The Garbage Time of History: China’s Economic Decline

*This video was recorded before Peter’s backpacking trip in mid-July.

Lesson of the day: if the Chinese government starts censoring a topic, it’s probably time to start looking into that. Today, we’ll be examining China’s economy heading into ‘garbage time’.

For the non-athletes that follow me, garbage time is a sports term that refers to the final minutes of a play when there is no chance for the losing team to recover, yet play must continue. So, if we apply that to the Chinese economy, it would suggest that China has crossed the point of no return.

If you trust the data coming out of China, the economy is stagnant and the demographic picture is grim. If you take your Chinese data with a grain of salt, the economy and demography of China are in a unrecoverable nose dive. So, to say that China is ‘laying flat’ and in ‘garbage time’ is no exaggeration.

If there was anything that might help China hold on, it would be strong international trade. Unfortunately, many countries are stepping away from deals with China and removing that last sliver of hope for the Chinese.

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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 everybody. Peter Zeihan here, coming to you from Lost Valley in Colorado, just above Denver. Today we’re going to talk about a bit of Chinese censorship and the general downward spiral the Chinese find themselves in. I keep an eye on what the Chinese are banning because it gives you an idea of what Xi Jinping and the CCP in China are nervous about.

A couple of new terms have popped up on the ban list that I think are worth discussing because they put a few things into context. The first term is “garbage time.” For those of you who are sports enthusiasts, you might have heard of this term. It refers to the final minutes of a game when one team is so far ahead that it’s impossible for the underdog to catch up. They still have to play out the rest of the game before officially losing. In geopolitical terms, it’s a concept that emerged in the 2000s and 1990s, referring to the period after the Soviet invasion of Afghanistan in 1979 when it became clear that the system was broken and it was just a matter of time before the inevitable end.

The Chinese government doesn’t like this term because it implies that their system is fundamentally broken and that it’s just a waiting game until the end.

The second term is “laying flat.” This idea is that things are so broken and hard work will get you nowhere in a dysfunctional system, so you might as well do the least amount of work possible because there’s no reward for anything else. Again, this term is problematic for the Chinese government because it reflects widespread disillusionment.

These terms are indicative of the economic situation in China. The Chinese recently released new data, showing annual growth once again coming in under 5%. This has been the trend since 2019. Most experts believe that China’s government overestimated their GDP growth by about five percentage points since the 2010s, suggesting that for the past five to six years, China really hasn’t grown much at all. This is reminiscent of Japanese-style stagnation but with an economy that hasn’t advanced as far.

Recent demographic data from China indicates that they’ve lost another 8 million people under age five. The data now publicly admits that there are roughly the same number of people aged 50 to 70 as there are aged 0 to 25. This is significant because, ideally, the younger age group should be two to three times as large as the older group.

Independent demographers argue that China has overstated its population by 100 to 250 million people, particularly under age 40. This suggests that the 0 to 25 age group may be overstated by at least 80 million people, possibly closer to 150 or even 200 million. Most consumption in an economy is driven by people under age 40, who are the ones buying homes and raising children. If this next generation doesn’t exist in significant numbers, China can never achieve consumption-led growth again.

This makes China increasingly dependent on international trade, which is in the process of cutting China out of the global system. This started with Donald Trump in the United States and has now expanded with recent sanctions on things like electric vehicles to Europe, Turkey, India, Indonesia, and Brazil. The effort is going global. So, the last best hope the Chinese had for recovery is now over six years old, and it looks like there won’t be another one. People are beginning to notice.

Can AI Replace Those Retiring Boomers?

*This video was recorded in mid-July, prior to Peter departing on his backpacking trip.

As the baby boomers age into retirement and Gen Z fails to satisfy the gaping hole left in the labor market, will artificial intelligence be able to help mitigate some of the fallout?

AI has solidified its spot in the labor mix of the future, but “when?” and “how?” are the looming questions. Producing AI-capable chips remains highly complex and reliant upon a web of critical international suppliers. Until that supply chain is slimmed down and fail-safes are added, production disruptions will continue to be a huge factor in limiting the AI buildout.

On the other front, the nature of AI lends itself to better take on white-collar work. Most people picture AI taking care of the manual and mundane tasks no one wants, but it is better suited to a lifestyle “in the office”. So, the places we need the help most, like blue-collar jobs, won’t get much help on the AI front.

AI’s transformative effect is coming, but it won’t occur as quickly as many expect. Think in the 40s rather than the 20s. When it does arrive, the productivity in white-collar jobs will skyrocket, but fields that really need some extra hands (or hand effectors or whatever you call robots’ metaphorical gripping mechanisms) will still be scrambling to navigate the labor shortages.

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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.

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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Transcript

Hey, everybody. Peter Zeihan here, coming to you from the Lake of the Ozarks in Missouri. Today, I’m taking a question from the Ask Peter forum about artificial intelligence. The question is, with labor shortages looming due to the retirement of the baby boomers, the largest workforce we’ve ever had, and the new generation, Generation Z (the Zoomers), being the smallest generation ever, can increases in productivity, such as through artificial intelligence, help round out and fix these issues? The answer is… maybe.

There are a couple of problems here. First, it’s very unlikely that we can sustain the level of production of artificial intelligence-capable chips necessary to fundamentally transform the American or global workforce. The issue is that thousands of companies are involved in manufacturing these chips. Yes, 90% of these chips come from a single town in Taiwan, which poses a security risk, but the problem is even bigger. Most companies in the supply chain for these fabrication facilities only make one product for one end user, which is TSMC in Taiwan. If something happens to a few of these companies, we could lose the ability to make these chips at all. So the idea of having massive server farms crunching data for artificial intelligence is probably not going to happen this decade and might not happen next decade. We’ll need to build a new ecosystem for that, and it takes time.

The second problem is the nature of artificial intelligence itself. There’s a saying that’s becoming popular: “We want artificial intelligence to do the dishes so that we can spend more time writing, not to do our writing so that all that’s left is the dishes.” The issue here is that artificial intelligence primarily helps with white-collar work, like brain work, correlation tasks, paralegals, researchers, writers, and editors. These are the sorts of jobs that AI is most likely to slim down. But that’s not where the labor shortage is in the United States. Over the last 50 years, baby boomers have focused on getting their kids into college and into high-value-added white-collar jobs.

However, in a world where China is fading quickly and the United States is experiencing an industrial renaissance, we need electricians, welders, linemen—people to physically move and make things. These are blue-collar jobs, not white-collar, and artificial intelligence can’t help nearly as much with them.

So while artificial intelligence will be a part of the future, I don’t think it’s going to happen as quickly as some expect. When it does, it’s going to reshape industries like finance, making it more efficient to move money around, which could reduce the need for large numbers of coders in places like New York. It’s going to increase the productivity of white-collar workers, so we might not need as many people handling tasks like processing insurance claims in doctors’ offices. AI might also help crack the genome to boost agricultural productivity and will certainly play a role in defense and cryptography to enhance security.

But it’s unlikely to have a huge impact on manufacturing. For that to happen, we don’t just need AI; we need robotics—mobile robotics—and AI isn’t quite there yet. It’s progressing, but we’re looking at the 2040s, not the 2020s, for significant developments in that area. So can AI help? Sure, at the margins. But you’re probably still going to have to do your own dishes.

Why Genoa Is Graying: Italy’s Demographic Decline

While the Italians may have mastered the arts of pasta, wine and gelato, they should have been spending less time in the kitchen and more in…another room. That’s right, we’re looking at the demographic problems facing Italy, and Genoa will be our example.

The population of Genoa in 1972 was 950,000. Today, it is under 680,000. The scary part is that Genoa isn’t an isolated instance. Italy’s birth rate has been below replacement level for over 75 years, leading to an aging population and a shrinking tax base. The scarier part is that Italy is just one example of a country facing demographic collapse, as places like Germany, Romania, and Spain are all in the same boat.

Unfortunately, there’s really no practical solutions for these countries to remedy this issue. Sustaining their economies and state functions without a younger generation won’t be easy, but at least we’ll see how nations can adapt to these demographic challenges.

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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.

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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Transcript

Hey everybody. Peter Zeihan here. Coming to you from Genoa, Italy. And I’m going to do something a little bit different today. I am going to show you the world through my eyes. Let’s turn this around. We’re over the business district in the central Genoa, and it’s not the buildings in the foreground I want you to see. It’s the ones in the background. 

The ones that are in more residential. You’ll notice that not a lot of them have a lot of lights on it. And over here we’re starting to go a the old town similar situation. And as we move over here you can see the train station kind of Grand Central if you will, and then up on the hill is mostly residential spots. 

But you’ll notice that even though it’s 10:00 at night, which is, you know, when everyone’s getting home from dinner in Italy, most of the buildings are less than one third lit up. Some of them, well, less than a quarter. the issue is that for the entirety of my life, Genoa one has been shrinking in population terms. 

And I turned 50 this year. 1972 was the last year that the city saw it increase in population. And that is pretty typical for Italian cities writ large. Unfortunately, Italy is going through a population crash and it’s well past the point of no return. the birth rate has been below two, births per woman for in excess of three quarters of a century. 

And over the next five years, the population bulge that exists in many countries exists here, too, but they move into mass retirement now, I’ve been traveling through Italy for about ten days now, and I’ve begun to a lot of small towns and, you know, they’re they’re full of old people and not a lot of them. and everyone has the same refrains, like all the young people were picked up to move to the cities. 

But now that I’m in one of the major cities, I can see that’s not the case. It’s just people haven’t been born here for a very long time, and now we’re looking at the dissolution of the tax base that is necessary to maintain a modern, civilized location. the the smart play here would be to turn back time and go back to the 1970s and figure out a way to make it easier for young people to have children. 

but at this point, the only theoretical solution would be to bring in Canadian style levels of immigration and a sudden wave that never ends. simply in order to stabilize the Italian population in its current structure, which is already the oldest demographic and the fastest aging demographic in Europe, would be to bring in somewhere between 1.5 and 2 million people under age 35 every year from now on, which, of course, would end Italy in its current form. 

Some version of this problem exists in huge portions of the world. Europe, of course, is where I’m thinking right now, because this is where I am. The Germans are only a few years, no more than five behind the Italians. And then there are a number of other countries that are a little bit younger but are actually aging faster. 

Whether it’s Romania or Spain. Poland still has a chance for demographic reconstitution, but only if they get on it right now. the Russians are in a position. The Ukrainians are in a worse position. And, East Asia, Taiwan is kind of where Poland is right now, whereas Japan and Italy are very, very similar. and the Koreans are about where the Germans are. 

So we’re seeing this over and over and over throughout the world. accelerated urbanization over the last 50 to 75 years has generated a population structure that is so old and aging so quickly, the reconstitution is no longer possible. And a number of the advanced states Italy, Germany, Korea, Japan, the next decade is going to provide a new model for us, populations in countries that are no longer capable of mass consumption or mass investment or max tax generation. 

At the same time their populations move into mass retirement. something’s going to have to give, whether it will be state coherence or the finances or the economic model. First, everyone’s got to figure that out for themselves. 

US Birth Rates Plummet To 40-Year Low

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Well, it looks like there’s something in the water in the US and it ain’t little blue pills. The recent US Census data shows a 40-year low in the birth rate – about 1.6 per woman.

With the birth rate well below the replacement level, there could be huge economic implications that follow. There are plenty of other countries facing similar demographic issues, so the US has plenty of case studies to read up on.

This isn’t the kiss of death quite yet, but it won’t be easy path forward. Between meaningful immigration reform and policies supporting young families to have more children, the US has to make some big changes if they want to stop that demographic timebomb.

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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.

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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TranscripT

Hey everybody. Peter Zeihan here. Coming to you from Colorado in between the snows. it is April 25th. And the news. You’re not gonna get this for, like, a week. I know, I’m sorry. the news today is that, the United States Census has come out with the most recent information on population structure for the United States, and it indicates that our birth rate has dropped to a 40 year low of about 1.6 per woman. 

2.1 is generally considered to be replacement level. And if you add in increases in the death rate in the United States from things like Covid, which killed about a million, 4 million, 3,000,004 people, as well as the rapidly aging and therefore passing the baby boomers. And then on top of that, the opiate opioid epidemic. We really need to be closer to 2.3 or 2.4. 

It’s just too cold. The population where it is. the only other way that you can plug that gap was with immigration. Let’s just say that that is a topic that is somewhat hot at the moment. what does this mean? Well, in the short term, from a demographic point of view, short term is 20 years. From a short term point of view, this is actually pause div for economic growth, because if you have a lot of people aged roughly 20 to 45, which is where the millennials are right now and they don’t have a lot of kids, then the money that they would spend on schooling and buying a bigger house, they can use 

for more furnishings and more travel and more restaurants, and more high octane growth that feeds through the system and has a multiplier effect. this is something that we saw in China in the 2000. This is something we saw in Europe in the 1990s. and you can get some really high quality growth out of it. The problem is that you only do that once. 

And if your birth rate never recovers, then after 20 years, you start eating into your working age population, and after 50 years, you start eating into your skilled worker population as well as your tax base. Then eventually you’ll get to a place like where the Germans and the Koreans are now, where this has now been going on for 60 years. 

And so this is the last ten year period that we basically have a modern Korean or German economy, unless something radical shifts more traditionally, having a low birth rate just means that you’re going to have fewer people available to work in the future and fewer people to maintain the system in the future. Now, for the United States, we have a very atypical demographic history compared to really everyone else in the rest of the world. 

compared to the rest of the industrialized world, most of the other industrialized countries are far more urbanized than we are. So they started this collapse below replacement levels not just 20 years ago, but 30, 40, 50, 60, 70, in some cases 80. And so it has a lot of steam built up for us. The decline really below, replacement is only about a 10 to 15 year process, and it’s been very slow even then. 

In addition, because the United States was part of the second cadre of countries to industrialize, we have seen our birth rates go down. But because the United States is such a big place with so many small towns and such huge options for suburbs, it’s declined a lot more slowly than everywhere else. So if you look at the data and we’ll throw a chart up here, you’ll see that the United States has been kind of hugging around that two, 2.1, area for the last 40 years, whereas a lot of other countries that are kind of in are pure class, plunged below it long ago. 

that doesn’t mean that we are doomed to follow them if Americans keep aging at their current rate. If the birth rate keeps dropping at its current rate, we’re not going to be facing a Korean or a German style problem within the next 40 years, and probably closer to 50. so while this isn’t a great sign, it’s not like we’re about to jump off a cliff. 

the other group of countries, the developing countries, are very different. these are the countries that, for the most part, did not develop the technologies of industrialization. It was thrust upon them. So you took a century, a century, a half of technical development in the West and in Japan, and in the course of under 30 years implemented it throughout most of what we now think of as the developing world. 

And so they went directly from the farms to condos and in, in doing so saw their birth rates just plunge horrendously. And you can see that on the chart. China, of course, is the country that industrialized the most quickly got the growth boom from that, from not having a young generation. and now is well past the point of no return and is very close to having one of the lowest birth rates in the world. 

So is there anything we can do about this? Well, there’s two things. The first is you can have meaningful immigration reform in order to bring in more people, but to bring in the scale of people that were required to tilt this, it would be pretty extreme. the second thing you can do is encourage policies that make it easier for younger families to have more kids. 

Part of the economic growth story of places like Texas the last 30 years is that the land is cheap, the electricity is cheap, the food is cheap, and taxes are low. So if you’re a young family starting out, it’s easier to have a house with a yard and raise children. If you’re going to do that in San Francisco, whoo hoo hoo! 

Or New York. Yeah, that’s not going to happen. Raising kids in a condo is no fun at all. one other little thing that I just kind of throw in there so that people understand that everything has a consequence over the same time that US birth rates have dropped since 1990. We’ve also seen the teen pregnancy rate drop by roughly half, and there is a direct correlation between those two things. 

So saying you need more kids makes a lot of sense how you get more kids. That’s what really matters. 

Can High Birth Rates Solve Demographic Problems for Young Countries?

I often talk about the importance of demographics for countries, but do high birth rates always equate to population growth?

In countries like Yemen and Nigeria, high birth rates can look promising, but we need to consider other factors before we start celebrating. The two big ones are infant mortality and life expectancy. As countries begin to industrialize, they start to reap the benefits of improved healthcare, driving up survival rates for children and adults alike. The story is all rainbows and butterflies so far.

However, if these advances in healthcare are heavily reliant on imported technologies, any disruption to international trade could prove devastating. The bottom line is that high and growing birth rates are great, but sustainable population growth requires a bit more work than just popping out some kids.

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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.

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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TranscripT

Hey everyone. Peter Zeihan here. Coming to you from Colorado. We’re taking a and from lost a limb in the story. Anyway, we’re taking the entry from the Ask Peter Forum. It lets demographics. The question is I talk a lot about declining demographics and the impact that’s going to have. But what about countries that have sky high birthrates? Is this a good is this a bad? 

Is this another thing? The two that come to mind are Yemen and Nigeria, both of which have birth rates that are just ridiculously high. How sustainable is this? What’s the impact? Good question. I generally look at birth rates when I’m looking at more advanced economies where the industrial technologies have been in place for decades. When you’re talking about the younger economies were industrial is Asian is more recent. 

There’s a couple other statistics you need to look at. The first is infant mortality, and especially child mortality under five years of age. See, how likely is it that a child that who’s bored is going to make it to five? And then second is life expectancy overall. You see what happens when a country starts to industrialize is they don’t just get concrete and pavement and buildings and rebar and electricity. 

They also get vaccines and medical care. And this drastically decreases the death rate among the young and drastically increases the average age of mortality among the older folks. So what we’re seeing in Yemen and especially in Nigeria is a steady inroads of these new technologies into the population. So it’s not just that the birth rate is high. Oftentimes for these countries that are early in the early industrializing period, the growth rate is very high. 

The question is whether or not the children survive. And then the question is whether the adults survive. So take the example of China. From roughly 1985 until roughly 2015, the population doubled. But almost all of that population increase wasn’t from organic birth rate. It was because people lived longer. The lifespan basically doubled in that same period. Now, these gains are real. 

These people are more productive. But you only get those sorts of gains once. And now that China has basically wrested all of the gains along Djibouti, it can’t out of the system because they’re coming against the upper level what humans are capable of today. There’s no one to replace them. So even if nothing goes wrong in the system, no financial crisis, no war, no agricultural crisis. 

You’re still looking at a population collapse because people can’t live any longer than they are. And for the last 50 years, people have not been having children. So that inverted funnel, the bottom just goes up and sucks away the entire population. Yemen and Nigeria at a much earlier stage of this process, there’s nothing to say that they’re condemned to the the Chinese end result. 

But keep in mind that in the case of these two countries in particular, most notably Yemen. But all of the technologies that allow them to live longer come from a different continent. And so if anything happens to international trade, you should expect infant mortality to shoot up and life expectancy to collapse. And then they just get sandwiched in between. 

It’s not merely as dark of a story as what we’ve got going on in China, but it’s not exactly a great one. If you’re going to have life expectancy and if you’re going to have infant mortality, be pause, have aspects of your society. You need to be able to be sure that you can produce the technologies that allow it to happen in the first place. 

Otherwise, you’re just as dependent on the rest of the world as if you imported 100% of your oil.

How Shrinking Populations Determine Economic Growth

We tend to overlook the dynamics of demography and its economic impact, so let’s take a step back and break down demographics by generation and how that will dictate the future of our economies.

There are standard behaviors for each age group. You’re born as a ward, but are cheap to take care of. Then you start to become more productive and consume a lot. Then you age into a situation where you’re providing taxes. And then you revert back to your old ways and become a leech on the economy again. Fairly cyclical and predictable.

So in rapidly aging populations like Europe, Korea, Japan and parts of Africa, once you tip that scale towards people consuming more capital than they are producing…you can imagine how well that plays out. There are certain situations where population shifts could benefit an economy, but there’s no silver lining to deep population decline.

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Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:

First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.

Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.

And then there’s you.

Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

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TranscripT

Hey everybody Peter Zeihan here coming to you from snowy Colorado today. We’re taking an entry from the Ask Peter column on overpopulation and under population a specifically. The question is, Peter, you talk a lot about population and the negative economic consequences of it. But if we are entering a world where there’s a lot of environmental concern and damage, doesn’t slimming down the population actually argue that we could be headed towards a better world?

In addition, in general, is this going to mean that there’s more resources available for everybody else? Wouldn’t that mean we’re going to have a degree of economic growth that is qualitatively different than what came before? And, you know, there’s some there’s something to that argument. But the problem is that assumes that we lose five, ten, 15, 20%. Pick your number across the world.

Equally of every age group of every country and every ethnicity. That’s not what’s going to happen. So before I go into the nuts and bolts of it, let me kind of give you the overview. As a rule, people under age 18 only can assume things like education, a little bit of health care. They don’t contribute to the working economy.

People aged 18 to 45, these are the folks that are having kids and buying homes and going to school. It’s very heavy consumption. Most of the stuff that you will consume in your lifetime, the greatest proportion of your consumption will happen while you’re raising your kids, which as a rule, ends between 45 and 50 from 45 to 5065.

These are your mature workers. These are the people who are playing, paying lots and lots of taxes. They’re saving for retirement. They’re generating the investment that drives the private sector. And then when you turn 65, you’re still consuming, but your consumption changes dramatically to things like health care and a little bit of leisure. But you’re still occupying your home.

But your tax bill goes way down and now you start drawing pensions and health care benefits that drive government commitment to you through the roof. So you start out being a ward but not being very expensive. You move into being very productive in a lot of consumption. You age into a situation where you’re providing taxes and then eventually age to the point where you’re just this giant sucking sound.

Instead, in the advanced world. We’re not just dealing with the population. We’re dealing with very, very rapid aging. So the population structure for, say, Europe or Korea, Japan in just 15 years is going to be a big bulge of people who have retired but not died. And then a very, very small number of working age adults and even fewer children.

It’s a very different pattern because old people. Let me rephrase that. People of advanced age consume goods, but also consume a huge amount of tax take and health care. And so they are a net drain on the system instead of tax payers like they were in their twenties, thirties, forties, fifties and early sixties. So the pressure on the system is massive.

A good thing. A good example. I can give you a how this imbalance really doesn’t work out is if you look at sub-Saharan Africa, especially southern Africa, during the AIDS epidemic, you had an absolute gutting of the population structure of people roughly aged 18 to 45, leaving you with mature workers and societies where the mature workers weren’t all that skilled and then no one to raise the kids.

And so the block of people 18 to 45. Those are the people who do most of the work, pay a lot of the taxes and absolutely raise the children for the next generation. And we lost their consumption at the same time. So a lot of these countries south of Congo basically faced a 25 year period of economic just despair as their population balance changed.

The part of the world where we’re probably going to be seen that this happened most dramatically. Well, let me give you two. The first one is East Asia. These are places that have seen absolutely massive increases in health care and longevity over the last 50 years. So, for example, I believe the Koreans are now the longest live people in the world, which means that you’re going to have these massive, massive aged populations sucking the government dry while there’s no one down below to do the work, much less raise children.

The other chunk is the Orthodox world, where a combination of the post-Cold War shocks and alcoholism and a poor diet are hollowing out the working age population. Before we get to the point where we have a population collapse, and these are two very different economic models that really don’t go anywhere particularly positive. But there is a lot of nuance and difference between the two.

In the case of East Asia, assuming for the moment that we don’t have an energy or trade breakdown big, if you’re looking at a general degradation of the states ability to function. In the case of Central Europe, you’re instead looking at scene wedges of populations that are actually going to benefit quite a bit from this because if you lose everyone in the thirties, but you still have people in your fifties, you still the tax base, you still have the work and the economic inequality that will erupt in that sort of environment suggests a significant political challenge.

So everyone has their own story, but it’s really hard to make the case that deep population has a silver lining and the environmental case. Keep in mind that if people age, they’re still consuming. You’ve just lost the younger generation that can pay the taxes and generate the investment that’s necessary to maybe transition to something that isn’t based on oil and coal.

So there’s really no upside here. There are just flavors of downside.

My Latest Interview on the NAIOP Podcast: Inside CRE

For those looking for some longer format content, here’s a recent interview from the NAIOP Podcast: Inside CRE.

LISTEN TO THE NAIOP PODCAST

I chatted with Christopher Ware about current U.S. demographic shifts, how the labor force is changing, and why now is the best time for businesses to hire and borrow. I also dive into China’s precipitous population decline, how the cost of manufactured goods will increase, and why we need to double the size of the industrial plant in North America.

I encourage you to tune in if you want a well-rounded, long-form discussion.

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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Mexican Demographics: Where Are All the Kids?

Most of the developing world has relatively similar demographics…the defining characteristic being a boatload of kids. And until recently, Mexico was no exception to that.

The first chart shows Mexico’s demographics before the new data was released. The only thing of note is the drop-off around age 25, where Mexico starts to move from a pyramid to a column shape. This is essentially a warning sign that if nothing changes, there will be a demographic collapse down the road.

The second chart shows Mexico’s demographics with the new data. Where did all the kids go? Well, a combination of the global financial crisis, COVID, and drug wars made people a tad less interested in raising kids. On top of that, America has shifted to a closed border system, which forced Mexican families to move to the US full-time instead of sending the men over for seasonal work.

This isn’t the nail in the coffin for Mexico, but they must change things up. And for the Americans, they best start treating their Mexican population like the precious resource it has become.

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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China’s Labor Problem: Youth Unemployment

Coming to you from Colorado’s very own Stonehenge out in the Lost Wilderness. Today’s new factoid is that youth unemployment in China is higher than in Italy (in percentage terms).

For context, Italy had the worst economic profile in Europe and has averaged negative economic growth for decades. If China’s unemployment resembles Italy’s, it is a very, very bad sign. Let’s break this down in the context of manufacturing.

Phase 1. Everyone is reshoring and pulling investments from China. Young people are pursuing IT jobs instead of manufacturing jobs. The problem is that China is a closed system that sucks at all things tech.

Phase 2. Xi’s cult of personality has ensured that China’s labor force won’t be able to develop into a value-add or tech-based system. Meaning everything will get significantly worse, and there’s not much hope of it getting better.

Phase 3. Remember the last time something like this happened in the Chinese system? We ended up with the Tiananmen Square protests. While that triggered the change in the political system we see today, Xi’s wiped away any opportunity for such change to happen now.

When a disconnect like this happens in the employment system, it inevitably translates over to the economic system. I’m not suggesting that this is the end, but this is how ends begin…

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

Demographics Part 10: Problems in The Middle East

Coming to you from Milford Sound in New Zealand.

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

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

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

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

Prefer to read the transcript of the video? Click here

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

CLICK HERE TO SUPPORT MEDSHARE’S UKRAINE FUND

CLICK HERE TO SUPPORT MEDSHARE’S EFFORTS GLOBALLY

TRANSCIPT

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

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

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

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

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

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

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