I am reading his book The Absent Superpower. You can get a lot of his ideas by watching this video. You can also see his intellectual style, which is certainly more confident than mine. He deals in strong pronouncements, and he does not worry much about establishing causality or conceding the plausibility of alternative hypotheses.
I view recent history and the near-term outlook as dominated by the four forces: increased resources devoted to education and health care (the New Commanding Heights); bifurcated marriage patterns; globalization; and computerization.
Note that a lot of economists’ bandwidth these days is focused on the computerization issue. For example, Tyler Cowen attended a conference of heavy hitters on the economic implications of artificial intelligence.
Zeihan igores those four forces in order to focus on energy markets and demographics. In the case of energy, he sees the shale revolution as a geopolitcal game-changer. Where I assume that “oil is oil,” so that the location of supply matters less than the overall match between supply and demand, he attaches great significance to the ability of the U.S. to match its own oil supply and demand. He sees this leading the United States to completely lose interest in global security and the international trading system.
Zeihan asserts that without our adult supervision, the world playground will erupt into wars: along Russia’s borders, in the Persian Gulf, and in Northeast Asia as China and Japan struggle over the sea lanes for oil in a world of energy supply disruptions.
In the case of demographics, he sees financial markets in terms of a simple life-cycle model of behavior: younger workers spend, older workers (40 – 65) save and take financial risks, and retired workers become risk averse. The Baby Boom generation has been in the older-worker phase, helping to drive up prices of risky assets throughout the world. But they are transitioning to retirement, which means they want to shift away from risky assets to low-risk assets.
Also important is the overall aging of the developed world, with the U.S. a bit of an exception. See Timothy Taylor on Asia. This is going to expose many countries to financial strife. The ratio of workers to dependents will be too low to support pensions systems.
Watch the video and/or read the book. I am curious what you think.
He sees this leading the United States to completely lose interest in global security and the international trading system.
Judging by the Trump administration you sure could have fooled me this one as he seems dead set to start a war with North Korea and tearing up the nuclear deal. Not exactly withdrawing from the world IMO. Everytime I see some foreign policy withdraw it seems like we keep getting drawn back in.
as China and Japan struggle over the sea lanes for oil in a world of energy supply disruptions.
I do see China getting themselves stuck in stupid invasion or war but not with Japan. I see more of failed investments or bankruptcy in South America or Africa and China reacts to protect investments. If I had to bet I placed it on Valenzuela but it appears China is avoiding that nation internal battle.
In the case of demographics,
It seems as the global economy continues to ration working class wages, the birth rates will continue to fall. So it appears the richer we are the less we can afford children.
I doubt the Chinese are going to stretch to military action just to collect debts. Not only does the world work differntly now, but a bankruptcy is just to such a bad thing for the Chinese.
If (when) debtor country X goes bankrupt, then many Chinese people (probably the whole tax base) will lose some wealth, but the powerful Chinese people who lent to country X in the first place will already have profitted mightily from whatever commerce was done with the borrowed money.
Expect a sustained pattern over the next few generations where rich Chinese transfer money to rich foreginers at the expense of poor Chinese (while of course skimming off their own cut).
I really enjoyed Mr. Zeihan’s talk. Thanks for the link.
I think Mr. Zeihan’s emphasis on geography, agriculture and natural resources are a better indicator of global affairs than consumer discretionary items such as education and (to a large extent) medical care. So the commanding heights are irrelevant in this context. Marriage patterns are important, and he’s included it partially under the demography rubric. The other items, AI and globalization, are important, but perhaps not most important.
I am generally skeptical of predictions of imminent catastrophe, and accordingly I doubt Mr. Zeihan’s conclusions. Yes, if everything goes wrong then we’ll end up with his result, but people have a way of muddling through for a lot longer than one thinks.
The reshoring of manufacturing to the US (partly because of AI) is significant and will tend to undermine globalization. But Mr. Zeihan omits the fact that, even diminished, global trade makes us richer. I don’t think the US will just sit by and watch China disintegrate and drop out of global trading networks.
Also, China doesn’t seem all that interested in dropping out. The One Belt, One Road project is nothing if not a commitment to global trade (if only to ship oil from the Middle East). Though it can also facilitate trade with Europe.
Bottom line: I think Mr. Zeihan is right about the trend. I’m skeptical about the degree and the timeframe.
Aging in Asia is a huge driver going forward. Can a society sustain such low TFR? Their better positioned to do so then us, but that’s still a fundamental change we’ve never seen before.
I once took the UN fertility statistics and other mainstream growth metrics *adjusted low IQ country growth to be more realistic) and found that world poverty would probably reach its minimum by 2050, though it wouldn’t be that much lower then today. Primarily because of economic growth in China and other Asian countries that used to be communist outpacing population growth in Africa and elsewhere. However, at 2050 you get to an inflection point where all those Asians are very old and there are no young ones too take their place.
Does IQ do much for your productivity at age 75? How dynamic is a society of geezers? The poverty picture got worse after 2050, provided we don’t get silly in categorizing poverty (making $5 per day instead of $1 a day is still poverty).
Aging in Asia is a huge driver going forward. Can a society sustain such low TFR? Their better positioned to do so then us, but that’s still a fundamental change we’ve never seen before.
Why are they better positioned than us on low TFR especially since the US is slightly below replacement level and there is a net Immigration total. (I am not arguing Immigration, just noting it.) So the US will not have a falling population unless something happens to TFR or Immigration. It seems the US is much better shape here.
And Japan is already falling population and has a flat GDP and I am not sure how their economy turns. The rest of the Asian Tigers are 10 – 15 years nearing population decreases.
Only people above a certain IQ threshold add to the economy. Most immigrants in the US are net drains rather then net assets.
Also, when there are hard times it helps to have the kind of social cohesion Japan has. Think of how they responded to their tsunami/meltdown versus what happened in New Orleans with Katrina.
Anyway, point is low Asian TFR means really bad news for global IQ later this century.
I posted my own response to Zeihan’s video here:
https://trotskyschildren.blogspot.com/2017/10/new-world-disorder.html
Boy, I’ll say. I watched the video and, found his presentation to be bombastic and overplayed: very much not your style. Also, he really has it out for Peter Navarro and Lighthizer, and expressed as much in a quite immature fashion. The 6 minutes bit about US politics starting at 21 minutes was just woefully off base.
In general, much of his analysis depends on a few “hard” measures that I don’t think matter nearly as much as they did a generation ago, and not as much as the other major technological and economic shifts.
For example, he mentions the extraordinary amount of US naval power, especially when compared to the rest of the world. But we already know the two major threats to that supremacy coming out of China.
First, the Chinese seem intent on building up their own blue water navy and connecting their “string of pearls”, and they actually have the local industrial capacity and hands-on know-how to get there if they have the will and resources – which all evidence seems to indicate they do.
As usual, the Chinese will be able to build a carrier, fleet, or strike group that is maybe only 50% as good in many respects (at least, for now), but at 10 times the speed and 10% of the cost. US “lack of interest” cannot be assumed to be some kind of static factor, and will likely rebound in reaction and response to events, in an attempt to balance that growing power, perhaps in mild alliance with some China-wary neighbors. Remember, even the entire US force has under 300 combat ships.
Second, you know, carriers are huge and slow. Actually, they can be surprisingly quite fast, for ships. But the fastest ship is a snail compared to the slowest missile. And the Chinese (and Russians, and others), have been hard at work developing long range ship killers. Of course there is an arms race in development, and US ships have some countermeasures for this problem and better ones are always in development. But in the long-run, the missiles probably have the edge. Your super power-projection platform isn’t so super when it’s a sitting duck.
As has been the case for two generations now, what keeps that kind of thing from happening is the fear of escalation into full scale warfare with nuclear weapons in play, and each side has to perform a very delicate, but also probing and mild provocative, dance to pursue interests and test lines without crossing them.
Relatedly, how important is demographics in the modern age to trade and security as things move in an increasingly capital-intensive direction. The Netherlands are the #2 food exporter in the world. That “better than the rest of the world combined” US Navy is manned by less 350K people, with a small fraction of that deployed on ships at any time, which is the “military age male population” of, what, a few dozen city blocks in a typical Chinese megacity?
We are definitely in an era of rapid change, but while Zeihan is right to insist on that, but the factors he is using for analysis are changing too, in character and in importance, and he doesn’t seem to be taking that into account.
very thought provoking, thanks for posting. I just went to the library to get “Accidental Superpower;” I assume that it will take a more detailed analytical approach than the talk did; I’ll let you know.