The Next 100 Years: A forecast for the 21st Century. George Friedman (p2)

is going to ask to associated questions or I think they're associated one is how Russia's going to fit into this new world order I know you've just spoken a little about that and whether they'll be whether you think there will be continuing conflicts in the Russia the nearby region of the Balkans given that arguably the conflicts that we've seen in that region over the last two decades are a reaction - or a consequence of the the collapse of the Soviet Union Vladimir Putin once said that the collapse of the Soviet Union was the greatest geopolitical disaster Russia had that Russia had been powerful but poor and after the full Russia was powerless and for the Russian view if you go talk to Russians other than those who do a lot of business in the United States and make money doing that is deep bitterness a deep sense of betrayal they traded their empire in their view for nothing there's also a belief that Putin addressed which is the United States and the CIA is attempting to topple pro-russian regimes in the former Soviet Union into this earth encircle and contain Russia so for example many in the West see the Orange Revolution as a tremendous success for democracy Putin's position stated very clearly it was a CIA engineered plot to create an anti Russian government the Russians look at NATO as they've always looked at NATO as a military alliance the United States wishes to shoot everyone it's just a club for nice people pay no attention to the Charter but the Russians are silly and they look at the chart and they know this much during the Cold War st. Petersburg was 1,100 miles away from NATO today it's a hundred miles away from NATO all that remains is for a NATO force to put a self at the northern tip of the Baltics and their second greatest city their access to the Baltic Sea is in danger they regard the Baltics as they've regarded it for hundreds of years as their Achilles heel they regard Ukraine as their Texas and by that they mean if Texas were taken and made part of the Warsaw Pact how defensible with the United States be you know they say reverse to situation is one of them one said to me we're in the same business and you know he looked at me and he said if we had one and we had an uprising in Mexico and the United States NATO would have gone to a Warsaw Pact and we would have suggested that Texas should become part of the Warsaw Pact how would you react it to which the answer is obvious and that's how they're reacting whether Russia has the ability to hold what they call their near abroad is a great question and I doubt it in the long run but the Russians are looking at the current miss imbalance of American power and they really don't care about the Europeans they look at the current imbalance of American power the fact that were overcommitted in Iraq overcommitted Afghanistan we had no strategic reserve and they see a window of opportunity lasting two or three years to rectify what had happened in 1991 to recreate a sphere of influence in the book at a problem which is at one point I wrote the Russians will invade Georgia and then I had to go back to the editor and say the Russians did invade Georgia because in fact there's a certain the Russian is very open about this they intend to regularize what they call regularize the relationship in the Caucasus and they certainly intend to deal with the pole with the Baltic situation so my expectation on Russia is that over the next few years we are going to see a much more assertive we see a much more assertive and aggressive Russia not because it's aggressive but because it feels that the West is aggressive and that's how war start when the other guy is aggressive I don't think there will be a war I don't think I'll be a cold war there will be a cool war but one phrase you use the New World Order which has never been a phrase I would use because I can't see order and all of this disorder to me the interesting thing about the world is how it defies order it insists on this order but I think that problem that President Obama has and which is why he's going to Russia in July he's got a big Russian problem and he'd like not to have one so I was concentrating on the big Afghan problem but it really is a Russia issue that he's going to have to confront because that's what Germany is pivoting on right now it's changing the subject you say in the book that you that you don't deal with the subject of climate change is that because you think that it's something that will be solved in the immediate future or that it's not as large a problem as as it has it seems to loom at the moment I think it's a large problem and I think it will be solved but I don't think it be solved in the way people expect it to certainly the climate is changing by all available evidence it is being changed by human action and the bulk of that human action is hydrocarbons the conservation solution doesn't work because no one has sat down and done the arithmetic of just how much the standard of living would have to be cut to achieve this outcome of balancing it off you have this problem you have China and India increasing their emissions they are not going to stop doing that because they're going to say look you fouled up the world now you want us to take the hit in Australia in the United States I've done some back-of-the-envelope estimating that I would expect a contraction of standards of living by over 1/3 if we were to compensate for that to imagine what that means I've tried to imagine what a 1/3 cut would mean it would not mean that you would ride your bicycle to work three days a week it would mean we would all experience a fundamental degradation of things that we expect ranging from health care to the idea that we will have professors working everybody's consumption will have to be cut and we never cut equally so it will be devastating some parts that there's no political will to that so the problem is that if I said to you that we have an ecological disaster in our hands might take 30 years may take 200 years in the meantime I want you to consign your grandchildren to life of poverty there's no political strength to it that's what we get Kyoto's Kyoto's our commitments to do something unspecified followed by no one doing it and so from my point of view I mean if you want to call for things by all means call for things feel good but the reality is there is no solution and consumption there are two solutions looming one is that the pressure on the economy will begin to decline mid-century because of population of stabilisation decline particularly in advanced industrial countries where you need the most you will have contraction and that will help but the second thing that will help is the fact that there are technologies readily available for use and what will help the most is that the US Department of Defense will want them all so when we talk about how new technologies are spawned they rarely come from petitions the microchip was invented to power American ICBMs going to the Soviet Union the internet was invented by the Defense Department as a means Fortran entering information from point A to point B the secure way the American interstate highway system was built not in order to create the suburbs but facilitate the movement of large units from the east coast to the west coast in the event of war one of the charming or unsure min characteristics of the American economy is the intertwining of technical solutions with the military the United States does not mind the hydrocarbon technology DoD doesn't care it does care about the growing dependence on the Persian Gulf and the fact that has to fight there if you pose a problem to Americans saying we really need to do something about the environment the Americans will say yep good idea try it if you say to them we've got to beat the Arabs now you're talking NASA has a massive program underway in space space solar energy they like it because one it doesn't impact their test facilities in Nevada two they like it because it generates electricity and beams at the earth in ways that they can utilize in American industry and second it makes us a nation that sells electricity to Australia and we can gouge in something fierce and we can also get you to cooperate with us and so in DoD when you think of space space energy you think not of pot not of solving the ecological crisis you think in terms of enhancing American national security and power and when you pose it that way in this world things happen and things are happening it's very interesting a month ago Pacific Gas and Electric which is large California utility signed the contract for the purchase of space-based solar energy so the first customers out there but the best example I like is Bramson a virgin and Bezos of Amazon out in West Texas not too far from where we live they have both huge ranches on which they're firing rockets and they're trying to reduce the cost of lifts into space this is their concern when you ask them both they say it's for tourism and I notice what I'm flying in Australia my virgin tickets offers me a free flight on virgin Galactica I'm impressed more impressive is the fact that whichever entrepreneur uses DoD technology to get into space for inexpensively will have more economic power than Exxon Mobil and and Saudi Arabia Saudi Aramco combined he who controls energy can control the shape of geopolitics and he who controls the shape of geopolitics can drive energy so I think there is a solution to global warming I don't think it's the one that people want or expect but I think it is one that coheres to the shape of power today but I think the argument for conservation if you actually sit down and calculate what conservation would mean will explain why there's so little willingness to do it in the face of so much talk about it it occurs to me that the audience might have some questions some people say that food is the new oil would you concur with that terms of shortages and increasing prices over the next 2 5 10 15 years I don't see the evidence of that food production is a function of energy I'm sorry can you hear me now I'm not seeing that is what I said I'm I regard food production as a function of energy costs because the most expensive portion of food production fertilizer aside is transportation this Russians for example have a terrific problem not because they can't grow food but because they can't transport it to where it needs to be so it seems to me that we are not having a crisis an output of food but there is a potential crisis of the price of food and you'll notice the intimate connection to the rise of oil prices the rising food prices so I think the center of gravity of the problem is energy costs sat down there given your area of expertise I'm sure you're familiar with Paul Kennedy's rise and fall of the great powers which came out about 20 years ago his central hypothesis was about Imperial overstretch and his theory was that the u.s. was getting close to its point of decline which is the opposite to what you say I get a bit nervous when I hear people say it's different this time I think we hear it in the financial markets quite a bit can you comment on your theory versus Paul Kennedy's Imperial overstretched theory and also perhaps with an eye to who actually finances u.s. debt sure are very different questions the Kennedy question if you take a look at the amount of manpower deployed across the globe by the British you take a look at the amount of manpower deployed across the globe by the United States and you take a look at the size of the population of the United States as opposed to the British what you'll find is that it's very difficult to make a case for overstretch the things that he is looking at is the cost of maintaining forces relative to he's relative to outcomes that brings I don't see that that brings us to the question of the current financial crisis the United States has had four of these crises since World War two and it always ends the same way in the 1970s because of energy crises energy prices we had what was called a municipal bond crisis that is states and local governments that were borrowing money could not repay the money the solution was for the federal government to intervene bailout New York City signaled that they were prepared to guarantee all local debts and we went on in the early 1980s we had a much worse crisis than this one which is a third-world debt crisis the third-world debt crisis were built around two assumptions the first was that the price of commodities would continue to rise it definitely as the house price of houses and the second was that a third world country would not default on its debts that is sovereign debt could not have a default both of these premises turned out to be wrong Mexico failed a range of countries failed around the world the United States primarily financed the bailout along with some other countries by creating an instrument called the Brady bonds after Nicholas Brady the US Secretary Treasury and enormous amounts of money went into stabilizing third-world debt at the end of the 1980s the United States had two saves in loan crisis saves and loans were a class of banks in the United States very important and because of a failure in the commercial real estate market these banks failed across the board the United States federal government intervened with about six hundred and fifty billion dollars which if you take a look at late 1980s numbers and compared to these numbers actually much larger bailout as a percentage of GDP and stabilized so the United States has a kind of pattern for dealing with the business cycle the business cycle goes to excess sectors of the economy fail the federal government intervenes and we all declare that the United States is classic that's part of the operating the interesting thing about this crisis is that when you compare it to 1982 in 1982 unemployment was about 12 percent now it's about eight point nine percent inflation was in the eleven percent range now it's depending how you count a two to four percent and interest rates there was no decline in housing housing the United States because you couldn't sell a house because mortgage rates were at eighteen to twenty percent and now they're down to four or five five or six percent so when I benchmarked this crisis from an American point of view okay I see a very routine event I would count this the third worst decline we've had since World War two for very simple reasons and the United States is coming out of it the general consensus is that by the end of the year we'll be over to class one thing to remember about the United States and this is crucial we count that when you go bankrupt they don't take a look at your salary compared to liabilities and typically assets compared to liabilities and we constantly talk about GDP versus liability as if that's the variable the theory of real variable is the net worth of the economy and we actually went and counted for various sources and the net worth of the American economy is about three hundred and twenty nine trillion dollars now why that's important is that the worst case scenario for an American bailout is three trillion dollars which means that we are talking about less than one percent of net worth now how do we use that net worth we print money and we we put money and we tax and so far we printed money and later will tax but anyway that's how you monetize the debt the countries that have a high liability and low net worth Iceland got absolutely hammered the second class of countries that really got hammered in this crisis are exporting countries particularly industrial exporting countries China Germany Germany is the biggest and the reason is because the way the world was structured the United States exported its unemployment because it had become so dependent on foreign countries for importing the probability for importing the commodities when we stopped buying the unemployment didn't occur in Illinois it occurred in Shanghai the question of who buys our debts the answer is everybody because the one thing that's happening is the money is pouring into the United States strengthening the dollar compared to many of others because in the middle of the crisis the United States was seen to be the safest place to put your money but also the largest economy that could handle the kind of transactions and the reason that I think they saw that is because they were looking where they were looking or instinctively understanding his net worth matters size really matters I was in Montana over last summer and went horseback riding for reasons I don't understand and people said well you have to bring a gun and I have a little gun than a 38 caliber to take care of muggers and what I showed up the guide laughed uncontrollably I'd wondering what I was going to do with that because in Montana they have bears and a bear would regard that as a minor annoyance compared the American economy to a bear it can take hits that other economies can't and one of the great unfairness is the world if you want is if you say that the United States started this crisis it's the rest of the plate the world that deals with it now I would like to also point out the United they didn't sell anything to anybody with their gun pointed to the head they bought the stuff so caveat emptor guys but what we're seeing is an actual strengthening of the relative position in the United States economically and a weakening of some other positions and that has to do the fact and this goes back to Kennedy's problem Kennedy in my mind that I admire him a great deal was not looking at the right variables so he was coming up with the wrong answers if he had looked at the net worth of Britain and how it was distributed around the world he would have seen the dissolution of the Empire you don't have anything like that happening the net worth is held in the United States and so it's a very different phenomenon someone just well well will India be Anand reduce just north of the Indian Ocean that's a very good question India is the country that we've all have been told for 20 years is just about to take off and it never quite does and there's a reason which is that India has a political structure that really has to be understood India when the British came was a series of independent countries the British imposed a kind of central authority and the new government extended it but the power very much rests in the States and the states have very different agendas and very different purposes so you'll find in Bangalore tremendous growth extraordinary growth and you wait for it to expand to States away and it doesn't there are serious legal problems there are serious problems on the question of investments on access to legal protections and a bunch of reasons why Western companies will move into one state and not touch another and I think I don't see the Indians solving that problem because many of these states don't see this is a problem they do not see economic growth as the highest priority would rather the preservation of the regime the state resumed and so we can't understand why they won't overthrow their entire internal system when they can make money but they seem to understand I think we all know where Australia will be in the next 50 years but can you tell us what you think our prospects are going to be given our relationship with both China and the United States well if I'd been answer that question 20 years ago be given our relationship with Japan than the United States and you have a very deep relationship with Japan and you're obsessed with your relationship to China and if I did interesting i I've come to do my wife was Australia and I've come here many times and I get the sense of isolation but when you study your condition you're much more exposed I see Australia as an island but with pulsating arteries and veins stretching all over the world you're a trading country you live and die by your access to foreign markets by the rules under which those markets are administered by the security of the sea lanes and so on you're like a creature whose most vulnerable aspect your veins are outside your body not inside and that really is I think the peculiarity of Australia it is easy to see Australia as secure from physical harm until you look at your trading system and if you include your trading system in the context of national security which you should then you're highly exposed Australia's greatest problem is that it has national security requirements far outstrip Australia's national security abilities they are forced since the founding of your country you have aligned with a great maritime power and sometimes our to maintain that alignment with Britain for example you carried out services to Britain that were not in your immediate national interest I think of Gallipoli but which served a broader strategic interest in maintaining your alignment with the one country that could guarantee your access to the seas you are now in that relationship with the United States one of the things I've argued is that Australian Special Forces troops in Afghanistan who by the way served with my daughter and our outstanding Australian Special Forces troops paid for free trade agreements so if you take a look at your trading relationships your relationship with the United States you begin to understand 150 year pattern as for China I understood the defense white paper and I think it's a very professional job I suppose if you have to put an enemy in there China has only five letters and it's a very nice one to put in but basically you need to control your sea lanes as far as you can regardless who the potential notional enemy is and you have to be in service to either the United Kingdom or the United States so I see Australia is a happy country but I see the threats to Australia national security is much more subtle and deep than I think many Australians do it's a tribute to George and to the book that a decision could go on for some time but we we have to finish George will be available the next room over in that far corner to sign copies of the book thanks to everyone for coming and if you join with me in thanking George again for a fascinating presentation thank you very much good you

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Length: 28min 29sec (1709 seconds)

Published: Mon Apr 08 2013