The End-Of-Globalisation Thesis
Preparing for the new world disorder
This is a scheduled email. I’m away on a 10-day meditation retreat at the moment- you can read my piece on that topic here.
Hello readers,
Today’s piece is a bit dark so buckle up.
We’re going to talk about the end of the world as we know it. The end of an era of growth, peace, and prosperity.
This is geopolitical analyst Peter Zeihan’s scary hypothesis, which has been articulated in his new book ‘The End Of The World Is Just The Beginning’. It portends a world starkly different from what we’ve experienced.
Let’s break this thesis down and start by analyzing the day and age we’ve been living in, which will possibly be the best time the world has ever had.
The Post-War Era
The world has experienced massive levels of growth in the last 70 years.
Countries became independent. War-torn economies could build back and they boomed like crazy. Life expectancy skyrocketed and so did incomes. We saw the rise and rise of megacities, which were powered by the best products sourced from all over the world.
It has been an era of absolute abundance. But what enabled this?
If you think of the world in the 1940s, it was full of dilapidated economies, countries destroyed by colonialism, and tear-inducing levels of poverty and shortages. While we still have billions who continue to struggle with the necessities of life, a big chunk of the planet has seen its fortunes improve over these decades.
What changed? How have we so utterly transformed and ushered this world of more?
I’d be lying if I pointed to one precise thing. As always, it’s a cocktail of factors. But one of the most critical ones was the integration of the world economy and a new era of trade and collaboration. In a word, globalization.
And one of the key things that enabled this was global shipping and containerization.
The world before containers was appalling. There was no standard box size for international shipping and things took way too many hours. Load your goods, unload at the dock, unpack, move to the warehouse, repack, and reload onto the ship….only to repeat the process all over again at the destination. It took longer than getting a Swiggy order on a rainy day in Mumbai. And a big part of this complication was that different goods came in their own, unique shipment sizes with zero standardization.
The standardized, modern container changed all of this. It became the globally accepted shipment unit and massively simplified the process. Sea trade became many times easier, warehouses were no longer needed, and the world saw the emergence of mega port cities which could be away from main cities- all they needed was road/rail connectivity.
The cost of shipping stuff around the world came down to <1% of the total cost, which is a MAJOR change. We can’t comprehend how miraculous this is, given that these costs were probably 90% or more for most of history. As this was happening, most parts of the world were building up their shattered economies and joining the global party.
In the pre-war days, all countries kept every part of the manufacturing process within their borders due to geopolitical uncertainties and hostilities that prevented such trade. But now in the postwar era, the entire world became interlinked. Countries could focus on what they did best based on the local conditions (geography, culture, resources, etc) and the world reached an unprecedented (hearing that word right after March 2020?) level of interconnectedness.
This is what enabled the boom. This is why we can have food that uses ingredients sourced from 20+ countries and drive cars whose parts came from more than 100!
Take a moment and think how magical all this is.
But hidden behind all the magic and pleasure it produces is the system’s mind-numbing fragility.
All of this has been possible because the global seas were safe for trade. But when that stops being the case, we’re in for some deadly chaos.
The Disorder
Per Zeihan, all this boom-time was possible because America became the hegemon of the world and provided global security in exchange for trade.
It essentially provided global security and let European nations focus on building back their economies (instead of armies) and exporting their stuff to the US (and elsewhere) in exchange for their support in the Cold War. More and more nations joined the party, as you saw above, and this resulted in the best days we’ve had. But that was probably not the trend but an aberrant period in history.
It’s because the Americans are probably not going to continue patrolling the waters. You see, after the collapse of the Soviet Union, the Americans didn’t need to continue providing security. It was too good a deal for the Europeans (and Japanese, and Koreans) and too expensive for them.
So as the US pulls back from its role of providing global security (what with the geopolitical tensions that abound), expect the global waters to once again become precarious.
And since these waters are where most of our energy supplies, food, and manufactured products travel to reach their destinations, you can imagine what can happen in such a situation. Even one day’s delay in critical supplies (like oil) can cause major upheavals for an economy. Imagine what can happen when there are not just delays, but sunk ships, canceled shipments, and pirate-infested waters?
It’ll be a new world disorder. And things will never be as good as they’re right now.
The (Possible) Fate Of Nations
Having understood the fragility of global supply chains and how we’ll always be at the brink, here are a few dark implications if the oceans do turn into geopolitical fencing yards instead of remaining the safe trade zones we’ve gotten used to:
The biggest blow will come to nations who come at the very end of these long supply chains and don’t have the naval might to go out and secure access to essential stuff like food, energy, and industrial materials. Countries like China, Korea, and Germany feature in this list.
The Middle East will also be in for a shock given how it imports literally everything (including knowledge workers and professionals for its oil industry) apart from oil.
By far, the scariest prospects are for those who don’t have internal food security AND depend on imports from countries that are far away. China is one, and the situation might get dire. Zeihan suggests that China will experience large-scale food shortages and will have to handle this situation with an aging population (thanks to their demographic collapse)- and even goes on to say that these things will lead to deurbanization and total collapse.
India will be in a decent space as all energy supplies eastward have to pass through the Indian Ocean- and this gives it a very strategic position on the world map. Barring a few issues, India is also good on the food security front (provided it can access fertilizers and other inputs), and has a healthy demographic with its best years ahead of us.
North America, with most of its trade happening within the continent, will be the most insulated from the global disorder. America, with energy independence, food security, world-class manufacturing, strong partnership with a young Mexico, and the best navy to secure access to materials it needs, seems to be in a great position (contrary to the bleak future pretended by other thinkers like Dalio). Probably the US’ biggest enemy will not be any other country…but itself.
EU will have a tough time sourcing energy, dealing with its demographics, and failing to find common ground. We might see different nations like France, England, Turkey, and Sweden pursuing their objectives and extending their naval reach to other regional nations as they work hard to secure energy, rare earth materials, and all other stuff that powers our global economy.
We might just see more of neocolonialism or mercantilism- where nations protect local industries and dump as much of their exports on others as they can. Prepare for a major retooling as economies might want to ensure self-sufficiency instead of relying on 100 other nations for different inputs/products. Expect chaos as the absence of a hegemon- from the Middle East to East Asia, pushes us back to a dark era.
Will these dark scenarios play out? Nobody can say for sure. But if there’s one thing we must pay attention to, it’s the future of global trade that most nations have a fatal dependence on. That, ultimately, will dictate the fate of nations.
Thanks for reading this! If you enjoyed this, you might want to read Zeihan’s book. While I do have my apprehensions regarding a lot of points he makes (which often sound too biased towards the US), it can offer a good perspective if you are blind to the faultlines in the global order. If you enjoyed this article: