21st Century Megatrends: Perspectives from a Fox - Clem Sunter

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      I used to have lunch with my father at the Honourable Artillery Company (HAC) in Moorgate in the City of London. My father was a stockbroker and I was working at Anglo’s London office in Holborn Viaduct. This was in the late 1960s before I moved to Africa.

      At one lunch, we were joined by a senior army officer who served with my father during the World War II. The HAC, as it was known, was an elite artillery unit which did its bit in support of the infantry. During coffee, we were discussing whether the Allied carpet-bombing of Hamburg (called Operation Gomorrah) in July 1943 and of Dresden in February 1945 was necessary. As an idealistic young man, I condemned the attacks as unethical. I will never forget the answer from my father’s friend.

      He said: ‘Half-fought wars are never won. You have to go in boots and all. Especially when the enemy does the same. We can all express regret for the 65 000 civilian casualties caused by the firestorms that engulfed the two cities. But we had to wipe out every trace of the Nazis so that Germany could start afresh after the war was over. We had to demoralise the entire nation in order to make them think differently about Hitler. And, incidentally, he only took his own life when his bunker in Berlin was surrounded and he knew that he was finished.’

      There is a ring of truth in what he said all those years ago. Germany, totally stripped of Nazism, has ascended to the top spot in Europe and has even overtaken its old foe, Britain. One could apply the same logic to Japan. The dropping of the two atom bombs in August, 1945, one on Hiroshima and the second on Nagasaki, ended the war in a decisive manner with a clear winner and loser. Japan, stripped of imperialistic ambition, mirrored Germany in its astonishing economic recovery which meant that, until recently overtaken by China, it was the second largest economy in the world.

      The third example is an interesting one because it is America itself. People forget how vicious the Civil War that ended in the defeat of the Confederacy in 1865 was. Major General Sherman (after whom the tank is named) invented the strategy of total war by marching his Yankee troops through Atlanta to the sea, destroying all the infrastructure, buildings and farms along the way. After the surrender of General Lee in April 1865, America never looked back. With its territorial integrity preserved, with slavery abolished and with an effective reconstruction programme in place, the economy enjoyed such a boom that the US assumed pole position in the world in a matter of decades.

      Before getting to the point of this chapter, let us look at the outcome of three half-fought wars. The Korean War (1950–53) was one where the Soviet Union and China supported the North and America and its allies the South. After the last two years ended in military stalemate, an armistice was declared and Korea was split into two portions along the Demilitarized Zone. To this day, the North and the South have an uneasy relationship punctuated with an occasional incident. The South has done well economically, while the North has only its army and a few nuclear weapons to show it has progressed.

      The Vietnam War lasted from 1955 to 1975 with America trying to prevent a communist takeover of South Vietnam. Following the capture of Saigon by the Vietnam People’s Army in 1975 and the simultaneous departure of American troops, America failed in its objective despite overwhelming logistical superiority. Vietnam was reunified in 1976 and has since put in a pretty decent performance in uplifting its population.

      The Iraq War (2003–2011) did end up with the defeat of Saddam Hussein and American soldiers did leave in December 2011. However, it is too early to say that sectarian violence is a thing of the past and that Sunni and Shia Arabs are going to forge a constructive relationship with one another. Car bombs still go off in crowded markets and the place could still descend into civil war.

      Now my point. We have one half-fought war continuing in Afghanistan and another one which could be half-fought or fully fought about to erupt in Iran. In the former case, both America and Britain have announced total troop withdrawals in 2014. My prediction, based on the assertion of my father’s friend and the examples of half-fought wars quoted, is that very little is going to change. The Taliban will be back and if Vietnam is anything to go by, they may well take charge once again. Will it all have been worth it? That will be a question which will frequently be asked behind the scenes (not in public of course).

      A conflict in Iran is still to come and will only take place in the event that the nuclear issue cannot be resolved peacefully. The stakes are much higher because, like Syria, America and its allies are on one side and Russia, together with China, are on the other side. It could be a war by proxy. Equally, though, Israel could precipitate things as a result of the threats made to its existence by the Iranian leadership. Again, based on the analysis in this chapter, the issue will only be resolved one way or another by a war without limits. A half-hearted affair will achieve nothing.

      My conclusion is that war is digital: you either have to go in boots and all or not at all. Success is compromised by anything in between. One therefore has to be far more cautious about going to war in circumstances where the enemy does not pose a direct threat to your survival. Leave well alone and don’t interfere. Keep your nose out. For the record, neither Korea nor Vietnam nor Iraq nor Afghanistan constituted a direct threat to America. Japan did in 1941 and so did Germany to Britain in 1939. Self-preservation meant no constraints other than the Geneva Convention. The enemy was crushed. A new chapter began in 1945.

      Yet, it can still be convincingly argued that, considering the act in itself, the bombing of Hamburg and Dresden represented the cold-blooded murder of civilians on a massive scale. It could not be justified even as a retaliatory act for the bombing of London and Coventry. Two wrongs don’t make a right. Thus, war remains one of the most difficult topics to discuss and arrive at a reasonable answer.

      Keeping the red flags down

      Classical scenario planning techniques focus on the quality and content of the scenarios themselves, sometimes with endless iterations. In our case, we put as much effort into identifying the flags which would suggest that you are moving from one scenario to another. Then, based on whether the flags are rising or falling, we attach a subjective probability to each scenario. Now comes the most important part. Based on the probability and impact of each scenario, you weigh up your options and decide whether you are going to do something now to cope with its challenges; or have a contingency plan in case its probability increases. Either way, you are trying to copy the agility of a fox.

      There are two reasons why Chantell Ilbury and I provide red flags for downside scenarios. The first is to allow people time to take action on their own behalf to ameliorate the impact of such scenarios on their organisations or personal lives. The second is to give them the chance, collectively with other people, to keep the red flags down in order to minimise the probability of Armageddon-type scenarios becoming reality.

      Such is the case with our most negative scenario for South Africa which we call “Failed State”

      It is where we join the likes of Somalia, Afghanistan and Syria because the level of violence and unpredictability surrounding our future rises to a point where foreigners are too afraid to come here, let alone invest in any new business. Yet again we are isolated from the rest of the world, but this time not as a result of sanctions but through being perceived as too high a risk.

      We have four red flags and one tendency associated with the “Failed State” scenario. A tendency is like Japan being located in a seismically active zone of the earth’s crust, so it has a higher probability of earthquakes. At the moment, we attach low odds to the “Failed State” scenario. But if any of the four flags rise or the tendency turns into reality, watch out – the odds are increasing and it is time to seek protection.

      Actions of the first kind in the first paragraph are to keep your passport up to date; possibly look for a job overseas; take as much of your wealth offshore as you are legally allowed to do; and if you own a business expand the geographical footprint elsewhere in Africa and overseas. In a “Failed State” scenario, the rand could fall to 100 against the US dollar (after all it has devalued by a factor of ten since 1980).

      Nevertheless, being patriotic, it is actions of the second kind which hold more interest for Chantell and myself. Let me therefore list the flags and tendencies and provide the countermeasures to keep them down and out of play.

      The

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