Peter Zeihan (@peterzeihan) is a geopolitical strategist, founder of the consulting firm Zeihan on Geopolitics, and author of The Absent Superpower, The Accidental Superpower, Disunited Nations, and The End of the World is Just the Beginning: Mapping the Collapse of Globalization.
What We Discuss with Peter Zeihan:
- How advancements in technology and global trade have led to a world where virtually everything we could want or need is available on tap.
- What the role of the United States has been in creating such a world, and why it seems to be rapidly losing interest in maintaining this role.
- What would happen if this interconnected world were to suddenly become disconnected — and the nations of the world had to become self-sufficient and produce their own goods, food, and energy.
- How only a small percentage of the world’s countries could successfully adapt to such a disruption, and what this would mean for the majority of the global population.
- What the aftermath of this social upheaval might look like, and how we can be best prepared to emerge from the chaos intact.
- And much more…
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You don’t have to buy a ticket to Disneyland to discover that it’s a small world (after all). In the 21st century, you can go practically anywhere without giving up the comforts of home, and you can enjoy access to goods and services from around the globe without leaving the house. But what if this level of convenience that we take for granted were to suddenly disappear? What would the world look like if supply chains that sustain the way of life we’ve come to expect were severed, and we were all left to fend for ourselves?
On this episode, we’re rejoined by Peter Zeihan, geopolitical strategist and author of The End of the World is Just the Beginning: Mapping the Collapse of Globalization, to discuss the repercussions of big changes to the status quo currently unfolding on the world stage. Here, we explore how this world came to be, the factors that contribute to its instability, and what chaos will ensue — more likely when rather than if — it all comes tumbling down. Listen, learn, and enjoy!
Please Scroll Down for Featured Resources and Transcript!
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If you want to hear the last time Peter Zeihan was on the show, be sure to check out episode 640: Peter Zeihan | Why the World Should Care About Ukraine!
Thanks, Peter Zeihan!
If you enjoyed this session with Peter Zeihan, let him know by clicking on the link below and sending him a quick shout out at Twitter:
And if you want us to answer your questions on one of our upcoming weekly Feedback Friday episodes, drop us a line at email@example.com.
Resources from This Episode:
- The End of the World is Just the Beginning: Mapping the Collapse of Globalization by Peter Zeihan | Amazon
- Peter Zeihan | Why the World Should Care About Ukraine | Jordan Harbinger
- Zeihan on Geopolitics
- Zeihan on Geopolitics | YouTube
- Peter Zeihan | Twitter
- Disunited Nations: The Scramble for Power in an Ungoverned World by Peter Zeihan | Amazon
- The Accidental Superpower: The Next Generation of American Preeminence and the Coming Global Disorder by Peter Zeihan | Amazon
- The Absent Superpower: The Shale Revolution and a World Without America by Peter Zeihan | Amazon
- Globalization in Business with History and Pros and Cons | Investopedia
- This Is an Incredible Visualization of the World’s Shipping Routes | Vox
- A Shipping Container’s Journey from China to USA | American Trailer Rentals
- How One of the World’s Biggest Ships Jammed the Suez Canal | The New York Times
- EU Ban on Russian Oil: Why It Matters and What’s Next | Centre for Research on Energy and Clean Air
- The US Protects the Global Commons. Others Can Police Its Choke Points | Defense One
- Pirate Interdiction and the US Navy | Naval History and Heritage Command
- How a Band of German Pirates Captured 15 Ships during World War I | War History Online
- China’s Geography Problem | Wendover Productions
- China’s New Aircraft Carrier: Never Mind the Fujian, These Are the Ships the US Should Worry About | CNN
- How Geography Explains the United States | Foreign Policy
- 5 Reasons Why Geography Is America’s Greatest Weapon Against an Invasion | Military.com
- Peter Zeihan: What is The History of Globalization? China | GEONOW
- Richard Nixon’s Visit to China: His Mao Zedong Meeting in 1972 Stunned World | The Washington Post
- Peter Zeihan: China’s Demographic Collapse and Geography | GEONOW
- China’s Former One-Child Policy Continues to Haunt Families | NPR
- Birthrates and the End of the World | Zeihan on Geopolitics
- What’s Driving the Decline in US Population Growth? | PRB
- Laowhy86 | China Uprising | Out of the Loop | Jordan Harbinger
- China’s Hukou Reform in 2022: Do They Mean it This Time? | CSIS
- The iPhone Supply Chain in 2022 | PAT Research
- New Data Reveals How Immigration Can Help Meet Labor Demands and Move the US Economy Forward | American Immigration Council
- North American Free Trade Agreement (NAFTA)
- Peter Zeihan: Why China Will Not Last This Decade | All Things Humanities
- Matthew Campbell | Examining Global Shipping’s Grim Underbelly | Jordan Harbinger
- Venezuela’s Vast Oil Wealth Could Become The World’s Largest Stranded Asset | OilPrice.com
- Electricity in Transition | Zeihan on Geopolitics
- Rare Earth Elements: Where in the World Are They? | Visual Capitalist
- US Job Growth Eases, but Is Too Strong to Suit Investors | The New York Times
- Global Agriculture at the End of the World | Zeihan on Geopolitics
- Putting Ukraine’s Grain Export Deal Into Context | Zeihan on Geopolitics
- Inflation? We Ain’t Seen Nothin’ Yet | Zeihan on Geopolitics
781: Peter Zeihan | Mapping the Collapse of Globalization
[00:00:00] Jordan Harbinger: Special thanks to Peloton for sponsoring this episode of The Jordan Harbinger Show.
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[00:00:08] Peter Zeihan: Shanghai and Beijing already have the lowest birth rate of any metros in human history. So the pace of the disintegration here is really difficult to wrap your mind around, and I think disintegration is the word. We are looking at the end of China as a political entity within a decade or two, and an economic entity within a decade.
[00:00:30] Jordan Harbinger: Welcome to the show. I'm Jordan Harbinger. On The Jordan Harbinger Show, we decode the stories, secrets, and skills of the world's most fascinating people. We have in-depth conversations with scientists and entrepreneurs, spies and psychologists, even the occasional mafia enforcer, drug trafficker, tech mogul, or hostage negotiator. And each episode turns our guest's wisdom into practical advice that you can use to build a deeper understanding of how the world works and become a better thinker.
[00:00:55] If you're new to the show or you want to tell your friends about the show, our starter packs are a great place to begin. These are collections of our favorite episodes organized by topics to help new listeners get a taste of everything we do here on the show. Topics like persuasion and influence, disinformation and cyber warfare, China, North Korea, crime and cults, and more. Just visit jordanharbinger.com/start or search for us in your Spotify app to get started.
[00:01:18] Got some fun news before we jump in. I'm in Costa Rica on vacation, but that's not the fun news. The fun news for you is that we've just launched a new AI tool built on OpenAI for the show. We're still ironing out some kinks, but it is pretty damn amazing. You can basically type in any question or query that you want. And it will comb all of our episodes, all of our content that we've created. We're still working on getting the text in there, but you can search through just about anything we've ever said on the show, and it'll give you anything that we recorded about a topic. So for example, you could type in, how do I identify a financial scam? Or how do I draw a boundary with my parents? Or what's the Better Help promo code? And the bot will return every result for that question in a neat and friendly interface. This is a pretty incredible tool if you want to go deeper into a certain subject or go back and find an episode that you can't remember or compile a bunch of material to read or share with other people. It's basically your very own personalized starter pack page. Just go to the website over at jordanharbinger.com. You can click AI at the top and it'll take you right there or just go to jordanharbinger.com/ai. Definitely check it out. Give it a go. Dig into the Feedback Friday library. Check out what different guests have said about the same topic. Find all of our promo codes for all of our sponsors in like five seconds. Oh, and please email me if you find any bugs or weird results. One of the search results said that my mom was a racist, which for the record, Bev is not a racist. So that's a good example of a bug to let us know about. Thanks for checking it out. Have fun. The AI future is really here.
[00:02:50] And today's guest, Peter Zeihan, who's been on the show before, is not going to talk about AI. He's been on the show before talking about the war in Ukraine, and I wanted to have him back to discuss economics, globalism, de-globalization. As I mentioned at the top of the show with him, this episode is just full of rosy news for global trade. Peter actually had the most shared episode of The Jordan Harbinger Show on Spotify in 2022. Today, we're going to cover de-globalization. In other words, the opposite of globalization. All the trade, all the integration we've been enjoying for the past, I don't know, decade, couple decades is maybe going down the tubes. We'll talk about famines that could be caused by the inability to get fertilizer and other agricultural inputs, raw materials for food production. This is going to leave many countries unable to produce goods for themselves, let alone for export. So a lot of what we see today with countries being interconnected and working together to specialize, that apparently according to Peter is going to decouple and that system will indeed crumble and we cover a lot in this episode from trade and economics to shipping, to demographic collapse, to petroleum, China, green energy batteries, and more. We had some audio issues with this one that we tried to fix, but bear with us on this one. I think you're really going to enjoy this episode because we covered a whole lot.
[00:04:06] All right, here we go with Peter Zeihan.
[00:04:14] This book, Peter, just full of sunshine and roses, wasn't it? ? Look, it's a great time to be alive, but it's kind of artificial, right? Let's talk about that. I want to talk about one, why it's a great time to be alive because the rest of the episode can be about how this is all falling apart.
[00:04:29] Peter Zeihan: Yeah, fair enough. It all has to do with globalization. In the world, before World War II, we had an imperial system with the empires, duking it out over access to everything. And trade as a rule needed to be militarized because every time there was a conflict, you would lose access to whatever happened even if you weren't a party to the conflict, a shipping would be a target.
[00:04:48] Jordan Harbinger: Ah.
[00:04:48] Peter Zeihan: So at the end of World War II, the Americans who at the only ne Navy left in the game said that they would put their navy at the service of the global commons so that anyone could trade with anyone anywhere at any time and access any market. And we came to know this is free trade in globalization. Now, there are two big implications from that. The first is that we were no longer in a world where if you wanted to be successful, you had to have iron ore and coal and steel and food. You only needed one of them now and you could trade for the other three. And everyone started to industrialize together, starting from different points and moving at different speeds. But we all got on this path that we are all now very familiar with. And second, when people industrialized, they changed their personal habits and national economies evolved as well. So it used to be that you were probably living on a subsistence farm, and when you do that, kids are free labor, so you have a bunch. But when you move into the town to take industrial and services jobs, kids go from being free labor to really expensive habits, and adults aren't stupid. So we had fewer of them.
[00:05:51] Jordan Harbinger: Fewer kids or fewer expensive habits or are those the same thing?
[00:05:54] Peter Zeihan: Different expensive habits, fewer kids.
[00:05:55] Jordan Harbinger: Got it.
[00:05:55] Peter Zeihan: You play that forward 75 years, and it's not that most of the world is running out of children. That happened 30 years ago. It's that now the world has run out of working-age adults and we're starting to run out of mature adults. Everyone's moving into mass retirement. So from a strategic point of view, globalization was based on America's commitment to the Cold War, which is long since over.
[00:06:18] Jordan Harbinger: Mm-hmm.
[00:06:19] Peter Zeihan: And economically the industrialization experience, the urbanization experience has been about this bulge moving through the population structure that started with children, then turned into 20 and 30 somethings that was consumption heavy, then turned into 40 and 50 somethings, which were capital heavy people saving for retirement. And now, they're all moving into retirement. So the whole process has already played out and under globalization, first with a lot of workers and with a lot of capital, we got the technological explosions that we know. But these were all nothing more than a moment in time. A moment that lasted 75 years, but it's now over. And so we now have to go back to what we had before World War II but without people.
[00:06:58] Jordan Harbinger: That doesn't sound possible.
[00:07:00] Peter Zeihan: It's not great.
[00:07:01] Jordan Harbinger: Okay. Yeah. Okay. I was like, what? I'm missing a piece here where this actually can possibly happen without suddenly inventing robots that can replace tons of people overnight that are also affordable.
[00:07:11] Peter Zeihan: Well, robots wouldn't even solve it because robots don't consume, they can only produce.
[00:07:15] Jordan Harbinger: Ah, I see. Right, so we could fix half the equation with one miracle, and then we need a different miracle to fix the second half of the equation.
[00:07:21] Peter Zeihan: We need cloning, low-cost cloning.
[00:07:23] Jordan Harbinger: Right. You've said the 2020s are going to see a collapse in many categories. Let's explore that because we've spoken before about, not necessarily you and I, but just we as in people can't shut up about how great globalization is. And then we had the pandemic and it was like, oh shoot, globalization, that thing that means we can't get things now. A cargo ship gets stuck in the Suez Canal and suddenly, we realize how fragile this system is. And it sounds so fragile that it's hard to believe how fragile it actually is. And none of us are looking at shipping. I've done shows on shipping and it's the Wild West. Only if things break the entire world is totally screwed.
[00:08:02] Peter Zeihan: I don't think it's quite that positive.
[00:08:03] Jordan Harbinger: No, quite that, okay. Gotcha. Gotcha.
[00:08:05] Peter Zeihan: The key thing to keep in mind for shipping — let me throw it into three general categories. Number one, 80 percent of the stuff that enables people to grow food is transported internationally, whether it's equipment or fertilizer or fuel. Only 20 percent of food is traded internationally, but 80 percent, you need the inputs to grow it in the first place. Number two, roughly half of all oil is shipped on the ocean blue, typically by supertanker, along with everything that comes out of the Persian Gulf. And then number three, safety on the waves is what's allows us to have the East Asian manufacturing model, which is a fancy way of saying the manufacturing model because roughly half of all manufactured goods are produced in East Asia. And you will get components coming from Thailand versus Indonesia versus China versus Korea versus Japan. But the key thing to remember is less than one percent of that shipping happens on land.
[00:08:54] Jordan Harbinger: Wow.
[00:08:54] Peter Zeihan: Korea is in effect an island. Japan is an island. Most of the Southeast Asian countries are either islands or peninsulas, and they're ring by mountains. So physical connections, independent of maritime trade in Asia almost don't happen at all.
[00:09:08] Jordan Harbinger: Wow. So we are totally, totally, totally dependent on these boats, being able to get from one place to another, not get stuck in canals, not get attacked by pirates. Having oil at a decent, somewhat reasonable price to be able to transport other oil and other goods, and also just logistics and other things not getting totally screwed up. And if any one of those things gets out of whack and this ecosystem suddenly Tickle Me, Elmo is not available for Christmas. And there's tears all over the world.
[00:09:38] Peter Zeihan: Certainly. And you know, the book is about how this happens on a decade's time scale. How the 2020s were always the decade that it was always going to break down in. But events in just the last couple of months are speeding this up. A lot of this is probably going to be front loaded.
[00:09:51] Well, think of what just happened in the first week of December. So the Europeans announced their plan for an oil export ban, and a lot of the details are being made up as they've gone in. It's a very European policy in that regard, but what it is encouraging is a split in the way we view oil from the Russian space versus the rest of the world and the different types of crude coming out of the Russian space. So the stuff the Europeans are primarily concerned about is Euro's crude that is exported west to the European space, and that can only be sold for $60 or less now, and that's affecting insurance and shipping rates and the type of vessels that go in. And we saw over the course of the last two years how disruptions and simply the type of vessel being available can generate supply chain snarl. So now, we're doing this with energy, but there's also a crude grade that exports to the Pacific that doesn't touch the European space at all that trades differently. We now, just in the Russian space, have two fundamentally different markets, not just for pricing, but for physical accessibility, for the ability to get ships and insurance to allow it to move.
[00:10:51] One of the reasons why the world has been so stable, air quotes, "stable" since 1945 is there's been one oil price. Now, it's modified by the length of the journey or the quality of the crude, but there's one oil price and everything is safe. The Europeans have now created a system where a lot of countries in Europe are now going to have a vested interest in interfering with Russian exports west. That's one pricing margin, that's one security paradigm. That's one insurance policy system. But then in the east where the Europeans are not the players, it's a different crude grade at a different price point using different insurance systems by different countries. We have split the oil market now into at least three pieces, two Russian, one everything else, which means now countries no longer have a vested interest in making sure the oil flows everywhere all the time because we're not all in this together anymore.
[00:11:37] Jordan Harbinger: Right. Okay. So if everything was plug and play, if all the outlets were the same, to use an electrical analogy, we would say, "Hey, we need to scare this system," and the United States would guarantee security for all that. But if it's like, "Well, our stuff works, and then the other side, it doesn't work for us even if we wanted it to."
[00:11:55] Peter Zeihan: And that no longer matters to us.
[00:11:57] Jordan Harbinger: Right. So now, we don't need to have the US Navy protect shipping routes for some other country because why should we? It's not going to do anything for us.
[00:12:04] Peter Zeihan: And this is just the beginning. We're going to see this spread throughout, not just the energy sphere, but pretty much every major commodity, and we're hiving the world up into different supply systems. And that is a recipe for 1910s and 1930s style conflict and competition.
[00:12:19] Jordan Harbinger: So I don't think a lot of people — it took me reading the book to actually know this as well, I didn't realize what role the United States played in securing shipping routes. I think most people, myself included, before reading your book, really thought, I don't know, ships leave and they go somewhere and then they come back and it's fine. I didn't realize, it's not like you don't look at the people maintaining the highways, right? You just kind of think, why is this under construction again? And it's that way with the ocean, only it takes up the majority of the space on the entire planet, and it's a lot harder to secure and maintain.
[00:12:52] Peter Zeihan: Yeah. In the world, before World War II, piracy, state piracy, and privateering were pretty common.
[00:12:57] Jordan Harbinger: Really?
[00:12:57] Peter Zeihan: Because almost everything that was shipped had an obvious value. The cost of shipping before the Cold War and globalization was about an order of magnitude more than it was previous. And in the pre-industrial world, it was an order of magnitude more than that. And the pre-deepwater era was an order of magnitude more. So interfering with shipping has always been very popular because you know that the value of the product's going to be high. It's only in the post-World War II era that the cost of shipping has dropped so much that we put everything on the waves.
[00:13:26] Jordan Harbinger: Right. Okay.
[00:13:27] Peter Zeihan: So that's intermediate manufacturing, that's low value added commodities, things that normally you would produce and consume locally. It used to be, it was all pretty much luxury goods or something of very high value. Now it's a little bit of everything.
[00:13:38] Jordan Harbinger: It was a ship full of gold, not a ship full of knockoff iPhone chargers that catch on fire if they're plugged in for too long.
[00:13:44] Peter Zeihan: Well, and not even the knockoff iPhone chargers, the components that might go into the knockoff iPhone chargers.
[00:13:50] Jordan Harbinger: Right. The thing that's job is to catch on fire after three hours of use. Yeah, that's a ship full of those. So that was surprising to me, right? Because the United States is securing, or I guess is still securing all of these trade routes for the most part, at least out in the open.
[00:14:04] Peter Zeihan: We're kind of in this soft moment in history where everyone's holding their breath and wondering if the next time there's an incident, the US is going to intervene or not. And I would argue we are not.
[00:14:13] Jordan Harbinger: Really?
[00:14:14] Peter Zeihan: Part of this is political. The Biden administration is the most populist administration we have ever had, more so than Trump. Basically, it feels like on trade policy, the Biden administration is going through Trump's tweets and picking them out one at a time and expanding them into position papers and putting them into policy and running a really good grammar scrubber over it. And we're basically getting the second Trump administration right now from a trade point of view.
[00:14:36] And then second, even if we wanted to intervene, this isn't the '60s or '70s. I mean, it used to be that there were no other naval powers. And so the United States with the destroyer heavy navy after World War II could patrol the global oceans because there wasn't a lot of competition. And we had the right tools for the job. But since 1990, we've retooled our navy, we've retired most of our smaller vessels, and we've concentrated naval power into our supercarrier battle groups. And if you want to knock off our country, that is the tool. But if you want to patrol the global oceans in an environment where other people have ships, you don't need the dozen supercar battle groups we have. You need like 800 destroyers. We only have 70.
[00:15:16] Jordan Harbinger: Oh, wow.
[00:15:17] Peter Zeihan: So even if we wanted to be the global policeman and patrol the waves, we no longer have the physical capacity to do it. Now, that sounds bad and it is, but keep this in mind. The United States is the least maritime trade-dependent country in the world. Only 12 percent of our GDP is from trade, about half of that is NAFTA. We're not the ones who suffer if global trade breaks down.
[00:15:41] Jordan Harbinger: Mm-hmm.
[00:15:42] Peter Zeihan: China is at the top of that list. Europe is a close second. China utterly lacks the naval capacity to project power more than about a thousand miles from its coast. And it is completely dependent upon resource access and in market access in countries that are half a world away.
[00:15:57] Jordan Harbinger: And if you look at a map, which I've done a lot of recently, especially when reading your book, because I'm thinking, wait, which way does this go? You look at China and you go, oh, they have great access to Russia. Okay.
[00:16:08] Peter Zeihan: Yeah.
[00:16:09] Jordan Harbinger: Except you have to go over this huge amount of nothing and tundra to get to what I assume is not really a great market because the Russian economy before the Ukraine conflict was what the size of Italy. So you need a bigger market, you need to get to Europe, you need to get to the United States. You can't do that over land. You need to do it with ships. If China can't really get even around the corner to Vietnam or much further than that, they've got a big, big problem.
[00:16:36] Peter Zeihan: And the Vietnamese hate them. So yes.
[00:16:37] Jordan Harbinger: There's that too. Yeah. They've got other problems too, but one of the problems is they have an aircraft carrier that looks like it's made out of cardboard, and everything on it is hidden, which is not really a good sign for them actually having an aircraft carrier.
[00:16:49] Peter Zeihan: It's not quite that bad. Now, the Chinese currently have three aircraft carriers floating. The first one used to be a casino.
[00:16:58] Jordan Harbinger: An actual casino.
[00:16:59] Peter Zeihan: An actual casino in Ukraine. Yeah. They will never claim that it is combat capable. They just bought it from Ukraine to refurbish it so they could learn how it works.
[00:17:08] Jordan Harbinger: Okay.
[00:17:08] Peter Zeihan: Their second one is a clone of the one that used to be the casino. The one that used to be the casino used to be a Russian carrier. They called it the Kuznetsov by the way. And the Soviets thought it was a disaster. During Soviet times with Soviet resources, it just kind of caught on fire from time to time.
[00:17:22] Jordan Harbinger: Okay.
[00:17:23] Peter Zeihan: Anyway, so the Chinese do not claim that these two will ever be combat capable.
[00:17:27] Jordan Harbinger: Okay.
[00:17:27] Peter Zeihan: The training for their engineers more than anything else. And they do have a third one that they're going through sea trials right now, and it is a larger carrier that they actually designed themselves. But again, it's a prototype. They don't view it as anything other than a test bed. So they might get their first carrier in 2027.
[00:17:44] Jordan Harbinger: Okay. Even then, I mean, they probably have a lot of ground to catch up on in terms of making something like that work. A floating city airport with working—
[00:17:53] Peter Zeihan: it's a lot more difficult than rocket science.
[00:17:55] Jordan Harbinger: Yeah. Multiple rockets on multiple vehicles and you got to keep the thing running with a nuclear propulsion system and all that kind of stuff. You write in the book about the geography of success. Old-time European countries had this. The United States seems to be in a good position with this. It's kind of like the opposite of China having water on one side, mountains, tundra of Russia, et cetera, on the other side, and having to go through Central Asia to get anything done.
[00:18:18] Peter Zeihan: Well, let's do the comparison here. So you've got the Greater Midwest, which is the world's largest single chunk of arable land in the world, high agricultural productivity.
[00:18:25] Jordan Harbinger: Mm-hmm.
[00:18:25] Peter Zeihan: It's directly overlaying by the greater Mississippi system, which is the largest natural transport network in the world. And if you compare a modern superhighway system like the American interstate system to moving things by water, the cost of operation is about one-twelfth to do it by water versus land. So we've got the best waterway network on the best bulk production zone. We've got more port potential on just the east coast of the United States than the rest of the world combined.
[00:18:51] Jordan Harbinger: Oh wow. I had no idea.
[00:18:52] Peter Zeihan: The internal waterway network is bigger than all of the internal waterway networks of the rest of the world combined.
[00:18:58] Jordan Harbinger: Really?
[00:18:59] Peter Zeihan: Canada is on the other side of a bunch of deep lakes and forests. Mexico is on the other side of some mountains and some deserts, and we've got ocean moats. So great economic potential, great defensive potential. China technically is a larger country than the United States, but about two-thirds of its land is either too hot or too dry or too cold to be inhabitable. So 95 percent of the population lives on one-third of the land. Of that 95 percent, 70 percent lives in the North China plain, which is an area that's not much bigger than the United States, east of the Mississippi, maybe about two-thirds the size of that.
[00:19:31] Jordan Harbinger: Mm-hmm.
[00:19:32] Peter Zeihan: So you're talking a billion people in one footprint. That footprint is flood-prone, drought-prone, and the river is actually, after 3000 years of habitation, the river bed is above the surrounding land area, so it just flows down a dike. So if they get a heavy rain, the dike overflows and the river goes down into where people live.
[00:19:52] Jordan Harbinger: Oh, yikes.
[00:19:52] Peter Zeihan: Yeah. So when you hear about flooding in Northern China, just run. There's no fix here.
[00:19:57] Jordan Harbinger: Yeah.
[00:19:57] Peter Zeihan: The land is relatively low productivity. In the south, you've got tropics and you've got mountains, so it's difficult to have integration. Hong Kong has always been in a separatist area, even before it was called Hong Kong. And then you've got mountains and jungles separating it from Southeast Asia and India. But then you've got the great wide open of the Eurasian Steppe connecting it to the Russian space. And off the coast, you don't have an ocean of mote. You've got all these secondary powers, Taiwan, Indonesia, the Philippines, Japan. And so China has never been able to penetrate out, but because they have a hard time unifying at home, others have often penetrated in.
[00:20:34] Jordan Harbinger: Mm-hmm.
[00:20:34] Peter Zeihan: It's not the worst geography in the world. That's probably Afghanistan, but it's definitely in the bottom 10 percent. And it's only because the Americans unified the world into globalization that China exists as it does today. Because we basically told all the countries that were preying on China to go home. Hell, we nuke Japan to underline that point. And so for the first time in Chinese history, the Han Chinese have been able to develop the way that they wanted to. And then Nixon and Mao had their summit and brought China into the globalized system to bring it away from the Russians.
[00:21:05] So I don't want to suggest that the Chinese played no role on their own success, but without the change in the strategic environment of Eisenhower and then, ultimately Nixon, none of this would've ever happened.
[00:21:15] Jordan Harbinger: So China has got pretty bad geography, but they also have a demographic collapse issue that seems like—
[00:21:21] Peter Zeihan: Worst in the world.
[00:21:22] Jordan Harbinger: I'm going to do a whole show and demographic collapse, so we can just be brief within, do a, like a 10,000-foot overview. But this is, you said, the worst demographic collapse in the world, and that I assume that even includes Russia, which is currently throwing any young man it can get into a war that it's not going to win.
[00:21:37] Peter Zeihan: It doesn't just include Russia, it includes the Black Death.
[00:21:40] Jordan Harbinger: Oh, wow, well.
[00:21:42] Peter Zeihan: It's like the worst ever. Part of this is policy. You're familiar with the one-child policy.
[00:21:50] Jordan Harbinger: Mm-hmm.
[00:21:50] Peter Zeihan: You do that for 40 years, you start running out of 30-year-olds. That's how math works. But most of it just has to do with development.
[00:21:57] When the United States started industrializing and urbanizing, we started back in the early 1800s. And so we have had generations to adapt to a more urbanized environment. And so we have this middle step where we went from farms to small towns, small towns to big towns, big towns to cities, and the cities have suburbs. And so there's always been a degree of elbow room put into the American model, which lowers the opportunity cost of having children.
[00:22:20] China didn't start to urbanize until 1980, and then they did it all at once. So people in a single generation went from living on a subsistence farm to a high-rise condo, and so they went from having seven kids to one kid in one generation. The one-child policy was on top of. And now that it's been more than 40 years, they don't have a lot of people aged under 40. There's no one left to have the next generation, so this was always going to be the last generation for the People's Republic. It was always going to be a two-generation experience total. But it's happened so fast that we don't even have an economic theory developed. Humankind does not have an economic theory for what would allow the Chinese economy to function in 2030. It's that far gone.
[00:23:10] Jordan Harbinger: Really? When I hear things like that, I go, look, people in the US are having fewer kids. It's not that bad. Also, we have immigration, right? We say, "Hey, we didn't need more young skilled laborers. Come on in." And we offer a bunch of, what is it, a J-1 or an H-1B. I always forget what these visas are. And we get a bajillion applicants and tech companies in Silicon Valley and companies all over New York and elsewhere just pick from the cream of the crop. And the problem is kind of solved, isn't it?
[00:23:37] Peter Zeihan: In the United States, we are a large population, 330 million. In order to round out our younger age groups, we really need to bring in about two to four million immigrants a year, and we're well under that right now, and that is something that will come back to bite us again and again and again in the decades to come. But we're also a settler society. None of us are actually from here, and so the United States is capable politically of sustaining large volumes of immigration for extended period of time. Just now is not one of those moments.
[00:24:03] Jordan Harbinger: Native Americans are going to email me and be like, actually, and look, okay, most of us are not actually from here. How's that?
[00:24:10] Peter Zeihan: Fair enough. Most of our descendants are not from here.
[00:24:12] Jordan Harbinger: Right.
[00:24:13] Peter Zeihan: Or most of our antecedents, excuse me.
[00:24:14] Jordan Harbinger: Right, antecedents. Yeah.
[00:24:15] Peter Zeihan: Immigration can be part of our solution. There's a lot of complications in that conversation politically and logistically. That's a different conversation. We can get into you if you want to. But the United States is the largest economy in the world with the greatest upward mobility from people from the lower classes to the higher classes. And the attractiveness of that system, especially since it's mostly free, is robust. And you're right that when we do decide to have an open immigration system, we usually have no problem drawing in people. And that's before you consider what's about to happen to the wider world where the delta between the US and everyone else is going to be huge.
[00:24:45] Jordan Harbinger: People will say, "Well, how come China can't just change their immigration policy and bring in a bunch of skilled people? They might even be able to offer better incentives than the United States." I disagree with that statement, and I'm pretty sure you do as well.
[00:24:58] Peter Zeihan: I would say there's three reasons that won't work. Number one is scale. The United States has over 300 million people. The Chinese have about 1.3 billion. So to move the needle, you don't just need to bring in three times as many people. You need to bring in 10 times. As many people under age 40, it's not clear that there are enough people that are potentially migrant to salvage just China, assuming no one else moves anywhere else.
[00:25:21] Number two, the United States has developed an interesting reputation of late, of being a little bit racist with white people being a little sketchy. But in China, which is 90 percent Han Chinese, they are blindingly racist to anyone who is not Han. And to think that there are going to be incentives that'll draw people, especially in numbers to the PRC, is ridiculous even before you consider the disconnect in terms of economic activity.
[00:25:44] But third, there's the governing system. You know, the US may be a flawed democracy, but a democracy, it still is. China is a country where you are welded into your room when there's a health crisis. The casual dismissal of the very concept that private citizens have agency or interests is something that does not attract migrants.
[00:26:08] Jordan Harbinger: You are listening to The Jordan Harbinger Show with our guest Peter Zeihan. We'll be right back.
[00:26:12] This episode is sponsored in part by Wrkout. Wrkout was created by my good friend Curtis. I'm not going to say this is partially my idea, even though it was totally my idea. Wrkout is like the Airbnb of personal training with hundreds of world-class trainers available for in-person or virtual training. I've been using them for years now. I lost 40 pounds of flab. I'm looking better than I ever have in my entire life. You can search for a trainer based on location, specialty, availability, training type for in-person or virtual. You can take a quick online quiz and then the Wrkout team will help match you with the perfect trainer. So I've been doing this, like I said, two years. I freaking have a six-pack just in time for Christmas, which I'm going to ruin with pie. This is one of the best decisions that I've ever made. Actually, Curtis kind of made me do it. I do it four times a week. Even my 81-year-old mother is hooked on Wrkout and does it twice a week now. I look forward to my sessions. Who the hell looks forward to workouts? This guy apparently. Never have I done that before in my life as well. My trainers, Chad and Kareem, who have the most personal trainer names ever have gotten to know me. They know how to push me. They know when I'm not feeling it. They know when to give me time off. I just freaking love Wrkout. So if you want to see what highly vetted world-class personal training can do for you, virtually or in person, check out wrkout.com/jordan to try it out. That's W-R-K-O-U-T.com/jordan. So it's workout without the first O. Tell them Jordan sent you. I guarantee this will change your life if you let it.
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[00:28:24] Hey, if you're wondering how I managed to book all these great authors, thinkers, creators every single week, it's because of my network, and I know that that word is gross and schmoozy, but I'm teaching you how to build your network for free in a non-cringe way over at jordanharbinger.com/course. The course is about improving your relationship-building skills. It's again, easy non-cringey, non-gross, very down to earth, no awkward strategies, no cheesy tactics, just practical exercises that are going to make you a better connector, a better colleague, a better friend, a better peer. Six minutes a day, that is all it really takes. By the way, many of the guests on the show subscribe and contribute to the course putting their little unique spin on their specialty on the things that we teach in there. So come join us, you'll be in smart company. You can find the course at jordanharbinger.com/course.
[00:29:09] Now back to Peter Zeihan.
[00:29:13] If I'm looking for a place to move, well, first I'd apply to a place like the US or Europe because I can walk around freely. My life would've to be really bad to go, okay. I know that people die in fires from being welded into their house, and I know that they read all of my messages on my phone. I mean, I would have to be in a place like maybe Guatemala or Honduras in a poor area where drug cartels and criminals are running rough shot over my physical safety in order to find a place like China better than my current lifestyle. So, the calculation just changes.
[00:29:43] Peter Zeihan: Well, and you'd still try to get to Cuba, Mexico, or the United States first.
[00:29:46] Jordan Harbinger: Right. Of course, yeah. So that's a problem then. And I think people don't realize that you can't just flip an immigration switch, even in places with the infrastructure and the culture of immigration, it's hard to change in a place that doesn't ever have it. It's going to be kind of a herculean task to fill that gap.
[00:30:03] Peter Zeihan: Yeah, China has never had net inward migration. It's always been outward. People trying to get out, not people trying to get in.
[00:30:10] Jordan Harbinger: I did not know that. I assumed at some point they would've had inward migration, but maybe you have to go back like 2000 years or something like that to find out.
[00:30:17] Peter Zeihan: Not even then.
[00:30:18] Jordan Harbinger: Not even then. Wow.
[00:30:19] Peter Zeihan: Now there is migration within the China system. People forget that China is not a traditional nation state. It is an empire.
[00:30:26] Jordan Harbinger: Right.
[00:30:26] Peter Zeihan: And they have expanded out and conquered other groups. And you do get migrants from those poorer minorities into the urban centers. But again, you can only do that once, because then you've hollowed out the countryside. And that is what has happened writ large throughout the entire system at this point.
[00:30:39] Jordan Harbinger: I've been studying China for years. There's this whole, it's called Hukou, and it's like almost like a culture of, I mean this means a lot of different things, but there's a whole culture of young people, and by young I mean 20 to 50, move from the countryside to the nearest city, work in a factory, leave their kids in the countryside with grandma and grandpa to essentially be raised, see their parents occasionally, money gets sent back. But nobody goes, "All right, we're done. We're going to move back to the countryside." Once those older folks die, that village just starts to hollow out, and that's the end of it.
[00:31:10] Peter Zeihan: And we've seen that across the system.
[00:31:11] Jordan Harbinger: Yeah.
[00:31:11] Peter Zeihan: The average age in some of these cities is upwards of 50 percent higher, what it is in the cities.
[00:31:16] Jordan Harbinger: How does this end up resulting in de-globalization and what does that actually mean?
[00:31:21] Peter Zeihan: Well, it's going to mean something different for everyone. Remember that there are two aspects, two things you need for globalization to work.
[00:31:27] Number one, you need the physical interconnectivity, the transport systems that are low cost and very, very safe. The cost of transport per unit, the more steps you can get in your supply chain, the greater capacity there is to expand into things that otherwise would be so low cost that you wouldn't trade them internationally. Things like wheat, for example, or plastics.
[00:31:45] Second, you need a balance of production and consumption, and that in many ways is a subset of demographic structures. So you need to have a significant number of people in your 40s, 50s, and early 60s in order to generate the capital and the skilled-labor base to produce. But then you also need a lot of people in their 20s and 30s to do some of the lower skilled stuff as well as consume. And this all has to be in balance for work. The demographic aging we've seen in recent decades means that that second piece is just completely gone and countries are increasingly finding in their best interest to kind of hoard what consumption they do have and not allow trade access to it, and then producing more locally. We were moving this way before the Ukraine war, before the Chinese started to break down, and before the German industrial model started to implode. This has just sped everything up.
[00:32:33] As for the first in with transport, we're kind of in this hanging moment where we're waiting for someone to take the first shot. Now, that the Americans lack the capacity to protect the system, but even if we don't get a formal conflict over transport, by everyone kind of hoarding the production and consumption zones for themselves, we no longer have a vested interest anywhere in the world and what happens over the horizon. And as long as that is the case, we can get regional transport breakdowns that from our point of view don't affect us. But from everyone else's point of view, it's a bit of a disaster. And the more linked in your country is to these networks, the more vulnerable you are. So China, Korea, Germany, very much so at the very top of that list for different reasons, but they're all dependent upon the inflow and outflow.
[00:33:16] And so you can damage global transport significantly before the Americans really notice. Not only is the United States one of the world's biggest mining countries for raw materials, so is Canada, so is Mexico. Brazil isn't that far away and it's all on the same hemisphere. So you can have an eastern hemispheric breakdown, which today, three-quarters of population, three-quarters of energy, three-quarters of food production, three-quarters of manufactured goods, and for the most part, the Western Hemisphere actually does better.
[00:33:44] Jordan Harbinger: Can you give us an example of what this means in a specific sector like smartphones? If we just don't have the ability to manufacture components in all these different places and move them into one place to then get manufactured and then ship those out to be sold, what happens? Because I can't even imagine this world where that system doesn't exist anymore.
[00:34:02] Peter Zeihan: The smartphone industry is probably simultaneously most sophisticated and spread out in terms of globalization and manufacturing and the most vulnerable.
[00:34:10] Jordan Harbinger: That's why I picked it.
[00:34:10] Peter Zeihan: Yeah, fair enough. So the iPhone has 1400 supply chain steps that touch 50 different countries. So you'll get the plastics probably from a precursor material that comes from the United States. You'll get the copper probably from Chile, but it's probably processed in China. It's probably built into an integrated circuit in Taiwan with a design happening in California. And the system on a chip that kind of ties it all together is probably from Japan, but it is made out of components from throughout Southeast Asia and so on and so on and so on. You missed one of these, you don't have a phone. What Apple has discovered under Tim Cook — you know, Tim Cook was brought in to operationalize the supply chain to make it the most efficient he was. It could be. And in doing so, 90 percent of those supply chain steps now in some way touch China. And what we've discovered with these COVID lockdowns of the last two weeks is that the facilities are no longer functioning. So Apple has stopped. I have a phone that I ordered two months ago that was supposed to be delivered two weeks ago. And now, I've received a notice that it's probably not even been built yet.
[00:35:13] Jordan Harbinger: Oh, wow. I didn't realize that they were that far behind. I figured they just—
[00:35:17] Peter Zeihan: Yeah. Well, they do have a facility in China with a hundred thousand people, and so when that goes offline, hey, do the math.
[00:35:24] Jordan Harbinger: Yeah.
[00:35:25] Peter Zeihan: Now, this is not the death of Apple. They've got billions in the bank. They can rebuild their supply chain in other places.
[00:35:31] Jordan Harbinger: You already paid for the phone. They're fine.
[00:35:33] Peter Zeihan: Exactly.
[00:35:33] Jordan Harbinger: Yeah.
[00:35:33] Peter Zeihan: But that's a five-year process. So this iPhone that I'm trying to get is probably the last one for a while until they completely rebuild their supply chain. So it's China-free because China is no longer a reliable manufacturing partner.
[00:35:47] Jordan Harbinger: Oh wow.
[00:35:48] Peter Zeihan: And they're going to have to do that in places. They don't have operations. You don't do that overnight, you don't do that cheaply. And Apple will be doing this at the same time. Other sectors are trying to do the relocation at the same time.
[00:36:00] Jordan Harbinger: Sure.
[00:36:00] Peter Zeihan: Because of demographic reasons, we have an absolute cap on how much labor we have available in the United States. Same with Canada. Mexico is in a better position, but there's still an upper limit. So everyone who's trying to nearshore or re-shore or friend shore at the same time has to compete for an absolute upper limit of labor availability. And we're now seeing that happen across the entire manufacturing world.
[00:36:24] Jordan Harbinger: The gravity of this is extreme because when we start looking at, "Okay, we have to move all this." Oh, and so does every other company," so now they need to find people and places where they can build factories, get the property, get the licenses, have the local fixers, do whatever they need to do, except now 500 or 5,000 companies need to do the same thing with the same staff in the same place. The prices are going to go up. The amount of people that can help them do this is going to just be, it's finite — first of all, they just can't work on 8,700 projects at once. It's not possible. And all of that kind of has to happen at the same time, or at least they're in a race to do that because otherwise, they can't really make money.
[00:37:04] Peter Zeihan: Yeah. The smart firms started this process in the last year of the Obama administration. Now, maybe for wildly different reasons. And then it accelerated under Trump because he launched a trade war and then accelerated more under COVID. And now, it's accelerated under Biden because Biden's even more economically nationalist. And now we've hit the wall.
[00:37:20] Jordan Harbinger: Is there a way to avoid this? You mentioned imperialism or mercantilism, neither sound very appealing. If you're on the wrong end of that. Imperialism, we kind of know what that is, right? We go and take over some other plays. Mercantilism, what is that again? I remember vaguely learning about this in high school.
[00:37:35] Peter Zeihan: Mercantilism is basically what we're hitting. It's where you exercise a degree of trade restriction in order to limit people's access to your market, but you try to shove stuff down their throats to destroy their local industry whenever you can. Certainly, the first part of that is going to be the norm for the next several years. The second part, we'll see what happens once the supply chains have been relocated.
[00:37:53] And I realize this is ugly. In the United States, this is 10 percent plus inflation for several years as we get all this stuff in place, same in Mexico, same in Canada. But on the backside, we will have a supply chain system that employs people from the continent that is simpler and shorter with fewer steps. That is cleaner, that uses less energy. And at the end of it when it's done, we will have a supply chain system that is largely immune to international crises and we're going to have record economic growth while we're building this. This is going to be a great story. High inflationary, yes, but people forget about the high growth part.
[00:38:27] Now, that's assuming you are affiliated with the North American network. As we basically take our marbles and go home.
[00:38:33] Jordan Harbinger: I see.
[00:38:34] Peter Zeihan: If you are someone else trying to sell in, you've got to cut a deal. And there are not a lot of countries that have prepositioned themselves like that.
[00:38:41] Jordan Harbinger: And this is because America has the beneficial, defensible geography, a lot of skilled labor, the ability to bring in immigrants, a lot of the raw material, the things we talked about before.
[00:38:50] Peter Zeihan: Because the shale revolution, the cheapest energy in the world and the largest cluster of millennials for consumption in the world.
[00:38:56] Jordan Harbinger: Shale revolution being that we can get oil out of shale, which is something that I guess was too expensive before, just for people that haven't heard that term.
[00:39:03] Peter Zeihan: Shale technologies, as of 15 years ago when the sector started, it probably cost you about $100 to $150 a barrel to produce the stuff. Now, we're below 35.
[00:39:12] Jordan Harbinger: Which would've been high a decade ago for oil but is not now actually. And skilled labor, you mentioned this earlier. You sort of hinted at this and I said I wanted to get to it. High skilled labor is going to be leaving other countries and coming to America in part because well furthering the demographic crisis those countries are having. But why else is this going to happen? Just simply because we're going to see that growth and maybe it's not going to happen in those other places.
[00:39:36] Peter Zeihan: If you've got growth in security and food supply and energy supply here and you don't go to other places. People will vote with their feet.
[00:39:41] Jordan Harbinger: Mm-hmm.
[00:39:42] Peter Zeihan: Unfortunately, we're in the process of a bit of a political reshuffling here in the United States, and the factions that make up the parties are moving around and the faction that is most in play is organized labor. And the issue that they are strongest on is not wanting an open migration system. So we are incapable at the moment in the United States for having a meaningful conversation about migration and until that passes, until we know where organized labor ends up, we are missing a wonderful opportunity here to take the best and the brightest from the rest of the world. And it's not just an issue of providing labor. I mean, think about it, if somebody has a college degree, that means they have 16 years of education. And if they come to the United States, a foreigner comes to the United States, that means someone else paid for that.
[00:40:24] Jordan Harbinger: Mm-hmm.
[00:40:24] Peter Zeihan: It means like by the numbers immigration is brilliant.
[00:40:27] Jordan Harbinger: So who gets screwed in this situation the most? We talked about why America's going to be largely safe from this and even benefit from this. You mentioned if people are part of the North American, I can't remember the word you use, but the sort of North America club, right? Does that mean Mexico and Canada are largely isolated from this because they have the US on their doorstep, for better or for worse?
[00:40:47] Peter Zeihan: Canada, if it was on its own, would be totally screwed, but it's attached to the United States via first bilateral trade deal and then ultimately by NAFTA and it has a lot of the same defensive capacity. So yes, Canada's going to be just fine. They've got some internal stuff they'll have to shake out, but they always have. So that's par for the course. Mexico is the highest value added economy in the world if you compare the cost of the inputs versus the value of the outputs. And so I would expect Mexico to be one of the three most quickly growing economies in the world for the next 30 or 40 years.
[00:41:17] Jordan Harbinger: Wow.
[00:41:17] Peter Zeihan: There are a short list of other countries, whether they saw this coming or just sheer luck have entered into trade deals with the Trump administration and are probably going to be fine. The top of that list is Japan came to the US seeking a deal, knowing it was going to be humiliating and Trump obliged. But then when Biden came in, the Japanese made it very clear they don't want to change the terms. So they saw a lot of these deglobalization and depopulation trends coming a long time ago because they were in many ways the cutting edge. They are the demographically, the oldest society in the world. And so they knew that they had to have access to a real market. So that whole Toyota mantra of build where you sell, that's not just a slogan, that's a national survival strategy for the Japanese. And they have found a way to swallow their pride and attach themselves to NAFTA. So I think they're going to be okay.
[00:42:04] I'd watched Southeast Asia pretty closely. We've got good relations with most of them. The one that matters the most by far is Vietnam. Good educational system, decent demographic structure, and they're trying to leapfrog China in terms of technological aptitude, and they're doing a decent job of it. They are definitely the country that has benefited the most from China dropping pieces of the manufacturing systems.
[00:42:27] Jordan Harbinger: I mean, do we see parts of China surviving this demographic crisis, this de-globalization crisis in joining global markets again? I mean, it's just so hard to imagine a place like Shanghai, right on the ocean, tons of educated people, tons of infrastructure, just being like, "Well, this place sucks. Everybody out." I mean, it seems like they would—
[00:42:44] Peter Zeihan: There's nowhere to go.
[00:42:46] Jordan Harbinger: There is nowhere to go. Right. But there's a lot of talent there. There's just a lot there. Is it possible we're going to see a Hong Kong style, almost like a separation, a cutout of a place like Shanghai and some of these other markets in places in China?
[00:42:58] Peter Zeihan: Let me give you the caveat first, especially when you're talking about demographics in China, we can only rely on the data we have. And with the Chinese now admitting publicly that it's all been fabricated—
[00:43:08] Jordan Harbinger: Mm-hmm.
[00:43:09] Peter Zeihan: —this fastest aging society in human history, that's the fabricated story. That's the best-case scenario. The reality is significantly worse. And even if you believe the data on its face, Shanghai and Beijing already have the lowest birth rate of any metros in human history. So the pace of the disintegration here is really difficult to wrap your mind around, and I think disintegration is the word. We are looking at the end of China as a political entity within a decade or two, and an economic entity within a decade.
[00:43:37] Jordan Harbinger: Wow.
[00:43:38] Peter Zeihan: Whether or not the CCP survives that, that is an open question because for the CCP, economic growth is no longer perceived as the path to legitimacy. The politics can go in a lot of weird directions, but let's talk about the country as a whole. It will not be able to hold together. It will not be able to fuel and feed itself. And in that sort of environment, the capacity of Beijing and the Northern core to control all the outlying territories is absolutely going to come into question.
[00:44:06] Now, China has only existed as a unified entity for about 10 percent of its three millennia of history. It is usually fractured apart and in situations where it has been together and then it's broken down, what usually happens is the Northern Zone turns into a famine-ridden hellscape where there's not energy, there's not food. There's a bit of a low grade civil war, and the central government is desperate to oppress people into unity, and it's an ugly, ugly place to live. They'll probably lose half of their population in the north.
[00:44:39] Jordan Harbinger: Because of migration or because of starvation?
[00:44:41] Peter Zeihan: Starvation.
[00:44:42] Jordan Harbinger: Oh God, that's terrible.
[00:44:44] Peter Zeihan: Then, the southern cities from Shanghai on south. You're right. This is where the value add is. This is where the cosmopolitan is. This is where the bulk of the higher value added manufacturing is, and this is where foreigners are more exposed and where we might actually feel it. If Northern China were to vanish tomorrow, we might not notice.
[00:45:01] Jordan Harbinger: Yeah.
[00:45:01] Peter Zeihan: But those southern cities, that's the part that's internationally wired. So historically speaking, these cities become defacto independent city-states and they interface with foreign countries and companies in order to access technology and finance and food, and then that's metabolized by local labor to participate in an international supply chain of some form. And then everything in the interior regresses.
[00:45:26] Jordan Harbinger: China is no stranger to this, right? I mean, we're talking about Macau, Hong Kong, probably also Shanghai earlier in its history—
[00:45:33] Peter Zeihan: Yes.
[00:45:34] Jordan Harbinger: —were really kind of isolated little economic city-states in many ways, kind of still are. They could just go back to that mode. I don't know how much the Communist Party's going to like it.
[00:45:43] Peter Zeihan: There's a very strong model here. For most of the last 1500 years, those city-states have imported most of their food from abroad. It's only in this most recent iteration that they've been interlinked in terms of economics and food supply in Northern China. This is a very new development for China.
[00:46:00] Jordan Harbinger: China, how are they even stable now? I mean, look, the obvious answer is there's a lot of repression and the CCP is a very strong, centralized authority. They must spend for stability. They must spend a lot of money.
[00:46:13] Peter Zeihan: Well, let's look at the outside and then work towards the inside.
[00:46:15] Jordan Harbinger: Okay.
[00:46:15] Peter Zeihan: So on the outside, they can still access global energy, they can still access global food, they can still access global food inputs. As long as that is going on, people will be fed and the lights will be on. Now, they are utterly incapable of influencing those events, so when they break, there's nothing the Chinese can do about it. And we're probably going to see in the next few months significant energy failures out of the Russian space where the Chinese are going to bear the disproportionate burden of that. So we don't have to wait too long for the external environment to look nasty. Internally, when you've got this heterogeneous system, the two things you do are, number one, you beat the crap out of anyone who steps out of line. And so it's a national security state in every way you can imagine it. You basically pay everyone to be on the same side. So you know, we bitch in the United States about the Federal Reserve and QE and devaluing the dollar and printing currency and debt spending and all that. Yeah, you know, that's a relevant conversation to have. The Chinese do it about an order of magnitude more than we do.
[00:47:09] Jordan Harbinger: Wow.
[00:47:09] Peter Zeihan: If you're a gold bug, everything you believe about the United States, it's much more true for the People's Republic. Now, they do not have an internationalized financial system, so this all stays bottled up. One of the reasons why whenever the Chinese do try to liberalize their account so they can be a global currency, whatever the spasm of the day happens to be, a trillion dollars floods out in a matter of months as people try to get their money to someplace where it'll hold its value. But it doesn't take much to pop that because basically, we're looking at subprime, the American subprime experience, but not just across the entire housing sector, but in every economic sector and the subsector of China where this financial hyper financialization is most exposed is agriculture. So they're going to get hit from labor, from finance and raw material supply all at the same time.
[00:48:00] Jordan Harbinger: Oh man.
[00:48:01] Peter Zeihan: That's going to kill a half a billion people.
[00:48:02] Jordan Harbinger: It's so crazy to think about. I thought it would be the real estate bubble that pops, right? You know, because the only place to invest in China if you're Chinese is essentially to buy an apartment that's not built yet somewhere else with the promise that the value's going to go up, and then the developer often will just not build it or build the concrete structure, and then there's nothing else. So the value kind of never in many of these places, that's why you have those ghost cities that are built but kind of not finished and then no one lives there and there's nothing there. And it's like, this is just investment.
[00:48:30] Peter Zeihan: That very well could be the proximate cause. Just remember we're dealing with somebody who's walking on a tightrope between two pickups going 90 down the highway as they go off a cliff into a whirlpool where a meteor is hitting. It doesn't really matter what the proximate cause is.
[00:48:43] Jordan Harbinger: Right. Okay.
[00:48:44] Peter Zeihan: Any of these things can end it.
[00:48:46] Jordan Harbinger: That actually makes sense. It seems like a very fragile ecosystem financially, well, not just financially, I mean with all of these different inputs. And I think, again, to sort of clarify what are we really afraid of with these shipping routes? If the United States isn't securing them, are there really that many pirates out there going and disrupting these things? Or are we worried about something else? Because I think a lot of people are like, "Wait, so now nothing's going to be able to get shipped if the Navy pulls out?
[00:49:08] Peter Zeihan: There's a number of ways this skin broke down, but the history of maritime transport is very rich with examples of security threats. So you know, you've got pirates. You've got state pirates or basically, you know, people using their navy to do stuff. And then, you've got privateering, which are private entities that have kind of a state charter in terms of having a place to fuel and sell their booty. But let's focus on insurance. You can't sail anywhere, you can't leave and leave port without an insurance policy. And at the moment, an insurance policy costs about one percent the value of the ship itself to be paid out in installments over a 12-month period. So one percent is the total.
[00:49:46] Jordan Harbinger: Oh, wow. Millions of dollars.
[00:49:48] Peter Zeihan: Yeah. But it's only one percent.
[00:49:49] Jordan Harbinger: Yeah.
[00:49:49] Peter Zeihan: Now, that assumes that no one is shooting it at anyone anywhere. If you sail onto an area where there is a conflict, the cost of that policy increases by a factor of a hundred.
[00:50:00] Jordan Harbinger: Oof.
[00:50:01] Peter Zeihan: To be paid weekly. That assumes that no one is shooting at civilian shipping.
[00:50:06] Jordan Harbinger: Right. That's just accidental. You might hit a mine kind of stuff. If people are going after the ships.
[00:50:11] Peter Zeihan: Yeah.You're just in a bad neighborhood, so we're going to charge you more.
[00:50:15] Jordan Harbinger: Right.
[00:50:15] Peter Zeihan: But if someone starts shooting at a civilian vessel, you cannot get an insurance policy at all. So the Europeans have set up an environment with this price cap where a lot of countries in Northern Europe now have a financial and security reason to go after Russian shipping. I would argue that the more China acts like a bag of dicks, the more countries in Southeast Asia are developing an interest in going after that shipping.
[00:50:42] Jordan Harbinger: Mm-hmm.
[00:50:43] Peter Zeihan: And while I don't think the Chinese are going to ever go after Taiwan, I think it would be national suicide. We are in an environment where that is plausible and I can totally see the US Navy, the guarantor of global maritime shipping, stopping the oil flows from the Persian Gulf to the Chinese coast. It doesn't have to happen everywhere. The whole world doesn't have to be a no-sales zone. You just need it to happen in a handful of environments to raise the cost of shipping to a point that most manufacturing no longer makes sense. Because remember, if you've got a thousand-step supply chain, transport has to be no more than two or three percent of the cost for the entire thing. So shipping from step to step to step to step has to be cheap, has to be quick, has to be reliable, has to be safe. If you change that, if you just increase the cost of shipping by double, you've already eliminated over half of the global manufacturing's viability. You don't have to move the needle very far to get there.
[00:51:42] Jordan Harbinger: This is The Jordan Harbinger Show with our guest Peter Zeihan. We'll be right back.
[00:51:46] This episode is sponsored in part by HVMN. You've heard me talk about ketones supplements and how they boost my workouts. They use fatty acids for fuel. That's supposedly how they work, but do they work? A lot of my fitness buddies take it. A lot of elite athlete friends take it, but you know, I don't do I need that kind of edge. I'm kind of a, I'm literally a garage gym guy. But what it does, what it's done for me is it's not like an energy drink where you get caffeinated out the wazoo. It uses ketones to burn fatty acids, which is different. It also rounds out your hunger. You're not going to feel a crash. You're not going to feel like starving during or after your workout. I don't know if you guys get that. There's a little bit of better endurance, a little bit more get after it than I might usually have. So definitely give Ketone-IQ a try. I'm curious. Write in and let me know what you think.
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[00:54:10] Now for the rest of my conversation with Peter Zeihan.
[00:54:15] All we need to do is double the cost of some transistor that goes in something and it's like, well, now it no longer makes sense to have that thing made in China. It's actually twice the price to ship it, so we might as well make it in, I don't know, literally anywhere else where we can at least get it safely and in reliable numbers. It's almost like you've got a beverage in front of you and someone's got a little dropper and they have motor oil in there and they go, boop. And you go, "Damnit. Now, I can't drink that.
[00:54:42] Peter Zeihan: I don't want that anymore.
[00:54:43] Jordan Harbinger: Right. Like most of it is still fine. That is enough to make it impossible, or at least very inadvisable to take another swig of that old fashion. There's something in there and you don't, you maybe you can't even see where it is until it's too late. And this is a tortured metaphor here, I suppose, but this seems like we really don't need a lot of disruption in a lot of different areas to make the whole thing get screwed up, and oil comes to mind, right? If we have Russian, African, Middle East, North African oil without American Overwatch, then once production is offline, even for a few months, the wells might freeze up. The workers go home and find different jobs. The equipment stops working or falls into disrepair. You can't just then go back, turn the heater on, crank the thing up, and start drilling the oil again. It doesn't really work like that from what I understand.
[00:55:31] Peter Zeihan: It depends where you are. In Siberia, it certainly doesn't work that way and a lot of offshores certainly doesn't work that way. Some oil production, actually, a lot of oil production is a little bit more modular in that regard.
[00:55:41] Jordan Harbinger: Okay.
[00:55:41] Peter Zeihan: Just to pick something here. South Sudan, not a place that I would ever put my money, but they are an oil producer. If that shuts down for any reason and you're dealing with civil collapse and breakdown in civil war already, no one's going to go back.
[00:55:55] Jordan Harbinger: Right.
[00:55:55] Peter Zeihan: There's an argument to maintain things once they're running because you've got it all in place. But once the money maker is gone for like a year, it's not like you can just walk back in and start operations up and that's going to be the case in Iran and that is going to be the case in Libya and that's going to be the case in parts of Algeria. We've forgotten in 2022 that the Middle East is a bit of a disaster. It's like with the drama of Ukraine war. We're just like, "Oh my, thank God that the Middle East is calm." It's not, nothing's changed there except the United States is no longer present. So the next time, we have a crisis, someone else gets to deal with it.
[00:56:31] Jordan Harbinger: All right, so oil for people who are like, wait a minute, I'm still confused. Oil prices are usually pretty fragile because one disruption messes up the whole system. It's not elastic like other things. I remember that from kind of Econ 102 back in college and it doesn't help that most oil in the world is located in a sketchy place as you alluded to earlier. Is that a coincidence or does having large amounts of commodities in your area just cause governments to focus on extraction to the detriment of literally everything else in their nation and society?
[00:56:58] Peter Zeihan: Well, it depends upon what else you have.
[00:57:00] Jordan Harbinger: Yeah.
[00:57:00] Peter Zeihan: So if you look at the Middle East, you're talking about an area where their biggest industries were pearling, frankincense, and fishing. And in desert communities, pre-industrial, you're talking about very small numbers of people. And then, you stick a straw in the desert and you get oil and obviously, you're going to focus on that. So you get the Dutch disease if you will. In comparison, Norway was an advanced technocratic society with basic manufacturing and hydropower nickel processing before they discovered oil. Or look at Texas, if it had been an independent country, it would've been a trillion-dollar economy before the shale revolution. So when you have crude, it doesn't necessarily make you a failed state, depends upon what was there before.
[00:57:40] Jordan Harbinger: Gotcha. Correlation isn't causation and all that, but I look at some of these places.
[00:57:43] Peter Zeihan: But there is a correlation.
[00:57:44] Jordan Harbinger: Yeah. Oh, good God, what did this, what happened to this place? So what is going on here? Speaking of disasters, what about getting Venezuela back online? I know Biden was trying to do that. I mean, I have concerns. I assume you do as well.
[00:57:58] Peter Zeihan: Well, let's start with what Biden was doing. He was basically saying that Venezuela, the state owes a lot of entities in the United States.
[00:58:05] Jordan Harbinger: Yeah.
[00:58:05] Peter Zeihan: Not just in the petroleum sector, a lot of entities, a lot of money. So we will loosen the sanctions a little bit so that the crude that you produce can be sold and you never see that money.
[00:58:15] Jordan Harbinger: Okay.
[00:58:16] Peter Zeihan: That money goes to the American firms that you owe money to, and if you can keep this up and not be a jerk about it, then a year from now when you've paid off those debts, we will then begin a more serious conversation about the broader environment. So it's an if-then. Do I think that Maduro is a great governor? No. Do I think he's the kind of person that should be allowed to be in control of Venezuela for the long run? Not really. I would argue that maybe we're not the people to make that decision. That should be the Venezuelans.
[00:58:44] Jordan Harbinger: Mm-hmm.
[00:58:45] Peter Zeihan: But we're just setting the stage for theoretically what comes next. And if Maduro decides to go back to his old habits, then this dissolves in a day and it's no harm to us.
[00:58:55] Jordan Harbinger: Right. Because we got the oil and then the money or whatever we needed out of the arrangement.
[00:58:59] Peter Zeihan: Well, I mean, if it stops tomorrow, we're not in any worse place than we were the day before.
[00:59:03] Jordan Harbinger: I suppose that's true. Yeah.
[00:59:04] Peter Zeihan: If your goal is to actually get Venezuela back to its peak of producing three to five million barrels a day, that's a different conversation. Because we have had full-on state collapse, complete with famine across the Venezuelan space. And this isn't Saudi Arabia where it's an easy field close to the coast. You've got a line of coastal mountains, then you've got your population belt, and your oils below that. So if you want to resurrect Venezuela, you need to send in at least 50,000 troops and physically rebuilt the country from the ground up over the course of a decade. And then, you have the option of spending 200 to 300 billion to resurrect the world's most complicated oil production system. And if you start today, you will not get your first oil most likely until at least 2035.
[00:59:52] Jordan Harbinger: That's insane. So that sounds hopeless for them.
[00:59:55] Peter Zeihan: Well, it's not something we are interested in.
[00:59:57] Jordan Harbinger: Yeah.
[00:59:57] Peter Zeihan: But if you fast forward a year or two and the Middle East is being the Middle East again, and the Russian oil is gone, and the Americans have basically built a little wall around their own energy markets, then you're going to have global energy prices that on a cheap day are looking like 150 and are typically over 200—
[01:00:13] Jordan Harbinger: Dollars per barrel.
[01:00:14] Peter Zeihan: Yeah.
[01:00:15] Jordan Harbinger: Wow.
[01:00:15] Peter Zeihan: And in that sort of environment, the Europeans are like, "Huh? hey, Washington, would you mind if we colonized Venezuela?"
[01:00:23] Jordan Harbinger: Oh, geez.
[01:00:23] Peter Zeihan: What sort of deal can we strike that you'll just let that happen?
[01:00:26] Jordan Harbinger: And you say colonize, but it's not really a joke because it's almost like that's what has to happen. Countries with large oil markets—
[01:00:32] Peter Zeihan: I mean, that's the scale of what has to happen here. And keep in mind that this is not the 1800s when the Europeans had the gun and everyone else had spears.
[01:00:41] Jordan Harbinger: Yeah.
[01:00:41] Peter Zeihan: Hugo Chávez, one of his last big acts before he died, is he distributed 150,000 AK-47s to the population. So anyone who thinks that this is going to be easy is wrong in every possible way.
[01:00:54] Jordan Harbinger: Oh my gosh. It does sound like re-colonialization where countries with large oil markets have to secure their own supply from another place.
[01:01:02] Peter Zeihan: Yeah.
[01:01:02] Jordan Harbinger: They can export it, but they don't have the security to do it themselves. Libya, Algeria probably also part of this problem, or same situation, I mean.
[01:01:11] Peter Zeihan: Libya has a similar situation of populations on the coast. The infrastructure runs through the populated areas, but the oil's deep in the desert. Now, because it's not tropics, because there aren't a lot of mountains, because the population is so much smaller, it would be easier. But the only country that I think is likely to consider that would be Italy. And I don't know how well you know your colonial history, but every time that Italy has tried to have a colony in the last 300 years, it's been a sh*t show.
[01:01:34] Jordan Harbinger: Italy is another fun place to watch because it just go, you just go, "Wait a minute. What really? Is this real news ? I can't believe it.
[01:01:40] Peter Zeihan: Well, I mean, it's crazy because the northern third of Italy where the half the population lives, that's more technologically advanced than Japan. An output per hour of work is more productive than Northern Germany.
[01:01:51] Jordan Harbinger: That's shocking actually. Just knowing my Italian friends who live in Italy still, yeah, they must not live in that part of Italy.
[01:01:57] Peter Zeihan: Or maybe they do, but they're just dragged down by the rest. You know, the southern half is a bit of a crazy, but in order to make that northern third work, they have to have access to gobs of energy. So they actually have a pretty sophisticated energy system. They can take any flavor of crude and mix it to make something that any of the refineries can run. One of the few places in the world can do that, but they have to still be able to source the crude and in a post-American deglobalize world, and that becomes a big problem. Libya is right next door.
[01:02:22] Jordan Harbinger: Okay. I know people are going to go, "This is why we need green energy to replace oil." Can that actually happen? I'm a layman. It doesn't sound like it's right around the corner.
[01:02:31] Peter Zeihan: Well, the idea is really sexy, right?
[01:02:34] Jordan Harbinger: Yeah.
[01:02:34] Peter Zeihan: I mean, if, if you can get enough copper and zinc and everything else, then you can basically declare independence from petroleum, and that sounds great, but making electricity is a lot more sophisticated than an internal combustion engine. I mean, internal combustion engine — I'm oversimplifying here — you light a match, you burn something, you capture the heat, you go.
[01:02:51] Jordan Harbinger: Mm-hmm.
[01:02:51] Peter Zeihan: That's what it is, basically. If you want an electricity storage system and transmission system, you need an order of magnitude, more machinery, more materials, and more different kinds of materials. You need your cobalt, you need your lithium, your copper, or your zinc and all the rest. And that means that you may, if you're successful, be able to declare independence from a world dominated by Venezuela, Iran, Iraq, and Russia, but it now means that you have to be inextricably linked to Canada and Mexico and Bolivia and Chile and Brazil and Argentina and Peru and Vietnam and Indonesia and Malaysia and Australia and Pakistan and India and China and Kazakhstan and Mongolia and Turkey and Algeria and oh yeah, still Russia.
[01:03:34] Jordan Harbinger: Because of rare earth metals and stuff like that. Is that why we're—?
[01:03:37] Peter Zeihan: Well, that's not — I mean, rare earth is like one of the few things that we actually have covered. You need at least five times as much of all of these materials as the globe production right now to make the green transition work. It's a lot of copper and we just don't have production capacity necessary to support this on a global scale, and we're losing the Russian stuff and very soon we're going to lose the Chinese processing capability. So if you are going to apply these technologies, you are only going to imply them in places where they really work well. So a good solar belt, a good wind belt, so that's the American Great Plains, that's the American Southwest and that's great. Australia looks fantastic, but there are not a lot of places where people live that are in sunny or windy locations.
[01:04:25] Jordan Harbinger: Right. And you can't just transport that power to where it needs to be with a bajillion miles of lines. It has to sort of be, I mean, it's more or less local.
[01:04:32] Peter Zeihan: Yeah. Assuming there's no permitting problem, a thousand miles is roughly the maximum distance that you can ship power.
[01:04:38] Jordan Harbinger: I probably should do a whole show on this, but what about nuclear? Because that seems like, okay, fine. Don't worry about the wind. Don't worry about the sun. Nuclear.
[01:04:45] Peter Zeihan: Nuclear is great. There's just two problem, well, three problems. Number one is disposal of the spent fuel. That's actually the easiest problem.
[01:04:52] Jordan Harbinger: Yeah. It seems solvable.
[01:04:52] Peter Zeihan: Yeah. I mean nobody wants a nuclear repository in their backyard. I get it. Problem number two is time. Assuming there were no regulations, assuming that you could just build it how, whatever you wanted, wherever you wanted, it's about seven years from the point that you put your first money into your first electricity.
[01:05:07] Jordan Harbinger: Wow.
[01:05:07] Peter Zeihan: You know, that's a pretty long delta.
[01:05:09] Jordan Harbinger: Yeah.
[01:05:10] Peter Zeihan: And then third is uranium. The world's largest source of uranium is Kazakhstan.
[01:05:17] Jordan Harbinger: Okay.
[01:05:17] Peter Zeihan: And Russia's number four.
[01:05:19] Jordan Harbinger: Ah, we're still tied to Russia.
[01:05:20] Peter Zeihan: And most of what is produced in Kazakhstan is processed in Russia in just fuel rods. So you can't do this without the Russians at scale.
[01:05:29] Jordan Harbinger: Well, there goes that idea. Okay, so let's say we figure that part out. Batteries, are we just swapping oil issues for rare earth metal and other issues?
[01:05:38] Peter Zeihan: I'd argue that rare earth really isn't an issue.
[01:05:40] Jordan Harbinger: Okay.
[01:05:40] Peter Zeihan: Rare earth production is a by-product of almost every kind of mining. It's a processing issue. And most of that is done in China because it's dirty. It's not that it's expensive, it's just the Chinese have subsidized it so people can get the finished product for a low cost.
[01:05:52] Jordan Harbinger: Got it.
[01:05:52] Peter Zeihan: And it's like, why would you process it yourself if you can get it from the Chinese a third of what it would cost you to do it yourself? So you're like, "Go do it." But 10 years ago when they tried to blackmail the Japanese with rare earth access, everyone went out and build out the processing capacity because the technology is 1920s technology. It's not hard. It's not even expensive, and most of that has been done. So if China were to like fall in on itself tomorrow, we'd probably have about six months that it would take to spin all this infrastructure up but it's already been paid for. So we'd be okay with rare earth.
[01:06:20] The problem is copper and lithium and getting it in volume. Most of the world's lithium comes from Chile and Australia and they're continuing to produce more and more and more. Copper is primarily Chile again and Russia and Indonesia, so that the Russian stuff is going away. We don't have enough of either of those to maintain a moderate green buildout in the United States, much less global at scale.
[01:06:44] Now, in a post-globalized system where Chile and Australia are part of the American network, that gives us some opportunities that other countries don't have. If you take their production, you concentrated into the Western hemisphere for sales, that just might work in places where this makes sense. But everywhere else, there's just enough.
[01:07:00] Jordan Harbinger: A lot of folks have asked me, why can't the United States — I'm shifting gears a little bit here. Why can't the United States replace what China makes with Mexican manufacturing? What's the problem here? You know, there's tons of skilled laborers in Mexico. I know we have to build factories and stuff like that. There's that whole idea, but t doesn't seem impossible to have Mexico replace quite a bit of that. What's wrong with that idea?
[01:07:21] Peter Zeihan: Let me give you the good and then the bad. So first, the good. We can, we are. And we will.
[01:07:25] Jordan Harbinger: Okay.
[01:07:25] Peter Zeihan: The industrial buildout in Mexico is epic, and the Mexicans on average are more skilled than Chinese laborers. And they're one-third the cost.
[01:07:33] Jordan Harbinger: Huh?
[01:07:33] Peter Zeihan: There are very, very few economic manufacturing sectors where the Mexicans are not already the low cost, high quality producer compared to China. And so that is preceding at pace.. Problems, number one, there's only 130 million Mexicans. You know, they've got one-tenth the population of China, so they can't do it all. So it has to be a group effort with the United States and Vietnam and others involved. So we have to basically relocate a whole lot of industrial plant yet don't do that overnight, no matter how disparate your situation is.
[01:08:01] Jordan Harbinger: Right.
[01:08:02] Peter Zeihan: Second electronics, what makes East Asia dominant electronics is they've got a labor system that taps 12 different labor markets with different skill sets, all in close proximity. So you do the injection molding in one place, the die cast in another, you make the wires in one place, the wiring harness in another. You process the copper in one place, you make the semiconductor in another, and it's doing all of these things differently, efficiently, and then bringing them together for assembly at yet another place.
[01:08:30] In North America, we have two labor markets. We've got the US and Canada, which are broadly the same, high tech. And then we've got Mexico, which does middle manufacturing very well. It's the delta between them that gives you good economies of scale and network effects for electronics manufacturing. because there's so many steps. Well, only in the US-Mexico border region do we get that interface. So we don't have the 12-step labor market that the Asians have, which means we're going to have to retool everything that we bring back in the electronics space in order to do it at scale. And that's going to look very different and we are going to have to make that up as we go. And that will probably be the economic sector where we feel the most pain from the changes. because it's going to take the longest.
[01:09:13] Jordan Harbinger: It almost seems like Mexico needs its own Mexico.
[01:09:16] Peter Zeihan: It does. It's called Colombia.
[01:09:18] Jordan Harbinger: Got it.
[01:09:19] Peter Zeihan: Yeah. So Mexico and Colombia both have Atlantic and Pacific ports and Colombia is very similar in economic structure to where Mexico was 15 to 25 years ago. So more skilled than their price point would suggest. And the Colombians are absolutely going to be an indelible part of whatever comes next for the greater NAFTA system. It'll take them a little bit longer to get up and running than it did the Mexicans because Mexico, it's right up on the US border.
[01:09:43] Jordan Harbinger: Mm-hmm.
[01:09:43] Peter Zeihan: So it's very easy for American entrepreneurs to reach out, find partners, and build out. Colombia is not just in a different continent. Most of the population lives on the sides of mountains. So you've got tropics in the lowlands and snowcaps in tundra at the top. People live in the middle and that makes the infrastructure question a really important one. It's not that the infrastructure is not in place. It is, but it's not built out to supply and support a mass manufacturing culture, which is what we need them to do. That's going to take some time too.
[01:10:11] Jordan Harbinger: They deserve a break over there. They've had a rough go for the past few decades.
[01:10:15] Peter Zeihan: They did, but their last 15 years have gotten progressively better.
[01:10:18] Jordan Harbinger: Yeah.
[01:10:18] Peter Zeihan: The civil war is over. FARC has gone, I don't mean to suggest that cocaine is vanished from their world, but they're not facing the degree of state challenge that they have for most of their history.
[01:10:28] Jordan Harbinger: Fantastic. Good. Okay. Well, in the time, we have left here, I'm so curious. What about food? You know, we heard before, this is a few months ago, we heard grain can't get out of Ukraine and Russia might be using food diplomacy. The United States might have to use food diplomacy to essentially say, "Hey, we'll feed your people if you do X, Y, Z." Is that realistic or am I reading too much news?
[01:10:48] Peter Zeihan: We were very lucky this calendar year. We only had a disruption out of the Russian space for fertilizer production of about one-third. And Mother Nature was very kind to us, the world over. Most of the world's farmers had great weather all year long and everyone had a fertilizer reserve. The amount of stuff that is getting broken down in the Russian system is accelerating. Mother Nature is probably going to be her normal self next year.
[01:11:12] Jordan Harbinger: Yeah.
[01:11:12] Peter Zeihan: The initial forecast, especially for us, the Western Hemisphere, don't look great and everyone has already used their reserves, so we should expect significant fertilizer shortages and sometime in 2023. The country to watches Brazil because they're the world's largest fertilizer importer. They're a big enough country, they've got the heft to get it, and if they start having problems, you know that there are dozens of smaller countries out there that are already in crisis point. So we'll probably see significant drops in agricultural output next year, especially in the second half of next year, which should suggest that we are going to have significant problems with food supply and a global scale in the months that follow.
[01:11:49] Jordan Harbinger: In your opinion, who are going to be the biggest winners and losers in the new world order? The biggest winners, it sounds like the United States. Who else am I missing in terms of winners? And I'd love to hear who you think is really, really in the chopping block, so to speak.
[01:12:01] Peter Zeihan: Sure. So Greater NAFTA, US, Canada, Mexico is obviously at the top of the list, Colombia, Australia, Japan, and assuming they can get their head out of their ass, the Brits are probably going to be part of the new network that works. And most of the Western hemisphere that was not on the list is at a minimum going to be able to benefit from a relatively placid security environment. So they're not going to be dealing with a lot of the changes that are happening in the Eastern hemisphere. In fact, a lot of these countries are commodities exporters. And so in that sort of environment where your commodities can still be produced, assuming you get the fertilizer, but you don't have to worry about a security concern. Your ability to sell high is very promising.
[01:12:38] The biggest loser by far is China. Everything about China's functionality is dependent on a globalization and a demographic moment that has passed, and they are definitely not going to survive as a country, much less as an economy. I think we're in the final decade of the European Union because, without that Russian energy, there is no German manufacturing model. And without the German manufacturing model, you don't have the money that is used to keep the EU in existence. Can you imagine what would happen with the Greek debt crisis if the Germans didn't have the capacity to write a check?
[01:13:08] Jordan Harbinger: Mm-hmm.
[01:13:09] Peter Zeihan: That's the environment we're going to be in a few years, adding terminal demographics and parts of Europe can go their own way and be reasonably successful. Scandinavia, I'm very bullish on. France, I'm very bullish on, but the rest of it looks really, really dangerous.
[01:13:22] Jordan Harbinger: Wow.
[01:13:23] Peter Zeihan: And then I am really concerned about Sub-Saharan Africa and South Asia because they import almost every speck of their potash and their phosphate and their nitrogen fertilizer and their food importers on top of that.
[01:13:35] Jordan Harbinger: Oh man. So we're going to see a pretty nasty, ugly famine in those places.
[01:13:40] Peter Zeihan: Yes. Now, that doesn't necessarily mean state failure. India is a great example of a country that can sustain a very high degree of chaos and just keep on chugging along, but most countries in this part of the world are not as strong as India.
[01:13:52] Jordan Harbinger: In closing here, what keeps you up at night? Aside from all the potentially horrible things we've already discussed, is there anything else that you think, "Hey, this is something to watch"? Nobody's talking about it.
[01:14:01] Peter Zeihan: Oh, no, that's about it.
[01:14:02] Jordan Harbinger: That's about it?
[01:14:03] Peter Zeihan: I mean, the food issue is the issue that gives me nightmares because I don't see a way to fix it. It takes 10 years to bring a new potash production facility online, and the Canadians got started as soon as the war began back in March. I mean, they started in March. The war started in February. They're hoping they can speed it up and get meaningful replacement volumes up by 2029.
[01:14:23] Jordan Harbinger: A lot of this seems really hopeless and now it all makes sense why you think skilled labor and basically people who have the ability to move are going to all move to places where that aren't going to have these problems.
[01:14:34] Peter Zeihan: We're going to have an interesting realignment of what is normal in the United States over the next 20 years. Because we've had this populist rise up represented by Biden and Trump, but we're also going to be probably taking in 40 or 50 million migrants over the course of the next 20, 25 years.
[01:14:52] Jordan Harbinger: Wow.
[01:14:52] Peter Zeihan: That is going to change our complexion because these are not going to be people who walked here.
[01:14:57] Jordan Harbinger: Right.
[01:14:57] Peter Zeihan: These are going to be people mostly from advanced countries with degrees and experience who can have an immediate value added impact that is quite a bit different from our normal immigrant draw.
[01:15:08] Jordan Harbinger: It's going to be an interesting couple of decades, man. I hate to say I'm looking forward to it. It's going to be interesting to watch, but also I'm very afraid for the people that are on the losing end of this equation. I think it's going to be, that's going to be pretty harrowing.
[01:15:22] Peter Zeihan: We've had a really good run the last 75 years. It was never going to. That doesn't necessarily mean it had to collapse in the way that it's going to though, and it's going to be a rough ride.
[01:15:31] Jordan Harbinger: Well, Peter, thank you very much for coming back on the show. We'll have you back, I assume, at some point in the next few months as well, because there's always interesting developments. I'm always watching your videos on YouTube and I will link to all of that and the book as well in the show notes. Thank you once again for coming back.
[01:15:46] Peter Zeihan: No problem. You take care.
[01:15:49] Jordan Harbinger: Hey, if you like this episode, you might want to go back and check out our earlier episode with Peter Zeihan, where we talked about the Ukraine War. That was actually our most shared episode on Spotify of 2022.
[01:15:59] Peter Zeihan: Putin will be the last capable, competent president of the Russian Federation. He's already 70. The Russians know that if they don't do this now, that no matter what the power balances are in the future, they will always be on the losing side. We haven't seen anything like this in the world since World War II. You should expect Putin moving many, many, many more forces to the border and will probably have a million Russian soldiers in Ukraine before the end of the year.
[01:16:28] Russia has been invaded 50-odd times in its history, and all of the invasions have come through one of nine of what I call gateway territories that link the former Soviet space to the rest of the world. Now, when the Soviet Union collapsed, the Russians went from controlling all nine to just one. And if they get Ukraine in its totality, they will have merely plugged another two.
[01:16:48] Ukraine is not the end of the story. There's another war after this one. Russia's going to win this, and we now know that if American forces and Russian forces meet on the field of battle, the Russian forces will be obliterated. And if that happens, the only choice the Russians have is between a humiliating strategic withdrawal to do whatever the Americans say or up the ante with nukes.
[01:17:12] It is perfectly reasonable to assume that Putin was going to be the last leader of Russia, anyway. This has gotten a lot scarier than we ever thought it would be. If we can't keep Russia locked down in Ukraine, if we can't believe them there until they die, then there will be a direct American-Russian confrontation. We have to prevent that from happening.
[01:17:34] There's a point we're going to get to in a few months, probably later this year, where the Russians will have digested Ukraine and Moldova to their satisfaction, their plan, and then they'll have that clash with NATO, and that's when the nukes become a very real question.
[01:17:51] Jordan Harbinger: For more with Peter Zeihan, check out episode 640 of The Jordan Harbinger Show.
[01:17:59] All right. Told you all, we covered a lot here. Because of COVID and aging population, most countries will never get to where they were in 2019, according to Peter. That is a quote from him. I mean, I don't know never's a long time. I want him to defend that a little bit. The USA really set up the global oil market. And after the Cold War, we couldn't let that go because the price was going to go way up and essentially destroy the US economy because we were so dependent on oil and oil prices. Well, now, we're seeing a lot of that decouple, and it's really, really going to be an interesting decade. We're going to see capital flight, we're going to see capital controls, especially from countries like China. Those capital controls are going to possibly backfire. The openness we are used to is abnormal, and it is coming to an end according to Peter.
[01:18:44] The book really interesting, a discussion on containers. The ones that fit on ships really, really fascinating. The, apparently those things changed global commerce in a huge way that's really hard to overstate Reduced shipping costs from 99 percent of cost of goods to nearly zero. It was basically like the steam engine in terms of impact, because they're all standardized. Really, really interesting. There's a bunch of chapters on semiconductors. The materials are mined or made in Africa, the Middle East, designed in Israel, in the United States, made in Taiwan, then manufactured in something in China, shipped back to us. All of that, that whole system, according to Peter, is going to sort of disintegrate, not to mention the national security implications of things like semiconductors. China wants to make them. The United States is now going to have to make them. If something happens to Taiwan, especially, what happens then to smartphones? What happens to the Internet of things? Transport prices are going to go up by at least a hundred percent. Imagine that everything costs a hundred percent more what is going to happen to our economy. I kind of hope that this is overstated. I guess we'll see. Time will tell.
[01:19:47] Big thank you to Peter. All things Peter will be linked in the show notes. You can also search for any show notes or anything on the show using our chat GPT AI chatbot at jordanharbinger.com/ai. Please let me know what you think of that. I think it's a game changer. I'm looking forward to adding more bells and whistles to that and making that tool easier for you all to use. Advertisers, deals, discount codes, all at jordanharbinger.com/deals or again, use the AI chatbot. And once again, please consider supporting those who support this show. I'm at @JordanHarbinger on Twitter and Instagram. You can also connect with me on LinkedIn.
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[01:20:39] This show is created in association with PodcastOne. My team is Jen Harbinger, Jase Sanderson, Robert Fogarty, Millie Ocampo, Ian Baird, Josh Ballard, and Gabriel Mizrahi. Remember, we rise by lifting others. The fee for this show is you share it with friends when you find something useful or interesting. If you know somebody who's interested in global trade, geopolitics, definitely share this episode with them because the greatest compliment you can give us is to share the show with those you care about. In the meantime, do your best to apply what you hear on the show, so you can live what you listen, and we'll see you next time.
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