Which BRIC’s Member Will Survive?

The future for most of the BRIC countries is not – as Rihanna so eloquently put it – “shining bright like a diamond.” If I had to choose between Brazil, Russia, India and China, my money is on India outlasting the others.

Most of you know where I stand on China, and its collapse is inevitable. Russia has been shooting itself in the foot for ages, and its recent war on Ukraine is only going to bring them closer to that final bell. Brazil has a better demographic outlook than China and Russia, but geographic constraints and dependence on China will catch up to the Brazilians sooner or later.

Thanks to a stable demographic picture and growing need for self-sufficiency, India stands out as the most resilient. As long as these factors remain, India is set to do very well…even if they have to do everything on their own.

Prefer to read the transcript? Click here

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Transcript

Hey, everybody. Peter Zeihan here. Coming to you from Maine. That’s New Hampshire over there. Because, you know, what? You state. Today I’m taking an entry from the Ask Peter Forum, specifically of the original BRIC countries: which one do I think is going to do the best and stand the test of time and why? And it’s always… there’s no boat.

The waves can’t be good anyway. Well, let’s do a process of elimination. First and foremost, China — let’s dispose of that. Demographically, China is facing national dissolution. The birth rate has now been lower than the United States since the early 1990s, and it’s already at a point where it has about the same number of people over age 50 as under.

So, we are looking at ethnic dissolution of the Han ethnicity before the end of this century. To think that there can be a country that comes out of a place with no people? No. It’s just a question of how China dies. And that’s before you consider that this is a country that imports almost all of its energy, imports almost all the components that allow it to grow its own food, imports almost all of its raw materials, and is completely dependent upon exports to the wider world in order to absorb all of its manufacturing capacity.

It is the country on the planet that is most dependent in absolute terms on globalization, and that means on the U.S. military to make sure that its ships can travel without being molested, no matter where in the world they go. That is a bad business strategy. And we’re going to be seeing the end of the Chinese system and probably of the Chinese state within ten years. So, not them.

Russia second. Very exposed geography: 5,000 miles of external border that really doesn’t have an anchor in any sort of geographic barrier. They have to defend the whole thing. Part of the logic of the Ukraine war is to get closer to the old exterior crustal defense they had during the Soviet period, where they could rely on things like the Tension Mountains or the Carpathians to shorten that external barrier.

So, they’re in a weird situation that if they don’t expand, they can’t actually shorten their external borders. Russia today actually has longer external borders, even just by drawing on a map, than the Soviet system did, despite losing all 14 of the constituent republics. So, geographically, that’s a bad situation. Demographically, we don’t have nearly as good of a picture of Russian demography as we do of the Chinese because the Russians stopped collecting census data 17 years ago and just started making up the data.

But at the time, they had one of the worst demographic structures in the world, and even by their official fabricated data, they’re in the bottom ten. So yes, Russia is not long for this world. The question is whether it dies this decade, next decade, or the decade after. There are some things they can do to buy themselves more time. They’re not nearly in as poor of a situation as the Chinese are, but they’re certainly not an economic power, and they can’t even maintain their raw materials exports without external help.

Third up: Brazil. Demographic situation is much better. Brazil didn’t really begin industrializing and urbanizing in fervor until the 1990s. Now the birth rate has dropped by almost three-quarters since then. But even if they keep aging at their current rate, they’re not going to face a Chinese or a Russian situation before at least 2070. So there’s still a demographic dividend to be had.

Their problem is more geographic. Think of Brazil as a table that has lost two of its legs, but the two legs that fell off are the ones to the interior. So if you want to start from the coast and get into interior Brazil, you first have to go up an escarpment and then gradually down into the interior. That means it has very, very high infrastructure costs because everything requires going massively uphill from these tiny little flat plains in the cities that are on the coast.

That makes Brazilian cities dramatic and beautiful, but it also means that everyone’s living on a postage stamp in a slum, and the only real city that they have that you would recognize anywhere else in the world is Sao Paulo. Up on top of that escarpment, which is a normal city, and so the economic hub. But it makes its interaction with the rest of the world very, very difficult and expensive.

So it’s not that Brazil is flirting with failed state status like China or Russia, but it’s very difficult for it to operate unless somebody is going to underwrite its development. Now, since roughly 1990, that country has mostly been China because the Chinese are not price-sensitive when it comes to getting raw materials, and so they will basically fund the development of infrastructure in Brazil in order to get to the farms and the mines that are in the interior and bring it out.

But in doing so, they also built joint ventures with a lot of Brazilian companies — joint ventures, which was Chinese for stealing all the technology that the Brazilians had so painstakingly developed over the last 40 years, taking those technologies back to China, mass-producing them, and forcing all the Brazilian companies out of business. So Brazil is actually less advanced now than it was 30 years ago. And that’s a really tough road to hoe.

The final country, of course, is India, and that is the default winner. But they probably would have won on their own anyway. Like Brazil, they had a demographic moment, and they’re now aging. And like Brazil, they didn’t really start to industrialize until after 1990 because they were basically pro-Soviet and didn’t want to participate in something that was U.S.-led, like globalization.

And so they are aging very quickly. But again, like Brazil, this isn’t going to be a real problem till at least 2070. In addition, India has never had a manufacturing pulse like, say, Brazil did. So there’s no place to fall. There was no place for the Chinese really to cannibalize these. What they need to do now, what the Indians need to do now, is more or less the same thing we need to do here in North America.

If they still want stuff in a post-China world, they’re going to have to build up their own industrial plant. And that is a growth story, but it’s going to be a more complicated one than it is here in the United States because the United States has partners in this. We’ve got Mexico and Canada and trade deals with Japan and Colombia and Korea, a solid relationship with Taiwan. And if the Brits can ever figure out what the hell Brexit means, I’m sure the Brits will be brought along for the ride as well.

That means that we have help in building out our supply chains, and we can all specialize in the things that are the best. India doesn’t have that. Every country that India borders hates India, and India hates every country it borders. So India is going to have to do all of this by itself, and that will make it more expensive. And that means it can’t get any help. And that means it has to build up the infrastructure with its own system in a way that we just don’t have to do in the United States.

There’s a pro and a con for that. The con is obvious. The pro is that this is an Indian story. With India doing this for its own reasons, on its own time schedule, in its own way, for its own needs. Yes, it will take longer. Yes, it’ll be a little ugly. Yes, it’ll be a little dirtier than it could have been otherwise. But it means that India will be globally significant even if it’s not globally involved.

And in a globalizing world, that’s just fine.

The BRICS Summit: Significant or Hoopla?

Have you ever seen a couple of 3-year-olds sitting on the playground talking gibberish and acting like they’re making life-changing decisions? Well, that’s what’s going on at the BRICS summit in South Africa this week.

BRICS comprises Brazil, Russia, India, China and South Africa, and if you’re struggling to find some overlap between those countries…you’re not alone. With limited economic ties and diverse interests, this group of countries struggles to connect on anything meaningful.

To complicate matters further, BRICS is looking to add some new members to their ranks: Iran, Saudi Arabia, the UAE, Egypt, Ethiopia and Argentina. I urge you to try and come up with a worse list of mid-tier countries to bring on if you want to expand your geopolitical influence.

The varying interests of the current and new members will likely halt any meaningful conversation. The practical significance of this summit and BRICS as a whole is – limited – to say the least. And if you were hoping this would shake up the global landscape, I’m sorry to burst your bubble.

Prefer to read the transcript? Click here

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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.

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Transcript

Hey everyone, Peter Zeihan here. Today we’re going to talk about the BRICS summit. It was originally intended to be a two parter, one during the summit and one after. But because programing got shot down yesterday. We’re combining this into one. So it seems to a little bit disappointed. That is why. And here we go. Hey, everybody. Peterson coming to you from the shore of Lake, where I have been visited by a whole bunch of goats.

They were very curious anyway. Today we’re going to talk about something that is in progress. And that’s the BRICS summit in South Africa. They’re trying to come up with a series of plans of what to do. They’re trying to consider whether they should let in new members. And odds are that this is just going to be a really stupid summit that’s going to amount to nothing.

But it’s still worth talking about because it’ll give you an idea of the architecture of the international system. And you never know. They might be able to pull something out of the fire. So the reason I have primarily been dismissive of the BRICS since the beginning is because it was never an organization. It was never a grouping that was founded by its members.

It was some finance guy who’s like, Look, we’ve got all this capital because the baby boomers haven’t retired yet. We should put it into bonds. And we’re some big bond markets. Oh, yeah, Brazil, Russia, India and China. That’s it. That’s all it was. And then taken to later, they led in South Africa in a in a fit of pique.

Nothing’s going on here. There’s never been any meaningful deal. They have formed a development bank, but now over 90% of the capital comes from China. And there are reasons for the BRICS to talk with China. It is a significant trading partner, but there’s no reason for them to speak with one another. Brazil, aside from exports to China, doesn’t trade with the rest of them at all.

Same with South Africa, same with Russia. India is a special case, and if there’s one country that doesn’t like China, that would be India. And, you know, every once in a while you’ll hear them talking about forming a global currency or a new alternative currency to challenge the dollar. And then they start talking about details and all falls apart.

So right now, India, China, South Africa and the BRICS own bank are on record saying that they’re not interested in a global currency. The only two countries are left are Russia, who thinks that everyone should use the ruble, of course, and Brazil. How can I qualify? Describe Brazilian foreign policies these days, especially on economic issues, kind of. Lodhi DA.

Not a lot of substance beneath rhetoric anyway. So the purpose of this summit is to bring in dozens of leaders from other countries and see if they can kind find something that they can all agree on. A history suggests the answer will be no and everyone is coming with their own list of grievances and desires. The Russians want everyone to sign up with them and boycott the West until the West agrees to give them their way on Ukraine.

Of course, Russia’s not included in that. Russia is still allowed to talk. The first is still how to to trade with whoever they want. The Chinese are hoping to get enough countries on board that they can then walk into Washington and demand trade concessions. They don’t care about all the other countries. They just want them for themselves. The Indians are there because they are more of a classic nine nonaligned power.

But as the Chinese become more rambunctious, the Indians have become more and more edging towards being in the American camp. So the normal rhetoric that you would expect to see out of the Indians just isn’t there. The South Africans who are hosting are pretending to be neutral in all this and say they don’t have an opinion. The Brazilians are very logical and that’s it.

We’re going to turn around here anyway. Why might this one spark? Why might this still matter? Well, if you look back to the Cold War period when we had the nonaligned movement, that’s what a lot of these countries are from. Not Russia, not China, but a lot of the ones who are now showing out, they saw themselves as not east, not west, not first or Second World, but is something else.

And they try to come together for a common thing called the new international economic order. And the idea was that the West should restructure their trade practices in order to benefit some of their former colonies. It didn’t amount to much at the time. Eventually it became known as the ACP group Africa, Caribbean Pacific, a former colonies of the Europeans who have a degree of preferential trade access when it comes to European markets.

But it never got the restructuring that they really wanted. The reason I’m even less optimistic this time around is because the interests of the groups that are showing up are far more diverse than anything that we had in the early post-colonial era back in the sixties and seventies. So if they do decide, if BRICS does decide to do something, it will probably be about expanding their membership.

And that would be one of the most effective ways that I can think of to make sure that BRICS never achieves anything at all because they don’t agree on any much right now. So this is going to be an unofficial two parter. We’re going to wait to see what comes out of the summit. And then I will let you know what I think about the new roster.

All right. That’s it. Bye. Okay, here’s part two. So BRICS did decide they wanted to expand to involve six members in the six countries they involved. Indicate to me that BRICS has no plans of doing anything useful in the future. Those countries in no particular order are Iran, Saudi Arabia, the United Arab Emirates, Egypt, Ethiopia and Argentina. And I mean, honestly, folks, this is hilarious.

Okay, so let’s start with what the naysayers are going to say about how this does matter and explain why it doesn’t. They’re saying that because of the addition of the three countries in the Persian Gulf region plus Egypt, that this grouping, BRICS, now produces about half to 60% of global oil. And that means the downfall of the dollar, the formation of an alternate currency, the end of the petrodollar, divestment, the United States.

And it’s the end of an era. And, you know, the short version is absolute bullshit. Number one, Saudi Arabia does sell a few loads to China in yuan, and Russia does sell a few loads in yuan or rupees in order to get around sanctions. But the Russian system is kind of by itself. And as Russia follows no one, as with the Saudi Arabians and the Emiratis, that might be a little different.

Well, you got to look at why they’re considering doing anything in non-US dollars. They’re looking for a security guarantor. They’re afraid that the United States is going to leave the region. And if it does, they’re on their own. And since they don’t like to be outside of air conditioning, national defense is something they’re not very good at. So they’re basically open to all potential takers when it comes to not oil sales for sales sake, but as a way of getting into your security planning.

The Saudis have gone with the U.S. dollar for the last several decades, not because it was the global currency, not because they’re part of a caucus group that is basically with the BRICS. And they’re not in any sort of meaningful organization in which the U.S. and Saudi Arabia members, they have a bilateral relationship that was based on security, and that was the reason why they use the U.S. dollar.

That’s the reason why they bought refineries on the U.S. Gulf Coast, because they saw the United States as the country that ultimately would bleed and die for them. And they’re looking for alternatives, not because they want an alternative, but because the U.S. is probably not interested in that role anymore. There are also right now trilateral negotiations going on among the Americans, the Saudis and the Israelis, in which the Saudis are seeking a Japan style security guarantee for themselves.

Now, they’re probably not going to get that. They’re probably going to get a lot of things that they’re after. But the bottom line is that for the Saudis, this has never been about the money. It’s never been about the currency. It’s about who’s going to take a bullet for them. And the Chinese simply lack the capacity to deploy at range in a way that the Saudis would be willing to accept and believe, especially since the primary foe that they’re worried about is none other than Iran, which is how it has been, added the BRICS as well.

That brings us kind of the second problem here. The the BRICS have realized that if you’re going to add a country like Iran, that is how should I say, has some firm opinions about security issues, for example, that it should be in charge of the Middle East. Well, then you have to add anyone else from that region at the same time.

Otherwise, you can never have any of them because the Iranians would do the vetoing. So that’s adding the UAE, Saudi and Iran at the same time. It guarantees that you can expand the organization in the future, but it also guarantees that on all significant issues, you now have members inside the organization that going to be in diametrically opposed positions forever.

So we already know that BRICS can’t have a meaningful energy policy because now you have a number of opposed powers Russia, Iran, Saudi Arabian, UAE, all in at the same time. What a shit show. Okay, next up, Argentina and Ethiopia. Ethiopia brings very little the table. It’s one of the ten poorest countries between per capita terms in the world.

It’s landlocked. It’s one of the handful of countries in the world that is not part of China’s one belt, one road, because even the Chinese like there’s no investment case there. So they added in in order to get a little bit of African flair into the organization. And that’s about it. Argentina is not poor. It has a entitlement complex in which it thinks that everyone should give it money and should never have to give any of the money back.

And the reason they applied for BRIC membership is they’re hoping to get Chinese money. It’s not that the Argentineans are anti-U.S. dollar in any meaningful way. It’s just they’re anti paying back their debts. And so they’re always looking for a new financial access point in order to leech off of it until it goes away as well. So honestly, you know, best of luck with those two because there definitely a drain on the organization and they really don’t bring much to the table.

Okay. Who am I looking to? Oh, yeah, Egypt. Egypt is basically a U.S. satellite state. The U.S. basically pays Egypt and Israel and Jordan, for that matter, to not go to war with one another. So thinking that there’s a security play here from bringing the Egyptians in. No. If anything, it’s a bit of a Trojan horse. It is a large developing country.

I would argue that the reason it got brought in is because of India, which still has a lingering love of the nonaligned movement in which Egypt was a reasonably potent player politically but economically. Strategically, I’m afraid not. All right. Is that everybody? Yeah, that’s everybody. When an organization expands, usually one of two things happens. Either one, you’ve got an overwhelmingly powerful single member that kind of decides how things go.

And that would be the United States and NATO’s, for example. Option number two is you expand it with each member, you bring in differing viewpoints, and eventually it paralyzes the organization from doing really much of anything. And the BRICS is definitely firmly in that category right now. This is really only going to amount to anything in the midterm now if one of two things happens.

Number one, the Chinese pay for everything, and that means subsidizing the existence of the Argentineans, as they believe they should be subsidized, which is a hefty price. And very, very poor countries like Ethiopia. The last time a major power tried to do this, it was the Soviet Union. It was the 1970s, and it broke the bank. So not very likely that the Chinese are going to pay for influence in places that they actually can’t control and don’t really bring them much if they did.

The second option is we could see this very, very rapidly expand to basically become the new nonaligned movement. Of course, it would be different this time because the Chinese very clearly have elements in mind and the Russians very clearly have some goals in mind. And it’s difficult to imagine a lot of the world’s middle and lesser powers following the lead of these two countries.

I mean, yes, a lot of the global south has not been interested in condemning the Russians for what’s going on in Ukraine. That doesn’t mean they want to follow them. And anyone who’s not blind realizes the Chinese has some very clear, very nationalist, very, almost hateful, domineering goals for the Chinese rise. And in that sort of environment, no one wants to be a pawn because all of a sudden the nonaligned movement is going to align with a global pull.

No. So where does that leave us? Well, I think if you look at what really went down at the summit, you get your answer. Chinese President Xi Jinping didn’t even show up to some of the opening ceremonies where he was expected to give a pole speeches. The Chinese don’t see this as a useful vehicle, except rhetorically, and that means you shouldn’t treat it as anything else.

All right. That’s it for me by.

How a New Strain of Wheat Could Boost Brazil

What if I told you that Brazil’s new tropical strain of wheat could cause the most significant shift to the technological power balance the world has seen in the past five centuries? I know it’s hard to believe that wheat could have the same impact as industrialization, but hear me out.

Wheat has been the world’s go-to crop because it’s easy to grow and calorie-dense. Brazil is tropical, and much of the soil isn’t conducive to growing much of anything. Supporting a growing population becomes difficult without food security, which inhibits economic and technological growth.

Within the next few years, we will know if this new strain of wheat is successful. And if it is…food security will rise, populations will grow, and the core reason for the world’s regional power imbalances will begin to dissipate. This isn’t going to be a fast process, but a new strain of wheat might change the world.

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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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.

Brazilian Elections Return Lula to Office and Leave Bolsonaro Silent

The Brazilian elections took place over the weekend, resulting in a narrow win by center-left candidate and former president – Luiz Inácio Lula da Silva, over right-incumbent Jair Bolsonaro. As of now, Bolsonaro has remained silent on the election results and many of the world’s leaders have already congratulated Lula on his victory. 

If Bolsonaro were to challenge the election results, it would likely come with little formal support and garner little traction. However, a challenge from the incumbent could leave Brazil in a troublesome place. 

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.
 
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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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Brazil’s Presidential Election Showdown

Brazilians will return to polls later this month to vote in a presidential run-off election between former president Luiz Inácio Lula da Silva, known popularly as Lula, and firebrand current president Jair Messias Bolsonaro. Run-offs aren’t usually this closely watched in Brazil, except for the fact that there has already been political violence and Bolsonaro has been campaigning on a steady message of anti-media, anti-institutional trust, and claims that any election he does not win is one that has been stolen from him. That he did significantly better in the first round than many polls had predicted has given him and his supporters a shot in the arm. 

Brazil is the second largest economy in the Americas, after the United States. It is a significant exporter of industrial materials and agricultural commodities. Brazil’s constitution dates back to 1988, and the first elections it held after the 1964 military coup were in 1989, meaning Brazilian electoral traditions are only as old as Taylor Swift. We are seeing the greatest challenge to Brazil’s democratic norms and traditions since their implementation, and that is a sobering thought. It’s not so much what Bolsonaro might do, as much as what he has promised.

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Energy, Currencies and Inflation: Worse for Some

In the worlds of finance, trade, economies, currencies and energy there is a lot going on. We’ve a war in Ukraine that will likely generate the largest oil dislocation in modern history. The global Baby Boomer generation is retiring and taking their money with them, generating the largest financial dislocation in modern history. Presidents Trump and Biden are following the same script on trade issues, generating the largest trade dislocation in modern history. And the Federal Reserve is tightening monetary policy in an effort to tamp down inflation.
 
The implications of all these seismic shifts are many and massive. Here’s two of them:
 
Whenever countries are struck by economic shocks – like, say, now – investors look for safer places to stash their money. Less money into tech, more into consumer products. Less money into Brazil, more into Europe. The safest of all safes is the United States, and so the U.S. dollar is on a bit of a tear, rising by roughly 10 percent verses most of the world’s currencies since the beginning of the year.
 
A rising dollar has any number of outcomes, but the one making the biggest splash at the moment is its impact upon energy markets.
 
Oil prices were already rising due to a variety of factors ranging from insufficient investment in new projects over the past several years, to disruptions in trade patterns, to, of course, the Ukraine War. For the United States this is known and obvious. But all commodity trade is denominated in U.S. dollars. Oil is no exception. Combine oil’s price rise with a strengthening dollar and much of the world takes a double hit.
 
Brazil’s real has largely kept pace with the U.S. dollar, so this energy hit doesn’t land on Brazilians quite as hard. But Europe and Turkey? Those locales heavily depend upon Russian crude. Not only does that challenge their supply systems, it’s also contributed to the pair’s suffering from significant currency weakness. The end impact? In local currency terms, internationally sourced oil now costs 10-15% more in Europe and Turkey than it does in the United States.

Unfortunately, there is little reason to expect the world’s energy situation to improve within the next half decade, nor is there reason to expect the U.S. dollar to go anywhere but up for years to come. But that is a story for another day.
 
That day is … June 8. That’s when we’ll be hosting our next seminar, Inflation: Navigating the New Normal. You can sign up 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

Where in the World: Fagradalsfjall, and Breakthrough Tech

Some questions I’ve been asked about as of late have been on the topic of what technologies do I see that could move the needle on some of the more… dire forecasts that I’ve made.

Some of the most impactful are going to be in the field of agriculture. The industrial revolution sparked massive changes in how humans grow and distribute food. Chemical fertilizers, pesticides, tractors, combines, storage, refrigeration, global transport—the things that give us tomatoes in winter (no matter the quality) are also what has allowed fewer people to feed a global population that has ballooned over the last century.

But what industrialization has brought, deglobalization can take away. Concentration of production of farm equipment, fertilizers, pesticides, and capital means that in the absence of the safe and secure transport modes of The Order most of the world’s current mega producers (Brazil, China, India) face precipitous declines in caloric output.

One answer to avoiding a catastrophic decline in food output? Technology. The same science behind increasingly powerful facial recognition has promising potential utility in conjunction with automated field equipment, more efficiently administering water, fertilizers, pesticides, and herbicides to crops in the field. The attentiveness and nurturing care of pre-industrial gardening, but on a much more massive scale.

If you enjoy our free newsletters, the team at Zeihan on Geopolitics asks you to consider donating to Feeding America.

The economic lockdowns in the wake of COVID-19 left many without jobs and additional tens of millions of people, including children, without reliable food. Feeding America works with food manufacturers and suppliers to provide meals for those in need and provides direct support to America’s food banks.

Food pantries are facing declining donations from grocery stores with stretched supply chains. At the same time, they are doing what they can to quickly scale their operations to meet demand. But they need donations – they need cash – to do so now.

Feeding America is a great way to help in difficult times.

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A Failure of Leadership, Part I: A Look Around the World

Read Part 2 and Part 3

The past few weeks have been…eventful. I make my living anticipating and explaining and projecting change, with an unfortunate emphasis on destabilizing and disintegrative change. Pre-coronavirus the world was already hurtling through its most rapid breakdown in living memory; Coronavirus has accelerated…everything.
 
Times of extreme change are often painful, but for many they provide opportunity. Leaders often shine during times of extreme change. History tends to remember people who help their people and institutions navigate periods of disruption. Reagan’s speech at the Berlin Wall ended the Cold War. Yeltsin standing on a tank, defying the military put a bullet in the Soviet brain. Meir launching a worldwide assassination program made tiny Israel a global power. Churchill pledging to never surrender set the stage for the Nazi defeat. Ataturk defying Europe’s post-WWI carve-up plans ensured that, eventually, the Turks would return as a major power. In moments like these, a few countries pull away from the pack and reinvent themselves.
 
I haven’t seen any of that so far in the coronavirus crisis. Anywhere. Honestly, it is a little disappointing that no world leaders are rising to the challenge. While some leaders have dealt with the crisis competently, I haven’t seen any effort by any leader to harness the crisis to put their country on a more solid footing or to prepare for the post-COVID future. The lack of global leadership effort is simply mindboggling.
 
Let’s run through the list:
 
Emmanuel Macron has hitched his star to the idea that EU countries with solid budgets (that is, the countries less spendthrift than France) should shell out more money to help the poorer countries (that is, countries like France) get by. That certainly generates him some gravitas in Rome and Lisbon, but personifying the concept of asking for a hand-out isn’t what leadership looks like.
 
Germany’s Angela Merkel was supposed to be retired by now. Her chosen successor stepped back in early February, just before we all became obsessed with coronavirus. With her retirement plan in tatters, the Indispensable European is now once more unto the breach, dealing with intractable issues in her quiet, competent way. Unfortunately, she is constrained by her country’s savings-obsessed culture. No one in Germany wants to bail out Europe’s weaker members, particularly since Germany’s forward-looking, keep-your-powder-dry medical and financial approach has (so far) proven successful while Southern Europe’s spend-it-even-if-you-haven’t-got-it mindset has not. Honestly, Merkel looks like she’s just tired of it all. I feel exhausted just reading about her. (And frankly, she should be tired. She’s been shoveling Europe’s shit for over a decade.)
 
Even if everyone loved Brexit and how Prime Minister Boris Johnson has handled it, Johnson just now emerged from some quality time in a freaking COVID ward (just in time to bring his new baby home). The UK in general – and Johnson in particular – is in no shape to lead much of anything.

The orders to tamp down any discussion of coronavirus in Japan in order to maximize the chance of the 2020 Summer Olympics being derailed undoubtedly came from the top, making Prime Minister Shinzo Abe directly culpable in a spreading epidemic in the world’s oldest national demographic. Needless to say, few are looking to Tokyo for a how-to guide.
 
Canada’s Justin Trudeau has the look of a man who has been completely overtaken by events…because he has been. That’s less a judgment of his leadership or his team’s management skills, and more the crystallizing realization in Canada that there is no future for Canada unless it does everything of substance hand-in-glove with the United States. That includes trade policy and energy policy and China policy and…anti-COVID efforts. Trudeau has been (repeatedly) blindsided by whatever fresh spasms of oddity have erupted from the White House, and he simply has no option but to make the best of it. Pragmatic? Yes. Necessary? Certainly. But the liberal flame has most certainly gutted out.
 
Russia’s Vladimir Putin proudly proclaimed Russia had COVID “under control” just ten days before the Moscow mayor launched a lock down. There’s been broad spectrum public criticism by health care workers of the Russian government’s (mis)management of the epidemic, that has progressed to several doctors committing suicide by jumping out of buildings (a favorite technique of the Russian security services for disposing of troublesome personalities). This would be bad enough at any time, but Russia’s educational system collapse in the 1990s means Russia doesn’t have a particularly deep bench of health care staffers. COVID combined with the government’s response to the bad PR coming out of the health care sector is gutting what’s left of an already woefully inadequate health care infrastructure. Needless to say, while many countries want to manage the message, no one else is liquidating their precious health care workers to do so. (And incidentally, the Russian bot farms are hard at work spreading bat-shit crazy COVID-related conspiracy theories so please quit getting your COVID news from Facebook.)
 
Not to be left out, most of the world’s secondary powers have slightly wacky nationalist leaders who are proving…wackier with every passing day.
 
India’s Modi is working diligently to disenfranchise a large portion of his own population, and seems genuinely surprised when there is (violent) push back.
Turkey’s Erdogan is gayly skipping his way down a neofascist path, setting the stage for (another) harsh, ethnic-based, wipe-out of a conflict with the Arabs to the south, the Europeans to the northwest, and the Russians to the northeast.
Brazil’s Bolsonaro seems committed to ensuring the epidemic hits his country as hard as possible, in part by personally leading press-the-flesh rallies against COVID-containment and mitigation efforts.
Mexico’s Andres Manuel Lopez Obrador is nearly as obtuse on the topic of the virus as Bolsonaro. Moreover, he has decided against providing much of any support to Mexican firms during the crisis, ensuring that Mexico’s recession will be longer and more difficult than it needed to be.
 
The number of leaders who have risen to the occasion is vanishingly small. Korea’s Moon Jae-in and Taiwan’s Tsai Ing-wen have done a phenomenal job of managing the COVID epidemic, but much of the credit must go to those countries’ intelligence and diplomatic corps who are arguably the most attuned to regional disruptions. After all, for them threat detection/assessment is a matter of day-to-day survival, and their hawklike watching of China is what provided their countries’ health services with the advance warning the situation necessitated.
 
Honestly, the only leader who has truly outperformed is Prime Minister Jacinda Ardern of New Zealand. But while Ms Ardern continues to impress, her country’s geographic isolation grants the Kiwis virus containment/limitation options denied the rest of humanity. There are a few lessons there for others, but only a few. Yet even with these three bright spots, no one outside of their respective countries is looking to Moon or Tsai or Ardern for leadership.
 
That holds true pretty much everywhere. With the possible exception of Angela Merkel, not many people have looked to any of these leaders to be authorities on regional issues, much less global ones…ever. Part and parcel of true global leadership is that there can really only be one. Since the Americans for the past 70 years have provided the security architecture and economic capacity for a global system to exist, it has fallen to the man in the White House to design the response, set the course, provide the resources and, to be blunt, lead. That’s triply true in the case of the meaningful international institutions which provide the sinew of global cooperation.

Those days are over.
 
Since his election, Donald Trump has functionally ended NATO, eliminating the single greatest security alliance in human history. Last year the Trump administration functionally destroyed the World Trade Organization, the only institution capable of empowering the multilateral trading system. Last month the Trump administration ended American funding for the World Health Organization. A flawed institution? Sure. But to abandon it during a pandemic was, in a word, questionable. The American alliance with South Korea – long one of America’s three most loyal allies – is likely to end this year at Trump’s behest. TeamTrump is even drawing up plans to pull intelligence assets out of the United Kingdom, America’s oldest, closest, and most capable ally, in protest over the Kingdom’s Huawei-linked telecoms policy.
 
It doesn’t really matter whether you think Trump’s actions are warranted or otherwise. The point is that the United States de facto controlled these institutions and alliances. By leaving or killing them while simultaneously failing to establish domestically-run alternatives, Trump has vastly reduced the ability of the United States to manipulate the world. That isn’t leadership. That is abdication.
 
Nor is it purely an international question. Domestically, Trump is a standout in that the longer he is in the White House, the less competent he appears to be at using the tools of domestic power.
 
I’m not talking here about Trump’s politics, policies, or even personality, but about his gob-smacking lack of managerial skills. Nearly three and a half years into his term, there are still hundreds of positions throughout the federal bureaucracy which remain unfilled, a disturbing number of which deal with issues of health. Headless bureaucracies are broadly useless except to carry out the last orders that they were given. It is with more than a touch of irony that I must note that despite all sound and fury to the contrary, Trump’s pathological unwillingness to engage with the federal bureaucracies has actually entrenched Obama’s regulatory disfunction rather than excised it.
 
Nor has much of what Trump has done trimmed those bureaucracies down to size. After all, reducing staff and mandates and budgetary outlays takes active leadership, and Trump is one singularly disinterested and disengaged leader. Since Trump hasn’t disbanded the agencies or programs, America has been landed with all the expenses of a sprawling bureaucracy, but few of the benefits.
 
Add in daily COVID briefings in which Trump seems pathologically committed to showcasing his furiously deliberate lack of knowledge, and Trump’s levels of respect at home and abroad are at the lowest of his presidency – and trending very firmly down. Imagine how weak he will look in a few months (weeks?) when the United States experiences its second coronavirus wave.
 
Absent from this list of not-necessarily-failed-but-certainly-not-successful leaders is, of course, China’s Chairman Xi Jinping. Understanding just how disastrously Xi has mismanaged the coronavirus crisis and just how much permanent, irrevocable damage his “leadership” is causing China requires an entirely independent newsletter.
 
Stay tuned for Part II…

With the world under COVID-related lockdowns, I’m pretty much as home-bound as everyone else. That’s nudged me to launch video conferences for interested parties on topics ranging from food safety to energy markets to the nature of the epidemic in the developing world. While most of these events are for a set fee, my next video conference will be free of charge. Space, however, will be limited.
 
Join me May 19 for a once around the world of where we stand in the current crisis. Which countries are suffering most critically? Which are pulling ahead? What the shape of the pandemic will be in the weeks and months to come? What will the world look like once coronavirus is in our collective rear-view mirror? As with all the video conferences, attendees will have the opportunity to submit questions during the event.

REGISTER HERE

Newsletters from Zeihan on Geopolitics have always been and always will be free of charge. However, if you enjoy them or find them useful, please consider showing your appreciation via a donation to Feeding America. One of the biggest problems the United States faces at present is food dislocation: pre-COVID, nearly 40% of all foods were not consumed at home. Instead they were destined for places like restaurants and college dorms. Shifting the supply chain to grocery stores takes time and money, but people need food now. Some 23 million students used to be on school lunches, for example. That servicing has evaporated. Feeding America helps bridge the gap between America’s food supply (which remains robust) and its demand (which coronavirus has shifted faster than the supply chains can keep up).
 
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Coronavirus: The Developing World Guide

As governments in Washington, DC and London and Paris took their time to push their respective populations to shelter in place, the novel coronavirus did what it does best: spread quickly and efficiently through dense populations, the sort of dense communities that define the US Atlantic coast and most of Northwestern Europe.

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