Geopolitics is driven by the growing competition for natural resources. That means that geography matters.
China is a large country—approximately the size of the United States. It is governed by a one-party system that publishes its strategic plans. The plans are interesting to read. China has a plan to take its success as a low-cost global producer and its creation of a massive industrial infrastructure and become a global superpower. American planning is done by secret societies. American planning is very secret, so one goes to the Bohemian Grove or the Bilderberg meetings and makes plans in secret.
If the Asian middle class triples in size, Asia, one way or another, will achieve superpower status unless Western secret technological and space surveillance and weaponry advantages are compelling.
The Chinese are building their military. The Indians are building theirs. We are watching the Shanghai Cooperation Organization being built into what could be an Asian NATO.
There is the global military and weaponry industry that spends more than $1 trillion annually as overt expenditures—not including covert expenditures. Obviously, the more tensions, the better things are for business.
There are hot spots to watch geographically related to the rise of the Asian consumer.
The first is the South China Sea. An enormous portion of global maritime trade goes through the South China Sea. China has been steadily developing its navy and building new islands to assert dominance in the South China Sea. The Chinese may successfully assert hegemony in the South China Sea, which raises a question: Will the other countries in the area—Japan, South Korea, Vietnam—continue to cooperate through the old Bretton Woods system, or will they cooperate first and foremost with China, at the cost of their relationships with the United States and its allies?
This possibility is one of the reasons there was such an effort to tie all of the countries in Asia away from China and into the Trans-Pacific Partnership. Unfortunately, the extent to which the Partnership favored corporations and harmed citizens was part of what killed any U.S. participation. The Partnership was designed to take our allies in the Pacific—Australia and New Zealand—and bind them into a consortium with everybody but China. It’s one of the reasons that you heard so much in the last five years about the pivot to Asia. Essentially the United States has been bogged down in the Middle East while getting its head handed to it in the South China Sea. The Partnership has proceeded without the United States, but there is no doubt that the U.S. failure to participate has weakened its hand in the Pacific Rim.
Watch the South China Sea. If China is going to take a step up as a superpower, it must assert dominance there. The sea struggle is part of trying to assert dominance over Taiwan, a very sensitive issue. That issue is why this decision by two U.S. airlines to stop referring to their routes as going to Taiwan is so concerning. If the United States folds up in terms of protecting Taiwan’s sovereignty from China, then watch the whole South China Sea region collapse into Chinese hegemony.
The second hot spot is the Silk Road. If you look at the global trade routes, more goods that have been shipped by sea are now going to ship faster on roads and railroads being built between Asia and Europe. This change is from a maritime empire enforced by the U.S. Navy and the Anglo-American alliance to something more dominated by a Eurasian land empire. Iran, not surprisingly, is smack in the middle of the Silk Road. Xi Jinping has for the last several years been committed to what he calls the One Belt, One Road initiative to support development of both land and maritime routes along the Silk Road.
This means that instead of China using its savings to finance American consumption, China is going to build infrastructure and economic development that supplants the American position in the world and brings great infrastructure and economic development all along the pathway between Asia and Europe. It connects Asia as both a growing consumer market and low-cost producer into direct low-cost transport networks with Europe, which has a significantly greater middle class than the United States. Europe is also the source of many goods and services that the Asian consumer wants.
This cuts America out of the middle. This is one reason why the United States is making a squabble throughout the Middle East and the Ukraine and along the so-called Grand Chessboard.
A third hot spot to watch is cybersecurity. The cyberwarfare and covert wars are enormous. I suspect that the electronic jamming of several U.S. Navy ships was not an accident; it was the Chinese using covert methods to sabotage the Navy in the Asian seas. Greater infowars will occur in cyberspace—whether attacking hardware or software—all around the world. Expect to see cyberwars grow significantly.
A major political question in Asia will continue to be the industrialization of agriculture. It’s been a significant issue for the last 20 years. The percentage of labor in agriculture in the United States is less than one percent. It’s tiny throughout the developed world—one percent to four percent. In contrast, Indian labor on farms is over 40%, and China’s is still over 30%. We covered these issues in the Annual Wrap Up two years ago in “Global Harvest.” I recommend that you take a look at that discussion inasmuch as the politics of food are intense and will grow more so. This is one of the reasons why Harry Blazer just interviewed Bill Niman about pork for the Solari Food Series. We called it “Hog Heaven.” The Chinese obviously care about their pork, which experiences tremendous swings in the market. There is a pork version of Red Obsession. What the Chinese did to the wine market, now the Chinese are doing to the pork market.
The percentage of people working in agriculture in Asia makes you question how robotics will impact the industrialization of agriculture. You wonder, in both the politics of Asia and the geopolitics of how Asia relates to the rest of the world, how increased automation is going to work out.
I would point out that the U.S. is food self-sufficient. America grows and produces more food than Americans eat. America has great stores of water. Asia has a significant need for food and a current inability to produce all of the food it needs. Asia has serious water and energy problems. America is energy and water self-sufficient right now. Asia is not—yet.
So, China needs to import food. If you just argue the geography of food, water, and energy, the United States is in a much, much stronger position. Part of that is a much smaller population. Think about the pressure on the Asian leadership. Keeping 3 to 4 billion people eager to rise into the middle class employed and fed in a world of change and automation is easier said than done. That pressure is a significant variable in the geopolitics of the world ahead.