Jason Szeftel – China Unraveled

Jason Szeftel
[00:00:00] Ed Watters: To overcome you must educate. Educate not only yourself, but educate anyone seeking to learn. We are all Dead America, we can all learn something. To learn we must challenge what we already understand, the way we do that is through conversation. Sometimes we have conversations with others, however, some of the best conversations happen
[00:00:42] with ourself.
[00:00:45] Reach out and challenge yourself. Let’s dive in and learn something right now.
[00:00:54] Today we are
[00:00:55] with Jason Szeftel, Jason is an expert on China and in today’s world we really need to understand what is going on with the world and China in general and the history behind it all. Jason, could you let people know just a little bit about you and introduce yourself, please?
[00:01:16] Jason Szeftel: Sure thanks for having me on. And I, yeah, I have a background going into China for the, in China, that’s about a dozen years and then the interest in China’s over 20. And a lot of what I’m doing these days is trying to give people some context for how China, what China is, how it came to be, what we see today, where things are heading, and then what that means for primarily Americans.
[00:01:38] And that’s, that’s the goal. We’re all seeing the world kind of break down and we’ve got the two big, bad bugaboos of the world, which are Russia and China and things are finally coming to a head and people need a bit of context for it to get on with their lives, do what they need to do. And I just try and provide a bit of that.
[00:01:52] Ed Watters: Yeah and it’s an excellent podcast that you have. I can’t wait to get a hold of your book, it’s going to be fascinating. I’m going to be one of the first to get it for sure. Um, your background in China, what got you started because it’s a lifelong passion for you. Explain that to us,
[00:02:14] please.
[00:02:15] Jason Szeftel: Sure. Lifelong passion,
[00:02:16] the early part is I grew up actually, actually with a Chinese man kind of coming in and out of my parents’ house when I was growing up for various reasons, had to do with my brother, and so I had that. And then really, since I was very young, I’ve always been fascinated by China. China and I guess, it may have, might of come originally from, I don’t know, Japanese interests kind of just moved to China. But whatever that is, that was the early interest that was profound,
[00:02:37] that was from a very young age, this sort of early fascination. And then as the two thousands rolled along, we had, well, we had wars, we had 9/11, we had these, these conflicts were brewing, all this was happening. I thought, wow, in the background, there’s China growing powerful, developing, modernizing at an astonishing rate.
[00:02:52] No I’ve never seen it before. Where are things going to happen? What’s going to happen. And then when I got into college, I got, basically got a scholarship to just study in China. I lived in Beijing, I learned the language and I was there for a long time. When I was there, particularly between 2010 and 2015 on and off, when China was very triumphalist. It was a sense after
[00:03:10] the great, the great recession, 2008, 2009, that China was, its time had come or its time had come again. And the U. S. was on the downswing and it was now trying to, reemergence into the world as sort of a hyper superpower type thing, and that, yeah, so that was the mood there. And then I came back and then a lot of what I’m doing afterwards and even a little bit forward was, my focus has been on development.
[00:03:32] So, uh, both the, the reality, the rhetoric and the reality of international development. I’ve been in, I’ve been in Europe, I’ve been to South America, and China, obviously. It’s about why do things develop where they do, uh, specifically, specific projects, whether that’s, uh, a natural resource, what kind of nations, what kind of stuff emerges from the ground up as you try and develop people. Particularly in the last 75 years as all of these countries, we have more capital, more opportunities for places that have never seen any sort of civilized life
[00:03:59] at a large scale. To see before and to see, is this possible? Is this sustainable? These are the really fundamental questions. And like, so can we go, can Afghanistan become something else than Afghanistan, the answer is clearly no, right? And you know, the American people in general, haven’t been given good reasons
[00:04:14] why. Or was this a waste of time? Was it noble? Were we, was it grifting? Were people, was it just entrenched interests? Uh, what was going on? Why can’t we admit when we’re wrong? Were we wrong? Do we have a discussion about, we don’t have any context for any of this and things are now unraveling very quickly.
[00:04:29] So it’s just based on all this time, now over 12 years that I’ve been trying to put together and I’m using China as well. It’s where I’ve had the deepest, longest interest, it’s the largest country, it’s the only one that can really compete with the United States at a serious level. And figure, answering this question of why China became what it is, what it became, how, why, where it’s going.
[00:04:47] This helps us see what, what is or isn’t possible in the world and why things happen and it’s just extremely instructive. Alot of people, there’s no other country the Americans think about as much as China anymore. We don’t really compare ourselves to Japan, or Germany, [00:05:00] or Britain. There’s really only one country that can capture people’s attention.
[00:05:03] And I just happen to have the interest, you know, the comparative perspective, and then like the long history, deep dive into this place.
[00:05:12] Ed Watters: Yeah. Well, you were in China during the Belt and Road initiative then. And that, I really believe that’s when China started breaking out again for this global recognition period.
[00:05:28] And, and somewhat we helped them do that, in many ways we helped them do that. And in many ways that’s not a bad thing because in the history of China, haven’t they always been about trade and it’s capturing the value out of trade for them?
[00:05:49] Jason Szeftel: China has a very tortured relationship with trade. And I’ll say your point’s even larger, it’s even bigger,
[00:05:55] it’s even more true than you think. We actually are a big reason why China succeeds, succeeded at all since 1978. If they hadn’t managed to kind of join the American Global trading system, China would have had seen famine and roll, a rolling series of famines and civil wars. Uh, they didn’t have the technology, the talent, the capital, the labor to do what it needs to do to industrialize, and it needed, it really, really needed the, the foreign input and help.
[00:06:24] And the only way to get that was through the, this American system, which is a very unique thing in history. So that’s even more, but we, we enabled all of it. And that triumphalist moment, it’s surprisingly small, really 2014 to like 2017 is like maybe as long as it happens. So people remember Belt and Road,
[00:06:41] wow, we’re doing all this stuff. What people don’t know today is like Belt and Road has been almost, the language is still there, they still talk about it, but the actual project, totally abandoned. Uh, there’s been huge problems with the project, none of these, because it’s just, there’s a big reason kind of that I was talking about earlier, development.
[00:06:58] You know, you want to put money in places to try and develop countries, and you also want to have it work out, and you also want to get your money’s worth. And so over 70% of these Belt and Road initiatives have not panned out so China was in the red for all of them. And the United States experienced this also in the sixties, seventies and later. But really starting in the sixties and seventies they did try to do all these development projects in different parts of the world
[00:07:18] and they just don’t pan out. And there’s big reasons why we could get into, but for China, it was just like, uh-oh, we wanted to create an alternative system. That was kind of part of the idea to the United States, this global trading system we joined, but the American system is better, right? Overland trade is, like you mentioned, China has a long history with trade and it’s, really the growth of Chinese GDP,
[00:07:40] what we, it’s kind of tough to talk about GDP. Whenever anyone’s talking about GDP before, like the industrial revolution, just don’t even listen to it. It was all, it was all super, we were all peasants, life sucked, like its, GDP is like almost a worthless concept, but it’s useful if you were just talking about some things. So really, but up until 1000 AD let’s say the first twenty, 2000 years of Chinese let’s say, yeah, 1200 years when it was Imperial, the, the growth in Chinese, uh, equivalent GDP, it was directly correlated to the growth and overland trade. Things like the silk road and other trading routes that China used to get its goods out to the rest of the world because China never had the largest consumer base,
[00:08:17] right? You didn’t have, it was 90% of the population was a peasant. Really a peasant is the right word, too. We get into what China, ancient Chinese agriculture looked like, it ain’t pretty, it’s a nightmare, a miserable nightmare forever, that was kind of the way it worked. And what you could do though, if you could sell Jade, if you could sell pottery, if you could sell tea, if you could sell all of these kinds of luxury goods to the rich people all around the world, You suddenly are,
[00:08:41] I mean, this is the base of trade. You get larger markets, you can expand your production, you can do all this stuff, and you get a lot more income for the government. So it’s been a huge thing, but really in the last, the last thousand years, when the world shifted to maritime trade, which is the basis of the American trading system, the American trade system is these big tankers all around the world and the American Navy patrols and protects everything, right?
[00:09:01] There’s no, you know, outside of Somalia, there’s never been a pirate that’s taken a ship off the coast of Australia. Not even a chance anywhere near the United States, never happened, you know, Western, North Atlantic, none of this happens just because the U.S. Navy is out there to do it. China has had a very different history.
[00:09:16] China is a, a land-based, you know, uh, power, uh, land-based people. Yeah. And particularly Northern China is the part of China that took over the rest of China. Northern China has no natural harbors all the way from basically Dalian, basically the Korean border, all the way to Shanghai. There are no great natural harbors.
[00:09:33] You need deep water industrial technologies to dredge the seabed, create space, remove the mud flats, remove all this stuff. So it never had a large maritime commercial economy anywhere near the China, the prem, the, the, basically the Chinese government all the way through the Ming dynasty, it just didn’t exist.
[00:09:48] So what happened when maritime trade came, which was really around 1000 AD, that all China went crazy. It like, it, and it started doing these things. Basically what China has been doing for the last thousand years is [00:10:00] it has this policy of opening up the ports, which are these Southern ports, and then closing them down, opening them up and closing down. What it’s trying to do is
[00:10:06] take in all the new technologies, take in all the capital, take in all the foreign goods, let it all in, gain wealth, gain wealth. But then what happens is the wealth starts to destabilize things in China so the government shuts it down and then it opens up again because it needs the money, then it shuts it down.
[00:10:19] It’s, it’s happened like six times in the last thousand years. And what we saw recently in the 1970s is the most recent iteration of that, where they had the special economic zones and they opened up the port cities. Uh, well, you can even say that the Imperial, uh, colonization efforts and sort of all the treaty ports, 19th century stuff, that was actually the start of it.
[00:10:34] The Europeans forcibly opened up a lot of Chinese ports that happened, Communists came and war came, they shut it all down. And then in 1970s, again, they opened up on their own part because there’s no other option to develop China. You need these coastal ports, you need to integrate into this maritime system.
[00:10:48] But because China is this large land power surrounded by islands so, or peninsulas, right? So you have the Korean peninsula, you have Japan, you have the Philippines, you have Taiwan, you have et cetera. It just goes all the way, all the way down to the one, the long Chinese Eastern coast. That has created a very tense relationship with this, with maritime trade, with sea peoples, with all this kind of stuff, because the Japanese were basically premiere pirates in the region for a thousand years before they came together as like, you know, Japan. They were out there just wrecking China’s day, day in and day out, uh, that was happening.
[00:11:17] And it’s, so it’s been an extremely tense relationship and it destabilizes the internal dynamics of China. And so I’d say the one fundamental myth people need to always start with when you think about China, is that the, the key myth, the primary one is that there is not one China, there are many Chinas.
[00:11:34] And I mean this from a population standpoint, I mean this from a cultural standpoint, a linguistic standpoint, ethnic, all of it. There, it’s so big there’re provinces in China with over a hundred million people, they’re larger than most countries on the planet. And they have long histories, a lot of them have
[00:11:48] histories that are independent of the primary Chinese Imperial, the thrust of Chinese history. And it, the whole thing is a mess, right? And when we in the United States think about China, we think about this big red China, one large country, just like the United States, just as powerful and just as united in certain ways.
[00:12:07] It’s just not true and that’s really the core. Once we start to understand that, we see that, what the, what’s the, what goes on inside of China between all these different pieces of them and how they don’t fit together well, that’s when you can start to understand the patterns of Chinese history. How can it be where it is, and then you know, where unfortunately things are going for China.
[00:12:24] Ed Watters: Yeah. China has a deep history and it’s amazing that you are out there talking about this because a lot of people don’t realize. Uh, I was listening to some of the podcasts you’d been on and you were talking about the efforts that China always breaks out, like you just stated, and then they come back in and these cycles that they go through. We see things every four years, you know, in politics and all of that, we really base our views every four years,
[00:13:07] we’re swapping them out. China doesn’t necessarily have that vision, they have a long-term vision. Can you talk to us a little bit about that?
[00:13:19] Jason Szeftel: Yeah.
[00:13:20] So China has this bizarre combination of a long-term vision and an extremely short-term vision. So let me tell you what I mean, so it’s like you said, there’s a long history but most of China’s history is division and chaos.
[00:13:33] If you look at what, you know, if you look online, you look at Wikipedia, you’ll be like, oh, there’s all these dynasties. It looks like a, you know, one long string of continuous unified national governments. They’re just kind of briefly broken up by some little problem periods and then it reemerges just like a Phoenix every time.
[00:13:47] That is a, that is a very deeply, uh, misrepresentative picture of Chinese history, really it’s the other way around. We mostly have states that are even, you have a brief, so basically there’s three parts to any Chinese dynasty. You have it when it’s coming up, it’s just unified, it’s integrated, it’s powerful,
[00:14:02] it’s on the rise, that’s maybe a third of the time, and then you have stasis and degeneration or uh, coming in, and then the final third is like absolute breakdown. And so you actually, you can take all these years of Chinese history and when you have to start breaking it down this way, you’re looking at mostly periods of like, brief periods when it’s coming up, which is kind of what we could say is the 19, last 20, 30 years in the recent pattern.
[00:14:26] And then it’s just, it’s absolute chaotic breakdown, so that’s really important. So what you see when there is that moment where things have come together and try to have this opportunity to unify, to do big things. They go hard, they go so hard the rest of the world looks, looks at them and says, you dudes are crazy,
[00:14:43] you’re extreme, you’re barbaric, you’re insane. Because what you need to do when you get this opportunity for political consolidation, for economic integration, for development, for any of this, the Chinese, they know that it’s deeply embedded in China, the Chinese psyche, you have to go, you have to do everything.
[00:14:57] So that is why we have the largest [00:15:00] infrastructure buildup in world history, by far, we have the largest investment in, in heavy industry and everything the world’s ever seen by far for decades. You just see an absolute push on all cylinders from everywhere because there’s no other way to do it. And the worst part about it is China’s problems are so big
[00:15:16] and they’ve been getting worse as the country has gotten larger, as the technical systems you need to become a modernized society require more and more systems, it’s become more unmanageable. So what China is doing now is just absolutely pushing everything to the absolute limit. And unfortunately, we’re gonna see that hasn’t been enough, but this, that’s the key thing.
[00:15:33] You have this long history of primarily chaos, and then you have these brief moments where you can try and fix everything. And every time they try and come together, they’re trying to overcome all of these challenges. And what happened this time is they’re trying to use all of the tools of the industrial and the digital and the, really the modern world of modern science and technology to overcome these really deep challenges.
[00:15:55] And this is, there’s been nothing like it the things they’ve accomplished far outweigh any old dynasty, it’s a completely different level. It still, it hasn’t been enough, but it’s that weird combination of a long-term perspective, which honestly, it’s really a farce anyone’s ever saying, oh, these, they’re like wise old mandarins
[00:16:10] they look out thousands of years. It’s like, yeah. But the pressures right now are usually so gruesome that they actually can’t. So for example, since 2008, the reason China, the reason China was able to weather the storm of the financial crisis so well is because it just flooded its economy with credit
[00:16:27] and it has not been able to really stop that. So 2013, 2014, 2017, 2019, it had these opportunities to dial it back, try and reconfigure the economy, but it just can’t. So what it was, what it’s been doing is making the problem worse economically by kicking the can down the road. And it’s, that is not something you would do if you were really looking from a long-term perspective.
[00:16:48] So actually what we’re seeing sits around 2014 where you, you’re right they, they, they tried to branch out to the rest of the world. Then they saw that capital, the rich people in China, their money was flooding out of China, to not come back. They were trying to get any, all of their money out as best as they could out of China.
[00:17:03] So the Chinese government actually shut all this down. They’re trying to keep everything they have together just recently. They’re declaring that all members of the poll, of the, basically the communist party and the high level members and their families, they all have to sell everything they own outside of China because they’re trying to get all the capital and check it all the money they can.
[00:17:17] Cause they know, you know, basically things are about to shut down again. There’s, I mean, obviously we’ve seen actual shutdowns with COVID and stuff, but this is a part of this larger pattern.
[00:17:26] Ed Watters: Yeah. Economic pattern, uh, very interesting. So, uh, is, is China or our pocketbook the
[00:17:38] problem?
[00:17:40] Jason Szeftel: Is China or the pocketbook?
[00:17:42] Ed Watters: Yeah, Is China or our pocketbook
[00:17:44] the problem, you know, America tends to go out and they want to harvest from other nations and it’s business as usual, you know, is our pocketbook, the problem?
[00:17:57] Jason Szeftel: Hmm. You know, it’s always very conflicted here. So the United States last 75 years, really 1945 let’s say, 2020 COVID hit. This has been the best time for any country anywhere in the world to develop that has ever existed
[00:18:11] and it’s not even close. All the Imperial systems of the world were dismantled with the end of the Soviet union and the reich standing one in particular. And you had global maritime trade, you had global security, you could access any resource, any market, any material, any worker, any labor, anywhere in the world
[00:18:30] so it enabled a lot of things. And there were other factors that came in, there’s the demographic boom of all these countries, had all of their industrial populations at, in the right, you know, in the right age group at the right time, working really hard, there wasn’t like 80% of the country wasn’t old people, right?
[00:18:44] Who were just sitting down, which is where a lot of countries are headed. You had all these factors that came together and so it enabled a lot of things. And it’s also enabled a lot of really bad things from the perspective of, you know, of Americans, you know, parts of the United States to, to make this whole global trading system work. To allow all of Western Europe to develop, to allow a place like China to develop, to allow a place like India, Brazil, all these places to develop.
[00:19:06] There was always going to be a cost in the United States. There’s gonna be a social cost, there was going to be industries that could not survive when you’re adding the equivalent of hundreds of millions of people into the global labor force, uh, for pennies on the dollar close to slave labor, because you have really cheap shipping costs,
[00:19:21] you have very low security costs and insurance costs because everything gets everywhere really cheap. You can buy something, you know, that was built, built in, made in Bangladesh, and it costs you nothing to get it here. You know, in this world of where you could manage these supply chains, you could do things that have never been done
[00:19:37] and it enabled a lot of things. But it’s, ultimately I view what America did over the last 75 years as primarily a net benefit for, for the world. Because the, for example, with China, so many people were brought out of poverty it boggles your mind, right? And I, I’m one of the people, I’ll frequently mention how China is much poorer than people realize. [00:20:00] It’s, it is not a modern, you know, the coastal cities, Shanghai is a first world city
[00:20:05] no, no question. And go, go 200 miles inland, you know, Southwest and there’s nothing first world in eyesight. So that, that’s a real challenge, but it’s just, there’s deep moral questions. Do we care more about American populations? Do we care more about where this country is going? Do we care? There’s deep questions about the international system and where things could go, but here’s, here’s a really great way to think about it. Right now
[00:20:29] we’re seeing something, we’re seeing a big war in Europe and here’s a, here’s a question. After world war two, you know, the United States had just, not only had it defeated Japan, but it also fought a war in Germany and it managed to do so while providing all the materials and the money to the Soviet union and to the United Kingdom. It basically won a war in two different parts of the world at the same time and came out totally on top,
[00:20:54] there had been nothing like this ever in history. And so if you’re a person and you’re thinking, well, should I invest my money in France right now? Or maybe I should invest it in the country with the bigger market, that much greater potential, you know. To even create a system where all money, all, all talent, all, all capital, all industry doesn’t head to the United States,
[00:21:13] it’s almost naturally pulling things in, right. We know this with immigration, every single person who is extremely smart and capable, wants to move to the United States and there is no way to stop it. So in a way, we are sucking all the best people out of all the other countries in the world. And we are, so is that a bad thing?
[00:21:27] Is that a good thing? It’s just, it depends on what you want, it depends where you think humanity, civilization, your country is going, what it means, and whether it’s good, whether it’s bad. These are very deep questions and we don’t really, the United States is so overwhelmingly powerful, and I, I don’t and I don’t mean this in sort of an American exceptionalist way, but it’s just the absolute fact of life that, it is very hard to see it when we’re inside it.
[00:21:52] Ed Watters: Yeah, yeah, you’ve got such a good point there, you know, uh, there’s, there’s so many people that look to us, not just for favor, but for influence. And, you know, I’m watching that diminish and it’s kind of frightening, but at the same time, I have this, uh, outlook that we have seen a lot of bad things and that trouble, that time that we get into, it always pulls us into this coordinated effort
[00:22:28] and we always seem to pull together. Uh, world war II is a good example of it, you know, we, we were isolated basically before world war two, and that, that was meaningful in many ways. And we were warned by George Washington in his farewell address to stay out of these international affairs. But yet here we are, we are trying to be here and there and tell everybody this and that
[00:23:05] and, you know, maybe it’s a good thing, I don’t really know that’s up to others to decide. But my, my point is we, we have a log in our own eye and we don’t need to be pulling somebody’s sliver out of theirs. And we always try to use our muscle instead of our political know-how to overcome, these trade negotiations, is
[00:23:38] very critical to everybody because everybody wants, you know, different meaningful connections. The banana market, and avocados, and rice, and all of these things that come from around the world, trade is a big deal. And being isolated is not necessarily going to be the best route for our modern day. I know a lot of people say we need to just close our borders and I don’t know if that’s good for us or not.
[00:24:13] What’s your opinion on that?
[00:24:15] Jason Szeftel: So
[00:24:16] I’m going to focus on what, the way, the way I see things as they are and not the way I think they should be, like nothing, how I want it to be, how I wish it was. I’ll just try and give people a read on what I see and where things, things are going, regardless of how I feel,
[00:24:32] right? I can tell you guys how I feel and also again, but I think that’s a more useful baseline. So I think you really nailed it. I think that if you, if China has cycles of basically order and chaos, so order, you’ve got a little period of order then chaos, order, chaos, order, chaos, but that’s the Chinese cycle
[00:24:46] historically. Americans have a different cycle, I think we could say it’s a pattern of engagement and then isolation with the world, so you nailed it. That George Washington says at the start, leave the rest of the world alone, we’re going to do our own thing. And then you’re going out and you start [00:25:00] having, you know, you have an obviously mixed, you have the Spanish civil war, I mean Spanish, American war,
[00:25:04] you could use that one, there’s world war one, and then we go isolationists. There’s this world war two and there’s this, and I think the way things, what’s happening now is we had another period of global engagement after world war, I mean, after 9/11. We had wars in Iraq, Afghanistan, and I think we’re heading into another period of some form of more isolation, just because we, Americans are tired of it.
[00:25:26] You know, we’ve had 20 years of war and it’s, it’s going to be extremely difficult for a government to argument, just to say that we should really be putting more American boots on the ground in different parts of the world. And American troop deployments are actually at the lowest before Ukraine situation,
[00:25:41] uh, the lowest, it’s like reconstruction after the civil war, it’s really a strong period of retrenchment in the United States. And I think that that’s important based on, just for the American mood, the American rhythm, and how it’s, how it is internally. And I think we’re also in a very, very different world.
[00:26:00] So you were mentioning how trade is so important. Well, another important fact about the United States is that the United States is actually one of the least integrated nations in the world with other trading systems, right? It uses, it’s like 14% of U.S. GDP, ish, is related to trade. Why is this? Because this is primarily because the United States has such a large internal market.
[00:26:18] That it’s almost like, you know, if you’re selling something from Seattle, somewhere in Miami, you have, you know, 330 million people, you have high levels of income all over, you have a large consumer economy. The United States, it has all the natural, you know, it has the food, it has the energy, has so much of what it needs just within its borders. That it has,
[00:26:35] it’s almost like it is a trading system on its own, and then you add in NAFTA. And so North America and Central America as well, and a little bit of South America, like Colombia, you’re looking at a massive chunk of the world that is self-sufficient, basically almost everything. And so it really does function on its own.
[00:26:51] Another country, let’s say a great example is the United Kingdom, the United kingdom needed an empire to become the, the, you know, the British empire. There’s not enough, it’s like a small, medium sized island, right? You know, it’s like, you know, maybe the size of the state of Michigan or something, and it’s not enough there. You need an empire that will give you all the resources all around the world that you need.
[00:27:11] So you needed South America, you needed, and you need to find all these trade nodes all around the world, you need to control access to all these key regions around the world, to just put your finger in every pot. And Japan is another great example. There’s nothing on Japan, there’s no material resource on Japan.
[00:27:24] They needed an empire to get that, to get what they needed until of course, after 1945, the U. S. basically gave the whole world the equivalent of their own empire. It’s like, oh, don’t worry, you don’t need to go conquer China, Japan, just join, join with us and you’ll be able to access anything you want in China. It’s like you got it,
[00:27:42] you didn’t have to pay for it. Yeah. It was one of the greatest deals ever for every country in the world, but the United States itself doesn’t actually need it. This is a big reason why people are always asking me, well, is the United States an Imperial empire? Is it an imperialist power or not? And there’s two good ways I’ve found to think about this,
[00:27:56] one is how does the different part of, the different parts of the United States relate to itself, right? So in a place like let’s say Russia, for example, which historically its empire is communist stuff or trying to, to a lesser degree, you tend to have a capital city where all the money and all the wealth is in the main city
[00:28:12] and there’s like nothing else, there’s not broad based opportunity. But in the United States, people in Texas do well, people in the north, Pacific Northwest do well, people in California do well, people in Florida do well, the great lakes region do well. There’s a very wide base and there is not a, there’s no yoking the various parts of the country to essential authority, which is, you know, you currently see that in federalism, you see that a lot in the structures the United States has. That’s one important thing
[00:28:37] and then there’s also, how does the United States relate to the rest of the world? Well, a lot of what it was doing after 1945 wasn’t grabbing resources all around, like the U. S. could have taken anything it wanted after 1945, we always need to keep this in mind. The U. S. was so overwhelmingly powerful in 1945, think about it.
[00:28:53] It’s just, it’s not, again, it’s not like a judge, a value judgment. It’s like Europe was in ruins, Japan had been defeated, China was in civil war, uh, Africa was, there was no development anywhere. It was just, the United States quite literally could have taken over everything, not ever, you know what I mean?
[00:29:10] It could have been, it could have been a very different world, but we didn’t do that. And the big reason why is not because we’re moral, it’s not because we’re better, it’s like, we just didn’t need it. And as crazy as that sounds, it’s like, we just don’t need it. You know, we’ll let you guys develop it, you can help us with the Soviets, and you’ll have access to us and we’ll have access to many resources,
[00:29:26] you could, you could do this thing and it worked. But what really happens is so much of this global trading system is actually to benefit europeans, uh, north, Northeast Asians, Koreans, Japanese, and all that. And the big cycle that’s going on now, not only do we have the American pattern of isolation once more, uh, we also have absolute breakdown in the rest of the world.
[00:29:46] So we’re, we’re, like everyone was talking for a long time about, oh, a multipolar world. We have China, and you have Russia, and you have all this stuff. And I guess we’re all saying that Russia is quite, not quite enough to be a poll on its own, it can’t even take over Ukraine. And it’s like lost, you know, it’s really struggling there [00:30:00] with the basic thing.
[00:30:00] And China would struggle a lot to take Taiwan, so people should be aware of that. Could see something very similar or worse that would happen in a conflict there. And neither of these places could actually survive on their own. So what, we’re not, we’re not going to, we’re going to see it’s multipolar, but it’s like, well, France is a thing, it’s Turkey,
[00:30:15] this is not the kind of serious multipolar world we’re talking about. We’re going to just see a world of more breakdown, of disorder, of chaos, unfortunately. We’re seeing that with energy markets, we’re seeing that with the fa, the clump, the coming global famine we’re going to see in a lot of the world and the United States is insulated from all of this,
[00:30:33] and it really is. It’s the natural bounty of the United States of North America. And there’s, we go really deep into this, but it really reflects itself in the trading patterns, in the military patterns, all this stuff that the United States engages in. And just to know that we actually don’t need the rest of the world as much as we, as Americans think, you know, we always think, oh, we need China to sell ourselves, to sell us stuff.
[00:30:57] It’s like, And we get into that, but we don’t need energy anymore cause we have, we’re the largest energy producer in the world, right? That’s a new development. So if there’s any, if there is ever American war in the middle east, this is to help Europe get energy, right? You know, this is to help Asia get it.
[00:31:13] Right. And that’s kind of actually what it was for a long time, you know, the, we, we’ve never used it as much. We are the peak, at the peak of our whole dependence in like 2005, we still use less foreign energy than China uses right now. So it’s the idea that even China couldn’t survive, china needs this American system.
[00:31:30] There is no world where it can, like the whole thing we were talking about, we have this land power surrounded by not just a bunch of islands, but a bunch of like developed hostile nations that have been lined up against China for a very long time. That’s a, that’s a, that’s a bad neighborhood to be in.
[00:31:47] Ed Watters: Yeah. Uh, I’m glad you brought all that up because it’s significant. Uh, we, we have been the bread basket of the world for a long time. And, you know, through these trade negotiations to help Europe, Central America, all of the other nations of the world, we, we have endangered ourselves. But we, we have to remember it doesn’t take that long for American know-how and technology to tool up and start producing again.
[00:32:21] And a lot of people, they look at Detroit, you know, and, uh, these big mega factories that have dwindled to nothing, but like you just stated, that was all to help other nations develop, to help them come out of their desperate needs. It’s very interesting. So I liked that you brought that up.
[00:32:47] Jason Szeftel: I think another key thing about industry, because people don’t realize this, America has always had the platform to just ramp itself up, like in a way that another country does not.
[00:32:56] We have money inside the country to fund almost anything we need, it’s just a question of what we want to do if we have a government that wants to do it. And, you know, when, when we really need to things happen quick here. And I think also a key part, well, let’s start with the industry thing because everyone looks at the rust belt,
[00:33:12] we just think this is the absolute decline of America. And that region of the United States has declined. But what’s happened is the industrial center of the United States, yeah, it moved, um, moved partially, you know, to other countries, but what’s really happened is still, yeah, the United States is still the second or third largest exporter in the world,
[00:33:30] it is. And it’s going to massively increase its industrial plan to deal with the breakdown of global supply chains, because, and it’s not just because the United States is doing it, every other country now, they don’t have as big a consumer market. They were here to sell to the United States that’s how Japan developed
[00:33:45] they sold things to United States, moved up the value chain. That’s how Germany developed, sold things to the United States, moved up the value chain, South Korea, China, all of them. And that era is unfortunately ending. So what is happening is they’re all moving production to the United States. Hyundai just opened, they asked for another plant, the Volkswagen, everyone, everyone is saying we have to locate production in the United States and where they go is the south.
[00:34:05] So the industrial Heartland of the United States is much closer to the Tennessee river valley than to Detroit now, it is, this is where it’s happening. So you have, you have more investment that the, you know, for many years running now, the state, U.S. state with the highest level of foreign direct investment, it’s not California,
[00:34:24] it’s not New York, it’s Alabama, Alabama, It’s Alabama. And there’s a lot of reasons for it, but basically it’s insane and a lot of factors are coming in. You have, big one is, uh, there’s no union presence. So everyone likes talking about unions and there’s maybe 10, 12% of the U.S. workforce is unionized. And in the auto industry, it’s three major legacy auto makers primarily who are unionized
[00:34:47] and that is in the great lakes region. And what happens starting with Toyota and Honda back in the seventies, eighties, even sixties, I can’t remember, the, they started moving production to the United States for the same reason, for other reasons, too. And they started moving to the [00:35:00] south and they went there because they didn’t have union laws.
[00:35:02] And now you have right to work laws so you have a massive labor advantage in the south. So your labor is cheaper and it’s not just like, not just Tesla or whatever. The students, it’s like every foreign company is in the south as well, none of their workforces are unionized. So it’s a huge major disadvantage to the old manufacturers, but it’s,
[00:35:21] The majority of the workforce isn’t in those states anymore. And you also have cheap energy inputs because the massive oil production and natural gas production in the south, but along with all the petrochemical development, you know, in Texas and Houston and all that is insane. It is, it is, it has lowered energy costs,
[00:35:36] uh, extremely. So, and energy is often the most, you know, besides labor, you have, energy is the largest and most costly input to industrial production. It’s a big reason why places like Mexico have struggled to industrialize. It’s like you cannot have, if you don’t have reliable energy, you think your house uses a lot of energy,
[00:35:51] wait till you have a giant factory running all the time with massive equipment, it needs an enormous amount of energy. And so a big reason why Germany is in, has been in bed with Russia with energy, with natural gas is because it needed to lower its costs on energy. Because it’s labor is so high, it’s labor so costly and expensive to make itself viable,
[00:36:10] it needed to lower energy costs as much as possible. And natural gas was the way to do it and also kind of bound them with Russia. They thought that might work out better, it didn’t. Uh, and then they also needed to take advantage of the EU to lower the current, to make their currency, uh, make it more competitive with the dollar and to embed
[00:36:25] within the German system a lot of cheaper labor and cheaper parts production in Eastern Europe. So they were able to lower the parts, cost, also the shipping costs with global, with global trade and the currency advantage, and they also got cheaper energy costs. This is why the German industrial export model could function. By the way, all that’s going away, unfortunately, all that’s going away
[00:36:45] and it’s a huge thing. So the advantages that are now accruing to the United States are immense and they’re, they’re, they’re, they go across many industries, they go across textiles, automotive, uh, aerospace, uh, petrochem, plastics across the board, it’s a huge change. And I think that’s a very important thing in the industrial thing.
[00:37:03] Also that mentioned, the, one of the most important facts of, of the modern world that is going to impact everything is demography. So, this is huge, everyone knows that China has a huge population, they know it had the one child policy, and they know it has, and now everyone’s getting old and there’s no babies anymore, you know?
[00:37:20] And, and the way it works is this happened all around the world. The moment industrialization starts, people leave the, the farms where you’re in the fields, where you basically had as many kids as possible, they would work endlessly as free labor. Uh, or, you know, if you have a family business, you have all the families at the Chinese restaurant working because it’s free labor,
[00:37:36] you don’t have to pay them. Uh, that’s, that’s rare though, when you get off the farm children become the cost, you don’t have as much space. You basically see the birth rates plummet as urban, as industrialization, urbanization, education, all of these things go up, incomes go up too, births plummet. And a lot of things that influenced us in, in, in effective, but basically all across the world.
[00:37:55] And even in India, India was the last place that had a fertility rate, that was really a major country, a fertility rate above the other place, right, India is now below it too. So we are at, the entire world, parts of Africa, which is probably gonna happen too. The entire world is now heading towards mass aging, and you know, also just the disappearance of various states because they literally don’t have enough people.
[00:38:16] And the way it used to work before industrialization is you had, you know, there’s four types of workers basically. You have children zero to 18, you have young workers, which is basically 18 to like, let’s say 45, and then 45 to 65, right, then you have retirees, right? So children, young workers, mature workers, and retirees, right?
[00:38:32] And the way it used to work you used to have a lot of kids. And then, you know, the brutal national wars that just killed progressively more people. You had a lot of kids, you had no contraception, a lot of kids, you know, less young workers, less mature workers and very few very old people, right? Because they would die.
[00:38:46] You couldn’t do anything about it. What happens when industrialization happens and all this, the demography, the curve starts to shift. So you have, you start to have, we’re going from a lot of kids to now having a lot of young workers, and then a lot of mature workers, and finally, we’re entering the world like Japan, where you have just a lot of old people.
[00:39:01] And what happens is there’s certain economic impacts as you move through this, this changing population pyramid. You have a lot of kids, you don’t have a lot of capital, kids cost endless money, they don’t pay anything into the system, there’s no taxes, you have to pay for them. And then you have, when you have young workers, these are people who are actually just spending and taking on debt and everything, right?
[00:39:21] Getting a house, you’re buying a car, you’re handling your accounting, you pay for all your kids, you’re doing this. You’re just, you’re just, endless money, right? And you, you fuel the economic system of, of your country, I mean, you, you fuel the growth. Uh, you fuel the, the immediate demand, the children are your future growth, right,
[00:39:35] because you need more children to eventually become the new workers. And then you have the young workers who are in demand in the moment. And then you have mature workers who are, they paid everything off, they, they don’t need, they don’t need anything, their kids are gone, their house is paid off, and they’re making insane money.
[00:39:48] Their costs are lower than they’ve ever been, their, you know, their debts paid off, house paid off, and they’re just paying into the system. So again, they’re getting gobs of money, right, they give you gobs and gobs of money. And then finally you just get to a world where [00:40:00] most everyone is retired and you just, you have no money in the entire system,
[00:40:02] it’s a disaster. So what’s happened is everybody, you know, industrialization is happening as the world has shifted after 1945, the whole world gets access to these development possibilities, the United States is enabled. And slowly by the 1980s, nineties, you’re starting to see that this growth is movement up the population pyramid.
[00:40:18] And so in the nineties and two thousands, well, the nineties, we actually had the majority of the developed world, the United, we’ll use the United States as an example, the United States more, majority of the people were in their, they’re young workers, right? So they were just, uh, spending a lot of money. But we didn’t have a lot of mature workers,
[00:40:30] we didn’t have as much money, but there are certain factors that made that work. And you had all this, fall of the Soviet union, you had the birth of the, the, the Euro, and all of this was flooding money into the United States. It was actually a good time in the two thousands, you had endless money and in the 2010s, you have this too.
[00:40:45] You have all these mature workers who are the majority of your population, and they’re just sending money everywhere, right? They’re the reason you’re sending money to Brazil and to China, and it just, it flows, flows around endlessly, right? And now we’re entering the world of the 2020s when this all stops, right?
[00:40:57] So every country is basically aging into mass retirement and they never had enough kids. Only the United States has a large millennial generation, like me, who is able to eventually take the role of being a large cohort of, of earners and productive citizens who pay their taxes and can fund the retirement of all these people and all that stuff.
[00:41:17] The rest of the world has none of it. China is the worst, China stopped having kids in the 1980s. Every, their entire demographic statistics are, are, are almost, are a fraud basically. So I wouldn’t, I’d ignore them, but it’s a disaster and they’re going to get old before they get rich. And they’re not gonna be able to fund anything,
[00:41:34] they’re not going to be able to have a consumer growth model because they’re not going to have, be able to support it, has huge problems with this. And I bring this up, not to just give this large thing, but because this is the world of trading, of trading nations and all this kind of stuff. It depends on having the right population structure to enable the right capital structure.
[00:41:54] So that means that if everyone’s a retiree, right, you basically, you need a country like the United States, which is the center of a trading network where everybody can sell to them. But the United States is larger than the next six consumer economies combined. And it’s going to soon be like the next 15, because everyone else is losing the ability to have those young people who buy things,
[00:42:13] right? Once you’re a majority you’re just saving up and then once you’re retiree, you’re not, you’re just, you don’t make income anymore. So you have to save everything, you’re very conservative, you don’t spend, et cetera. And you require, you’re getting pensions, you’re doing all these healthcare costs, all these things that are actually a drag on the government finances.
[00:42:30] And so everyone’s very worried about like a Chinese trading system, none of this is possible. Just, you can’t have China as the center of a trading system because it does, it’s not a consumer economy. What it would basically try and do is destroy the industrial systems of any country that is just aligned with China.
[00:42:46] It would be, you know, Vietnam and all these other countries that are with China. It’s a disaster, it doesn’t make sense. What actually, the way it used to work, so I know I’ve been talking awhile, I think there’s another really key thing. Cause everybody was, everybody was wanting Trump and imports and trade wars. And we need some context for this.
[00:43:03] So after 1945, the U. S. changed the game. The United States rewrit the map, rewrote the map, but the way it used to work is more like what Trump was talking about. So let, let me tell you what I mean, you know, great, great, greatest example is the United Kingdom. The United Kingdom was the first place to industrialize and it had massive products,
[00:43:21] it was creating more stuff than anyone had ever created. And so what it did is it would go pummel some country and force them to open up their markets to its products and then dump everything on them, destroy their industry, like complete, like that, that was the, that was a really good mechanism, right,
[00:43:37] that’s what they did. It was like, it was a, that was what you did when you lost, you would have to open up your economy and they would just destroy it basically. That is, you know, that’s a very important thing, and that is more the way it worked. Industry was very precious, all that kind of stuff. After 1945, It really changed because the United States, like I said, it has, it’s so big,
[00:43:55] it’s so powerful, it has this enormous market, this enormous capacity that it would, we were able to allow other countries to join in, on our, on our system, right? We let them in, we, we voluntarily allowed them to import to us knowing that it would actually kind of probably hollow out a lot of industries over time. but we were so predominant, like just predominantly, we were so overwhelmingly powerful. Over 50% of GDP or whatever in 1945, it didn’t seem to matter that much.
[00:44:21] Then all these countries developed, you add more and more countries too. What we originally were doing was trying to redevelop Europe and Japan to help them fight with the Soviet union against us. We could, they couldn’t be rubble they had to be useful and they had to be on the front lines, right? So it was a strategic initiative or initially, and then it just became a broad like, let’s develop the whole world.
[00:44:38] Well, once you start developing the entire world, you’re, you’re, suddenly the cost of every little carve out, you know, Canadian dairy, wood products, it just starts to hit every little piece of the economy. And it, you start to get major effects even in a country like the United States. But this whole system of allowing imports into the United States,
[00:44:56] this is the reason we were able to have the development in the, [00:45:00] of the rest of the world that we saw. We had this time in history when you could have export oriented industrialization, which is how every major economy, new economy has entered the world. Taiwan, Germany, not new, or reentered, or entered.
[00:45:12] So Taiwan, Germany, China, Japan, South Korea, all the major, big success stories of the last 75 years. It’s all export oriented industrialization where you industrialize by selling stuff to United States to move yourself up the value chain and eventually have your own self-generated economic growth to some degree that lets you kind of do your own thing more.
[00:45:29] So that’s the story, right? But that story is basically over when we saw this trade war and what was going on with Trump. Again, it’s, it’s, you know, one way to look at it is like the world has now changed, uh, you know, we, we had this system that was intended to do that, but now the consequences of it were, had been, felt too deeply.
[00:45:47] It had manifested in the American electorate, it had elected Trump, and there’d been a strong animus against China, which is the, you know, the core country of globalization. China is like the creature, the house, that globalization built basically, right? And yeah. And so it became the, the, the, the lightning rod for all of this.
[00:46:05] And what, what a lot, it was a lot of this trade war stuff was, was this very overt sign that the world we’ve known, it’s totally coming to an end. And then what is the world that comes after this? What is the world after this global trade, and globalization, cheap shipping, and total maritime, Naval production all over the world, large consumer economies.
[00:46:22] Uh, we don’t know but it doesn’t look good. Like for most of the world, there’s no answer to this problem. There’s no answer to what you do if your entire population is heading towards mass retirement or death, right? You’re, as a, as a state, as a demography, you are disappearing. So I will say, um, this is a slight side, but when you have this, we’ve had a lot of, lot, many times in history
[00:46:44] there’s been great fears over the changing national population, right? In the United States when the Pols were coming into the country, the Irish, Catholics, all this stuff about the national composition of a country, it’s been very fraught. And I will say that we’ve never been in a world where you have total depopulation of the world going on.
[00:47:02] Deglobalization, depopulation are the two major forces going on right now. And when you have depopulation and you have these changing ethnic makeups of the country, this is a witch’s brew for crazy ideas, for, uh, everything, everything you can imagine. And I just, that, that context is important because there’s no government that has provided, uh, really even talked about this issue as much as they should.
[00:47:24] And there’s not even a hope for improving it, right? China’s not going to be able to do a fertility program that’s going to work. Russia tried and failed, Iran I think that actually has the most intense, the attempt to have more people to improve its population, to improve all this stuff I’m talking about. It’s been a total disaster.
[00:47:40] China is literally converting old abortion clinics into like fertility clinics, but it’s not going to matter. This is a deeper rooted process related to industrialization and urbanization. And it’s, it’s, it’s broader, it’s across the world, so it’s a, it’s a major problem. And basically we’re going to have to live with it.
[00:47:55] And really the only country that, major country that can look like, look like it, looks like it can make it out of this in any kind of good shape is the United States. For all the reasons we talked about, the natural bounty, all the people that everyone at the high end and the low end of the, the labor, the skillset labor scale, like skillset scale, they all want to come United States.
[00:48:13] Whether you’re a really poor Mexican person who wants to have the largest increase in your wages, going from poor rural agriculture, something in Mexico, to any job in the United States, even a minimum wage job, that’s often the largest increase in wage anyone ever gets. And then at the high end, if you’re the most educated person in Ukraine, if you’re one of the smartest engineers in Russia or whatever, you always want to go United States. the United States is going to suck up
[00:48:36] not only all the labor in the world, I call it labor. It’s also going to set up, set up all the capital. So money is flooding out of economies, rich people, basically the smart money so-called is leaving all the other countries where the writing is on the wall for the entire system as it is. So all that money is probably going to flood into the United States.
[00:48:54] That’s why right now, among other reasons why the U. S. dollar is about to hit parody with the Euro. And it’s going to erase one of the competitive advantages there. And you just, you have money flooding into the U. S. system, which is often reflected in the, at the strength of the U. S. dollar, and that’s not going to stop.
[00:49:08] And then the United States has the labor advantage, it has the capital advantage, not only because of the money’s coming in, but the U. S. produces more capital naturally than any other country. And it has the land advantage because United States has the best geography in the world to accept all these people for transportation, for agriculture, for trade, for industry, you know, that’s the root of it.
[00:49:27] So you have these inbuilt advantages, they’re all stacked up off each other, and it’s actually leaching whatever is possible from the rest of the world to try and fix themselves. Not that they could do it anyway, but this is the way things look.
[00:49:40] Ed Watters: Yeah. You know, that’s well said. I’m glad you brought up the
[00:49:45] upside down pyramid, basically with our population, uh, it’s critical. And that, that global thing is going to affect all of us. It’s going to be interesting the next [00:50:00] 50 years to see what transpires out of this and really, yeah, really the, uh, population growth is very important for any nation. This, this concerns me now with a lot of what’s going on in America but, you know, uh, you, you said earlier in what you were just stating about not taking, uh, statistics, what’s coming out of China. But you know, One study suggests that the slowest population growth since the 1970s out of China right now.
[00:50:42] And I think that’s really significant when we look at like the one child policy that they had. And I think they changed that now where they’ve actually want people to start populating China. And that’s a scary thought also because you know, the, China already has a lot of people. So gobbling up resources to support all of this,
[00:51:14] it’s a fight that’s for sure. What do you think we are actually looking forward to with relationship with China? Because you see this expansion into the South China Sea, and you know, that I’m more concerned with the Taiwan situation than the Hong Kong situation. But they’re both kind of really key to that, that global trade.
[00:51:47] And what’s your opinion and thought on that?
[00:51:52] Jason Szeftel: Sure.
[00:51:52] So I think the key thing is that the Chinese, no attempt to reconfigure the Chinese population structure is going to work, right? That’s kind of what I alluding to earlier. It’s, it’s too little too late for their attempt to change the one child policy. Way too, way too little, way too late is the way to think about it,
[00:52:09] so that’s not going to succeed. And then you’re also right that China really in the last 500 years, China has become increasingly overpopulated not like in some generic, but like to what the land in China is capable of supporting. All right. So what do I mean by that? So the United States, just one of the most important facts about China is that roughly two thirds of China is mountainous or hilly.
[00:52:31] You know, it’s not good land to do anything, right? A great example is Hong Kong, right? This really impressive looking city because it builds, uh, skyscrapers up the mountain side, but you don’t want to build skyscrapers up a mountain side if you could ever avoid it. You go to Manhattan, it’s all flat, right?
[00:52:46] That’s what you want, that’s much better. So, and you’ll see the same thing with agriculture, you see these really impressive rice patties that crawl up mountain sides. Well, you don’t want to do that if you ever can, because you can’t use mechanized agriculture. It’s much more labor intensive to do, you don’t have much, you can’t get tractors,
[00:53:00] it’s a disaster, that’s what it is. So the United States is opposites basically. Instead of one-third, instead of one-third good land, like two thirds, you know, flat good land, and then two thirds like mountainous land, it’s the opposite. So it’s like one third, you know, the Rockies, and Appalachia, and then the rest of it is mostly good,
[00:53:14] right? So that’s a really important thing and what that means is that China basically, when we all hear about like the Colombian exchange, right? So you got the new world plan. So in the old world we got tomatoes, and then there’s potatoes, and all the crops are shifting back and forth. Well, another key thing is that a lot of these crops also went to China around the same time. And things like yams, certain sweet potatoes, and stuff like that,
[00:53:33] it allowed, uh, to, allowed China to basically cultivate a lot of the marginal land, a lot of it’s hilly land I’m talking about. It led to a population explosion that started in the last 500 years and then this really hit a peak in the Ching dynasty. And basically since 1800, China has been, uh, way over populated compared to what it could support.
[00:53:51] And then this just went out of control in the 20th century with, right, when we went to over a billion people, right? So it went from like 500 ish million to then, to like 1.2, you know, to potentially 1.4, depending on what you believe about the statistics. It’s, it’s massive and it’s far more than the Chinese land could support. The
[00:54:09] one way to look at this is the actual arable land that you can use and how much yield you can get per acre and how many calories that produces and how, how many calories, I mean, what number of people that amount of calories could support, right, that’s one way to look at it. And the only reason that China is able to support the number of people it has is actually because of basically industrial agriculture. Basically they inject the land with more industrial fertilizer than anywhere else on earth,
[00:54:35] it’s not even close and that’s what they do. They basically inject it with steroids to kind of get the, the juice it, to get the, the numbers they need. But I’ll tell you, even when I was in China, I think this was 2012, I was getting a lecture, basically I was looking at a map of China where all the crops are produced in China.
[00:54:48] And I remember this guy had to learn all this stuff, a lot of stuff, this guy stops Chinese guys. Like we can’t, he basically just said, and I remember at the time I was thinking, wow, China, so triumphalist, what’s gonna happen? And he’s like, we can’t have a first world diet in China. [00:55:00] It’s like, we don’t have enough land, to have the livestock, to have it also have the grain to feed the livestock, to eat as much meat as the rest of the world.
[00:55:07] Like full stop all over the United States, like full stop. We can’t eat like, and to make it more, even more powerful. China, if China could buy soybeans from the United States, China won’t be able to eat meat, right? So while, it’s like, oh wow, we only just sell soybeans to them and then they sell us all these manufacturing goods and God, we’re just becoming like a satellite colony to China.
[00:55:26] It’s like, right, there’s some of that, that’s kind of relatively true. But the deeper thing is like, if they didn’t have soybeans, they couldn’t eat meat they would all have to eat rice. And the whole Chinese agricultural system is, it’s a mess, I have a big article on that if anyone’s interested.
[00:55:37] It’s called Feeding China, and it’s a bad thing. So I just want to give this sense of this population pressure and these ecological, which is creating all these ecological problems. And there is no world where China doesn’t have some of the worst ecological disasters in the next 50 years. There’s no world where that just isn’t the way it’s going to happen,
[00:55:54] so that is a huge challenge. And then most likely we’re going to see mass famine in China. I don’t want to sound brutal, but the, the, the end result, anyone who’s been listening this long, China isn’t like in for a couple bad years. China, as we know it, is doomed that is really the key thing here. And this is obviously very different from what you know, people will say
[00:56:14] and everyone’s been saying China is a major threat. And kind of what happened is in the nineties, eighties, and two thousands, we were kind of underestimating, underestimating China and then we kind of flipped back over and we’re like, now we’re overestimating China. And so I always give this large context so people know that I’ve thought this through a good amount, but China is functionally doomed, right?
[00:56:32] It’s the energy, the agriculture, we go through all these finances, the trade wars, the diplomatic problems, political problems, the internal tensions, it goes on and on. And the reason we’re seeing a dictatorship in China is because the CCP and Xi Jinping look at the lay of the land and they think, oh my God, we know what this story looks like in China and Chinese history. We know what it, the main theme of Chinese history is, uh, Imperial collapse, basically. Imperial, Imperial collapse in the attempt to recover
[00:57:03] what we once had. That is the, that’s the theme of the, what I, I’d argue is that the most important Chinese political novels called Romance Of The Three Kingdoms. It’s about the fall of the Han dynasty and the attempt by a noble virtuous band of people to recreate that, uh, great Han dynasty and to figure out, you know, not have it descend into chaos. And the attempt to figure out what, where at the Han dynasty.
[00:57:24] Like that was the first time to try to, really came together and the fact the Han dynasty failed was like, it’s this, there’s nothing more romanticized and thought through and studied in Chinese history, the attempt to figure out why Han, China failed, the Han dynasty failed. I mean, right? We call them the Han Chinese people, right? That’s where, before then they were called something else, the people in China,
[00:57:43] so it is a very key thing. We don’t really think about it the same way with Rome, but it’s very, very, very, very, very, very important to China. And that the answer is of course that there is these deep structural problems that no state has been able to overcome and that have gotten worse with time. So the population pressures that are brought up are bad.
[00:57:59] The fact that China doesn’t have the, the energy resources it needs, like we’ve talked about once you industrialize, you need energy. Germany put itself in bed with Russia just to get the energy it needed because then you can’t be an industrial power. That Japan had to join with the, the United States,
[00:58:13] it had, it has no choice to this day because it cannot get the, they can’t be civilized if it doesn’t get the energy that the United States enables it to get, right? If this is, this is the way of the world and all these problems have gotten worse as China has gotten larger, as things have gotten worse. And the, the net effect of this is, is a horrific collapse of China, right?
[00:58:35] It will be as impressive as the rise.
[00:58:39] Ed Watters: That’s, that’s fascinating and I want to segue with that just a little bit because we’re touching on our time limit here. There’s two other subjects I’d like you to address and I’ll kind of combine them. That’s the, uh, nuclearization of China and all of that, you know, nuclear power that it has under the CCP.
[00:59:08] And also what’s with all of the cities, the ghost cities in China, and what is that about?
[00:59:21] Jason Szeftel: Okay, so nuclearization, do you mean nuclear weapons or nuclear energy or both?
[00:59:25] Ed Watters: Well, either
[00:59:27] way, because you know, you can easily transfer once you have the technology of one to the other.
[00:59:33] Jason Szeftel: Sure. So for nuclear weapons, uh, China has had nuclear weapons since fifties or sixties.
[00:59:39] They got it along with the Soviet union it was one of the first nuclear powers, France probably before the UK, but it’s been nuclear for a very long time and nuclear diplomacy and strategic deterrence, all this kind of stuff is a nitty gritty area of, uh, sort of strategic thinking and stuff. But the gist of it is basically that, uh, China just [01:00:00] needs to be able to have a credible threat to the Soviet union and the United States,
[01:00:03] now Russia and the United States, that’s the gist of it. The, increasing the number of nuclear weapons that you have really doesn’t change the strategic picture, right? This is part of the reason we had all these arms agreements during the second half of the 20th century. Like, you didn’t need, like once you hit a certain number of nukes,
[01:00:18] uh, it’s, uh, don’t worry, you’ve destroyed that country, you know what I mean? Like having 20 more, a hundred more, it doesn’t really change things. But it is, it’s often, uh, you know, a big reason, for example, the big reason the United States has, is always doing nuclear tests, not well, not anymore, but is always doing missile testing, military exercises, all this kind of stuff.
[01:00:35] It’s in part because a country like Russia, for example, responds to this sort of strong defensive posture, right?
[01:00:41] Ed Watters: Saber rattling.
[01:00:42] Jason Szeftel: Saber rattling. They look at this and they’re like, uh oh, you know, this is a big deal. So that’s a big part of it and so it is a great sort of great power type thing. There’s a huge nuclear component to it.
[01:00:52] And you know, the threat of tactical nuclear, nuclear weapons right now in Ukraine is something people are worried about. But most likely, the key thing is that China’s problems are internal to China, so there’s nothing it can nuke to solve this issue, right? And the same thing as with Russia, it’s like, you can, you can nuke the United States, well to destroy your country, right?
[01:01:12] That’s the net, like you could do it out of spite, like the United States is still chugging along and it’s just, you’re just so angry about it, there’s a limit to what anyone could do about that. But that’s, that’s kinda the, the main nuclear threat. I mean, there’s no amount of, China would, China is not, first of all, China has a very small number of nuclear weapons,
[01:01:31] I think it’s a couple hundred compared to thousands for the United States and for Russia. So it’s always never wanted to invest in the nukes because it knew it doesn’t really change things, right, uh, it really doesn’t change the picture. It’s investing more cause it’s trying to, it’s trying to amp up the credibility of its threat and its ability to intimidate and all this kind of stuff.
[01:01:49] But truly like in the end game, hypersonic nuclear weapon, it doesn’t matter what kind of nuke you have, there’s submarine, the United States has permanent submarine patrols under the water. And, and it has air, there’s, again, this is this whole triad thing in America. Also people in the strategic community and all that, and like this sort of political foreign policy community. People freak out whenever people, like the United States is currently spending an insane amount of money to modernize all of the nuclear weapons.
[01:02:15] We’re having new subs, it’s going to be, it’s just like, don’t worry, we’re spending a lot more on nukes than them. I mean, I’m not saying that’s a good thing, but that’s part of it. On top of nuclear energy, nuclear energy is actually the, this is the one energy source that could solve a lot of China’s problems.
[01:02:33] I have an article about this and how I really think that this is true. Solar and wind energy’s uh, useless for trying, try to use just 50% more energy than the United States, just to give you a sense of the scale of the energy needs, right? So this is China’s problem, it’s always a scale problem, China has to feed 1.4 billion people.
[01:02:51] So there’s the entire international agricultural export market, can’t help them if, if agriculture in China fails, so that’s one thing. And then the same thing with energy, they have nowhere near the resources they need internally to fuel this need, right? It’s just huge. The one thing they do have is coal
[01:03:06] so that’s why they use more coal than the rest of the world combined. Cole is the, is a big reason why they are able to get cheap energy to, you know, like Germany was using the Russian gas recently in the last couple decades, China used coal and that’s why it’s so dirty and hideous and stuff around Beijing.
[01:03:19] Ed Watters: Beijing, that’s right.
[01:03:21] Jason Szeftel: It circles around there.
[01:03:22] So nuclear energy is a key thing, but nuclear energy as an industry, has huge problems. It’s extremely expensive to build nuclear power plants, there’s no economies of scale, you’re spending billions of dollars on each new plant. And then also, first of all, there’s a lot of problems that China has built, you often build nuclear power plants near water for various reasons, cooling, stuff like that.
[01:03:41] And you know, you could have, if you have a natural disaster, kind of like a Fukushima, anything like that, even China is cautious about building just a bunch of shitty, excuse my language, shitty nuclear power plants everywhere, right? That would, and any attempt of having nuclear energy solve the problem.
[01:03:57] But you have basically a cost problem, you have a scaling problem, and you have just, you know, problems of really maturing the technology, improving the safety, it’s a huge, it’s a huge problem. So there’s a current push in the western world a bit, a bit as well in China, too. There’s a new generation of nuclear reactors coming,
[01:04:14] they’re smaller, this will be safer, realistically, they’re not coming until 2030. And then to ramp them up is also extraordinarily difficult. So there’s no answer to China’s energy problem, just because of that scale, you need so much, you need 50% more than the United States. You’d be building insane amounts of, uh, nuclear power plants.
[01:04:30] You’d have to do it quickly, cheaply, safely, they don’t have the, they don’t have the industry to do that, uh, and they don’t have the money anymore. They will have problems and there’s not enough time, so that’s, that’s what I say for the nuclear energy thing. Although long-term, if we had a world where you had energy to, to cheap to meter, a lot of things would change,
[01:04:45] a lot of things would change. So that’s one thing that could be a big part of it. And then Hong Kong, Hong Kong’s future is to be flattened, uh, I guess not flattened physically, but flattened to become an indistinguishable part of Southern China. At least this is the Chinese [01:05:00] national government’s attempt. So Hong Kong’s role,
[01:05:03] so Hong Kong, Taiwan, and China, mainland China, all developed together as one greater system from the seventies on, right, so, uh, late seventies on. So Taiwan is riding a lot of technology and financing, uh, the UK, I mean the Hong Kong, under the British authority, provided, uh, capital, and a lot of financial know-how, and it acted as a borderland and interface region for both financial flows, monetary flows, everything that you need to get into China and to start developing these core coastal regions that we talked about. Where a lot of the special economic zones in China were designed to deal with, interface with, uh, Hong Kong, to interface with, Xiamen was tied in to interface with Taiwan.
[01:05:41] This is a lot of the way that this happened, so they’re part of one system. However, we are now at the place where all these global trade flows and capital flows, everything is dragging out, and so Hong Kong doesn’t have the role it used to have. And Hong Kong is also competing with the internal Chinese financial center in Shanghai,
[01:05:55] so it’s a huge problem. And in any battle between Hong Kong and Shanghai in a world where deep, there’s deep globalizing processes going on, Hong Kong loses. So Hong Kong has been losing its value to China in the sense that it doesn’t provide the same amount of economic benefits, doesn’t help stabilize the currency,
[01:06:09] doesn’t help with all the foreign direct investment, all this kind of stuff. It does to some degree, but now you have greater problems. There’s a lot of, there’s deeper problems that this country has created, the, the, Shenzhen is creating. And it gets back to what we were talking about, about how China opens up the ports and then closes them.
[01:06:26] And Hong Kong is really the, one of the places where this is being seen in direct, in the, in the, in the sunlight. And what Hong Kong is, what’s happening there is the problem of democracy, the problem of freedom of speech, all these things in the Chinese eyes is, is happening in Hong Kong, it’s visible. And the idea that Hong Kong has become wealthy and simply a modern first-world state or city without really being part of the Chinese system in the same way.
[01:06:53] What this does is this opens up independent separatist tendencies, all across the Southern Chinese coast, because there’s a lot of city states basically nestled up in the mountains, along the Southern coast that are functionally, these are, these could be like Hong Kong. They could interface with the rest of the world.
[01:07:07] They could, they’re not really as integrated in with the Chinese system. This is one of these deep structural, um, many parts of China problems and Hong Kong is foremost in the, in that mind because it is, it’s now not providing, it’s not functioning as this borderland interface zone, because there’s less of an interface between the west and China.
[01:07:26] And a lot of, Hong Kong is becoming a locust for the, the conflicts. It’s becoming a border zone, like the conflict border zone, rather than a helpful, friendly border, right? That’s what’s going on in Hong Kong in their, their policy is to try and flatten it to make Hong Kong indistinguishable from any other Chinese city, to make it, you know, to just bring it into the fold, make people forget, make it just part of the system.
[01:07:46] We’ll see how that works, most likely that’s going to have some problems and that’s the Hong Kong situation. You’re just going to see an endless string of stories about how things are getting worse, freedoms are getting worse, people are getting arrested. Catholic bishops, newspaper owners, and people who speak out, human rights activists, et cetera.
[01:07:59] But that’s why they’re going to have increasing number of Chinese Stooges, political officials, appointees kind of running things, kind of towing the government line, et cetera, that’s part of it. And then for Taiwan, you have, uh, another thing, I mean, Taiwan is a much bigger issue in the Chinese world, right? The entire Chinese military, communist Chinese military is designed to conquer Taiwan, and to prevent the United States from interfering, to let it happen, et cetera.
[01:08:23] This is really the, what it was designed to do and, you know, China sees Taiwan as a part of China. And this is part of the historical pattern where China, this is the second time that a Chinese government that lost a war has fled to China. Actually, when there was the Ming and the Qing were fighting it out in a massive civil war, the Ming, part of the Ming dynasty basically just fled to Taiwan.
[01:08:42] And what happened is after it took over mainland China, the, uh, the Qing just eventually built a boat, quick Navy and eventually took them out. But this time the U. S. Navy stood between them and Taiwan. So there was no chance, like we’ve talked about before, the zero chance you could, it doesn’t matter.
[01:08:57] How many, how many boats do you bring? You’re not winning this fight. So Taiwan was protected and it became, part of the, this, the fact that the U. S. prevented China from having Taiwan made this massive problem for China forever. It’s probably part of, it was part of U.S. strategic policy to kind of throw a wrench in their whole plan.
[01:09:15] And now we have this issue, I mean, there’s many levels to the Taiwan thing. I’m going to do a podcast about it eventually, but yeah, things are so fluid there’s a lot to do right now. But Taiwan is very interesting, it is deeply integrated with the global technological financial trading world. In particular it is really important for semiconductors, really, really, really important.
[01:09:33] So what a lot of what’s happened now, just to dive right into it really quick, quick land to land. Ukraine war and the issues in Hong Kong have changed the calculus. A lot of what we were doing, we were always kind of giving implicit support to Taiwan, and we were kind of like, we don’t want to do it unless it’s implicit.
[01:09:49] And we are allowing Beijing to do all this stuff and we didn’t want them to declare independence, but we also didn’t want Beijing to try and take it by force. And we kind of lived in this gray zone for awhile. Now that Hong [01:10:00] Kong is where, Taiwan has seen what Hong Kong, what it looks like when you reintegrate with China, starting in 1997, we’re now seeing where that ended.
[01:10:07] That’s kind of showing the way things are going to go. And then on, now with the Ukraine war, we’re also seeing what, China, in the same way Russia can’t just, you know, steam roll, uh, Ukraine like everyone thought, China is not gonna be able to steamroll Taiwan. It’s, what it’s wanting to do is present this as like a fait accompli, no matter what you do, no matter what happens, Taiwan, we’re so big,
[01:10:28] we’re so powerful. Taiwan, it’s inevitable just accept it and that’s been their m.o., that’s not going to work. The Chinese, they could easily lose a third or more of their military trying to do this and fail. So that is, that’s kinda what’s happening there. And there’s just been such a hardening, I mean, we also saw retaliate, retaliatory financial war as a result of China,
[01:10:46] uh, Russia’s invasion of Ukraine. So the ability of the west to come together to defend against these sort of hostile actions, that’s been shown to be much larger than anyone thought, really. And Taiwan is, is part of that fold and the other thing is also, Japan has basically announced that any, any battle with Taiwan would involve Japan as well. Because, and the way it works is Taiwan,
[01:11:10] you can see from one of the farthest, the Southern most Japanese island, you could see Taiwan on a good day. Do you know what I mean? So it naturally breaks, china needs to break, get to Taiwan to break through this island chain that separates it from the rest of the world, gives it space to maneuver, do all this kind of stuff. But you take Taiwan and you, you basically have to take parts of, um, you know, Senkaku islands, which is like were Okinawa is you have to basically go,
[01:11:33] and so Japan knows like, well, if you take that, you’re going to take our stuff. So we’re just going to stop you there. So now you’re seeing a lot of problems. I mean, China, there’s the amount of force that could be brought to bear against China is much larger than what Ukraine has. First of all, Taiwanese, that’s, that’s an advanced, modern, industrialized nation with a very difficult geography.
[01:11:52] Which, if you have enough asymmetric warfare stuff like drones, and mines, and missiles, China can never conquer this island, right? And you’re getting American support and maybe Japanese support, this is a difficult thing. And if you also get retaliatory sanctions, like what we’re seeing with Russia, because now we’re seeing like the genie’s out of the bottle, the Chinese system collapses because there’s, like we talked about, they need all these imports.
[01:12:13] They have to, they built 600 major industrial cities, large like millions of people. They need, we’re used to thinking of China as an export hub, but it also, it has, there’s a deficit in the current account because it now needs to import so much to keep all this stuff up, up, up and running. We’ve talked about how it’s so many people you don’t have enough agricultural materials,
[01:12:31] you don’t have enough energy resources, but you also don’t have enough metals, and minerals, and everything else so it needs the rest of the world and so this is it’s dilemma. And the Chinese government has justifiably seen all this and decide not to attack Taiwan for a long time. It’s known this, but things are getting very bad in China.
[01:12:48] So, you know, it’s, it’s not impossible that a state like China, which is on the ropes kind of like Russia really was on the ropes before the Ukraine war, not because of they’re worried, just cause the, the, the demography, the economic system, all that is collapsing in Russia. And they’re they’re staring at the, like I’ve said, trying to, is most likely doomed.
[01:13:06] So they’re saying it’s something just as horrible, worse, much worse than what’s happening in Russia, it’s gonna happen in China. So you, sometimes you need to do something, change the narrative, to do whatever you need to do, but that’s really what we’re looking at in Taiwan. And yeah, I mean, that’s, that’s kind of the story and it’s really changed.
[01:13:19] I’m actually glad I haven’t done a podcast on it because so much has changed. That it’s good that I’ll be able to kind of have more up to speed than if I’d done it before Ukraine and all that.
[01:13:27] Ed Watters: That, that
[01:13:28] sure is a hot zone in our world today and that’s where my attention has been focused. Not really, Ukraine really kind of
[01:13:38] concerns me because, you know, the wheat production, and the grain productions, all of this, that’s going to affect a lot of these other nations in the world, so it’s interesting. And that, that Taiwan thing, it really is on my mind because the legitimacy of the governance there, you know, they, they actually claim to be the rightful heir of China
[01:14:08] anyway, so that’s contentious. It has been for a long time, very interesting. Uh, I’ve enjoyed this conversation, I’m not gonna keep you here much longer. Uh, could you give us a call to action for our listeners and tell our listeners where to find you please?
[01:14:28] Jason Szeftel: Sure, yes. So you guys could find me on, let’s see, Twitter, Tik TOK, YouTube, Instagram,
[01:14:33] I do some live streams. I got obviously, videos, I got interviews, all that kinda stuff. Uh, Tik Tok’s probably the most fun, I’m doing little short videos and that’s fun. Everyone should check out the podcast, too. So there’s podcasts called China Unraveled, a new episode is coming out called The Red Emperor.
[01:14:47] Uh, it’s very cool, I think you guys will really like it, it talks about how, what politics looks like in China. It’s kind of a continuation of a five-part series called Tales Of The Communist Empire, which talks about what on earth is the communist party? How do you have a communist party [01:15:00] with hundreds of billionaires in the country and dozens in the government?
[01:15:04] It’s like, what’s going on here? There’s a long story about that. And this one is about politics, power transitions, how, how the sausage gets made in China, something people don’t know, it’s a black box. That should be really interesting, that’s cool. The, another thing is everyone can check out, I have a website, jasonszeftel.net and it, it’s got articles, its got stuff.
[01:15:19] I say I’ve got an article on this thing, you can check that out there. Uh, Twitter, I talk about whatever’s on my mind, I don’t, don’t look for very enlightened commentary there. It’s more of a, now I want to say poop emojis, but I’m less constrained, uh, super, uh, all put together when I’m on there. And yeah, and then everyone should, they’re ready
[01:15:36] by the end of the year, there’s gonna be a book called, uh, China Unraveled, uh, it’s going to be same name as the podcast, uh, and it’s going to go through these, these deeper patterns in China’s history. So it’s, we’re at this moment where the United States is now the undisputed, uh, most powerful country in the world.
[01:15:52] And there is, there is no one that can even attempt to compete with us. We, we’ve gone into this a lot in this podcast and basically this, this happened in the late 19, uh, late 19th century. United States eclipsed all the European powers in industrial and agricultural commodity, consumer market, all that kind of stuff.
[01:16:08] It happened again in 1945, it happened again in 1991. And now with the collapse of China, this is the last country on earth that could really pull together the land, the labor, the capital, the technology, the talent, everything to try to compete with the United States. So we’re living in a very, very different world.
[01:16:25] And I think to understand where the United States come from, where does our great power come from? What does it mean? Does it have responsibilities? Is it because we’re exceptional? Is it because we’re, uh, we used to be part of Britain? Where does this come from? I think this is a very important thing to get a grounded sense of this because you don’t want to get wrapped up in either sort of disparaging the United States too much or
[01:16:43] valorize, you don’t want to get too much American exceptionalism and too much like anti-American, American imperialism type of stuff. You want to have a grounded sense of what’s going on, so that’s useful. And then also when you compare Russia, I mean, China to the United States, you really see, you see this deeper sense of history and what’s going on.
[01:16:58] And I think when things really go bad, to connect yourself to deeper patterns, trends, histories, whatever that happens to be, is very powerful because we’re in a time of extreme disorder, our political systems are reconfiguring themselves. They’re not where you should be putting a lot of your mental energy in, emotional energy, even though we all are, so that’s the problem.
[01:17:15] And I think that just trying to get a better sense of, of how the world works is really important. We’re losing the ability to do that from the media, from journalism, not even just the media, I mean, like the quality of journalism has declined. It’s no longer an industry that is self-sustaining, it doesn’t have an economic base that can support journalists.
[01:17:32] So we used to have some of the smartest people about international affairs and all this kind of stuff. Used to be correspondents were embedded all over the world, they’re embedded in China, they’ve been everywhere, they’ve seen everything, they’ve seen so much. These people, they’re, they’re retiring and we don’t have another crop of journalists that have the same breadth of experience, they don’t have the same,
[01:17:49] they haven’t been tutored by people who knew so much that they don’t see these longer patterns and trends. And it’s extremely dangerous, it’s unfortunate. And you really, really need to get a broader picture here, it’s very good for all of us. At some point in the future I want to create a course that can help ground people with this,
[01:18:06] to give a sense of these deeper, how things develop, how we went from nothing to agriculture. These big, this battle between geography and technology could really help us get a sense of how things happened, but that’ll be later in the future. For now, uh, check out the podcast, check out the book, check out where I am.
[01:18:20] Uh, you know, please message me if you think I’m totally wrong or whatever, feel free to donate, send money, whatever you want. Uh, if you’ve enjoyed this and I really enjoyed talking to you, so if you ever wanna talk again, this would be, uh, a good thing, cause there’s actually going to be a lot of meaty global problems coming down the pipeline and China’s going to be really at the center.
[01:18:40] Ed Watters: That’s right Jason, I think you’re a wealth of knowledge and I had a fantastic time speaking with you and thank you so much for sharing your knowledge with us on the Dead America Podcast.
[01:18:53] Jason Szeftel: Thank
[01:18:53] you.
[01:18:58] Ed Watters: Thank you for joining us today. If you found this podcast enlightening, entertaining, educational in any way, please share, like, subscribe, and join us right back here next week for another great episode of Dead America podcast. I’m Ed Watters your host, enjoy your afternoon wherever
[01:19:20] you may be.