The Next 100 Years: A forecast for the 21st century. George Friedman

I took it from the from the book that he thought that the United States would be the pivotal actor in the 21st century to some extent of course that's been true in the in the 20th century as well but I wondered how you saw it playing out that role over what's the next as you say the next hundred years well I mean we have to begin with some basic facts the American economy is larger than the next four economies combined if you take Japan China Germany in the United Kingdom and you combined them they're not quite as large as the United States we speak of the United States is d industrializing American industrial output in 2007 was larger than the combined industrial output of China and Japan the United States is the world's second largest producer of natural gas the third largest oil producer ahead of Kuwait for example when you put these economic facts on the table you get a sense of the enormity a qualitative difference between the US economy and all other economies the American economy constitutes between 25 and 30 percent of the world's economic activity let me add to this one final fact Japan's population density is 365 people per square kilometer Germany's is about 260 people the United States is 34 not counting Alaska if you think about the possibility of upside if you will and you think of the three inputs into an economy land labor and capital and you take a look at the land availability in the United States as opposed to Germany or Japan or China for that matter if you take a look at the ability of the United States to manage immigrants very efficiently because they can go somewhere far away from other people and then if you think about the fact that the United States Navy controls all of the oceans in the world something that no other state in the history of humanity has ever achieved and you consider what the United States could potentially do with that military power not that it will choose to do so I suspect but what it could and you combined the picture together then you start thinking about the hurdles that other countries would have to leap through to begin to challenge American power well power is relative there's the power you have and the power the Challenger has so we talk about China it would have to grow it's about tripled its size in the past 20 years we would now have to grow five times in the United States not at all for China to equal the United States economically and then would have to start worrying about the military growth so in other words the actual barriers between the United States and other countries whether you like the United States or not whether you think it's just or anything else this here fundamentals of it when you step back and stop the rhetoric and just take a look at it it is very hard for an other country to challenge the United States and all the dimensions in which it's powerful I understand from that that you say that China won't challenge the United States over that period but I wondered how you would see China's development over the medium term in political and economic respects well I have to benchmark that as well and I do a lot of benchmarking comparing if you recall in the 1980s we all knew that Japan was going to overwhelm the United States and the rest of the world because it was so productive so creative and so on and so forth we have gone through three phases of Asian post-war economic development the first was the Japanese surge that ended in the 1990s in which the West node is standing in 1995 it was a five-year lag the second was the East Asian meltdown of 1997 and now we are looking at China the characteristics of Asian economies are fairly similar they are based on not having a market economy in capital capital is distributed for political reasons for social reasons for Chi retsoor reasons what have you Japan in 1990 had in the industrial world the lowest rate of return on capital in the world which means they sold a lot of products they didn't make a lot of money my Uncle Louie had addressed business he sold dresses for nine dollars it cost him ten dollars to make it but he figured he'd make it up in volume in many cases in Asian economies you have very narrow profit margins and the rate of growth does not reflect the health of the economy in fact as in the case of Uncle Louie a very good Christmas killed him and you really have to take that very seriously because we tend to focus on growth rates because some of the disciplines of non Asian economies will mean that a high growth rate will mean profit that there is a connection between the two and one of the things we learned in Japan is there wasn't they had an extraordinarily high growth rate it hollowed out their banking system leading to the crisis of 1991 and froze up the country China has that problem and I'll define it in these terms when Japan went south as we say in the States the ratio of non-performing loans in other words loans that you're going to stiff the bank on to GDP was 17 percent when Korea and Taiwan ran into trouble they were at about 23 percent if you believe Chinese official government figures the number in China of non-performing loans of GDP it's about 40 percent and that's an optimistic number so this is an economy that has reached a climax stage that's built into the kind of capital allocation you do at Asia one of the characteristics of reaching this Kraig is everybody is gaga over you because you are selling more and more and growing faster and faster well of course you have a debt driven economy you're trying to cover your cash flow so you sell you sell for cash flow not for profitability and every month you're going to grow and every month everybody's going to say marvelous what a great country we knew that Japan was in deep trouble when the Japanese started investing in Pebble Beach and Rockefeller centered everything not in Japan and we asked a very stupid question if Japan is such a wonderful investment that anybody be fool not to invest in why the Japanese not investing there why they buying anything outside of Japan and there was a reason which is that the insiders knew they knew the problems they had in 95-96 showed a similar massive outflow of capital from Taiwan and South Korea and again the media took this to be a sign of enormous strength whereas it was really a harbinger of terrific problems you now have a massive outflow of capital from China buying mines buying condoms condos buying anything that's not in China which if the president occations from Chinese China enthusiasm the West were true would be suicide Li stupid behavior why do I want our own real estate in Australia when I could mean an economy that's going to grow by 15 percent forever well the answer is growth and profitability two different things and they know better remember this about China which is different from all these other countries China has a population of 1.3 billion people 1.1 billion of these people live at a standard of living of Nigeria they make I went to pudong and had one of those wonderful dinners that costs the next year's earnings and I asked you know what one of the waitresses was baking and she was making 60 70 dollars a month and I went to the place she lived I had somebody taking that and going oh she lived and she was living in a concrete building unheated there was cold water no hot water and the privies were outside for reasons I don't understand and she regarded this as a marvelous improvement over what she had before in the farms so 1.1 billion of this people live in the most extraordinary poverty of the 200 million people living in what we recognize as the China that's exciting this China is not part of China these factories don't sell in China you can't sell those products to people who are at subsistence level agricultural life these are extensions of the West these factories are part of the American economy the Australian economy of European economy but mostly the American economy and if the American economy stops buying because we have a recession or we increase our savings rate then what happens is the rate of growth of exports Falls and their ability to cover their debts fall and what you're seeing in China right now is the government's scrambling badly to use what are actually quite limited reserves two trillion dollars isn't what it used to be two simultaneous to try to get demand going in the interior of China which you can't do it about six hundred billion dollars that's just not enough for 1.1 trillion people and secondly to cover the banks that are in very deep trouble because of cash flow issues and thirdly make sure they're putting enough into the American economy so the American economy doesn't slip any deeper into recession and stop buying GI Joes from China and everything else that they sell and so I would argue that China has a double-whammy on it it has reached a stage that Japan and South East and East and Asia reached at a certain point and it reached at about ten years cycle so there was Japan hit East Asia hit China's hitting now the Japanese collapse came from an American recession in 91 92 because they were exporting to us and we stopped buying very similar phenomenon occurred in the 1990s although somewhat more complex having not to do with the United States but this recession is not particularly hurting the United States it's clobbering the Chinese if this hadn't happened they still would have had their non-performing loan problem the very low rate of return on capital problem and the fact that one point one trillion shiney billion Chinese are furious at being left out and of having their land stolen because one of the ways did you get loans in China is through land and when a company needs more loans it needs more land and the company official goes to his cousin who is the assistant governor of the region and they take land and if you read the newspapers you will read about land riots and so on going on in China this isn't happening just was mean people are doing things this is how you're stabilizing the banking system about two months ago a bomb went off in PSB headquarters in Shanghai PSB is the FBI of China and somebody blew up the building now when you ask the question if China is doing so well why they so obsessed with security why are they violating human rights why are they doing all these things two answers are possible they're incredibly wicked people who don't appreciate the fact that they could live like Australians if they just stopped it or the Chinese know a great deal more about China than Westerners and they know they're in trouble which is a very long way of saying but it was a very important question because one of the great underlying myths of the past years is that the Chinese economic miracle and it was a miracle is eternal and that it can go on ad infinitum and will go on ad infinitum and when I tried to lay out as the reasons the single most important question of why it's not going on and it certainly can't go on for another 30 years I think one of the things that many people would find surprising about the book and I suppose I was certainly surprised is the central role that you give to two particular countries Turkey and Poland over the next hundred years countries that haven't of course up-to-date played that kind of role in them in world affairs I wonder if you'd like to explain how and why you think that's going to happen well in the first place if in 1900 I told you all the British and French empires of collapse a third world country with 50% literacy rates would dominate the world the United States I mean and the center of gravity of international industrialism would be Northeast Asia they'd carry me out and had it soothe and give me medication nothing is a worse guide to the future than common sense because common sense basically tells you that what we have here is pretty much or what I have in the future and that's just not how history works in a particularly the 20th century and we were sitting here in 1985 and I were to say to you the Soviet Union will collapse in five years you'd laugh of course history is full of what appears to be breathtaking changes so let me explain what I think is going to happen I see China not collapsing I see China weakening becoming a less of a force and the People's Liberation Army is an internal security force it's not going to attack anyone I see Russia going through a period of resurgence in decline and I see Eurasia sinking down into a degree of Myr malaise situa at the very least it will be the periphery of Malaysia that of eurasia that will create the great powers and of the great powers you mentioned - I see three great powers emerging or more precisely two of them they've already emerged firstly the great Asian power is not China it's Japan Japan has a much larger economy than China it is much has much fewer weaknesses it doesn't have three-quarters of population in dire poverty it's not growing particularly well but it certainly has the largest Navy in Asia when the North Koreans were launching their missiles it was ages destroyers from the Japanese defense forces that came in there ready to shoot down the missiles the Japanese Army is larger than a British army now Japan is a country that wishes not to be noticed and please pay no attention to me I'm harmless and have no intentions and that is truly how they feel they don't want to have engines but China is now trying to get the Navy the Japan already has and so when I look at the great Asian powers and I forget the newspapers Japan leaves out immediately that would be one power the second power that I'm looking at is Turkey turkey now is the 17th largest economy in the world it is the large larger than Saudi Arabia it has an army in a military capability that is probably the best in Europe with the possible obsession of Great Britain they could beat the Germans in an afternoon and the French at an hour if they showed up so when we take a look at the German at the Turks it is not an accident than President Obama when he finished his tour of Europe it's quite unsatisfactory tour of Europe finished off in Turkey and the message to the Europeans was very simply you know I've really enjoyed eating with you guys and talking to you guys and being told no by you guys now I'm going to go to a real ally that has real military power is negotiating with the Syrians is working in Iraq has a very close line to the Iranians of the Iranians are quite frightened of them is negotiating with the Armenians stabilizing the situation the caucuses which is a serious power whenever the Islamic world in the past thousand years has had a unification it has been under a Turkic power and for 500 years it was under the Ottoman rule and when it was under the Ottoman rule the Arabs took a subordinate position and the Turks created a an order now the past hundred years Turkey has been in a very strange position that it was never in before this cause it was surrounded by first Europeans and then the Russians and the Americans but the Americans are leaving the Russians are not coming back and the British are busy doing other things and suddenly turkey is unfolding its wings and there's no one in the region when you talk to who doesn't in every discussion of politics does in the second session build-up what did the Turks once the third country is Poland which is the strangest choice but let me explain apart from the fact that in the 17th century Poland was a great European power the United States is watching the rise of Russia it's using the window of opportunity to invade Georgia to transform the Ukrainian government to put pressure in the Baltics and so on the Germans are unable to act be Germany imports 50% of its natural gas from Russia and last January if you recall the Russians turned off the flow of natural gas kind of say hi how are you happy new year and if you think we won't do it think again Chancellor miracle is being very cautious with the Germans it is not in the American interest to see German European let's say European industrialism and Technology United with Russian natural resources this is not what u.s. grand strategy really wants to see happen if the United States wishes to block or contain Russia was to go around there's only one place to do it that's Poland and that's not because of Polish history it's geography that is the border now the United States has already decided to put a ballistic missile defense system in the Poland and it really doesn't have to be in Poland probably doesn't work and that's not what we us are doing it it is putting a stake in the ground to say that this is a special relationship of the United States and we reserve the right to put anything we want in there was far more important and not reported in the press is the fact that the United States is selling f-16s the poles training their Special Forces and doing all sorts of other lovely things that Americans like to do the Russians of course are going bananas because they understand exactly what we're about to do and they want to stop it now when you wind up a strategic asset to the United States something very special happens good in bed and for that I invite you to think about South Korea in 1950 South Korea was a nation of rice farmers not even very good rice farmers you know torn by occupation by the Japanese about to go through a horrible war today South Korea is a massive industrial power and you drive Korean cars many of you and watch Korean television sets and if I had said to you in 1950 that South Korea is going to be a great industrial power in 50 years you would have left why did it become a great industrial power if they imitated industrial power because the only real superpower the United States needed it to be one it needed a very vibrant and viable South Korea for American strategic reasons and therefore there was technology transfer there was capital transfer and the Koreans had access to the American market on very favorable basis this was not the only example Israel as another where Israel which in 1950 should not have become a major military or economic power did and the u.s. relationship was critical to that same with Japan Sami Germany so there is a pattern and a knowable process of what happens when the United States badly needs a country to be successful the United States very badly needs Poland to be very successful because it sits in the north driven claim blocking the Russians from the American point of view making Poland the great power is cheap and easy compared to other things that could happen from Poland's point of view it is sitting between its two favorite countries Germany and Russia and they're talking to each other again which if you're polish means nothing but trouble in other words the US needs Poland and it has Poland where it wants it Poland needs the United States and has the United States where it wants it and I see a dynamic kicking off that we've seen several times since 1950 that will culminate in a great power great regional power involving you

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Length: 23min 44sec (1424 seconds)

Published: Mon Apr 08 2013