Beyond Borders: Navigating Global Upheaval with Peter Zeihan at MIC’23

Leah Archibald: This is Leah Archibald here at aPriori’s 2023 Manufacturing Insights Conference with our keynote speaker, Peter Zeihan. Peter Zeihan is a globally renowned geopolitical strategist, author of several bestselling books. What else do you wanna say about your CV?  

Peter Zeihan: I help people make sense of the world. That’s my job. 

Leah Archibald: He helps people make sense of the world, and he’s gonna help us with that a little bit today. So, Peter, your latest bestselling book, “The End of the World Is Just the Beginning.” End of the world…really?  

Peter Zeihan: End of the world. Well, end of the world we’re in. We’ve been living in the globalized age now for 75 years, and that’s generated a lot of interesting things in agriculture and manufacturing and finance, but it’s all predicated upon a security environment that can’t be sustained anymore and an economic player, the United States, who no longer has an interest in keeping it going. So, it’s now starting to fall apart and it’s going to do so with ever faster degradation, culminating in… Probably the most dramatic impact is gonna be the end of China within a decade. 

Leah Archibald: And when you say everything is falling apart, what you really mean is that there are disparate elements of our international structure that are coming together in a way that you’re seeing and other people aren’t seeing. So the war in Ukraine, the high prices for international shipping, the shortage of labor, you’re saying these are not isolated incidents, these are coming together into a kaleidoscope of catastrophe?  

Peter Zeihan: Absolutely. Many of things have their roots in globalization, so part of what the Americans did back in the late ’40s and early ’50s is we tried to convince everybody that your old historical rivalries didn’t matter anymore, ’cause we were gonna maintain a global whole for everybody, and that allowed everyone to specialize, everyone to move up the value-added supply chain, everybody to industrialize. But that ultimately changed a lot of things; we started having fewer kids. And when you fast-forward back 75 years, it’s not that we’re running out of children in most of the world, it’s we’re running out of working-aged adults. So simply maintaining the production facilities now is beyond the capacity of a lot of countries, and there’s not enough young people to consume it anyway. 

Leah Archibald: So, this is something that we’ve been talking about for a few years. There are not enough people to replace the aging boomers out of manufacturing jobs. You are saying it’s not only the manufacturing industry’s problem and it’s not going to get better for a very long time. 

Peter Zeihan: Absolutely. So with globalization, industrialization, as we moved into cities to take those industrial jobs, the birth rates suddenly started to fall. And the last really big generation that existed on the global basis were the baby boomers, and they were born between the mid ’60s and the mid ’80s. Well, they’re now retiring in mass. So largest generation, largest workforce we’ve ever had is going away. The next generation down that is of size are the millennials, but the millennials are… They don’t have the quality of the generations that have come before. 

Leah Archibald: Say what you mean. What do you mean, “quality?” 

Peter Zeihan: So, you all know the negative stereotypes about millennials; lazy, narcissistic, took five years off in Europe to find themselves in their 20s. That’s true for half of them. The other half have always done everything we expected; they graduated from college early, they went straight into the workforce. But because of that, they got hit with the Great Recession. They were the last ones in the door, so they’re the first ones kicked out. So whether the millennials did everything right or everything wrong, they all lost out on four years, on average, of work experience in their 20s, so they are… 

Leah Archibald: And it’s fragmented work experience. 

Peter Zeihan: Absolutely. 

Leah Archibald: They don’t have the same experience with the baby boomers coming up….

Peter Zeihan: Or Gen X. And so they’re the least skilled generation for their age bracket that we’ve ever had. So there are a lot of them, and thank God for that, but they don’t have the skill set that is necessary to replace things, and the next generation down that might, the Zoomers, is the smallest generation we’ve ever had. And the shortage of Zoomers means that we’re gonna have an increasing labor shortage each and every year, until we have another large generation enter their 20s. And it’s not gonna happen till 2045. So this is just the environment that we’re in. It’s going to get stricter and stricter and stricter, and there’s no way around that. 

Leah Archibald: And that’s happening in the United States, but it’s not just happening in the United States. The population restriction is happening worldwide, in a way that also impacts manufacturing. 

Peter Zeihan: Absolutely. So, American boomers are unique in only one way; they had kids, they had the millennials. The boomer generation everywhere else in the world, with the exception of New Zealand and France didn’t. So this period of stretch for the next 10 to 25 years that we’re going through, that is a uniquely American issue. Everyone else, it will never get better. 

Leah Archibald: Now, we have in the past 10 years, solved some of the labor shortage problems by offshoring, by buying cheaper goods from Asian companies, from India, from China. That is becoming less viable options. 

Peter Zeihan: Absolutely. 

Leah Archibald: We saw that during the pandemic, part of that is shipping problems, crises of shipping availability. You’re telling me that it’s more actually than just recent challenges, like that’s gonna be an ongoing challenge, sourcing from Asia?  

Peter Zeihan: Well, the Chinese situation is by far the most dramatic. So, they’re facing the same birth rate collapse as everybody else, but because they were a late comer to industrialization, they were able to apply the technologies of industrialization and urbanization at a much faster rate, so they went from having seven kids to having less than one kid in 40 years. And now, you put the one-child policy on top of that, and this is the last decade that they will have any workforce. It’s that dramatic, they’re gonna cease to exist as a functional economy within 10 years, assuming nothing else goes wrong. And since this is a country that imports 80% of their energy and 80% of the inputs for the food stuff, you can imagine a lot of things going wrong even if the politics were perfect, and they are not. Now, India is a different picture; much younger demographic, much later to the industrialization process, much slower urbanization program. But the problem there, to be perfectly blunt, is quality. Their infrastructure is substandard. The country is over-populated, so it’s kind of hard to generate the capital that you need to move up the value-added chain. 

Peter Zeihan: It’s not that you don’t have some very skilled Indians, you do. It’s just that the very skilled Indians come to the United States. And as long as that is the environment, India can take a big chunk of the manufacturers market, but it will take it for itself. They won’t be producing as part of a broader network. That’s still globally significant, it’s just not globally involved. So we need to look a lot closer to home for our labor situation. 

Leah Archibald: And this is what you’re encouraging all countries to do, what we’ve been calling “reshoring” or “nearshoring.” But you’re even saying, “Don’t talk about shores at all, [laughter] talk about what you can do inland, within the United States… “ 

Peter Zeihan: Well, I’d say the North American market. The advantage… Mexicans bring us two huge advantages; number one, it’s a different demographic structure. They started the industrialization process like India, late in the game, so it’s a much younger workforce with much higher consumption per person that you’re gonna have in some of these rapidly aging systems. In addition, because they’re proximate, the logistics of getting stuff back and forth is usually not colored by international security issues. It’s not that there aren’t issues in the bilateral relationship or in Mexico. Obviously, there are, but they’re manageable ones and they’re ones we’re more familiar with, and they’re ones that don’t sneak up on you, like say when the government of China just decides to shut down Foxconn because of a political issue. 

Leah Archibald: So what is the second part of this? What is… The End of the World Is Just the Beginning, is the title of your book. What’s the beginning that we’re going into?  

Peter Zeihan: Well, the beginning is something we’ve had before. Globalization is a weird period, historically speaking. It really only started in the ’50s, this current phase. And being able to go anywhere, to tap any market for any resource or any partner, that is not standard. Usually, you have a much tighter circle for your economic reach, and you might have a few trusted partners and some de facto colonies in the past that are part of your network, and then that competes with the other networks that are out there, and state power and economic power are often fused. We’re going back to a world that’s more like that.

Now, the American network is going to include probably all of the western hemisphere, plus Japan, which is… The Japanese are the only people who have found a way to cut a deal with Trump and Biden. They’re the only ones that have figured out… Seen what’s coming, and they’ve already positioned themselves. And I think Southeast Asia looks pretty positive too, for a lot of reasons that are similar to why I’m so bullish on Mexico. But we have seen industries that have re-shored from China have discovered that the transformation process was, for the most part, a lot simpler than they thought it was going to be. And the more supply chain steps you have in each individual facility, the less gangly it all is. So, it will look different. I would say front-load any of the transformation you possibly can do. 

Leah Archibald: Straight from the mouth of the renowned bestselling author, geopolitical strategist, Peter Zeihan. Thank you so much for talking today. 

Peter Zeihan: Pleasure.