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The world has changed and NATO has tried, unsuccessfully, to change with it. I believe the only way to save NATO, is to fundamentally rethink its purpose. Without a successful revision, its members (particularly the United States) will ultimately walk away, if not now, then in 10 years. First of all, lets be clear. The Soviet threat is over. Russia is not its replacement. The need therefore for an Article 5, drawing a line in the sand against the expansion of the Eastern block, is moot. Obliging the U.S. to defend say Lithuania against a Russian attack is both foolhardy and foolish. First, we risk an attack on US cities for something that is not a US priority, and second, we would never actually do it. So why the charade? NATO actually weakens its own credibility when it promises something that everyone knows it will never actually deliver.

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NATO needs to be a flexible group of allied countries, committed to each other’s security and with interoperability among its militaries to conduct joint exercises. Countries will align for the common good, but there is no do-or-die military obligation. Simply put, the current environment no longer calls for this. Ending Article 5 will go a long way to ending the free-loading off the US, something we can no longer afford. Wealthy Europe can pay for its own defense, or not have one. It may be that we do have an Article 5 style arrangement with some countries – a hub and spoke system that we have in Asia – but that can only be with important countries who are critical to us, and who are willing to share the burden eg Britain or maybe France.

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To keep NATO alive, it needs to be relevant. To be relevant it needs to be real, ie have a strategy that meets today’s world and have the credibility that people know it will back its words with action. NATO must remain the vehicle that binds the two sides of the Western World (North America and Europe). But it must be restructured for a world where the Soviets are gone, and neither Russia nor Al Qaeda replace it. A flexible alliance, devoid of non-credible do-or-die commitments, where each country is obliged to pony up for its own defense, may be best way of achieving it. It doesnt have to lessen our commitment to certain key countries where we have greater interests, but those can be negotiated separately, and not part a blanket all-for-one which has effectively turned into a club where America provides defense for everyone.

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The United States is already fighting two open wars in the Islamic World,  and waging a number of other battles from Pakistan to Yemen. As a result, we are seen as an intrusive, hostile force by Arab and Muslim people, no matter what our intentions. Loudly leading another front would only add to this rage, and undermine our interests. Furthermore, the American people themselves have no appetite for another land war in a Muslim country, especially a war that will be seen as one of choice. Rallying the American people for war – leading from the front – the way George W Bush did in Iraq would have been hugely unpopular.

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In the Arab world, change is coming, whether we lead from the front, back, or not at all. The populations in the region’s autocracies and monarchies are getting younger, better informed and angrier. An explosion, driven by domestic unrest, was inevitable. The ouster of Ben Ali in Tunisia had nothing to do with us whatsoever. Similarly, Egypt’s revolution was led by the students in Tahrir Square, though the removal of U.S. support was the critical turning point in Mubarak’s decision in stepping down. The uprising in Libya also started as a purely domestic affair. It was only Gadhafi’s threat of massacring the people of Masrata that moved us to seek UN authorization for Western intervention.

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It is clear now that NATO’s intentions went far beyond the humanitarian action authorized by the UN. London and Paris, it seems, decided that it was in their interests to see the end of the Gadhafi’s government, and so sought an old fashioned regime change. Whether this was a smart move or not, time will tell, but openly announcing this intention to remove another Arab government would have outraged the Arab World and denied the Libyan rebels the legitimacy they needed with their own people. From an American perspective, rallying the American people to take the lead in an attack on a country not threatening us, would have been counterproductive, particularly as this was clearly something being sought by Europe, and not us. As it was Congress was unhappy with the way the U.S. got involved. Ultimately, this was a British and French decision, and it was therefore there’s to lead. The continued relevance of NATO, in fact, demanded that the U.S. not be seen to be carrying the entire burden of Western defense. No doubt, US military support was indispensable, and it was provided – just without fanfare or primetime noise.

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In the end analysis, we can only judge the effectiveness of a policy by reviewing its results. As NATO operations wind down, these are now plain to see. Massacres were avoided in Masrata. Regime change was effected in Tripoli. The Arab Street did not erupt in rage against the United States. The Europeans took the lead in their own defense, a U.S. foreign policy goal. NATO unity was maintained. And the U.S. public has largely stood behind NATO actions.

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I therefore see no other conclusion that President Obama’s approach of leading from behind has been hugely successful.

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While the world’s finances go into free fall, the political situation is fast deteriorating as well. Violence of the worst kind continues to plague Libya and Syria. Continued attacks in Iraq, Pakistan and now Israel also punctuate the morning news. But more telling than these is the less destructive but equally worrying violence in London. There is no doubt in my mind that what happened in the British capital was criminality. But these things do not come out of nowhere. They are a result of the alienation and sense of hopelessness of a new generation that is about to enter the work world. I suspect that this alienation is widespread across Europe. There is a possibility (though not yet a probability) that this unrest will spread to the United States. Over the longer term, even when economic growth returns, if the benefits only accrue to a few, and a majority is left flipping burgers, the scene is still set for a social explosion.

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For all the market and social reasons I outline above, I believe some of the brightest long term spots in the world economy may now be guns (ie the security industry) and gold. Gold is an easy proposition. The U.S. currency is most likely going to be debased, whichever way you look at it, and the Euro is not giving much room for comfort. Continued malaise in Japan and the lack of convertibility of the Renminbi suggests there are few other places to hide. Investors will look to gold as a safe haven (even though they will continue to look to the U.S. dollar for some time given the lack of alternatives). A more difficult proposition is guns. After all, cutting the deficit is going to hit the defense industry more than any other. However, this is a short term view. History has shown that it is at times of economic stress that you see domestic unrest and heightened geopolitical tensions. Well, the unrest is already here. As for geopolitical tension, Asia is entering into an arms race, that is spreading from China to Japan to Australia and India. It is only a matter of time till the U.S. doubles down in the region too. Over the medium term, after the current cuts, it is entirely possible that the defense sectors in the U.S. and globally are reenergized.

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So what does this market meltdown and social unrest tell me? It may be time, at least psychologically speaking, to be thinking guns and gold.

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Despite the cuts mentioned above, there is clearly a point whereby we seriously start cutting into the muscle of the military. There are those, on both the left and the right, who think that this is fine – that we are no longer at war. The reality is, however, quite different. The “War on Terror” may be over but the threat posed by terrorists is far from done. Add to this, other non-state actors ranging from drug cartels, to organized crime and professional cyberterrorists, and we still have serious asymmetric threats facing us. Far more profoundly, the rise of China poses a fundamental and direct threat to our interests. First, we face the very real possibility of being pushed out of Asia – the locus of trade, manufacturing and oil. We cannot remain a superpower and not be the preeminent power there. Secondly, for the first time since World War Two, we are being challenged in the Pacific Ocean itself, which directly abuts the Continental US. Given China’s rapid military build up, we cannot fail to notice the threats.

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I suspect that when all is said and done, Congress will end up cutting real muscle out of the military. Simply put, it is easier to make cuts in a loyal service that will take it on the chin than to cut Medicare and Social Security. I believe this is short sighted, as it is only delaying the day when those two programs will have to be cut, as it is in fact those (and not defense) that will drive the budget out of all balance. But assuming that my hypothesis is correct, we need to start planning now on how a smaller military can fulfill its obligations to defend the country and to preserve our role as the world’s preeminent power. The clearest answer lies in developing a new global security strategy realigning our overseas posture and alliances with the threats at hand.

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I have been arguing for some time that we transform our individual treaty alliances in Asia into a multilateral security architecture – an Asian NATO-lite – that can preserve the peace by balancing China. This does not need to be a provocative gesture. We are not recreating the NATO of the Cold War, although the threat is clearly there. As part of this, we must press our Asian allies into cost sharing. Simply put, they need to contribute to their own security. Many countries are already expanding their defense budgets in any event. This can be made far more effective by avoiding duplicative tasks. On the other side of the world, we need to reassess the current NATO. As it stands, it overcommits us to the defense of over a score countries – often in places where we have no strategic interests. Adding insult to injury, most of these countries can afford to defend themselves but have no incentive so long as NATO exists. If singular alliances in Asia can give way to one multilateral one, the exact opposite is possible in Europe.

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Whatever you think of the above changes in US defense posture, one thing is clear. It needs updating both for the new security environment and also for the new budgetary environment. In fact, the bigger the cuts in our defense budget, the more urgent the need for a new global security strategy.