NSI Publications

“Chinese Strategic Intentions: A Deep Dive into China’s Worldwide Activities”

Authors | Editors: Allen, G. (Center for a New American Security (CNAS)); Astorino-Courtois, A. (NSI, Inc.); Beckley, M. (Tufts University); Bragg, B. (NSI, Inc.); Bremseth, L.R. (Computer Systems Center Incorporated (CSCI)); Cheng, D. (Heritage Foundation); Cooley, S. (Oklahoma State University); Copeland, D. (University of Virginia); DeFranco, J. (George Mason University); Dorondo, D. (Western Carolina University); Ehteshami, A. (Durham University); Flynn, D. (Office of the Director of National Intelligence (ODNI)); Forrest, C. (US Air Force HQ AF/A3K (CHECKMATE)); Giordano, J. (Georgetown University); Gregory, J. (United States Military Academy, West Point); Hinck, R. (Monmouth College); Jiang, M. (Creighton University); Mazarr, M. (RAND); McGlinchey, E. (George Mason University); Nandakumar, G. (Old Dominion University); Roberts, C. (Hunter College, City University of New York (CUNY) / Columbia University); Schurtz, J. (Georgia Tech Research Institute); Sherlock, T. (United States Military Academy, West Point); Spalding, R. (Hudson Institute), Watson, C. (National Defense University); Weitz, R. (Center for Political-Military Analysis, Hudson Institute); Wright, N. (Intelligent Biology; Georgetown University; University College London; New America); Peterson, N. (NSI, Inc.); Pagano, S. (NSI, Inc.)

Prefaces Provided By: Czerewko, J. (Joint Staff, J39); Babb, J. (US Army Command and General Staff College)

Executive Summary

This white paper was prepared as part of the Strategic Multilayer Assessment, entitled The Future of Global Competition and Conflict. Twenty-seven experts contributed to this white paper, providing wide-ranging assessments of China’s domestic and international activities in order to assess the future of China and the challenges that these activities may present to US interests. This white paper is divided into five sections and twenty-four chapters. While this summary presents some of the white paper’s high-level findings, the summary alone cannot fully convey the fine detail of the experts’ individual contributions, which are worth reading in their entirety.

Understanding Chinese motivations and strategy

There is broad consensus among the white paper contributors that understanding the reasons, motivation, and strategy behind China’s actions is critical. Several of the contributors highlight the motivations behind China’s global activities. For example, one driver of China’s actions is the Chinese Communist Party’s (CCP) belief that it is currently in a state of competition with the US (Cheng). A sense of insecurity about the future (Copeland) and a desire to maintain power also influence CCP behaviors (Copeland; Mazarr; Watson), as does the Party’s belief that information is inseparably linked both to the national interest and to the CCP’s survival (Cheng).

Other contributors focused on Chinese strategy. Internally, the CCP uses humiliation, distrust of the US, and China’s historical grievance to validate its rule and maintain power (Watson). Externally, China has developed a form of “strategic integrated deterrence.” This concept—which goes beyond military capabilities to incorporate political, diplomatic, economic, information, psychological, and scientific/technical capabilities—is designed to “deter and compel the US prior to and after the outbreak of hostilities” (Flynn). Given the criticality of information to regime survival, the CCP deems it necessary not only to control and influence information flow into China, but also to shape and mold the international structures that manage this flow (Cheng). Similarly, the CCP recognizes the importance of data—particularly for social control. The Party seeks to embed its model of social control into the technological matrix built and powered by Western tech companies, according to Dr. Robert Spalding III. It also seeks to expand and guide the development of tech-based businesses and social models in the future, and in order to do so, the CCP may recognize the benefits of adopting a more open system.

China and technological innovation

Several contributors indicate that China is well-positioned to become a world leader in science and technology research and development (S/T R&D), blockchain technology, and artificial intelligence (AI) technology. Dr. James Giordano, CAPT (ret) L. R. Bremseth, and Mr. Joseph DeFranco indicate that China is making significant investments in international scientific, biomedical, and technological markets for strategic purposes. Moreover, China intends to align its S/T R&D with explicit national directives and agendas to exercise its global hegemony and could leverage its S/T to disrupt global balances of order and power (Giordano, Bremseth, & DeFranco). China is also aiming to dominate the finacial technology (fintech) sector. Several Chinese companies possess digital payment systems that have major competitive advantages in the form of scale and proprietary technologies (Nandakumar). These companies could easily become market leaders if blockchain-based financial systems become the norm, and blockchains can also be used by the CCP for strategic purposes. Lastly, according to Mr. Gregory Allen, the CCP believes that AI is a “strategic technology” that will play a critical role in the future of economic and military power. Allen suggests that AI has the potential to start an “intelligentized” military technological revolution, which could give China the opportunity to narrow its military gap with the US. Consequently, China will only continue to seek leadership and make even greater use of its AI strength.

Another contributor, Mr. John Schurtz, argues that China is becoming a world leader in technology and military innovation as well. The People’s Liberation Army (PLA) recognizes the importance of leading military innovation, and as a result, it has become poised to challenge the world’s most advanced militaries in the production of next generation high technology weapon systems. China will only continue to pursue ambitious innovation objectives in these areas, as is evidenced by its ‘Military-Civilian Fusion’ (MCF) development efforts.

Digital authoritarianism and Chinese regime durability

In this white paper, Dr. Nicholas D. Wright critically examines the relationship between digital authoritarianism and the durability of the Chinese regime. Although digitization may have negative effects on the durability of the Chinese regime, Dr. Wright argues that it can also strengthen the regime’s durability in the short- to medium-term by providing a plausible route for ongoing regime control while also making Chinese citizens wealthy. In addition, China’s development of a digital authoritarian regime enables its influence over other states in a competition for global influence, both through ideas and the exportation of digital systems (Wright). However, if China’s model is not broadly appealing to swing states, China may not be able to solidify its influence over these countries’ regimes and will ultimately lose this competition for influence. The future evolution of AI technology and the way in which liberal democracies adapt to becoming digital political regimes are also factors that could impact the situation (Wright).

Chinese global influence

China aspires to achieve global power status and challenge the US by extending its influence and strengthening its relationships with regions such as Europe; Eurasia; Central, West, and South Asia; and Latin America. One way in which China is aiming to increase its global influence is by increasing its economic footprint in these regions, as is evidenced by China’s expansion of trade and investments via its Belt and Road Initiative (Ehteshami & Weitz). China wants to secure access to valuable resources and create an “economic web” for its own benefit (Ehteshami, Watson, & Weitz). If these countries become economically dependent on trade with China, Beijing could use these dependencies to its advantage by using economic pressure to gain political compliance and/or undermine alliances with the US, as China did with South Korea and US deployment of a Terminal High Altitude Air Defense (THAAD) system (Astorino-Courtois & Bragg).

Some regions, such as Central Asia, have reacted to Chinese influence activities with hesitation and skepticism (McGlinchey). Other regions, such as Latin America (Watson), have welcomed China’s increasing engagement and have increasingly turned to China, rather than the US, to fulfill their economic needs. European states benefit significantly from access to Chinese markets for exports and have thus welcomed Chinese economic engagement opportunities as well, despite disapproval of enforced technology-transfer by domestic European companies seeking to operate in China, international property theft, and human rights abuses by Chinese companies (Dorondo).

Another outcome of increasing Chinese influence across these regions is that pre-existing US alliances with regional states are subject to increased pressure from China. Modern US alliances across the globe, and with European nations in particular, have enabled a a high level of US prosperity and security; conversely, weakening of these relationships could lead to potential US vulnerabilities (Dorondo). The diminishment of US relations with states in the referenced regions could result in economic troubles and/or a loss of regional influence, for instance. The US has the ability to counter these Chinese global outreach activities and prevent reliance on trade with China by strengthening its own relationships with these countries and using Chinese regional shortcomings to its advantage.

Despite Chinese global influence activities that present challenges to US interests and the current global order, the US must recognize that Chinese “future elites” (e.g., students from the top universities in China) still generally respect and admire American values and institutions (Gregory & Sherlock). Thus, despite the critical narratives being propagated by the Chinese regime and the competitive nature between the US and China, a significant portion of the Chinese population still views the US in a positive light, and not as an enemy.

The future of US-China competition

The future of global competition between the US and China will be centered around economic development and technological innovation (Hinck & Cooley). Dr. Michael Beckley presents a critical perspective of China’s economic growth, arguing that it is not as impressive as it appears, and that China faces several significant restraints that prevent it from closing the wealth gap with the US. However, China will try to continue to make economic strides in an effort to catch up to the US. Prof. Cynthia Roberts cautions that, despite the importance and usefulness of international financial instruments, the US should refrain from overusing such instruments. US decision makers must consider the consequences of weaponizing finance or imposing economic costs on its opponents. Such actions could result in consequences such as countries looking to diversify to currencies other than the US dollar, like the renminbi (RMB) or digital currencies, which over time could significantly reduce US leverage and give others, including China, greater freedom to maneuver.

Managing the challenges that China presents

The US and China are competing to shape the foundational global paradigm—the ideas, habits, and expectations that govern international politics (Mazarr). This competition ultimately revolves around norms, narratives, and legitimacy. The CCP has tethered its legitimacy to achieving the goals of the China Dream proposed by Xi Jinping, which include economic success, increasing Chinese influence, and defending national territories (Astorino-Courtois & Bragg). Both internally and externally, it is critical for China to highlight its successes and portray itself in a positive manner in order to make the China Dream a reality. In its attempts to achieve these goals and shape the global paradigm, China is pursuing ambitious economic endeavors, such as the Belt and Road Initiative. China’s power is also growing in the form of its military buildup, as is evident through its increased pressure on Taiwan, its limited war with Vietnam, and its conflict with India over disputed territory (Mazarr). The challenges that China presents threaten US interests and the current world order, and therefore, it is imperative that the US successfully and carefully mitigates these challenges.

Several contributors also provide recommendations for US decision makers, namely that they must acknowledge the extent to which the US is already in competition with China and recognize the range of actions that China is taking; they must also begin to counter these actions by engaging in hard bargaining, drawing clear redlines, and remaining cautious to not provoke unwanted Chinese behaviors (Cheng). One white paper contributor, Dr. Maorong Jiang, suggests that the US might need a new strategy, utilizing a soft-power deterrence approach in order to simultaneously engage, challenge, and integrate China. Additionally, Lt. Col. Christopher D. Forrest asserts that competing in the gray zone will be an integral part of this competition, where the US must focus its time, energy, and resources. In order to effectively counter ongoing Chinese gray zone actions, the US will likely need to make some cultural and organizational changes and adapt a different lens through which to view US capability development and operations (Forrest).

Author | Editor: Kuznar, L. (NSI, Inc.)

Executive Summary

Data

No primary data were available for analysis. Instead, a literature review of the Democratic People’s Republic of Korea (DPRK, i.e., North Korea) inequality and stability is summarized.

Results

Primary data on North Korean inequality are not available. However, anecdotal information and innovative means of tracking resource flows indicate that the DPRK may be by far the most unequal society in the world, with a small elite (less than 10%) controlling virtually all wealth, leaving the rest of the population at barely or below subsistence level.

Significance for Risk Taking and Stability

Since the vast majority of the population is probably at near equal levels of impoverishment, they are probably risk averse toward one another, since there is no status to be gained or lost. Because the elite control the existence of the population in this totalitarian society, the population does not have the means to challenge elite control. Therefore, at this time, the risk sensitivity of the population at large is probably not relevant to state stability. Because wealth is concentrated at the top and the state uses material rewards (income, apartments, luxury goods) to incentivize party members, there is likely intense competition and risk acceptance among elites. Rumors of coup plots among these elites indicates that extremely high levels of risk acceptance exist in this segment of DPRK society.

Implications for US Interests

While the risk sensitivity of the population may not be relevant to US interests, the likely risk acceptance of the elite could open the possibility for elites (military officers, high ranking party officials) to challenge central state authority. However, because central party figures punish perceived and real challenges harshly, it is difficult to gauge the extent to which elite risk acceptance could translate to challenges to the central party and the Kim family.

Implications for China’s Interests

China faces the same dilemma regarding risk sensitivity of North Koreans as does the US. It is illustrative that Kim Jong-un is reported to have executed one of China’s key links to the DPRK government, his uncle Jang Song-thaek, who may have been involved in a coup plot (rumored to have involved Kim Jong- un’s half-brother and China). The execution of Kim Jong-un’s uncle and half-brother demonstrates the absolute control the Kim family exercises over all in the country.

Implications for Russia’s Interests

North Korean inequality has the same implications as China and the US, but because events concerning the DPRK have less impact on Russia, any consequences have less effect on Russian interests.

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Author | Editor: Kuznar, L. (NSI, Inc.)

Executive Summary

Data

Five datasets on wealth and status distribution in Ethiopia were analyzed: 2016 World Bank quintile and decile estimates of income, International Labor Organization (ILO) income by occupation estimates for 2013, and USAID Demographic and Health Survey (DHS) data from 2016 on wealth factor scores and agricultural land ownership and 2005 data on wealth factor scores.

Results

Ethiopia is paradoxical; compared to other countries it is an extremely poor nation with an extremely high economic growth rate and low inequality across the entire population. However, Ethiopia’s strides in economic growth and reducing inequality are uneven across socio-economic, rural/urban, educational, and ethnic lines. Economic growth has been differentially enjoyed by well-educated, urban elites from minority ethnic groups such as the Tigray.

Significance for Risk Taking and Stability

The differential distribution of Ethiopia’s limited wealth has led to grievances from poorer uneducated members of ethnic groups such as the Oromo and Amhara as well as risk acceptant elites from these ethnic groups. These grievances have erupted into protests that have destabilized the Ethiopian government and led to the resignation of the Tigray Prime Minister and the recent (June 2019) assassination of the Army Chief of Staff and the president of Amhara State in a coup attempt. The groups that the authors would predict to be acceptant of taking political risks appear to be acting upon their grievances.

Implications for US Interests

Ethiopia is the United States’ primary ally in East Africa and one of the US’ most important allies on the continent. To that end, the US continues to invest heavily in the country through foreign direct investment and governmental aid. The current shape of inequality and its attendant social unrest threaten these interests. Ironically, China’s aggressive involvement in Ethiopian development may enable it to eclipse US influence. The US is in danger of losing its influence in Ethiopia no matter what direction the country goes economically and politically.

Implications for China’s Interests

China is currently the primary investor in Ethiopia, through foreign direct aid (especially in infrastructure) and loans. Inequality fueled instability threatens these investments. However, China’s larger investment (2.5 times that of the US) provides it the opportunity to eclipse US influence if Ethiopia stabilizes.

Implications for Russia’s Interests

Russia has not invested nearly as much in Ethiopia but has recently signed an agreement to support the development of Ethiopian nuclear capability. Ethiopian political instability may threaten this Russian investment. However, if Ethiopia stabilizes and continues to grow economically, then Russia would gain a strategic and economic advantage and consequent leverage in Ethiopia.

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Author | Editor: Kuznar, L. (NSI, Inc.)

Executive Summary

Data

Two datasets on wealth and status distribution in Finland were analyzed: 2016 World Bank quintile and decile estimates of income, and International Labor Organization (ILO) income by occupation data for the years 2017 and 2011.

Results

Finland is known as one of the world’s most equal societies, and the analyses conducted for this report reinforce this perception. The low levels of inequality, combined with cultural factors such as a tradition of cooperation and trust in government, most likely contribute to Finland’s social stability.

Significance for Risk Taking and Stability

The analyses in this report indicate that Finland is one of the least risk acceptant populations in the world. Consequently, people do not have reasons to challenge the Finnish status quo.

Implications for US Interests

Even though Finland maintains friendly relations with Russia and tries to moderate between Russia and the US and its European allies, Finland is an important check on Russian ambitions in the Scandinavian north. Therefore, Finland’s stability is an asset to US interests.

Implications for China’s Interests

China is beginning to develop trade ties with Finland and hopes to project its power into the Arctic. Therefore, Finnish stability serves China’s aspirations by providing a stable partner.

Implications for Russia’s Interests

Russia’s near-term primary interest in Finland is as a source for Russian energy exports. Despite Finland’s near total reliance on Russian energy (70%), Finland’s shift toward sustainable energy and the availability of energy on the open market makes Finland potentially independent of Russian influence. Therefore, Russia’s influence in Finland is likely to diminish. Finland’s positive relations with the EU, NATO, and the US are liabilities for Russia. Recently, Russia is suspected of cyberattacks and social media campaigns designed to sow discord in Finland.

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Author | Editor: Kuznar, E. (NSI, Inc.)

Executive Summary

Data

Two datasets on wealth and status distribution in Germany were analyzed: 2015 World Bank quintile and decile estimates of income, and 2014 International Labor Organization (ILO) data on income by occupation.

Results

Income data provided by the World Bank and occupational data provided by the ILO show similar patterns of a risk acceptant population with both the individuals or occupations earning the highest incomes being the most risk acceptant. Germany’s mean Arrow-Pratt measure is a modest -3.97.

Significance for Risk Taking and Stability

The risk acceptant nature of the German population shows some potential for generating instability in both its civil society and political institutions. However, Germany’s risk averse population may be its greatest liability for state stability. Risk aversion changes to risk acceptance by Germans in occupations where people fear loss in income and status. Russian propaganda and the surge of refugees have combined to create a perception of threat and loss in many working-class Germans, which appears to be fueling the rise of more authoritarian right-wing groups (Shuller, 2018 & Koehler, 2018); this extremism is represented by the white nationalist Alternative for Germany (AFD) which has gained seats in the German Bundestag and now possesses political power (Deutscher Bundestag, 2019). Germany also has an ongoing economic issue with its bottom 20% of society owning little to no assets (WSI, 2019). This gives people in this category very little chance to improve their quality of life.

Implications for US Interests

The US and Germany continue to maintain a strong alliance. Germany is often the most economically capable to aid the US in its Eastern European interests (Janning & Möller, 2016). Despite their close alliance, the two countries have some policy differences in the manner in which they deal with China and Russia (Sharma, 2018). The risk acceptance of Germany’s population has allowed Russia to encourage far right-wing organizations that challenge the German political status quo. This risk acceptance has culminated in the insertion of Russian influence into German political institutions, which threatens US interests in Germany (Shuller, 2018; Applebaum, 2018).

Implications for China’s Interests

China’s interests in Germany are coming under suspicion by the German economic and political organizations it relies upon to continue its advancements (Düben, 2019). This is due to slowing economic reformation that is supposed to ease access to Chinese markets and is potentially a growing hurdle for China to overcome, as it has in the past had a warmer relationship with Germany than many of the other European Union member states (Kakissis, 2019). Even with the current shift toward Chinese skepticism, Germany’s risk acceptant population is partially fueling grassroots movements by far right-wing organizations that favor autocratic governance presents China with an opportunity (Shuller, 2018).

Implications for Russia’s Interests

Russia has both strong opportunities in Germany and major obstacles to overcome. It shares strong trade with Germany (OEC, 2017), however it has at the same time both inserted political influence and alienated itself from the German government (Applebaum, 2018; Stelzenmuller, 2017). It has ridden a wave of right- wing populism, giving media aid to members of the AFD in order to gain political influence in Germany (Applebaum, 2018). However, its success has put the rest of Germany’s government, which make up the vast majority of its political offices, on high alert and helped highlight the saliency of keeping Russian influence out of Western democracies (Stelzenmuller, 2017).

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Great Power Activities in the Indo-Pacific and Africa – A Future of Global Competition and Conflict Virtual Think Tank Report

Author | Editors: Jafri, A. (NSI, Inc.); Popp, G. (NSI, Inc.); Stevenson, J. (NSI, Inc.)

Subject Matter Expert Contributors

Dr. David T. Burbach (US Naval War College), Dr. Ryan Burke (US Air Force Academy), Dean Cheng (Heritage Foundation), Major Christopher Culver (US Air Force Academy), Abraham M. Denmark (Woodrow Wilson International Center for Scholars), Michael Fabey (Jane’s Fighting Ships), David C. Gompert (US Naval Academy), Dr. Justin V. Hastings (University of Sydney), Anthony Rinna (Sino-NK), Dr. Derek M. Scissors (American Enterprise Institute), Andrew Small (German Marshall Fund), Yun Sun (Stimson Center), Dr. Philip Fei- Ling Wang (Georgia Institute of Technology), Ali Wyne (RAND Corporation), Lieutenant Colonel Maciej Zaborowski (US Central Command)

Question of Focus

[Q6] How might US allies and neutral nations be impacted by increasing Chinese influence in the Indo-Pacific and Africa? How might US allies and neutral nations be impacted by Russian efforts to assert its influence in the Indo-Pacific and Africa?

Summary Overview

This summary overview reflects on the insightful responses of fifteen Future of Global Competition and Conflict Virtual Think Tank (ViTTa) expert contributors. While this summary presents an overview of the key expert contributor insights, the summary alone cannot fully convey the fine detail of the expert contributor responses provided, each of which is worth reading in its entirety. For this report, the expert contributors assess Chinese and Russian activities and influence in the Indo-Pacific and Africa, and how an increasing Chinese and Russian presence in these regions are likely to impact the United States and its allies.

Please see the PDF below for the complete summary overview.

Author | Editor: Kuznar, L. (NSI, Inc.)

Executive Summary

Data

Three datasets on wealth and status distribution in Honduras were analyzed: the 2017 World Bank quintile and decile estimates of income, the 2011-12 distribution of agricultural land, and the 2011-12 distribution of the USAID DHS wealth factor score.

Results

The Honduran population exhibits an overall propensity for taking risks, and at a much higher rate than is typical for most countries. This analysis indicates that both the very poor and the wealthiest Hondurans have the greatest potential for risk taking.

Significance for Risk Taking and Stability

The high degree of risk taking among elites may be reflected in political instability such as the 2009 coup d’état. Risk taking among the poorest half of the population could be manifest in their attraction toward illegal activity, migration as a reaction to the lack of economic opportunity in a poor nation with wage stagnation, and to the threat of violence from gangs.

Implications for US Interests

Honduras’ high levels of inequality are a source of its extremely high levels of violence, which has emerged as the main driver for migration. Honduran migration has had a destabilizing effect on the region, including on US domestic political unity. Increasing distance between the US government and Honduras, coupled with the potential for unexpected changes in leadership and policy of the Honduran government, could jeopardize US interests and create opportunities for Chinese and Russian encroachment.

Implications for China’s Interests

China has been actively increasing its influence in the region through development, aid, and education programs. The Honduran government could potentially shift its allegiance toward China depending on changes among the political elite, and common Honduran people might seek Chinese aid in order to overcome the lack of opportunity within Honduran society. However, Honduran recognition of Taiwan remains an obstacle to Chinese/Honduran political relations.

Implications for Russia’s Interests

Russia has been actively increasing its influence in Latin America through diplomatic initiatives. The Honduran government has historically been a staunch US ally, although recent decreases in aid to Honduras may weaken that relationship. The Honduran government at this time appears to fear growing influence of Russia in the region, although increasing distance between the US and Honduras creates an opportunity for Russia to undermine US influence.

Author | Editor: Kuznar, E. (NSI, Inc.)

Executive Summary

Data

Five datasets on wealth and status distribution in Indonesia were analyzed: 2013 World Bank quintile and decile estimates of income, International Labor Organization (ILO) income by occupation data from 2017 and 2009, and USAID Demographic Health Survey (DHS) wealth factor scores from 2012 and 2007.

Results

The study examines data from three different sources: World Bank, ILO, and USAID DHS. The data provided by all three sources shows a similar pattern of a risk acceptant population. The World Bank provides information on income, the ILO provides occupational data, and USAID DHS provides data on assets per household. The datasets show the highest earning individuals, occupations, and households owning the most assets as the most accepting of risk.

Significance for Risk Taking and Stability

Indonesia has a strongly risk acceptant population with several cultural, ethnic, religious, and socioeconomic fissures that threaten to cause widespread civil strife. Many of these intergovernmental and societal issues are rising to the forefront of Indonesian political dialogue as it begins its 2019 national election cycle (Pepinsky, 2019). The upcoming elections and varied degrees of civil unrest throughout the country make its risk acceptant population a potential threat to Indonesian stability.

Implications for US Interests

The US has many potential strategic interests in Indonesia; however, many of these interests have yet to be realized. Indonesia’s democratic government and regional importance potentially give the US a capable ally to control the valuable waterways that flow through South Eastern Asia and confront China’s encroachment into the South China Sea (Kurlantzick, 2018). However, recent policy changes for the US saw a decrease in the US’ advocacy for democratic expansion, and the ending of its involvement in the Paris Accord has slightly alienated the US from Indonesia. The risk acceptant nature of Indonesia’s population threatens potential US interests by potentially destabilizing an ally and increasing the possibility of terrorism.

Implications for China’s Interests

China views Indonesia’s hostile stance toward Chinese claims in the South China Sea as an abridgement of China’s sovereign rights (Zhen, 2016). To increase its control over Indonesia, it has tried to increase economic leverage through foreign direct investment (FDI) into the country (Tan, 2019). However, Indonesia’s skepticism of Chinese involvement in its economic and political institutions has been making it harder for China to aggressively pursue this end. The risk acceptance of Indonesia’s population gives the Chinese the opportunity to continue to gain political influence by offering aid to a country eager for economic opportunity (Legarda & Hoffman, 2018).

Implications for Russia’s Interests

Russia views Indonesia as a potential country with which it can build its international prestige (Gurganus & Rumer, 2019). Through utilizing arms sales and energy deals, Russia is gaining influence in the South East Asian country (Tsvetov, 2018). Indonesia’s risk acceptant population gives Russia the potential to increase its involvement through instability much in the same way as China by using political instability to sway political leaders in favor of aid (Metz, 2018), while at the same time posing little threat to Russia’s current, overall-weak interests in the country.

Inequality, Risk Sensitivity, and Grievance in Context – An NSI Aggrieved Populations Analysis

Authors | Editors: Kuznar, L. (NSI, Inc.); Kuznar, E. (NSI, Inc.); Aviles, W. (NSI, Inc.)

Executive Summary

Success in the global competition between the US, China, and Russia may be determined by a country’s ability to influence the world’s populations. A population’s aspirations and grievances can drive national security problems for all three powers when frustrated aspirations and grievances lead to state instability, terrorism, or other challenges such as unwanted or unmanaged migration. In accordance with the questions posed in the J39 Strategic Multilayer Assessment (SMA) Great Power Competition tasking, this report summarizes context-specific qualitative and quantitative analyses of the conditions impacting population aspirations and grievances for 25 countries, and how these impact US, Chinese, and Russian interests. Issues include:

• Identifying where aggrieved populations are likely to exist globally and how they may be operationalized against US interests
• Anticipating the effects of global climate change on state stability
• Identifying the forms of instability that may challenge US interests (political instability, autocratic regimes, violent extremism, adversarial proxies)
• Identifying the causes and effects of mass migration
• Understanding Chinese interests and strategies in specific countries and their impacts on US interests
• Understanding Russian interests and strategies in specific countries and their impacts on US interests

Six broad patterns in inequality, risk sensitivity, and social disruption emerged from these analyses.

• Baselines. Two countries were used to baseline all other comparisons.
  • Finland—The world’s most stable society is also one of the world’s most egalitarian and therefore least acceptant of risk. The population also is homogenous, lacks a history of feudal inequality, and has a high level of education. The Finnish population’s lack of risk acceptance and high level of education appear to have inoculated its population against Russian attempts at disruption through social media.
  • The United States—The US was chosen as a baseline because of its familiarity to the researchers and intended audience of this report. The US has a highly risk acceptant population increasingly divided along class, race, and rural/urban divides. Furthermore, much of the middle class is experiencing loss aversion due to losses suffered in the Great Recession of 2009, which have not been regained. Adversaries have effectively used this risk acceptance to sow discord through social media.
• Risk Acceptant Populations—Brazil, Honduras, Mexico, Nigeria, South Africa, and Venezuela have populations that are entirely or mostly risk acceptant
  • The primary effect of widespread risk acceptance is extremely high homicide rates, confirming research that demonstrates a connection between inequality and homicide.
  • In Nigeria and Venezuela, inequality between ethnic groups and/or classes has given rise to extremely disruptive protests, rebellions, and terrorism. Social unrest in Nigeria threatens oil production, investments, and the political stability of Africa’s most populous country, which all great powers desire. Social unrest in Venezuela threatens Russian and Chinese investments in propping up an adversarial government to the US.
  • Honduran and Mexican inequality and risk acceptance has fueled illegal migration and created disruption at the US border and further division among the US population.
  • Widespread risk acceptance in China has caused little disruption because of the state’s ability to suppress dissent, and to sustain growth that provides opportunities for a population hungry for advancement. However, protests in Hong Kong and Xinjiang are symptoms that when wealthy Chinese feel threatened (Hong Kong) or minorities (Uighurs in Xinjiang) perceive unfair gains for Han Chinese, the state will be challenged. A key to China’s mitigation of the risk acceptance of its population is to sustain a high rate of growth, which the Chinese economy may not be able to do in the future.
• Loss Averse Populations—A number of the countries in the sample are experiencing real or perceived economic losses, leading to loss aversion, risk taking, and unrest.
  • European countries in this sample (Croatia, France, Germany, Italy, Serbia, United Kingdom) largely experienced either real or perceived losses and threats to their livelihoods and cultures from immigration, placing their populations into highly risk acceptant, loss averse, frames. This has manifest in challenges to their political status quo (Brexit) and the rise of right-wing challenges to their governments. Russia has exploited the situation to weaken European governments, the integrity of the European Union, and NATO.
  • Dramatic losses in status by working class Pakistanis fueled the rise of maverick populist Prime Minister Imran Khan.
  • Real and sustained economic losses in the Venezuelan economy have contributed to unrest.
  • Losses from a softening oil market and US sanctions are exacerbating upper-class risk acceptance and rural/urban differences, although the Iranian government’s ability to suppress dissent will probably contain any serious challenge to the government.
• Agrarian Populations—Agrarian societies are characterized by extreme levels of inequality and consequently, risk acceptance. This was especially the case in Afghanistan, Ethiopia, Honduras, India, Indonesia, Nigeria, and Pakistan. Most of these countries are also distinguished by sharp ethnic divides in access to wealth and opportunity, and all of them have a distinct impoverished rural vs. relatively wealthy urban divide. These divisions and inequalities create highly risk acceptant populations with grievances against other ethnic groups and urban elites, fueling social unrest in many forms including ethnic conflict, rebellion against the government, and terrorism.
• Typical Populations—A typical society has an impoverished, risk acceptant class of poor, a distinct and risk averse middle class, and a highly risk acceptant elite. India, Indonesia, Japan, Russia, Serbia, and South Korea have such a typical profile.
  • In the cases of Japan and South Korea, low inequality in relation to other countries has supported social stability, although there has been a shift toward a more nationalistic government in Japan.
  • India and Indonesia have so far been able to mitigate degrees of risk acceptance in some segments of their populations through continued economic growth. However, their agrarian and rural/urban divides and their ethnic diversity pose a challenge to stability.
  • Russia’s and Serbia’s communist past has left a legacy of relative equality compared to most countries, despite the rapid growth of their economies since the fall of the Soviet Union and a continued concentration of wealth among oligarchs. For now, indications are that Russians and Serbs are not risk acceptant enough to pose a serious challenge to their governments.
• North Korea—There is probably no more unequal country than the Democratic People’s Republic of Korea (DPRK). Virtually all wealth is concentrated in an extremely small cadre at the very top of society. Furthermore, the Kim regime punishes all dissent extremely harshly and effectively. This provides common North Koreans, who are struggling to survive, with virtually no incentive to rebel or to take any risky course of action such as escape through immigration. They are predicted to be risk averse. In contrast, the fight for the spoils among the elite is expected to generate intense competition and challenges at the top. There is some evidence that challenges have occurred. However, the Kim family has so far punished any challenge, even from close relatives, extremely harshly, effectively quashing any dissent. The DPRK is a truly unique case.

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Author | Editor: Kuznar, L. (NSI, Inc.)

Executive Summary

Data

Five datasets on wealth and status distribution in Iran were analyzed: 2017 World Bank quintile and decile estimates of income, and Iranian government income data for years 2015 and 2006 for both urban and rural populations.

Results

Iran has moderate levels of inequality compared to most countries, although inequality is gradually increasing and there is growing concentration of wealth in cities and a corresponding impoverishment in the countryside. Inequality is exacerbated by sanctions.

Significance for Risk Taking and Stability

In general, Iran exhibits moderate levels of risk acceptance, although losses in the business sector are beginning to result in riots and demonstrations which culminated in 2018. While inequality appears to be fueling unrest, the Iranian government has a strong capacity for suppression of dissent.

Implications for US Interests

Social unrest weakens the Iranian government, potentially distracting it from its regional objectives and US sanctions are exacerbating this unrest. However, the Iranian population is overall not very risk acceptant and the Iranian state’s capacity for repression probably means that dissent will not really weaken the Iranian state. There is no evidence that Iran has been distracted in its regional activities, including operations in Syria, Yemen, and the Persian Gulf.

Implications for China’s Interests

Iran is an important node in China’s Belt and Road Initiative (BRI) and China has been investing heavily in Iranian infrastructure. Inequality and social unrest threaten these investments.

Implications for Russia’s Interests

Iran is Russia’s key ally in the Middle East for countering US influence. Inequality and social unrest that can weaken the Iranian government would be problematic for Russian interests in the region.

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