Warning Signs

Intelligence analysts have labored for years to identify the factors that make countries unstable. For those wanting to anticipate the next failed state, Nassim Nicholas Taleb and Gregory Treverton (“The Calm Before the Storm,” January/February 2015) offer a counterintuitive insight: “Disorderly regimes come out as safer bets than commonly thought—and seemingly placid states turn out to be ticking time bombs.” But the authors fail to support that claim, and their proposed method for assessing a state’s fragility does not appear to offer anything better than the early warning methods already in use.

Taleb and Treverton point to “five principal sources” of fragility: “a centralized governing system, an undiversified economy, excessive debt and leverage, a lack of political variability, and no history of surviving past shocks.” These variables are indeed important, as other forecasting models recognize. In particular, intelligence analysts have long evaluated what is called “state resilience” to internal and external shocks. The challenge has always been to determine in advance whether a state under stress will bend or break.

Discussing the recent experiences of Syria and Lebanon, Taleb and Treverton suggest that their own approach could have predicted that the former would descend into violent chaos while the latter would remain relatively stable. In the case of Syria, however, it is far from clear that concentrating on their five indicators of fragility would have been especially illuminating. According to statistics from its central bank, Syria’s economy was in fact quite diversified before the civil war, divided among agriculture (22 percent of GDP), industry and excavation (25 percent), retail (23 percent), and tourism (12 percent). The country’s external debt had plummeted in 2005 and stayed low afterward. Syria had also ridden out major challenges in recent history, surviving the 1982 uprising in the city of Hama and the prolonged succession crisis occasioned by the declining health and eventual death of its strongman leader Hafez al-Assad in 2000. True, Syria was a highly centralized state. But what made the country vulnerable was less authoritarianism per se than the fact it rested on minority sectarian rule. Exogenous factors, such as the civil war raging in Iraq and the successive droughts in northeastern Syria, also contributed.

As for Lebanon, Taleb and Treverton are right that it has proved relatively robust. They attribute this outcome to the country’s decentralized political structure and relatively open economy but ignore the inconvenient fact that its external debt grew substantially before 2011, which under their model should promote instability. It is also plausible that the still vivid memories of a horrific civil war, along with the restraining influence of external actors such as Iran and its proxy Hezbollah, have also played a part. What’s more, Lebanon’s resilience may well not last. Some things, after all, snap from accumulated stress rather than sudden shocks.

A closer look at the other cases Taleb and Treverton highlight further calls their model into question. They label Egypt “fragile” because it manifests so many of the factors they consider critical. But someone could just as reasonably conclude that it has shown remarkable resilience by reverting to military rule after the revolution and not falling apart. Judging by the generals’ past staying power, moreover, the current regime could remain in place for a long time, especially if several Persian Gulf states continue to prop it up financially. Bahrain’s situation is similar.

Conversely, the authors hold up Thailand as an example of an “antifragile” state, one that has grown resilient from weathering previous crises. Yet although Thailand is hardly a basket case, it is difficult to look at the country and not feel unease: it has once again succumbed to a military coup, unrest is growing in the rural north, and an ugly insurgency has rendered much of the far south a no-go zone.

Taleb and Treverton’s most baffling assertion, however, is that former Soviet states should be viewed as “relatively stable” because they have recovered from the collapse of the Soviet Union. Setting aside the contradiction between that generalization and the authors’ pronouncements about the growing risk of instability in Russia, the collapse of Viktor Yanukovych’s regime in Ukraine and the deadly conflict that ensued represent a giant exception to their theory that needs to be explained. The crisis in Ukraine caught nearly everyone by surprise, and there is no reason to believe that analysts employing Taleb and Treverton’s five factors would have seen it coming either. Although Ukraine was burdened by debt and politically centralized, its economy was quite diversified and the state had adapted well to a series of leadership changes.

Given all these problematic cases, it’s hard to see why those who have to make important decisions in response to warning signals—policymakers, investment managers, humanitarian relief planners, and so on—should rely on Taleb and Treverton’s approach for guidance. Indeed, the authors seem to admit as much, belatedly conceding that their five factors “cannot indicate with high confidence whether a given country is stable—no methodology can—but they certainly can reveal if a given country should cause worry.” The problem, however, is that dozens of states “cause worry” for one reason or another, and decision-makers need to differentiate and prioritize among them.

The authors’ solution for making this task easier is not encouraging. Taleb and Treverton propose three categories of states: “fragile,” “moderately fragile,” and “slightly fragile.” Without further elaboration, these terms are virtually meaningless. If the best a methodology can do is reach conclusions such as that Russia “probably lies somewhere between moderately fragile and fragile,” “Greece and Iran could transform into more robust states or lapse into fragility,” and Nigeria is “somewhat adaptable in the face of new threats,” it will not gain traction among policymakers. Nor should it.

Ultimately, as Taleb and Treverton acknowledge, there will be uncertainty associated with any method of assessing a country’s vulnerability. For this reason, analysts should focus on the other dimension of risk: consequences. Given that the collapse of some countries would pose a far larger threat than the collapse of others, it makes little sense to fixate on probability rather than impact. If policymakers grew more aware of the downside risk, then they would be more likely to hedge against potential threats and, better still, minimize them—for example, acting earlier in Syria or being better prepared for what happened in Ukraine. Such assessments would almost certainly make them think twice about hoping—as Taleb and Treverton casually do in closing—for the swift arrival of “a Black Swan of Beijing.”