The Peter Zeihan Podcast Series - The Greatest Reindustrialization Process in US History || Peter Zeihan

Episode Date: July 10, 2023

You know those little 'Made in China' stickers on everything you can buy in the US? Well, don't be surprised when those all say 'Made in America' after the US carries out the greatest reindustrialization process ever... Full Newsletter: https://mailchi.mp/zeihan/the-greatest-reindustrialization-process-in-us-history

Hey everyone, Peter Zion here, coming to you from Heart Lake above Boulder, Colorado, just below the continental divide, which is where I'll be for the next few days. I managed to pull some data down before I left so I could do a few videos, and this first one is going to be on construction spending in the United States. I know some would be like, and I get it. But remember that we are in the midst of the greatest reindustrialization process in the United States history, building out industrial infrastructure and factories and refineries and pipelines roads and all that faster than we did during World War II. There's a lot of things in play here.

So let me start with kind of the legacy factors, and then we will go into the more the issues of the now. So first, legacies. The United States has the most highly skilled labor force in the world by a significant margin. There are a few countries like Singapore where the overall education level might be higher, but Singapore is a country of five million people. The U.S. is a country of 30 million. Even in the state of the Germans or the French, might have a little bit more productivity per hour than the United States. You know, we're talking about a labor force in the United States. It's four or five, six times as much.

And that means there's not a lot that the United States can't do if it puts its mind to it. Now, historically, since 1945 and especially since 1991, what the U.S. has done is focus on the really, really, really high value added. We basically shipped all of our underwear manufacturing overseas, first to Mexico and then the China and India. and instead we design computers, we design space stations, design microchamps. Not a lot of the manufacturing habits here, because to be perfectly blunt, that's not sufficiently high value added for the skill set of the American workforce. So that's always been in the background.

Second, the Shale Revolution. Courtesy of the Shale Revolution, the United States, is glutted with natural gas, which is not merely a power fuel. It's also used as an input for chemical components, which then go into all other types of manufacturing, whether or not you're looking to do electrical work or diapers or anything in between. The Shell Revolution made us net independent and natural gas roughly 10 years ago, net oil independent a little bit after. We had a few hiccups because of COVID, but we're back to being net independent and all the factors that matter again. And one of the first things that the Shale Revolution encouraged the United States to do in terms of industrial buildout was we're fighting in chemicals. And so we now are the world's largest producer of all the precursor materials that go into all petrochemicals everywhere in the world. And now we're using those materials to do the next stage of heavy manufacturing.

So this kind of the first big phase of this industrial spending issue isn't necessarily for building power lines. It's for building the stuff that allows us to build the stuff. Now under the more current issues. Two big things. First, COVID. We discovered that our international supply chains perhaps weren't as reliable as we thought they were. And between China's centrality and all things manufacturing and China's own COVID lockdown, we found out that if we wanted stuff, we had to build it ourselves.

So we did. And during COVID, we saw total industrial construction spending double above the 15th. your average. More recently, in the last two years, the Inflation Reduction Act passed by the Biden administration, which has nothing to do with inflation. There's more going on here than just aspects of a green new deal. Turning over the power system and reshoring the production for everything in the power system includes everything that we did with NAFTA and NAFTA 2. You know, I should say a third

thing because NAFTA 2 is a big piece of this too. But anyway, the IRA put roughly a trillion dollars into the system to build out what we need in order to meet the requirements. And that has doubled construction spending again. So we were already at record levels three years ago. We've now doubled the record and it's just going on from there. Now, this does mean we're going to have some more inflation in the short and the midterm because there's no way you double the size of the industrial plant without that. But once we get to the backside of this a few years from now, we will have a supply chain system that is local, that is employed by locals, that serves local customers, and uses less energy and less water, and has fewer steps,

and is largely immune to international shocks. This is a really good story at really every step. We just have to suck up a little bit more inflation while we're doing the work. All right, that's it. I'm going to go put on some gloves. Bye.