SIBF Annual Summit 2013: Opportunities of the Present, Crises of the Future - Peter Zeihan
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Transcript of SIBF Annual Summit 2013: Opportunities of the Present, Crises of the Future - Peter Zeihan
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Geopolitical Evolutions
• The Dawn of the American Age– Geography, Demography and Shale Energy
• The (Real) Crises of the Future– The North American Drug War– European History Recommences– The China War– The Alberta Question– Militancy and immigration go big and go
global
Peter ZeihanSIBF
October 5, 2013
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Bretton Woods: Restructuring the World
• 1946: U.S. dominates high seas• Formation of Bretton Woods
– Establishes World Bank, IMF, and USD as the global currency
– U.S. grants market access without demanding reciprocity
– Adherents defer to U.S. security policy
– U.S. uses maritime strength to guarantee maritime trade
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Bretton Woods: A World Restructured
BW turned maritime rivals into allies and clients, leaving only disparate land powers to challenge the American power
(that’s hard)
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Bretton Woods: A World Restructured
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The American GeographyIntegrated natural transport network overlaying gigantic piece of useable landÞ Unified, capital-rich polity
Two oceansÞMassive military insulationÞDirect access to two trading basins
Net effectÞ Largest marketÞLargest agricultural producer/exporterÞLargest military
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Evolving Demography
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Shale:Acceptance?
• Groundwater contamination (porous v non)
• The “toxicity” issue is about to vanish
• Even without “approval” is already remaking the system
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
4.00
6.00
8.00
10.00
12.00
14.00
16.00
18.00
Average Electricity Prices
US total NY TX CA
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Shale Output: Only Local…United States
Middle East
FSU Europe China
Deep capital supplies
5 4 2 4 3
Legions of autonomous petro-engineers
5 1 2 3 2
Legal system that rewards landholders
5 3 3 1 2
Preexisting collection/ distribution infrastructure
5 2 5 4 2
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The Situation at the End of an Era• Large, stable,
growing market• Energy secure• No hegemonic rival• Dominates (but
doesn’t need) intl trade
Þ Energy/trade no longer central concerns of strategic policy
Þ U.S. largely immune to intl system
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Every culture has a national neurosis, the Americans’ is...
manic depression– Pearl Harbor– Sputnik– Vietnam– Japanphobia– Sept 11, 2001
A Critical Point About the Americans:Geopolitics and Culture
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The First (Mexican) Problem:A Very Hostile Geography
No rivers, few portsÞLow capital generation
Mountainous, disassociated territoriesÞNo infrastructure EcoSÞWill never be a strong state
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The Second (Mexican-American) “Problem”:An Economic Miracle Not to Be Missed1) China is losing the
ability to subsidize its competitiveness
2) Remember U.S. shale
3) Young demographics generate growth (and cheap labor)
4) Drug war makes Mexican labor more attractive
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The Third (Mexican-American) Problem: Not a Normal Border
2013• 0.7t cu feet of
natgas • $500b of bilateral
trade• 350m legal border
crossings
2020• 3t cu feet of natgas • $650b of bilateral
trade• 500m legal border
crossings
The Fourth (American) Problem: America’s only Ghettoized Community
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Crisis #1:The North American Drug War
• American naval interception created the Mexican land route (and the cartels)
• The cartels can expand along land routes
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The First Chinese Problem: UnityNorthern consolidation difficult; Yellow River unnavigableÞBeijing is the political/military capital
Yangtze is navigableÞShanghai is the economic capital
South has good ports, but (sub)tropicalÞGreatly retards northern controlÞEncourages foreign presence
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The Second Chinese Problem: The Limits of Bribery
• Country requires social binding agent
Þ Private capital pooled, then funneled at sub-market rates
Þ Maximize employment by large firm size, market share and throughput at the cost of debt and profitability
Þ Subsidizes inputs and outputs
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?
The Third Chinese Problem: Nationwide Subprime
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Crisis #3: The China Wars
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The First Canadian Problem: Transport
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The Second Canadian Problem: Old
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The Third Canadian Problem: Needs MismatchPopulation heft 22 million in
eastern, Eur-oriented core
3.6 million, sequestered near U.S. Midwest
Demography Aging towards mass retirement
American-style double bulge
Tax structure High: support aging pop
Low: support young pop and energy industry
Currency preference
Strong: preserve purchasing power
Weak: facilitate commodity exports/FDI
Alternative markets
None needed None available
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Option 2: The Prairie Kuwait Option 3: The 51st state Option 1: Patriotic but poor(ish)
Crisis #4: The Alberta Question
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A World Without Canada?
• US completely energy (and largely mineral) independent
• The “adult” factor
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Crisis #5: Militancy and Immigration Go Big and Go Global
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Global Stability Map: Militancy
• Militants like collapsed states• Transborder terrorists like weak states
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Global Stability Map: Immigration
• Skilled labor likes stability and growth– Steady influx of fleeing capital and high-skilled labor– Keeps cap on capital and labor costs
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1985 1990 1995 2000 2005 2010 2015 2020 2025AustraliaCanadaFranceGermanyItalyJapanUKUSBrazilChinaIndiaMexicoRussiaTurkeyIndonesia
The Cheat Sheet Slide
Demographically-
Driven Growth
Financial
Tipping
Points
Curre
nt
Geo
politi
cal
Risk