The bandwagon for economic catastrophe is overflowing with analysts, as any CNBC show or professional conference demonstrates, and that bandwagon within the US intelligence community (IC) is no different.

Historically intelligence community concerns have revolved around hard power and hard targets. Hard power matters include orders of battle, weapon capabilities and military threats from other countries.

Hard targets, such as North Korea, Hugo Chavez’ inner circle, and Russian space-weapon programs, refer to places, people, or programs that present a considerable challenge and threat to the United States and its information collectors. This traditional obsession with the hard, however, has given way and led to an expanded scope that pays more attention to soft power and soft targets.

The move became a significant trend in the 1990s (e.g., HIV/AIDS as a national security threat) and carried through the second Bush administration (e.g., climate change becoming an IC concern) in many ways.

Soft on Intelligence

The soft power realm of economics has long been an important pillar for intelligence analysis, but its importance, treatment, and focus has changed with the salience of other soft power dimensions.

Whereas in the past economic analysis focused on critical manufacturing and technical sectors–most of which related to guns and butter–current analysis is as much centered on technological (e.g., information technology, nanotechnology, and biophysics) and financial subjects. The shift can be seen in comparing old and new intelligence reporting.

During the heyday of the Cold War, the IC’s economic analysts focused on Soviet access to raw materials, location and robustness of Communist factories, and the Bloc’s food production capabilities.

Analysts remain interested in these matters, but also pay significant amounts of attention to financial flows, local stock market and bank strength, and the leadership’s ties to commercial organizations. It’s unlikely the US IC will ever engage in France-like industrial espionage, but foreign corporations are definitely a newer and more significant target of work.

Both as a cause and consequence of this shift, the IC has evolved its hiring practices when it comes to economic analysts. Historically these analysts were of an old-school variety that more or less reflected economics’ status as the dismal science.

In recent years, and particularly well-publicized after the financial crisis, the IC has recruited Wall Street types. These finance-cum-intelligence analysts have an eye toward job security and, perhaps, patriotism, even if it means giving up a (possibly) more
lucrative position in their original career.

Not only have the IC’s hiring practices shifted, but so has the finished intelligence products. One change has been the character of traditionally focused reports. These now frequently carry sections or references to finance-focused analysis, perhaps including notes about a country’s credit, regulatory and enforcement bodies, investor sentiment on a given company, or a person’s role in market reform.

Another change in the character of intelligence products are the types and names of the products themselves. Regular attention is now paid to world markets, health of developing economies, and specific foreign corporations’ links to other foreign corporations. This work is distributed through a number of new or rebranded products that are geared toward financial and economic analysts.

And some of the IC’s most active Web 2.0 groups (i.e., the active communities on Intellipedia and A-Space–the IC’s versions of Wikipedia and Facebook, respectively) are those dealing with financial intelligence.

How Different and How Effective?

Economic analysis has always played an important role in assessing national security threats. But this type of analysis has changed dramatically, as reflected in the hiring practices of IC agencies, the character of the intelligence being produced, and the trend of which this shift is part.

The recent global financial crisis has only provided energy for the movement. The Director of National Intelligence, (Ret.) Admiral Dennis Blair has even said that the crisis is one of the great threats to US stability. And during the height and immediate aftermath of the crisis, major daily briefs regularly contained reporting on financial developments around the world.

But how effective is this turn of attention? It’s not like the CIA used slush funds to bail out banks, so is it worthwhile for the IC to use resources on such issues? Is the new financial focus of the Community’s work to counter threats appropriate or is this a case of
mission creep that adds to the piles of (some worthwhile, some not) reporting that’s never read?

The immediate shift toward a financial spin on economic analysis took off after the events of Sept. 11, 2001, when the IC dove headfirst into identifying, tracking and eliminating funding sources for terrorist operations.

These efforts largely built off counter-narcotic operations targeting drug kingpins and their empires. Disappointingly, neither the counter-narcotic nor counter-terrorism efforts have led to an end in their respective “War on…” episodes.

But as the IC’s finance-related programs matured, namely through experience and appropriately trained new talent, important secondary affects emerged. These include better identification of the financial flow patterns used by terrorist-related groups (even if this hasn’t stopped group operations) and detaining individuals and cells before
they become “active” (again, even if this has not stopped the larger group’s operations).

In a sense, the IC has become more educated but not significantly more effective in countering terrorism finance. Similarly, in terms of other, harder targets, the US has become more educated but not more capable in countering threats.

Education, though, is an important first step. The IC is no different. Continued efforts and better integration of financial analysis with traditional analysis ought to be increasingly effective over time.

Officer X is an active-duty member of the US intelligence community.