EU’s institutions are rearranging the Titanic’s deck chairs during a Godzilla attack with a tsunami on the horizon.
President Donald Trump entertained his first foreign dignitary Friday, January 27: UK Prime Minister Theresa May. The primary outcome of their trip? The two pledged to work towards the formalization of a “quick trade deal.”
This takes us all kinds of interesting places.
First, from a strategic point of view anything that binds the United Kingdom closer to the United States is phenomenal for U.S. power. Britain maintains the world’s third-most powerful navy, and soon will float the only functional supercarriers in the world not in the U.S. fleets. London is the world’s second-largest financial hub, and the chief route out for capital fleeing Continental Europe. London has centuries of bred-in experience manipulating political and economic systems the world over. Add in a wealth of preexisting bilateral political, economic and cultural ties, and if there is one country that is a natural complement to American power projection, it is Britain.
Second, the EU is spotlighting the path to its own end with a bizarre sort of enthusiasm. Technically, the May-Trump summit is illegal; under EU law only the European Commission — the EU’s executive — can engage in trade talks on behalf of its members, and the UK’s exit negotiations haven’t yet begun. Just to be sure that the Europeans know that this isn’t an accidental oversight, May has also announced the commencement of trade talks with Canada, Australia, New Zealand, Turkey and India.
The Commission and EU Parliament are bubbling with fury about how this won’t be allowed to stand, will poison the UK’s pending Brexit talks with the EU, and that Britain will be punished for it. But considering May has indicated that she prefers simply walking away from the EU to any sort of divorce deal that doesn’t serve London’s interest, the EU is absolutely bereft of leverage.
If there was an issue that could prove that the EU had some flexibility, a flat-out Brexit negotiation was it. It will be a negotiation that is predominantly economic in which the EU has lots of leverage and for which the EU has lots of options to choose from. This should be easy.
Guess not.
Such obstinacy pretty much dooms the EU in its grappling with its far larger problems: the EU faces a demographic implosion, a sovereign debt crisis that only increases by the year, anemic-at-best economic growth, a rising banking crisis, an aggressive Russia, an increasingly belligerent Turkey, waves of refugees as Mideast countries crumble, and so on. Rather that start reimagining the Union or getting on with the very real work ahead, the EU’s institutions are doing the equivalent of rearranging the Titanic’s deck chairs during a Godzilla attack with a tsunami on the horizon. Britain is already moving on, yet it looks like Brexit will consume all the EU’s emotional bandwidth for months (years?). Such ossification makes it scarily easy to predict how this will all go: everything that happens in the EU is now an institutional crisis.
Third, after decades of Continental military downsizing, the UK and U.S. are Europe’s security policy. May still went through the motions of pledging her support for NATO, which literally earned no more than a curt nod from the new American president — a man that, since his election, has made no secret of his belief that the alliance is already over. So long as Europe cannot come to terms with Brexit, it is a mighty reach to assume that the UK will continue going to bat with Trump for the sake of the Continent. Expect American drawdowns of its warfighting capabilities in Europe to begin in the not-too-distant future. The only question now is whether this is done in league with evolutions in U.S.-Russian relations or not.
Where does this leave Europe? Trump probably put it best by calling the EU a “vehicle for Germany.” That may sound harsh. After all, the EU is nothing if not a constant multi-lateral tug of war among all the EU’s 28 members. But consider what’s happened in the past year: The Brits are leaving. NATO is all-but-gone. There’s political stall — if not outright breakdown — in Italy, Spain, Austria, Belgium and the Netherlands. Poland and Hungary are wallowing in their moves away from democracy. Like it or not, planned or not, Germany is the center that holds.
And a quick glance through history indicates that a German center to Europe never holds for long.
Trump’s method for non-enforcement of Obamacare has big implications and may tear apart Obama’s legacy in weeks.
I’ve spoken before of the danger of Obama choosing to not enforce laws that he did not agree with, in large part because of the dangerous precedent it set as regards not simply to civil liberties, but to the rule of law itself. What good is Congress, after all, if its constitutionally-granted powers of legislation can simply be bypassed by a recalcitrant or capricious executive? I don’t bring this up to forecast that is what Trump will do, although the thought has certainly crossed my mind (repeatedly) in recent weeks.
Instead, Trump seems to have found an… elegant way around my concern. Rather than following Obama’s precedent of simply ignoring preexisting laws he found distasteful, on his first day Trump instead tinkered with executive flexibility in a starkly different way. In his Day One executive action on Obamacare, Trump directed the IRS that whenever it has any discretion with respect to any aspect of enforcement on Obamacare, that it is to exercise that discretion in favor of individuals and not in favor of the government. (Keep in mind that come Tax Day, it is up to the IRS to impose penalties upon anyone who has failed to purchase health care insurance.)
The impact of such an approach is potentially wide ranging to say the least.
First, it does an end-run around Obama’s signature achievement. The IRS already possesses wide latitude at enforcing tax law. For example, when the IRS was having a spat with House Republicans in 2015 which resulted in Congress cutting the IRS’ budget, the IRS responded by using its regulatory latitude to simply not answer its phones. With Trump’s new executive order, the IRS will almost certainly not even bother checking if 22-year-olds have indeed purchased their Obamacare-mandated health insurance because the income from the penalties wouldn’t be worth collection. Such “enforcement” in effect kills Obamacare without even resubmitting the issue to Congress. (Of course, it does not replace Obamacare; that’s a far thornier topic for another time.)
Second, the new approach potentially signals a very easily-replicable pattern for regulation writ large. Regulatory agencies often use their executive latitude to pick fights with prominent personalities or companies or institutions as a means to induce compliance across the board from folks who would normally resist (think back to how the prosecution of high-profile personalities like Martha Stewart did wonders for dissuading insider trading). If executive orders force the bureaucracy to begin with a presumption against the government, then many existing regulations cease to hold much weight. This holds triply so for regulations rooted in executive privilege as opposed to Congressional law. I anticipate EPA-related regulations — which haven’t had a lick of Congressional law added to them in six years — to face particularly harsh gutting.
And perhaps most importantly, unlike Obama’s preferred method of non-enforcement of laws he disagreed with, there is zero legal recourse for Trump’s enforcement-lite. You could sue the government should the executive agencies not be enforcing the law or magicking up their own regulations and reinterpretations, but you cannot sue the government for implementing laws within Congressionally allowed ranges.
Agencies will still have to go through the motions of formally repealing Obama-era regs, but considering how few laws Obama got through Congress and how heavily he relied upon re-interpretation and executive-originated regulations, this approach could eliminate Obama’s entire legacy in functional terms in a matter of weeks.
Many — including me — arched an eyebrow at Trump’s earlier assertion that he would reduce the federal government’s regulatory burden by three-quarters within a year. Now my other eyebrow has moved up as well.
I’m happy to announce that The Absent Superpower: The Shale Revolution and a World Without America is finally in print and in stock. Here is a link to the purchase page on Zeihan.com. We will have a digital version ready by February 1st. Additionally, book format issues limit me in terms of graphics capacity to only black & white images but many of the topics I write about are in screaming color, so here is the map room for The Absent Superpower.
Which brings me to my next announcement: the Zeihan on Geopolitics website has had a face lift for the New Year. We’ll be populating it with more material during the next few weeks, particularly as the Know Your World section expands. Feel free to explore.
And if all that wasn’t tease enough, in lieu of a New Year’s newsletter, we’ve instead opted to share the introduction for The Absent Superpower…
INTRODUCTION
The Journey to The Absent Superpower
EVERYTHING IS CHAOS!
At least, that’s what it seems like every time you turn on your TV, radio, computer, or smart phone.
The European Union is falling apart, Syria is in meltdown, cybercrime is an hourly occurrence, the Chinese economy is gyrating wildly, Russia is on the march, the election of Donald Trump has Americans of all political stripes wondering what comes next, and the Kardashians get more press time than Congress. It’s enough to give anyone a panic attack.
Well, not quite anyone. Unlike the average person, all this craziness puts me in my happy place. Where most see the world turning itself upside down and inside out, I see a long-overdue shift in the global order. New trends emerging. New possibilities unfolding. For me, change is good for business.
That’s because my job is a bit…different than the standard. You see, I’m a geopolitical strategist. That’s a fancy way of saying I help organizations understand what challenges and opportunities they will be grappling with across the world in the years to come. As such I’m sort of a professional apprentice, rarely a master of any particular craft but needing to be able to hold my own in conversations about manufacturing and transport and health care and finance and agriculture and metals and electricity and education and defense and such. Preferably without pissing off anyone whose living is based off of manufacturing or transport or health care or finance or agriculture or metals or electricity or education or defense.
In many ways those conversations make me who I am. From the Air Force to the Pickle Packers, every interaction gives me a good hard view of the world, yet each of these interactions originates from a radically different perspective. Combine all those angles and interactions and perspectives and the unique information that comes from them with my private intelligence experience, and I’m granted the privilege of seeing something approximating the full picture — how the world’s myriad pieces interlock — and catch some telling future glimpses to boot. More than anything else, what I sell is context.
That picture and those glimpses and that context formed the bones of my first book, The Accidental Superpower, which was published in November 2014. In Accidental I made the case that the world we knew was at a moment of change: The Americans who had created, nurtured, enabled, maintained and protected the post-WWII global order were losing interest. As they stepped back the world we know was about to fall to pieces.
At any time in history such a shift would have had monumental consequences, but the American retrenchment is but one of three massive shifts in the global the order. The second is the rapid greying of the entire global population. Fewer people of working age translates directly into anemic, decaying economies — enervating global trade just as the Americans stop guaranteeing it. Third and finally, the American shale revolution has changed the mechanics — if not yet the mood — of how the Americans interact with the energy sector. Surging petroleum output within the Lower 48 is pushing North America toward outright oil independence; in the past decade the total continental shortfall has narrowed from roughly 10 million barrels of oil per day (mbpd) to about 2mbpd.
In the two years since Accidental published, I’ve had ample opportunity to re-examine every aspect of my work — some of my critics have been (over) eager to assist in such endeavors — and I fear that I may have been off the mark on a couple of points.
First, the American shale sector has matured far faster and more holistically than I could have ever expected.
Despite a price crash in oil markets, despite ongoing opposition to shale among a far from insignificant portion of the population, despite broad scale ignorance about what shale is and what shale is not, shale has already overhauled American energy.
In 2006 total American oil production had dropped to 8.3mbpd while demand was touching 20.7mpbd, forcing the United States to import 12.4mpbd, more than Japan and China and Germany combined. By 2016 U.S. oil output had breached 15mbpd. Factor in the Canadians and Mexicans, and total American imports of non-North American oil had plunged to about 2mbpd — and that in the teeth of an oil price war. And that’s just oil specifically. Take a more comprehensive view and include everything from bunker fuel to propane, and the continent is less than 0.8mbpd from being a net energy exporter.
The end of American dependence upon extra-continental energy sources does more than sever the largest of the remaining ties that bind America’s fate to the wider world, it sets into motion a veritable cavalcade of trends: the re-industrialization of the United States, the accelerated breakdown of the global order, and a series of wide-ranging military conflicts that will shape the next two decades.
This book’s opening section contains the long and the short of this Shale New World, the greatest evolution of the American industrial space since at least 1970. For the financiers and accountants and policy wonks out there, this was written with your geeky brains specifically in mind.
Second, the isolationist trickle I detected in American politics has deepened and expanded into a raging river. Of the two dozen men and women who entered the 2016 presidential race, only one — Ohio Governor John Kasich — advocated for a continuation of America’s role in maintaining the global security and trade order that the Americans installed and have maintained since 1945. The most anti-trade candidate on the right won his party’s nomination, while the most anti-trade candidate on the left finished a close second in the Democratic primaries to the Clinton political machine. Last night (now President) Donald Trump and Hillary Clinton met in New York to debate economic policy. What struck me as self-gratifying and horrifying in equal measure was that their core disagreement on trade issues wasn’t whether trade was good or bad for the United States, but how much to pare it back and which reasons for paring cut it the most with the electorate. (The pair of them obviously disagreed — colorfully, vehemently and often — on other issues.)
The world has had seven decades to become inured to a world in which the Americans do the heavy lifting to maintain a system that economically benefits all. The world has had three decades to become inured to a world in which the Americans do not expect anything of substance in return. As the Americans back away, very few players have any inkling of how to operate in a world where markets are not open, transport is not safe, and energy cannot be secured easily.
The stage is set for a global tailspin of epic proportions. Just as the global economy tips into deflation, just as global energy is becoming dangerous, just as global demographics catastrophically reduce global consumption, just as the world really needs the Americans to be engaged, the United States will be…absent. We stand on the very edge of the Disorder.
The Disorder’s defining characteristic is, well, its lack of order. Remove the comfortable, smothering American presence in the world and the rest of humanity has to look out for its own interests. As many of those interests clash, expect devolutions that are deeply-felt and disastrous in equal measure. Part II breaks down the breakdown. I’m equally proud and terrified to report that some of the darker shades in Accidental are happening sooner rather than later. For generals — armchair or otherwise — who prefer jumping directly into the fight, Part II is what you’re after.
In the final section we will circle back at take a good hard look at the United States. Energy independent, economically robust, physically secure, and — above all — strategically unfettered, the United States will be taking a break from the world writ large for the most part.
Yet “for the most part” is a far cry from a full divorce from all things international. The Yanks will still find bits of the world worth their time, effort, money and ammunition. Section III explores the American Play: where the Americans will still be found, why they will be there, how they’ll act, and what they’ll be up to.
It may be small comfort, but the acceleration of the shale revolution as well as the American political shift towards populism has illuminated a great deal, sharpening my view of the future. The various glimpses that made up Accidental have somewhat merged, lingering to the point that they now constitute a bit of a roadmap.
That roadmap is the core of this book.
Peter Zeihan September 27, 2016 Somewhere over Kentucky
Something happened yesterday with the Trump transition that worried me. By “worry” I mean it is great for me personally, but as I’m a bit of a purveyor of doom and gloom, everyone else should perhaps be a bit concerned.
It is probably not what most of you are thinking.
Many assert that Trump’s push for a deep bench of billionaires in his cabinet is generating the most serious conflicts of interest in modern history. (I find it adorable that some folks think self-interest is new to Washington.) Just look at it in context. Obama’s first cabinet had a combined 122 years in government experience and only five in the private sector. Un-shockingly, the Obama administration proved rather inept when it came to having conversations with people, while proving a champ at enacting regulations. Trump is simply the inverse. We’ve had a change in rulership, which will mean a change in policy and a change in approach. No biggie from my point of view.
No, I’m more concerned about something that was almost glossed over. President-elect Donald Trump announced Peter Navarro, a professor at the University of California (Irvine), would be in charge of trade policy. Specifically Navarro will run a new office called the National Trade Council.
Now I don’t have major concerns about Navarro in general. To put him in what I hope is not an unfair nutshell, Navarro is an anti-China agitator whose most notable book is “Death by China.” He advocates, among other things, a broad-scale economic, strategic, and political confrontation to sever exploitive economic exposure to China completely and, if need be, forcibly break the entire Chinese political and economic system. (Like I said, doom and gloom = good for Peter.)
My concern isn’t so much about his views as his likely style.
Shanghai, People’s Republic of China
Putting an academic in a policy position bears risks. Unlike bureaucrats, they don’t know how systems work. Unlike military officers, they think “chain of command” simply means everyone does what they say. Unlike business people, they have no practical experience in making decisions or compromises or making things happen with limited resources. What sounds great in the classroom sometimes shatters upon contact with hard realities, and it is far from unheard of for academics to then look for what’s wrong with the world rather than reevaluate their theories. As such academics’ record in government service is unsurprisingly patchy. A couple of examples:
Robert McNamara brought in a bunch of quantitative analysis professors to put numbers into the planning of the Vietnam war. The idea was to be able to have metrics for assessing how pacification was progressing, and how hearts and minds could be won. Unfortunately, the methods of the “whiz kids” couldn’t be reconciled with the facts in the jungle, and the profs were unwilling to admit that their formulas were unworkable. The war ended up being far more brutal and bloodier than it needed to be.
More recently, President Barack Obama put Stanford professor Michael McFaul in charge of Russia policy. McFaul’s views of Russian society and governance offended everyone in the Kremlin with breathtaking efficiency, effectively walling off the entire American diplomatic apparatus from Russia. The result was the fastest, deepest slide in any two countries’ relations in recent history that did not end in war, contributing to Russia’s invasion of Ukraine and Russia’s participation in the Syria war. Geopolitics may all but dictate Russia’s efforts, but (bad) diplomacy certainly sets the course and timing. Reset indeed.
My goal here isn’t to crap on academics. Lord knows I know plenty of academics who are utterly essential to many in and out of government, myself included. I’m simply pointing out that the culture of academia often does not necessarily mesh well with the culture of governance … and we now have a vehemently anti-China academic overseeing America’s primary interface with the rest of the global system. Combine that with Trump’s statements on Taiwan and I think it is pretty clear that a broad-scale competition with the Chinese is now not just baked into the system, but that on the American side it will be incredibly visceral, aggressive and fueled by personal vitriol. And thats before one considers the President-elect’s personality. Things are about to get decidedly lively (again, good for Peter).
If I’m right on this, an uber tradewar with the Chinese is just around the corner. I’ve dealt with many of the likely futures for China in previous newsletters and in The Accidental Superpower so I’ll just hit the highlights here and spend most of my typing on follow-on effects:
China faces an internal political crisis. Southern China is far more economically viable than the rest of China, far more exposed to foreign trade, and far more culturally willing to work with foreigners. The portions of China that will suffer the most also are the most likely to not look to Beijing for leadership. Traditionally, secession threats are a very big deal in China. They are about to be once again.
Foreign investors in China — especially U.S. investors or investors in interior China — stand to lose everything. The rough translation of “joint venture” in Mandarin is “you pay for everything and we’ll steal all your tech.” Anyone who still has any trade secrets left is about to lose them all, and the Chinese will confiscate your entire physical plant in the name of national security. Time to work on those exit contingencies and shareholder explanations. Might want to start with plans for any key employees of Chinese ethnicity as Beijing doesn’t consider foreign citizenship a barrier to arrest on charges of sedition.
Northeast Asia faces massive upsets. Fully half of the world’s manufacturing supply chain steps are in the region, with most of those dependent upon Chinese links. Any meaningful Chinese-American trade conflict breaks many (if not most) of them. The country likely to get the worst of it is Taiwan, since the country’s companies are on the small side (most sell into a single supply chain) and the local market is but 23 million people.
The inverse is true for North America’s I35 corridor — in particular from Mexico City to Oklahoma City — which is the piece of the world most likely to pick up manufacturing capacity that will need to relocate. Easy regulation, the large Texas population, good infrastructure, cheap land, underpriced but high-skilled labor, and cheap and reliable energy all add up to short- and long-term manufacturing booms. (Navarro is not known to have particularly blistering opinions on Mexico.)
The biggest loser beyond the immediate region likely will be Australia. The Aussies have bet the farm on the Chinese industrialization process and their raw materials exports will flatly collapse. This is hardly the end of Australia, but their golden generation of economic growth is about to go into screeching reverse — and they have a lot of fat to cut.
The oil exporters of the Persian Gulf are also about to get hit hard. Anything that crimps Northeast Asian economic activity is going to prove crushing to them, since Northeast Asia takes more than half of the Persian Gulf’s collective oil exports.
It is unthinkable that the Americans will take the Chinese to task in a spat of statism, protectionism, and populism; and the far more statist, protectionist, and populist Europeans will not pile on. Expect France and Italy to lead the charge for broad-scale European trade sanctions on China.
Last week, U.S. President-elect Donald Trump shook the global diplomatic community to its bedrock by throwing the One China policy into doubt, specifically noting, “I don’t know why we have to be bound by a One China policy unless we make a deal with China having to do with other things, including trade.” He expressly linked One China to possible negotiations over the South China Sea and the North Korean nuclear program.
The One China concept is that meaningful, positive relations with the Chinese are predicated on public proclamations that mainland China and island Taiwan are one and the same country, and that Beijing oversees the whole thing. American acceptance of One China is not something that was agreed to lightly, but is instead part of a deeper strategy.
In the aftermath of the Normandy invasion of Nazi-occupied Europe, the Americans drew their Western allies and their major colonies together at Bretton Woods to prepare for the post-World War II (WWII) world. Pre-WWII global commerce was fiercely competitive with all countries using all levers of power to maximize their overall strategic position. Trade, finance, culture, employment, and war were all simultaneously tools and vulnerabilities. Successful states/empires would use all of them to maximize their gains in others. One result was the all-against-all nature of pre-1945 international affairs, ultimately leading to WWII.
Mount Washington Hotel in Bretton Woods, New Hampshire
At Bretton Woods the Americans changed the nature of the game. From now on the U.S. Navy would guard oceanic commerce for all participants, while the American economy would be opened to all participants. There was, of course, a catch — you had to join the Americans in their Cold War.
As the Cold War took shape new countries were admitted into the Bretton Woods system. Former Axis. Former neutrals. Developing countries. And finally, China. Unsurprisingly, Beijing insisted the Americans adhere to One China. Under Henry Kissinger’s guidance, the United States willingly and knowingly swallowed One China hook, line, and sinker. Bolstered by China, the Bretton Woods system now presented the Soviets with hostility in all directions. It was quite the strategic coup, and contributed heavily to Soviet overextension and eventually, collapse.
Yet the key factor to remember is that Bretton Woods firmly limited how the Americans could pursue trade. American market access was extended to allies for strategic reasons. Anyone could dump products on the American market, so long as they maintained their position in the anti-Soviet wall.
But the Cold War is over. Bretton Woods has outlived America’s strategic needs, and American trade policy is now evolving to serve America’s economic needs. Trump’s statement on One China is (probably) not an off-the-cuff comment, but instead a true pivot away from Bretton Woods and towards a fundamentally new strategic posture. If the American government no longer views trade as a means to an end, but instead an end in its own right, it can and will begin using issues such as trade access, maritime security, and political positions on issues such as One China to cut different deals. That changes the global strategic picture radically.
China is wildly unprepared for such a shift. Everything about the modern Chinese system was designed expressly for the Bretton Woods system. The economy is export-led. Efforts to drive domestic consumption have largely ended in ignoble failure. The economy is driven by an Enronesque flooding of the industrial sector with subsidized capital. Such growth comes at the cost of sustainability and a functional banking system. China’s strategic position is completely dependent upon the United States offering market access and guaranteeing freedom of the seas for China’s merchandise exports and raw material and energy imports. Remove the economic and strategic cover of Bretton Woods, and it all comes crashing down.
Hong Kong Special Administrative Region of the People’s Republic of China
Even mentally the Chinese are not prepared for change. Since the election, the only American that Beijing has reached out to is none other than Henry Kissinger himself, the only statesman the Chinese respect and trust. But while Kissinger remains strategically brilliant, his connections and advice are firmly rooted — critics might say mired in — the Bretton Woods age. Beijing is so in love with its China Rising mantra — again, made possible by Bretton Woods — that it just cannot come to grips with the fact that the Americans might now have other plans.
Or that the Americans hold most of the cards. No surprise that Chinese state media’s response to Trump’s offhand statement could best be described as a seizure.
The Chinese are not alone:
Like China, modern Germany was expressly designed to maximize exports to the Bretton Woods system to the point that nearly half of German GDP is export-driven. In fact, the entire EU project relies upon the United States market as well as U.S. military protection for commodity import supply lines. Other countries heavily dependent upon global trade include — but are far from limited to — South, Korea, Taiwan, Singapore, Thailand, Japan, the oil producers of the Persian Gulf, Egypt, Australia, New Zealand, Brazil, Uruguay, Paraguay, Algeria, South Africa, and Israel. If these countries — or any others dependent upon trade — are going to retain market access and maritime trade opportunities, they will need to offer the Americans something in return.
A whole host of countries are utterly dependent upon implicit or explicit U.S. security guarantees. A partial list includes Estonia, Latvia, Kuwait, Lithuania, Poland, Saudi Arabia, Georgia, Azerbaijan, Finland, South Korea, Germany, Romania, Qatar, the United Arab Emirates, Taiwan, Japan, Sweden, Singapore, Croatia, Denmark, the Netherlands, Turkey, and Israel. If these countries are going to retain that strategic cover, they must give the Americans something the Americans find useful.
Part and parcel of the Bretton Woods system is the guarding of energy flows, in particular those out of the Persian Gulf. Remove American guarantees and the countries of the Gulf have to resolve their security issues themselves. That endangers energy flows at the point of production, within the Gulf, at the Strait of Hormuz, and even globally as importers must take supply protection into their own hands.
Of course, there is still a lot of wiggle room in all of this. And regardless it won’t all change (or fall apart) overnight. Some relations (like U.S.-Japan) have more ballast. Others (like U.S.-Australia) are so rooted in cultural, strategic, economic, financial, and political fundaments that they’ll likely survive on their own merits. But for every relationship that looks solid, there are a half-dozen others that just don’t make much sense outside of the Cold War rubric.
A few specific calls on the countries that are not likely to make the cut:
South Korea is too exposed (and expensive to maintain) for the Americans to continue a deep relationship.
The United States has been fighting a war of zero strategic relevance in the Philippines for a half century (anyone remember Mindanao?); that’s pointless except as a hedge against China.
Egypt’s descent into impoverished, dysfunctional tyranny means that it no longer is a threat to anyone, much less nuclear-armed Israel.
Syria’s civil war eliminates Damascus as a concern, eliminating any rational for ongoing alignment with Jordan.
Relations with Kuwait, Saudi Arabia, Qatar, and the United Arab Emirates have long been dominated by the concern of oil availability. Because of the shale revolution, the Americans only need that oil to fuel their alliance — an alliance that now is largely strategically irrelevant.
Subsidizing German, Polish, Baltic, and Romanian economic and physical security only makes sense if the United States wants to risk a ground war with an increasingly insecure (and yet still nuclear-armed) Russia.
Pakistan is nothing more than a giant pain in the ass.
What’s coming can only be described as the opposite of a global order — a Disorder.
Want to know more about what that looks like? Our next book — The Absent Superpower: The Shale Revolution and a World Without America — went to the printer today. It should be available in about two weeks. : )
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.
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.
Think November will bring an end to the shenanigans of the 2016 election cycle? Don’t hold your breath.
If there is one thing that drives editors batty, it’s an author who can’t keep his grimy fingers out of the editing process. So for the past three weeks I’ve been backpacking through Yosemite and the Thorofare while my team beats the text of Shale New World into shape. We’re aiming for an October release. (BTW – free case of books for anyone who can come up with a sexier title. I’m dry.)
Anywho, I hiked in to my taxi-out lodge this morning, did some laundry (mostly throwing away clothes that should never be worn ever again), and started getting caught up on the world. All y’all have been busy: a near-coup in Turkey, a devastating attack in Nice, the Brits throwing yet more spanners into the European project, the Chinese economy in a nose dive, India’s central bank chief stepping down, Japan’s prime minister looking particularly wounded, Justin Trudeau’s hair still rockin’ and so on. So much to work with! (The world has been so very good to me this year!)
But by far the most notable item of the past three weeks happened just yesterday when Texas Senator Ted Cruz addressed the Republican convention. His supporters gave him a hero’s welcome, and when it became apparent that he was not going to support Donald Trump, the nominee, a giant auditorium full of Republicans…booed him off stage.
You can parse this dozens of different ways, and I’m certain that the pro-Trump crowd did everything they could to whip the crowd into a frenzy once it became clear that an endorsement wasn’t going to materialize — but the bottom line is that a speaker being jeered to stage left hasn’t happened at a Republican convention in the past several decades.
Most pundits are making hay about the disunified nature of the Republican Party and the impact it will have on the general election. I certainly agree this adds a bit more gravel to what is already a gritty process, but let’s be honest here. Did anyone really expect Senator Cruz, the person in the sitting Congress with the blackest track record for throwing anyone and their grandmother under any available mass transit vehicle if it served his personal interest of the moment, to not be an ass at the convention?
Get real. In this election such is par for the course.
Instead, there are three other things that I’m thinking.
First, as a national political figure, Ted Cruz is likely dead. You just don’t come back from a convention rejection. Unless the Tea Party splits off from the Republicans formally, we are done hearing from Mr Cruz at the national level. Your personal politics will tell you whether this is fabulous or disastrous.
Second, a deeper question is what does this mean for Cruz’s Tea Party movement? I’ve never considered a billionaire like Mr Trump to be a stable representative of a group that prides itself on being less well-off than the average American (and living nowhere near Manhattan). The illuminating item for me was when Trump supporters were so nearly-physically hostile to Mr Cruz’s wife, Heidi, that security had to escort her from the convention floor under the assault of jeers of “Goldman Sachs”. Needless to say, the Tea Partiers are having a bit of a leadership crisis. I’d expect an identity crisis to follow shortly.
But the true geopolitical issue is the third one: Cruz’s fall isn’t exceptional, but instead representative of the in-flux nature of the entire American political spectrum.
The two American political parties are in reality coalitions of coalitions, and the stability of those coalitions of coalitions has proved remarkably stable since 1935-1945.
Let’s start with the Right.
The Republican coalition is comprised of five pieces: national security conservatives, evangelicals, the business community, populists and pro-lifers. At first blush this doesn’t seem like a very large grouping. But what it lacks in size it makes up in cohesion; These five groups don’t contradict each other. Folks who use religion to guide their votes don’t tend to stress about business regulation, while voters who shoot from the hip (figuratively and literally) tend to not have strong opinions on abortion. It’s easy to construct a political platform that addresses the pet issues of all five groups without alienating any of them. As such the Republican coalition is a reliable one that tends to carry the day.
The Democrat crew is more motley: greens, socialists, unions, gays, unmarried women, blacks, under 30s and pro-choicers. They disagree on pretty much everything. Greens and unions fight over every aspect of industrial policy. Gays and blacks have wildly different views on what the term ‘civil rights’ actually means. The under-30s and socialists expect single mothers to help pay for their college debt. And there’s always the threat that if the rest of the Democrats manage to cobble something together, the pro-choicers will blow it up if their single-issue voting style isn’t respected. Now if a charismatic personality — say, a Barack Obama — can inspire the lot, the Democrats will breezily walk away with the election. Their numbers are simply so much bigger than the Republicans. But shy of such a unifying candidate the biggest obstacle to the Democrats is themselves.
This is how things have been for decades. Yet in this election cycle it has all blown apart.
Within the Republican coalition the pro-lifers simply don’t trust Trump, as he was pro-choice just two years ago. The national security conservatives remain furious with Trump for insulting U.S. military’s poster boy, veteran Senator John McCain. (The same crew also views Hillary Clinton, in her role of Secretary of State, to be the only person in the Obama administration to really “get it”.) The party loyalty of the evangelicals — who considered Ted Cruz to be their man — to Trump is, at best, suspect. And because of campaign finance reform the business community never had a candidate in the race in the first place. (Ironically by taking money out of politics we Americans have replaced it with a hefty dollop of crazy.) That just leaves the populists running the show and so that’s what Trump has ridden to the nomination.
If anything the damage is even deeper, if less obvious, on the Left.
The gays got most of what they were after with the Supreme Court settling the gay marriage issue, and in the aftermath of the Orlando attacks are thinking of immigration and national security in ways new and terrifying. Pro-choicers look at Trump’s record on abortion and don’t see all that much at stake this time around. Trump’s anti-free trade rhetoric is a siren song for organized labor, particularly in light that Hillary Clinton’s husband presided over the greatest expansion of free trade in recent memory. Working-class white men and unions—once the backbone of the party—seem to be favoring Trump over Clinton in several swing states. The socialists and under-30s were so vehemently pro-Bernie Sanders (and vehemently anti-Hillary Clinton) that many walked out of the rally when Sanders bowed to the inevitable and endorsed his rival. Many won’t bother to even show up to vote (I even have a pro-Sanders buddy who is considering emigrating not over the possibility the Donald moving into the Oval Office, but over “Crooked Hillary” sitting there.)
This motion isn’t bad for American democracy. In fact, it is perfectly normal. Parties change. They evolve. Sometimes they even die. Before 1935 it was the Republicans, not the Democrats, who favored big government. Anyone remember the Whigs? Life moves on.
But new coalitions do not form overnight. The last time the Democrats and Republicans swapped factions it was the Great Depression and World War II, and that reshuffling took the better part of a decade. No matter who wins the election in November, the new president will neither have a functional party to rule with nor a function party across the aisle to negotiate with. U.S. politics are about to stall for a while.
Now spackle that atop what’s going on in the rest of the world.
The American security and economic commitment to the free trade era is what has enabled the world to evolve into its current form, making everything from the European Union to independent Africa to global energy markets to the Chinese Communist Party possible. It made this commitment to bribe up an alliance to confront the Soviets. The Cold War ended in 1989 and American foreign policy has been on cruise control ever since. Now, for reasons geographic, military, economic and demographic the United States is finally backing away from these commitments — a process on vivid display on both the American Left and American Right. As the scaffolding that supports the broader global system is pulled away, global structures big and small will collapse while the Americans ride off into the sunset, blithely unaware of the consequences in their self-contained continental system.
Even if Americans were internationally-minded, even if they were convinced that their economic and physical security were dependent upon international engagement, even if they could appeal to their better natures, the simple fact remains that for the next few years they will be obsessed with their domestic political restructuring.
In this light, whether the next president is someone with bad hair or Donald Trump just doesn’t matter very much. The Americans are going out to lunch — and it is going to be a long lunch.
President Obama kicked off a trip to Asia with a visit to Vietnam, where he announced that the United States is fully lifting the arms embargo on Hanoi. In a joint press conference with Vietnamese president Tran Dai Quang, President Obama finished a process that has been proceeding incrementally throughout much of his term in office, namely slowly rolling back the vestiges of the United States’ bitter two-decade war against Vietnamese communists. Sentiments among many American Baby Boomers regarding Washington’s slow-but-steady outreach to Hanoi are mixed, but President Obama’s visit and decision to end the arms embargo reflect the United States’ determination to restructure Cold War alliances in a nod to today’s shifting global environment.
Countries like Vietnam are emblematic of the future of American alliance structures.
Hanoi is an inveterate land power—having proven itself sufficiently scrappy to resist centuries of Chinese encroachment and both French and US military might.
Lifting the arms embargo is unlikely to cause serious heartburn down the line for other friendly US states in Southeast Asia — namely Thailand and Singapore — because Southeast Asian geography is sufficiently rugged that Vietnam does not pose a threat to these states.
It helps strengthen pro-US sentiments among Vietnam’s vehemently anti-Chinese military leadership, a vital bulwark against Beijing’s regional interests for both Washington and Hanoi’s fellow ASEAN member-states.
Vietnam’s long eastern coastline is home to Cam Ranh Bay, the finest natural deep water harbor in South East Asia. Cam Ranh has hosted French, American and Soviet fleets in the past century.
Vietnam lies along the South China Sea and claims the Paracel and the Spratly Islands, rocky outposts that have become flashpoints in the powder keg of the South China Sea. Vietnam’s views on China and the South China Sea mean that its geographic and strategic positions are now in-line with American interests, rather than threatening them. Vietnam’s geographic position is now more strategic than ever, and its stance on China has opened the door for American influence.
Washington’s outreach to Vietnam cannot be defined purely through military or anti-Chinese positions. Vietnam’s large and youthful population represents a strong future growth market, and getting in on the ground floor of Vietnam’s push toward industrialization will be a boon to American manufacturers looking for both cheap skilled labor and a market for higher-end, US made goods. Vietnamese power and transport infrastructure is in desperate need of foreign technology and investment, and the country’s offshore energy assets represent several opportunities for US supermajors experienced in deep-water energy production.
The United States and Vietnam are burying the hatchet. Hanoi still has work to do on its end—economic and political reforms and the kinds of asides about human rights concerns US leaders habitually mumble about in front of journalists—but Washington is committed to working with the Vietnamese leadership to see that this process is carried out in-line with American regional interests. The process will have hiccups and headaches along the way, but the United States is committed to moving forward in what will be the bedrock of expanded US-ASEAN cooperation.
Outside of the political protestations regarding Obama’s visit to Cuba (it is a presidential election year, after all), the United States has a strong strategic interest in returning Havana to the American sphere of influence.
The geopolitical rationale is twofold:
A hostile Cuba, backed by a meaningful external power (such as the Soviet Union during the Cold War) could threaten control of America’s internal waterways—most notably anything exiting the Mississippi, as these exports have to pass either the Florida or Yucatan straits. Also at risk are the Intracoastal Waterway along the Gulf Coast. As the US becomes less interested in international trade, domestic exchange becomes more important, and so too does the political relationship with and within Cuba.
Cuba is the only portion of the Western Hemisphere through which American power does not thoroughly penetrate. That it is so close to US shores only heightens Washington’s interest.
After the collapse of the Soviet Union, Venezuela became Cuba’s key political and economic ally. With Caracas itself caught in the throes of political and social unrest, Cuba has no choice but to normalize relations with the US. And so it is.
There will be three primary changes that will emerge from the thawing of the last vestiges of the Cold War:
1) Tourism. Already underway, Cuba’s tourism sector is poised to soon become the top Caribbean destination for American tourists, and within a decade should be well on its way to resume its position as a sort of tropical Las Vegas. The embargo doesn’t even have to be lifted for this to happen.
2) Sugar. Cuba’s sugar industry is historically far stronger than America’s, and has operated with far lower costs. The island’s proximity to the Intracoastal Waterway and the Mississippi will vastly simplify the logistics of the sugar trade and distribution within the US market. Sugar production is set to at least double in the half-decade following the lifting of the embargo as investment flows into Cuba’s cash-and-tech starved sugar industry. The biggest obstacle is the US sugar lobby (far more powerful than most people realize), but America’s other agricultural producers will likely prove more formidable as they clamor to access a Cuban market heavily dependent on food imports.
3) Manufacturing. Perhaps one of the most frequently overlooked impacts of an American détente with Cuba. Although Cuba’s educational and vocational training system is vastly outpaced by the United States, Cuban wages are a mere fraction of what they are in the US. Cuba’s proximity means that the island can be integrated into US infrastructure and supply chains relatively easily, as well as NAFTA/CAFTA. Training, infrastructure and industrial plant buildout will take a decade, but the economic argument behind integration is solid.