A forecast for the 21st century: George Friedman. ANU, May09

good evening ladies and gentlemen and welcome to presentation very honored this evening to have an extremely dynamic speaker that will be introduced to us in a moment by the Dean of college age of Pacific let me just indicate that as one of the two co-hosts of the Asian security series and I'm professor bill Tao dr. Brennan Taylor is the other convener of the asia-pacific series sitting up there that we're very very proud tonight to be co-sponsors for this special event we have about five or six speakers per year with the Asians security series last year for example we had James Kelly former US Deputy Secretary of State come in to talk about the future of Korean nuclear weapons which was as it turned out to be quite prescient so I think this evenings presentation will probably prove to be equally so but let me now introduce Professor Andrew McIntyre Dean of the College of asia-pacific who in turn will introduce our guest thank you I think thanks bill and welcome everyone for tonight's event an especially warm welcome for people who've come from off campus as bill was saying tonight's lecture is really the intersection of two series bill spoke about the security series and the the other arm of the intersection is the toyota anu public lecture series the university is very proud to be in partnership with toyota on this lecture series is a number of major talks throughout the year and they always get a good turnout and tonight's no exception our speaker tonight dr. George Freeman is the CEO founding CEO of Stratfor a Global Intelligence company he established in 1996 a distinguished author of several books on national security and intelligence his latest book which if you weren't looking in the right direction you may not realize is available on sale outside and will also be still available on sale at the end of tonight's lecture is the net title the next 100 years it's a New York Times best seller and forecast the geopolitical technological and cultural changes we can expect around the world over the course of the 21st century dr. Friedman has been featured in many publications including Time magazine the cover of Barron's The Wall Street Journal Fortune and the New York Times he graduated with a bachelor's degree from the City College of New York and a PhD in government from Cornell University please join me in welcoming dr. Joe [Applause] well I'm delighted to be here I think as a full and academic fallen far it's daunting to be back in lecture room and I hope I don't fall on my face we should be well um the title of my book is the next hundred years which is undoubtedly the most presumptuous title anyone has ever had for a book so I have to begin by justifying what I'm doing I'm forecasting and forecasting is as much as part of the human condition love hate and all the other things you choose a career with the expectation that it will be appropriate for you you fall in love with the expectation that that person is lovable you cross the street with the expectation that the person down the road is not going to floor it and take you out it is impossible to live without forecasting it is impossible to live without forecasting well because if you continually forecast catastrophic ly there's not going to be much less left of you so in the sense that we human beings must confront the future and cannot evade the responsibility of predicting what it will be I will argue that forecasting in general far from being some odd arcane art practiced by people with magic wands and so on is the work and wolf of everyday existence I grant you I've taken a little farther the most but my reason for doing so is less to be precisely predictive about the future but to identify those forces that will define the future to distinguish between those things which come to be in pass away and those things which will be in front of us and dry permanently it is very easy in reading the headlines and listening to the television and reading news magazines to constantly feel that we are in a state of ongoing crisis collapse at the catastrophe that's what they make their living on and we may well be but the job of intelligence analysis or of anything else is to distinguish what's not going to be important from what is important and the method I use for that is to focus unconstraint to focus on what is impossible and by process of elimination if you will arrive at what is possible I'm in the capital of Australia which if it is anything like the capital of the United States is a city that mass produces policies the great product is policy and policy assumes choice and I'm a great critic of policy because in many cases where there appears to be choice there really is none and the real task of all of us is to distinguish between where there is choice and where there isn't it's a particularly good time to talk about this because the United States has a new president and this new president appeared to many people to be extraordinarily new different and it is fascinating to watch how much of Barack Obama's foreign policy is a continuation of George Bush's and it's also necessary to believe that he sincerely wanted it otherwise and it's also necessary to understand that it didn't matter what he wanted in Iraq the policy continues to be essentially that policy which the Bush administration put into place of a stage withdrawal he may do a little faster in Afghanistan it is stay the course but if anything become a little more aggressive in Russia it is continued to support NATO expansion in Poland it is reversing his decision to withdraw the ballistic missile defense system and leaving it there in opening the door to Iran and Cuba finding the Iranians and Cubans slamming the door shut his face in going to Europe to ask the Europeans for aid in countering this paradox he ran for president on the assumption that Bush was an unpleasant and harsh man and that was why the Europeans were not more cooperative but that when he went there opening himself to their views and everything else they would be more helpful the Europeans welcomed him because finally there was going to be a president who wasn't going to ask them for anything the collision in Europe in the last trip was extraordinary here was the American president asking for the same things that George Bush had asked for troops in Afghanistan economic concessions and so on and here were the Europeans telling Obama the same thing they told Bush it's extremely important to watch this laboratory of international affairs to understand the nature of constraint to understand the manner in which foreign policy is not determined by the personality of the leader nor by the wishlist of policies that are recommended to them but by harsh objective constraints even in the extraordinary case of Guantanamo which I think in his heart he wanted to do something about Obama found that the world was much more complicated than it appeared in the same way that george w bush did not take office expecting to face 9/11 but had to face it because of decisions made during the clinton administration and the same way that the clinton administration did those things because the bush administration had gone had created certain realities each president finds the limits of power we talk about the limits of power many times when we try to say that the president should not be imperial he should not do this and not that i mean by the limits of power the limits of choice the constraints on leadership and i'm not the first one to teach this by any means that teaching comes from academia because Machiavelli's most important teaching to us was teaching the prince that he's all-powerful in everything except his decisions that if he wanted to remain prince he would behave in a certain way and no other so the art of forecasting really consists of a certain empathy if you will to put yourself in the position of an Obama and understand the enormous pressures that come to him that eliminate all sorts of options and constrain him shape him make him the president where as I like to put it presidents do not make history history makes presidents each president responds to the circumstance he finds himself each prime minister each ruler it is the nature of the prince of all the constraints the one that I find the most important is place you are born Australian I am born Hungarian who went to America and that makes us profoundly different not as different as either us is from a Tibetan or from someone in Iceland place shapes who we are and had met or Nick or Talleyrand been born in Iceland no matter how brilliant he was he had only the tools that Iceland had available to him and if a fool were elected president of the United States and several have he would still be President of the United States and had the tools available to him and the supports and the limits that would have kept it in place in order to do forecasting and foreign policy you must begin by spending very little time on people but a great deal of time in humanity the individual personalities are trapped and you have to understand the things of trap it beginning with geography and beginning with an other principle that before I go on I think is fundamental to understanding how human beings behave and that's the principle of love of one's own in Romeo and Juliet there is a great play about love of one's own and aquired loves the city is torn between the factions and two young fools think that they can overcome these things and indulge their personal romantic love their quiet love the result is catastrophic proving that 14-year old should never be listened to certainly not in such important matters love of one's own is the most natural love most love of one's parents of the language they taught you of the religion they share with you and so on and that is the root of nationalism one of the greatest problems intellectuals at our time have is coping with the reality of nationalism it was very interesting to watch during this recent economic crisis the manner in which the European Union completely collapsed rather than administering the bailouts of the banks through Brussels they were administered through Berlin to Rome through Paris because the Germans made it very clear that they didn't want their money bailing out Italian banks and the British made it very clear they had more than enough trouble worrying about the French banks and nobody wanted to bail out the Polish banks they were on their own that was love of one's own at its simplest point the Germans took care of the Germans the French took care of the French the Italians took care of the Italians the strong took care of what they could take care of and the weak were left to dangle in Adam Smith's theory there's little room for nationalism really because we're all individuals pursuing our own self-interest nations are just something to get it away a free trade in Karl Marx of course nationalism exists only as a visual abstraction for the workers have no country class is meaningful but I will argue that the single most persistent characteristic of the world for the past few centuries has been the nation-state it continues to be the most significant framework for which we and certainly what happened in the EU last October was an extraordinary event were the greatest advocates of multinational ISM through multinational ISM over in pursuit of nationalist course the nation state has no theoretical foundation in liberalism or in Marxism it is simply there it is simply there and reasserting itself constantly and so I begin with the fact that although I may not have a theory of nationalism I have the fact of nationalism and I must construct a theory of human behavior built around that and so based on all of that and much more that I won't bore you with I've tried to construct a model that explains what is likely to happen over the next hundred years because I'm trying to explain what matters and what doesn't matter if I were alive at the beginning of the 20th century and I was doing this enterprise I wish I had written about the following things what was important in the 20th century what happened well first the European imperial system collapsed beginning in the 16th century Europe created a framework of global social political and economic relations based on a system of conquest and for four centuries a European power be it Spain be it France buting 'land had always been a global power in 1991 for the first time in several hundred years there was no European global power Soviet Union collapsed and for the first time in an extraordinary event European global power disappeared there were regional powers they had some influence here but a great decisive European power even a challenger to global power had disappeared the second thing that I would want to talk about is the quadrupling of the human population at the beginning of the century there were 1.6 billion human beings at the end there are over 6 billion that was an extraordinary event that shaped the entire human condition the relationship of human beings to the planet to each other to their understanding of the future and that's certainly I wish I had written about and finally I wish I had written about the extraordinary revolution and transportation and communication which took place in the 20th century a century that began without an aircraft having been invented and culminated with my flying this year two four continents from Turkey to Australia and at all times being able to harass my children and the office with this and if you wish to see the spirit of the age concealed congealed it is here we take it for granted but if we consider the human condition it transforms our relationship to each other certainly changes the way I walk down the street staring at my phone seeing if anybody'd emailed me I changes my relationship with my children they can't get away changes my relationship with my wife we may as well be together because we'll never be apart these are extraordinary transformations compared to which the great depression is actually merely a passing event if we take a look at say watch the century be very hard to say that the Great Depression was definitive we might say that the two world wars were critical in causing the collapse of the European empires but they were means in themselves and certainly compared to this all of the extraordinary excitement that dominated the century on any day of the week if you picked up a newspaper falls into something trivial now you might say well that's very nice you can say this retrospectively but of course the fall of the European Imperial system was widely discussed at the beginning of the 20th century Lenin wrote a book about it as did others this was not an unknown or unprecedented event many were discussing it when we talk about the quadrupling of the population this is something to David Malthus had written about and many Malthusians in the nineteenth century we're predicting just such a calamity as this and certainly if you want to talk about the things the technological things the superb master of all such things HG Wells was prescient beyond belief in fact I will argue that the most neglected in contempt genre held most in contempt science fiction has been this superb track record for discussing if not the human soul and certainly human technology I mean look at Star Trek and the communicators look at your cell phone and my goodness about fast all of these things are talked about all these were by some people predicted my you Burris is not that I'm going to be talking about the next hundred years because these things were discussed my you Bruce is that I want to do all of these myself which is a lesser universe if you'll pardon me so if I were to be talking about the 21st century what are the things that I would be talking about as I talked about the 20th and there would be three things and the first and most important is the extraordinary decline in the birth rate throughout the world in the advanced industrial countries the birth rate has fallen so low that in the case of Germany we can expect population to contract between 20 and 30 percent of next 25 to 30 years this is not a guess this is arithmetic based on women numbers children born and so on and that's the United Nations estimate it's also the German estimate other countries are in similar interesting conditions according to the United Nations by the middle of the century the middle tier countries like Mexico will have reached a similar position of zero population or negative population growth as well but in all sectors in Bangladesh in Congo at all places the birth rate is plunging that transforms the entire structure of capitalism capitalism was built on the assumption that there would always be more people more consumers more producers more soldiers what-have-you the entire structure of capitalism was built on the assumption of rising land prices and land as a basic tool of collateral because the assumption was that population would always rise increasing the cost of land what if the population Falls there has always been the assumption that the price of labor could be suppressed to a great extent by the fact that there was always surplus labour in the world in other words the one input into the economic system of land labor capital so labor is both the most reliable resource and potentially the cheapest resource and the focus of capitalism has been on finance on capital itself so that up till now if you wanted to make a lot of money being a investment banker was a pretty good way to do it they controlled capital they control the most expensive variable in the system they operated that won't be true in the twentieth first century as population declines particularly in advanced industrial society the logic of land prices are going to shift I don't think that this particular crisis derived from those numbers that this comes later and for example labor will become an expensive commodity right now the United States and Australia are busy keeping immigrants out in 20 or 30 years I suspect will be involved in bidding wars trying to get an inn the reason being very simply the following we have in the United States retirement age of 65 years that was set in 1932 and life expectancy was 62 years it was a very good deal if you got lucky and lived longer than average you'd get some money today life expectancy in the United States averages 18 men and women at about 79 the system was never designed for people living that long and it was particularly not designed for people on average going to college until they were 22 or 23 or 24 years old that makes if you look at it now 50% of the time you are going to be non-productive I don't want to call students here non-productive but let's face it that creates an extraordinary mathematics of our society it also creates a fundamental change in the way families work in the sixteenth century in order to have zero population growth just keeping population going woman would have to have eight children four would die before the age of one either in childbirth or before the age of one two would die before puberty you'd have to have eight now under those circumstances women were reproductive machines they were reproducers and nurturers and they died at and if you read your grim fairy tales the wicked grandmother was always the stepmother I should say was always coming in that wasn't an abstract thing that was the great fear of 18th century of 17th century children their mothers would die the father would remarry in serial polygamy a new mother would come in and have children and want to move the others out of the nest this was the structure of life in urban society in rural society having children is critical they are your retirement in urban society children are the ultimate side of men of conspicuous consumption nothing is more swung than three children so the number of children we have plunges because they don't add anything to your economic life and they're purely there for your emotional gratification and you find that one will do or as I told my younger son he was reserved it doesn't look like it would it be needing you but consider how it changes our marriage structure previously women would get married at the earliest possible age after puberty because they had to start the reproductive process today having children is what good that calls an elective affinity you want to have it have it if you don't you don't that means that the birth a the age of birth has stunningly moved in less than a generation from the early 20s to the early 30s it also means a traditional religious values such as chastity which might work till the age of fourteen really gets rugged by the time you get to be thirty and you have all sorts of strange my children bless them lift together didn't live together who's this person living with you now what happened to the one last week and all of these things then after living together for three years they all got married and they wanted a wedding they've been living together for three years what was the point of the wedding it's not clear our personal lives are in chaos chaos in the sense that the rituals that bind together society have dissolved and we have a tremendous struggle between traditional religion in every culture which has always focused upon the family as an instrument of social stability and the reality that if you're only going to have one kid you could have your own career ladies and that means that you don't have to stay married to your husband and that means that you're going to base your marriage on love and love this fickle and therefore the entire structure of marriage becomes an elective affinity and we move into a situation of internal chaos in which the most extreme counter representation is al-qaida if you read Osama bin Laden's speeches they're all about women they're all about women and family and children that's the extreme case but in every religion you find a redefinition or struggle with the redefinition of family so that is the first thing that I look at the second thing that I look at is the fact that is going to be a tremendous labor shortage people are going to live longer and when I am in my dotage and drooling I will want to be taken care of and there'll be less people to take care of me and so we are looking for technologies technologies that will allow you to not live longer we certainly don't need you living 200 not doing anything or me either but to be more effective and take care of yourself and not need a nurse until you die and that's medicine but the most critical thing we're looking for technologies that replace labor in other words as fewer workers are present we need technologies that replace them in order to maintain the standard of living for others and this we call robots the computer that sits here has about run its course in a sense that has been a killer app for years how many different ways can you give me the same operating system but imagine the computing power enhanced manipulating world doing things this is a necessary and logical outcome and one might add that as many things in the States the Department of Defense is working on this intensely you wanted the internet you got it care of DoD and say here now this poses a problem we are experiencing global warming and a shortage of hydrocarbons but the creation of a new cat class of active vehicles if you will will dramatically increase energy consumption how do we handle it well the hydrocarbon economy has a geopolitical problem which is whatever hydrocarbons are that's where wars will take place and the second problem is the prices going up in some weird way that's hard to predict so in order to introduce these new vehicles these new entities if we boost the price of them to the point that no one can afford them we're going to be in a very strange position we need to lower the price of energy because we need robots because population is declining constraints the obvious solution the most efficient a solution is solar energy the prob of solar energy on the earth is that it would be an ecological disaster then look very nice on top of your house heating your bathroom but to run industrial society with power from solar energy would require vast areas of the countryside to be covered with collectors even if there was a massive improvement in their product in their efficiency and that would mean covering deserts because that's where the Sun is mostly and that would mean destroying very delicate ecosystems plus the fact that the United States would mean to death of Las Vegas a town I worship that's what forecasting really takes place where would you put solar energy where is there a place where there is Sun no clouds no night in the answer space NASA currently has a project underway for space space solar energy Pacific Gas and Electric has agreed to purchase said solar energy when it becomes available the creation of space-based solar energy with the energy beam back in microwave or in tethered satellites however you want to do it is something that is underway and requires no technical breakthrough requires an economic breakthrough and here we get into geopolitics because if we really believe that solar energy can be based in space then that power which controls space now begins to resemble Saudi Arabia and I'm sure it never occurred to anyone at NASA or DoD that if the United States had a hammerlock on space generated energy and they were selling it to Australia the Australian might be very polite to the United States less they not got it because that represents power not simply to run an economy but it represents the energy that can run a system and it's important to bear in mind that the country that's working on this right now is the United States and it's also important to bear in mind that it can't be Chile it can't be Canada it also can't be China because they are far away from being able to work on such matters technologically constraints what I've tried to show is the logic and I lead to an outcome one of the critical things of the 20th century the third thing that I would like to write about is what replaced the European imperial system to which the answer is very simply the United States but it replaced it in 1980 not when the Soviet UFO was in 1980 for the first time in human history trans-pacific trade equal transatlantic trade and for the first time in history therefore the North Atlantic was no longer the key to economic power but shared that space with the Pacific which meant that any power that was native to both the Atlantic in the Pacific had a geographical advantage and any power that also had a navy that could control the Atlantic in the Pacific had a geopolitical advantage there has been many discussions about the decline of American power and I wish I were not an American since this would be more persuasive then but this is not because I think the American United States is a virtuous country it's not because I think that the Federalist Papers are just great and it's really not because I like American culture it has to do with the fact that the United States economy is larger than combined economies of Japan China the UK and Great Britain the UK Germany the United States economic activity accounts for between 25 and 30 percent of world global economic activity when we look at industrial production and we know that the United States the industrialized the United States has reached a point which industrial output is only larger than the combined industrial outputs of China and Japan the United States is the world's second largest natural gas producer and third largest oil producer substantially larger than Kuwait or the Emirates nations like that not sufficient for American needs but what I'm trying to do is to benchmark the extraordinary size of the American economy when you add to that the fact that the United States Navy controls all of the oceans of the world something that no power including Great Britain has ever done that there is no naval challenge and that means that the United States can reshape international trade as it wants although God knows Unitas is always reasonable and never aggressive should it ever decide to it has the ability unilaterally to do all sorts of things Europeans speak of American unilateralism they haven't seen unilateralism because implicit in American power is tremendous unilateral power we talk today about the financial crisis of the United States they point out to you this is the fourth such crisis since World War two the first was the rise in oil prices that led to the near bankruptcy of cities and states in the United States called a municipal bond crisis when the United States intervened to bail out the bond market the municipal bond market by bailing out in New York City in the early 1980s there was the third world debt crisis the third world debt crisis was an extraordinary event in which third world countries failed and failed and failed until the United States led a consortium to issue something called the Brady bonds named after Nicholas Brady the US Secretary of Treasury treasurer to bring them out in the late 1980s we had the threat of the savings and loan crisis when the entire savings and loan sector of the American economy failed and the federal government intervened to the tomb of six hundred and fifty billion dollars at a time when six hundred and fifty billion dollars a lot of money in other words American capitalism has a sequence of growth followed by hysterical exuberance followed by failure followed by bailout followed by operatic declarations of the world is over followed by getting back to life how can the Institute the United States do that it's very simple we calculate the net worth of the United States if you went bankrupt people would look at your liabilities the internet worth net worth of the United States is roughly three hundred twenty-nine trillion dollars the worst size of the loss if everything went south this crisis would be three trillion dollars there'd be less than one trillion of total net worth it is important when you talk about the decline of the United States to bear in mind these variables there is a discussion for example of China replacing the United States your white paper talks about shine about 2020 matching the United States and economic output for that to happen the Chinese economy would have to grow roughly four and a half times in the American economy would have to grow not at all shine is an extraordinarily successful country but surpassing the United States is not something that is extremely likely to happen China is a country of 1.3 1.3 billion people 1.1 billion of which live in extraordinary poverty 200 million of which live in a boom land which cannot sell to the rest of China but must sell to other countries such as the United States and if it can't sell to the United States it can't generate the cash to take care of the non-performing loans in the system to leave that aside but the question of how much natural resources China will buy from Australia really depends on how much production the United States will buy from China so if you want to know what your mineral markets are going to look like a look at Walmart because of every seven containers that leave China one goes to the Republic of Walmart and that really represents a crucial relationship that determines China which is why I think that China is not is too vulnerable too dependent on its export partners and the greatest threat to Chinese prosperity is the rising American savings rate for every dollar Americans save a certain percentage of that does not go to Walmart and if it doesn't go to Walmart it doesn't go to China and the second thing that China faces is it's extraordinarily narrow profit margins sometimes even negative because in dealing with Walmart for example Walmart is in the business of cutting profit margins it's not in the business of selling it's in the business of forcing consume producers to reduce costs and China has been selling into this market long enough that the growth rate that it shows does not have an equivalent rate of return on capital to put it very simply the mere factory is selling something doesn't mean you're making a lot of money at it and the fact that the Chinese are always surging their exports is based around the fact that given their narrow margins they have to simply to stay even it is very easy to confuse a high growth rate with economic prosperity but growth rate and prosperity aren't the same thing my Uncle Louie used to sell dresses it cost him ten dollars to make it he sold it for nine dollars he figured he'd make it up in volume that is in some ways what is happening in China so the fact that China is growing rapidly does not mean that China's healthy it is certainly had an extraordinary run for the last 30 years but China has done what Japan did run the limit on a particular model and is now reconstituting itself the great power of Asia under any circumstance is not China is Japan whose economy towers over that of China and who has the Navy that China wishes it had Japan is a great power the world's second largest economy is by definition a great power that it wishes not to be noticed that pay no attention to me I'm just a little white bread with black rain cloud doesn't is a strategy but doesn't change the reality the issue is not whether China is going to surpass the United States the issues of a China will surpass Japan an other country that I regard as of extraordinary importance as turkey Turkey is the world's 17th largest economy the largest Muslim Conaty larger than Saudi Arabia it has one of the most substantial armies not only in the region but in Europe except for the British Army and it'd be an interesting fight I wish I could stage it except for the British Army there is no European army that could face turkey not the Germans certainly not the French this is very important because turkey was historically the dominant power in the region and in fact when the Islamic world coalesced into some sort of orderly system it was under Turkic power and for the past five hundred years was under Ottoman rule in Turkey today I was there recently and they talk about Neil ottomanism and is the one thing to the secularists and the religious agree on the idea that Turkey is a great power which it is and the idea that Turkey is the power that for example the United States depends on to maintain stability in Iraq in long run to negotiate with Syria to create openings to Iran to deal with the Armenians as they're doing and to be present in the Balkans Turkey once again is not going to be a great power it is one now it's a question of how rapidly develops and so on but it lives in a vacuum it grows faster than the European economies is whether this economic crisis far better than the European economies its military is enormous ly better than Europeans the issue is at what rate will be Turks act to fill the void left the southeastern Europe by Europe and left in the Middle East by the United States the third power that I predict this is where else pause for laughter is Poland thank you why Poland we all know that Russia is reasserting so we know about the Georgia not war we know about Ukraine Benson - Baltics and so on we also know that Germany imports 50% of its natural gas from Russia Russia cut off that gas for three weeks last January just to say hi how are you welcome to the neighborhood and Chancellor Merkel has made it very clear that she is not going to be confronting the Russians under these circumstances under any circumstances perhaps is certainly not under these it is not in the American interest to see an amalgamation of Western European industrial power and Russian natural resources that's obvious if the United States wishes to at least limit the expansion of Russia to the former Soviet Union and not to the form of satellites it must protect the Carpathian Mountains in the south and on a northern European plain the place that it must act is in Poland this is why the Bush administration wanted to put a ballistic missile defense system in Poland it could have been anywhere no one knows it works no one cares and this is why the Russians went nuts when the Americans put the ballistic missile defense system there certainly they don't care they have thousands of missiles they'll overwhelm the system immediately what was the issue the United States wanted to make it clear that outside the context of NATO the United States could have a bilateral relationship with Poland and that the Russians could not veto that relationship more important than the ballistic missile defense system of the f-16s we sent and along with the f-16s we sent there were many other technologies transferred to Poland the choice of Poland is a constrained one if the United States does not want Russia and Western Europe amalgamating Western in Germany particular which it doesn't then it has to build a force to block them the only place to build a force is Poland you can't put it in Portugal you can't put in South Africa Poland in the meantime is faced by its two favorite countries Germany on one side and Russia on the other side they don't really have a choice in these negotiations constraints logical constraints now why do I say that great Poland will be a great power because the United States wants it to be and that will sound like jingoism but I refer you to South Korea in 1950 South Korea was a nation of rice farmers and not very good at that either they had been oppressed by the Japanese had gone through a horrible time fifty years later you are driving Korean cars and watching Korean televisions how did Korea go from a really bad third-world country to a leading industrial power the answer is technology transfer from the United States favorite trade relations with the United States because South Korea was a critical country to the United States it was part of an American strategy just as Israel was part of American strategy just as Germany just as Japan the benefits of living in a place that the world's leading superpower wants to play geopolitics in is empirically demonstrable when I compare Korea in 1950 and Poland today Poland is much more advanced society and therefore the relationship that's building between the United States and Poland is extremely important and it will redefine Europe because at the same time that the Germans are locked into a series of social arrangements and economic arrangements that it's their power as the British come closer to the Americans on any number of dimensions as the French try to find out where their center of gravity where their balance is and for some reason I can't understand they just opened a military base in the Persian Gulf I'd love to understand their strategy but there is one that I just don't understand it when you look at all of that you can see that the countries that are used to be called in the 1930s the interne imodium the between the sea countries between the baltic and the Black Sea Hungary Slovakia Romania Bulgaria have a particular strategic interest to the United States a particular hostility to Western Europe I'll give you an example of the hostility most of the banks in Eastern Europe are now owned by German Italian and Austrian banks they began giving loans to Eastern Europeans for homes and autos denominated in yen euros and Swiss francs when the currencies of Eastern European countries went south the cost of these loans soared and the banks foreclosed when the banks themselves started to fail the expectation was that the mother countries austria italy germany would intervene and save the banks germany block that there was no bailout of the eastern european banks except through the IMF so the americans could contribute to it as well as well as the chinese and the level of bitterness that there exists right now in eastern europe against particularly the germans is enormous but then Eastern Europe has a very different economic dynamic than Central Europe they are in different paths they operate differently and when they link together there's tremendous friction contraints the EU looked like a great idea and it probably is a great idea for some for others it was a trap in every century there are great Wars and in every century there are new great powers if anybody had said in 1900 that a semi-literate third-world country like the United States would emerge as the dominant power they would laugh if anyone had said that northeastern Asia would be the industrial heartland of the world David left I'm not predicting here anything except stating that the second-largest power economy in the world with the largest Navy in Asia is a great power and a country like China without that sort of Navy and not nearly as big economically is a lesser power this is pretty stupid but that's the best I can do under the circumstances in predicting that Turkey will resume its historical role when I point to how rapidly it's grown economically and militarily it's not much of a guess to say Turkey is a great power because it's not Turkey who certainly not Iran who fought Iraq for eight years and lost know some trick when we look at all of this we begin to see a century that has a shape could I be wrong on Poland short could I be wrong on anything yes but what I've tried to give you is the sense of constraints to drive the century and of all the constraints the one I want you to think about the most is the size of American power it is very difficult to comprehend the magnitude of that power and therefore very easy to dismiss it in passing trends but it would be as if in the 19th century during one of the several financial panics that occurred in Britain we would immediately write off the British Empire it doesn't work quite that way and it doesn't work quite that fast so in my view if I live in a world of constraints and I look at the population and I look at the technology that deals with that and I look at the country that will produce that technological solution and that I look at the other countries in the world and see if they're rising or falling or where they'll be I can actually I think glimpse something of the future and if I can't glimpse the future at least I can get a sense of what's important in the present I can tell you that the great global financial crisis equal to GFC here it's great name that it's it's a nasty one yeah it is not the big one it's not the Great Depression it is not even close to the major economic meltdown of the century of the post-war period I should say it allows you a method to distinguish the passing from the significant and to try to get some sort of sense of what the century is going to look like that was my intent of the book and as I say in the book I hope that my grandchildren or great-grandchildren read it and say not half-bad which is about all I can aspire to under the circumstances thank you [Applause] think about colleagues the floors open but time for a few questions yeah you didn't mention that IDs as if the force of ideas ideology those sort of things have you see David Player and how important do you view those as animating societies to become great powers or to create certain things where they can become prey or achieve their full potential I am a profound disbeliever in ideology having seen Adolf Hitler and Joseph Stalin make a pact with each other I am a far greater believer in geopolitical necessity that includes the American ideology and all others in the end I believe that good that gave us a choice Shakespeare gave us a choice between elected affinities ideas that i acquire run an adult and the things were born to and everything that I've seen tells me that the things were born to in the end overwhelm these acquired ideas and when I look at the 20th century which more than any other century was a century of ideology I recognize it far more clearly from the pursuit of national interest I can understand Stalin far better as a Russian Tsar that as a communist I can understand Zionism far better in terms of Israel in the second century BC then I can understand it in terms of the founders of Zionism and very frankly I can understand the United States better in terms of the river structures of North America than I can through the founders from personal point of view I far prefer American society I'd like the founders but I daresay that if we had a revolution and ecologists would take over the country they would have immediately pledged to close Guantanamo and then decide well maybe let's not brush this in the middle then further back do you think that climate change is going to interact with geography so that places at a very productive so that some of the things that you've been studying for a long time will be throwing a question closer detective climate change well I take climate change seriously I see two factors one mitigating one transforming the mitigation is the decline of the rate of increase in population but that's only mitigation the transformation is the end of the hydrocarbon ecology I see no possibility of controlling climate change through cuts and consumption apart from the geopolitical question China is increasing its consumption it sees no reason to decrease it simply because the Americans and others got there first if you actually took a look what level of cuts and consumption would be required to change the patterns of climate change it's simply extraordinary the numbers there's an econometric there's an input-output model it takes a look at this and it's stunning you would not have a very happy life I can tell you as a political matter that that's not going to happen so what I expect to happen is a transformative change in getting rid of hydrocarbons that's the key here's what I don't know and I study this a great deal and I used to do military modeling so I know something a modeling the models on the past are very clear the models that predict the timeframe for impact of climate change and which forecast what the impact will be are quite muddled disagree with each other and that's it should be there huge numbers of variables from political side people are invoking all sorts of things but in fact we don't know when climate change will begin to cut in not clearly so the bet is and the race is between the development of non-hydro car fuels and not phasing out hydrocarbons but slamming them out the door and climate change now most models you know consensus models seem to put into 1 to 200 year phase there are some now that are claiming 30 years and so on I've looked at them I'm having trouble making them out it's something I wanted to study but if it turns out that we have climate change in 20 years we're so hosed it isn't funny if it turns out that we have a hundred years I think we'll make it not by cutting consumption but by changing the economy its relationship to hydrocarbons prediction from solar power what place do you see for the killer power over the coming century and what effect absolutely on trade relations when I first began the book I thought I was going to be an advocate of nuclear power what I discovered was an underlying economic problem it takes between 15 and 20 years to build a nuclear plant between the licensing and the verification process it is almost impossible to predict the market 20 years out investors who've put their money into nuclear power tended to lose their shirts because usually they got to the market at the same time everybody else got to the market and there was a sudden oversupply or they didn't make a dent in the market and other hydrocarbon systems came online in other words when you're building something that's not going to happen till 20 years and it's for the local area through here in Canberra I'm not sure that anybody knows what Canberra is going to demand in 20 years and so most people who are investors won't touch nuclear power the countries in which has been used are countries in which the government has created nuclear power France Japan in particular and so on these are not always had the happiest experiences in terms of the cost payment ratio there's been always tension between them what I looked at here was that I saw the nuclear powers not scalable it was a cliff bank you had a huge input 20 years later another you Jim hood and so and so forth and in most economic theory you want something scalable that you can increase as you go along in response to market needs and so I abandoned the idea of nuclear in favor of solar and I abandoned nuclear also because of the residual risks when the time when you take a look at the two technologies you don't need the residual risk how's it going back to your discussion of the declining birthright and replaced placement with technology how do you think that that will create what will effects on that the resilience of the economies that a couple of bridges or in that issue I really don't know the answer to that question I'm looking at a dynamic that I don't really understand between changes in land prices I'm not sure the cost of capital will be this is a capital function and I'm not sure what the demand is going to be so in a rare moment of honesty I don't know question here the question here and then we'll come down here one of the big things in the twentieth century was the migration of people in the city you see in the next century or this century major migration around the world to the countries that are you're saying in the world out there is the by Gration process will continue but here's the countervailing in the case of the United States the major source of low-cost labor is Mexico Mexico is now the 13th largest economy in the world it's huge the proclivity of Mexicans to leave Mexico to come to the United States declines as the Mexican economy grows the Europeans have drawn their main source of migration from Turkey turkey is in a very similar position I mean do you really want to leave turkey at this point and so what I think we're going to see our new patterns of migration not from the middle tier to the first tier but from the third tier and I think that will have certain complications and difficulties because for one thing the second tier is going to start importing later it's labor itself and one of the things you see in Turkey is Arab labor they have a shortage in now they're pulling in Arab labor so I think we'll have different patterns once I think is also going to be interesting we already see in the United States is a de urbanization pattern and a D suburbanization pattern has more land inexpensively available outside the city limits way outside is coming into utilization but I mean this is as I said here this is one of the murky elements I really don't know what land-use patterns look like it seems to me that what's happening is low-cost land is being purchased but I don't want to push this beyond what I know question of interest to most of us over the next hundred years and us Australian it's going to be alright in terms of maintaining our standard and living an enviable lifestyle in comparison with the rest of the world given if my wife is Australian I certainly hope so I think the answer is yes but I think it'll be more difficult than Australians think Australia thinks of itself as an isolated country fairly safe it's not Australia physically is safe but think of Australia not as a country but as rivers of trade arteries and veins stretching all over the world and imagine those veins cut Australian well-being depends on an international trade regime that allows access of favourable terms to foreign markets that is not protectionism allows you to purchase various goods and services and isn't cut militarily so I see Australia in an interesting way I think which is I look at it as an animal that keeps its circulatory system outside its body which is a really dangerous way to live and then says well I'm a salaita here I'm quite all right but I don't see the geography of Australia that way I see Australian geography has extraordinarily intertwined very many dangerous places Australia not being able to protect its interests and therefore being forced into alliances that can be very painful in the same way that Australia's relationship to Britain got very painful sometimes Gallipoli so - the relationship of the United States can get very painful and yet Australia can't avoid it just do some traffic manage here look what your sorry about mr. George there's a con view that the 21st century is Asian century you subscribe to that no no Mike I don't subscribe to that because of the problems I told you about China and because it's very difficult to imagine how it could not be America century I mean if you take a look at the numbers that I quoted for it to be Asia century somehow an Asian power would have to rise to challenge in these ways and you know I'm old enough and you're young enough not to have lived through the great Japanese super state where we were told in the 1980s that very shortly Japan will overwhelm everything in the world and on everything there's a tendency when thinking about Asia to think linear if it did this in the past at all do this in the future everything is a curve Asia has a relatively long business cycle but when it hits as a mother and that's what happened to East Asia as a weapon Japan I don't believe that China is going to come out of this looking the way China did five years ago and so I really don't see how lobbying Asia's would have enormous Lee important it's going to be productive it's going to be an important region I mean let's not dismiss it but I don't see how it becomes the Asian century we're speaking before you mention the importance of weapons I'm wondering if you can speak about the future of nuclear proliferation that's a very long subject because firstly you have to begin by understanding that only the United States and Britain together ever invented a nuclear weapon de novo the French got to technology from the Americans the Russians stole the technology from the Americans the Indians got the technology from the Russians the Chinese got it from the Russians the Chinese gave us the Pakistanis and the Pakistanis gave - God knows who the creation of nuclear weapons is extraordinarily easy to describe and extraordinarily difficult to do North Korea just exploded a nuclear device it is not a weapon to be a weapon it has to be small enough to fit on a rocket and rugged enough to survive a 10g launch entry into a vacuum temperature's shifting from 300 degrees above and 300 years below and then re-entry at 5,000 degrees you can have older nuclear physicists you own the world that's not the technology you need you need advanced electrical engineers material scientists and above all many many many Quality Assurance engineers technicians and so on because the key to a good nuclear weapon is testing testing testing the last thing you want to do if you're North Korea is pop a weapon in the middle of the Ginza and have it not go off with a big thing sticking out saying bade in North Korea so you want to have a degree of certainty and therefore I'll argue that really build and this is why I never agreed with the Bush administration on Iranian nuclear threat it's not that they don't want to build one they'd love to build one it's just really hard to do we did a study once which raised the question if building a nuclear weapon or a biological weapon is so easy and there are so many people who'd love to do it how come they didn't and we found the error in the so easy it is not so easy but in the field called terrorism of which there are practitioners on the same orders y2k funds are granted by emphasizing the ease of the threat from our point of view the reason we have not had a a nuclear weapon is not that they didn't want to do and I know gang in the Bronx that would like to do one it it's just really hard to do yep Jojo though you see the next major energy regime chicken to be space-based solar that was actually no advocated 72 mile another zone can you do please take off because of what economic and has been the price of power created before that's worth do you see that being priced played getting to the next energy regime and maybe a little less economic growth as a result well we really understand that the American economic culture for a moment why this works the interstate highway system was built because Eisenhower was absolutely convinced that he needed a fast path to move troops from the east coast to the west coast the microchip was created under a government contract because the ICBM needed a guidance system the internet was created by Defense Advanced Research Projects Agency because they were looking for secure way to move data between the National Labs the cost of each of these including DARPA net was astronomical it became a very efficient tool because it was underwritten by the department defense and I could go on to other examples my favorite is Oracle which is a great company and very few people realize is there because the Navy needed a database so to understand the American culture is to know and love the military-industrial complex from the point of view of the military hydrocarbons is an accident waiting to happen first it's a very inefficient way to fuel power projection and secondly if there's anything this generation has learned is they don't want to revisit the Persian Gulf it's been nice but thank you we'll pass the underwriting of the first generation systems will come out of NASA and will come out of the Department Defense Department offense will be attracted to it for two reasons first it solves a geopolitical problem and it creates a geopolitical opportunity so if you sell to Joint Chiefs of Staff to ask for funding for this project and you say in return for that you don't have to go back to the Persian Gulf and you get the blackmail every country in the world because you now have solar power thereon and I think that is the different variable in this case that I think we've reached a point within the defense community where investment in this becomes attractive and please bear in mind that out in West Texas a guy called Bezos so the guy called Bramson on separately ranches are busy building rockets and their explanation is because they want to have space tourism and they do a straight face that I really like these guys they understand that whoever reduces the price of lift is going to be as we stay in West Texas Bubba when it comes to the energy field this is kind of a gold rush going on but I think the main costs will be burned by DoD what advice you have for strider on the paths we should save with the national priorities you should sit as we head into the next century the center of gravity of australian prosperity is trade system there has to be a careful risk analysis of the trade system because if that fails either for economic reasons or regulatory reasons or military reasons australia is in desperate condition one part of it is to really understand what is the most viable and risk-free exports and imports I'm not certain that Australia being an exporter of raw materials is necessarily the most risk-free thing because you're moving a lot of tonnage around through water you don't control two customers whose behavior you can't predict but to me the priority is a careful analysis of the trade regime that you're in I suspect that alignment with the United States is in Australia's best interest I know it's in America's best interest so I'd like to con you a little bit to come on board but you're going to do your own analysis but if you asked me what the priority is to me the opaque position of Australia is the risk/reward structure of its trade regime I think it's an unexamined element at a potential accident waiting to happen George people not to think about the stresses Australians of nuclear weapons leaving reentering also give us a lot of different ideas ideas we normally hear connected some of the dots are and I suspect there's lots of people in the audience just quietly working through a lot of different ideas and different ideas of work coming out for on a call tonight ladies and gentlemen the bag of what 2009 publication Wall Street girls shout out says predictions as mayor George frame and a hot property in these days the books out there the author will be happy to sign them in just a minute please join me in thanking you

Channel: ANU TV

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Keywords: george friedman, economics, politics, terrorism, war, technology, military, defence, stratfor, the future of war, the next 100 years, toyota, anu, the anu, canberra, education

Id: RiMRAhupqE0

Length: 83min 13sec (4993 seconds)

Published: Thu Mar 11 2010