TLDR: This post surveys Peter Zeihan’s new book on demographic trends and geopolitical strife, in which he warns of future severe disruptions to global trade, and the likelihood of industrial collapse in many regions. I then leverage off Zeihan’s book (and some similar recent work we’ve done on global catastrophic risks) to suggest a suite of other risks/risk factors that could all manifest with the same catastrophic trade isolation for New Zealand (including nuclear war/winter, supervolcanic eruption, extreme pandemic, solar flare, asteroid/comet impact, conventional war, etc). I briefly introduce an upcoming project to investigate these issues and inform a possible future New Zealand National Catastrophe Resilience Strategy (or similar). I call for interested contributors to get in touch to learn more.
Demography and geopolitics
An international demographic time bomb that is already underway, interacts with US retreat from globalisation, and this sets off a cascade of trade uncoupling that sees only the US (NAFTA) and a few very select locales maintain industrialisation.
This is the scenario Peter Zeihan contemplates in his new book ‘The End of the World is Just the Beginning’ (Harper Business, June 2022). Zeihan uses this scenario, which he argues is very plausible, to present an extremely engaging overview of the interconnected dependencies of the industrialised world, their historical origins, and how they will end.
The lesson is that immense global interdependencies across transport, finance, energy, industrial inputs, manufacturing, and agriculture are extremely fragile to the scenario he describes. Unmitigated the outcome could be deindustrialisation, and hence de-civilisation for much of the world.
Zeihan’s forecast scenario is one where the United States determines that the world Order (with a capital ‘O’) that it helped engineer after World War Two was useful for keeping the Soviet Union at bay but since the fall of the Berlin Wall is no longer in US strategic interests (Zeihan’s final manuscript was completed days before Russia invaded Ukraine). The US withdraws its policing of global trade routes, setting off a wave of trade insecurity.
The US move is amplified by a demographic transition that has already past the point of no return in many countries, namely the retiring of baby boomers, who cease productivity, extract capital from the economy, and leave insufficient children in their wake to supply labour and consumption. The impact on China, which is averaging 1.3 children per couple, is particularly catastrophic, halving the Chinese population by 2070.
Zeihan notes that the ONLY high-development steady-demographic countries are: the US, France, Argentina, Sweden, and New Zealand, that’s ALL. Most countries will never return to 2019 stability and growth, and most have now lost the chance to even try to shift footing.
In this scenario, the world cannot assume that industrial technologies that reduce mortality and raise standards of living will continue to be supplied if trade collapses. Industry sustains the ability of many human settlements to remain where they are. For example, water management systems are essential for many cities in arid regions, and without industrial inputs there would be societal breakdown. If global flows of products and services and energy and food are interrupted, ‘political and economic maps will change’.
Zeihan argues that the US (with the cooperation of NAFTA partners Canada and Mexico) can shuffle things internally and supply all the material resources and labour that they need, along with the geography and means to defend it all.
Elsewhere de-globalisation means an ‘unravelling’. Zimbabwe and Venezuela are cited as examples, and much worse could happen (perhaps Sri Lanka is on the precipice).
‘Should something happen to the sustainability or reach of the industrial technology set, all of them will simply fade away-and take all their benefits with them,’ says Zeihan. Basically, if a country lacks the industrial inputs they need, then they can’t achieve the outputs. Deindustrialization would be much quicker than industrialisation.
Some selected highlights from Zeihan’s systematic and highly engaging discussion of the critical sectors are as follows:
Transportation is the ultimate enabler of industry (arguably it’s energy, but it’s all a bit chicken and egg and energy comes below). The world has become massively dependent on long-distance shipping, with logistics concentrated in a handful of mega-ports such as Rotterdam and Shanghai. Nowadays it is not just raw materials and finished goods that are shipped, intermediate products are shipped too and there may be hundreds or even thousands of intermediate steps products pass through.
Long haul transport is an early casualty in the scenario because it requires peace in all regions (and the absence of state piracy). It also requires diesel (which must also be transported). Small interruptions amplify to major interruptions due to the just-in-time logistical nightmare that is global shipping. Skill or capacity to adapt to failed arrival of commodities is lacking in many locales if transport fails. Rail, trucks, let alone horse carts, are completely inadequate to preserve the flow of goods enabled by modern long-haul container, and bulk, shipping.
At present the importance of oil for global industrial functioning cannot be overemphasized. Firstly, transportation (above) depends on oil. Protection of shipping lanes and other transport routes depends on oil. Zeihan compares renewables and electrification with oil and finds that although there are some emerging solutions these are too few, too slow, and not up to the task of replacing industrial energy needs (yet).
Furthermore, existing oil infrastructure (and any new build-out) depends on UK and US experts. Left to their own devices many states will struggle with oil, and countries such as Russia may struggle to maintain their existing pipelines due to shortages of capital, labour, and technical expertise.
A few weeks without oil and industrial civilization is screwed. This is why the EU requires countries to maintain a 60-day buffer of fuel supply, and Japan over 120 days. In New Zealand there is 20 days of operational reserve, although MBIE has made moves to increase this. However, none of these short-term buffers is actually a solution.
Essential inputs to maintain industrialization include iron ore, copper, bauxite, as well as rare earths and many many other materials. Zeihan’s scenario forecasts the withering of Chinese industry (including smelting) as the demographic timebomb really hits, compounded by collapse of China’s over financed industrial build-out. The world has prepared to compensate for a weakened China in some areas, such as rare earths, where there are processing facilities on standby (eg in Australia), if the products can be successfully transported! But the loss of a steady predictable flow of other inputs would spell immense disruption and the book surveys in some detail the role and difficulties associated with a suite of key industrial inputs.
Zeihan notes that countries may individually be able to accomplish some steps in critical processes, but there are some very challenging steps that require specialised mastery. Solar panels and semiconductors require extremely pure silicon. Forging steel is harder than making rails. Zeihan argues that the world needs more smelting capacity. Places like Australia produce both iron ore and coal and could connect the dots, but there are still problems with transport and energy (see above).
Manufacturing has become a highly distributed, highly specialised process. A car might have 30,000 parts and hundreds if not thousands of suppliers and intermediate steps in the manufacturing process. Any disruption to any one supply chain could turn cars into expensive paperweights. Other manufacturing sectors such as lumber, electronics, semiconductors, machinery, pharmaceuticals, plastics, and so on, are all highly susceptible to disruptions in long-haul shipping, capital, labour, and expertise.
Any trade disruption would hit food supply hard. Firstly two-thirds of countries are dependent on food imports for calorie intake. But industrial inputs including raw stock (eg seeds), equipment, and industrial commodities must all be transported. Diesel, pesticide, and fertilizer (including sources of nitrogen, phosphate, and potassium) must all be sourced. Transport and refrigeration are needed. Zeihan predicts that large scale monoculture will give way to small scale polyculture.
Zeihan also talks about Finance, but I’ve skipped over that in the interests of brevity (however, it’s worth a read).
Relevance for New Zealand
Zeihan paints a detailed picture of the collapse of many regions of the world. However, he predicts US (NAFTA) success thanks to its demographic and geographic abundance and diversity. He also leaves room for other thriving regional networks if the right cooperation is in play. For example, Southeast Asia plus Australia and New Zealand. This is where Zeihan’s analysis intersects with a topic I’m particularly interested in.
Zeihan’s book is about US policy and world demographics. He doesn’t contemplate catastrophic risks to the US, such as major political instability, let alone supervolcanic eruptions (Yellowstone), immense solar flares, global conventional war, or extreme bioweapon pandemics. Nor does he consider nuclear war.
The reason I raise these potential catastrophes is because they all have the potential to cause the same kind of global trade meltdown and deindustrialisation as in Zeihan’s scenario, but in these cases the US/NAFTA may be particularly hard hit. This is especially the case for nuclear or volcanic winter where food production could collapse in North America. France, Canada, and the US may be the most agriculturally robust countries, once access to agricultural inputs and equipment are also considered (according to Zeihan), but these countries suffer some of the worst from sunlight reduction and crop failure in nuclear war modelling studies.
Under such scenarios the Australia-New Zealand dyad may be one of the few places on earth able to sustain functional industry, and probably only with careful planning and cooperation. No matter the proximal cause (demography, geopolitical unrest, pandemic, nuclear war, volcano) trade collapse requires a similar response.
We recently analysed the nuclear war (or other abrupt sunlight reducing) scenario and came to similar conclusions to those in Zeihan’s book. Australia and New Zealand have an agricultural buffer that might resist severe shock (both sunlight reduction and lack of some inputs), but resilience might be optimised by regional cooperation with the likes of Indonesia, the Philippines, etc. Our academic paper on ‘Island refuges for surviving nuclear winter and other abrupt sun-reducing catastrophes’ is currently going through the publication process, and I will blog separately on it when it appears, but the one line summary is that only eight island nations have sufficient food production under even ‘mild’ nuclear winter conditions but these include: Australia, New Zealand, Indonesia, and the Philippines, which like Zeihan’s ‘Southeast Asia’ set, could form an extremely complementary quartet (throw in PNG’s mineral resources and the likes of Vanuatu and the Solomon Islands excess food production).
It is not just our analysis of nuclear winter that has recently contemplated trade disruption and its impact on New Zealand. The Covid-19 pandemic and Russian invasion of Ukraine have highlighted many of these issues. Waka Kotahi have published an issues paper on freight and supply chain, MPI’s think tank Te Puna Whakaaronui has written on global food security, and an Office of the Minister for Energy Cabinet Paper addresses short-term issues for refined fuel supply. Some organisations have started to think through these implications in isolation. However, in the 1980s the New Zealand Nuclear Impacts Study explored this somewhat systematically but appears never to have been followed up with an actual strategy.
The question remains, how can New Zealand optimise its resilience to catastrophic trade disruption and what level of industrial civilisation could be sustained?
In one sense New Zealand is in the worst possible position, as the most remote temperate land mass in the world (if there is catastrophic geopolitical/global demographic disruption). In another sense it is in the best possible position as the most remote temperate land mass in the world (if there is nuclear or volcanic winter, or an extreme bioweapon pandemic). Regardless, the issues may be roughly the same.
What should New Zealand do?
What follows is not intended to be a set of recommendations or a plan, much more work is needed to identify and then prioritise the most important impacts. However, possible approaches can be conceived. For example, failure of transport might be aided by a plan to secure resources for coastal shipping, or a strategy of developing a hydrogen powered logistics fleet. Oil will be necessary (it is also an input to many products), and local production should be matched to a local refinery handling the appropriate grade. The present 20 days of refined fuel as operational reserve will be manifestly insufficient, and any suggestion for increasing reserve, and for storing it onshore (rather than offshore as at present) will help the transition (diesel should be prioritized).
Biofuel production facilities could be prepared and on standby. Hydroelectric power could be used to produce green hydrogen. Geothermal energy, and wind and solar could be further developed. Plans for how to prioritise energy for essential functions could be drawn up, cities can plan to down-power. Coal can be used. Nuclear can be investigated.
Overall, solutions that are the least technically challenging, and have the lowest probability of requiring imported commodities and expertise for maintenance should be prioritised.
That said, a critical part of such planning should be integrated cooperation with near neighbours, where shipping may still be possible (with locally owned ships and strategic use of limited fuels). This might occur among New Zealand, Australia, Indonesia, and the Philippines. Along with Papua New Guinea, this mix of countries holds a diverse, complementary, and possibly self-sustaining set of natural, human, and economic resources (akin to the NAFTA situation).
New Zealand will clearly not be able to manufacture everything it desires. The automotive industry might study the case of Cuba during its decades of trade blockade. On the other hand, use of woollen textiles and a growing textile industry might be encouraged. Machinery is needed for all manufacturing, and the Japanese and Taiwanese strategy of supporting a multitude of tiny facilities that machine, produce and supply customized parts could be developed. 3D printing can be harnessed provided there is access to input materials. Raw inputs such as bauxite, iron ore and rare earths could be traded with Australia (smelted and returned in the case of aluminium).
Agriculturally New Zealand is well-placed but could squander that advantage with poor management. Overfertilisation may have baked several productive years into the soil, but eventually these inputs will need reliable energy and transport. It might be in some cases that it is more efficient to move people closer to production (deurbanisation). Shifting planting (away from the margins) with large scale monoculture giving way to smaller scale localised polyculture could preserve variety, even preindustrial gardening can be highly efficient, though a sustainable plan for seed stock is needed. We’ve found in recent work that NZ exports of milk powder alone, if directed to the domestic market, could provide more than 100% of New Zealand’s caloric needs even under the severe modelled global conditions of a nuclear winter. However, no one wants to eat only milk.
Regional cooperation, perhaps with non-traditional partners, is likely to be important to connect New Zealand to supplies of equipment and inputs. This might require a new paradigm for regional shipping, a stocktake of resources and capabilities across places like New Zealand, Australia, Indonesia, and the Philippines (all of which feature in that ‘top 8’ in our analysis of nuclear winter). Zeihan notes that there is ‘no obvious leader’ in Southeast Asia. This only underscores the potential value of a regional alliance for resilience.
Overall, an oil replacement, such as biofuels or hydrogen, will be critical to New Zealand’s plan if it seeks to preserve industrial society, along with the infrastructure to support it. Critical too will be regional alliances forged ahead of time with local resilience in mind. The transition to a society resilient to the shocks listed above might take decades but should be started now.
New Zealand has been identified in many writings on global catastrophe (including nuclear winter) as one of the few potentially sustainable corners of civilisation in the most extreme circumstances. These analyses include Zeihan’s book, where New Zealand features repeatedly (often as a functional dyad with Australia), and in our analyses on island refuges against extreme pandemics and against abrupt sunlight reducing scenarios such as nuclear winter (academic paper forthcoming, blog here). However, we have been clear that of the islands identified as ‘most prepared’, none are yet close to being ‘fully prepared’ for this suite of catastrophic risks.
New Zealanders must ask, if appropriate anticipation does not occur here, where chances are best, then where?
Many New Zealand organisations have started work on aspects of trade disruption, supply chain issues, or the future of agriculture and food. However, I would like to see the scenarios that are contemplated expanded to encompass the more severe catastrophes mentioned above, with at least some resilience work targeting such possibilities (which in turn should also help allay fears over the lesser challenges). A programme of work on global catastrophic and existential risks should complement and integrate with emerging and ongoing work on day-to-day risks to foster a resilient New Zealand across the decades to come.
The first step in such a resilience project is to understand the key common consequences across these scenarios. An obvious common impact is the loss of trade (which may occur in isolation or in a context of climate (nuclear winter) and/or electrical (EMP, solar flare) disruption, or other factors).
We will soon be announcing a project investigating exactly these issues, for which we have recently secured funding.
I am very keen to talk with anyone who has an interest in contributing to the project goal of mapping out what could be the nucleus of a New Zealand (nuclear, trade isolation, biothreat, supervolcano, solar flare, asteroid impact…) National Resilience Strategy and Plan. I am excited for upcoming wide engagement and hope to foster a sense of collaboration. Feel free to get in touch and share your experience, ideas, and expertise with me.
A successful strategy depends on exactly what the impacts are likely to be, and that should now be explored for the most catastrophic scenarios.