Where in the World: Adair and Winds, Pt. 1

NB: The following video is one I recorded while on my annual backpacking trip in August; please excuse any potential anachronisms.

Camping at Adair Lake is most comparable to spending a night in a wind tunnel – and yes, it was as peaceful as your picturing. The little sleep I did get was supplemented with some thought around wind’s impact on global agriculture.

Many of the world’s agricultural zones get their moisture from 1 of 2 wind sources – jet streams or monsoons. As the climate shifts, we will see more dramatic shifts in winds, leaving these single-wind-source agricultural zones with substantial moisture vulnerabilities.

There are, however, 5 zones that were blessed with multiple wind currents and their importance will become very apparent as the climate continues to change.

Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:
First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.
Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.
And then there’s you.
Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.



Demographics Part 3: The Xer Cut

You all know the Boomers, you all know the Millennials, but have a care for GenX. Their successes, their failures, their (lack of) numbers, will determine the fate of the United States and New Zealand until nearly 2040.

A bit macabre? Certainly. But it’s a freakin’ adventure park compared to what will roll out everywhere else.

Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:
First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.
Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.
And then there’s you.
Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.



Demographics Part 2: The Canadian Treadmill…Stops

For decades, the Canadian system has been the world’s most friendly to would-be immigrants. But just because the model has worked does not mean it will always work.

Rising trends in national disintegration in the late globalization age haven’t so much swamped the Canadian system, but instead changed the nature of its inward migrants. Increasingly, foreigners have stopped looking to live in Canada, but simply want their money to reside there. That works to a point. That point raises the cost of living in Canada to beyond that of most Canadians, and now Canada is having to at least partially close the door…

…just as Canada needs a fundamentally new social model.

Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:
First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.
Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.
And then there’s you.
Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.



Demographics Part 1: Understanding the Basics

At its core, my work weaves together the heavy trends of geopolitics and demographics into a tapestry that can be viewed from any number of directions. Most folks in spaces political, economic or strategic tend to gloss over demography. Much to their detriment in my opinion. Yes, decades-long trends take decades to play out, but once they arrive, they have decades of steam behind them and have become absolutely irresistible. Glaciers are boring until they punch you in the face.

So with just a touch of fanfare this holiday season we’re launching an open-ended video series on the guts and glory of all things demographic. We’ll start today with a bit of a what’s-what, before delving into a small army of countries, topics and forecasts.

We’ll begin today with a run through of the demographic patterns of the past several decades so you can take an educated stab at the issues in play.

Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:
First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.
Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.
And then there’s you.
Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.



The Cutting Room Files

Disclaimer: The following newsletters were originally published in late 2019. As the newsletter continues to grow, I will occasionally re-share some of my older releases for the newer members of the audience.

As a partial thank you to all you who have directly and indirectly supported my efforts, and to perhaps keep some of those of you who are more intellectually ravenous at least partially sated, I present to you the Cutting Room Files. This newsletter will be an open-ended compilation of newsletters cobbled together from various bits that didn’t make it into the final version of Disunited Nations, as well as some embargoed not-quite-pieces of my previous books – The Accidental Superpower and The Absent Superpower.

If any of the following reading sparks an interest to pick up any of my books, feel free to click HERE or learn more at the bottom of the newsletter.

Read the other installments in this series or merely scroll to read them all:
The CRF Files, Introduction
The Cutting Room Files, Part 2: The Future of Mexico
The Cutting Room Files, Part 3: The Future of Canada
The Cutting Room Files, Part 4: The Future of Japan
The Cutting Room Files, Part 5: The Future of the United Kingdom
The Cutting Room Files, Part 6: The Future of China
The Cutting Room Files, Part 7: Europe
The Cutting Room Files, Part 8: American Politics

The Future of Korea

When Donald Trump became president, world leaders fell into two broad buckets. The first thought that if the Americans were going to drop the global mantle of leadership, then perhaps there is some space for us. Russia’s Vladimir Putin became more aggressive throughout the Russian near abroad. France’s Emmanuel Macron tried to become the voice of the West. Canada’s Justin Trudeau became a liberal supermodel.

The second were those leaders who weren’t sure the Americans knew what they were doing in electing an isolationist, and thought the best bet was to not rock the boat. This club included Germany’s Angela Merkel, Australia’s Malcolm Turnbull, and Britain’s Theresa May. All and more bet/hoped that Trump would be little more than a hiccup in normal relations. They kept quiet and aimed to not do anything that might annoy the Americans as a whole, so that when Trump left the stage their relations with America could get back to normal.

There was one exception: South Korean President Moon Jae In. Rather than strike out or hunker down, Moon bluntly asked for the terms of a revised trade deal that Trump would approve of.

Moon’s logic was unassailable. Put simply, Moon recognized that he completely lacked leverage, (correctly) calculating that being an eager first volunteer might allow South Korea to walk away without undue sacrifice as the Trump administration looked for an early win. The revised deal’s technical talks took but a few weeks, and the revised KORUS is already implemented.

Good thing too. “Logic” was about all Moon had going for him. Everything about Korea’s success is exclusively because of the Order.

South Korea imports all its oil and natural gas, and its import/export flows are so large that it is the world’s 5th-largest trading power by value despite having a population of only 51 million. As with many of the world’s developed economies, South Korea cannot look internally for greater economic growth; The country’s population has all but peaked and, again like much the rest of the world, faces a rapidly aging demography supported by an ever-smaller working age population.

South Korea’s largest trading partner today is actually China, but that is the beauty of the Order. South Korea can trade with whomever is willing to buy their goods. For now. It all relies on American guarantees that seem to be crumbling.

That’s the numbers and dollars argument. In strategic terms things are far more complicated.

South Korea sits among Japan, China and North Korea and has adversarial relationships with all of them. The only reason South Korea even exists is because American troops ward off the most salient threat to the north, while preventing Japanese and Chinese imperialism. That security guarantee is not easy to maintain:

North Korea believes the best way to beat a Grand Master at chess is to never let them make a first move. Infamously, North Korea has aimed an untold number of pieces of artillery at Seoul, just across the border and home to nearly half the country’s population. In a real war, by the time the first shell lands in Seoul, tens of thousands of others would already be airborne. But this is only one of its many preparations. Turns out that if you dedicate a country’s entire attention span for 70 years to a seething hatred of what’s on the other side, you can accomplish some pretty impressive things, up to and including an effective nuclear deterrent.

South Korea decided to focus instead on ships and trains and petrochemicals and white goods and electronics and computers and cellular tech. South Korea may be able to prevail against North Korea in a knock-down, drag-out fight, but there is no way the South Koreans can K-Pop themselves out of hideous infrastructure damage and mass civilian casualties. Only American forces – massed in and near Seoul and the DMZ – can provide the hitting power to at least partially preempt and mitigate such carnage.

That’s just North Korea. The South Koreans, accurately reading their history and geography, view China and Japan as even more significant security threats. Japan outpopulates South Korea by well over 2:1, China by over 20:1. The navies of either country could wipe the Korean navy from the seas in days. To the south, east, and west, South Korea is surrounded by waters that either Japan or China could dominate given the right push. South Korea’s second city, Busan, is in a particularly vulnerable spot separated from mainland Japan via the Korea Strait, barely more than 100 miles across. Inchon, the western extremity of the Seoul metro region, isn’t much further away from China. And of course, Korean trade links to the wider world are impossible to maintain without both Japanese and Chinese quiescence.

For decades this has all been moot. South Korea, Japan and China were all members of the U.S.-led global Order. The U.S. Navy has ensured peaceful seas and ample trade. Oil, LNG and raw materials flow in, finished goods flow out, and Korea is one of the world’s largest transshipment and manufacturing nodes. So long as the Americans remain involved, Korea’s economic and security problems remain purely theoretical.

But the Americans – left, right and center – want to slim down America’s global position. The Korean deployment is America’s third-largest (after Japan and Germany), and the one that is by far in the trickiest and riskiest strategic position. And that is what keeps Moon’s administration up at night. The Americans are losing interest, and there is no version of a post-Order world where South Korea continues to survive at all – much less as a wealthy, trading nation – unless Seoul can obtain a powerful, dedicated ally.

So it was all Moon could to do cave in trade talks with the American administration on everything. And not just in trade negotiations. The Trump administration is insisting that South Korea compensate the United States for ongoing troop commitments to the tune of at least $5 billion annually. That’s a lot for a country Korea’s size, but honestly it’s a bargain considering what 26,000 American troops can do when they are suitably motivated.

Is caving to the U.S. on trade and defense reimbursement enough to keep the American troops in-country in this post-Order world? No clue. But Moon, correctly, concluded that without conceding to American terms there was no chance whatsoever. 

That’s hardly the end of the story.

First, in the post-Order world, getting a deal with the Americans on trade or troops or whatever is not the end of the negotiations. It is the beginning. Because the Americans no longer have a global strategy or see a national interest in play aside from getting some better market access, keeping the Americans interested requires giving in not once, but every single time they ask for anything.

If the Yanks are displeased with the Koreans’ response, they will leave and there is no guarantee they can be induced to come back. It’s bad business to allow a homeowner that refused to pay for fire insurance to do so after the house catches fire. The Americans can – and will – watch the neighborhood burn. They won’t feel good about it, but they won’t feel all that bad about it either.

Second, the one item in the neighborhood the Americans really do care about – the North Korean nuclear program – is one that they may have found a way to muddle through. The handshake deal Donald Trump appears to have reached with North Korean dictator Kim Jung Un is that the reclusive country can keep their nuclear program so long as they abandon their ICBM program. The Trump administration seems to think it can live with a localized NorK nuclear threat so long as Pyongyang cannot nuke Seattle and beyond. What North Korea “projectiles” that have been launched since the first Trump-Kim summit are of the decidedly short-range sort, and there are at least some indications that North Korea dismantled a significant portion of their long-range missile testing facilities.

In a world where the Americans are blasé about South Korean issues, in a world where Americans no longer consider North Korea a direct threat, the Americans need a lot fewer forces in-theater. That’s great for the Americans…and the ultimate statement of no-interest in South Korea. The Trump administration appears to have handed off the entire North Korean issue to the local powers. And since North Korea already has the capacity to drop a nuke anywhere in South Korea or Japan or in the parts of China that are home to over 80% of the population, the entire region now has to deal with something that has stymied ten American administrations.

Finally, the Koreans have a hideously distasteful choice to make. They must prepare for a world without the Americans and that means they must find a new security guarantor. The menu of options are not encouraging.

While China is currently Korea’s largest trading partner, China is just as dependent upon the Americans as the Koreans for maintaining its economy and security. With the Americans checked out, China’s future will likely mirror its past; that of a broken, impoverished nation completely unable to maintain its own security or even feed its own people. Culturally, China might be Korea’s closest relation, but a long-term partnership will only bring Korea destitution.

In comparison, the future of Japan is bright. It already maintains the world’s second-most-powerful expeditionary navy and is one of the very few countries that has a chance to maintain its supply lines without active American assistance. The “smart” play for the Koreans would be to find a means of inserting themselves into the Japanese sphere of influence. Unfortunately, the politics of such insertion are wretched. The Koreans charge the Japanese with carrying out a cultural genocide during Japan’s 1905-1945 occupation of the Korean peninsula and, so far, have been unwilling to let the past go. Even then, letting that past go would only be the first step to entering Tokyo’s world. Much kowtowing by the proud Koreans would be required.

The third option is for South Korea to become its own defender. That is impossible with conventional weapons, but it just might work if the Koreans build a few dozen nukes to hold everyone at bay. Technically, the obstacles to South Korea becoming a nuclear power are minimal; it could be done in a few months at most. Operationally, however, it would turn South Korea into a regional pariah of the North Korean type and cut the country off from not just global trade, but regional trade (although post-Order that is unlikely to cause the same problems, as much as it is frowned upon today).

Partnership with China might be somewhat comfortable, but it would end with a starvation diet. Partnership with Japan might preserve the Koreans’ standard of living, but it would be politically toxic. Going nuclear might preserve independence, but it would force mass deindustrialization.

For the South Koreans, the future is a land of fear and want.

But that’s not the case for everyone…

The Future Of Mexico

American-Mexican relations have been…colorful of late. American President Donald Trump has threatened Mexico with a rising tariff system that would constitute the greatest tariff effort in dollar terms by Americans in their history. Mexican President Andres Manuel Lopez Obrador (AMLO) is pushing a change to tax law that would more or less treat businesspeople like money launderers which would throw trade relations into the freezer. Threats and counterthreats on migration and trade and law enforcement and energy and water rights have ratcheted up to near-crisis levels.
This is actually… really good. Ever since Mexican independence in the early 19th century, American-Mexican relations have oscillated between cold-shoulders and American invasions. Today, really for the first time in both countries’ histories, the Americans and Mexicans are not talking past one another, but instead speaking with each other. The process is loud and messy, yes, but it is actually a conversation. The United States and Mexico are working out deals, making functional compromises, and finding common ground. What’s been happening the past two years are the sorts of interactions one would expect between two countries who find themselves increasingly intermingled both economically and demographically. We all fight most vociferously with our families.
That hardly means it is all well thought out. One of the most frustrating things about working in the geopolitical forecasting space is that sometimes luck plays a role, and that has most certainly been the case of late.
Consider the individuals helming both countries.
In the United States, Donald Trump rose to power on a wave unapologetic nativism, which expressly included a harsh campaign against Mexico on economic, political, security and racist grounds. On the other side of the border is AMLO, a guy who combined Trump’s disdain of foreigners, Elizabeth Warren’s enthusiasm for dressing down corporate interests, Ted Cruz’s penchant for blind obedience to ideological dogma, a Clinton-esque love-affair with political corruption, and Bernie Sanders’ pathological refusal to engage in basic mathematics. It’s difficult to imagine a set-up that would be less constructive to functional bilateral relations.
And yet, here we are, with the Americans and Mexicans enjoying the most positive bilateral relationship ever.
The unexpected outcome largely has to do with an olive branch from AMLO. After his election in mid-2018, but before his inauguration in late-2018, AMLO apparently had an epiphany. He realized that if he and Trump engaged in a binational pissing contest over who was more populist, the bad blood would consume his entire presidency. As he had put together a laundry list of tasks to remake Mexico in his own image, that simply would not do. So he reached out to both his predecessor and Trump, and indicated that if they could complete the renegotiation of NAFTA2 before he took office, he would not seek to reopen talks and would ensure the new deal would be ratified in a timely manner.
AMLO has since proven to be a man of his word. Mexican ratification occurred on June 19 of this year.
While there are obviously portions of NAFTA2 the Mexicans are less than enthused about and the new deal will disrupt a great many industrial patterns across the length and breadth of Mexico, for the most part the new deal is as much a win for Mexico as it is for the United States.
Among the Trump administration’s biggest goals in the NAFTA renegotiations was to make sure goods that benefitted from the low tariffs of the NAFTA system were mostly produced inside of it. These “rules of origin” quotas were increased and ensure that a certain percentage of the product’s value was produced within Mexico, Canada, and the United States rather than outside of it. As Mexican manufacturing capacity is both less expensive and more efficient than most manufacturing in both China and Canada, Mexico will certainly pick up a disproportionate share of whatever relocates to the North American market. Add in the general breakdown of the global Order, and Mexico’s now-even-more-privileged access to the American market, and Mexico’s economic future looks brighter and brighter.
Merchandise trade is only one of several aspects of a tightening, more constructive, relationship between the two North American powers.

  • One of the many aspects of America’s shale revolution is an accidental, incidental oversupply of natural gas prices in the U.S. market. American natural gas prices are now the lowest (unsubsidized) in the world, and a dozen major pipeline networks have been laid down to connect that supply to Mexican demand. All the pipes are now completed and soon about half of the electricity consumed in Mexico will be sourced from American natural gas.
  • One of AMLO’s less-functional plans is an overhaul of Mexico’s state energy monopoly Pemex, a company so badly run and a process so ill-conceived that it would probably be better for Mexico to burn the entire company to the ground, shoot everyone involved, and start over from scratch. The more dysfunctional Pemex is, the less able Pemex will be able to meet Mexico’s growing energy needs… and so the more reliable a customer Mexico is for American energy product exports.
  • Mexico has rapidly developed since the implementation of the first NAFTA accords back in the early 1990s. That has shifted millions of Mexicans off subsistence farms and into urban environments, even as the standard of living of the average Mexican has surged. Less agricultural production plus more disposable income makes Mexico a premier destination for American agricultural products. In particular, when Mexicans get a bit of extra scratch, the first food product they reach for is beef – American beef.
  • Higher living standards within Mexico have gutted immigration from Mexico to the United States – it has been negative for ten straight years. That gives both countries a vested political interest in regulating Central American migration through Mexico to the United States. One of the dirty secrets of the immigration debate in North America is that Mexicans are even more opposed to Central American migration than Americans. Trump has provided the Mexicans with the perfect excuse to crack down on the through-migration, while enabling the Mexican government to rack up a public relations win.
  • While Mexican migration to the United States peaked years ago, past migration has made Americans of Mexican extraction the second-largest minority in the United States. Even if the economic mingling were not occurring – and it has already surpassed that of any other American co-mingling in history – the demographic co-mingling easily puts Mexican cultural influences in third place behind German and British culture.

Taken together, Mexico is now America’s second-largest partner in energy, trade, agriculture and security, and is on the cusp of taking the top spot in all categories.
So… that’s the good news.
Understanding the bad news requires a bit of a step back.
Roughly a decade ago Mexican and American authorities were tracking hundreds of small groups involved in moving cocaine and marijuana through Mexico to America’s southern border. Just as mountainous regions help fracture regions among several competing countries, Mexico’s mountainous geography meant no single drug trafficking organization (DTO) could command all that much territory. A small DTO might control a single stretch of highway, or a single city or a local shake-down racket. Violence between these groups and Mexican law enforcement was horrific, but that carnage was nothing compared the violence among the various drug trafficking groups as they battled to expand their role in the drug trade or defend their patches from one another. In that environment, Mexico’s murder rate soared.

But even then, not all DTOs were created equal because not all DTO leaders were created equal. Today’s story involves a 5’ 6” dude by the name of Joaquín Guzmán, aka El Chapo (which roughly translates as “shorty”), who ran his drug group less like the Sopranos or a street gang, and more like a Korean chaebol.
Under his hand, the Sinaloa alliance focused on three general themes:

  • First, the bread and butter of drug smuggling to the United States. Violence within the alliance was snuffed out, while the sort of petty violence – assaults, rapes and robberies – that characterized other DTOs was frowned upon. Regular Mexican citizens living in Sinaloa territory were not terrorized by the cartel, so they tended to not resist its efforts.
  • Second, experimentation with new business lines that would enable the Sinaloa to deepen and expand its business. Cocaine never went out of fashion, but the cartel also commercialized heroin and methamphetamines. Selling counterfeit pills to profit from Americans’ opiate addition was an easy add. Cash-heavy businesses found favor as a means of assisting in the drug-money-laundering effort: limes, beef, avocados, real estate, tourism. More business lines mean more and more stable profits.
  • Third, oblique cooperation with the Mexican government to help weaken the competition. Officially, the Sinaloa would provide the Mexican government with scads of intel on their competitors’ operations. Unofficially, the Mexican government would turn a blind eye to the Sinaloa’s operations because Mexico City could only prosecute raids on so many targets at a time. The Gulf and Zeta cartels tended to suffer the most from this de facto alliance.

El Chapo’s strategies were so successful the Sinaloa grew to become the most powerful organized crime group not simply in Mexico, but the world. As the Sinaloa alliance expanded and deepened, violence among its constituent components plummeted. After all, they were all on the same side, and El Chapo did not tolerate infighting. Mexico’s murder rate fell.

But nothing happens in a vacuum. Sinaloa’s success meant it also became the most powerful organized crime group in the United States, which earned El Chapo a spot at the top of the Obama administration’s most-wanted list. A joint American-Mexican effort resulted in his arrest in 2014. El Chapo promptly escaped… and was re-arrested in 2015. Mexico extradited him to the United States in 2017, where following his conviction on… lots of charges he is now serving multiple life sentences in an American prison.

Without the business-minded El Chapo to ride herd on the Sinaloa alliance, the relative peace of the Sinaloa era quickly collapsed as the DTO’s various factions fought for control. The biggest and baddest of those factions is known as the Jalisco Cartel Nuevo Generacion, a group run by the Sinaloa’s former enforcers. Whereas the Sinaloa expanded by collaboration and diversification, the Jalisco expands by brute violence.

Four things come from this.

First, the Jalisco is not the Sinaloa v2.0. The Jalisco’s leader – Nemesio Oseguera Cervantes aka El Mencho – first instinct is to kill everyone in every room he enters. He absolutely lacks El Chapo’s charisma and management skills. The Jalisco is expanding, particularly in challenging its former patron, the Sinaloa, but it is most certainly not on course to dominate the drug trade.

Second, between the Sinaloa’s fall and the Jalisco’s rise, Mexico’s murder rate is once against setting record after record. El Mencho has also – repeatedly – broken the cartels’ unwritten rule that one does not engage in open violence in tourist areas.

Third, the Sinaloa is not dead and still supplies the majority of drugs that enter the United States. After a year of chaos and breakdown, elements of El Chapo’s family – most notably his sons – have seized control over what was left of the alliance and thrown up substantial roadblocks to El Mencho’s bloody expansion. Los Chapitos may not be the leaders their father was, but they have proven far from incompetent.

To give an idea of just how potent the Sinaloa remains, consider the events of last week. A government raid October 17 on a suspected sniper in the city of Culiacán accidentally captured one of los Chapitos. Shocked by their unexpected haul, the government stammered a bit. Shocked by the loss of one of their own, the entire Sinaloa alliance descended upon the city in a tsunami of carnage, forcing the unprepared government to release El Chapo’s son. In northwest Mexico, the Sinaloa remains the de facto government. The old man would undoubtedly be proud.

Which brings us to the fourth and arguably most important outcome. El Chapo’s business diversification efforts combined with the breakdown in the “peaceful” nature of the Sinaloa’s management strategy combined with the rapidly deepening economic integration between the American and Mexican markets means that the cartels are now becoming part of the North American economic picture and they are bringing their violence levels with them.

At present this expansion has not penetrated manufacturing – that’s an industry that’s simply too high value-add and too finance-heavy for easy links with DTOs. But nearly everything else is game: transport, trucking, energy, agriculture, construction, tourism, real estate. All these sectors and more now have DTO threads woven throughout, particularly in the Sinaloa heartland of northwest Mexico. And it doesn’t take a big leap to link these Mexican sectors with their American peers. First landfall of Mexican DTOs in these veins will be U.S. regions just across the border from Sinaloa strongholds: Tucson, Phoenix, El Paso, San Diego, Los Angeles and the California Central Valley.

It is worth remembering that while the collapse of the global Order has consequences for everyone, and in many cases those consequences will be the determining factor in a country’s future, regional and local factors don’t simple fade away. Countries’ local geographies and local economic trends and local histories remain relevant. Global shifts are likely to favor Mexico more than any other country, but it can still get tripped up on issues closer to home.

And the same goes for the third NAFTA partner…

The Future of Canada

Canada is… not a normal place.

Everything from its settlement patterns to its defense strategy to its national politics to its economic structure is wildly different not just from the United States, but from every other country on the globe. Until now that has not had an overly negative impact upon Canadian-American relations, but times are changing (and from the Canadian point of view, not for the better). To really understand recent shifts, we need to start not in Canada, but in Mexico.

It comes down to demography.

Mexico has a more-or-less standard demographic profile. Lots of children, a good number of young workers, fewer mature workers and very few retirees. Chart it out, children on the bottom and retirees on the top, and courtesy of simple mortality you get a pyramid.

For purposes of the North American market, there are two big takeaways here. First, Mexico is hungry. All those young workers having lots of kids means the country is a never-ending festive parade of spending on education and food and diapers and homes and cars. Second, Mexico isn’t all that skilled. This is less an indictment of Mexico’s educational system, and simply that people below age 40 don’t have all that much experience in their chosen professions. It makes Mexico excel at relatively low-value-added manufacturing and assembly, but the Mexicans are forced to leave the high-value-added stuff and design to others.

For the Americans, this makes Mexico the perfect complement. Its people are ravenous for American exports, the Mexican work force meshes nicely America’s more high-value-added workers, and for the most part the two countries do not compete head-to head. No wonder that Trump’s rhetoric on Mexico has evolved so strongly over the course of the past two years from issues of trade to issues of identity and migration.

Simply put, from American point of view, the Mexican demography is the demography of the perfect partner.

Canada’s is not.

Canada’s population bulge isn’t among the young workers who complement the American economic structure, but instead among the mature-worker demographic who compete. A demographic bulge in the 40-65 bracket means Canada is super-saturated with high-skill workers. This extra supply depresses the cost of skilled labor within the Canadian system, which has a similar impact upon the price of the goods the country’s skilled labor force produces.

Even worse, the lack of 20- and 30-something Canadians means Canada cannot even consume its own production. It must dump that production on foreign markets, and proximity alone means that some 75% of it goes to the United States. Economically, Canada isn’t a partner. It is a competitor, and that’s before one considers the Canadian tendency to subsidize industries as unrelated as dairy and aerospace and timber and electricity.

In a time when the Americans are pulling back from the global system and rewriting all their trade relationships, this alone would be cause for great concern in the Great White North. But the Canadian-American economic mismatch is only the first problem.

The second problem in Canadian-American relations is the Americans are having a change of heart about their northern neighbor not simply in economic terms, but overall.

When the Trump administration started its whole the-world-is-screwing-us-and-we’re-going-to-forcibly-renegotiate-all-trade-deals campaign, the Canadians took it as an opportunity to make demands of the United States. That clearly didn’t fit with TeamTrump’s understanding of what was supposed to be going on. Why in the world would the Canadians believe they have leverage over the government who controls the only market that matters to Canada, and global finance, energy and sea lanes to boot?

Canada’s confidence dates back to the Cold War. The flight path for the feared Soviet nuclear missile strike on the United States would have been over Canada. There was no version of American security that would not by default also guarantee Canadian security. The Canadians could have been security free-riders if they had chosen to, but to their credit they have fought and died alongside American soldiers in nearly every overseas endeavor the U.S. military has undertaken.

That does not mean the Canadians did not use their leverage, they just used it on issues of trade rather than security, leveraging their strategic position to gain concessions on market access for their products. The Canadians had a strong hand and they played it well. Repeatedly. Those trade victories were all folded into the original NAFTA accord back in the early 1990s.

It all fit with the times. The whole concept of the American-led global Order was that the Americans would create and subsidize a security and trade rubric to induce countries to join them in the fight against the Soviets. Guns-for-butter was the rule of the era. Canada’s position meant it had more to offer, and granting Ottawa some extra trade concessions for its cooperation was a price the Americans were eager to pay.

Times change.

Canadian negotiators resisted the Trump administration’s trade goals, thinking Canada’s leverage still existed. But with the Cold War over, the Americans no longer fear Russian attack. Canada is now just another country. Once the Americans had finalized NAFTA2 with Mexico, they turned to Canada and issued a simple ultimatum:

Mexico’s market is growing. Yours is not. Your market is protected. Mexico’s is not. The Mexican labor force is complementary to ours. Yours is not. We have a deal with the country that matters, and that isn’t you. We are leaving NAFTA. You know our terms. Take them or leave them. We are moving on.

In a single searing moment of revelation, everything that had guaranteed Canada leverage over America, everything that granted Canada a place in the world, everything that had generated any meaningful international influence, had evaporated. Canada capitulated within days and signed on for NAFTA2.

All things considered, as emotionally crushing and economically damaging as a forced rejiggering of Canadian-American relations will be, it could be (a lot) worse. Canada is very close to the top of a very short list of countries that the Americans have positive feelings for. Will the Canadian ego and economy suffer under NAFTA2? You betcha. But Canada will still enjoy privileged, security-risk-free access to the American market. In a post-Order world precious few countries can claim the same. Canada may limp, but it will still be able to walk.

Unless the third issue completely overturns the Canadian system from the inside.

Again, Canada is not a normal place. Unlike the United States where the states and federal government exercise roughly equal amounts of power, in Canada the provinces are preeminent and often have the ability to block federal policies they do not like. The country didn’t even get its first comprehensive internal free trade agreement until 2017.

As such, the provinces of Canada function less like components of a common country, and more like a loose clutch of independent countries which compete – oftentimes furiously. That would be problematic enough if the provinces shared a common demographic base. That, they do not.

Quebec is as vitriolically Francophone as the Maritimes are Anglophone. A huge chunk of the population of Toronto is South Asian, while East Asians tend to be overrepresented in Vancouver. The Prairies are as white bread as America’s upper-Midwest. These splits at least partially explain the seemingly never-ending drama of Quebecois separatism, but it is the intersection of demography and economics where the real problems erupt:

The Maritimes’ economies crashed decades ago and its subsequent “recovery” has been anemic at best. Now those provinces have all aged into mass retirement making them de facto wards of the national government. Mighty Quebec is only a few years behind, and is making the transition to demographic basket case right now. Both British Colombia and Ontario are no more than five years behind Quebec. A big piece of the BC economy is serving as the gateway to Asia, and the Trump administration’s trade war is likely to enervate those links. Even worse, the NAFTA-integrated manufacturing and agriculture that makes Ontario and Quebec hum were sectors that specifically benefited from NAFTA1, and which now face far steeper competition from the United States and Mexico under NAFTA2. More specifically, Quebec’s aerospace company, Bombardier, is both one of the most heavily subsidized in the world and is linked into Airbus – a firm that is both the target of extensive American tariffs and one whose fate is locked up in the Brexit drama.

Functionally, that restricts economic dynamism to the demographically young provinces of Alberta and Saskatchewan, a pair of entities whose economies depend upon old-school oil and natural gas production. For years now, funds transfers from the pair – quintuply so from Alberta – to the center is what has enabled Canada to enjoy its much-lauded social welfare state.

That’s not the end of the story, but instead just the beginning.

Canada’s leader is one Justin Trudeau, a scion of a powerful family. Justin’s father, Pierre, was a force of nature. Love him or hate him, everyone acknowledged that Trudeau the Senior was a commensurate politician. Dude could work a room, and it isn’t much of a surprise that he served as Canada’s prime minister for 16 years.

Justin, in comparison, isn’t a particularly smooth operator. His rise to the prime minister’s chair five years ago largely occurred because of circumstance. Many Canadians had tired of a decade of conservative minority rule under the somewhat curmudgeonly Stephen Harper. A coalition of liberal players banded together around the Trudeau name and managed to carry an election.

In that environment, Trudeau the Younger fit the bill. He isn’t very bright, his French is on the weak side, his past work experience was at best mediocre, but he is young and so very very pretty. In a world of social media and an increasing split between modern liberal values and traditional economic sectors, that proved enough.

Under Justin Trudeau’s rule Canada has… gotten by. There have been no disasters, but few serious new policies. Really, Justin Trudeau’s administration has only shifted two things.

First, it has steadily centralized power in Ottawa, making it easier to drain cash from Alberta and Saskatchewan both to balance out the slipping economic performance of the rest of the country, and to push this or that pet policy. Second, the pet policy of the moment is a fairly aggressive environmental program that has proven popular with Justin Trudeau’s base. That program has put ever-more-stringent restrictions on the economies of Alberta and Saskatchewan – specifically on the sectors that make the Canadian national budget possible.

Justin Trudeau’s lackluster performance has cost him. His Liberal Party has been ejected from parliaments in Alberta, Saskatchewan, Ontario and some of the Maritimes in favor of the conservatives; in BC in favor of the left-leaning NDP and Greens; and in Quebec in favor of more nationalist sentiments who are furious with his capitulation to the Americans in NAFTA2.

Within the Liberals, the future isn’t all that bright either. Aside from the Trudeau name, the one characteristic that Justin inherited from his father is the charisma necessary to suck all the air out of the room. Justin is such a big presence that there is no next-generation of young leaders working their way up through the Liberal Party ranks. When Justin falls, so too will the party.

Fast forward to this week.

The Canadians voted in national elections October 21. Justin Trudeau’s Liberals were not exactly gutted, but they lost a lot of seats ending up with just 157, thirteen shy of what’s necessary to form a majority government. That will force the Liberals to rely upon support from the Greens (whose primary concerns are climate change policies) and the NDP (who are like a more math-challenged version of the Greens).

For Canada as a whole, this courts disaster.

Political sentiment in Alberta and Saskatchewan turned sharply anti-Green and anti-Trudeau years ago. The Albertans and Saskatchewanians assert the Greens, the NDP and the Trudeau government are actively conspiring to stymie any and all efforts to get Albertan and Saskatchewan energy exports to the wider world. The Greens and NDP openly say they do, with anti-Albertan policies in the one province they control – British Colombia – having reached the point that BC and Alberta have a hot little inter-provincial trade war going. The Trudeau government attempts to be at least a bit circumspect on the issue, but under Justin Trudeau’s rule construction has yet to begin on a single cross-province pipeline.

Legally, there is an excruciatingly painful route forward. Quebec’s on-again, off-again independence spasms firmly established that Canadian provinces have the right to leave Canada. Paths to secession have been approved – at least in theory – by both the Canadian parliament and the Canadian Supreme Court. We are approaching the witching hour.

There is no modern Canada without Albertan and Saskatchewan financial strength, and there is no Albertan and Saskatchewan financial strength without the two provinces’ energy sectors. Now, with the Liberals needing Green/NDP support to rule, the already-deep political split is taking on more ideological, more hostile overtones.

The vote breakdown is not encouraging. In Monday’s elections the Liberals lost every seat they previously held in both Alberta and Saskatchewan. In an echo of America’s 2016 presidential elections, the opposition Conservatives actually won the popular vote, but because of Canada’s equivalent of America’s electoral college they earned 25 fewer seats than the Liberals. Further mirroring America’s more recent political evolutions, Justin Trudeau claimed a “clear mandate” for stricter climate-change-related policies – an assertion positively Trumpian in its ability to creatively reinterpret the facts on the ground.

We are likely to see two things over the course of 2020.

First, the new federal political alignments are the absolute worst-case scenario for Alberta and Saskatchewan. They have already tried and failed – horribly – to renegotiate their financial relationship with Ottawa, and now they can look forward to ever harsher restrictions on their economic capacity paired with ever more robust siphoning of their wealth to the Canadian center. The formal, open, public debate on secession begins now.

Second, the Americans are likely to take both notice and action.

In the War of 1812 Canadian colonials burned down the American capital. In the war’s aftermath, realizing the Americans would be jonesing for revenge, the Canadians carried out what has arguably been the most successful rebranding effort in history, from trigger-happy arsonists to polite, cuddly socialists.

That effort enabled Canada to avoid American wrath. Later, Canada maintained a bit of protection due to its status as part of the British Empire. In the interwar period the U.S. had bigger fish to fry at home, what with the Great Depression and all. Post-World War II the Americans’ need to maintain the global Order meant that Canada, for all its inconsistencies, was under American protection – which included protection from America.

The Canadian system is splitting along provincial, economic, demographic and ideological lines, and there is no one in the Trump administration who likes Justin Trudeau personally, ideologically or politically. Add in a now-unrestrained America, an America who sees Canada as a competitor, an America who sees the Canadian government as a mix of annoying and ungrateful and self-righteous, and a complete role-reversal is fully in play. Unless the Canadians can get their shit together, it will be eeeeeeasy for Washington to start cutting deals with individual Canadian provinces to hammer preexisting wedges ever-deeper into the Canadian system.

Alberta has the means and motive to destroy Canada. Washington has the means and motive to destroy Canada. And the likely format of the new Trudeau government is providing the opportunity.

The Future of Japan

Japan is … odd.

Most countries have a very clear chunk of reasonably good land that serves as home to a specific ethnicity. That group forms a government to serve the needs of those people in that place, and then that government steadily expands its writ over more territory and peoples. The valleys Nile, Thames, Ganges and Argun for the Egyptians, English, Indians and Chechens; Muscovy for the Russians; the Beauce for French, the Zagros Mountains for Persians, the Tibetans on their namesake plateau, and so on.

Japan doesn’t really have something like that. The Japanese islands are so steep and arable land so hard to come by that even as late as early 1800s, well over a millennium after after of the emergence of the Japanese ethnicity, the Japanese still lacked a common government.

So…what made Japan matter?

First, isolation. In the imperial age Japan was beyond the back of beyond. Between its island nature and its position on the northeastern corner of the Afro-Eurasian continent system, no one simply happened by. Anyone who wanted to reach the Japanese really had to want to reach the Japanese. If the Japanese’s geography wasn’t as good at isolating them from the rest of the world as one another, they would have been conquered ages ago and never emerged as a people of consequence.

Second, industrialization. What Japan could not do with muscle and wood and arrows and horses and manure they could do with steam and gunpowder and rifles and electricity and chemical fertilizers. The industrial suite of technologies enabled the late-19th century Japanese to overcome their horrid internal geography and forge the truly unified economic and political space we know today as Japan.

But that was hardly the end of the story. More the beginning. Because aside from its people, Japan has nothing that enables industrialization. Steel foundries require high quality iron ore, and Japan has none. Power lines require copper ore or bauxite, and Japan has none. Electricity requires coal or uranium or natural gas, and Japan has none. (Japan’s solar and wind potential for greentech energy is similarly pathetic.) Name an industrial input. Japan doesn’t have it.

And so, the only way Japan could industrialize – the only way Japan could reliably unify – was to raise an empire that could funnel the various inputs of the modern world to the Home Islands. To exist in the modern age, Japan had no choice but to expand into empire.

The Japanese know this in their bones, and they know the converse is true as well. The Japanese fought so hard in World War II less out of nationalism or because their emperor ordered them to, and more because they knew failure would mean a return to mutually-warring Balkanized medievalism.

The modern Japanese also know something else in their bones. No matter how powerful they become, no matter how well they anticipate and administer and execute, no matter how potent their navy, they will never be able to challenge the United States. Attempting to do so pisses the Americans off, and that has consequences. Dire, horrific, searing consequences.

With their WWII defeat, the Japanese prepared themselves to vanish from history. Unity required industry required empire, and their attempts at empire had failed.

But the Americans had other ideas. They needed a worldful of allies to contain and beat back the Soviets, and with 1940s-China in the fourth decade of a particularly messy civil war, Beijing was off the menu. So, in Asia, that left Japan. And so, the Americans folded the Japanese into their new global Order.

That meant unrestricted access to the global commodity supply and the ravenous American market, all guaranteed by the American Navy that had just so completely wrecked Imperial Japan. Economically, it was as if the Japanese had won the war. The decades since have been the richest and most secure in Japanese history.

Fast forward to today.

The Americans are leaving. The Order is ending. The happy period of growth and development and security and expansion without needing to invade anyone is nearly over.

Managing the American departure, or even better yet, preventing it, is paramount. Ergo the Japanese Prime Minister was the first world leader to visit the new U.S. president after Trump’s election, and the second to visit after his inauguration. Abe did everything right. He brought his host a set of golden golf clubs. He lost to him (hideously) in 18 holes. Egos were stroked. Groveling was on the menu. Abe went home satisfied that he had bonded with the new guy and the bilateral relationship was firm.

And a few months later the Trump administration slapped steel and aluminum sanctions on the Japanese economy.

Like many leaders Abe had believed some version of a cake-and-eat-it-too deal was on the menu, and if he could forge a personal connection with the new American leader, then Japan could continue on as before. Abe was convinced the tariffs were a negotiating tactic, and that he just needed to hold out and let Trump’s deal-art run its course.

But a few months later, the United States had inked trade deals with the South Koreansthe Mexicans, and the Canadians. Four of Japan’s largest trading partners had already organized themselves into a post-Order system. The remaining really big one was a country the Japanese really didn’t want to be left with: China. So, Abe did the only thing he could do. He followed the example of the Koreans and Canadians and caved. On everything. U.S.-Japan trade talks wrapped up in September.

Awkwardness aside, this transition to a world of Disorder is a transition the Japanese can manage. In the aftermath of Japan’s 1990s financial collapse, the Japanese corporate world relocated much of their industrial capacity to serve markets far more dynamic than their own. Build and employ where you sell. This doesn’t simply put Japan on the safer side of every political, currency and supply chain risk question, it makes their hosts as interested in protecting Japanese investments as the Japanese themselves.

The strategy hasn’t simply worked, it has transformed the Japanese economy from one of the most dependent upon international interconnectivity to one of the least. Add in the world’s second most powerful blue-water navy, and Japan today is the most flexible and insulated country in their region.

There’s more on this topic to be unfurled and explored. A lot more. But unlike South Korea or Mexico or Canada – the countries covered so far in the Cutting Room Files – Japan is a country exceedingly well set up not simply survive in a world without America, but to dominate its neighborhood. What’s above is a light trim from one core chapters of Disunited Nations. Which means that if you want to truly understand Japan’s future, you’re going to have to wait a bit.

The Future of the United Kingdom

I’m not going to more than obliquely address the UK elections coming this Thursday (December 12). Polls at this time point to a strong Conservative showing, largely because British Labour leader Jeremy Corbyn is a sexist, anti-Semitic, anti-Western, authoritarian, unrepentant Stalinesque bigot whose main message to lifelong Labor members is “vote for me because I’m not a Conservative.” Not exactly a winning program, and that’s before you take a look at his economic proposals. Corbyn is also personally for Brexit even if his party is semi-officially opposed.

I’m far more concerned with what will happen in the United Kingdom in the weeks and months to follow. Barring some truly impressive political gymnastics, the UK’s divorce from the European Union has been baked in for some time. And while it has been dizzily entertaining to watch British politics contort in its attempt to alternatively operationalize or deny that basic fact, this particular chapter is almost over and Brexit is about to happen.

As seems to be the case with me these days, looking forward first requires a look back.

Only a century ago, the British Royal Navy was the greatest the world had yet seen. The Brits used that incredible navy and their capable (if small) contingent of land forces to maintain an empire where the sun never set. That isn’t a metaphor, but instead quite literal.

But the ravages of the World Wars shattered the world’s navies and shattered right along with them the British Empire. The British were so desperate at times for war materiel that they signed away to the Americans the rights to many of the bases that made their empire.

What did they get in exchange? Fifty destroyers that were far shy of substandard when they had been built a quarter-century previous, along with a fistful of loans on terms that could best be described as usurious. This was Lend-Lease, the policy discussed in American history textbooks as a gesture of “goodwill.” The near-eradication of British power from the Western Hemisphere and the welding of British fortunes to American strategic desires was the first step in the creation of the American-led international system. Britain didn’t claw its way out from under the debts until the 2000s, and it still hasn’t gotten most of its bases back.

The issue with London from the American perspective is harsh in its simplicity. Only three countries have ever threatened the U.S. mainland directly. The Soviet Union aimed nukes at the United States, and so Washington will typically take steps overt and covert to whittle away at Russian power. Mexico and the United States fought a land war, that ended with the Americans taking half of Mexico’s territory.

The third country to threaten the American mainland is the Americans’ former colonial master, the United Kingdom, and Washington will always – at a minimum – keep an eye open for opportunities to ensure that the balance of power in the bilateral relationship never again tips against the United States. Are the two countries allies and family? Certainly. But as we all know, family drama trumps pretty much everything else. 

Which brings us to the current day: Brexit is providing Americans with the biggest opportunity to lock the Brits into strategic enslavement since Lend-Lease.

The first aspect of the opportunity is institutional:

Big decisions in the European Union require unanimity, and there is no version of a British divorce from the EU that would have satisfied the Irish on border issues and France on nationalist issues and Spain on Gibraltar and the Netherlands on EU rules and Germany on market access and Luxembourg on financial issues and still be able to make it through the British Parliament.

There was never going to be a divorce deal, and in prolonging the Brexit talks from a few weeks to now over three years the Brits have had to sacrifice nearly every bit of financial, political, economic and strategic leverage they could have used to chart an independent path. Strategically and economically, the British are now weak and vulnerable, and their eventual post-EU membership trading partner will be able to pick them clean.

The second aspect of the opportunity is about economic centers of gravity:

Half the UK’s trade portfolio today is with the EU. In perfect conditions it takes the EU over a decade to negotiate a trade deal with countries they like (think Canada). Add in some Brexit-related bad-blood, the never-far-below-the-surface geopolitical competition with the French, the Dutch insistence that anyone who gains access to EU markets also follow EU rules in full, an Irish penchant for knife-twisting, Germany’s iron-clad demand that the UK pay Europe in cash for EU market access, and Spain’s never-ending bitching about Gibraltar, and ten years will barely be enough time to decide the shape of the negotiating table. That flat-out rules out meaningful re-integration with the Continent on the sort of time frame the EU likely has left (which in and of itself will be a topic for later in this series of newsletters).

Turkey is often mooted in the British press as a replacement, but its current imports from the UK are less than 1/30th the amount they would need to be to replace the UK’s exports to the EU. In fact, to replace EU trade, Turkey would have to import from the UK exclusivelyAnd the country has dropped into narcissistic nationalism. So let’s just stop pretending anyone is interested in that deal, shall we?

China is simply too far away to be the Brits dominant trading partner, even if you buy into the “rising China” propaganda. (Incidentally, much China-UK trade today is gateway trade to the EU. Post-Brexit that’ll go pbbbbbt.) The combined Commonwealth is both too scattered and insufficiently wealthy. Even worse, the most significant piece of the Commonwealth – India – is notoriously opposed to free trade deals on principle. Canada is willing, but just isn’t big enough. Nor does Canada boast enough young people to serve as a meaningful sink for British goods.

The only market with the proximity, size, institutional capacity, and complementary needs and capabilities to be a meaningful trade partner is the United States itself.

The third aspect is political:

Like the United States, the UK is experiencing one of its once-a-generation political reshufflings with both the Conservatives and Labour shattering along economic and populist fault lines. Neither Boris Johnson nor Jeremy Corbyn are the sorts of blokes you would introduce to your mom, and the pair are now deliberately, hilariously, tragically mis-running Parliament. Makes it difficult to have a meaningful conversation about the future, much less build consensus, much less get anything done. Post-EU domestic economic regeneration was always a near-impossibility, but with this sort of political chaos the post-Brexit Brits will be desperate for any sort of lifeline. Only an American lifeline will be on offer, but that comes with conditions. Many conditions.

The fourth aspect of the opportunity is strategic:

Post-Order America won’t be in the business of supporting allies that cannot support themselves. To that end Britain has location and hardware arguing for it. Great Britain’s position just off the European mainland has made London the European arbiter for the bulk of the past four centuries. Britain’s geography couldn’t be better designed to drive the French mad. It acts as both effective barrier to large-scale attack while also giving the English a redoubt from which to interfere on the mainland. Close enough to participate in Eurovision, separate enough that armies marching across Europe isn’t reason enough to leave tea early. That’s useful to America.

Just as important, the Brits are in the process of floating two of the four biggest aircraft carriers in history that are not U.S. flagged. That’s useful to America. But in the post-Cold War era the British tried to do three things simultaneously: downsize their military while also building those supercarriers while also increasing the size of their ground forces to assist the Americans in places like Afghanistan and Iraq. As such the British navy was forced to decommission a huge swathe of their ships. As venturing out with a supercarrier that doesn’t have an escort ring is a great way to lose a supercarrier, the only way the British navy can now function is hand-in-hand with the American Navy. Moreover, carriers are crap for defending trade. That takes a lot of smaller ships – smaller ships the Brits currently do not float…but the Americans do.

The Americans are certainly willing to de facto merge navies for Britain’s strategic and economic benefit, but only in exchange for considerations on other things. Lots of other things. Most notably in the bilateral trade deal the Brits so desperately need.

Which brings us to the nitty gritty.

Within British politics there has always been a small but vocal group – most notably but hardly exclusively within Labour – who is annoyed that the United States plays such a loud role in internal British…everything. Of late most of the British political spectrum has come to the conclusion that if there is a future for the UK in the wider world, it will involve a trade deal with Washington. Which means we’re starting to see some linkage between some latent anti-Americanism and some raw-nerve British political issues. This was unavoidable, but that doesn’t mean it is pleasant, much less focused on the right things.

The item that’s getting the most press at present are Jeremy Corbyn’s recent comments on the National Health Service. Most in Europe and Anglo-America look at the NHS as…a bit of a disaster. Middling-quality, high-cost health care permeates the British system, but the Brits adore the NHS and really that’s all that matters. Corbyn has postulated that a trade deal with the Americans will force American-style prices for prescription drugs onto the NHS (apparently the American inclination for pill-popping is something else we got from our cultural parents).

Honestly, it is a perfectly reasonable concern, but it is also almost comically small fry. If one wants to be afraid of getting in bed with the American elephant, one needs to think bigger than drug prices.

Much bigger.

First, agriculture.

It probably comes as no surprise that British food isn’t…good. A big piece of the explanation is geographic. The UK is a short-summer, cool-temperature, low-sun country with mediocre soil quality. Those aren’t the sorts of conditions that generate a wild diversity of high-quality foodstuffs. What improvements to British agriculture and rural prosperity that have occurred during the past four decades are largely due to EU exposure.

On the production side, the few things the Brits do well – certain types of meat, dairy and especially fish – are exported to the EU market, a market that soon will be largely closed. On the financial side, the EU’s agricultural subsidy program is among the world’s most lavish. It has slowed technological uptake and consolidation that has defined global agriculture since the 1970s. With Brexit those subsidies will vanish in a day.

Like it or not, low-cost, high-quality American agriculture is about to swamp the British market, and American trade negotiators will blast away whatever protectionist measures the Brits will want to erect to protect their own farmers. Phytosanitary requirements, hormones, tariffs, quotas, you name it. It will all vanish and 66 million UK consumers will soon be American fed.

Second, manufacturing.

Even after seven decades of integration, most European countries take great pains to protect their manufacturing networks from foreign involvement. The UK included. For the Americans, who have already integrated with Canada and (to a greater extent) Mexico, that won’t fly. The Brits will have to join the American manufacturing supply chain system based on the NAFTA model.

If the Brits thought that tussling with the French over aerospace or the Germans over automotive was a frustrating experience, its nothing compared to dealing with the colossal, tangled networks of North America where mammoth economies of scale can drown the Brits out. What will likely hurt the most is sudden exposure to Mexican manufacturers. US and Canadian manufacturers have had decades to adjust to the ever-more-skilled but always-less-expensive Mexican work force. UK manufacturers will have to do so nearly overnight.

Third, finance.

London has been the world’s second-most important financial center for decades, a position it solidified with its membership in the EU. Put simply, the Brits penchant for low taxes and lower regulations has long encouraged many Europeans to handle their finances in London rather than at home. This is doubly true for any pass-through monies that sought to escape the bloc for greener pastures.

The agony of endless Brextensions has taken the shine off that system. With the specifics of the UK’s future in doubt, the UK is no longer the holder of value it once was, and pass-through money is more likely to skip London altogether. The wildly gyrating pound only underlines both weakenings. U.S. trade talks will end both roles altogether. The Americans will demand the relocation of the bulk of the London financial district to New York City.

(Don’t think for a moment that the Europeans will get more than one-quarter of London. Every time the Continental Europeans float the idea that all euro-clearing must be handled in the eurozone, the Americans remind them that should that occur the U.S. will require that all dollar-clearing would then need to be handled in the United States. As the USD is more important to European trade than the euro, such reminders tend to convince the Europeans to pipe down for a bit.)

Most of the pro-Brexit crowd voted the way they did because they don’t like faceless European bureaucrats deciding issues for Britain. The reality is that Britain’s only way forward post-Brexit is to assign even greater levels of authority to American bureaucrats.

The Brits could always say no. They could try to fly solo against a more insular and prickly America, an unleashed France, a rapidly rearming Germany, a resurgent Turkey, and a desperate Russia in an environment of wildly higher energy prices and food prices. (Spoiler alert: There’s a full chapter in Disunited Nations on each of these countries’ pasts and futures.) The Brits could choose to slip into permanent military irrelevance and strategic vulnerability. They could choose to suffer an economic disconnect as bad as the Great Depression that would include dramatic reductions in standards of living and employment and energy availability and health care. Some countries, when faced with the choice between pride in poverty vs relative wealth and security, go with the former.

But I doubt it. The Brits tend to be pretty pragmatic. Stiff upper lip and all that.

Early in the Order era, the Brits attempted to restart their empire by seizing the Suez Canal from the Egyptians. The Americans gave them a hard f**k-no, started to cut the British economy out of global finance, and made some not-very-veiled threats that they’d eject British troops from Egypt by force of arms. The Brits – shocked and chagrined – made the conscious decision to never again be on the Americans’ bad side. In the 2020s that means strategic subjugation, by doing a deal on America’s terms.

While this forecast may seem as cheery as a London winter morning, it could be a lot worse.

In a post-Order world, these British economic sectors are going crash anyway. At least a deal with the United States holds out the hope for something better down the line. Even more importantly, the Brits have something few others could hope for: the Americans have saved them a seat at the table.

The Americans spent the last seven decades paying the world to be on their side. Those days are over. The only countries that will be able to enjoy U.S. market access and strategic cover are those who either pay the U.S. a lot of money, or bring something exceedingly shiny to trade. Supercarriers, being the gold standard of strategic assets, count. Islands off major continents, being the gold standard of strategic positions, count.

Simply put, the United Kingdom has an in so long as it cow-tows appropriately. Japan is in a strikingly similar position for similar reasons. Mexico gets an invitation because it is an entangled neighbor with a dynamic economy. Canada (barely) squeaks over the threshold largely out of habit. South Korea (so far) is paying its way.

And that’s…everyone.

Those five countries are the only five major countries likely to make the final cut before the end of 2020. They collectively account for nearly half of the American trade portfolio, and they will comprise nearly the entire American Friends & Family plan. With the exception of the UK, everyone else’s deals are already in the can. Whoever wins the election on Thursday will need to seal a deal with the Americans before the Americans lose interest in…everything. Beyond these five countries, everyone else will have to defend their own territory and trade, and there are less than a handful of states that have the strategic and economic capacity to even attempt such a feat.

Dark? Dreary? Even depressing? Sure. But in a world of full American disengagement, having any relationship with the Americans at all is about as good as it gets.

The Future of China

December 16 and 17 all the international news that was fit to print showcased announcements in both China and the United States that after some 18 months of talks, tariffs and recriminations, a Phase1 trade deal had been reached.
So we’re out of the woods? Right? The threat to the global trading system is now addressed?
Um, no.
Trade deals can come in all shapes and sizes but roughly put there are those that restructure industries, those that restructure countries, and those that restructure the world. When it comes to China, Trump is going for the latter. The problem is that you don’t restructure the world without restructuring the Chinese economy and you can’t restructure the Chinese economy without restructuring the political system all the way up to the very tippy top. The people at the tippy top have some say in how that all goes down… the question is how much.  
To figure out just how much say they have, let’s revisit what the Trump administration is demanding:

  • An end to industrial subsidies including the end to the Chinese practice of flooding its market with cheap capital. Favored companies today can expect those loans to be rolled over indefinitely. Given that kind of leeway, these companies went after market share rather than profits. In other words: China brims with overcapacity, a factoid which drives product prices down, commodity prices up, forces the Chinese to dump their products into other markets, and drives competitors in other countries out of business.
  • An end to all state-run cybertheft and an end to the systematic practice of joint ventures which require technology transfer. The Americans claim, reasonably, that this harms American companies that go through the effort of research and development. It adds to the cost of securing information and just generally sucks.
  • The immediate opening of nearly all sectors of the Chinese economy to fully-foreign owned firms. In other words: competition from the outside in all sectors. Since Chinese firms are for the most part competitive due to price, and that price competitiveness is due to heavy subsidies, remove those subsidies and allow more efficient foreigners to enter China’s home market and mass bankruptcies are the logical outcome.

From the American perspective, this sounds like a decidedly easy problem to fix.
Step one, simply stop massively subsidizing industries and infrastructure that the economy can’t meaningfully absorb. Step two, stop taking intellectual property that isn’t yours. Step three, become a true capitalist society with competition from the outside… ok, that last one sounds like a lot no matter how you say it.
But the point is: sure, maybe that means a recession, but such adjustments are part and parcel of being a modern economy. Cultures as diverse as France and Turkey and Korea and Thailand and South Africa and Brazil have mostly managed such transitions ok. Certainly the “mighty” and “eternal” Chinese can pull it off.
Yet from the Chinese perspective – that is, from Chinese President Xi Jingping’s and the Chinese Communist Party’s perspectives – this is utterly unfathomable. Giving in to any of these demands wouldn’t simply be perceived in China as an unforgivable loss of face, but each and every one would shatter the Chinese economic model, the Chinese political system, and China as a country. Easy money is, after all, the only way the Party can keep up its end of the bargain with its citizenry: a better life than your recent ancestors in exchange for trust in and power to the Party. It does this by offering widescale employment and keeping the doors open at inefficient companies. For the wealthiest, the tradeoff is even more straightforward. Anytime you have a fire hydrant of money blasting, you can expect interests to become entrenched, corruption to spread. Even dictatorial, statist regimes need a political base.

The Party knows this is an unsustainable system and has been racing against the clock, trying to steer an un-steerable, careening behemoth. It aims to transition the Chinese economy from the wobbly foundations of a heavily subsidized economy that relies on other economies buying their goods to something rarified, something more like what the Americans have: a stable, self-sustaining market where goods are produced and consumed domestically. To do so, it needs to cut back overcapacity in a controlled fashion and boost consumption by the Chinese consumer. Until that goal is achieved, the Chinese remain dependent upon imported technology, energy and raw materials, and upon exported goods to more stable markets. China’s real problem is that this entire sequence requires a global system that is open and safe as guaranteed by the Americans.
So far the Party has failed in transitioning the country onto more stable macroeconomic footing, fearing at each step that it will lose one or more of its most important constituencies. Put another way, the Party finds itself unable to transform its economy away from dependence on the Americans. It finds itself at the end of its economy’s ability to take on debt.
Which brings us back to the Phase1 deal:
The trade talks have followed an almost disturbingly predictable pattern: The Americans make demands the Chinese cannot possibly meet. The Chinese promise to comply. A few weeks later Chinese actions make it clear they have no intention of complying. The Americans levy more trade restrictions. Repeat.
All the Phase1 deal is is a bribe to the Trump administration: a promise to purchase a few tens of billions of dollars of American agricultural products and to start implementing protections for intellectual property (some of which were agreed to twenty years ago), in exchange for a slight rollback of the tariffs already in place and a promise to delay a new planned batch for the time being.
The next step in the drama is obvious: sometime in late January or February, the Americans will again say the Chinese are not complying, and that new batch of pre-prepared tariffs will slam into place. And incidentally, geopolitics aside, I can’t think of a better international backdrop for a populist president than to run against China in an election year.
So it’s time to call it. There isn’t going to be a meaningful trade deal with the United States because agreeing to the Americans’ demands would be the end of the Party. The Americans can afford, if they must, to cut China out. It isn’t “easy,” but it’s more akin to a cold than leukemia. In fact, a combination of cheaper resources like natural gas, advanced technology, highly educated labor, and geopolitical disruption all make relocation to North America easier at the same time that East Asia’s costs – from labor to risk – are going up. Some companies and industries have already moved into the NAFTA marketplace and we’re still in the early stages of all these trends. If the world’s largest, most important consumer market, and the physical guarantor of all Chinese supply chains simply walks away, the Chinese are simply out of options.
More likely, it will be (far) worse than that for the Chinese. If the Americans, instead of merely cutting out the Chinese instead get aggressive, things could quickly cascade. Even with a naval deployment policy that’s one-quarter of what it is currently, the Americans could easily – almost lazily – interrupt any trade flow on the planet. In comparison, the Chinese cannot even guarantee their maritime safety within a thousand miles of their own coast, and most of their oil comes from five times that distance along a path littered with threats and rivals. And the size of those oil inflows? Edging up to 12 million barrels a day – greater than what American total imports were at the height of American energy dependency in the early mid-2000s.
China’s crash will be much like its rise. Big, bold, brash, loud, all-consuming, and, in hindsight, completely inevitable.
For more on what the future holds for China, and the entirety of the East Asian rim, take a look at my new project, Disunited Nations: The Struggle for Power in an Ungoverned Worldnow available for pre-order.


After three years of drama, on midnight Jan 31 the Brits finally left the European Union. The next piece of the Brexit drama will be a decidedly non-European affair, instead being between a family debate between London and Washington.

Which leaves it to the European Union – now with 27 members – to attend to its own drama.

When discussing the challenges facing the European Union it is…difficult to know where to begin.

I guess it makes the most sense to start at the top. The European common currency – the euro – is a spectacular achievement, but unfortunately it was insufficient to the needs of binding Europe together economically. Because the union has no complimentary tax or banking regime, each country follows its own economic strategies. In most circumstances, the currency cannot adapt to changing economic norms, while for their part the various eurozone members lack the tools to fine-tune their systems with monetary tools.

In simple terms, at any given time some eurozone members are growing gangbusters and for-them-too-low eurowide interest rates spur overheating, inflation and asset bubbles, while others are in recession and for-them-too-high interest rates make growth impossible. On both sides eurozone members are left to experiment with less-than-fully-safe tax and banking policies which generate their own bubbles, recessions and distortions. Twenty years on, the much ballyhooded macroeconomic alignment the euro was supposed to bring about is further away than ever.

This has blown up most spectacularly in Greece. Thirteen years on on from Greece’s debt blowup, the country is still on the hook for over 339 billion euros in state debt, or 185% of GDP. A few horrific points of comparison:

  • In relative terms, this is roughly double the relative American debt load.
  • The total EU annual budget is just under 170 billion euros. The Greek economy is less than 2% of the total EU economy.
  • Nearly all of this debt has been offloaded by financiers, and is now directly held by European institutions or supported by EU payouts. In effect, the entire country is in receivership.
  • Under the best-case scenario assuming no funding crunches, no problems with the euro and no recessions in Greece or Europe, this receivership will run for decades. The European Commission does not expect Greece’s debt to drop below 100% of GDP until 2048.

It’s worse than it sounds. The EU’s selective and partial integration enables EU citizens to change residency (and to a degree, citizenship) with ease, so the top 5% of Greeks as regards wealth and educational standards shifted legal status, while less-rich Greeks have kept their legal status to maintain access to Greek transfer payments, but physically relocated to avoid Greek taxes. Greek politics are too complicated to call merely Byzantine, and for the most part have simply collapsed into a Greek tragedy.
Greece will never recover. Greece’s agricultural, energy, financial and industrial sectors are for all practical purposes, gone. Greece only continues as a state because the EU shells out money for it to exist. This is the price that must be paid for the euro to have any international credibility whatsoever.
As big as a problem as Greece has become, it is peanuts compared to Europe’s banking problems. While not nearly as bad as what passes for banking in China, in the EU banking is a de facto arm of state policy, with loans on preferential terms regularly being handed out to achieve this or that (un)official state goal.
In many cases there is at least something sane in mind, such as boosting economic activity or expanding infrastructure. Sometimes sanity gets stretched, such as when EU member states throw money to failing companies or help finance expansion into markets – whether geographic or product type – they probably should have stayed out of. And sometimes the loans simply go to purely political, even partisan, activities. Spin down to the regional and local levels and regional and local banks are regularly used by regional and local politicians of all stripes as personal slush funds.
While the details differ from country by country and year to year, it adds up to a banking sector so moribund, so overexposed to unrecoverable risk that EU’s sector-wide assessments of banking health suggest that if the top 300ish EU banks were located in the United States, that the FDIC would have closed down all of them.
The Europeans are notoriously squirrely about the specific numbers behind their banking crisis, using myriad statistical models and definitions as to what actually comprises a “bad loan” to make things look less dire than they are. But pretty much everyone with a pulse agrees that by far the worst of the problems are in Italy. Semi-officially, even with over a decade of debt write downs and government funds injections, Italy still holds about half of the total stock of bad loans of the entire eurozone. Officially, the figure peaked – using Italian numbers and definitions – at 360 billion euro in 2016. The real figure, is undoubtedly higher. Double? Triple? More? (My bet is on more, especially if you use American definitions and thresholds.)
Remember, the more local the bank, the more likely local politicians are to tap them for personal needs, and the mafia are quintessentially local “politicians.” For comparison, the U.S. subprime real estate market during the 2007-2009 crisis generated bad debt worth $600 billion – a figure that was remediated considerably by the liquidation of housing stock that backed all the bad debt – for an economy seven times as large. Even if you believe completely the Italian data (and, HA!) that makes Italy’s debt crisis at least triple that of US subprime. Use US definitions and we’re easily talking an order-of-magnitude higher.
At its core, many of Europe’s chronic problems come down to competitiveness. For all their vaunted educational systems, Europeans have a devil of a time translating high learning into high skills that generate economic activity. In part it is a legal system that strongly favors the old or employed over the young or unemployed. In part it’s an overly-burdened, overly-generous pension system that is a (the?) leading source of the political system’s legitimacy for the middle class. In part it is a tangled thicket of multi-level regulatory burdens. In part it is statism. In part it is protectionism. In part it is a rigormortized labor market. In part it’s an economic system that discriminates against new economic sectors in favor of state support for the largest players of old industries.
The competitiveness issue isn’t simply between Europe and the rest of the world, but within Europe as well. Much of this is policy, but much of it also reflects simple geography. Flat, well-rivered northern Europe can easily lay down roadways and railways and canals that quickly knit together major urban centers to achieve economies of scale. That’s simply not possible in the highlands of Scotland, Spain or Sicily. Put them all into the same regulatory space and lots of places get left behind.
The bottom line is no part of the competitiveness issue started up recently, and so meaningfully addressing it would be a horrifically painful multi-decade effort.
These are all real problems. Mortal threats even. But at least theoretically it would be possible to grow out of these problems. Generate enough economic activity for long enough and even the worst of banking disasters lose their sting, while infrastructure and industrial plant and educational standards in weaker geographies can be brought up to snuff. Buy enough time and maybe, just maybe, Europe can integrate itself to a point where the euro can be part of the solution rather than part of the problem.
Or maybe not, for Europe faces additional problems that rob it of the one thing it really, truly needs: time.
Birth rates started dropping in some of Europe’s more advanced economies as long as five generations ago, and in most cases slipped below replacement levels in the 1970s. Fewer children then, meant fewer young workers and consumers by the 2000s, means fewer mature workers and taxpayers in the 2020s, with mass retirements – and national economic collapse – coming within the single digits of years.
It is worse than it sounds. Europe’s current debt, currency and state spending crises are occurring before the mass retirements generate far larger debt, currency and spending crises. Soon most of Europe will simply be unable to support its ever-aging population while also carrying out other tasks necessary for the existence of modern, functional states whether that issue is education or infrastructure or health care or defense.

Of the EU states, demographics have already turned irrecoverably past terminal in Austria, Luxembourg, Portugal, Belgium, Germany, Italy, Estonia, Latvia, Lithuania, Poland, Malta, Slovakia, the Czech Republic, Hungary, Romania, Bulgaria, Croatia, and Greece. Barring historically unprecedented baby booms, Denmark, Finland, Ireland, Sweden, the Netherlands, the United Kingdom, Spain, Greece and Cyprus are less than 15 years behind (while not EU states, Norway, the UK and Switzerland fall into this second group). Few government policies are good at bolstering birth rates, and even runaway success wouldn’t generate a new crop of consumers for a quarter-century.
Obviously, demographic collapse has its own implications for Europe’s competitiveness crisis, but it also makes the Europeans far more vulnerable to global shifts than they otherwise would be. Having a population structure which is heavy on soon-to-be retirees means Europe today is currently heavy on mature workers. Such workers are productive, but they lack European consumers to absorb their production. The EU has in effect aged into an export union, one that is utterly dependent upon exporting its excess output to the rest of the world. Germany in particular is heavily dependent upon sales to China.
So long as the Americans are holding up civilization’s ceiling and absorbing scads of output, this works. But the Americans are letting the global system collapse. For the EU this is tragic – it exports upwards of half of its manufacturing output and imports roughly 90% of its oil and natural gas needs, this imminent shift is flat-out disastrous. Sure, fold in Norway and the UK and the North Sea and the numbers get a bit better, but remember, there were energy winners and losers in Europe before the UK left. Now the differences are far more dramatic.
There is no European economy without global integration. Europe simply cannot retreat behind the walls of Fortress Europe and wait for the storm to pass, yet neither does Europe have the military capacity, economic reach or political unity required to venture out and shape the world – or even its own neighborhood – to its needs.
Securing markets for sales or energy for purchase in a world without Order ultimately requires some sort of security policy. Not only has Europe proven incapable of crafting such a common policy, even if the policy existed on paper the EU couldn’t implement it. Defense spending across Europe as a percentage of GDP is at historical lows for all EU countries who are not on the border of the Russian sphere of influence, and the country who holds the vast majority of the EU’s long-range-deployable forces – the United Kingdom – is now more likely to be a competitor than a partner.
In times of economic degradation – in particular the sorts of broad-spectrum economic collapses that are on deck for Europe – governance tends to get dicey. The idea that the EU’s pan-governmental system will survive the economic collapses-to-come is, in a word, hyper-optimistic. Even now, in times of relative wealth and stability, democracy is failing in Poland and Hungary, while the far right is becoming politically respectable in Austria, Italy, the Netherlands and France. The political fringes in Germany – both left and right – have even odds of dominating the next national elections at the expense of the centrist parties which have ruled since the war.
This isn’t “just” about democracy, but instead a reminder that when the Continent cracks apart it doesn’t die, but is instead reinvented in ways many find problematic. Germany, France, Italy – just to name the historical experiences most Americans find graspable – have histories rich in, shall we say, creative governance when the economic road gets rough.
Put in that light, I’m almost tempted to ignore Europe’s “other” problems. Russia continues to push towards Europe’s eastern frontier while assiduously working to drive wedges between the Europeans and Americans on one hand, and between the various European nations on the other. Not far behind is Turkey, firmly in the hands of its own autocrat.
The two have teamed up after a fashion in both in the Levant and North Africa – most aggressively in Syria and Libya – to sow chaos, expunge European influence, threaten European energy supplies, and meter the flow of migrants to the Continent in order to extract concessions from Brussels, Paris and Berlin. It is working. Well.
For now.
This is an exceedingly dangerous game which willfully ignores both countries’ histories vis-à-vis Europe. Europeans are near-pacifists…until they snap, at which point they become anything but. Both the Russians and Turks seem hell-bent in recreating the conditions that would rekindle some serious European fire and fury. As locations directly adjacent to the Continent, this seems to me the height of inanity.
All of Europe – hell, all the world – should have been worrying about all these issues for years, but instead everyone has been obsessed with Brexit. All these issues existed before the Brits’ referendum in 2016. None have been addressed. All are worse. Perhaps the brightest silver lining from Brexit’s completion is Europe can again at least perceive these issues.
And yet there is something new under the sun. America is becoming a problem, and not simply in its fall into narcissistic populism. The UK was by far the most free-market member of the EU, and its presence alone bolstered the European Commission’s efforts to keep many of the EU members from their statist instincts. That’s gone. And since demographic decline has in essence demoted the EU to being an export union, the two trends are putting the EU directly into the Trump administration’s crosshairs.
This was probably inevitable. Now that US Trade Representative Robert Lighthizer is done with Korea  and Japan and Mexico  and Canada, and has at least put a pin in China talks for the time being, his attention has turned to the UK and the EU. Considering Lighthizer and Trump’s amply-earned reputation for using America’s command of global trade, transport, finance and energy as cudgels for use in trade talks, it isn’t an experience the Europeans will enjoy.
Individually these are all monstrous (lethal?) challenges. Put together, it would take a strong leadership with a strategic vision and popular support to survive them. But not only can I not recall the last time I heard the words “strong leadership” or “strategic vision” or “popular support” used to describe the European Union, the EU doesn’t even have an elected executive who might be able to rule by order in a crisis. Even worse, on anything important, each individual EU member state enjoys full veto power. The EU literally has the worst conceivable organizational structure for dealing with the soon-to-be future.
(Incidentally, the same organizational mismash which makes it impossible for the EU to truly address their many issues also makes it impossible for the Europeans to negotiate trade deals on anything shorter than a decade time frame. There will be no US-EU deal at all.)
That will leave the future less to the European Union, and more to its individual member states. Two are worthy of call out, with both meriting an entire chapter in Disunited Nations.
In most ways that matter, Germany is the poster child for what’s gone so hideously wrong.
Absolutely catastrophic demographic structure? Check. A geography woefully in appropriate to greentech? Utter dependence upon energy imports? Check. Almost comical dependence upon global markets for its exports? Check. Reliance upon Russian and Turkish cooperation for its economic and physical security? Check.
And that’s not even the big problem. It has always been an open question whether an American-led NATO could defend Europe from the Russians in a real war, but there has never been any doubt that NATO sans the Americans would have much of a chance. Failing to invest in one’s own security in today’s strategic environment is the very definition of blind and arrogant and stupid.
The award for most-blind, most-arrogant and most-stupid clearly goes to Germany, who has lectured the US both publicly and privately on how it should deploy its forces in the Middle East despite having a broadly non-functional military that Berlin is squeamish about stationing outside of Bavaria.
Of course, this isn’t entirely fair. Germany is squeamish about security issues for good, solid, historical reasons. But honestly that is now besides the point. Newer historical trends are about to wash away everything that makes modern Germany modern Germany. Chancellor Angela Merkel is likely the last meaningful leader of a unified, peaceable, wealthy, democratic Germany. The question for the next decade is, in what order with those adjectives break?
In contrast, in most ways that matter, France is the exception to everything that’s gone so hideously wrong in Europe.
France’s economy is statist – it defends its local markets from competitions both European and global. During the global Order this was a massive waste, but with the Order breaking down the French have the least distance to fall. France is the only European state not only boasting birth rates above replacement levels, but strongly so; it is the only EU state that can look forward to a meaningful consumer market both in terms of size and growth for decades to come.
France’s location at Europe’s western extremities means not only that France isn’t dependent upon anything the Russians or Turks control, but its proximity to North and West Africa even grant it a high degree of energy security. And with the Brits now gone from the EU, France is the only EU member boasting a military capable of independent, expeditionary action. It isn’t anywhere near enough to help Europe, but it roughly right-sized for the sorts of issues France will face.
While French voters are as fickle as their American counterparts, President Emmanuel Macron could well be the first leader of a post-European France. But regardless, he certainly will not be the last.
Need more? Disunited Nations publishers on March 3. Both France and Germany sport full, fat chapters about how they will – and won’t – fit into a future much messier than that of the past seven decades.

American Politics

I try to avoid US domestic politics in most of my work. In part because domestic politics are a loud and busy space, and it is easy to have your work get lost in the noise and rage. In part because – especially at the primary level – it is mostly fluff that doesn’t move the national needle. In part because Americans are wildly fickle in their views of political leaders and we’re just too early in the process for it to normally be worth my time. In part because I attempt to keep my personal views out of my work as a matter of course, and, as an American and a political independent, the sound and fury seems committed to drowning me. 

But mostly it is because US foreign policy since World War II has been nearly lock-step bipartisan. The Americans crafted a global Order to fight the Soviets, and preventing global thermonuclear war tends to encourage unity.

This election cycle is different. 

For one, US foreign policy is – for the first time in the life of everyone aged 75 or under – in flux. The Soviet Union collapsed in the early 1990s and America’s long-lived, Order-driven, bipartisan foreign policy overnight became a lot less relevant. America’s subsequent presidents never updated the policy for the post-Cold War age and global structures fell into disrepair. Now, a generation on, it is the American policy of forcing global stability which is collapsing, and it is taking the entire global Order with it. For the first time in decades, an American debate over foreign policy isn’t simply relevant and necessary, it is inevitable. Simply put, for the first time in most of our lives, foreign policy is political.

For two, the United States is utterly incapable at the institutional or national level of having that debate. For the moment, America’s two-party system is off-line. Every generation or two the factions that make up America’s parties shuffle around. Some get stronger. Some get weaker. Some get exiled into the wilderness where they become swing voters. Some factions of swing voters come in from the wilderness and join a party. In previous periods of American political reincarnation the populists of Trumpian extraction used to be Democrats, while African Americans used to be Republicans. 

From one point of view this is normal and even healthy. Technology and social mores and economic patterns and security trends all shift with time, and American politics evolve with them – in ways both substantial and unpredictable. 

But from another point of view this transition is anything but normal or healthy. While this rejiggering is in progress, the Americans effectively lack functional parties which means the capacity of the US to internally discuss issues of import more or less collapses. That’s triply true for topics – like foreign policy – for which the average American citizen lacks day-to-day exposure. During periods such as this, what passes as foreign policy comes down to the personal charisma, connections and diplomatic skill of the president. Last time around that was one of the American greats: FDR. This time around it has been a pair of men who are somewhat less…great: Barack Obama and Donald Trump.

So with that disclosure and backdrop, let’s dive in:

Over this past weekend the Americans held their third pre-contest for who will get the right to run on the Democratic ticket in November’s presidential elections versus Donald Trump. 

Now I have (somewhat strong) opinions about all six of the remaining major candidates, but let me sum the relevant bits in as nonpartisan language as I can manage. (Remember, I’m an independent. I’m an equal opportunity bubble-popper.)

  • Former Vice President Joe Biden continues to underperform. The leader in national polls should not be doing so badly. His rankings so far in the primaries are fifth, fourth and a very distant second. Biden’s debate performances have been nothing short of awful and IMO he not going to make it, particularly in an environment where the party radicals are the ones who show up to primaries and caucuses.
  • Mayor Pete Buttigieg is an interesting character who is likely to do well…in 2032 and beyond. He’s just too young and too inexperienced and isn’t nearly radical enough to attract the sorts of people who actually show up to these primary votes.
  • Senator Amy Klobuchar is another moderate attempting to come from behind, but ultimately she is competing with Biden and Buttigieg for the same limited pool of votes.
  • Senators Bernie Sanders and Elizabeth Warren are utterly, hideously, hilariously unelectable in a general election. Sanders isn’t even a Democrat. He only fills out the paperwork to say-so when he’s running for president. It isn’t simply that the pair espouse policies that most Democrats (to say nothing of independents or Republicans) are uncomfortable with. Warren made the mistake of issuing dozens of policy papers in which her apparent non-command of math was made eminently obvious. Sanders never pretended that his policies are bound by the laws of math. (This is the guy who turned what he joked was his honeymoon to the Soviet Union during the Cold War into an anti-US propaganda piece.) But since their politics are the sort that appeal to the sorts of people who show up for primaries, both continue to do well in the polls. Expect one to endorse the other in time (likely Warren backing Sanders) or even a joint ticket.
  • Billionaire former New York City Mayor Michael Bloomberg spent more on advertising in the past few weeks than all other presidential hopefuls have on all media markets for the past year. A candidate debate last week was his first appearance in the mix of things. Bloomberg didn’t exactly shine, but since he wasn’t actually on the ballot in Nevada we don’t have any reasonable data to tell us how well (or badly) he is doing nationwide. His latest advertising campaign involves anti-Trump billboards scattered throughout Trump Country saying things like “Trump eats burnt steak (Mike Bloomberg likes his medium-rare)” or “Trump cheats at golf (Mike Bloomberg knows this from playing golf with Donald Trump)”. While the watch-it-all-burn part of me thoroughly enjoys this rhetorical billionaire slap-fight, the key takeaway is not only does Bloomberg have a functionally unlimited budget for the race, but he’s already positioning himself as running against Trump rather than other Democrats.

With Nevada in the rear-view mirror, I feel reasonably confident to make a squishy forecast. 

I expect this to go one of two directions, neither of which are good for the mainline Democrats. Both scenarios hinge on Super Tuesday. On March 3, Alabama, Arkansas, California, Colorado, Maine, Massachusetts, Minnesota, North Carolina, Oklahoma, Tennessee, Texas, Utah, Vermont, and Virginia hold simultaneous electoral contests. That’s our pivot.

In scenario 1, the centrists align to prevent a Sanders from gaining the nomination.
This scenario may well be a long shot. Klobuchar continually demonstrates her utter disdain for Buttigieg despite their ideological similarities. Joe Biden repeatedly showcases he is no longer capable, but refuses to step aside. You have to be an egomaniac to run for president, but the degree of disunity among what American independents have taken to calling the “sane” Democratic candidates is striking. Asking them to pull together in a touch over a week is a tall order.
But let’s assume the moderates agree to pool resources or even run some sort of joint ticket. They will face off against Bernie Sanders, and when we reach the party convention in July, we’ll all live through a rehash of the 2016 conventions when Sanders faced off against moderate Democrats…and lost.
But this time it’s different. No matter how intriguing you find the concept of a President Amy or Pete, they lack the force-of-nature and political-machine qualities of Hilary Clinton. More likeable? Certainly. More electable? Perhaps. But absolutely less recognizable or powerful. They would cut far weaker figures in July.
Perhaps more importantly, this time Bernie isn’t alone. The general breakdown of the Democratic Party in recent years has spilled into Congress, with Sanders now having a plethora of high-visibility allies. Between a weaker moderate wing and a stronger radical wing, the party will split down the middle no matter who receives the nomination.
In scenario 2, Bloomberg does well enough on Super Tuesday to eclipse the Buttigieg/Klobuchar/Biden crowd and proceeds to the convention as one of the top two candidates. We then have a face-off between Sanders, who rallies against money in politics and institutional interests committed to “stealing” the nomination, and Bloomberg, who is only a contender because of the money he’s put into politics and who in essence is looking to steal the nomination. Once again, the party splits down the middle. This time with folks like Biden or Klobuchar or Buttigieg – you know, the “normal” people who we have all thought of as “Democrats” for the past several decades – barely part of the conversation.
In either scenario, either Sanders loses the nomination and attempts to sink the party, or Sanders wins the nomination and political independents (and a not insignificant number of moderate Democrats) hold their noses and vote for Trump (assuming they show up at the ballot box at all).
The point is not that Trump is the odds-on favorite to win the election (although if I were a betting man, that’s what I’d put my money on). The point is that this primary process is the end of the Democratic Party as we know it. How long will it take to reform with a new set of factional alliances? History suggests 8-12 years.
For those of you reading this who consider yourself Republicans, curb your enthusiasm. Your party died over three years ago with the nomination of Donald Trump, a then-candidate who considered three of the core Republican factions to be ideological foes: fiscal conservatives, national security conservatives and business conservatives. If you consider yourself a member of one of those sub-groups, your party is gone – reduced to being a sort of personal vehicle for the sitting president. I’d argue the most significant outcome of the 2018 mid-term elections was those factions’ near-wholesale ejection from the House of Representatives and their replacement with TeamTrump members.
Both parties are now nonfunctional. The Democrats are shattering along jagged, ideological lines. The Republicans have been hijacked by their equivalent of Bernie Sanders. We’ve been here before. We’ll get through it. It just takes a roughly decade-long transition period. The Democrats are starting now. The Republicans started three years ago.
But there’s something else going on right now that we’ve been through before that is likely to make this transition to our new normal even messier, and to have far more dangerous international implications.
It has to do with how we manage and transmit information.
Before the 1980s every American newspaper of even moderate size maintained a series of offices around the world to investigate, report and generate news as a matter of course. These foreign bureaus were the backbone of the American media presence globally.
But in the 1980s the fax machine, and in the 1990s email, gutted those bureaus. No longer were editing or copy-editing or research staff required on site. Instead a handful of reporters (still stationed at the bureaus) could simply communicate with the home office for support work.
Then came file attachments. Suddenly the bureaus were not needed at all and the reporters became de facto freelancers with no foreign office support. If you had a dial-up modem, you were the bureau.
Then came algorithms and the Internet. At home such advances jacked up productivity, and so necessitated fewer staff to handle tasks like editing. Fewer people by default meant a poorer collective memory which both made for thinner stories and less capacity to call “bullshit” on bad or inaccurate ideas. Abroad such technologies started scraping foreign news stories from foreign sites directly; stringers went away.
The new face of media is one of fewer and fewer bureaus with fewer and fewer staff at higher and higher cost. Not exactly a recipe for deep, quality-driven, context-heavy, investigative work. Newer algorithms and early-AI are now even writing a few stories here and there, slimming down the already rail-thin institutions that remain. From 1975 to 1995 network coverage of foreign news fell by two-thirds. Since then it has more or less fallen off a cliff.
And there’s the not-so-minor issue of time. Magazines had a production cycle of a week or more. Newspapers a day or more. The 6-o-clock news at least a day. There was time to peer under rocks and tease out details. Online media publishes the heartbeat the quick-take is completed, and no one reads the retractions (in part because no one can find them).
If there are few to no employees living abroad, and if computers are doing the heavy lifting, and if there is no context or institutionalized knowledge, then most of what remains is opinion. Shrill, screamed, uninformed, opinion. Add in social media and much of our information feeds today are distilled with a hatchet down to a Facebook post or something that can be transmitted in fewer than 289 characters.
It is nearly blasé to now say that social media has become a problem in American politics. By reducing the cost of not simply contributing to, but initiating, a political conversation to zero, we are now subject to an onslaught of voices ranging from the crazy cousin we all avoid to Russian propaganda as a matter of course. This is wretched for institutional parties who can no longer control fundraising and messaging. This is fantastic for folks in the political wilderness who now face few barriers to entry (e.g. Donald Trump and Bernie Sanders).
This isn’t an American phenomenon, but is instead global. Arguably the United Kingdom’s BBC has gone furthest down this road and is now a pitiful shell of its former glory. Canada’s CBC isn’t far behind and IMO ranks slightly below the American majors in terms of (lack of) quality. France24 is probably the Western institution that has fought off these trends most effectively, although even there the drop in excellence is obvious. Of the global news services Al Jazeera is the company making the best effort at providing what we used to think of as good global reporting (which is hardly to say AJ has no biases).
Now, like I said, we’ve been here before.
The last time the world wrestled with a new technology that reduced the costs of information flow, it was the telegraph and telephone. Then, like now, we had no legal tools for regulating what people could and could not say in the public domain. Slander became omnipresent, particularly in politics. Congress was of questionable effectiveness, and ultimately it fell to the Supreme Court to force a nationwide standard for libel. Media became responsible for the accuracy of what they printed.
Something like that is inevitable for today’s social media too. We’ll get through this. The question is, how long will that take? And, what will we break between here and there?
Last time, the Supreme Court didn’t act until it became clear Congress wouldn’t: 1964. I have some confidence it will be quicker this time around because the holes in our system are so obvious and what’s left of both parties agree on the core issue (even if they define the problem differently). Not to mention faster information flow works on the Supreme Court just as effectively as it does on the rest of us.
As to breakage, I’m far more concerned. The last time around the shift from road to rail reduced travel times by an order of magnitude while the telegraph and telephone enabled immediate communication. Journalists were able to report in near real time, putting a premium on sensationalism. Journalists of the yellow sort simply made stuff up. One of those fabrications charged the Spanish with blowing up the USS Maine, which led directly to the United States declaring war on the Spanish Empire.
Back then, the United States had a functional political system, was a military laggard in an imperial world, and really, seriously cared about international blowback from its actions. Today, the Americans’ foreign policy is a one-man show, its navy is more powerful than everyone else’s combined, the world is dependent upon the American security position, and Americans lack the institutional capacity both in politics and the media to even have basic awareness about the world.
This could well be imminent. This worries me. Greatly.
For a look at what is possible and probable with US foreign policy in the next two decades or so, I refer you to something else that is imminent: the release of my new book – Disunited Nations: The Scramble for Power in an Ungoverned World. I’ve got a whole chapter for you on how the Americans’ political rewiring collides with a global collapse to make for something fundamentally new.
Disunited’s release is on, heh, Super Tuesday.

Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:
First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.
Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.
And then there’s you.
Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.



I Want an Automobile for Christmas

A number of changes are coming soon to the world of American automotive. NAFTA-related tariffs on foreign cars and trucks take effect in 2023 and 2024, while the Biden administration’s buy-American and buy-green policies will make electronic vehicles more affordable…assuming those vehicles are made in North America.

Want to see how your favorite make and model stacks up, take a look down this looooooong chart. (video with more details wayyy at the bottom).

Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:
First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.
Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.
And then there’s you.
Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.



I Think They Get It Now

Disclaimer: The following newsletters were originally published in mid-2018. As the newsletter continues to grow, I will occasionally re-share some of my older releases for the newer members of the audience.

U.S. President Donald Trump made a… let’s call it a splash, at the G7 summit in Canada June 9, 2018. Normally, the G7 is a bit of a lovefest with leaders agreeing to push this bit of financial stability or that bit of poverty reduction. This time was different.

In this series we will go through the members of G7 and look at how this summit affected each of those countries. 

To view all portions of this series, start here, or jump to other parts of this series: FranceGermanyUKItalyJapan, and Canada. To view them all succinctly, keep reading.

Part 1: Intro

U.S. President Donald Trump made a… let’s call it a splash, at the G7 summit in Canada June 9. The G7 comprises the seven largest industrialized democracies – the United States, Canada, Japan, Germany, the United Kingdom, France and Italy – who also form the core of the entire American alliance network. Their leaders and finance ministers meet regularly to discuss challenges to the global order. Normally, the G7 is a bit of a lovefest with leaders agreeing to push this bit of financial stability or that bit of poverty reduction.

This time was different. The Trump administration is busy belittling and/or wrecking parts of the international order, and a mere week before the summit the United States levied steel and aluminum tariffs on nearly all the G7 members themselves. As such the summit was preceded and followed by quite aggressive statements out of most of the G7 members, most notably from Canada and France, about how American tariffs would not be allowed to stand in specific and a general dissatisfaction with the position of the White House on global affairs in general.

In essence, ahead of the summit the G7 leaders were showing concern that Trump’s rhetoric wasn’t simply rhetoric. And in the summit’s aftermath the emotion could best be summed up as defiant despair that Trump really, truly, means what he says.

I can see why they’re all pretty bummed.

The Americans created, supported, subsidized, and maintained the global order since the end of World War II. Under that order the industrialized world in general and the other G7 countries in specific have done very well for themselves, rebuilding after the war’s devastation in an environment of absolute physical security.

Maintaining a global order is far from “normal” when viewed from the long stretch of American history. In fact, it has only been the dominant strain since the end of World War II. Before that the United States had other foreign policy themes that competed for top billing.

  • In the post-revolutionary era it was all about standing up to the established European empires, with former imperial master Britain in general triggering a near-dehabilitating mix of obsessive paranoia and narcissistic fear.
  • The competing ideology back then was that the United States should be one of those imperial powers.

Theme1 nudged the Americans into the War of 1812, and led the Americans to encourage the independence of the European’s imperial colonies throughout the Western Hemisphere. Theme2 birthed the Monroe Doctrine and set the Americans on their own pseudo-colonial drives.

But as the world – and America – changed, American foreign policy changed with it. The American Civil War and Reconstruction removed all appetite and bandwidth for meaningful foreign policy, triggering a shift to hard isolationism. Once the Americans finally had their (second) coming out party with the Spanish-American War in the 1890s, isolation gave way to a mercantile-driven dollar diplomacy where the Americans would fence off swathes of the world in a corporate-driven foreign policy designed to maximize American economic penetration. The Depression and World War I convinced Americans the world was no fun at all; isolationism came back into vogue.

The great upheavals of the World Wars left the US the pre-eminent power in every respect that matters. Over the course of fifty years, the Americans had gone from almost no navy, stealing Britain’s IP, and being a major global debtor to having the only navy, the technological edge, and to being an economic power on an unprecedented scale. The US had a choice: seek isolation once again and watch its only real competitor – the Soviets – slowly eat away at the periphery until they could challenge the US or find a way to take a ragtag group with long lists of mutual historical grievances a mile long and get them to work together. A real life Magnificent Seven.

The new idea was as straightforward as it was revolutionary: use America’s newfound and historically unprecedented economic power to pay all the previous competing powers of eras gone by to be on the same side. Any country that had any meaningful imperial presence could only do so if it also had a significant naval force. These empires’ clashes — over resources, populations and trade routes — were the root causes of nearly every significant military conflict of the entire industrial period, and they culminated into the First and Second World Wars.

In response, the Americans launched a broad system of what was collectively known as Bretton Woods, named after the location where the deals were first hammered out.

Bretton Woods provided global security for all the maritime and industrial powers, enabling all of them to access any resource anywhere at anytime safely, and then export finished goods to the American market. Bretton Woods puts all the world’s competing naval / maritime / trading powers on the same side by providing them with everything they had ever fought to attain. In exchange the Americans only demanded one thing: alliance against the Soviets.

All those purchased allies are all still powers of significance today, and it should come as no surprise that the most powerful of them now comprise the G7. All were represented at the G7 summit in Canada this past weekend.

The Bretton Woods strategy is notable in American diplomatic history in that it had no counterpoint. No other policy oscillated with it. Bretton Woods was both bipartisan and served as the norm for seven decades. But longevity and broad support are not the same thing as sustainability or permanence. The world is changed since the Cold War’s end, and now – belatedly and until now piecemeal – the Americans are finally changing with it. Trump’s foreign-policy beliefs are not a bug in the American system, they are a feature. Under Trump the Americans are firmly – finally – abandoning Bretton Woods, and in doing so flirting with all four of their pre-Bretton Woods foreign policies.

  • Trump’s hardball on NAFTA is most definitely neo-imperial. He is attempting nothing less than the forcible change of the economic structure of America’s neighbors to meet specific American structural needs. Also fitting the mold is Trump’s suggestion that Russia be re-admitted to the G7. In a post-Bretton Woods world Russia is less a foe to be contained as it is a potential partner to leverage against other competitors.
  • Trump’s position on Syria is flat out isolationist. As are many of his inklings on U.S. basing and strategic stances in Western Europe and East Asia. It isn’t as crazy as it sounds. Something that no one has ever been able to explain to me about American involvement in Syria is what-does-the-winner-get? And the idea that the Americans should defend the Europeans from Russia so that they can use Russian energy en masse has always been an awkward sale.
  • Trump’s pending trade war with China has overtones of the anti-British policies of America’s early decades. And there are more than mere echoes of the general anti-British paranoia in Trump’s overall feelings about foreigners whether they be Chinese, Mexican, Iranian or Arab.
  • Trump’s willingness to flirt with North Korea most certainly has a dollar diplomacy feel to it, and Trump has directed Commerce Secretary Wilbur Ross on a never-ending road-show for American goods… and linking potential sales to ongoing trade negotiations with, well, everyone.

Viewed through the prism of Bretton Woods all these goals and methods are inane. But viewed through the lens of anything other than the strategic environment for which Bretton Woods was designed, Bretton Woods itself is ridiculous.

It isn’t that these goals – or even methods – are good or bad. It is that they are different. It is that they better reflect America’s current situation than the Bretton Woods situation does. The Americans are done paying for alliance.

Courtesy of the G7 show this past Saturday, I think they get it now. I think America’s closest allies realize the shift in the White House is, indeed, real. I think they understand Trump is not bluffing. I think they’ve internalized that Trump’s rhetoric is the American position. I think they finally believe Bretton Woods will not magically regenerate when Trump is gone.

And that means it is high time for the allies to figure out where they fit into the scared new world that is tumbling open right in front of them. In this series we will go through the other six members of the Group of Seven. These are the powers that the Americans co-opted to make the Bretton Woods system work. They are the countries with the greatest long-term potential to shape and re-shape their worlds. Many may be out of practice, but that is far from saying they are done with history.

Part 2: France

French President Emmanuel Macron is a bit aggravated these days. He went out of his way to court a personal relationship with U.S. President Donald Trump with the belief that chumminess would enable him to tilt American policy decisions. Between the Iran nuclear deal, steel and aluminum tariffs, the Paris Climate Accords and now the G7 debacle, Macron has learned otherwise. Social lubricant in international politics can be important, but it rarely trumps policy and national interests. The Americans have shifted from an alliance-based to a transactional foreign policy, and a parade followed by a firm handshake and a nice dinner just isn’t strong enough currency.

So, atmospherics aside, let’s talk about the French strategic position.

The French think of the European Union as theirs, and with good reason. They are, after all, the people who made it. With the end of World War II the Austrians, Germans and Italians were occupied, the Low Countries were rebuilding from rubble, the Swedes and Swiss were neutral, the Spanish were languishing under a local despot, and all Central Europe was locked away on the other side of the Iron Curtain. The strategic competition that had dominated the past millennia of European history was on hiatus, and the French found it almost too easy to force their political will on a shattered continent. And so Paris pulled together Italy, Germany, the Netherlands, Belgium and Luxembourg to create the European Coal and Steel Community, which a dozen treaties later evolved into what we now know as the European Union.

But for the French it was never about economics. The French metropolitan territories are rich. Phenomenally productive farmland. A wealth of inhabitable climate zones. Great rivers for industry and internal transport. A population far younger and aging far more slowly than the European norm. The French economy has always been held mostly in house, and the Cold War era was no exception.

France also boasts easy access to the North Sea, Atlantic Ocean and Mediterranean Sea, giving France – and France alone – fingers in every pot that matters to Europe. France’s position near the westernmost extreme of the European Peninsula even grants it good strategic depth, even if that “depth” belongs to other countries.

French strategic isolation freed up French defense planning to focus on the far horizon, as evidenced by France’s nuclear aircraft carrier and nuclear missile force. Nearly alone among the European states, the French do not need someone to defend them. It all means that the French didn’t really see a huge attraction to the Americans’ Bretton Woods plan.

The French know full well that should the Americans walk away from Bretton Woods, the global security that enables the European Union – which is at heart a union of exporters dependent upon global access – would no longer be possible. That obviously upsets Macron, but it doesn’t overly hurt France. Just as the Americans designed the world order for strategic reasons and so never lashed their economy to Bretton Woods, the French designed the EU for strategic reasons and so never lashed their economy to Europe.

Any global breakdown, even a European breakdown, is one that France can survive without the sort of catastrophic and transformative economic, political, cultural and strategic shocks that will so ravage almost everyone else.

France also faces no meaningful strategic challenges in the near- or mid-term. It is far enough away from Russia and Turkey to avoid complications from their expansions. Its position on refugees is so hostile that few try to go there. Its neighbors are militarily inept, demographically imploding, horrifically dependent upon America’s global trade and security strategy, or in most cases, all the above. In contrast, outside of the United States and the United Kingdom, it is the French who have the longest and most active history of engaging in military interventions. French forces are capable, experienced, professional, not at all in danger of rusting on the shelves, and when they go in, they go in hard – even in places such as Sub-Saharan Africa where the Yanks fear to tread.

That more or less dictates that in a world without the Americans running things, France is by far in the best position of any country on the planet (besides the United States itself) to chart an independent course. Macron isn’t hopscotching around the world (just) because he is a megalomaniac on an ego trip. He is doing it because he represents a waking superpower, because the world that is shaping up is a world in which France will shine, because he’s laying the foundation for France to once again be an imperial power.

No wonder Macron has been so combative with Donald Trump of late. Not only does his country have the most insulation from any meaningful trade conflict, his country is by far in the best position to do well should it all fall apart.

One of the beautiful things about having a strong national system with no international dependencies or exposures means that you can choose your battles rather than having them chosen for you. France will become a free actor at heart. That makes it somewhat difficult to suss out precisely what the French will go after, but there are three themes worth considering.

First, the French have to have a German strategy. The French have fought multiple wars with the Germans over the years and most of them… have not gone particularly well. The combination of Bretton Woods and the European Union enabled France to both defang the German military and harness the German economy to serve French strategic interests. It has been a happy time, but it is nearly over – which means Paris now needs to figure out a way to either re-harness Germany, point it firmly in another direction, or both. A rumbling Russia intent on re-securing its outer periphery before demographic collapse turns it into a brittle shell provides opportunities for both options simultaneously.

Second, the French need a Western Mediterranean strategy. As the only Northern European country with a Southern European foothold, the French have a unique capacity to leverage the capital, industrial and population densities of Northern Europe into a region that doesn’t have a whole lot of capital, industry or population. (France’s most important imperial territories were in the Mediterranean basin for good reason.)

There is a great deal more opportunity than danger for the French here. Italy and Spain and Portugal may be European, but projection-based powers they are not. With the EU on the ropes and likely soon to be gone from this world, France quickly becomes first among not-even-close-to equals and will be able to use its superior capacity to shoehorn the Southern European trio into any container it wishes. France already enjoys solid relations with Morocco and Tunisia, and while French-Algerian relations are reliably testy, in a post-American world Algiers will have no reliable partners aside from their former imperial overlords. Libya even presents an opportunity for a French state-building effort which, courtesy of Libyan oil, might even pay for itself.

Success in the first two strategies requires a third strategy: that of temporary alliance. There will be conflicts of interest constantly not only with Germany and Algeria, but with countries one step removed: the United Kingdom, Turkey, Egypt, Israel, the Netherlands, Sweden, Russia, even the United States. All will maintain capacity to get in France’s face, and yet all will prove to be tactical allies based on the issue of the moment. Securing such temporary alliances is a French national specialty, but a flair for dealmaking does not mean France will be able to leverage those positions into something greater.

Projecting power beyond your home region requires reach, access, insulation and strength. France has all of those, but only enough to dominate its front and back yard, and only then with a lot of back and forth. Moving into the Eastern Mediterranean or Sub-Saharan Africa or the Middle East, much less Asia or the Western Hemisphere requires a degree of spare capacity that France simply cannot generate unless it simplifies its neighborhood.

That could take many forms. Overcoming Algerian cantankerousness and successfully burying the hatchet would make the Western Med a French pond. An entente with merry ole London would lend itself naturally to co-dominion of the North Sea. A meaningful alliance with desperate Russia or neo-imperial Turkey would put Germany so firmly into a box that it would buy France a free hand in Western Europe. A (public) understanding with those neurotic Americans would go a very long way on everything.

But all these options require the French doing something they do not do well: act reliably and in good faith. That’s not how the French tend to function. France tilts the board. France switches sides. France abandons lost causes. France ditches allies. France extracts what it can when it can however it can because the French know they won’t be involved in any particular situation for long. France is a successful player because France is a player. As the French themselves say, “France has no enemies or allies, only interests.”

That switch-hitter mentality has served the French well for centuries, and continuing to follow the only-interests mantra will indeed enable France to reclaim its position as the first power of its region. But the constant back and forth prevents France from becoming more.

It is easy for a powerful, united nation to carve out a temporary sphere of influence in a time of global upheaval. But building something bigger, something that lasts, that requires a cleared board – and that is something that France cannot do unless it has a few allies who truly trust it.

Times of international chaos are wonderful opportunities to reset cultural norms. Emmanuel Macron’s rise to power shattered the traditional French political elite, making this an opportune time to change the French mindset on what the word “alliance” means. Let’s see what he does with it

Part 3: Germany

You may have noticed, but the Germans lost the world wars. Ever wonder why? The obvious answer is they started a two-front war, but the truth is more basic.

Germany sits in the middle of the Northern European Plain (NEP), a stretch of flat, arable, temperate, well-watered, densely-rivered territory that comprises most of the rich parts of Europe. It is a great place to craft a successful ethnicity, polity, economy and state. With one exception: Germany sits in the middle of a plain. Germany doesn’t have much in terms of defensible borders.

As big as Germany is, the Germans will never enjoy a quantitative advantage over their collective competitors so their only option is to be better at, well, everything: infrastructure, education, planning, financing, manufacturing, and so on.

But there are no secrets in Europe. The high productive capacity of European farmland means the whole region was the first in the world to urbanize. Combine a dense population footprint with an agriculturally rich zone like the NEP, and French cities and Dutch cities and Polish cities and Danish cities are so close to German cities that everyone’s noses are perennially in everyone else’s business. Germany cannot hide how good they are. Make anything as big as Germany as efficient as Germany and its mere existence is interpreted by everyone as an existential threat, prompting a pan-European alliance that tears it down.

Germany can deal with this in two ways. Option one is to hope against hope that no one will come for it in the night. Every time that do-nothing strategy has been chosen, Germany eventually suffers cataclysmic defeat and dismemberment. Option two is to attack first, trying to defeat its rivals in sequence before they can overwhelm Germany. Every time that strategy has been chosen, Germany eventually suffers cataclysmic defeat and dismemberment.

Unfortunately for the Germans, they live in a geography that actively discriminates against successful long-lived countries.

But the post-World War II world is different from what came before. In the bad ole days the imperial powers (Germany included) duked it out in a more or less continuous march of often-multisided wars. Trade among the empires was kept deliberately curtailed because trade with today’s friend could quickly devolve into dependency upon tomorrow’s enemy. Germany’s perennial quest for superior quality was harnessed for military purposes, and the Germans kicked some serious ass. From unification in 1871 on, the Germans inflicted triple or more the casualties on their foes than were inflicted upon them. The marrying of such a deliberately fractured international system to the rising industrial technologies to Germany’s penchant for perfection brought us to the inevitable horrors of World War II.

At war’s end the Americans bribed all the expeditionary powers – wartime allies like the United Kingdom and France and wartime foes such as Japan and Germany – to be part of its Bretton Woods alliance. The rivals who had caused the war were now clustered under American strategic leadership. The most successful of those powers were those able to refabricate their systems to fully take advantage of a world of open borders, of a world where the Americans provided free security for all, of a world where all the expeditionary powers were aligned, of a world where trade wasn’t something to fear, but something to embrace.

No one did it better than Germany.

Because Germany was defeated, the Germans had the advantage of a clean slate. The ancien régime wasn’t simply removed, it was executed. The allies imposed a new constitution (the Germans know it as the Basic Law) which established a number of legal roadblocks to keep extremist parties away from decision-making power.

But the real transformation was in German industry. After centuries of treating the German military as its first and most important customer, having the option of investing in, well, Germany, was a bit of a treat. Germany’s penchant for efficiency and organization was no longer directed to service the needs of the SS or the Wehrmacht but instead using the best technologies of the day to rebuild a country from scratch. Energy shortages became a thing of the past. The result was one of the fastest stretches of economic growth in world history. (Note: We are talking about West Germany here. Soviet-dominated East Germany was a hot mess.)

As West Germany-the-country was rebuilt, it was only one small step to West Germany-the-export-machine. Germany’s position in the middle of the Northern European Meat Grinder meant Germans had long been used to deferred gratification. Their savings tended to get funneled not into personal consumption, but instead into state-centric investment plans that typically had at least a heavy dusting of military purpose. But with the Nazi regime gone and the rebuilding largely completed, Germany’s (in)famous efficiencies were no longer applied to tanks or planes or rail lines or smokestacks, but instead to export goods such as automobiles and chemicals. West German exports were highly sought after the world over, largely because they were the highest quality goods humans had ever produced.

When the Cold War came to an end, the Germans advanced from what had been the greatest era of its existence to something even better. The two Germanies reunited. Germany gained access to a dozen new oil suppliers. The former Soviet satellites to Germany’s east and southeast all joined NATO and the EU. Instead of being a front-line state, Germany was now surrounded by allies and partners who were all members of the American-secured global structure. Defense spending plummeted with the savings poured into making Germany an industrial behemoth.

Simultaneously, the rise of the euro fused the European space together under German economic leadership. Even the weakness of some of the euro’s members – most notably Italy – helped Germany. With Germany in the same currency zone as moribund economies, the price of the Euro was weaker than a purely German currency would have been. German exports no longer merely competed on quality, but also cost. A second Golden Age dawned.

It was too good to last. Since 1992 the Americans have been pulling away from maintaining the global order that is so central to German peace, success, wealth and unity.

The first hot point for the Germans in this scared new world involves the Russians. The whole idea of Bretton Woods was to fence in the Russians. If the Americans walk away from Bretton Woods, Russia is not only no longer the bugaboo, it becomes a potential partner in a never-ending multi-sided balance of power game. And nearly anytime anyone has thought of the Russians as a partner, a bit of a scrap has eventually ensued between Moscow and Berlin.

The second point involves Europe. The European Union is able to exist because the United States keeps the European countries safe from both outside powers and one another. Germany is the EU’s economic heart and Germany is an export-oriented economy, which makes every other EU state integrated into German supply chains export-dependent systems as well. Remove American security overwatch and the whole thing comes crashing down (assuming other European issues such as the euro, sovereign debt, bad banks, terminal demographics, refugees, and so on don’t tear the Union down first).

It should come as no surprise that German Chancellor Angela Merkel’s dominant emotional state these days seems to be exasperated resignation, and why the key word from her post-G7 summit communications was “depressing.” There is absolutely no way forward here that works out well for Berlin.

But inaction is not an option, and so Germany once again faces the inevitable clash between strength and fear. The Germans under the Bretton Woods regime were able to have global economic reach without corresponding military reach. Strip away that feature, and the Germans either need to massively deindustrialize so that their economy matches their current military power, or they need to massively re-arm so that their military can sustain their current economic power. In times past the first option generated the 30 Years War, the Great Depression, and the near collapse of European civilization. In times past the second option generated the Nazis, the World Wars… and the near collapse of European civilization.

Which is a roundabout way of me saying that I think the Germans will end up trying something a bit different. They don’t currently have the military required to look after their own interests, and they don’t have an economy that is sustainable without someone powerful looking out for them. What they do have is a few neighbors who find themselves in hauntingly similar situations, many of which are also tied into pre-existing and most certainly non-military German manufacturing supply chains.

Courtesy of Bretton Woods, NATO, the Soviet collapse and the euro, there is an arc of countries that have broadly the same top-level concerns as Berlin: a crumbling European system, a supply chain model dependent upon extra-European end consumption, a concern about large-scale refugee movements, a shortage of local energy resources, and above all a resurgent Russia.

  • Poland, the Czech Republic, Hungary, Slovakia check all the above.
  • Estonia, Latvia, Lithuania, Sweden, Finland and Denmark check all but the supply chain issue.
  • Belgium, the Netherlands, and Austria check all but the Russia issue.

The first two bullets suggest a Germanocentric NATO in miniature. The latter two bullets suggest a Germanocentric EU in miniature (perhaps selling military goods to the Germanocentric NATO?).

Neither is likely to last the test of time. Russia’s demographics are so horrid that it is unlikely to be a long-term problem and nothing kills an alliance like the lack of an enemy. Any revised supply chain system still needs a market, and once war-related demand fades, what then? And a Germanocentric system of any type is certain to attract the gentle crowbars of the French, British, Russian and Turkish diplomatic services within minutes of getting going. Compared to the long dark of Germany’s past, the possibility — however impermanent — of a third way between near-pacifism and a raging war machine is a surprisingly upbeat future. Merkel has presided over the best years in German history. What’s in front of her with a bit of luck just might be brighter than the German norm.

Part 4: The UK

The United Kingdom has been the United States’ firmest and most capable ally for over a half century. As such many often think of the British Prime Minster as a sort of Washington Whisperer. The Brits, so the thinking goes, are a civilized people who can bring the oftentimes erratic Americans around to a saner course of action.

As one of the United Kingdom’s great statesmen, Winston Churchill, famously put it: “You can always count upon the Americans to do the right thing… after trying everything else.” The quote is as much an homage to the immense power of the United States, as it is to the trademark patience, dry humor and stiff upper lip of the English.

And so it is with no surprise that many world leaders have called upon British Prime Minister Theresa May to intervene on humanity’s account with U.S. President Donald Trump. But it is no surprise to me that she has done nothing of the sort. Nor will she. It is all wrapped up in why the United Kingdom is a major power in the first place.

The United Kingdom matters not simply because Great Britain is an island, or because the Kingdom has the naval power to defend its island, but because the Kingdom has sufficient naval strength to project power well beyond its island. That enables the Brits to pick the time and place of the conflicts they choose to engage in. Even if they choose poorly, they can always pack up, sail away and try again later. Clashes that leave most in ruin at most force an early election in the Kingdom.

There are only two things that could undo this strength. First, the United Kingdom’s flexible strength could be overwhelmed by a more powerful navy. Since the only Atlantic Ocean navy that is more powerful is the American Navy, this is a low risk. Second, the United Kingdom could for whatever reason find its navy degraded to the point that it can no longer project power. And that is precisely the challenge facing the United Kingdom today.

Ironically, painfully, the UK’s current naval weakness comes directly from an attempt to generate strength.

It is difficult for any student of global strategy who is not willingly blind to ignore the role played by the American supercarriers. The Nimitz class carriers are not simply the largest combatants ever floated, as a rule they pack at least seven times the combat capabilities of any rival naval vessel – including the largest carriers floated by other countries. The Nimitz ships have enabled the Americans to project power not just anywhere on any ocean or coast, but in most cases several hundred miles inland as well. Without nuclear weapons they are the most powerful conventional weapons systems any country has ever fielded, and just one of them if nuclear-armed has more firepower than the entire military of France. (No, that is not a France slam. The supers are simply that cool.) The Americans have ten of them. The combined rest of the world? Zero.

So long as the Nimitz carriers (or their soon-to-be successors in the Ford class) are the top shelf of military capacity, anyone seeking to oppose the Americans has to find a way to push the Americans at least a thousand miles away from shore (ergo why the Chinese are so heavily invested into long range anti-ship missiles). And should any naval power seek to ally with the Americans, they will always be entirely in the shadow of the massive, raw American power that the Nimitz ships provide. So long as the Americans are the only people with fully-operational supercarriers, no one but the Americans gets a vote as to how the Americans and their allies perform global strategic policy – even if you are one of the allies.

There are a lot of non-blind students of global strategy in the United Kingdom, and about two decades ago they all came to the same conclusion: if the UK is to matter at all, we must have our own supercarrier. And since, like any other vessel, ongoing refits are part of the process, we must have at least two. The end result was the launching of the Queen Elizabeth carrier program. Weighing in at 65,000 tons displacement they will be the largest combat ships ever floated with the notable exceptions of their inspirations: America’s Nimitz and Ford classes. Fully operational, they will give the Brits exactly what they are after: a seat at a table for two, the only table that matters. When the first ship of the new class started sea trials in December 2017, a veritable army of bubbly erupted at Whitehall.

Just one problem. The Brits screwed it up a little bit.

Maintaining weapons development systems over multiple decades and multiple administrations is difficult. In the time since the plans for the Queen Elizabeth class were first floated, the Brits have had a dozen elections and five prime ministers (and unless my political tea-leaf reading has gone completely off the rails, they’ll have a sixth before long). With each change of leadership there is a change in priorities, and oftentimes life rudely intervenes. Financial crises of the Asian, European and global kind have competed with the British Navy for resources. The Iraq War, the Afghan War and the Libyan intervention ruthlessly pulled British defense prerogatives away from the sea and towards land. The Joint Strike Fighter development program has gone egregiously, criminally, hilariously over budget.

At each step the Queen Elizabeth carrier program had to re-justify itself and fight for funding anew. In the process the Brits found themselves forced to mothball their existing jump carrier fleet in total in order to funnel resources to the new supercarriers’ construction effort. The Brits had to transfer their navy aircraft, pilots and flight crews to the U.S. Navy in order to maintain any hint of naval aviation capacity. And now, with Brexit looming, they’re having to slim the rest of the naval force to keep their supercarrier program on track.

Which means the Brits no longer have sufficient ships to protect their new supers once they are fully operational.

Carriers are not just massive and massively capable combatants, they also represent years if not decades of investment into equipment and personnel, and while they cannot be sunk easily, sunk they most certainly can be. As such every carrier is but the nucleus of a battle group, with all the other vessels’ primary purpose to ensure the carrier does not sink. The British Navy has atrophied so much for so long that it can no longer assemble two credible battlegroups and still defend Great Britain itself.

For the Queen Elizabeths’ deployments, this is nothing short of a Charlie Foxtrot. The new British supercarriers dare not venture further away from shore than the reach of British air power, whether that air power be launched from the United Kingdom itself or from the territory of a trusted ally. Support ships can certainly be built up more quickly (and cheaply) than the supercarriers themselves, but ships don’t grow on trees. This will be the state of the British Navy for at least a decade. Probably two.

This presents London – the naval power par excellence of earlier eras – with a galling choice:

  1. Abandon all hope of ever projecting power, and treat its shiny new supercarriers as the same sort of idiotic chest-beating paperweights the old Soviet “carrier” was,
  2. Fold its supercarriers into the Americans’ battle groups and de facto merge with the United States on all strategic policy… and hope against experience, culture and hope itself that the Americans will listen to your strategic opinions because you contributed a couple big boats.

The decision has already been made. The Brits know better than to fly solo, and they certainly know better than to fly solo against the Americans. The key memory is the 1956 Suez Crisis.

At that time the Brits were certain when the Americans said under the Bretton Woods system all the empires would be disbanded, that it didn’t apply to the British Empire. The British assault on Egypt inadvertently forced the Americans to choose between maintaining the British Empire and their own new global order. It wasn’t a hard choice. The result was strategic castration – with the Americans using all their ample political, financial and military strength to force the United Kingdom into a permanent, subservient position within the alliance that has lasted ever since.

To underline how annoyed the Americans were, they also forced the Brits to stick to the letter of the deals signed to support the United Kingdom against Nazi Germany in the early days of World War II before the Americans themselves were involved. The terms of such loans were so onerous that the Brits didn’t finish paying them off until the 2000s.

And so the Brits have no choice but to stiffen that lip and march forward into the very much known.

  • They will seek a direct bilateral trade deal with the Americans in order to replace the European Union at the core of their economic strategy. It may have fewer regulations, but it won’t enable the United Kingdom to be as wealthy as they have been, and the Americans will offer few concessions because the Brits are economically and strategically without options.
  • They will surrender the financial centrality of London to New York City either as part of the trade negotiations in the hopes they can glean a few concessions on other topics, or because without a firm Brexit deal the financial sector will up and leave London anyway.
  • Should the Trump administration manage to extract a final NAFTA deal from the chaos of the current negotiations, the Brits will grudgingly sign on knowing full well that direct competition from Mexico will do to the United Kingdom what Team Trump says Mexico has done to the United States. The alternative is to be a forgotten side deal only tenuously linked to the American market.
  • And no matter what military adventure the Americans go on, the Brits will be there. They know better than anyone it is far better to be in the Americans’ shadow than in the Americans’ way.

Put simply: what Trump wants, Trump gets. It’s that simple, because if the goal is security and stability for the British people, there is no other option. This might sound humbling, horrible even. But it really is not. So the Brits don’t matter strategically on their own. They are still safe. They are still wealthy. With the world crumbling down there are worse sides of history to be on than being an adjunct to the Americans. And isn’t it the fate – if perhaps not the goal – of most parents to eventually move in with the kids?

Part 5: Italy

In any discussion of foreign affairs the same list of powerful countries have been bubbling up for decades, if not centuries. The order often shifts, but the countries themselves tend to hold on: the United States, Russia (aka the USSR), Japan, the United Kingdom (aka the British Empire), France, Germany (aka Prussia). There’s also a secondary list of largely regional powers: Iran, Turkey, India, Mexico, Brazil, Argentina and Sweden. Israel, Korea and Pakistan are relative newcomers to the second list while China has graduated from the latter list to the former.

One country that most don’t spare thoughts for, however, has been one of the world’s top ten economies ever since humanity developed sufficient command of statistics to come up with the list in the first place. That country is Italy, and it is about to crash back into the world as a significant player.

But first, it has to…crash. Hard.

Contemporary Italy is beyond dysfunctional.

  • The country is flat out broke — only Japan and Greece have national debts that are higher in relative terms.
  • Its banking sector is arguably the most overextended in the world, with a relative weight of bad loans that is eighty times that of the United States at the height of the subprime crisis.
  • Unemployment is at a level that would spawn riots in the United States.
  • The birthrate collapsed thirty years ago and never recovered. Its population is one of the ten most rapidly aging on the planet, and already well past the point of meaningful recovery.
  • The country’s current pension overhang is already among the worst in the world, and that before the Italian Baby Boomer generation even begins to retire.
  • Italy suffered greatly during the European financial crisis and its economy hasn’t seen appreciable growth since 1998.
  • Citizen trust in government is so low as to barely register in opinion polls.

And the political situation is an utter circus, complete with actual clowns or, more accurately, a populist comedian but you get the idea. The Italian equivalent of the Republicans and the Democrats have been gutted to the point of extinction, being displaced by an alliance that could only happen in Italy: a pair of parties that most closely resemble Texan secessionists (the Northern League) and Bernie Sanders…if Bernie Sanders was a career comedian who used a lot of racist jokes and opened rallies with the song “America-F*** Yeah” (the Five Star Movement).

What’s the way forward here? There isn’t one, except national collapse. Italy as a modern political economy is already over. The only reason it has not passed into history already is that it is lashed into the European Union. There are many structural issues embedded within the European system that could bring the entire edifice down. The United States withdrawing from the global order is one. The death of Italy is another. Weighing in at over $2 trillion dollars, the Italian system isn’t too big to fail — it is too big to save.

But from the rot of the current system, from the end of a Europe that is united and free, something new is about to arrive. Or perhaps it is more accurate to say that something old is about to return.

The Italian core territory is unlike anything else in the world. The Po Valley is a rich land with a perfect climate nearly encapsulated by some of the world’s most rugged mountains. The Po’s entire northern horizon are the European Alps. Even with today’s technology and centuries of infrastructure building in what was until very recently the world’s richest continent, the Alps still remain a massive barrier to communication, much less armored columns. To the south the Apennine Mountains of the Apennine Peninsula are certainly less imposing, but the utter lack of large chunks of flat land (and the fact that southern Italy is a peninsula of peninsulas) make it both a non-challenge to the economic and political supremacy of the Po as well as an at best imperfect invasion route.

In the Po’s near neighborhood there are no meaningful threats. To the north — across the Alps — are Switzerland and Austria, a Germanic pair of countries far more concerned with issues on the Northern European Plain than in the Po. To the east are the minor and often failed states of the Western and Southern Balkans: Slovenia, Croatia, Bosnia, Serbia, Montenegro, Macedonia, Kosovo and Greece. None of which — individually or in concert — can hold a candle to Italy’s economic heft, and none of which — individually or in concert — pose even a modicum of a security threat. (If anything, their bickering chaos provides Italians with a massive strategic buffer.) To the south across the Mediterranean is Northern Africa, a region that has not posed a meaningful danger to Southern Europe since Christopher Columbus was a teenager.

That just leaves its western neighbor, France. The Italians may have some differences of opinions with the French, but since the Franco-Italian border is a chunk of the Alps and the Po’s window on the world lies far to France’s east via the Adriatic, it is rare for the pair to butt heads. Add in a moderate sized navy of moderate skill — which the Italians have — and the Po is if anything more secure than the United Kingdom.

And that’s how we must think of the Po — as an island. Separate from Europe, separate even from the rest of Italy. Within that distinction lies the Italians’ future.

In the world before World War II the Po Valley was one of, and at many times the, economic powerhouse of the both Europe and the Greater Mediterranean. Its physical separation and inviolability made it the logical location to broker deals, to install infrastructure central to the economic health of the broader region, and to serve as trade middlemen for everything that mattered.

Part of the attraction of the Americans’ installation of a global security order was that geography mattered less, so countries with often-compromised geographies could shine — in many cases for the first time. For the Po Italians whose geography was their ticket to centrality and wealth, this sort of sucked. Had they not been on the wrong side during the war and not already been issued an opinion on the matter, they may well have sat out membership.

As the Bretton Woods order expanded, as the European Continent unified under the aegis of the European Union, as stability spread, what made the Po special became less so. Italy as a whole saw its position slide. With the end of the Cold War the Po is little more than a rich backwater. Italy as a whole hasn’t seen meaningful economic growth in nearly two decades, and its end is nigh.

But Trump’s actions at the G7 indicate that the system that has so enriched the rest of the world and so stabilized Europe — in part at Italy’s expense — is at its end. Remove global stability, remove the European Union and NATO, break the supply chains that supply the global system with everything from cars to crude, and all of a sudden the Po’s island-but-not-an-island geography combined with its relative centrality makes it the place to be.

So what kind of place will the Po become? What does it have to offer?

First, a step back to frame the discussion:

Just as the Po Valley and “Italy” are not the same thing, the Po Valley itself isn’t one place. The cities of Northern Italy in many cases have identities and histories just as distinct from one another as full-blown European countries. Verona, Trento, Parma, Bologna, Milan, Venice, Turin, and Genoa were all independent players from the fall of the Roman Empire right up until Italian Unification in the 1870s. That means they only rarely act as a unit, and the emphasis of all things Italian has always been on diversification and differentiation.

In the world of energy it means the Italians maintain one of the most varied set of refineries in the world, able to take in any crude stream and process it into any end product. Today Italy boasts roughly double the refining capacity they need. Toss in the sort of economic adjustment that comes from state collapse and dollar to donuts the Italians’ surplus capacity will soon make them the largest source of available refined product within three thousand miles in a world where energy security for most is a long-faded dream.

In the world of manufacturing it means the Italians make things a bit differently. For Italians wares are not about assembly lines or efficiency — that requires economies of scale and integration. The Italian cities compete with one another instead. They don’t share. They keep all the steps in house, so it is all about expression and perfection. The sort of long, gangly, multinational supply chains that can only survive in a world of stability and global market access are not the sort of things Italians do well. Think Fiat. So instead of mass producing serviceable items, the Italians hand-craft products that could easily be mistaken as art. Think Lamborghini and Versace. That sort of “manufacturing” does just fine when the world falls apart.

The problem with this machinery-as-art model is labor. It literally takes a lifetime to train a Ferrari craftsman. It is something the new manufacturing techniques that are sweeping the American industrial space cannot integrate into. The Italians don’t hate immigrants for simply the standard religious, ethnic and economic reasons, but also because immigrants simply cannot help with the problem the Po faces.

Nor is this new. Nor is it constrained to outsiders.

The Po Valley versus Italy’s south is a study of polar opposites; the Po’s sophistication and productivity contrasts sharply with the statist rot, civil breakdown, organized crime, and poverty of the South. Between unification and 1940, southern Italians moved en masse to work in northern factories. This was at a time when Northern Italian sentiments toward many in Southern Italy was racist in a generous sense. Even Mussolini’s son-in-law is said to have privately mused that perhaps it would have been better to be born a Jew than a Sicilian in Fascist Italy (against the backdrop of the Holocaust, no less). Today, the south’s population is smaller, older and sicker relative to the north than ever before. It is already on the ragged edge of failed statedom, and northerners fear southern in-migration nearly as much as they resist boatloads of migrants from Africa.

Northern Italy doesn’t need Southern Italy for anything in the traditional sense: labor, market, capital, technology, food, even strategic depth. What the Po does need is free access to the Mediterranean for oil inflows and trade outflows (and perhaps the refineries that dot the southern coastlines). It needs Southern Italy to be in a box that also contains the Southern Italians and blocks would-be migrants from the world beyond. It needs to be able to treat the south as an occupied territory.

There’s really only one governing system that can fit that bill: Fascist. Again, this isn’t new. Fascism was well established in Italy a decade before Adolf Hitler’s rise to power in Germany for much of the same reasons.

Assuming the Italians of the Po can constrain and contain the Italians of the south, there is little need to venture further out. The Po will again become the lynchpin between the Middle East and Africa on one side, and Europe on the other. The Italians’ very lack of strategic ambition makes them the perfect middleman. About the only weakness in such a system is ensuring sufficient inflows of crude so that Italy can be a large refining center. There’s nothing new here either: The Northern Italian cities have been brokering deals with whoever controls the Eastern Mediterranean for the commodities of the day for over a millennium.

To paraphrase an old European saying: Italy is dead. Long live Italy.

Part 6: Japan

Japan was a latecomer to the modern world.

The Home Islands are rugged territory with few chunks of flat land that can play home to the sort of agricultural infrastructure from which most cultures rise. Geography made transport between these little pockets of land treacherous and rare. Combined with a dearth of local resources much of Japanese history right up until the industrial age was flat out feudal. Local leaders would rise and fall based upon local politics and dynastic struggles. Family was everything. The odd imperial impulse towards unification did occur, but typically the emperor’s powers were of the limited sort. Most competitions had a distinctively local feel. Hell, most names had a distinctively local feel. Most Japanese commoners didn’t have last names until after 1868.

The islands’ distance from the Asian mainland combined with China and Korea’s brand of insular chaos layered on more locality; aside from pirate raids, Japanese interaction with the mainland was at most episodic. Foreign ideas, culture, technology and norms were a world away. Life was slow. While the Germans and Americans and Brits and French and others were using (early) industrial volumes of steel in railroads and stoves and weapons in the first half of the nineteenth century, pre-industrial Japan’s steel use was pretty much constrained to a handful of implements and those famous samurai swords.

But then the Americans arrived.

Admiral Matthew Perry’s flotilla of hybrid sailing-steam ships likely comprised more steel than had been produced by all Japanese in the previous decade. The world realized Japan wasn’t some mystical kingdom, but instead a hugely, hilariously, outdated backwater. The tsunami of American trade – and the new technologies that came with it – surged across Japan, wiping away and transforming the country’s entire political, social, cultural and economic system in what is arguably the most holistic transformation in modern history. It wasn’t an entirely pleasant experience, including as it did the greatest industrial buildup in history, regional civil wars, a class-based genocide, a massive imperial expansion, and a fascist rise to power,

It happened so quickly that Japanese cultural mores couldn’t possibly keep up.

The Japanese thought of their enclavic geography as granting them infinite variety, but when exposed to the kaleidoscope of the wider world they realized just how uniform Japanese culture was. The Home Islands’ isolation sharply limited contact with the wider world; the Japanese are nearly homogenized racially, not just compared to multi-ethnic America but even to rather monochromatic places like Vietnam or Korea.

The sudden exposure encouraged some significant rank-closing, further deepening Japan’s cultural monolith. And since the consolidation occurred during a time of rapid economic development and technological advancement, cultural unity became synonymous with the ideals of Japanese superiority and invincibility.

Cross that cultural tweak with Japan’s geography and East Asia got something new… and dangerous. For Japan wasn’t simply a unified nation, it was a unified island nation – and islands have navies. Industrial prowess, an industrialized navy, a culture bordering on the wrong side of haughty with a burning desire to show its neighborhood just how invincible and superior it really is… you can see where this is going.

Japan’s participation in the Second World War resulted in the imposition of a regional brutality that while not as industrialized as Germany’s Holocaust, was more pervasive through the Japanese armed forces. More casual in its application.

The combination of cultural arrogance and the reach of an industrial navy inevitably brought the Japanese into sharp conflict with the Americans, who eventually rolled the Japanese all the way back to the Home Islands. The post-WWII settlements were crushing – Japan lost absolutely everything from over a generation of imperial expansion. That made sense to the Japanese. They had lost the war so they lost territory.

But the post-WWII order the Americans imposed was downright bizarre from the Japanese point of view. Through the Bretton Woods system, the Americans offered the Japanese everything they had fought for for decades: access to global resources and global markets. In addition, the Americans offered to protect the Japanese from all threats. In exchange all the Americans asked for was that the Japanese join an alliance expressly designed to combat a country that the Japanese had crossed swords with three times in the past half century. Confusion reigned, but the Japanese know a good deal when they see it. They signed up for Bretton Woods eagerly.

The American occupation continued with the now-familiar Japanese tradition of root-and-branch overhaul. The emperor was stripped of everything except his clothes. Democracy was imposed. Bombed out cities – three of which were little more than cinders – were rebuilt from the ground up. The Americans used Japan as a launching pad for their military operations, first in Korea and later in Vietnam. By the early 1960s, Japan had recovered and was humming along nicely.

And then the changes… stopped.

Sure, the newest technologies were still layered into the Japanese system as soon as they were developed, sure booms and recessions came and went, but there were no wars. No political revolutions. No jarring cultural upheavals. No coups. No invasions – either by Japan or of Japan. No shocks – internal or external.

For the next fifty years.

After a century of shock and reinvention and revolution and war and pain, Japan simply was allowed to… be. In a way, time stopped. In a way, Japan walled itself off from the world again. In a way, the average Japanese citizen’s interactions with the world ended.

In a way Japan’s cloistered narcissism returned.

Now the Americans are backing away from it all. All at once the Japanese are discovering the global structures which enabled them to be wealthy while also being isolated are evaporating. That there isn’t a thing Japan can do to preserve the world order. That very soon they will have to choose between wealth and isolation. Considering that one involves high living standards, electricity and full bellies, I’m pretty sure I know which they’ll go for.

But East Asia isn’t as simple a place for the Japanese in 2018 as it was in 1928, because the Japanese were not the only Asian peoples the Americans brought into Bretton Woods.

Taiwan too came in early, and became nearly as technologically sophisticated as Japan. Access to global markets combined with American military protection transformed backwards, poor, wrecked Korea into an industrial powerhouse. Richard Nixon and Jimmy Carter brought mainland China into the fold, starting Beijing on the path to the colossus it would become.

With the Americans leaving, Japan finds itself in a struggle to be Asia’s first power. Unlike in 1928 when Japan was industrial and the rest of Asia undeveloped, the whole East Asian rim is overflowing with industrial might. No longer is Japan towering above the rest.

But that hardly means Japan is going to lose. All Japan’s perceived vulnerabilities are real, but in all cases those same vulnerabilities apply to all its East Asian neighbors – where they are all far more serious.

  •   All the East Asian powers face a dependency upon foreign markets, but Japan has long since offloaded its production capacity to be on the safe side of currency and political risk. Its trade exposure is less than a third relative to its economic size of any of its neighbors.
  •     All the East Asian powers have horrid demographics, but Japan mastered automation over a decade ago and has been steadily modifying its industrial base to operate in a world of constrained supply chains ever since. As a percent of GDP, Japan’s vulnerability to disruption is a shadow of everyone else’s.
  •     All the East Asians face cultural difficulties in dealing with other countries, and Japan has utterly failed to collaborate with its neighbors as equals. Yet far from weakening Japan this exclusionary attitude has forced the Japanese to find economic and technological means around immigration. For example, a refusal to admit foreign health workers has lead to the rapid rise of automation and AI in geriatric care. This not only generates positive knock-on effects throughout the Japanese economy, it keeps a large chunk of the Japanese economic system in-house and utterly immune to the ebbs and flows of the international environment.
  •     All the East Asian powers are hugely dependent upon oil imports, but Japan sits on the outside of the island chain that constrains Asian mainland access to the world. Japan also has a long-reach navy that can go almost anywhere in the world without encumbrance.
  •     All the East Asian powers are poor in any sort of electrical input fuel whether it be high-quality coal, natural gas, or uranium. Not only does Japan’s geographic position enable easy access to diversified sourcing, but Japan’s overbuilt power system enables it to fuel switch with a few days’ notice to whatever imported inputs Tokyo can scrounge up. (For those Greens out there, East Asia has pathetically low wind and solar potential too.)

Will Japan have to fight? Certainly. But it is a fight Japan is well suited for.

My concerns are twofold.

First, part of what made the Asian theaters of the Second World War so nasty was the norms of cultural and racial superiority that emerged from Japan in the pre-war decades. While democratic Japan today is a far cry from the imperial fascism of the 1930s, the Bretton Woods system has certainly enabled pieces of the old cultural milieu to re-entrench. The sort of culturally isolated Japan that exists today, combined with a technologically advanced navy, and a need to use that navy to achieve national prerogatives feels uncomfortably familiar.

Break the global system and it is devilishly easy to imagine an East Asia where the Japanese are not simply on the warpath (again), but one where the Japanese are less than gentle with countries who disagree with them. Most focus on the likelihood of Chinese aggression throughout the region. I think that’s a bad reading of East Asia’s geographic, industrial, trade, and historical characteristics – both past and present.

Second, is the issue of “what then?” I typically try to limit my forecasts to the next couple of decades. Past that range, changes in demography and politics and culture and technology tend to layer in a lot of future fog that limits data-and-geography-fueled forecasting to little more than armchair prognosticating. But if the Japanese have the deck so stacked in their favor, I believe it is useful to push a bit further forward and guess at what’s just over the horizon. What happens after the Japanese have re-established some version of a mercantilist colonial relationship with their region, an Asian Co-Prosperity Sphere, if you will?

More than any of the other major players, Japan needs to be cognizant of American goals, interests and whims. The United Kingdom is in tight and won’t break with Washington. Canada is family. Family fights, but family also makes up. The Germans and Italians swim in different ponds. The French will be the French, but there’s no real likelihood of meaningful French structural competition with North America.

But Japan is likely to emerge from the coming Disorder as the dominant regional power. Its relations with everything from Vladivostok to Yangon will be a diverse mix of neo-imperial management systems ranging from alliance to partnership to suzerainty to occupation. That sort of dynamism and variety is certain to suck in external powers. And this phase in American isolationism is just that: a phase. It will end.

Of all the soon-to-be-rising powers, it is Japan which must tread most carefully to ensure it doesn’t step on Washington’s toes. Tokyo remembers full well what miscalculation in that department leads to.

Part 7: Canada

Writing about Canada is a guilty pleasure for me. I find endless intellectual stimulation in delving into the particulars of a country that is so close – and yet somehow so far – in political and cultural norms to my own. I also find it highly entertaining at how offended my Canadian friends and colleagues are when I don’t talk about Canada… and how horrified they are when I do. (It’s one thing when this dumb Yank proves aware of Canada’s inner workings, and quite another when he highlights cracks in the façade of liberal Canadian perfection.)

Recent events have put the typically sleepy world of Canadian-American relations front and center. Canadian Prime Minister Justin Trudeau played host the G7 summit (which triggered this series). His team crafted an agenda for the summit, most of which American President Donald Trump found so superfluous that he came late and left early. Trudeau’s post-summit firm rejection of American trade tariffs (firm by Canadian standards, that is) so enraged Trump that Trudeau found himself the target of a presidential tweetstorm.

Terms like “dishonest” and “mistake” and “Canada will pay” peppered the airwaves. Trump’s trade advisor, Peter Navarro, went so far as to assert there was a “special place in hell” for Trudeau for his alleged baiting and switching of Canadian policy positions. (Navarro later recanted on his hell quote, although it was pretty clear his heart wasn’t in the apology).

Despite my glee that writing about Canada is fully topical, I get no joy from what I see coming down the pipe. The end of the global system is putting the existence of Canada into mortal danger. It all has to do with how the Canadians are attempting to manage the Trump administration.

First, let’s put Canada into the Bretton Woods context:

The United States set up the Bretton Woods system in order to fight the Cold War. The Americans traded global market access for security cooperation. It was a straightforward butter-for-guns swap.

As the Americans withdraw from maintaining the Bretton Woods system, all the structures they established – the WTO, NATO, free trade, freedom of the seas – are disintegrating. All the things that thrived in a world of open borders and wealth – the EU, the Chinese Communist Party, OPEC, globalized manufacturing supply chains – will crash and burn. Very few of these collapses will be clean. There will be chaos. There will be wars. Some will stay local. Some will span continents. A lot of B- and C-list countries will cease to be. Even a couple of the A-list face dissolution. Canada was a founding member of the Bretton Woods agreements, and Bretton Woods’ fall will impact Canada as well.

But Canada is different.

Global chaos has zero impact on domestic Canadian security. With the Cold War over, the Americans are freeing themselves of the responsibility of defending Europe from Russia on one side and from defending Japan, South Korea and Taiwan from China and North Korea on the other. (A particularly cold reading of the Eurasian situation suggests renewed conflicts on both of Eurasia’s ends might be good for the United States’ overall strategic position, but let’s leave that debate for another day.) Yet the Americans can never stop defending North America. Canada has the option of getting a free ride even if relations with Washington tank.

What about economics? Consider the rest of the world. When China or the EU beat the trade war drum, I find it kind of sad. Economic success in China and Europe has proven possible largely because of the economic concessions allowed and security environment imposed by the Americans. The Americans subsidize the global trade and security order in order to purchase the cooperation of the Bretton Woods allies, but the war the Americans needed the allies for ended three decades ago. The Americans no longer get much utility from the Order that makes everyone else’s systems possible. The Order’s end won’t cost the Americans much. Anti-American chest-beating may make good local political fodder, but anything that pisses off the Americans in general – or America’s thin-skinned leader in particular – just seems suicidal to me.

But Canada is different.

Canada has something other Bretton Woods members do not: leverage. Canada is directly adjacent to the United States. That means the Americans traded with the Canadians not only before Bretton Woods, but before the industrial revolution hit the North American continent. NAFTA is the only active trade deal the Americans have that was not a strategic swap of the Bretton Woods model.

That provides Canada a unique opening. Broadscale chaos in the global system will not overly harm the domestic American experience, but mild chaos in North America would. Unlike Japan or France or Italy or Germany or the United Kingdom, the Canadians have their claws into the American economy’s guts, giving Canada the option of hitting America where it hurts. When the Canadians talk reciprocal tariffs, it matters.

And the Canadians know what to do with that leverage, because Canada has something else the other Bretton Woods allies lack: insight.

Because Canada is different.

The bulk of the Canadian population lives within a couple hour drive of the U.S. border, massed on road and water infrastructure that admits Canadian citizens and commerce to the most densely populated American territories. Integration – economic, cultural, political – is guaranteed. Canadians and Americans are family. It’s a family where the Americans outnumber the Canadians nearly ten-to-one, but isn’t the younger, smaller sibling always the thoughtful, scrappy one?

Canadians might not always like what they see, but issue number one for any Canadian government is managing relations with their primary security, economic, trade, cultural, and political partner. America’s power and insulation from the wider world combined with the imbalance between Canada and America means the Americans can take a rather lazy approach to all things foreign. Canada’s lack of power and lack of insulation from the United States means the Canadians can never take bilateral Canadian-American relations for granted. And so Canada studies the United States more than the Americans study Russian, Chinese, Iranian, North Korean, Mexican, energy, trade, disarmament, military, and immigration issues combined. Canada knows the United States intimately, while the United States barely registers what’s going on north of its border. (The only country that even comes close to studying the United States as intently is Israel.)

In a time of global breakdown, all this security, leverage and insight has encouraged the Canadians to play hardball.

Canada’s foreign policy of late hasn’t seemed to be about protecting the global order, but is instead about wrecking it:
•   Canada is pursuing cases against the United States at the WTO that – should Canada win – actually hurt Canadian producers and exporters… but a win would prompt the Americans to abandon the WTO altogether.
•   Canada is one of only a scant handful of NATO countries that has made any effort to increase its military spending… but rather than spending on NATO programs, the assets it is building are for independent power projection.
•   Canada’s intransigence in NAFTA talks are likely to wreck the negotiations altogether… assuming the Trump administration in the United States and likely incoming López Obrador administration in Mexico don’t wreck them first.

The logic is as simple as it is dark:

If the global order does not collapse, Canada will have made itself the leader of the anti-Trump league of nations, reaping beaucoup gravitas for the country in general and for the Trudeau administration in particular. If the global order does collapse, the Canadians have a separate trade deal with the United States outside of NAFTA and the WTO, so Canada would be the only country of consequence to retain access to the world’s largest and most stable market as the world falls apart.

Such a scorched earth policy has almost a Trumpian feel to it, but delivered as it has been with panache, politeness and perfectly poised hair, the world in general and Americans in specific have interpreted Canada’s burn-it-all-down campaign as a hug offensive. (Say what you will about the Trudeau team, they know how to manage public relations!)

Canada’s hardball strategy is clever, but clever is not the same thing as smart. There is a very real risk that the Trudeau government’s America strategy puts the very existence of Canada in doubt.

In most places a single ethnic group forms in a specific location and forms a government to look after the interests of that people in that place. The people and their government then expand outwards until they control a large, rich and securable enough geography that they can become what we now call a nation-state. The English of England dominate Great Britain, the French of the Beauce dominate metropolitan France, the Japanese of the Seto Inland Sea dominate the Home Islands, and so on.

But Canada is different.

Canada is by far the least centralized of all the world’s operational countries. Canada is a settler state, colonized by a mix of different ethnicities in different places. The governments of settler states are far less centralized than those of the traditional nation-states, with a great deal of decision-making power reserved for regional and local governments.

It is a direct reflection of Canada’s geography. The northern four-fifths of Canada is tundra, taiga and the broken poor-soil, heavily-forested lakelands of the Canadian Shield. Its entire population exists like a sort of thin frosting on the southern border. But even this is broken up into disparate pieces.

Populated British Colombia, which is to say the city of Vancouver, is blocked by a 12-hour winding drive through the Canadian Rockies from the Prairie provinces. The Prairies are blocked by a 24-hour winding drive through the Canadian Shield from Ontario and Quebec, Quebec is blocked by a 10-hour winding drive through deep forest from Halifax, the largest city in the Maritimes (whose name gives away that you cannot drive to most of it). Each province has its own legislature which enjoys broad decision-making power almost over everything but foreign and defense affairs. Topics that are national policies in most countries as a matter of course tend to be devolved to the provincial level.

Much has been made – rightly – of how the cultural split between Anglophone Ontario and Francophone Quebec threatens Canada’s national coherence. The two provinces may have the bulk of Canada’s population, but starkly different economic management styles have generated starkly different economic structures – and it doesn’t help that Ontario’s window on the world is the St Lawrence Seaway… a waterway Quebec controls. Quebecois independence referendums have, repeatedly, threatened Canada with national dissolution.

But Quebec separatism is hardly the biggest threat to Canada these days. Ontario ultimately bought Quebecois loyalty to Canada by paying Quebec off. Fat financial transfers – largely funded by taxes on Ontarians – have kept the Quebecois fat and happy. But times are changing. Canada has the world’s second most distorted and fourth fastest-aging demographics. The Quebecois are on the cusp of mass retirement which means the state will need a lot more money to support a population that will no longer be working. But the Ontarians are but three years behind, meaning that Ontarians can no longer afford to pay the Quebecois to be part of Canada.

The two provinces have decided the solution is to jack up taxes on the remaining provinces to make up the difference. But citizens of the Maritimes and British Colombia are as old or older than the Quebecois and Ontarians. That leaves the tax burden on the Prairies, most notably on Alberta and Saskatchewan. In The Accidental Superpower I included a chapter titled “The Alberta Question” in which I detailed at length how the disconnects between Alberta and the rest of Canada threatened the country’s national coherence. I stand by that assessment, but now I see something more ominous.

The United States is a global power. As such it has a lot of brands in a lot of fires at any particular time. Canada may be America’s largest trading power, but the Americans haven’t viewed Canada as a security threat in nearly two centuries. Washington tends to allow American-Canadian disputes to slide down the to-do list. That, in part, is what has enabled the current Canadian government to take such a firm stance on trade issues. There’s a perfectly reasonable expectation that the Americans will get distracted by something shiny out there in the great wide world, and give in to Ottawa just to simplify things.

But something most Canadians miss is that while their proximity to and close relationship with the United States does indeed grant them security and leverage and insight, that’s only an advantage if the Americans are distracted.

End America’s position as the global leader. Take most of those irons out of the fire. Contract America’s already small international economic footprint. Washington’s to-do list shrinks immeasurably. Purely by circumstance, Canada moves up. Way up.

Canada faces very real danger of national fracture without American attention. But if the American population or presidency perceives – rightly or wrongly – that Canada is part of the problem rather than part of the solution, then the full power of the American system can be brought to bear on its politically, economically and strategically fragile neighbor.

Many Canadians think of Trump as a child, but there are soooo many weak points in the Canadian confederation it would be child’s play to pry it apart. Even without going for the jugulars of Albertan or Quebecois separatism, there are a host of options. Here’s a few:

  • Canada’s riven geography means every Canadian province trades more with the United States than with the rest of Canada. Canada only implemented their first comprehensive internal free trade agreement among the provinces last year. Granting preferential access to this or that province’s politically sensitive sector in exchange for monkeywrenching Ottawa would be painfully simple.
  • The Ontario-Quebec cultural split means Ontario gets more electricity and electricity inputs from the United States than it does from neighboring, hydropower-driven Quebec. That gives Washington the ability to jerk with energy supplies and/or tariffs to either benefit – or harm – Canada’s two core provinces.
  • Pipeline politics in Canada have forced Prairie producers to shunt nearly all their petroleum exports south to and through the United States rather than to their own country’s ports despite orders from the central government that new pipes should be routed through British Colombia. Carrot and/or stick options to benefit or slam Canada’s primary export moneymaker abound.
  • An environmental/petroleum spat between Alberta and British Colombia is forcing BC to get most of their refined products from the United States. Restricting and/or allowing such products to flow enable the Americans to take sides on what has become a blistering Canadian domestic argument.

The Maritimes survive on financial life support from Ottawa, a situation that can only persist so long as Ottawa has spare cash. Any number of tweaks of American policy could crimp the financial flow.As America’s global interests shrivel, Canada may be about to evolve from the country that the Americans are most likely to grant a pass to the one they are least likely to ignore.

After all, Canada is different.

Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:
First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.
Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.
And then there’s you.
Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.



Where in the World: Quartzite and Greentech

NB: The following video is one I recorded while on my annual backpacking trip in August; please excuse any potential anachronisms.

After a strenuous trek to Quartzite Peak, the views are what make it all worth it. While we’re on the topic of things that we hope are worth it, let’s talk about Greentech – solar and wind in particular.

The underlying goal of these green solutions is to produce clean energy at scale, that can be effectively used. Solar has surged into the spotlight, but the shadow it casts is often overlooked. I’m not saying there’s no place for solar energy, but hefty considerations need to be made beforehand.

Wind offers a more promising outlook; lower environmental impacts, reliability and better financials. However, both of these technologies have a long way to go before they are powering the world efficiently and effectively.

Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:
First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.
Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.
And then there’s you.
Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.



Steel: Thinning Supply Lines

Steel. The backbone of…just about everything. The cars we drive. The buildings we work in. Where we store our food. You get the point. But what happens when access to the inputs necessary for steel production starts to disappear?

As we continue down the path of deglobalization, getting those inputs will become increasingly difficult. We are already seeing this playout as the Ukraine War has cut off supply from Russia and Ukraine. Leaving Brazil as the only major supplier of pig iron for the US.

Luckily, some locations will weather this storm better than others. Topping that list is The Hoosier State – Indiana.

Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:
First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.
Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.
And then there’s you.
Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.



JDAMs: Ukrainian Bombs Get Smarter

If you’ve ever spent time in a pub throwing back (a few too many) pints, you’ve probably wandered over to the dart board. And hopefully you can at least hit the board, but beyond that…who knows where that dart is going. Take that analogy and apply it to Ukraine’s current arsenal of bombs.

The Ukrainians have struggled to hit a target with any degree of confidence until now. Introducing JDAMs (Joint Direct Attack Munitions). Relying on our analogy…JDAMs are like putting that same dart into the hands of a 65-year-old chap from the UK…and he doesn’t miss often.

This technology has the ability to change the tactical and strategic scope of this war. With Ukraine’s unrestricted airspace, they can now hit any location within range with pinpoint accuracy. More like J-DAMN…

Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:
First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.
Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.
And then there’s you.
Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.