Demographics Part 10: Problems in The Middle East

Coming to you from Milford Sound in New Zealand.

The demographic situation in the Middle East can be explained by three factors: water, oil, and food. Water prevented the population from expanding. Oil generated the capital needed to industrialize and help the population grow. Food security will ruin all of this.

The Middle East doesn’t have a ton of moisture, so most populations remained relatively small and geographically concentrated. This kept demographics in the traditional pyramidal structure. Once oil was discovered, these populations had the money to industrialize. This enabled Middle Eastern populations to grow beyond the land’s carrying capacity.

As the population expands, you naturally have more mouths to feed. The only way to sustain a growing population is through imports and subsidies. While Middle Eastern countries have retained their pyramidal demographic structures, these populations have become increasingly unstable.

Since the Middle East is so dependent upon globalization, any disruptions to the global system could turn catastrophic. Combine a potential food crisis with wealth inequality and political instability, and the degree of civil breakdown in the Middle East could be devastating.

Prefer to read the transcript of the video? Click here

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.

CLICK HERE TO SUPPORT MEDSHARE’S UKRAINE FUND

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TRANSCIPT

Hey everybody. Peter Zeihan here. Coming to you from Milford Sound, one of my favorite places on the planet. Still in New Zealand. Today we’re going to do the most recent of the demographics series, specifically focusing on the Middle East. Now, the key thing to remember about the entire swath of territory between roughly Kuwait and Algeria. So that whole stretch – Northeast Africa, all the way into the Persian Gulf region – is that there’s not a lot going on from a moisture point of view. Most of these cultures are centered around oases or narrow river valleys. The Tigris and Euphrates in many places, the entire coastal plain is less than ten miles thick. And the coastal plain in places like Libya look very, very similar. Egypt doesn’t even have water on its coastal plain. It’s just the Nile. So you get these very, very dense population patterns on a very, very concentrated footprint. And the carrying capacity of the land is very, very low. And it wasn’t until the 1900s when you could introduce things like artificial fertilizer that you really got a very dense population even within that zone. So this is an area that was among the last parts of the world to enter the industrial era. And so you had kind of a classic pyramidal formation for the population density until relatively recently in their history.

Okay. Where was I? There are some exceptions. In northern Algeria, you’ve got a much wider coastal plain. So agriculture is more favorable there. Obviously the Nile Valley and Mesopotamia, places that are still desert, but they have irrigation figured the places between the Tigris and the Euphrates Rivers. Obviously going back to antiquity. These have had a lot of people. But the general point when it comes to industrial agriculture stands, you can have a certain concentration and then you just kind of stop to be in the desert, which means that these are some of the last areas in the world to experience industrialization, artificial fertilizers, mechanized agriculture, that sort of thing. And so they don’t, they just have never historically reached the level of population density that you’re able to achieve in, say, the Western world or the East Asian world. Now, what that means is that there’s been a hard population cap on all of these regions up until today, until one thing changed. Oil, whether it’s in Algeria or Libya or Egypt or Iraq or Iran or Saudi Arabia. Once oil became part of the equation, the income potential for these regions expanded by more than an order of magnitude in some cases, almost literally overnight, certainly within a decade. And what that has allowed is these populations to expand beyond the carrying capacity of the land. In the case of Egypt, Cotton contributed well. So these countries could all bring in food and sell the oil to pay for it and then generate a very, very different population matrix.

And we’re back. All right. So what this means is the countries have had it. All these places have a traditional pyramid going back to antiquity and then as we hit industrialization because of oil and the food just kept coming, they were able to maintain very high birth rates. They were no longer doing this with domestic food production, but instead with imported food. So the pyramid has stayed. It’s just gotten broader and broader, broader and broader because most of these countries have food subsidies in order to maintain political tranquility. But when the food is cheap, but you’re not producing it yourself, we get more and more people, but it eventually becomes more and more unstable from a demographic point of view. And now, whether you’re in Algeria or Egypt or Iraq, and especially in places like, say, Lebanon or Libya, you’ve seen the populations increase by a factor of four or five, even six or seven over the time since 1945, while food production has gone stagnate or in many cases like in Egypt, actually gone negative as we switched over to things like citrus and especially cotton. Which means these are the parts of the world that are now most vulnerable to anything that happens with globalization, because if anything impacts their ability to export their non staple food products and import wheat, you get a population crash. It’ll probably be worse in places like Libya, where food production has maybe doubled since 1945, but population has increased by a factor of seven or eight. And in Egypt, where a lot of the wheat has gone away and it’s been replaced with cotton and citrus since a population has boomed. And now, even if they switch all the food production back to wheat, you still would have a 50% shortage. And the ability of local food production in order to support the local population. So these places have seen some of the greatest expansions in population ever in human history and we’re not too far away from them experiencing some  population crashes in human history. What we’re about to see as the global population sinks in is a degree of famine that is absolutely unprecedented and is likely to be even far more extreme than what we’re about to see people in china.

And so remember when you got a pure pyramidal population structure with lots of people under age 40, in that sort of situation, you’re going to have high growth because of the consumption, high inflation because the consumption and not a lot of productive capacity, because you don’t have a lot of skilled workers that are age 40 to 65. You also don’t have a lot of capital. And so these societies had a hard time lifting themselves out of poverty, except when it comes to things like oil sales, which is then usually the province of the state that doesn’t generate the sort of velocity of capital that is necessary for good infrastructure, for good education, and for all the other things that we kind of celebrate as the norm in the first world. It also means that you have a lot of young people who don’t really have a stake in the system because they don’t control the wealth that’s controlled by the sheiks and the princes at the top. So you tend to get very politically unstable systems. And if you add in the coming food crisis, the degree of civil great down that is possible in this, these areas are few. And for those of you who consider yourself students of history, if you look back and the rise and collapsed rise of cloud and the rising collapse of city states and empires throughout this entire region, this is starting to sound a little bit familiar. This may be where humanity got its start, but it’s also capable of some of the most catastrophic civilizational collapses. And we’re going to see that next decade or two.

Oh, yeah. One more thing. On yeah we relocated to Te Anau. I know there is a unique demographic pattern for some countries in the Middle East that is largely based on their intense wealth, because once you get to a certain level of income, you start paying people to do other things. So, for example, if you’re in the United States in your top 1%, you probably have a housekeeper. Well, you carry that into the Middle East where you’ve got this oil and natural gas income and you’re surrounded by places with a pyramidal demographic structure, and you start hiring people to do everything. So it’s not just menial chores or raising the kids. It’s building roads. It’s building bridges, it’s doing your oil infrastructure. You bring in labor for absolutely everything. And so if you look at countries such as Saudi Arabia, Qatar or especially the United Arab Emirates, you will notice that they have a pyramidal demographic structure. But on the men’s side, between roughly age 15 and 40, there’s a huge bulge that goes out, which is in essence, foreign guest workers who for the most part, unless you’re on that top end, it’s like doing the air traffic control and stuff, basically slave labor.

And in some cases that is not just a significant percentage of the population. In the case of Qatar, that is like half the population for the UAE, almost three quarters. So when you’re looking at the geopolitics of the region, you’re like, Oh, you don’t like the Iranians or We don’t like the Iraqis. Just keep in mind that the countries that the Israelis and the Americans, to a certain degree have identified as potential allies of the future Saudi Arabia, Qatar, UAE.

You are dealing with slave autocracies. So have fun with that.

The Mega-Prison of El Salvador

Coming to you from just above Glendhu Bay at Lake Wanaka in Southern New Zealand.

Today we’re talking about El Salvador’s new ‘mega-prison’ that will be filled with gang leaders, drug traffickers and the worst of the worst. In theory, this sounds great…lock up the bad guys and throw away the key…but the reality is that they may have just opened a can of worms.

Here’s the problem. When you place a bunch of bad people in a high-stress environment, hierarchies and bonds will begin to form. And in a country of only a few million people, these shot-callers have the influence to form political parties and sway major decisions.

So what does all this mean? To this day, El Salvador has NOT been a Narco state….it will be now.

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.

CLICK HERE TO SUPPORT MEDSHARE’S UKRAINE FUND

CLICK HERE TO SUPPORT MEDSHARE’S EFFORTS GLOBALLY

Clean Energy in Chicago: Why Windy Suburbs Matter

What do Chicago, Denver, and DFW all have in common? Yes, they are all major metro areas in the US, but more importantly, they’re colocated with green energy sources. As the world adopts more and more clean energy, these regions with localized energy sources will have a huge leg up on places like New York, Berlin, and London.

Finding a metro (where people actually want to live) surrounded by wind and solar potential is rare…it just so happens that the US is home to most of these regions. For places not so geographically blessed, the main concern becomes transporting the power from the source to the city. This can often span hundreds, even thousands of miles, and that distance puts up a number of red flags.

There are the obvious concerns of transmission loss, equipment, and overall economic viability, but once you start transporting power across states and grids, you have to deal with regulatory issues as well. The federal system in the US means that national, state, and local governments all share power. So transporting energy is no simple task.

It will take an act (or two or three) of Congress before the flow of green energy is freed up; that’s not going to be a quick process. The metros with green energy sources nearby will have a huge advantage in the years to come. So if you need a place to move, I hear DFW could use a few more green-friendly folks.

Prefer to read the transcript of the video? Click here

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.

CLICK HERE TO SUPPORT MEDSHARE’S UKRAINE FUND

CLICK HERE TO SUPPORT MEDSHARE’S EFFORTS GLOBALLY

TRANSCIPT

Hey Everybody. Peter Zeihan here coming to you from very chilly northern Illinois. Behind me, of course, we have a wind turbine which is one of literally hundreds in the immediate area around me. We are at the edge of the Great Plains here. I mean, technically, yes, we’re in more of the Midwest, but we are in one of the world’s great wind zones, Great Plains, going into the northern Midwest is all pretty good wind space. And what is unique about this turbine in particular is it is supporting the metro region that is the Chicagoland zone, which is the fourth largest metro in the United States. In most places of the world, it doesn’t matter what continent you’re on, what country you’re in, it is very rare for there to be good wind or solar potential near a major metro. And so even if you are able to build out the system to generate the power, then you have to transmit hundreds, maybe even thousands of miles. Chicago is one of the handful of cities in the world that is an exception to that rule. Northern Illinois, especially northeastern Illinois, you’ve got decent wind right at the doorstep of the metro zone. And so you don’t need high voltage lines in order to transmit the power up to the urban section effectively. You can use more lower load bearing facilities and equipment, and that means that Chicago is able to reach out not just to northern Illinois, but also southern Wisconsin, eastern Iowa, something a little bit of western Iowa and into Ohio as well in order to generate electricity. Now, there are very, very, very, very few places in the world where this works, but most of them are in the United States. So my adopted hometown of Denver is at the edge of the Great Plains great wind zone. Phoenix is obviously at the heart of a great solar zone, as is Albuquerque and Dallas Fort Worth is probably the American metro that has the most green potential of all because it’s where the Great Plains meet the Southwest. And so Dallas Fort Worth is likely to be the first major American metro zone to go 100% green, despite the fact that there are only like four environmentalists in the entire metro zone.

Now, if you’re going to try to make a green impact, it’s very important to co-locate power with your urban centers, because it’s very rare anywhere in the world to locate power generation more than 500 miles, because at that point, the transmission loss becomes so high that it’s really not worth it from an economic point of view anyway. And in the United States, we’re one of the very few places that actually has the metro zones that meet those criteria. But you can’t do that in New York. You can’t do that in Toronto. You can’t do that in Paris. You can’t do that in Berlin or London or Moscow or Beijing. It’s really only in the United States where we have that co-location. If you don’t have that co-location, then you have to have high voltage lines that are designed for a long range transmission, and those are not cheap.

Now, in most countries, you have a unified power grid. The United States is not. In most countries, we do things a little bit differently. Most of our utilities are set at the state or even local level. And that means if you want to transmit power from, say, Utah to Los Angeles, you have to cross through different states, regulatory authorities and each of them have their own rules for transmission and for even just raising the capital to do it in the first place. And, God forbid, you want to cross between different grids because the United States has three. Roughly everything west of the Rockies is on one. Roughly everything east of the Rockies is on another. And then, of course, Texas has its own thing. If if if the goal is to decarbonize the power system, not only do we need a lot of solar and wind, we would also need several acts of Congress that would break down the regulatory burdens that exist across these different grid systems and across the different states and across industries, municipalities. The problem the Americans face is that the United States is a federal system where the national government, the state governments and the local governments all share power. They all have about the same amount. And Congress would need to break that down within the power sector in order to encourage a more unified grid space that allows green electrons to travel more freely.

That would trigger dozens of lawsuits from the state and localities, which would rightly challenge the power grab from the federal government, which means, at least in the near term, the next decade, maybe two, most of the stories for green power penetration into the American grid have to happen at the local level. And that gives cities like Chicago, Albuquerque, Phoenix, Denver and of course, Dallas, Fort Worth, a huge leg up over everyone else whose local electricity resources, when it comes to green tech, simply aren’t that great.

Okay, everybody. That’s it for me. See you next time.

Sooner or Later: Oklahoma’s Time to Shine

That pan-shaped state above Texas offers much more than just tornados and sports. The Sooner State has done most of the heavy lifting in establishing itself as an agricultural, precision manufacturing, and energy state. All that to say, Oklahoma is not only a leader in the US but globally as well.

Oklahoma is like Texas’ little brother…they do a lot of the same things, but trying to compete with the big dog is pointless. However, that doesn’t mean Oklahoma cannot progress along the value-added chain in preparation for the collapse of globalization.

Oklahoma already has a robust refining industry. It wouldn’t take much to start producing the plastics, housewares, and synthetic rubbers that could face supply chain issues in the coming years. They have all the raw goods; they just need to build out the last step…and some better rail lines wouldn’t hurt either.

Prefer to read the transcript of the video? Click here

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.

CLICK HERE TO SUPPORT MEDSHARE’S UKRAINE FUND

CLICK HERE TO SUPPORT MEDSHARE’S EFFORTS GLOBALLY

TRANSCIPT

Hey, everybody. Peter Zeihan here coming to you from Oklahoma where the winds are strong and the gasoline is so cheap. Anywho, as I’ve been traveling around the country for work, I’ve been doing little bits like this on where I see these various parts of the country go in and what they need to do to do better and what their strengths and weaknesses are. In the case of Oklahoma, they already have most of the hard work done. This is an agricultural state. This is a precision manufacturing state. And this is an energy state. So a lot of the sectors in which the United States already excels, Oklahoma is a leader not just within the United States, but globally. But there are some opportunities they could take advantage of if they do a little bit more.

So one of the problems that Oklahoma faces is it’s right next door to those damn Texans. And anything that Oklahoma attempts to do, Texas can do at scale with a larger population and better transport modes to the rest of the world. So the best way for Oklahoma to compete is to not. They will never be able to outcompete Texas on the things that Texas does well, however they can feed the beast. So we’ll come back to that in just a second. The whole issue is to move up the value added supply chain. Second, a lot of the processing that happens in raw commodities around the world doesn’t happen in the United States. I mean, we’re the world’s largest refinery. So I probably phrased that wrong. But in terms of our exports, we export a lot of raw commodities, most notably foods and energy. But a lot of this stuff is then taken by other countries with China at the top of the list and then processed locally. And the world we’re moving into, a lot of that is going to break down any sort of security complications in, say, the Indian Ocean or the East China Seas. And you’re going to see the Chinese lose the ability to access that stuff in volume. And that’s going to generate a lot of volatility across the entire commodities space, which means that a lot of that capacity is going to become stranded. And if you’re in a place like Oklahoma that exports a lot of the raw product, you’re not going to have enough people in the outside world to process it anymore. So you might as well do it yourself.

Now, Oklahoma already has a very robust and advanced refining industry, but you can take things a step beyond that. You can not just produce the methanol, you can start producing the plastics. You can produce some of the housewares that come from this sector. You can produce synthetic rubbers. These are all things that exist in terms of the raw form in the Oklahoma system, but they need that next step in order to get value out and go into manufacturing proper.

Oklahoma is also a significant producer of wind power with some great resources, and every fistful of electrons that Oklahoma generates for its own domestic electricity system frees up a handful of molecules for export or use in other projects. Now, Oklahoma has always been a little obsessed with getting into manufacturing and never going to try to talk them out of that.

But they have a problem both in terms of the add on processing and the add on manufacturing when it comes to transport. This is a state that has a robust pipeline infrastructure, most of which goes into Texas, but it doesn’t have good other transport options. And a lot of these products that Oklahoma probably will be very good at in the not too distant future are large and bulky. And right now everything has to be shipped by truck. A better rail system, particularly with an intermodal somewhere in the Oklahoma City, Tulsa area, would be a really good idea because it would then provide the transportation backbone for companies to have confidence to expand into these areas at scale. The alternative is to just keep shipping raw commodities down to Texas and watch the Texans take up this entire product sector.

So from my point of view, all you have to do is build some rail lines. That’s a really easy carry. And Oklahoma’s future, even without that, looks pretty good…with that, it should be fantastic. 

Alright. That’s it for me. Take care.

Will AI Steal My Job?

The world of international trade is constantly evolving, and it’s important to keep up with the latest trends and developments. From emerging markets to geopolitical conflicts, there are many factors that can impact global trade, and we’ll be discussing some of them today. So, grab a cup of coffee, sit back, and let’s dive into this exciting and ever-changing topic.

Go ahead and watch today’s video before you read the rest of the newsletter…I promise you’ll understand why that first paragraph was so painfully awkward!

If you watched the video, you can probably see why I’m not worried about my job security. While AI is going to change the way we do a lot of things, it still needs some time before it’s cracking the kind of nuanced jokes I’m famous for.

However, there are quite a few spaces where AI is already disrupting the job market, and if you don’t want to be fighting the machines…it may be time to adapt or pick up a new trade.

Prefer to read the transcript of the video? Click here

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.

CLICK HERE TO SUPPORT MEDSHARE’S UKRAINE FUND

CLICK HERE TO SUPPORT MEDSHARE’S EFFORTS GLOBALLY

TRANSCIPT

Hey Everybody. It’s Peter Zeihan. And today we’re going to talk about the future of global trade. Now the world of international trade is constantly evolving, and it’s important to keep up with the latest trends and developments. From emerging markets to geopolitical conflicts, there are many factors that can impact global trade, and we’ll be discussing some of those today. So grab a cup of coffee, sit back and let’s dove into this exciting and ever changing topic.

The world is changing fast and technology is a big reason why. Now you’ve probably heard about automation and A.I. and how they’re really shaking things up in the business world. I mean, who knew robots would be better the packing boxes than humans? Now we just need to make sure they don’t unionize. One thing we’re seeing is the emerging markets like China and India becoming major players in global trade. They’ve got big populations and are growing middle class, which means they’re buying more stuff. And that’s great news for businesses that want to sell to them. So if you’ve got a product, it’s hot in India, get ready to see those profits skyrocket. Just make sure you have a good recipe for curry because you might need to impress some clients. But there are some challenges to. The United States for example, it’s become more protective of its industries, which has led to trade tensions with other countries. And Brexit has made things a little bit more complicated between the UK and Europe. I mean, who doesn’t love a good geopolitical drama, right? And then there’s the going ons of the Ukraine conflict. Now I know what you’re thinking. Wow, this is getting heavy. But hey, on the bright side, it’s not all doom and gloom. You can still order your favorite Ukrainian vodka online. You have it delivered right to your doorstep. So let’s raise a glass to international trade, even in times of conflict. So what does all this mean for the future? Well, it’s hard to say for sure, but one thing’s for sure, we are in for a wild ride. And as a geopolitical strategist, I’ll be keeping a close eye on things and I’ll share my insights with you as we navigate this ever changing world. Thanks for tuning in. And remember, laughter is the best medicine, even when we’re talking about serious topics.

Okay, now, that was not my words. That is chat GPT. Who was asked to write a script? For me, it took about 60 keystrokes and it came up with that. Now, from a geopolitical analytical point of view of my own, it’s out of crap. It’s at best freshman, not even sophomoric. But remember that GPT is barely into beta testing right now.

And the fact that it was able to analyze what I’ve written and said in the past and pick up on my cadence and insert the odd joke, even if they were just horrible jokes, is an indication of what’s coming down the pipe. And for folks that don’t require my depth of knowledge in order to tease out things like the caveats and the long term forecasts, you got to admit that just kind of splattering that on the wall like spaghetti for a first try was disturbingly good.

Now this isn’t going to disrupt every industry, but now that the context and the grammar and the sentence structure is something that AI can do, we’re going to be seeing this get more and more mature as it builds in more information now from my point of view, as somebody who’s authored a few books, copy editors are in trouble now because this thing was flawless from a grammatical and copy editor, point of view and again, it generated this thing in less than a second. But when it comes to drawing connections between different topics or, say, diving into demography, all it knew was to say the word demography. And all it did was to say the word trade and protectionism. It doesn’t have a deeper understanding of what those mean in a broader context. We’re in a human context. So at the pace we’re going, my job is still good for probably the rest of my professional career. But for folks who are dealing with low value added white collar work or even mid value, where the strength is not the cross context and the cross disciplinary experience, but simply running the numbers. And I’m thinking here about basic accountants. This is a pretty problematic innovation for you. So the trick will be for folks who are a little lower on the value added totem pole to figure out how to use this technology themselves to leverage themselves among their peers. Using this, I probably could put together too much of a framework, but most people are not in my field. And in terms of teaching someone English, oh my God, what a great tool. So is it the end of the world for all of us? No. Are the machines rising up? Know clearly the value add in this system is still relatively limited, but it does have the capacity to form complete sentences in paragraphs and thoughts now, and as it gets better, it’ll start hanging ornaments on those in a way that we’ve already start to challenge those low and mid-level white collar jobs.

Now, the way the economy is evolving globally anyway, we’re going into a system where there’s more breakup. And as capital costs get higher because of the retirement of the baby boomers, we are seeing different industries suffering benefit in different ways. So for the tech industry, for example, having really, really cheap capital, a lot of people in their twenties and thirties is the lifeblood, and that’s not the world we’re in. And so we’ve seen significant layoffs. If they can’t maintain their output without inputs that are of lower cost. But as the world of globalized manufacturing is moving around and countries like the United States that still want stuff are going to have to build it themselves. Well, higher capital costs aren’t great for that. But if you are building something real in an environment of shortage, it’s relatively easy to get capital in even workers. What we’re seeing now is kind of the revenge of the real, as you will, as intangible goods no longer have the demographic and economic and capital situations that they need to thrive. But if you want to build industrial plant to build a real physical product, all of a sudden in relative terms, it’s gotten a lot easier because the Googles and the Facebooks of the world are not sucking all the oxygen out of the room and all the capital out of the markets. It’s part of the transformation.

Where Chat GPT is going to push in the opposite direction of a lot of those trends, which means that all those white collar workers who have done really, really well in the last 20 years suddenly have some competition. At the same time, that base inputs, capital and labor for their industry are starting to dry up somewhat. It’s a real reorientation, and if you’re in the bottom half of the income scale, you’re more likely to be blue collar.

You have a really, really good decade ahead of you. Okay, that’s it for me. I’ll see you guys later.

The Water Crisis in the American Southwest

The American Southwest is primed to be one of the largest beneficiaries of the changes caused by deglobalization – mainly the reshoring of manufacturing. They owe this to years of in-migration bolstering their demographics. They also account for a significant portion of the nation’s foodstuffs. However, everything in the American Southwest depends upon one thing…WATER.

To put it lightly, the water situation in the Southwest is fickle; rivers can go from rushing to bone dry in a matter of a year. Up to this point, the Colorado River Compact has been the saving grace for the Southwest: a treaty outlining how much water from the Colorado River will be allocated to each state in the region.

The issue with the compact is that it operates on a priority system. So states that were urbanized when the treaty was signed have priority over states that developed later on. Fast forward to today, and we have an archaic system that benefits places like California over places like Arizona.

So what happens if the states upstream decide to walk away from the compact and start using the water as they see fit? It would be an ugly few years of political and legal chaos, but if the Southwest wants to be the beneficiary it’s poised to be…they better figure it out quickly.

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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.
 
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TRANSCIPT

Hey everybody. Peter Zeihan here coming to you from Vegas. And today we are going to talk about water and drought and all the things that come from that. Specifically here in the American southwest, we have a water problem. Now, for those of you who know your paleontological history. That’s a mouthful. You will know that the Southwest has a history of mass extinction and civilizational breakdown events that have on time descended into cannibalism. The issue is the terrain. It’s an arid area with a lot of elevation, and that means that most of its water comes from orographic precipitation, which is a fancy term that says that when you get moisture moving across a landscape, if it hits an elevation center or a mountain, it will rise. And if the temperature at the higher elevations is cold enough, the water will condense into vapor form clouds and then rain. And most of the rainfall that hits the American southwest has that sort of origin. The problem with orographic precipitation, though, is it’s fickle. And oftentimes you will not get enough cold temperatures at elevation or not sufficiently humid air currents in order to generate the moisture in the first place. So rivers literally come and go and that is caused the collapse of civilisational systems as you get mega droughts from time to time to time. We are in one of those periods now. So that’s probably one.

Problem Two, when the American Southwest realized that they had limited amounts of water. The states back in the 1920s, 1922, I think, set up a legal structure called the Colorado River Compact, in which they agreed to share the water. The problem was that the year that they used to evaluate how much water they had to share was one of the wettest years on record. So we’ve known for decades that in time the volumes that were written out in the treaty just weren’t going to be there. In addition, this is all heavily litigated and legalized, all written down in law. And at the federal level, it’s an issue of senior water rights. So the urban centers that existed at the time of the treaty in 1922 have priority. And anyone who has built infrastructure since then to tap into the waterway network is at a lower priority. So if you were an urban center in 1922, you have senior water rights and everyone else who has added is lower and lower and lower and lower. And so if you were at the very bottom in, say, the seventies when your system was built, you’re at the very, very bottom. The first state mentioned in the compact is the one that had the highest population then and now, and that’s California. But Los Angeles has 15 million people. The entire Southwest only had that many people in 1922. So you can see as part of the problem, the last state to build out its infrastructure to tap the waterway network was Arizona. It only finished the the Central Arizona project in the late sixties and into the seventies. So they’re at the very bottom. And when there was a dispute over water a few years ago, Arizona and California ended up in court. And the Supreme Court ruled very, very clearly that California has severe water rights and Arizona is at the bottom of the stack of junior water rights, which means that Arizona water demand can go to zero before California has to cut at all. And with that ruling in California’s back pocket, California has simply refused to engage in negotiations with the other states of the Colorado River basin. So we even had a deal last year where all of the other states got together and agreed to slash their demand. If, in exchange, California were to make a moderate decline. And California refused. The California position officially is you all go to zero and die and we will just keep having our golf courses.

So the debate now among the other states, especially the upstream states, is about just walking away from the compact completely. Now, this would lead to California suing them in a court case that they would probably lose, but that would take years because it would get tied up in court. And in the meantime, California would go completely dry. And Southern California gets roughly a third of their water from the Colorado River. So massive economic dislocation. Now, aside from the whole human tragedy of this, why does this matter? Well, let me give you three reasons. Number one, the world is deglobalizing and the United States is discovering if it still wants stuff, it needs to build out its own industrial plant. So there is a competition among the states right now about where that stuff will go. Texas is probably going to be the single biggest winner of the American South. Looks really good. But there’s parts of the Southwest that are very, very high value added. And getting semiconductor fabrication facilities in places like Phoenix are a great idea. But it requires water. In addition, we need to reshore especially the electronic supply chain system. And the Southwest is probably the best part of the country for that for labor reasons. In order to do manufacturing of electronics, you need a differentiated workforce with a lot of different price points. That means the person who does the lens for the camera is not the person who does the memory board, is not the person who does the plastic molding, is not the person who does assembly. These are all different skill sets. They all have different price points for the labor. And so you need multiple skill sets, multiple price points, multiple labor forces in relatively close proximity. This is one of the reasons that East Asia has done so well in this space for decades, because you have your technocracy in Korea and Japan and Taiwan, you have your mass assembly in places like Vietnam and China, and then you have your mid-range in places like Malaysia and Thailand. The only place in North America we have that sort of variation is in the US-Mexico border. And for the Southwest that’s a really good selling point if you can keep the water flowing. And another big reason is agriculture. Now, one of the big problems, one of the reasons why the Southwest is in this problem is that they are growing a lot of food in the desert. And, you know, if you look at that on its surface, you’ve got to wonder if that was a very good idea in the first place. And the answer is no, it was not a very good idea in the first place, but it is now part of our food security system. And so places like Yuma, Arizona, which are about as far south in the country as you can get, get all of their water from these water courses that are governed by the compact and of Colorado just walks away. Then in the winter, we’re talking about losing a quarter to a third of most of her fresh vegetables because it’s got the perfect climate for it if you got the water. Now, unlike, say, interior Washington, where you’ve got the Columbia River, which is the continent’s biggest water flow by volume, and you take water from that for, say, the Yakima and the Walla Walla, the Benson systems. You know, it’s not a big deal, but you can’t do that at scale over time in a watershed like we have in the Southwest. And so we’re talking about losing a significant amount of food production that is important, not just locally and regionally, but across the national system.

Now, California don’t get too smug. The Central Valley is facing this exact same problem, and you can’t blame that one on any one upstate. That is your homegrown ecological and agricultural crisis. That’s a problem for another day. And then third, taxes. One of the things that we’ve seen in the last few years is Americans are moving in a way that they haven’t in quite some time. The baby boomers want to move someplace where it’s warmer. The millennials want to move to someplace that has more elbow room where it’s cheaper to expand the cities and therefore they can afford yards. And not a lot of people want to be dependent on mass transport because they’re afraid of diseases. Well, the American Southwest scratches all of those itches. And it has been the fastest growing part of the country from in-migration in the country now for roughly 50 years. And all else being equal, there’s not a lot of reason to expect that to change unless there’s a persistent water crisis.

Now, the good news is there are a lot of things that America can do in order to get by a lot better. You remove a lot of the water intensive agriculture from the region. You make things like golf courses go away. You don’t have fountains in Phoenix, for example, and you just manage your water resources with the best technologies of the 13th century, we can probably have a population increase of 50% without a problem.

But above all, the Colorado Compact has to be renegotiated for a more realistic environment. And since California will not choose to do that willingly, they are going to have to be forced, which means either we do have a crisis first triggered by the upstream states or Congress steps in and abrogates the pact and imposes a replacement. This is going to be an ugly, ugly political issue for the next few years. That is absolutely unavoidable, but is absolutely critical if the United States in general, this region in specific, is going to take advantage of the demographic and geopolitical shifts that are wracking our world right now. This region should be one of the biggest beneficiaries of the changes going on, but they have to be able to get the water situation right.

Alright. That’s it for me. See you guys next time.

Dire Straits: Energy in Europe

Horrible views today up on the Isthmus Peak Trail in New Zealand.

Europe’s energy situation looked pretty dire last year as concerns began to mount over the impending winter season. Thankfully they dodged a bullet this year, but how many more bullets can the Europeans dodge?

The issue with Europe’s lucky streak is that none of what saved them can be replicated. Industrial demand has already plummeted, and maintaining these levels would have detrimental effects. Paying through their teeth for liquified natural gas isn’t sustainable. And unless the Europeans have Mother Nature on speed dial, they can’t expect another moderate winter like this year.

Unfortunately for all of us, current global energy supplies are likely the best they’ll be for years to come. So the Europeans need to say thanks for the extra time and head back to the drawing board to get out of this pickle.

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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.

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TRANSCIPT

Hey everyone. Peter Zeihan here coming to you from New Zealand on the Isthmus Peak Trail just came down off the summit where it was a breezy, negative five degrees centigrade, complete with. What was that called again – grapple – grappling. And when that was no fun at all. Anyway, we found a nice spot with a backdrop here. I want to talk to you about what’s going on with energy in Europe now in the aftermath of the Ukraine war.

We all know that between damage to pipelines and boycotts and shut offs on the Russian side and war damage that the Europeans are using, a lot less natural gas from Russia. And Russia was their primary supplier providing the continent with about a quarter of the total natural gas. And in the case of Germany, specifically, over 40% coming from a single pipeline.

Now, for those of you who’ve been following me for a year, you know that I was really concerned that over the winter, natural gas was going to just not be available. Because if you look at historical trends when it comes to storage and pricing and usage…it looked pretty dire? And in fact, in the aftermath of Nord Stream being blown off back in September, we saw natural gas prices go up by a factor of five, six, seven. And at one point they were about $70 per thousand cubic feet. Apologies for those of you who speak metric. Most of my audience is American, blah blah blah. Anyway, but over the winter, prices have plummeted to historic lows.

Now three things have happened that have enabled that to occur and to prevent just a complete meltdown in Europe or freeze up, I guess.

Number one, the Europeans, especially the Germans, shut down most industrial demand. So they just stopped smelting aluminum and steel and stopped fabricating petrochemicals and fertilizers. That is something you can sustain, but only at the cost of absolutely massive damage to your economic system. This is more of a problem for Germany than the rest. I mean, it’s a problem for everybody. But for the Germans, the petrochemical systems that they use are fueled by natural gas and those petrochemical outputs then go to the base materials for their manufacturing sector. So by shutting this stuff down, they are now dependent upon intermediate products that come from a continent away which are not nearly as reliable and are much higher cost. So the capacity, the profitability, the sustainability of the entire German industrial model is now in severe doubt. And in the best case scenario, the Germans probably only have about two years left that they can operate like this, assuming nothing else goes wrong.

Second, the Europeans paid five, six, seven, eight, nine times the prices that they were paying before in order to tap natural gas and liquefied form. Now, natural gas is kind of hard to move. It’s a gas. You have to have a pipeline system that links production to transport, to distribution, to usage all at the same time, because storage is relatively expensive. And the Europeans were obviously dependent on the Russians for that. But if you have a lot of extra infrastructure here, you can at a point of export near a point of production. You can chill the stuff down, basically with a giant freezer tied -300 odd degrees and make natural gas an actual liquid and then ship the liquid like you would any other liquid, although specialized tanker. And then once you get it to the end destination and you can warm it back up, gassify and pump into your system per normal. And Europeans tapped the global market for that at a scale we have never seen the Europeans do before, and they paid through the teeth to do that. LNG on average costs about triple what the gas cost because of the costs of cooling and in transport and regasification. Excuse me, but it was either that or not have power. So the Europeans generally did that and that triggered a series of energy problems all around the world, especially in countries like Japan and Korea and Taiwan, who normally rely on LNG as their primary source of energy. So that was the second thing.

The third thing is they got really lucky. Temperatures for the last nine, ten weeks across all of Europe have been 20 to 30 degrees above historical average. It has been the warmest winter on record. And in that sort of environment, demand for natural gas, for heating just hasn’t been as robust as it normally is.

Now, the problem for the Europeans is none of these things are really replicable. I mean, you can’t count on Mother Nature being that nice. More than one year in a row. The Russian supplies that are piped aren’t coming back this summer, which is normally when the Europeans would refill their stocks. So the only way that they can refill them is to go back to the international market and tap even more LNG. But it takes 5 to 7 years to build an LNG liquefaction facility. So global supplies are as good as they’re going to get for the appreciable future and they could keep all of their industry offline in order to reduce demand. That might be their only option, but that comes as a critical economic cost over the long term, not just in terms of competitiveness, but the very existence of some of these heavy manufacturing sectors.

So no good solutions. The Europeans dodged several bullets this year, and they should consider themselves very, very lucky. But we are only at the beginning of a multi-year transition to what is next. And the Europeans were simply fortunate that they have a little bit more time to work on other things.

Oh, yeah. One more thing that helped the Europeans out. If you remember back to November, December and January, that’s when the Chinese were imploding over COVID. We still don’t have good numbers, but assuming that the COVID strain that the Chinese were dealing with matches what the anti-vaxxers in the United States suggested was the actual authority rate for COVID. They lost a million people. And in that period, economic activity basically crashed. So for roughly three months, the Chinese were not importing a lot of liquefied natural gas themselves. At the same time, the Europeans desperately needed whatever molecules they could get. So we had a three month period where natural gas prices globally in the liquefied market was just weird and it benefited the Europeans the most you could possibly imagine…DONE.

They’re Watching You: The TikTok Ban

The CCP is always watching…and no, I’m not talking about spy balloons today. Under the law in China, any company must cooperate with the government. So if you’ve got TikTok on your phone, you may want to watch your back.

However, there is an even scarier company out there, and it’s called META. Both companies collect the same data, but Zuckerberg takes this a step further. Your data is bundled, segmented, and sold to scammers as “Likely to fall for XYZ scam.”

The potential restrictions on TikTok are only the beginning of what I see as a necessary move toward protecting our personal information and data.

Prefer to read the transcript of the video? Click here

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.

CLICK HERE TO SUPPORT MEDSHARE’S UKRAINE FUND

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TRANSCIPT

Hi Peter Zeihan here coming to you from Crown Point Overlook in New Zealand, just outside of Queenstown. The news that I’ve been following of late has to do with TikTok and everyone talking about how it is this government spy program and it needs to be banned. For those of you in what pretty for a while, you know, I’m a relatively laissez faire kind of guy for most things, but there are exceptions and this is absolutely one. Under law in China, any company, not an information company, not an Internet company, not a social media company, ANY company has to cooperate with their intelligence services for any reason at any time, in whatever way the Chinese government requires. So technically, every Chinese company is a security risk, especially one that you put on your phone. And with the technology as it currently exists with TikTok, even if you have the app closed, it’s recording everything you do, bank account information, your cell phone calls, everything. And what happens is the Chinese government, if they have an interest in you, they will go into tick tock and say, I want information about this person in this area, these keywords, that sort of thing.

They have to make a very specific request to go into the data and pull it and TikTok is legally required to cooperate and hand over all the information. So from a security point of view, absolutely TikTok is a threat, but there is a company out there that is at least an order of magnitude worse than TikTok and it is called Facebook because they collect data in exactly the same way. It’s just as invasive. But unlike TikTok, where the Chinese government has to then come in to go after you. Facebook does the work for them and they take all of their data from their billion plus users and they break them up into chunks of 10,000 based on what sort of fraud they think (Facebook thinks) you will fall for a religious scam, an anti-vaxxer or scam, a give money to the elderly scam, a save the children scam, whatever it happens to be. And then they take these packets of 10,000 and they go to a place in Vegas every year where the scammers get together for literal conventions and they market your data, they market your data to these entities. And of course, the Chinese government shows up for that. So does the Russian government. So the only way to be safe from these two apps is not simply to delete it off of your phone, but then to go through and do a full system reboot and purge. Because even if you have signed out of TikTok or Facebook, it is still collecting the data you actually have to delete the entire thing after signing out. Its the only way to get around it. 

So the restrictions on TikTok, I think they’re a great idea and I think they’re only the beginning of what we need to do to get our social media space back. Alright. OOOP weather just turned. We got to go. You guys take care.

Demographics Part 9: The Advanced Developing World

The advanced developing world is about to have its moment. We’re talking about India, Turkey, Indonesia, Vietnam, and Brazil. These countries were a little late to the global scene, but now it’s their time to shine, hopefully…

The path to globalization is well-traveled, but that doesn’t mean its obstacle-free. These countries will have to work hard to balance their shifting demographics with changes to their economic structures and movement along the value-add chain.

For a country like Brazil, their current trajectory could very likely send them into a crippling demographic situation with no way to pull themselves out. If a country like Turkey continues to move up the value-add chain steadily, I could see them flourishing in the coming years.

These countries are not facing a terminal demographic situation quite yet, but if history has taught us anything…now is the time for them to reconcile their declining demographics and prepare for what comes next.

Prefer to read the transcript of the video? Click here

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.

CLICK HERE TO SUPPORT MEDSHARE’S UKRAINE FUND

CLICK HERE TO SUPPORT MEDSHARE’S EFFORTS GLOBALLY

TRANSCIPT

Hey Everybody. Peter Zeihan coming to you from Colorado. I am in training for my upcoming New Zealand trip and so I wanted to record a couple of videos that would last a little bit longer. So this is the most recent installment in our demographic series. And today we’re going to talk about the advanced developing world, a group of countries that includes India, Turkey, Indonesia, to a lesser degree Vietnam, certainly Brazil.

These countries have a lot of things in common, not just in terms of their demographic structure, but their economic history. So until World War Two, these were all either colonies or kind of isolated systems. And they had that traditional, pre developed world pyramidal structure that was very high consumption, high inflationary and relatively low value added. But even in the early decades of the post-World War Two era, they didn’t really join into the Bretton Woods free trade system, even though some of them, several of them were signatories to the pact. They kept their economies to themselves for nationalistic reasons. And to be perfectly blunt, there was a fair amount of the advanced world, most notably Europe, where even though global trade was available, they really didn’t globalized their supply chains. They were export products, but they tried to not become dependent upon anybody else in terms of the production cycle. Well, you play that forward until 1992. And what changed in 1992 is, of course, the Cold War ended. And that’s meant that a lot of the strictures that had made it difficult to do things went away. And these countries came in from the cold from a little bit a second in 1992, the Europeans signed the Treaty of Mashhad, which did away with a lot of the internal tariff and non-tariff barriers that existed within the European space. And that meant that the Europeans started to integrate and especially German supply chains started to link to the rest of Europe over the course of the next 20 years. That was extended first as economic links and later as full EU membership to all of the states of Central Europe, from Estonia down to Bulgaria, with Poland being the most important one. And that meant that the European space, or if you want to be honest, the German economy became suddenly this global powerhouse and started exporting products that were a lot more value added from a lot more product sectors. But most importantly, of course, 1979 was the year that the Chinese started to tiptoe into the international system and then really join in in the 1990s and 2000s, which meant that the Chinese were ravenous for raw commodities and would pay pretty much anything to get whatever they needed.

This all benefited the advanced countries of the developed world because they could get certain products from the Germans and the Chinese that they could make at home, and then they could work on either raw materials or manufacturing to fill in the niches that the bigger economies didn’t provide. So for most of this class of country, 1990 really was the break point where they started to urbanize and industrialize. It took the combination of not just the global trading system, but also a change in the way that other major economies viewed economics. In the case of Mexico. 1992 is when after was adopted and of course, the early 1990s when the WTO came into existence.

So what this means is that these countries started this rapid process not in the forties or fifties, like, say, the Koreans or the Japanese or the Europeans, but not until the 1990s. But by that point, the process of developing and industrializing and urbanizing was kind of old hat for a lot of the world. So these countries were able to proceed down that path a lot faster than the countries that have come before. So for the Brits, it took seven centuries. For the Germans, closer to five. For the Americans…America’s a special case, let’s leave them out. For the Spanish, it really only took 2 to 3. These countries have done it in really one, one and a half to two. And as a result, starting in the 1990s, their birthrates plummeted, in most cases dropping by half to two thirds. So if you look at the population structure of their demographics, it’s a pure a pyramid for people who are above about age 35 and then it goes straight down in a column. Now, this is hardly a disaster. By having fewer children, more money can be focused on education, on infrastructure, general business investment. And so all of these countries have been moving bit by bit up the value added scale. We’ll look at Mexico from a value add point of view, comparing the value of the inputs versus the value of the exports. It’s probably the most high value added economy in the world. So, you know, no slouches in any of these categories.

But this has some consequences because if this continues, these countries are going to age at a much faster rate than the countries that preceded them. So, you know, we’re talking about these countries reaching a mass impact in really under 20 years. And in the case of the United States, as a point of comparison, the U.S. is going to be a younger country, demographically speaking, on average, than Brazil in the early 2040s in Mexico and Indonesia are going to pass by us in the early 2050s and probably even India by 2060.

Now there’s a lot of history to be written between here and there, but these countries all have a demographic moment and if they take advantage of it, to become developed by moving up the value added chain very, very rapidly, kind of like Mexico is, then by the time they get to these points, they will be developed enough to deal with those sort of demographic consequences. But if they become stuck in the middle, which is definitely what seems to be happening with Brazil, they’re going to have some real problems because they’ll have gotten old without becoming developed.

The case of Brazil is a special one and it’s almost entirely because of China. The Chinese came in under President Lula, his first term, and they signed a number of deals to build joint ventures for producing products in Brazil. But the Chinese basically lied and stole all the technology from all the Brazilian firms and then took it back home, produces in mass and basically drove all the Brazilian companies out of the global market. So the Brazilian industry now only basically services the Brazilian system. Indonesia has not fallen prey to that because they didn’t have the technological aptitude in the first place. They’re trying to move up the value added scale, getting out of raw commodities into processing and ultimately into things like battery assembly, which is overall a pretty good plan, inconvenient for the rest of the world, who is trying to go green quickly, but definitely in Indonesia’s best interests. Mexico is definitely the furthest along overall and moving up the value added scale. And in terms of labor productivity, I’d argue they’re above Canada already. Who am I leaving out? Turkey? The Europeans have integrated with Turkey to kind of be the Mexico for Europe. And Turkey began with a much more sophisticated labor force and infrastructure than the Mexicans had in the 1990s. They haven’t moved as fast, but you have a much deeper penetration of these technologies in these skills throughout the Turkish system than in any other countries in this class. So if the Europeans were to vanish tomorrow, the Turks would obviously feel it. But they definitely remain the most powerful country in the neighborhood, and their demographics are young enough and their neighbors are even younger that I could see a Turkish manufacturing system really taking off. Obviously, this isn’t Germany would be the same quality, quality of product, but would still be a pretty good result anyway.

Bottom line of all of this is that these countries all had a moment, the historical moment that is approximately as long as the one we’ve just completed with the hyper globalization of the post-World War Two era. But it is still only a moment, and they all need to really buckle up and get down to business if they want to do well in what comes next.

All right. That’s it for me today. See you guys next time.

Russia Moves Nukes to Belarus

Today’s video comes to you from the shores of Lake Hawea with the famed Dingle Burn arm behind me.

Anytime Russia and nukes are mentioned in the same sentence…the world pays attention. But does moving your nukes to a new place inherently change your military posture?

In the case of Belarus, the answer is no. Russia already has nukes in Kaliningrad (further west than Belarus), so this isn’t “expanding” Putin’s military reach. Additionally, the Belarusian infrastructure sucks, so these nukes will likely sit around and collect dust (unless they’re sold on the open market, but that’s an entirely different conversation).

So what does moving Russian nukes to Belarus accomplish? Putin gets to bang on his chest a little, rally up the domestic nationalism machine, and ensure the internal political situation is still propping him up. As for international security issues, this doesn’t move the needle…at least for now.

Prefer to read the transcript of the video? Click here

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TRANSCIPT

Everybody. Peter Zeihan here coming to you from the shores of Lake Hawea with the famed Dingle Burn arm behind me. This is my favorite lake in New Zealand for the obvious reasons. And today we’re talking about Russia and nukes. So for those of you who have, you know, not been under a rock, the Russians have been threatening nuclear, this and that and everything since the Ukraine war started. But if you look back and look at the statements, you’ll know that sometime in mid-March of last year, Putin stopped making threats. And it was only in the last couple of weeks that the Russians have said they’re moving nukes up to a permanent station in Belarus, which is the first expansion of the Russian military footprint in terms of nuclear arms since the end of the Cold War. A lot of people are worried about that. But I think it’s best to look back before we look forward.

So if you remember back to February and early March, Putin was making nuclear threats against anyone who was willing to support the Ukrainians in any way. And then he just stopped. And the way it was explained to me the last time I was in Washington, went something like this this – the ambassador was dispatched to talk to Putin and to lay out a little bit of logic. And the idea was that if you look back to February and March, especially in January, when the Russians would have a super secret meeting with the National Security Council, the locked room, and then within hours, the transcript of those conversations would be published in Western media. The way the ambassador explained it to Putin was that the Americans have been listening to everything every phone call, every conversation, reading, every email, and in doing so, had a full picture of everything that Putin was personally considering and within his inner circle. And the idea was that, you know, a minor detail of this sort of espionage was that the United States knew at any given time physically where Putin was. So if he thought he could fling a nuke into the Western Hemisphere in the first couple, wouldn’t just come back and come right down his throat. He was kind of out of his mind. So he stopped making the threats and he left it to his henchmen to do it. This new development is kind of in the same vein.

Putting nukes in a place doesn’t in of itself change your military posture. And we know from some of the nuclear threats that the Russians made back in last March and April and May is that they didn’t actually change their readiness. They were just shouting. This is kind of like that. Because if you put a nuke in another country, you need a hardened facility, you need a command and control system, you need a night system that is absolutely hack proof. And putting that in Belarus, Belarus barely has electricity on a good day. It’s a horrible place for a nuclear race. So if the Russians did transfer nukes there, they basically would be sitting in crates surrounded by soldiers unable to be launched. So at this point and this specific issue, the nuclear threat coming out of Russia has not actually increased. The potential risk we have here is proliferation, because we know that the Russians don’t have the best security and we know that the military has become really corrupt, especially when it comes to hardware and funding. So taking secure nuclear materials and transferring them to a country that’s a kleptocracy like Belarus actually raises the chance that these things might get sold on the open market. It’s not that that’s a non risk, but it’s a very, very different risk from the idea of the Russians actually physically expanding their nuclear deployment footprint. But in terms of operational readiness, there’s really no change because the Russians already have a nuclear footprint in their little enclave of Kaliningrad on the Baltic Sea, which is west of Belarus.

So nothing has really changed here. The Russians are just looking for a little way to beat their chests and kind of feed the domestic nationalism machine that is keeping the government in power. This is about internal Russian politics, not international security issues, at least for now. Alright. That’s it for me. Talk to you guys later.