The Peter Zeihan Podcast Series - Deglobalization: The US Navy's Withdrawl as Global Protector || Peter Zeihan

Episode Date: October 9, 2023

If you've read my latest book, you know that a driving force behind deglobalization is the US Navy stepping away from its role as patroller of the world's oceans. Full Newsletter: https://mailchi.mp/zeihan/deglobalization-the-us-navys-withdrawl-as-global-protector

Hey everybody, Peter Zine here coming to you from the Colorado Front Range foothills. Today we're talking about why the United States isn't going to be patrolling the global oceans for much longer and how that's going to change the economic system a little bit. The United States never did it for itself. At the end of the Cold War, the United States created this new global network. We found ourselves facing down the Soviets at the end of World War II, and we didn't like what we saw. We were outnumbered.

We were on the wrong continent. Western Europe had been devastated. The idea that Soviets would just roll in and take over everything was very, very real and realistic. So the United States needed a way to convince everyone to stand up. And more importantly, from the American point of view, not just stand up to the Soviets, but stand up and put themselves physically between American forces and the Soviets. And that required an incredible inducement. And global trade and globalization was a solution. The U.S. sent its Navy out to patrol the global oceans so that anyone could trade with anyone in any time, and the American market, which was the only one of size to survive the war intact,

would be open so that anyone could export to the U.S. consumer market. Remember, at this time, the U.S. consumer market was about as large as the rest of the world put together. And that created the world that we know, which has eventually grown into the world of today with a global GDP of roughly $90 to $100 trillion, of which one quarter to one-third is based in international exchange, none of which would be possible without the Americans patrolling the oceans. Remember that even today, after everyone's been building navies for the last 30 years, the U.S. Navy remains at least seven times as powerful as every other Navy on the planet

combined, especially if you're going to factor out tight allies like the Brits and the Japanese. So wouldn't work without that, but the United States never did this for itself. We have a continental economic system. In fact, it wasn't until 1992 that we immediately started integrating with the Mexicans and even the Canadians. So our experience in international trade is decidedly local. The two countries that benefit the most from this setup are Germany, which for demographic reasons is facing national economic oblivion within a decade, and China, which thinks of itself is the next global superpower, but it plans to do so without a global navy and without a consumption that system and without any friends.

Okay, so where does that leave us now? For well over a decade now, bit by bit, the Americans have been moving away from maintaining this system, and as a result, we're seeing incremental shifts in foreign policy making the United States less likely to protect things like oil tankers or things like shipments out of the Russian space, countries that are benefiting from American largesse, but not providing anything on the back end for security.

And since the Allies as a rule are facing down, demographic breakdown, the economic case for globalization is also weakening, and the security case is just gone. The part of the world, I think it is the greatest example of how this is going down as the Persian Gulf, which from a maritime shipping point of view is the most important chunk. Again, the United States has always gotten most of its energy from the Western Hemisphere. More recently, it's net independent. But most of the crew that has always come out of the Persian Gulf hasn't come to America. It's gone to the Alliance net. work. Well, in the more recent events of the last few years, especially since the Russia

war, most of that crude is going to China. So again, the strategic case for globalization and keeping the sea lanes open has weakened, and we've seen that reflected in a change in policy. So you may have noticed that over the last several months, the Iranians have confiscated, or hijacked, is the better word, a number of oil tankers. And the U.S. Navy did nothing. Now, of late, the United States is starting to deploy a Marine Expeditionary Unit. And an MEU is no joke. It's a carrier. And it has 2,000 Marines on board.

And, you know, these are not desk jobs. These are the people who, like, storm the beaches and do some very real stuff. But a Marine Expeditionary Unit is about one-sixth, the firepower of a Nimitz supercarrier. And until about 10, 15 years ago, the United States always. had a supercarrier in the Gulf, sometimes too. Now, we've gone years without a meaningful presence, and when issues arise that we feel we need to reassure some of our local Arab allies, we're sending an MEU. Now, an MEU is not nothing, but it is small fry compared to what the United States would have reflexively had on station, a station in Bahrain specifically, in the past. Those

times are simply over. So how will this all go down? There's a thousand different ways based on local affairs that could break a system when the United States really doesn't care and is not paying attention anymore. But I think at the moment, the most likely one is going to involve the Russians. The Russians are being more and more violent in their operations in Ukraine. They're actively going after the agricultural system now to try to deliberately cause a famine. And they are using grain that they've confiscated from Iranian territories they've captured to ship out. Neelous to say, this is rude. I think we're not too far away from the United States either explicitly or implicitly, removing cover from Russian maritime shipments.

And what that happens, once something happens to one of those ships, whether it's piracy or a state grabbing it or anything, global insurance rates are going to change dramatically once they realize that the U.S. Navy is out of the business providing global security for everyone. And it doesn't take much of a nudge to break a lot of supply chains. Most manufacturing, specifically in things that are below the level of cell phones and computers, run on margins less than 3%. And most of these things involve countries that span the Asian rim and beyond, at least a dozen countries.

So any one of these little steps gets interrupted, steps that have less than a 3% margin, and the whole product chain falls apart. Especially in the era of containerized shipping where you can have thousands of containers containing hundreds of thousands of components simply to make a normal run. It doesn't take much disruption for that at all.

all fall apart. And then all of a sudden you're talking about the entire economic model of East Asia breaking in a day. We're not that far off, most likely. And that's only one example. Bottom line, if your supply chain is gangly, you should probably just make plans to close down. There's probably not enough time left to build something else. Most of the labor in North America has been spoken for in one degree or another, and to be perfectly blunt, we're running out of time. All right, That's it.