remains open: Will early be early enough? It's true that many lone wolves announce their plans ahead of time, but most of the time they do so surreptitiously through encryption -- or right before they strike.

On the morning of Nov. 1, 2013, 23-year-old Paul Anthony Ciancia stormed into his flatmate's room and insisted he immediately drive him to the Los Angeles airport. What's more: He sent a text message to his family in New Jersey in which he hinted at his impending suicide. Ciancia's father alerted the police and officers arrived at Ciancia's apartment shortly thereafter. But they were too late.

The lone wolf was already at the airport, where he shot four people, one fatally.

Are Attacks Preventable?

Can terrorist attacks and shooting sprees be prevented? Are there effective strategies against the radicalization of youths? Is it possible to recognize when young migrants begin to direct their anger toward their newly adopted home?

If you ask researchers at the University of Maryland and Jacobs University in Bremen, Germany, the answer is yes to all of the above. But there's one condition: We have to let go of our false belief that religion plays the decisive role in the matter.

The American and German researchers wanted to figure out what the appeal of jihad was for young Muslims who grew up in the West, so they conducted a psychological study, titled, "The Struggle to Belong: Immigrant Marginalization and the Risk of Homegrown Radicalization."

They surveyed 464 people, mostly young and educated Muslims in the United States, the Netherlands and Germany.

They found that the more young people felt rejected by a majority of society, the more susceptible they were to fundamentalist, black-and-white thinking.

Migrants who neither felt at home in Germany nor in their countries of origin are prone to radical ideas, says Klaus Boehnke, who co-directed the study. For these people, acceptance is paramount. "But instead, we make them feel like outsiders," Boehnke says.

Thomas Mücke, head of the Violence Prevention Network (VPN), believes prevention must be far more comprehensive and begin much sooner. The VPN looks after more than 200 at-risk youth. Mücke speaks of a "cocktail of frustration" that gradually builds up in disenfranchised adolescents.

From there, it's only a matter of time before it can be exploited by extremists. "If integration fails and a young refugee feels alone and ostracized, that's when they start recruiting," Mücke says. In his opinion, further attacks won't be prevented with more repression and surveillance.

"We need an educational infrastructure in addition to our security infrastructure in Germany."

After so many years, the German government seems to have come to a similar conclusion. For the first time, the Interior and Family Ministries have joined forces to come up with a "Strategy of the Federal Government for Extremism Prevention and Democracy Promotion," which they unveiled two weeks ago. The 62-page paper makes clear that "security policy" is no longer solely in the foreground; preventative measures are weighted just as heavily.

German Family Minister Manuela Schwesig has set her sights on a new law that would guarantee financing for the country's numerous prevention programs. Until now, these programs have had to beg for fresh funds on a nearly annual basis. Organizations focusing on prevention among refugees, in particular, will be supported in the future. During a meeting with her state-level counterparts last week, Schwesig said her ministry would come up with draft proposals over the summer.

Finding a New Approach

The severity of the situation is on full display in the office of Mechthild Wenk-Ansohn, a doctor and psychotherapist who has spent 23 years working in the outpatient clinic of the Berlin Center for the Treatment of Torture Victims (BZFO). Since last year, she has been practically overrun with refugees. Wenk-Ansohn estimates that at least a quarter of the people who seek asylum in Germany are in need of psychological care.

Her doctor's office is like a seismograph that measures the impact of political decisions in the German capital on the psyches of refugees. When the government decided to limit the ability of asylum-seekers to have their families come join them, Wenk-Ansohn could immediately see the effect it was having on her patients. A similar thing happened when it became clear that the countries in the Maghreb region would be deemed safe places of origin by the German government. "Every political decision, every official letter can plunge a person who is already in an unstable condition deeper into crisis. Very often, this can lead to suicidal tendencies," Wenk-Ansohn says.

This is even truer for young refugees who get stranded in Germany without their parents or contacts and often without any prospects for the future. Hospitals located near asylum-seekers' dormitories are often confronted with teenage refugees who have tried to kill themselves. Most clinics don't have the capacity to cope with these situations.

In the southwestern German state of Saarland, authorities are trying something new. There too, young refugees have tried to take their own lives by swallowing thumbtacks, injuring themselves with knives, knocking their heads against radiators until they bleed or trying to strangle themselves.

Since last August, however, unaccompanied minors living in Saarland have been getting psychological assistance without even realizing it. A support system has been integrated into their daily lives -- one that often takes place in groups -- and it's been hugely successful.

Whereas there was at least one attempted suicide by an unaccompanied minor every night a year and a half ago, now that figure is down to two per month, according to Eva Möhler, the head of child and youth psychiatry at the SHG Kliniken Sonnenberg medical center in Saarland.

Möhler came up with a concept she called START, which stands for stress, trauma symptoms, arousal regulation and treatment. "It's a short-term intervention designed to help people overcome acute, emotional crises and learn to self-regulate themselves and their feelings," she explains.

She says that refugees don't arrive in Germany as aggressive, unapproachable criminals; at first, they're full of hope. People here need to be careful not to destroy that by plastering the new arrivals with negative labels. "If a young refugee hears over and over again that he's not wanted and is treated as if he's a thief or potentially violent, it's not surprising if he adopts that role at some point," Möhler says.

With the way things are now, Möhler would have a tough time convincing the broader public of the utility of her work. Doctors and psychologists promise solutions in the medium term, but many people are feeling an acute sense of insecurity. They want immediate solutions.

Even before the series of attacks in July, fears of terrorism had overtaken all other worries among Germans in the polls. And coupled with those fears is a growing rejection of migrants and Muslims.

For many, the fact that it was Muslims who swung an ax in Würzburg and detonated a bomb in Ansbach was confirmation of the next supposedly irrefutable truth: That Islam is synonymous with terrorism.

The majority of Germans have not jumped to such conclusions following the recent violence, but for a large, very vocal minority, a sense of fear could change to aggression, as seen during the refugee crisis last year.

Spreading Vitriol

In the days since the ax attack in Würzburg, a number of Germans have resorted to vigilante justice.

In Gailhof in the German state of Lower Saxony, as well as in Rösrath in North Rhine-Westphalia, asylum-seekers have been attacked out in the open. In Niesky, in the state of Saxony, shots were fired from a car at a dormitory for refugees. In Dresden, Heidenau and Königstein, anonymous vandals painted chalk outlines in front of train stations and left behind leaflets with the words "Migration kills" splashed across them.

Countless people are also taking to social networks again to spread their vitriol. They agitate against German Chancellor Angela Merkel under the hashtag #merkelsommer -- which translates to #merkelsummer -- saying she opened the floodgates and let criminals, rapists and terrorists into the country. "Germany is sacrificing its citizens on the altar of massive immigration," one anonymous user wrote on Twitter.

In order to capitalize on the violence to the greatest extent possible, one political party wasted no time in making fear one of their party's central credos. Frauke Petry, the head of the far-right Alternative for Germany (AfD) party, wrote on Facebook on Monday: "Würzburg, Reutlingen, Ansbach … Is Germany colorful enough for you, Ms. Merkel?" The party's second-in-command, Alexander Gauland, called for the right to asylum to be lifted for Muslims.

But the AfD politicians weren't the only ones who sought to link Merkel's refugee policy with the recent violence. The head of the far-left Left Party, Sahra Wagenknecht, did too -- to the chagrin of her party colleagues. Early last week, the politician issued a press release stating that "events of recent days show that there are considerable problems associated with taking in and integrating a large number of refugees and migrants and that it is more difficult than Merkel tried to convince us it would be last fall with her frivolous 'We can do it'" mantra. The popular politician said "potential threats" must be tracked so "that the people of our country can feel safe again."

Merkel, for her part, sought to calm the country with a mixture of sober reflection and determination. The "barbaric acts" would be clarified quickly, Merkel promised last Thursday. At the same time, she warned against overreacting. The terrorists' goal is to "destroy our way of life. They sow hatred and fear among cultures, and they sow hatred and fear among religions."

Merkel knows just how precarious her situation is. During public appearances, she is repeatedly confronted with the accusation that the state has lost control. Every act of violence only serves to further strengthen that sentiment. "It is unbelievably difficult to counter that," a close confidant of Merkel's explains.

Reflexive Responses

Merkel wants to prevent a discussion of her immigration policy from flaring up. But that approach didn't take into account CSU head and Bavarian Governor Horst Seehofer, one of the leading critics of the chancellor's refugee policies from the very beginning. "We were validated in all of our prophecies. Especially concerning security policy," Seehofer said last week at a meeting of his state government cabinet. He then proceeded to present a list of demands from his law-and-order policy toolbox: allow domestic deployments of the German army, the Bundeswehr, hire more police officers, push through more encompassing data retention legislation and increase surveillance at refugee hostels.

Seehofer's interior minister, Joachim Hermann, went a step further, saying that "deportations to crisis regions" should "no longer be taboo." Bavarian Justice Minister Winfried Bausback called for electronic ankle bracelets for extremists. There was only one problem: The Islamist who murdered a priest in France last week was wearing such a device -- and it didn't stop him from committing that grisly crime.

These are the same reflexive responses that have dominated Western security policy for the past 15 years. Since 9/11, around two dozen new anti-terror laws or amendments to existing legislation have been enacted in Germany. Many of them had to be corrected or were rejected outright by Germany's Constitutional Court because they were hastily written in the immediate aftermath of a violent attack.

The fact that expanding government powers alone isn't enough to prevent further violence from happening is perhaps best exemplified by France. A state of emergency has been in place there for nine months and police and intelligence officers enjoy even broader powers than they do in Germany.

Yet French authorities were still powerless to stop the most recent terrorist attacks, such as the one in Nice that killed 84 people.

Seehofer and officials in his CSU party are similarly convinced of the state's obligation to do something -- anything -- in times of uncertainty. After the chaos of the last weeks, admitting it is too early to come up with a substantive response doesn't seem to be an option.

The CSU party chief has at least refrained from further radicalizing the political discourse so far.

Whether he'll continue to do so will depend on his performance in the polls. Lately, approval ratings for the CSU have been stable, but if there are more Islamist extremist attacks, the party's rhetoric will only intensify -- and the cycle of fear will escalate.

Germany Spared Major Attacks

It must be noted that while the latest wave of violence in Bavaria and elsewhere may have brought terrorism uncomfortably close to home, Germany has still been spared a major attack. Ansbach and Würzburg are not New York, London or Paris -- and they're certainly not Baghdad or Kabul. Of the thousands of people who are killed by terrorism every year, only a very small percentage of them are Europeans or Germans.

And when delusional or insane people are forced to reach for axes or knives to do their killing, it just goes to show that Germany is better prepared than many people think. Someone who avoids trains out of fear for their life and instead chooses to drive a car should know that they're exposing themselves to an incomparably greater risk.

Fear brings the world into disarray; it is often felt most strongly where there is the least danger -- and vice versa.

In the chaos of the recent shooting spree in Munich, while it still wasn't clear who the shooter was or whether he was acting alone and public transportation came to a standstill, something else happened: Munich residents took stranded, frightened and panicked people into their homes. Even the Bavarian state parliament building and numerous mosques opened their doors. People organized emergency shelters in their neighborhoods, coordinating their efforts under the hashtag #offenetuer, German for #opendoor.

Countless strangers found protection in the apartments of Munich residents.

Fear had to wait outside.


Reported by Maik Baumgärtner, Anna Clauß, Martin Knobbe, Ann-Kathrin Müller, Ralf Neukirch, Sven Röbel, Jörg Schindler and Wolf Wiedmann-Schmidt


The Globalization Disconnect

Stephen S. Roach

Newsart for The Globalization DisconnectOlivier Douliery/Stringer         


NEW HAVEN – While seemingly elegant in theory, globalization suffers in practice. That is the lesson of Brexit and of the rise of Donald Trump in the United States. And it also underpins the increasingly virulent anti-China backlash now sweeping the world. Those who worship at the altar of free trade – including me – must come to grips with this glaring disconnect.
 
Truth be known, there is no rigorous theory of globalization. The best that economists can offer is David Ricardo’s early nineteenth-century framework: if a country simply produces in accordance with its comparative advantage (in terms of resource endowments and workers’ skills), presto, it will gain through increased cross-border trade. Trade liberalization – the elixir of globalization – promises benefits for all.
 
That promise arguably holds in the long run, but a far tougher reality check invariably occurs in the short run. Brexit – the United Kingdom’s withdrawal from the European Union – is just the latest case in point.
 
Voters in the UK objected to several of the key premises of regional integration: free labor mobility and seemingly open-ended immigration, regulation by supranational authorities in Brussels, and currency union (which has serious flaws, such as the lack of a fiscal transfer mechanism among member states). Economic integration and globalization are not exactly the same thing, but they rest on the same Ricardian principles of trade liberalization – principles that are falling on deaf ears in the political arena.
 
In the US, Trump’s ascendancy and the political traction gained by Senator Bernie Sanders’s primary campaign reflect many of the same sentiments that led to Brexit. From immigration to trade liberalization, economic pressures on a beleaguered middle class contradict the core promises of globalization.
 
As is often the case – and particularly in a presidential election year – America’s politicians resort to the blame game in confronting these tough issues. Trump has singled out China and Mexico, and Sanders’s opposition to the Trans-Pacific Partnership – the proposed trade deal between the US and 11 Pacific Rim countries – has pushed Hillary Clinton, the Democratic Party’s nominee, to adopt a similar stance.
 
In short, globalization has lost its political support – unsurprising in a world that bears little resemblance to the one inhabited by Ricardo two centuries ago. Ricardo’s arguments, couched in terms of England’s and Portugal’s comparative advantages in cloth and wine, respectively, hardly seem relevant for today’s hyper-connected, knowledge-based world. The Nobel laureate Paul Samuelson, who led the way in translating Ricardian foundations into modern economics, reached a similar conclusion late in his life, when he pointed out how a disruptive low-wage technology imitator like China could turn the theory of comparative advantage inside out.
 
Nor is it just a problem with an antiquated theory. Recent trends in global trade are also flashing warning signs. According to the International Monetary Fund, annual growth in the volume of world trade has averaged just 3% over the 2009-2016 period – half the 6% rate from 1980 to 2008. This reflects not only the Great Recession, but also an unusually anemic recovery.
 
With world trade shifting to a decidedly lower trajectory, political resistance to globalization has only intensified.
 
Of course, this isn’t the first time that globalization has run into trouble. Globalization 1.0 – the surge in global trade and international capital flows that occurred in the late nineteenth and early twentieth centuries – met its demise between World War I and the Great Depression.
 
Global trade fell by some 60% from 1929 to 1932, as major economies turned inward and embraced protectionist trade policies, such as America’s infamous Smoot-Hawley Tariff Act of 1930.
 
But the stakes may be greater if today’s more powerful globalization were to meet a similar fate. In contrast to Globalization 1.0, which was largely confined to the cross-border exchange of tangible (manufactured) goods, the scope of Globalization 2.0 is far broader, including growing trade in many so-called intangibles – once nontradable services.
 
Similarly, the means of Globalization 2.0 are far more sophisticated than those of its antecedent. The connectivity of Globalization 1.0 occurred via ships and eventually railroads and motor vehicles.
 
Today, these transportation systems are far more advanced – augmented by the Internet and its enhancement of global supply chains. The Internet has also enabled instantaneous cross-border dissemination of knowledge-based services such as software programming, engineering and design, medical screening, and accounting, legal, and consulting work.
 
The sharpest contrast between the two waves of globalization is in the speed of technology absorption and disruption. New information technologies have been adopted at an unusually rapid rate. It took only five years for 50 million US households to begin surfing the Internet, whereas it took 38 years for a similar number to gain access to radios.
 
Sadly, the economics profession has failed to grasp the inherent problems with globalization. In fixating on an antiquated theory, they have all but ignored the here and now of a mounting worker backlash. Yet the breadth and speed of Globalization 2.0 demand new approaches to cushion the blows of this disruption.
 
Unfortunately, safety-net programs to help trade-displaced or trade-pressured workers are just as obsolete as theories of comparative advantage. America’s Trade Adjustment Assistance (TAA) program, for example, was enacted in 1962 for the manufacturing-based economy of yesteryear.
 
According to a report published by the Peterson Institute, only two million US workers have benefited from TAA since 1974.
 
The design of more enlightened policies must account for the powerful pressures now bearing down on a much broader array of workers. The hyper-speed of Globalization 2.0 suggests the need for quicker triggers and wider coverage for worker retraining, relocation allowances, job-search assistance, wage insurance for older workers, and longer-duration unemployment benefits.
 
As history cautions, the alternative – whether it is Brexit or America’s new isolationism – is an accident waiting to happen. It is up to those of us who defend free trade and globalization to prevent that, by offering concrete solutions that address the very real problems that now afflict so many workers.
 
 


Apocalypse Now

A Year of Crises, Shocks and Fears of Terror

By Mathieu von Rohr
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    Getty Images  Munich, July 22, 2016: Police escort people out of the city's Olympia Einkaufszentrum shopping center.


Ansbach, Munich, Würzburg, Nice, Brussels -- in light of the many horrific news stories, many are asking: What's the matter with 2016?

Has the world gone mad? This question is occupying the minds of many people these days. It feels like the world is out of step, that multiple crises are encroaching upon us and that the distant world of international politics is about to get dangerously personal. How are we supposed to deal with the feeling of living in an era that we no longer seem to understand?

"I'm tired of living in interesting times," a Twitter user wrote several days ago. His words were retweeted more than 1,000 times. Everyday, people on social media ask: What is wrong with 2016? When will it be over? What more does it have in store for us?

This year, international political events have overlapped in an unsettling way. Something seems to be coalescing and brewing, though it's not yet clear what. Each new development seems to come a bit faster than the last. It may have begun with the Arab Spring in 2011, but it also continued with the wars in Libya and Syria and was further exacerbated by the conflict between Ukraine and Russia and the latest terrorist attacks. We are witnessing the destabilization of the world as we've known it since 1989.

When our phones began vibrating a week ago Friday with breaking news alerts about the military coup in Turkey, we were still processing our shock over the terrorist attack in Nice, France. Each shock fades quickly in light of the next one. On Sunday, a Syrian refugee detonated a bomb outside an outdoor concert in Ansbach, Germany. Last Friday, an 18-year-old student shot and killed nine people in Munich, most of them teenagers. And only days before that, a 17-year-old asylum-seeker in Würzburg attacked a group of Chinese tourists with an ax.

It was only a month ago that a majority of British voters decided to leave the European Union.

The United States is shaken by racial unrest, the massacre in Orlando -- and the rise of the Republican presidential nominee Donald Trump.

With that, 2016 was really only the worst year since 2015, the year of the great refugee crisis.

And 2015 was only the worst year since 2014, the year of the war in Ukraine.

We are living in an age of shocks and crises that could well be traumatizing in their rapid succession and concentration, since it's not yet clear whether they're only a temporary jolt or the beginning of a trend with no end in sight. Of course, the sheer number of conflicts has remained constant in recent years. But there is much indication that we find ourselves in a new era of global instability. The biggest geopolitical stories of our time are the destabilization in the Middle East, the European security order and the European Union. In addition, there has been a societal shift in many Western countries: Many citizens are angry at the elites, because they see themselves as victims of globalization, free trade and migration. This anger has enabled the rise of political movements from the fringe to the mainstream in only a few years: Donald Trump, the Brexit movement, Front National and the Alternative for Germany, or AfD. The classic political camps are dissolving as the battle between the political left and the right is replaced by one between Isolationists and Internationalists.

Every now and then, there are phases in international politics during which more happens in the span of a few weeks than would otherwise happen in decades. Do 2014 and 2016 fall into that category? They're not comparable to the most dramatic phases of the past century, when both World Wars broke out; nor are they anything like 1989, when the Cold War ended and the world order was rearranged. It's also unclear whether this year will end with the same chaotic violence it started with.

But it is rather likely that global insecurity will become the new status quo. The old, more stable world of the 1990s is not coming back. We have to accept the fact that we live in trying times. Many things are being thrown off-kilter: the balance of power between the United States and China, the future of the EU, NATO's eastern flank, the global economic order, the relationship between modernity and political Islam, not to mention democracy and human rights in the West.

Finding the thread that ties all this together is tough. There are causal and random effects, clear connections and we're often dependent on speculation. Does the ease with which attackers commit murder in the West have anything to do with the horrific images of Syria that we're seeing? Do military officials like those in Turkey find it easier to encourage a coup if they find themselves surrounded by violent conflicts and the region is gripped by chaos? And is Erdogan taking a page out of Putin's book when he suspends the European Human Rights Convention? Instability begets instability -- that's something we are now seeing on a daily basis.

It's hard to say when the world began to grow more instable. It's a truism to say 1989 didn't usher in the end of history, as the political scientist Francis Fukuyama predicted at the time. The end of the Cold War also meant the disappearance of the rivalry between two superpowers that kept the rest of the world in icy suspense. After a short phase of sole American dominance and the relative calm of the 1990s, history once again reared its head with the 9/11 attacks and the Iraq War, which bears responsibility for much of what is afflicting the world today.

The Iraq War had two consequences. It ushered in the collapse of the Iraqi state and the rise of terrorism in the region, as the self-styled Islamic State was born out of the rubble of Saddam Hussein's tyrannical rule. George W. Bush's war marked the overextension of American military might and the beginning of a new isolationism in US foreign policy.

Barack Obama began the withdrawal of US forces from the Middle East and Europe. He wanted to concentrate more heavily on the Pacific region, where China was reclaiming its historical sphere of influence. He wanted to leave interventionism behind him, opting not to invade Syria even though he admitted the situation in the region had spiralled out of control.

If neither the US nor the Europeans or some other major power wants to maintain order, a geopolitical vacuum forms -- and that's what we're dealing with now. So far China hasn't been interested in taking on a global role militarily either. If Donald Trump becomes president, America would withdraw from the world even further. It would be the end of NATO as we know it. The Europeans filling the gap left behind by the US is rather unlikely in light of their own weaknesses. Western foreign policy now seems impotent.

The second cause of the geopolitical uncertainty in the Middle East is the Arab Spring. It arose from a dissatisfaction with the economic conditions in Arab countries and it has only been exacerbated by rapid population growth. Enraged young people overthrew their post-colonial rulers, whose power had become brittle. But rather than democracy and prosperity, what followed in many cities was chaos, sectarian clashes and destabilization in the entire region.

Old state structures in Syria, Libya and Iraq have collapsed. Borders once imposed by colonial rulers have disintegrated. Some political scientists feel reminded of the Thirty Years War given the unrest throughout the region. By now, the destabilization of the Middle East has also enveloped Turkey, where old state structures are being called into question. The country is on the brink of civil war as political Islam faces off with secular tradition, tearing the country apart. The further Turkey distances itself from Europe, the more the unrest in the region will have an impact on Europe, for the Continent will have lost an important buffer between East and West.

The geopolitical turmoil wouldn't have the same effect on us if the West wasn't already feeling insecure. The shock hits us so hard because we are no longer sure of ourselves. External instability reinforces internal instability.

Terrorism threatens our daily lives, while nationalist populism threatens the political culture. Since the financial crisis of 2007, there has been uncertainty about whether capitalism is still working. Many European countries are languishing amid low growth, high unemployment and growing inequality. A new class of angry citizens has emerged, one in which voters feel left behind, threatened and unrepresented. The beneficiaries of the crisis are the nationalist populists. They sympathize with the authoritarianism of Putin, fan the flames of anti-Muslim rhetoric and dream of bringing an end to the EU. They are fighting the West from within.

Another worrisome tendency in the West is the tendency to believe the kinds of conspiracy theories that circulated on Facebook and Twitter in some countries after the Arab Spring and poisoned the atmosphere there. Even in Europe, some citizens have completely lost their certainty that a reality based in proven facts even exists. The credibility of classic media and politicians is called into doubt -- instead, lies and rumors are preferred.

At the beginning of the Arab Spring, there was a debate about whether the uprisings in Tunisia, Egypt or Syria would have happened had it not been for Facebook and Twitter. They probably would have still happened, but the protesters wouldn't have been able to mobilize as quickly as they did online.

The same holds true today. Social media platforms bring the world closer to us than ever before and help us understand it. But they at the same time intensify and spread a new permanent sense of insecurity. They disseminate word of every single shock, attack and cruelty across the globe, and they give everyone a forum where they can further incense themselves. Furthermore, they make it more difficult to maintain perspective in this chaotic world.

Many of us simply don't understand the world anymore. It will probably be up to the historians of future generations to accurately categorize what exactly it is that we're experiencing in these times of transition. This is, however, not the time to give in to panic -- it is time to have confidence in one's own values and keep fighting for the society one believes in. Geopolitical turmoil is best overcome when one is grounded in clear convictions, which holds true for both citizens and countries as a whole. First of all, a clear compass is needed in order to take responsibility for foreign policy, confront dictators and manage the crises that we're witnessing.


Mathieu von Rohr is DER SPIEGEL's deputy foreign editor.


The Problem with Fighting Islamist Terrorism

By George Friedman


Radical Islamism is a movement, not an organization, which makes it much harder to defeat.

The United States has been at war for nearly 15 years. The primary purpose of the war was to end the threat of terrorism posed by jihadists. The war has taken various twists and turns, and many of the operational choices have been questioned and are questionable. It can be said, however, that regardless of views on Iraq or Afghanistan, the fundamental strategic goal has not been achieved. Islamist terrorism remains active in Europe and shows its hand occasionally in the United States. The shift to Europe from the United States might have been the result of U.S. operations, but it might also be a shift in terrorist strategy for the moment.

At its heart, the United States’ strategy was to identify terrorist groups and destroy them. The assumption was that terrorism required an organization. Progress in this strategy meant identifying an organization or a cell planning terror operations and disrupting or destroying it. Since terrorist organizations are relatively small at the operational level, the strategy has resembled police work: the first step is to identify the person active in the organization. Having identified him, send drones or SEALs to capture or kill him.

Operationally, the strategy worked. Terrorists were identified and killed. As the organizations were degraded and broken, terrorism declined - but then surged. These endless intelligence and special forces operations may have been brilliantly carried out, but the strategic goal of the United States has not been achieved. The war is not being won and a stalemate is equivalent to a loss for the United States.

The essential problem has been a persistent misunderstanding of radical Islamism. It is a movement, not an organization. Or to be more precise, radical Islamism is a strand of Islam. How large or small it is has become the subject of a fairly pointless debate. Its size is sufficient to send American forces halfway around the world and it is capable of carrying out attacks in Europe and the U.S. Whether it is a small strand or a giant strand doesn’t matter. What matters is that it cannot be suppressed, or at least has not yet been suppressed.


One of the problems in American thinking is that it still draws from the U.S.’ experience with European and Palestinian terrorism prior to 1991. These groups were heavily influenced by the Soviet model and created organizations that were to a great extent hermetically sealed. The organizations had three characteristics. First, although sympathizers might be recruited with a careful vetting process, membership in the organizations was formal in the sense that you either were a member or you weren’t. Second, the organizations protected themselves by staying, to the extent possible, at arm’s length from any movement. They were obsessed with preventing penetration. Finally, they were heavily compartmentalized so that members and operations were known only on a need-to-know basis.

These organizations were intended to be sustainable over an extended period of time. But they had a flaw. If they could be penetrated (however difficult it might be) by informants or electronic monitoring, the entire organization could unravel. Either it would be completely destroyed through operations or the sheer paranoia of knowing it was penetrated somewhere would cause internal conflict or lead it to become inert.

In some cases, these organizations had no movement supporting them or the movement was so thin that it was not an issue. This was particularly true with European terrorists. The Palestinians had a substantial movement, but it was so fragmented and penetrated that the organizations distanced themselves from the movements. These organizations were over time broken by Western security services and bitterly factionalized to the point that the different factions could be used against each other.

For 15 years, the operational focus for the U.S. has been the destruction of terrorist organizations. The reason for this is that destroying a particular group creates the illusion of progress. However, as one group is destroyed, another group arises in its name. For example, al-Qaida is being replaced by the Islamic State. The real strength of Islamist terrorism is the movement that the organization draws itself from and that feeds it. So long as the movement is intact, any success at destroying an organization is, at best, temporary and, in reality, an illusion.

In addition, because there is a movement, the main organization can organize terror attacks by sending individuals who know little of the details of the organization to carry out operations.

But because the movement consists of individuals who understand what needs to be done, jihadist organizations do not have to recruit people to carry out attacks or teach them how to do so. The complexity of 9/11 was never repeated and the level of simplicity has increased over time. That means that members of the movement who have never had contact with the organization can carry out attacks. From the point of view of the organization, these are ideal attackers. They cannot be traced back to the organization, they are not under surveillance and there are sufficient models for them to draw on without needing to ask for advice.

In the old model, all attacks were coordinated by the central organization. In the new model, most organizations have no contact with the people organizing operations and attacking the center will not diminish the attacks. Of late, there have been absurd discussions about whether particular terrorists had contact with other terrorists, or whether they had been “radicalized.”

I assume this means the person was persuaded to become a terrorist. In a movement, you are aware that there are others like you and who think like you. You do not need formal attachments to respond to the ideology of the movement.

However, the idea of jihadism has permeated the movement and Muslims are aware of this. Most may reject it but others embrace it. You don’t need a training program to absorb what is all around you. If an individual doesn’t know anyone who is part of this ongoing movement, there is enough on the internet, or enough speculation in the media to draw a map for anyone who wants a map drawn. The idea that if a Muslim shoots 20 people, but has had no contact with a terrorist organization, he might not have done it for ideological reasons might be true.

But it forgets that he does not need contact with a mentor to plan an attack, especially a relatively simple one. The movement and the atmosphere is filled with the idea.

The movement is not an organization any more than conservatism or liberalism is. There may be organizations attached to it, but it is more of a social tendency. However, its members still communicate with each other. There are leaders in all these movements, although there may not be managers.

This tendency in Islam makes the movement difficult to defeat. It cannot be surgically removed. Some members of the movement don’t wear a uniform. It is also impossible to attack the movement without attacking Islam as a whole. And attacking Islam as a whole is difficult.

There are 1.7 billion Muslims in the world and any of them can believe in radical jihadism. And the believers in jihadism are serious people, moved by their own fate. We would like to dismiss them as fools. If they were, they would be easy to defeat.

It is obvious that the conventional special operations approach hasn’t worked and won’t work.

It is also obvious that a general war on Islam is impossible. What is left is difficult but the only option. It is to bring pressure on Muslim states to make war on the jihadists and on other strands of Islam to do so as well. The pressure must be intense and the rewards substantial. The likelihood of it working is low. But the only way to eliminate this movement is for Muslims to do it. They may not want to, and they may fail if they try. But more drone strikes and announcements that another leader of some group has been killed won’t work. Our options are down to having to “live with it” or fomenting a civil war in the Islamic world. In the end, we might wind up with “live with it” anyway.


Here’s What Happens When the World Overdoses on Debt

Justin Spittler


Bonds are no longer assets. They’re liabilities.

You might find this hard to believe. After all, most folks think of bonds as a safe way to grow their money. For decades, you could make a decent return of 5% or more in government- and investment-grade bonds without risking big losses.

Not anymore.

These days, most bonds pay next to nothing. Some have negative interest rates, which means owners must pay interest on the bond instead of earning interest. If you own a bond that pays a negative interest rate, you’re guaranteed to lose money if you hold the bond to maturity.

And yet, folks are lining up to buy these bonds.

Dispatch readers know we’re in this mess because governments have gone mad trying to “stimulate” the economy. Central banks have cut rates more than 650 times since the 2008 financial crisis. Global rates are now at the lowest level in 5,000 years.

Low and negative rates have done nothing for the global economy. The U.S., Europe, Japan, and China—the world’s four biggest economies—are all growing at their slowest rates in decades. About the only thing these policies have done is put investors in serious danger.

Today, we’ll explain why the global financial system is more fragile than ever…and we’ll show you two proven ways to protect yourself.

• You can’t escape negative interest rates…

More than $13 trillion worth of government bonds now have negative rates. That’s more than one-third of all government bonds. Keep in mind, negative rates were unheard of until about two years ago.

Negative rates are taking over the corporate bond market too. Last week, Bloomberg Business reported that $512 billion worth of corporate bonds now have negative rates. There are now 11 times more corporate bonds with negative yields than there were at the start of the year.

There’s no reason to think negative rates will stop spreading.

Two weeks ago, German railroad company Deutsche Bahn AG sold 350 million euros worth of five-year bonds with a rate of -0.006%. It became the first non-financial company to issue bonds with a negative yield.

• You're probably wondering who buys this garbage that’s guaranteed to lose money…

The answer is giant institutional investors. You see, many pension funds and insurance companies are required by law to own “safe” bonds like those issued by governments and companies in good financial shape. And right now, many of these bonds pay nothing in interest or charge you to own them.

This has made it very hard for institutions to meet investment return goals. For example, the average U.S. public pension fund made just 0.4% last year, the lowest average return since 2008. Most public pensions expect to make between 7% and 8% each year.

While rock-bottom rates have made life difficult for pension funds and insurance companies, they’ve also allowed companies to gorge on cheap money.

• U.S. corporations have borrowed more than $10 trillion in the bond market since 2007…

Last year, they issued a record $1.5 trillion in bonds. Corporate America is loading up on debt faster than it did during the dot-com bubble or before the 2008 financial crisis.

The same thing is happening around the world.

According to Bloomberg Business, the debt-to-earnings ratio for global companies hit a 12-year high in 2015.

Soaring corporate leverage led credit rating agency Standard & Poor’s (S&P) to downgrade 863 companies last year. That’s the most downgrades since 2009…when the world was in the middle of a global financial crisis.

• There’s no end in sight for this epic borrowing binge…

Last week, S&P said it expects global corporate debt to jump from $51 trillion today to $75 trillion by 2020. That’s a staggering 47% jump in four years.

This huge surge in corporate debt supposedly won’t be a problem as long as the economy keeps growing, companies pay their lenders, and rates stay low.

• Dispatch readers know those are dangerous assumptions…

As we said earlier, the global economy is barely growing.

And companies are already falling behind on their debts. According to MarketWatch, 100 corporations have already defaulted this year. That’s 50% more defaults than there were at the same time last year. At this rate, we will see more defaults this year than there were in 2009.

If this happens, lenders will take huge losses. This could spark a “credit crunch” where banks make fewer loans, cut lines of credit, and charge higher interest rates. In other words, the easy money could dry up. That could lead to even more defaults.

In other words, it’s extremely likely that the huge surge in corporate debt will create serious problems.

• S&P admits that the global financial system is very fragile…

CNBC reported last week:

"Central banks remain in thrall to the idea that credit-fueled growth is healthy for the global economy," S&P said. "In fact, our research highlights that monetary policy easing has thus far contributed to increased financial risk, with the growth of corporate borrowing far outpacing that of the global economy."

S&P says about half of the companies outside the financial sector are “highly leveraged” right now.

Longtime Casey readers know companies with too much debt aren’t just a threat to themselves. They're a threat to the entire global economy.

During the last financial crisis, the collapse of a handful of large, highly leveraged banks triggered a chain reaction that brought the entire global financial system to its knees.

S&P says we could see a repeat of the 2008 financial crisis if something “unforeseen” happens. CNBC reported:

"A worst-case scenario would be a series of major negative surprises sparking a crisis of confidence around the globe," S&P said in the report. "These unforeseen events could quickly destabilize the market, pushing investors and lenders to exit riskier positions ('Crexit' scenario). If mishandled, this could result in credit growth collapsing as it did during the global financial crisis."

• Regular readers know we’ve been warning about the huge buildup in corporate debt for months…

Now the mainstream media, which is typically behind the curve, is finally starting to catch on. This is a sign that we’re getting very close to a financial crisis.

We encourage you to protect yourself today. Step #1 is to own physical gold.

As we often say, gold is real money. It’s preserved wealth for centuries because it’s unlike any other asset on the planet. It’s durable, easy to transport, and easily divisible.

Its value doesn’t depend on a growing economy, a healthy financial system, or a responsible government. The price of gold often soars when things fall apart. It’s one of the only assets in the world like this.

If you’re worried about the global economy or financial system, the first thing you should do is own gold. We recommend you start by putting 10% to 15% of your money in gold. Once you feel like you own enough gold, you could put some money in silver. Regular readers know silver is also real money. Like gold, it often does well during times of turmoil.

We also encourage you to watch this short presentation. It explains why a collapse of the debt market is a threat to your wealth even if you don’t own a single stock or bond. That’s because this could trigger something far worse than anything we saw in 2008 or 2009.

As you’ll see, this coming crisis could reach you no matter where you are in the world.

Tech Recommendation of the Day: Buy or Sell Facebook?

Today, we have something special to share with you. Instead of our usual “Chart of the Day,” you’ll find valuable insight on technology stocks from tech guru Jeff Brown.

If you don’t know Jeff, he’s a true tech insider and angel investor. Over the past 25 years, he’s built tech startups and held high-level positions at some of the world’s largest tech companies.

On Friday, Jeff explained why longtime tech darling IBM (IBM) is a “dangerous stock.” Today, he gives his take on social media giant Facebook (FB). Keep in mind, the following was taken from a recent interview between Jeff and Amber Lee Mason, who runs our affiliate Bonner & Partners:

Amber Lee Mason: So next up we've got a name that you hear about all the time. It's one of the hottest stock stories we've seen in the last five years. We've got Facebook.

Jeff Brown: Facebook, wow. This is a strong buy. It’s an amazing company and one, I think, that has been widely misunderstood by a lot of the market. People know how pervasive Facebook is as an application and a company, but many people don't understand what Facebook actually owns.

Facebook owns a company called Instagram. They've also got their messenger platform. Instagram was a company that Facebook acquired back in, I think it was 2012. It only had about 30 million users, and they paid $1 billion for it, and the market thought that Mark Zuckerberg, the CEO, was crazy for doing that. Today, Instagram has over 0.5 billion users and was recently valued at $35 billion alone. So that's a 35 times return on that $1 billion investment in 2012 in a matter of less than four years.

And so, if you add up the amount of time the average user spends on Facebook, Instagram, and its Messenger product on a daily basis, it's 50 minutes. Fifty minutes, and Facebook has 1 billion-plus users today. They watch more than 100 million hours of video on Facebook a day. And so, again, this is an extraordinary company with extraordinary reach, and it's been very aggressive on developing its artificial intelligence assistant. It's called “M.” It's not widely deployed yet, but you're going to be hearing a lot about it soon and it will be one of the most functional artificial intelligence assistants available on the market.

Another acquisition worth mentioning, that they made, was a company called WhatsApp – which is a very well-known messaging application acquired in 2014 for what again was thought to be an extraordinary amount, $19 billion – and is now thought to be a genius acquisition. That division is forecast to generate about $5 billion a year in revenue by 2020.

And on top of everything else, Facebook has been very progressive in the work they're doing on augmented reality and virtual reality. They had a large acquisition in 2014 of a company called Oculus, and they're doing a lot of extra work in that space. They have such an incredible platform to launch new products and services from. This is, again, a strong buy.

Jeff may be a big fan of Facebook. But he sees even better opportunities in other tech stocks.