…exports as a share of GDP have levelled off in recent years–while remaining near the all-time high. However, global flows of data and information are dramatically rising
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Indeed, it may be that the US-China conflicts end rearranging the patterns of world trade, with reduced flows between the two countries, but with those international flows being redirected to other countries rather than reduced.
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[T]he world is less globalized than many presume. Most activity that could take place either
within or across national borders is still domestic, not international. Roughly 20% of global economic output is exported (in value-added terms), FDI flows equal just 6% of gross fixed capital formation, about 7% of phone call minutes (including calls over the internet) are international, and only 4% of people live outside of the countries where they were born
After WW2, America used its Navy to keep global trade and shipping lanes open
Bribed our alliance to fight the Cold War – but Cold War ended 30 years ago
Americans are now done with this arrangement
Population structure was mostly a pyramid in past – more kids, less parents, fewer grandparents
On farms, kids are free labor
In town, kids are expensive pieces of furniture
China today – fastest aging society in human history – result of One Child Policy By 2100, will have <50% of today’s population
CHINA
China imports 80% of oil needs – world’s most exposed trade route since most of it comes from Persian Gulf
China utterly dependent on US-maintained global order for these shipping guarantees
Xi has consolidated power even more than Mao “No one wants to tell him bad news”
China vaccines don’t work against Covid – can’t move away from zero-Covid policy bc healthcare impacts would be crushing
World’s oil and gas investment is only half of what it was 10 years ago
Takes 3-8 years to develop at its fastest
Soonest energy inflation fixes itself is 2025
US blessed with lots of domestic shale – largely fixed our natural gas problems
RUSSIA
Lots of land that isn’t habitable yet can’t be easily defended
Lost control of many access points / invasion points that were controlled under the USSR Only way Russia can protect its borders is to expand
Time’s not on Russia’s side – like China, a severe demographics problem (not enough children and young people)
Russia only has 2M troops – they’re irreplaceable, no more reserves
AFRICA
Over 5 decades, agricultural output increased by 5x
But heavily reliant on global inputs of eg, potash and other chemicals
Expects many wars of collapse as America withdraws from maintaining global order
MEXICO
One of healthiest demographies in the world Mexico in 2060 will look approximately like US today
Exports 77% of all goods to the US – critical bilateral relationship
El Chapo ran a Korean-style conglomerate – many regional commanders that he loosely controls
He saw it as business, not warfare – once he was removed, violence increased (Sinaloa), multiple leaders Sinaloa is largest crime group in the US today, and risk of it getting worse
Geographically similar to Afghanistan – rugged terrain, unsecurable border – may need similar tools to manage it
AMERICAN POLITICS
2×2 – economic conservative v liberal, social conservative v liberal
Military doesn’t participate in the domestic political conversation
“Greatest period of change we’ll experience in our lives”
AUDIENCE Q&A
After the Civil War, the US was split, focused domestically on re-integration, didn’t have time for diplomacy / foreign affairs Dollar diplomacy arose – individual business interests went around the world and did what they wanted
Resulted in hemispheric chaos, led to China’s fall to Communism
Economics is an outgrowth of demography and geography (probably his core thesis)
Han (Chinese) have been around for 3K years, but only been united for 10% of it
Didn’t worry about Taiwan war until recently – but if everything else is collapsing, something to be said about choosing time/place for fight and controlling the narrative (from Xi’s perspective) – considers it 1/3 chance
If China falls:
-N China plain would be its own political entity
-City states from Shanghai to HK will integrate into extra national system / external alliances
China – sex imbalance of 5-20%
95m more men <40yo than women – driving population collapse
Bullish on Turkey – still a developing country, but all energy within arm’s reach, good agricultural inputs, good European cooperation, control / easy access to key bodies of water
Russia-Chinese alliance
Not capable of functional cooperation once you remove US’s overarching reach
Only settled border disputes ~10 years ago
Can’t sustain conflict given demography problems
We’re in transition – old world giving birth to new world; will last many years
Trade was de-politicized – made possible by collapse of Soviet Union – but that’s over now
Countries broke off to form sovereign states – Gorbachev was not strong leader, Yeltsin was drunk often
Western tide flowed east ward
When Putin took power, he started to fight back
He knew Russia couldn’t fight on population, but could on weaponry / technology – invested in this
Ukraine war marks limit of flow of the Western tide eastward
Now it’s an inter tidal period
May see situation similar to Korean Peninsula
More or less ceasefire, de facto partition that may last decades
Rise of China
Creates insecurity in Anglo Saxon world
Five Eyes (intelligence cooperative) used to be a very quiet – decided Huawei was great threat – gave joint media presentation – very unusual for an industry that’s always quiet, discreet
Xi Jinping likes to say “changes not seen in 100 years” – keeps repeating it
China’s US ambassador gave speech after retirement – “America’s ill will for China has no bottom line and underlying it is racism”
“Never fight a war you cannot win, never fight a protracted war”
It was a scripted speech – signal from China leadership
China is preparing for war not because it wants it – but to avoid it, you must prepare for it
Plan on basis that you can withstand all attacks – then there’ll be peace
3 domains of warfare that China’s worried about
1) Nuclear warfare – must have deterrent capability; US cannot prevail in South China Sea; several hundred is not enough, dependent on strategic submarines which is why South China Sea is so important; game going on there; China will increase warheads to 1K, have counter strike capability
2) Cyberspace – fight will be from outer space to underground; assume undersea cables can all be tapped; NASA has said China wants to take over the moon, China space industry making rapid progress
3) Every dynasty has had epidemics – China recorded over 300 epidemics; lots of experience to handle; traditional way to handle is lockdowns; during SARS China locked down and stopped it; even have lockdown procedures for harems and inner palace / princes!; Shanghai lockdown was traumatic but can’t be helped – it’s a rehearsal for something worse in the future
These are what XJP means by challenges not seen in 100 years
China thought could have working relationship with US – but now it’s “don’t assume they won’t attack”
China wants more time, they are growing stronger
US has not been this divided since Civil War – which was decided by violence
Greatest uncertainty in world today is US politics – every institution has been weaponized and politicized
Democrats may face defeat in midterms
For China the big issue is Taiwan
Basis of US-China relations starting with Nixon was based on one China
Every US admin thinks Taiwan is a card, but it’s not — it’s the whole basis
Deep state is committed multi year program to fight China – won’t change based on Democrats or Republicans
Singapore very reliant on US for weapons, finances – best bet is ASEAN; can hide behind ASEAN position
As trade minister, most important was ASEAN – stronger it is, the more Singapore has buffer If Singapore + Indonesia are aligned, can have ASEAN agreement
Impressed by Indo’s G20 leadership now
Globalization has crested, it’s decoupling because strategically necessary
Every country must protect itself