Podcast Summary
The End of the American-led Global Order: Countries must adapt to the new disorderly world by leveraging their strategic advantages, including arable land, natural resources, and strategic locations.
We are entering a new age in human history, the age of disorder, and every country must adapt to this new reality. According to geopolitical strategist Peter Zajian, this new age marks the end of the American-led global order that began after World War 2. In the past, a few countries with strategic advantages such as good geography, large populations, and capital generation dominated large chunks of the planet. However, the current global order is no longer suitable for the US, leading to a shift towards disorder. Zajian believes that around 10 to 12 countries possess strategic advantages that will make them better positioned to compete in this more disorderly world. These advantages include factors such as arable land, natural resources, and strategic locations. As we move into this new age, every country, including the Chinese Communist Party and the European Union, must figure out how to thrive without the global order that has sustained them for the past few decades.
The Role of Powerful Countries and the US Navy in Global Commerce: Historically, powerful countries with secure borders and arable land have driven economic growth. The Bretton Woods Agreement established a stable global commerce environment, leading to diverse supply chains and specialization. The US Navy's dominance ensures safety and affordability of international transport, enabling global sourcing.
Historically powerful countries have prioritized secure borders and arable, temperate land for economic growth. The Bretton Woods Agreement post World War 2 established a safe and orderly global commerce environment, enabling the rise of diversified supply chains and specialization. This led to an unprecedented advancement in the human condition and spread of wealth and democracy. However, without the strategic order set by the Americans, this global manufacturing system could collapse, and we may see a return to more constrained, localized networks. The US Navy's dominance has been a crucial factor in ensuring the safety and affordability of international transport, making it possible for companies to source materials and labor from around the world. The US Navy's power is significant, with no second navy coming close in terms of capabilities.
US Navy dominance in the mid-22nd century: The US Navy's dominance in the mid-22nd century is due to historical reasons and the country's continued military investment, but politically, there's a trend of decreasing interest in the global system, potentially impacting trade routes.
The United States holds significant naval power and dominance in the global system, with other countries' navies combined being roughly equivalent to the American Navy in the mid-22nd century. This dominance is due in part to the devastation of World War II, which left the US Navy as the only major naval force. Today, the US continues to strengthen its military, but politically, there has been a trend of decreasing interest in the global system for several presidential administrations. This includes the US having a lower percentage of exports relative to other major powers and a less integrated trade system. As a result, countries heavily reliant on the ocean for trade are dependent on American commitment to maintain global trade routes. However, it is important to note that the US continuing to build up its navy does not necessarily mean a decrease in policing those routes or a waning interest in the global system.
A 25-year trend towards isolationism and disinterest in global affairs: The US has been reducing its naval presence and shifting towards domestic issues, leading to a potential collapse of the global order for commerce and security.
The current state of American politics and foreign policy is the result of a 25-year trend towards isolationism and disinterest in global affairs. This shift began with President Carter's attempt to spark a national conversation about the future of American foreign policy, but was met with his eventual ousting from office. Subsequent presidents, including Clinton, W, and Obama, continued this trend, with varying degrees of focus on domestic and foreign issues. Militarily, the United States has been reducing its naval presence, making it less capable of maintaining global commerce and patrolling the seas. This, coupled with the shale oil revolution and the availability of cheap capital, has led to a shift in American energy production and a potential collapse of the global order when it comes to commerce and security. In essence, we've been moving towards a presidency like Trump's for decades, and the current state of affairs is simply the culmination of that trend.
US Shale Industry: Lowest Cost Producer of Oil: The US shale industry's focus on light crude and heavy capitalized refining system has made it the world's lowest cost oil producer, surpassing Saudi Arabia. The US is now a net exporter of oil and gas, with potential for further growth.
The US shale industry is becoming the lowest cost producer of oil on the planet, surpassing Saudi Arabia. This transformation, which has occurred in just a few years, is significant because it was not long ago that the US was still grappling with peak oil. The US is now the largest producer of natural gas, crude, and refined products, with trend lines pointing vertically upwards. The difference between light and heavy crudes is crucial to understanding this shift. Light crude, which is easier to refine and produces high-end products, is what the industry has primarily focused on. Heavy crude, which is thicker and more difficult to process, was not economically viable until the 1970s. The US, with its heavily capitalized refining system, started producing heavy crude in the mid-1970s, and with the advent of shale, the US is now producing some of the best quality crude while importing and processing heavy crude from other countries. This dynamic allows the US to export light crude, import heavy crude, and make a profit on the arbitrage between the two. However, in a disorderly world, this arbitrage may no longer be possible, and the US will need to adapt its refining complex to process a greater proportion of light sweet crude. This transition can be accomplished in 18 months if necessary.
Potential Challenges for the World as the US Transitions to Net Exporter: The European Union, heavily dependent on American involvement and the global market, could face instability and potential disintegration, while countries with a large percentage of GDP from net exports, energy or agricultural dependence, and the ability to maintain their own continuities without outside assistance, may fare better in the new disorder.
As the United States transitions towards becoming a net exporter, the rest of the world may face significant challenges. The end of the global order could lead to a breakdown of everything that makes the global system possible. The European Union, heavily dependent on American involvement and the global market, could face instability and potential disintegration. Southern European countries, heavily indebted in euros, may revert to their own currencies, causing Northern European banking structures to collapse. The areas that have experienced the greatest growth under the global order, such as the European Union, the Russian system, the Persian Gulf, and Northeast Asia, will likely face the greatest disruption. Countries with a large percentage of GDP from net exports, energy or agricultural dependence, and the ability to maintain their own continuities without outside assistance, may fare better in this new disorder. It's important for Americans to be aware of these potential consequences as business people and investors.
The End of the Global Order: A More Conflict-Ridden World: The potential collapse of the global supply chain system could force Germany to become more self-sufficient and potentially militaristic, leading to an increase in smaller and larger conflicts worldwide.
The current global order, which has allowed countries like Germany to focus on manufacturing and economic growth without the need for military or strategic concerns, may come to an end. Germany, once a powerful European nation, could be forced to revert back to a more self-sufficient and potentially militaristic state due to the potential collapse of the global supply chain system and the loss of external resources. This shift could lead to more physical conflicts, with a focus on smaller, localized wars over scarce resources, as well as larger, globe-spanning conflicts, such as one between Russia and Europe. The United States, while still having the financial and technological resources for advanced warfare, is expected to avoid large-scale infantry wars in favor of more specialized methods like drone warfare and naval engagements. Overall, the end of the current global order could result in a more volatile and conflict-ridden world.
Geopolitical conflicts could disrupt global systems: Rising geopolitical tensions in Russia, Middle East, and Northeast Asia pose risks to finance, energy, agriculture, and shipping, potentially leading to catastrophic consequences for global systems, while technological advancements and global interconnectedness offer opportunities for higher quality of life.
The geopolitical landscape is shifting dramatically, leading to potential disruptions in global finance, energy, agriculture, and shipping. Three major conflicts are looming: Russia's expansion westward, the instability in the Middle East, and tensions in Northeast Asia. These conflicts could lead to the end of the world as we know it, with significant consequences for global systems. However, there are also positive consequences from technological advancements and global interconnectedness that could lead to higher quality of life for many. Unfortunately, these gains may be threatened by the current geopolitical instability. The Western Hemisphere may be able to continue on its current path, but the Eastern Hemisphere could experience catastrophic backsliding.
US focus shifts from global security to self-sufficiency: The US may pull back from global affairs for the next decade to two decades, focusing on self-interest and private representation of US interests abroad, but new regional powers will eventually draw the US back in.
The US is expected to have a decreased interest in global security and order due to self-sufficiency for the next decade to two decades. During this period, American intervention for humanitarian purposes is unlikely, and the US will focus more on "dollar diplomacy" where private American citizens or groups represent US interests abroad. However, in the long term, new regional powers like Japan, France, Turkey, and Argentina are expected to emerge and consolidate their influence, eventually drawing the US back into global affairs. The power imbalance between the US and these new powers will be significant, and the US engagement will depend on whether it's driven by opportunity or fear. Japan is mentioned as a potential rising power due to its demographic and resource challenges, but its position is also questioned.
Japan's advanced technology and navy keep it self-sufficient: Japan's advanced tech and long-reach navy help maintain supply chains and production levels, while China faces challenges with food supply, urbanization, and financial instability
Japan's powerful long-reach navy allows it to secure its own supply chains and maintain its local system, even in an era without American strategic overwatch. Despite demographic challenges and a shrinking population, Japan's advanced technology, particularly in robotics, enables it to maintain high production levels and remain one of the least exposed major countries to the global economy. In contrast, China faces significant challenges with its limited arable land, urbanization, climate change, and water shortages, leading to a potentially unstable food supply and political instability. China's reliance on a national security state, questionable financial practices, and overexposure to global markets could lead to a significant economic and political crisis.
China's Economic Success Story Amid Global Instability: Despite global instability, China became the world's second-largest economy, but its overcapitalization, over-financing, and over-leveraging make an eventual downturn inevitable. Argentina's unique geography and agricultural capabilities could thrive in instability or dominate neighbors, while NAFTA countries are essential U.S. partners.
The Chinese economic success story, which began in earnest in the 1990s, unfolded during an unprecedented period of global instability. China grew to become the world's second-largest economy but also the most overcapitalized, over-financed, and over-leveraged economy in history. While China's eventual economic downturn is inevitable, the question is what will follow in the Asian power landscape. Argentina, with its unique geography and agricultural capabilities, could thrive in a world of economic instability or dominate its neighboring countries in a more stable environment. The United States, Canada, and Mexico, physically connected through NAFTA, are essential to the U.S. economy and will likely remain significant partners, regardless of the global economic situation. The Trump administration's handling of NAFTA negotiations underscores the importance of these countries to the U.S. economy.
Canada's miscalculation during NAFTA renegotiations: The US now holds significant leverage in international trade negotiations, requiring the other side to offer concessions, not just the US.
The United States, under President Trump, has shifted its negotiating stance in international trade deals. During the Cold War, Canada leveraged its strategic location to secure economic concessions from the United States. However, with the end of the Cold War, Canada believed it no longer needed to offer anything in return. This led to a hardline approach during the NAFTA renegotiations, which angered the Trump administration. In response, the U.S. secured deals with Mexico and South Korea, demonstrating its economic power and leaving Canada with few options but to cave. The U.S. now holds significant leverage in international trade negotiations, and deals with countries like Japan and the UK are expected to be wrapped up this year. The new norm in American foreign policy is for the other side to need something from the U.S., rather than the other way around. This shift is not unique to Trump, but rather the earliest and least sophisticated iteration of a new trend in American foreign policy.
A natural part of American political history: transitions and transformations: We're experiencing a significant political transition, with the disintegration of old party structures and the emergence of new factions. Focus on pressing policy issues like climate change, economic inequality, and national security.
The current state of the US political system, marked by intense disagreements and shifting alliances, is a natural part of the country's history of political reorganization. The parties we know today are not permanent, and every few generations, the American political landscape undergoes significant changes. We're currently experiencing such a transition, which involves the disintegration of old party structures and the emergence of new factions. This process, fueled by social media and the collapse of the global order, is making the political discourse more agitated than in the past but is not fundamentally new. The new parties that will emerge will likely take shape over the next decade, and it's essential to focus on pressing policy issues that could benefit the country once a clearer political framework emerits. Some potential areas of focus include addressing climate change, economic inequality, and national security.
US as the world's largest consumer market and infrastructure opportunities: The US, with its growing consumer market and vast infrastructure needs, offers significant opportunities for economic growth. However, outdated policies and a focus on innovation are necessary to overcome challenges and seize opportunities.
The current global situation presents a unique opportunity for the United States to shape the international agenda and structure, as the baby boomer retirement wave will make the US the world's largest consumer market in just a few decades. This transition, if managed correctly, could allow the US to repair its capital structure, get ahead of debt, and make evolutionary changes without a complete system break. The US infrastructure, particularly its waterways, presents a massive opportunity for economic growth through investment. However, outdated policies like the Jones Act hinder progress and must be addressed. In terms of new technologies, shale is one example of innovation that has had a significant impact, and it's essential to keep an eye on other emerging technologies that could shape the future.
Impact of digital revolution on shipping and agriculture: Digitization in shipping reduces costs by up to 15%, digital agriculture increases production and lowers pollution and carbon footprint, while reliable international news sources have become scarce due to the breakdown of international reporting
Technological revolutions, particularly the digital one, have significantly impacted industries beyond the usual suspects of tech, military, and agriculture. Two examples given are shipping and agriculture. The digitization of customs clearances in shipping can reduce costs by up to 15%, while digital agriculture, with the use of computer vision and precision farming techniques, can increase production and lower pollution and carbon footprint. As for research, the breakdown of international reporting has led to a decline in quality and volume of news, leaving only a few reliable sources like Bloomberg for international news coverage.
Navigating International News: The Importance of Local Sources and Building Your Own News Feeds: Stay informed and adaptable in a rapidly changing world by seeking out local sources and building your own news feeds. Al Jazeera is currently a reliable option for international news, but investors should also consider lesser-known countries and alternative sources like China's Xinhua and France 1.
The media landscape has changed significantly, and reliable international coverage is becoming harder to find. The speaker emphasized that Al Jazeera is currently the best option for international news, but it's not always reliable when it comes to Middle Eastern news. Other sources like China's Xinhua and France 1 are decent, but overall, investors need to seek out local sources and build their own news feeds. The digital revolution helps in this regard, but the selection of reliable sources is limited. The speaker also mentioned that his upcoming book, "Disunited Nations," challenges preconceived notions about which countries are the future and why they might not be. He emphasized the importance of looking beyond the usual suspects and considering lesser-known countries. Overall, the conversation provided valuable insights for investors, emphasizing the importance of staying informed and adaptable in a rapidly changing world. The speaker shared that his success was due to the support of various individuals and organizations throughout his life, and he recommended New Zealand and Alberta, Canada, as must-visit destinations.
