Figure 5.1: Foreign-born population and percentage of total population for the United States (1850–2010) — Figure 5.1 Foreign-born population and percentage of total population for the United States (1850–2010)

Some have already decided that a wall between the United States and Mexico would be a disaster. Yet, something interesting has happened that may have escaped their attention. Mexico’s economy has become very competitive. Wages in Mexico are substantially lower than in China now. Quality control in Mexico is US standard and deeply entwined in the United States’ supply chains. As a result, Mexicans are no longer moving north, because there are good jobs at home. If anything, US business leaders are moving south, shifting operations into this competitive location. Similarly, China does not see Mexico as a threat, more as an investment opportunity, as it is now upgrading Mexican infrastructure, including airports, ports and rail links.

European economies are profoundly affected by immigration flows. The strife in the Middle East and the lure of European life have together attracted war, economic and political migrants. Europeans are divided on the issue. Some leaders want freedom of entry for all refugees and not only for moral reasons. Europe has an ageing population and needs the infusion of youth. Others feel Europe’s slow growth and limited job creation capacity will leave such immigrants without resources and opportunities while threatening the lives and livelihoods of existing citizens.

For the United States and Europe alike, the question comes down to the two cardinal points on the Kythera: Infrastructure and Isolation. They either embrace the opportunities created by migrant flows or they put up walls against them.

Resource infrastructure

Access to raw materials such as water, protein and energy continue to drive geopolitics because they shape the behaviour of nations and migrants alike. Even in an era of unprecedented technological advancements, these resources still matter. China, for example, lacks enough water and arable land to feed itself. It has 20 per cent of the world’s population but only 7 per cent of the water. The problem is the Heihe–Tengchong Line.²⁸ West of this line is 57 per cent of China by area, but only 6 per cent of the population. East of the line is 43 per cent of the area, but 94 per cent of the population. Even after 80 years, the area west of the line remains underdeveloped and poor compared to the east. Much of this is desert. This is why water provenance really matters. Despite energy costs falling in the long-term forecast,²⁹ desalination cannot yet provide water supplies to the hinterland of China. This is because the process needs a plentiful supply of seawater plus an ability to dispose of heavily polluted residues without causing environmental damage. China’s leaders understand it can’t have Western standards of living without an increase in water consumption. Here’s the problem. Only 2.5 per cent of all the water on the planet is fresh water and, of this, 2 per cent is frozen in glaciers. This is illustrated in Table 5.1.³⁰

Table 5.1 World water reserves

Water source	Water volume, in cubic miles	Water volume, in cubic kilometres	Percent of fresh water	Percent of total water
Oceans, seas, and bays	321,000,000	1,338,000,000	–	96.54
Ice caps, glaciers, and permanent snow	5,773,000	24,064,000	68.7	1.74
Groundwater	5,614,000	23,400,000	–	1.69
Fresh	2,526,000	10,530,000	30.1	0.76
Saline	3,088,000	12,870,000	–	0.93
Soil moisture	3,959	16,500	0.05	0.001
Ground ice and permafrost	71,970	300,000	0.86	0.022
Lakes	42,320	176,400	–	0.013
Fresh	21,830	91,000	0.26	0.007
Saline	20,490	85,400	–	0.006
Atmosphere	3,095	12,900	0.04	0.001
Swamp water	2,752	11,470	0.03	0.0008
Rivers	509	2,120	0.006	0.0002
Biological water	269	1,120	0.003	0.0001

Source: Gleick, P H (ed) (1993) Water in Crisis: A guide to the world’s fresh water resources, Igor Shiklomanov’s chapter ‘World fresh water resources’, Table 2.1, by permission of Oxford University Press, USA

China is not alone when it comes to water problems. The Middle East, India, Africa and even the United States suffer from a lack of water. This is one reason leaders worldwide are focused on solutions that lessen the reliance on water. These include growing methods that require less of it and more efficient harvesting.

Environment in its widest sense

China’s economic success has also created new problems. It lost 6.2 per cent of its farmland between 1997 and 2008, according to a report by the United Nations’ Food and Agriculture Organization and the OECD.³¹ In an era of spiralling property prices, local governments are incentivized to sell agricultural land to more profitable real-estate developments. This trend, combined with the fast transition to manufacturing, has resulted in so much environmental degradation that China’s leaders have now made it a top priority. At the start of President Ji Xinping’s second term, at the 19th Party Congress in 2017, he announced that the nation is now ‘at war’ with pollution.³²

No discussion of the world’s geography and infrastructure is complete without some reference to the environment. To date, we have defined the world environment too narrowly. If the environment is to be saved, there needs to be civil dialogue. The ultimate environmental catastrophe might be not global warming but conflict. Leaders might ask if they are paying more attention to plastic waste than the possibility of apocalyptic military events. Both might be important.

Protein

This is one reason why China is especially focused on the freedom of the seas. It sees a world in which protein is in short supply. The Washington Post writes:³³ ‘China’s per capita fish consumption was estimated by the Food and Agriculture Organization at nearly 80 pounds in 2010, nearly double the global average, and is growing by roughly 8 percent a year.’ This helps explain the incidents between China and its neighbours in the South China Sea, and is one reason why China is committed to the South China Sea. ‘Fish, the overlooked destabilizer in the South China Sea’, as one research group put it.³⁴

Pork is also important to China. This is the single most important food item for Chinese households. In recent years, the price of pork has risen by as much as 300 per cent in a single year. So, China is focused on acquiring not only more pork but better pork-growing know-how. That is why one of the largest acquisitions China has announced was the 2013 deal in which the Chinese giant Shuanghui International acquired US company Smithfield Foods.³⁵ Smithfield processes 27 million pigs, producing over six billion pounds of pork per annum. It owns the world’s largest slaughterhouse and meat-processing plant. It was acquired at a premium of 30 per cent to its market price, which was, at the time, the largest Chinese acquisition of a US company ever.

Energy and the end of oil

China also lacks energy resources, which is another reason for the physical and diplomatic links into the Middle East – although, as we’ll see, even those oil producers are moving away from oil. Energy resources play a large part in understanding geography. Nations that depend on oil for their income have seen it dramatically damaged by falling oil prices. The Kingdom of Saudi Arabia (KSA), Russia, Norway, Nigeria and Iran all saw their budgets damaged by lower revenues. This coincided with a backdrop of rising costs and higher inflation as government subsidies fell away. Many in the tech world anticipate that alternative energy advancements may reduce the value of a barrel of oil to historically low levels over time.

The KSA has changed its leadership in response to the cash crunch caused by a falling oil price. It has skipped several generations to empower the new Crown Prince, Mohammed bin Salman (or MBS). He has recognized that the Kingdom can no longer afford to provide the traditional subsidies for housing, petrol and food. Saudi is embarking on radical reforms to diversify its economy away from oil dependency. The new leadership is now promoting entrepreneurship and encouraging a wide range of business sectors to the country. Like Norway, Saudi is also selling oil assets. The plan is to float Saudi Aramco and then use the proceeds to support the reform programme rather than reinvest in oil infrastructure.

The Kingdom is expanding its universities and greatly promoting a new culture of entrepreneurship. It has unveiled plans to spend $500 billion creating an entirely new economic zone called NEOM on the country’s North West Red Sea coastline. The 26,000 km² zone will link to Jordan and Egypt and is expected to contribute $100 billion to GDP by 2030.

Nigeria has also suffered from falling oil prices. The public there have been demanding ever-greater accountability about oil revenues and how they’re spent. Nigeria, too, is diversifying away from oil and to entirely new sectors of the economy.

Saudi,³⁶ Norway,³⁷ Russia³⁸ and Nigeria³⁹ are all promoting entrepreneurship. They all want to strengthen the small and medium-sized business culture. All are introducing new sectors. Nigeria has emerged as the new coding centre for the world. Mark Zuckerberg has backed a firm called Andela that specializes in training young male and female Nigerians with world-class coding skills.⁴⁰ As a result, some argue that Lagos is fast replacing Bangalore as the world’s coding centre. This is a major change on the geographic landscape that leaders should know about. Andela is now spreading into Uganda and Kenya, building this same human tech infrastructure across the continent.⁴¹

Russia is also moving away from oil and gas and into high tech. This is one reason that we have heard President Putin say that the nation that leads in artificial intelligence (AI) ‘will be the ruler of the world’.⁴² Russia sees a strong future in pursuing the ‘colossal opportunities’ that AI affords. China agrees and continues to diversify its economy in this direction as well.

Suddenly, we can see why leaders need to rethink their understanding of the geography of the world. Every place has its own story. We’ve long known of the Africa that is blighted by famine and poverty. Does that blind us to the Africa that is becoming connected and tech driven? Some of the fastest-growing economies in the world are now in sub-Saharan Africa.⁴³ We think of the Middle East as a place that is being torn apart by wars, but it, too, is changing its orientation on the Kythera. It has chosen to have better infrastructure and more connectedness to the world economy.

Centralization versus decentralization

A common theme has been unfolding as populism has increased. People are asking whether the solution to global and national problems is to centralize or decentralize power. The Brexit vote in the United Kingdom can be seen in these terms. The political leadership in the EU seems to be moving towards more centralization, for instance, with a single European Army and a single Foreign and Finance Minister. While some love this direction of travel, others harken back to the concept of subsidiarity. They want more power to reside at the state level. Leaders should be aware of this dynamic. They will see the same trend in their own organization.

Europe is caught in this debate, seeking something halfway between capitalism and socialism. Can German capitalism or Rheinische Capitalismus combine free market capitalism with social policies in an acceptable way? This is a question faced by many nations. Japan is trying to balance between the two extremes. Even the United States has an audience for a third way: witness the supporters of former US presidential candidate Senator Bernie Sanders, who exemplifies this position. China, too, wants to encourage capitalist incentives and payoffs while ensuring that income disparity and the decentralization of power are not destabilizing forces.

The question is whether Brexit was the end of that debate or whether it was the first sign of further fragmentation in Europe. Leaders must think about these questions because they will be asked to choose between the UK and the EU, just as they are being asked to choose between the United States and China or even between China and Africa. Britain’s success does not mean the EU’s failure or vice versa. Both have different political and business models. China’s success does not ensure the Unites States’ failure or vice versa. Instead, leaders can look for the synergies between the parts of the world and leverage the relationships between them. There is room in each case for both to succeed, but flexibility is important. Leaders need to ensure the structures they operate in are as flexible as possible.

The Unites States may be undergoing a similar phenomenon. Both Presidents Obama and Trump were elected on a change mandate. The public want to change Washington, DC. Some want the capital and the Federal government to be bigger, others want it to be smaller. This is the same centralization argument again.

QUICK TIP Leadership needs to be self-aware of the balance between centralized and decentralized decision-making. This is a dynamic measure which should alter depending on economic conditions, being usually more centralized in recession.

Infrastructure is the new politics

China has cleverly dealt with the centralization issue by introducing the BRI. The new infrastructure ensures that the country will have new markets both to buy from and sell to. All roads, though, lead back to China. It is ensuring that China is increasingly the centre of the world, while also allowing for great diversity in the internal and external economies it interfaces with. The BRI both centralizes and decentralizes simultaneously.

Truth be known, when the British established the Prime Meridian or the sea lanes or when the United States and Germany built their freeways and autobahns, they were doing the same thing. This is simply a lesson from history being redeployed.

Rules

The greatest challenges on the global geopolitical landscape involve the rules of the game. Since the Second World War, the United States has backed a global rule system that was designed to benefit all those who signed up to it. It came with clear goals – free trade, the freest possible movement of capital, goods, services and human capital, and free transmission of ideas. Institutions were built to support and facilitate these outcomes – The World Bank, the IMF, the UN and other international organizations – but new developments and scandals have weakened faith and trust in the rules and in all institutions.

China and Russia have become ever more sceptical, fearing that they could never get a seat at the table that was commensurate with their power.⁴⁴ China, in particular, tried to repair and reform these Western institutions and ideals in the aftermath of the financial crisis. It was rebuffed. Instead, it has decided to create its own global institutions, such as the Asian Infrastructure Investment Bank which now rivals The World Bank. Both Russia and China feel the United States has been too cavalier with the rules and the institutions, seeking to fulfil its own interests first. Emerging-market nations have long complained that these organizations unfairly offer all the senior roles to staff from the founder nations, so they can never have any influence.

Meanwhile, the public are expressing increasingly populist views. They lean towards the isolation side of the Kythera. They are not interested in trade rules that never seem to benefit them. Public support for free trade has waned. Everyone seems to want greater protection from globalization at the very moment, ironically, when globalization seems to be spreading jobs and wealth more widely than ever. Where all the jobs used to go to mainly China, the world economy is distributing job creation more widely. Perhaps the public will catch up and decide that this benefits them? Their leaders across every sector will be called upon to contribute to these debates. The geopolitical landscape is changing fast, reconfiguring itself in real-time. Everything is affecting everything else, so the need for parenthesis is fundamental.

Diplomacy

Carl von Clausewitz said: ‘War is the continuation of policy by other means.’⁴⁵ If that’s true then diplomacy is now more important than ever, but it’s not just something that happens between nations. It also occurs between leaders. International organizations, whether private or public, have a part to play, too. The problems described here are difficult enough. They become almost impossible in a world where anyone who disagrees is labelled either as evil or as an idiot. Leaders can play their part in restoring civility and returning to the language of diplomacy. They can see win–win solutions instead of binary outcomes.

Leaders need to infuse their thoughts and actions with this positive and enlightened attitude. This is because the rise in defence spending combined with the imperative for resources are together likely to produce more geopolitical trouble spots. Leaders cannot allow themselves to be surprised by this. They need to study the true state of geopolitics proactively, not assume it has been unchanged since the Berlin Wall fell.

Conclusions

Despite many feeling as if this period is the ‘end of days’, there are many other periods in history that could lay greater claim to this. The Cuban missile crisis, the dropping of the first atomic bomb, the Blitz or even the Great War might have been worthier of this epithet. The world may be a more dangerous place but not necessarily when compared to other periods in history. It is possible that we can manage this.

We are being driven to defence spending for economic and nationalistic reasons. Sometimes this is to gain access to resources. More often, it’s because the original 20th-century infrastructure benefitted only the nations that established it. These new links will create new important geographies, often in areas where there were none before.

Governments are being torn in two directions. First, they are having to deal with a new nationalism, with its implied threat of isolation and tariff barriers. This comes from an old world of sovereign parliaments and defined boundaries. At the same time, the trend towards internationalism is clear and the global economy is redistributing wealth and economic power at an unprecedented rate, based on ever more open trade. Leaders of all types therefore need to be internationally and geopolitically fluent at the same time as being aware of the pain caused by economic change. This is quite some balancing act.