RENEE MONTAGNE, host:
The global economic crisis has taught lessons that reach far beyond Wall Street. Back in February, the U.S. director of National Intelligence said the financial turmoil had replaced terrorism as the number one threat to the nation's security. The economic panic may have subsided, but its effects linger.
NPR's Tom Gjelten reports on how the crisis has elevated the importance of economic issues on the national security agenda.
TOM GJELTEN: Here's some connections between the economy and security. A subprime mortgage crisis in the United States can lead to social unrest in the developing world when financial markets freeze and the global economy stalls, so does the flow of money from rich nations to poor nations. Another example, dependence on debt financing from potential adversaries leaves the U.S. vulnerable to economic warfare.
The U.S. official responsible for tracking these connections is Michael Froman. He's both the deputy national security adviser under General James Jones and a deputy to Larry Summers, the president's economic adviser.
Mr. MICHAEL FROMAN (Deputy National Security Adviser, Deputy Economic Adviser): I report jointly to General Jones and Larry Summers, as does my staff. We worked equally for both of them. There are some issues that have more of a national security component and some issues that have less of a national security component, and sometimes that points us towards one boss more than another. But we work jointly for both.
GJELTEN: Froman advises security colleagues on the geopolitics of economic events. At the National Economic Council, meanwhile, he specializes in those economic issues that have a foreign policy dimension.
Mr. FROMAN: Actions taken at home to stimulate the economy or to repair the financial sector or to reform the regulatory regime, all have international implications that require international concerted action.
GJELTEN: Froman gets help from the CIA. Since February, the agency has been preparing a daily economic intelligence brief for him and a handful of other U.S. officials. The EIB, as it's called, is a direct outgrowth of the global financial crisis. It's separate from the more famous president's daily intelligence brief, and focuses exclusively on economic issues.
One recent brief, for example, reported secret data on supply and demand issues in the global oil market.
Richard Cooper is a Harvard economics professor who chaired the government's national intelligence council in the mid-'90s. He says the CIA might tell policymakers, for example, what the Chinese appear to be doing with the trillion-plus U.S. dollars they hold as part of their current reserves.
Professor RICHARD COOPER (Economics, Harvard University): China has been very secretive about how they hold their reserves. If the Chinese were to begin moving their reserves, the intelligence community could find out, at least as quickly as the markets notice it - perhaps, more quickly.
GJELTEN: Another example: several countries, including Russia, have so-called sovereign wealth funds. Basically, huge state-owned investment funds. Cooper says many of those countries hire private fund managers, but the CIA could do some secret digging to find out more.
Prof. COOPER: What instructions are given to the private managers, exactly, you know, just maximize returns or stick it to the Americans, we have an interest in. That's an area where some of our sources and methods could be helpful in giving us advance warning if somebody wanted to make trouble.
GJELTEN: A senior intelligence official who helps write the daily EIB won't say whether it discusses currency transactions or sovereign wealth funds. He does say the vast majority of the agency's economic intelligence reports do involve secret information. A monthly economic vulnerability review, for example, lists the countries in serious economic trouble.
Such reporting became more important in the last year. Michael Froman says the economic crisis showed that the Group of eight industrialized countries can't solve economic problems along. Froman looks instead to the larger G-20, which includes China, India and other rising economies. There is a new geopolitical lineup.
Mr. FROMAN: The G-20 reflects that. It's been very effective in mobilizing concerted action. And it does reflect a different approach to global governance.
GJELTEN: Froman is the Obama administration's point man for the G-20 meeting in Pittsburgh later this month. He'll draw on the CIA's economic intelligence briefs. The intelligence official who helps write them is ready. When U.S. officials go into negotiations, he says, they look to the intelligence community to tell them what the others are bringing to the table. That, he says, is something we do - a new type of spy work for a changing world.
Tom Gjelten, NPR News, Washington.
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