The Peter Zeihan Podcast Series - The Future of Ohio: Manufacturing Growth and Political Shifts || Peter Zeihan

Episode Date: November 8, 2023

If you've ever spoken to an Ohio State fan, you know that they'll tell you how amazing they are without you asking. Unfortunately for all of us, I'll be adding to their boasting list today because there's plenty of success and growth in store for Ohio. Full Newsletter: https://mailchi.mp/zeihan/the-future-of-ohio

Everybody, Peter Zion here coming to you from not Idaho and not Iowa, but Ohio. Iowa's got corn and pigs and soy and insurance. And Idaho has potatoes and wheat and the snake river. Ohio excels at things like manufacturing. Or at least he did. Ohio is one of the states that's been really hurt by something called the Jones Act, which is something that bars cargo ships from transport. porting cargo between American ports unless the vessel is 100% American-owned, captained, built,

and 75% crude. It's something we did in 1920 as part of the Interstate Commerce Act that absolutely destroyed the ability to move things on the water. And since Ohio is bordered to the south by the Ohio River, which is one of the world's great waterways, and on the north by the Great Lakes, which are one of the world's great waterways, Ohio is arguably the state of the union that has suffered the most. It also took a big hit because of globalization. Ohio is also the state that has arguably suffered the most from globalization because

it had an economic geography that was excellent in terms of lots of flat land that was easy to build infrastructure on and a lot of legacy infrastructure from its industrial period. But with globalization, the United States basically elevated places that didn't have very good geography as part of our plan to defeat the Soviet Union. and that meant that places with subpar geography, thinking here Brazil or India or China, were able to get a huge leg up and that gutted a lot of the manufacturing base here. Now, Ohio is still a significant manufacturing player, just not as rich as they used to be, and part of the decline in the use of the waterways and because of globalization is part of the reason

why Maga and Donald Trump have done so well in this state and why the state's politics has taken such a hard turn to the populist right. that is in the process of shifting, maybe not the political stuff, but all the economic trends. De-globalization means that we need to rebuild a lot of industrial plant in other parts of the world, and all of a sudden, geography matters again, and Ohio's looking pretty good. Ohio is one of the healthier demographies in the advanced world, suggesting that it has a pretty robust potential workforce. And the state and the local governments here in the Columbus area have been very aggressive at going out and courting the investment, with the single biggest achievement they have

being the Intel facility that is just down the road here. Intel is an American semiconductor manufacturer who was the world leader until about six years ago when they made a bad bet. They bet that this new thing called it Extreme Ultraviolet lithography was just not ready for prime time and they designed their chips using an older type of technology

that's much more expensive to operate and a lot more finicky. But turns out that EUV actually was ready and the company that bid on it was TSMC, which is the semiconductor manufacturer out of Taiwan. So today, all the world's best chips are basically made in Taiwan. And while Intel has designed some of the chips that TSM makes, they don't really manufacture very many of their own,

certainly not here in the United States. This new facility that's under construction in Ohio seems to change that. Specifically, they've got these two models called the 20A and the 18A. If it works, by 2025, they'll be produced in this facility, and they are sub five, even sub three nanometer, which will almost overnight elevate them to producing some of the world's most advanced chips. So far, $20 billion have been sunk into this facility,

$2 billion of which is local and federal subsidies. And if Intel has its way over the course of the next decade, that number 20 billion will increase to $100 billion, and that's just for fabrication. That doesn't include any follow-on businesses that are likely to pop out from network effects, whether that is assembly or testing or light manufacturing to take these chips and put them in things that we use every day. So the potential here for the Ohio region to grow is explosive.

And that even assumes that we don't want to do anything with the Jones Act. And if we do, then all the old manufacturing is likely to come back as well, because you just can't beat the local geography here for internal transport. So will that have political connotations? Probably. And that'll get really colorful. going to cover that in a different video. I'm just outside Columbus today, and we're going to talk politics a little bit. We'll use a link in this mail. I'll give you an idea of where I generally

think U.S. politics are going, but the general issue here today is we're at an inflection point. Ohioans are proud that they've been voting for the winning side in almost every presidential election for over a century, with only events in 2020 breaking their pattern. And the reason both for it happening in the pattern break is Donald Trump. So before 2020, Ohio was the middle of everything, middle class, middle income, middle in manufacturing, middle in services. It was very representative of the United States as a whole. So it was very easy to track the political wins based on what the Ohioans were thinking. But they did suffer quite a bit from globalization and something like the Jones Act, as you saw in the previous video. And so there's a lot of resentment in the state.

And since Donald Trump basically ran on resentment in people who felt they had been left behind, Ohio switched, and now is considered a generally populist, conservative, socially, area. However, if you remember some of my other work, you know that the political factions that make up the country are moving around. Basically, the American political system is made up of two very large parties because the electoral system forces that into form. Basically, you have to get one more vote than the other guy in order to win the seat,

and so therefore you don't want to alienate any potential voters. And in that sort of environment, you get two huge parties that are made up of independent factions that shift around based on changes in economics, sociology, politics, demographics, and in the last 30 years, we've had a lot of things go down. We've had the rise of the baby boomers and now the retirement. We've had hyper-globalization and now it's end. We've had the rise of social media and the implosion of information transfer. And through all of that, the two parties held together until very,

very recently. And in the Trump era, that relationship is breaking down. Now, Trump did a lot of things for a lot of reasons to a lot of people, but the ones that matter for this discussion is he elevated a faction known as the populace to power, and they are now the single largest voting block in the United States. They're very powerful here in Ohio. But in doing so, he drove away a number of more traditional factions, he would call them rhinos, that include the entirety of the business community, but he was able to court other groups that are more socially conservative, like the Catholics and the Hispanics over to his side. And as part of that process,

there is now a tug of war between the Democrats and the Republicans over the future of organized labor. We're in organized labor is only to become more and more powerful over the next decade because we need to build out the industrial plant and most of those jobs are blue-collar. And we're an environment of labor shortage. So we're going to see more and more strikes. What this means is the business community

and the labor community, which have traditionally been the two most powerful voting blocks in Ohio, are suddenly swing voters. So everyone got used to Ohio being the man in the middle and ultimately representing what we were all thinking. We're still there. It's just that the two factions that matter the most are at the moment not part of the political process.

So what we're going to be seen over the next few years between this massive reindustrialization and buildout, and this political shift is Ohio is still going to be the man in the middle. And where they come down is going to determine the shape of our political parties moving forward. And we're seeing those arguments across the Ohio political landscape right now with everyone engaged and everybody angry and everyone hopeful, all at the same time. So stay tuned, watch Columbus,

and they're going to give us our first good team. of what our post-Trump party structure is going to be.