The 2020 Elections and Beyond

I normally try to stay out of American politics. My work is in the wider world, the American system is remarkably stable and self-regulating, and if I’m to be completely honest, making domestic political forecasts tends to burn bridges no matter how even-handed I attempt to be. Case in point: many responses to my most recent newsletter on the American political system deepened my appreciation for creative expletives. And yet the 2020 general elections are only a few weeks away and their results are among the most hotly anticipated geopolitical events in years. It would be weird for me to not say anything.

Before proceeding, let me dispose of my personal politics. No one who espouses my particular mix of views on economic and social and global issues is on the ballot (and they weren’t last time, or the time before, or the time before that) so this newsletter isn’t so much an assessment of political positions with an endorsement or condemnation, but instead an explainer of where things stand along with a forecast for how both the elections and their aftermath will shake out.

Let’s begin with the incumbent:

In terms of international relations, perhaps Trump’s greatest presidential failing is his preference for personal deal-making as opposed to institutional diplomacy. What made Trump a successful real estate and branding magnate was his willingness and ability to shift responsibility – financial, legal or otherwise – around among different parties as part of his brokering.

In business, Trump’s method worked because the United States has a robust civil society, rule of law and multiple levels of government with investigatory and enforcement power. In essence, in his business negotiations Trump maneuvers the folks on the other side of the table into positions where state and the society do much of his work – and nearly all his enforcement – for him.

But the world is not the United States. There is no global, multi-layered, professionalized, largely-apolitical cadre of institutions to enforce agreements among countries. What few global institutions do exist share three fatal flaws:

First, such structures only have enforcement mechanisms should member countries choose to allow them enforcement mechanisms, often on a case-by-case basis. For example, the International Court of Justice’s rulings are technically binding, but any country can choose to withdraw enforcement power selectively or wholesale at any time for any reason. There aren’t many rules to rely upon. Only unenforceable norms.

Second, pretty much all global institutions were American-crafted as part of America’s anti-Soviet Cold War efforts. They only work if the US forces them to work, and between the gradual disengagement of Presidents Bill Clinton and George W Bush, and faster disengagement of Barack Obama and Donald Trump, they simply no longer function.

Third, in global affairs, the people on the other side of the table – Russia’s Putin and China’s Xi come to mind – have a lot more experience in breaking norms to their advantage. Both to a degree built their systems around such tactics. No wonder Trump often appears outmaneuvered.

Yet even bilateral deals where such squishiness is less common tend to be weak. It too is an institutional issue, although in bilateral agreements it has more to do with tasking and executive leadership. For example, in the final decade of the Cold War, Ronald Reagan negotiated a series of “trust but verify” nuclear disarmament deals with the Soviets. After the deals were signed Reagan didn’t simply leave to watch the Sound of Music, his administration worked out the monitoring details with the Defense Department, the State Department, the CIA, and the Arms Control and Disarmament Agency. Enforcement did not magically happen. TeamReagan had to make it happen, and that required engaging not simply the Soviets, but multiple pieces of the American executive branch as well.

Trump simply ignores such empowering minutiae. After announcing his big deals, he moves on to something else and rarely looks back. That’s a big part of why his pacts with North Korea fizzled within months or why the Phase One deal with China was dead on arrival (in China). About the only exceptions have been TeamTrump’s trade deals, but here institutional involvement not only helped make the deals happen, but helped make them stick. The same institution responsible for negotiating the successful trade deals with South Korea, Japan, Mexico and Canada – the Office of the U.S. Trade Representative – is also responsible for enforcing the deals.

From my point of view, the Trump administration has been a missed opportunity.

Nearly everything about the American strategic position – from military procurement to diplomatic positioning – is a hangover from the Cold War: The prime operating principle guiding America has been that the United States will create a safe, globalized world that empowers weak countries and fosters global trade for all, and in exchange Washington gets to direct everyone’s security policies in order to better combat Moscow. The security-policy aspect stopped working when the Soviet Union collapsed, but the Americans never changed the script on globalization and kept holding up the world’s collective ceiling. American foreign policy became ossified and rudderless.

Trump, as a geopolitical neophyte unburdened by commitments made in the previous century, had the opportunity to come up with something new. He certainly proved eager to sledgehammer previous structures and relationships, but he – like his three immediate predecessors – failed to generate a replacement.

“America First” isn’t a policy, much less a strategy. It’s a motto. It’s just like Obama’s “don’t do stupid stuff”. And so I put Trump into the same basket as Obama: leaders who left the country worse than they found it. And that’s before considering Trump’s preference for playing fast and loose with ethics or institutions.

Now, the challenger:

Biden’s first problem is that he is a black box from a policy point of view. Biden is commensurate political chameleon. His position shifts on every issue based on what he perceives the majority of power brokers within the Democrat Party currently believe. That has put him on both sides of nearly every issue of importance during his long tenure in politics. Such flexibility is particularly problematic on topics where consistency is key, such as national security and trade issues. Such an unfettered lack of convictions is part of what led former Defense Secretary Robert Gates to note that Biden has been on the wrong side of every foreign policy and strategic issue of the past four decades.

Biden’s second issue is his utter lack of leadership experience, which I realize sounds odd considering he has served in Washington since 1973. But aside from two years as a legal clerk and lawyer, he had only been a senator before becoming VP. To be blunt, senators suck at being president. They have little concept of how to manage an organization – such as the federal government with its three million employees.

Nor did Biden’s tenure as Barack Obama’s vice president provide him with many leadership opportunities. This is most definitely not Biden’s fault. Obama was famous for hermetically sealing himself in the White House and only allowing in information that supported his penchant for non-action, and his near-pathological unwillingness to have conversations with…well, anyone. But Obama refused to let policy be made without him, leaving Biden with little to do for eight long years.

(Incidentally, similar issues constrained a far more straightforward and ambitious member of the Obama administration: Secretary of State Hillary Clinton. Part of why Ms Clinton resigned at the end of Obama’s first term is that Obama melon-balled out of the State Department control of diplomatic relations with the world’s most important countries, transferring their management to the West Wing where…nothing happened.)

The most positive thing I have to say about Biden’s expertise is the odd combination of his lack of convictions combined with having a boss who didn’t like to interact with others meant that whenever the Obama White House needed a mediator in Congress, Biden was the obvious choice. That’s great. That’s essential. I don’t think I’d call that leadership.

But I think, for me personally at least, the issue of mental competence is Biden’s biggest looming issue. Being gaffe-prone doesn’t bother me, especially when a gaffe-prone person owns it as Biden historically did in the Senate. I find it humanizing. Even credibility-building. I’m instead talking about something more concerning: I’ve lost track of the number of times of late that Biden has stumbled over his words or looked confused, even when reading pre-prepared remarks from a teleprompter. I had the opportunity to meet Biden shortly after the Obama administration ended and my first thought was “Wow. He might…he might have dementia. It’s a good thing he didn’t run for president.”

Yet here we are. I want my president to be able to handle a crisis. And foreign leaders. And the press corps. And a phone call. Due to his disposition, Trump has repeatedly demonstrated he cannot do these things well. Biden’s recent track record suggests something potentially even worse.

Despite Biden’s lack of consistency or experience and concerns for his mental capacity, many hopeful for (or resigned to) a Biden administration believe this can still work out. They say that, sure, Biden might be a keg short of a six pack, but so long as he has a strong cabinet everything will be fine. I’ve heard this argument before. Recently. It is what old-school Republicans hoped about Trump back in 2016. It didn’t work out very well. At the end of the day, the president has the power and you need to trust the person in that position, not his unelected handlers.

So we’re left to choose between two seventy-something men who feature different flavors of incompetence. I have no idea who I am going to vote for.

But I’m still, well, me. So I will make a prediction:

President Trump’s seemingly deliberate and always callous mismanagement of the coronavirus crisis has contributed to the death of 200,000 Americans. In per capita terms that’s double the suffering of Europe or Canada. In absolute terms that’s higher than the number killed in any American military conflict save the Civil War and World War II itself. Forget vaccines. Forget ventilators and masks. Forget the CDC and the WHO. Forget the PR war with the Democrats. All Trump needed to do to mitigate the risk was say something like “wear a mask, maintain some distance, and look in on your loved ones”. Paraguay managed it. Bulgaria managed it. This isn’t hard. Most of America’s political middle finds Trump leadership lacking and his behavior disgusting.

Trump also faces danger on the Right. Trump has alienated fiscal conservatives, the military and the business community – all once bedrock Republicans. The Democrats have avoided – albeit narrowly – running an absolute whackjob and instead settled on Milquetoast Biden. To achieve reelection, Trump must capture every swing state as well as a couple decent sized blue states. That’s just not possible. Trump surprised last time because there was a large block of voters – the populists – the pollsters missed. That’s not the case this time around. And so Trump will lose and he will lose big.

Assuming, that is, Biden can prove he still has some marbles.

Biden has been the most closely managed candidate in modern American political history. He has not been without his ring of protectors for two years, giving him the feel of a badly operated marionette. Americans need to know if he can function, and we will all find out together on Sept 29.

Next Tuesday will be the first presidential debate, moderated by Chris Wallace. It will be the first time Biden will need to hold his own in a long-form open forum without his support crew. His performance will determine the election. Biden does not need to best Trump in the debate. All he needs to do is come across as marginally capable.

If Biden can do that, concerns for his mental capacity will ebb and he will win handily.

If the Biden who served in the Senate for three decades shows up – a likeable, master debater who can identify with people with a glance and laugh at his own missteps – he will win in a landslide.

But if Biden just…can’t, then Trump walks away with it all.

It really is that simple.

Now I’m sure that many of you are either cheering my wisdom or burning me in effigy (maybe both for some of you), so let me now say something certain to piss everyone off at once:

As regards global affairs, who wins November 3 really doesn’t matter.

Yes, the U.S. President is the single-most powerful person in the world, but ultimately the United States is fundamentally incapable of moving forward on the world stage.
 
Another four years of Donald Trump would grant us the clarity of a known quantity: continued degradation of the structures of the international system. But that system has been degrading since 1992 so I don’t see this as more than a few additional steps down the same road towards a sort of retrenchment / neo-isolationism. That’s ultimately where I saw the United States heading back when I wrote the Accidental Superpower back in 2014.
 
A Biden administration would be little different except in tone. Resetting American foreign policy in any meaningful way first requires a replacement for the Cold War structures which are now three decades out of date. No one on TeamBiden has so much as blinked in that direction. Nor do I believe for a moment that a President Biden would prioritize such an effort. Ultimately, such a task would require a clear, firm national goal. That would require something Biden simply lacks. Convictions.
 
A grand reset would also require the service of an American institution which no longer functions: the State Department. The past four administrations have alternatively neglected or gutted America’s diplomatic corps. It is largely incapable of being part of any solution without first undergoing a decade-long regeneration.
 
A grand reset would also require an American institution which is likely to be hostile to a Biden administration: the Senate. The Founding Fathers designed the Senate to act as a brake to prevent policy from evolving too quickly. One-third of the Senate faces election races every two years, so full turnover is sooooo sloooow. The Senate regularly reflects American politics as it exists…a decade in the past. In addition, each state gets the same two senators regardless of population – a measure designed to prevent larger states from trampling smaller states. That means more rural, lower-population states are more heavily represented. More rural, lower-population areas tend to prefer Trump over Biden.
 
For Biden to have a working majority in the Senate he needs to flip at least four seats. It is possible of course, but highly unlikely. (Recall that when the 2018 midterms delivered Trump a sound thumping at the national, state and local levels, Trump-aligned Republicans gained seats in the Senate.) The point of this constitutional detour is that the Senate is the institution that ratifies treaties, a classification that includes all the various agreements that underlay America’s Order-era structures: NATO, NAFTA, the United Nations, the WTO, the Japanese alliance, the International Monetary Fund, and so on.
 
A grand reset would also require time, which would also be in short supply. A President Biden would spend the first six months dealing with coronavirus and a series of legal reforms that address issues of accountability designed to Trump-proof future elections. Add in little things like summer breaks and in the most aggressive case scenario a President Biden couldn’t even begin any sort of new global effort until 2022. And don’t forget that the domestic issues Biden wants to prioritize also require the Senate. In the highly likely outcome that Biden’s domestic hopes are dashed on the Senate’s shoals, anything global is likely to be pushed not so much to the back seat, but to be abandoned on the side of the road.
 
For a good time, you too can play with electoral and Senatorial politics at https://www.270towin.com/.

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France Dodges a Bullet…By Catching a Bullet

The results are in:

Emmanuel Macron defeated Marine Le Pen of the National Front by 66% to 34%, making him the youngest president in French history.

Many were worried about the implications of a Le Pen presidency as the right-wing, pseudo-racist, anti-European populist has called bluntly for an immigration ban, a withdrawal from the euro and EU, the severing of most economic connections with the wider world, and a general break with the whole French system since World War II.

But while there were admittedly a couple of big gulp moments during the campaign, I wasn’t ever really that worried about such an outcome. France’s pro-European instincts are still pretty strong, and the French political center is robust as well. As soon as it became apparent that the center-right wasn’t going to go down the rabbit-hole, I was pretty sure that Le Pen didn’t have a serious chance. The bullet would be dodged.

Which isn’t the same as me saying that all is good in the state of France.

Just because the center remains strong in the French electorate doesn’t mean it remains strong in the French political system. In the first of France’s presidential election’s two rounds, the two parties that have ruled France since the formation of the Fifth Republic only scraped together 26% of the vote between them. And Marine Le Pen increased her father’s share of the vote – when he made the second round a decade ago – by half.

So should the French be congratulated, even celebrated, for their election results? Sure. But let’s not get ahead of ourselves. All the trends in play that enabled the National Front to so hugely improve its vote take remain fully in force, and all will push France in a much darker direction in the months and years to come.

Automation at home and abroad continues to erode the earning power and job prospects of French workers. So long as the global trade system and EU survive, the French system’s lack of competitiveness continues to hollow out the French economy. France’s vulnerability to energy shocks continues to deepen.
Europe’s sovereign debt crisis is loads worse than it was in 2007, and continues to sap economic activity in France’s Spanish and Italian neighbors. Inward immigration from France’s colonial legacies continues to flow as those former colonies face issues of systemic collapse. Germany remains shielded from the worst of most of this, and so long as it is the heart of the EU not just geographically, but also economically, financially and politically it will continue to ascend at France’s expense. France is trapped in a system it cannot control and that system is in terminal decline. I’d be scared and angry too.

And let’s not understate the challenge the new president faces. The entirety – yes, the entirety – of the parliament is made up of parties that were just wholly discredited on the national scene. The new president doesn’t have a single legislator in office. The comparison is imperfect, but can you imagine if Donald Trump ran on a third-party ticket to become president? How do you think the Democrats and Republicans would treat his priorities when they hold all the legislative cards?

Sure Macron can try to capture the French imagination (and some seats) in the June parliamentary elections, but so too can Le Pen. And now that one-third of the French electorate has broken the seal and voted for the National Front, it is highly likely that Le Pen’s (massively) more organized and institutionalized party will do just as well as Macron’s neophyte on-a-shoestring En Marche. When we get to the next presidential election, France is likely to have a president with few successes, an ossified and discredited center-left and center-right, and a National Front that has racked up dozens of electoral successes in both national and regional bodies.

Doesn’t take a pessimist to guess how that will turn out.

Part X: Trump Finally Plays a Card

Trump finally played a card with the Syria strike and it was a doozy – whether the messages were intended or not.

The past week saw the rhetoric of President Trump’s campaign messages meet the reality of the office he now holds. Stepping back a little further, April has been a very revealing month — if not somewhat cruel to President Trump’s more isolationist-leaning backers — in terms of what an emerging “Trump Doctrine” looks like.

Attaching the term “doctrine” to various past presidents’ policies is always somewhat of a misnomer as their actions are constrained by a variety of factors, including the unfeeling realm of geopolitics, and are informed by a bevy of inputs most of us could never even imagine.

Voters across the political spectrum were either terrified of, or enraged by, or ecstatic over the idea of a President Trump who would sharply reduce the United States’ global footprint and upend decades of long-standing formal and de facto relationships that have come to define the post-WWII era.

But any ideas of what a Trump foreign policy would or wouldn’t look like blew up earlier this month when nearly five dozen Tomahawk missiles struck the Syrian regime’s Shayrat airbase. So much for all the times candidate Trump decried foolish U.S. military intervention in the Middle East, amirite?Well, not so fast. The missile strike against regime forces in Syria was the very least President Trump could do and still reasonably claim he had done something. And there are zero signals that Washington is preparing to send U.S. ground troops en masse into Syria to fight against both the regime and various jihadi forces.

The reality is that the strike is important because it was the first tangible international action by the new President who has yet to clearly define his strategy and the world is taking notice. Here’s where we stand now:

  • The Syrian regime in Damascus has been warned that any use of nerve agents or chemical warfare in the future risks triggering a U.S. strike. The actual impact the last strike had within Syria is still being debated as details from both the Syrian and US government are fuzzy, but the immediate diplomatic kerfuffle it caused with the Assad regime’s Russian backers was relatively short lived. The U.S.-Russian “deconfliction” line – meant to prevent conflicts from escalating – that the Russians suspended was restored a few days later, with none of the tension so lovingly built up during the previous administration any worse for the wear.
  • On the last point, the Russians suddenly see a cost to their direct actions in Syria that has been palpably absent in recent years. But before you start bursting into renditions of “America, F#%$ yeah!” try and see this from the Russian perspective: your aging, limited military resources are now stretched incredibly thin from Ukraine to the heart of the Levant, and you have a tendency to see enemies across all borders. With the Americans again willing to fling ordinance about, things could get ugly fast.

RIMPAC Exercises

  • Trump’s ordering of the strike in Syria has implications outside of the Middle East as well. For China, the timing could not have been more awkward. As 59 Tomahawk missiles were being launched from U.S. ships in the Mediterranean, Trump was entertaining Chinese President Xi Jinping at his Mar-a-Lago estate in Florida. Following intimate conversations over a “big, beautiful” piece of chocolate cake, President Trump has decided that he will not label the Chinese as currency manipulators after all, but the Chinese delegation is said to have left Mar-a-Lago agreeing to help eliminate the U.S. trade deficit and the North Korean nuclear threat.
  • With all the explosions as of late (including the crater the Americans blew into Afghanistan’s Spin Ghar mountains last week via MOAB), the North Koreans are nervous that they’re next. Pyongyang’s decision to not test a suspected planned nuclear device over the weekend to coincide with the 105th anniversary of founder Kim Il-Sung’s birth could be seen in response to the U.S. Navy moving the USS Carl Vinson Carrier Strike Group to the region. But back a desperate, anxious neurotic into a corner and you might not like what happens next…
  • With all this ordinance on display, the U.S. has outlined, highlighted, and made bold what sort of capabilities will not be on the side of its NATO allies should they continue to fail to meet their funding obligations to the alliance. Trump has changed his tune recently regarding how NATO is no longer “obsolete,” but the new administration has made it crystal clear to both NATO and EU leadership that members can no longer expect US protection essentially for “free.”
Whether or not President Trump or members of his administration intended for all of these things to fall into place following the strike in Syria is of course another topic, but the adults in the room (especially Defense Secretary Jim Mattis and National Security Adviser H.R. McMaster) certainly understand how many opportunities the April 6 strike against Syrian forces have opened up. And given the deference Trump has for “his” generals and an increasing tendency to delegate decision-making during these first 100 days, it’s safe to say that the emerging Trump foreign policy is going to be anything but boring.

Part IX: The First International Challenge

Trump has big foreign policy choices to make this week and they both have world changing consequences.

It’s already been a big week for Trump. He just got his first pair of foreign policy crises.

First, the one that he picked.

Chinese President Xi Jinping will arrive tomorrow at Mar-a-Lago for direct talks with President Trump. We will know within a few days just how hostile the Trump administration will be toward all things Chinese. In these talks, The United States — and by extension, Trump — holds most of the cards: a functional anti-Chinse military alliance, absolute naval mastery of the Pacific, a Japan chomping at the bit for a more aggressive anti-Chinese stance, full command over the security of the global trading system upon which China depends, etc.

It isn’t that China cannot cause the Americans pain, just that any method of doing so obviously invites the Americans to counter in-kind at a higher order of magnitude. Xi is flatly coming seeking a “deal” and the talks are in Florida — rather than Washington or Beijing — so that Xi need not worry about American journalists or Chinese politicos hearing the discussions and potentially casting Xi as being as weak in the talks as he fully realizes he is. So either we’ll get a deal or this is the beginning of the end of the Chinese system in its current form. Personally, I’m popping some corn.

Then there’s the crisis that Trump most certainly did not pick.

Earlier this week the Syrians broke out some of their chemical weapons stocks again and used them on one of the more stubborn rebel positions in the country’s northern Idlib province. Russia quickly provided a modicum of diplomatic cover for its Syrian ally, asserting that a Syrian airstrike merely struck a rebel chemical weapons factory, and so scattered someone else’s chemical weapons.

For those of you who like to obsess about technicalities, chemical weapons depend upon being aerosolized for dispersion. It isn’t that the liquid material isn’t toxic — it’s totally toxic! — but a pint of liquid chemical weapon will kill everyone in a room while the same aerosolized amount can kill everyone in several city blocks. Hit a chemical weapons depot with a conventional bomb and you’ll incinerate far more of the material than you’ll disperse, much less aerosolize. The Russians of course know this and fully realize that the statement isn’t just a lie, but a particularly asinine one.

There’s a method to the madness.

The Russian challenge is the same one they used when invading eastern Ukraine: say something so beyond the pale that you are daring the international community to do something. It leaves everyone — Trump included — with needing to follow one of three paths. First, suck it up and do nothing. Second, deploy tens of thousands of troops to engage in a broad scale war against a country backed by a nuclear power that already has combat troops in-theater and risk thermonuclear escalation. Third, start a drone/airstrike campaign with the express purpose of decapitating the Syrian government, up to and including the assassination of Assad himself.

Option 1 makes you look like a wuss, emboldening Russia (not to mention Syria) to use similar tactics in other theaters. Option 2 bogs you down in a winless, bottomless war that makes the Iraq conflict look simple (and that’s assuming that nothing goes horribly wrong). Option 3 gives up on a stable future for Syria and the surrounding region. It would also be public acceptance of assassination, opening up a Pandora’s box of strikes and counter-strikes all over the world by a panoply of powers.

Say what you will about the Russians, they are very good about presenting their rivals with unwinnable choices.

I never expected the alleged Trump-Putin love-fest to amount to anything. Russia’s geopolitical and demographic position is precarious, but Russia’s tool-box is fairly full. Trump has yet to fully familiarize himself with the awesome raft of tools the U.S. president has in foreign affairs, and his demeanor is somewhat… inconsistent. It’s a combustible mix, not to mention that I personally find the idea that the world is big enough for the Trump and Putin egos to co-exist (darkly) amusing.

What really gets my attention is that these two developments happened in the same week. Xi’s trip has been on the docket for awhile now, and timing the use of a chemical munition wouldn’t be all that hard. While I have zero proof, the timing does appear to be trademark Russian: force the White House to pick a crisis — a buffet of unpalatable choices in the Middle East, or a major politico-economic conflict with another power. Either way, it potentially keeps the Trump administration obsessed with conflicts far from Russia’s borders.

Just don’t forget that no matter what Trump picks, the outcomes are going to be far worse for others. An America engaged in a Syrian conflict is one that generates building disasters for Turkey, Israel, Egypt, Saudi Arabia, Iran and Europe. An America engaged in a head-of-state assassination campaign destabilizes entire continents. An America pursuing a Chinese competition wrecks the entire global supply chain system from raw crude to iPhones.

The only way this doesn’t lead to Disorder is if Trump chooses to look like a whimp.

Part VIII: Keystone and the Method to Trump’s Madness

Trump is turning the government his own personal shade of orange and it may take decades to get the dye out.

President Donald Trump formally signed off on the Keystone XL pipeline on March 24.

While there will undoubtedly be ongoing legal and environmental wrangling (that’s just the nature of pipeline politics these days), the presidential waiver was the final formal step of the approval process. Construction will begin in short order, with completion likely in about two years.

Three things come to mind:

1) The economics of Canadian crude in a world of U.S. shale is questionable, but at least now they aren’t so ridiculous.

U.S. shale is very low in contaminants. In a normal system it would sell for a massive premium, but the speed at which shale crude has come on-line has overwhelmed not just American infrastructure, but global energy trends. From-scratch, shale wells can now begin production in less time than OPEC states take to bring pre-existing spare production back online. The result is that despite its sky-high quality, U.S. shale actually sells for a slight discount to international norms.

Canadian oil sands is more traditional from a pricing point of view. It is thick and gooey and packed with sulfur; it’s one of the lowest quality crudes in the world and as such sells at a steep discount. It also gets sold almost exclusively into the U.S. Midwest, the same area that is awash with U.S. shale crude. The result is that Canadian crudes typically sell at a $10 a barrel discount to U.S. shale at least, and more than that to global norms.

The real problem (for Canadian crude) is production costs. U.S. shale oil full-cycle costs are now below $40 a barrel. Canadian heavy is about double that… and that’s before you consider that Canadian heavy often needs to be railed because there isn’t sufficient pipe transport capacity. The transport difference alone adds $5-10 a barrel more to Canadian heavy’s cost. Keystone XL will reduce that shipping cost to the $2-3 range, in theory making Canadian heavy more competitive over the long term. The production cost differential is still wide enough to likely dissuade any new volumes of Canadian heavy coming online anytime soon, but at least the economics of production will be a bit less out of whack vis-à-vis shale.

2) U.S. industry needs to formally adjust for new crude mixes.

Ten years ago everyone knew that crudes like Canadian heavy were the future, and so everyone retooled their refineries to run on heavy, sour crudes. Then shale popped up and wrecked everyone’s well-laid and expensively-funded plans. Now in some ways U.S. refiners faces the best and worst of all worlds. Best in that the two major input streams — Canadian heavy and shale — can be purchased at discounts to the global norm. Worst in that the two crude streams are about as far apart as concerns quality as is possible and so cannot be run in the same facility.

The solution is blending facilities that mix the two along with a few other inputs to make something a bit more regularized, preferably with enough flexibility that refineries can custom-order a blend that matches their technical requirements as well as the market needs of the day. The problem isn’t just tank farms and dedicated pipelines, but those “other inputs” that help the blend remain blended. Otherwise the mixed crude tends to separate like salad dressing. Spoiler alert: Keystone XL guarantees that such blending facilities are going to be a big growth industry for the next decade.

3) Trump is not a normal president, and he’s becoming less so by the day.

That Trump moved quickly on Keystone XL doesn’t surprise me. What surprises me is that the announcement today came without Trump’s Elon-Musk-style leadup and fanfare. While many media like to lampoon him as, well, eminently lampoonable, the fact is that he is a shifting target who shows no sign of establishing a normal order of business. In the meantime, he is forcing the government to work the way he wants them to.

My contacts in the refining world have already detected a 180-degree shift in the way the Environmental Protection Agency operates. Under Obama, EPA inspectors would drop in unannounced and demand to see everything. Now they are giving weeks of notice for information requests and volunteering that even these looser reporting deadlines are more like squishy guidelines…and that’s before Trump’s 30%+ funding cut to the Agency kicks in.

The State Department has had minimal contact with its own Secretary, Rex Tillerson, who has emphasized personal diplomacy over institutional diplomacy. Both styles have pluses and minuses, but the Trump team is very clearly laying the groundwork for a broad-scale elimination of many of the levers of government power. People criticize Trump for seeming to still be floundering after two months on the job, but I see the greatest civil deconstruction in the history of the Republic. At the speed Trump is moving, it would take a generation of effort to rebuild the bureaucracy should future presidents attempt to turn back the clock. Trump may well have the greatest impact of any president on the structure of government since the New Deal.

And Trump’s efforts are hardly limited to the executive; Congress is firmly in his sights. After some rough back-and-forth with the Republican caucus on the Obamacare replace/repeal, Trump threw up his hands last night and directed Congress to vote up or down on the bill as it stands. His message to conservative and moderate Republicans opposing the reform bill in its current form is a stark one: you campaigned on repealing Obamacare, but now you’re all bitching about the details. So either do it and let’s move on to other things, or break your pledge and reap the whirlwind from your constituents. It’s a stark reminder that Trump isn’t just not really a Republican, but that he ran against the Republican Party.

Trump is merging the Obama’s strategy of direct executive orders that can only be challenged via multi-year lawsuits with the Reagan strategy of building and abandoning Congressional alliances issue-by-issue with a Clintonesque predilection for going direct to the people in order to force everyone’s hands. Yet Trump is governing without a support infrastructure, so he’s both difficult to influence or to hold to account.

It is far too soon to say that Trump will be successful, but considering the enervated nature of the U.S. parties, betting against the new president would be most unwise. Love him or hate him, President Trump doesn’t just have his own style, he is going to rule.

Part VII: Ms Merkel Goes to Washington

How Merkel and Trump get along (or don’t get along) will determine the world’s path for at least the next three decades.

Here it comes.

German Chancellor Angela Merkel will meet with U.S. President Donald Trump tomorrow (March 15). These are the leaders of the two branches of the free world, and how they get along (or don’t get along) will determine the world’s path for at least the next three decades. I’m not hopeful. Two weeks ago the Trump administration issued its new trade guidance, which calls for nothing less than the unravelling of the global trade order.

The key institution is the World Trade Organization, a grouping formed by the United States expressly to manage global trade, most notably by adjudicating trade disputes. The WTO isn’t just some gathering like the G20, but instead a Senate-ratified treaty at the heart of U.S. economic law. In Trump’s new policy outline, which at a few hundred pages is by far the most detailed anything I’ve seen out of the Trump White House so far, Trump asserts that U.S. citizens are subject to U.S. law, not WTO rulings. When the two clash, U.S. law takes precedence. More than the travel ban or the Dakota Access Pipeline or Russians having conversations with the Attorney General, it is the implementation of this decision that will determine how our world will (d)evolve in the months and years to come. The WTO — indeed, the entire trade order — cannot function without the world’s largest market being open, and without the world’s largest navy making imports and exports of everything from iPods to Toyotas to French cheese to Kuwaiti oil safe for everyone.

I warned in the Accidental Superpower that it didn’t really matter to the United States how things unraveled, but that for everyone else “it truly matters whether the American shift from Bretton Woods occurs slowly over a decade of neglect or deliberately in a single [moment] of panicked fury” after the Americans have a really bad hair day. We are very clearly seeing the latter—no Trump jokes intended.

There are few countries with more to lose than Germany, and Merkel must be preparing for her summit with palpable dread.

Germany is not a normal country. Its territories are cobbled-together statelets that historically have had stronger local and regional, rather than national, identities. But whenever those statelets do start to act as one, their sheer heft tends to scare the bejeezus out of everyone else. A fractured Germany is one that falls prey to its neighbors; a unified Germany is one that its neighbors feel forced to tear down. Most of German (which is to say, European) history has obsessed with how to manage the German Question, and the answer has always been either grueling war or equally grueling occupation.

Except when the Americans were in control, that is. The whole point of the Bretton Woods system of free trade was to unify the world’s once-warring countries under a single rubric in order to contain, beat back, and destroy the Soviet Union. In this order Germany was no longer isolated target, but instead an integrated bulwark. With Germany and France and Spain and Italy and Britain and Sweden and Turkey and more all on the same side, the Germans could for the first and only time in their history expand economically without risk of invasion (except from the Soviets, of course). The time since the Bretton Woods era kicked off has not “simply” been the greatest period of peace and prosperity in human history, but it has been the only period of peace and prosperity in German history.

I say this without hyperbole: without Americans underwriting Bretton Woods, there is no free trade. No free trade, no EU and NATO. No EU and NATO, and suddenly Germany is once again exposed to the broad-spectrum competition that is Europe — a competition that Germany is by default the most powerful player, but equally by default cannot possibly win.

Merkel faces the impossible task of somehow convincing Trump that everything that he knows and believes spells disaster for Germany, Europe, and the global system. And that somehow that makes it bad for the everyday Americans, US strategic goals, and Trump himself as well. And to do so without triggering something worse. After all, it isn’t like it is Trump’s goal to deliberately and explicitly tear Germany down. He just doesn’t care.

I do not envy her that conversation.

The timing for Merkel couldn’t be worse. The entire European fabric is shredding, even before the Americans set sail in the other direction.

  • The United Kingdom is leaving the EU, giving fact to the fear that the EU is not Europe’s inevitable future. As London has already launched free-trade talks with the Americans, Canadians, Turks, Indians, Australians, Kiwis and the European Free Trade Association, there is a building horror that the Brits might not be destroyed by Brexit, and should that happen, then what is stopping other rich members from leaving?
  • Relations within the EU have turned acrimonious. A Polish internal spat is throwing a veritable troop of monkeys (and their wrenches) into EU workings, with Warsaw threatening to upset the entire EU order. At issue is the EU’s decision to override a Polish objection to a change of the EU president (the sitting Polish government is angry that the EU’s titular head is a former Polish prime minister from their domestic political opponents). The last time something like this happened, it was Margaret Thatcher using her anger at EU budgeting to stall all things EU for the better part of a decade.
  • The Dutch government — by far the most effective party at patching together EU unity in trying times — is likely not just to fall in elections this Wednesday, but might actually get replaced by the strongly Euro-skeptic party of Geert Wilders, a man who makes Donald Trump look positively calm and inclusive. Similar firebrands have already taken power in Hungary and Poland, seem posed to assert command in Italy, and that doesn’t even broach the topic of Marine Le Pen’s likely first round victory in France’s upcoming presidential elections.
  • Turkey is on the warpath, both figuratively and literally. First, figuratively: A big topic in current European politics is to prevent Turkish politicians from holding political rallies across Europe (typically with anti-European themes). It has gotten so bad that the Dutch government denied the Turkish foreign minister the ability to land his plane last week. As such, the notoriously prickly Turkish government is screaming it will cancel or subvert every single deal the Europeans have made with the Turks in the past decade—President Erdogan has even accused the Dutch of behaving like “Nazi remnants”. Now for the literally: Anti-ISIS efforts in Syria and Iraq are coming to a head outside of ISIS’ capital of Raqqa, Syria and its largest city of Mosul, Iraq. In both cases the U.S. and Europeans have become deeply involved in alliances that involve Kurds, something that so infuriates the Turks that it cannot help but impact Western-Turkish relations more broadly — and Turkey controls how many Syrian refugees can swarm up from Europe’s southeast.
  • Russia is reinforcing its positions not just in the Ukraine border region, but in Ukraine itself. A serious military effort may well be imminent. Putin sees a government in Washington that is testing the NATO alliance even more than he does, and Putin likes what he sees. Others have noticed. In late February the Swedes formally abandoned their post-Cold War optimism, reinstituting the draft.

And while normally I prefer to leave aside personality issues, they are depressingly relevant here. Merkel has a (well-earned) reputation for being methodical, slow to commit, pensive and in general reserved. Trump has an (equally well-earned) reputation for being the exact opposite. If ever there was a time that personal styles would be needed to help make impossible talks possible, it would be now. Instead, we have the opposite.

About the only thing Merkel (and Europe, and the world writ large) have going for them is the slim reed of hope that Trump’s anti-trade policies might not be finalized. Leaks out of the White House point to a “civil war” within the core Trump team between nationalist/isolationist/anti-trade personalities like Steve Bannon and Peter Navarro and more nuanced pro-business personalities such as Gary Cohn of the National Economic Council.

But the emphasis is definitely on the “slim”. The complete absence of strategists such as National Security Advisor HR McMaster or Defense Secretary James Mattis from the conversation, much less the broader debate, is crushingly telling. The United States is the least integrated major economy into the global system. For Washington the creation of the trade order was a strategic gambit with understood economic costs meant to underpin the Cold War alliance, not a plan perceived to generate economic gains. If Trump’s military advisors don’t see themselves as having a role in this trade debate, then that slim reed of hope is just the proverbial last flash before light vanishes from the sky.

Part V: Watch Mattis, Not Flynn

While the news focuses on the Flynn scandal, Mattis puts NATO – and the global system – on notice.

So apparently whenever I go on vacation the rest of the world has a busy week.

Let’s focus on the United States.

While I was kayaking in Milford Sound, National Security Advisor Lt. General Michael Flynn was excused from his 24-day-old job. Flynn has a reputation for being a bit…volatile and monochromatic, so his departure from what I consider to be the job in the U.S. government that requires the most calm, far-reaching and level-headed thinking isn’t something I consider to be all that bad.

The political issue surrounding Flynn’s dismissal is that he allegedly discussed national security matters with the Russian ambassador, and then lied to now-Vice President Mike Pence about it. If Flynn indeed told the Russians that a Trump administration would take a softer line on all things Russian over the course of a series of conversations, then this may indeed have altered the Kremlin’s response to the Obama administration’s sanctions. Among Democrats in general and more national-security-minded Republicans, this is certainly the biggest foreign policy issue of the new President’s term.

Under normal circumstances I’d agree wholeheartedly, but as I’m sure everyone with a pulse has noticed, we’re not exactly in normal circumstances these days. Instead, a far more critical evolution is taking place.

A personality I take much more seriously than Flynn is the Defense Secretary, General James Mattis. At a NATO defense minister’s summit the day after Flynn’s dismissal (when I was hiking the Kepler Track near Te Anau), the good general put the entire alliance on notice. He flatly warned the allies that they must raise their defense spending – quickly and sharply – or face the Americans backing away from their alliance commitments. Specifically he noted with a degree of subtlety that only a Marine general could muster: “No longer can the American taxpayer carry a disproportionate share of the defense of Western values. Americans cannot care more for your children’s future security than you do.”

In my opinion, Mattis is deadly serious – hell, in my opinion Flynn was deadly serious – and both were/are executing policy not only with the full knowledge of President Trump, but are doing so because it is policy, not because of some quid pro quo with the Kremlin. The Americans are getting out of the global management business, and a rationalization of its alliance commitments – Europe included – is simply par for the course. All that remains is to see how quick and how deep the changes will be.

We might not have to wait long.

It was also reported in the past days that the Russians have deployed the SSC-8 medium-range missiles in violation of the landmark Intermediate-Range Nuclear Forces Treaty (or INF) signed between President Ronald Reagan and Soviet leader Mikhail Gorbachev. The creatively-named treaty bans all short-to-intermediate range (500-1000 km, or roughly 300-600 miles) nuclear and conventional missiles by either party. The agreement served as a stepping stone to more aggressive nuclear arms reductions, and in no way is it an understatement to say that the INF remains the lynchpin of all post-Cold War U.S.-Russian relations.

Looking at a map, it’s easy to see why. The primary beneficiary is Russia (and its predecessor state, the USSR). After the agreement, U.S. military bases sprinkled throughout NATO countries can not serve as launching pads for missiles designed, essentially, to reach Russia; similarly, the removal of such missiles from Russia’s arsenal directly impacts the security of the United States’ European allies. But these missiles simply cannot reach the continental U.S.

While slight mention was made within American media about the Russian’s violation of the INF, the message is being heard loud and clear by NATO. But for all of the prodding and threats by Mattis and the White House, the reality is clear: as the United States remains determined to reduce its global military footprint, Europe faces a Russia already well into its operational mobilization while most of Europe remains functionally disarmed to respond to such a threat.

This weekend is the Munich security conference. The Munich conference involves leading defense and foreign policy thinkers from both the NATO and greater European communities. It has no direct, formal impact – it’s  just a talk shop – but it has a reputation for not only candid discussions, but being a place where top government leaderships announce fairly startling policy changes. In the past German, American and Russian leaders have indicate shifts that fairly dramatically adjusted the regional centers of power.

And this weekend Vice President Mike Pence will be in attendance.

Part IV: Bribes, Trade and the European Union

Some countries are adapting to Trump and some don’t know the rules of the global system have changed. 

The Japanese government leaked a provisional policy document to Reuters late Jan 31 titled “U.S.-Japan Growth and Employment Initiative,” which noodles over how Japan can invest more heavily into the United States in a variety of economic sectors. The policy was supposedly read out loud to Reuters staff, and it is very clearly in the under-development stage with a great many gaps.It is expressly meant to pave the way for Japanese Prime Minister Shinzo Abe’s upcoming summit with Donald Trump on Feb. 10. Among the document’s noodling includes possible investments into various infrastructure projects and the shale sector. The leaker indicated that the investment would be on a scale that could generate “hundreds of thousands” of American jobs.

(Before you discount that “figure” as ludicrous, keep in mind that the Japanese economy has been so moribund for so long thatthe Japanese regularly force the near-entirety of their pension system — with a huge dose of flat-out printed money — to invest in Japanese government debt, an asset with a zero percent return. It is well within the BOJ’s purview to instead purchase foreign assets if that serves Tokyo’s purposes, and to do so in a volume that quite literally reaches the high hundreds of billions of dollars.)

If this feels like a bribe, you’re thinking about things the right way.

The United States is backing away from the world writ large, a development that spells utter disaster for the many countries that designed their economic, political and military systems around the central concept of American engagement. Every bi- and multi-lateral relationship that the Americans have is in the process of being obviated. That includes everything from the UN to the WTO to NATO … to the Japanese alliance.

In Accidental Superpower I noted that in the coming Disorder there would only be a very short list of countries with which the Americans would choose to remain entangled, largely because the Americans perceive unmitigated benefits. If your country isn’t on that list, and you want to retain American engagement, you have to come to Washington and plead your case. And if you come empty handed the answer will almost certainly be “no”.

Abe apparently intends to try and flat out purchase American involvement. A bit crass for my tastes, but that doesn’t mean it won’t work.

The Japanese understand what’s happening. They know full well that their exposure to global energy markets and the fragility of their manufacturing supply chains makes them vulnerable. The Brits get it as well. The Canadians are desperately hoping that they are on the “unmitigated benefits” list (they probably are). The Mexicans are twisting in the wind, unsure if what’s coming out of the White House is rhetoric, policy or a negotiating strategy (it’s probably the latter). The Chinese are having problems coming to grips with just how bad things are about to get for them.

And the mainland Europeans are in flat-out denial.

American security involvement and American trade access are what ended the European civil war of roughly 1800 thru 1945, and generated the past 70 yoears of peace and prosperity. Europe is only able to import raw materials and export finished products because of American global overwatch, to say nothing for Europe’s (in)ability to defend itself (or in general get along with itself). In fact, without swap lines and loans from the Federal Reserve, it isn’t much of a stretch to assert that the Euro would have failed already. Without express U.S. involvement and strategic sponsorship, there is no European Union.

Rather than start tweaking themselves towards a system that might be sustainable without American overwatch and largess, most European politicians right up to the German and French premiers are engaging in a (not entirely) diplomatic back-and-forth with the Trump administration. It isn’t that I’m taking Trump’s side on any particular ethical, legal, constitutional, economic, strategic or practical issue, but instead that continental Europeans are acting as if the old rules still applied.

And unlike a week ago when the issues at stake didn’t hold immediate implications for the EU, now they do.

Apparently I was wrong. National Trade Council chair Peter Navarro is indeed aware of the existence of countries that are not China. Specifically, he knows where Germany is. On the same day the Japanese were testing the waters with their…consulting fee suggestion, Navarro laid into German trade policy. Specifically, he noted that the euro in essence functions as means of depressing the cost of German exports, constituting an unfair trade advantage.

Navarro is both wrong and right. Wrong in that the German intent for the euro isn’t to facilitate exports outside of the eurozone, but instead to induce economic convergence among the eurozone’s members and thus bulwark all of them against international volatility, and strengthen all of them as an internal trade bloc

But that’s not what has happened. The Europeans have proven completely incapable of grinding down financial, fiscal and political barriers within the bloc, so instead of helping everyone converge, the euro has instead established a dependency system in which Germany is the indisputable center of gravity. Since this is done in the context of a currency union, the weaker members have the effect of dragging the currency’s value down. And here’s where Navarro is dead-on correct: the failure of Europe to federalized has devolved the euro into an “implicit deutschemark that is grossly undervalued”. That was never the Germans’ intent, but it is most definitely the outcome — and will remain so until Portugal and Greece look more like the Frankfurt (which isn’t going to happen in our lifetimes).

It is highly unlikely that the Trump administration will be impressed with a “U.S.-Germany Growth and Employment Initiative”, even if Berlin had the political and economic bandwidth to fashion one. The accruing nature of everything threatening Europe is simply so multi-vectored, entrenched and damning that the Continent is now exactly the sort of commitment that the Americans are not interested in.

Yet if anything, that understates the challenge that Europe now faces.

The primary responsibility of the National Trade Council that Navarro leads is to prosecute trade wars. Which means it isn’t just that the European Union cannot exist without express U.S. support, but now also that the United States seems about to actively kick out the Union’s scaffolding.

After The Election

I try to avoid commenting on U.S. politics – anything I say tends to anger at least one-third of the room. But from time to time the United States takes a turn that elevates its internal issues to international import. Of late, evolutions in the American political system has taken such a turn. So here we go …

The American governing system isn’t small. U.S. local, state, and national governments are the country’s first-, second-, and third-largest employers. Combined, their staff is more than 22 million. So long as Americans disagree over how to do things, parallel structures are required to manage those disagreements in the context of the governmental apparatus. Those parallel structures are the Republicans and Democrats. With people constantly moving in and out of office at various levels, the parties need their own deep bench of support personnel to bulwark candidates-turned-mayors and representatives and senators and governors and presidents. The American parties are not traditionally tools of ideology, but tools of governance.

One, among many, outcomes is that various private interests get involved in building that bench of support. That way they can influence government decision-making both indirectly (via lobbyists) and directly (via elected officials and their staff). That takes money, and for decades the folks with the most money in the political system were those in the business community. The result was a somewhat revolving door of business leaders giving cash and staff to the parties to get people into government. When those people left government they returned to business to make more money. Some of that money then flowed back into influencing the political parties and government, and so the wheel turned. It was pretty rare for a stark-raving-mad politician to rise to the top. Business hates risk and likes continuity. Staffing choices reflected that.

Critics called this corrupt — and they had a point. Throughout the 1990s a consensus built that there was too much money in politics. The campaign finance reform effort was designed to minimize, and ideally eliminate, large donations to political campaigns, and thus root-out the perceived corruption. This weakened the business community’s connection to the political process to the point that it really didn’t have a candidate in the 2016 presidential run. This is the first piece of the parties’ unravelling: the single-largest and most cohesive and most status-quo-vested wedge of the political system was shown the door.

The second piece was even more disruptive: technology. In the pre-PC and smartphone age your options for contributing to campaigns of any sort were limited. You could give your time, or you could write a check and send it via snail mail. Checks of $20 or less were barely worth the man hours required to process them, so not a lot of effort went into bushbeating. In 2000 the landscape started to shift. Electronic checks, online bill pay, and money-by-text steadily reduced processing costs to nearly zero, even as social media techs enabled fundraising campaigns to be spread by email, SMS, Facebook, and Twitter at negligible cost. There’s now room for the masses to play politics with their cash.

The third factor almost seems prosaic: redistricting. State legislatures dominated by single parties would redraw their congressional districts’ boundaries, excising or including this or that population to build up their party’s electoral presence in the House of Representatives. The majority of such districts are now “safe” seats.

This all makes American politics loud and messy.

  • Courtesy of redistricting, the real competition for most House seats is no longer at the general election, but instead at the primary level among party stalwarts. That pushes the debate from the center to the edges.
  • At those edges, single-issue-voter money comes hugely into play. While businesses are interested in stability and continuity, individuals have axes to grind. Most Americans find it sexier to donate to specific causes and issues than to political parties and general platforms.
  • Single-issue penetration into both party and government politics polarized the system away from the consensus-building required to get on with the business of governing, and into razor-sharp disputes on issues of principle. Disagreement didn’t lead to bargaining and compromise, but was instead perceived as treasonous or flat-out evil.
  • Social media’s presence in the news cycle enabled people with a lot of extra time to prat on endlessly about this or that issue, blissfully unmoored from social trends, economic developments, decorum, facts, or reality. Biased or even fake “news” — much of it generated by folks outside of journalism — is now par for the course.

In such an environment the parties are largely incapable of appealing to the political center (by definition the political center is made up of people who are not single-issue voters). The parties have devolved from being tools of governance to vehicles for narrowly defined ideologies. America has become a great place to have an argument, but without functional parties it is almost impossible to have a debate.

American political candidates now break along a simple line.

On one side are those who cater to the ideological extremes to harness the increasingly-radicalized party structure: people like Ted Cruz, Elizabeth Warren, Bernie Sanders, and Michele Bachmann. On the other are those who can exist independent of the party structure and run their own campaigns: the Bush family, the Clinton Foundation, Trump Inc., and even Barack Obama. For them the parties were useful in a supporting role, but all of them succeeded because of their independent wealth and/or gravitas. W. Bush won by coalescing the evangelicals into a voting block independent of the Republican Party. Hillary Clinton manipulated the Democratic Party machinery, not the other way around. Barack Obama’s popularity was built on a social media network that co-opted the Democrats; once he was in office his connections with “his” party were cool at best. Trump could not only self-fund, he succeeded despite the Republican party.

At first the Republican Party got the worst of these changes. As a rule the business community is pro-Republican, so campaign finance disproportionally impacted their bottom line. In a double-blow the Democratic Party’s coalition is a much broader sweep of the American electorate. Reduce transaction costs and the Democrats’ larger party base can funnel a larger number of small donations. Before 2010 the Republicans were always the party that could raise more money. That’s now flipped, and Democrats have been able to use their superior financial position to fund ever-larger campaigns.

The Democrat Party stalwarts looked at this turn of events and got very excited about the 2016 presidential race. As America’s leftists tell it, American conservatives are a bunch of old white rich dudes who lord over the world. Campaign finance largely ejected them from the election process, which stripped the Republican party down to its racist, sexist, homophobic dregs. Beating those dregs in a general election would be child’s play because every single minority group in the country combined with the liberal Millennials would be able to sweep the field, eliminate the Republican position in Congress, and usher in a socialist utopia.

The Democrats got it completely right. Except how blacks would vote. And gays. And Hispanics. And unions and Millennials and women. They were wrong about everything. As a result Trump captured every single swing state except Virginia, and several blue states to boot. The Republicans now control both the presidency and Congress for only the second time since World War II. Barring some truly impressive breakthroughs in geriatrics they’ll also control the Supreme Court for another couple of decades.

What is fundamentally revolutionary in my mind isn’t what has changed, but what hasn’t. The technology has changed, dispersing political power far and wide. The way money is raised has changed, enabling the issue of the moment to dominate the Internet and airwaves and national debate. The parties have changed to the point of near irrelevance. But what hasn’t changed is that most Americans are still centrists.

Fully 42% of women, 30% of Hispanics, 45% of Millennials, and 33% of Californians voted for Trump. On the other side, 41% of men, 34% of rural inhabitants, 45% of people without high school diplomas, 25% of Mormons, and 43% of Texans voted for Clinton. The American political center endures, it is just now completely unmoored from the political selection and reporting process. And so it will remain until the American political parties can regenerate themselves.

That will take a lot of soul-searching. I hear encouraging bits. For the Democrats who aren’t part of those single-party factions, it has really sunk in that every election of the past generation that their candidate lacked charisma, they’ve lost. All those single-issue voters just can’t deliver success, because their screaming pisses off left-leaning moderates (not to mention everyone else). And since all but a half dozen of the Senate seats that will be up for grabs in the 2018 bi-elections are held by Democrats, they’d best get a move on unless they want to risk a generational blow out. For the Republicans willing to stand up to Trump, there’s already a realization that a party led by those rebelling against the order can’t rebel against their own order. The Trump election is a one-shot deal.

So it isn’t as bad as it seems…in the United States anyway. In the meantime, things are looking horrible for the rest of the world. The United States is the country that guarantees global security, global trade, and global energy. There are no single-issue voters who are interested in global management. America’s bandwidth to understand — much less discuss — what is going on in the wider world is nil until such time that the American political parties can regenerate themselves. Until then, the superpower that makes the world work is simply absent.

Scared New World

This isn’t a brag piece.

Many have credited me with predicting the Trump rise. To be clear, I never predicted Trump’s entry into politics, or that he’d win the Republican party nomination or that he’d carry the presidency.

But this is still a bit of an “I told you so.”

Everything about the American position in the international system is based upon the Americans holding together what we currently call the international order. Americans have been doing this since 1944. At that point the Americans re-forged the global system, shifting it from a series of warring imperial networks into a global system they personally managed. The Americans imposed global order — the first global order — and created free trade as a means of purchasing the loyalty of the Western and Asian allies, the defeated Axis powers, and in time Communist China. It was all about paying for alliance networks to contain and defeat the Soviet Union. When the Cold War ended the Americans neglected to shift their policies. The Americans continued to provide global security and empower global trade, but did so without the requisite security quid pro quo.

People noticed. The Brazil/Russia/China/India boom could only happen in such a strategic moment in time. The euro could only exist when economics were protected and security was free. But it wasn’t just in the wider world that people noticed. Free trade isn’t really free. Free trade requires someone providing the physical security and global ballast and market access to indirectly subsidize the rest of the system. The Americans have provided that for seven decades, and for the last three decades they have done so without asking for anything in return. With the Trump rise, this whole thing is now in its final years. Perhaps in its final months.

The reason for the accelerated timeframe isn’t just temperament, although I agree TrumpTantrumsTM will certainly play a role. It is far more structural than that. The entire webwork of elite relations that maintains the free-trade system just found itself without access to the leader of the free world. It’s not so much that the new American president is populist, although that is definitely a piece of it, but that he is not really affiliated with either American political party or the overall American business community or any other institutions that are linked into international trade. Trump is a purely domestic entity, disconnected from U.S. governance at all levels. Presidential history isn’t my strong point, but I think the United States hasn’t had one of those since Andrew Jackson, another strongly populist president who didn’t think all that highly of the wider world. But Jackson didn’t inherit responsibility for the global system. Trump has. And if there is one point on which Trump has been consistent, it is that that responsibility will be abandoned.

Yet this isn’t all Trump. The United States has been moving this way for a good 25 years, and I’ve little doubt that even a President Hillary Clinton would have ended the global system one way or another. I have been saying for months that the primary difference to the international order of Trump versus Clinton is timeframe. Clinton would move the United States away from the international order in a relatively slow manner. Probably 4 to 8 years. Trump would do it in 4 to 8 months.

To me the timeframe never really mattered. One way or another the global system was going to breakdown and we would find ourselves in the Disorder. This allowed me to view the world from afar and focus on the structure. The details would take care of themselves in time.

Well, that mode of operation is now about as relevant as the Clinton family.

With a shorter runway, a few things have clarified.

  • Almost everything from the Obama presidency will be undone by the end of January 2017. Obama has shown next to no ability/interest in having conversations with Congress, even with members of his own party. The only large law passed during his entire tenure is Obamacare, so only it cannot be undone with a few strokes of a pen. How that law is modified or unwound requires Congressional involvement, and since Congress remains in the hands of the Republicans, that too is on deck — it will just take a bit more time. Any international treaties negotiated by Obama — whether they be the Paris Climate Accords or the TransPacific Partnership — are dead.
  • The World Trade Organization has less than a year to respond to what will undoubtedly be a tidal wave of U.S. cases. Should those cases not be dealt with in adjudication at a pace and in the way the new White House desires, the United States will start taking unilateral moves which will, in essence, obviate the global trade order.
  • One of those first moves — which might not even wait for the WTO to try and act — will be to declare China a currency manipulator as well as revoke its status as a free market economy. Any countries that attempt to relabel Chinese goods are likely to be caught in a dragnet. This one push should be enough to throw China into its first recession in 30 years. The question now is whether or not President Xi’s political consolidation efforts have progressed enough that China can weather the resultant internal political and economic explosion.
  • NATO is for all intents and purposes dead. Russia’s moves into Ukraine will increase, and broadscale Russian plans for its entire western periphery — everything from Latvia to Poland to Romania to Azerbaijan — will accelerate. The only way forward for Europe is for Sweden and Germany to massively rearm.
  • Formal talks between the United States and the United Kingdom on some sort of post-Brexit trade deal will open. (Technically these are illegal under EU law, but what is Brussels going to do? Kick the Brits out?) The only question is whether these talks herald British entrance into NAFTA.
  • The alliance with Korea and Japan will no longer require U.S. troops in those countries, and even that assumes the alliance isn’t ended outright. Both countries will have little choice but to beef up their power projection capabilities, which is highly likely to include nuclear weapons. A much more aggressive Japan ends China’s creeping power projection to the northeast.
  • Alberta may have just gotten a fresh lease on life. One of those Obama executive orders that will be scratched out is the Keystone pipeline. Its construction will enable Albertan crude to access the U.S. refining network where it will be blended with light/sweet U.S. shale crude. The resultant blend will save U.S. refiners a couple hundred billion in refinery overhauls, resulting in lower cost gasoline for the country. It also just might provide Alberta with enough income to climb out of what would have otherwise been a multi-year recession. The question now is how much of that income will Ottawa take, and how Alberta will respond to the forced transfer.
  • Mexico now has no choice but to work with Donald Trump. Since most of the migration that comes into the U.S. actually comes from Central America and not Mexico, the most constructive path forward will indeed be a border wall that Mexico will indeed pay for…but on Mexico’s southern border rather than its northern one. How Mexico City handles this issue will determine the future success of both Mexico and NAFTA.

And now if you’ll excuse me, I’d better get back to that book writing. Apparently I have less time to get these projects out than I had thought.