Peter Zeihan: Mapping the Collapse of Globalization

This is why I laugh at people who complain about “subsidies” to renewable energy projects. They fail to realize how important our military spending is to keeping oil prices low and stable. And its never priced into the cost of oil, or an expense to petroleum companies.


All the more reason to push for renewables - No need to protect the Sun from piracy. :wink:

Just now Russia is busy destroying the Ukrainian electric utilities. Imagine a Ukraine with all the houses sporting solar roofs…

There are so many instances where distributed is better than central…

The Captain


Sure, but that’s because that area is deemed to be in America’s interest. In contrast, we don’t seem to care all that much about most of Africa, at least from a military perspective. America doesn’t spend a lot of resources keeping all trade routes safe, just the ones that matter to America. That’s not the definition of a global policeman.

The main reason why corporations support globalization is because American consumers want the benefits of globalization. Americans benefited from globalization with higher quality cars, cheaper electronics, and less expensive clothes. Ask your buddies if they would be willing to pay an extra $149.99 for an American-built iphone. What do you think they would say?

There is such a fuss being made about the rising prices caused by inflation. That would pale in comparison to the price increases resulting from protectionism that eliminates competition from foreign brands.

Look at the historical data.

Global trade was increasing rapidly since the first industrial revolution in the 19th century. It decline for obvious reasons after the two world wars and it took until the 1980s to regain the levels seen in 1900. In other words, international trade was increasing at a pretty rapid pace when America was only a regional power with a relatively modest navy. What does Zeihan say about the pace of globalization from 1850 to WWI?

Globalization appears to be an inevitable consequence of industrialization that is only disrupted by wars. America’s military dominance indirectly helped global trade by reducing the likelihood of global conflicts, but that’s about it.

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There is an interesting uTube video about the end (collapse) of the bronze age. It talks about trade not just in the Mediterranean but from Afghanistan to the British isles. Tin from Britain, lapis lazuli from Afghanistan, olive oil from the Middle East and so on.

1177 B.C.: When Civilization Collapsed | Eric Cline

o o o o o o

There was the ancient incense trade route route through Yemen in Biblical times.

The incense land trade from South Arabia to the Mediterranean flourished between roughly the 3rd century BC and the 2nd century AD

o o o o o o

Around the 15th century the Age of Discovery joined forces with limited liability joint stock corporations to start a new age of globalization dominated by the East India companies and other trading houses.

o o o o o o

Globalization is just trade writ large. We could be witnessing the collapse of the post WWII, Bretton Woods age of relative peace and abundant prosperity.

The Captain

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That industrialization helped accelerate it. For example, it allowed faster traversal of oceans, and going against river currents. But you still had piracy issues. However, as your graph shows, it really took off post Bretton Woods.

What the US Navy did was allow ANYONE (with or without a navy to protect their interests) to trade with anyone else. THAT NEVER HAPPENED BEFORE.

If you really want to know more, and what Zeihan thinks, you need to read his book.


There is little evidence that globalization is in long-term decline.

Again, globalization was advancing at a very rapid pace well before Bretton Woods so there is no reason to believe that a Bretton Woods navy is necessary for globalization.

Any acceleration of globalization is (IMO) more likely due to advances in technology. Giant mostly automated container ships, GPS/satellite navigation, more accurate tracking of storm systems, more efficient methods of financial transactions with foreign currency, have probably had a greater impact on the pace of globalization and maritime trade than the US navy.

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Globalization can collapse. It has before. Economists call the period from about 1870 to 1914 the First Globalization. WWI obviously blew a big hole in that. But globalization also caused a huge wealth disparity, and there was a backlash against immigrants and other nations, which in turn made trade tariffs popular in many nations, not just the US. Many countries went off the gold standard which made trade harder. Globalization was effectively ended until after the end of WWII when GATT was created and the dollar became the world’s reserve currency. From that time until now GATT and its successors have lowered tariffs and standardized trade.

Currently, we are experiencing a huge wealth disparity. There is a backlash against immigrants and other nations, and trade tariffs have become popular again. International trade agreements like the EU are straining at the seams and the TPP was DOA. There is also a hot war that hasn’t spread too far, but it isn’t helping. Many actors don’t want the dollar as the world’s reserve currency.

So yeah, globalization can totally fail. The world is a lot different now than in 1914, but a lot of the same pieces are in place.


And if you read Peter’s book he would tell you yes, it was accelerating before. And continued more so. And that the Navy had a big impact on that for reasons I’m tired of discussing in a forum. If you don’t believe me, read the book. His reasoning is solid.

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The only times globalization has failed since the first industrial revolution is during times of world war, major recessions, and global pandemics. Even those over the long-term have just been hiccups on what has otherwise been steady increases in international trade. Looks to me from the data that barring catastrophic events, globalization is an inherent tendency of human societies.

Just keep in mind that this isn’t physics, there is no experimental testing of Zeihan’s claims. Zeihan finds correlations and provides a rationale for why those correlations are causal. He spins a narrative that is essentially intelligent guessing. Much like Malthus prediction of global famine and Paul Ehrlich’s Population Bomb.

Globalization is not in decline. In 2021, global trade hit an historic high, up 13% from 2019, the year before the pandemic. We only think globalization is in decline because we have a very American-centric POV. America no longer dominates international trade. We now have formidable competitors and because of that we have had some well publicized negative impacts (as well as positive one’s that we pay less attention to). But the reality is that globalization has greatly reduced global poverty, particularly in Asia with Africa likely being the next big benefactor. The world benefits from international trade and the only alternative is an economic depression, so globalization is here to stay. America just has to adjust to now being one of several economic equals rather than the elephant in the room.

Technological advances continue to make international trade easier to do, most notably improvements in transportation, communication, and information processing. Technology is making the world smaller and more interconnected. Reversing globalization means trying to swim against an increasingly powerful current. Ain’t gonna happen for any significant length of time.

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Spot on!

But globalization has its problems.This time around globalization was joined by just in time inventory (just in time manufacturing) which made the system more efficient but also more fragile and the Covid pandemic broke the camel’s back. Another source of fragility is the outsourcing of strategic elements. We saw that with the Arab oil embargo in the 1970s and Germany is seeing it now with the gas shortages. This week the owner of the neighborhood laundromat complained that (natural) gas price has risen by 300%. That’s disruptive!

There is always tension between efficiency and fragility, you can see it in your portfolio as well as in global trade. When the world is at peace efficiency is high and tends to be built out to the limit until a butterfly somewhere wrecks the whole thing. Putin, Xi, and others don’t help.

The Captain


On the other hand there would probably be a lot fewer laundromats without the lower costs of washers and dryers resulting from globalization.

But that may be because we are not sufficiently interconnected. I would argue for example that Poland is more resilient to external threats, both military and economic, by being a member of the EU and NATO than if it were going it alone. I also think we would be in a much stronger position against China if we had joined the Trans Pacific Partnership.

It takes a lot bigger butterfly to disrupt the union of 50 states that is the USA than it would if we were 50 small independent nations.

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Not directly for the navy. Bretton Woods allowed for a liberalized economy, meaning western economies came off the gold standard. That allowed for a massive industrial build up where the economic cycle could repeat on different cycles throughout the global trading system. We gained the wealth for such a powerful navy.

The disagreement here is about cause and effect. My position is that the economic benefits of trade are so significant that countries will do whatever it takes to make trade happen. It is the desire for trade that causes the creation of navies and financial agreements like Bretton Woods, not the reverse.

In other words, I think Zeihan’s observations are accurate but he has the cause and effect wrong. The need for globalization to maintain economic growth is the main driver of international behavior. There are occasional backtracking caused by the megalomania of tyrants or pandemic-induced isolationism, but these are hiccups in the long-term economic trend of increasing interconnections. Sure, countries will modify some aspects to protect self-interest, but the overall tendency to greater globalization remains intact

Barring some extinction-threatening catastrophe I think this trend will continue for the foreseeable future.

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Just posted this on the inverted yield thread. There is a wrinkle in what the FED was doing in the 1930s worth noting on the first page or two concerning gold and the yield curve. Making the development or pressure for the US to get off the gold standard a technical and monetary move.