Good News, Sort of!!

Do any of you out there take an interest in the state of our world? I know I do. I think about it a lot. There’s a lot out there to be gloomy about, I know. But what if we lift our head from the steps immediately before us, and look further ahead? What can we see through the fog presenting itself as our future?

Even as a Canadian, I am distressed by the chaos I see developing south of the border. I can’t help feeling that our fates our closely bound up with what happens there. They are, after all, our most important trading partner by far, besides being the place where most of us go when we travel out-of- country.

For the past many decades we have relied on the U.S. to be the bulwark behind a stable world order. It had its origin in America’s overwhelming military power, but its economic heft as well. Most of us didn’t appreciate that an important element of this was America’s energy dependence, and its importance as an energy buyer. Owing to this, it was able to impose on all oil exporting countries that the US dollar was the currency to be used in world trade for oil. And it still is today.

Fast forward the present. The US, thanks to the shale oil revolution, is now an energy exporter. Its leverage as the major buyer has disappeared as the US has become an exporter. Along with that has gone its ability to influence the policies of other major oil producers like Saudi Arabia.

Russia is seeking to impose the ruble in its sales, and exchanges are occurring on a barter basis. Further, America has become more inward-looking, no longer the world’s policeman. We have Russia, Iran, China, even Turkey, emerging as bad guys without any real response by the US.

The free trade initiative is also breaking down as bad actors are putting our reliance on that to the test. It is becoming more important for countries to have domestic or closely-allied sources for the supply of strategic goods. America hollowed out its industry in pursuit of lowest cost for its consumers. It is now reversing that in an important way. They will be investing hundreds of billions to rebuild industrial capacity. Currently they have a million job vacancies and this will get worse. I am hoping Republicans will soon wake-up and smell the roses on immigration.

The West is being challenged by China and Russia. Both these countries are facing a catastrophic decline in population because they have not been replacing their aged. They are countries of older people. China’s generations-long one-child policy has caused their problem. It has now been halted but the damage has already been done and will take a long time to repair. Russia has a similar problem. Russia’s abortive attempt at military mobilization has just sent 200,000 young people fleeing their borders in just the last few weeks, aggravating their situation. They may want Ukraine as much for their population as for their other reasons. That would explain the wholesale kidnapping of Ukrainian children and populations into Russia.

Some expect China’s population to be cut in half in the coming decades. It is totally dependent on its exports, and imports, particularly of energy, and technology. It sends hordes of students abroad for this latter reason. It lacks large energy sources and fertile food-producing areas to match all its needs. Labor prices have risen such that it is now economic, with automation, for America to replace its imports from China with local sources  and those from neighboring countries. China will have to focus on its declining domestic markets and its local consumption, instead of exports. This will take time but that is the dynamic we are witnessing.

How will China earn the funds to finance its crucial imports? The Chinese government has agents everywhere in the developing world buying up the companies that will be able to supply the goods it needs. It is working hard in less-developed countries to acquire ownership of strategic resources. In some more-developed countries, governments have refused to allow these transfers of ownership when they concern strategic goods.

We can look at Japan’s struggle with a stagnant economy, given its aging population and avoidance of immigrants. Residents of Russia and China are fleeing where they can, aggravating their situation. With a sharply declining economy in the future, denied technology inputs from the west because of their policies, even though they remain very powerful, one can see a reduction of influence and power.

Europe will be seeking more reliable sources of energy.  North America will face pressure to increase supplies of fossil fuels, reversing its recent tendency to reduce investments in favor of emphasis solely on renewable sources of energy. The drive for nuclear power is resurgent.The current situation calls for the presence of both in the coming decades.  

But the scenario outlined foretells a massive re-industrialization in North America. We will be hungry for additional hands and skills from anywhere to help us with the tasks before us. The capital inputs required will be massive. And foreign capital will seek to join in. These speak to the thriving economic future on the North American continent. The economy, which is now so consumer centered, will continue to be so, even less dependent on supplies external to the continent.

One of the brightest spots will be the creation of up-to-date chip production facilities to produce the tools for the forthcoming technology that will power it all. Dependence on Taiwan will end over time, its products not being the high-end chips that new fabricating plants in North America will be producing.

If we can avoid a wholesale war with the two declining powers, we can look forward to a rapidly falling sphere of influence on their part. The ability of Iran and Turkey to wreak havoc will be reduced. On the other hand, North America will become even more influential on the world scene owing to its growing population and economic scale. It is India that has a bright future as well with its large young population. The world may become a less dangerous place for our children.