This is a country that has a missile
system that was designed to obliterate the United
States.
And while they have lost over and over
and over and over and over about where
the red line is.
We only have to be wrong
1
for this to get out of control.
Welcome to activation. I'm your host, Peter High.
My guest is Peter Zion.
Peter a geopolitical strategist to his expertise is
at the intersection of demography,
economics, energy, politics,
technology and security. He founded his firm eye
on geopolitics in 20 12 following a dozen
years as a geopolitical analyst for Strat 4.
Peter's written 4 books, including the accidental superpower,
which has a new edition recently published providing
updates to his analysis from across the 10
years
since the book's first publication. His fourth book
is the end of the world is just
the beginning, mapping the collapse of globalization, which
was published in June of 20 22 and
was a new Times best seller.
Peter welcome back to. It's great to speak
with you today. To be back. Wonderful. I
thought we'd begin
Peter with some really interesting insights you have
about why you believe that Stalin was the
most important or influential person in the past
of, 500 years.
Explain how he set the table for the
world world order for most of the past
century.
It wasn't so much for what he did
or where he lived, but because of who
he terrified,
Americans realized in the late 19 forties that
we were
on the tail end of World War 2,
all of a sudden gearing up for another
war with a much more powerful enemy on
the planes of europe, and we knew that
it wasn't a war that we could not
win.
So we knew we needed tens of millions
of people to stand not with us, but
in front of us.
And convincing the Europeans to sign up to
be cannon fodder right after World war 2
as kind of a high bar. So we
knew we needed some way to induce them
to take that role, and our solution was
globalization. We sent out our navy to patrol
the global ocean so that any maritime shipping
can go anywhere without an s court that
never happened before in human history.
And the result was the prayed order that
we now have today.
None of that would have happened if we
weren't scarce. By stalin.
Well, you note in your most recent book,
the seeds of d globalization were so decades
ago,
provide an overview if you would of why
you happened and why it's been inevitable.
Well, keep in mind, globalization was a reaction
to an American
security fear.
So we never invested our economy in the
system in the first place. So number 1,
the security environment changed, even with the Russians
back on the war path or a pale
shadow of what they were during the cold
war. So we no longer feel we need
to have a global alliance. In addition, 75
years later, there are a lot of secondary
economies out there that have some he. So
the idea that the United States, even in
its current strength in terms of its consumer
base and the size of its economy could
directly subsidize all of that. That was never
gonna fly.
And politically, the Us has moved on. So
we never invested our economy in the system.
We don't have an inter international economy, but
we provide the security for everyone else to
have in the international economy, and that doesn't
fly anymore. So we're just backing away from
the system There's no country. There's no coalition
of countries that can take our place either
as the market of first and last resort
or as the global security gu. So that
ends it right there.
Second and just as importantly is after 75
years of
globalization, we have had 75 years of
globalization 75 years of
urbanization. And when you move from the farm
into the city, kids are no longer free
labor, they're an expense and adults aren't stupid.
So we had fewer of them. Do you
fast forward that from 19 50 to today,
we've seen global birth rates drop by more
than 3 quarters.
And in an increasing
percentage of the world's populations, there are no
longer enough people under age 45 to assume
in volume.
China's is on that list now. And so
there isn't a population structure to support global
trade in me more anyway. So whether you
look at it from the guns or the
butter point of view, this chapter of history
is very rapidly coming to a close.
Fascinating analysis, you note that
demographic conversion is going to lead to economic
free fall across many industrialized countries and you
point out they're they're simply aren't enough. You
own people across the industrial as world as
you noted, given the fall and birth rates.
You've also noted that many of these countries
past the point of over turn, so to
say, in the 19 eighties,
and you... You've also noted that the worst
stop of all is China, you just alluded
to that. In your latest book, you noted
in I quote here, China faces a d
industrialization that is nothing less than mythic. It
almost certainly
faces a political dis integration. And even des
civilization, Can you describe what that entails and
why that's the case? When an economic model
breaks the political
always breaks. There has not been an exception
to that throughout human history, and the Chinese
system is based on mass import of raw
commodities most notably energy and stuff they need
to grow their own food and a mass
export of finished goods to end markets that
have consumers.
Well, there... The consumer market is now danger
in shrinking and trade tensions are destroying the
front end of that as well. And that's
before you could start talking about Americans new
obsession with things like semiconductors
or rare earth metals.
There's
very little that the Chinese can do to
influence events in these topics on their shores,
much less dictate American policy.
So it was always an issue where
the single greatest gu tour of Chinese economic
success was the United States Navy and that
was never a very good long term bet
in the first place.
Since the book has come out, This situation
in China has gotten so
much
worse.
We now have
the public system in China admitting that they've
encountered their population by more than a hundred
million people. We now have official statistics suggesting
that their birth rate has dropped by more
in the last 6 years and what happened
to the Jews Europe during the holocaust.
And now we have private economists,
private
saying that the over count on the population
is probably closer to 250000000.
All of the missing millions under age 40.
So not only is consumption led growth now
impossible in the people's republic. They have age
passed even the theoretical
stage where you could press gang women into
rape camps to generate a higher birth rate,
which is something that every once in a
while I want I'm in Asia, people suggest
something that might happen, which
I might not have a high respect for
the humane levels of the Cp, but I
have never thought they wouldn't go that far.
But down not even that is an option.
I mean, unless we have, like, a sudden
breakthrough in Star Wars style cl
where you can grow a bunch of 20
something's
with full skill sets in under 2 years,
this ends
within 10 years. And by this, I mean
the Chinese system itself.
This is a system that can't feed itself.
Can't fuel itself, and it no longer has
enough people to try to go back to
a subs
agricultural system.
We are looking at a breaking of what
it means to have a hana ethnicity in
just the next few decades.
And what does that entail in in practice?
Gonna... What what will China? Obviously, people will
still be there? The land will still be
there
what what then range? Chaos
you know, who who leads that? How what
what sort of how does it function or
or how how does it not, according to
to Well, let's try. Start by saying that
this is all guess work because this has
never happened before civilization history. The closest,
perhaps parallel we have, and it's not a
great 1. Is the population collapse we saw
in the late Roman period when a combination
of sla and disease gutted a lot of
the provinces,
And, yes, you see a breakdown in civil
control to the degree that you basically had
a d population through lack of security, lack
of disease, lack of health care. Lack of
economic activity and entire area basically resort the
barb.
In this specific case, in China,
China's history is actually rep repeat with civilization
collapses in in the past. If my math
is right, This is gonna be the 20
seventh
civilization collapse. Where the central government has simply
collapsed,
huge swath of territory that we think today
of being economically vital, basically revert to the
the term marches
where basically you've got pockets of
civilization that can kinda hold back the night
and then big swath of territory where no
1 holds sway.
In Chinese Par,
it's warlord is.
The problem, of course, in a place like
China is most the people live in an
area where you can't grow food
unless you also have a significant water works
system.
So if you break down
civilization
pillars
and central control, the ability to maintain those
networks goes by also the Chinese import 80
percent of the inputs they need to grow
their own food. So on top of all
of this, having a a mass famine large
sections of the population,
especially in the North China plane where the
inputs are the highest and the demands
for a water work system are the highest.
Historically speaking.
Of those 27 collapses, about half of them
have kind of followed some version of of
the same pattern
where the north
North China plane has famine
has warlord ism has an attempt by Beijing
to basically invade ne depress itself to stability,
which typically kills half the population.
And then you have the southern city states
from Shanghai Guangzhou Joe that go their own
way.
And basically, cut deals with foreign powers to
import capital technology and above all else food.
In order to continue existing. Most of these
cities have imported the majority of their calories
for the last 1700 years.
And the modern era that we're in where
all of Mainland China under a single political
authority,
and Guangzhou gets its food from the planes
around Beijing. That's not normal for them. So
this is gonna sound horrible, but we're actually
reverting to something closer to the historical mean
here,
and the historical mean is not pretty.
Very interesting analysis.
You know, part of the demographic challenges you
described or part of the industrialization that most
countries have gone through, but part of it
also self inflicted of course with the 1
child policy on top of that. All that
you described, I would imagine would not be
news necessarily to to president Xi.
And what you said it in many ways,
his actions are actually listening the country's demise.
And I wonder how much of that is
to the unintended consequences,
you know, do you see him attempting to
to to put to action something that would
at least stave off the inevitable?
I think the government system at the top
is to degrade the point that useful policy
if it happens is more like monkeys on
a keyboard.
Don't mean that as a racial slur. I
just mean that she has so purge the
system of anyone who is competent that no
1 even brings some information anymore. So he's
making decisions in a complete vacuum guided by
nothing more than propaganda. Now we we know
5 years ago
before the purge of the bureaucracy he was
complete. But he was fully aware of the
limitations that China faced at home and abroad.
He knew he was dependent on the Us
market. He knew he was dependent on the
Us Navy. He knew he was dependent on
international trade to keep the lights on.
He was aware of all of this and
more. But with the purge of bureaucracy, no
1 is any longer presenting him with basic
information about what's going on at home or
abroad. And whenever something does penetrate this kind
of her meta seal he's got around himself
in the forbidden city. Everything's news.
And
1 person,
no matter how competent
can't micro manage a country of a billion
people,
and he's destroyed all the avenues of communication
and information flow.
So as a result, the government, the bureaucracy
is either making things up as they go
or more likely doing nothing
because they don't wanna be called to the
account for something they weren't specifically approved for
because that gets you killed. I don't see
them recovering from this.
The about the only scenario I can think
of right now,
where the Chinese might might might might be
able to start down a path, that's a
little bit more sustainable, at least buy them
a little bit of time. Is if she
were die to die by accident,
And all of these nearly brain dead people
that he's installed on the polar mirror not
because they're confident not because the... They're yes,
men. Because they're silence. If they were collectively
to come to the realization that they need
to go out and job hunt for people
who actually can do math.
And run a a small town.
That's a lot of ifs to get to
a possible then,
You, the the... I I wanna talk about
the broader implications of what you've described to
the the the the rest of the world.
China still produces as you noted,
a lot of goods for the rest of
the world is still being a manufacturing hub.
And it's not as though the the the
rest of the world, the Us very much
included among that
have
alternatives in place that would be able to
make up for this, Yeah. Especially if the
demise comes quickly, you you predicted perhaps even
in the next 10 years.
You know, what what would you if you
you were as as you do. In fact,
it was in the ear of a policy
makers in the United States,
what's I'm not the whispering kind of guy,
but thank you.
You're you're you're speaking loudly in rooms with
with leaders in the United States.
What sort of advice do you do you
provide to ensure that the downstream impact of
this isn't also disastrous for for economies like
ours? Well, let's start with the reality of
the exposure.
The Chinese are the king of low end.
If it deals with assembly or things that
are not too technically
challenging, and this is where the Chinese can
compete because they compete on scale. As you
move up the value added scale, they bring
less and lists to the table.
This is an an economy that has seen
their costs of labor go up by a
factor of 15 or 16 in the last
25 years, but labor productivity is barely tripled.
So there aren't a lot of sectors where
value add is the critical component of the
mix where the Chinese are players and unless
they just massively suck Isaac it, which they
do.
The places where
they are competitive are in industries where the
value add is very low and it's usually
about processing
And in those sectors, they're born in the
world later. So whether it's aluminum or
cobalt or copper
40 to 70 percent of global processing for
a lot of these materials
is China centric. Now there's nothing nothing
about this processing process that is difficult or
expensive or even time consuming to relocate.
But
easy and cheap and fast is not the
same as immediate and free.
So when I think about things like aluminum
or lithium,
that's where the biggest shock will be. When
I think about things like steel rebar where
the Chinese
have an advantage because of their subsidies. It's
not that this can't be done either and
it's not that we don't do it ourselves.
It's just the shock to the system if
this word to end overnight would be significant.
But as you move up the value add,
it becomes less and less of a factor.
So high end chemicals, mid tier chemicals,
automotive,
things as simple as a spark plug the
Chinese Do and they do it scale, but
they don't do it well, and they don't
do it at a particularly competitive price point.
So there really are for
the end result of things.
The the the point of the spear and
manufacturing if you will.
That I'm less worried about. It's the building
block or I'm most
concerned. Now
If you love the chips fall where they
may in a free market system.
Most of that sort of industry is going
to go to places with the cheapest energy
and the cheapest cost of production of the
ore.
For most of these things, the ore is
pretty spread out around the world, and the
United States does have by far the cheap
electricity in the world because we have the
best territory on the planet aside from Australia
for Green tech, and we have the cheapest
natural gas. On the planet, and we have
the cheapest high caloric content coal.
So if you let everything go in time,
it will all back here. My concern is
it's gonna be a shock. So I'm of
the opinion that every day that China doesn't
collapse.
Is a gift
because it gives us a day to get
ready for the end of those supply lines.
And we are seeing more and more and
more of even the
low end stuff coming back to the United
States, with I would argue the Gulf coast
being in the area that's going to be
adding the most not only does it have
the really cheap electricity and approximate industrial capacity
places like the Texas triangle.
The view of invite metal production in places
like Louisiana and the Texas Coast are somewhat
lower than the national average, which provides us
some opportunity in that space.
But China was long the most populous country
in the world.
You've noted that perhaps by 20 55 that
will have half its current population.
It's just recent months that at least officially,
India re... Has taken over the title of
most populous
country in the world.
How bullish or bearish are you regarding India's
prospects?
Whenever I talk to the Indians, I... First
thing I make clear is you are not
going to be the next China and you
do not want to be.
The the strength of the Chinese system is,
a dictator state forces everybody into the same
page and a a huge subsidy system that
is financially wildly
inefficient, but does allocate
capital to productive uses in order to keep
those populations
happy and marching in the same direction. You're
never gonna get that in India. In India,
capital isn't a political good. It actually has
a value, which means that you don't make
loans just to make loans. You don't make
loans to guarantee high employment. You make loans
because there might be turn on the other
side. It's much more efficient in that way.
And if you were to apply the Chinese
mile to India, you'd probably end up with
the same rapid
industrialization, but then followed by the same civilization
collapse and India is smarter than that. They're
better than that.
That doesn't mean that India doesn't have its
own problems well My God India has its
problems.
Their problem is that they basically have 30
different regions at 30 different countries, 30 different
economics systems, and they don't integrate well.
The... It's not just a policy issue. It's
not just a geography issue. It's it's a
corruption issue.
And that makes it difficult for the political
leadership of 1
Indian state to integrate with another 1 even
if it's a perfect match.
Politics there are very
localized. It's a true federal system kinda like
the United States or Germany, where the national
state and local governments all have roughly the
same amount of power And it makes policy
making a mess,
but it does mean that you can always
learn from 1 another, which is why you
have places like the Bangalore corridor that are
basically first world economies and other places are
basically giant call centers and other places have
failed.
But let me under something on the population.
Chinese data isn't great. They're keep updating it
Thank God.
But I would argue that India surpassed the
Chinese population something like 15 years ago. With
the new insight we've gotten in just the
last 12 months,
So we've already been not so tip toe
towards this new world for quite some time
now, and we had 5 year period where
the Chinese were in a degree of information
locked down during Covid where we didn't get
any good information. On the backside of that,
we're finally seen that
A lot of these peaks
in China,
car sales, cover consumption maybe didn't simply come
in the last 12 months or even during
Covid, but actually date back to like, 20
17 20 18. On the demographic picture, it
looks like it was a lot. Further back
than that. Like, we now know that the
Chinese birth rate probably dropped below the American
birth rate back in the early nineties.
Interesting points about how how, how accurate the
data is and how that might
reflect differences there as as you point out,
Well, we we started our conversation with 1
Russian strong man. Let's let's move on to
another 1,
in Putin,
in 20 10, you predicted that Russia would
invade the ukraine in 20 22,
quite quite a prediction while done Peter.
Sorry why
was that so clear to you, then?
Okay. So there's 2 pieces to this. First,
the why it has to happen.
The Russian frontier in its current forms is
completely offended. It's it's wide open it's populated.
There's no way for the Russians in any
form with no matter how confident their government
no matter how powerful for their military. To
patrol and secure the entire border system. It's
something like 5000
kilometers long.
But
if they were advanced
to advance past their current borders and to
get something a little bit more similar to
what they had in the Soviet period. They
could anchor their military in places of geographic
constraint
where mountains and seas can provide a defensive
bull work, and then they concentrate their forces
on the places between those. Like the Polish
gap, like the best Arabian gap in Romania,
like the caucus is
coastal strips. And then their entire
internal boundaries are less than 500 miles. That's
something that they can do. So they've been
working on some version of this for the
entirety that we have had an entity called
Russia over 4 centuries.
They achieved it under Stalin, they lost it
with the post Soviet collapse. And everything that
they've done, and by they, I mean, the
Russian state, not putin. This pre dates putin.
Everything that the Russian this state has done
since 19 89 has been about out been
about reestablish that outer crust defense.
Ukraine is not the first post soviet war
with that goal. It's the ninth, and it
won't be the last if they win. So
that's the why. The why now is demographic.
Russia has these peaks and trough in the
demographic structure that largely
line up with either major wars or majors
centralization collapses, and
mismanagement,
whether it's k jaw forcing everyone into apartments,
or World War 2 causing 20000000 civilian deaths.
You got these giant go out of their
demographic structure.
But none of them are a of severe
is what happened after 19 92.
The economic system collapsed,
we had several years of a corrupt government
under yelp and that basically did nothing to
stop the free fall.
Culminating into the collapse of 19 98.
And during that period, the death rates stored
the birth rate crash and for almost 20
years, we had a death rate that was
twice as high as the birth rate.
And even if you believe the statistics that
the Russians started making up 15 years ago,
This is a population structure that is so
far past the pale that recovery just isn't
even theoretically possible,
which means that the men that they have
in their twenties are really their last
group of deployable forces that they will ever
have.
And 20 22 was kind of in the
middle of the date range that I saw
where if they were gonna... If they waited
any longer,
they simply wouldn't have the people to even
theoretically
attempt a military solution.
So it always had to happen. It always
had to happen about them.
And if they keep losing people at their
current rate and there's
thousand ifs that are condensed into that if.
They probably can only sustain this for about
another 6 to 9 years
and then they simply don't have the people
to try.
Well, you've noted that Russia always does long
wars, not quick ones. Right. And when you're
running out of people that's strategy doesn't work
as well. Exactly Right.
Well, you... You've noted that you're out of
the prediction game on the world Ukraine on
multiple places I've seen you you speak. And
but I wonder if you can walk through
what would need to happen for Ukraine to
get the upper hand versus what would need
to happen for Russia to to do so.
Well, let's start with the Russians.
As long as they can maintain supply flows
from North Korea
for artillery from Iran for drones and should
for China for electronics and metallurgy.
You marry that to the Soviet arsenal, and
they are not looking at it a meaningful
equipment shortage within the next 5 years.
Based on how long China lasts, it could
be a little bit longer than that. So
at least in the midterm, they're fine on
equipment. And because this is their last war
and they realize that, the manpower issue is
not an issue either it's just a question
of how they politically manage drafting.
I don't think that is going to be
the thing that bring down the government. So
minimum 5 years for the Russians things look,
I don't wanna say hun dory, but they
can maintain their flows.
And they're finding new and innovative ways to
use their old weapon systems in did more
devastating capacity. So for example, the glide bombs
or the most recent innovation basically dropping a
metric ton of explosives on an urban center
and just bit by bit making the front
zone completely une inhabit
so that if you're the Cra military, you
lose an interest in defending something that no
longer has a value.
They started with the power centers. They're now
going after things like apartment blocks and just
making places completely un unbelievable.
That's not... It it's in humane, but it's
not a stupid strategy from a strategic point
of view. And if you can cause enough
havoc
that the West realizes that the rebuilding might
not be worth the cost, maybe maybe maybe,
it's an open question about how long the
Ukrainians can.
Maintain defensive operations.
It's a legitimate conclusion no matter how horrible
it sounds.
On the other side, the issues is Crimea
Because of the shape of the land because
of the presence of the Ne river,
any sub apply going into crimea, it basically
has to come from 1 of 3 routes.
You've got a rail ferry bridge, basically bringing
things in by water. That the Ukrainians have
largely destroyed. They've also destroyed most of the
Russian landing ships in general. So supplying by
see has become very, very hard. Number 2,
you got the Kirk Bridge,
which goes from Ross Don or, the railway
goes in from Ross,
south
into the k straight and then crossing in
primary pet Peninsula. That's taken enough hits that
its ability to take mass cargo has been
limited pretty strict fleet.
And I think with these new weapon systems
that the Ukraine recently gotten, the K bridge
is not gonna be around much longer anyway.
Then third, you've got a series of rail
connections that are on
southern shore Ukraine proper,
and while they are in long range rock
artillery range in many cases,
the Ukrainians don't have a liability to target
the trains with artillery.
So that's where the bulk of things are
going right now.
If
Ukraine
can cut that final rail system,
then the Russians would be
forced to ship anything
to crimea by truck
from Russia Proper through the Don boss,
past mir and multiple
and across a single road and rail system
to get into Crimea proper.
That's over a thousand kilometer long supply line
by
truck
with the Ukrainians being able able to basically
interject in multiple spots. If we get to
that point, and that is basically what seems
to be the Ukrainian goal for this summer
once they get air power to try to
cut that line. If they can do that,
Crimea goes from a potential launch point Russian
forces to the most
exposed
portion of the entire Russian land mass.
And the public
humiliation of having a couple million Russians in
crimea starving because the Russians can't supply their
own civilian population, much lesser military
population.
Ukrainians don't have to capture
crimea to generate that outcome. They simply have
to interject 1 train.
And if you can have a global
humiliation of putin,
This is how about half of the governing
systems in Russian history have ended from either
internal collapse,
or popular
uprising
because the Russians have lost a war very,
very, very, very publicly, so some version of
this is what went down for world war
1 from some version of this is what
went down for the Crimean war ironically.
And that seems to be the Ukrainian short
term goal, and that is also not a
stupid strategy.
So both of these things
can work,
and both of them are very, very ugly.
Yeah. Very interesting.
You Ukraine has the support of the Western
world.
And Russia has a support of countries like
China and North Korea.
So in many ways, this is a proxy
war for China and the west to some
degree and that the primary factors are of
course, Russia and Ukraine.
Are you are you fearful at all that
the proxies might be drawn into the conflict?
At the moment, no.
If there is going to be a conflict
that involves China it'll be under a a
series of very, very different circumstances. Remember, the
Chinese can't project power more than about a
thousand miles. Thousand kilometers really, from their own
shore. So the idea that they could get
involved in something involving sea lanes in South
Asia or much less in Ukraine
beyond the pale, North Korea's, obviously significantly less
capacity in that regard.
And in the case of Iran, Iran and
Israel are actually getting along as well it's
possible for the 2 of them to get
along right now. So I don't think that's
a serious conflict either.
I have never been of the opinion that
a war between the United States China isn't
inevitable, much less imminent. I don't wanna say
it can't happen.
But if we do get into a slug
fast
The United States is gonna put a few
ships in Indian Ocean Basin, cut the energy
artery, cut the manufactured goods artery, and we'll
have a des civilization collapse China and under
your complete the famine. 5 years ago she
knew that. My only concern today is that
he is so destroyed the capacity of information
to flow within the Chinese system that maybe
he's forgotten it.
The 2 countries we primarily spoken about so
far,
China and Russia are also led by paranoid
dictators who have nuclear arms.
And talk about the risks of the combination
of those factors. Yeah. Not a non factor.
Now.
To the degree that the United States has
a missile defense system, it was designed for
the Chinese system and while they have been
adding more and more silos,
we have learned in the last year that
corruption and theft within the Chinese procurement system
is if anything bigger than what's going on
in the Russian procurement. System with the nuclear
forces being the 1 that has leaked out
the most.
Specifically, the Chinese general who is responsible for
maintaining the silos,
stole the money that was supposed to go
for the fuel for the rockets and just
filled them up with water, which probably makes
the rockets useless.
I would not be willing to bet the
existence of the United States on that fact,
but there is no way that this is
a single data point.
This is something that is very easy to
discover. So anything that he was trying to
actually hide is probably worse.
I I wanna say I'm not... I don't
worry about China at all, but not to
the same degree as most people in the
military industrial complex in the United. States. I
just I don't see it. I don't see
the capacity for power for projection.
In the case of Russia, that isn't much
more serious threat. A number of deliverable weapon
systems is much higher, and that's before you
include the ones that have been moth ball,
but not dismantled.
So you're talking about basically a thousand delivery
platforms today. And if if if they decided
they wanted to bring their old stuff out.
They could expand that by a factor of
5 or 6 theoretically.
Our missile system is not designed for that,
not just in terms of numbers in terms
of coverage,
Our hardware our fixed ground placements are on
the West coast and Alaska, designed for North
Korea assigned for China,
our East Coast doesn't have that. We've got
a lot of mobile systems, but not sufficient
to cover all of our population centers. So
if
1 of these red lines that the Russians
keep lying about actually turns out to be
real,
then we could have a very serious problem.
So we've got this fun little situation where
we've got 2 kind of general camps in
the United states. Those who take the red
lines very, very seriously.
And think that as a result, we should
become Neville Chamberlain and just let the Russians
have whatever they want. They want you Ukraine
and let them have it. They went poland
and they let them know happen. They want
Germany let them have it. Let them have
all of nature. Let them have Mexico. Basically
just stand by,
stand back and let them brushes do whatever
they want. You know, that that's idiotic.
And not very American.
The other side,
it's like, we should give the Ukrainians every
weapon system they possibly can. We should allow
them to target everything they want whenever they
want. However they want and we should actively
assist them.
That's too extreme in the other direction.
This is a country that has a missile
system that was designed to obliterate the United
States.
And while they have bluff over and over
and over and over and over about where
the red line is.
We only have to be wrong
once.
For this to get out of control. So
I think the Biden
administration when it comes to security policy relating
to Ukraine
has broadly
struck
the right degree of caution versus aggressive miss.
Basically what we've done for the last 2
years is when the Russians
state a red line,
1 country in Nato.
Puts a toe across it just to see
what happens, and then they step across it,
and then other countries join in.
And 3 weeks later, everyone's doing it. So
this happened with artillery. This happened with the
storm shadows has happened with the Ja most
recently
It happened with allowing the Russians to use
the outcome system to target Russian assets
across the border from Car.
And to go after the places where the
Russians were launching assaults on civilian populations. And
just in the last 48 hours, that has
now been expanded to pretty much the entire
front.
Ukraine in the American eyes now can use
our weapon systems to target any place in
Russia that is actively
generating a logistical hub to target
Ukraine proper.
And I would guess that in the next
couple of months, even that limited restriction will
go away as well.
But 1 of these days, 1 of these
red lines might actually be real.
I am guessing here, but I would guess
that it will be when you Ukrainian forces
field they need to cross the border into
Russia proper to physically break it up the
logistical hiccups ups we're not gonna hit that
this year.
But it is something to start stressing about.
Yeah. Another
strategic and important part of the world is
Taiwan.
And there's a a lot of, a reason
why that is
contemplated as,
a risk in the future. And I wonder
that that is conflict with China. And I
wonder to what extent not only what you've
described in terms of the
existential challenges that China has But on top
of it, the... What they are seeing with
the war in Ukraine, to what extent do
you
believe that this is dampened cheese enthusiasm for
conflicts.
It's really hard to get a read on
g because he doesn't have conversations with everybody
with anybody. So, you know, you can tap
phones and hack fax lines and emails in
Rush and get a decent view of what's
going on in the Kremlin, but she has
conversations with no 1. So it's all guest
work. And the fact that his decisions are
not driven by what's going on in the
world. They're just driven by what rare bits
of information get into his head
and then conversations with no 1 about the
details, it... It's kind of a fool errand
to predict. I would just underline that
If there was a war with Taiwan, it
would be the end of China, not that
there wouldn't be fallout, not that there wouldn't
be blood, but it would be the
end of the people's republic.
Also,
even if
in their wildest dreams, that version of Chinese
nationalism happened where they were able to conquer
Taiwan intact in 2 weeks.
So
doesn't solve any of their problems,
and they can't operate their own semiconductor fab.
That's... Those are manned by critical staff from
other countries. You put them in charge of
Ts see they wouldn't know what to do
with it. I don't see the gain here,
aside from a little nationalist drum beating that
you can then keep beating that drum As
country cole is around you and maybe use
that to write the narrative for the next
iteration of the Chinese government in an era
of famine and no electricity.
Doesn't seem like a winning play to me.
Yeah. That makes sense. Let's turn to the
United States a little bit more than we
have so far.
You've noted, you you alluded earlier to the
fact that we are a continental economy. And
I know from from past conversations that you've
you've talked about the impact of d globalization
is, therefore not going to be an existential
problem for the United States, provide your analysis
there, please. Sure. So remember globalization for us
was ploy to get everybody on our side.
And if we had invested our economy into
the global commons, it wouldn't have been a
bribe. Wouldn't have been nearly as attractive.
So today, only about 15 percent of our
Gdp comes from international trade.
Roughly half of that is mix and Canada.
Roughly half of what's left is exports of
raw commodities like
crude oil, refined product and grain.
So now you're talking about a total exposure
of 3 to 4 percent of Gdp.
Now that's not nothing, and most of that
is in the form of manufactured goods.
So if we were to see a cut
of everything
overnight, we would have a glut of finance
food and energy and a shortage
in
electronics.
That would be how we would basically feel
it.
We don't move along from that overnight. We
don't move on from that without a considerable
expense, but this isn't a
civilization ending
event like it will be in other places.
I I've been fascinated by your analysis of
the presidential and we're speaking now in the
summer boy be 20 growth.
But I mean, you you you are une.
You you say this will be a Biden
win by a land wide. Yeah. To describe
why that's the case. Okay. So, 3 3
and a half things.
Number 1, there's fewer Republicans than Democrats.
And so the Republicans have always done well
at the national level because the factions that
make up the coalition don't fight among themselves.
Well, Trump has not only started a civil
war among Republicans he's actually purged some of
these factions like the business community and the
National security community, from the coalition altogether. So
without all the Republicans and locks up, there's
no chance of a victory.
Number 2,
people seem to have forgotten what happened during
the midterms.
Donald Trump told independence that their vote doesn't
matter in the general election, and that's the
only place. But independents vote matters.
Trump wants it to be all about the
primaries because that's where he dominates.
And so in elections where he put his
finger on the scale and was, like, a
really heavily campaign through specific candidates,
independents showed up and drove to vote against
those candidates.
Well, again, if fewer
Republicans than Democrats.
The Republicans have never won the presidency without
capturing 2 thirds of the independent vote.
They're gonna lose the independent vote. So now
we're not just talking about it feet. We're
talking about a route.
Third,
or of Kennedy junior.
Trump thought he had cornered the bat shit
crazy vote, and now it split. So you're
talking about a loss of vote even in
strongholds.
And this is before he became a convicted
felon.
So we're looking at the second or third
worst electoral defeat for any
presidential candidate in American history. I mean, this
is gonna be like gold water or worse.
Assuming Biden doesn't die. Biden doesn't die I
reserve or... If Biden die, I reserve the
right to change my mind but that's where
we are today. Well, let's let's assume for
for 1 reason or another that you're incorrect.
And and Trump wins. What do you see
is some of the things that he would
do or perhaps some of the risks of
a second Trump term. Well, the only thing
that we know that he would do for
certain is be as tough on China as
Biden. Now, they have a very, very similar
policy when it comes to international economic affairs.
In fact, I would argue that the 2
most similar presence we've ever had in that
regard, coming from different points and a decline
policy differently, but getting to the same general
result of basically
dividing the Chinese
from the American system.
And while I could sit back here in
arm share quarter, quarterback for both of their
strategy that how like could do it with
less pain, more more effectiveness.
Most Americans are broadly on board with that
push,
and Trump does deserve credit for starting that
conversation. But beyond that,
Trump's policies are basically shaped by whoever flattered
him most recently.
And I can't predict that.
If it happens to be somebody in Mexico,
then Mexican relations will be great. If it
happens to be putin then look out Ukraine.
But if Z Z gets to him first
look out Russia.
He's in unpredictable because he has no attention
span. He ignores the information that is available
to him. He ignores his advisers mean that
he doesn't fire them outright. So predicting the
specifics,
I can tell you though that the general
engagement
through government assets,
whether it's the military, the bureaucracy,
the state department, he just doesn't use those
tools in a way that a normal president
would. Just makes everything very erratic.
Mh. If Biden wins, of course, as you
predict, do you have a sense of any
changes in direction or or policy,
modifications when when he will not have any
more races to run?
In foreign policy, I would expect it to
be reasonably steady state. So, again, steady reduction
in anything that globalization has to do, no
new trade deals.
Ever tighter options on the Chinese moving down,
the technological
platform from things that the Chinese have no
chance of doing themselves to things where the
Chinese are dependent foreign corn supply chains, and
then only in the later on, things where
the Chinese depend on foreign markets, basically ratchet
up the pressure steadily.
On domestic affairs, it really depends upon what
happens with the congress.
I think at this point, it's kind of
a shoo in that the Democrats are gonna
win the house. The question is the senate.
Now normally, and until a month ago, I
would have said that the Republicans will probably
hold the majority in the senate There's 33
seats up. 20 of those are being defended
by Democrats.
In order to get a majority, the Democrats
would have to defend every seat and then
gets 10
more
seats from the Republicans.
That just doesn't happen. I'm mean Sorry. Not
majority clot.
To get 60 60 seats in order to
basically control things. I would've have said no
way.
And then Trump was convicted.
And so there are going to be negative
coat tails for Trump in this scenario. The
question is how big, but I have gone
in the last month from thinking there was
no chance. That the Republicans could lose the
senate to that degree to all a sudden
like it's within the realm possibility.
Now if if if
we have that sort of just dynamic
blow out.
Then we're gonna find out just how economically
liberal and incompetent the Biden team can be.
I have not been impressed by their domestic
economic policy. I was not impressed by trump's
economic policy. I was not impressed by, Obama's
economic policy. It's been a long time since
we had someone who could do math in
the White House.
Odds are,
strong presidential result, strong house result, both the
Democrats
and then a split senate are probably even
a Republican majority.
As long as the Republicans have 50 seats,
there's a break.
That's probably where we're going. So clearly, your
analysis generally speaking,
based on
demography based on we can including, you know,
the the fact that we are surrounded by
2 oceans here in the Us.
But based on
just the the the dynamics in the rest
of the world,
the United States is positioned to be the
big winner in the years decades ahead.
What capacity do you feel the the government
has to potentially slow our progress or or,
you know, be be b the the 1
thing that gets in the way of that
outcome. Well, I'm fur in the Beg can't
be Choose camp. We need to basically double
our industrial plant to prepare for a post
globalization world because we won't be able to
import those finished goods. Or maybe the intermediate
goods that are important in our own manufacturing.
With the benefit of Hindsight, I think a
lot of people realize that we should started
building this out years ago as opposed to
relatively recently, but I mean, here's a thing.
Think of, say the
inflation reduction act.
Couple trillion dollars of investment into various green
tech to build out new industrial plants so
we can compete in these spaces.
The economist in me is like, this is
wildly
inefficient.
But we're kind of on the clock.
And even if we build with subsidies an
industrial plant that isn't perfect for what we
need 05:10 years from now. We're still building
out the electrical systems a physical infrastructure, moving
the populations that are necessary to have what
we need at the end. And if we
have to re tool this stuff between now
and then fine.
The efficient time to start this process was
20 10.
We started in 20 21.
I'll take what I can get at this
point. And even if we're not building the
perfect thing, we're building something that we can
then reuse.
Talk about the role of immigration?
The countries we've spoken about primarily,
the only 1 that has a history of
immigration is the States and in many ways,
actually, our demo... Demography
is is is it's the primary benefit. Demographic,
the fact that we are a young nation
in many cases because of immigration.
Talk about the role that that plays as
a potential
force multiplier to the advantage of the United
states relative to some of the other countries
you're doing. Yeah. The issue is for immigration
to be a meaningful part of the solution
is it has... It has to be something
that has deep roots and you have to
have a society that can regularly
assimilate relatively large numbers of people without changing
the core,
identity of the country to point that it
triggers a backlash. Now in the United States
here, we're kind of on sign curve. We
have Highs and lows. And right now, we're
definitely at a low,
Trump basically criminal all legal route something that
biden doubled down on, which he should get
full credit for that or full blame based
on where you are.
Which means that the only way to come
into the United States now is should come
in illegally. And that's why we're seeing a
surge of people from Russians from India from
China to Southern border because close off all
the normal wet ways that they would have
used to get here. I will point out
that we brought in about 2000000 people illegally
last year. And if it not for those
people going into the work force our inflation
problem would be much higher than it is
right now, at least double, probably triple.
Until such time as our political systems settle.
I don't think we're gonna be able to
have a meaningful conversation about immigration in the
United States, which means we won't probably have
a change in our current structure
for 5 years.
It's a missed opportunity because as we see
countries fall apart around the world,
Now is the time to be setting up
the policy so you can hoover up that
labor in those skilled workforce,
and we're not gonna be able to benefit
from that.
Not a lot of places are.
Really the only country I would argue that
has kind of made immigration kind of a
day in day out part of their systems
Canada,
But even they are experiencing some significant ba
because when you bring in a large number
of people year on year on year for
15 years,
they all need homes and they're relatively price
sensitive when they go looking for them because
you have to have 1. And so there's
now an affordability crisis in most of the
major metro in Canada,
With most of the people who were born
in Canada no longer being able to afford
a house.
It's a different sort of problem.
It's not a perceived as a crime issue,
it's perceived as a cost of living issue.
So the smart play now would be to
have a degree of immigration reform that doesn't
just tough up the border, but opens up
new avenues for people to come in legally,
but until we can have that conversation.
Immigration is not part of the solution in
a traditional sense. We might be able to
bring in,
bring in, run toward probably. A lot of
illegal to do work
to keep inflation under control, but that's about
it.
We're missing out on what should be right
now the greatest skills transfer in modern history?
What other countries are you bullish on in
terms of long term prospects beyond the United
States?
Well, the first 1 is 1 that from
a demographic point of view looks like a
no brainer for being a failure in that'd
be Japan.
It's the oldest
demographic structure in the world, they have managed
to bring the birth rate back up or
at least re target's reduction.
But under Trump, they were able to cut
a trade deal that was humiliating, which almost
brought them into the American inner circle of
allies, and there's basically doubling and tripling down
on that right now. So they found a
way to get access to Us market over
the long term,
and a merger of security interest over the
long term, but I think we'll do them
very very well.
I'm also very bullish on Mexico.
If it wasn't for Americans
obsession with cocaine, this should be 1 of
the most successful states in the world.
And their demographic structure perfectly complements ours. They're
already on the verge of having a trillion
dollar consumer market
because of their structure. So it's not just
a source of manufacturing for us. It's also
an export partner, which is very, very important.
Southeast Asia, looks very good for similar reasons
and has less cocaine.
Young population,
multifaceted manufacturing system. And it's as a region,
probably the part of the world that will
benefit the most from
industry moving out of the people's republic. They're
at a similar state... They've several states that
are at a similar stage of economic development
that are actually far more economically efficient
already.
And there aren't a lot of local
military
competitions that are a serious problem. So you
can end globalization on a global level. Still
have a regional globalized system within Southeast Asia
that can then trade with Japan and the
United States.
Those are my big 3.
Would talked about a number of countries that
are on negative trajectories that you believe can't
be corrected. Are there any that have negative
trajectories that can? And if so, what are
the actions they you do? I mean, I'll
never sell short the Koreans because they keep
rewriting the rules of physics to make things
happen. But, I mean, their demographics are, like
the second or third worst in the world.
I'm interested in Poland right now. Poland
today is kind of like Mexico. Poland versus
Germany is a little bit like Mexico versus
the United States.
But whereas a, a lot of the other
European countries have aged out,
the polls still have a lot of people
aged roughly 30 to 50,
and if they can build out a pro
family nat list policy system, the idea that
they could regenerate their population over the next
20 years is it's not beyond the pale.
But if they don't do it soon if
they're gonna run out of time, they'll have
a moment. When Germany has failed, when Russia
has failed and they're like the guiding star
of Europe at that point.
But it's only a moment unless they can
get their demographics back up, watch turkey, positive
demographics. Again, to like that Mexico, Us sort
of thing between Turkey and Europe,
France,
healthiest demography in the rich world outside of
the United States.
They've got some issues to work out, but
unlike Germany or the United States, they never
spread out their manufacturing system.
It's not as efficient as a result and
they've kind of missed out on a growth
boom these last 30, 40 years.
But as globalization fades away, they actually don't
have to re tool much. Take advantage of
the world and the form it's going to
be in.
About the Uk, that all the data seems
to suggest that there's now a pretty strong
majority that feel that Brexit was a mistake.
Many any chances in your mind that there
would be, I'm never gonna tell a country
what to do when it comes to international
organization membership because there's too many pieces in
play. Now when when Brexit was first brought
up, or was it 10 years Ago I
was like, why no, I can see the
point of that? Because without
globalization,
the Eu has no chance,
especially once you think that the Germans who
pay for everything or aging out and aren't
gonna be able to pay for everything. So
getting out ahead of it,
figuring out what's next. That made some sense
to me.
It's been 7 years since the Brexit vote
and the Brits had done nothing.
And they basically wasted the last decade. And
now their demographic problems are starting to bite.
Now, they're not nearly as bad as Italy's
or Germany's or Russia's China's, but they are
serious.
What the brits need to do is make
up their goddamn damn mind and what Brexit
actually
means.
And it's too late now to go back
into the Eu and try to salvage it.
So they do need a third way
The only way that I can see that
that works now is to basically get into
Nafta
And if they decide to do that, the
United States will brow beat
a number of concessions into the agreement
that the brits really don't wanna agree. They
will never have as good a deal as
they head with the European Union. If think
go with the United States.
But there isn't a sufficiently large source of
consumption anywhere else within reach if it's the
United States or you become a failed middle
power.
None of these are good solutions for the
British.
So so humiliation like Japan, but but with
longer term positive implications of of of of
bending.
Exactly. I mean, the world has changed and
it's changing in a direction that is not
favorable for what the brits have normally been
good at. So they're gonna have to take
a deal that they don't want or they
have to go it completely alone
and
that doesn't look nearly as frankly.
Who who do you see as America's primary
rival as the century rolls on?
I I think we're gonna take about 20
years off from even having that conversation.
We have to figure out when I say
We Human humanity has to figure out what
the economic model is for post globalized
post demographic collapse world and until we know
what that is,
and we haven't really started
that yet. We can't imagine what the geography
of excess for that new model is going
to be. Because whatever it is. It can't
be based on consumption, production or investment.
Those are the 3 pillars
Well, consumption, production investment in labor. Those are
the 4 pillars of all economic models in
the world today, and they're not gonna be
relevant in 20 years on a global basis.
So until we figure out what that new
model is, I have no idea.
Peter Zion, thank you so much for joining
me. Again today,
always a pleasure to access to your insights,
and to spend a little time with you
I'm grateful for him. My pleasure.