 Alright, now it's time to call the room to order. If you need to carry on a conversation, would you please adjourn to the hall? You know, I used to teach fifth grade. It is by far the best preparation for Washington of any course of study I ever undertook. There is a lot of fifth grade behavior in this town. It's also true that some of you know this story. It's the only job I've ever had where I had to kneel down and pray for the strength to make it through the day. So anytime I think, well maybe the election didn't go quite like I wanted, I just reflect back to that fifth grade class and I realize, man it could be a lot worse. Although we get more fifth graders every year in this process. I'm David Burto. I'm the director of the Defense Industrial Initiatives Group here at CSIS and a senior advisor. And it's my privilege and pleasure to introduce our luncheon speaker. The Kaufman Foundation has put out a very coherent, comprehensive and ambitious research agenda for expeditionary economics. If you haven't already picked up a copy of this, it's outside on the table and I encourage you to take a copy with you. It's actually got quite a lot of very demanding ideas in it. As part of my introduction to our speaker who is from the Kaufman Foundation, I want to comment on that research agenda because I think it is comprehensive and ambitious. But the way I want to comment on it is when you have such a broad set of topics before you, and you've heard them all laid out already this morning in our opening speaker and our two panels, this is a really complex set of circumstances that we find ourselves dealing with and it's very difficult to answer the question of okay, what do we do first? How do we prioritize across this spectrum of events, if you will? And both the comments and the questions have lengthened. And I would suggest there's at least three things that we ought to keep in mind as we do this. One is we need to be rapid because we're at a very serious set of inflection points in Iraq, in Afghanistan and in a host of other countries around the world. And whatever it is that we're going to need to focus our additional research and work on, it needs to bring results quickly because the time to deliver those is now. The second is it's got to be very pragmatic. It's got to actually tell the government folks and the non-government folks what do you do differently tomorrow than you were doing yesterday if you want a different outcome. And some of our speakers here already commented on that today. And the third, it's got to recognize that the relationship between economic opportunity and the private sector is not just about economics. It's about supporting governance. It's about supporting rule of law. It's about anti-corruption. It's about creating an environment in which all of these elements connect to one another because, ultimately, you don't deal successfully with corruption unless you replace it with some other way of making money. And so there's a connectivity that cuts across all of that. We looked at a number of these things in our own report, also copy outside, just looking at the military side of economic development in Iraq. But of course you can't look at just the military side. You've got to look at the whole spectrum. And that's really where we are now. So with that, I'll turn to our lunch keynote speaker. Bob Leighton is the vice president for research and policy at the Kaufman Foundation. He's also a senior fellow in economic studies at the Brookings Institution. He is now in the business of helping people figure out how to solve their problems. For many years though, he was in the business of creating those problems for people. He was an associate director at OMB. He was a deputy assistant attorney general in the A&E Trust Division. And he was a staff economist at the Council of Economic Advisors. And I'm not quite sure if you create problems when you're the Council of Economic Advisors. But I'm almost certain you don't solve them when you're in that position. And he consults for a host of public and private sector organizations, including the Treasury Department, the World Bank, etc. He's got a very ambitious speech. He's going to squeeze it into the time remaining and give us back the balance of our time. So please join me in welcoming Bob Leighton. Thank you very much, David, for that generous introduction. He's right. I'm going to try to race through this speech so that at least you'll have some time for Q&A. Is the mic on? Can you hear me? Okay, just to make sure. Okay. So he's already advertised the fact that we have a new working paper series in special economics, and the very first piece is a research agenda that's co-authored by Dane Stangler. Over there, I'd like Dane to stand. He works with Kaufman. And if you want to write something, I can't guarantee you we'll publish it. But if you want to write something, and it's on sort of this general topic that we're talking about today, we have this new working paper series, and you should come see Dane. The second person who has some importance is Rebecca Patterson. And I'm going to embarrass her too. But you can stand up, Rebecca. Okay, Rebecca Patterson is a major in the U.S. Army, who is a council for relations fellow who is working with us at Kaufman this year. Now, Rebecca's relevant for two reasons. One is she co-authored that research agenda with Dane. And the second thing is that she is co-authoring the paper that I'm working on that I'm about to describe to you in a few minutes. But I will accept all blame for all the bituporation that will come. I assure you in a couple of minutes. But if I have anything that I can't answer, I'm going to have Rebecca answer instead. So why are we all here? In part, we are here because Carl wrote this article about expenditure economics about which we have heard so much. He actually didn't come up with the term. It was Jeff Peterson's boss, and that's another person who is here. Jeff Peterson is a colonel at West Point. And the chairman of his department, who's no longer there, I guess he's working for Dave Petraeus right now, his colleague, I guess his boss or sort of boss was Colonel Mike Neese, who was the head of the social department at West Point. He actually suggested to Carl that he called this field the expeditionary economics and it's stuck. And there are really two tenets to it. And I want you to understand these before I go into my controversial talk in these few minutes. Number one, that firm formation and that firm formation and growth is critical to the growth of any economy. Or to put it another way, if you want scale economies, you've got to have scale firms. That's first proposition. Second proposition, maybe even more controversial, is that growth and jobs in a conflict, in a post-conflict situation may be more important at least in the short run than democracy in elections. All right, keep those two propositions in mind. Because now what I'm going to tell you, I'm going to advance a, oh, and then a third point that I just want to get on the table, because I want to counterpoise it against the thesis that I'm going to give to you, is that Connie up here just a few minutes ago, and also Jeff Peterson has analogized what the military does post-conflict with respect to economics as sort of like a trauma unit, right? So they're saving lives in the short run and they're waiting for USAID to come along in the long run and to provide economic development, all right? So that's the analogy that we have in our head and what we're all trying to figure out collectively is how to operationalize that trauma period, and how to make it work better, and what can the military do to facilitate firm formation and growth, all right? And that's a lot of what EE is about. Now I'm going to give you a different thesis, and I warn you, it's controversial, it's a work in progress, a lot of you may not agree with it. If you've got comments, I'd love to hear from you, and if we don't have time today, you can email me at rlyton, rlitanatcoffman.org. And I'd love to hear from you, okay? So here's the thesis. Let's start again with a proposition of EE that the most important thing post-conflict is to get firm formation and growth going. Number two proposition, what that requires is a government that makes it easy to do that, to basically have a very high ranking in the doing business rankings, like number one or number two. Easy to form a business and easy to have it grow without bribes, all right? Because unfortunately the countries that we tend to get militarily involved in are full of corruption. We all know this, okay? So keep those points in mind. And if you accept my logic thus far, then here's the question that I ask. Why is it that we feel no compunction about violating the sovereignty of the countries that we temporarily invade, shoot people, kill people, do all kinds of horrible things in the name of winning a war? And we basically don't respect sovereignty in that part. And then on the other side, when it comes to governmental function, my God, we say, we have to respect the sovereignty of the government. And so we have the USAID provide technical advice, the military provides technical advice, and we treat the government like with kid gloves. When we know they're corrupt as hell and they're incompetent and basically they're doing the things that are antithetical to promoting growth. And yet promoting growth is our objective. You may be on my side, I expected you to boo me. So it sort of hit me, Ann Rebecca, and we said to ourselves, well let's go back in history, and it turns out before we get to World War II, the US military until World War I, basically when it got involved in wars, Mexican war, Civil War, Spanish-American War, they temporarily occupied places that they won. And they performed governmental functions until the civilians came along later. And then after World War II, we ran Germany. We ran Japan. Now it's true that we actually used some of the locals, and we did. We denazified the Germans, but we used some of them. And the Japanese we actually used. Now when they wanted to do things we didn't like, General MacArthur basically overruled them and we just imposed American law on them, and ditto in Germany. But by and large, we ran these countries for six or seven years. Now the objective during those periods was not growth. The objective was that they don't go communist, all right, and they don't return to war-like ways. And let's face it, that occupation worked, all right? Keep that in mind, that worked, okay? And then we handed these countries back and we let them have elections and they became their own sovereign countries. Why did we abandon this model, all right? Now we have a different problem now, all right? It's not the commies, okay? The problem now is terrorism. And the objective now in countries in which we get involved in, either today or in the future, most likely, will be to foster growth, as we just said, foster firm growth in particular. And so it's not necessarily promoting elections and democracy, but that's been so far our policy. Our policy is we, quote, win the war, we then hold elections, and that's the whole purpose of doing things, we have it backwards. Our first objective is to get these economies growing and have these people have jobs so they don't turn around and become terrorists, all right? Then after the country's become stable and you have some growth, then they can have elections and they can have their country back. I call this approach, and Rebecca called, I mean, we came up with this name, we call this foster country approach, all right? They become foster countries. And this ought to be our default proposition. I'm not saying that, and we're not saying that every country that we become involved in militarily in the future ought to be a foster country. Cuz there may be some countries we get involved in that have a functioning government and we don't need to take it over. But if we're involved in a country that has a corrupt government or a failed government or a weak government or an incompetent government, we take it over. That ought to be the default position, all right? And then we teach these people how to have a essentially no entry barrier way to get into business and to grow a business with no corruption. It may take five or ten years, and then people learn that you can actually make money the fair way and the non-corrupt way, and you change a culture. And once you change the culture, you give the government back to the people. That's the thesis of what we're working on. Now, we're not saying again that you have to do this every place, but it ought to be something that ought to be in the contingency plans of all our military operations. And so the next proposition I advanced to you is if that, and the military ought to present this to the president of the United States before we actually engage in any future military action. And if the president is unwilling to engage in what we call foster parenthood after the war is over, he shouldn't send troops in the first place because we're wasting our people, our lives, our money. Because we're not going to have a stable country afterwards. And I think Iraq and Afghanistan are teaching us that right now, okay? And so we think this ought to be the default proposition. And I'll give you one other point, and then I'll shut up. Some people may accuse us of being imperialists and saying, well, if all it takes is replacing a government so that it can grow, why don't we just go around and invade everybody? Isn't that what we're arguing? No, we're not arguing that. We're saying that if for any reason the US military is asked to go in and fight, this ought to be on the table as the exit strategy. That's all we're saying. But we're not advocating that we go in and take over the rest of the world, all right? But it does imply, though, that a lot of USAID money that goes to a lot of these governments is going down the toilet, all right? And that's the reason why economists like Bill Easterly, who runs these regressions, and he finds that USAID has no effect. The reason I believe that those regressions show there's no effect on aid is that our money is going through these governments and it's disappearing. All right, and it goes to Switzerland or it goes to other places, but it doesn't go to the people or it goes to US contractors, by the way. I forgot there are another recipient of the money, okay? And that's why the regression show this. And so you know, this is the last proposition and then I really truly will shut up. There is tremendous pessimism now among the economics profession about what it takes to grow an underdeveloped country. And it's best reflected in actually a Brookings book and I'm still affiliated with Brookings by Jessica Cohen and Bill Easterly. And they put out a book last year. I think on why development doesn't work or does work or whatever, I forget the exact title. And it's got essays by all the leading sort of superstar economists now, this generation in growth economics. And they basically hand wrink. And they say we don't know anything. And what we have to do is control, we have to do randomized experiments, little experiments to figure out what works, okay? And I'm not against this, all right? It's good social science. But in the meantime, the world's gonna change in the next 50 years while we do all these randomized experiments. And you know what? We actually know more than that book says, all right? We know what makes countries work. We know that if you educate the people and they have good K through 12 systems, we know that if the people save, we know that if they are reasonably open to foreign investment and to foreign trade, we know that if they have the basic rule of law. Eventually once they get rich enough they can start affording infrastructure. We know pretty much the basis cuz that's how the Asian tigers grew. It's how China and India are growing with variations. I know there's a lot more state involved in China than there is needed in India. But the fact of the matter is we know more than the pessimists actually claim. And so I think we take the position that if the US government ends up controlling a post-conflict economy, it actually can make it work. And this leads to the final point. So who should be in charge? The answer is, and it was here on the last panel, the military. And I don't think we should have any embarrassment about this. The military has been in this business, as I said, for 100 and some years. All right, they know how to do this. And even if they have to be there for five or seven years, I still want the military in this, all right? They know how to make the trains run on time. They have the boots on the ground, and they have guns on their holsters, all right? And they're the only people that are capable of making this happen. And they also have, and I've learned this over the last several years by being in Kansas City cuz we teach part-time at Fort Leavenworth, is that the military has a whole web of training institutions of colleges for their people. I mean, it's a thinking organization. People, they think of the military, all they do is shoot people, all right? It turns out they have a very strong system of training, their majors, their colonels, and their generals. This is a very thinking organization. I know many of you who know the military know this. And so it's got a tradition of approaching problems through an intellectual bent. And this is a challenge that I think the military has got to take up in the future if we want to have future successes in any future wars that we have. Thank you very much if you haven't taken any questions. Any questions, fights, anything like that? I think we have, we still have a few minutes. People can see whatever they want. I think what we have to do is have a mic, right? And then you have to get up and talk. Is that, David, is that? I go back to David's introduction and this sense of urgency and we've been involved in running these two things at the ICAF. And I think what you all have got started is magnificent. But it does seem to me that there's got to be this counterpart of entrepreneurial investment structure. That's why we're groping for something maybe centered in Qatar. And by the way, I think the mistake we make is not getting more of these retired military. We've lost over half the class of 2000 at West Point have gotten out because they can't do these three or four time appointments, stay married. So there's a cadre that could be brought back into this. And I think the training ground is important. But the earlier discussion of not over-Americanizing during the Korean War, I was assistant secretary out of the military, but I went up into Laos. It was less Americanized than what we were doing in Vietnam. We over-Americanize in our mags and so forth. So I think to go with what you've got to get this entrepreneurial structure, and somebody that understands this is Turkey. She's Mutar Kemp at a Coca-Cola. And he's heading this partners for a new beginning for Hillary Clinton with two others. And they're all over the place. He agrees that we need to center on being successful. Afghanistan, Pakistan goes with it in a different way. And then in, because we've got this residual commitment in Iraq. If we don't have this follow on, which we did have in with McArthur, but I would just add, we sent Deming over there, and they did a lot of it through its private sector. And the Marshall Plan, we gave the money, but that was entrepreneurial. Now we've got no entrepreneurial follow up, and we've got no organized framework. We're trying to, Jim Jones already brought this up at the NSC. But we see that as urgent to connect what you're doing. And while you're working long range. Right. To get something going to save this situation. And Brother Ritter's with me here, and it can be done. But it's got to be done to mobilize like we got big things done in the Great War and in the Cold War. So that's my comment. I think what you all have done, and Carl's breakthrough article is a strategic tour to force. But it needs to be brought to a fine point of a policy end game and not over Americanize before it's too late. That's just my concern. And that's a fair point. And really what Rebecca and I are laying out, and I want to be very clear by the way, Carl hasn't yet endorsed what I just said. I'm out on a limb here with Rebecca. And don't worry, Rebecca, you're with me. We're really laying out a strategy for the future. I mean, Iraq's too late. We can't do this in Iraq. And we probably can't do it in Afghanistan because it doesn't look like the US government has a stomach to do it. We're going to make an argument in our article that if we had done this strategy in both countries, we'd be better off, all right? But it's too late. But it could still be used in Yemen. God forbid we get involved there, Sudan, or you name any other country that's a harboring terrorist. We could still do that. But your point about not over Americanizing is very important. And I'm still wrestling with it. And I think the point here from the gentleman from Chevron was making an excellent point, the joint ventures are the way to go. We don't want to have to have basically no entry barriers and have the perfect business climate only to basically have only American companies come in and profit, because that would be the most disastrous outcome. This has to be done for the locals, all right? So you're absolutely 100% right, yeah. Well, that certainly is a non-controversial approach of yours, Bob. I warned you. I warned you. And I want to just follow up on what David is saying. Because we are in Afghanistan, we can't do this model now. It's too late. The idea in the Carl Schramm article, and if you haven't read it, you've got to read it. He talks about where our current, he doesn't propose what Bob is proposing, by the way. He talks about what's kind of gone wrong with the assistance programs and foreign aid as a driver of social and political stability. And the basic thesis is that the widespread distribution of commercial presence, influence, driving forces throughout a political economy, is what causes good governance to emerge. And that good governance in vacuum of a strong widespread commercial sector, a strong government with all the funds invested in government capacity building, strong government in the absence of this widespread commercial engagement across the length and breadth of society actually can strengthen government with respect to the private sector and cause a distortion, a kind of crony capitalism where the government takes advantage of the private sector, uses the private sector for its own enrichment. So then the question is, what is the strategy in a place like Afghanistan, which is already too late for this, if this were ever to occur? I think if you look at the results in Eastern and Central Europe after the fall of the Soviet Union, we primed their economic pumps with capital professionally deployed. This is the way the Marshall Plan worked, as David was saying. This is what happened in Korea and Taiwan and Thailand and Hong Kong. Their good governance was driven by the distribution of commerce. And so we need to think of a different model other than the contract economy into which corruption is built. Corruption is in the DNA of the contract economy. Those of us who experience it know it well. And the distortions in the contract economy that take jobs out of the private sector, out of the market economy, and put them into contracts that pay far higher. It was brought up this morning. The government's pay far higher. It distorts the market economy. And if the market economy is pushed down by the contract economy, and then you have the competitive narcotics economy, and you have the competitive terrorist economy, you don't get to that point of social and political stability. So anyway, the idea of pumping investment capital professionally deployed, a lot of enterprise funds that worked in Poland, that worked in Hungary. Francis Grubasewski was one of the architects of the Polish-American Enterprise Fund. They have returned. I don't know. You should probably have the question out. Yeah. I think the point is I've made the point. You made the point. But I would ask Bob how he and the Kaufman Foundation, would intend to move in a place like Afghanistan, given some of these considerations. What's the next move for Afghanistan to change the model, to change the venue, to change the structure of our assistance programs that can provide that entrepreneurial effect on society? Sorry. Well, I think this is a cop out, but there's some truth to this. Is Connie still here? Yeah. So we need more Connie's. All right? I'm not kidding you. We need more people that basically are helping indigenous Afghan businesses grow. Now you make the point, maybe we need enterprise funds. Maybe we do. I'll keep an open mind on that. Maybe we don't. I will say one thing. Korea did not grow through enterprise funds. Korea actually, after the Korean War, we took our hands off Korea. And we just let the dictatorship run and it existed for some 30 years. So I'm not sure what the right approach is when it comes to capital buy. I am pretty sure that the right approach is to try to encourage as much money to support indigenous Afghan companies, and not Bechtel and Halbert. All right? That's the basic idea. All right? Last question. As part of your research, are you also looking and comparing with other military operations? I mean, of course, there's other developed countries who have looked at military, private sector sort of relationship. Of course, I also think it would be interesting to look at places like in Europe, of course, some of those. But also Iran, if you look at, actually, the Iranian Revolutionary Guard has a system like that where the military and have linkages to private companies. And there is, whenever they got, I know in Lebanon, they actually worked together on a number of things. And also, the People Liberation Army in Africa also has a similar setup. So it would be interesting models to look at. OK. So the short answer is I haven't looked at other militaries. But in part, that's because US military, at least I can trust, and largely, it will not be corrupted. And I think it'll do the right thing. And it's done this before, so we can do it again. Let's leave it at that. OK. Thank you, guys.