CHAPTER 9

Partners

Who’s Who in the Disorder

In my speaking engagements, I essentially present the first eight chapters of this book in the first twenty minutes or so and then spend the rest of my time addressing the future from the point of view of my respective audiences. In the aftermath, the Q&A sessions can take us anywhere. What about Azerbaijan’s efforts to resist Russia? What is the future of Dubai’s financial sector? Will the Brazilian cotton industry survive? What parts of China’s manufacturing base are most viable? Will wheat production in Saskatchewan be able to find new markets? What are Sweden’s prospects in a post-euro world? What do you think of India? Will the aging state of U.S. infrastructure hobble American power? The list goes on. And on.

And on.¹

In other words, I’m acutely aware that it’s a great big mess of a world out there, filled to overflowing with complex interactions. One of the greatest challenges in crafting this book—not to mention trying to forecast out to 2030(!)—was not so much deciding who and what to cover, but instead who and what to leave out. Everyone has a story, and everyone’s story impacts someone else’s, but I couldn’t tell them all. So in the remainder of this book I will endeavor to hit what I see as the key points of the future:

• The countries that will be most willing, whether due to opportunity or desperation, to put their mark on the world;

• The countries that will be lucky enough to find themselves in America’s inner circle, and so will continue to benefit in some way from the American market access and physical protection that will be increasingly absent for everyone else;

• And, because this is ultimately a book about the reality, consequences, and use of American power, the major developments across the international system that are most likely to impact the lives of Americans. Note the diction: impact, not threaten. There are multiple pros and cons for the Americans within each of these developments, which we’ll address in the final five chapters.

In this newly Darwinian, Hobbesian world there are any number of ways of classifying and evaluating countries. As a starting point, I think it is best to give you a map of the future so you can see for yourself what the rough contours will look like. I had considered spamming you with a variety of maps that presented the likelihood of demographic collapse versus growth, of famine versus plenty, or military disaster versus success. It would have been a lot of maps. Instead I’m going to start by giving you the result of my findings, and then in following chapters explore the dynamic factors and countries that make the conclusions possible.

Without further ado, here is the global stability map of the future, circa 2020–30:

The world can be broken into six categories:

1. State failure: Syria, Greece, Libya, Turkmenistan, Kyrgyzstan, Yemen, etc. These countries do not have what they need to survive outside the parameters of the world as it has been for the past few years. Maybe the Cold War gave them protection. Maybe they are economically hopeless without Bretton Woods. Maybe their national identities never really coalesced, making them vulnerable under almost any circumstances. Maybe some regional power just hasn’t gotten around to swallowing them up yet. Regardless of the cause, as modern states they won’t be with us much longer.
2. Decentralization: Russia, China, Bolivia, Nigeria, Cameroon, Sudan, Ethiopia, etc. Like the first category, these states do not have what they need to survive in the new era. Sufficient food, energy, raw materials, capital, markets, security—most lack at least three. Making matters worse, they won’t have any allies, and they’ll lack the capacity to even attempt to secure their needs in the long run. However, the pressures facing them are not quite state-destroying. Central government will hold, if only just. Life will be painful. But at least it will still be life.
3. Degraded: Brazil, India, Canada, Hungary, Saudi Arabia, Algeria, etc. These states are missing some of the basic building blocks of modern society: popular buy-in, government legitimacy, sufficient food or energy or markets. But what they do have is the capacity to partially address some of their challenges. They will fail at most of these attempts, but it won’t all be bad. Most important, the pressures they are under—while multivectored and structural—will not hit them with critical force. Central authority in these countries will remain fairly strong, even as most everything else about the country weakens.
4. Steady state: United Kingdom, France, Denmark, Sweden, Peru, Philippines, etc. The countries in this group will probably be able to hold on to the level of stability they currently enjoy. But stability isn’t the same thing as stasis; all of these countries are going to experience change and will have to find new ways to operate. What really sets this group apart from the earlier categories is that they will have the capacity not just to sustain themselves but also to secure what they need. Some will be able to muddle through on their own. Some will be able to keep or find some friends. Most will be able to reach what they need one way or another.
5. Rising stars: United States, Australia, Argentina, Angola, Turkey, Indonesia, Uzbekistan, etc. These are the masters of the chaos, the durable countries and systems that will be able to thrive under the harshest international circumstances the new world can throw at them. Most of these have exceptional geographies to begin with, and those that do not will fall in with a certain superpower that has more than enough to share.
6. Aggressive powers: Germany, Japan, Uzbekistan, Saudi Arabia, Russia, Turkey, Angola. Each country in this category also exists in one of the five previous. What makes the members of this overlapping category distinctive is that their attempts to grapple with the emerging disorder will lead them to make bold—or desperate—forays beyond their own borders. They will challenge their regional status quos. They will invade their neighbors. They will attempt to fashion new alliance structures, new political networks, new trading systems. Win or lose, these countries will be loud. They will be the newsmakers of the next twenty or so years. We’ll address all of them in the next few chapters.

Partners: American Allies in the New Era

In the chaos to come, the United States will be the friend to have, for many reasons. Here are the top four:

• Market. In times of global stability, the United States already boasts a market larger than any other by a factor of three. As the global situation deteriorates, the U.S. market will tower above all others in its stability, size, and strength. It will also be among the few that not only boast the demographic and financial capabilities to grow, but also possess the security and stability necessary to grow continuously. The United States will be one of only a scant handful of developed countries with substantial populations of citizens in their twenties and thirties, making it the state to experience consumption-led growth.

• Capital. As the country with the greatest river network, the United States has a capital supply that is independent of its demographics. American capital, however, will not even be limited to its ample domestic sources. The relative stability of the American system will make it a magnet for capital fleeing less stable lands. In times of global strength like the 1990s, some $5 trillion—over 6 percent of American GDP over the decade—fled to the United States. Just imagine the sorts of volumes that will flee to the United States in times of global mass disruption. In a world of rapidly shrinking volumes of capital, the Americans will hold the lion’s share.

• Security. While other countries will be forced to reallocate scarce resources to secure their defensive interests at home and their economic interests abroad, the United States’ geographic position and embedded, cordial relations with Canada and Mexico will spare the Americans that onerous cost. In fact, American defense spending may actually decrease while available American forces increase. Part of the Bretton Woods deal is that the Americans would patrol the seas for all and defend the territory of all. That will no longer hold. This raises the distinct possibility that the United States’ military posture will return to the traditional role it played between 1898 and 1945: almost no foreign bases, but a posture of permanent offense. The United States will once again be a country with a global military, but one free of global interests. This will not only ensure that potentially hostile powers get nowhere near American shores, but will also enable the Americans to intervene where and when and how they wish.

• Trade. While the Americans are extraordinarily unlikely to provide freedom of the seas for the world at large, they will still have a navy that is triple the power of the combined world in terms of its ability to project power. That is actually more in favor of the Americans than it sounds: At the beginning of this age, the United States will have twelve fully deployable supercarriers against the combined fleet of the rest of the world’s two, and those two will be British and French. Nearly every other navy on the planet is limited to coastal and support vessels. At the beginning of this age, only the Americans have aircraft that can be based at home and yet bomb any location on the planet. That means that only the Americans will have the capacity to guarantee—or more importantly, deny—shipments to or from any coast on the planet at any time. Any ocean-borne trade that is to be sustainable will require—at a minimum—American disinterest.

From almost any angle, the United States will be a one-stop shop for a country that wants to succeed in the newly Darwinian world, and the enmity of the Americans will be something to avoid at all costs. The process of securing American friendship in the new world will be radically different from the old. Instead of the Americans working assiduously and sacrificing to build a broad alliance network, countries will have to petition the Americans on a bilateral basis to get the market access, capital, technology, or protection that they will so desperately need. The trick for would-be allies will be to find something shiny that will catch American attention.

North America: The Inner Circle

In 2013 the United States exported roughly $1.6 trillion in goods and $680 billion in services, while importing $2.3 trillion in goods and $450 billion in services. That sounds like a lot—it is a lot—but it isn’t as bad as it seems at first glance. The American economy settles in at a very non-dainty $16 trillion; its total trade exposure in absolute terms may be the world’s largest, but in relative terms it is below that of everyone but Brazil and South Sudan—even Afghanistan is more internationally integrated. Additionally, what exposure the Americans have is remarkably local: The United States’ top two trading partners for decades have been Canada and Mexico,2 accounting for one-third—some $1.15 trillion—of the total U.S. trade portfolio. While NAFTA is by its very definition a free trade agreement, it was negotiated separately from the global free trade order, and is legally and administratively disconnected from the Bretton Woods system, complete with its own adjudication mechanism that exists solely for the NAFTA signatories. The United States doesn’t even need to patrol the oceans to keep the trade open, since nearly all of it occurs either in territorial waters, the Gulf of Mexico, or via land routes. Bilateral American-Canadian trade on the Ambassador Bridge, which links Detroit, Michigan, and Windsor, Ontario, is by itself of greater volume than the total combined trade with all but four of America’s other trading partners. NAFTA and its CAFTA extension, which brings in the Central American states of Honduras, Nicaragua, Guatemala, El Salvador, Costa Rica, and the Dominican Republic, are no-brainers for the Americans. All are already firmly integrated into the American economic system independently of Bretton Woods. In essence, they are America’s backyard. The Americans can—easily—have their local trade without lifting a finger to support global trade.

Cuba: The Prodigal Returns

The notable outlier from the NAFTA/CAFTA system is of course Cuba. As a bastion of anti-Americanism since its revolution in 1959, Cuba has been the plank in the eye of the American strategic position in the Western Hemisphere for decades. This will not last, and not simply because Fidel Castro will (probably) not live much longer. Cuba’s problem is primarily economic. It doesn’t collaborate with the vibrant economic giant at its doorstep and so is dependent upon limited trade with the wider world. This is tolerable so long as the world as a whole lives by the rules of free trade. Remove that characteristic, however, and Cuba, which lacks even a merchant marine, is all on its own.

The Americans are certain to underscore that status, because Cuba’s ability to vex the United States comes from its position at the mouth of the Gulf of Mexico. Capable military forces stationed on the island would be able to pinch closed the Florida and Yucatán Straits, blocking most trade that would have entered or exited the greater Mississippi system. However, “capable” military forces are not ones that could naturally originate on an island with as few resources as Cuba. The danger to the United States from Cuba isn’t from Cuba, but from larger powers that would ally with Cuba. The Americans were willing to risk nuclear war during the 1962 Cuban Missile Crisis for just this reason. With the end of the Cold War there wasn’t a hostile blue-water navy anywhere in the world, so Cuba fell into strategic irrelevance and Americans stopped paying it any attention. Fast-forward just a few years to a more mercantilist world, however, and the Americans are unlikely to tolerate a hostile country on such a strategically positioned chunk of land so close to their internal trade ways. Whether it is because Havana wants to avoid destitution or because the Americans force the issue, Cuba is about to be folded into the American system.

Colombia and Venezuela: Wealth or Ego?

Don’t think of South America as a single entity, or even a single landmass. The combination of the mountains of the Andes and the tropics of the Amazon divides the continent into pieces. The northern tier of states—Colombia and Venezuela—are for all practical purposes in another world. Only the most remote and low-quality of roads link Colombia and Venezuela to their own tropical interiors, much less span the thousand-plus miles of the Amazon Basin to the developed portions of Brazil. The Venezuelan rail network does not even connect to another country. Nearly all of the populated centers of both countries access the wider world by looking north to the Caribbean rather than south to Brazil or west/east to each other. Integration with each other would be difficult. Integration to the south is simply ludicrous. They are, in essence, part of the United States’ extended backyard, and integration with the Americans is the only natural economic partnership they can hope for.

Colombia has accepted this fate—not a lightly made decision considering that under Teddy Roosevelt the Americans sponsored a revolution in Colombia, helping carve the country of Panama out of Colombian territory. Bogotá has partnered repeatedly with the Americans on issues of security importance to Washington, namely efforts to reduce cocaine and coca flows out of the Colombian highlands, and they have achieved a bilateral free trade agreement.

Venezuela has not. Ideological opposition has landed Caracas with one of the worst bilateral relationships with Washington of anywhere on earth. This need not be the case. But since Venezuela does not actually border the United States and it is not strategically located like Cuba, the Americans will not make the decision for the Venezuelans. If Venezuela is to be anything other than a dispossessed country with a crushingly impoverished population, it will need to start repairing relations with the United States before it is too late. It isn’t a pretty choice, but unlike most countries in the coming era, at least Venezuela has the option of making a choice about its future. But time is running out, and it all comes down to shale.

Venezuelan crude is so viscous and thick with contaminants that only a handful of refineries anywhere in the world can process the stuff. Almost all of those refineries are on the Gulf Coast of the United States.

Hugo Chávez, who ruled as Venezuela’s president from 1999 until his death in 2013, sought to reduce his country’s economic connections to the United States in general and those refineries in specific. His solution was to sell his crude to China and subsidize the Chinese for the huge additional transport costs as well as compensate them for the lower volume of products their refineries could produce from crude grades they were not designed to handle. The Chinese happily accepted the subsidies, picked up the crude from the Venezuelans, sailed it north to the Gulf of Mexico, sold it to the Americans, and pocketed the difference.

This would be little more than an amusing anecdote about the opportunity costs of blind ideology, but then there is shale. Most shale oil isn’t just sweet and light, it is ultra-sweet and ultra-light, and so is remarkably easy to refine into light distilled products, like gasoline. Unless Venezuela can find a means of repairing its relationship with Washington, soon America’s Gulf Coast refineries will be retooled to run high-quality shale oil rather than low-quality Venezuelan oil and Venezuela will become the first energy producer in history to not have a market.

Europe: Cherry-Picking

To be blunt, from a strategic and economic point of view, the United States does not care much for mainland Europe. Leaving aside the American views of European distaste for American strategic policy and culture, Europe is a hard place to do business. It is overbureaucratized, burdened with heavy layers of regulation at the national and EU level, and should it—against all odds—coalesce into a truly unified entity, it would be a match for American power. But that doesn’t mean that the Americans will ignore it completely. It comes down to simple size. Even in the ashes of World War II, the Europeans were collectively the world’s second largest economy; so even in the coming economic shipwreck there will be any number of European markets of interest. The Americans just won’t want to have to deal with those markets directly.

Luckily for the Americans, they don’t have to. Denmark and the Netherlands are the quintessential middlemen of Europe. The Dutch own the lower reaches of the Rhine, Europe’s richest river, and occupy a strategic spot midway between France, Germany, and the United Kingdom. As such, they have been consummate dealmakers of European history since the time of the Spanish Empire. For their part, the Danes command the opening to the Baltic Sea, and so quite literally can decide who within can access the outside world.

Both the Dutch and the Danes control access to massive trade arteries. Both the Dutch and the Danes occupy extraordinarily strategic locations. Both the Dutch and the Danes are distrustful (to put it mildly) that some singular power might arise from the North European Plain. Both the Dutch and the Danes are exceedingly pro-American. And both the Dutch and the Danes will be among the most attractive allies the Americans will have.

There is one broader lesson for the world that will emerge from the likely Danish-American partnership. Denmark’s geopolitical expertise in managing the Baltic Sea’s trade has been translated over the years into its nurturing of Maersk, one of the world’s major shipping companies. In a world in which shipping volumes collapse along with world trade and supply chains, there may well be room for only one major player in that industry. If the Danes can keep themselves on America’s short list of allies, that one major player certainly won’t be Arab or Chinese.

The United Kingdom faces the best and worst of all worlds. On the upside, as the European Union’s financial problems deepen, an ever-rising volume of enterprising Europeans are attempting to hide an ever-rising volume of capital from the claws of their governments’ tax collectors. London’s Square Mile—the greatest density of banking activity in the world—has accepted these monies with open arms, building the UK financial world into a global powerhouse and the kingdom’s most dynamic economic sector. As the EU descends into depression and dissolution, that flow of capital—and London’s fortunes—will only fatten.

Now for the downside. This huge inflow of capital already puts ever stronger upward pressure on the pound versus the euro. As the pound rises, every other economic sector in the United Kingdom—manufacturing, agriculture, shipping, steel, mining, everything—becomes ever less competitive. As the new world unfolds, the United Kingdom will be able to feast on Europe’s bones, but its own nonfinancial economy will shrivel on the vine. Between a strong currency, an aging demography, and an ever more expensive social welfare state that is already well beyond the kingdom’s economic means, the United Kingdom’s very existence as a modern industrial economy is almost over. The entire country is becoming reduced to little more than a (admittedly huge) financial center.

Yet the Americans are still interested. There is no country in Europe more terrified by the concept of a united Europe than the United Kingdom, and no country with more expertise and experience in preventing a united Europe from coming about. This is something the Brits will apply their substantial energies to regardless of what the Americans do, and those energies now have a characteristic that cannot help but grab American attention: They’re about to launch two supercarriers.

And never forget that Great Britain is an island. The cost of maintaining the United Kingdom’s independence remains minimal, and London’s ability to throw monkey wrenches of all sorts into Continental affairs remains legion.

Asia: Free Trade in Miniature

Thailand is in many ways America’s favorite ally. The Thais occupy an interesting piece of real estate: a coastal bowl valley on a fantastically insulated bay adjacent to an open plateau, all surrounded by jungle mountains so impregnable that even after seventy years of Bretton Woods only coastal rail corridors lead out of the country. That protection has allowed the Thais to develop with a minimum of interference from outside powers regardless of era, enabling them to hold on to their independence even at the height of the European imperial age. Thailand’s mix of geographies grant it a capital-intensive, high-value-added industrial-technocratic society around its Bangkok core, but also a more agrarian highland interior that benefits from a modest amount of raw materials. It isn’t simply mainland Asia’s most secure state and best equipped to protect its own borders and interests, it is also the only one that can interface with the outside world on its own terms. Even better, perennial political discord between the Bangkok core and the inland plateau all but guarantees that Thailand will never pose a military threat to its neighbors. It is the perfect ally: It doesn’t need U.S. troops stationed on its soil, it doesn’t need much economic help, and it doesn’t generate much heartburn. It is also a damnably useful friend due to its strategic position between India, China, and the Southeast Asian trade lanes. Additionally, Bangkok’s extensive experience in dealing with its somewhat squirrelly neighborhood means it can even offer the Americans extensive security cooperation as a sweetener to any alliance deal.

One surprising potential partner is Myanmar, a country that has been on America’s blacklist for the past generation. Myanmar has three things going for it. First, it has moderate volumes of a wide array of natural resources from oil and natural gas to zinc and copper to hydropower and timber. As it is right next door to Thailand, the synergies are many and obvious. Second, Myanmar’s Irrawaddy River is the only river in the region that is navigable for any reasonable length. If there is a part of the region that cannot just rapidly develop, but start to bootstrap its own economy, it is Myanmar.

Third, the Myanmarese have a streak of paranoid mistrust of their more powerful neighbors. Throughout the 1990s and 2000s, this led to a de facto alliance with China in the face of Western disapproval of Myanmar’s choice of political management system (i.e., military dictatorship). But in the early 2010s, the Chinese started treating Myanmar as a province, and such perceived intrusions into internal Myanmarese business resonated so poorly that as of 2014 the Myanmar-Chinese relationship has imploded. The result is a lurching democratization process in order to facilitate a strategic opening to the very Western countries that the government so distrusted for so long. You can count on the Myanmarese not to trust their larger neighbors. Those larger neighbors—India and China—are precisely the sort of would-be regional hegemons that the Americans would prefer to keep locked down. The mere continuing existence of Myanmar, regardless of the flavor of the local government, achieves that all by itself.

Taiwan and South Korea are not so clear-cut. Strategically, they are absolutely partners the Americans want. The two countries are smashed between the Japanese and Chinese spheres of influence, incredibly competent in managing their own defense, and could go nuclear over a long weekend if they were particularly stressed.3 But keeping them in America’s circle of allies will not come cheap. Both countries import nearly all of the energy and raw materials they use, and their markets are too small to support the world-class industrial base they have developed under the Bretton Woods regime. Keeping those economies alive and relevant would require the Americans to maintain on-land military footprints in East Asia, and to continue, at least in part, with the ocean-patrolling and trade-protecting activities that they would so like to get out of. For instance, just these two small countries require twenty supertankers of crude per month. That would force the Americans to convoy tankers from at least Southeast Asia, and maybe even the Persian Gulf, as well as maintain transpacific trade access so that Korean and Taiwanese goods can be sold into the American market. These two traditional allies will be the litmus test for just how far the Americans are willing to go to support allies in the new era.

Which brings us to Singapore. As Singapore sits upon the world’s busiest trade and energy transport artery, it is difficult to imagine a country that gained more from the United States’ forcing of free trade upon the world—or to imagine a country that will suffer more from its removal. Singapore has greater trade and energy throughput than any other location on the planet, the flows it manages form global benchmarks, and its considerable technocratic-industrial base is funded almost entirely from its trade facilitation profits. Simply put, Singapore is free trade in physical form. Without a global trade order, without the Americans protecting trade flows between East Asia and Europe and energy flows between East Asia and the Middle East, Singapore has nothing… except a damnably strategic piece of land. If there is to be any trade between East Asia and Europe, or any East Asian purchases of Middle Eastern energy, then Singapore is the place that would enable the Americans to short-circuit any East Asian rival at any time without firing a shot. But this makes Singapore a strategic ally, not an economic one. Bereft of American commitment to patrol much beyond the Strait of Malacca itself, Singapore’s economic fortunes will need to be recast in a far narrower—and more local—net.

American involvement with Myanmar, Thailand, and Singapore raises potential solutions to the economic problem raised by America’s possible interest in Taiwan and Korea. Those solutions are Australia and New Zealand. Between them they are low-to mid-cost reliable producers of nearly every significant industrial and agricultural commodity under the sun: oil, natural gas, coal, uranium, aluminum, wheat, fruits, vegetables, dairy, beef, and lamb. There is no more perfect mating to the resource-poor and hungry states of Taiwan and Korea than the Anglos of Australasia.

While a commitment to keep trade lanes to the Middle East might be more than the Americans are interested in, commitment to keep the far shorter and less fraught lines to political and cultural mates in Australia and New Zealand would be comparatively simple. The pair are also so physically removed from the Asian mainland that the defense commitment required to maintain their sovereignty would be minimal. American involvement in Australasia would also solve—at least partly—Singapore’s problem. A web of trade among the United States, Korea, Taiwan, Myanmar, Thailand, Australia, and New Zealand would put Singapore smack in the middle. In fact, in the middle along with Singapore would be its current economic partners: the Philippines, Malaysia, Indonesia, and Vietnam.

All four of those Southeast Asian countries will never be able to project meaningful amounts of power on the water. The first three are archipelagoes, but so disassociated across distance that they cannot develop into a powerful empire as Japan did, or even maintain a navy that might more than marginally threaten their neighbors. The fourth, Vietnam, has its northern and southern populations so separated by distance and geography that simply solidifying internal integrity is a century-long process that the Vietnamese are not even halfway through. These weaknesses also create a very peculiar demographic geography. All of the countries sport only lightly populated hinterlands, instead being extremely urbanized with very dense population centers packed with people trying to carve out a better life for themselves than is possible in tropical agriculture.