Book Review: The End of the World is Just the Beginning

Those who have been following me these past several years, know that I am a believer in the cycles of history. The phenomenon that human history has repeated, or at least rhymed, over the many millennia of our existence.  Life, as far as we know, only exists in the universe on planet Earth and the architecture of life is driven by competition for resources. Whether it’s “Panthera Leo Melanochaitaor” (the lion) or Homo Sapiens (us), we compete for survival with other species and within our own species to pass on our genes. Humans, being fully conscious beings, have become the dominant species on the planet, allowing us to control our environment and rise to the top of the food chain. That means, that our primary competition is amongst ourselves. Individuals compete and nations compete. Nations rise when their economic systems are relatively open, diverse and rules-based so that individuals and companies can specialize. As the society becomes richer, there is a tendency to get fat and happy over time. Successive generations live comfortably and forget the things that made their parents and grandparents successful in the first place. Civic behavior is replaced by selfish behavior which ultimately degrades the nation morally, economically and militarily which makes it vulnerable to competition from new rising nations. The old adage of “those that forget history are doomed to repeat it,” is a real thing.

I first became aware of this historical cyclicality, through a book I have recommended many times in these pages and also in my book, Locally Grown: The Art of Sustainable Government. That book is “The Fourth Turning” by William Strauss and Neil Howe. I read it at least three times since it came out 25 years ago and I consider it a must read for anyone. The book describes the historical cycle as being the length of a long human life, 80-120 years. This cycle, or saeculum as the Romans called it, is divided into four stages which can be thought of like the seasons of winter, spring, summer and fall. Spring, the first turning, is characterized by the rising nation. Summer is the nation at the peak of its power. Fall represents the decline and winter, (the fourth turning), details the catastrophes that lead to wars where the old order is washed away in favor of the new order. Then the cycle repeats. I have watched for a quarter century how Strauss and Howe’s predictions have largely come true.  Hint: We are in the midst of a fourth turning.

So, it’s probably no surprise that there are two books in the top 10 of the NYT Bestseller list whose subject is this historical cyclicality. Number 10 on this NYT list is by Ray Dalio, the multi-billionaire founder of top hedge fund Bridgewater Associates:  Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail. I haven’t read Dalio’s book yet but I do follow all his LinkedIn posts on where he addresses many topics in the book. He describes repeating history as mostly a function of global debt cycles where nations incur a level of debt that they ultimately cannot service except by printing money and devaluing their currencies. This creates runaway inflation and currency crises which is one of the most destructive forces in the universe. From this, comes the bad stuff like economic collapse and war. Dalio charts the rise and fall of oceanic empires, from Rome to the British empire, over centuries and plots out China’s growing influence and eventual rise over Pax Americana. Not sure I agree with his conclusion that China rules the world.

The #4 spot on the NYT Bestseller list is a book I just finished reading and will explore in more detail here. Like Ray Dalio, I have been following Peter Zeihan’s blog for several years. He has spent his career as a top-notch geopolitical consultant to some of the largest companies in the world, especially those in the shipping and energy industries. His latest book,  The End of the World Is Just the Beginning: Mapping the Collapse of Globalization, argues that the world is headed for serious trouble as it deglobalizes due to the United States pulling back from its 75 year commitment to ensuring free and open trade on the high seas.  This pullback has increased tensions with Russia and China.

Zeihan’s analytical framework focuses on three major factors:

Demographics. He looks at country’s population aging over time which give a reading on a country's prospect for its labor force growth or contraction over time. In turn, this informs the overall economic prospect of a country in terms of economic growth and rising living standards.

Geography. He focuses on access to oceans and internal waterways (rivers) because maritime transport is by far the cheapest mode of shipping goods. Therefore, a country’s waterways, and the flat land over which goods can be transported from the ports, provides an important competitive advantage in economics and trade.

History. Since the end of WWII, the US has supported a safe and secure maritime world trading system by patrolling the global seas with the most powerful navy. As the US commitment to safeguarding this maritime world trading system is waning, this pretty much changes everything.

Using this framework, he then analyzes the most important economic sectors:

• Transport

• Finance

• Energy

• Materials

• Manufacturing

• Agriculture

Transport

For75 years sine the Bretton Woods Agreement, the United States has secured the movement of trade globally. In addition to maritime security, the US also opened up its market to world trade along with access to financial markets and government-backed lending. In doing so, it also knowingly permitted its domestic industries from textiles to steel production to semiconductors, to wither as lower cost-competitors displaced them.  This resulted in a hollowing-out of the American middle class as good paying manufacturing jobs were outsourced to China and other countries.  This was determined by American administrations since Harry Truman, to be the price of keeping world peace.

“In the age of globalization, everyone could get in on global access, manufacturing, and mass consumption,” writes Zeihan in a chapter titled The Americanization of Trade. “The world needed more ships to transport more products, but in a world where competition among the Imperial Centers was no longer the global environment’s defining feature, security was no longer the overriding concern. Competition was no longer about guns and sea lane control, but instead about cost. This shift from security to efficiency as the predominant corporate concern meant the world didn’t simply need more ships; it also needed different kinds of ships.”

And it was not only just-in-time consumer goods packed in shipping containers destined for Walmart and Amazon that became cheap but also the world’s supply of energy and basic materials of trade aboard city-block size cargo ships. The massive amounts of copper and iron ore needed to build wind turbines, silica for solar panels, concrete to build almost everything, and more basic human essentials like food and energy.  Everyone prospered from more efficient shipping but there was a cost paid by the one nation that did not need maritime security because it had two large oceans protecting it from would-be aggressors, was a net exporter of food and fuel, and had more miles of rivers and coastal waters than anyone other nation. One nation with an abundance of most natural resources. One of the very few nations that is not facing imminent demographic collapse. The United States of America.

The cost to America of globalization has been incredibly large, measured in trillions of dollars. Maintaining security in all of the world’s oceans not only requires hundreds of warships, submarines, and super-carrier strike groups. It also requires naval bases placed strategically around the world. The logistical cost of maintaining dozens of permanent forward-positioned garrisons, protective airfields, fuel depots, security cutters, and America’s Marines is incredibly expensive.

Maritime security has always been a hard sell to a mostly isolationist American public, but lawmakers worked hard to hide the costs. Naval expenses were buried in joint operational spending bills. The US Maritime Administration was dismantled, and the American Merchant Marine was allowed to rust away. Without many American ship captains or powerful American shipping executives around there simply weren’t many people with political clout or the type of media access needed to sound the alarm. That worked for a time but no longer does for one very big reason. China.

China is THE one nation that has benefited the most from the Pax Americana. China is also, hypocritically, the one nation most hostile to American naval protection and freedom of navigation. Once China started building the world’s largest shipyards, the second largest fleet of merchant ships, and the world’s largest Navy… funding global maritime security stopped making political sense.

Demographics

Demographics are changing across the planet in an unprecedented way: almost all societies are getting older. Large rural labor forces are no longer needed for agriculture and the world is thus urbanizing rapidly. Urbanization lowers birthrates mostly because it makes having a lot of children a financial burden rather than a benefit. You would think a net reduction in mouths to feed would be positive in terms of lowering environmental stress, but the problem is that the entire global economy has been built on an assumption of continuous growth. Young people earn, build, and consume more, whereas older people (though wonderful and cherished) are technically an economic burden on states. Current population charts have already baked-in many old people and very few young people. Absent a sudden revolution in politics and technology, Zeihan believes we are soon going to see a gigantic drop in global economic activity this decade as a result of the mass retirements of Baby Boomers.

Food

Zeihan stresses that agriculture is THE basic industry.  No food, no life.  Great crop yields are greatly increased by the use of fertilizers. Zeihan describes how synthetic nitrogen, phosphorous and potassium fertilizers create unparalleled agricultural density, or yield per acre. Comparatively, so called “organic farming” requires much more land to produce the same crop yield. Natural gas is commonly used as a feedstock to produce nitrogen-based fertilizers in large quantities. Where are the sources of fertilizer?  Well, two of the primary sources are Russia and Ukraine. Recall that the last time Russia decided to use food exports as a political weapon, we experienced the “Arab Spring” in the Middle East as people rose up and toppled regimes because of the price of bread.

Zeihan also argues that climate change will have different effects across the world and be especially difficult for the developing nations that already have issues feeding their people. In the book, he compares the climate change experience in Australia vs. Illinois. Both face a similar rise in temperature over the next few decades. But, because Illinois has a cooler, more humid, and less volatile climate, it will actually benefit from climate change. Its agricultural sector is likely to become even more productive than it already is. On the other hand, Australia with an already hotter, drier, and more volatile climate is expected to really suffer from climate change. He argues that a good deal of the planet, including major agricultural areas will be negatively affected by climate change in a similar way as Australia.  Zeihan suggests that we are looking at up to a billion people dying of starvation and another two billion being chronically hungry.  Is this disaster going to happen?  I hope not. 

Energy and Basic Materials

Next to food, energy is the indispensable resource.  But due to the political focus on climate change, one of America’s two major political parties is at war with the very fossil fuels that make the entire global economy possible.  Many folks who believe the only solution to climate change is an immediate transition to renewable energy sources like wind and solar, regardless of the costs. Never mind that so-called “green energy” currently represents only 20% of global energy consumption and that energy source is not nearly as reliable as fossil fuels. When the sun doesn’t shine or the wind doesn’t blow, there is no green energy.  Keep in mind, that our electrical grid is in an “always on” mode.  Physics demands that the grid must always be running with electricity at a constant volume, or we suffer black outs as now are happening in California and other states with big green energy mandates.  Green energy proponents tout battery storage as the solution to this intermittency problem. Fair enough, but battery storage technology is nowhere close to being ready for prime time at the scale that would be required.  Not to mention that the exotic materials like lithium required to make batteries mostly come from adversarial nations like China and Russia.

In contrast, fossil fuels come with a battery already built in. They are energy storage substances that are easily transported and ubiquitous across the globe.  Until 2021, the United States was the largest exporter of oil and gas in the world. Prior to the current presidential administration, the U.S. was energy self-sufficient.  At some point, the deep economic pain that results from our short-sighted energy policy will buckle under the political pressure of rolling blackouts and people unable to pay soaring utility bills. America has the resources to correct this mistake. But, what about the developing world that must import their energy? What happens to them?

Now I am not denying that climate change is problem, I just don’t believe it is THE problem. With tragic irony, many political leaders who believe that climate change is THE most important issue we face, also are vehemently opposed to nuclear energy, the only scalable zero-carbon footprint solution mankind possesses right now. And it is proven and has been in production for decades. France produces 70% of its electricity needs from nuclear power and has been an innovator in smaller, safer nuclear power plants.  Faced with choice of rolling blackouts, even maniacally green governments like California and Germany are suspending the decommissioning of their few remaining nuclear power plants. Reality sucks I guess.

Wrapping Up – My two cents

Zeihan argues that the era of globalization is ending what has been a golden age of plenty, reliability, and relative stability since the end of World War II. He predicts that everything is going to become more expensive and more difficult to obtain.  Only the United States and handful of others like Australia, France, New Zealand, Canada, and Mexico that have favorable geographies with access to homegrown food, energy and natural resources, will be able to weather the coming storm.

Some of the causes of the problem are already baked into the cake such as rapidly aging populations. However, the most important root cause is the choice by American leadership to retreat from its unique role as guarantor of free and open global trade. America has turned inward, choosing to change its social fabric to one that requires all decisions be filtered by race, gender and sexual identity. It’s no longer acceptable to have the meritocracy that created our greatness in the first place. I am all for defending legitimate civil rights, but must that include permitting men to compete in women’s sports? Or dumbing down school curriculum because academic achievement is somehow racist? Or choosing doctors and military commanders based on the race, gender and sexual identity rather who is best suited to the job? This is classic fourth turning moral decay. Forgetting what made you strong. You can be sure that our adversaries are watching this self-immolation with glee as they move in exactly the opposite direction.  Zeihan takes a frankly apocalyptic view about China’s future due its ageing demographic profile and low-quality manufacturing base. He asserts China is going to be a hellscape within a few decades and doubts whether it will even survive as a unitary state. I am not sure I agree with that.

As I discussed with my guest, former diplomat David Hunter, on my most recent podcast, the most important issue America faces is its declining military capability.  China already has a bigger navy than the U.S. Both China and Russia have deployed hypersonic missiles that travel at Mach 5 and can evade all our existing anti-missile defenses. The U.S. is just now starting to test hypersonic missile technology and it states we should be able to deploy them in a few years.  Really? I hope like hell we’ve got some secret technology the Pentagon is not talking about because a strategic military asymmetry like hypersonics would be unforgivable incompetence that encourages war sooner than later. 

For the time being, America is till the “indispensable country” and Zeihan rightly points out that we are blessed with incredible geography, resources and a history of adaptability and economic vitality that is unmatched in the world.  America is able to weather the great storm that is coming and come out the other side even stronger potentially. That assumes, however, that we can heal our internal divisions and avoid a cataclysmic war that escalates to the unthinkable nuclear scenario.  The possibility of that happening is dramatically higher than it was even two years ago.  Climate change, abortion and transgender rights won’t matter one lick in a nuclear war.  On the bright side, America has a history of correcting its imbalances.

So here comes the political stuff because there are good ideas and there are bad ideas. For better or worse, American government runs largely on a two-party political system. There are differences between the parties to be sure but, traditionally, there was much more ideological overlap than we see now. Most everyone was on the same page in terms of military readiness. On the same page with regard to public schools. On the same page about police support. On the same page with the biological definitions of a man and a women.  Now the divisions are deep and wide.

Right now, the most important thing our country can do is keep the Democrat party from power until they can expunge the radical socialist elements that are currently driving the bus. Not that the Republicans have all the answers, but nearly all of the Democrat policies are exactly wrong for our country. Dangerous even. Things like printing more money to tame inflation. Raising taxes in the midst of a recession.  Encouraging millions of illegal immigrants and drugs to stream across our southern border. Reducing our military readiness in favor even more unsustainable social spending.  And most egregiously, destroying our energy industry. It’s hard to believe supposedly smart experts would advocate these policies in the face of all the evidence of their counterproductivity.  It’s almost as if they are trying to weaken our country. Shame.

With an incompetent President whose foreign policy is possibly compromised by his family’s business dealings in Ukraine and China, the stakes cannot be higher.  Hopefully America votes to change direction this November again in 2024. Only then can we begin the hard job of unwinding the bad policy decisions we are making now. If we can do this, maybe we can forestall or at least mitigate the damage from of the unavoidable cycles of history. In the meantime, I would encourage you to read Peter Zeihan’s new book.  I don’t agree with all of his conclusions, but if he is even half right, we are in for some tough times. At least we have been forewarned.