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Kindle Notes & Highlights
by
Peter Zeihan
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April 2, 2023 - March 5, 2025
Unlike the shockingly unequal preindustrial world, the industrialization/globalization combo has achieved the seemingly impossible duology of enabling the utterly unskilled to live at something above an abused subsistence level while pushing the frontiers of human knowledge and education further and faster and more broadly than ever before.
Modern vessels are fat beasts. Container ships running full tilt max out at just under twenty-nine miles per hour. Bulkers at half that. The fastest civilian ships we have are . . . passenger cruise liners, mostly because they are mostly empty space. No joy in refitting them to ship corn. Modern transoceanic container ships hold thousands of containers, more than half of which are packed to the gills with intermediate goods essential to the fabrication of pretty much all manufactured products. Those intermediate products are built by a workforce who only know how to produce one specific piece
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Quick war story, in this case, the Iran-Iraq War of the 1980s: By 1983 the conflict had reached a stalemate, inducing both countries to fling missiles at one another’s shipping in attempts to strangle their opponent economically. Altogether some three hundred vessels were struck. About fifty were disabled, and a dozen sunk. Compared to the size of global shipping at the time, it was barely a footnote. But that handful of events nearly destroyed the global . . . insurance sector.
There was even a period from roughly 1950 to 1975 with zero attacks on shipping. Loss provisions on maritime insurance, therefore, were, at most, minimal. Preparing for such incidents with large sums of cash would have been like setting aside billions to address earthquake claims in Illinois. But when the claims from the Iran-Iraq War rolled in, insurance firms quickly ran out of operating capital. So they filed claims with their reinsurance firms, who quickly ran dry as well. Suddenly all insurance companies discovered that their entire industry teetered on the precipice. Fire insurance, car
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In perhaps the preeminent demonstration of the undisputed fact that the U.S. military feels that overkill is underrated, the combined navies of the wider world have less than one-tenth the power projection capacity of the U.S. Navy. A global inability to impose norms on the region will guarantee a decades-long global depression as well as ensure a succession of woefully inadequate efforts by a half-dozen powers—Japan, the United Kingdom, France, India, Turkey, and China—to salvage . . . something from the bloody chaos. It’s going to be a mess.
Future Europe’s problems are many, but four stand out.
The first is energy: The Europeans are more dependent upon energy imports than the Asians, and no two major European countries think that problem can be solved the same way.
The second is demographic: The European countries long ago aged past the point of even theoretical repopulation, meaning that the European Union is now functionally an export union.
The third is economic preference: Perhaps it is mostly subconscious these days, but the Europeans are aware of their bloody history. A large number of conscious decisions were made by European leaders to remodel their systems with a socialist bent so their populations would be vested within their collective systems. This worked. This worked well.
The fourth and final problem: Not all European states are created equal. For every British heavyweight, there is a Greek basket case. For every insulated France, there is a vulnerable Latvia. Some countries are secure or rich or have a tradition of power projection. Others are vulnerable or poor or are little more than historical doormats.
To believe that globalization will continue without an overarching enforcer and referee, you must believe three things:
First, that all powers in a given region will agree to do what the most potent regional power demands.
Second, you must believe that certain tools of statecraft will remain firmly off the table, most notably military tools.
Third, you must believe that the dominant regional powers will not come into conflict.
long-haul transport is an instant casualty, because long-haul transport doesn’t simply require absolute peace in this or that region; it requires absolute peace in all regions. Such long-haul disruption describes three-quarters of all shipments in energy, manufacturing, and agriculture.
The defining characteristic of the new era is that we will no longer all be on the same side. And while many might reasonably argue such has always been the case, what made the Order work is that we all collectively agreed that there were limits as to what form intrastate competition could take. No one uses military force to confront an economic competitor. But most important, no one shoots at or hijacks commercial shipping. Period.
Long-haul transport is what brings everything from areas of high supply to high demand, regardless of participant. For any product that is concentrated in terms of supply or demand, expect market collapse. Products particularly concentrated in terms of supply include oil, soy, lithium, and mid- and low-end microprocessors. Products particularly concentrated in terms of demand include liquefied natural gas, bauxite, high-speed train cars, and squid. Products facing a double squeeze include iron ore, helium, cocoa beans, and printer toner.
Expect state piracy to come back into vogue with particular verve in the Turkish bloc, with the Turks (and Israelis) gleefully (and relentlessly) raiding anyone desperate enough to attempt to ship crude oil through the Suez Canal and Eastern Mediterranean without first paying whatever level of protection money that Ankara and Jerusalem deem appropriate. India is another power to watch out for, but in a slightly different way. The Indian Navy may be, well, below awful, but within the Indian Ocean it faces no regional peer. The subcontinent is also the first stop for any shipments out of the
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This highlight has been truncated due to consecutive passage length restrictions.
The biggest winners? Those locations that entered the Industrial Age in force because they had internal geographies brimming with navigable waterways as well as a degree of stand-off distance from threats: the United States, the United Kingdom, Japan, France, Turkey, and Argentina, in that order.
as transport costs rise, low-margin non-energy and nonfood goods are less likely to be shipped in the first place. Not only does this further weaken what economic ties still bind; it also means that anything that is shipped is more likely to be oil or edible or otherwise valuable.
The biggest losers? Those countries at the very end of very exposed shipping routes, which lack the naval capacity to convoy their own merchant vessels: Korea, Poland, China, Germany, Taiwan, Iran, and Iraq, also in that order.
A return to the days of militarized merchant marines is not far off. You think folks the world over are nervous about some countries having no restrictions on their military exports now? Just imagine what happens when the Koreans or Israelis or French start selling idiot-proof anti-ship weaponry designed to be mounted on bulkers operated by India or Saudi Arabia or Egypt.
Remove the global system, remove global transport, and cities will be responsible for their own food and energy and industrial inputs.
Even America’s single globally busy port, at Los Angeles/Long Beach, California, is unique. Unlike the Asian and European ports, which are first and foremost transshipment centers, Los Angeles/Long Beach is a destination port. It does not process scads of intermediate products, but instead serves as the final port of call for largely finished goods that are built and assembled elsewhere. Such goods are loaded onto truck and rail for distribution throughout the United States.
The second-largest piece of the globe that can be “gathered” to help cities survive is the continent of Australia plus the islands of New Zealand. Like the Western Hemisphere, the pair of southwest Pacific nations have far more resources and foodstuffs than they could ever consume.
The problem for this Southeast Asian bloc is that (a) no one is large and in charge, and (b) the group lacks the military capacity to look out for its varied interests. This need not end in disaster, nor is it likely to. Both the Americans and the Japanese will have reason to seek economic and strategic partnerships with the Southeast Asians (including the Aussies and Kiwis). The trick for all three sides of the relationship will be to keep Japanese and American views in rough alignment. A serious falling-out would be devastating to anyone west of the International Date Line.
Russia has loads of stuff that countries need, but the Kremlin has long used its resource wealth to extract geopolitical concessions out of its customers. Russia’s economic strategic policy can best be summed up as . . . failed. In the pre–Cold War eras, the strategy oscillated between Russian subjugation of said customers and said customers flat-out invading Russia.
The Russians today think that their Trans-Siberian Railway (TSR), theoretically capable of transporting massive volumes of goods between East Asia and Europe, is an excellent way to break America’s hold on the seas. Reality disagrees: a single one of those large container ships transported more cargo than total annual TSR traffic in the entirety of calendar year 2019. Bottom line: I’ve personally long found Russian confusion amusing given their use of an 1800s playbook that has consistently failed them in the twenty-first century.
The Middle East is packed with energy but imports more than two-thirds of its food needs. Expect massive and rapid-fire population . . . adjustments as global commodities trade craters along with everything else. In the aftermath, France and Turkey will feast on the region’s bounty to fuel their own needs and ambitions, perhaps with the Japanese making the odd guest appearance.
By far the biggest loser in this new dis-structure is China. Everything about modern China—from its industrial structure to its food sourcing to its income streams—is a direct outcome of the American-led Order. Remove the Americans and China loses energy access, income from manufactures sales, the ability to import the raw materials to make those manufactures in the first place, and the ability to either import or grow its own food. China absolutely faces deindustrialization and deurbanization on a scale that is nothing less than mythic.
Transportation is the connective tissue that holds the world together, and, if anything, what you’ve just absorbed is only the beginning of the transport story.
First, when a civilization falls, it’s rare to follow the example of the Indus and have every person, product, and idea utterly vanish from the Earth. Citizens become survivors. Survivors become diasporas. Diasporas intermingle and form new communities. It isn’t just people who mix but also ideas and products and techniques. People need a medium of exchange to lubricate the increased variation. Enter currency.
Second, this post-collapse merging naturally led both to technical booms from the skill mixing of the various overlapping diasporas and the desire to reconnect with others in their fallen cultures.* The combination of more technological advancement, greater product differentiation, and a bit more outwardly focused mentality not only granted us greater heft and stability and populations, they contributed to the shift from the Bronze Age to the Iron Age.
Third, with both stability and economic dynamism steadily increasing, traders had more confidence that the city or country or empire they wanted to trade with or for would be there when they got back. For the first time in history there was a geopolitical rationale for developing a currency better than barley.
The first is to make your coin out of something that people want. Gold, silver, electrum, and copper are all good choices, but really, anything a culture deems valuable can be used. Options through the ages have included barley, strips of iron, cocoa beans,* dolphin teeth, potato mashers, tulips, wheels of Parmesan, and, my personal favorite, beaver pelts.*
This brings us to the second option: make your publicly circulating currency exchangeable for something of value. Again, a metal of high worth is the obvious choice; you just keep the actual metal in a government vault instead of having the value reside in the coin itself.
Even in the late Spanish period, well into the British rise, Spanish coin remained so large in volume, so far-reaching in circulation, and so reliable in purity that it was used more in British America than the British pound. Spanish currency was especially popular in the rum-sugar-slave triangle linking Britain’s American, Caribbean, and African possessions.
Only the United States had the military capacity to take that currency far and wide. The only even theoretical candidate for a global medium of exchange was the U.S. dollar. It did not need to be formalized in the Bretton Woods treaties for that to happen.
The numbers not only didn’t add up, they couldn’t add up. Throughout human history, humanity has probably produced no more than 6 billion troy ounces of gold (about 420 million pounds). Assuming every scrap of gold ever mined was available to the U.S. government, that would only be enough to “back” a total global currency supply of $210 billion.
If there was a singular rule of finance in the era before 1971, it was that there was never enough money. Currency value was directly linked to some sort of asset, while currency volume was determined by the capacity and reach of the sovereign power in question. Both characteristics generated extreme limitations, both for the governments issuing the currencies and for the people and firms (and other governments) who used them.
The Japanese financial model wasn’t about achieving economic stability, but instead about securing political stability.
Considering that most were among the least developed and poorest patches of the planet at the onset, their collective makeover is among history’s greatest economic success stories. Three things helped: First, the Americans steadily outsourced their own industry to the Asian states. That provided an excellent rationale for the Asians’ debt-driven model, as well as ensuring ravenous American (and in time, global) demand for the Asians’ products. Second, that foreign demand proved robust and stable enough to make the Asians’ exports profitable enough that all four managed to (for the most part)
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The biggest of the adherents to the Asian financial model is, of course, China. It isn’t so much that the Chinese applied the model in any fundamentally new ways, but instead that they carried the model to its absurd extremes by nearly every measure.
Every country puts a premium on political unification. Every country has fought internal wars to achieve it. China’s own internal unification effort is one of the world’s most heinous, stretching back across four millennia and dozens of discrete conflicts. The most recent major dustup—Mao’s Cultural Revolution—killed at least 40 million people, twenty-five times the number of Americans killed in all wars.
The Chinese government assigns capital to everything. Infrastructure development. Industrial plant buildout. Transport systems. Educational systems. Health systems. Everything and anything that puts people in jobs. Excruciatingly little of it would qualify as “wise capital allocation.” The goal isn’t efficiency or profitability, but instead achieving the singular political goal of overcoming regional, geographic, climatic, demographic, ethnic, and millennia of historical barriers to unity. No price is too high.
Fresh new lending in calendar year 2020 was about 34.9 trillion yuan (roughly US$5.4 trillion), which, even if you use the statistics for national economic size that even Chinese state economists say are bloated, comes to just shy of 40 percent of GDP. The best guess is that as of calendar year 2022, total outstanding corporate debt in China has reached 350 percent of GDP, or some 385 trillion yuan (US$58 trillion).
Part and parcel of the Chinese financial model is that there is no top. Because the system throws a bottomless supply of money at issues, it is hongry. Nothing—and I mean nothing—is allowed to stand in the way of development. Price is no issue because the volume of credit is no issue.
Something similar occurred in Japan in the 1980s with real estate, when for a brief and bizarre moment a square mile of downtown Tokyo was supposedly worth more than the entire U.S. western seaboard. The Japanese immediately recognized that this was not a sign that things had gone radically right, but instead that something had gone radically wrong.
Another result is massive overproduction. China is worried about idle hands, not bottom lines. China is by far the world’s largest exporter of steel and aluminum and cement because it produces more of all three than even hyper-ravenous China can use. China’s much-discussed One Belt One Road global infrastructure program—which many non-Chinese fear is part influence peddling, part strategic gambit—is in many ways little more than a means of disposing of the surpluses.
The Chinese Communist Party’s only source of legitimacy is economic growth, and China’s only economic growth comes from egregious volumes of financing. Every time the Chinese government attempts to dial back the credit and make the country’s economy more healthy or sustainable, growth crashes, the natives start talking about making lengthy strolls in large groups, and the government turns the credit spigot back to full. In the CCP’s mind, moving away from debt-as-all is synonymous with the end of modern China, unified China,
