Playing Jenga with Maritime Shipping

Cargo ship with containers

In my books, I highlighted how even a minor, seemingly insignificant event could cripple global maritime shipping. Well, not only did one of those events just happen, three did. We’re talking about a Russian cargo ship sinking, Israel targeting the Houthis in Yemen, and Finland impounding a Russian ship.

A Russian cargo ship went down in the Mediterranean and some foul play could be involved. This ship was critical for Russia’s nuclear icebreaker fleet, as it carried equipment necessary for construction. This will delay (or even cancel) these construction timelines, which marks a significant blow to Russia’s merchant marine capabilities.

Israel expanded its operations against the Iranian-backed Houthis, with efforts to disrupt supply chains. This could even spill over into targeting ships transporting Iranian weapons.

Finland’s seizure of a Russian ship accused of severing subsea cables escalates tensions in the region. This ship was already under scrutiny for its unsafe condition, but its suspected involvement in sabotage activities was the final straw.

Global maritime shipping relies upon trust, insurance and the US securing the sea lanes. These three events that have unfolded in the past weeks are causing the pillars propping up maritime shipping to teeter. It’s only a matter of time before maritime shipping, and globalization along with it, come falling down.

Prefer to read the transcript? Click here

Here at Zeihan on Geopolitics, our chosen charity partner is MedShare. They provide 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, so we can be sure that 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.

For those who would like to donate directly to MedShare or to learn more about their efforts, you can click this link.

Learn about medshare here

Transcript

Hey everybody. Peter Zeihan here. Coming to you from Wynona Bay. Just outside of Carmel Town in north east New Zealand. Doing a lot of little things have happened in the last 48 hours that are threatened to boil up into, something very significant. So let me go through the three items in our time together. First of all, the Russians had a cargo ship that sank in the Mediterranean. 

There’s some question as to whether sabotage was involved. What’s unique about this ship is, you know, the Russians don’t have much of a merchant marine at all. And this one was a roll off, roll on vehicle that can just accept vehicles from pretty much any sort of facility. Doesn’t even have to be a proper loading port or anything. 

There were also a couple construction cranes on board and a lot of specialty equipment for the Russian icebreaker fleet, most notably its nuclear fleet. Anyway, without this ship, the Russians are going to have a hard time moving things around the Mediterranean, where they’re in the process of evacuating their forces from Syria. And in the longer term, there, icebreaker, nuclear or icebreaker, which is under construction, which was supposed to be operational already has been pushed back to 2027 and 2030, probably will never be built because the Russians can’t build, the sort of specialty parts that were on board, one of which is something as simple as hatches. 

So we’re looking at the beginning of the end of the Russian merchant marine because they now can’t move the pieces around. Sanctions prevent them from moving or buying everything else that they need. Second, Benjamin Netanyahu, the prime minister of Israel, has announced the beginning of a much broader assault against the Houthis of Yemen. Now, the Houthis are a militant group, Islamic, that are sponsored by the Iranians. 

And the Iranians have basically been supplying them with weapons over the last 20 years. 

Yeah, it’s probably too much. It’s got 15 years, in order to destabilize all kinds of things in the country, because they see the Houthis as an eminently disposable ally or proxy, whatever the right word is. Because basically they’re a bunch of desert fighters who have never been able to hold anything together, completely incompetent at administration, and not very good at attacks either. 

But they know how to operate a chunk of equipment that flings a weapon. So they’ve been used to attack population centers and oil facilities in Saudi Arabia. They have been used to take out some things in Israel. They’ve engaged in some, like piracy, and they’re just generally a strategic nuisance. The countries in the neighborhood that have tried to quell them, most notably Saudi Arabia, have done bombing campaigns in the on again off against sponsorship of other sides in the ongoing Yemeni civil war. 

And but the terrain is very difficult. The Houthis are, if anything, persistent. And it has basically been impossible for anyone to bring Yemen to heel. And that is not something that this is the last ten, 15 years. That goes back centuries. It’s an unruly place with a difficult geography, and no one has really had a lot of fun operating there. 

I don’t think that, the Israelis will be successful in rooting out the who? These. Fabulous. Put that to the side right now. But, the Israelis have definitely demonstrated some interesting out-of-the-box thinking over the last few months, and in doing so, have participated in the destruction of Syria as a conventional power had destroyed Hezbollah in Lebanon. 

And, well, their operations in Gaza against Hamas, are let’s just call that complicated. Hamas is definitely in a box and cannot strategically expand at all. So to say that, success against the Houthis is impossible is, of course, ignoring recent history. I’m more concerned with how they would interrupt the flow of the weapons systems that they have a problem with, because the Houthis have been doing long range drones and missiles and talking to Israel directly. 

And to go after that sort of stuff, they would have to go after the ships that sail from Iran to supply the weapons systems. So that’s two third Finland just all over the place today. The Finns have, boarded and impounded the first ship of the Russian shadow fleet. One of the things we’ve been seeing over the last several months, really started about 18 months ago, but really accelerated recently is that the Russians have been either directly or through third parties, like the Chinese. 

Getting ships operating in the Baltic Sea to drag their anchors to sever subsea physical infrastructure, within the northern Baltic, specifically places that transmit data or electricity among Sweden, Finland, Estonia, Latvia, Lithuania, and the ship that they have now impounded is accused of basically dragging its anchors and severing five different cables in a short period of time. 

Now, in the past, what has happened is when the Russians have done this, they’ve done it to one at a time. They’ve done it through a third party vessel, most notably a Chinese vessel. And the ship has gone before anyone realized what was going on. But this time, two things have changed. Number one, the, all the Scandinavians, all the the Baltics, all the Nordics are more on to it. 

And they’ve been watching a lot more closely. And the Russian vessel, did several in short order. And the vessel itself is part of the Shadow fleet, which means it’s old. It’s rusty. Probably couldn’t pass a safety inspection in Guatemala, much less in Finland. And so the Finns were already watching it. And so when these cables got snapped one after another in a short period of time, they really had no doubt as to what was in play. 

Okay. That’s a lot. What’s going on here is we’re seeing a multi vector challenge to the naval order that allows international trade to happen. One of the things that we had in the world before World War two was unless you could provide naval security for your ships, you just didn’t sail somewhere. Or if you did, you did so without any insurance or confidence, that the ship could make it. 

It was very, very risky business. One of the many, many things that globalization has been very successful about is about making it so that anyone can sail anywhere at any time and interface with any partner to access any commodity or any product. And that has engendered not just global trade as we know it now, but the expansion of various economic sectors in a way that just simply wasn’t possible before. 

So, for example, today, over half of all internationally traded oil sales, long haul ships. And that means if you’re going from the Persian Gulf to the East Coast or Northeast Asia, wherever, you can do so without much fear that your cargo is going to be anything inopportune. And for that rare occurrence where something might go wrong, you can buy an insurance policy for your vessel and its cargo, which only costs about 1% of the cost of your ship every year. 

Quite affordable. Same thing for food production. Roughly a third of all food production globally is shipped in a similar manner, with a similar insurance for fishermen. And the very existence of a manufacturing sector in the world is courtesy of this sort of security set up. Because if you’re looking at something like, say, a stereo, you know, there’s roughly 400 parts in that thing. 

You’ve got 400 different producers for each part, some of which have their own supply chain stretching back several steps, and intermediate products are shuttled around. Well, especially in East Asia, almost all of that, well over 95% of that is done on the water. And none of this would be possible without a relatively peaceable international system. Well, now we’re seeing that system hit from a number of different angles. 

You’ve got the Russians who are basically turned much of the Black Sea to no go zone. You’ve got the Ukrainians who have started to go after Russian shipping in that space. We now have the Baltic states and the Nordic states, Scandinavian states, sorry. Most notably Finland, that have just impounded one of the ships that is taking advantage of that order in order to evade sanctions. 

And we now in the Middle East have a situation where the Israelis, on a little bit of a high after the fall of Hezbollah and the fall of Syria, are going after another strategic irritant, the Houthis, which means they have to go after the shipping in order to interrupt the weapons. All of this is happening at the same time. 

And one of the things I hit very hard in my, my last book, The End of the world, is just the beginning. Talking about the end of globalization is that the maritime order is based on trust. The trust that your ship will get there, the trust that the Americans will enforce the sea lanes, the trust that no one will challenge that. 

And all of that is now falling apart. And in the book, I mentioned that, you know, it doesn’t really matter, what it is that breaks the system of trust. I must admit, having Israel and the Houthis or the fins and the shadow fleet on the bingo card. Not specific things I predicted, but it doesn’t really matter what it is. 

Because as soon as states, for whatever reasons, have a vested interest in going after the system, the trust is broken and the insurance system can’t handle it. And that’s when we get a rapid fire breakdown in all types of shipping, because it’s no longer profitable or safe manufacturing is definitely the sector where we will feel it. First, in the United States, for most of the rest of the world, it’s going to be a race between energy and agriculture. 

So we are in the witching hour of this system right now. And based on how any of these issues unfold could get really rocky, really quick and never take your eyes off the Russians because they’ve just lost the ability to maintain their icebreaker fleet, which means the entire Arctic route is something that is no longer strategically viable for them. 

And if that is the case, then the Russians have a vested interest or may perceive that they have a vested interest in challenging parts of the system itself. We’ve been in this weird little holding pattern globally for the last decade, roughly where it wasn’t apparent that the Americans had the will, the interest or the ability to maintain the global order. 

And lots of countries that are American rivals started challenging the US and various points thinking that the future was the Americans will keep the world safe for everyone, but they can carve out whatever they want for themselves, and we’re about to see all of that blow up in everybody’s faces. The future on the other side of this, from my point of view, is pretty clear. 

You basically have regional powers that can guarantee regional security for the waves. And so you can have regional trade systems or national trade systems, but the days of long haul multi continental shipping that have dominated manufacturing, agriculture, 

And energy since 1950 were at the very end of that. And it’s going to be interesting to see whether it’s Finland or Israel or Russia that fires the shot that formally breaks the system. 

But these are just three examples of how easy it would be for this whole thing to come unwound. And we may very well see this before I get back from New Zealand. Yikes.

One Ship Inspection Could Unravel Global Maritime Shipping

Photo of a ship in a port in Helsinki, Finland

The Nordic nations are teasing a new initiative of inspecting ships leaving Russia’s St. Petersburg port for insurance and environmental compliance. This may seem insignificant, but it could disrupt shipping on a global scale.

Russia has relied on its shadow fleet (uninsured and aging tankers) to export oil after the sanctions began; this new initiative aims to curb Russian income and disrupt funds for the war in Ukraine. But what happens when one of these countries completes an inspection and decides to confiscate or detain one of these ships? We’re talking about uncharted maritime territory…and it could get messy very quickly as countries start to take maritime security and trade into their own hands.

A return to localized maritime security enforcement and controls won’t look the same everywhere. The Western Hemisphere and the Nordic countries will experience some shortages but be mostly fine. The Mediterranean’s future would rely on cooperation between Italy, France and Turkey. Places that are heavily reliant on energy and food imports (i.e. East Asia) could face economic collapse or famine.

Prefer to read the transcript? Click here

Here at Zeihan on Geopolitics, our chosen charity partner is MedShare. They provide 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, so we can be sure that 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.

For those who would like to donate directly to MedShare or to learn more about their efforts, you can click this link.

Learn about medshare here

Transcript

Hey, everybody. Peter Zeihan here. Coming to you from the Tongariro Crossing in New Zealand. We finally got a break in the weather, just in time for the emerald pools, which are, you know, volcanic and super stinky. Anyway, on the 17th, 18th, of December, representatives from all the Nordic nations, plus Poland and Britain. So that’s, Norway, Sweden, Finland, Denmark, Estonia, Latvia, Lithuania, basically got together and said that they’re going to start checking ships that are coming out of Saint Petersburg port in the Baltic Sea, for things like insurance and compliance with environmental regulations. 

In order to disrupt the shuttle fleet, the shuttle fleet is how the Russians are getting their cruise to market since they canceled by pipeline, and they can’t use Western maritime insurance or navigation aids. They basically, have to get insurance from the Russian government, the Chinese government or the Indian government. And there’s a suspicion that no one is actually issuing policies that pieces are just sailing. 

They get out of the port, regardless of whether or not they have a policy. Not the Indians, the Chinese and the Russians have never actually paid out on one before. So if there was an accident, the idea is that there would be no one there to help pay for the cleanup. But more to point, the Shadow fleet is how the Russians get their money. 

They basically have uninsured or under-insured old aging tankers, that evade everything that the Europeans are trying to do to shut Russian oil out of their systems, and especially to deny, income to the Russians as they’re launching a war in Ukraine. Will it work? It all depends upon how the Nordics and the poles and the Brits decide to handle enforcement. 

So if a ship doesn’t have anything, what does that mean? You confiscate it, you take it into port. That would be getting into some very interesting territory, that it would be uncharted in the modern age. The whole idea of globalization as created by and then guaranteed by the United States since World War two, is that anyone can sail anywhere at any time. 

And you don’t necessarily have to have insurance, although that’s a really good idea. And if the Russians don’t have it, it’s then up to the Nordics to decide what to do. And if the ships are confiscated, because they don’t have something that is not technically illegal, or they haven’t complied with something that just someone said that they needed to do. 

We enter into a new phase of naval maritime transport. If if, if, if we go down that road that there’s no reason for any country really in the world to not take a ship that they like the look of or don’t like the look of unless they fear the consequences of whoever happens to own the ship or whoever happens to, have the ship registry. 

The registry is a joke. Those are countries like Guinea Bissau and Panama, basically places where you can basically file a web address for free, and officially register your ship if you’re going to replace the system with something that actually means something that has to be a country that has a navy that can actually protect the shipping and are only a handful of countries in the world that can even pretend to do that in a regional basis. 

And only one U.S. that could do it on a global basis. And since the United States does not dependent on international transport for most of its economic strength, it’s a stretch to think that the United States would do that unless it was paid a whole lot of money. And so if the Nordics do this, it is the end of the globalized system as we know it. 

Now, keep in mind that I think we’re going here anyway. There is too much shipping. There are too many powers or too many people wanting revisions, and the US has lost too much interest. And we’re probably going to a naval freefall in the not too distant future. I’m not saying that this is the trigger, but I think it’s time to start talking about what the next system looks like and what the consequences are. 

For the United States, if it happened today, it would hurt. Most of the naval shipments that come into the United States are large container ships carrying manufactured goods from Asia. So we’d have to get by without things like phones and computers and all that. The more valuable stuff eventually would be flown. But for all the bulk stuff, you know, your stereos, your cars, you’re going to be having some problems until that manufacturing capacity is rebuilt in North America, something we’re working on, something that is unlikely to be finished before the end of the decade. 

So, you know, timing matters here, too. For other countries, this would be an absolute disaster. Most of the countries of the world, especially in East Asia, import the vast majority of their energy and material inputs. Some of them are even dependent upon significant food inputs, or at least the inputs they need to grow their own food. 

So if this happened to China, for example, we would easily have a deindustrialization, or collapse, complete with famine in a very short period of time measured in months, not even years. 

What takes its place is probably regional groupings, where either the seas are safe or everyone’s on the same side, and agrees with the rules of the games are, that looks really good for the Western Hemisphere. 

That looks pretty good for the Scandinavian bucket. And in the Mediterranean might get a little dicey based on how relations between or among the Italians, the French and the Turks go. If they agree that they can, work together. That looks great. And if they can’t, You get two different mediterranean’s that shoot at one another, which, if you know your history has happened many, many, many, many, oh, so many times. 

So, I can’t wait until the first time that Sweden or Finland or Poland decide that a ship that’s sailing by their coast isn’t doing something right. I want to see what they do. This is one of those many things that could all fall apart in a day. If the stars are aligned. 

So stay tuned. This is probably not something you’re gonna have to wait for me to comment on, because if it does go down, a lot of things are going to break real soon.

Why I Don’t Care About the Fallen Bridge in Baltimore

At this point, we’ve all heard about the Francis Scott Key Bridge Collapsing in Baltimore on March 26. While it may seem like this should drastically impact American shipping, I’m really not worried about it…

Before this catastrophe, I was convinced that the Jones Act hadn’t done anything good for America. However, I can now say that the Jones Act has one redeeming quality – since cargo transport on American waterways has drastically fallen since the Jones Act was introduced, the fallout of this bridge collapse won’t be as bad as it could have been. That’s a positive, right?

In a world without the Jones Act, natural port systems like the Chesapeake Bay would be teeming with manufacturing and short-haul shipping. I’m not convinced the prevention of some immediate disruptions is worth utterly stifling economic growth, but hey, I’ll let the policymakers come to their own conclusions.

Prefer to read the transcript? 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.

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TranscripT

Hey, everybody. Peter Zeihan here, coming to you from Colorado. several of you have written into the Ask Peter forum asking why I haven’t had anything to say about the falling of the Francis Scott Key Bridge in Baltimore back on the 26th of March. the idea is, you know, this is controlling the mouth of the Chesapeake. And shouldn’t this be a big issue, considering how gung ho I am about water transport?

It’s about 1/12 the cost to move things by water that it takes to move them by truck. And so you would think that seeing an interruption in one of America’s greatest ports would be a problem. it should. It really should, but it’s not. So let me give you the backstory. first of all, the Chesapeake is the world’s greatest natural port system.

It has more miles of frontage that can be used for ports than any other part of the world, with the possible exception of the Texas coast. And even that’s a tight race. It’s in the Mid-Atlantic, so it’s the midpoint going north south on the American East coast. For the parts that are densely populated from roughly Atlanta all the way up to Boston.

And it has access to what used to be the national road through the Cumberland Gap, getting into the Ohio River Valley. So it should, should, should be a crossroads of the greatest manufacturing zone on the planet. it is not because of something called the Jones Act, which was a program passed in 1920 that was designed to keep jobs within the American system.

that says that any maritime vehicle, any ship, the transport, any goods, between any two American ports must be American built, owned, captained and crewed. And as a result of having that restriction on maritime transport, but not on truck transport or air transport or rail transport, people stopped using the river ways completely. And we’ve seen cargo on America’s waterways dropped by over 99% in the century since.

And so we’ve taken what is honestly the greatest natural gift that God could have possibly given to any culture and destroyed it. the United States has roughly 3000 miles of naturally navigable, interconnected waterways, and we hardly use them at all anymore. We certainly don’t use them with small ships. we should, should, should, should, should have thousands of tiny ships carrying a handful of containers here and there throughout the system, making our own multimodal manufacturing system that is the world’s most efficient.

Instead, we move half of our cargo by truck, which is the most expensive way to do it, which it shouldn’t work because we removed the cheapest way of doing it and then other stuff by rail. Well, because of this, our waterway networks, including the Chesapeake Bay, are barely used, and places like the Ohio River Valley and the Great Lakes system, which should be the busiest zones in the world, are barely used.

So we should have this rough pentagon of territory going from roughly Buffalo, New York, to Duluth, Minnesota, to Saint Louis, Missouri to Pittsburgh, and then with an arc going down to Baltimore that is the busiest section of waterways and the biggest manufacturing zone in the world. Instead, it’s the Rust Belt. there are many things that have caused the steel belt to become the Rust Belt, but I would argue that the Jones Act is the single biggest factor, because it raised the cost of transport among these systems and basically drove the business somewhere else.

So this should, the downing of the Francis Scott Key Bridge. This should be a really big deal. Instead, the only thing it does is interrupt a few cargo shipments coming in, container shipments, which can easily be rerouted to places like new Jersey or Savannah, as well as some internal, petroleum fuel distribution systems within the Chesapeake Bay itself so that these are non-issues.

But these are like minor rounding errors, considering how catastrophic of an event this should have been. if we had gone the other direction, we’d have an extra $10 trillion on the U.S. economy right now. Most of that in manufacturing, most of it in this zone. And then it would have been a very big deal. So I guess from a certain point of view, the Jones Act has saved us from problems by gutting our economic growth.

For the last century, the part of the United States that has suffered the most of those countries in the Midwest that border both the Great Lakes and the Ohio River Valley, so specifically Ohio and Indiana and Illinois, because these are the ones that should be at the heart of all of this, and they can’t participate in almost any of it.

A North Dakota Love Story: Agriculture and Railways

For all those with an aversion to woodchippers…today’s video is for you. That’s right, I’m in Fargo, North Dakota and we’re discussing the state’s agricultural prowess despite a lack of water access.

While most Midwest states rely on river systems for shipping, North Dakota has built an extremely robust rail system that facilitates the transportation of their agricultural products. These railways connect to both the Mississippi River and the Pacific Coast, which broadens and diversifies market access.

As impacts to global agricultural markets increase, the importance of North Dakota foodstuffs will only grow. However, the shale revolution has introduced some competition for rail space between the agriculture and energy industries, but that’s a story for another time.

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.

Support medshare's ukraine fund
Support medshare's global efforts

Talks of the Trade with James Fraser & J.P. Morgan

I recently had the opportunity to sit down with J.P. Morgan Payments’ Global Head of Trade and Working Capital, James Fraser, for episode 2 of “Talks of the Trade.”

In this episode, we discussed how global markets and cross-border trade flows are vulnerable to geopolitical risks; these factors can have oversized impacts on costs, access to capital, and overall economic stability. We do a deep dive on a handful of these factors, including deglobalization, international tensions and crises, world financial markets, urbanization, manufacturing, and supply chain risks.

Click the link below to watch other episodes or to learn more about Trade and Working Capital at J.P. Morgan Payments…

Learn more

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.

Support medshare's ukraine fund
Support medshare's global efforts

The Collapse of Global Maritime Shipping

Cargo ship with containers

No matter how much bubble wrap and caution tape we slap onto global maritime shipping, the industry has found itself in quite a predicament.

Despite the Ukraine War, a drought impacting the Panama Canal, Houthi attacks in Yemen, widespread piracy, and mounting geopolitical tensions in the South China Sea (yes, that is a lot of disruptions), the maritime shipping system has not cracked yet. However, it is very, very, very fragile.

The main thing propping up shipping in these more problematic regions is the emergence of ‘ghost fleets’ with alternative insurance policies. This insurance system is untested and unreliable, and as soon as one of the dominos falls, the entirety of the shipping system will follow.

The looming threat of a shipping collapse should terrify you. In case you need a supply chain refresher, manufacturing and global shipping is more interconnected than ever…so if the global shipping system fails, we’re in for a world of hurt.

Prefer to read the transcript? 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.

Support medshare's ukraine fund
Support medshare's global efforts

TranscripT

Hey everybody. Peter Zeihan here. Coming to you from a chilly day in Delray Beach, Florida, while chilly for Florida. It’s like 50. Today we’re going to talk about what’s going on in the world of maritime shipping and why we should be thankful that nothing has gone horribly wrong yet and why we should count on that. Continuing. Just a quick recap of what’s gone down in just the last couple of months.

We’ve got Ukraine taking accurate potshots at Russian energy facilities on the Baltic Sea at a place called Ust-Luga and on the Black Sea, a place called to Tuapse. And they’re reviewing up for an overseas hit. Now we’ve got a drought in Panama, which, based on goose numbers you’re using and whether you’re going by value or tonnage, has reduced the throughput of the Panama Canal by somewhere between one third and two thirds.

We’ve got Houthis in Yemen who are taking potshots at pretty much every other vessel that happens to go by them, which has reduced shipping through the Red Sea by about 10% for energy and cargo. we’ve got fresh piracy in places like Somalia. This really gone away in places like the Gulf of Guinea or the Strait of Malacca.

And we’ve got the Chinese making ever louder noises about wanting to change the security environment in their own neighborhood, even as the Russians are actively making roughly two thirds of the Black Sea a no go zone. It’s a long list. It’s getting longer by the day. But, but, but, but, but, but to this point, there has not been a meaningful break in the old system.

A big part of that is because of the insurance structure where every vessel who’s sailing anywhere has to get some sort of policy to insure both their whole and their cargo. And while with the ever tightening sanctions on the Russians because of Ukraine or to this point, that system has not been broken. It has been denied Russian shipping.

But Indian, Chinese and Russian state companies have stepped in to offer policies. And so far, none of the ships that have had problems anywhere have been under one of those policies. So what has happened is we’ve got this dual system where we have the the normal world where the Americans and especially the Europeans are providing the insurance for most of the shipping.

When you’ve got this ghost fleet that’s developed, mostly older vessels that were about to be decommissioned, that have been brought back and given a new lease on life as second rate cargo haulers, especially for liquids where they have a Chinese Indian or Russian insurance policy. This ghost fleet, based on whose numbers you’re using, that may be as much as 10% of the global tanker fleet.

And there’s also a few brokers and maybe, maybe, maybe even a few container ships that are kind of joining its ranks now to anything that the Russians can do to keep things under the table from the point of view of global record keeping and shipping. Now, what that means is that the risk has been deferred and absorbed by this shadow organization that has kind of popped up.

We’re now in a situation where we’re kind of in a holding pattern where we’re kind of waiting for like a real actual disruption to happen. But so far, no real country has targeted any sort of shipping. It’s not like the Japanese and the Chinese have started trying to block each other. The U.S. is still using its naval power to patrol the oceans where it can, and the biggest beneficiary of that system is none other than China.

And we don’t have the Russians or NAITO deliberately targeting each other’s commercial shipping yet. In fact, everyone is very will be closely sticking to the old structures. They’re just kind of trying to maneuver their own ways to get national and regional advantages. Now, this isn’t going to be long for the world. This is a very unstable sort of equilibrium that we have reached in early 2024.

And the that this is crazy that goes fleet is the reason why it’s all still working. It’s kind of a testament to the strategic inertia of the system. But now the buffer, the ghost lead is something that is largely documented, largely under the table. And if one of these ships gets into trouble, it’s an open question of whether or not the U.S. Navy will step in to help.

All of these are unknowns, which means as soon as that happens, a ghost fleet ship gets into trouble or a real country starts taking shots at another country’s shipping. We don’t just lose that buffer. We lose all of the insulation that we’ve managed to build up in the last two years, and we get a very quick breakdown much faster than we would have otherwise.

Now, based on what happens geopolitically, this could all go any number of directions. If the United States decides to take a shot at what the Iranians are doing in the Gulf, you know, that obviously takes us one direction. The Chinese decide to do something in the South China Sea that takes us another. If Ukraine accidentally hits an actual third party vessel in some of its anti-Russian operations and goes another, if the Russians are bored and captured, somebody go into a Ukrainian forward that takes another.

We’re on the edge. There’s a lot of guns aimed at our heads right now. And it honestly from my normal point of view, it doesn’t really matter which way this goes. It all leads to the same in place where long range shipping is simply no longer viable and shipping in general through dangerous areas is simply no longer viable.

And the two biggest places in the world that benefit from the current system are, ironically, Russian sanctions busting oil exports, which have to sail all the way around Eurasia and Chinese merchant US exports, who have to do the same thing. Those are the longest haul plays out there, all going through dangerous zones. So when this cracks, we see those two things get hurt first, but they will be far from alone.

Remember, East Asia is home to half of all manufacturing supply chain steps. There is no version of manufacturing in the world, especially when it comes to things like computing and electronics, where it works without that setup. And that requires global shipping to be safe. So we need to be prepared for the not too distant future when all of this just stops working.

And we have to figure out a fundamentally new model that’s probably going to be more based on regional trade rather than global. Okay, that’s plenty for the day. Take care.

Shipping and the Red Sea

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If any of the gifts you ordered have to go through the Red Sea, it might be time to buy a backup. If you haven’t heard, there has been a series of attacks carried out by Yemeni militants on commercial shipping.

Most of the major shipping companies have suspended operations in the region; no surprise there. However, if you’re not a shipping savant, these attacks in the Red Sea could disrupt nearly 30% of all global container traffic.

Some countries will feel the heat a bit more than the rest of us. Chinese exports to Europe will require longer routes, crude shipments from the Persian Gulf could be disrupted, and don’t get me started on Russian crude exports. This is a complex issue that, if left unattended, could have major consequences down the road.

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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 chilly Colorado. And the news we have in the last few days is that militants within the militants in Yemen are launching a combination of low grade ballistic missiles and drones, commercial shipping in the Red Sea. And that’s led the ten major shipping companies of the world to basically suspend operations in that area and either tell their ships to wait at the openings to the Red Sea until the threat passes or simply sail around the Red Sea completely, which means going all the way around Africa for the Asia Europe run.

Now, first, let’s get the caveats out of the way. This is not a state making a determined effort to shut down shipping in the area. That is something that has happened before in the aftermath of the 1973 war between the Arab states and Israel, the Israelis found themselves occupying the eastern side of the Suez Canal. And so they did just that in order to destroy one of Egypt’s main sources of foreign currency and force them to the negotiating table.

That’s what it’s play here. We have basically a bunch of drug addled militants, some of the world’s least competent ones, operating from some of the world’s least valuable land in Yemen, probably at the instigation of the Iranians who are their primary supporter, because this is a little conflict that is a needle on the side of Saudi Arabia, cost them very little to do it.

They’re using some of the same weapons systems that they’re selling to the Russians. And it’s plausible deniability just causes a lot of heartburn. So this is not a formal shutting down of trade. This is more of a heavy annoyance that has the opportunity maybe get worse. But at the moment, the warheads in play here are, you know, no more than a few pounds to a few dozen pounds each.

Nothing that can take out a tanker, nothing that can take out a container ship. The reason everyone’s so touchy about it is the way insurance law works on the seas is if you sail into a zone where someone is shooting the commercial shipping, your insurance policy is null and void. And so if anything happens like you need a tow, you’re on your own, or God forbid, that you actually get a leak either from the attack or from something else, you’re on your own.

So out of an abundance of caution, everyone’s just avoiding the area altogether. Now, who gets affected by this? Three big things to keep an eye on. First of all, this is roughly 30% of all global containerized traffic. And the biggest single chunk of that is Chinese exports to the European Union. These routes now need to go around the bulk of the African continent, which, based on where this stuff is being sold to, increases the sailing distance by one third to two thirds.

And that means you need one third to two thirds more container ships to maintain the same flows. So we’re going to see a lot of pinches in the supply chains for finished goods. These aren’t intermediate products for the most part. These are finished goods coming from the Chinese, which is obviously going to hit their bottom line in an environment where consumption is basically seized up in China and all they have left are exports.

It’s also going to make it a little bit easier for the Europeans to put trade sanctions on the Chinese for product dumping, for example, on the eve space. The Europeans are always looking for protectionist methods to apply. And if the Chinese are proving unreliable in their deliveries, that’ll make that case that much easier. The second thing is crude oil coming from the Persian Gulf, mostly Saudi crude that is going the north through the Red Sea and Suez.

There are a couple of bypass pipelines for Suez that go through Egypt as well, which go into the Mediterranean basin and of course, Europe in the aftermath of the Ukraine war. This route has gotten a lot more traffic because the Europeans are no longer taking Russian crude. So the Persian Gulf has stepped in. This is about 12% of global energy shipments.

Now, if this proves to be any more than a momentary problem, what the Europeans are going to be forced to do, what the Saudis are going to be forced to do is to do what happened the last time this was closed down in 1973, the supertanker was developed. The traditional oil tanker only carries about 500,000 barrels, whereas a supertanker can carry a little bit over 2 million.

It takes a larger tanker to make the trip all the way around Africa economically viable. And of course, the Saudis know a few people who have supertankers. So expect to see larger and larger vessels plying this route, which is going to put pressure on anyone else who is trying to bring in crude from a longer distance. Which brings us to the third problem and where we’re probably going to see the most pain in the market, and that’s Russian crude exports.

Now, when the Ukraine war started, the Europeans basically stopped using Russian crude and then they gobbled up all of the crude that was available within arm’s reach. Some from the United States shale fields, some from North Africa, some from West Africa, and the rest from the Persian Gulf. That meant that because of a lack of infrastructure, Russian crude had to be exported through the same port points on the black and the Baltic Sea.

But it had to be then shipped through the Mediterranean, through Suez, through the Red Sea, across the Arabian Sea, to India, Southeast Asia and China. Well, that is barely an economically viable route now, which is one of the reasons why the Russians are typically selling their crude at a 20 to a $30 a barrel discount. But if Suez is closed, then they can no longer send these small tankers through it.

And these small tankers don’t have the reach to go all the way around Africa, in addition to all the way around Asia. So you’re looking at something like 1.5 to 2 million barrels a day of Russian crude that might finally actually be stranded if this isn’t solved pretty quickly. Now, the Russians do have one thing going for them here.

The insurance rules that I kind of laid out there are how insurance has been working since the 1980s. But since the Ukraine was started and Western insurers have been bypassing Russian ships completely. You have some Russian players, some Indian players and some Chinese players who have started to offer indemnification insurance. So we might get this really colorful situation where the real shipping companies would stop using Suez and the Red Sea.

But these shadow companies that have never had to pay out start using it. And then we get to find out what happens if an Iranian backed militant force hits a Chinese, Indian or Russian ship and goes down there. So this is an interesting little story. This is not the panic in shipping that I’m anticipating because there’s no real sovereign behind it.

No one’s actually trying to break the shipping routes, but it does raise some interesting mixes of motivations that are probably going to shake out in the next week or two. So stay tuned. I know I’ll be watching, but.

Why the Port of Savannah Is Poised for Success

Savannah is awesome!

Not only is it home to my favorite bar and one of my favorite food scenes, but it is also the site of the largest containerport in North America. For the people of Savannah, a lot of the hard work has already been done. They are well positioned to thrive no matter what happens with the global environment or how Americans do or do not take advantage of the changes.

Also, the best shrimp and grits on the planet.

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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 Savannah, one of my favorite cities in North America. And one of the reasons is the bars, and one of the reasons are the restaurants and the other one, it is home to the largest container port in the continental United States, been operating for a few years now. They keep expanding it.

You’re looking at here one of the Merce medium size ships. The supers do come through here. They just have a problem getting through that bridge there. All right, It’s raining. We’re gonna do the rest of this inside. All right. Got some shelter. The Savannah super container port is definitely the newest in North America, and it’s the only one that was really designed for the the post-June TechEd world that we’ve got.

So the Jones Act restricts shipping within the United States, saying that no foreign vessel, no matter what kind, can dock at two consecutive ports. If they come in, then they have to leave the country to come back. And that’s made it really hard to have a domestic waterborne manufacturing system in the country. But it wasn’t until the Savannah port came on operation in the last decade that we actually had a place in the United States could really handle the very, very large container ships.

I mean, yes, you got Long Beach, California, such a special case in so many ways. Usually what happens is they dock in a place like Kingston, Jamaica, and then the cargo is broken up into smaller vessels who can just do a single run because the idea of doing a circuit where you go to New York and Boston and more Fulgham and Savannah and Miami, a foreign ship can’t do that.

It can come in, dump its cargo and leave, has it in the country before it comes back. So those shuttle tankers take most of the traffic except for, again, at the mega port of Long Beach. Oh, the question is, moving forward as the United States re industrialized is because we have to of which sorts of ports are actually going to be able to continue operation.

Now, in the case of Savannah, it probably is looks pretty good because you’re not going to build a huge amount of manufacturing in Atlanta or in Miami. And so you can still have the super container ships coming in and docking and disgorging to serve a huge area because Savannah has excellent rail connections, which is how most of this stuff is shipped about.

But when you’re talking about areas where manufacturing can move back, eastern Virginia, for example, or Texas, then all of a sudden the ability to take really, really large cargo ships really doesn’t matter. And so it’s only going to be the small stuff that can continue to go. I’m particularly concerned about places like Long Beach because despite all of the negative things that everyone always says about California, most of that stuff is coming from China.

If the Chinese face stability issues, they’re going to have to find a different business model. Other ports, like say Tacoma, are a little bit different because they handle so many commodities exports, but places that specialize in containers really haven’t put in the infrastructure to adapt to the changing world. And I really don’t see it happening on the time scale that is necessary for this transformation the U.S. is going to be going through in the next 5 to 7 years.

Savannah seems to be in the sweet spot. It’s all keepers. I think.

Reviving Water Transport in the United States

The US is blessed with one of the most prolific water networks in the world, yet it operates at sub-optimal levels. You’ve all heard my thoughts on the Jones Act, so you can probably guess where the blame falls once again.

Something will have to change as the US reshores its industry and attempts to build out its manufacturing footprint. Thankfully, reviving water transport in the US is a low-hanging fruit. All it requires is some amendments to the Jones Act and its regulations on waterborne commerce.

If we can manage that, we’ll all enjoy some nice economic growth thanks to reduced product transport costs and a boost to US manufacturing.

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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.

Support medshare's ukraine fund
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Transcript

Hey everybody. Peter Zeihan here. Coming to you from Milwaukee, where I’m doing a little street hiking along the Kinnickinnic river, which is, you know, say that five times fast. This used to be one of the great industrial heartlands of the United States. Big into steel. Big into heavy manufacturing. And the reason was because of what’s right here next to me.

Moving things on water is about 1/12. The cost of moving them by land and courtesy of in the Air and the nearby Lake Michigan. Milwaukee, just like Chicago, just like Oshkosh and Green Bay, were part of a broader transport network that included the entirety of the Upper Midwest, of the United States and the New England States and the Mid Atlantic states.

Basically from here in Chicago. You can take your local rivers and canals out to the Great Lakes, go through the Great Lakes until you get to Erie, and then you’ve got two choices. You can either take the Mohawk River, Erie Canal and Hudson to New York direct, or you can go the long way, which goes through Quebec and Ontario in order to reach the Atlantic Ocean.

That’ll loop back around. From New York, you go south through the barrier islands system all the way to Miami from Miami. You can go through the barrier island systems all the way to Matamoros or you can hit New Orleans and go up the Mississippi River and go all the way back up to Chicago via canal that links into the Illinois River.

It’s the great circle of North America and it has long been one of the great manufacturing zones of the world until about 1920. And then in 1920 as part of it, discretionary, protectionist system, the United States put in place a law called the Jones Act, which says that any cargo transported on any vessel that goes between any two American ports has to be on a vessel that is American owned, captain, crewed and built.

And over the course of the next century, we saw cargo transport on America’s waterways drop by 97, 98%, something like that. Anyway, so we basically taken what has been the world’s most beneficial old natural geographic feature from an economic point of view and crushed it into irrelevance. Now that we are entering an environment where the United States wants to double the size of its industrial plant in the aftermath or the soon to be aftermath of the European and especially Chinese failures, we need to start thinking a little bit differently, and that means we need to start looking for things that are very, very, very low hanging fruit.

In this case, that means getting the waterways back up and running again. Because when you think about the sort of manufacturing that the United States traditionally is not good at things like electronics, it’s largely because you have different price points for different types of work. The person who does injection molding is not the same as the person who does the coding for the wires and not the same who does the software work.

You need multiple skill sets in different places, and if you can drop the transport costs for getting those intermediate products among those places, well then you’re looking at something pretty special. And we actually have that built into the American heartland itself just requires changing one law, not abolishing change. Part of the Jones Act, the Interstate Commerce Act, if you will, is about regulating commerce among the states on the water.

And some of that we still need we clearly need a national regulator. But the rest of it really, honestly can go away. And if you think that this is a nationalist issue, that, you know, we should have this all in American hands, consider that we don’t do that for truck and we don’t do that for rail and we don’t do that for air only for water, only for the thing where we have a massive geographic advantage.

So if you’re looking for a quick and easy way to stimulate economic growth in Wisconsin, in Illinois, in New York, anywhere in New England, anywhere in the South, anywhere in the Midwest, this is the low hanging fruit. All we have to do is get out of our own way.

Autoworkers Strike: The Union’s Rising Influence in America

If your kids need poster boards for an upcoming school project, you may want to visit the supply store before the autoworkers hit the picket lines. With a strike looming, let’s break down the economic and political consequences.

An autoworker strike – even if it’s short – could disrupt the largest manufacturing sector in the US and potentially send us into a recession. If the economic threat wasn’t significant enough, the unions are also gaining political influence and acting more like swing voters as the availability of labor decreases.

These ongoing negotiations and potential strikes are all part of the evolving political and economic American landscape. Whichever political party can gain the union’s favor will reap the benefits of a boost in overall influence.

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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.

Support medshare's ukraine fund
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Transcript

Hey everybody. Peter Zeihan here coming to you from above Spanish Square in New Orleans. And it is the 13th of September. And the big news that is not a 747. Well, that’s kind of fun. The big news is when you see this tomorrow, we will be within hours of a potential autoworkers strike, the first one of significance in decades and potentially a very economically and especially politically consequential one.

Let’s start with the economics. Manufacturing is not one of the huge sectors. The United States, we’re much more of a services country, but manufacturing of automobiles is the single largest subcomponent. So the autoworkers are threatening to strike if they don’t get their way, which could take the largest section of manufacturing offline, which would have massive economic ramifications if they were to strike for as little as three weeks.

It would be more than enough to throw the United States into a recession from the quarter and considering that this quarter, we’re probably going to see economic growth north of 5%, which is almost unheard of for an advanced country. The economic impact obviously would be huge. The impact on specific types of automotive could be particularly bad. A lot of American automakers are attempting to launch new EV lines, and this was supposed to be the year that all of it hit the market and this would just stop it in its tracks.

So I can’t tell you whether the strike is going to happen. They’re asking for more than a one third increase in pay, but the damage they could do, the economy would be immense. So kind of even odds there. But in terms of, well, it’s there’s some sort of party going over there because, of course, it’s New Orleans. And it doesn’t matter that it’s only Wednesday.

Anyway, let’s talk politics now. For the last several decades, unions have been part of the Democratic coalition, and they’ve kind of been the economic core of that coalition. The people within the coalition who can do math, if that’s an easier way to think of it. However, they feel fairly put upon under Clinton, the Democrats shifted to the right on economic issues, especially especially on issues such as globalization, which led to a steady decline in union membership.

And as NAFTA took hold, a lot of union jobs vanished into Mexico and as manufacturing then expanded in value added terms in the United States. Most of the new jobs in manufacturing and auto went to places that were not union states, most notably Kentucky, Tennessee, Alabama and especially Texas. So when you’re looking at what’s been happening with trade and with the reshoring of trade, unions really haven’t benefited from about at all.

And that’s part of the reason why unions are no longer really functionally part of the Democratic coalition. Donald Trump was very effective at bringing them over to his side during his term. Joe Biden has been partially successful in bringing them back, but it’s best to think of them as swing voters right now. And this is something we’re just going to have to get used to.

The fact that the unions are becoming more of a linchpin in the American political process and not just because they’re in the wind right now, but it’s a lot of votes in the world were evolving into in the country. The United States is evolving into. There are not enough workers. The boomers are the largest generation we’ve ever had.

The extras that are replacing them at the top of the pyramid of worker skills have a lower worker participation rate, and the new generation coming in are the zoomers, and they’re the smallest generation we’ve ever had. So we’re looking at a significant reduction in the availability of labor writ large in the system. And in that sort of environment, you would expect organized labor or just labor in general to have more and more pricing power and more and more political power.

And that’s before you consider that the problems in East Asia and the problems in Western Europe suggest that if the Americans still want stuff, autos or otherwise, we’re going have to double the size of the industrial plant. That’s going to take a lot of workers. That’s going to take a lot of blue collar workers. Exactly the sort of workers that are more likely to unionize than not.

So what we’re going through today, what we’re likely to be going through through the next few weeks as these negotiations drag on. Don’t think of it as aberration. This is now part and parcel of the American economic and political experience, and whichever party the unions ultimately fall in are going to have a significant increase in their overall fall.

But in American life, the end.