Détente, ESG, and Mirror-Imaging

Détente, ESG, and Mirror-Imaging

The following commentary/analysis is one I wrote in my capacity as a senior fellow at “the nation’s oldest consumer protection agency,” Consumers Research, where, among other things, I compile a weekly letter for public pension-fund managers.  I am sharing it here today because I thought it might be useful to some of you.


Mirror, Mirror, on the Wall…

In May 1976, President Gerald Ford, with the assistance and agreement of the Director of Central Intelligence, George H.W. Bush, launched the project that would become known as “Team B.”  Team B was a competitive analysis exercise designed to find any weaknesses in the CIA’s assessment of the Soviet Union’s capabilities and intentions and to provide a parallel but distinct assessment of the risks the Soviets posed to the United States and the free world.

The project was headed by Richard Pipes, a Harvard professor and one of the world’s foremost experts on Russian history.  The work Pipes and his colleagues did is now nearly legendary.  They concluded that the CIA’s analysts misunderstood the Soviet Union, misinterpreted its leaders’ intentions, and as a result, had placed the entire Western world in an extremely vulnerable position.

Team B’s assessment formed the foundation of a shift in American foreign policy, beginning near the tail end of the Carter administration and continuing, even more intensely, through the Reagan years.  In the end, Team B’s analysis and the policies based on it led, more or less directly, to the collapse of the Soviet Union, a mere 15 years after the project’s inception.

In 1986, while much of Team B’s work was still classified, Dr. Pipes took to the pages of Commentary magazine to explain in general terms what his team had found and why the CIA’s official analysis was so mistaken in the first place.  Among other things, Pipes noted that the CIA’s in-house analysts and the scientists on whom they relied were notably positivist in their outlook, believing that because the natural world operates logically and rationally, the human world can and should as well.  Such an approach to human affairs is often mistaken and results in the application of several cognitive biases, notably “mirror-imaging,” which Pipes described as follows:

Now he who speculates on the motives of others can proceed in one of two ways.  He can ask himself: (1) given what I know of these people, what can be on their mind?; or (2) if I were in their shoes, why would I do what I observe them doing?  Clearly, the first of these approaches is preferable.  It is also the more difficult because it requires knowledge of alien cultures and psychologies, not to speak of an effort of the imagination.  If we add to this difficulty the fact that the scientists and engineers entrusted with responsibility for preparing these estimates tend to belittle the influence of cultural factors on human behavior, it is hardly surprising that the U.S. intelligence community, in assessing Soviet strategic programs, has relied heavily on the second approach, popularly known as “mirror-imaging.”  This practice attributes to others one’s own motives and intentions on the unspoken assumption that these alone are “normal” or “rational.”  “Mirror-imaging” is the very antithesis of the scientific method which seeks to eliminate personal and subjective factors from the process of observation and analysis.  Yet, paradoxically, it is precisely how scientists are likely to proceed once they leave the realm of the exact sciences.

A Nation’s intelligence community reflects the habits of thought of its educated elite from whose ranks it is recruited and on whom it depends for intellectual sustenance.  The CIA is no exception.  Its analytic staff, filled with American Ph.D.’s in the natural and social sciences along with engineers, inevitably shares the outlook of U.S. academe, with its penchant for philosophical positivism, cultural agnosticism, and political liberalism.  The special knowledge which it derives from classified sources is mainly technical; the rest of its knowledge, as well as the intellectual equipment which it brings to bear on the evidence, comes from academia.

Over the last two decades, the ruling classes of the West – governments as well as international organizations like the United Nations and World Economic Forum – have enabled and participated in a revival of positivist-inspired, academia-driven mirror-imaging, specifically on the matter of climate change and the policies best suited to address it.  The baseline presumption driving all of the West’s actions on this front is that the world craves “leadership” on the issue, meaning that Europe and the United States need to drive both the conversation and the physical conversion of economies, which will, in turn, prompt similar actions from the developing world.  Science tells us what is happening and how to address it, and like us, the Chinese and the Indians and the Brazilians and the rest want nothing more than to “follow the science.”  If we lead, therefore, they will follow.

In his dissenting opinion in the 2007 decision in Massachusetts v. EPA, Chief Justice John Roberts noted how mirror-imaging was driving the climate change agenda, demanding that policy be determined by presumptive fantasies.  The case – in which the Commonwealth of Massachusetts and other states sued the EPA to force it to regulate carbon dioxide and other automobile emissions as causes of global climate change – was decided in favor of the states, although the Chief Justice questioned the underlying logic of the contention that the EPA could “fix” the problem (h/t Chris Horner):

As the Court acknowledges, “developing countries such as China and India are poised to increase greenhouse gas emissions substantially over the next century,” ante, at 23, so the domestic emissions at issue here may become an increasingly marginal portion of global emissions, and any decreases produced by petitioners’ desired standards are likely to be overwhelmed many times over by emissions increases elsewhere in the world.

Petitioners offer declarations attempting to address this uncertainty, contending that “[i]f the U. S. takes steps to reduce motor vehicle emissions, other countries are very likely to take similar actions regarding their own motor vehicles using technology developed in response to the U. S. program.” Stdg. App. 220; see also id., at 311–312. In other words, do not worry that other countries will contribute far more to global warming than will U. S. automobile emissions; someone is bound to invent something, and places like the People’s Republic of China or India will surely require use of the new technology, regardless of cost.

More recently, when “Qatar announced a major expansion plan for its liquefied natural gas just as the US has paused new export licenses for the fuel,” Russ Greene, a senior fellow at Stand Together and a critic of ESG, summarized Roberts’ sentiments more succinctly, writing, “The basis of ESG and net zero is that if the West limits oil and gas production, the world will follow suit, out of climate solidarity,” and “Supposedly we can trust China and India to restrict their own development, in the name of the international community, and sustainability. Never mind the facts.”

That last bit there is the key:  “the facts.”  The facts – including Qatar’s LNG expansion, China’s massive ongoing expansion of coal usage, India’s similar expansion of coal power, China’s enduring massive human rights violations, and the rest of the developing world’s general predisposition not to give a tinker’s damn what the United States and Europe think or do – show that the intellectual footings of net-zero, ESG, and the rest are all fantastical at best.  They are based on the presumption that the Chinese and the Indians and the Qatari’s and everyone else will do exactly as we do because they will see the “crisis” exactly as we see it and will of course want to address the matter through de-industrialization and economic regression.  This is all based on mirror-imaging.

I have argued repeatedly – most recently, here – that ESG, as it is practiced in the West, constitutes a significant competitive disadvantage for American and European corporations.  “Not only are American companies subjected to more thorough, more transparent, and more honest accounting and governance standards, but they also have to deal with and “engage” with politically activist shareholders whose engagement positions may not reflect the best interests of the company.”

The potential costs associated with this competitive disadvantage may not be as readily apparent or as extraordinary as those associated with the CIA’s 1970s obsession with détente, but they are significant, and they do threaten the post-war global order profoundly.  They too place the entire Western world in an extremely vulnerable position.

When assessing and addressing the presumptive behavior of others, it is always wise “to eliminate personal and subjective factors from the process of observation and analysis.”  See the world and its actors as they are, not as we wish them to be.

Stephen Soukup
Stephen Soukup
[email protected]

Steve Soukup is the Vice President and Publisher of The Political Forum, an “independent research provider” that delivers research and consulting services to the institutional investment community, with an emphasis on economic, social, political, and geopolitical events that are likely to have an impact on the financial markets in the United States and abroad.