The Biden administration is shopping around with some less than savory potential partners in order to lessen the blow of energy sanctions against Russia. Venezuela, Saudi Arabia and Iran – all well known and fairly maligned regimes from right, left, and center of American politics. All sitting on top of some of the largest energy reserves on the planet.
For a bit of fairness, the Biden administration is doing nothing new. American governments have held their nose and worked with a whole host of despotic characters, especially with the aim of undermining the bigger devil in the room. Partnering with Stalin against Hitler. Working with Communist China to undermine a Communist Russia. But if we’re going to continue to be fair, will the outreach work?
Iran and Venezuela especially present enormous challenges to anyone looking to develop their energy deposits (technical, geological, financial) and even Saudi Arabia – which loves to boast about its spare capacity – would take about a year to bring on a sustainable million barrel increase in production. All told, working with the devils we know in Riyadh, Caracas and Tehran would offset roughly about a quarter of the oil lost from sanctioning the bigger devil in Moscow.
Add in the Biden administration’s other likely moves to help address rising US gasoline prices and, well… there doesn’t seem to be a lot of relief coming for oil consumers in the foreseeable future.
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.
Russia is finding it increasingly difficult to sell its oil in Europe and other traditional markets, as a mixture of sanctions, market pressures and consumer choice are shifting against Moscow. It’s not that Russia is barred against selling oil. It’s that shippers, insurers, and dock workers don’t want anything to do with the stuff. So where does it go?
There is a persistent question – and at times, assumption – that Beijing will step in to buy up whatever crude Russia can’t sell elsewhere.
Not so fast.
The problem is infrastructure. The pipelines that carry oil to Russia’s Pacific loading terminal, and directly into China itself, source their crude from eastern fields. Russia’s western exports are sourced from western fields. There’s precious little in the way of connecting infrastructure between the two–meaning if Russia can’t load tankers in the Baltic and Black seas, there’s little reason to pump it at all. What does this mean for Chinese imports of Russian crude? Probably not what you’d expect…
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.
As we now enter the third year of the ongoing COVID pandemic, we have had an evolution in how countries–especially in East Asia–react to outbreaks. Gone are the days of national lockdowns, and instead provincial, city, and even facility specific lockdowns are the norm. While it might sound like an improvement for supply chain security, it’s not: instead of a wide-spread lockdown that could carve out exemptions for certain classes of workers or strategic manufacturing needs, entire facilities are shut down and no goods can get out.
But there’s a much more significant shift underway than the changing minutiae of how countries react to rising infection levels and new variants. It’s China. The Chinese Communist Party once based its legitimacy on guaranteeing full employment and economic prosperity for its people. Now, the Chinese population looks to Beijing to guarantee its health. Zero-tolerance lockdowns, like the one currently underway in Zhejiang and the globally significant port of Ningbo, reflect a Chinese strategy geared toward proving to its citizens that it takes their concerns regarding COVID seriously. Not keeping jobs at a factory or port facility filled. Not reaching artificial production quotas. Not making sure foreign supply demand is met.
After decades of orienting national policy toward making China the largest and most important part of as many global supply chains as possible, Beijing’s decision-making rationale has shifted. And with it, China’s ability to be a reliable link in global supply chains.
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.
The team at Zeihan on Geopolitics thanks you and hopes you continue to enjoy our work.
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.
The team at Zeihan on Geopolitics thanks you and hopes you continue to enjoy our work.
Bit by bit we are getting back to normal. Over half of the American adult population is now vaccinated, and vaccines will soon be available in most locations on a walk-in basis. At current rates, I have little doubt all American adults can be vaccinated by June 1.
For me personally, that means I am starting to travel again. But the world really doesn’t care where I am. Events happen and I need to get to work. The big news this week is out of China, and it is NOT good.
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.
The team at Zeihan on Geopolitics thanks you and hopes you continue to enjoy our work.
Last week the American ambassador to China, Terry Branstad, attempted to publish an op-ed with his assessment of American-Chinese relations. The Chinese Communist Part summarily squashed it, banning the op-ed in all Chinese publications. This Monday, September 14, Branstad submitted his resignation from his post. (He will continue to serve in a caretaker capacity until his as-yet-unnamed replacement can step in in October.)
I hardly have the ambassador’s ear on this topic, but it is fairly clear from the op-ed that Branstad sees no hope for an improvement in the bilateral relationship and that the fault lies with Beijing. The op-ed neither has the tone of someone who is mourning what could have been, or someone ready for a fight. Instead it sounds like someone who after years–decades–of engagement is admitting the obvious: relations are not working and have not been working for some time.
Chinese-American relations have always been complicated, but they’ve been substantially less sunshiny and rosy in recent years. Differences over trade and finance and bank policy and human rights and navigation and a dozen other things all, independently, would have been enough to inject severe challenge into any relationship. But the simple overriding fact is the two countries have been strategically diverging for some time.
It comes down to demographics, security, trade, and America’s role in the world:
Between rapid urbanization and the One Child Policy, birth rates in China plunged below replacement rates decades ago. The only thing preventing broad-scale population collapse is improved health care among China’s older cohorts which has extended the average Chinese citizen’s lifespan. Demographically speaking, that’s a bit of a starvation diet. Within the decade that demographic dividend will be spent, and China’s population will begin a harsh decline. The most reasonable estimates project a China with half its population in 2100 compared to 2020.
That’s hardly the worst of it–or the part that will be felt first. The 2100 projection ignores the economic effects of today’s young (already numerically gutted) generation. Without sufficient young people, nothing about today’s China is sustainable. The young generation are the people who do work, buy goods, staff the army, and care for the old.
With the younger generation numerically incapable of forming a broad-based consumption-led economy, China has no choice but to lean on exports to power their system. China faces two issues here.
First, like all export-led systems, China relies upon others to consume, and China is hardly the only country suffering from a rapidly aging population. Within the next decade, enough countries–ranging from the United Kingdom to Brazil to Poland to Chile–will age out of the “consuming” cohort to make the very concept of an export-led economy impossible.
Second, China’s dependence upon imported raw materials and exported finished goods requires physical access. Historically speaking, countries have only been able to enjoy such access if they can militarily secure it themselves. China’s navy may have a lot of vessels, but only a tenth of them have the capacity to sail more than 1000 miles from port. Even that assumes they face no challenge. China’s primary energy supplies are five times that distance. China’s merchandise customers are even further away.
Strategically, China is in a box. The Chinese have only been a global trading power when the countries of the First Island Chain – Japan, Taiwan, the Philippines, Indonesia and Singapore – have been forced by a greater power to be on the same side as China. That has only occurred once. Today. Under the American-led global Order. If the American goal is truly to destroy China, all the Americans have to do is go home.
Without the Americans negating China’s problematic regional geography and so empowering it on the global stage, China simply lacks the military heft to impose its will on Australia, much less India or Saudi Arabia or Brazil or Germany or the United States–all countries China needs access to if it is to maintain its position.
Which leads us to the most galling, inconvenient truth for the Chinese nation. Everything about its modern history – the defeat of the Japanese, national unification and consolidation under Mao, the turning of the tide against the Soviet Union, its bursting onto the global scene as a major economic player–none of it would have happened without American strategic sponsorship. None of it is sustainable without ongoing American involvement. And the Americans are simply done. With China. With the world. With all of it.
And so, China begins its rage against the dying of the light.
Which brings us back to Branstad. Managing relations between an administration as egocentric as Trump’s and a country as egocentric as China would have been a tough job regardless, but doing so during a period when America is disengaging and China is grappling with the consequences of that disengagement was probably always going to be a thankless task. Yet if anyone was going to eke out any crumbs of success, it was going to be Branstad.
Branstad was no neophyte. First elected governor of Iowa at the tender age of 36, he went on to serve six terms, making him the longest-serving governor in American history. Unlike senators and real estate marketing magnates, governors actually have to deal with people, manage things and establish compromises. In a word, governors…govern.
Branstad, is particularly well-known among the non-Twitter side of American politics for his educational reforms which have consistently put Iowan students at or near the top of most measures. (Full disclosure: I’m from Iowa, was a student there during Branstad’s first, second and third terms, and worked for the Iowa legislature during his fourth.)
Branstad was no hawk. He has known Chairman Xi in a personal capacity since their first meeting back in 1985 when Xi visited Iowa as part of an agricultural delegation. Branstad and Xi have both often commented on their friendship, a friendship grounded in their respective polities’ interactions: Iowa is America’s largest pork producing state, and China is the world’s most enthusiastic pork consumer.
Branstad was no dove. He was one of Trump’s first appointees (and, incidentally, one widely supported on both sides of the American political aisle). His connection to Xi gave Team Trump excellent access within Beijing when pushing on hard-knuckle issues related to trade or intellectual property or navigation rights or Hong Kong.
Branstad was not simply the very best ambassador America had to offer as envoy to Beijing, he may well have been the only person who could have salvaged the American-Chinese relationship these past few years, no matter who sat in the White House.
The question, of course, is what is next?
On the American side things will get harsher, no matter what occurs with national elections in November.
It is impossible to think someone as pragmatic and proper as Branstad would have released the op-ed without President Trump’s personal knowledge and green lighting. After all, the letter has already been endorsed by US Secretary of State Mike Pompeo and posted on the State Department’s website for all to read.
At its core, Branstad’s op-ed lays bare something that wasn’t exactly a well-hidden secret: that Chairman Xi has been–personally, directly, intentionally and repeatedly–lying to the Trump administration for years on issues both economic and strategic. It stretches the imagination to think that with the cat not so much out of the bag as prancing on the countertop that Trump will treat Xi as anything less than something who has tried to make him look the fool. Cue your imagination for possible retaliations.
Nor would a Biden-Harris administration treat China much better. For the past two years, Biden has been far more critical of China on issues economic, cultural, trade, military, and strategic than anything that’s ever come out of Trump’s Twitter account, going so far as to personally and explicitly label Xi a “thug”. As a former attorney general (aka friend-of-cops), Kamala Harris’ diction regarding Xi has been somewhat less…polite.
Branstad’s op-ed is not a condemnation of a recent Chinese policy shift, but instead an admission that relations are simply impossible unless and until there is a Chinese policy shift.
Realizing that their future likely holds strategic, economic and national oblivion, the Chinese Communist Party–led and personified by Chairman Xi Jinping–has degenerated China into a sort of nationalist fascism that brooks no internal challenge whether racial or political or cultural. One that denies any external influence aside from foreign money that helps employ Chinese citizenry (which in turn bolsters the CCP’s political legitimacy).
It has already become so intense as to border on the comical. China has already closed up to the point that domestic media coverage of Disney’s new theatrical release of Mulan–meant to be a celebration of Chinese culture–is now banned in China because outsiders are lambasting Disney for kowtowing to Beijing.
It isn’t that things that have been in the news ranging from Huawei to Hong Kong to Xinjiang don’t matter–they do–but instead that all of them are symptoms of much deeper problems that the CCP simply lacks capacity to address. Summed up, the CCP and Chairman Xi are desperate. And if we really are approaching China’s witching hour, then all the normal niceties of diplomacy and global trade simply aren’t as important as they once were. Xi sees it as high time to lock down everything and hunker down for the long haul. Foreigners be damned.
And forewarned.
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.
The team at Zeihan on Geopolitics thanks you and hopes you continue to enjoy our work.
The short version is that China’s spasming belligerency is a sign not of confidence and strength, but instead insecurity and weakness. It is an exceedingly appropriate response to the pickle the Chinese find themselves in.
Some of these problems arose because of coronavirus, of course. Chinese trade has collapsed from both the supply and demand sides. In the first quarter of 2020 China experienced its first recession since the reinvention of the Chinese economy under Deng Xiaoping in 1979. Blame for this recession can be fully (and accurately) laid at the feet of China’s coronavirus epidemic. But in Q2 China’s recession is certain to continue because the virus’ spread worldwide means China’s export-led economy doesn’t have anyone to export to.
Nor are China’s recent economic problems limited to coronavirus. One of the first things someone living in a rapidly industrializing economy does once their standard of living increases is purchase a car, but car purchases in China started turning negative nearly two years before coronavirus reared its head.
Why the collapse even in what “should” be happening with the economy? It really comes down to China’s financial model. In the United States (and to a lesser degree, in most of the advanced world) money is an economic good. Something that has value in and of itself, and so it should be applied with a degree of forethought for how efficiently it can be mobilized. This is why banks require collateral and/or business plans before they’ll fund loans.
That’s totally not how it works in China. In China, money – capital, to be more technical – is considered a political good, and it only has value if it can be used to achieve political goals. Common concepts in the advanced world such as rates of return or profit margins simply don’t exist in China, especially for the state owned enterprises (of which there are many) and other favored corporate giants that act as pillars of the economy. Does this generate growth? Sure. Explosive growth? Absolutely. Provide anyone with a bottomless supply of zero (or even subzero) percent loans and of course they’ll be able to employ scads of people and produce tsunamis of products and wash away any and all competition.
This is why China’s economy didn’t slow despite sky-high commodity prices in the 2000s – bottomless lending means Chinese businesses are not price sensitive. This is why Chinese exporters were able to out-compete firms the world over in manufactured goods – bottomless lending enabled them to subsidize their sales. This is why Chinese firms have been able to take over entire industries such as cement and steel fabrication – bottomless lending means the Chinese don’t care about the costs of the inputs or the market conditions for the outputs. This is why the One Belt One Road program has been so far reaching – bottomless lending means the Chinese produce without regard for market, and so don’t get tweaky about dumping product globally, even in locales no one has ever felt the need to build road or rail links to. (I mean, come on, a rail line through a bunch of poor, nearly-marketless post-Soviet ‘Stans’ to dust-poor, absolutely-marketless Afghanistan? Seriously, what does the winner get?)
Investment decisions not driven by the concept of returns tend to add up. Conservatively, corporate debt in China is about 150% of GDP. That doesn’t count federal government debt, or provincial government debt, or local government debt. Nor does it involve the bond market, or non-standard borrowing such as LendingTree-like person-to-person programs, or shadow financing designed to evade even China’s hyper-lax financial regulatory authorities. It doesn’t even include US dollar-denominated debt that cropped up in those rare moments when Beijing took a few baby steps to address the debt issue and so firms sought funds from outside of China. With that sort of attitude towards capital, it shouldn’t come as much of a surprise that China’s stock markets are in essence gambling dens utterly disconnected from issues of supply and labor and markets and logistics and cashflow (and legality). Simply put, in China, debt levels simply are not perceived as an issue.
Until suddenly, catastrophically, they are.
As every country or sector or firm that has followed a similar growth-over-productivity model has discovered, throwing more and more money into the system generates less and less activity. China has undoubtedly past that point where the model generates reasonable outcomes. China’s economy roughly quadrupled in size since 2000, but its debt load has increased by a factor of twenty-four. Since the 2007-2009 financial crisis China has added something like 100% of GDP of new debt, for increasingly middling results.
But more important than high debt levels is that eventually, inevitably, economic reality forces a correction. If this correction happens soon enough, it only takes down a small sliver of the system (think Enron’s death). If the inefficiencies are allowed to fester and expand, they might take down a whole sector (think America’s dot.com bust in 2000). If the distortions get too large, they can spread to other sectors and trigger a broader recession (think America’s 2007 subprime-initiated financial crisis). If they become systemic they can bring down not only the economy, but the political system (think Indonesia’s 1998 government collapse).
It is worse than it sounds. The CCP has long presented the Chinese citizenry with a strict social contract: the CCP enjoys an absolute political monopoly in exchange for providing steadily increasing standards of living. That means no elections. That means no unsanctioned protests. That means never establishing an independent legal or court system which might challenge CCP whim. It means firmly and permanently defining “China’s” interests as those of the CCP.
It makes the system firm, but so very, very brittle. And it means that the CCP fears – reasonably and accurately – that when the piper arrives it will mean the fall of the Party. Knowing full well both that the model is unsustainable and that China’s incarnation of the model is already past the use-by date, the CCP has chosen not to reform the Chinese economy for fear of being consumed by its own population.
The only short-term patch is to quadruple down on the long-term debt-debt-debt strategy that the CCP already knows no longer works, a strategy it has already followed more aggressively and for longer than any country previous, both in absolute and relative terms. The top tier of the Chinese Communist Party (CCP) – and most certainly Xi himself – realize that means China’s inevitable “correction” will be far worse than anything that has happened in any recessionary period anywhere in the world in the past several decades.
And of course that’s not all. China faces plenty of other of issues that range from the strategically hobbling to the truly system-killing.
China suffers from both poor soils and a drought-and-floodprone climatic geography. Its farmers can only keep China fed by applying five times the inputs of the global norm. This only works with, you guessed it, bottomless financing. So when China’s financial model inevitably fails, the country won’t simply suffer a subprime-style collapse in ever subsector simultaneously, it will face famine.
The archipelagic nature of the East Asian geography fences China off from the wider world, making economic access to it impossible without the very specific American-maintained global security environment of the past few decades.
China’s navy is largely designed around capturing a very specific bit of this First Island Chain, the island of Formosa (aka the country of Taiwan, aka the “rebellious Chinese province”). Problem is, China’s cruise-missile-heavy, short-range navy is utterly incapable of protecting China’s global supply chains, making China’s export-led economic model questionable at best.
Nor is home consumption an option. Pushing four decades of the One Child Policy means China has not only gutted its population growth and made the transition to a consumption-led economy technically impossible, but has now gone so far to bring the entire concept of “China” into question in the long-term.
Honestly, this – all of this – only scratches the surface. For the long and the short of just how weak and, to be blunt, doomed China is, I refer you my new book, Disunited Nations. Chapters 2 through 4 break down what makes for successful powers, global and otherwise…and how China fails on a historically unprecedented scale on each and every measure.
But on with the story of the day:
These are the broader strategic and economic dislocations and fractures embedded in the Chinese system. That explains the “why” as to why the Chinese leadership is terrified of their future. But what about the “why now?” Why has Xi chosen this moment to institute a political lockdown? After all, none of these problems are new.
There are two explanations. First, exports in specific:
The One Child Policy means that China can never be a true consumption-led system, but China is hardly the only country facing that particular problem. The bulk of the world – ranging from Canada to Germany to Brazil to Japan to Korea to Iran to Italy – have experienced catastrophic baby busts at various times during the past half century. In nearly all cases, populations are no longer young, with many not even being middle-aged. For most of the developed world, mass retirement and complete consumption collapses aren’t simply inevitable, they’ll arrive within the next 48 months.
And that was before coronavirus gutted consumption on a global scale, presenting every export-oriented system with an existential crisis. Which means China, a country whose political functioning and social stability is predicated upon export-led growth, needs to find a new reason for the population to support the CCP’s very existence.
The second explanation for the “why now?” is the status of Chinese trade in general:
Remember way back when to the glossy time before coronavirus when the world was all tense about the Americans and Chinese launching off into a knock-down, drag-out trade war?
Back on January 15 everyone decided to take a breather. The Chinese committed to a rough doubling of imports of American products, plus efforts to tamp down rampant intellectual property theft and counterfeiting, in exchange for a mix of tariff suspensions and reductions. Announced with much fanfare, this “Phase I” deal was supposed to set the stage for a subsequent, far larger “Phase II” deal in which the Americans planned to convince the Chinese to fundamentally rework their regulatory, finance, legal and subsidy structures.
These are all things the Chinese never had any intention of carrying out. All the concessions the Americans imagined are wound up in China’s debt-binge model. Granting them would unleash such massive economic, financial and political instability that the survival of the CCP itself would be called into question.
Any deal between any American administration and Beijing is only possible if the American administration first forces the issue. Pre-Trump, the last American administration to so force the issue was the W Bush administration at the height of the EP3 spy plane incident in mid-2001. Despite his faults, Donald Trump deserves credit for being the first president in the years since to expend political capital to compel the Chinese to the table.
But there’s more to a deal than its negotiation. There is also enforcement. In the utter absence of rule of law, enforcement requires even, unrelenting pressure akin to what the Americans did to the Soviets with Cold War era nuclear disarmament policy. No US administration has ever had the sort of bandwidth required to police a trade deal with a large, non-market economy. There are simply too many constantly moving pieces. The current American administration is particularly ill-suited to the task. The Trump administration’s tendency to tweet out a big announcement and then move on to the next shiny object means the Chinese discarded their “commitments” with confidence on the day they were made.
Which means the Sino-American trade relationship was always going to collapse, and the United States and China were always going to fall into acrimony. Coronavirus did the world a favor (or disfavor based upon where you stand) in delaying the degradation. In February and March the Chinese were under COVID’s heel and it was perfectly reasonable to give Beijing extra time. In April it was the Americans’ turn to be distracted.
Now, four months later, with the Americans emerging from their first coronavirus wave and edging back towards something that might at least rhyme with a shadow of normal, the bilateral relationship is coming back into focus – and it is obvious the Chinese deliberately and systematically lied to Trump. Such deception was pretty much baked in from the get-go. In part it is because the CCP has never been what I’d call an honest negotiating partner. In part it is because the CCP honestly doesn’t think the Chinese system can be reformed, particularly on issues such as rule of law. In part it is because the CCP honestly doesn’t think it could survive what the Americans want it to attempt. But in the current environment it all ends at the same place: I think we can all recall an example or three of how Trump responds when he feels personally aggrieved.
Which brings us to perhaps China’s most immediate problem. Nothing about the Chinese system – its political unity, its relative immunity from foreign threats, its ability import energy from a continent away, its ability to tap global markets to supply it with raw materials and markets to dump its products in, its ability to access the world beyond the First Island Chain – is possible without the global Order. And the global Order is not possible without America. No other country – no other coalition of countries – has the naval power to guarantee commercial shipments on the high seas. No commercial shipments, no trade. No trade, no export-led economies. No export-led economies…no China.
It isn’t so much that the Americans have always had the ability to destroy China in a day (although they have), but instead that it is only the Americans that could create the economic and strategic environment that has enabled China to survive as long as it has. Whether or not the proximate cause for the Chinese collapse is homegrown or imported from Washington is largely irrelevant to the uncaring winds of history, the point is that Xi believes the day is almost here.
Global consumption patterns have turned. China’s trade relations have turned. America’s politics have turned. And now, with the American-Chinese breach galloping into full view, Xi feels he has little choice but to prepare for the day everyone in the top ranks of the CCP always knew was coming: The day that China’s entire economic structure and strategic position crumbles. A full political lockdown is the only possible survival mechanism. So the “solution” is as dramatic as it is impactful:
Spawn so much international outcry that China experiences a nationalist reaction against everyone who is angry at China. Convince the Chinese population that nationalism is a suitable substitute for economic growth and security. And then use that nationalism to combat the inevitable domestic political firestorm when China doesn’t simply tank, but implodes.
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.
On May 19 I’ll be doing a once around the world, laying out 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 videoconferences, attendees will have the opportunity to submit questions during the event.
While most of these events are for a set fee, the May 19 event will be free of charge…which means it booked solid in less than a day. Fear not! We’ll be recording and posting it upon completion. First release will be via this newsletter list. If this was forwarded to you and you’d like to sign up yourself, you may do so 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).
A little goes a very long way. For a single dollar, FA can feed one person for three days.
The propaganda out of China of late has been…notable. Beijing has accused the French of using their nursing homes as death camps, has blamed Italy for being the source of the coronavirus (at the very peak of Italian deaths), has charged the US Army with bringing the virus to China in the first place, has thrown a “fact sheet” of truly disbelievable disinformation at the fact-oriented Germans, and turned the country’s ambassadorial core into cut-rate tabloid distributors – all while leaning on anyone and everyone from the United Nations to the World Health Organization to the European Union to regional legislative bodies to alternatively suppress and delete any information or analysis that does anything but laud China, as well as push them to take public stances that slobberingly praise China.
In doing so the Chinese have seemingly deliberately wrecked their relations with the Americans, French, Italians, Germans, Czechs, South Africans, Kazakhs and Nigerians, just to name a few. (The Swedes had all but ended their diplomatic relationship with China – having come to the public conclusion that the Chinese government was a pack of genocidal, power-mad, information-suppressing, exploitive, ultranationalists – before COVID.)
Nor are these disturbing shifts limited to the realm of foreign disinformation. Propaganda at home is boiling in a new direction as well. Overt, blatant racism is the core of the new program, with the government expressly blaming foreigners of all stripes for coronavirus in specific and China’s ills in general. Everything from restaurants to buses to gyms are banning foreigners. As a rule the government edicts are color-blind, but there are plenty of stories out there of this or that municipality or establishment singling out this or that nationality or skin color for…special consideration.
And the invective will get more offensive and self-destructive and seemingly stupid. China’s propaganda offensive April was done by the professionals – the folks at the head of the Ministry of Truth-, er, Foreign Affairs. All the lies and everything that demeaned and insulted countries in the grips of the coronavirus was expressly deliberate and sanctioned from the top, with the ambassadorial core directed to follow suit. (For those of you who like names, watch spokesman Zhao Lijian, a man who enjoys Chairman Xi’s personal sponsorship).
But we aren’t in April any longer, and China’s propaganda effort has become more diffuse, adopting more of a mob mentality. Now the entire governing apparatus has been unleashed, including agencies and bureaus down to the local level who normally have nothing to do with public relations, much less official propaganda. There is no longer a cohesive storytelling effort a la the Soviet style of propaganda. It is as if the Chinese equivalent of the MAGA crowd and the Bernie Bros are suddenly part of the propaganda effort, working alongside – or at least in parallel to – the Voice of America and the State Department.
The April propaganda was sophomoric and moronic, particularly at influencing foreign audiences or achieving some sort of strategic goal. In May it has already degraded into the realm of the infantile. My personal favorite was when an apparatchik made a lovely post stating “We condemn the fatso to death” with the “fatso” in question being US Secretary of State Mike Pompeo. Considering the ultrafine mesh the Chinese internal censorship dragnet has been using of late, that particular post’s ongoing longevity is a testament to just how holistic the CCP’s effort has become.
In the past few weeks the Chinese have deliberately destroyed three decades of efforts to build up soft power. I have never seen this sort of influence collapse, much less on a global scale. Even the Soviet fall saw Moscow retain influence throughout Latin America, Africa and the Middle East…and then the Soviet Union collapsed. The Trump administration just lost their Olympic gold in Gravitas Destruction to the Xi administration, and not by a small margin.
So…what the hell?
The Party may be descending into narcissistic ideology, and the Han Chinese may have always had a superiority complex based on a superiority complex, and we all may be a bit aghast at both the new tone and substance of Beijing’s foreign policy, and CCP is too paranoid, controlling, arrogant and bunkered to pretend to lead anything on a regional – much less global – scale, but I think we can all accept that the Party is not run by a bunch of morons.
The explanation is unfortunately very simple: the Chinese leadership is well aware that soft power isn’t what is going to solve the problem they see. There’s some guidance as to the CCP’s thinking in how the propaganda effort is being explained within China, and it doesn’t bode well for the future.
Semi-officially, the CCP called the April (official) effort Wolf Warrior diplomacy, in reference to a recent (and wildly popular) Chinese movie series about ethically pure Chinese soldiers who purge the world of evil American mercenaries. The closest equivalent I can think of would be like calling an American propaganda effort Starship Troopers diplomacy. (Yeah, it is as stupid as it sounds.)
The (more disperse) May effort, in contrast, is being referred to as a Yihetuan Movement mindset. It is a reference to a particularly chaotic period at the turn of the 19th to the 20th centuries when a particularly violent strain of ultranationalism erupted in response to foreign actions within China. Most non-Chinese readers probably don’t recognize the Yihetuan Movement reference, but they probably do recall how it was labelled in the West: the Boxer Rebellion. More on that in a minute.
This new propaganda program isn’t about Xi attempting to convince the wider world of China’s greatness or rightness. This isn’t about the United States or Europe or Africa, and certainly not about global domination. Instead it is about intentionally saying things so far beyond the pale that there’s a global anti-Chinese backlash. The backlash itself isn’t the goal, but instead a means to an end. Xi is attempting to use a global anti-Chinese backlash to enflame anti-foreigner nationalist activity within China. Put simply, Xi is trying to get the world pissed off at China so that China becomes pissed off at the world.
Xi feel he needs to hyperstimulate and mobilize a large enough proportion of the population so that they can assist the state security services in containing, demoralizing, cowing – and if necessary, beating, killing and disappearing – those who do not buy in.
Think this seems a bit…extreme? Brush up on your 20th century Chinese history, particularly in the context of how the CCP is explaining its propaganda effort to the Chinese citizenry.
Google the Great Leap Forward to review just how deliberately brutal the Chinese government can be to their own people, and just how good the Chinese government can be at motivating its own citizens to persecute one another.
Check out the Cultural Revolution to see how mobilizing portions of the population to repress the rest of the population makes the East German Stasi look like New Zealand socialists.
Review the Tiananmen Square massacre to remind yourself of how far the CCP will go even in “modern” times when it faces a threat to its power.
Look up the Boxer Rebellion to see how such processes result in the state-sponsored lynching and murder of Christians and foreigners. (Btw, if you are a manufacturer or investor and you still have personnel in China, now would be a glorious time to get them the fuck out).
The only part of this that is new for China is that this time they have industrial and digital technologies to help manage the population so that the sharp end of state power can be brought to bear more quickly.
This leaves only one question: Why…WHY would Chairman Xi feel this sort of extreme action is necessary?
Put simply, Xi fears the end of China is nigh.
And that, again, requires a completely new newsletter.
Stay tuned for Part III…
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.
Signups for the teleconference are first-come, first-served with attendance capped at 1000. After the event, we will make the video available, so watch this space.
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).
A little goes a very long way. For a single dollar, FA can feed one person for three days.
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.
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).
A little goes a very long way. For a single dollar, FA can feed one person for three days.
Four things have popped up in the past 48 hours that are worth a look. First, we now have enough preliminary data to say some general things about the virus and the news is good: the virus is neither as deadly nor as communicable as the SARS virus from more than 15 years ago.
